Coveted by sailors and adventurers of old for its ability to last on long voyages, soothe on cold nights, and be used as a key ingredients in many home remedies. This burnt wine is as ingrained in our cultural heritage as much as the wine industry itself.
Distilling is a craft perfected by South Africans, from the legends in the industry such as KWV and Van Ryn's to small batch distillers making everything from witblits, gin, tonics, brandy, grappa, and more. South Africa has been part of the IWSC competition for the past 26 years. During that time, South Africa has walked away with the brandy trophy 17 times, to the annoyance of Cognac.
We much malign the control that the KWV monopoly had on the development of our wine industry, but we must never assume that the people in charge were idiots, although some might argue misguidedly. There is a reason that they chose distilling to handle excess wine and grapes in the South African sector.
Although you can see where it went off the rails. With distillation making up more than 70% of all wine produced in South Africa from 1976 to 1984, giving way to the folklore of underground lakes full of brandy under KWV. No wonder the people of Paarl always seem to be in better spirits than the rest of us. Pun intended.
Before the craziness set in due to the Apartheid regime’s obsession with control, nationalisation and outside sanctions, the powers that were reckoned distilling is the perfect answer to control the wine market from excess wine South Africa produced, and let’s be honest, in those days not always of the best quality.
A decline in alcohol consumption has been a long-term trend with consumers with a move to consume less alcohol, but with a increased monetary value of the alcohol consumed. A focus group of upper middle-class consumers that drink alcohol regularly were asked about their preferred drink. They identified wine 43%, gin 33% and brandy 7% of the time their preferred drink. Although a small, focussed target group these are the consumers we must attract and keep if we want successful premiumisation of the wine industry. It shows that the wine industry’s distilling arm will play a big role in achieving this.
Australian wine production is very closely correlated with the South African wine industry production. This is because these two countries compete in a lot of the same markets, so changes in these markets affect South Africa and Australia relatively the same and we can monitor the effects that trade fluctuations have on these two countries. Australian production variance is up to 20% of production, while for South Africa it never varies more than 8%. The smaller fluctuation for South Africa can be attributed to our strong distilling industry. Something that is sorely lacking in the Australian wine industry. With the upheaval of the trade sanctions placed on Australian wine by the Chinese government, I bet the Australians would not mind a big brandy distillery or two at the moment.
South Africa is currently distilling about 12-13% of its wine production. This is down from an average of between 20-23% where it stabilized during the early 1990’s until the economic crises in 2008. Most of the current distilling is being supported by the huge gin-boom that started in 2015. The long-term sustainability of this boom is still in question as we are seeing a slowdown in gin production.
The advantages of having a strong distilling industry to support your wine industry is that it is used to limit and control bulk stock in the industry by taking away the lowest value bulk wine stock and ensuring that prices do not drop too much with over supply. The core idea that the old timey KWV was working with. With 50% of wine sold for under R30 a litre and only 18% sold for <R48 a litre, this is an important function of the distilling industry for wine production.
This feeds into the next advantage that distilling has on your wine product. It takes these lower valued wines and adds significant value to them. Turning what would have been a very low profit margin product into something considered a luxury product with much larger profit margins.
Distillate is also less time sensitive and, if the capacity is available, can be stored for years without determent to the quality of the product. In the case of brandy, storage also increases the quality.
Finally, with the bottleneck and increased cost of international trade and with few short- to medium term solutions seemingly being on the table, having a higher valued product that takes up a lot less physical space also helps ease the burden on exports to keep the industry functioning.
With a compound annual growth rate of -3% from 2013 to 2019 for wine, we must not and cannot afford to neglect this often unseen and yet integral part of our wine industry.
Expansion and focus on our distilling industry can help with the premiumization efforts that the wine industry is trying to undertake and gives us an ace up our sleeves not available to a lot of our competitors.