Distil has enjoyed strong Christmas trading over the important Q3 period to end December, with revenues increasing 71% year-on-year. This was driven by very good performances from the RedLeg spiced rum brand and the group’s Blackwoods gin range, which more than offset weaker sales of Blavod Black Vodka in Eastern Europe. Distil has expressed its confidence on Q4 trading prospects and that full year performance will be “in line with the Board’s expectations”.
Shift in sales mix: The shape of the P&L in Q3, with revenue growth of 71% outstripping volume growth of 31%, reflects a shift in the sales mix, away from lower-margin “licensed” sales, mostly in Eastern Europe, to sales through its own channels, where it captures a higher proportion of the value chain. As the product portfolio looks to build up its brand and customer franchises, this requires investment in brand marketing, with these support costs rising by 96% in the quarter.
Brand and market performance: RedLeg spiced rum was listed and widely available across two of the Big Four grocery chains in the UK, a major fillip for the brand, alongside its presence in other retail outlets and the on-trade channel. RedLeg also performed well in Australia and Distil is pushing on with gaining TTB approval for RedLeg in the important US market, where its US distributor has been successfully building on-trade presence for its Blackwoods Small Batch Gin. Distil continues to benefit from the rising popularity of the gin market, especially the premium segment, with double-digit growth (in volume and value terms) reported for both Blackwoods Vintage and Blackwoods Limited Edition. Having re-entered the US market, Blavod is performing well, with repeat orders being placed in both consumer and trade channels.
Shape of forecasts revised: We have adjusted the shape of our forecasts to reflect the continued strength of top line revenues. The impact on the bottom line is however less marked at this stage, given the accompanying increase in brand marketing costs to support this welcome top line growth, wider geographic and channel coverage and greater brand recognition. The virtuous circle of increasing brand recognition and extending product availability remains key to driving long-term shareholder value.