As group CEO of Distell, Richard Rushton has to have vision broad enough to keep track of the different facets of the company’s business and far-sighted enough to see the future. Speaking to WINIFRED BOWMAN, he reveals that his vision is 20/20.
Distell: from local to global
Formed in December 2000 when Stellenbosch Farmers Winery Group (founded by Dr Charles Winshaw in 1925) and Distillers Corporation (founded by Dr Anton Rupert in 1945) merged, Distell is a marketer and producer of spirits, fine wines, ciders and ready-to-drink beverages. Today the company has a presence in many parts of the world and employs more than 4 500 people. The Distell Foundation supports and invests in socially responsible programmes which aim to help minimise and mitigate the potentially harmful impacts that the abuse of alcohol consumption have on society. The foundation invests in programmes focusing on the prevention of Foetal Alcohol Spectrum Disorder, youth development, job creation and entrepreneurship. These important initiatives are complemented by the company’s long tradition of supporting the arts and culture. Richard Rushton has been the group’s chief executive officer since November 2013. He has gained more than 25 years of experience in diverse emerging markets within the beverage and fast-moving consumer goods industry.
Where did you grow up?I was born in Johannesburg and spent some of my formative years here in the Western Cape at Rondebosch Preparatory School. I finished school in Johannesburg and completed a BCom degree at the University of the Witwatersrand.
Where did your career take you before you joined Distell?I worked for SABMiller as an expatriate for 17 years, managing its operations in Botswana, India, Ecuador, Panama and Colombia. My wife, Tracy, and I returned home to South Africa after having brought up our two children on three different continents.
How do you see the future and opportunities for Distell?There are massive prospects and
exciting opportunities for our company, particularly in Africa. The forces shaping our business are global as well as local in nature and they present us with many new challenges. As a result, we are constantly asking what makes us truly different and what is the core of our business.
Distell is a multifaceted, layered and complex enterprise that participates in three large arenas: wine, spirits, and premium ciders and ready to drink (RTD) premixed beverages. Our brands cut across all consumer occasions, price spectrums and income groups. This is challenging for our business for two reasons. Firstly, the spirits and beer industries have undergone substantial global consolidation. Our competitors are now more focused than ever and have significant economies of scale. Secondly, globally there is an increased consumer interest in premium products, as well as a shift to local craft offerings in all categories. These trends are now prevalent in developed world economies.
For us at Distell, there is a major opportunity to grow our presence in the mainstream wine and spirits segments in Africa and we are resolutely establishing our premium ciders, wines and spirits on the continent and in a carefully selected number of international markets. Our unique strength lies in offering a broad portfolio of brands across consumer occasions and price points and this enables us to pursue our growth strategy with less risk. However, it also comes with the downside of higher costs and potentially being slower to react to changes in the market. So we are really attempting to create a business with more focus and simplicity.
A weakness of our broad portfolio offering is that it is more costly to produce, distribute and market, which puts pressure on our profitability and returns. For example, wine is a major category and one of great importance to Distell. We are a major player in the South African wine industry and our offering is very strong in the mainstream, everyday-drinking segment of the market. The opportunity to play to our strength in wine on the African continent is massive and one we are pursuing with urgency. At the same time, we must also play our role in emphasising the superior quality of South African wines. But as you know, it’s not easy for ‘big companies to do small well’.
Compared to beer, which is my background, wine is still very much a craft business and is therefore much more fragmented and complex. It is also experiencing a broad shift in consumer appreciation; purchasers tend to look at the story and the people behind a brand, and how societies and communities benefit from it.
What are the challenges to growth?Driving economies of scale in wine production is by far the South African industry’s greatest challenge. Distell is the largest South African wine producer, yet we are still small in the bigger scheme of things. So how do we profitably grow the wine industry and create premium credentials for wine that deliver acceptable returns, particularly in international markets where our channel influence is still so small and where there is such a wide choice of brand offerings from New World wine countries?
Given our legacy and historical brand strength in certain wine segments, our view is that we need fewer and bigger ‘big’ brands to deliver sufficient economies of scale so that we can selectively invest in premium brands for the long-term profitability and growth of our company.
