CAPE TOWN: South African liquor maker Distell aims to double sales and profit by 2020 through cross-border acquisitions to offset slowing growth at home, its chief executive said on Friday.
The company, which makes ciders, brandies and Amarula Cream, earns three quarters of its annual R12 billion ($800 million) revenue and R1.2 billion headline earnings in South Africa, an economy forecast to grow barely 1% this year.
“We’ve got the ambition to double the size of our business by 2020…and we are not going to create that without some sort of inorganic activity,” Chief Executive Richard Rushton told Reuters in an interview.
Rushton said Distell, which competes with Diageo, Pernod Ricard and Ab Inbev, was looking for opportunities elsewhere in Africa, where consumption prospects have been in doubt after the price of oil and other commodities – export mainstays of many economies – plunged. “We are exploring opportunities in Africa, but we are also doing so further afield,” Rushton said, adding he was most interested in middle-income emerging markets.
Distell prefers partnerships in developed markets such as the United States, but has set up a manufacturing facility in Ghana and has bought land to do the same in Angola. The liquor maker sees long-term potential in countries where disposable income is growing and the alcoholic beverage market is yet to be formalised, said Rushton.
Though Rushton says consolidation has largely played itself out in most of the world’s alcoholic beverage categories, he sees the merger between AB InBev and SABMiller as a “recalibration” in the market which could release assets to buy.
And he sees room for further mergers and acquisitions in the cider market, a category the firm has grown from nearly nothing in South Africa to sales of 4.6 billion rand in its business.
The global market for ciders is unevenly developed, he said, listing certain characteristics that would provide fertile ground for cider growth. “Places where societal attitudes toward alcohol are more open… and mixed gender drinking is not frowned upon.”
Rushton did not specify which countries Distell is eyeing, but hinted it would consider acquisitions of not only distillers and brewers, but also established consumer goods companies. “Because the category would develop almost from scratch in some of these markets, we’d clearly look to partner with someone that has some capability in the value chain,” he said.
