Sebeka failure shows Cape’s challenge in US

The South African partner in E&J Gallo’s high profile Sebeka brand venture has explained why the project was dropped, despite a $10 million marketing push.

Sebeka: ahead of its time?

Originally launched in 2007, Sebeka represented a major move to establish South African wine in the North American market. Developed in partnership with Swartland Winery, sales of the brand rose from a standing start to 300,000 cases by 2012, when Gallo decided to quietly abandon the project.

“They loved the brand, they loved the quality but the sales were just not there,” Pieter Terblanche, head of global sales & marketing for Swartland Winery, told the drinks business.

“They wanted to build one million cases in five years,” he explained. “By their standards it was just not big enough, even though it was the biggest selling Sauvignon Blanc in Canada.”

One major hurdle for Sebeka, suggested Terblanche, was the relatively embryonic scale of South Africa’s presence in the US wine market. According to data from the South Africa Industry Information & Systems (SAWIS), the country exported fewer than 10 million litres of bottled wine to the US during 2014.

“They spent $10m on the marketing side, but in the US South Africa was not a category,” reported Terblanche of Gallo’s efforts to establish the brand. “There was just no shelf space and they were doing it all on their own.”

Despite this disappointment, he expressed optimism about the potential for growth in the US market as Swartland Winery gears up for a global expansion push following its acquisition at the end of last year by Chinese businessman William Wu.

While the move secured Wu a stable source of grapes, as well as brand development, bottling and shipping capabilities ahead of his plan to list Swartland Winery on the Hong Kong Stock Exchange in a few years time, Terblanche insisted that sales would not be channeled solely toward the Chinese market.

With Brazil and Ireland recently opened up, he confirmed: “We’re currently expanding in all countries. Our biggest market at the moment is East Africa but our focus this year is the US.”

Offering his own analysis of current opportunities in the US, which has been flagged up by other sources as “the most attractive major market” right now, Terblanche remarked: “The US has been going through different trends, first Yellowtail, then Malbec from Argentina and now their own Moscato. We don’t know what will be the next big thing but hopefully it’s Chenin Blanc or Pinotage. It just needs that one breakthrough that everyone writes about.”

This year is due to see a boost for South Africa’s profile at the higher quality tier as Californian-based producer Jackson Family Wines prepares to launch an $85 Chardonnay from its recently acquired estate near Stellenbosch.

Commenting on the potential for this wine in the US, Jackson winemaker Graham Weerts told db: “We wouldn’t have invested in the project if we didn’t think it had potential. South Africa hasn’t made a huge impact in the US yet but in our view it’s very much a ‘yet’ scenario.”

Despite this belief, Terblanche acknowledged the challenge for any South African brand brave enough to attempt a big volume move in this direction. “We thought the soccer world cup would help, but the US is not really a soccer country,” he remarked. “For the US, South Africa is not on the map; they still think there are lions in our streets.”

An in-depth look at the scale and impact of recent foreign investment in the South African wine industry appeared in March’s issue of the drinks business.