WINE: Producers Must Explore New Markets
Recent Western Cape Business News
South Africa’s wine export volumes have shown healthy growth for the first three months of 2012, increasing by 21% compared with the first quarter of 2011. While driven largely by bulk sales, there is also good growth for bottled wines coming from non-traditional markets such as East Africa, Russia, and Japan, according to WOSA CEO Su Birch.
Now the organisation is also looking to tap the potential of the Nigerian market, the second largest economy in Africa, with a projected annual GDP growth of 11,8% till 2016 and a population that is increasing by 2,35% a year. The US Census Bureau predicts that Nigeria will be the world’s fourth most populous nation by 2050.
Speaking at a WOSA-hosted seminar in Stellenbosch this week (April 17, 2012) on wine marketing opportunities in Nigeria, Sapta Bhattacharyya, the associate vice president of global research company Aranca, said the volume of wine exported to Nigeria between 2007 and 2011 had shown a compound annual growth rate of 24,12%.
The value of Nigeria’s wine market, now worth around US$300m a year, was expected to reach US$370m by 2015. Currently, Europe held the lion’s share of this market with some 60% of volumes sold, but South Africa was the next biggest player with a 22% by volume share, he said.
Bhattacharyya estimated that some 5,2 million people, representing the top 10% of earners amongst the population of 156 million, accounted for 43% of consumption expenditure in the country. This was the group to target as potential wine consumers.
South African wine exports to Nigeria grew by 12% for the 12 months to March 2012.
While total volumes of all wines sold in Nigeria were expected to grow by 6% a year but just 2% by value, Birch said the potential for growth at the higher end of the market should not be overlooked.
“Many of the global luxury brands have entered the Nigerian market and these include several famous-name spirits, as well as champagne brands whose products are being welcomed by the country’s affluent consumers. We know anecdotally from a number of South African producers that there is a robust appetite for premium and higher-priced local wines.”
Most wine consumed in Nigeria, according to Bhattacharyya, was red, which accounted for 73,6% of volumes sold.
He estimated that there could be as many as a million consumers in the market for ultra-luxury goods.
With most economic activity occurring in Nigeria’s key metropolitan areas of Lagos, Abuja, Kano, Kaduna, Onitsha and Port Harcourt, Birch said potential wine markets were being identified and developed with top-line hotels and restaurants catering to the well-heeled in these centres. However, all of WOSA’s efforts would be concentrated on the south, non-Muslim regions of the country, said WOSA’s manager for Africa and the Americas, Matome Mbatha.
Bhattacharyya said importer distributors accounted for around 70% of distribution with the balance imported directly by retailers and the hospitality sector.
He stressed that producers should be aware that although consumer purchasing power was on the rise and there was a growing interest in wine, in the main, the market remained extremely price-conscious. He added that other issues to be considered when entering this market were the 50% import duties, the onerous and expensive bureaucracy that included registration of all wine SKUs with the National Agency for Food and Drug Administration and Control (NAFDAC), as well as political unrest and corruption.
Mbatha confirmed that WOSA was working with South Africa’s department of trade and Industry to explore ways of streamlining the NASDAC registration process for producers. WOSA was also participating in South Africa week, taking place in Nigeria in mid-July and would be hosting VIP tastings for trade and media, as well as with consumers.
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