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Send  Share  RSS  Twitter  30 Sep 2008

FOOD & BEVERAGES: Wine Onto Next Big Thing


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Speakers at September’s Nedbank Cape Wine 2008, the wine industry’s largest ever showcase to the international market, took pains to point out to the mostly foreign audiences of wine buyers and media, that the change in the country’s presidency had occurred without incident and was a reflection of the stability and growing maturity of South Africa’s democracy.

Not even what could arguably be called the most turbulent week in the country’s history post-1994 appeared to unnerve those attending the bi-ennial exhibition hosted by Wines of South Africa (WOSA), with a mood of optimism prevailing.

Political and trends analyst JP Landman, addressing delegates drawn from every continent, during the opening seminar entitled, 2010 and Beyond, highlighted that 4,2 million jobs had been created in 13 years, poverty had been reduced and all indications were that by 2014, 20 years after the advent of democracy, 90% of South Africans would have access to housing, water, electricity and sanitation.  Dennis Dykes, group chief economist of the sponsors, Nedbank, said a million jobs alone, has been created during the past four years.

WOSA CEO Su Birch believed it was possible for the country to increase the national vineyard from the present 102 000 hectares to 140 hectares within the next 10 years.

At a later seminar on the potential return on investment South Africa offered to foreigners participating in the local industry, Troy Christensen, president of Constellation Europe, said the peaceful change in leadership, and the country’s political and economic institutions boded well and could be considered encouraging signs.

He believed South Africa as a wine category in export markets was underdeveloped and thus offered huge potential.

The Constellation Group, the world’s largest producer of wines, had acquired Kumala, South Africa’s biggest export brand, in 2006.  He said research in the UK, the brand’s largest market, had shown most consumers did not associate the trademark with this country but with Australia. Christiansen said his group was now intent on reclaiming lost market share, which had seen Kumala drop from 3 million case sales a year to 1 million cases.   Constellation had recently invested in a £5 million campaign to market the brand and was focusing its efforts on building awareness of South Africa’s attributes as a wine-producing country, taking the leadership in driving category growth and engaging with consumers, encouraging them to experience more of the country’s offerings, so that in the process they would trade up to higher-priced brands.  In addition to Kumala, Constellation also owns South African brands Fish Hoek and Flagstone.

Christensen pointed to opportunities for South African brands in both developed and developing markets.  The South African wine category was well perceived in Canada and the Scandinavian countries, but there were also opportunities in emerging markets such as Russia and Eastern Europe, while domestic ties with Brazil, China and India should be exploited.  He also urged producers to build South Africa’s identity by highlighting the country’s involvement in conservation, sustainable wine production and Fairtrade, in which consumers already have shown a keen interest.

Grant Dodd, an Australian representing Haskell Vineyards in Stellenbosch’s Golden Triangle, believed South Africa offered opportunities for producers in the face of climate change.  While Stellenbosch, for example, was expected to show an average 0,8ºC increase in temperature over the next 50 years, temperatures in the Barossa Valley, Australia, were projected to rise by 2,2ºC during this period.

He said there was still land available to establish new vineyards and that growing innovation in viticulture and production made South Africa an attractive proposition.

He added that even in mature markets, engaged consumers with a high level of involvement in wine were willing and ready to explore the wines of areas hitherto unknown to them.  Suggesting that it might be South Africa’s turn to take centre stage amongst wine consumers, he urged producers to ready themselves in case the country was “to become the next big thing”.

However, he drew attention to the weaknesses of a volatile currency, the “ethnicised and polysyllabic names” given to many local wines that acted as an impediment to consumer engagement and the inflexibility of some regulations that made it difficult to innovate in the market.  He also believed more needed to be done generically to market South African wine quality and that producers should make a concerted effort to replant virused vineyards.  He cautioned against building market share by discounting.

Wine industry commentator Michael Fridjhon, who chaired the discussion on return on investment, said thus far there had been a massive underinvestment in Brand South Africa, which had seen producers taking advantage of a weak currency to trade on price, as opposed to building a positive image of the country and its winemaking attributes which would allow it operate in less price-sensitive areas of the market. He said a “currency paradox” meant that producers, who had premised their business models on a weak rand, would find it difficult to survive should the currency strengthen.

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