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our world.

our world. Expanding into Africa Hinré Smit New Business - Africa Accelerate Cape Town November 2011. Following the economic crisis. Outline. Africa and Distell’s strategic aspirations Africa strategy Pre GAP GAP strategies How key markets were selected Brand building in Africa

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our world.

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  1. our world. Expanding into Africa HinréSmit New Business - Africa Accelerate Cape Town November 2011

  2. Following the economic crisis

  3. Outline • Africa and Distell’s strategic aspirations • Africa strategy • Pre GAP • GAP strategies • How key markets were selected • Brand building in Africa • Some lessons learnt • Opportunities • Questions

  4. Distell’s strategic aspirations • Domestic market: Consolidating our strong position in the domestic market by offering a compelling suite of brands across a range of alcoholic beverage categories and price points that represent fair and reasonable value • Global footprint: Expanding our global footprint by entrenching brand visibility and awareness in key target markets. • Our aspiration is to further extract growth from our exports, while establishing a stronger local presence in key emerging markets by participating more actively, where appropriate, in the value chain of our products •   Strengthening our status as a profitable and leading South African exporter of wines • Expanding our strength in the global cider industry • Leading player: Leading the spirits industry in Southern Africa and the rest of Africa; and • Amarula and Bisquit: Growing the presence of Amarula and Bisquit globally.

  5. Africa strategy

  6. Africa overview: Nigeria Ghana Uganda Kenya DRC Tanzania Angola Zambia Mozambique Mauritius Zimbabwe 54 countries (44 in SSA) and 7 dependencies* - Distell exports to 35 and 2 respectively

  7. Prior to Grow Africa Project (GAP) in 2003: • BLNS part of Africa • Offices in Nairobi and Accra • Trading mindset: • Little A&P investment (other than Amarula) • Large brand portfolio • “Container salesmen” Nigeria Ghana Uganda Kenya Since GAP: Focus DRC Tanzania • On key markets • Stock continuity • Owning sales & marketing • Brand building • Balanced portfolio • BLNS regarded as part of domestic market Angola Zambia Mozambique Mauritius Zimbabwe

  8. Focus on key markets: four clusters North West cluster • Similar consumption patterns with existing cross border product flow • Part of existing trade zone (ECOWAS) • Proximity of countries with developed road system • Ghana and Nigeria are English speaking • Relatively stable political situation North East cluster • Similar consumption patterns with existing cross border product flows to Uganda and Tanzania • Part of existing trade zone (EAC) • Proximity and well developed road network to Kampala and Northern Tanzanian border from Nairobi • Common language (Swahili) Nigeria Ghana Uganda Kenya South West cluster DRC South East cluster Tanzania • Angola attractive on a standalone basis • Positioned to serve lucrative Cabinda province • Longer term, could provide access to Congo and DRC • Similar consumption patterns with existing cross border product flows • Part of existing trade zone (SADC) • Proximity of countries with developed road system from Harare to major cities • Zimbabwe, Zambia and Malawi are English speaking Angola Zambia Mozambique Zimbabwe Map key: Focus Country Tagalong Country Trading Country

  9. Stock continuity • Function of distributor’s cash-flow (credit terms) and harbour congestion

  10. Owning Sales and Marketing: • Most African distributors do not focus on Alcoholic Beverages alone – they also sell commodities like milk, rice and sauces • To ensure focus on our portfolio and promote brand building, we appoint our own local sales team (either directly or through our distributors) • They link customers to the main distributor, thus increasing sales and helping to prevent out of stocks • Earnings are part fixed, part variable (commission) to drive performance • Sales people receive training (in SA and otherwise) to enable them to activate/promote our brands correctly • The current sales team in Africa has steadily increased in number from 2004. Marketing: • Initially, the capabilities of the local agencies were fairly limited in some countries, but that has changed over time • Billboards in Angola and Nigeria are expensive – TV may give better reach

  11. The GAP focus on key markets work(it is also a prerequisite for brand building) ℓ’millions ℓ’millions 3,36m 3,36m

  12. Selecting key markets - looking at opportunity and risk

  13. Factors indicating opportunity: Affordability Population AB drinking culture Beer volumes Distell volumes WHO (!) Euromonitor (!) SAWIS exports Source: IMF Sep 11

  14. Factors indicating risk: Corruption Bribe payers index 2008 “It is worth noting that South African companies were seen as likely to pay bribes when doing business abroad within the (African) region”. • Corruption perception Index (out of 10): • Compiled by Transparency International (178 countries surveyed in 2010) • Less than 3 indicates rampant corruption; • Less than 5 indicates a high level of corruption.

  15. Other factors indicating risk: High taxes (Excise & VAT) Inflation Elections Exchange rate Ease of doing business Human development Global Competitiveness (esp infrastructure) Exchange control (liquidity) The right partner can help you navigate this terrain

  16. Brand building across a balanced portfolio in Africa

  17. Amarula in Angola

  18. Savanna in Angola

  19. Knights in Angola

  20. JC in Mozambique

  21. Nederburg tastings in Nigeria

  22. Savanna in Ghana

  23. Viceroy in Kenya

  24. Overmeer in Tanzania

  25. Angola

  26. Great Lakes

  27. Lessons learnt & opportunities

  28. Lessons learnt • Be very careful when selecting your distributor/business partner (sound cash-flow, good relationships, willingness to invest in brands) • Get to know the African consumer – their drinking habits and preferences differ from that of SA and other markets. • Adjust your marketing material for the market. Do not copy and paste. • Employ locals. • First mover advantage. • In Angola, the ability to speak Portuguese is a major advantage. • Have lots of patience .

  29. Opportunities: • In general, the less industrialised the country, the bigger the need to import, which creates opportunities for local manufacturers and suppliers. (Merchandising material, fridges, etc.) • The growing middle class – not affluent enough to drink JWB on a regular basis, but aspiring to more than the typical homebrew. • Advisers – auditors and attorneys – that cater for medium sized corporates. • “Honest” brokers – estate agents, recruitment agencies.

  30. Thank you Questions?

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