KWV returns to profitability27th June, 2013 by Gabriel Stone
KWV has put an end to “massive volumes at even bigger losses” as it aims to quadruple trading profit by 2016, according to UK & European business manager Jonathen Ralph.
Having joined the South African wine and brandy producer in 2011 from an FMCG background, Ralph highlighted the “difficult commercial decisions” required to begin turning the business around, including some significant personnel changes.
With the current sales and marketing team featuring “only one person who has been there for more than four years,” Ralph pointed to the injection of expertise gained by headhunting staff from a number of other major South African drinks firms.
“I inherited a big mess”, he told the drinks business. “Before everything was done on a need to know basis, but now we’re bringing in new talent and new ideas.”
As part of these changes, KWV’s former head winemaker Richard Rowe has now moved into the more ambassadorial role of “roving consultant”, being replaced internally by Johann Fourie.
Jeff Gradwell, KWV’s brand director for Icon Wine Brands, which include Mentor, Cathedral Cellar, Laborie, Café Culture and Pearly Bay, outlined a 2016 strategy to “quadruple trading profit through focusing on core KWV brands in key markets.”
The impact of these changes are beginning to show, with KWV’s financial report to the end of March 2013 showing an operating profit of R3.5 million, a marked improvement on its R80m loss the year before.
As part of this shift, last year saw KWV switch its UK distribution partner to Myliko Wines after Ralph felt there was “a disconnect with what we wanted to do with our brands and what our partner wanted to do.”
The new agreement sees KWV work directly with a number of accounts, while Myliko manages the rest in what Ralph described as “a fantastic hybrid structure.”
For the moment at least he confirms that the UK multiple retail sector is not a priority, suggesting: “It’s not the right place to be if you’re consolidating – to get profitable you have to start slow.”
Instead Ralph outlined a significant focus on the cash and carry sector as he predicted: “We’re going to get our core growth out of the £5.99-£6.99 category classics.”
Looking more broadly at his country’s performance in the UK, Ralph pointed to “a silly amount” of bulk shipments as he argued: “The South African category is not getting itself into a position to be up-trading. We can’t look too desperate.”
As a result of this effort to restore profitability, Ralph revealed that KWV is currently operating at “about a third” of its 80-90 million-litre annual production capacity.
With the company about to launch its products in Kenya, Ralph picked out the strength of Namibia and Angola in particular, as well as the appointment of 11 new employees to look after this region, remarking: “Africa is going really well for us.”
Asia is also “going incredibly well” for KWV, with Gradwell highlighting “a very strong high end portfolio in Japan”, while the company is “just starting to make inroads” in China.
Although the US tiering system is “very frustrating”, Ralph pointed to “some really good hits in the on-trade”, having just signed a major deal with the Hilton hotel chain.
Although KWV’s wine production is more than double the scale of its brandy operation, Gradwell noted last year’s launch of a brandy and coke pre-mix. However this product is unlikely to be made available in the UK, where he suggested “brandy from South Africa is a tough sell.”