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Thread: Comvita - CVT

  1. #661
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    A few posts back someone mentioned the possibility of CVT having "a large stock of poor, unsalable honey"

    I believe this is correct and will provide some context - Manuka is early flowering, the beekeepers feed their hives prior to nectar flow with sugar water to promote numbers and high bee activity. However, even with keepers swapping out combs (some are poorer with this practise), alot of the 'sugar honey' remains in the hive. This becomes a problem as there is a 'C4 sugar test' as part of QA release into China and the EU/UK, honey which has >7% sugar derived honey will fail this test. Generally CVT will be blending their batches to get at close to this as possible or dumping product in other countries which dont do import testing. The bad weather would have promoted greater amounts of feeding to keep the hives viable, but less manuka to feed on. Equals poor quality honey.

    If we are looking for the next downgrade, expect them to write off the value of some of their inventory.....

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    Quote Originally Posted by kiwidollabill View Post
    A few posts back someone mentioned the possibility of CVT having "a large stock of poor, unsalable honey"

    I believe this is correct and will provide some context - Manuka is early flowering, the beekeepers feed their hives prior to nectar flow with sugar water to promote numbers and high bee activity. However, even with keepers swapping out combs (some are poorer with this practise), alot of the 'sugar honey' remains in the hive. This becomes a problem as there is a 'C4 sugar test' as part of QA release into China and the EU/UK, honey which has >7% sugar derived honey will fail this test. Generally CVT will be blending their batches to get at close to this as possible or dumping product in other countries which dont do import testing. The bad weather would have promoted greater amounts of feeding to keep the hives viable, but less manuka to feed on. Equals poor quality honey.

    If we are looking for the next downgrade, expect them to write off the value of some of their inventory.....
    Interesting industry insights - thanks kiwi$bill

    $95m of honey is a lot of honey

    Last report said this high level of inventory was one of theit strengths

    Bit of a bugger ifeven a small portion is not worth much (10%is nearly $10m)
    Last edited by winner69; 30-01-2017 at 10:13 AM.
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  3. #663
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    Quote Originally Posted by winner69 View Post
    Interesting industry insights - thanks kiwi$bill

    $95m of honey is a lot of honey

    Last report said this high level of inventory was one of their strengths

    Bit of a bugger ifeven a small portion is not worth much (10%is nearly $10m)
    Two years ago, the word amongst the industry was 'Secure your supply'- the M&A activity and CVT buying apiary businesses speak to this. Fast forward two years we have the opposite problem, with the massive growth in the number of brands seen in China, Manuka is quickly becoming commoditised (if it isnt already). Notice in the ONL release the commentary around distributors requesting price points which were not achievable? The market is awash with product at the moment.

    Looking into the crystal ball.... this may shake out a number of the brand owners who don't have a viable business anymore, also look for an announced range of regulatory changes from China in the near future to also do this. Two years from now, CVT should likely still be around (unless PE look it at the same way I do and buy it out from angry shareholders), waiting 6-12 months for the volitility to die down a decent entry point might be achievable to ride the bounce. Likely to however trade on a much more sensible PE.

    Very similar to what the IF market has had to go through.....

    DYOR

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    My pick is that counterfeit product will fill the vacuum of lack of supply of high UMF product in China in the year ahead. Counterfeiting is obviously still a massive issue in China for all sorts of products.
    The other thing is all honey is good for you, (mentioned many, many times in the bible) so consumers taking counterfeit manuka honey, factoring in the placebo effect will mean most customers won't notice the difference and will believe the counterfeit product is the real article. This places even more price pressure on genuine suppliers. Comvita appear to be in quite a "sticky", (sorry, couldn't resist), situation.

    Brokers still appear optimistic this year is a one-off, I believe headwinds may remain for the medium term.
    Last edited by Beagle; 30-01-2017 at 05:25 PM.
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    If the competitive 'moat' is under siege, along with operational issues, the future may be more about getting used to the new normal, which may not bode well for future SP even after the correction, unless CVT finds a way to address its issues and maintain its differentiation.

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    Quote Originally Posted by Roger View Post
    My pick is that counterfeit product will fill the vacuum of lack of supply of high UMF product in China in the year ahead. Counterfeiting is obviously still a massive issue in China for all sorts of products.
    The other thing is all honey is good for you, (mentioned many, many times in the bible) so consumers taking counterfeit manuka honey, factoring in the placebo effect will mean most customers won't notice the difference and will believe the counterfeit product is the real article. This places even more price pressure on genuine suppliers. Comvita appear to be in quite a "sticky", (sorry, couldn't resist), situation.

    Brokers still appear optimistic this year is a one-off, I believe headwinds may remain for the medium term.
    Yea that too, be wary of any Manuka of a rating more than 15+.

    Near on impossible to get it that high nowdays and pass the C4 sugar test

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    Kiwi$bill -I take it Watson & Son are having the same supply issues as well?
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    Quote Originally Posted by winner69 View Post
    Kiwi$bill -I take it Watson & Son are having the same supply issues as well?
    Wouldnt be sure about them specifically but I see no reason why they would be any different to these supply issues.

    There are a few high end suppliers that remained supplying in the UK and didn't go into China like everyone else, they wont be facing the same pressure at the seller end but likely the same poor honey collection.

  9. #669
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    Quote Originally Posted by kiwidollabill View Post
    Yea that too, be wary of any Manuka of a rating more than 15+.

    Near on impossible to get it that high nowdays and pass the C4 sugar test
    Thanks for that, k$b.

    Will make sure I steer my overseas visitors away from the $280 per 250g jar of UMF 18+ honey!

  10. #670
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    Quote Originally Posted by Roger View Post

    Brokers still appear optimistic this year is a one-off, I believe headwinds may remain for the medium term.
    I note Forsyth updated their CVT coverage with 'just' a 30 cent downgrade to $11.70

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