SOUTH AFRICA: The Rainbow Nation’s pot of gold

South Africa’s wine trade has been through a tough few years. But now, says Ben Grant, by focusing on their roots, the top brands are leading the category back into good times

“if you can keep your head when all about you,
Are losing theirs and blaming it on you
… Yours is the Earth and everything that’s in it,
And – which is more – you’ll be a man my son!”
You may be wondering, quite reasonably, what on earth Rudyard Kipling’s much-loved poem, If, has to do with the South African wine trade. OK, I’ll accept reeling off a few (abridged) lines of poetry isn’t exactly standard practice in the pages of the drinks business, but if you’ll grant me just a little poetic licence the words feel particularly apt to the category’s current position.
The message that lies at the heart of If is the importance of remaining true to oneself in spite of the challenges one faces. If there is one thing you can be sure of in life, it’s that from time to time you’ll have to face up to trouble and strife; the greatest of achievements, Kipling suggests, come when we confront and overcome these obstacles without losing touch of who we are and where we come from.
In this context, Kipling’s sage words of wisdom have been heeded well by the South African trade in recent years. And as a result, there’s every reason to believe that it’s well placed to reap the rewards. Lately, times have been pretty tough for the sector: a comatose category leader, punishing currency issues and fierce competition all hit the country right where it hurts, and the sharp value decline in 2006 must have left many in South Africa wondering whether the giddy heights of success would ever truly return. But the good times most certainly are returning and one of the principle reasons is the fact that the category has stuck firmly to its guns. While many other producer nations drift ever closer towards an undefined “international” vinous style presented in a homogenous bottle, South African wine remains unashamedly true to its roots. It is loudly, proudly and unmistakeably South African. This self-assured status clearly chimes with consumers, and as competitor countries grapple with challenges of their own – be they climatic, financial or image-related – the Rainbow Nation is perfectly primed to take full advantage.

Any discussion of the health of the South African wine business must, almost by definition, begin with a look at the market leader. Kumala controls such a significant slice of the South African pie in the UK that when it sneezes the entire category catches a cold. As we all know, the two rapid changes of ownership left the brand well and truly under the weather in the last couple of years, dragging the rest of SA down with it. The first piece of good news is that – after a painful but necessary period getting to grips with the brand – Constellation is confident that the good times are finally returning, borne out by an impressive 15% rise in the latest Nielsen MAT numbers. But even more encouraging for South Africa as a whole is the results of the company’s extensive market research, and thus the manner in which future growth is going to be generated. After an incredibly detailed study of UK consumer attitudes, Constellation has concluded that Kumala’s greatest asset is its South African-ness. In future, place of origin will therefore take centre stage in every aspect of brand communication.
Constellation marketing manager Claire Griffiths explains that rather than implementing “a knee jerk reaction”, it was essential to take the time to fully understand the brand dynamics before making wholesale changes. The company thus undertook a deeply scientific analysis of the category and Kumala’s place within it, and the evidence was indisputable: “UK consumers are incredibly emotional about South Africa,” Griffith explains, so “we will benefit if we are putting South Africa at the forefront of consumers’ minds.” And that’s exactly what they plan to do. Constellation finally rolled out its own vision for the brand at last month’s LIWF. The packaging has been simplified and South Africa-fied while Bruce Jack has weaved his magic to improve the quality of the wine itself. The final stage is talking to the consumer: Constellation has set aside £5 million for a through-the-line campaign – the largest marketing budget in the category’s history – and, Griffiths confirms, “it will centre around hero-ing the South African origin”. Such a sizeable war chest will almost certainly bump up Kumala’s numbers, but the provenance focus of the marketing campaign means that the rest of the category can presumably look forward to the halo effect too.

