Viva Wine Group AB
STO:VIVA
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Good morning and welcome to the Viva Wine Group presentation of the Q1 result. As always, presenting is, myself, Emil Sallnäs, the CEO, together with Linn Gäfvert, our CFO. You see the agenda on the left hand-side and you will get instructions for the Q&A on your screen and also in the end of the presentation.
So starting with an introduction. A quick introduction to the Viva Wine Group. We are a company which have our business in 3 different segments: Sweden and Nordics, which are both the monopoly markets in Sweden, Norway and Finland [indiscernible]. Strong e-com business based in Germany. We are the Nordic leaders in wine in a very stable monopoly market. And we have a very strong mix of own brands and partner brands together -- which together with a pioneering role as a sustainability leader in the business makes us a very strong group.
Our operating companies are based in four different countries: Germany, Finland, Sweden and Norway. In Germany, we have 2 companies and 3 platforms, Vicampo, Wine in Black and Weinfürst. in Finland, we have Cisa and in Norway, we have Norwegian Beverage Group. In Sweden, where everything started, we had 6 companies, which you see on the screen. So over to the quarterly numbers.
The quarter has been very stable, despite a quite challenging start of the year. So we have in the Sweden and the Nordic segment reached record market shares, which means that we are growing stronger than the underlying market. And also our net sales increase in total for the group with 1.3% despite both the Nordic markets as a total Sweden, Norway and Finland and the eCom market being down. On the adjusted EBITA, the news is mixed. We had very strong margins in the eCom, while we do see significant impact on the FX in Sweden and in the Nordics and especially in Norway, in that case.
But we do feel that we are in a very strong position for growth. We are starting from a record high market shares, and we are increasing quarterly. We have a very strong and lean organization in the Nordics, which, together with a very strong product line and the increased cooperation between the Nordic companies is growing -- is driving our sales in the Nordics. In the eCom, we have a very cost-efficient structure. We are on the way of finishing our own warehouse. We are already in one warehouse, but we will soon move into a new modern one. And we have one team serving all the three platforms. So very efficient eCom cost-wise.
In addition, we are, every quarter, basically increasing the expansion of the Weinfürst concept into new markets. So we are every quarter or continuously getting into new markets with the Weinfürst concept, which to remind you, is the entry-level concept, which is quite well suited for the current market conditions. So over to Linn and some financial overview.
Yes. So taking a look at the group numbers. At group level, we have a growth in net sales, as Emil mentioned, the growth is 1.3% in the quarter. We have some positive effects by the earlier Easter sales. Taking a look at our gross margins, we have pressures on the gross margins, mainly explained by the negative FX effects in Sweden and Norway. There is also some cost inflation, mainly hitting freight and distribution.
However, our eCom business is delivering very strong gross margins. Due to our pressure on gross margin that also affects our adjusted EBITA in the quarter negative. Taking a look at the segments we see here that the net sales contribution comes both from Sweden and the Nordics. And our adjusted EBITA margin here, we can clearly see that the pressure and the negative FX effect hits the total adjusted EBITA, and it comes from Sweden and Nordics mainly. eCom, however, in line with last quarter previous year.
Our net working capital is lower than last year at the same time, and we have a positive trend towards net sales. Our net debt situation is very strong and gives us a lot of strength going forward. Looking at the cash flow. We have a strong cash flow from our operating activities. We have improved working capital during the quarter and is also in line with normal seasonal patterns. So that gives us a very strong position in the quarter.
Going to segment Sweden. Here, we have a net sales increase of 5.3%. So that's well above our financial targets. We have had successful launches, price increases and also some positive effects of the earlier Easter sales, but very positive development on the net sales level. Our volumes developed stronger than the market with plus 2% in the quarter, and the market was down 1.6%. So our market share increased in the quarter, landing on total 26.7% at record high level. So very great news.
Our adjusted EBITA margin, as mentioned, lower GM puts pressure on the EBITA margin, and we have a significant negative FX effects also some inflation mainly in freight and distribution. So that means that our adjusted EBITA margin is lower than last year.
And as the tradition has been, it's my pleasure to introduce you to some of the new products that we have launched in the quarter. We have launched so many products so they can't fit into one presentation. So we are always doing a small selection. And starting off on the top left corner, you see two Piemontes wines, one from our partner brand, G.D. Vaira -- Langhe Rosso, sorry, from Piemonte, and then we have La Vecchia Via, which is an own brand; which has the special USP or being an older vintage introduced in the 2012 vintage and has had huge success.
