Download Our values - Parliamentary Monitoring Group

FIRST ENGAGEMENT WITH
THE PARLIAMENTARY
SELECT COMMITTEE ON
ECONOMIC DEVELOPMENT
11 September 2012
Overview of the Presentation
•
Introducing Distell to the Select Committee
– Who we are; What we do
– A few of our products
– Our Values and Aspirations
– Ownership
– Corporate Overview
– Global Alcoholic Beverages Landscape
•
The great challenge of sustainable development . . .
•
So what is the best way to rise to this challenge . . .
– Far-reaching legislation to ensure State regulation?
– Continued self-regulation by Industry?
– Joint efforts by the State and Industry?
2
Distell Group in brief
Distell Group: Who we are; What we do
Who we are
• Distell Group Limited is a 12-year-old company with an 87-year-old history
• Distell was established in 2000, following a merger
between Distillers Corporation (founded in1945)
and Stellenbosch Farmers’ Winery (founded in1925)
• We employ nearly 5 000 people worldwide
• Our annual turnover for the latest financial year ended 30 June 2012 was R14,2
billion (R12.2 billion (85%) of which came from southern Africa)
• We now have a global footprint, but we remain proudly rooted in South Africa
• We are on level 4 in terms of BBBEE (from level 8 four years ago)
What we do
• Distell is Africa’s leading producer and marketer of spirits, fine wines, ciders and
ready-to-drink alcoholic beverages
• We are ranked 2nd in the world for cider production, and are among the top-8
brandy producers and top-11 wine producers in the world
• Some of our products (eg Van Ryn’s and Three Ships) have achieved “best in the
world” status, and others (eg Amarula) are among the fastest-growing brands in
the world
4
Distell Group: A few of our products
5
Distell Group : Our Values and Aspirations
Our values
• A sense of ownership
• Entrepreneurial spirit
• Performance-driven culture
• Customer and consumer market orientation
• Respect for the individual
• A global mindset responsive to change
Our aspirations
• Continuously building on our position as a profitable and leading South African wine
exporter
• Consolidating our position as a domestic market leader
• Expanding our global footprint through exploring new markets
• Creating shareholder value
• Accelerating transformation
• Continuing on our path as a responsible corporate citizen
6
Distell Group: Ownership
•
BBBEE-consortium conversion date set for 2013,
which will result in 6-8% shares becoming available
7
Distell Group: 10-year Corporate Overview
Over a ten-year period we have
•
Delivered a total shareholder return of 24.6% CAGR (compared to the JSE top-40
index’ s ten-year CAGR of 12.6%)
•
Contributed R37,4 bn to the country’s economy
•
Distributed R34,1 bn in cash to stakeholders:
• Government received 63.4% (R21,6 bn) by way of taxes
• Employees received 25.9% (R8.8 bn) by way of emoluments
• Shareholders received 10.7% (R3,7 bn)
8
Volume per geographical pool (mL)
9.6%
450.0
Litres Millions
400.0
381.1
14.7
417.8
350.0
300.0
250.0
200.0
150.0
22.1%
4.8%
100.0
35.4
50.0
47.5
37.1
58.0
3.9%
46.2
48.0
RSA
AFRICA
BLNS
12 mth June 2011
INTERNATIONAL
12 mth June 2012
* BLNS figures represent in-market figures, excluding Africa channels
Source: Business Information Warehouse
9
Global Alcoholic Beverages Landscape
• Declining global growth of 3.9% made for tough trading conditions
• Globally, alcoholic beverages posted further gains in 2011 both in volume and total value
• Total value growth has returned to pre-recessionary levels, whilst volume growth is lagging
• Whilst globally the industry’s growth trajectory signals a firm recovery, on a regional level growth performance is varied
with emerging markets taking the lead with higher growth rates as compared to mature markets
• In 2011, at category level, the volume consumption of wine and spirits grew ahead of beer at 2.35% and 2.91%
respectively, whilst cider continued its high growth momentum with 5.75% volume growth
Source: 2012, Euromonitor
10
The great challenge of
sustainable development
Distell Group: Responsible Drinking
•
•
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We promote only the responsible enjoyment of alcohol. This entails, amongst
other things:
• discouraging consumption of alcohol by pregnant women;
• discouraging the selling of alcohol to minors and already intoxicated
people; and
• fully supporting the ARA’s Code of Commercial Communication.
