Distell results reflect increased consumption of premium brands

"We have placed our customers and consumers at the centre of our thinking, driving us to deliver continually improved products, matched by world-class service and fair prices that represent good value, while retaining margins at responsible levels," Scannell said. He stressed that chasing volumes at the expense of sustainability was not Distell policy.

Domestic sales

Domestically, sales volumes increased 7.2%, compared with the 2% growth of the entire alcoholic beverage sector. He said Distell's performance was the result of excellent growth from the company's RTD (ready to drink) and spirits portfolios. Elevated by cider brands such as Hunter's and Savanna, sales volumes of RTDs rose 16.9% , despite a highly competitive market (2005: 3.7%), while spirits volumes, including brandy, increased 3.2% (2005: 3.4%), with brands such as Klipdrift and Flight of the Fish Eagle contributing to growth. .

Wine sales volumes, even though they did increase 1.9% (2005: 2.6% decline), were "hampered by increased competition exacerbated by a global oversupply and a strong rand that saw many producers return to the domestic market".

However, both Durbanville Hills and Sedgwick Old Brown Sherry had shown exceptional growth, he said.

International sales

International sales volumes, excluding Africa, increased 18.7%. Total international revenue rose 14.8%. Defying the global trend that saw wine brands fight to retain position in an environment of protracted oversupply, the company produced a remarkable growth in wine sales volumes of 20.3%, comfortably outpacing the South African wine industry growth rate for the period.

"Good growth came from Canada, the Netherlands, Ireland and the US, led by brands such as Drostdy-Hof, Two Oceans, Nederburg and Durbanville Hills. Although we did not do as well as we hoped in the UK, there have been several very encouraging developments in recent months. These include the appointment of a new distributor for several drive brands, including Nederburg, now listed by Morrisons and Waitrose supermarket chains."

Amarula, Distell's biggest spirits brand and reportedly South Africa's most widely distributed alcoholic beverage, recorded a growth of 12.1%. "This was thanks to a robust performance in Germany, where Amarula is the fastest-growing cream liqueur, as well as excellent sales in Canada, the US and Brazil, where it is the market leader."

Off-shore presence

Scannell said Savanna was also beginning to build an off-shore presence, notable in the UK and several European countries. The brand was stocked by Tesco, as well as by an increasing range of on-consumption outlets.

Revenue derived from African countries increased 12.8% on a sales volume growth of 8.3%. Significant growth came from partnerships in Tanzania, Mauritius and Kenya, while even a joint venture in Zimbabwe managed to show profits, notwithstanding the country's economic crisis.

The group expects to continue to reflect growth in revenue and headline earnings excluding the BEE share-based payment, although growth is unlikely to be at the same levels experienced in recent years.

Scannell said that while business conditions in the domestic market remained favourable, increased interest rates and rising inflation would make it unlikely that growth rates achieved in recent years could be sustained.

"We do expect growth but at more modest levels than we have seen over the past few years and look forward to the impact of several new advertising campaigns, as well as investment in customer and consumer management strategies that allow us to engage more directly with these key stakeholder groups."

He said that similarly, further international growth was being anticipated despite the likely rise in fuel prices and its inflationary impact. "We have concluded distribution deals with new partners in North America, Australia and Spain and believe these relationships, together with established agency agreements, should boost sales volumes."