KWV’s centenary is a good time to look at how the domestic wine trade has developed since the abolition of the quota system. Today, producers have several options when it comes to marketing their bulk wine locally.
KWV was established at a time of crisis in the wine industry. At the turn of the 20th century, producers were struggling to survive after a period of low prices, tight competition and great economic uncertainty. In 1918 the national cooperative was formed to regulate the South African wine trade and set minimum prices, creating much-needed stability. KWV maintained these controls until 1992, when the quota system was abolished. Since then wine prices have been determined by the free market, with KWV competing on equal footing with other wine producers.
Most cellars have existing and long-term relationships along the value chain. These relationships have been built over many years and guide their production and help them acquire or offload excess product. But beyond existing contracts, wineries that want to trade excess or unbranded wine on the domestic market have until recently had only two traditional platforms: trading floors and private brokers. Now a third option – online direct trading – is set to revitalise the market.
Rita Schietekat runs Wine on Line, a broker for bulk and bottled wines. “Wine on Line keeps a record of bulk wines available on the market,” she says. “Often it’s easier to ask a broker for help in the search process. It takes the pressure off the winemaker and the broker knows what the current prices are.”
As a full-time broker, Rita is constantly in contact with numerous buyers and sellers and always has an ear to the ground so she can provide expert advice about current market conditions. Sellers benefit from her expertise and gladly pay her a reasonable commission for her services.
Rita finds wine on the market that meets the buyer’s demand and obtains samples for the winemaker to taste and analyse. If they’re happy, a contract is drawn up – another area where her expertise may be called upon. She facilitates the process up to delivery and payment.
Rita doesn’t see other platforms as a threat to her business model. “Wine on Line has been going for 16 years. My service is personal and completely transparent, and the people I do business with know and trust what I do.”
To maximise potential profits, primary producers can also make use of prearranged trade events such as the International Bulk Wine Exchange, Trade and Auction (Ibeta), established in 2014 by Philip Jonker and Steyn Fullard of Weltevrede. This event has the advantage of allowing immediate face-to-face contact between buyers and sellers while providing them with a transparent, efficient experience and high level of satisfaction. Samples are judged and rated before going into a competitive bidding process.
The auction format considerably speeds up the normal trading process, and all relevant information for decision-making is close at hand and verified. Bulk wine auctions are not without their critics, who argue the events encourage unhealthy business practices and drive down already unsustainable prices – a stigma Ibeta wants to change (see wineland.co.za/big-challenges-for-bulk-industry/).
Even so, the hosts take their cut, and organised events often can’t meet the unforeseen needs of buyers and sellers which prompt them to look for new partners.
In 2016 Tielman Roos Jr of Mooiplaas, Stellenbosch, found himself in a predicament. The estate urgently needed wine to fulfil an international order, but Tielman found the conventional procuring processes painfully cumbersome. There has to be a better way, he thought.
As it turned out, he was reading the thoughts of Vinimark financial manager James Schuster. They had independently realised the need for an online wine exchange in South Africa and set out – in their personal capacities – to make it a reality. Their enquiries led them to each other, and after meeting they decided to work together. After intensive research and design, the South African Wine Exchange (sawex.co.za) was finally launched in March this year.
SAWEX takes whole process of bulk trading online. Cellars can upload their available wines to the website, where buyers can search the listings. Registered users can perform every step of the transaction, from communicating through an instant messaging system to requesting samples and making an offer via the website. SAWEX is able to verify wines listed with Sawis to provide users with peace of mind. Users can remain anonymous throughout the entire process and SAWEX facilitates the exchange of samples to protect users’ anonymity.
It’s easy to see the platform’s advantages. It provides efficiency, discoverability, scalability and confidence, and is intuitive to use. But one feature makes the system stand out: it’s free from start to finish. No fees are levied on transactions at this stage as the focus is on getting as many people trading on the website as possible. “We want the system to benefit the industry,” Tielman explains. He and James plan to expand and improve the system as it matures.
A free market allows the trade of goods according to demand through various channels. The rise of multisided platforms like SAWEX and entrepreneurs like James and Tielman are important signs of health which strengthens the industry to face new challenges.