It’s been four years since Wine Business International took a close look at the top players in the South African wine market. While at first glance it seemed that not many changes could have taken place over that brief period, after a little thoughtful analysis was applied to the wider category – wines, spirits, the local market, and international trading activity – a surprisingly different picture began to emerge. From gradual shifts to seismic transformations, the industry in 2016 is a vastly different beast from the one of four years ago.
Much of this has been the result of the marked improvement in the quality of what is available at the top end of the wine market, together with the change of profile of Cape wine internationally – the result of a genuine recalibration in terms of performance. Wine writers everywhere are describing South Africa as the most dynamic/exciting wine-producing country in the world. This, in turn, has led to greater visibility for producers in wine stores, restaurants, and in the international wine press. Coupled to this has been the downward spiral of the rand. In 2012, R10 bought €1.00 ($1.12). Today you would need R16 – and that’s a marked improvement on the R18 you would have had to lay out a few months ago. For producers exporting at fixed hard currency price points this has been an extraordinary bonanza, providing them with unexpected extra income to invest in marketing.
It is also important to remember that South Africa is a country divided – geographically, racially, politically, and along class lines. The two major economic hubs (the Western Cape – which includes Cape Town – and Gauteng – which comprises Johannesburg and Pretoria) are 1,500 km apart. The wine industry produces in the Cape, but sells less than 25% of its production there. Only 6% of the population pays income tax (94% earn too little to fall within the tax net), of which 42% of the income tax collected comes from Gauteng residents, and only 15% from the Western Cape. So to the extent that the tax base reflects the location of purchasing power, it is clear that the biggest buyers of Cape wine live a great distance away from the region of production. It is also clear that the majority of the population can never exert much influence on purchasing patterns: Changes in who controls what segments of the industry occur in what is in effect a tiny but massively active hot-house.
Major wholesaler/distributor
Over this period, nothing could have happened to dislodge the primacy of Distell, comfortably the country’s largest wine and spirits producer and wholesaler. With over 60% of the domestic market directly under its control, there was never a likelihood that any of the other players would undermine the sheer commercial force of the company. In the past four years, Distell has seen the appointment of a new CEO, Richard Rushton, which has led to a significant streamlining of the business, yielding a marked improvement in profitability. Under his watch (2013 to 2016) turnovers have increased from R15.9bn to R21.5bn, and operating profits from R1.1bn to R1.6bn. On this basis, Distell is the indisputable leader in this sector of the market. However, it is worth noting that wine now accounts for less than 25% of the group’s business and the shrinking local brandy market (of which Distell is the dominant player) has taken its toll on the company’s spirits business. Overall, ciders and RTDs have provided much of the recent growth. Two of its competitors have also expanded and shown resilience in difficult trading conditions. DGB remains the only other all-round major player in this segment, with strong growth in its wine brands and a recent move into craft beer production.
Meridian Wine Merchants has increased its presence in the fine wine distribution business and now represents a majority of the powerhouse brands. It too has made a move into the craft beer market and has acquired an interest in a successful gin business.
Sommelier
At the turn of the century there was no one working in the South African restaurant industry who was anything more than a glorified wine waiter, and the term “sommelier” was hardly in usage. The growth of the restaurant scene in the Cape – a feature of the high percentage of international visitors spending time in the region – saw the first real commitment by restaurateurs to bring properly trained wine service into their establishments. Then the Saxon Hotel in Johannesburg, the discreet retreat of international celebrity guests, developed its own sommelier training programme, drawing on the results of competitions sponsored by Bollinger and Riedel, and more recently, by Wines of South Africa. The fruit of these various projects is now everywhere to be seen, with Gareth Ferreira, whose career began at the Saxon, winning the 2016 Ruinart Challenge while working as assistant head sommelier at 67 Pall Mall in London and finishing in the top 15 at the Sommelier du Monde Competition in Mendoza a few months later.
