Q&A | INDUSTRY INSIGHT
Distell frees its premium wines with Libertas Vineyards
There’s been relatively little time since Kay Nash was unveiled as the head of Distell's new premium wine unit, Libertas Vineyards & Estates. However, Nash has been working for Distell since the start of the last year, seeding the ground for one of company's most ambitious projects to date. Andy Morton sat down with her to find out more.
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Kay Nash's sizeable remit has not only been to break away Distell's premium wine portfolio from the group's spirits and RTDs and into the standalone Libertas. She is also tasked by Distell to breathe fresh impetus into premium wine brands such as Nederburg, Fleur du Cap and Durbanville Hills - and at the same time resuscitate South Africa's struggling premium wine category. It's a task the voluble South African has attacked with zeal, and a sense of national purpose.
"The reason I got involved was because Distell was deeply concerned about the sustainability of the [South African wine] industry. Because Distell is one of the biggest [wine companies], they get a lot of criticism. There was a sense we needed to play the game differently, pick up the national agenda and support what we can, instead of just rolling along. That requires a few of us on the lunatic fringe."
As a standalone, Libertas owns all of the assets - the estates, farms, sellers, bottling operations and everything else - that goes into making wine. Within that, each estate is moving towards a self-sustaining model that incorporates all of its functions on-site, be it marketing, HR or ground maintenance. The aim, says Nash, is to foster an entrepreneurialism often lacking in large corporations.
"People are starting to act like owners," Nash explains. "I've said to them - we don't phone the travel agent to book the flights to international trade shows. You get off your arse, find the cheapest flight and do it yourself. After all, do you know any magnificent wine brands on estates where the owner isn't obsessed and deranged?"
As an outsider, how did you view Distell's wine business when you came in a year ago?
We've got a business that's got fantastic brands, a business that has not been a focus for Distell. That's always an opportunity when you need to grow. The focus was more on the spirits and RTDs, and rightly so because the margins are much better. You'd be a raving lunatic to decide not to focus on that.
Also, some of our brands were suffering from the passing parade of change. When you look at wine brands and the roll of familiarity, people want to be excited. We have fantastic brands with proper authentic roots in history, but we sort of lost touch with some of that.
So, we took a top-down view of our brands and saw that we have hundreds of stock-keeping units (SKUs). It's chaos. Many of those SKUs are only marginally profitable and we're hoofing a couple of cases halfway across the world at which point it's actually cheaper to give them away at the airport.
We've got rid of a massive amount already. At least 150 [out of about 380], but the business hasn't faltered. We have a couple that are mission-critical but then a long tail. We have to chop off the long tail.
Which brands are mission critical?
Nederburg. If we are going to upsell premium South African wine we need a brand that can carry the South African mantel. So, Nederburg is really important.
There's also Durbanville Hills, our Cape Town urban winery. It's a big profit contributor, and Cape Town is very sexy. Everyone is interested in Cape Town.
We also have Pongracz. It's an MCC [méthode cap classique sparkling wine], fermented in bottles, and its growing like crazy. That's a cute one - it has huge margins and huge growth.
Will you strip out any brands?
No. We believe we need fewer SKUs and less complexity but you've got to have a good portfolio of brands. Our strategy is to double the top and halve the bottom.
How far into the project are you?
We're probably about 60% of the way in. We've restructured our business and no longer have a head office. In an estate model, the owners have their hands on everything. It's difficult for any business that isn't owned by its owners to be entrepreneurial. But, a big part of premium wine is that it's very personal. You have to care. You cannot sit on your computer in an air-conditioned office and hope to know what's going on.
That's a big change from before.
Yes, it's been a big shock to everyone. I think [Distell] are very brave and very committed, because I'm still here one year on. I promise you, I am a deep problem - shaking the tree and no idea how to act in the right way.
Does the rest of the industry need to be brave?
Yes, but they need to see that we are going to be. There are pockets in the industry that are doing a great job, and changing the perception of the South African industry. But, the big players, which have more to lose, have been more cautious. We've been the most entrenched in our own model. Now, we're saying, we are being the catalysts. We are like a following wind, we will support what is moving. But, people need to see.
Have you been spending more?
Yes, because you are culling and reducing the portfolio so revenue is going down. You'll have a better base of earnings, but it's expensive to lose turnover. Then, you have new people knocking around, changing things up, and that's expensive. You have to go through that investment phase. Then, you can cut out anything that is loss-making, and that's significant.
What are you doing in international markets to convince consumers to pay more for South African wine?
The first thing is not to put your products on shelf at silly prices. We're also bringing new products into that premium tier. And, we're going back to basics - magnificent juice and beautiful products.
We're also changing the Nederburg wine auction and building it up to be a real fine and rare auction for the entire industry. Previously, we haven't had all the producers [of wines scoring above 94 points] at the auction. It was very much Nederburg, at Nederburg with Nederburg and Distell. So, we're debranding it after 45 years. It's going to be the rare wine auction brought to you by Nederburg.
We will have all those magnificent South African brands in that auction, not just Distell.
It's a risk. It's all a risk, but we have to do it.
This article originally appeared on just-drinks