Restrictions on the sale of alcoholic beverages have had a significant impact on sales by Distell, one of Africa’s biggest producers and marketers of spirits, wine and ciders.
The Stellenbosch-headquartered company buys 35% of South Africa’s grape volumes each year, of which less than 4% comes from its own farms. Its wine business represents about 36% of total wine sales by value in the country, and it is the largest exporter of wine into the rest of Africa.
Some of its top brands include Amarula, Hunter’s, Savanna, 4th Street, Klipdrift, Nederburg, Richelieu, Viceroy, and J.C. Le Roux.
In an update to shareholders on Friday, Distell said that the impact of the coronavirus pandemic and resultant lockdowns had been varied due to the diverse geographical locations in which it operates.
While its South African business has been unable to generate revenues from the sale of alcoholic beverages since the start of the lockdown in late March, it has been able to resume limited exports.
As a result, the group’s profit attributable to ordinary shareholders for the 10 months ended April 2020 is expected to be about 25% lower than the same period last year. Headline earnings per share for the year for the year to end June are expected to fall by between 60% and 80%.
The easing of export regulations related to agricultural products under Level 4 of the lockdown in SA have meant that approximately R440 million worth of open orders can now be processed for delivery to customers in countries with open ports and no restrictions on the sale of alcohol.
Distell said it was engaging with the government about the lockdown levels by offering “pragmatic solutions” to responsible trade without adding further risks to public health. The aim is “to avoid dire economic consequences for the industry as a whole”.
A security employee at one of the company’s distribution centres tested positive for Covid-19 early in May and was immediately placed in quarantine, Distell said. The distribution centre was closed immediately and all prepared safety protocols were followed. Operations resumed on 7 May.
Since the lockdown started, Distell has generated R8 million worth of revenue from the sales of alcohol and sanitiser since the lockdown to a range of businesses. The group is now investigating this as a sustainable business opportunity.
The group added that it has donated 105 000 litres of sanitiser to both government and NGOs.