Edward Snell & Co. eyes African markets

Wednesday, 3 July 2024

The spirits firm is on a growth trajectory, aiming to tap into rest of the continent while bolstering its market share in SA.

SA’s largest privately owned spirits group, Edward Snell & Co, plans to establish an export market into the rest of Africa to diversify its sales geography.

Speaking to Business Day, group MD Karin Krause Wessels said exports were becoming a bigger focus for the business against the backdrop of a tough domestic economic environment.

She said the shift came after the owner of Russian Bear, Strettons and Firstwatch learnt valuable lessons during the pandemic about not having strong export markets, as the SA government clampdowns on liquor trade hampered sales and challenged its operating model.

“We are increasingly looking at export opportunities. Our focus is by and large in more of our developing markets in Africa because our own portfolio caters beautifully to that kind of consumer set;’ said Krause Wessels. “So, we are definitely looking at those export opportunities to balance the portfolio of markets.”

Aside from its locally manufactured brands, Edward Snell also looks after Scottish whisky company William Grant & Sons, which holds Glenfiddich and Grants; French spirits group Remy Cointreau’s Remy Martin; Proximo Spirits’ Jose Cuervo; and the US-based Sazerac Company’s brands such as Southern Comfort.

Its most expensive product, a bottle of 50-year-old whisky, is priced at R650,000 and the cheapest sells for R139, so it caters for all palates and wallets.

The MD, who is also the deputy chair of the Drinks Federation of SA, said the business had managed its cash well, and its cash-positive position gives it room to look for acquisition opportunities, whether in brands, companies, horizontal or vertical supply chain integration, and “definitely expansion outside SA.”

With its operations based in SA already exporting products into other African states, as well as Middle Eastern and European markets, Krause Wessels said shoring up its international volumes would bolster the group’s growth. This is especially critical as the company’s outlook for the local economy is bearish. “We don’t see the economy necessarily turning around within the next five years in any significant form.”


Rail challenges

In SA, rising raw material costs, constrained consumers and counterfeit alcohol imported through Mozambique, Swaziland and Lesotho and sold at below-market prices have made liquor trading challenging.

The importer of global spirit brands said it was not left unscathed by the recent rail and port challenges in SA and had to carry more stock to prevent a product shortage. The group also had to find different shipping routes to ensure disruptions would not affect its cargo.

“That had a significant impact on cash flow in our business;’ said Krause Wessels, “As you need to carry more stock, your cash is tied up.”
However, the logistics supply situation had improved over the past year, she said, though the piled-up stock would take as much as a year-and-a-half to deplete.

“So, it’s a bit like a hangover effect still remains, and it is still not predictable;’ she said. The group was still carrying extra stock from ports such as Mexico.”

According to the latest analysis by NIQ SA, the local R144bn liquor sector experienced a 19.4% rise in annual sales in 2023 as it adapted to evolving consumer palates and preferences.

Volume sales in wine and spirits increased, led by gin, brandy and liqueurs.

Krause Wessels said as Edward Snell & Co was manoeuvering through a tough trading environment characterised by logistics and foreign exchange challenges, there were vast amounts of opportunities for the 175-year-old group to grow further in SA through brand creation and innovation.

The firm, the fourth-largest as measured by spirits value share in SA, said it was also gearing up to increase its market share, gunning for the third spot on the SA rankings, which would mean toppling Pernod Ricard.

Diageo, owner of Johnnie Walker Black Label and Smirnoff 1818, occupies the top spot, followed by Heineken.

“We sit at 8%-9% of spirits value share. That says we have 90% of other spirits value share to go after;’ she said. The company’s investment strategy was to invest in its existing brands to ensure this feat.

“We are very confident that we will get to our number three position in the next 12-24 months. I think we can confidently get onto the podium to get a bronze in terms of number three.”

The MD highlighted that if the company were to target the first or second place, it would have to look closer at more interesting ways to address the model and realise that level of growth, intimating that the group was not closed off to a possible JSE listing.