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WILL KWV ADD SOME MIX TO ITS RANGE?

13 Dec KWV Holdings

WITH the outlook for wine and brandy subdued, it seems Paarl-based liquor group – now under control of empowerment giant HCI – will look at adding some mix to its traditional grape-based product range.

In the year to end June KWV saw a 7% drop in revenue on the back of weaker sales volumes in SA and abroad as well as a deteriorating mix of products sold. In his annual review acting CEO Andre van Veen says there are more attractive growth opportunities in other alcoholic beverage categories.

“We have prioritised innovation and product development in order to access these growth categories and will be alert to acquisition opportunities to fast track strategic choices when required.”

While KWV traded at a loss in the past financial year, the company is still in the fortunate position of holding plenty of cash, which will help if the company does uncover suitable acquisition targets. While its difficult to speculate around which company could be a candidate for a takeover for KWV, there is a sense the company could be looking at shifting into high volume markets like alcoholic coolers, beers and ciders.

While no such bold moves are evident as yet, Van Veen says KWV’s new product development process and pipeline are improving. “We have to increase the basket of products offered in the local market and develop products that have the potential to be sold profitably in export markets.” He points out that KWV recently launched Berraz, a sweet Shiraz, that has already seen interest from international clients.

Van Veen says KWV will also look at supplementing its own portfolio with managed brands in order to provide clients with a more comprehensive product offering. Locally managed brands already include well known spirit brands like Rémy Martin, Piper Heidsieck, Bols and Cointreau.

Van Veen stresses the current KWV business model is dependent on volume in order to effectively amortise its cost base and infrastructure. This will require KWV to develop new markets where the growth in wine consumption exceeds general economic growth as disposable income levels increase and consumer purchases become more aspirational.

Van Veen says KWV is also able to produce and bottle wine on a cost-competitive basis and has concluded insourcing agreements to produce and bottle wine on behalf of other companies. This will allow KWV to amortise its infrastructure over a wider base.

There is also some encouraging news on the brandy side. Van Veen says although the local brandy market continues to shrink, KWV managed to increase sales of packaged product by 10% in the financial year to end June.He says the brandy market remains very competitive and KWV has a limited advertising and promotional budget compared to its competitors.

“The KWV brand remains ‘premiumised’ for consumers and it is important that local market distribution and sales plans ensure that the brand is available in all relevant on-consumption outlets.”

Source: Cape Business News