Embattled spirits supplier Distil has suffered a massive drop in sales in the run-up to Christmas, as shoppers prioritised spending and traded down to own label to save money.
Revenues at the RedLeg, Blackwoods and Blavod distiller sank by 59% to £233k on a 56% volume decline in its third quarter to the end of 2024. Distil highlighted the quarter lapped a period of exceptional growth in the same three months a year earlier, when sales increased 39%.
Gross margins also came under pressure as the group’s fixed costs remained the same, leading to a fall of six percentage points to 42%.
Distil slashed advertising and promotional spend by 55% in response.
Executive chairman Don Goulding said market conditions continued to be tough across the spirits industry, particularly in the UK.
He added that major customers had acted more cautiously, not buying as much as usual heading into Christmas.
“In addition, rate of sale at retail store level was suppressed, continuing the trend we’ve seen in previous months, as consumers’ spending continues to be stretched, with own label and aggressive discounting winning basket share,” Goulding said. “We are working with our partner, Global Brands, to define strategies to increase sales through Q4.”
And the on-trade also suffered, with volumes falling significantly, as consumers opted for longer drinks such as beer and cider, which are perceived to offer better value for money, he added.
In response, Distil will move its full UK distribution, including the on-trade, to Global Brands, which owns the likes of VK, Hooch, and Franklin & Sons. It is hoped the move will provide synergies with Distil brands in terms of target consumers and trade accounts. Distil’s relationship with Marussia Beverages, which has serviced UK on-trade and premium off-trade customers since September 2022, will end.
Shares in Distil dropped by 26% to 0.08p on the back of today’s trading update. The AIM-listed penny stock has lost almost 90% of its value in the past year following a profits warning in the summer and an emergency fundraise in September.
Goulding said today: “The medium-term macro-outlook continues to be challenging, as the overall spirits market remains soft in response to increased pressures on consumer spending and further duty increases in the UK.
“However, we are confident that the extended partnership with Global Brands will put our brands in the best position within the market and offer important opportunities for growth across the portfolio, and we are working to mitigate the impact on the full year.”
Distil issued a profits warning in August last year after its revenues took an unexpected nosedive, plunging 55% as the global spirits market was hit by a downturn.
It left the group needing to plug a hole in its finances, with an emergency raise of £650k providing it with a lifeline to get through the rest of 2024.
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