Alcohol industry continues efforts to reach pre-Covid highs: spirit producer

The alcohol industry in South Africa remains as competitive and dynamic as ever as the list of beverage options available to consumers continues to grow, the country’s largest independent spirits group Edward Snell & Co said this week.

It said experts project that the market is expected to grow annually by 8.5%.

“In 2022, brands made a concerted effort to increase ‘above the line’ spending to pre-Covid-19 levels in an attempt to make up for revenues lost during the lockdowns and subsequent alcohol bans. These efforts are expected to continue over the next few years,” Edward Snell marketing director Melanie Campbell said.

She said the industry had to negotiate a challenging business environment in recent years, a scenario that was likely to continue in 2023.

“Persistent rolling electricity blackouts and water security concerns have added to the triple challenge of unemployment, poverty and inequality in the country.”

She said around the world, consumers continued to protest the rising cost of living and businesses had not been spared as they grappled with the higher cost of doing business.

One example was the increase in fuel prices, which had the knock-on effect of disrupting supply chains and threatening businesses’ profitability and sustainability.

Despite security improvements to the business, Edward Snell experienced an escalation in armed robbery attempts on its transporting trucks.

Campbell said the illicit alcohol market represented one of the most serious threats to both the industry and consumers. 

A report by Euromonitor International, commissioned in 2021 by the South African Liquor Brandowners Association, Beer Association of South Africa and Vinpro, found that the illicit market in South Africa grew by 10% in volume terms from 2017 to 2020. The total share of illicit alcohol in 2020 was estimated to be worth R20.5bn and comprised 22% of total alcohol volumes.

“Tragedies such as the 21 youths who lost their lives last year at the Enyobeni Tavern in the Eastern Cape remain a lowlight for the industry.

“They force us to reflect on how the flouting of compliance regulations and laws can have calamitous effects and how all stakeholders in our sector must collectively commit to operating ethically and in good faith,” Campbell said.

She said on a more positive note, consumers’ changing preferences had seen the industry evolve and develop new product categories such as ready-to-drink items which included hard seltzers, canned cocktails and non-alcoholic spritzers.

“Since 2019, gin has steadily entrenched itself among the most popular spirit categories, breaking the grip spirits like vodka and brandy had long held.

She said the explosion in celebrity-owned and endorsed alcohol brands were further disrupters to the industry. Cassper Nyovest’s Billiato, Tendai “Beast” Mtawarira’s The Beast Wine Collection and Bonang Matheba’s House of BNG were three recent examples.

Meanwhile, Vinpro said last month a smaller wine grape crop was expected.

It said the wine grape harvest run-up, which runs from January to April — the second of four crop estimates by viticulturists and producer cellars  — indicated a smaller crop than in 2022 and the first estimate that was published in December 2022.

The crop was estimated to be smaller at this early stage, maybe even the fourth smallest crop in 17 years.

“The season was characterised by mostly average cold units and fewer snow deposits on mountain peaks than in previous seasons,” said Conrad Schutte, manager of the Vinpro team of viticulturists who issue the crop estimate, together with industry body SAWIS.

The next crop estimate will be released in the third week of February 2023.

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