Then on the right-hand side, you see two products from the Mood brand -- in the Mood brand, I should say. You see the can, which is a very environmentally friendly product that will run through a tender listing, which is selling quite well in the start. And then on the right-hand side, you see in the Mood bagging box, the red one. We have previously shown you the white one and now also the red one is doing very well. And this is positioned below SEK 200 in the bag and box segment, also meeting a little bit the trend where the consumers are going.
In the middle, you see another tender win from a partner brand, Doppio Passo, which has started very well. It's a 2-liter bagging box. So not all of the bagging boxes in the market are 3 liter. And on the left-hand corner, you see the Crazy Cat concept. You have seen the red, you've seen the white now comes to Rosé, the logical step. And this is the Kitten Rosé, which -- with so far the cutest cat.
The Crazy Cat that you have seen in previous presentation is a quite typical way of how we launch products. If we are successful with the red or the white, in most cases, you start with the red or white t,hen we will be able to launch at least a red, white and Rosé in total. So that's a little bit how we grow an existing brand that has been received very well. Over to the Nordics.
Yes. And in our Nordics segment, we have Finland and Norway. We have a very strong net sales increase in the quarter with 10.1%. So that's also well above our financial targets. We have some positive effects of the Easter, but very strong net sales increase, both Finland and Norway outperformed the market. Finland increased the volume by 4.6%, while the market actually declined with 5.8% and Norway increased by 7%, and the market was down 1.6%.
So that also gives us record high market shares in both Finland and Norway. In Finland, 18.8% and in Norway, 5.9% in the quarter. Our adjusted EBITA margin is below previous year, landing at 8.6%. And the main reason is the negative FX effect hit Norway hard. We also have some cost inflation in this segment related to freight and distribution mainly.
In the Nordics, we have launched a lot of products as well, and we've done a lot with our partner brands this quarter. So Lisbonita, the white bottle on the top left-hand corner. It's a tender win with a 1-liter PET presentation. Again, a very environmentally friendly packaging and one of our sustainability goals to go to more and more eco-friendly packaging.
On the right -- in the middle, you see Gran Appasso, which is a brand that we have been selling many years, and now there's a new wine from the Gran Appasso series that has been very well received. On the right-hand side, you see two products from Brouilly, one of our main partners in all three markets. You see Chateau de Pierreux, which is Brouilly wine, beautiful wine I've been there many times myself. I'm very happy that we are now launching that also very successfully in Norway. And then on the right-hand corner, you see the Bouchard Pinot Noir, a bag-in-box Pinot Noir with a [ burgundy ] style, which has been starting very well in Norway.
In the middle, you have a Bulgarian wine, Plateau, which we have launched in Norway with a lot of success. So that's together with [indiscernible], also a producer that we work with in all three markets. And on the left-hand side bottom corner left, you see Aina Panda Riesling. And that's actually the first -- one of the first wines that we have developed in Finland as terms of a brand. Historically, we have launched a lot of brands that started in Sweden, Aina Panda specially made for the Finnish market and aiming at the Riesling trend, which is very strong in the Finnish market.
Yes. And over to the segment eCom. We have a net sales decrease in the quarter with 11%. The market sentiment is still low. Our organic growth was negative. We have high comparison numbers still compared to 2022, where Q1 was affected positively by the pandemic. Our gross margins are strong and according to plan, despite cost pressures, we have been able to through smart pricing strategies and product mix, being able to keep those at strong high levels.
Our adjusted EBITA is actually at the same level as last year so that's proves that we have a very cost efficient and stable situation in eCom at the margins and the EBITA level.
And we'd like to highlight that we have increased average order values and continued strong margins, as Linn mentioned. We are expanding geographically. So we are now since a little bit more than a month, live also in Hungary. And as you might remember, we were quite successful in the Czech Republic, and we believe that Hungary is a market with quite similar characteristics. So we're hoping for that to work out well. Then the construction of the new warehouse and the distribution center is going totally according to plan. So everything is in line with our plans.
The KPIs on the right-hand corner are in line with how the market looks, of course. Sales are decreasing the number of orders are also decreasing as well as the active customers, but we are very happy that we're retaining a lot of sales from our repeat customers. And that's maybe one of the secrets behind the fact that we are keeping our gross margins very well, good.
