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SOUTH AFRICA: Room at the top
A number of South African producers make top-end wines, but usually only in very small quantities, prefering to focus instead on the more commercial side. Clinton Cawood reports on the Cape’s gap in the market for icon wines
South Africa may produce a number of top-end wines, but Cape producers still have some way to go in terms of gaining recognition for these.
The challenges are various, ranging from problems of supply, to a historical reliance on entry-level wine. The greater margins generated at the top end of the market, however, should be enough of a motivation for focusing strongly on this part of the market. In addition to the positive perceptions created by top-end wines, practical concerns such as currency fluctuation are less of a factor at these higher price points.
When it comes to the potential for creating a positive perception at this level, Mike Paul, operating within Europe for Charles Back, agrees. These wines, he believes, “are crucial – they set a tone. It sets a halo effect if you get it right. If as a country your ranges are skewed to the bottom end, you’re at a disadvantage”. He goes on to use France as an example: “They started with Bordeaux, Champagne and Burgundy – it’s far better than starting low and going upwards.”
Too few by far
A number of producers in the Cape create top-end wines, but usually in such small quantities that the effect is almost negligible. Jannie Vermeulen, managing director of Swartland, is in this situation. “We go for commercial wines below that bracket. We do have one wine that sells in that top bracket, but it’s in very little quantities.” He adds, however, that as a country there are a number of wines in the above-£10 bracket, but that it is “spread over a lot of labels”. For Swartland’s top wine, Idelia, Vermeulen confirms that “only a few importers are aware of it”.
For Sarah Gandy, marketing manager at Distell Europe, “over £10 South Africa must focus on innovation and offer a genuine point of difference for consumers.” She draws attention to Nederburg’s “Ingenuity” line extension, which, at £15, includes a white blend with eight varietals and a red with three Italian grapes. “It’s about offering something new and different from South Africa.”
Developing these wines, as Neleen Strauss of London restaurant Vivat Bacchus points out, “costs winemakers a lot of money”. Strauss, whose restaurant has a focus on South African fine wine, would nevertheless “like to see more wineries in South Africa prepared to make a fabulous flagship wine more often”.
While there could, according to Strauss, be more of these top-end wines, there are “a number of hidden gems – some wines up there with the best wines in the world”. She lists the top wines of producers like Vergelegen, Jordan, Mont du Toit, Boekenhoutskloof and Waterford Estate.
The latter’s icon wine, The Jem, was created last year, and is an example of a producer focusing quite deliberately on the top end of the market. As managing partner, Kevin Arnold, points out, the company “concentrates on the premium market”, with prices ranging between £12 and £48. For Arnold, “the reputation for premium South African wines in export markets is good, and more often than not these are in short supply as a result of demand”. He adds that this issue of supply is “being overcome”, as a result of practices in the vineyard and the cellar.
Arnold goes on to say that producers should concentrate on higher-priced wines, as “the market is flooded with mediocre wines that do little for the image of a wine-producing country.” Meerlust’s winemaker, Chris Williams, comments on this image, saying, “South Africa is still seen as being cheap, especially in continental Europe, but things are changing, especially in Holland, Germany and Sweden. Several dozen brands, mostly estate-type wines, are selling in the premium bracket now.”
Focus on exports
While there is a domestic market for South African wines, there is a particular focus on a number of export markets for top-end and icon wines. As Strauss puts it, “In the US or the UK, for example, people are happy to pay top dollar for top wine.” Waterford’s Arnold explains: “There is generally a greater understanding of quality wine in the import companies that we work with. Here at home we have less specialists, and therefore have to hand-sell a lot of our wine.”
For Cape Legends general manager, Naas Erasmus, there is an issue when it comes to the image of the country’s wines in some markets. He believes that South Africa “is unrepresented at the top end, the fine wine end. It is suffering from an image problem, and therefore battling to get into the top end, although the quality is there.”
However, for Bouchard Finlayson’s marketing and sales manager, Karen Davison, “some export markets only want our premium range”. Davison notices another difference between export and domestic sales: “As our tourist season is very weather dependent, the domestic market is far more season dependent. During summer, the tourist season, our sales soar. In terms of exports, it is pretty much constant all year round.”
Newton Johnson Wines’ managing director, Bevan Newton Johnson, notes some other differences between exports and domestic sales: “Other markets are more receptive to more recent producers, but there is a loyal following in SA for some of the more established producers and for styles of wines that have been consistent for the last decade or so.”
Kanonkop’s co-owner, Johann Krige, believes that the premium end of the market is “probably more important in the domestic market, where brand building starts”. He believes that “word of mouth will carry a successful premium brand into the international markets”. In spite of this, Kanonkop exports, according to Krige, 65% of its production.
Despite some factors that may discourage a focus on South Africa’s domestic market, Hamilton Russell Vineyards’ owner, Anthony Hamilton Russell, is optimistic. “What is not apparent to many of our overseas markets is how vibrant the very top end of the domestic market is. There has been enormous wealth creation in the last decade in SA, and best- of-category wines have never fetched higher prices or been more sought after.”
Supply concerns
With these relative benefits in both its domestic and export markets, it is little wonder that producers have traditionally complained about having too little to sell – particularly at the top end. For Newton Johnson, however, “supply concerns come in for producers who have not focused on establishing a long-term relationship with a grower or from the vineyards they have established their reputation on”. Hamilton Russell believes that shortages can be overcome “in the longer term”. He continues: “There is a significant move to more coastal, cooler sites, which afford the opportunity to make more refined wines. There is a lot of unplanted high potential.”
Graham Beck’s marketing and sales manager Etienne Heyns agrees, saying, “South African producers have become much smarter at responding to increased higher-end volume demand.” For Charles Back’s Paul, the barrier to building top-end brands is supply of mid-priced wines. “SA hasn’t had the advantage of Australia – it has a gap in the middle,” he says. “Penfolds has always had significant quantities in the £5 to £10 market, and South Africa just hasn’t had the quantities to replicate that model.” For Meerlust’s Williams, brands in top price brackets are “almost non-existent in South Africa. We don’t have a Penfolds at this level”.
Brand call
Among a number of producers, the importance of creating not only premium wines, but brands at this level, is evident. As Krige puts it, brands “are more applicable at the premium level than at entry level”. Arnold agrees, saying, “Brands are synonymous with the top price bracket, and need to be continually polished and driven to maintain brand equity.”
For Hamilton Russell, the issue of brands is quite clear: “I believe a 1,000-case winery of high repute is as much a brand as a one million-case winery – just a very different one. Brands are highly important at all price points.” Newton Johnson agrees, saying that top-end wine brands “are as important as for any other price bracket for South Africa”.
Icon wines from South Africa do exist, and there is undoubtedly demand for them, in both domestic and export markets. South Africa is not, however, taking full advantage of these opportunities, with space to increase production and create stronger brands within top price brackets.
| Premium Whites Red wines are frequently a benchmark for judging a country’s top wines, and South Africa is no exception. This may, however, be changing, as the country’s white wines begin to gain recognition. At the very top end of the market, as Swartland’s Vermeulen explains, there has traditionally been “a bias towards red wine. South Africa as a country has battled to create top-level white wines.” Charles Back’s Mike Paul confirms this, saying, “Traditionally, red wine is what you’re measured by at this level.” He goes on to say, however, that “a number of commentators are saying that SA premium white wines are coming through strongly, like top Sauvignon Blancs with their own identity.” According to Kanonkop’s Johann Krige, premium white wines “are on the up as a result of new regions, such as Elim, Bredasdorp and Cape Point finding their niche.” |
db © June 2008