Job cuts begin at SAB, Distell as uncertain future dampens liquor industry spirits

Beer bottles filling on the conveyor belt in the brewery factory.

  • South Africa’s alcohol industry employs more than 415 000 people.
  • Distell said it had reduced the number of its contract workers to 326, from 536, in January last year.
  • The country’s biggest beer maker, SAB, announced that it had suspended 550 temporary contract workers.

Liquor producers and companies along the value chain are beginning to reel under the effects of the ongoing alcohol sale ban, with some forecasting further cuts to already reduced number of contract workers, and others factoring in the possibility of retrenchments or preparing to turn off their taps for good. 

The third government-imposed ban on the sale of alcohol in December was implemented to keep hospital beds free of liquor-related trauma cases, but the move has come at a hefty cost for an industry that employs more than 415 000 people.

On Monday, Savanna maker Distell said it had reduced the number of its contract workers to 326, from 536, in January last year.

“We currently are using 210 less contractors than normal in our supply chain …  renewals will solely depend on further demand and our ability to trade. If the ban is prolonged for another month, there is likely to be a further reduction in contracted employment,” said Distell’s Group Manager of Investor Relations, Frank Ford. 

Despite cutting back its contract workers, Ford said retrenchments were a last resort and staff had taken a 10% salary reduction, with executives and board members taking bigger cuts. The group, which also produces the Hunter’s, Klipdrift and Bernini brands, lost 100 million litres in sales volumes and R4.3 billion in revenue for the 2020 financial year across all its operations in South Africa, Kenya, Angola, Nigeria, Mozambique, Zambia and Uganda.

Much like Distell, the country’s biggest beer maker – South African Breweries (SAB) – announced that it had suspended 550 temporary contract workers across its local operations. The Ab-InBev owned producer said it was doing everything in its power to avoid retrenchments, but communication and engagement from the government on the timelines for the ban have made business planning difficult.

“The scale at which our value chain is being impacted by the ban is deeply concerning. We have already cut overall staff salaries by 10%. We have already cancelled R5 billion in investments,” said Zoleka Lisa, Vice-President of Corporate Affairs at SAB in a statement on Monday.

South Africa’s winemakers have also felt the pain of the Covid ban, with revenue losses of more than R18 billion during the ban that has lasted more than 18 weeks. It also loses R300 million every week that the ban continues, while the current harvest season will bring a new challenge.

“We have started our harvest this week and we carry huge stock levels because we sell, and that creates challenges in these wineries that we may not have enough storage space for the new harvest that comes in over the next 10 weeks,” said Rico Basson, managing director of wine industry representative, VinPro, who described the situation as “dire”.

Basson explained that there are 30 000 jobs at stake in the industry, made up of 3 000 producers and 533 wineries. Of that number, 15% or 80 wineries and 400 producers may have to shut down their businesses.

“A lot of those jobs have got four or five dependents, so while the numbers may not seem high from a social economic perspective, there are severe challenges. I think the third ban really made it extremely difficult on cash flow,” he said.

For craft beer makers, the situation is more dire and a poll by the Craft Brewers Association of South Africa (CBASA) has revealed that seven out of eight brewers may not survive the latest ban.

“The craft brewing industry has done all it can to persevere under the most extremely restrictive environments. CBASA members have maximised their credit extensions, and are now drowning in waves of debt, with no ability to pay off their loans or rental fees. Already, 30% of local breweries have been forced to permanently shut their doors and 165 000 people have lost their jobs,” said CBASA in a joint statement with the Beer Association of South Africa (Basa) on Monday.

Basa and CBASA said they would have to start issuing food vouchers for employees of the surviving craft breweries and have called for the government to urgently communicate and provide clarity on when the ban is likely to be lifted.  

At South Africa’s biggest glass maker, Consol Glass, furnaces stay on at a cost of R8 million a day, waiting for customers, like Distell, to begin trading.

“The first two alcohol bans resulted in losses in production and sales of more than R1.5 billion to the glass packaging industry, and if this latest ban continues without a clear indication of how long it will last, it will result in similar losses and place at risk several hundreds of thousands of direct and indirect jobs in the industry’s supply chain,” said Mike Arnold, CEO of Consol Glass on Monday.

The company employs 2 000 people – and Arnold said, in the previous bans, it had focused on maintaining jobs by freezing vacancies and applying salary wage sacrifices across the board.

“The company will apply the same philosophy if we know with certainty that the third ban will be limited. However, we are reaching a point where a continued ban will force us to make decisions that result in permanent job losses,”  Arnold said.

The group suspended the construction of a R1.5 billion glass manufacturing plant in Ekurhuleni, Gauteng, last year, due to the ban. 

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