A potential looming giant, by Edo Heyns

Wednesday, 11 December, 2013
Edo Heyns, WineLand Magazine
The Dark Continent is seemingly being polished to become a shiny, black pearl.

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Although this developing market is a far cry from being recognised for its wine drinking culture, many wineries would much rather take on the challenge of educating and often adapting to a generation of brand new African wine drinkers, than battling with saturated, and often overcrowded, traditional markets.

The past decade has seen greater stability, sound macro economic policies, improved terms of trade and blossoming African partnerships with emerging economies. This according to a report by the United Nation’s Economic Commission for Africa, which states that African nations are freer than ever to choose their own development paths. And, based on wine sales, choose their own drinks.

While Chinese investment and exports of primary resources have undoubtedly played a significant role in the sudden vibrancy about the once conveniently avoided continent, African economies have generally diversified and a growing middle class, notably aspiring to be associated with sophisticated brands and products, is difficult to ignore.

The wine world has certainly taken note, markedly illustrated by local offices for global giants like Concha y Toro and Gallo among the Cape’s own wineries. Often regarded as the gateway to Africa, the country at the looming giant’s southern tip potentially has a valuable opportunity to lead the charge.

Timing could also not have been better. While wine sales are decreasing in traditionally unquenchable markets, our nemesis on the sports field and wine shelves, Australia, has seemingly decided that its salvation is 'Made in China'.

Wosa’s 100% increase in its budget allocation for Africa in 2014, compared to 2013, suggests confidence and hope in there surgence of its neighbours and beyond. South Africa’s trade agreements, established networks, political connections and general Africanness could be dealbreaker advantages.

The man tasked with leveraging these advantages, Wosa’smanager for the African continent, Matome Mbatha, has seen markets opening since he took this position in 2009, but he is equally aware of the fact that Africa is neither an easy nut to crack, nor a potential dumping ground for inferior products.

A jam-packed information session about the African market– presented at Backsberg earlier this year – indicated that producers are interested in Africa and are making use of the platforms and information that Wosa offered.

African markets are not homogeneous in size, language orregulation and are at different stages of market evolution. Matome stresses that the wine industry must therefore develop fit-for-market non-traditional marketing strategies.

Wosa has identified key markets within the safari continent, based on research that was conducted in 2013. These include the current top three export destinations – Angola, Nigeria and Kenya– followed by other markets that offer the greatest potential for growth, notably Ghana, Uganda, Tanzania and Cameroon.

Angola is the ninth largest importer of packaged wine from South Africa with 5.4 million litres of packaged wine exported in 2012, up 26% on 2011. Sparkling wine – mostly JC le Roux – is the biggest category at 4.4 million litres exported during this period.

Currently the second largest market for South African wine, Nigerian exports have increased by 21% for the first nine monthsof 2013, with bubbly sales also seeing an increase of 68% in 2012 on the previous year.

“Moet & Chandon sells more Champagne in Lagos, Nigeria, than in the rest of the continent – including South Africa. There is huge potential for premium brands to establish themselves in a market that aspires to sophistication and will spend money on what they drink, drive and wear to achieve this,” tells Matome.

Wosa’s strategy is to position South Africa as a premiumplayer and this is reflected in the glitzy events that they host in Angola, Nigeria and Uganda. Matome, however, affirms that products at lower price points – including wines that are mixed with soft drinks – are also very much in demand.

He adds that producers should not be misguided into thinking that South Africa has the luxury of first mover advantages in an uncontested market. Portuguese wines are well established in its former colony, Angola, while the French and Italians – and more recently the New World Chileans – have also jumped at the opportunity.

Africans are also very unlikely to select wines purely based on the fact that they are from an Africa brother. Basic business principles prevail and Matome stresses that competitive pricing, client service and basic good practice are non-negotiable.

A South African competitive advantage could, however, lie inthe networks, distribution channels and connections of other pioneering South African companies, who have already made significant inroads in Africa. According to Matome, Shoprite is the leader of the pack, now in 16 countries in Africa‚ with 192 stores.

