1

PREPARED FOR:

______________________________________________________________________________________

Study of the Liquor Industry in South Africa

_____________________________________________________________
PRIVATE & CONFIDENTIAL

Prepared by:

Date: March 2004

Reality Research Africa report prepared for the Department of Trade and Industry
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CONTACT DETAILS

Reality Research Africa’s team for the assignment includes:

• Karon Clare Research Executive

• Elliot Ramatapa Managing Member
• Bob Currin Member

The contact details for the company are as follows:

• Telephone Ê 011 442 6662

• Facsimile Ê 011 442 5299
• E-mail Ê statpack@global.co.za
• Address Ê 22, 7th Avenue
Parktown North
2193
• Post Ê Box 1436
Parklands
2121

This report has been prepared specifically for the Department of Trade and
Industry.

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Background
The last two years have seen a major initiative by the Department of Trade
and Industry to restructure the liquor industry. This drive has focused on
breaking existing monopolies and to bring new entrepreneurs on board,
while at the same time addressing the social and economic costs associated
with alcohol misuse.

As part of this process, the dti commissioned Reality Research Africa to

undertake a study investigating the current state of play within the
industry.

The South African Liquor industry is estimated to be generating gross

revenue of R30 billion per annum. The evolution of this industry has led to
an industry now characterised by a few companies with high levels of
horizontal and vertical integration. In addition to this there is a large illegal
or informal sector, confined mainly to retail, resulting in employment of a
survivalist nature.

This situation defeats the government’s approach to competition. The

government has proposed two policy shifts in its role as regulator:

i) To restructure the liquor industry and give priority to facilitation of

entry and empowerment of new entrants;
ii) To better reflect all costs associated with Liquor, including alcohol
related problems in health and other fields.

The vision is to determine the appropriate mix of enterprise and regulation,

to balance the interests of all participants in the liquor trade and of society
as a whole.

Objectives
The objectives of this study is to gain an in-depth understanding of the
South African Liquor industry, including major players, their composition,
dynamics and degree of fulfilling public policy objectives.

The brief indicated that the objective of the project is to gather

information with a view to providing input for the restructuring of the
industry.

The scope of this study encompasses the following criteria:

Overview of the Industry

i) The size and nature of the liquor industry – formal

ii) The number of manufacturers and distributors by province;
iii) Estimated annual turnover for manufacturers and distributors;
iv) Estimated alcohol volumes produced by manufacturers;

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Meeting the public policy objectives

i) Ownership and the level of vertical or horizontal integration of the

industry;
ii) Employment creation – manufacturing and distribution;
iii) Revenue generation – manufacturing and distribution;
iv) The need for fixed investment and infrastructure development;
v) Black economic empowerment in the industry – manufacturing and
distribution.

Approach to Market Analysis

The approach that we have adopted stems from the fact that primary
research is very expensive and that wherever possible existing, highly
accurate and reliable data should be utilised in the first instance and once
the broad parameters have been defined, primary research can be
commissioned.

The overview of the industry we approached using desk research. We

obtained data from public and private data sets as well as interfacing with
individuals within the industry itself.

Overview of the industry

The liquor industry has changed significantly over the last 2 years, with
mergers and insolvencies taking place and consequently dominance within
the industry has become obvious. The South African liquor industry has
experienced a period of consolidation arising in part from a polarisation in
which the larger players become more powerful and the smaller players
struggle to survive.

Size and Nature of the Liquor Industry

The South African liquor industry has experienced a period of consolidation

arising in part from a polarisation in which the larger players become more
powerful and the smaller players struggle to survive. The Distell merger
(while still subject to ongoing negotiations with the Competition Tribunal)
has brought economies of scale which make it difficult for even the other
large companies to compete. At the same time, the makeover of Gilbeys
South Africa into Guinness UDV has been completed and international brands
belonging to Guinness have largely (but not entirely, NB : Gordons Gin)
become part of the Guinness UDV portfolio. The result is that in brand and
therefore margin terms Distell faces an international competitor of real
significance in the spirits market. The domination by these two companies
of the branded spirits market will be dealt with elsewhere in this report.
Suffice it to say that there are poor pickings for anyone else seeking to do
business in this section of the industry.

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South African Breweries recorded a slight volume increase in 2003, mainly

due to very good December trading. The growth in presence however of
Namibian Breweries’ brands in the premium sector of the domestic market
shows that SAB’s virtual monopoly is being eroded. Just the same, it is fair
to say that there is little opportunity for other players to threaten SAB’s
domination of the beer industry.

Unsurprisingly, this climate has adversely affected the competitiveness of

most other players. DGB, now effectively owned by management, has
shown good consolidated growth with increased profitability in certain niche
markets, e.g. notably with brands targeted to the 18 – 30 year old disco /
night-club consumers. However, with Distell and Guinness UDV dominant in
the branded spirits sector, DGB is still forced to seek growth and margin
outside the conventional spirits industry. The company has seen a dramatic
increase in its wine volumes though a significant percentage of this turnover
comes from exports. Strong UK based relationships have protected the
volumes but it is safe to assume that margins are substantially under
pressure.

Winecorp is in the midst of a further reshuffle. The company recorded a

trading loss in 2003, blaming this on the strengthening Rand. It is reported
that shareholders are hoping to cease their ongoing funding commitments.
A major strategic study of the company and its potential is presently being
undertaken and it is not improbable that sections – if not the whole trading
business – may be offered for sale.

The bankruptcy of Cellarmaster in 2001 forced a vast number of local wine

producers to seek alternative distribution arrangements. DGB set up a fine
wines division and picked up some of the more lucrative brands. The Really
Great Brand Company expanded its range; so did Vinimark and Meridian.
New World Wine Agencies also grew as a result of this realignment.
However, it is safe to say that one of the difficulties faced by small wine
producers (and all overseas brands seeking representation in South Africa) is
the absence of real choice when it comes to local market representation,
especially in Gauteng and on a national basis.

For the minor players in the industry, survival is a real issue. Higher
distribution costs, too few viable brands (and too many rats-and-mice
products) have all undermined profitability. Late in 2003, Tayler &
Company shut its doors. Cape Vintners International also appears to have
ceased trading as a wholesale distribution operation. While Terroir has
been on the acquisition trail (from a brand / distribution point of view)
rumour has it that margin pressure is beginning to take its toll.

Local wine farms – many of which have enjoyed good times since the mid
1990s – are now experiencing margin pressure as the Rand strengthens and
international markets – many in recession – seek cheaper product. By the
middle of the second quarter of 2003, wines which had been offered
primarily to export markets were being reintroduced to local consumers.
Resistance by trade customers and sluggish domestic demand has put

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further pressure on these prices. The result is that many prestigious wine
brands which previously sold on allocation are now struggling to achieve an
acceptable level of sales. Wineries which were dependent on exports for
the bulk of their revenue are suffering severe negative cash flow. It is
reported that Stellenbosch Vineyards is showing quite serious losses. Even
strongly structured companies like Fairview find that their export sales
produce no real income.

The Rupert family has separated some of its own brands / estates from the
Distell umbrella. La Motte, L’Ormarins and Fredericksburg / Rupert &
Rothschild are now handled through a separate business as part of Meridian.
LUSAN, the family’s joint venture with Hans Schreiber is handled within
Distell as a separate division though it is rumoured that there have been
negotiations around Schreiber’s shareholding. Meridian – purchased by
Gavin Ditmar from Longridge prior to the acquisition by Winecorp of the
rump of Rupert Johnson’s business - has become one of the more visible
players at the premium end of the market. In other words, like DGB,
Vinimark, Really Great Brand Company, and New World Wine Agencies,
these smaller players have profited from the mergers, meltdowns, and
bankruptcies of the industry to become stronger within specific niche
markets. NMK Schulz appears to be stable, partly because of its
professional management, partly because of its specialty beer business.
George Pagan (formerly Pagan International) now trades as Wines of the
World and appears to continue to cobble a living from an extensive range of
Portuguese products offered to Portuguese communities in South Africa and
exported to neighbouring states.

The effect of Excise

Over the past decade, the State has sought to increase its share of wine
producers’ income. The previous government was particularly tolerant of
the wine farming interest and collected the bulk of its revenue from the
beer industry and from spirits producers. For example, in 1987 excise on
wine totalled R12.8 m whereas excise on brandy and wine spirit amounted
to R181.3 m. By 1997 however, wine excise had risen to R243.9 m (a twenty
fold increase) while on brandy and wine spirit it had increased to R545.4 m
(a threefold increase).

In 2002, wine excise totalled R355.1 m, brandy and wine spirit excise,
R634.6 m. Despite this enormous increase in the State’s share of wine
revenue, the industry has not been able to keep up with demand. In 2002,
it was compelled to import over 30 million litres of wine in bulk to meet the
requirements of the local wine market (by comparison, bottled wine imports
in the same year totalled a mere 429,000 litres). It is clear from this that
the domestic wine market is not significantly threatened by imports and
further that demand, despite a dramatic increase in wine excise, has grown
ahead of the industry’s ability to supply. Moreover, taking into account the
total State revenue from the wine industry (excise and VAT), producers’
income exceeded State revenue in 2002 for the first time since 1993.

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The extent and potential of Exports

The focus in this section is mainly on wine. There is a certain amount of

trade (legal and illegal) in all alcoholic beverages to neighboring states.
Beer, it should be noted, is generally brewed in the country of consumption.
Spirit exports, other than to neighbouring states and for the hospitality
industry, are mainly parallel trade. A notable exception is Amarula which
has grown to be a significant international brand with important markets in
South America and the Far East.

Wine sales have grown dramatically since 1995. In 1997, total wine exports
totaled 110 million litres. In 2002, this had risen to 217 million litres, and
exports had grown to 38% of total table wine production from just over 20%
five years before.

The UK is still South Africa’s most important customer, accounting for 97

million litres, followed by the Netherlands 37 million litres, Germany 16
million litres, Denmark 8 million, Belgium 8 million, and Canada 7.6 million
litres.

The recent strength of the Rand may have produced a tapering off in export
demand though the potential is still significant. In the past three years,
South Africa has leapfrogged into number 3 or number 4 position in the UK
market. From this, it appears that the baggage of the past has been largely
eliminated and this has been confirmed by market research. In a market
where Australia now outsells France, it would appear that the New World’s
credentials as a wine supplier are not in question. This in turn means that
the opportunity for further growth in this market should not be
underestimated. South Africa’s small presence in the United States and the
opportunities in Germany, other European countries and the Far East, all
suggest that, notwithstanding inefficiencies and high domestic costs
(themselves a consequence of years of a weak domestic currency), South
Africa’s wine export potential is still largely untapped.

Manufacturers
In order to better understand the industry as a whole, we have within our
research process looked at each manufacturer and gathered information
that encompasses the following:
• address details,
• contact details,
• number of employees,
• description of products,
• brand names,
• target audience,
• production capacity per annum,
• market share,
• shareholding,

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• empowerment stake (%)

In addition to this, manufacturers were asked to comment on aspects such

as:
• factors influencing the success or otherwise of the industry,
• competition and Barriers to entry,
• Prevailing conditions in the Industry

Our research process relied upon the co-operation of the various players
within the industry. This will be apparent in the detail given by the various
manufacturers.

