Who owns SA’s most compelling premium wine brand?

By , 29 June 2021

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A legacy not yet entirely wasted?

Among the biggest wine business news of the year so far is that Heineken, the world’s second-biggest brewer, has approached Distell regarding the potential acquisition of the majority of the local liquor company’s business. Distell owns brands like cream liqueur Amarula, ciders Savanna and Hunter’s Dry, various brandies including Klipdrift, and, of course, Nederburg.

You imagine what Heineken wants is to tap growth opportunities in Africa and it’s Distell’s established sales and marketing network in the continent that’s really attractive. Will Nederburg continue to exist if the deal goes through? Who knows but if it does, the focus will surely be on scaling the likes of Edelrood, the red blend that sells for around R100 a bottle, rather than making more small-volume, ultra-premium stuff. Nederburg’s top two offerings, namely Two Centuries and Private Bin have already been consolidated into a single tier called, wait for it, “Private Bin Two Centuries”. Hardly the most elegant piece of branding ever…

The point has been made often enough that South African wine industry is compromised by having too many micro-cellars (vinifying fewer than 100 tons). Most small producers struggle to charge a sufficiently high price per bottle to be economically sustainable while limited volumes make brand building difficult in the sense that not enough wine drinkers ever get to experience the wines in question.

So who’s going to achieve the necessary economies of scale and simultaneously establish enough brand equity to be a global player beyond entry level? Boekenhoutskloof have been successful with Chocolate Block making somewhere in the vicinity of 750 000 bottles and selling it for R250 a bottle but then there are precious few other examples. Chateau Libertas at around R60 a bottle has over decades been run into the ground by Distell while Roodeberg at R100 a bottle has suffered much the same fate over at KWV.

Something like Paul Sauer from Kanonkop is not short on name recognition but production for the newly released 2018 is 42 000 bottles, meagre compared to the classed growths of Bordeaux. Vin de Constance from Klein Constantia properly demands a premium, the current-release selling for R1 250 per 500ml bottle, but again total production is limited varying from 12 000 to 35 000 bottles depending on the vintage.

Part of the issue is that successful brands should ideally promise a differentiated benefit, something not being addressed by the competition and here, Chateu Musar immediately comes to mind – whether you like the stylistics or not, it’s Lebanese origins are part and parcel of its identity and help to set it apart in the world of wine. The likes of Diemersdal, Hamilton Russell, La Motte, Meerlust and Paul Cluver manage significant annual sales at not inconsiderable prices but they have all more or less opted to work with varieties and styles that are readily obtainable elsewhere in the world.

What of Chenin Blanc and Pinotage, I hear you ask. Chenin Blanc’s intrinsic merits are manifest but it’s difficult to conceive of it being made in very great volumes at a very high price simply because it’s a white variety – although the likes of Bellingham, Kleine Zalze and Spier are trying. As for Pinotage, quality improvements in the last decade have been such that it’s no longer a laughingstock but many commentators and consumers remain prejudiced against it and for now it must remain a regional oddity rather than SA wine’s spearhead.  

Nature abhors a vacuum, as the saying goes, and one recent development that suggests SA wine may be on its way to getting a luxury brand made in meaningful volumes is the acquisition of Helderberg property Alto by Germany company LVS Capital, the major shareholder in Ernie Els Wines – Alto Rouge has a strong legacy that has not yet been completely wasted, volumes are already significant at around 600 000 bottles per year while recent vintages have been more than sound in quality terms.

There were also intriguing events on the Paarl side of the Simonsberg towards the end of last year with it first being announced that Backsberg had been sold to a mystery buyer and then that Plaisir de Merle had been snapped up by the Jordaan family of Bartinney Wine Estate. You suspect that a lot of this land will eventually become boutique hotels and luxury housing but there’s also some pretty smart vineyard planted on particularly Plaisir – where, you have to wonder, are these grapes destined to go?

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  • Tim James30 June 2021

    An important question, of course. The answer not to be found, of course, in the Cape’s new wave, which have selected with enthusiasm the Burgundy model of small-terroir wines in tiny volumes, and those are the wines being taken most seriously by the crucial international market. Sadie and Mullineux, though, for example, are aiming at selling large volumes of blends from wider areas than single vineyards (as well as the latter), but haven’t got to the stage of big volumes yet (one has to sell the stuff as well as make it…). Christian mentions Chocolate Block – but it would also be worth keeping an eye on Boekenhoutskloof Syrah, I’d suggest. The quality is high and volumes are potentially vast – and Marc Kent is involved. And when I wrote recently about the maiden Taaibosch, I quoted their aim of reaching 100 000 bottles. A return to greatness of Alto would be splendid, but let’s look for signs of real ambition there.

