SA wine industry faces challenge of rising global wine glut
Thursday, 1 April, 2004
Lynn Bolin
Exhibiting an ‘enthusiasm for the future’
The current large surplus of wine in the international market, already posing problems for wine producers worldwide, is expected to continue to rise by another 50% over the next five years, thus making conditions for smaller producers such as South Africa even more difficult, according to local wine industry expert Michael Fridjhon. Despite this challenge, however, Fridjhon is optimistic about the industry’s future over the next five years.
Addressing participants in a special seminar on the future of the South African wine industry at the Cape Wine 2004 exhibition, Fridjhon said that ‘Old World’ producers such as France and Italy would continue to dominate the surplus, while that coming from ‘New World’ producers like South Africa would rise only slightly. However, the South African wine industry would still face keen competition and would have to redouble its efforts to market and differentiate its wines in both Old and New World markets.
Fridjhon believes the South African wine industry is currently at a crossroads in determining the path for its future - deciding between the ‘Australian’ route of creating mass-market global brands with reliable quality and a fixed brand image, but at the expense of uniqueness and authenticity; or of opting to develop smaller, terroir-specific wine brands reflecting the country’s uniqueness and authenticity.
‘South Africa does not yet have many big international brands, and so it is not condemned to follow Australia,’ he observed. ‘I believe South Africa has a key role to play in the area of authenticity of place - it has long had a system for protection of site-specific wines.
‘South African wines can definitely reflect a ‘taste of place’, and can have an advantage in this area.’
At the same time, he said he believes that local wines can also differentiate themselves in the tough international market through their identification with Africa. The country also has some obvious advantages in its fight to gain market share, such as a favourable climate, ample labour, advanced technology and an, ‘enthusiasm for the future’ in the wine industry that were key elements for its future.
On the strong rand, Fridjhon commented that, although previously the local industry had relied on the depreciation of the currency for its marketing - making discounting easy - it would now have to accept that the rand ‘would no longer do its marketing for it’. The industry would instead have to ensure that its wines could compete at higher price points by over-delivering on consumer expectations as the best way to build Brand South Africa, he said.
According to Wendy Luhabe, Chairperson of South Africa’s International Marketing Council, recent research had shown that Brand South Africa was valued at approximately US$55 billion, making it the fourth most valuable brand in the world after Coca-Cola, Microsoft and IBM. The brand’s potential for greatness had only been marginally tapped in the past, she told the seminar, and now was focused on getting maximum value-added from human capital.
The 2003 World Competitiveness Report had ranked South Africa fourteenth overall out of 30 similar-sized economies, showing a significant improvement in both business and government efficiency, she added.
‘The wine industry has grown beyond our expectations and we regard South African wines as ambassadors and amongst the country’s greatest assets,’ she concluded.
This seminar was part of the biennial Cape Wine Show – Cape Wine 2004, currently taking place at Cape Town’s International Conference Centre. The show will continue until Friday 2nd April and is open to the public on the last two days.