We have defined a breakdown of the market as follows:

• Distilling, rectifying and blending of spirits; Ethyl alcohol production

from fermented materials; Manufacture of Wine: Large companies
• Distilling, rectifying and blending of spirits; Ethyl alcohol production
from fermented materials; Manufacture of Wine: Medium companies
• Breweries (excluding sorghum beer breweries)
• Sorghum beer breweries
• Smaller wine producers (information not available by individual
producer, but included as are vital to in obtaining an understanding
on the total industry volumes)

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Distilling, rectifying and blending of spirits; Ethyl

alcohol production from fermented materials;
Manufacture of Wine:
Large companies

Irish Distillers &

Groupe Pernod-Ricard
Remgro-KWV Investments Ltd – 60% Diageo plc (UK) – 100% (France) – 100%
Other Beverage Interests – 30% Brait Pvt Equity & Management – 80% KWV (Pty) Ltd – 55.6% Family owned – 100%
Other investors – 10% Graham Beck – 20% Old Mutual Life – 6%

DGB
Douglas Green Bellingham GUINESS UDV PERNOD RICARD
E SNELL Includes the former Co. handles just
4m cases p.a. KWV LIMITED*
Turnover 2003 – R500m Gilbeys Distillers & Under 1 m cases pa.
Turnover 2003 – R1bn
DISTELL* 15.75ml p.a. Vintners
SA Turnover : R381m
Turnover – R5 188m 1.75m cases pa.
Brandy : 630 000 l pa
31bn cases of spirits in SA Distill/Blend Wine : 19m l pa
Distill/Blend
Aguila Tequila, Bellingham,
Aguila Tequila,
AntonellaBellingham, Subsidiary
Antonella
Connoisseur Brandy, Distribute Company controls Long Mountain Co.
Connoisseur Brandy, Distribute
Wellington VSOB 70% of vodka market,
Subsidiaries Courvoisier, Culemborg, Distill Wellington VSOB
Courvoisier, Culemborg,
Douglas Green, Distill Welling VO, Glendower Has significant control
Distell Ltd – 100% Cathedral Cellar Welling VO, Glendower of whisky market &
Douglas
Harveys BristolGreen,
Cream Cathedral Cellar Whisky, Barclays Whisky
Stellenbosch Farmers’ Imoya Brandy Whisky,& Clyde
Barclays Whisky controls 20% of the
HarveysMullets
Millstream, BristolBlended
Cream Imoya Brandy Bonnie Whiskey
Winery Ltd – 100% KWV Brandy 10 & 20 yr Bonnie & Clyde Whiskey spirit market
Millstream,
Rum, Nordic Ice,Blended
Mullets KWVKWV Brandy 10 & 20 yr Firstwatch Whiskey Manufacture
Manufacturers of Wine Reserve Firstwatch Whiskey Manufacture
OudeRum, Nordic
Kaap Ice,
(export) KWV Reserve Two Key Whiskey Gecko Ridge
Nederburg Wines – 100% Roberts Rock
POOude Kaap (export)
10C, Saints 1,2 &3 Roberts Rock GlenTwoEagle
KeyWhiskey,
Whiskey Gecko
Long Ridge
Mountain
Durbanville Hills Wines – 67% Distribute Glen Eagle
PO 10C, Saints
St Augustines, Butlers1,2Marula
&3 Distribute Stretton’s Gin, Whiskey,
Russian Long Mountain
Martell Brandy
Farming Backsberg Estate, Stretton’s
St Augustines,
Cream, Butlers
St Claire, Tang SourMarula
Apple Backsberg Estate, Bear Vodka, Gin,
CapeRussian
to Rio Distribute
Martell
Ilala Brandy
Liquors
Nederburg Wine Farms – 100% Beyerskloof Estate, BearJack
Vodka,
Cream,J’wana,
Zappa, St Claire,Cape
TangRuby
SourPort
Apple BeyerskloofEstate,
Estate, Cane, TarCape to Rio
Dark Rum, Distribute
Archars, Baileys
Ilala Liquors
Distribute
Bouwland Cane, JackGrapefruit
Tar Dark Rum,
Zappa, J’wana, Cape Ruby Port
Icon , J’wana Bouwland Estate,
Cathedral Cellar,
Hoopers
Hoopers Grapefruit
Archars,
Bells, Baileys
Pimms AbelourDistribute
Single Malt
Icon , J’wana Schnapps, Bells, Pimms Abelour Single Malt
Import/Distribute
Import/Distribute ClosCathedral Cellar,
Malvern Estate, Schnapps,
Hoopers Peach Schanpps
Bertrams VO
Bertrams VO
Armagnac
Armagnac
See Company Spread Sheet: Angostura Bitters, Cointreau Clos Malvern
Coastline, Estate,
De Wetshof Hoopers PeachAperitif,
Schanpps Cape Velvet Bisquit Cognac
See Company Angostura Bitters, Cointreau Cape Hope Cape Velvet BisquitSingle
Cognac
for full Spread
list: Sheet: Ballentines
Ballentines
Whisky
Whisky
Coastline,
Estate, GrootDe Wetshof
Constantia Cape Hope Aperitif,
Gingo’s Silver, Jack Daniels,
Gilbeys Bushmills
Bushmills
Malt
Single Malt
for Fruit
full list: Estate, Gilbeys
Alcoholic Bev’s: Mateus Rose Estate,Groot Constantia
Kanonkop Gingo’s Silver,Comfort
Jack Daniels, Gordons, J&B, Busnel Calvados
BusneldeCalvados
Alcoholic10Fruit
Approximately Bev’s:
brands from BeefeaterMateus
LondonRoseDry Gin, Estate, Kanonkop
Estates, KWV, Neil
Southern
Southern Comfort
Gordons,
Johnnie WalkerJ&B,
Black, Café Paris
Approximately 10 brands from Beefeater London Dry Gin, Famous Grouse, Moet & Johnnie Walker Black, Café de Paris
Bernini to Savanna Black Douglas
BlackKahlua,
Old Scotch
DouglasJagermeister
Old Scotch EllisEstates, KWV, Neil
Estate, Pearly Bay, Famous Absolut
Chandon, Grouse,Vodka
Moet & Johannie Walker Red
Johannie Walker Red
Chivas
Chivas
Bernini to Savanna Whisky, Ellis Estate, Pearly Bay,
Roberts Rock, Roodeberg, Chandon, Absolut Vodka Jose Cuervo, Clan Campbell
Whisky, Clan Campbell
Wines: KrugKahlua,
ChampagneJagermeister Roberts
Rust enRock,
VredeRoodeberg,
Estate
JoseSmirnoff
Lupini, Cuervo, Dec Wines
Krug Champagne Lupini, Smirnoff Dec Wines
More than 50Wines:
brands from Red Heart, Remy Martin
Red Heart, Remy Martin
Rust
SilverenLining,
VredeVanEstate VAT 69 Havana Rum,
Havana Rum,
Jacobs
Jacobs
More than 50
Allesverloren brands from
to Zonnebloem Schoonspruit, Tia Maria Loveren Estate,Van
Silver Lining, WhiteVAT 69
Horse Creek Wine, Jameson
Allesverloren to Zonnebloem Schoonspruit, Tia Maria LoverenEstate.
Estate, White Horse Irish Creek
Whisky,Wine,
La Jameson
Fontane
Tia Maria, Veuve Cliquot, Warwick Guiness, Ciroc,
Tia Maria, Irish
Wines,Whisky,
MartellLaBrandy
Fontane
Spirits: Coburns Port,Veuve Cliquot,
Ferriera Port Warwick Estate. Guiness,
Moet Ciroc,
& Chandon
Coburns Port,Casa
Ferriera Port Moet & Chandon Wines, Martell Brandy
Approx 50Spirits:
brands from Mateus
Mateus
Rose, Garcia (jv with LVMH) Murrayfield
Murrayfield
Whisky,
Whisky,
Approx
Admirals 50 brands
Reserve from
to Viceroy Malibu Rum,Rose, CasaWhisky
Teachers Garcia (jv with LVMH) Pernod, Ramazotti
Malibu Rum,VAT,Teachers Pernod, Ramazotti
Admirals Reserve to Viceroy Highland Hooch,Whisky Digestif, Ricard Pastis,
Highland VAT, Hooch, Digestif,
The RicardSingle
Edradour Pastis,
Graham Beck, Galliano,
GrahamDisarona
Beck, Galliano, The
Malt,Edradour
Wild TurkeySingle
Drambuie, Originale
Drambuie, Disarona Originale Malt, Wild Turkey

* Listed on the JSE

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DGB (PTY) LTD

A private company created out of the merger of Douglas Green and Bellingham.
Postal Address Physical Address Telephone: 011 653-1000
PO Box 7896 724 Sixteenth Fax Number: 011 653-1101
Avenue
Halfway House Randjiespark Website: www.dgb.co.za
Gauteng Midrand Gauteng
Code
: 1685 1685
Contacts : Name Designation Contact at:
Harry Dare Director: (Marketing Director)
Mr Y Ebrahim Director
Timothy Hutchinson Director: Managing
Michael Lovell Director: Financial
Mr CC Smit Director
No. of Employees 500
In January 1999 there was a change in the DGB
shareholding whereby a consortium consisting of Brait
Private Equity and Management acquired a 80%
Shareholders shareholding. Graham Beck - 20%
Empowerment Stake % nil

Description of Products :
The company produces wine and spirits and also imports, exports and distributes
fortified wines, spirits, liquors, as well as soft drinks and bottled waters.

Target Market :
Retail, hospitality and airlines.

Brandnames :
Aguila Tequila, Angostura Bitters, Antonella, Ballantines, Beefeater London Dry
Gin, Bellingham, Black Douglas Old Scotch Whisky, Cape Ruby Port, Casa Garcia,
Cockburns Port, Cointreau, Connoisseur Brandy, Connoisseur Superior VO,
Courvoisier, Culemborg, Disaronno Originale, Douglas Green, Drambuie, Ferreira
Porto, Galliano, Graham Beck, Harveys Bristol Cream, Highland Vat, Hoopers
Hooch, Icon, J’wana, Jagermeister, Kahlua, Krug Champagne, Mateus, Millstream,
Mulletts Blended Rum, Nordic Ice, Oude Kaap, PO 10 C, Red Heart, Remy Martin,
Saints 1,2 & 3, Schoonspruit, St Anna, St Augustine, St Augustines, St Claire, St
Morand, St. Raphael, St. Vincent, Tang Sour Apple, Tia Maria, Valvita, Veuve
Cliquot Champagne, Zappa

Production Capacity pa: 4 Million cases per year (approximately)

Factors influencing the success or otherwise of the industry :

The company acknowledges that it is reliant on the export market for growth,
which presents vulnerabilities when the rand strengthens. However a strong rand

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is advantageous when importing spirits for distribution.

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Competition and Barriers to entry :

Has always been a very competitive industry.

Prevailing conditions in the Industry :

The company has seen a dramatic increase in its wine volumes, however a
significant percentage of their turnover is due to exports. Margins, however, are
under pressure.