Then over to sustainability. We have recently launched our Annual Report and Sustainability Report, and I do encourage you to look at the sustainability part of that, which is amazing. We are awarded -- according to GRI universal standards, which means that our auditor, EY, has assured that everything we report is in line and is correct.
Highlights are that we have reduced our emissions in '22 with 1.7%. We are now up with 75% with climate smart packaging. The packaging I mentioned, it could be cans, it could be PET bottles, bag-in-boxes and also lightweight glass. There are several others, obviously. And then finally, we feel that we are well positioned for the new regulations that are coming from the EU in terms of reporting, the Corporate Sustainability Reporting Directive, a very long, very EU word, thanks to the fact that we have worked with the GRI standards and with audits for several years now, we feel that we are well positioned for that job ahead of us.
Then my closing comments, we normally take a look at on the financial targets. And here, it's, of course, a little bit of a mixed bag. In the growth on the Swedish and Nordic markets, we are beating our expectations very well. While in the eCom, we do feel that we are in line with the market when we look at our -- the competitors where the numbers are available, we see that the decline that we see is very much in line with the market, but obviously not in line with our financial goals, that's not news to anyone looking at our company from quarter-to-quarter.
On the M&A, we see increased activity. So that's somewhere where we -- especially in the eCom segment, you see a lot of things happening in the next period. Profitability, again, mixed bag, profitability on the eCom going in very well, while we do see the impact of the FX effects on the Nordic segment and the Swedish segment. The capital structure, we are at one, so very well in line with that. And yesterday, at the Annual General Meeting, we decided on the dividend policy, which -- where we are having a dividend of SEK 1.55, which is in line with the dividend policy as well.
Of course, we're again, reiterating the message that we are trying to turn this headwind into a tailwind. We feel like we have a very good position in the market for growth. We have a strong product pipeline, which is well suited for current market situations. We have shown you a few of the products that we have launched that are working very well in the current market context, where you see a general down trading. People are buying cheaper wines in the market. That's a very clear trend now.
In previous calls, we have mentioned that it looks like it. Now it's a very clear, clear trend that people are buying cheaper wines in all of the Nordic markets, not so much in the German market where order values are actually going up, as you saw. We are getting -- seeing a lot of positive effects from the increased coordination between the Nordic countries, and I think that is contributing to the growth that we see in the -- all Nordic countries. In the eCom, I mentioned the warehouse and expansion of Weinfürst, and we are planning on introducing more markets in the coming coming year. So we are -- have a very good situation also there, waiting a little bit, obviously, as mentioned before, for the headwind to turn into a little bit of a tailwind when it comes to eCom.
And then as I mentioned, M&A, we are looking at a lot of cases and hopefully, we'll have some news during the year, of course, always difficult to say when, but we feel that it is happening a lot in the market, and we are very well positioned for the M&A -- in the M&A segment. So over to Q&A.
[Operator Instructions] The next question comes from Benjamin Wahlstedt from ABGSC.
You hear me? Perfect. Sorry about that. You're talking the [ reported ] identified positive signals in the e-commerce segment. Should we interpret this as positive momentum going out of the quarter, please? Or some other way...
Sorry could you repeat the beginning of the question? We had a slight issue on the sound here.
No worries. You talked about identified positive signals in the e-commerce segment, talking about stabilizing markets. Is this a comment on intra-quarter momentum or what positive signals have you identified, please?
I think that we have sort of reached a plateau where we expect to grow from. It is, of course, really difficult as we've seen in previous calls, it's very difficult to call the market right now in terms of consumer confidence and so on. But we do see some positive small signs in the market that the eCom will pick up a little bit in the coming months ahead. Again, the comparison numbers will be a little bit softer as well. So I think we will see better numbers. But again, I had said that before. So I'm a little bit like -- yes, we are seeing it, but I don't want to call it very strongly, but we are seeing a little bit of positive signs in the eCom market, yes.
Yes, perfect. You also mentioned this briefly that the increase in AOV in the e-commerce segment is partly due to price increases and partly due to an increased number bottles per order. Is it possible to give any indication on the split between those two, please?
We don't have that number as of now, but we're happy to provide you with that.
