The collective wine trade may be taking a pounding as the recession drags on, but if there is one spectacular exception to the rule then it has to be South Africa. A combination of a weak rand,
ever-growing quality, the revival of
Kumala and growth of its
rivals, the launch of new premium brands and an overall feel good factor generated by what, in international terms at least, is a very young and dynamic wine industry, have conspired to deliver a 9% market share, up from 8.1% last June. This, along with positive feedback and support from some of the biggest gatekeepers in the trade, suggests that South Africa's bull run is set to continue.
Given other factors such as the rise and rise of the Cape as a premier long -haul tourism destination, to be compounded by the British Lions tour this summer, the wine industry's 350th anniversary celebrations next year
and, of course, the
2010 football World Cup, and the opportunities for South Africa look good .
Despite being a wine industry that is 350 years old, the real revolution wine-wise really only took hold following Nelson Mandela's rise to power in 1994. The country's winemakers are still in the throes of exploring its diversity, in terms of matching varieties and vineyards to suitable sites, exploring cooler -climate locations and developing wines that appeal to the modern wine drinker. Poised in style somewhere between the New
World and Europe, South Africa has much going for it in terms of broad appeal.
Quality to value
Nielsen's figures reveal quite how remarkably this country has performed in the UK against an overall flat market in the off-trade. By value the category was up 24% over the year to December 27, 2008, with the leading brands
First Cape, Kumala, Namaqua and Arniston Bay all in positive growth
- and an even more remarkable rise in sales of between
27% and 66% at all but one £1 price
to £10 and above. The
picture that emerges is one of a wine -producing nation that is not just being driven by the success of its major brands, but also one that is increasing its foothold across the market.
Arguably there has never been a better time for retailers to re-evaluate their South African offering. There's no getting away from the fact that the relative weakness of the rand has played into
South African producers' hands, but this, insist the South Africans, is not the whole story. South Africa's growth at more premium price points, it is argued, suggests that a strong quality-to-value factor is being built into the wines and that this will outlast any less favourable fluctuations of the rand.
"The wine industry has become far
better and more humble in terms of listening to what the market wants,"
says Hermann Böhmer of
the Company of Wine People, whose brands range from the fast-growing Arniston Bay to the empowerment-rooted Thandi. "We are still building up a collective experience as an industry, and because of the resonance this is generating with consumers we can continue to grow the popularity of South African wines."
With Nielsen figures clearly showing consumers dropping out of the wine category altogether at the lowest
price points, South Africa's growth in terms of both image and presence at higher, premium price s, is likely to be integral to its longer -term image and positioning.
"This is not just driven by currency," says Graham Nash, who as Tesco's buyer for South Africa has perhaps the single biggest influence on its fortunes in the UK. "In many ways South Africa is similar to Australia in that it resembles the earlier success of that country, but just as Australia has run into difficulties
South Africa has continued to grow its appeal to the consumer."
Nash reveals that in Tesco's £5-£10 range South Africa continues to outperform all other major producing countries. "South Africa's leading brands are doing a good job, but there has also been an improvement quality-wise every year across the board, and wines like Boschendal, Vergelegen, Flagstone and La Motte are showing there is much to offer in the more premium category."
It's a point picked up
by Matt Pym, responsible for
South African wines
at Majestic . "South Africa has grown
17% by value for us in the
past 12 months and performs very well across all price points," he says . "It is fair to say that they have been able to take advantage of a relatively weak rand to take sales from euro zone producers, but we have great success in selling estate wines, and the £8-£15 category is stronger in South Africa than most other New World regions."
Of course, in the broader market the success - and image - of a country's leading brand or brands remains crucial in terms of reinforcing the overall perception of the category and also in drawing in new consumers. First Cape, which has recently taken the top spot from Kumala, has in six short years established itself as a reliable counterpoint to the likes of Wolf Blass, Gallo and Jacob's Creek, driving the South African category with 45% year -on -year growth.
"What is remarkable is that we have achieved this with distribution in only 57% of the off-trade," says Greg Wilkins, director of Brand Phoenix. "I feel passionately that South Africa's success lies in unlocking the lifestyle message and continuing to deliver what the consumer wants in terms of quality, consistency and good value."