General Comment :
Approximately 20% - 25% of turnover is due to exports primarily to the United
Kingdom. The company prefers to seek growth outside the conventional spirits
industry and targets the clubbing consumer in the 18 - 30 yr age bracket.

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DISTELL GROUP LIMITED

Listed on the JSE.
Postal Address Physical Address Telephone: 021 809-7000
P O Box 184 Aan-de-Wagen Fax Number: 021 886-4611
Road
Stellenbosch Stellenbosch Website: www.distell.co.za

Code : 7599 7600

Contacts : Name Designation Contact at:
Duimpie Bayly Director: Non-Executive
Piet Beyers Director: Non-Executive
Merwe Botha Director : Financial
Johan Carinus Director
Stoffell Cronje Human Resources Director
Edwin de la H Hertzog Director : Non-Executive
Smartie Genade Operations Director
Hennie Heyl Director: Production
Director : International
Etienne Heyns Operations
Gert Loubser Director: Research
Mr MJ Madungandaba Director: Non-Executive
David Nurek Chairman
Scott Pitman Director : Marketing
Daan Prins Director
Jan Scannell Managing Director
Andre Steyn Director : Corporate Affairs
Peter Swartz Director: Non-Executive
Timothy Tarr Director : Sales
Thys Visser Director: Non-Executive
No. of Employees 4300
Remgro-KWV Investments: 60%; Other Beverage
Shareholders Interests (Pty) Ltd: 30%; Other investors: 10%.
Empowerment Stake % None
Turnover (R million per 5 188m Year End: 2003
annum)

Trading Subsidiaries :
Distillers Corp (Botswana) (Pty) Ltd, Distillers Corp (Namibia) Ltd, Distillers
Corporation International Ltd, Distillers Corporation Ltd, Durbanville Hills Wines
(Pty) Ltd, Ecowash (Pty) Ltd, Expo Liquor Ltd, House of JC le Roux, Lusan Holdings
(Pty) Ltd, SFW Ltd, Swaziland Liquor Distributors Ltd, Western Province Cellars
Group Ltd

Description of Products :

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Distell is a producer, distributor and markets flavoured alcoholic beverages as

well as fine wines and spirits.

Brandnames :
5th Avenue, Admirals Reserve, African Sky, Allesverloren, Alto, Amarula, Angels
Share, Autumn Harvest, B & G Schnapps, Bacardi, Bernini, Blowhole, Bols,
Brandydale, Bucksfizz, Cameron, Capenheimer, Castelo Gingerfizz, Cellar Cask,
Chateau Libertas, Chateau V O, Clan McGregor, Clubman, Commando, Consulate,
Copperband, Count Pushkin, Crown, Dewars, Drostdy Hof, Dunns, Durbanville
Hills, Espirit Ales, Fleur du Cap, Flight of the Fish Eagle, Fort Simon, George Spies,
Glenfiddich, Golden Alibama, Gordons, Graca, Grand Mousseux, Grants, Green
Spicer, Grunberger, Harrier, Hilltop, Honey Blossom, Hunters, Jacobsdal, Jacques
Pinard, JC le Roux, Kalahari, Kellerprinz, Klipdrift, Knights, KWV, Lanzerac, Le
Bonheur, Lemon Sting, Lieberstein, Louis Roederer, Macleans, Mainstay,
Manhattan Lemon Sting, Martell, Martini, Meerlust, Mellow-Wood, Moby Dick,
Monis, Nachtmusik, Nederburg, Neethlingshof, Olaf Bergh, Old Buck, Oom Tas,
Original Paarl Perle, Oude Meester, Overmeer, Peche Royale, Pimms, Plaisir de
Merle, Pongracz, Richelieu, Rietvallei, Romanoff, Roodendal, Royal Oak,
Sableview, Savanna (Savuti), Scottish Leader, Sedgewicks, Seven Seas, Ship
Sherry, Stellenryck, Stellenzicht, Tanqueray, Tasheimer, Tassenberg, Thandi,
Theuniskraal, Thomas Jefferson, Three Ships, Tukulu, Two Oceans, Uitkyk,
Underberg, Van Ryns, Viceroy, Virginia, Zonnebloem, Zorba

Sales by Volume: 15m cases of wine

Market Share (Estimate) :

70% brandy; 40% spirits; 50% FAB

Factors influencing the success or otherwise of the industry :

The company still feels the impact of cell phone and gambling spend which has
resulted in a drop of national alcoholic beverage sales. However, premium
brandy showed good growth and premium wine showed the strongest growth
with 23%.

Prevailing conditions in the Industry :

Distell gained market share in all the major categories except flavoured alcoholic
beverages. Better domestic growth and improved customer demand in the
forthcoming year is expected. Internationally, the picture has been less positive
with the world economy in poor shape, although it does seem to be improving.

General Comment :
The company’s retail outlets are Western Province Cellar and Liquor Town, both of
which have shown a lack of profitability. The competition authorities ruled that
the company had to relinquish the brands Martell and KWV 10 and 20 year old
brandies. The company was able to fill the gaps left with their existing extensive
range. Distell dominates the local gin market.

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EDWARD SNELL & CO. LTD

Postal Address Physical Address Telephone: 031 902-8877

PO Box 26325 49 Joyner Road Fax Number: 031 902-8553
Isipingo Beach Prospecton Website: www.esnell.co.za
Kwazulu-Natal Isipingo Kwazulu-
Natal
Code
: 4115 4115
Contacts : Name Designation Contact at:
William Hooper Director

Dave Hooper Director: Managing

Iain Hooper Deputy MD
Jean Marc Pousson Director : Financial jmp@esnell.co.za
Neil Proudfoot Director
George Topp Director
No. of Employees 300
Shareholders Privately owned.
Empowerment Stake % Nil

Description of Products :
The company is the third largest alcohol spirit beverage business in the country,
producing, warehousing, distributing and selling their own brands, as well as a
number of major international brand names.

Target Market :
Lower end of the consumer market

Brandnames :
Barclays, Barclays Whisky, Bonnie & Clyde, Cape Hope, Cape to Rio Cane,
Firstwatch Whisky, Glen Dower, Glen Mill Light Rum, Glen Morangie, Glendower
Whisky, Gleneagles, Hoopers Grapefruit Schnapps, Hoopers Peach Schnapps, Jack
Fraser, Jack Tarr Rum, Russian Bear Vodka, Strettons London Dry Gin, Two Keys,
Wellington VO, Wellington VSOB

Units manufactured pa 15.75m litres

Market Share (Estimate) :

18%

Factors influencing the success or otherwise of the industry :

The excise duty which is soon to be increased will negatively affect the industry.
The SFW/Distell merger is now a stronger force to be reckoned with, despite them
having to relinquish certain brands to appease the competition authorities.

Competition and Barriers to entry :

15
 16

Fair competition

Prevailing conditions in the Industry :

The respondent commented on the growing illegal trading operations which are
adversely affecting business.

General Comment :
As the company performs almost exclusively in the discount market they battle to
compete in terms of shelf space, influence or net revenue. The company’s wine
distribution amounts to approximately 5% of turnover. The percentage of export
sales is considered fairly big which they would like to increase however due to the
strong rand it could be difficult. They distribute the following international
brands: Jack Daniels, Southern Comfort, Famous Grouse, Moet & Chandon and
Absolut Vodka. They bottle Southern Comfort under licence to Brown Forman
Beverages of America. They have offices in Bloemfontein, Cape Town, George,
Kempton Park, Newcastle, Pietersburg, Durban and Port Elizabeth.

16
 17

GUINNESS UDV SA (PTY) LTD

Postal Address Physical Address Telephone: 021 917-4200

Private Bag X21 Old Oak Office Fax 021 917-4399
Park - Acorn Number:
House
Tyger Valley cnr Durban and Website: www.diageo.com International
Old Oak Roads
Cape Province Tyger Valley Cape e-Mail: info@gudv.co.za
Province
Code: 7536 7536
Contacts : Name Designation Contact at:
Mr GM Ballantine Director
Mr CP Caldwell Director : Financial
Mrs SA Keith Director : Marketing
Mr DA King Director
Simon Litherland Director : Managing
Mr SKT Seane Director
Mr JA Steyn Director : Sales
Karen Van der Meulen Manager : IT Development
No. of Employees 400
Shareholders Diageo plc (UK) 100%
Empowerment Stake % Nil

Description of Products :
The company manufactures, imports and distributes liquor.

Brandnames :
Archers, Bells, Bertrams VO, Cape Velvet, Captain Morgan Black Label, Captain Morgan
Spiced Gold, Gilbeys, Gordons, Guiness, J&B, Johnnie Walker Black, Johnnie Walker Red, Jose
Cuervo, Lupini, Sambucca - Black & White, Smirnoff, Smirnoff Spin, Vat 69, White Horse

Main Competitors and Comparative Size :

Distell

Market Share (Estimate) :

20% of spirits

Competition and Barriers to entry :

Very competitive market

General Comment :
The company controls 70% of the vodka market and has a significant control of the premium
whisky market. They also control 20% of the spirit market. Diageo, the holding company, are
considered to be the largest producer and distributors of liquor in the world.

17
 18

KWV LTD
Bankers : ABSA Ltd. Auditors : PriceWaterhouseCoopers.
Postal Address Physical Address Telephone: 021 807-3078
KWV Group 57 Main Street Fax Number: 021 863-1061
PO Box 528 Suider Paarl Website: www.kwv.co.za
Suider Paarl
Code : 7624 7624
Contacts : Name Designation Contact at:
Willem Barnard Director : Manager (Group)
Mr WB Bestbier Director: Managing
DC Cronje Director : Non-Executive
D De Wet Chairman: Deputy
FA Du Plessis Director : Non-Executive
AS Du Plessis Director: Non-Executive
CJ Du Toit Director : Non-Executive
Mr AW Eksteen Group Secretary
WR Hewett Director : Non-Executive
Mr WR Hewitt Director
PBB Hugo Director : Non-Executive
LN Jonker Chairman
Mr TN Kotze Director
Mrs E Mouton Director
PB Retief Director : Non-Executive
FA Sonn Director: Non-Executive
Wiehan Viviers Manager : Marketing
CH Wiese Director : Non-Executive
No. of Employees 723
Shareholders VinPro Co-operative Limited - 10%
Empowerment Stake % Nil
Turnover (R million per 1bn Internationally, Year End: June 2003
annum) South Africa
turnover - R381m =
37% of turnover

Description of Products :
KWV distills rebated brandy to the specifications of Distell and E Snell, which they
send to them for further blending of the liquid into the finished product. KWV also
manufactures wines and fortified wines through their interest in Distell, as well as
a grape fruit concentrate for non alcoholic beverages which is sent to the Ceres
Fruit juice factory

Brandnames :
Backsberg Estate, Beyerskloof Estates, Boschendal Estate, Bouwland Estate,
Cathedral Cellar, Clos Malvern Estates, Coastline, De Wetshof Estate, Groot
Constantia Estate, Imoya Brandy, Kanonkop Estates, KWV Brandy 10 & 20 year,

18
 19

KWV Reserve, Neil Ellis Estate, Pearly Bay, Perold, Roberts Rock, Roodeberg, Rust
en Vrede Estate, Silver Lining, Van Loveren Estate, Warwick Estate

Sales by Volume: Brandy - 630 000 litres & 19m litres of wine

Turnover per product :

Local turnover figure pertains to brandy sold locally.