Economies of influence are also playing a major role in wine. On the one hand, our trade customers are looking for more differentiated brands that are of sufficient size for them to invest disproportionate time, money and effort to promote and support the South African wine category. On the other, a rapidly changing, digitally enabled world means that marketing influence has moved away from the producer or marketer and to the consumer. So ensuring that our brands have sufficient scale and differentiation at both customer and consumer levels, represents our biggest opportunities and challenges.
And by far our biggest opportunity at Distell is thinking big but acting small. When you own a small wine farm or estate, building relationships with individual outlets and a smaller group of consumers who drive opinions and perception is critical to success. This is not easy when you are serving more than 44 000 customers each week with a broader brand portfolio in South Africa alone. So we are starting to create smaller premium wine and spirits teams in order to activate and differentiate our brands more successfully. We are also narrowing down our portfolio so that we can improve the focus of our efforts.
Although building our premium portfolio is vital, we have a far bigger challenge – and opportunity – in providing the African consumer with more brand choices in wines, spirits and ciders beyond the traditional clear and sorghum beers that are already so easily available throughout the continent. Our portfolio plays to the growing demographic in Africa that shows rising levels of income and urbanisation and, most importantly, an increase in female participation in the workplace. This is a unique opportunity for us to capitalise on and we will do so with urgency and focus.
In terms of new markets, China has a huge population and a whole new generation of consumers opening up to Western products. We have already spent a lot of time researching the country and the opportunities for growth there. The market potential is enormous but it is also complex and costly to tap profitably. So accessing the appropriate channels to find a market partner is an essential first step to success – as is taking a long-term view.
Finally, our biggest short-term challenge is navigating the impact of the drought on the sustainability and cost of procuring grapes and wine for the wine and brandy segments. While grape prices have risen due to the drought, bringing some relief to our wine farmers, we have to manage our price competitiveness to the trade and consumer with care, as wine also competes with spirits and beer. Wine margins are lower than those for spirits and beer, so managing grape and wine prices while retaining wine market share and category relevance is a significant balancing act.
Is there cause for optimism? Definitely! A prime example in our portfolio would be 4th Street. This is a massive brand and although volume growth has slowed recently, we have noted tangible evidence of consumers
expanding their choices and exploring higher-priced brands in our portfolio. This is good news in our bid to make wine brands more appealing to customers by underscoring their superior quality.
The consumption of wine and brandy is growing in many important urban nodes of South Africa, such as Soweto and Tembisa, and today we are seeing a much bigger tavern and counter service presence for our brands. Our focus is to expand our portfolio offering to more consumers in urban, peri-urban and township areas and to ensure our promotional efforts are both effective and responsible. We are still optimistic that there are significant opportunities for our brands to grow in South Africa and we are determined to actively pursue such opportunities as economic and social conditions improve.
Tell me about your centre of excellence at Distell. We established a centre of excellence just over two years ago. Johan Venter is at its head and its purpose is to ensure that Distell retains a leading edge in the offerings of its wine, spirits, cider and RTD brands. The team is made up of seasoned subject matter experts in their respective fields. They are responsible for guaranteeing the quality promise and integrity of all our brands. They travel the world to keep abreast of leading trends and practices and they are also responsible for Distell’s participation in various annual industry awards programmes. You could say that this past year has been the best yet for awards. Among the many accolades Distell has won since July 2017, we are extremely proud of the 66 Gold and Double Gold medals for wine, 72 Golds and Double Golds for spirits and of being named the Producer of the Year at the annual Veritas Awards.
What are your hobbies? I love playing golf and mountain biking (plodding at the back in stage races) and I am a South African sports fanatic. Our son Matthew is a professional golfer and I enjoy following his progress. I also like to read when I have time; mainly business books (the latest is The Excellence Dividendby Tom Peters). And I avidly follow world events on the news and social media. I love travelling with my family when time permits.
Is there something that people might not know about you? I speak fluent Spanish. And I love cooking. I went on a cooking holiday in Venice with my wife and daughter Laura.