INSIGHT-Brandy chases whisky in South African spirit wars

From Reuters - October 12, 2017

* Brandy narrows gap with No.1 spirit whisky

* Economic slump squeezes consumer spending

* Many people switch from pricey, imported whisky

* Makers of wine, used for brandy, also benefit

By TJ Strydom

JOHANNESBURG, Oct 13 (Reuters) - Klippies and coke. Ricky Louw. Karate Water.

These are the orders ringing out in bars across South Africa as thrifty consumers switch from imported, big-brand whisky to various types of locally produced brandy to quench their thirst.

The trend, fuelled by a stagnant economy that is strangling spending, has led to the first increase in brandy sales for more than a decade, and falling sales of pricier whisky.

This is an unexpected reversal in a country that multinationals Pernod Ricard and Diageo targeted as a lucrative growth market for their whisky brands, and where they had enjoyed years of surging sales among an emerging middle class. Pernod Ricard sells more Jameson in South Africa than anywhere else apart from the United States.

Brandy still lags its rival in the contest to be the number one spirit by some distance - about 32 million litres is sunk a year versus nearly 39 million of whisky - but the gap has almost halved since 2014, when the economic slump set in.

Most brandies retail for around $8 (110 rand) for a 750 ml bottle, compared with around $13 for Diageos Johnnie Walker Red Label and $20 for Pernod Ricards Jameson, the two most popular whiskies. A significant price difference in a country where the minimum wage is less than $2 an hour.

At my local a double brandy is the same price as a single Jameson, says Fred Bester, 36, a sales consultant for technology startups in Johannesburg. Thats why I now drink brandy.

The international companies, however, are fighting back. They are shifting focus to more affordable whisky brands and dipping into their war chests to step up marketing drives.

Pernod Ricard does not break down results by country, but acknowledged brandy was taking market share in South Africa because of lower pricing.

The companys national sales director Werner Vosloo told Reuters it was trying to avoid a knee-jerk reaction that could damage the long-term potential and image of its brands and so was steering clear of price cuts.

He said it was also increasing advertising and promotional spending. He declined to provide figures, but the drive is evident on billboards, TVs and social media across the country.

Hollywood actor Don Cheadle can be seen sipping Chivas Regal on a huge billboard overlooking one of the countrys busiest routes, on the way to the Johannesburg business hub of Sandton - known as the richest square mile in Africa.

Pernod Ricard has also had a marketing push for its more affordable premium brand, Ballantines, which costs about $15. It is trying to woo customers with gift packs, said Vosloo, typically a free whisky glass or two when you buy a bottle.



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