Back to basics

by | Mar 2, 2016 | Business and Marketing

Wine producers need to join forces and focus on varietals such as Chenin Blanc and Pinotage to set Brand South Africa apart.

Turning grapes and wine into profit is a tough business but by working collectively to get the basics right the South African wine and brandy industry can get to grips with its challenges. This was the message at the 11th annual Nedbank VinPro Information Day held in Cape Town on 21 January. Organised by VinPro, which represents 3 500 South African wine producers and cellars, the event was attended by close on 700 delegates.

EXCITE, DON’T ALIENATE

Do global consumers find South African wines “sexy” enough? Jane Robertson, category development director at Accolade Wines in the UK, says brand South Africa can make its wines more appealing to especially UK consumers by creating a credible mid-tier to help them discover the great wines the country has to offer. “Get the retail gatekeepers on your side and use native varietals such as Chenin Blanc and Pinotage as heroes to set your wines apart,” she advised.

Jane also urged the industry to use ethical accreditations such as Fairtrade to set itself apart itself. To this end VinPro transformation and development officer Unathi Mantshongo illustrated how the VinPro Foundation supports and funds various industry initiatives, such as ethical trade, to make a difference in wine farming communities.

“Make South African wines sexier by using Chenin Blanc and Pinotage as heroes in the mid-tier.” – JANE ROBERTSON, ACCOLADE WINES

“The VinPro Foundation aims to improve the lives of wine farming communities.” – UNATHI MANTSHONGO, VINPRO “Simplify wine and innovate packaging to get South Africans to drink it.” – NICKY VAN HILLE, THE MOSS GROUP “Take the ‘me’ out of land reform.” – PROF DAVID VENTER, INDEPENDENT SPECIALIST “Wine businesses need to proactively identify opportunities to turn change into profit.” – DR JOHAN VAN ZYL, FORMER SANLAM “South Africa has holes in its economic roof.” – ISAAC MATSHEGO, NEDBANK “The smaller harvest may bring good quality, lower alcohol wines.” – FRANCOIS VILJOEN, VINPRO “Take a good, hard look at your business and challenge the status quo!” – CHRISTO CONRADIE, VINPRO

The industry can grow the local wine market significantly by changing the way it talks to its own consumers. Although domestic wine sales have grown over the past two years the majority of South Africans find wine intimidating, exclusionary and the number of brands overwhelming. “Simplify wine and innovate the packaging to get South Africans to drink wine rather than other drinks,” The Moss Group director Nicky van Hille said.

HAVE THE GUTS TO CHANGE THE STATUS QUO

Equally important to enrolling new entrants and growing consumption, is finding ways to improve producer returns. On average only 15% of wine grape producers are currently profitable, while 55% are at breakeven or low-net farming income and 30% are farming at a loss. Producer cellars are also struggling to obtain wine prices above those needed to break even.

“Input costs are rising sharply, with income simply not keeping up,” VinPro wine cellar division manager Christo Conradie said. “Take a good, hard look at your business, identify those aspects that can improve, challenge the status quo and have the guts to change it!”

Following one of the hottest, driest seasons in years, a significantly smaller wine grape harvest can be expected in 2016. VinPro viticultural consultation service manager Francois Viljoen said the industry had had only 60% of its average winter rainfall in 2015 after which an El Niño effect had brought abnormal heat from October to mid-January. On the up side, lighter bunches and smaller berries may bring about excellent colour and flavour concentration. The VinPro 2030 Future Vineyards Project will experiment with new technology and cultivars to address water limitations and global warming.

SPEED UP POLICY CHANGES

Plagued by infrastructure constraints, labour problems, constrained credit markets and an inconsistent policy environment, the South African economy has stagnated over the past four years.

“Some fundamentals are not in place, which creates holes in South Africa’s economic roof when global storms hit,” Nedbank economist Isaac Matshego said. “The slow pace of policy amendments and their implementation creates uneasiness and hampers economic growth.”

This also rings true for land reform and transformation. Independent negotiations specialist Professor David Venter said the absence of a coherent national policy and positional bargaining approach for land reform has impeded progress. He proposed a model of principled negotiation as an alternative for land reform discussions. This would result in a “win more” solution for both parties as it is based on finding common interests to create value.

PLAN AHEAD TO PROFIT FROM CHANGE

“Change is universal and the wine industry is not unique in the challenges it faces,” former Sanlam CEO Dr Johan van Zyl said. “Wine businesses need to proactively identify opportunities to turn change into profit, then sharpen their business plans or develop new plans and take calculated risks.”

The industry can also only grow its market share and value if all role players work together, VinPro managing director Rico Basson said. “There are still too many wineries who fight for the same shelf space on their own, not realising the power that collective efforts can have on building Brand SA.”

With this in mind the South African wine and brandy industry has created Wine Industry Strategic Exercise (Wise), a strategic framework with specific targets for 2025. These include expansion and premiumisation of South African wines both locally and abroad, innovations in research and technology, speeding up transformation and closer collaboration with government, labour and civil society.

“The industry has a new hymn sheet: Let’s make it part of our day-to-day business, our board packs and think tanks,” Rico said.

For more information on Wise go to the new SA Wine and Brandy portal at www.winesouthafrica.info.

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