...and brand SA?

Alex Dale continues his survey of the international brand-driven market by questioning South Africa’s readiness for it

What is the significance of international mergers, of the development of brand-based markets, for South Africa’s re-emerged wine industry? An industry that in seven years has catapulted to an eight percent market-share in the UK, overtaking all but the most established players, and currently sits sixth in the pecking order. An industry that is Holland’s second largest supplier, shipping there ten times as much wine than the Australians.

Very encouraging on the surface; remarkable, in the circumstances …

Why ‘surface’ and ‘circumstances’? Because SA’s success has been despite several substantial obstacles – the absence of big brands is the most critical, but others include an image driven by low-cost, high-volume sales, and a lack of marketing savvy amongst the larger producers/distributors.

The branding issue puts SA’s performance in one perspective. Try to name a SA wine brand in the international markets that is on a par with, for example, Lindemans, Penfolds or Jacob’s Creek. There being no answer to that, try naming the Cape’s leading brand in the UK. Nederburg? No. Douglas Green, Chateau Libertas, Craighall, Zonnebloem, Fleur du Cap, Tassenberg, Drosty Hof, Swartland, JC le Roux, Graca or Boschendal? No, no and no. Their total export volumes are probably below that of SA’s number one: Kumala.

Perhaps ironically, Kumala belongs to a UK importer/wholesaler and is sourced via a network of cooperatives and cellars in the Cape. It sells over a million cases in the UK annually and is the only SA brand in the UK’s top ten (alongside seven Australians and two Californians). The KWV, with all its infrastructure, wealth and plethora of products hovers around sixteenth place.

How can the world’s sixth- or seventh- largest wine producing country not have top brands in such a brand-driven market? Our competitors (and supporters) must ask why we are taking a knife to a gun fight....

And other markets, also brand-driven if not to the extent of the UK market? Often the easy option has been to create ‘labels’ to package export-destined product, which can be parked in one supermarket chain, for example, whilst another label is created for the rival chain. Many labels aren’t easily traceable to a specific producer, and most do not have proper advertising and promotion programmes (like Kumala) which would enable them to become, let alone be classified as, brands. One of the biggest export labels is called Kaapse Pracht, which sells some three quarters of a million cases annually to our second biggest market, Holland. There are countless other labels that live almost exclusively overseas. Their ownership varies – from a retailer to an agent, an exporter or – often last in line – a producer: Hippo Creek, Cape Soleil, African Terroir, African Dawn, Blydskap, Groot Plesier ... and many others.

 Volume or quality?

Which brings us to another obstacle: what real good are these labels collectively doing for the image of the South African category? Not to mention the millions of cases of supermarket own-label Cape wines at the lowest price-points. They mostly help South Africa to achieve one of the lower average retail prices in Europe. The ambition, sorry ability, to sell large volumes is undeniable. But what about the ambition to also stand out for quality and branding, rather than thriving on a reputation for having huge amounts of wine to sell at the cheapest prices ?

Given the above, it appears as if our marketers are intent on shifting short-term volume rather than creating a sustainable demand based on quality, profitability, industry transformation and, again, long-term brand building.

Lack of investment in branding (Kumala alone will spend some £1.5-million this year, way ahead ahead of the KWV, Nederberg or any of the South African based Cape brands) will not enable SA to take on Southcorp, Beringer Blass, Hardys, Gallo, Allied Domecq, Lion Nathan, Orlando or any other massively aggressive, dynamic and well-funded groups.

Talking of those companies, it is worth asking why they have almost without exception avoided South Africa. With all the acquisitions and shifting going-on globally, why have none of these movers and shakers bought into the Cape? One can try blaming Aids, Mugabe, or whatever. But perhaps we should acknowledge our relative ineptitude at configuring wine entities of sufficient quality, dimension, branding and focus to warrant the attention of the international pros.

To succeed in today’s brand-driven market, a trailblazer needs to be consumer-focused, market-orientated, a specialist, and flexible. Everything the KWV, Distell and other producer/exporters appear not to be.

The KWV remains product-driven and hierarchical, and Distell has a pretty dismal track record: the flagship Nederburg appears to be an international flop; big-volume brands such as Two Oceans seem to do OK, as long as they sell very cheaply; and the Lusan grouping of estates marketed by Distell (Le Bonheur, Alto, etc) doesn’t really seem to have caught anyone’s imagination. One has to question the validity of a strategy that involves roping-in other estates to market rather than focusing on building quality and branding within one’s own stable. Take Plaisir de Merle as an example – a potentially beautiful gem, yet a consistent underperformer.

The other major South African volume exporters, such as Coppoolse-Finlayson, Savisa, Winecorp and so on also appear to lack real branded substance (apart from Vinfruco’s Arniston Bay, which is being increasingly successfully developed). And brand-committed players like Stellenbosch Vineyards face an uphill battle implementing their strategies without outside investment.

Glimmers of hope?

There are glimmers of hope, coming from private companies and wine-focused individuals. Graham Beck is probably the leading light, alongside Charles Back’s Fairview and Spice Route. They are building business and brands that are beginning to look like local equivalents of what Allied Domecq, Lion Nathan, etc have targeted in Australia and elsewhere. Will these grow into larger brands, into larger stables?

More importantly, will they become the target of take-overs and acquisitions? To add scale and value to an international network, a target brand really needs to sell in excess of a million cases internationally. It needs to be profitable and to posses a solid international following. One of the SA wine industry’s greatest drawbacks today, from an international wine group investment perspective, is its lack of such brands – let alone a whole array of them. Not to mention the lack of a respectable foothold in the all-important US market.

But do we need to belong to large international groups, do we need big brands to succeed, do we want to change the nature of our industry? Judging by the state of some of the larger companies here, the answer is unclear.

But, in fact, the answer is unequivocally yes. By being part of a successful dynamic at the volume brand end of the market, we can forge greater recognition and credibility for the rest of our offerings. Such recognition and demand for South African wines – thanks to the pull into the markets of big brands – would result in many opportunities for small and middle-sized producers. They could continue to forge their own lives, their own identities and styles and collectively contribute to a passionately appealing Brand South Africa.

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