Comvita - CVT

[Ogg]

Ogg you don't buy the competition argument , I don't buy the " Comvita will just continue to dominate this market forever" If Comvita are dominating the market why aren't they making serious money ? Why is the S/p half what it was ?
Do you realise at one stage there was more "Manuka" honey for sale in the UK then gets produced in NZ each year ..... and I thought most of it got exported to China ... So it's being ripped off everywhere . I understand they have taken measures to stop the counterfeiters but like drug cheats they are normally one step ahead of the game .
There is nothing stopping the Chinese from doing a JV with one of the IWI to use their land and labour to produce Manuka honey for them .Comvita to quote you "is just another brand" nothing unique .... so much so that the average punter in the UK doesn't know he is buying fake product .....

They are dominating the market in terms of their brand and position, but yeah, they're not making serious money yet for two reasons:

1) Trouble getting their product direct to the Chinese consumer.
2) Trouble making enough high quality product.

In other words, the problems are coming from the supply side, not the demand side.

This is what happened...Basically, back in the day, they only exported to Australia, UK, and USA. Then all of a sudden demand from China "sky rocketed". HOWEVER, just like what Ebay, Google, and Amazon experienced, the Chinese market is difficult to deal with and understand. Doing business there is completely different. This so called "daigou" channel developed, where people would full suitcases up with stock and small businesses would import goods through the so called "grey channel". This is why the stock price went up to $12. Then all of a sudden, the Chinese regulators had enough, and imposed new regulations. That's why the stock price went down.

Some companies like A2 Milk have done better because they understand the "daigou" channel more, where as other companies like Bellemy's didn't, so that's why their stock got hammered. This is also why Comvita have done the JV with the Chinese company, to try and improve access to the market through their network. I don't really know what went wrong, or how to fix it, I just know that Comvita have had a hard time lately. It's some how a combination of contacts, ecommerce, partnerships, and networks, that is required to some how break the Chinese market. That's why this Chinese company probably wants to buy it, because it has the secret to opening up the Chinese market, because well, it's Chinese.

If you look at the history of A2 Milk it was very "rocky" for many years, it went into administration at one stage. It's only recently that it's sales and profit has increased substantially. I think they understand the Chinese market better. I believe Comvita can have the same success as A2 if it fixes the two problems above.

Re second problem. Making more quality product is largely weather dependent but also more investment, and R&D is needed etc. This problem will fix itself.

Re counterfeiting, that's always a problem and always has been. Nike has the same problem so does Microsoft. This is just a side issue.

Re a JV with some other company or IWI. I doubt that will happen. This goes back to understanding the Chinese market. The Chinese consumers want the brand Comvita. They're all about reputation over there. It's like a status thing. It's sort of like what Apple has in the US.

At the end of the day, I just know these Chinese will pay up to $15 per share for this. It's just a matter of not getting short changed and squeezing them for every cent.