There was a collective groan from certain wine industry insiders in January when South African liquor behemoth Distell announced the formation of an affiliate to take care of the upper-end of its wine business. Under the name of Libertas Vineyards and Estates, a stand-alone company has been put in-place to corral ubiquitous Distell brands such as Alto, Pongrácz, Nederburg, Chateau Libertas, Durbanville Hills, Zonnebloem and Plaisir de Merle into an entity tasked with focussing on the corporation’s premium wine offering.
But as the true vision of the new Libertas entity begins to take shape, it appears as if Distell’s wine strategy has reached a maturity and inclusivity sorely missed over the past few years.
“No, Libertas is not the rebirth of Cape Legends, the division under the Distell umbrella which marketed a number of premium brands for many years, in a new guise,” says Kay Nash, the highly-regarded marketer and business strategist who has been put in charge of Libertas
“Cape Legends was a sales and marketing division of Distell, not a company, which Libertas is. Libertas has its own assets and balance sheet. Libertas owns every estate and farm it represents. The entire primary and secondary production units, such as bottling, sits under this business. Plus, Cape Legends was never responsible for marketing Nederburg, still South Africa’s leading international and local wine brand, a name that is very much at the top-end of the focus for Libertas.”
As is the case with corporates, especially in small industries such as South Africa, the term arrogance is not something wine industry pundits and producers themselves disassociates from Distell. Over the past decade the company’s focus on profit-spinning segments such as ciders, RTD’s, spirits and entry-level volume wine brands including 4th Street at the cost of venerable wine brands such as Zonnebloem, Fleur du Cap and Chateau Libertas, has not endeared itself to the more established, premium and romantic part of Brand South Africa’s wine offering. Premium wine revenue is a drop in the ocean – less than 5% – when seen in the context of group revenues of R24 billion.
Although Nash does not use these words, humbleness and modesty appear to be part of the reasons that led to establishing Libertas. “Distell acknowledges and understands that the wine industry is innately complex,” she says. “What is going to work for, say, the RTD category is not going to work for premium wine as these are markets of different scales requiring different capabilities. Route to market dynamics are different and separate levels of skills are needed in selling the end product. You can only go so far with efficiencies and costing-engineering when dealing with premium wine, which is not a commodity.”
Nash says this is where Distell and its MD Richard Rushton realised there were two pieces at play here. “Including wine in a mainstream multi-category approach is not optimal. Focus drives profitability and passion drives beautiful quality wine and experiences.”
“So Libertas has got to uncouple itself from a volume and scale conversation and in Libertas we have banned talk of volume. We are only talking value.”
For the past couple of years the entire South African wine industry, she says, has been talking about the need for profitability. The new Libertas needs to actively support the industry in its premiumisation and profitability quest.
Which brings one to another shift in the Distell ethos, namely one of inclusivity. Over the past few months Nash has been on a drive to meet industry players from big to independent and iconic to discuss and understand the category dynamics, mythologies and how to collaborate effectively.
“The smaller players have done a great job at getting into the premium end of the local and international market, and many are terrifically profitable businesses,” she says. “But, the South African wine industry needs its bigger players on the premiumisation agenda or our industry will continue to be a shoal of small pockets of success without unlocking the true potential of the entire industry.”
She sees premium pricing between R80 and R120 a bottle and agrees that big Libertas brands such as Nederburg are going to have to evolve their offering. We have to be more focussed and have credible brand portfolios .
But, says Nash, Libertas is very keen to collaborate and be part of deciding where to focus effort and support for premiumisation and as an example, building common definitions of what constitutes premium and super premium wine price bands across the world.
Nash says things are happening fast. “We’ve now got Distell chief winemaker Niel Groenewald as the wine-leader and personality behind Nederburg, something the brand needs and hasn’t had for some time,” she says. “The Cap Classique market is booming, so Libertas is focussing on Pongrácz. Together with Alto, one of Distell’s and South Africa’s oldest wine brands, these two are our strategic growth brands.”
With experience at SAB, Cadbury-Schweppes, Yellowwood Consultants and Vital Health Foods, Nash brings a bit of marketing savvy along with strategic knowledge of turning businesses around.
“We want to be less predictable in our marketing and focus on the needs of the consumers and how we make our stories relevant,” she says. “We need to engage them at every touch point and make sure our estate experiences are unique and importantly, personal. Not being a big corporate gives us a great opportunity to touch every aspect of our brands.”
As an example, Libertas is moving its teams onto the estates and as close as possible to customers and consumers. “We won’t have a head-office approach. Premiumisation is not just about lifting your price and getting better packaging. It’s a mind-set, and if brand South Africa is going to succeed, we are all going to have to take-on this mind-set. A rising tide lifts all boats.”
No doubt the groaners are watching to see whether the tide comes in.