Bucking the trend in exporting packaged wine

Over the same period, the country's export volumes of packaged wines have remained virtually unchanged on the previous 12 months but, in marked contrast, bulk wine exports have jumped 24%.

"Fidelity to brand equity, a solid distribution network and a wide geographic reach are helping us navigate our way through the global oversupply," says Gallow.

"Whereas many producers, particularly those who participate at the extreme value end of the spectrum, have been forced to collaborate with retailers and package abroad in an effort to maintain competitive pricing, Distell has eschewed the route of aggressive discounting to build market share. By investing in our brands over the long term, we have fortunately not been forced into compromising the integrity of our trademarks or of having to trade at unprofitable levels to keep going."

While South Africa's two biggest wine export destinations are the UK and the Netherlands respectively, Distell operates over a broader base. It is seeing strong growth in Germany and Scandinavia and, at the same time, North America is making a major contribution to export sales.

Last year, total wine sales in the US reached US$26bn, according to the San Francisco-based Wine Institute, with the biggest growth recorded in the price segment of US$7 and above, which grew 13% and is where Distell is most active.

Working with specialist distributors

Gallow says company strategy is to work with a range of specialist distributors selected to suit the individual profiles of the company's brands, working with leaders in retail and on-consumption channels, grocers and speciality wine outlets.

Last year Distell concluded a deal with US distribution giant Brown-Forman to represent the Durbanville Hills range that retails at the U$11,99/U$14,99 price point in the US. The distributor's European arm also sells the brand in the UK. Durbanville Hills exports have more than trebled in the year to March 2006.

The company will shortly announce a new deal with a leading national US distributor for another of its drive brands, Two Oceans. The brand recorded an international export growth of 21% for the year to March 2006, Gallows says.

Brands such as Nederburg, Zonnebloem and Fleur du Cap, selling for between US$7,99 and US$9,99, have also all reflected strong growth.

Critter-branded

"A recent ACNielsen study has shown that 18% of wines in the US market feature an animal on the label and that annual sales of critter-branded wine have reached more than $600m. While we don't have similar figures for Canada, we can see the impact of this trend on one of our brands, Obikwa, which has performed very well. It delivered a 43% growth in export volumes, with Canada in particular showing outstanding results."

Drostdy-Hof, more popular in European markets, recorded growth of 21%, he says.

He adds that the company is also actively pursuing the Danish and Middle Eastern markets. "By trading simultaneously in a range of countries we are better protected against individual market fluctuations."