Market Share (Estimate) :

50% of the local brandy market

General Comment :
KWV South Africa buys in the wine from its Co-op members, and further blends,
matures, and distills it before passing the products to KWV International for
selling abroad, and Distell and Edward Snell for the local market. KWV
International is the marketing arm of the group who, up until recently, exported
all their products. Due to the restraint, which forbid them from trading in South
Africa, being lifted in 1999 and the restriction placed on Distell from distributing
KWV 10yr & 20 yr old brandy (as a result of Distell’s merger with SFW), KWV will
now become involved in marketing and distributing within the country.

19
 20

PERNOD RICARD SOUTH AFRICA (PTY) LTD

Postal Address Physical Address Telephone: 021 880-8800

PO Box 1324 2nd Floor, Carpe Fax Number: 021 880-8860
Diem
Stellenbosch Cnr. Proton and Website: www.longmountain.co.za
Quantum Streets
Western Province Techno Park www.pernod-ricard.com
RSA Stellenbosch
Code
: 7599 7600
Contacts : Name Designation Contact at:
Director :
John Bailie Marketing
Manager : Group
Dirk Conradie Brand
Audrey De Mardt Public Relations
Director:
Mr DP de Mardt Managing
Director: National
Fergus Fitzgerald Sales
Manager :
Jane Snyman Financial
No. of Employees 150
Shareholders Pernod Ricard Groupe - 100% via Irish Distillers.
Empowerment Stake % Nil

Trading Subsidiaries :
Long Mountain Wine Company

Description of Products :
The company manufactures Long Mountain wine and Gecko Ridge wine, Martell
Brandies and Ilala Liquors. They import a considerable amount of spirits which
they distribute along with their own products, throughout the country. They also
export just under half the company’s turnover.

Target Market :
Retail and hospitality industry

Brandnames :
100 Pipers, Aberlour Single Malt, Armagnac, Benriach, Bisquit Cognac, Black Bush
Powers, Bush Mills, Bushmills Single Malt, Busnel Calvados, Cafe de Paris, Chivas
Regal, Chivas12yr old, 18 year old and standard, Clan Campbell, Gecko Ridge
Wines, Glen Grant, Glen Keith, Glenlivet 12,18 & 21 yr old, Havana Club Anejo
Rum, Havana Club Silver Dry Rum, Jameson Irish Whisky, Long Mountain Wines,
Longmorn, Martell Brandy, Martell range of Cognacs, Olmeca Tequila Blanco &
Gold, Pernod, Powers, Prince Charlie, Ramazotti Amaro, Ricard Pastis, Royal
Salute - 21 yrs old, Sambucca - Black & White, Seagrams Gin, Strathisla, Wild

20
 21

Turkey, Wild Turkey Rare Breed

Units manufactured pa Just under 1m cases per annum

Factors influencing the success or otherwise of the industry :

The demise of Seagrams saw the company inheriting most their brands.
Internationally, the company is one of the world’s three largest leading liquor
companies.

Competition and Barriers to entry :

Has always been a very competitive and dynamic market.

Prevailing conditions in the Industry :

The company’s brands are becoming stronger, with the premium brands growing.
All categories are showing strong growth.

General Comment :
The company’s wine has been accepted very well internationally. It is the No.1
selling SA wine in Ireland and the 4th biggest selling wine in the United Kingdom.

21
 22

Distilling, rectifying and blending of spirits; Ethyl

alcohol production from fermented materials;
Manufacture of Wine:
Medium companies
Business Partners Ltd Standard Bank of SA –32.44% Capricorn Group via
Gandalf Trust
Real Equity Trust –21.63% SpierHoldings Citation Holdings SA (Luxemborg) –70%
100% Kovacs Investments 608 –30%
AFRICAN WINES & 100%
BULMER SA SPIRITS STELLENBOSCH
Produce : 240 000 cases pa. Distributes : 200 000 –25 000 VINEYARDS WINECORP LTD
300 000 litresbulk concentrate Cases pa. Produce : 3.7m cases @ Turnover 2003 : R85m BOSCHENDAL ESTATE WINE
(for export) 6 bottles pa. Produce :2.6m litres 180 000 cases pa.
Handled : 9m litres
Blends & Distributes
BertraBlmsWiendsne,& PorDisttr&ibSher utesry; Produce & Distribute Produce
Produce & Distribute
CamparBeri;trCiamsWi
nzanoFine,vPore Spit &ritSherCoolrye;rs; VersProduce
us; Genesi&sDi; Kumkani
stribute; Produce Produce
Bad GirlProduce
; Crossbow& DiCisdterrib; Harutedys VersInus;finiGenesi s; Kumkani Produce
i ; Longride; Spier; Savana; Bay
Boschendal
Cider; Merrl;rCrimoansCi
Bad Gi ssbowderCi;dScrer; uHarmpydys CinzanoSpumantnzanoFi
Campar i; Ci ve Spirit Cool
e; CinzanoVer moutehrs;s; ti; Shamwar
Infiniti; Shamwari View;LongrCapeide;LandsSpie&r; PrSavana; Bays
Boschendal
CinCrzanoSpumant ivate Label
CiderJack;
; MerStrimroansCi
nbowCiderd;erScr; umpy aighall Wines;e;GrCianndzanoVer Marniemr;ouths; View; CapeDiLands Distribute via
stribute Labels
& Pri vat e
SyberianIce, TattoonbowCi
Jack; St r o; VodkaderCr; uiser Marie Brizard Liquors (imporMartend)ie;r;
Cr ai ghal l Wi n es; Gr a nd
subsi di ary DistributeKensi
company, via ngton
Savanha; BayDiVisteriw;butCape
e Lands
SyberianIcZole,eTatnskiItoo;ceVodka Cruiser MontMarezCof
ie Brifzeare dLiLiquorquor; OudeMol
s (importeed)n; subsidiary company, Kensington
Savanha; Bay View; Cape Lands Wholesale Liquor Distributors
ZolenskiIce BrMontandieezCof
s; PelfeleegrLiiqnuoriBi;t OudeMol
ers; Skyy en Wholesale Liquor Distributors
Vodka; South/South West Indit ees;rs;TaiSkyyt inger
Bra ndi e s; Pel l e gr i niBi
Vodka; South/SoutWhihteWestDiamond
Champagne; Indies;Cane.
Tait inger
Champagne; White Diamond Cane.

Allan Grey –22.9%

Charles Back First Rand Asset Management –15% AlcofinanceSA (Belgium)
Old Mutual –18.8%
JaquesGermanier(Swiss) 100%
100% InvestecAsset Management –9.4%
Anglo American Corporate via
100%
FAIRVIEW ESTATES Anglo American Farms
Company would not AFRICAN TERRIOR NCP ALCOHOLS
100%
advise volumes 21m litres ILLOVO SUGAR LIMITED* 250 000 h litres
Turnover 2003 : R680m
VERGELEGEN ESTATES WINE Downstream products
Turnover 2003 : R20 –30m [c] 50m litrespa
Produce: Produce:
36 000 cases pa.
Fairview; GoatsProduce:
Do Roam; Red Seal; MiiltonGroveProduce:
; Out of Africa; Company processes
Fairview; GoatSpicseDoRoutRoam;
s Red Seal; Tribal Range; Win; dsOutofofChange
Mi il to nGro ve Africa;
DownstCompany processes
ream alcohol products
Spice Routs Tribal Range; Winds of Change
Company has 2 distil iery Downstproduced ream alfcrooholm thpreoducts
Local Distributor: Local Distributor: Produce plantCompany
s in Merebank& has 2 diGlsteilndalierye
sugarprcompany
oduced fTongaat
rom the -
They RealLocal
ly GreatDisBrtraibndutCompany
or: CommerLocal
ce SpiDiritsutexD’
ributAofr:rique
VerProduce
gelegen
plaPrntosduciin Merngehibank& Gl
gh quality e ndal e sugar company
Hullet Tongaat-
They Really Great Brand Company Commerce SpirituexD’Afrique Vergelegen Pr o duci n g hi g h qual it y Hullet
ethyl alcohol –base product
ethylForalcohol –base
spirit drinks pro duct
For spirit drinks

22
 23

AFRICAN TERRIOR (PTY) LTD

Company was known as Savisa.
Postal Address Physical Address Telephone: 021 869-8103
P O Box 2029 Distillery Road Fax Number: 021 886-4838
Windmeul Stellenbosch Website: www.african-
terrior.co.za

Code
: 7630 7600
Contacts : Name Designation Contact at:
Alain Cajeux Cellarmaster
Olivier Glannaz Director : Managing
Dawie Kriege Manager : Financial
Pierre Smit Manager : Operations
No. of Employees 180
Shareholders Privately owned - Jacques Germanier (Swiss)
Empowerment Stake % nil

Description of Products :
African Terrior only manufactures wine. The company owns the following farms:
Sonop, Kersfontein, Diemersdal Estate and Cilmo Winery. Initially, African Terrior
distributed solely to the international market. However, in June 2003 it began
distributing its wine through Commerce Spirituex D’Afrique, a South African
company, which distributes to both the retail and hospitality industries.

Target Market :
Primarily export market, although attempts are being made to capture the local
market.

Brandnames :
Milton Grove, Out of Africa, Tribal Range, Winds of Change

Units manufactured pa 21 m litres

General Comment :
The company is part of a Swiss Group, who also own Italian Terrior and Swiss
Terrior. The countires that they export to are : United Kingdom, Germany,
Norway, Sweden, Finland, Denmark, Holland, France, Italy, Japan, Hong Kong,
Canada and Switzerland.

23
 24

AFRICAN WINES & SPIRITS (PTY) LTD

Postal Address Physical Address Telephone: 021 680-9300

P O Box 389 Level 1 Fax Number: 021 680-9386
Constantia Dean Street Website: www.africanwine.co.za
Arcade
South Africa Newlands Cape
Code : 7848 7700
Contacts : Name Designation Contact at:
Mike Cox Director : Marketing 021 794-6697
Kees de Haan Director
James McLaghlan Director : Managing 021 794-6697
Andre van Wyk Director : Operations
Chris Weeden Director : Sales 021 794-6697
No. of Employees 36
Shareholders Business Partners Ltd - majority shareholder

Description of Products :
The company sources and blends its own wines and spirits, and distributes them
throughout the country. Wine equals 65% of turnover and the premium branded
spirit market, the balance.

Target Market :
Retailers and hospitality industry

Brandnames :
Bertrams Wine, Port & Sherry, Campari, Cinzano Five Spirit Coolers, Cinzano
Spumante, Cinzano Vermouths, Craighall Wines, Grand Marnier, Marie Brizard
Liquors - imported, Montez Coffee Liquor, Oude Molen Brandies, Pellegrini Bitters,
Skyy Vodka, South / South West Wines, Taittinger Champagne, White Diamond
Cane

Units manufactured pa 200 000 - 250 000 cases pa

Factors influencing the success or otherwise of the industry :

The company believes that the consolidation in the market has been to their
benefit. The industry is going through tough times. Trends are changing all the
time to such an extent that clients do not know how to order. Due to the strong
rand and the consequent affect on exports, there now tends to be a glut of wine
on the market.

