Cape Crusaders

Bigger generic budgets, a galvanized export effort and real enthusiasm mean that South Africa is a force to be reckoned with in the UK wine market.  Charlotte Hey analyses the category’s performance

THERE’S NO DOUBT about it.  South African wine producers should be patting themselves on the back.  The turn around within the industry during the past 10 years has been phenomenal.

Not only has the face of South African vineyards changed from white to red (82% of the total planted area was red varieties in 2001) but total exports have risen from 20 million hectolitres in 1992 to 240m hl by 2002.

The country’s success in the UK is plain to see with volume having risen from 6.8% of the total market in 2000 to 9.5% last year and value growing in line from 6.7% to 9.1% (AC Nielsen) for the same period.

Last year the category reported a 23% year on year growth in value and a 26% growth in volume compared with 2001.

There is certainly a buzz going around South African wine, a feeling of confidence and of business being done that some of its generic competitors must envy.  Things are definitely coming together, some would say, in a way that has not been seen before.

No doubt the promise of £1.2m worth of generic funding, mainly to be spent in retail promotion, has helped in the renewal of the can-do spirit.  However, the feeling of energy and eagerness to succeed starts at home.  Today in South Africa there is a real sense of the wine industry wanting to present a united front in all of its key export markets.

This enthusiasm, however, does not mean that producers and exporters are blind to the challenges that face them. 

Currency fluctuation

The strength of the rand has been one of the principle concerns for exporters since the beginning of this year.

Fluctuation of the rate is bad news for those who have based their export pricing strategies on some of last year’s values.  Although the rand has strengthened against the US dollar by 51% since December 2001 rates of 7.11 rand, which were current in April of this year, spell disaster for those exporters who have not been prescient enough to take the long-term view.

Many of the larger established exporters expect that there will be natural fall out of those companies that do not have the wherewithal to sit out the recent currency vacillations and feel that the rand will settle at a more realistic rate between 13-15 rand to the pound sterling when the South African government makes its anticipated move on interest rates either later this autumn or early next year.

Promotional power

Another challenge facing the category is the establishment of strong brands and their individual approach to promotional policy – something that is closely linked to the South African commitment to increase the average value of a bottle of wine to over the £4.49 price point. (Average bottle price in 2002 stood at£3.60.)

At the moment three South African brands occupy positions in the UK top 20 – Kumala, Namaqua and Arniston Bay – all of which experienced exponential growth during 2002.

With a planned UK retail promotional push in the autumn of 2003 a realistic view needs to be taken towards promotional activity given that market demands are increasingly competitive in this sector of the market.

It seems that the importers’ committee, set up last year, is aware of the dangers, however, having included promotional caveats which will go some way to promoting stability and long term growth in the category.

While South Africa is riding high now the real task is to ensure it becomes an established player in this, and other, key markets.  The Common Customs Tax rebate has enabled the generic organisation, Wines of South Africa, to invest in research on UK consumer perceptions of the country and its wines, and its generic plan for this year is taking the first steps in encouraging consumers to identify with core South African values.

Let’s hope that the industry continues to present a united front and back the generic campaign values so that they may reach their goal of achieving 15% market share in the UK within the next two years.

How’s the money being spent?

Sophie Wagget, marketing manager at WOSA UK is having a busy year but she’s effusive about it. 

 "Having the generic campaign up and running now is great," she told the drinks business.  "Having both the CCT budget and what I call the ‘Levy’ budget really means that we can make  some proper noise about South Africa this year.

"We have been very careful in trying to make sure that the budgets work to the maximum for us, the main focus being added value promotions with all the major retailers from September onwards.

We have worked hard with the multiples to make sure that an element of the campaign is focused upon the £5-plus sector of the category and in creating interest in-store via tastings and promotional activity.

This promotional push will be supported above the line with an advertorial campaign in lifestyle publications under the banner ‘Explore a different world’.  This campaign will also run during the autumn period," she explains.

The remaining funds will be spent on a trade tasting programme, press trips and consumer activity at the county shows throughout the rest of the year. In addition, a major portion of the CCT budget is being invested back into South Africa in the WEITA initiative, an anti-alcohol abuse scheme and other empowerment projects.