Tempting on-trade

The UK bar and restaurant sector provides plenty of potential for South Africa, says Chris Orr

Last week was the fourth biennial Cape Wine bash down in sunny South Africa, and as things go it was a pretty buzzy place to be in early April. The frisson of excitement caused by Constellations takeover bid for Vincorp – encompassing one of the modern monoliths of South Africa wine, Western Wines – was certainly a part of it. But more crucial was that in just two years, South Africa’s wines seem to have fast-tracked themselves in terms of both quality and variety.

There was a point not so long ago when South Africa was considered a possible player. Over the past five years they’ve gone way beyond that, and in the last two years they have become a must have in terms of shelf space and share of consumers’ throats in the UK. Retailers are in a position now where they must have more than just an acceptable range from South Africa, but actually a very comprehensive range.

That was recognized in the number of buyers attending this year’s Cape Wine. All the big guns were there – spending half their time at the show, and the other half tearing around the Cape making sure they were up on the latest and greatest the region has to offer. It’s not so long ago that South Africa would elicit little more than a raised eyebrow from your average UK buyer, despite being a favourite of Scandinavian and German buyers for some time now – so it was encouraging to see such a change in emphasis.

However, it was interesting to see that, while the UK market was paying serious attention to the South African wine industry this Cape Wine, many producers had their heads turned in a different direction – the US. With oversupply an issue in South Africa just as much as it is in Australia – and for that matter, the rest of the world – developing the US market is becoming as important to the country as it is to the likes of France and the good old Aussies. The question is, can they crack it.

"Well, bizarrely, I think the Constellation deal could really help develop the US market for South Africa as a whole," comments Vernon Davis, the CEO of WineCorp in SA. "If you look at what Yellowtail did, in terms of developing a wider market for Australian wines in the US, it’s perfectly feasible that Kumala could do exactly the same for South Africa in the US, should Constellation choose to push it hard enough."

But is the US market everything it’s cracked up to be. "Well, if you can get it right, it’s certainly an effective and potentially profitable way of shifting juice," points out Davis. "But getting it right is the challenge – and its not and easy or cheap market in which to do business."

The new emphasis on the US market that seemed prevalent throughout Cape Wine suggested that for many producers the UK market is becoming a less attractive, less profitable option. And yet in truth, South Africa still has huge potential in the UK. It’s established its credentials and won market share at the lower end of the market and over the past two years has focused on raising the bar in terms of the country’s premium wine sector. But it is still nowhere, relatively, within the on-trade sector. To my mind they’d be smart to take a few leaves out of Australia’s game plan and hit this sector as hard as possible over the next two years. The on-trade is ripe and ready for significant change in terms of the wines flowing through it – and the French seem as over confident and underwhelming in this sector as they did in the off-trade 20 years ago, just before they allowed the Australians to swipe away their market share. So whilst the US is a glittery, shiny prospect on the horizon, I’d advise many producers to make the most of the hard work they’ve put in over the past five years in the UK and cement South Africa’s share across the trade as a whole. That will give them a much better, and more secure, platform from which to take on the great US consumer.

Chris Orr  db  13th April 2006