SA wine back on growth track

7 January 2008

South African wine exports are on the rise again, reflecting a 16% volume increase for the first 11 months of 2007 compared with the same period in 2006, says Wines of SA CEO Su Birch, commenting on the latest data from industry body SAWIS.

Birch expects exports for the full year to exceed the 300-million litre mark, which would be a record for the country.

Confident of continued growth this year despite the highly competitive nature of the international market, Birch is projecting an increase in export volumes of at least 6%. “Although a conservative estimate, all indications are that the temporary setback in sales experienced in 2006, when volumes dropped some 5% on 2005, is now well and truly behind us.”

Another positive trend, Birch adds, is that the country’s global reach has widened, significantly diversifying risk. “Whereas five years ago, 72% of our packaged exports went to just the UK and the Netherlands, the net has widened so that the UK, Sweden, the Netherlands, Germany and the US currently account for 70% of total export volumes.”

She says that with the exception of the Netherlands, where sales are characterized by heavy discounting, all other major markets have shown sound growth in demand for local packaged wines. “In the Netherlands, we are currently addressing the higher-priced segment of the market, where margins are more attractive for producers, and we are advising local wineries to move their focus away from extreme value business.

“The UK remains our biggest export destination, where we have reversed the negative trend of the past two years. Not only are packaged wines showing a growth of 6% but we are growing ahead of the market’s 4%, which means we should begin to increase market share again from next year. We are also particularly heartened by the fact that much of this growth is taking place in the more premium segment of the market.”

South Africa has also succeeded in retaining three trademarks on the UK multiple grocers’ Top 20 list of bestsellers – Kumala, FirstCape and Namaqua.

Birch says Wines of South Africa is continuing to pursue opportunities to grow profitable trading relationships, not only among the multiple grocers but by giving greater attention to the independent retailers and the on-consumption channel.

Sweden has become South Africa’s second biggest market for packaged wine. “We are now number two in Sweden, behind market leader Australia,” says Birch. “The entire Scandinavian bloc offers very exciting potential. We have shown double-digit growth not only in Sweden, but also Denmark and Finland, and we haven’t even begun to tap Norway.”

One of the strongest growth markets has been Germany, where volumes have jumped over 40%. According to Wines of SA’s representative in Germany, Petra Mayer, South Africa is now the fifth biggest supplier of imported wines to the country, up from ninth position in 2000.

Another star performer is Canada, with Quebec proving a fast-growing market for South African producers, historically most active in Ontario. Volumes to Quebec grew 76% to reach sales of 175 000 cases with a value of CAN$22-million in the 12 months to September.

Local wineries not already in this market are being urged also to develop a presence in Quebec, which accounts for 40% of Canada’s total wine consumption. All four provinces have upped their purchases of local wines, says Wines of SA’s representative in Canada, Laurel Keenan, with total volumes for Canada up 11%.

Exports to the US are over 9% higher on last year.

Russia also offers excellent opportunities, Birch believes. After an initial foray by Wines of SA earlier this year, sales have risen fourfold on a year ago, albeit off a low base, and there is widespread optimism for further market penetration.

Birch does, however, sound a note of caution. “With exports of red wines growing at nearly three times the rate of whites, we could be experiencing shortages of reds by 2010. As it is, there are currently some shortages of certain white cultivars, notably Sauvignon Blanc.

“Although shortages might mean higher prices for grape suppliers, the situation will not be to the advantage of our industry. South Africa is still a very young exporter in global terms, and to be unable to meet market demands could make us vulnerable.”