Moving on to the Sweden segment. If possible, could you talk a bit more about the time line to getting back to more normalized gross margins perhaps 2021 levels, for example?
I think that's a time line, which is very much related to the euro. And I mean I think we are all facing -- I mean, every import company in Sweden, Norway is facing the same situation now or should we expect this to be the new Euro or NOK level or not? I mean we are working on it. But if we were just -- if you just look on the lag that we have, I mean, the exchange rate when we set the prices for March, which was based on exchange rate in end December already there, you see we are lagging because now we are at approximately 30, 40 more on SEK exchange rate. So it is a bit tricky right now.
I think that you would have to go into '24 to -- even if you're just catching up with the exchange rate, we'll probably be into '24 before we can see a change going back to higher numbers unless the exchange rate does something that we don't, which is positive for us, again, very difficult to call. But also the very high exchange rate is tricky because the customers are obviously going in another direction.
Customers want cheaper wines, and we need to increase the price of some of the wines. And I think that effect -- we are counter-affecting that by increasing the number of cheap wines or entry-level wines that we are selling. But obviously, there will be a choice to be made in the coming months in terms of how we treat that and how we look at the exchange rates. So we look a lot on exchange rate, and I know you guys do that as well. It's really difficult to say.
I mean, I'm hoping that '24 will look better, but not earlier than that. Because again, even if we just play catch up with the exchange rate, we will increase prices in September, in October, depending on which of the Nordic markets we're talking about, and that leaves only 1/3 or a quarter of the year in order to catch up. So I think that '24 is the earliest possible, but it will have to -- the exchange rate shouldn't go in the other direction, let's put it that way, then we will again have to play catch up. Long answer to a short question, but it's a tricky [indiscernible].
Yes, of course. I perhaps should have specified the question. We're sort of assuming flat exchange rates, but I think you answered that question.
Assuming flat exchange rate, I think by March '24, we will be more in line, but not totally because it's going to be difficult to increase everything if the competitors are not increasing the prices.
Is it possible to -- as well as a bit of a [indiscernible] question. Is it possible to quantify the Easter effect that you mentioned, quantify the sort of excess sales for you during Easter?
Yes, we don't have the exact numbers, but we have some positive effects, meaning that more of the Easter sale was in March this year where almost all Easter effects were in April last year. So that gives us -- there has also been a change with delivery date. So it's a bit tricky, but more in some positive effects where all was last year in Q2.
[Operator Instructions] There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Well, actually, we do have some online questions as well. So one question from [ Rauli ]. You mentioned you expect pressure to margins for some time. What kind of time frame are you talking about here? Your competitors seem more optimistic in offsetting the impact of weaker SEK NOK with price increases already during Q2.
I think the SEK NOK is a little bit easier. We haven't been as aggressive as we have been with this -- about SEK NOK, okay. It's both together. Sorry, my bad. I think I answered that partly already, but I do believe that it is tricky to increase prices just immediately. So again, by March '24, all things equal, we should be back on track.
And so the next pricing isn't until September, October. So not during Q2, the price increase will have effect in Q4.
And then there's another question for you Linn from Andreas at MediumInvest. How much did the currency depreciation affect the gross margins in the Swedish and Nordic segments?
Yes. And here, I can ask you to look at the note #4, where it's -- where we have the split between the segment on the gross margins. And the Swedish had -- the Swedish had 15.9% this year compared to 20.3% last year. And the Nordics has 60% this year compared to 20.8% last year, and the main effect is coming from the FX in both segments. So please look at that one. And if you have further questions, please send us an e-mail.
Finally, so far, we have an anonymous question. And do we have a hedging policy? And yes, we do.
Yes, we have a hedging policy. And here, we can also refer to our annual report that was recently released. We have Note 22 where all our policy is described and how much we are affected by the currency is also explained in detail. We have had a policy of 75% to 100% hedging in the SEK krona and the NOK krona. However, we can do exemptions from that policy together with the Board. And as we have mentioned before, at these times, if we believe that it's not possible to increase prices to cover the currency effects, we have been on the lower side of the hedging.
I hope that answers your questions. I don't see any other questions, and I don't believe there are any on the phones either, no? So I'd like to thank you all for joining, and I ask you to enjoy our new logo that we have slowly introduced to the market. We like it a lot, and we hope that you enjoy it as well. Thank you for today, and see you next quarter.
Bye-bye.