BRANDY PERKS UP

Brandy appears to be regaining some of its old customers. Clifford Roberts examines a change in the fortunes of South Africa's most ordered spirit.

With the global slow-down in liquor consumption and a tough economic climate in South Africa liquor retailers at both the on- and off-consumption level don't have much to celebrate these days, so when brandy punched back through the
40-million-litre mark recently there were murmurings of excitement.

Company directors don't swing from chandeliers in childish exuberance, but there are sure to have been a few practising chin-ups in their walk-in closets following the news that brandy shows signs of, once again, becoming the in South African thing.

The R2-billion industry left a perch of 56-million litres sold in 1996/1997, falling to the 38-million litre mark in just four years. Some experts suggest the dizzy heights of 1996/1997 were a fortunate spike, nevertheless, millions of litres up or down have a direct effect on the day-to-day running of a myriad of businesses. And 6% up on last year is a lot of brandy. Who else can say they have sold 6% more of anything this year?

Brandy represents 40% of all spirit sales in SA. Some five of the 10 most popular liquor trademarks in the country are brandy brands.

Then why is everyone using the words: "cautiously optimistic"?

"One is always scared of broadcasting good news," said SA Brandy Foundation chairman Bertie van der Merwe at the opening of the organisation's 18th AGM recently. He described all role players as being "cautiously optimistic". Distell global marketing manager for brandy Gavin Pike too, said in a recent interview: "You can quote me with these two words: cautiously optimistic".

The fact is that brandy producers and wholesalers have done their homework. No-one, least of all a company like Distell that derives substantial income from its 75% share of the brandy market, could afford to ignore sliding sales. Companies adjusted focus, like Distell when it identified its drive brands, decided to try and read the market according to consumer motivations rather than within rigid categories, and increased marketing investment; retailers got a sniff of the optimism and gave generic support to the category; and consumers reacted.

How many cognac drinkers felt the pang of homely patriotism at the couple of postal lads charging along gravel roads to deliver a case of Klipdrift to a platteland dorp in the Distell television ad campaign, or stood proud at the sight of a claymation Springbok wallop Wallabies in an ad for Wellington VO? More than would have admitted to it in the past for sure, but someone's buying into the refined marketing, the brandy and what those that are involved with brandy believe is a quality product. Just check the numbers.

The flipside to the good news - and the reason behind the somewhat subdued rejoicings - is that the last few years have seen intrinsic changes in the marketplace. Consumer spending patterns have shifted dramatically and spending on alcoholic beverages is declining. The pressures on consumers remain as petrol prices soar and the little tax relief that is offered, is swallowed by companies unable to continue absorbing inflation.

Then there is the HIV/Aids factor that analysts have suggested is a reason for SA Breweries' growing interests overseas - its local customer base is dying. In the context of the brandy market alone, Distell and other brandy producers share this market with SAB and are faced with the same harsh reality.

Sources say the reality is that in order for brandy producers and business in general to continue making a contribution in ways such as the annual R531-million paid by the brandy industry in excise taxes and R243-million paid in VAT, they will have to strive to remain profitable even if it means at reduced volumes.

By all accounts, however, the rise of a new dawn in the brandy market is one that not only the brandy industry is glad to see.