We are starting to achieve success with programmes aimed at equipping young
people to make healthy choices about alcohol, sex and drugs
We are in regular engagement with government about taking a balanced
approach to managing alcohol abuse (i.e. balancing economic development with
health and social concerns):
•
•
•
•
•
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Minimising the impact of Alcohol Abuse
Fetal Alcohol Syndrome
Drinking and driving
Lifestyle diseases
Youth education
Emphasising that the tot system is illegal
12
Distell Group:
Skills Development & Human Rights
Mindful of South Africa’s skills shortage, we aim to attract top talent by improving our
reputation as an employer of choice, equip individuals with the skills we require, and
look after the talent we have.
• Training spend increased by 2,78% (2011: 22%), with 78% of our training spend and
87% of our internship spend allocated to previously disadvantaged individuals
(PDIs).
• Learnership intake increased significantly from 69 to 111.
• Lost time injuries increased by 62% due to expansion activities, but the number of
lost days halved.
• We suffered no industrial action and union membership held by our employees
decreased marginally to 35,6%.
• Following the Human Rights Watch report on conditions of farmworkers in the
Western Cape, Distell re-examined its own practices, and emerged confident that
we are respecting workers’ human rights on farms that we own or co-own. These
practices include working and living conditions, remuneration and economic
empowerment
13
Distell Group: Environmental Focus
We are committed to reducing our impact on the
environment through our five-point policy,
as implemented by our environmental working
group. Distell has two environmental specialists
who are responsible for guiding the company’s
strategy to reduce its impact on the environment
They focus on:
• Climate change and carbon footprint
• Energy efficiency
• Water usage to sustain water supplies
• Primary waste management
• Packaging material
• Effluent / waste water
• Responsible farming:
• Sustainable practices (IPW)
• Conservation of biodiversity (BWI)
• Organic wine cultivation
14
Distell Group: B-BBEE
We are making making progress towards our new employment equity and preferential
procurement targets, as set in February 2012:
•
•
•
•
•
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Achieved 100% B-BBEE compliance (Level 4 B-BBEE rating) five years ahead of target, with a
score of 65,32 (7 points better than last year).
Strongest improvement shown in the areas of equity ownership and preferential
procurement.
70% of our South African staff are historically disadvantaged individuals (HDIs), and of these
17% are female.
85% of all new appointments were PDIs, and 89% of all promotions were awarded to PDIs.
50% of Distell’s total procurement spend, or R3,89 billion, went to B-BBEE suppliers (2011:
38%).
R48,78 million was spent on enterprise development.
15
Government concerns about the
liquor industry
Social Development – Alcohol abuse reduces disposable income of
breadwinners in poor families, leading to family pressures; youth become
addicted because of easy and abundant availability of alcohol
Health – Increased cost of health care because of association between
trauma care and alcohol abuse; high incidence of fetal alcohol syndrome
in South Africa.
Transport – Increased road accidents because of drinking and driving
Police – Increased person-on-person assaults/violence
Education – Learners with fetal alcohol syndrome struggle at school
17
Objectives of the National
Planning Commission
•Eliminating poverty by creating
more jobs
•Reducing inequality by improving
our educational system
•Reducing high burden of disease
•Too few South Africans are
employed – large proportion are out
of school and adults who are not
working.
19
Department of Trade and Industry’s
Objectives
• Job creation
• Facilitate transformation of the economy to promote industrial
development, investment, competitiveness and employment
creation;
• Build mutually beneficial regional and global relations to advance
South Africa´s trade, industrial policy and economic development
objectives;
• Facilitate broad-based economic participation through targeted
interventions to achieve more inclusive growth;
•Create a fair regulatory environment that enables investment, trade
• and enterprise development in an equitable and socially responsible
manner; and allow new entrants into the market.
• Promote a professional, ethical, dynamic, competitive and
customer-focused working environment that ensures effective and
efficient service delivery
•Manage Liquor Manufacturers and distributors licences
19
Department of Tourism Objectives
• South Africa remain Competitiveness
• To generate economic growth and foreign exchange, by
aggressively developing and promoting tourism
• To establish tourism as a national priority
• To create sustainable employment opportunities and
contribute to the well-being of all the people of South
Africa
• To optimise opportunities for SMME's, specifically
emerging entrepreneurs
• To use tourism to aid the development of rural
communities
• To promote domestic tourism amongst all South Africans
• To encourage tourism growth and cooperation in Southern
Africa
19
Department of Agriculture,
Forestry and Fisheries Objectives
•Economic growth and development
•Job creation
•Rural Development
•Sustainable use of natural resources
•Food security
19
So what is the best way
to rise to this challenge?
