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KWV DILUTES BRANDY SURPLUS

08 Nov KWV Holdings

Going for broke in ready to drink

Loss-making liquor giant KWV Holdings might have found a way to increase its volumes and, at the same time, reduce its brandy surplus.

The company recently launched a ready-to-drink (RTD) brandy and cola mix under the “KWV & Cola” banner.

“KWV & Cola” will compete in the so-called “broke” (brandy and coke) market against larger rival Distell’s “Klippies & Cola” brand, which was launched several years ago.

KWV & Cola is the third RTD launched by KWV in the past 18 months and follows the release of wine spritzer brands such as Ciao and jimmijagga.

KWV – now controlled by empowerment investment company Niveus – has stressed the need to broaden the company’s traditional wine and brandy ranges with new liquor products that hold a wider appeal in a bid to increase production efficiencies and boost volumes profitably.

In the year to end-June, KWV posted an R80m operating loss from R762m in turnover derived mainly from wine and brandy sales.

Should “KWV & Cola” prove a strong seller, there will not only be benefits for KWV’s red-stained income statement. Mass production could also mobilise part of KWV’s huge brandy stock to meet demand.

At last count KWV held R809m in inventory, much of which is reckoned to be brandy stock.

Though it is too early to gauge the success of the new RTD, some observers have frowned on KWV’s attempt to mix a well-known and up-market brandy brand with cola. There is a concern that the new RTD could cheapen a “classy” brandy brand.

KWV three-year-old brandy is used in the RTD, which retails at around R10/can (though we have seen the product on special at closer to R8/can).

Despite a general decline in brandy sales in SA of late, KWV has reported that its three-year-old brandy has increased its market share.

Source: Financial Mail – Marc Hassenfuss