A new partnership between Distell, a leading South African (SA) alcoholic beverage company and the RETHINK brand, would see Distell diversify into cannabidiol products. The company will be leveraging a 20 percent stake in RETHINK, a cannabis wellness product rage by Releaf Pharmaceuticals.
Although the value of the latest investment is not made known to the public, it would grant Distell access to the RETHINK brand and product range like oil, capsules and tea. According to Distell, it could produce a range of cannabidiol (CBD) brands, including but not limited to CBD-infused drinks. It is also expected that this partnership would expand its market share both in its base and in other major markets.
In September 2018, SA decriminalized the use of cannabis for an adult, giving them the right to use, possess, or grow the plant in private for personal consumption. The court cited that the ban on the private use of cannabis by an individual and the private cultivation of cannabis was inconsistent with the Constitutional right to privacy.
The court also stated that there was no evidence to suggest that cannabis could be any more harmful than alcohol. But since it became legalized, progress has been slow for a country with considerable potential in the sector. However, cannabidiol (a chemical compound found in cannabis or marijuana) is gradually gaining recognition for its health and beauty benefits.
In a statement, Richard Rushton, the CEO of Distell mentioned that “the cannabis sector is still in its infancy and primed for growth as legislation to control and legalize certain aspects of usage is developed.”
In the wake of the COVID-19 (coronavirus) pandemic in South Africa, the government placed a ban on alcohol to curb the pandemic. The alcohol ban was made to prevent drunken fighting, cut domestic violence and eliminate weekend binge-drinking prevalent across South Africa.
This affected Distell’s FY2020 outcomes in its South African market as domestic revenue slumped by 18.2 percent alongside non-alcoholic growth and innovations during restrictions. Also, it experienced a drop in EBITDA and headline earnings and a temporary suspension of dividends. Overall, the alcohol ban in SA reduced the trading year by nearly 20 percent, causing a loss of about 100 million litres in sales volume and R4.3 billion in revenue.
Distell got listed in the Johannesburg Stock Exchange (JSE) on 19 March 2001 and SA remains its largest market. With the new stake, the company plans to grow its market share within and outside South Africa while promoting the safe use of cannabis.