Prevailing conditions in the Industry :

The company is sensitive to the economic conditions in the country as they
represent niche brands aimed at the upper end of the consumer market.

General Comment :
Approximately 15% - 18% of turnover is exported primarily to Europe and Africa.
The company is looking at growing this export figure.

24
 25

BOSCHENDAL ESTATE WINE

Postal Address Physical Address Telephone: 021 870-4200

Boschendal Pniel Road Fax 021 874-1864
Number:
P O Groot Groot Website: www.boschendal.com
Drakenstein Drakenstein
www.directory.wine.co.za
Code : 7680 7680
Contacts : Name Designation Contact at:
Charles Boswell Director
Chris Nissen Director
Clive Venning CEO
No. of Employees 200
Citation Holdings SA (Luxemborg) - 70% & Kovacs
Shareholders Investments 608 (Pty) Ltd - 30%
Empowerment Stake % 30% Kovacs Investments 608 (Pty) Ltd

Trading Subsidiaries :
Kensington Wholesale Liquor Distributors

Description of Products :
Boschendale produces wine under its own label, and distributes the wine through
its subsidiary compay, Kensington Wholesale Liquor Distributors.

Brandnames :
Boschendal Estate

Sales by Volume: 15 000 cases per month

General Comment :
The estate has been taken over by the new consortium. Its previous sister
company, Vergelegen Estate is still assisting the new holding company in the day-
to-day running of the business. The new consortium proposes a low density
residential development that will not affect the agricultural rights of the estate.
500ha of vineyards will be developed into 20 founder’s estates and will be sold off
at between R15m - R30 each. The owners of these estates are entitled to 1%
share in the winery.

25
 26

BULMER SA (PTY) LTD

Postal Address Physical Address Telephone: 012 661-5600

P O Box 579 8 Adriana Fax Number: 012 661-5671
Crescent
The Reeds Gateway Website: www.bulmer.com
Industrial International Company
Estate
Centurion No local website
Gauteng
Code : 0158 0157
Contacts : Name Designation Contact at:
Karl Gribnitz Chairman
Johann Nel Director: Non-Executive
Andrew Thornywell Director : Financial
Mr MC Veysie Director : Managing
Michael Veysie Manager : Marketing
No. of Employees 16 Reduced from 150
Shareholders Gandalf Trust - 100%
Empowerment Stake % nil

Description of Products :
Bulmer produces, markets and distributes ciders and coolers.

Brandnames :
Bad Girl, Crossbow Cider, Hardys Cider, Merrimans Cider, Scrumpy Jack,
Strongbow Cider, Syberian Ice, Tattoo, Vodka Cruiser, Zolenski Ice

20 000 cases per month; 25 000 litres bulk concentrate

Units manufactured pa
per month

Factors influencing the success or otherwise of the industry :

The respondent mentioned the affect of weather on the industry with regard to
production. He also confirmed that the three main players (DGB, Distell and
Guinnes) dominate the industry and cause a ripple effect throughout the industry.
They further advised us that they complained to the competition authorities about
Distell.

Competition and Barriers to entry :

Very competitive market, with undue dominance.

Prevailing conditions in the Industry :

The company has been going through a turbulent time due the uncertainty within
the company. The management buy-out took place in November which they hope
will bring stability to the company. Two of their products, namely : Tattoo and
Vodka Cruiser, are made under licence to a New Zealand Company. The other
brand, Bad Girl is a joint venture with the Bad Girl company in Durban. This brand
is a new concept with only 2.5% alcohol. The company is expecting competition in

26
 27

this sector of the market.

27
 28

General Comment :
Bulmers International, was acquired by Scottish & Newcastle in July 2003 and is a
wholly owned subsidiary of the company. Bavaria Brau was going to become a
major shareholder in the local Bulmers company, however, they became insolvent.
Consequently management bought out the local Bulmers company and included
Gandalf Trust to fund the operation. The company is due to be restructured and
renamed this year. Exports comprise 60% of turnover to Botswana, Finland and
Mauritius.

28
 29

FAIRVIEW ESTATES(PTY) LTD

Postal Address Physical Address Telephone: 021 863-2450

P O Box 583 Suid Agler Fax Number: 021 863-2591
Suider Paarl Paarl Road Website: www.fairview.co.za
Suider Paarl
Code : 7624 7646
Contacts : Name Designation Contact at:
Charles Back Director : Managing
Koos Davis Manager: Sales
Suzanne Venter Co-ordinator : Marketing
Letitia Visser Administration : Financial
No. of Employees 150
Shareholders Charles Back - 100%
Empowerment Stake % nil

Description of Products :
Company produce a unique range of cheese and internationally acclaimed wines.

Target Market :
85% of turnover is exported to USA and United Kingdom

Brandnames :
Fairview, Goats Do Roam, Red Seal, Spice Route

Factors influencing the success or otherwise of the industry :

The respondent confirmed that the overseas markets are very receptive to South
African wines and that our prices are very competitive.

Prevailing conditions in the Industry :

It is a very competitive industry with the company having as many as 40 different
wines in their stable. They market to both the on-trade (hospitality) and off-trade
(retail) industries.

General Comment :
The Really Great Brand Company distribute their wines throughout South Africa.
The overseas market is distributed by local agents. The company supply the
occasional case of wine to African countries, on request, for the hospitality
industry.

29
 30

ILLOVO SUGAR LIMITED

Postal Address Physical Address Telephone: 031 450-7700

Illovo Sugar, Illovo Sugar, Fax Number: 031 462-9114
Merebank Merebank Plant
PO Box 31003 Ballantrae Road Website: www.illovo.co.za
Merebank Merebank Durban
Code : 4059 4052
Contacts : Name Designation Contact at:
Patsy King Manager : Financial
DG MacLeod Director : Managing
Burger Pretorius Manager: Marketing
Larry Riddle Manager : General
Mr RA Williams Chairman
No. of Employees 216 Including both distilleries
Allan Grey - 22.9%; First Rand Asset Management -
15%; Old Mutual - 18.8% & Investec Asset Management
Shareholders - 9.4%
Empowerment Stake % Nil
Turnover (R million per 680 Downstream Year End: March 2003
annum) products

Description of Products :
Low-cost sugar producer and a significant manufacturer of high-value
downstream products. The two distilleries, Meredale and Glendale, manufacture
high quality ethyl alcohol which is the base product for spirit drinks.

Target Market :
Spirit manufacturers.

Production Capacity pa Two plants: Merebank and Glendale.

Units manufactured pa 50 million litres per year.

Market Share (Estimate) :

Less than NCP Alcohols

Factors influencing the success or otherwise of the industry :

The volatility of the rand has a huge impact on turnover as all exports are quoted
and sold in US$. The local market is saturated and therefore cannot take up any
slack. International world prices and, indirectly, the weather, affect the industry.

Competition and Barriers to entry :

There are only the two players in the market with Illovo attempting to gain
market share

30
 31

Prevailing conditions in the Industry :

Disposable income always affects spending power in the local market and the
company feels the affects of cell phones, lottery spending, gambling etc.

General Comment :
Illovo sells their ethyl alcohol unbranded as a commodity chemical, locally to
major liquor companies, and also to pharmaceutical companies for use in products
such as cough mixtures, and as a solvent in cosmetic aerosols. In addition they
export ethyl alcohol to about 20 companies for use in their alcoholic beverage
industries. 70% of the volume produced is exported to Africa, Europe and the Far
East. The two distilleries recorded increased volumes during the past year, with
downstream operations contributing 14% to overall profit.

31
 32

NCP ALCOHOLS (PTY) LTD

Postal Address Physical Address Telephone: 031 560-1111

P O Box 2204 132 Sea Cow Lake Fax Number: 031 579-2776
Road
Durban Durban Website: www.ncpalcohols.com
Kwa Zulu Natal
Code : 4000 4051
Contacts : Name Designation Contact at:
Gary Bregovits Manager : Operations
Mark Norton-Amor Manager : Financial
Hartmut Nowak Manager : Export
Peter Starling Director: Managing
Elmarie Tack Manager : Marketing
Andre van der
Westhuizen Manager : Supply chain
No. of Employees 84
Alcofinance SA (Belgium) 100%. Part of the Alco Group
Shareholders of Companies
Empowerment Stake % Nil

Description of Products :
The company manufactures and markets a high quality fermentation alcohol for
the South African and International market, produced from sugar cane molasses
and used in the alcoholic beverage, cosmetic and pharmaceutical markets.

Target Market :
Liquor Companies and pharmaceutical companies, both locally and abroad.

Units manufactured pa 250 000 hecto litres pa ethanol

Market Share (Estimate) :

Lion’s share

General Comment :
NCP is the primary processor of downstream alcohol products for the sugar
company, Tongaat-Hullett, who do not regard this as their core business.

32
 33

STELLENBOSCH VINEYARDS
Bankers : BOE; Auditors : PriceWaterhouseCoopers Inc.
Postal Address Physical Address Telephone: 021 881-3870
P O Box 465 Welmoed Fax Number: 021 881-3102
Complex
Stellenbosch R310 Baden Website: www.stellvine.co.za
Powell Drive
Lynedoch
Code : 7599 7603
Contacts : Name Designation Contact at:
Frans Albertyn Director : Operations
Hermann Bohmer Director : Managing
Manager : Accountant and
Charl Cilliers Administration
Chris Kelly Chief Winemaker
Manager : National Sales &
Carol Maggs Marketing
Michael Moore Manager: Sales
Dave Stanford Director : Financial
No. of Employees 206
Douglas Smollen Holdings - 7.49%; Real Equity Trust -
21.63%; Saldanha Group Investments - 4.60%; Standard
Bank of SA- 32.44% & balance of shareholders with less
Shareholders than 10m shares each = 33.84%
Empowerment Stake % nil
Turnover (R million per 140 Year End: 2003
annum)
Current Forecast 170

Trading Subsidiaries :
Stellenbosch Bottling

Description of Products :
The company is involved in growing, making, bottling and marketing their
produce, to satisfy the needs of the market.

Target Market :
Retail and hospitality industry

Brandnames :
Genesis, Infiniti, Kumkani, Shamwari, Versus

Production Capacity pa: 20 000 tons

Units manufactured pa 3.7m x cases @ 6 bottles

Prevailing conditions in the Industry :

33
 34

Approximately 50% - 60% of their produce is exported.

34
 35

General Comment :
The company produces wines at its 3 wineries, Welmoed, Helderberg and
Eersterivier. The company comprises of several of the former Stellenbosch Wine
Co-operatives and shareholdings from various Stellenbosch estate owners. The
company has experienced significant growth in the sales volumes in the domestic
and international markets. They export R106m per annum at 650 000 cases. The
company has been selected by BRL Hardy (Australia) as their partner for their new
South African Joint Venture.

