Western Cape Business News

Send  Share  RSS  Twitter  13 Oct 2008

WINE: KWV at Last 'Digestible'


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KWV Limited, the Paarl-based wine and brandy producer headed by former SA Nylon Spinners boss Thys Loubser, generated a barrel full of profits in the year to end June 2008.

Unlike previous years when loss making or marginally profitable KWV Limited operations were topped up with profits from associate company Distell, the core wine and brandy business this time made a stout contribution to bottom line.

KWV Limited reported profits from continuing operations at R73 million – up a remarkable 99% over the previous year. The astounding growth in bottom line was achieved in spite of volumes only increasing 12% and revenues by 15%.

Loubser, it seems, wasted no time in taking KWV Limited back to basics. Notable efforts included the merging of KWV International and KWV SA, the sale of non-core and less viable businesses (like NMK Premium Brands and Eggers & Franke) and stringent cost controls.

But Loubser cannot afford to bask in his early successes at KWV Limited. After the ‘cut and trim’ operations Loubser now has to turn his attention to ‘growth and innovation’ in a bid to grow its brands locally and offshore.

As such, the biggest challenge lies in bulking up market share for KWV’s wine brands in SA – where, in essence, KWV is a relatively new contender.

KWV’s year to end June results show that wine volume market share was up to 2.4%. Clearly there is great scope to grow KWV’s strong brands like Roodeberg and Laborie as well as the generic KWV labels locally.

Significantly the group has recently introduced a new pinotage called Café Culture, which has a funky, upmarket appeal that represents the new vibrant corporate spirit at KWV Limited.

Currently ‘packaged wine’ sales only represent 15% of KWV’s total wine sales, which reiterates just how much room the company has to grow its strong wine brands.

Meanwhile internationally aimed Golden Kaan is also going great guns with Loubser reporting a 6% increase in volume and an encouraging 7% increase in value on the back of a shift in focus from Europe to the USA.

KWV has also opened the House of Golden Kaan in Robertson – which, Loubser explains, is to show that Golden Kaan is not a virtual brand.

Like its corporate cousin (and rival) Distell, KWV Limited is also enjoying some success on the African continent with volumes up 14% and revenue up 10%.

Loubser says KWV Limited has a ‘continuous presence’ in Eastern African markets, and is now eyeing opportunities in Nigeria, Angola and Mozambique.

The star performer for KWV for the year to end June 2008 was Europe, where sales volumes and value were up 20%.

Loubser says growth was driven by strong demand in the UK and Scandinavia (where Roodeberg sales spiked).

Interestingly, the successes in Europe have prompted KWV Limited to introduce a Roodeberg White.

A break down of revenue shows that wine sales of just over R400 million represents more than 40% of KWV’s top line business with spirits generating R300 million and concentrates a not insubstantial R155 million.

Packaged spirits – made up mainly of the well known KWV brandies – grew by 30% to around R170 million.

But this was offset by a marked fall off in bulk sales (lost to Distell) to R130 million. Loubser indicates a willingness to build up bulk sales again, claiming it is the easiest way of doing business. “We pump it out and someone takes it away,” he says.

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