Liquor producers puzzle on how to ease alcohol ban

Converting bars into beer-collection points and staggering
liquor-store opening hours: Just two of the proposals put to South Africa’s
government by drinks makers desperate to lift a 50-day ban on alcohol sales.

Industry leaders met with government officials on Friday and
had “open-minded, collaborative and constructive talks” about how to resume
trading alongside a broader easing of a lockdown to contain the coronavirus,
Richard Rushton, chief executive officer of wine and spirits maker Distell
Group Holdings Ltd., said in an interview.

Alcoholic drinks may be available for sale by the end of the month,
he said, though details on how to trade safely have yet to be finalized.

The so-called booze ban – imposed on March 27 to reduce the
temptation for social gatherings and ease pressure on hospital emergency wards –
has helped South Africa earn a reputation as having one of the strictest
lockdowns in the world.

Tobacco products are also banned, while citizens are only allowed
to exercise outdoors between 6am and 9am more than two months after the
country’s first case of coronavirus (Covid-19) was discovered.

Industry is feeling the lockdown pinch

The tight restrictions have been hailed as a success, with
the country’s 219 recorded fatalities a fraction of the deaths suffered in many
other countries such as Italy and Spain. But the move has come at a cost, with
millions expected to have lost their jobs amid a deep economic contraction.

As many as 80,000 small businesses ranging from farmers to
craft brewers may be on the verge of collapse as a direct result of the alcohol
ban, Rushton said. Distell’s earnings are likely to be as much as 65{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2} lower in
the year through June, according to a trading update, with sales of popular
drinks such as Klipdrift brandy and Hunters Dry cider halted in the company’s
biggest market.

The company’s shares have slumped 41{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2} this year, compared
with a 13{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2} fall on the FTSE/JSE Africa All Share Index.

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South Africans have instead resorted
to home brews, with recipes for ‘pineapple beer’ widely shared on social
media and Whatsapp groups, while commercial drinks have been available from
illegal sources.

Meanwhile storage facilities have been filling up, with
Anheuser-Busch InBev NV needing special permission to transport beer from
manufacturing plants to depots to avoid having to pour it away.

Industry proposes a different model

With a lot of South African liquor sold through a network of
informal taverns and over-the-counter outlets, the industry sees an opportunity
to try different business models that don’t involve the congregating of crowds.

There are about 54,000 smaller licensed establishments
serving local communities, and the liquor makers have proposed that owners be
supplied with masks and sanitizers to hand out to customers and sell drinks
only for off-premise consumption.

“Government is really interested in this proposal, with the
emphasis on getting our industry responsibly trading,” Rushton said. As much as
40{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2} of the taverns and smaller outlets are in “grave danger” of going bust if
they do not start trading soon, he said.

Staggering hours and providing varied retail options could
help South Africa avoid pitfalls seen in countries such as India, where liquor
stores suffered a stampede following the lifting of a 40-day ban. The industry
recommended trading be allowed from 9 am to 6 pm Monday through Friday and
from 9 am to 1 pm on Saturday, while allocating buying slots based on the first
letter of their family names.

Distell has accepted that bars are not going to open for
large social gatherings for some time, so demand for alcoholic beverages will
remain relatively low. The company is exploring alternative revenue streams
including the making of sanitizers, the CEO said.

“Forefront for everybody are the health risks around
Covid-19, but also the need to get the economy going,” he said. “We are going
to come out of this a different company, but a strong, resilient and
purpose-driven company.”