Full Steam Ahead – South Africa: On-Trade

South Africa’s performance in the UK on-trade still lags behind its success in the off-trade. Now WOSA plans to convince on-trade wine buyers that the country’s wines deserve a spot on wine lists everywhere

Anecdotal evidence might not be permitted in a court of law but it can still be a useful source of information – and it’s surprising what you pick up when eavesdropping (never talk loosely around journalists, we’re trained to observe everything). So a little while ago, when I overheard an interesting conversation between two industry types about why they thought South Africa had not thus far achieved its potential in terms of the UK on-trade, I noted it down in my scruffy reporter’s pad. “It’s funny,” said one, “that this is the case, since a friend of mine who runs a bar in southwest London says she frequently can’t keep up with demand for South African wine, especially around January to March. After their winter hols in South Africa, the Nappy Valley lot can’t get enough of it.” Sadly, I failed to find any hard evidence to back up this claim but, as far as anecdotal evidence goes, it does present the case for the opportunity that lies in the on-trade for the category.

South Africa now has a very positive image in the minds of UK consumers, who are getting more and more used to experimenting with wine and who are familiar with the South African lifestyle proposition. Moreover, the on-trade is well placed to educate and hand-sell to drinkers who might be open to South African wines but haven’t quite managed to
make the leap in the off-trade.

So, the two fundamental questions on everyone’s lips are: why hasn’t South Africa yet managed to take advantage of this in terms of the UK on-trade and is it now about to do so?

“It is true to say that we are currently undertrading in this sector, compared to our off-trade performance,” confirms Sophie Waggett of Wines of South Africa (WOSA) in the UK. “From a generic perspective, we are stepping up our on-trade activities in a bid to change this. There is a definite lack of knowledge about the wines in this area, and so there is major education work to be done by us. We need to raise awareness of exactly what is going on within the category and to provide as many tasting opportunities as possible, especially at the premium end.” Overall, the

goal is to move South Africa up “a few notches”, as Waggett puts it, on wine lists. “From that £12–£13 house wine to around the £17–£18-plus mark,” she confirms. “In order to achieve this, we launched the Escape to The Cape initiative last year, and the first trip went out in January. There were 20 key buyers from across all sectors of the on-trade: hotels, restaurants, pubs and gastropubs, with an emphasis on more premium players. In total, we will be taking 100 buyers out to South Africa over a two-and-a-half-year period; two groups of 20 will go out in 2007. There is no doubt that those who go out are converted to the cause and come back ambassadors for South African wines. The challenge, however, is to sustain that interest, and we are now looking at ways of doing that, revolving around staff training.”

The key message that WOSA is pushing is one of diversity: South Africa offers a wide range of varietals and varietal styles from an environment as biodynamically diverse as any on the planet. In addition, “South Africa has such a great range of producers, from large players through to boutique operations”, Waggett says. “And it should be able to service all sectors of the on-trade.” However, recently, other generic bodies have seen more success pushing a simpler message: New Zealand and Sauvignon Blanc, for example, or, further back, Australia and Shiraz. With the diversity message, is South Africa in danger of confusing consumers? Would the country be better advised to concentrate on Pinotage and/or Chenin Blanc as a simple point of difference? Unsurprisingly, there are differing opinions in the trade on this.

Louise Hill, marketing manager at Stratford’s Wine Agencies in the UK, is one who disagrees. “I think South Africa shouldn’t
be trying to create a USP in Pinotage, and it should focus instead in making great-quality popular varietals. Too much effort has been spent on Pinotage, which most people don’t like, and Chenin Blanc, which has a lower-quality and value image. Time to focus on Sauvignon Blanc, Chardonnay, Merlot, Cabernet Sauvignon, Shiraz, etc,” she says. A diverse proposition indeed.

For others, it is the opposite tack. “I think they should push Chenin and Pinotage because they are points of difference,” says Eileen Ginger, category buyer, light and fortified wines and spirits, at Whitbread. “When you have a small wine list, quite often you can have only one Chardonnay, one Merlot and so on, and you have a wide choice of countries where it can come from, and it is likely that the selection would come from Australia or Chile (currently, these are more cost-effective choices, given the strength of the rand). Chenin and Pinotage are synonymous with South Africa, and they offer the customer something different.”

