Cool brands get hot treat­ment in brag book

Finweek English Edition - - Companies & Markets - BRUCE WHIT­FIELD brucew@fin­

WHAT’S THE POINT of hav­ing some of South Africa’s big­gest con­sumer brands in your port­fo­lio un­less you can show them off ? That seems to be the think­ing be­hind AVI’s 2008 an­nual re­port. Rather than stuff­ing the pub­li­ca­tion with page upon page of staff mem­bers des­per­ately try­ing to look like su­per­mod­els, it in­ter­sperses pages of fi­nan­cial state­ments and direc­tors’ com­men­taries with ad­verts you’d ex­pect to see in Vogue or GQ: show­cas­ing its brand port­fo­lio with ev­ery­thing from Carvella shoes to Ciro Cof­fee and Bak­ers bis­cuits. It even in­cludes a flavoured Five Roses prod­uct sam­ple. Nice touch...

Un­like many an­nual re­ports that fo­cus rigidly just on the rules sur­round­ing dis­clo­sure, AVI uses it as a ve­hi­cle to en­lighten the reader on what it does. Sure, AVI is an in­dus­trial group that owns smelly trawlers and noisy man­u­fac­tur­ing plants but it wants to be re­garded as a brands busi­ness rather than the owner of soul­less fac­to­ries.

By way of il­lus­tra­tion, it has spent R500m on mar­ket­ing and trade sup­port in 2008 – twice as much as it spent on fixed cap­i­tal in­vest­ment to en­sure on­go­ing pro­duc­tion. It’s a use­ful in­sight into the firm that ei­ther makes or sells pop­u­lar branded goods.

AVI is notic­ing the early stages of a con­sumer slow­down, which it says is ex­pected to per­sist into next year. Cost pres­sures in its bev­er­ages busi­ness – En­tyce – saw gross mar­gins com­pressed to be­low 40%, but in­creased ad­ver­tis­ing and pro­mo­tions saw mar­ket share growth in its Five Roses and Freshpak brands, while mount­ing com­pe­ti­tion in the cof­fee seg­ment saw it

AVI uses it as a ve­hi­cle to en­lighten the reader on

what it does.

lose share there. In­put inflation in its bis­cuits and snacks op­er­a­tions – Snack­worx – saw the first real in­creases in pric­ing in re­cent years; but in­creased com­pe­ti­tion in that seg­ment also saw op­er­at­ing mar­gins marginally con­strained. It built a new bis­cuit line in Fe­bru­ary but of­fers no com­men­tary on whether or not its vi­a­bil­ity will be tested in the months ahead.

Its fash­ion brands divi­sion, which dis­trib­utes a range of top-end global la­bels such as La­coste and Kurt Geiger, is ex­pect­ing a slower 2009. It opened 18 new stores dur­ing 2008: that num­ber will drop by two-thirds next year as con­sumer spending slows and the divi­sion seeks some much needed con­sol­i­da­tion af­ter its ini­tial growth spurt and South Africans come to terms with hav­ing less dis­pos­able in­come.

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