Greg Sherwood: Why the South African Wine Industry Needs a Strong Secondary Wine Market
By Greg Sherwood, 26 June 2019
If you are a fine wine collector or even just a keen wine drinker, you could not have failed to hear or read about the recent inaugural Strauss & Co fine wine auction held on 8 June in Houghton, Johannesburg. This maiden auction was the long-contemplated brain child of South African wine merchant Roland Peens of Wine Cellar and leading South African sommelier Higgo Jacobs. Both highly experienced wine trade professionals in their own right with broad commercial, tasting and international judging experience, they realised a long time ago that one of the key factors holding back the overall South African fine wine market on multiple levels was not the consumer’s lack of cash or their readiness to spend it, nor was is the dire economic legacy wrought by a decade of damaging “Zumanomics” that has plagued the long term economic prosperity of all South Africans. No, South Africa’s greatest hamstring was the lack of an established fine wine secondary marketable to function independently, effectively and coherently within a structured environment which allows collectors, speculators, investors and normal consumers alike to sell well-provenanced, well-cellared fine wine rarities back into the broader market place on a willing buyer, willing seller basis.
As Strauss & Co now reflect on the conclusion of their maiden auction in Johannesburg which attained an 85% sell-through rate and begin to plan for their follow up auction at the Westin in Cape Town on 14 September, debate has raged amongst the local wine commentators and wine journalists as to how a secondary fine wine market will change the local wine industry landscape should it prove a long-term ‘success’. From my point of view, as someone who has been working in London, the most intricate and nuanced fine wine market in the world, buying and selling the world’s greatest icon wines to private clients for over 20 years, the whole notion that somehow the South African wine industry and broader wine market is better served by not having active secondary fine wine market commerce is absolutely ludicrous. Much of the anti-secondary market sentiment has been derived from a naive, simplistic, nostalgic, sentimental belief that the great wines of the country should only be bought and cellared by the purchaser with the sole intention of deriving pleasure from the contents of the bottle one day when the wine is consumed by them. Indeed the mere thought of individuals actually buying fine wine as an investment or even as a currency/inflation hedge is enough to send a multitude of wine lovers into instant decline.
But enough of the amateur dramatics! Creating a healthy secondary fine wine market is exactly what is currently required to help wine farms, brand owners, wine merchants and collectors improve the pitiful profitability currently experienced in the broader South African wine industry. Quite clearly, the doomsayers have got this one wrong. I for one can remember the good ol’ days when great estates like Alto only used to release their wines with a minimum of six years of bottle age, and when the cellars at the Bergkelder were full of well-aged back vintages of some of South Africa’s great old wineries. But South Africa’s re-emergence into the international wine market dispensed with these large stocks of back vintages gems within a very short period of time, often at ridiculously cheap prices or as the ‘sweetener’ to sign up new international distributors or agents. If only the great minds of the wine industry had seen the merit in developing a proper secondary market to trade these old wines back in the early 90s, we would already have a mature, well structured infrastructure of fine wine commerce established across South Africa.
But the doomsayers need fear not. The secondary fine wine market is not evil and has no victims, only winners. Everyone in the food chain benefits. If producers have the foresight, cash flow and stock to hold back and cellar, top wines in due course, will realise higher prices in the market once current releases are consumed and a natural element of scarcity has been established. Contrary to popular belief, most wine consumers don’t always want to drink young current-release reds such as Kanonkop Paul Sauer, Porseleinberg, Meerlust Rubicon or Sadie Family Columella. Many would prefer to at least have the opportunity to buy a mature bottle with perfect provenance and that has been cellared optimally. Even the massive tranche of high scoring Chenin Blancs and white blends from a broad swathe of South Africa’s top producers are fantastically better and more interesting wines if aged five to eight years or longer. But of course, like California and Australia, South Africa is a very hot country and popping a few cases of top red under the stairs or in a cooler corner at the back of the garage is not going to yield well-aged red wine after 10 to 15 years. Professional, temperature controlled cellarage is one of the key spokes in the secondary market fine wine trading wheel and finally, key players in the industry have re-awoken to this fact and are now offering optimal cellarage opportunities for consumers.
For the man in the street, nothing will change. They can still buy their everyday drinking reds or whites and carry on with their lives untouched because fine wine is and always will be a very niche market. It has already been proven that Millennials are looking for a different kind of engagement with fine wine and they certainly seem to be drinking less but better. Having a broader selection of already mature wines regularly available to buy, whether directly at auction or from secondary retail, can only be a good thing. When one looks at the broader fine dining industry, the massive luxury hotel industry serving wealthy tourists, the top five star game lodges and of course plain and simple fine wine drinkers, the opportunities for the secondary trade in fine wine makes sound common sense from which ever angle you approach it. Needless to say, the trickle down, halo benefits will offer indirect rewards for most layers of the South African wine industry.
- Greg Sherwood was born in Pretoria, South Africa, and as the son of a career diplomat, spent his first 21 years travelling the globe with his parents. With a Business Management and Marketing degree from Webster University, St. Louis, Missouri, USA, Sherwood began his working career as a commodity trader. In 2000, he decided to make more of a long-held interest in wine taking a position at Handford Wines in South Kensington, London and is today Senior Wine Buyer. He became a Master of Wine in 2007.