Wine industry ‘struggling’

Michael Fridjhon.

The Old Mutual Trophy Wine Show (OMTWS) is one of those events on the national wine calendar that most people who love wine await with anticipation.

Now in its 16 year – it debuted in 2002 – it is the premier local wine show, which showcases some of the finest wines on offer.

In the past eight years or so, as long as I’ve been following the show, around 1 000 wines are entered, but this year the number of entries dropped to 960, from 198 producers. That’s about 5% off the norm.

“It’s a sign of the times,” says OMTWS show chairman Michael Fridjhon. “The wine industry is struggling, and with the rand relatively strong despite political uncertainty, income is compromised for many producers who rely on export income.”

Established brands with market presence will weather the storm better, but the smaller and newer producers are struggling. If you’ve attended one of the frequent wine sales that take place at Somerbosch on the R44, you’ll have picked up some really great wines from well known producers at discounted prices. That so much wine ends up on sale at such an event, begs the question: why is the wine not sold through normal channels, or from the cellar door?

The sad truth is that many producers have become price takers, and that does not bode well for the industry long term. Sure, those with an established export market will have that as backstop, but in order for the industry to experience real growth, we need to see an uptick in local wine consumption.

Before you go on a rant about our national alcohol consumption being too high as it is, remember this: of a total annual per capita consumption of 9.46 litres of pure alcohol, only 1.17 litres is for wine, according to a 2011 WHO global status report on alcohol and health. That translates into about 8.5 litres per capita head per annum, and chances are it hasn’t changed much since then.

If you look at alcohol consumption across the various categories, it paints a gloomy picture. The 2016 South African Wine Industry Statistics (SAWIS) report notes that South Africans consumed 436.9 million litres of wine, and 428.4 million litres went to our export markets.

By contrast, we drank a staggering 3.17 billion litres of beer, just over seven times as much as our local wine consumption.

Even the ready to drink (RTD) market – spirit coolers and the like – almost but not quite kicks the wine industry’s butt at 431.2 million litres. Granted, RTDs appeal to the younger generation who perhaps have not yet developed a taste for wine, but what’s the deal with beer?

In a word, marketing. Whereas the beer industry has made it its business to persuade the masses to drink beer by default – witness the level of sponsorship and the constant blizzard of persuasive advertisements – the wine industry has lagged far behind in the local market.

Until recently, there was no concerted local effort to promote wine consumption, until producer organisations, led by VinPro, launched the Wine Industry Strategic Exercise (WISE) in 2014.

By contrast, statutory organisation Wines of South Africa (WOSA) has been marketing South African wine overseas for the last 18 years. WOSA is well funded, because each of its 500 members pays it seven cents for every litre of wine exported.

That amounted to just over R30 million in 2016, a not inconsiderable sum. WOSA’s income is guaranteed by statute, the organisations driving WISE are not so lucky.

Although WISE has laboured mightily since its inception to promote responsible local wine consumption, the anticipated uptick in sales, and concomitant revenue for producers, has not materialised.

Ideally, what the wine industry wants is churn – converting those who don’t drink wine to switch. That way, per capita alcohol consumption can remain more or less where it is, but the industry’s income will increase. So what’s the problem?

Well, the potential is there, but it needs to be tapped into by producers. Ever since 1994 the much sought after but little realised so-called Black Diamond market has been seemingly just out of reach, but that is set to change.

Aside from running OMTWS, Michael Fridjhon also runs the annual RMB WineX consumer wine festival, which attracts thousands of wine drinkers.

“Last year we did a deep survey of over 1 000 people who attended WineX. Attendances were 50-50 black/white and roughly 50-50 male/female of the middle class, particularly in Gauteng,” he says, “the biggest single market in the world for Cape wine. It represents 60% to 65% of the domestic market, and 40% to 45% of all bottled Cape wine sales in South Africa.”

But there is a caveat. Savvy black wine consumers are looking for products that reflect meaningful transformation in the industry.

“You don’t create a second brand into which you put the empowerment component,” says Michael. Rather you say this is the brand. The wine business is a brand driven business and that’s where empowerment has something to offer as well as to take.”

“If you put the empowerment package together properly so that the brands are suddenly not seen to be white owned brands they will reach into a new community of consumers who are spending real money. The moment you understand that, you understand that the market has changed.

“They are ready to buy into the idea of brand transformation. They don’t want secondary brands, they want real brands and the brand owners that embrace this concept are going to do very well,” he says.

Question is, which of our producers will be farsighted enough the rethink their empowerment model in order to tap into this potential market?

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