Distilling Sweet Spirits

Source: African Distillers Limited Source: African Distillers Limited

African Distillers Limited (Afdis), a story of spirits and now ciders that started in 1944.

The financial results for African Distillers Limited for the year ending June 30th, 2014, denote a maturing story of profit from inception of operations.

Afdis performance in this year is very impressive, spurred by volume growth, cost management, improved productivity and seasoned leadership.

Zimbabweans have fond memories of Afdis brands such as Viceroy, Gold Blend, Nikolai, Smirnoff, Gilbirt’s, Green Valley, Mainstay, Montello, Chateu, Amarula, JC La Roux, and now Hunters, Savanna, Sting and Esprit.

The story of African Distillers Limited begun in 1944.

In 1944, P. J. Joubert Limited was registered in Bulawayo, then changed its name to African Distillers (Rhodesia) Limited in 1946, whose activities were the sales and distribution of imported spirits, liqueurs and wines. 

During the same year a distillery was acquired in Mutare, and the local production of a range of spirits commenced. 

In 1951 African Distillers became a public quoted Company. 

In 1974, the company moved its present headquarters at Stapleford, a complex just outside Harare which houses production, warehousing and distribution facilities.

African Distillers Limited has five depots in Bulawayo, Harare, Kwekwe, Masvingo and Mutare which ensures a first- class distribution service; supplemented by customer Collection Depots countrywide.

The strong performance of Afdis has been achieved in a very difficult trading environment characterized by a slow-down in consumer spending and tight liquidity conditions. 

Meanwhile Afdis continues on a path to sustainable growth as it asserts itself in the market as the leader in the fine spirits, ciders and wines segment. 

The product portfolio has been expanded with the addition of ready to drink offerings such as the recently launched Esprit, and prior were Hunters, Savanna and Sting ciders.

The year’s volumes at 6.1 million litres grew 10% on prior year. Local product portfolio contributed 71%, up from 58% last year. Growth was driven by firm demand for brown spirits in the second half of the year.

Turnover for the year amounted to $35 million which is 18% above prior year. This is on the volume growth of 10%. 

Siting good performance and productivity, the Board of Afdis recommended a dividend of 0.45 cents per share.

In a move to reposition for future growth, Afdis recapitalised; the funds raised were for a project to localize the production of ciders, whose production is commenced in September 2014.

Recapitalization of the Company through a rights issue was successfully undertaken in January 2014, and an additional 15 451 174 shares were issued at a price of $0.3236, raising US$5 million, required to fund the new plant which will enable local production of the flagship cider brands, Hunters and Savanna.

Fundraising for Afdis was smoothed by the fact that 95% of its Shareholding is by resident Companies, Pension Funds, Individuals, Investments and Trusts, and other Organisations, whose interests are to grow the business as it is that profitable. The 5% non-resident shareholders were also supportive, injecting capital that saw their holding increase from 7% to 9% from 2013.

Tribute is paid to the company’s management and employees for their effort and commitment and producing an excellent result in face of a tough trading environment. 

Performance for the year under review was achieved in a difficult environment characterized by declining disposable incomes exerting immense pressure on aggregate demand. 

Despite the tough market conditions that prevailed, the company’s performance was commendable.

The competitive environment was dictated by issues of product affordability and typically, price remained a major consideration in consumers’ purchasing decisions ahead of brand loyalty. 

This was more evident on the mainstream and value product segments. The premium brands benefited from their strong positions in the market and remained significant contributors to the overall business performance.

Product innovation became a key strategic priority for growth during the period under review as two products were successfully introduced to the market namely Esprit and Savanna Dark. 

Esprit, a new Spirit Cooler range of products, was launched in September 2013 to a positive marketplace acceptance, while Savannah Dark, another cider brand extension offering continues to grow since its introduction.

The Spirits business anchored the company’s performance as total volumes grew by 26% on prior year, contributing 62% to total volumes. 

Brown spirits at a growth of 49% to prior year more than compensated for the 5% decline in white spirits, whose volume performance was under pressure from affordable low margin competing products. 

The white spirits segment has increasingly become prone to new entrants as it becomes highly commoditized. The business will strengthen fortification of its key Brown spirit brands while crafting margin enhancing and growth strategies to combat the battle for market share in the white spirits segment.

The Spirit cooler product portfolio was expanded with the introduction of the exciting Esprit, a fruit flavored product. Further growth opportunities will be investigated in this segment targeting new entrants into the alcoholic beverage market.

Focus will be on growing volumes through wider distribution of these products and exploiting the on-consumption outlets as depicted by restaurants. The local Green valley brand will witness a “facelift” in the form of a label and pack upgrade during the new trading year.

On trading activities targeted at product trial as well as improved merchandising techniques will assist volume performance in the outlook period.

This is an extract of the Annual Report for African Distillers Limited for the year ending June 30th, 2014, published August 21st, 2014.

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