35
 36

VERGELEGEN ESTATES WINES (PTY) LTD

Postal Address Physical Address Telephone: 021 847-1334

P O Box 17 Vergelegen Wine Fax Number: 021 847-1608
Farm
Somerset West Laurensford Rad Website: www.vergelegen.co.za
Somerset West
Code
: 7129 7130
Contacts : Name Designation Contact at:
John Knight Director : Financial
Don Tooth Director : Managing
Eddie Turner Manager : General Marketing
No. of Employees 130
Anglo American Corporation of SA through Anglo
Shareholders American Farms - 100%
Empowerment Stake % nil
Turnover (R million per 20 - 30m Michael Fridjhon’s Year End: 2003
annum) estimate

Description of Products :
Vergelegen manufactures wine under the Vergelegen label. Anglo American sold
the Boschendal farm in November 2003, to a consortium.

Target Market :
Niche market

Brandnames :
Vergelegen

Sales by Volume: 36 000 cases p.a.

Factors influencing the success or otherwise of the industry :

The company believes that having their own distribution company is to their
advantage. The distribution company only represents Pelligrino and imported
water, along with Boschendal and Vergelegen labels.

Competition and Barriers to entry :

Very competitive market

Prevailing conditions in the Industry :

The strong rand over the last 4 - 5 months has put margins under tremendous
pressure, particularly for exports. This has made the local market look attractive
once again and in some cases, labels for exports are being distributed locally.
Because there are numerous labels on the market, the respondent commented
that generally the public choose a familiar brand. The smaller wine producer
produces a superb quality wine, winning awards and is therefore aimed at the
discerning public who know and appreciate fine wines.

36
 37

General Comment :
Company also sold their distributing company, Kensington Wholesale Liquor
Distributors with their Boschendal farm to the same consortium. The distributors
will continue distributing Vergelgen wine along with the Boschendal wine. Anglo
American is still involved in assisting the new consortium with the running of
Boschendal (production, marketing and distribution) - this is likely to continue for
about a year. Boschendal produces 15000 cases of wine per month. Anglo
American decided to sell this estate as it is not the corporation’s core business,
however Vergelegen is seen as a smaller estate aimed at a niche market with very
valuable and historic property. Both estates export between 25% - 30% of
production primarily to the United Kingdom.

37
 38

WINECORP LTD

Postal Address Physical Address Telephone: 021 881-3690

P O Box 99 Winecorp SA Fax Number: 021 881-3699
Lynedoch Annandale Road Website: www.winecorp.co.za
Western Cape 7603 Stellenbosch
Code
: 7600
Contacts : Name Designation Contact at:
Quintus Basson Manager : Marketing quintus@winecorp.co.za
Bryan Culhane Director : Sales
Elizna Duminy Director : Financial
Jaco Durand Director : Logistics
Nicola Millson Director : Marketing
Moira Potgieter Company Secretary 021 868-3322
Linda-Louise
Roosenschoon Manager : Public Relations
No. of Employees 120
Shareholders Capricorn through Spier Holdings - 100%
Turnover (R million per 85 Year End: July 2003
annum)
Estimated Profit (Rm) Company recorded a loss in profits

Trading Subsidiaries :
Africa Vineyards (Pty) Ltd, Thales Wine Cellar Services (Pty) Ltd, Winecorp Private
Label Division (Pty) Ltd, Winecorp SA (Pty) Ltd

Description of Products :
The company is an investment holding company of a number of subsidiary
companies and an associate company, holding interests in wine production and
sales nationally and internationally, and in the cleaning and sale of wine barrels
and cellar hygiene.

Target Market :
The quality market, with approx. 9% of their wine being exported, and half to the
UK, the balance to Germany, Holland and Denmark

Brandnames :
Bay View, Capelands, IV Spears, Longridge, Naledi/Sejana, Spier

2.6m litres produced of their own brands; 9m litres

Units manufactured pa
handled & distributed for their Private Label Services

Factors influencing the success or otherwise of the industry :

Changing wine tastes, i.e. a current higher demand for good quality red wines,
compared with a higher demand for white wine some years ago. The end of

38
 39

sanctions against SA has opened up the export market.

39
 40

General Comment :
The company is primarily split into two divisions. Winecorp Private Label is
involved in supplying the multiple retail sector internationally, concentrating in
high volume commercial brands owned by retailers and agents. Over the last year
this division has grown substantially, supplying over 800 000 cases of - buyers
own brand - wine. The company have a wide network of 25 contract growers and
long-term contracts with 12 core growers. The company presently own three
vineyards, Spier, Nooitgedacht and a joint venture with Burgherspost, a West
Coast vineyard. The other subsidiary, Afrika Vineyards, is responsible for the
viticultural and vineyaard farming operation of Winecorp Brands, producing and
procuring all the grapes for their wineries. The company distributes Savanha, Bay
View and Cape Lands, whilst Vinimark distribute their premium range; Longride
and Spier. According to industry sources the company may be sold or split up and
sold.

40
 41

Breweries (exclusive of sorghum beer breweries)

Phil ip Morris
Bavaria Brau(Germany) (Altria Group Inc)

100%
23%

Bavaria Brau SAB Mil er PLC*

(Under Provisional Liquidation) Produce : 24m h litres

Produce & Distribute Produce & Distribute

Producea EdelLager
& Distribute Produce
Bavari
Bavari Carl ing Bla&ckDistriLabelbute
Bavariaa Edel
PointLager
5 CarlCastingleBlLager
ack Label
Bavaria Premium Lit 5ght
Bavari a Poi n
CastlCast
e MilelkLager
Stout
BavariHola Premi
sten um Light CastDoolle Mieyslk Stout
Holsten
HansaDoolPilesysner
LiHansaPi
on Lagerlsner
LiRedds
on Lager
SolRedds
antis
SterlingaLintigsht
Sol
Sterling Light
* Listed on the JSE

41
 42

BAVARIA BRAU (PTY) LTD

The company is under provisional liquidation.
Postal Address Physical Address Telephone: 012 661-9233
P O Box 15599 8 Adriana Crescent Fax Number: 012 661-9232
Lyttelton Gateway Industrial
Park
Gauteng South Centurion, Gauteng
Africa South Africa
Code : 0140 0157
Contacts : Name Designation Contact at:
Rainer Funk Director : Managing Bavaria
Andrew Saunewell Director : Financial Bulmer
No. of Employees 150
Shareholders Bavaria Brau (Germany)
Empowerment Stake % Nil

Description of Products :
High quality, naturally brewed, German style lager beers.

Target Market :
Premium end of the SA beer market.

Brandnames :
Bavaria Edel Lager, Bavaria Point 5, Bavaria Premium Light, Holsten

Main Competitors and Comparative Size :

SAB

General Comment :
As the company is in liquidation and in the process of being bought out, no further
details were divulged. Information would be forthcoming via the media. The
respondent advised us that currently only Holsten dumpie bottles and Holsten
light in cans are available.

42
 43

SAB MILLER PLC

Established in 1895. Auditors : PriceWaterhouseCoopers.
Postal Address Physical Address Telephone: 011 407-1700
P O Box 1099 2 Jan Smuts Fax Number: 011 339-1830
Avenue
Johannesburg Braamfontein Website: www.sabmiller.com
Johannesburg
Code
: 2000 2001
Contacts : Name Designation Contact at:
Geoffrey Cyril Bible Director: Non-Executive
Steve Bluen Director : Human Resources
Louis Carey Camilleri Director: Non-Executive
Sue Clark Director : Corporate Affairs
Nancy Jane De Lisi Director : Non-Executive
R Fellows Director : Non-Executive
Jacob Meyer Kahn Chairman
Michael John Levett Director : Non-Executive
Graham Mackay Chief Executive
Peter John Manser Director : Non-Executive
Vincent Maphai Director : Corporate Affairs 011 888-8111
Peter McLoughlin Director: (Marketing Director) 011 881-8111
Miles Quintin Morland Director : Non-Executive
Gaoning ’Frank’ Ning Director : Non-Executive
Cyril Ramaphosa Director : Non-Executive
L Renwick Director : Non-Executive
Mr G Sanders Director : Financial
Tony van Karlegen Director : Managing
Malcolm Wyman Chief Financial Officer
No. of Employees 5424
Shareholders Altria Group, Inc - 23.5% largest shareholder
Empowerment Stake % nil
Turnover (R million per 1.270m Year End: March 2003
annum) US$ in SA

Description of Products :
The company brews and distributes a number leading beer brands. Although the
company does have interests in non-alcoholic beverages, figures mentioned here
are for beer and relate to this country only.

Brandnames :
Carling Black Label, Castle Lager, Castle Milk Stout, Dooleys, Hansa Pilsener, Lion
Lager, Redds, Solantis, Sterling Light

43
 44

Sales by Volume: 24m hectolitres

Production Capacity pa: 30m hectolitres

Factors influencing the success or otherwise of the industry :

Consumer trends in South Africa are continuously changing, which requires
innovative thinking and rapid response on the part of suppliers to keep pace with
market demands. To bear this out, IOL reports how some of Cape Town’s
upmarket clubs and bars have refused to stock Castle and Carling Black Label, two
of SA’s most popular beer brands, as they are not considered trendy/exclusive
enough to suit the image the club wishes to portray, opting, instead, to sell
premium beers, which are more expensive. (www.iol.co.za - 10 January 2004)

Prevailing conditions in the Industry :

Volumes were increased in South Africa by 0.8%, with operating performance in
this business at an all time high. Improved productivity was offset by significant
increases in raw material prices, higher marketing spend on new product
development and introductions into the marketplace.

General Comment :
The company has brewing operations in Cape Town, Durban, two in
Johannesburg, Pietersburg, Port Elizabeth and Pretoria.

44
 45

Sorghum beer breweries

Old Mutual RMB

22.9% 12.2%
MrThan Wan Ford Tiger Brands* United Breweries (India) –75%
Marriot Bank –25%

100% 100%

AWETHU BREWERIES* KING FOOD

Turnover (2003) : R1.5m Division of Tiger Brands UNITED NATIONAL BREWERIES SA
FormerleyNational Sorghum Breweries
Company trying to disinvest from Company refused to divulge
This industry volumes Volume : 400m litrespa.

