Cool brands get hot treatment in brag book
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.