Fortunately it is not just the category leader that has acknowledged that South Africa’s greatest asset is its provenance; a number of other brand owners have also cottoned on to the fact. Gerard Barnes is product development manager of Raisin Social, owner of high-flying BIB brand Namaqua. “Having confidence and pride in our own image is very important,” he explains. The company has run a number of trials to see what resonates with UK consumers and found that “when we tweak the label to emphasise the South African cues non-promotional sales have improved”. Thierry’s buying director Lindsay Talas agrees – she argues that the country’s authenticity and ethical status are highly attractive to drinkers, so “the challenge is to communicate these USPs to consumers”. Jordan Winery proprietor Gary Jordan takes the argument further still, warning that the category will suffer if it fails to emphasise those unique factors that define it. “South Africa has a regional identity that we should be extremely proud of,” he says, before cautioning that “we must guard against losing our identity”.

Strong pack
Dramatic improvements are often forged in the crucible of hard times, and this certainly appears to ring true when it comes to South Africa’s branded offer. Just a few short years ago Kumala cut a pretty lonely figure, but as the brand returns to growth it is joined by a pair of sparring partners; a fact that undoubtedly bodes well for the overall business. “We were overly reliant on Kumala, but now there are three strong brands,” says WOSA UK market manager Jo Mason, “so it’s no longer as simple as ‘whatever happens to Kumala affects the whole’.” Spreading the risk is certainly a plus, but, more importantly, the meteoric rise of First Cape and Namaqua has given consumers a plurality of attractive brand families to tempt them into the category.
Crucially, all three are very different propositions, so appeal to a broad audience with very little crossover. Brand Phoenix director Greg Wilkins believes that the two brands have “come of age” in the last 18 months, arguing that their “complementary” nature is particularly important to this success. Mason adds that the Kumala-inspired decline resulted in companies reconsidering how they tackle foreign markets. “They had to focus on what’s working,” she says, “so brands have emerged with much more awareness and understanding of what export markets need to survive.”
Once you go beyond the leading trinity, there is a relatively sharp drop-off with none of the chasing pack commanding more than half of the volume of the leading three – but is there potential for another player (or players) to step up and join this exclusive top-performing group? Wilkins points towards the emergence of California 15-odd years ago as evidence that three really strong brands is probably the limit for now, but adds that “logically there’s definitely room for other brands to step up, [although there are] no signs of this happening for the time being.” But Thierry’s in particular is aiming to crash the party, with five brands listed in the top 20 and heady ambitions for further growth.

But it’s not just the brand building that has improved; there’s almost unanimous consensus that the quality of the wine itself has got significantly better, too. “The liquid quality is much better,” says Ehrmann’s marketing manager Felicity Billington, “and we’re sure that more investment going forward will improve things further.” Barnes is similarly optimistic. “We mustn’t forget that the export industry is still only 14 years old; there have only been 14 vintages to learn from overseas and apply these skills.” Mason agrees, enthusiastically explaining that “the results of the [South African industry’s] learning are coming to fruition, every year has seen an increase in quality.”
But as the wine has improved dramatically, the price has only crept up gradually, ensuring that SA offers a price/quality ratio that is highly alluring to both buyers and consumers. When this is combined with the currency pressure that is being felt acutely by other producer countries, there’s plenty of room for optimism from a South African perspective. “Other categories are being forced to put through pretty significant price increases,” says Talas, “but the exchange rate is helping South African producers to minimise any hike in the price.” When compared to its New World competitors, SA therefore appears to offer increasingly enticing value.

Future perfect
A gaze into the crystal ball provides plenty of encouragement for the category. As we’ve already seen, the South African identity is the country’s greatest asset – and the next few years will see it assume unprecedented levels of exposure on the international stage. With the World Cup just two years away, the eyes of the world will be fixed on the Rainbow Nation, and its vinous output is sure to profit as a result.

Reviewing the global picture, the conditions could scarcely be more conducive to sustained South African success. “Other categories are facing real challenges at the moment,” Origin’s Bernard Fontannaz points out, “but South Africa is in a great position. Conditions are all very good at the moment – the volumes, the quality and the price. Now is the right time for South Africa to strike.” If, as Mr Kipling suggested, South Africa can keep its head (and remain true to its identity) while other categories are losing theirs (either as a result of external pressures, or the steady march to international conformity), then the future looks very positive indeed. It’s a big if, but South Africa’s future is very much in its own hands.

db ©  June 2008