Powdered sorghum beer and malt for

Principally involved in the brewing and distribution of Powderpreepard soratiogn,humas beer
home well asandcermalealtsfo. r Manufacturers and distributors of sorghum beer
sorPrignhumcipallandy involmageubeer
ved in the,brasewiwelngl asandthedismitrlibinutgioofn of
home preparation, as well as cereals. Manufacturers and distributors of sorghum beer
sormaighumze andandwheat mageubeer based,prasoductwellsasforthusee miinl ing of
Produce & Distribute: Produce & Distribute:
its own promaiductzieonandprowheat cesses.based products fisorinusenegotin iations
The company Produce ProduceChib&ukuDistribute:
King&KorDinstribute:
titosselownl itprs oprductoperiotny,prploacesses.
nt and equiThepcompany
ment in oridserin tnegoto securiateions Chibukual
tfoundssell tiotsinprvestoperintyot, plherantmorande equi KinKigsngBrKorewn IjubaSpeci
profiptament
ble ventin orudreers itno tsecur
he e IjubaSpeci
funds to invest in otinhfoerrmmoral secte proorf.itable ventures in the Mnant1Ki(pnowder
gs Brewbeer) Leopar d Spciaall
Mnant1 (powder beer) Leopar
Tlokwed Spcial
informal sector.
Tlokwe
Produce & Distribute
ProduceAwet&hDiu stribute
MegaAwetMilhinug
Mega
MrFreMishl ing
TotMrFrpakesh
Totpak

* Listed on the JSE

45
 46

AWETHU BREWERIES LTD

Listed on the JSE.
Postal Address Physical Address Telephone: 016 986-0667
P O Box 5813 6 Delfos Fax Number: 016 986-0910
Boulevarde
Vanderbijlpark NW 7
South Africa Vanderbijlpark awethu@global.co.za
South Africa
Code : 1900 1911
Contacts : Name Designation Contact at:
Jean Caddy Company Secretary
Director:
Tony Ford Managing
Director :
Irene Vermaak Financial
No. of Employees 100
Mr Than Wan (Tony) Ford (MD) : 50.8% & Financial
Shareholders Institutions - balance
Empowerment Stake % 100%
Turnover (R million per 1.5m Turnover reduced Year End: June 2003
annum) from R8.5m of
previous year.

Trading Subsidiaries :
Hotshots Liquors (Pty) Ltd

Description of Products :
The company is principally involved in the brewing and distribution of sorghum
and mageu beer, as well as the milling of maize and wheat based products for use
in its own production processes. The company is in negotiations to sell its
property, plant and equipment in order to secure funds to invest in other more
profitable ventures in the informal sector.

Target Market :
The catering industry, mines and the informal sector through a network of its own
franchised outlets.

Brandnames :
Awethu, Mega milling, Mr Fresh, Totpak

General Comment :
The large decrease in turnover is due to a change in company policy from actually
selling its own beer to renting out its breweries and mill. The group further
suffered a setback on the sale of the Ventersdorp Mill, which fell through as the
guarantees had not been met. The company continues to rent out its Carltonville
and Marizaan breweries and the Mill.

46
 47

KING FOOD
A small division of Tiger Brands Limited. Tiger is listed on the Stock Exchange.
Postal Address Physical Address Telephone: 018 297-7180
P O Box 63 4 Curlewis Fax 018 294-8521
Street Number:
Potchefstroom Potchindustria Website: www.kingfood.co.za Divisional
address
North West Potchefstroom, www.tigerbrands.com Parent
South Africa North West company
South Africa address
Code
: 2520 2520
Contacts : Name Designation Contact at:
Luke Horsten Director : Managing
Ernst Steynberg Manager : Administration
No. of Employees 200 (Beer Division)
Through Tiger Brands Ltd, listed on the JSE: Old Mutual
Shareholders 22.9%; RMB 12.2%
Empowerment Stake % Nil

Description of Products :
Powdered sorghum beer and malt for home preparation, as well as cereals.

Target Market :
Primarily Metro Cash & Carry and the rural retailers

Brandnames :
King Korn, Kings Brew, Mnanti (powder beer)

Units manufactured pa Respondent refused to divulge units produced

Main Competitors and Comparative Size :

United National Breweries

Factors influencing the success or otherwise of the industry :

The market has been slowly shrinking over the last 20 years. The respondent
attributed this to the target market aspiring to western culture as there is more
status attached to drinking a western beverage. However, he felt that that even
though the market was diminishing, it would never disappear altogether.

Competition and Barriers to entry :

A competitive and sensitive market, with a few remaining players, all competing
in a shrinking market.

Prevailing conditions in the Industry :

Throughout Africa, consuming home brew is still seen as a respectable past-time.
The local people tend to make and grind their own malt, and shy away from
purchasing beer/sorghum powder.

47
 48

General Comment :
Despite the continuous, slight downturn in sales throughout the sorghum/home
brewing industry, the respondent confirmed that it is still a profitable business for
shareholders, and a well run business. As he was reluctant to divulge
consumer/sales figures, we can ascertain that the market is sensitive and
competitive. He believed that, in South Africa, there is a stigma attached to
consuming sorghum beer, referring back to the country’s political history, when
only sorghum beer was available to the black market.

48
 49

UNITED NATIONAL BREWERIES (SA) (PTY) LTD

Formerly known as National Sorghum Breweries Ltd
Postal Address Physical Address Telephone: 011 315-7337
P O Box 9353 Gallagher House Fax Number: 011 315-0318
Centurion Gallagher Estates
Richards Drive
Midrand
Code : 0046 1685
Contacts : Name Designation Contact at:
Mr SP Choudharys Vice President - Executive
Vice President : Senior Coastal
Mr PS Gill region
Vice President : Corporate
Mr RL Prekash Finance
Mr R Ranganathan Vice President - Executive
Vice President- Senior In-land
Mr K Scholtz Region
No. of Employees 900
Shareholders United Breweries (India) - 75%; Marriott Bank - 75%

Description of Products :
Manufacturers and distributors of sorghum beer.

Target Market :
Beer halls, shebeens & tuck shops.

Brand Names :
Chibuku, Ijuba Special, Leopard Special, Tlokwe.

Sales by Volume: 400m litres pa.

Main Competitors:
Bergville Breweries, Carlton Breweries, Champion Breweries, Ukhamba Breweries
– Vanderbijl Park, Ukhozi Breweries.

Market Share (Estimate) :

90% of industry-made beer.

Competition and Barriers to entry :

The competition lies in the fact that 75% of sorghum beer consumers brew their
own beer. The competitors mentioned in this profile are very small and unreliable
in nature, but combined, own 10% of market share.

Prevailing conditions in the Industry :

The company is always seriously affected by increases or agricultural concerns in
the maize and grain market. When prices rise the company is very reluctant to
pass on the increase to the consumers as demand will inevitably decrease, profit

49
 50

margins therefore become extremely tight. Consumer figures overall remain

steady.

General Comment :
The company owns 9 breweries and has 50 depots throughout the country - they
distribute to over 200 000 outlets in the form of shebeens, tuck shops and beer
halls. As the shelf life of the product is only 4 - 6 days from time of manufacture,
this limits export growth considerably. The company exports a small percentage
to Botswana, Zambia, Namibia and Angola.

50
 51

Liquor Industry Volumes

Excise Market per Alcoholic Category - Year End 2002 / 2003

ACTUAL R.S.P. PER

CATEGORY SALES VALUE
VOLUME LITRE
Brandy 40 700 62.53 2 544 971
Whisky 18 400 87.78 1 615 152
Rum 3 100 85.73 265 763
Brown Spirits 62 200 71.16 4 425 886

Gin 7 400 53.66 397 084

Cane 3 000 39.96 119 880
Vodka 13 700 50.97 698 289
White Spirits 24 100 50.43 1 215 253

Liqueurs 3 600 69.69 250 884

Other Local Spirits 900 66.18 59 562
Total Spirits 90 800 65.55 5 951 585

Sparkling Wine 7 800 39.81 310 518

HP Natural 36 000 33.79 1 216 440
MP Natural 83 000 11.60 962 800
SP Still 154 300 8.58 1 323 894
Perle 41 700 11.70 487 890
Total Natural 315 000 12.67 3 991 024
Total Fortified Wine 30 550 23.82 727 701

AFB’s and Spirit Coolers 194 000 13.82 2 681 080

Beer 2 308 000 7.63 17 610 040
GRAND TOTAL 2 946 150 10.61 31 271 948
• AFB = Alchoholic Fruit Beverages
• R.S.P = Retail Selling Price
•
Volume: 000, Value 000

Source: ACNielsen Retail Services

Excise Market per Company - Year End 2002 / 2003

Volumes

Company Volumes
1 SABMiller 80.0
2 Distell 9.2
3 Guinness UDV 2.0
4 EW Snell 0.8
5 DGB 0.3
6 Namibian Breweries 2.1

Source: ACNielsen Retail Services

51
 52

Market Share per Company - Year End 2002 / 2003

Value

60
52.5
50
40

30
21.1
20
10 8.7
3.4 1.6 1.9
0
SAB Distell Guiness EW Snell DGB Nam
UDV Brew

Value Market Share

Source: ACNielsen Retail Services

Market Share per Alcoholic category 2003

% share based on alcohol content

50
42.6
40

30
23.6
20 17.4
13.3
10
3.1
0
Sorghum Wine Malt Beer Spirits AFB

Market Share x Category

Source: SAWIS – SA Wine Industry Information & Systems

52
 53

South Africa’s Top 20 Selling Liquor Brands

BRAND BRAND OWNER

1 Carling Black Label SAB Miller
2 Castle Lager SAB Miller
3 Hansa Pilsner SAB Miller
4 Castle Milk Stout SAB Miller
5 Amstel SAB Miller
6 Smirnoff Vodka Guinness UDV
7 Klipdrift Distell
8 Hunter’s Dry Distell
9 Bell’s Guinness UDV
10 Richelieu Distell
11 Redd’s SAB Miller
12 Windhoek Lager Namibian Breweries
13 Wellington VO Edward Snell & Co.
14 J & B Guinness UDV
15 Viceroy Distell
16 Smirnoff Spin Guinness UDV
17 Gordon’s Gin Guinness UDV
18 Bertrams VO Guinness UDV
19 Sedgwick’s Old Brown Sherry Distell
20 Autumn Harvest Crackling Distell

Source: ACNielsen Retail Services

53
 54

Smaller Wine Producers

Index
(all included in appendix A titled wine.xls)

1 Definitions
2 Extent of the South African wine industry
2.1 Extent of the total wine industry
2.2 Extent of the drink-wine industry
3 Wine industry structure
4 WINE REGIONS (For statistical purposes)
5 Vines and area under vines
5.1 Vine types
Geographic distribution of South African wine grape vineyards per
5.2 wine region
5.3 Total hectares wine grape vineyards planted and uprooted
5.4 Wine grape vineyards planted per wine region
5.5 Wine grape vineyards uprooted per wine region
5.6 Area distribution of wine grape varieties
5.7 Wine grape varieties per wine region
5.8 Age of vines per wine region
6 Production and utilisation of crop
6.1 Total crop
6.2 Distribution of production between red and white
6.3 Varieties utilised for wine making purposes
6.4 Grape production for wine making purposes per wine region
6.5 Certified drinkwine
6.6 Certified drinkwine per producer group
7 Producers' sales, income and prices
7.1 Producers' sales and income
7.2 Average prices of wine sold in bulk
7.3 Average prices of grapes sold for the production of drinkwine
7.3.1 Prices for deliveries to co-operatives by members
7.3.2 Other prices
7.4 Particulars of packaged drinkwine sold on the local market
8 Exports
8.1 Total quantity of drinkwine exported
8.2 Types of drinkwine and other liquor products exported
8.3 Bottled and bulk natural wine exports per country
8.4 Bottled natural wine exports per country
8.5 Bulk natural wine exports per country
9 Imports
9.1 Imports to South Africa – total
9.2 Imports to South Africa - bottled and bulk
10 Liquor consumption in South Africa
10.1 Drinkwine
10.2 Spirits
10.3 Per capita consumption in South Africa
10.4 Market for all spirits in South Africa

54
 55

10.5 Market for alcoholic beverages in South Africa

11 Taxes
11.1 Excise duty
11.2 Value added tax (vat)
11.3 Estimated state revenue from wine products
11.4 State revenue from wine products versus producers' income
12 International comparisons
12.1 Area under vines and wine production
12.2 Area under vines (white, red and selected varieties)
12.3 Per capita consumption

Size of producers that sell wine, bulk and packaged

July 2002 – June 2003

Volume sales Number

Litres Western Northern Free
National Cape Cape State MP

> 10 million 12 11
> 5 – 10 million 21 21
>1 – 5 million 65 60
>100 000 – 1 million 122 119
<100 000 236 233

Sub total 456 444

No sales during period 199 198

Total 655 642 11 1 1

Source: SAWIS

Note: SAWIS agreements with the wine producers preclude the release of the data for
Northern Cape, Free State and Mpumalanga.

