Diversification drives KWV International forward
Although the UK market remains a strategic focus, KWV International has started to spread its focus elsewhere, with startling results. With profits up 407%, Arnold Kirkby talks to managing director Vernon Davis about the success of this more cosmopolitan approach.
KWV International, the marketing and distribution wing of the KWV Group posted after tax profit up 407% which contributed 32% of the KWV Group's earnings.
The company achieved a 22% volume growth worldwide, implementing a strategy, which has seen it diversify and spread its portfolio to a greater extent.
According to MD, Vernon Davis, the company had decreased its reliance on the UK market which up until recently accounted for up to 50% of the company's exports. The UK now accounted for 30% of trade.
He said in an interview yesterday that they had started cutting out own label supplies and were concentrating on building their Cathedral Cellar, KWV and Robert's Rock ranges.
"The UK is still a strategic focus market, but analysis showed that from a profitability point of view it is tough to compete there. We lost some market share in the UK, but not volumes.
"We, however, want to build a strong global brand. In the mid 1990s we were in 75 destinations around the world, but it was all small amounts. We cut our markets down to 22 and have slowly and methodically built them up to 28.
"This follows intensive research and analysis looking at the consumer bases in various countries as to whether we could build a wine brand. We found it was achievable and then set about benchmarking ourselves, so that all our growth is based on sound foundations.
"Our total exports for the year topped 2.3m cases, of which 1.8m were South African wines and about 500 000 cases were from our foreign interests. This is a 16% increase on the previous year and we have budgeted for a further 17% growth of our South African brands this year.
"We now have a more even spread of wines around the world and are doing extremely well in countries such as Germany, where we are bucking the trend with a 47% growth in a market where South Africa last year showed a decrease.
Davis attributed largely to the marketing and distribution abilities of Eggers & Franke, the subsidiary they purchased in 1997.
"The same applies in the USA, where though we were not able to reach the year-on-year targets we set because of 9-11, in the first three months of the current fiscal year our subsidiary 57 Main Street Wines is ahead of budget.
"Our North American markets have grown by 43% which is outstanding, while we have also had excellent results in Denmark in particular, as well as the other Scandinavian countries.
"On the other side of the world in Japan, our 40 year relationship with importers Kukubu has kept us viable in an economy facing difficulties. In spite of this we increased exports by 22%, where the South African category in that market showed a 7% decline.
"Some of our other markets which have shown good growth are Belgium with 21%, Norway 26% and Africa with as a whole with 51%, where Kenya shone very well.
"In line with our decision to put money into advertising and promotions
last year has paid dividends. Our adspend in the UK topped £2 million;
Europe 1,5 million Euros and North America US$ 1,5 million.
"We doubled our adspend and I'm happy with the results we achieved," said Davis.
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