Listening and talking to Distell

Distell, our industry giant, is not known for its urge to communicate frankly with wine commentators, so it was something of a surprise to be invited to a breakfast at which CEO Richard Rushton would be talking – and listening – to a handful of people from the press. And a very welcome surprise to have him do the former with a great deal of candour and the latter with equal courtesy and attention, supported by a team of top-level Distell executives.

Mathélize Tredoux has already given a good overview of the event, so there’ll be some repetition here. In fact I can’t cover much of what was discussed – but overall I feel a little closer to Distell, and a little more trusting of “them”, and happily accepting that channels of communication have now become more open.

Marthélize acutely, I think, surmises that the meeting was partly in response to speculation about the recent break-up of the Lusan partnership and “because they wanted to take control of the discussion’. In fact, speculation about Distell is rife in the winelands – not surprisingly, given how important Distell is to very many producers of grapes for wine and brandy (I’ll come back to another element of that relationship). In recent months I’ve heard it suggested with varying degrees of certainty that Fleur du Cap was being abandoned along with the whole Bergkelder, that Uitkyk was virtually sold, even that Plaisir de Merle was being bought by a consortium of money people and former Distell Chief Winemaker Razvan Macici! And a whole lot more.

Richard Rushton in more formal mode

I believe what Rushton told us last week. His report was in the context of Distell, as he says, doing a lot of introspecting over the past few years, especially with the now enormous weight of cider in their business (wine is roughly a third of the total), and the need to negotiate the great differences in those two elements. Distell seems to be particularly interested at both the premium end of wine and the overwhelmingly predominant lower end (the likes of 4th Street), and in building Distell’s contribution to both of them “at scale”. It wasn’t possible to do that for Le Bonheur, it seems, so Le Bonheur was let go; but there seems a lot of faith in Alto as a brand, so that will be kept. To an extent, I think, Alto plays something of the “credibility-giving” role of Plaisir de Merle – doomed to remain a tiny brand, but important as a fine estate to Distell’s image.

Durbanville Hills and Fleur du Cap will also be kept and built as Distell brands – and Nederburg of course, as the leading brand. Uitkyk they seem to want to hang on to for some reason (they don’t want anyone else to have it?), but it clearly won’t be merely as a rather lacklustre brand and a lovely Cape Dutch homestead. There’s been talk for a while about establishing Uitkyk as some sort of “destination”, so I daresay that will be developed as part of the “transformation” Rushton speaks of.

What of Zonnebloem? Rushton evaded my question at first but later answered with what came across as frankness: they’re not sure – or not sure enough whether or how they will abandon the brand (one they have, in fact, effectively trashed over recent decades). Zonnebloem, neither top end or bottom end, is clearly a problem for the way Distell is conceptualising its wine offering.

Other stuff

There was quite a bit of discussion about South African wine exports in general as well as specifically Distell’s. One thing that struck me, as too often the industry seems to be denial, was Rushton’s acknowledgement of “the need to address the apartheid heritage image”. (By which I hope he means the need to address the image primarily by addressing the reality of the heritage.) Perhaps this issue is related to the point made by Steve Nathan (Director for International Operations) when he pointed to the substantial decline in exports to the Nordic countries.

Hardly connected to that, except by the idea of image, was Rushton’s clear dissatisfaction with the way Stellenbosch is presenting itself. He didn’t go into it much, but said: “Stellenbosch has got to reinvent its red-wine offering”; and I think he’s right.

The question of a Chief Winemaker came up – as it should, given that Distell seems to see the need for one and it’s six months since they got rid of the last one, the redoubtable Razvan Macici (to whom I chatted by phone very briefly recently, during the middle of his Romanian harvest). Oddly (it seems to me) one thing they can’t make up their minds about, Rushton indicated, is whether to go for a local or “international” one. If he wants my opinion, given the full integration of Cape wine into the international market and the standing of the top local winemakers, it would be an inappropriate vote of no confidence to decide that a local person could not do the job.

Farmers

Connected to all the – worried – rumours flying about the winelands as to Distell’s intentions, is a great deal of dissatisfaction with the business relationship between Distell and supplier-farmers. I have heard of such things as sudden terminations of contracts, of most contracts only being made – or lost – in December, once all the expense of farming has been made and the next harvest is imminent.

Rushton was unequivocal in his response. He conceded that the way Distell has operated has been problematic, but “this perception of Distell as bully boy is over”. Contracting in December, specifically, must cease, and he promises that “corrective” action will happen, and that there will be new engagements with producers. Of course, as he said, there must be “different models at the premium and scale ends”. Certainty over Distell’s continuing brands will help all this. Sustainability is important; costs are relevant to the business. If grapefarmers can have certainty that Distell’s commitment to wine continues, and that a less arrogant contracting process will replace the present system, they have something to celebrate.

That’s important at a time when the grape-growing industry is beset with a crisis of profitability. The role of Distell – including, as Rushton says, being the “buyer of last resort – is hard to overemphasise, not only in this aspect, but others too. For better or for worse, the South African wine industry is structured how it is, and Distell is a vital component. I look forward to more frankness from them – and to thinking of some tough questions.

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