55
 56

Meeting the public policy objectives

i) Ownership and the level of vertical or horizontal integration of
the industry;
ii) Employment creation – manufacturing and distribution;
iii) Revenue generation – manufacturing and distribution;
iv) The need for fixed investment and infrastructure development;
v) Black economic empowerment in the industry – manufacturing and
distribution.

Ownership and the level of vertical or horizontal

integration of the industry
It is clear from section one of this report, that the liquor industry has
become increasingly uncompetitive. The Distell merger, the consolidation
of Guinness UDV brands in the old Gilbeys business, the ongoing domination
of the beer market by SAB, the financial pressure on some of the mid-size
wine industry players (notably Winecorp and Stellenbosch Vineyards), and
the consolidation within the small distributor business have all reduced the
number of key players performing adequately in the South African market.

The situation is significantly worse however the moment one analyses

dominance of the high margin branded liquor business. It is important to
distinguish therefore between players who live off the crumbs of the
distribution business, and those whose ownership of, or rights to, strongly
established brands, entitle them to much greater profits. Guinness UDV for
example has between 5% and 10% of the total liquor market and around 20%
of the spirits market, but it controls 90% of the prop whisky market and a
significant percentage of the premium whisky market. It also controls 70%
of the vodka market including the most lucrative white spirit brand. Since
it is overseas owned, and so are the brands that it handles, it is able to
transfer price to optimise income. Distell has over 70% of the brandy
market but almost all of the high margin brands. While companies like E
Snell have plus / minus 9% of the brandy business, 29% of the whisky
business, and 15% of the white spirits business, they perform almost
exclusively in the discount segment of the market. The result is that they
cannot compete in terms of shelf space, influence or net revenue.

Horizontal integration continues to plague the branded liquor market. SAB

has maintained a 30% share of Distell thus linking its dominance of the beer
market to a company which dominates the domestic brandy and (for the
time being) local gin market. KWV continues to vote its interest in Distell
with Rembrandt though its proposed 2004 launch in the domestic market
may open fracture lines in this relationship. For the time being at any rate
the 1979 industry realignment is largely intact with only the presence of
Guinness UDV as the brand owner / distributor of whisky, vodka (and
potentially of Gordons Gin) in a position to counterbalance this
preponderance.

56
 57

Vertical integration is much less relevant. Lack of profitability of the

Western Province Cellars / Liquor Town stores made them something of a
millstone within Distell. Rebhold’s ownership of Picardi Rebel has not
integrated backwards into an important wholesale or distribution company.
The same is true of Aroma Drop Inn which has failed to develop a wholesale
presence through Premier Wine Cellars. Stellenbosch Vineyards (comprising
several of the former Stellenbosch wine co-operatives but with
shareholdings from various Stellenbosch estate owners) has not really
integrated between the production and the distribution sectors.
Redistribution businesses – most notably Makro and Metro – have not
established any substantially vertically integrated alliances; the grocers
have also remained independent buyers (though Shoprite Checkers, Pick ‘n
Pay, and Woolworths, are beginning to follow the UK model of developing
their own brands).

While it is true to describe the industry as unattractive from a competition

point of view, the fault has less to do with vertical integration, more to do
with horizontal integration, and most to do with ownership of margin arising
from brand domination.

Industry Table Showing Suppliers Through To Consumers

In theory, power lies in the middle, where

few process from the many thereby giving
4346 Grape Farmers
them buying power and sell to the many,
thereby giving them market power. While
428 Wine Cellars this is often the position, power can also be
affected or changed by the ability of any
6 major wine & spirit producers sector to organise itself, commercially or
politically or both.
11 medium wine & spirit companies
(Adapted from “The Dressmaker’s Model” -
Conspiracy of Giants – Michael Fridjhon & Andy
10 Brewers Murray)

33 other
wholesalers/distributors

5 000 restaurant licences Suppliers

25 000 – 30 000 other licences Producers

DTI estimates between 20 000 – 200 000 illegal Distributors / Wholesalers

Outlets ranging from shebeens, stovels to
Convenience stores.
Consumers

57
 58

Black economic empowerment in the industry –

manufacturing and distribution

The absence of a Black Economic Empowerment charter has been widely

noted and formed the basis of negotiations between the industry and the dti
at the time that the new Liquor Act was drafted in the first half of 2003.
The proposed three-tier structure was intended to enhance black ownership
at the distribution sector of the industry, though the final Liquor Bill sees
these provisions in only a very watered down form. The South African Wine
Industry Trust is presently engaged in drumming up support for a Black
Economic Empowerment initiative. This would appear to be a smokescreen
to conceal a conflict of interest between the Chairman of the Trust, some of
his business associates, and the KWV as the funder of the Trust and the
potential party to the deal. The arrangements – all of which are covered by
a confidentiality agreement – appear to involve the purchase by Trust
Chairman Gavin Pietersen and BAWSI Holdings (now trading as Chuma
Investments) of a stake in KWV. In order to fund this purchase, the parties
seek to pillage the empowerment fund of the Wine Industry Trust, and have
obviously secured KWV’s six (out of 13) Trust votes. Pietersen brings the
necessary extra vote. With the down payment of between R50m and
R100m, the parties have approached the IDC to fund the remainder of the
purchase. The sellers comprise G T Ferreira and a consortium which
includes Hansie van Niekerk, all of whom appear to have purchased their
KWV shares as a speculative investment. If the deal goes through, this will
give a black empowerment consortium a significant stake in a high profile
liquor business which in turn owns a sizeable chunk of Distell. While this
will aid both companies in terms of government contracts, it will not reflect
community empowerment in any way nor will the owners enjoy a controlling
share in any important domestic brands. Other black economic
empowerment occurs in schemes managed by organisations like the Wine
Industry Trust and various wine farms where workers obtain an equity stake
in part exchange for their labour. Such schemes include the worker’s trust
at Paul Cluver, Thandi, Beyerskloof, and Vredendal, and now the
empowerment stake at Boschendal.

Corporate Actions
This report has already detailed the effect of mergers, liquidations, and
down-trading on the production and wholesale sectors, and suggested
imminent changes affecting the presence of KWV. The uncertainties
relating to Winecorp and Stellenbosch Vineyards have also been noted.
Speculation by Michael Fridjhon beyond this is offered with the utmost
caution.

• It seems unlikely that the Distell merger will not proceed and only
cosmetic changes to brand ownership are expected.

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• Neither Winecorp nor Stellenbosch Vineyards can continue to trade

indefinitely under existing circumstances. While there are strong
shareholders willing to see out short term crises, there is obvious
impatience at the difficult trading circumstances in which both
companies find themselves. However, there would be little logic in a
merger between the two entities and little value in stripping the
assets of either company. While foreign liquor companies (notably
Allied and Lion Nathan) have both expressed an interest in South
Africa, it is difficult to imagine them paying a premium for either
Winecorp or Stellenbosch Vineyards.

• Major international whisky brand owners, viz. Guinness UDV and

Pernod Ricard are both investing substantially in the premium whisky
market. It seems reasonable to assume that there will be a shift in
consumer spending as a result of this. An increase in whisky volume
sales will come at the expense of ‘softer’ beverages since the target
market (black 45% female) is not necessarily a present consumer of
premium brown spirits.

• Changes in liquor legislation may encourage some producer

wholesalers to look to the existing low margin distribution sector.
Meridian already has an alliance with the Rupert family. New World
Wine Agencies is effectively independent though its major
shareholder, Nick Diemont, turns 60 next year and must be seeking an
exit strategy which may involve the wine farms the company
represents. DGB has long sought an alliance which will increase its
critical mass and may welcome overtures from foreign companies
able to enhance distribution for its brands internationally or able to
increase its clout in the local market. However the profile of its own
products do not make it particularly attractive to Pernod Ricard. The
long awaited launch of KWV in the South African domestic market is
likely to be something of a damp squib and for this reason will
probably not be of interest to an operation like DGB.

• Anglo American Farms has sold the Boschendal Estate to a consortium

as at October 2003 for a sum of R323m. (please refer to Annexure 1).
Anglo American still own Vergelegen. The consortium of investors is
led by Mr Clive Venning and Mr Charles Boswell and is made up of
Citation Holdings SA who has acquired 70% of the farm. Kovacs
Investments 608 (Pty) Ltd, an empowerment group, chaired by Mr
Chris Nissen will acquire 30%.

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Geographic Information
As part of the study, it was decided to map the locations of the various
producers in order to assist with a more informed observation of the
industry.

The locations of the wine cellars and wholesale outlets were mapped in the
first instance.

This spatial data adds a completely new dimension to the viewing of data
and helps to add a further dimension to the understanding and
interpretation of data.

The findings of the desk research and geo-location of outlets and

communities being served should provide an excellent basis for
understanding the dynamics of the liquor industry in Southern Africa, and
pave the way for informed and responsible legislation of the industry.

Geo-Location of Wine cellars and Wholesalers

The following two maps provide a national overview only. Detailed

provincial maps are also available.

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ZIMBABWE

MOZAMBIQUE

BOTSWANA Northern Province

NAMIBIA
Mpumalanga
Gauteng
North West
SWAZILAND

Free State KwaZulu-Natal

Northern Cape LESOTHO

Eastern Cape

Western Cape Legend

Wine cellars
National roads
Provinces

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ZIMBABWE

MOZAMBIQUE

BOTSWANA Northern Province

NAMIBIA
Mpumalanga
Gauteng
North West
SWAZILAND

Free State KwaZulu-Natal

Northern Cape LESOTHO

Eastern Cape

Western Cape Legend

Liquor wholesalers
National roads
Provinces

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References

Companies/Organisations
ACNielsen Retail Services
All Media Product Survey 2003A
Cape Wine and Spirit Association
South African Wine Industry Information & Systems (SAWIS)
Who owns Whom (Pty)Ltd: The
Research House
Wines of Southern African

Publications
Alcoholic Beverage Review 2003 Ramsay Stone & Parker
Beverage Business Yearbook 2004 Ramsay Stone & Parker
Michael Fridjhon & Andy
Conspiracy of Giants Murray
Department of Trade and
Liquor Policy Paper Industry

Websites
Africa Business Direct:
Food and Beverage On-Line
South Africa food industry fast facts
South Africa food industry overview
Trade Page
Department of Trade and Industry

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Appendix A

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