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How does SA get wine prices up?

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Old Mutual Trophy Wine Show Judges’ Feedback Session.

At the feedback session after this year’s Old Mutual Trophy Wine Show, the mood among the judges concerning the quality of wines entered was perhaps as positive as it has ever been. Jacques Roux, marketing director of DGB, however, introduced a sobering moment when he posed the question from the floor: “How do we get prices up?”

For all the massive strides made in quality improvement in the last two decades or so, the fact that South African wine prices remain depressed in a global sense must be put down to unrealized potential, at least in some part. All that dynamism that’s been shown in the vineyards and cellars this past while clearly isn’t being communicated to consumers in a way that gives the industry a competitive advantage.

Accolade’s Kumala and the other mainstream brands are implicated – they clearly haven’t taken consumers far enough in terms of differentiating SA from its competitors and motivating them to trade up.

But the corporates can only carry so much of the blame. The South African wine industry as a whole suffers not because it has a negative image in global markets but rather because it has no image at all. To succeed in the fine wine market, it can be argued that the three notions of regionality, personality and individuality are key. The first refers to a sense of place (see today’s article by Greg Sherwood MW’s on the importance of this here), the second refers to the winemaker or brand hero and the third to the style of wine. Any producer interested in developing a premium image needs at least two of the three to succeed. The New Wave (Swartland, Eben Sadie, Columella being the most obvious example) show the way and the rest of the industry not so much.

It must be said that is somewhat curious that the industry has made such few inroads into the premium sector. The Old World producing countries have an abundance of all three of the above criteria for success but the New World far less so – New Zealand’s offering, for instance, is heavily weighted towards Sauvignon Blanc and yet finds itself well ahead of South Africa.

The very complexity of the South African Winelands in terms of terroir surely makes communicating a coherent and single-minded marketing message more challenging (who can forget WOSA’s fraught slogan “Diversity is in our nature?”) while industry structure is not ideal when it comes to achieving critical mass: two or three major producers more focused on spirits than wine combined with a multitude of small and medium-sized producers that struggle to scale.

Luckily, the opportunity to launch premium propositions that resound with the consumer is still present. It is interesting to note that just like the Swartland took itself to the world via the Swartland Revolution, Stellenbosch now has the Cabernet Collective, Hemel en Aarde the Pinot Noir Festival, Elgin the Chardonnay Colloquium and Breedekloof, the Breedekloof Makers focusing on Chenin Blanc. If you take a positive view, then the last 20 years have been about building foundations and the rest should be easy. Keep putting better quality wine in the bottle at all price points and show real desire to sell wine and build brands and the industry will ultimately be just fine.

3 COMMENTS

  1. The problem exists because having diversity creates confusion. New Zealand has been more successful than South Africa because Sauvignon Blanc is 70% of its production and not in spite of it. Bordeaux, Burgundy and Champagne attract higher prices because the consumer knows exactly what they will get and the regions market themselves based on that expectation, they have an identity. It’s sometimes referred to as ‘Territorial Marketing’ and is designed to build regional loyalty as a consistently high quality brand in which all producers at all price points can benefit, as long as they are of the same mould.
    South Africa has become a victim of its own diversity. Post ’94 when global markets opened up, South Africa’s wine makers rushed into finding out about what the world wanted. At the time it was the dying embers of Australia’s success. Big and bold Cabernet, Merlot and oaky Chardonnay wines were still selling fast but their appeal was waning. South Africa went ahead anyway, trying catch a wave that had already passed, without much consideration for crop suitability or viability. The result was often low quality, with the obvious exceptions, and no identity. Soon after, the race was on to jump on the Sauvignon Blanc train that had departed the shores of New Zealand, with similar results. But there was wine and a market for it. The only problem was quality, and the price it will attract.
    As any marketeer will tell you, launching a new product successfully requires knowledge of what the product is, how much it must sell for, where it will be sold and how to promote it. Of course, it’s more complicated than that but maybe a good place to start. From a consumer’s perspective, the only defining feature to grasp with South African wine is the grape variety as regional identity is muddled by diversity. To succeed in the fine wine market requires so much more than that as Australia has discovered. It’s taken them almost as long as South Africa has had access to global markets to redefine what Australian wine is. In the last few years, they have been able to define each region by grape, style and quality so fine wine buyers and consumers actively seek out wines that fit the mould. South Africa has already started the process, it’s learning of its own terroir and distinct regions with identity are beginning to appear. We are seeing Elgin Sauvignon, Hemel en Aarde Pinots, Swartland Chenins (I find it a tragedy that the old Steen vineyards were overlooked for more fashionable varieties when they can, at their best, compete with some of the great white Burgundies) and yes, even Stellenbosch Cabernet as part of our regional identities. Individuality is also being discovered, not just the funky wines made by the young and adventurous, but people are finally recognising that a luscious and rich Chenin from Swartland is fabulous or an austere and precise Sauvignon from Elim can compete with the best of the Loire and blows New Zealand juice out of the water. The South African psyche is spreading across the world followed closely by its wine makers. South African wine has arrived so what’s holding it back?
    The people of this great nation don’t like paying fine wine prices. Until the price rises here, there’s not enough profit to invest in marketing, without marketing the price won’t rise. It’s not good enough to spend your winery marketing budget on listing fees in restaurants and the occasional trip to trade fairs overseas. Industry buyers will not pay a premium when there’s no differentiation between a bottom shelf Syrah at R30 and a top shelf one at R500. Most consumers don’t know and aren’t interested in who the winemaker is, they want to know what the difference is between the two and why is one more expensive than the other. At present, most consumers just see them as the same because they are both just Syrah.
    As a country, we need to change how wine is sold and invest in the people doing it. Let’s stop being lazy and wasteful on listing fees and get more sommeliers in restaurants. If it’s good the sommelier will list it and be able to explain the difference to their guests. Lets upskill the staff in wine shops and liquor stores so they can hand sell wines based on their knowledge. It will not only benefit the winemakers but also retailers and restaurants across the country. Eventually, it will create scarcity of the really good wines, people desperate to get hold of your wine is the one final factor that will lift prices on a global scale.

    • Excellent commentary Neil. I would add that we are in an unusual situation when it comes to terroir diversity in the W Cape, in that we have large climatic and other physiographic changes over very short distances compared to places like France or Italy. This makes it appear from a distance even more like we are trying to do everything in one place and can’t make up our minds.

  2. Neil echoes most of my thoughts, as an outsider looking in who supports South African wine more than any other country but also likes drinking French Burgundy, German Riesling or Rhône Syrah.
    There is still a mainly poor image of South African wines in the UK and we are your biggest international market.
    If I want a top Chardonnay and I have £50 tonspend, then I will look to Burgundy and not South Africa, even though I love the Chardonnays from the Hemel en Aarde. However if I was spending £25, then South Africa offers great values.
    A lot is about perception and South African wine is still relatively young in global terms. Things take time and people need to start trusting in the country.

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