Consider the terminology we use for blends: Bordeaux blends, Rhône blends, Bordeaux whites, Burgundy-style, and so on. These French wines have set the benchmark against which all other wines made from French cultivars are measured.
With the rise of more discerning consumers and the growth of origin-based food products, a market has emerged for products that evoke a sense of place and authenticity.
In terms of wine, people are increasingly willing to pay for the terroir of New World wine-producing regions. This trend aligns with what we observe among younger wine consumers: despite drinking less wine than older consumers, they are willing to pay a premium on the occasions when they do drink wine.
A stellar example of an industry that has seized this opportunity is the Greek wine industry. Greece, long overlooked as a wine-producing region, has over the past decade increased the value of its wines per bottle by between 40-100% and grown its wine exports by more than 150%. They achieved this by focusing on their unique terroir and over 150 indigenous wine grape varieties. They have elevated varieties such as Assyrtiko from near obscurity to one of the world's newest wine trends.
In comparison, South Africa's local cultivars have seen a decline over the past decade, with hectares of Pinotage (-8.5%), Nouvelle (-9.3%), Chenel (-53.7%), Therona (-77.2%), Grachen (-24.3%), and Weldra (-91.5%) decreasing. The one positive exception is Roobernet, which has grown by 110%. Unfortunately, this growth is mostly in the bulk wine sector and is not marketed as a varietal wine, but it does create opportunities for brand-building around this unique cultivar.
Despite success stories like Greece's marketing of their unique cultivars, this remains the exception, as seen in South Africa. Over the last two decades, there has been a homogenisation of the wine industry, with varietal composition between countries increasingly resembling one another (according to Kym Anderson). This is largely due to the expansion of globalisation and international trade. Currently, about 50% of all vineyards worldwide are planted with traditionally French grape varieties, the so-called noble cultivars, up from 15% in 1960. While this homogenisation may have made trade easier, it has also caused reduced value differentiation between wine-producing countries. They now compete in the same commodity market, much like grain or any other agricultural commodity.
Although this is our bread and butter, we can see from the table below that there is a price premium of 8.5% for red grapes and 39.4% for white grapes for producers who manage to create a market for the more obscure cultivars in South Africa.
When looking at wine markets, they almost form an hourglass shape with large volumes of entry-level wines, a smaller middle market, and then growth again in the premium category. The cultivar choices between the base and top also differ, with entry-level dominated by the classic French noble cultivars and greater variation in the premium category. We must keep this in mind as the South African wine market continues its premiumisation strategy.
The challenge for New World wine producers lies in leveraging the unique aspects of their terroir and indigenous grape varieties to carve out a distinct identity in a market dominated by French grape varieties. The opportunities are there for those who can tap into this growing consumer market by offering wines that tell a unique story.
Source: SAWIS