Recent Nielsen research, commissioned by SAWIS, examined how the changing alcoholic beverage landscape has affected the wine market. The information will empower brands and retailers wanting to make up for lost time and revenue.
The various alcohol bans South Africa experienced in 2020 and 2021, amounting to over 200 lost days of trade, has left a mark on the alcohol industry. What was once a predictable, growing and stable industry has become nervous, unpredictable and complex. NielsenIQ, which analyses monthly data from retailers and independent stores around the country, reports that 83% of consumers have changed their buying and consumption patterns. The market research company presented its findings in an online seminar to industry stakeholders.
“Only four of the top ten brands saw positive growth in 2021, measured against 2019,” says Jon-Jon Emary, retail intelligence strategy lead for NielsenIQ in South Africa. 4th Street and Robertson Winery was down, but Paarl Perlé realised almost 50% growth, with Autumn Harvest and Drostdy Hof also managing to show some growth. “Overmeer was a clear winner, jumping seven places in the biggest brands in South Africa with 29.7% growth.”
Drivers of growth
“With wine inflation at around 6.9%, people are spending more per volume of wine than before,” Jon-Jon says. “People are buying bigger packs, whether that’s cases or 5 L boxes, or they’ve moved from 750 ml to 1 L or 2 L boxes, this significant shift in pack sizes contribute to positive value. But the biggest driver, adding R1.8b of additional sales to the category, has come from demand for unfortified wines.”
According to Nielsen, 2021 was the year of the box. While bottled wine sales declines by 15% over 2019, box wines grew by 3% despite all the challenges. It wasn’t just from consumers looking for larger pack sizes that are easy to store and use during bans; there was also a lot of innovation, says Jon-Jon. “The 33 new brands that have launched in boxed wine in 2021 added R42 million to box wine sales [over 2019], while 61 existing brands (98% of the category) only contributed 8.8 million.”
Another driver has been alcohol-free wine, but this trend seems to have been mostly driven by circumstances. “Unlike the beer category, wine sales returned to prior levels outside the ban periods,” says Jon-Jon.
Some brands in the Sparkling wine category were also able to perform under pressure. Four of the top 10 brands have gained rankings since 2019, but the Annabelle Cuvee Rosé outpaced all its competition. This KWV brand jumped 60 places since 2019 to seventh position, growing more than 100%. Luxury beverage brand House of Bonang was also able to grow by 86% since it launched in 2019.
Keys to success
Adapt. Jon-Jon advises producers to keep a close eye on changing consumer needs. “We need to understand these evolving behaviours, and adapt to emerging trends. We can see where people are moving to, and by really understanding what the consumer is buying we can leverage those insights and tailor our solutions to them.”
The big picture. “The liquor industry is so broad with so many touch points, from online to brick and mortar and omnichannels to formal and informal markets, that it’s important to see the understand the total picture to be able to make informed decisions.”
Analyse. “It’s critical to analyse everything. Know your pricing and price elasticity, and how your products adapt to promotion and price change,” says Jon-Jon. “With inflation as it is, consumers will continue to be under pressure for the foreseeable future with growth only returning to pre-Covid levels in 2024. That means it’s critical to analyse your portfolio, and make sure your range is correct for that market and that your route to market is optimal to unpack and leverage changed consumer states.”
Nielsen shows South African shoppers are employing various coping mechanisms to ease pressure on their finances. Firstly, they’re looking for more value. That means products that fit their wallet and lifestyle better. Premium boxed wines such as the new Woolworths range is one example. They’re also focusing on brands they know and trust. The good news is that consumers want to take their wine experiences home.
If you take care of your customers when they need you, they’ll take care of you when you need them.
* Registered members can access NielsenIQ’s full domestic report at SAWIS.