A tip­pling good year

Ex­cel­lent wines for 2009

Finweek English Edition - - Business Strategy - EN­GELA SLAB­BER en­ge­las@fin­week.co.za

THIS YEAR COULD PRO­DUCE the best vin­tages of the decade, thanks to last year’s good rains and sub­se­quent cooler weather, which re­sulted in a long ripen­ing process and high qual­ity grapes. That would be an ap­pro­pri­ate achieve­ment to mark the 350th an­niver­sary of South Africa’s wine in­dus­try.

Absa AgriBusi­ness GM Ernst Janovsky says he’s ex­cited about the prospects of SA’s wine in­dus­try pro­duc­ing ex­cep­tional qual­ity and good vol­umes this year. “While the in­ter­na­tional re­ces­sion could put a dam­per on the de­mand for pre­mium wines, I don’t think it will re­ally af­fect the de­mand for cheaper wines, both in SA and over­seas mar­kets. Peo­ple tend rather to look for cheaper op­tions. Also, we’ve seen in the past that peo­ple ac­tu­ally drink more in pe­ri­ods of re­ces­sion and wine is rel­a­tively cheap com­pared with other drinks.

“How­ever, over the long run SA will lose mar­ket share, be­cause we’re hav­ing prob­lems es­tab­lish­ing 1 000ha of new grapes each year. Com­peti­tors, in­clud­ing Chile and Peru, eas­ily plant 30 000ha to 40 000ha ev­ery year. But SA’s good and es­tab­lished brands do help SA’s wine pro­duc­ers hold their own in­ter­na­tion­ally. The weaker rand could also en­cour­age ex­ports and the re­duc­tion of high stock lev­els this year, which will in turn ease prices for SA’s wine pro­duc­ers,” Janovsky says.

Lat­est es­ti­mates put the 2009 wine grape crop at 1 321 877t – about 7% down on the record crop last year. The stock level in pro­ducer and pri­vate cel­lars will fall to an es­ti­mated 332,7m litres at year-end 2009, from 401,1m litres on 31 De­cem­ber 2008.

Wine es­tate Fairview’s Charles Back says it re­mains dif­fi­cult for SA’s wine­mak­ers to gain en­try to the United States mar­ket due to its neg­a­tive per­cep­tions about Africa. In Amer­i­can eyes SA is lumped with the rest of the con­ti­nent. “The re­sult is that wine­mak­ers have to put a bot­tle of wine worth US$15 on the mar­ket for $10 in or­der to off­set those per­cep­tions.”

SA has a fur­ther prob­lem: that its wine is too ex­pen­sive due to the ge­ol­ogy (moun­tain ranges) of the West­ern Cape, which has a range of cli­mates and soil types that makes it im­pos­si­ble to pro­duce large quan­ti­ties of ho­mo­ge­neous wine. SA’s pro­duc­ers are con­se­quently forced to fo­cus on niche mar­kets.

Back says the frag­men­ta­tion of the US mar­ket has its own prob­lems. Each state has its own rules and reg­u­la­tions. “De­spite what’s gen­er­ally as­sumed it’s not so much fig­ures that count for the Amer­i­cans but re­la­tions. Our strat­egy is to bring 30 in­flu­en­tial Amer­i­cans to SA ev­ery year and ex­pose them to what the SA wine in­dus­try has to of­fer. It’s also im­por­tant to have a pres­ence in the US.”

Bey­ers Truter, of Bey­er­skloof, who is also the chair­man of the Pino­tage As­so­ci­a­tion, says the 2010 Soc­cer World Cup will of­fer won­der­ful op­por­tu­ni­ties to mar­ket the SA wine in­dus­try and, specif­i­cally, Pino­tage – a uniquely SA type of wine. Pino­tage was cre­ated in 1924 when Pro­fes­sor Abra­ham Izak Perold suc­cess­fully crossed pinot noir and cin­saut grapes (then known as her­mitage).

Though Pino­tage has been ne­glected in the past, it’s a wine type that’s earned some of the world’s top awards for SA over the years. The pro­duc­tion of Pino­tage wines was given a huge boost with the for­ma­tion of the Pino­tage As­so­ci­a­tion in 1995 and the Absa Top 10 Pino­tage Com­pe­ti­tion in 1997, which re­sulted from it.

Says Truter: “There re­ally was a need for a body to pro­mote Pino­tage. I sent out 200 let­ters and 200 peo­ple turned up. The as­so­ci­a­tion rests on a num­ber of foun­da­tions, the most im­por­tant be­ing def­i­nitely the qual­ity of the wine, the free ex­change of in­for­ma­tion and mar­ket­ing.”

Absa’s Top 10 Pino­tage Com­pe­ti­tion doesn’t have an over­all win­ner but 10 fi­nal­ists are an­nounced al­pha­bet­i­cally, so that the pub­lic­ity is spread over 10 Pino­tage wines.

Truter is ex­cited about the op­por­tu­ni­ties of­fered by both the SA mar­ket and Africa as a whole. “The SA mar­ket has 47m peo­ple and we tra­di­tion­ally sell wine to 7m. There’s a whole new world wait­ing for us to open. We’ll have to do re­search on wine styles and packaging to gain a larger share of that mar­ket. In Africa, there’s An­gola and Mozam­bique, which have enor­mous po­ten­tial at all price lev­els. The same fur­ther north.”

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