Kumala, meanwhile, has had a complete overhaul under the ownership of Constellation and has become a credible flagship brand
- not least as it is now under the stewardship of talented and charismatic winemaker Bruce Jack.
"We started the campaign with Kumala last year following the Wine Nation research," says Claire Griffiths, vice president for European consumer marketing. "We began a revitalisation process that began with the packaging design, coupled with new communication to the consumer and, most importantly, focusing on the quality of the wine in the bottle."
Importantly, Griffiths agrees with others
that whereas in the past consumers may have been drawn to a strong South African brand, there was perhaps a lack of range architecture on many shelves that allowed these same consumers to trade across and up to more premium brands. Constellation's answer to this lies in now owning a ladder of three brands rising in price from Kumala by way of the more mid-market Fish Hoek to the premium Flagstone wines.
"There is a big opportunity for premium South African offerings," says Griffiths. "And, like Australia, South Africa has its hero varieties, with Chenin Blanc at the fore - a great variety which it can truly call its own - plus good -value Sauvignon, an increasing rol
-call of Syrah and Rh ône
blends, along with Bordeaux varietal and style blends which clearly engage with the consumer."
Distell's Sarah Gandy also argues that South Africa has achieved a form of critical mass from which it can now consolidate its position. "Until recently its fortunes were perceived to be tied to the fortunes of a single brand with a number of niche producers to offer relief and interest," she says. "That view has changed and is changing further, as the category has a broader number of brands and several are developing a personality that offers them a chance to clearly define what they represent." She contrasts Distell's Two Oceans, which "offers aspirational lifestyle" and "accessible wines of quality" with Nederburg "rooted in quality, innovation and heritage". It's a good insight into the flexibility of South Africa's offering: Nederburg was established in 1791.
Closer to home, what is likely to continue to drive footfall towards the South African shelves beyond recent currency-backed value is a round of sporting and tourist-related events that will p ut the spotlight firmly on South Africa well into next year.
The importance of tourism to South Africa - and thus interest in its wines - cannot be underestimated. Gandy suggests that the British Lions tour series against the Springboks this summer will send up to 60,000 Brits to South Africa.
The spectacular backdrop of the wine country around Cape Town, with its excellent cellar door facilities within easy reach,
has great potential
to conver t drinkers to South Africa . This
is capped by the FIFA World Cup in 2010, which is, quite simply,
the biggest sporting event
Africa has ever hosted.
While the wine routes in and around
the Cape go into overdrive with events and celebrations, brands like Nederburg, which is producing a
edition range of wines with FIFA to tie into the event, will undoubtedly be working closely with UK retailers to capitalise on interest surrounding the event.
For high-end producers such as Gary Jordan of Jordan, the importance of wine tourism, especially in light of the forthcoming sporting and celebratory anniversary events, cannot be understated. "The effect of tourism is enormous and if you look at the number of people who become engaged in South African wines because of visiting cellar doors
and trying the wines here,
this effect can only grow over the next couple of years ."
In line with many at the premium edge of the industry, Jordan believes
the time is
right for South Africa to drive its m essages of diversity and quality home in the specialist independent and on-trade sectors. So much so, that the estate has put its money where its mouth is with the opening of High Timber, a restaurant in the City of London that is a showcase for quality South African wines.
Holding its own
It is in the independent off-trade sector, though, where South Africa can now perhaps best capitalise on its gains in terms of both shelf space and image.
Parallels have been drawn to Australia during its years of remarkable growth. Few are bullish enough to suggest that South Africa can capture anything like that market share any time soon. But while Australia is struggling to promote a premium, regionally diverse message, following tough times witnessed in a combination of supply issues and downward spiral of discounting, South Africa has managed to hold and grow its more premium offerings even during the downturn. This bodes well for the future, not least as new and exciting wines continue to emerge
more vineyards, regions and styles
come to the fore.
Few doubt that South Africa will find it tougher to continue its momentum following the welcome boost the exchange rate has lent to its growth. But as Böhmer stresses, "looking to the future, in the current economic climate, we have as a business and collectively to look at it from a glass -half -full perspective, because there is no point in short -term gain at the expense of long -term growth ". It is a point echoed by many and one that would appear to ring true as the gains of recent times have been largely reinvested in sustaining and growing the future quality of South African wine.