    • @MikeRatcliffe3 July 2021

      Good comments Tim, but with respect, I don’t believe that the “Cape’s new wave … have selected with enthusiasm the Burgundy model of small-terroir wines in tiny volumes” as you have suggested. It is indeed accurate to observe that there are similarities in approach between your definition of the “new wave” and the Burgundian model, but the argument for strategic intent lacks substance.

      The ‘New Wave’ does indeed constitute a large proportion of “the wines being taken most seriously” and this should be applauded – this ongoing innovation and excitement is ‘currently’ a national treasure for our industry. Please don’t get me wrong, I would love to see the “new wave” achieve even a fraction of what Burgundy achieves both in terms of recognition, prestige & demand (and price). What is potentially holding this back?

      I would argue that lack of land ownership and consequent insecurity of tenure is a driver. The worrying and developing “new wave” trend to fragmentation of offering, or rather, lack of focus and definition in small volume portfolios. Certainly, a significant obstacle is lack of volume and an inability to actually offer these fine wines to the “crucial international market” that would probably buy them if they were actually available – which they are not. Cashflow constraints and elusive profitability, while symptomatic, are often also causal factors.

      Finally, I would argue that the biggest obstacle and the biggest factor distinguishing the South African “new wave” offering from “the Burgundy model of small-terroir wines in tiny volumes” is confidence. The notion of confidence is often, at least partly, expressed in pricing and this is the most dramatic differentiating factor. I do not for a second suggest that the ‘new wave’ should double and then double again their pricing. I do however suggest that these wines generally (yes, almost always) represent a disconnect between (global) market reality and product quality. An unpopular (& likely controversial) comment would be that the “new wave” are too cheap to be taken seriously by the most significant wine lovers/collectors in the world.

      Probably inadvertently, the South African “new wave” in particular, and the entire wine industry generally, continues to allow the perpetuation of the notion of a ‘country discount’. A notion that could be confused somehow with a sense of inferiority? I have always, and will continue to believe, that a greater sense of confidence and pride in the inherent merits of our incredible South African wine offering may well be the shot in the arm that we need.

  • Mike29 June 2021

    Alto Rouge? R110 a bottle? Hardly premium! Track record not what it was! Perhaps under the new ownership… Holding thumbs!

    • Christian Eedes30 June 2021

      Hi Mike, It bears mentioning that the 2016 and 2017 vintages both rated 92 when tasted blind for the Signature Red Blend Report 2019. Getting the price up will be difficult but not impossible. My instinct is that there’s a lot of goodwill towards the brand in the marketplace.

      • Mike30 June 2021

        Good will towards Alto Rouge, sure. But isn’t a score of 92 equivalent to a silver medal in your book? Not so “compelling” then…

  • Jeremy Sampson29 June 2021

    An editorial about brands, premium brands at that.
    Well done Mr Editor. More please, we are playing catch up.

  • jason+mellet29 June 2021

    Nice read Christian. Is part of the problem that South Africa’s quality wine sector whether it’s boutique or mass produced just to young… back in the day there was a lot of plonk being produced and even today …. During WWII and WWI even some of the great Boudreaux houses might of been simply boutiques, much like Mullineux etc is now, give them 100 years and let’s see what they can get their production up to. I think for now the problem may be availability of quality grapes.

  • Michael Ratcliffe29 June 2021

    Nailed it Christian! A succinct summary of the core structural problems holding the industry back, followed swiftly by a concise solution. The world doesn’t need more wine – but it could do with more authentic, convincing brands, especially from South Africa. The Achilles heel of South African wine is that we have failed to produce a single compelling volume brand that doesn’t sit on the bottom shelf. Volume doesn’t mean cheap – but it does require a significant value proposition – at all price-points.

  • Schalk Burger29 June 2021

    On the subject of Plaisir de Merle, I understand that a significant chunk of its production currently goes to Nederburg. Given the possible change in ownership of the latter, and Mr. Jordaan’s acquisition of the former, perhaps a greater portion of Plaisir’s output will go towards own bottlings. That would be a welcome development – I enjoyed the earlier vintages of Plaisir tremendously, around the time when Platter’s proclaimed rather breathlessly of the maiden ’93 Cab that it was ” a new departure for the Cape”. Jordaan is a savvy operator, committed to quality as he has proven at Bartinney, and not lacking in the necessary capital to propel Plaisir (back?) to the top ranks. I will be watching the Bartinney/Plaisir nexus (with more possibly to be added to the stable – some other premium estates must surely be up for grabs in these economic conditions) as a likely contender for “compelling premium wine brand” status going forward.

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