1. Home
2. News

Looking ahead: Joseph Walsh, commercial director, Distell

We continue our series with insights from Distell’s Joseph Walsh. 

How has the first half of 2018 been compared to 2017?

Last year was a very good year for us. Having brought all our brands back in house and engaging our retail customers directly we began to see the results. A number of major key listings followed including Nederburg in both Sainsbury’s and Asda whilst also growing Amarula. Our new financial year started 1 July and we have got off to a solid start, but it is still too early to gauge properly and still dependent on retailer range reviews. What we have done is grown our distribution with new customers where we have not previously traded which has helped minimise the over reliance on the major multiples.

What, currently, are the biggest challenges for the trade (excluding Brexit)?

The changing landscape of the retail sector is a moving feast. It will be interesting to see how Sainsbury’s and Asda progress as both have very different models and consumers. That will be the catalyst for more mergers and aquisitions and partnerships like we have seen with Tesco and CarreFour. Will Amazon join the party? I think that is a realistic possibility sometime soon.

As a brand owner, this makes having long term strategies with our retail partners more and more challenging as retailers seek a more short-term approach particularly around own or tertiary label.

Our own biggest current challenge is the harvest conditions in South Africa. The category is suffering one if its worst droughts in many years. Farmers are planting alternative (more profitable) fruits than grapes and 12,000 hectares of vines have disappeared since 2006. Subsequently, there is a 50 million litre shortfall in the category from the previous year. So being more targeted on where we can play has become critical. South Africa has to premiumise and compete with other regions by shouting about some of the fantastic wines it does have to offer.

What outcome would you like to see from Brexit and why?

I would like to see the outcome! I am tired of hearing from the doom-mongers and naysayers on both sides. ‘Project Fear’ has gone way too far. There will be no civil unrest. There will be no queues for food. We will not be at risk from invasion. It has all been very over the top. My view is we have to get on with it now whatever the agreed action. However, I do see it as an opportunity to create new trade deals with countries like South Africa, the USA and Australia. Being an organisation with roots firmly established in South Africa, I see these new trade deals as a big opportunity. It may also help move away from the cumbersome Common Customs Tariffs and make South African wine more competitive.

What’s your focus for the second half of the year, through autumn and leading up to the Christmas trading period?

Our focus this year is very much on premiumisation and driving value behind our spirits, particularly our malts. We are focusing on working with our key customer partnerships that want to work with us. We want to focus our time and energy where we can develop long term relationships.

Are there any specific challenges that you’re planning for?

Minimum Unit Pricing is interesting as it will inevitably have to include the rest of the UK. It means we can look at various different pack formats as a solution to the retailers’ MUP issues. Eventually, it is also likely to become a tax.

We are also looking at the continued impact of the reduced harvest in South Africa. Any specific trends you anticipate?

Gin is showing no sign of halting its growth. However, this is a proliferated category with lots of “craft” gins currently on the market. Consumers are also becoming more interested in our malts and we have launched Deanston Virgin Oak and Bunnahabhain Stiùireadair as an introduction for consumers new to malt whisky. We see rum as the next breakout category and have plans to ramp up our Angostura profile. In terms of wine, buyers want to see more interesting varietals not usually associated from South Africa.

Which channels are likely to perform best and which will be under the greatest stress and why?

Our Impulse channel has grown at a rapid rate and that is to the credit of Paul Wanless and his team as this was a newly created unit where we had not really dealt previously.

What I like about this channel is relationships still very much matter and the customers are very brand focused. We have listened to what they have told us and now have eye catching outer cartons for example for pallet displays.

Our multiple retail business will always be under the most pressue purely because of the volumes at stake and the competitive climate. It is always disappointing when you receive a delist notification but it hurts even more when you have been a supplier for such a long time to them. Grocers want to drive their tertiary labels, which is understandable so it is a challenge for all suppliers to find a balance between providing the grocers with what they want and driving branded business. Project resets will continue with blended scotch being squeezed further and replaced with more malts, rums and speciality products.

How optimistic are you – will business for the drinks trade be better or worse between now and 1 Jan 2019 compared with last year and why?

Personally, for us I believe it will be better as we are still relatively new to the UK so our growth will come from new business opportunities and stealing category shares. There will be more retailer resets and suppliers fighting for shelf space in a tough trading climate. Retailers will want to work with fewer suppliers but deeper so there will be casualties along the way. People are drinking less and going out less often so growth needs to come from premiumisation. Consumers still want value for money. They want authenticity with brands that tell a story and have a heritage so the competition is going to get tougher but we have the brands that tick those boxes so we are up for the challenge. 

• LOOKING AHEAD
• Distell
• Joseph Walsh
• 2018