Western Cape Business News

Send  Share  RSS  Twitter  25 Oct 2009

BEVERAGES: Showdown In Dopsville


Recent Western Cape Business News

NEW-look KWV Holdings, the Paarl-based wine and brandy producer, looks set to lock goblets with its bigger Stellenbosch-based rival, Distell, on the wine front.

KWV last month threw down the gauntlet by indicating that it wanted to double its local wine sales.

That may sound like an ambitious goal, but one needs to remember that KWV – primarily an exporter of wine – only entered the local vino market about five years ago.

Currently KWV sells about 90% of its wine production in international markets, which means there is huge scope to build a profitable local niche.

The irony of KWV’s onslaught on the local market is that the bold initiative will be undertaken without the usual safety net.

That safety net was KWV’s 15% stake in Distell, an investment that for a number of years now has reinforced with consistent dividends KWV’s (often) flagging bottom line. Last month KWV split off (or unbundled) its stake in Distell to shareholders in a new (but entirely separate) company called CapeVin Holdings.

The truth is that KWV have their work cut out to grab market share in a competitive local market.

Not only must KWV find shelf space amongst a plethora of boutique brands, but it must also compete against Distell’s wide range of wine brands.

Distell really covers the spectrum of the wine drinking market – whether it be Tassies or Oom Tas, Chateau Libertas and Graca or Nederburg or Durbanville Hills.

KWV’s wine brands – most notable Roodeberg and the KWV Lifestyle brands – are robust. But these brands are up against Distell’s formidable mid-to-upper ranges, which includes Nederburg, Durbanville Hills, Zonnebloem and the iconic Fleur du Cap.

KWV – now under the guidance of former Sans Fibre’s boss Thys Loubser - has made some interesting moves – including the introduction of a white Roodeberg and a very untypical ‘vibey’ wine called Café Culture.

The test for KWV will, of course, be whether it can garner profitable market share in a market where consumer spending is looking rather restricted.

Loubser clearly believes the quality of KWV’s brands can maintain the company’s trading margins, which means there will not be any price slashing tactics in a bid for short-term market share gains.

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