Michael Fridjhon: Are there any limits to the growth of small-scale wine brands in SA?

By , 18 March 2020

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There are 550 production cellars in South Africa, of which half crush 100 tons or less. Assuming these smaller cellars sell no bulk and bottle their entire production, this means there are 250 producers trying to make a living on an annual sale of 7 000 cases or less. The “or less” is important. The top end of this bracket is 100 tons. There are some crushing only 10 tons. It’s probable that the average for each cellar in the category is less than 5000 cases. This means that roughly half of the cellars in the industry are responsible for producing a little over 1m cases – which is roughly 1% of South Africa’s wine production, and roughly 2.5% of domestic consumption. Put another way – the remaining 50% of our wineries produce 99% of all the wine we consume, and all the wine we export.

Skurfberg3
Skurfberg near Clanwilliam – source of some SA’s most renowned old-vine Chenin Blanc.

If you go back 20 years there were far fewer small production facilities. Their numbers have increased as young winemakers follow the example set by the likes of Eben Sadie and the Alheits and try to carve a niche for themselves sourcing old vine fruit and creating wines which have personality and provenance. For most the choice of cultivar is chenin blanc, partly because it is so versatile, but also because old vine fruit is readily available, and not very expensive.

South Africa has roughly 3 900 hectares of vineyard certified as over 35 years old, and of these, roughly 50% is chenin blanc whose yield (allowing for vine age as well as soil and climatic conditions) may be as low as 2 – 3  tons per hectare. Let’s assume a total old vine chenin harvest of 5 000 tons, enough to supply over 300 000 cases of of wine. (This presumes that all old vine fruit is good enough to produce fine wine – which we know is not the case, but even if half of it is good enough, there’s a potential 150 000 cases of such wine.) The remaining 1 900 hectares of old vineyard comprises mainly “retired” brandy varieties – clairette blanche and colombard, for example, but also palomino (from our now defunct sherry industry) as well as semillon and cinsault and a smattering of surviving vineyards of so-called noble varieties planted in the first days of the modern industry – the 1970s.

If you are an aspirant rockstar winemaker you might be brave/creative enough to try and make a statement with palomino or colombard – and some obviously do. The problem will be that cultivars planted for their high yields and for the blandness of their fruit are unlikely, even in extreme old age, to yield wines of great personality. If you are launching your career it may be useful to include some of these now more exotic cultivars in your blend and on your label, but if you want to sell your production quickly enough to finance the next vintage, you will need fruit with flavour.

The math of being a wine producer is frankly daunting. If you’re setting out, and you’re planning to produce a wine which doesn’t need extended ageing you’ll have to work with white varieties. Assuming you can get reasonably good old vine fruit you’ll be paying around R15k per ton, and for 1 500 cases you’ll need a little over 20 tons. So you’ll need R300k for fruit and another R200k plus for bottles, cartons and labels. If you don’t have a cellar you’ll be renting space and probably paying per litre processed, so add R50k for that. You won’t want new wood, but you’ll need to borrow or buy some old barrels – 20 to 30 of them depending on their capacity and whether or not you have access to stainless steel storage. You’ll have to pay a mobile bottling unit. If you’re lucky you’ll come in with a budget of R600k, excluding salaries (including your own), and you’ll have to sell at least half of your crop – and collect the money – at around R900 per case to free up the cash for your next vintage.

It’s hardly surprising that so many set out filled with hope, only to be worn down by the reality of a capital-intensive business. If old vine chenin fruit weren’t easily accessed, there would be less incentive even to give it a bash. But the ready availability of this extraordinary resource makes the idea of being a small, craft fine wine producer appear tantalisingly easy. No wonder so many have attempted it. I’m guessing between 30 and 50 of these boutique start-ups bottle such a wine every year and, although there’s obviously a turnover as newcomers enter and and the disenchanted exit, this has been going on for the past 10 years. Incidentally, this number is over and above established chenin producers who already enjoy a reputation, and may have several different cuvées in the trade.

Can this process continue? At one level there’s no reason why it shouldn’t: it’s an essentially Darwinian attrition, with survivors (financially/emotionally/commercially) advancing and the others reaching their evolutionary cul-de-sac. The fact that every year a few more become sustainable helps to keep the prospect tempting enough to bring new blood into the game. The fact that others drop out is what gives the category churn, and creates (at least the illusion of) opportunity.

Will enough consumers keep on supporting the category? For the time being at least, it’s hard to see why not. The wines have been getting better and better, and there’s no reason to imagine that this process will stop, or even slow down. The size of the market may change, as other varieties become fashionable, or as premium buyers emigrate or run out of money (or come back and come into money). But as long as there are newcomers seeking to make statement wines, vineyards to supply them with fruit, and customers to buy and consume what they produce, craft wine will remain a feature of our landscape.

  • Michael Fridjhon has over thirty-five years’ experience in the liquor industry. He is the founder of Winewizard.co.za and holds various positions including Visiting Professor of Wine Business at the University of Cape Town; founder and director of WineX – the largest consumer wine show in the Southern Hemisphere and chairman of The Old Mutual Trophy Wine Show.

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2 comment(s)

  • Gavin Bloy24 March 2020

    I’m a very keen chenin drinker and accumulator and I spend a lot of time researching winemakers and their assistants. There appear to be a significant number of people making wine for larger companies being allowed to make their own wine on the side under a different label using the employers facilities. Almost exclusively chenin. Interestingly some of them have now branched off on their own and left their former employers having been given a leg up into the industry and in some cases having helped to put their employers on the map. I think this speaks to the magnanimity and generosity of the bigger producers who have already established themselves and made their mark. Just a thought. I don’t make it I only drink it and these people are making some seriously good chenin.

  • Tim James18 March 2020

    Interesting and important observations and questions, these. But there’s something that bothers me with the arithmetic – I can’t easily make the numbers add up. Where are all these many new entrants making their wine? As Michael says, 20 years ago there were many fewer wine cellars crushing grapes. But 10 years ago there were more than now! And there were more of the smallest category (281 in 2009; 222 in 2018). Where have all the new small producers of the last decade gone? Some of them, one can assume from the figures, into shared space, in wineries crushing 100-500 tons (149 of those in 2009; 166 in 2018).

    But even having as 3-5 producers sharing larger facilities is extremely rare. So where are the other tiny producers making their wine? One doesn’t hear very often of significant new producers of sexy old-vine chenin giving up, although Michael suggests this is happening to a significant extent. Part of the answer, certainly, is that many of the new boutiquists are also winemakers for other producers. They will, I’d guess, be given facilities to make their own small volumes cheaply or for free, and this would give them some time and space to grow while they try to establish their brands to ensure income enough to survive. Though, of course, at the least there’d be a need to buy grapes (a few old barrels wouldn’t cost much). Would those moonlighters be enough to account for the ever-lower total number of wine cellars recorded by SAWIS despite the ever-larger number of producers? And thereby to account for the relatively few failures (so far – and it is early days still)?

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