CVH Spirits targets doubling its SA business

CVH Spirits, a Scotland-based premium spirits company, aims to double South Africa’s contribution to its business over the next three years as it rebuilds its presence in a market it effectively lost following the breakup of Distell.

South Africa currently accounts for about 1%-2% of CVH’s business, CEO Ronan O’Rahilly told Business Times. The company wants to increase that to roughly 2-4% within three years.

The group is bringing its Bunnahabhain, Deanston, Tobermory and Ledaig single malt whiskies back to the South African market through a new distribution arrangement, after its brands fell out of the local distribution network during the 2023 transaction in which Heineken acquired Distell.

CVH was created when Distell International’s spirits assets were carved out of the enlarged Heineken business.

O’Rahilly, who was part of Distell’s mergers & acquisitions team during the transaction, said Heineken’s strategic interest was primarily focused on acquiring Distell’s South African business and strengthening its position in categories such as cider and ready-to-drink (RTD) beverages, which are premixed alcoholic drinks sold in cans or bottles.

He said the international Scotch portfolio was a better fit outside Heineken, which does not have the same focus on international spirits.

CVH Spirits CEO Ronan O’Rahilly (Suppl) “Distell was a very diversified business,” O’Rahilly said. “We had wines, we had RTDs, we had ciders, we had mainstream spirits.”

The separation has allowed CVH to make decisions more quickly and focus its investment on Scotch whisky markets and products, he said.

The push into South Africa comes as the global whisky and spirits market remains under pressure.

O’Rahilly said the whisky category had experienced difficult trading conditions for almost three years, with high inflation in the US and Europe weighing on consumption. He also pointed to:

The increasing use of GLP-1 drugs, which are used to treat diabetes and manage weight, is also contributing to changes in alcohol consumption patterns in some developed markets, he said.

The pressure has not been uniform across the category. O’Rahilly said premium and super-premium whisky had proved more resilient than value and mainstream segments. CVH is focused on the premium end of the market.

South Africa has its own economic pressures, but the company sees an opportunity among consumers who remain willing to spend on premium spirits and are becoming more willing to experiment with less familiar whisky brands.

O’Rahilly said some consumers were moving from more expensive spirits and Scotch into premium whisky as economic pressure encouraged them to seek lower-priced options without leaving the premium segment, creating an opportunity for CVH’s single malts.

Rather than compete primarily on volume, which has been a challenge across the broader whisky market, CVH is focusing on single malts, each with its own production methods and flavour profile.

CVH’s East Kilbride distillery in Scotland (suppl) Bunnahabhain has an established presence in the South African market from its time under Distell, while the other brands are less familiar to local consumers. O’Rahilly said the response from the trade and consumers to Bunnahabhain’s return had been “overwhelmingly positive”.

The company’s portfolio also includes Deanston, Tobermory and Ledaig single malts. O’Rahilly said Deanston is positioned at a more accessible price point for consumers familiar with Scotch who want to move into single malts, while Tobermory and Ledaig target consumers looking for more niche whisky styles and flavour profiles.

Italian spirits group Campari Group also took a minority stake in CVH in 2024. Referring to Remgro as the majority shareholder, O’Rahilly said the South African ownership was one reason the company wanted to maintain a presence in the local market.

The company is looking for growth outside mature whisky markets, where changing consumption patterns are creating headwinds.

O’Rahilly identified Asia, Africa, the Middle East and South America as markets with potential, with India particularly important to the next phase of the company’s growth in the spirits market.

On future acquisitions, O’Rahilly said the company was not looking to add new whisky brands. “Instead, we’re focused on expanding distribution for the existing portfolio and filling our production capacity.”

CVH has invested close to £30m (about R650m) over the past five to six years in its East Kilbride facility in Scotland, consolidating bottling, blending, warehousing and related production operations at the site.

O’Rahilly said the investment had increased the group’s production capacity. Further investment would be considered if capacity becomes constrained, he said.