03 Feb 2016 SA’s wine industry urged to innovate

VinPro data shows 15% of wine grape producers are profitable, 55% are at break-even and 30% farming at a loss. Cellars struggle to obtain wine prices needed to break even.

SA’s nearly 100,000ha of vineyards generate about 3% of the world’s wine production.

Wine producers in the Western Cape, SA’s main wine-producing province, are facing a harsh season due to drought and heat. Early indications are that the harvest will be smaller this year, although VinPro predicts a higher quality.

Farmers in the province are also counting their losses after fires destroyed 3,000ha of vegetation and vineyards. Grapes were also contaminated with smoke. The Western Cape wine industry estimates that the fires resulted in R240 000/ha of vineyard lost.

Speaking at a conference organised by VinPro and Nedbank recently (21 January 2016 at CTICC), VinPro’s wine cellar division manager Christo Conradie said input costs were rising sharply, with income not keeping up.

VinPro MD, Rico Basson, said the industry could only grow its market share and value if industry members worked together. “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.”

Jane Robertson, category development director at Accolade Wines in the UK, said SA could make its wines more appealing by creating a “credible mid-tier”.

“Get the retail gatekeepers on your side and use native varietals such as Chenin Blanc and Pinotage as heroes to set your wines apart,” Robertson said.

Stop intimidating and overwhelming consumers

Nicky van Hille, director of Cape Town consulting firm The Moss Group, said the industry can grow the local wine market by changing the way it talks to consumers.

Local wine sales have grown by 9% in the year ending November 2015, to 377 million litres. “This is a step in the right direction; however the potential market of consumers older than 18 years is three times as big,” said Van Hille.

She alluded to the specific Brand SA local marketing project flowing from the Wine Industry Strategic Exercise (Wise), through which the industry aims to attract 1.2 million new consumers in South Africa and increase weekly consumption by one glass by 2025.

According to research done by The Moss Group and the Consumer Insight Agency, South Africans on average consume 22 beers, 8 spirits and 3 glasses of wine per week.

“These targets will be easily attainable and present a huge opportunity. We just need to get South Africans excited about our products and replace those beers and spirits in their hands with wine,” Van Hille said.

Many consumers are trying to buy into the category – wineries just aren’t making it easy.

The majority of South Africans find wine intimidating, complex and exclusionary. The cultivars are difficult to pronounce, there is a perception that consumers need to be knowledgeable about wine to enjoy it, and the massive amount of brands on the shelf are overwhelming.

“Simplify wine and innovate packaging to get South Africans to drink it compared to other drinks,” she said.

Equally important to enrolling new entrants and growing consumption itself, is finding ways to improve producer returns. Premiumisation of the wine category is a third outcome of the Brand SA strategy.

According to The Moss Group’s findings, producers only make around R3 (6%) profit from every R50 bottle of wine sold. Government receives 18% via taxes, 10% goes towards product cost, 9% distribution and overheads and 8% marketing and sales.

“Take a good look at how a further 26% spent on trade terms and margin is working for you – is it putting your brand in the consumer’s face? And make sure that the 20% packaging spend goes towards innovating packaging to let your wine stand out from a wall of similar bottles,” Van Hille reiterated.

She urged the industry to adopt the Brand SA strategy into their business models and collaborate closely. “Growing share of the category is a win-win situation for all role-players in the wine value-chain – so let’s work together to make it happen!”

Source: BDLive.co.za, www.vinpro.co.za

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