A rising tide lifts all ships

British master of wine, Tim Atkin. speakerspeakereventNederburg Wine Auction, reopened the debate about South African wine prices.

Each year at about this time, two benchmark wine industry events take place: the Nederburg Auction and the Cape Winemakers Guild (CWG) Auction.

The rivalry between the two is more in the minds of auction attendees, pundits and the media than it is in the minds of organisers of either event, but the results achieved each year are compared, often gleefully, but for completely the wrong reasons.

While both auctions see some of the finest South African wines go under the hammer, comparisons of total sales, price per litre, number of bottles sold, and so forth is like comparing apples with pears, because the auctions are completely different in focus.

Started originally as a showcase for Nederburg wines, the Nederburg Auction is today the benchmark event for the sale of old South African wines, some of which achieve stratospheric prices – the top price achieved this year at Nederburg was R22 000 for 3x750ml bottles of Zonnebloen Shiraz 1976, or R9 777 per litre.

The CWG Auction is the benchmark event for the sale of contemporary fine South African wines, which in their own right, also achieve stratospheric prices – Abrie Beeslaar’s Kanonkop Paul Sauer 2013 sold for R13 400 for a 6x750ml bottle case, which equates to R2978 per litre.

The essential difference bet-ween the two is quite simple: the Nederburg Auction provides a window into the illustrious past of the wine industry, each year revealing the winemaking prowess of years gone by, in some instances by legends who are no longer with us.

The CWG Auction on the other hand, is a snapshot of the current state of the industry right now, and prices achieved there, are an indication of where things ought to be headed in wine price terms.

Borrowing from trend watching legend Clem Sunter’s most recent book, Flagwatching, the Nederburg Auction is a clockwork flag, which ticks away in the background as a fairly predictable trend that is going to continue. The CWG Auction on the other hand, is more of a cloudy flag, one which has a range of potential outcomes, because it is a microcosm of evolving South African wine styles. Witness the emergence of Adi Badenhorst’s bone-dry 2013 “Geel-Kapel” Muscat de Frontignan – an orange wine if there ever was one – at the 2015 CWG Auction, which achieved the remarkable price of R1 138 per litre, making it a black swan in flagwatching terms, a completely unanticipated outcome.

But it was at Nederburg this year – the long look at our vinous past – that the perennial question about South African wine prices reared its head when keynote speaker British master of wine Tim Atkin, speaking about the 2015 vintage which he reviewed in his annual Tim Atkin Report the day before, had this to say: “For the time being, these wines are dramatically under-priced. In fact, it’s hard to think of another country, anywhere in the world, that delivers such spectacular value for money.”

While the Nederburg Auction gives us a clear picture of our past greatness, the CWG Auction provides a window on what is to come in terms of wine styles, and more importantly perhaps, South African wine prices.

“A rising tide lifts all ships,” Abrie Beeslaar told me on Saturday at Spier as the Auction progressed towards a record total sales figure, and record white and red wine per litre prices. He made the cogent point that higher prices achieved there, would inevitably translate into higher prices for South African wines in general, particularly in the overseas market, a vital component in the economic sustainability of the local industry, with just over 50% of production being exported. “For too long we’ve been seen as a producing ‘value for money’ wines, and as soon as we push prices up to levels similar to fine wines from other regions, we’re seen to be ‘expensive’, and that must come to an end.”

With around 25% of the local industry operating profitably, something has to change if the industry is to survive, and what must change is what we pay for local wine, and what people pay for our wine overseas.

The economic Holy Grail for a South African grape grower – there are of the order of 3 600 primary producers and around 800 wine producers – is to earn at least 3% net farming income, in order to be able to maintain existing vineyards viticulturally, and to replace vineyards when they reach the end of useful life, but increasingly that is not happening.

Grape producers are price takers. When confronted with declining returns from a vineyard, is it any wonder that cash crops like apples or pears are an easily pursued alternative, when it comes to replacing an old vineyard?

Inevitably, the national vineyard will continue to contract, as more producers rip out their uneconomical vineyards.

Ideally the outcome will be better quality grapes, and improved producer prices per ton.

Hopefully Abrie Beeslaar is right, and the increasing trend in CWG Auction wine prices will spur concomitant increases in South African wine prices, but as Wine Concepts’ Sue Proudfoot said on Saturday: “The industry can no longer chug along at an annual 10% increase in prices. What we need is an increase of around 25% to make the industry more sustainable. And we (the retailers), have to tell the consumer to enjoy the low wine pricers they currently enjoy, while they can.”

Perhaps the best analogy for this conundrum is the coffee price. Primary producers – mostly small scale farmers – get around a dollar a pound for their coffee beans.

Were that price to double, which would increase the producers income by 100%, it would add around 10c to the price of a cup of coffee at the local Starbucks. In similar vein, increasing the price per ton paid to primary grape producers to the point where it makes growing grapes economically sustainable, will make a relatively small difference to the shelf price of a bottle of your favourite tipple.

Question is, dear South African wine drinker, are you prepared to pay a few rands more per bottle to ensure that you can continue to buy and drink quality South African wine?