These fore runners already stock South African products in their local stores and offer an uncomplicated channel through which South African wines are exported to several African nations. There is also a lesson to learn in observing in which countries are flourishing, as well as in which markets they are investing.

Partnerships with South African companies are also key in the success of the South African Wine Festival in Uganda. With the backing of significant sponsors like South African Airways, MTN and Stanbic, this was indeed a proudly South African affair.

Classy in Kampala
There is nothing quite like arriving at an African airport. Entebbe greeted representatives of 24 South African wineries with tropical humidity and smiles, after flying 45 minutes over Lake Victoria – the world’s second largest body of freshwater. Remarkably, the people of the land once ruled by the ironfist of dictator Idi Amin are regarded as some of the friendliest on the continent.

The hour-long trip from Entebbe to Uganda’s capital, Kampala,was an insightful paradox: While the road-roulette traffic made for some adrenaline rushes and the road itself was challenging, the roadside scenery was marked by development and investment all along the way – a Ugandan version of driving from OR Tamboto Pretoria. It was clear from the start that doing business here is not exactly a walk in the park, but the obvious growth and particularly the future prospects make it all worthwhile – which pretty much also applies to the whole continent.

The mix of participants was a nice representation of what South Africa has to offer – including smaller players like Oldenberg and Raats Family Vineyards and empowerment brands Remogo, as well as larger companies, like Distell, Constellation, Origin Wines and DGB. Exposure to Africa was just as varied, with newbie travellers staring wide-eyed at the perceived chaos, while others casually chat about the last time they were in Lagos, or their next planned trip to Nairobi.

The majority of the wineries – 18 in total – were sponsored by the Department of Trade and Industry, while those which, due to the large scale of the businesses, did not qualify for supplementary funding, received discounts on their flights and accommodation.

Extremely tight security with the wine bus’s arrival at the Serena Hotel was partly a result of the Kenya West Gate Mall terror attack, with this Western-looking crowd of forbidden tipple carrying travellers feared to be a particularly attractive target for the Islam extremist group, Al Shabaab.

After being cleared, it was back to business, with a planning session on the night before the festival. Matome explained that South African Airways presented its first wine show in Kampalain 2010, when only three companies were represented. The following year four wineries presented their products, after which Wosa joined as partners in the event, which saw winery participation grow to 10 in 2012 and 24 this year.

The more than 350 guests that attended the glamorous affair were treated to finger food, vibey music and of course a wide selection of wines to choose from. While the wine makers and marketers were doing their thing, I had the opportunity to stroll about and chat to the guests, who included media, trade and associatesof the different sponsors.

Connecting with these consumers was a definitely a highlight of the trip, with the general excitement and aspiration to learn more about wine contrasting with the snobbery that is often associated with Western and often even South African wine shows.

The average Ugandan wine drinker was only recently introduced to wines and sparkling wines and sweeter styles are often the first introduction to the world of wine – which boded well for Uniwines’ Moscato quaffers and the numerous sweeter rosés which were on offer.

Martha Ahumuza and Beatrice Ongode, both involved in Ugandan television, explained that wine is very often a celebratory drink, drunk on special occasions. They said that the very rich will drink wine on a more regular basis, adding that red wine and Champagne is particularly regarded as a status symbol, associated with sophistication.

Advocate Anthony Katamba again showed the role that tourism can play in wine marketing. He coincidently went on a wine tour in Constantia while visiting Cape Town for a golf tour and has been ordering a case of South African wine monthly ever since. And these are often the premium status symbols.

Feedback from participating wineries included that there should be a greater emphasis on educating consumers, with the suggestions of more formal seminars. Others argued that the show should span two days, with a specific time slot allocated solely to trade and distributors. Although the potential increase in wine sales will ultimately determine whether the show was a success, it was certainly a showcase of which the wine industry and sponsors can be proud.

Ever enthusiastic, Matome said that, as the distribution centre of east Africa, Kenya was next. “Market activation is key. We need these African nations to grow with the South African wine industry and events like these are our way of sending out ambassadors for South African wine.”

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