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Brandy n Coke

Brandy’s SA decline and what to do about it

Many black South Africans steer clear of brandy in favour of imported whisky. Increasingly their Afrikaans-speaking counterparts are following suit.

“Brandewyn” was first distilled on a Dutch ship in Cape Town’s harbour in 1672 and with the Cape vineyards providing the base product, became the spirit of choice for white South Africans for the next 300 years.

But it has fallen to 28% of the R19.4-billion annual spirits market from more than half in 1994, the year Nelson Mandela became president, and the industry is now angling for state support.

Whisky has climbed to more than 40% of spirits sales in 2014, capturing most of the premium market as black middle-class drinkers buy expensive bottles of single malt to share in night clubs.

Spirit consumption fell across the board in a 2009 recession but brandy never recovered as global drinks groups, Diageo and Pernod-Ricard, took advantage of a European Union free trade deal that ended whisky import duties in 2012.

“The brandy guys were caught napping. They really allowed the whisky companies the space,” said Mike Mabasa, head of corporate relations at Diageo unit Brandhouse.

Brandy makers have since tried to go up-market with adverts featuring Hollywood stars Jamie Foxx and Idris Elba but are struggling to shake off the image of burly white men mixing local brands such as Klipdrift or KWV with coca-cola.

Last year, sales fell to a three-decade low of 33-million litres.

With overall per capita alcohol consumption dropping in South Africa, the brandy industry knows future growth is unlikely to come from new drinkers or existing ones increasing their intake.

“Brandy growth can only be achieved by restoring market share and premium-ising,” said Christelle Reade-Jahn, director of the South African Brandy Foundation.

The industry argues that brandy’s falling market share has hurt wine farmers and communities in Western Cape and Northern Cape provinces and it has asked for tax breaks of up to R200-million a year.

The treasury declined to comment although it noted the industry’s view in February’s budget. Brandy’s rivals have made clear they would put up a fight, however.

“The whisky industry would maintain that the playing field should be level and giving brandy any tax or excise breaks would distort it,” said Dirk Conradie, head of corporate affairs at Pernod Ricard’s South African unit.

Instead, brandy’s salvation may lie overseas.

At the moment, only 8% of South Africa’s brandy is exported, most of that to a few US cities and pockets of Europe, making expansion into foreign markets a possibility, Reade-Jahn said.

India, the world’s largest brandy consumer, and the growing premium markets of Nigeria, Ghana and Angola beckon, she said.

The strategy includes a plan to assign the spirit its own Geographic Indicator, much in the way that the French brandy Cognac has taken the name of that region. A catchy name would be required.

Source: Reuters