“Losing market share to these countries, which can offer more value for money, is a definite challenge for the category,” Ginger continues. “To avoid this, South Africa needs to be more competitive and offer points of difference.”

The branding issue
Another area in which the South Africans need to concentrate is branding, says Ginger, since they are weak in terms of brands in comparison to Australia and the US. “We need the next Kumala,” she says. “There has been a definite improvement in quality, and the focus is clearly on that rather than quantity now, which is good news. Some producers are doing good things throughout their ranges – for example, Springfield. Also Raisin Social
has got a really good portfolio of South African wines now and could be a one-stop shop for a lot of people, with wines right through from entry point to more premium offerings.”

At Hayman Barwell Jones, too, the scope of the offering within the category is emphasised. “I think the South African wine industry has already developed beyond simply backing a single varietal,” comments Nicola Hale of the importer. “Look
at Australia. First there was Chardonnay – great for a while, but then customers tired of it. South Africa has the propensity to offer a similar accessible diversity to the trade and should steer clear of being labelled as a one-trick pony. Its diversity allows it to compete with a broad range of wine-list veterans. Moreover, what it lacks in reputation at the moment, it makes up for with accessibility, and it now offers enough brilliance to win over even the most hardened of sommeliers. But how is the consumer convinced to trial the wines? The on-trade buying experience is more formal and more expensive for consumers, and both these factors will subdue their willingness to experiment. This will be a challenge going forward.”

Given that this is the case, it is perhaps towards the higher end of the trade, where sommeliers and trained staff are available to hand-sell to consumers, that an opportunity lies for the category. At Mentzendorff, where the
South African offering is, by the company‘s own admission, “at the top end of the trade”, they are finding some success with this approach, as Jon Stevens, Champagne and New Worlds brands controller, confirms. “In my view, South Africa performs strongly in the on-trade. Where we operate – with wine-savvy consumers drinking in outlets ranging from gastropubs and country restaurants to white-tablecloth and Michelin-starred establishments – we have shown strong growth. In this market segment, I think South African wines have something close to cult status, because the styles
are exciting and represent excellent value for money.”

Matt Wilkin, on-trade sales executive at Genesis Wines and the 2005 Ruinart Sommelier of the Year, agrees that this sector offers a lot of scope for the category. “The on-trade is a natural target for South Africa, especially since some of the wines are very food-friendly in style,” he says. “A quick route in would be through the gastropubs and then up. You have to be careful about targeting chains because it is difficult to move a brand out of there, but everything has a home – it is just a question of finding it.”

Even at this level, however, Wilkin bemoans the lack of brands in the portfolio. “Brands are useful on a wine list, even
at the higher end. South Africa needs to work out how to do that. Look at where something like Yalumba Signature from Australia has succeeded – we could even sell that off the list at The Capital Hotel. There needs to be more of a branded and lifestyle approach to really get the message over.”

Challenges ahead
Wilkin also suggests that it might be about time to start banging the regional drum in South Africa, particularly if the country is to stay ahead of the game in the UK. “Things like ‘Coastal Region’ on a label don’t mean anything to consumers, you don’t hear about it enough. Think what Central Otago in New Zealand has managed, or Casablanca in Chile… you don’t get that from Stellenbosch, for example. Generically, there has been some success, but sub-generically there is still a major challenge.”

And, of course, it isn’t the only one. The on-trade is a notoriously difficult nut to crack, and then there’s the strength of the rand, the concentration in the off-trade and the difficulty and expense of educating and training in a fragmented sector to contend with as well.

“The on-trade is certainly not the refuge that many think it is,” says Damian Carrington, marketing manager at Enotria.
“It takes a great deal of time in the market, patience and investment to build meaningful volumes. However, it clearly does have to be a key component in future strategies.”  db June 2006