KWV

shareholders report

Prepared by
Shareholder
Kate Lokhina

January, 2015

1.
KWV is a wine and spirit producer established in 1918 in South Africa. The range
of product: wines, spirits and ready to drink beverages (cocktails). The products are sold mainly
in Scandinavia, Germany, the Americas, Japan, and South Africa1.
2.
The main competitors for KWV are the companies producers of wine, spirits
etc. from South Africa, as in other markets KWV has to compete mainly with SA wine
producers. The main competitors are: Distell, Orange River cellar, Drostdy Hof, Brandhouse.
High price
Brandhouse

Little variety of product

Distell

Drostdy Hof

Wide variety of product

KWV

Orange river cellars

Low price

P.S. The links proving the information on the positioning map.

1.
KWV wines prices http://kwvwineemporium.co.za/shop/product-category/kwv-classic-collection/
2.
Orange river cellar wines prices http://orangeriverwines.com/product-category/wine/dry-redwines/?orderby=price
3.
Distell wine prices
http://www.snooth.com/wines/distell/#action=search&query=distell&hide_state=1&search_page=1&country=ES&e
ntity=wine&store_front=0&title_only=1
4.
Drostdy Hof wine prices http://www.snooth.com/wines/drostdy-hof/
5.
Brandhouse spirits prices http://www.bdlive.co.za/business/retail/2012/09/13/marketers-turn-to-africa-tolift-spirit-sales

3.
KWV competitive advantage is a uniqueness of its product2. Entering new
markets such as UK, Kenya or USA, the company launches new product \ line of product3. The
function (by M. Porter) KWV uses to deliver its competitive advantage is marketing and sales:
extensive relationships with distributors, participation in wine fairs etc4-5, 10% contribution to
TransAfrica Forum from all sales in USA.
4.
KWV uses the strategy of broad differentiation. It creates new products (product
differentiation) as well as increases its share in several (not only one) new markets by launching
new product.

KWV official web-site: http://www.kwv.co.za/our-company/about-us#down

Figure 5.1 from Generic strategies
3
http://www.businesswire.com/news/home/20130124005085/en/South-African-winery-KWV-launches-AfricanPassion#.VLuK3mc5DX7
4
http://www.thedrinksbusiness.com/2013/04/kwv-set-for-major-uk-push/
5
http://www.businessdailyafrica.com/Corporate-News/KWV-launches-Nobleman-brandy-into-Kenyan-market//539550/2084236/-/iwbjr/-/index.html
2

5.
Having experienced some changes in shareholders and management team, KWV
nowadays is pursuing a volume-growth strategy. It means the company is aiming at selling more
of its product in SA region and at the same time to conquer international markets. As a proof of
this strategy, the data from companys financial report shows that KWVs market share in SA
was increased from 10% to 12%, even though by means of gross profit margin (the board is
ready to accept reduced profitability in a short-term period)6. In terms of international strategies,
KWV uses transnational strategy, as it produces unique products and offers affordable prices for
it to settle in new markets and to gain customers loyalty, and at the same time the company is
broadening its share in a domestic market, selling more of well-known brands. Other modes
KWV uses to enter international markets is exporting (the simplest way, that requires less efforts
and less risks) and licensing (there is no data, but I suppose that KWV has licensing agreements
with its foreign distributors). These strategies are effective for KWV as it increased the share in
domestic market and is able to develop new brands and conclude new distribution contracts (as
an example KWV changed distributor in UK in order to follow independent retail strategy in UK
market7).
6.
Over the last years the SA wine industry has overcome some changes involving
local industry deregulation, internationalisation and the politics of democratisation and legal
reform. As a result the competition on internal market became stronger, the companies in the
industry started to align or to change their forms as well as to go international in order to be
effective8. According to SA wine industry survey 2013, the main markets for SA wine industry
are North America, Asia, Africa and Europe (see page 7 in the survey9). The experts also see the
next opportunities for SA wine business to grow: growth in existing markets and new markets
(see page 7 in the survey, link 9). So I can conclude that our company pursues the right volumegrowth strategy (described above). Comparing the financial data with our main competitor I can
show that KWV gross profit is lower than Distell (see Table 1 in Appendix A). However, as I
mentioned before, it is acceptable for the board to follow the growth-volume strategy. From the
Table 2 in Appendix you can see that KWV decreased its promotion and sales expenses that can
be explained by comparatively low increase in revenues in 2014 compared to 2013. This increase
was boosted mainly by the weakness of African rang by 20%. For successful future development
I would recommend for our company to consider the strategy of contract manufacturing (e.g. to
conclude one in Kenya), strategic alliance (e.g. with distributors in UK or with Clover - one of
South Africa's biggest dairy foods producers that wouldnt mind to be united with KWV10).
International acquisition as also one of the future strategy for our company, but here the
managers should analyse thoroughly the firm to acquire before taking the decision as it will bear
all its liabilities.

KWV performance overview 2014 http://www.kwv.co.za/shareholder-services#down

KWV changes UK distributor http://www.harpers.co.uk/news/kwv-relaunches-uk-distribution-strategy-byswitching-from-myliko-wines-to-bottle-green/371815.article
8
How competitive is South Africa? http://com.revues.org/305#abstract-305-en
9
The South African Wine Industry: Insights Survey 2014 http://www.pwc.co.za/en/publications/winebenchmarking-survey.jhtml
10
"KWV Holdings up for grabs" http://www.ignitepoint.com/?articleid=1730921
7

Appendix A
Table 1, Gross profit
Distell11
KWV12

Gross profit, %
2014
35
31.5

2013
34
29.8

Table 2, Promotion, marketing and distribution expenses

Promotion, marketing and distribution expenses, % of revenue
2014
2013
Distell
20
19.5
KWV13
21
27.3

11

Distell integrated annual report 2014 http://www.distell.co.za/runtime/popcontentrun.aspx?pageidref=3210

KWV interim results 2014 http://www.kwv.co.za/shareholder-services#down
13
The data for the year 2013 is given on 9 months basis.
12