KWV under pressure
2009-03-19
A SIGNIFICANT decline in bulk spirit sales has put the performance of KWV’s own operations under pressure for the first six months of the financial year. The international financial crisis resulted in several bulk orders not materialising. In addition, consumers, especially in the local market, are trading down. The fact that KWV competes predominantly in the premium categories for wines and brandies, means that the company experienced this trend negatively in several markets. Consumers are consistently going for cheaper options when buying liquor, resulting in a change in the product mix of KWV brands sold. Combined with a lower group turnover (1,2%), all of these issues resulted in the company’s operating profit decreasing by 34%. The group’s profit on continuing operations, however, increas- ed by 7,4%, due to the contribution from its investment in Distell. KWV has reacted by further reviewing its costs and changing its marketing and sales approach appropriately in most markets. KWV has ended its shareholding in its UK associate, Thierry’s Wine Services, in line with its revised distribution strategy which pro-ved successful in Europe. Thierry’s will continue to distribute KWV’s portfolio of brands in the UK. Going forward, the company will concentrate on maintaining volumes at reduced margins, which means that KWV will be operating in premium as well as lower categories. CEO Thys Loubser described the financial results as concerning, but added that KWV has launched several initiatives over the past few months to improve its profitability and reduce risk. KWV has taken a decision to focus on its own operations through a proposed restructuring (this includes marketing wine and grape juice concentrate internationally). A cautionary notice in this regard has been issued, following a decision to unbundle by selling off its shares in Distell to KWV shareholders.
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