However, with Ferreira no longer a resident in South Africa, the problem of determining who is the most influential sommelier in the country becomes one of looking at a plethora of possible candidates and deciding whose position carries the most authority. Here the mantle would fall on Miguel Chan, Mauritius-born and bred, but resident in South Africa for many years. As chief sommelier and wine buyer for the Tsogo Sun group – which includes Intercontinental Hotels in South Africa, Southern Sun Hotels, and Garden Court hotels – he has control over more wine lists than anyone else, and in the flagship establishments he has endeavoured to introduce wines which reflect the excitement and dynamism of the modern Cape wine industry.
Wine retailer
Four years ago it was necessary to draw a distinction between multiples and wine merchants, with the former (including grocers) accounting for the bulk of all wine sales and the latter too small to appear to exercise much influence. Since then, while most of the players have languished, becalmed by the very brittle economy and the booming export market, a sometime wine merchant has expanded its operation, opening a number of stores not only in Johannesburg, but also in Cape Town. Norman Goodfellows now dominates the fine wine business in Johannesburg and has already made a marked impact in the Cape. An extraordinary range of local and imported wines and spirits, as well as a delivery, party service, product procurement, redistribution, mail order and wine show operation are the hallmark features of the business directed by Solly Kramer, son of the founder of the original fine wine outlet, the late Norman Kramer.
Insofar as the grocers are concerned, most have seen their businesses stagnate. The exception has been the Shoprite Checkers Group, much of whose expansion has taken place beyond the borders of South Africa. However, hand in hand with this has been a concerted effort to bring good-value imported wines to South African consumers, an enterprise which played a significant role in transforming the expectations and parochial patriotism of wine drinkers in the country.
Online retailer
Four years ago, Cybercellar was pretty much the only candidate worth mentioning in the category of online retailing. It is still the dominant player and, under new ownership, is driven by a hard-working and commercially skilled team. However, in that same period online has grown by leaps and bounds: Yuppiechef, undoubtedly the most successful kitchen equipment supplier in the country, runs a very active liquor department, together with a broad range of stemware and wine accessories. A more recent newcomer however, Port2Port, has been making inroads into market, vying with the more established online traders for a share of the ever-growing online rand. It is probably too soon to determine if Port2Port will usurp the other more established operations, but at this stage it seems to be achieving visibility and gaining market share ahead of its rivals.
Wine educator
For years the Cape Wine Academy was the sole source of wine education for consumers and trade alike. However, more recently, Cathy Marston has taken on the challenge of teaching the WSET programme, and has attracted widespread interest in the course. In terms of student numbers, her enterprise is still small, but it has drawn a number of industry professionals into its orbit. It may never challenge the dominance of the Cape Wine Academy, but it has brought a more international feel to wine education in South Africa.
Generic body
Wines of South Africa has long been the sole operation responsible for the generic marketing of the country’s wine. However, it is precluded by statute from working in the domestic market – hence the need for an organisation to address wine marketing within the country. The producers’ organisation, VinPro, appears to be taking up the challenge. Led by Rico Basson, VinPro itself has been transformed from a low-key growers’ representative body to the most influential force in the industry. From widely attended annual symposia, to extension services for wine farmers, underpinned by detailed research into every element of the value chain, VinPro has become the most important – and potentially most useful – organisation within the Cape wine industry.
Wine media
Sadly, the past four years has seen the demise of almost every serious wine publication – and certainly every magazine in hard copy format. What remains is the annual Platter’s Wine Guide, a once-a-year review of the country’s wines, and the online WineMag, occasionally controversial, usually parochial, but at least thought-provoking and entertaining.
While changes in the wine industry are notoriously slow in coming, leading to the impression that it is a deeply conservative and largely unchanging environment, it is clear that the Cape wine industry is a notable exception. Vital, opportunistic and innovative, it lives a mantra of adaptation and transformation, and it has proved itself as good as its message.