Alternative to Restriction /
Banning of Liquor Advertising
• Self Regulation
• Populating the Code of Commercial, Communication and
Conduct to all in the value chain
• Reinforcement of economic contribution from enterprise
developments
• Reinforcement of CSI contributions
• Enforcement of legislation
Legal drinking age 18 years
Licensing
BAC limits
• Partnerships
Foundation for Alcohol Related Research (FARR) (decrease in
FAS by 30%, De Aar, NC)
Government, DTI, ECLB, WCLB and KZNLB.
19
Understanding Alcohol Abuse Better
• Alcohol abuse and alcoholism emerge from a
complex interaction of biological, socio-cultural and
psychological factors in the environment that will
not respond to simplistic and cosmetic prevention
measures.
• We recognize that harsh social and economic living
conditions contribute to alcohol abuse and agree
with the World Health Organisation that in order to
reduce alcohol-related harm it is crucial to address
social deprivation.
• Alcohol abuse is a multi-faceted problem and there
is no ‘silver bullet” solution.
19
Understanding Alcohol Abuse Better, contd
Different drinking patterns are related to different health outcomes,
both long-term (chronic) and short term (acute), and effective
prevention requires a thorough understanding of how people drink
How people drink not only how much they drink determines
outcomes they are likely to experience. These ‘drinking patterns’
describe three aspects:
• Individuals: e.g. age, gender, health status, pregnancy,
experience
• Drinking settings: e.g. home, retail outlets, public spaces,
commercial and non-commercial alcohol
• Drinking behaviours and activities: e.g. mealtime drinking, binge
drinking, drinking at work, drinking and driving
19
Consider Targeted Interventions
•Targeted interventions seek to reduce the potential for harm by
specifically and selectively focussing on problematic drinking patterns
•Targeted measures:
• Specifically address harm where it occurs
• Can be tailored to individual, societal and cultural differences
• Do not require structural change or legislation for implementation
• Avoid most unintended outcomes by virtue of their specificity
•Targeted measures include;
• Brief interventions for problem drinkers
• Local accords and community action
• Provision of information, raising awareness and alcohol education,
particularly for ‘at risk’ groups
• Responsible hospitality and server training
19
Impact of severe restriction or banning of
liquor advertising
•Restrictions will not reduce abuse and will have negative consequences
•There will be increase of job losses, direct and indirect on the industries
that work in the liquor-beverage value chain.
•State security risks will increase – unrest arises when basic needs are not
met.
•Increased pressure on Social Grant system.
•Economy will not grow but suffer more.
•There will be increase in cheap illicit products and illegal syndicates
•New BEE partners or emerging BEE partners product will struggle to
market their products, while well-established players will benefit
•Regulatory power by Social Development and Health amount to
“double jeopardy” (bargaining with National Treasury and Finance and
regulating industry)
19
Regulation concerns:
Sustainable Livelihoods Foundation
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•
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•
•
•
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180,000 – 265,000 informal liquor traders country-wide.
25,000 unregistered traders in the Western Cape.
Shebeens are important micro-enterprises in the township informal economy:
–
The most numerically common home-based retail business,
–
Provide informal employment for South Africans,
–
Shebeens exert strong economic multipliers: food (braais), recycling, ice, spaza shops, DJs, table games
and music, and liquor retailers.
The great majority of shebeens are long established, operate over weekends and sell low volumes to an
established client base.
The majority of shebeen owners are women, who trade liquor as a means of survival, and have no choice to
remain in business given labour market conditions and the competition within other spheres of the informal
economy.
The scale of informal, unregulated, liquor trading in the townships is too large – too many entrepreneur livelihoods
are at stake and the demand for a diversity of outlets for drinking (and access to liquor) is too high - for law
enforcement to control illegal trade.
Regulation can provide a means to empowerment for a broad-base of micro-entrepreneurs in the liquor industry.
– Micro-enterprises within the medium to high volume segment are sufficiently large to be included within the
regulatory framework.
Industries (within the formal sector) cannot have an influence at the base of the pyramid if businesses are illegal
and criminalised.
Inappropriate policy results in harm:
– One of the main liquor policy harms has been the ghettoization of drinking culture, which in turn is fostering a
demand for strong, cheap, liquor. This ghettoization also sustains drinking spaces which contribute to antisocial behaviour and liquor harms.
