Consumer Products

PROFILE: Distell produces and markets fine wines, spirits and flavoured alcoholic beverages in South Africa and internationally.

Distell Group HOLDINGS LIMITED (DISTELL)

Distell’s contribution to Remgro’s headline earnings for the year under review amounted to R165 million (2019: R459 million). Including an additional IFRS 3 charge accounted for at Remgro level, Distell contributed R117 million (2019: R412 million).

Distell’s reported headline earnings for its year ended 30 June 2020 decreased by 64.1% to R517 million (2019: R1 441 million).

The restrictions imposed on the sale of alcohol as a part of government’s strategy to curb the spread of the Covid-19 virus reduced the trading year by nearly 20%. As a result, the group lost approximately 100 million litres in sales volumes and R4.3 billion in revenue due to the lockdown restrictions that were imposed in various countries and, in particular, its largest market, South Africa. Revenue declined by 14.6% to R22.4 billion on 22.5% lower volumes. Revenue excluding excise duty decreased by 15.8%.

Key gin and vodka brands performed well in a competitive environment with spirits enjoying some growth after the first South African ban on liquor sales was lifted. The broader wine category was also impacted by restrictions although the category saw a resurgence in consumer purchases following the lifting of restrictions. Increased competition and discounting in a growing ready-to-drink (RTD) category continued. However, Savanna continued its strong momentum against competitors, validating Distell’s focus on building brand equity over aggressive price discounting. New innovations in Esprit and Savanna Non-Alcoholic recorded strong performances during the year. The group also generated a total of R25 million in revenue from the sales of ethanol and sanitiser in the reported period.

In African markets, outside South Africa, revenue declined by 3.0% on lower sales volumes, which were down by 14.7%, mainly as a result of a 19.1% decline in volumes in Botswana, Lesotho, Namibia and Eswatini. Volumes in international markets outside Africa declined by 13.1% and revenue by 8.8%, respectively.

PROFILE: Siqalo Foods manufactures spreads which it sells under market-leading trade marks.

Siqalo Foods PROPRIETARY LIMITED (Siqalo Foods)

Siqalo Foods manufactures spreads, which are sold under market-leading trade marks such as Rama, Flora, Stork and Rondo within the Southern African customs union territories.

Siqalo Foods’ contribution to Remgro’s headline earnings for the year under review amounted to R414 million (30 June 2019: R332 million), excluding additional IFRS 3 amortisation of R79 million (30 June 2019: R80 million). Siqalo Foods received an after tax finalisation amount of R31 million from Unilever. Excluding the finalisation amount Siqalo Foods’ contribution to headline earnings increased from R332 million to R383 million (or 15.4%). During a challenging, turbulent year impacted by the Covid-19 pandemic as well as the weak South African rand impacting on imported raw materials (resulting in a price increase taken in September 2019), Siqalo Foods experienced a 3.3% decline in volumes compared to the prior year. Good cost management enabled the business to increase its operational EBITDA by 13.7%. The business continues to deliver good results in line with prior years driven by its market leading brands. On 30 June 2020, Siqalo Foods had a combined 12-month moving average value market share of 70.2%. Siqalo Foods remains committed to grow its brands and volumes in 2021 while maintaining its profit margins during the subdued economic conditions.

Two contracts are in place with RCL Foods. Vector Logistics provides the distribution, sales and merchandising, while a management services contract governs certain services that RCL Foods Shared Services platform provide to Siqalo Foods on an arm’s length basis. The result is an innovative, alternative business model, leveraging the capabilities within the wider Remgro Group of companies.