Lucas Verwey: Distell’s strategic finance leader
Distell group CFO Lucas Verwey relishes the strategic leadership and variety that his role offers him.
Lucas Verwey joined Distell in 2014 and was appointed group CFO a year later, and is also an executive director on the company’s board. The alcoholic beverages group, which is headquartered in the Cape winelands and listed on the Johannesburg Stock Exchange (JSE), is Africa’s leading producer of spirits, wines, ciders and ready-to-drinks (RTDs) as well as the world's second-biggest producer of ciders. Some of the company’s top brands include Amarula, Hunter’s, Savanna, 4th Street, Klipdrift, Nederburg, Richelieu, Viceroy and J.C. Le Roux.
For Lucas, no day at the company is the same. “I’m involved in most aspects of the business – the breadth of the role is what keeps my work interesting. This includes involvement in operations and supply chain and in our African and international expansion. I hold a strategic finance role that includes investor relations, M&A, business planning and building out strategy,” comments Lucas.
Before joining Distell, he was an investment executive at the investment holding company Remgro. Remgro itself owns almost a third of Distell. His entrepreneurial experience includes running a small distribution business in Cape Town. In 2017, Lucas was nominated for the CFO Awards.
No trading activity
The hard lockdown was grueling for Distell with four months of no trading activity. The alcohol industry was hit badly by the first nine-week ban, losing R2 billion in sales according to market research agency Nielsen. Distell group CEO Richard Rushton called the two bans “massive hits” and estimated that the company lost out on the sale of 100 million litres of alcohol due to lockdowns around the world, including its main market, South Africa. Instead of retrenching, Distell’s 4,900 employees took a 10 percent pay cut across the board.
Distell’s board and executive management took a 30 percent cut in fees and remuneration for three months from 1 April 2020. “Along with cash preservation and balance sheet management, our key consideration was to look after our people, customers and suppliers, particularly our smaller ones. A pay cut was difficult, especially for factory workers, but preferable to losing jobs,” says Lucas. “Doing the right thing is important to all of us, and in the ethics and DNA of the company.”
During lockdown, Lucas spent time protecting the group’s cash flows while also preparing to service the market once again. With Covid-19, M&A activity has taken a temporary back seat due to the need to conserve cash.
The recovery in consumption once the bans were lifted was above expectations. “In-home consumption has helped this recovery with consumers preferring trusted brands. We have a diverse portfolio of brands and many price points – from the premium to everyday drinking. The breadth of this portfolio has protected us during these times and positions us well in any recovery,” adds Lucas.
An unforeseen positive development is that the company made some revenue from the sale of alcohol and sanitiser in the financial year, which was launched and sold two weeks from concept, demonstrating the company’s agility during a crisis.
Another innovation launched in July 2020 was Distell’s web-based solution Click2Collect.co.za that allows South Africans to order a wide range of alcoholic drinks. The platform connects consumers with more than 22,000 taverns countrywide and although designed by Distell, it allows consumers to order any alcoholic beverage, including those offered by other producers.
Product innovation also continued during the difficult period with the marketing teams launching seven new innovations in three months – one of which was in the non-alcoholic space.
Small players in the supply chain
The company currently procures from over 2,100 small businesses, a large proportion being black owned. Distell supports small businesses and black farmers through the Escalator and Agrigator programmes. “We work hard to transform our supply chain and contribute to meaningful development that supports a more equitable and sustainable society. We do this by increasing the number of black-owned and black women-owned companies from which we procure goods and services,” says Lucas. “This is beyond B-BBEE scorecard ‘box ticking’; this again, is doing the right thing for the country.”
One of the projects Lucas has been responsible for is the 150-person strong shared services centre in Tyger Valley, away from the Stellenbosch corporate headquarters. The centre, called the Hive, was created to enable cost saving and efficiency as well as the proper use of technology and data.
The company is using emerging finance technologies to execute repetitive tasks and digitalise some of the processes in the business. “We are building up our data analytics capabilities to use data better. We want data to be more readily available for better decision-making. We are working towards dashboards that people can access quickly in order to make better decisions,” says Lucas.
At present, the rest of Africa outside South Africa contributes approximately 14 percent of the group’s revenues. Angola, Botswana, Ghana, Kenya, Mozambique, Namibia, Nigeria and Tanzania are its key markets on the rest of the continent, while South Africa is its main base. While African markets are traditionally beer markets, African consumers are growing a taste for ciders, mainstream spirits and wines.
Trading conditions in many African countries like Angola and Zimbabwe are challenging, with currency devaluations against a backdrop of tough economic conditions. “Africa is our next frontier of growth and strong growth always comes greater risk. We plan to export more products into Africa while also building out local production facilities. As consumers need more choice outside of beer, Distell intends to leverage its diverse portfolio to satisfy consumer demand,” comments Lucas. “Many people focus on China with a population of 1.4 billion people. Africa has a similar size of approximately 1.3 billion people – we have an amazing opportunity in our back yard.”
In his free time Lucas enjoys spending time outdoors playing a variety of sports with his family. This includes tennis, golf, sailing and mountain biking.
Working from home has given him new perspectives on family life. “Despite the challenges, there were lots of positives around remote working. I felt closer to my family and the rhythm of home life. We spent more time together braaiing and playing board games.” Lucas spends a great deal of time reading for business but when he gets a chance for personal reading, he favours CEO memoirs.
Growing a finance career
Lucas grew up in Bloemfontein where his father was a partner at accounting firm PwC. He studied in Bloemfontein, but completed his articles at Coopers & Lybrand in Cape Town. He has a B.Compt Honours and he is a CA(SA) and a CFA. His father, two brothers and sister are also CAs. He was attracted to finance as a route into commerce and business management.
Lucas is involved with mentoring a few people across the business as well as taking on a mentoring role with his direct team. His advice to young finance professionals is to act as if they owned the business:
“This means being passionate and putting yourself on a steep learning curve. You need to commit to learning every day. It's also important to pre-empt what people would like to know. This means understanding the business at a deeper level.”