27
Regulation concerns: Spirits excise
However well-intentioned, government’s goal to align South Africa’s excise taxes levied on alcoholic beverages with
international norms, has produced some unintended consequences
•
An excise increase of 20% on spirits was announced in the 2012 national budget. Taking into account trade
inflation, the spirits industry estimates that a further 20% to 22% spirits excise increase will be required in February
2013 for the industry to reach its excise tax goals
•
As result retail pricing increased by around 15%
•
Brandy volumes declined immediately, from a good performance in the first 8 months
• Our concern remains around the proposed regulatory and legislative amendments, the future of alcoholic beverage
advertising and exorbitant excise levies that may lead to undesirable consequences such as dwindling margins for
legitimate farmers and an increase in illicit alcohol trading
• These exorbitantly high excise hikes for South African spirits increase the economic incentive for illicit trade. As it is,
the South African Liquor Brand Owners Association (SALBA) estimates that in 2012, illicit trade in spirits
predominantly in the formal trade, will result in approximately R472 million in excise and VAT evasion. As industry, we
are currently engaged in a process with national government to develop a new illicit trade quantification methodology
to assess at national level the taxation gap by alcohol category, which will also take into account volumes stemming
from the informal trade sector. This is important, since a significant part of the informal trade is unlicensed and
operates outside the regulatory realm of liquor in SA
• The spirits excise hikes also hold significant implications from a socio-economic perspective and could well lead to
further job losses. Moreover, these job losses could also affect the country’s wine industry, one of the major
employment providers in the Western Cape
• It is Distell’s intention to continue with our industry peers, to participate in government’s review of SACU’s excise
policy, with the aim of providing constructive inputs that objectively consider the intended and unintended
consequences of excise policy going forward
28
Some suggestions to tackle Alcohol Abuse
•Alcohol policy must operate within a reasonable regulatory framework
that balances individual freedoms against the well-being of society
•Alcohol policy must recognize the cultures and religions that affect
consumption patterns
•Government should appropriately and effectively regulate alcohol
beverage sales
•Governments should set a minimum age for the purchase of alcohol
beverages
• Laws should penalise those who illegally supply alcohol beverages to
those under the legal purchase age
• Government should enforce laws against drinking and driving and impose
severe penalties on those that violate them
• Illicit production and trade in alcohol can cause serious health problems
and governments should enforce laws to prevent this
19
What has worked and what has not
What has worked
•Parents’ involvement
•Strictly enforced self-regulations.
•Partnership with government, eg ECLB, KZNLB and
WCLB)
•Establishment of sport- and arts-and-culture- loving
society
•Establishment of Recreational Centres
What has not worked
•Warning Label
•Banning of advertisement in France and USA
19
Thank you for listening.
Questions?
Strategic elements of Government’s AntiSubstance Abuse Programme of Action
o Reduce demand through . . .
• Interventions aimed at discouraging abuse of alcohol by
members of the public
o Reduce supply via . . .
• Law-enforcement strategies to stop production and
distribution of liquor, illicit substances and associated
crimes
o Reduce harm by means of . . .
• Initiatives to minimise and mitigate the social,
psychological and health impact of alcohol abuse
Demand-reduction interventions
o Harmonise liquor laws and policies (1)
o Information and education campaigns against alcohol abuse
(12)
o Restrictions/Ban on liquor advertising (21)
o Ban on product-promoting sports and arts sponsorships (22)
o Life-skills programme for young people (24)
o Public advocacy and messaging against substance abuse (27)
o Reducing current legal alcohol limit for drivers (31)
o Zero tolerance for novice drivers (32)
o Alcohol-free public -service functions (34)
Supply-reduction interventions
o Reducing accessibility by raising current legal drinking age to 21
(3)
o Restricting times and days of the week that alcohol may be sold
(4)
o Reducing number of liquor outlets in specific geographic areas,
ie away from schools, libraries and places of worship (5)
o Regulating to control home brews and concoctions (6)
o Raising duties and taxes on alcohol products (7)
o Imposing health and safety requirements for liquor premises (8)
o Prescribing measures for containers, warning labels and alcohol
content (9)
o Increasing criminal and administrative liability of individuals and
institutions that sell liquor to underage and already-intoxicated
drinkers (10)
Harm-reduction initiatives
o Mandatory contribution by liquor industry to a fund
“ring-fenced” for prevention and treatment of
alcohol abuse (11)
o Continuum of care focussed on full spectrum of
health services for alcohol abuse (23)
o Strengthening of after-care services for learners (25)
o Increasing provision of and access to rehabilitation
and after-care (30)