How are South African wines selling overseas?

Monday, 8 June, 2009
Kim Maxwell
It used to be about medal stickers, but 2009 could be the year of pavement pounding to ride the recession out, says Kim Maxwell.
We're forever hearing that award stickers sell bottles on retail shelves. Yet with a global downswing, wines require more than an award sticker to sell. South African wine certainly hasn't lagged in the metal-clinching action, with nine golds for South Africa at the London Wine Challenge, and eleven regional trophies in Decanter's World Wine Awards.

Of interest is that Nederburg, Kleine Zalze and Tokara performed well in both the international Challenge and in South Africa's Old Mutual Trophy Wine Show (awards early June), although not necessarily with the same wines.
Where else can wine sales be encouraged? Restaurants are suffering globally; so wines positioned on high-end wine lists instead aren't a sure bet either. Stories are trickling in about international investors and chefs offloading under-performing fine dining restaurants to their mates to cushion hefty overheads. Some Cape restaurants aren't in great shape either - all the more reason to support our chefs and take advantage of value-orientated winter specials. For an opportunity to sample outstanding produce and expert skill without the seasonal tourist mark-ups, ask about winter specials at wine-inclined venues such as the Roundhouse, Constantia Uitsig, Buitenverwachting, Terroir and Catharina's.

M'Hudi Wines is one relatively new wine venture offering cellar door visitors a wine stop en route to lunch. This cosmopolitan family recently opened a tasting room on their Koelenhof property. If you haven't come across them, former professor Diale Rangaka left urban life in the North West to buy a farm. After rejecting 21 farms, he changed tack from farming cattle to supplying grapes and bought the 22nd one. A wine brand came later, thanks to professional input from neighbours at Villiera. Rangaka roped in his family who left their careers, mortgaged homes and applied their entrepreneurial skills.
Ex-teacher and matriarch Malmsey Rangaka initially thought they'd be targeting black South Africans, but their dry wine styles didn't appeal to novice drinkers. A couple of years on, 90 percent of M'Hudi's wines sell overseas - a small contingent in Switzerland and Sweden, and 70 percent is exported to the USA. Thanks to a meeting with a US distributor looking specifically for black-owned African brands, the wines are available in 42 US states. M'Hudi also has listings on Marks & Spencer shelves in the UK. The family hasn't just sat back - brothers Sanyane and Tsêliso concentrate on online wine sales and Gauteng retail respectively, while Diale, Malmsey and sister Lebo handle the tasting room, marketing and international trade visits. Lebo also spent five weeks with Marks & Spencer during 2008, learning about British wine consumers.

Established boutique winery Vergelegen trades wines at the upper end of the price spectrum, and continued sales happen through relationship building with their customers. Half of Vergelegen's wine consumers are in South Africa. The winery doesn't advertise much in South Africa or overseas markets, and attending trade fairs is more about presenting a public face than doing real business. According to marketing man Eddie Turner, their trips involve a lot of pavement pounding with distributors in the UK and USA, visiting wine shops and restaurants to "remind them what we look like".

Turner is hard-pressed to predict UK trends for 2009. While wines in lower UK pricepoints are flying, he reckons suppliers will suffer on the exchange rate ultimately. UK consumers are buying down, and Vergelegen's cheapest UK pricepoint is £8.99. "So if trading down from £20 on a Napa or Bordeaux, South Africa still offers good value at £10 or £15," he suggests. But these are tricky times, the restaurant trade in European countries no longer a reliable bet to offload top-end wines. Turner says the difference is noticeable in Benelux countries where corporate dining has been reigned in.
Andre Shearer, CEO of Cape Classics in New York, is focused on fine wine imports of 19 South African boutique brands in the USA. He's noticed a very direct change in wine trends in the 42 states they operate in, synchronous with US consumer worries about paying mortgages and holding jobs. Sales of the under US$10 category are growing dramatically, while wines in the US$10 to $15 (such as Excelsior and Brampton) are in a good market space and holding steady. Yet wine consumers previously spending $20 to $25 on wines are now dropping to the $10 or $15 category.
The reasons? "In the under $10 bracket, regionality used to be a big deal in major cities globally, whether it was wines from New Zealand, Argentina or California. But that's changed since the recession: buyers are looking at value and they don't really care if it's from South Africa or New Zealand," he explains. Cape Classic's Indaba brand (under $10 price range) has benefited, doubling in production from 2008 to 2009. Wines in the $10 to $15 range are generally fine. But Shearer warns that even established brands need to work harder. Mulderbosch Sauvignon Blanc, "easily SA's best-known Sauvignon in the USA", has seen a lot more competition in the $15 to $20 category than 12 months ago, for instance.

Wines in the price category of De Toren have a different predicament: they're expensive. And while a consumer should logically downgrade from $100 to a $45 De Toren Fusion V, this doesn't necessarily happen. Wines such as Kanonkop Paul Sauer, Thelema Cabernet Sauvignon, Rustenberg Peter Barlow or John X Merriman all have this challenge. Shearer draws a direct link with decreased wine spending at upmarket restaurants, citing dramatic stock price dips at restaurant groups such as Ruth's Chris Steakhouse, which has over 120 US "fine dining" steak outlets.

"Ruth's Chris Steakhouse stock price has dropped massively because people going out and buying $50 steaks have massively changed their spending habits. So our wines are not selling as often in those categories," he explains. Ruth's Chris Steakhouse has one of the USA's largest fine wine programmes.

We know it's about riding out the times, but diversifying your wine range across a number of overseas and local markets is another smart idea for small companies focused on traditional markets. Eddie Turner says Dubai is Vergelegen's fourth-biggest market, with fine wines mostly purchased by corporate drinkers and hotels. Will the good times continue as stories trickle in about how the world's largest building site could become the largest airport carpark for abandoned cars of retrenched construction workers?

Shearer's advice to producers is that Americans are buying more prudently, and suppliers are not carrying stock for the sake of it. It's not that higher priced or even mid-priced South African wines aren't selling. But rather that a lot more pavement pounding and marketing muscle will be required by producers hoping to achieve those sales during 2009.
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The Rangaka family who owns M'Hudi Wines. M'Hudi Wines currenly export 90% of their wines.
The Rangaka family who owns M'Hudi Wines. M'Hudi Wines currenly export 90% of their wines.

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