Michael Fridjhon: SA wine has the infrastructure. Where are the sales?

The recent editorial entitled “The Stormers get it. The Proteas less so. What can wine learn?” on Winemag.co.za, which proposed a business case for the wine industry based on the recent commercial success of the Stormers, was glib but not wholly misdirected.

Even before that editorial appeared, the state of our wine industry had been on my mind. However, unlike Christian, I wasn’t nearly as concerned about its performance. For a start, while the decline (7.7% in 2025) in domestic sales definitely reflects the cutback in consumer spending, the home market is not in free fall. The figures look bad in the face of the international average – which is only 2.7% – but it’s also not out of line with many important markets. Wine consumption fell by 9.4% in Italy, 4% in the USA, 4.2% in Germany, 2.5% in Britain and 12.7% in the Netherlands.

Economies with a more substantial middle-class component – so therefore less exposed to the effect of tough times on discretionary spending – held up better. The UK, USA and Germany saw a combined volume decline of under 4%. China lost 13%, Argentina dropped 18% and Spain 8.1%.

Considering South Africa’s Gini co-efficient (the measure of inequality in the economy), the lack of economic growth, the ANC government’s prohibitionist agenda and the political uncertainty which pervades the thinking of those South Africans who do not live in the Western Cape bubble, it’s hard to attribute the numbers to mismanagement and incompetence. Eedes – squinting through his Western Cape lens – suggests that wine is declining in relevance to people who once regarded it as essential to their everyday life. Consumption may be down in the leafy suburbs of the Mother City but it’s holding up quite well in the pot-holed streets of Gauteng.

The domestic wine market is made up of many components and several of them interact in ways which are beyond whoever might be responsible for managing the future of the industry. When times are tough wine drinkers on the breadline gravitate to the cheapest available beverage. Mostly this is product outside the reach of those who gather the statistics. So-called ales (sugar-fermented beverages) are a first substitute, so is illicit bulk wine sold out of the back of the cellar in plastic jugs, with no excise recorded or paid. Given the size of the illicit market, it’s worth testing whether the measured decline in sales is reflected by an exact and commensurate increase in the industry’s stocks on hand. I’ll bet a papsak of your choice that they don’t.

This brings us to the question of who actually runs the wine industry, and why the analogy with the Stormers (or any other company) simply doesn’t work. The South African wine industry is not a business in a way that a rugby franchise or a gold mine is one. Even if it were desirable to configure it as such (and I’m not denying there’s a case to be made for a more coherent structure) as things stand this is simply not possible.

For a start, there’s no commercial connection between the many moving parts. There are the bits that have to be done by some statutory authority, there are the marketing efforts of the producers, and by appointed entities (representative organisations such as WoSA, for example, but also Stellenbosch Wine Routes, CWG etc), and there are actual sales in which only the producer or distributor has a financial interest. In the bad old days you could conceivably argue for an umbrella organisation like KWV to do it all. Only the now-defunct Communist Eastern Bloc ran a single sales channel for a nation’s wine – and we know how that ended.

When things aren’t going well it’s tempting to find someone to blame other than yourself – like SA Wine or WoSA – or the government which doesn’t do enough to support the wine industry, or the retailers who, with unspeakable cruelty, chase the best deal at the expense of the more naive craft producers. It’s true that at the moment there does appear to be a low-key war between the two bodies (SA Wine and the Wine Certification Authority) both of whom might function more effectively if they were less obsessed with territory. But it doesn’t explain the current predicament.

SA Wine is doing a pretty solid job ensuring that growers and producers work as scientifically and cost-effectively as possible. But it’s not there to sell their wine for them. There’s no real support for domestic sales (and until now there’s also been no money for such an entity). That’s what producers the world over have to manage on their own – the same as if you sell magazines or widgets.

On the export front it’s easy to point out WoSA’s failures (and to forget its successes). But it also has an infinitesimally small budget for the size of the task it confronts. The current management has inherited most of the focus markets. And that inheritance was partly influenced by the preferences of the producers who participated in or led the market selections. So since 1994 everyone has been plugging away at the UK, the Netherlands, Germany, Scandinavia, Canada, China and the USA (which were more fun but less cost effective to travel to than Gauteng). Last year we lost much of the USA – no one at SA Wine or WoSA was to blame for that. And we haven’t yet been able to tap into the China duty-free benefit because it seems SARS has been dragging its feet in providing the certifications demanded by the Chinese.

So arguably we’ve been great at building competences and skills and we’ve not been very good at building sales. Industry institutions are expected to create appropriate infrastructure, establish vehicles for training and skills transfer, and maintain product integrity. Hard to fault anything here. WoSA has managed the thankless task of facilitating exports on a ludicrously small budget. I’ve no doubt that a better job could have been done, but not by an institutionalised bureaucracy. Sales (local and international) have been stumbling for some time. A one-line diagnosis here would be that as an industry we “other” the consumer rather than include consumer expectations in our thinking. In addition, very few of the key decision-makers spend any real time in the biggest wine market in the world for Cape wine – which is Gauteng.

So in my view – and to use Christian’s Stormers’ analogy – the corporate machine is doing what it’s supposed to be doing. It’s the players who keep fumbling the ball and missing the chances. The fact that some are doing really well (while others aren’t) tells us that the team is a disparate blend of stars and mediocrities. Not everyone in the class can realistically get a distinction, so perhaps we should also consider failures. Here, compared with other wine industries around the world, we’ve had remarkably few bankruptcies. I guess, in South Africa at least, die agteros kom ook in die kraal.

• 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 Trophy Wine Show.