Okt 10

South Africa’s two wine industries

Tag: Ländersigi.hiss @ 07:02

An analysis by Michael Fridjhon – South Africa does not really have much of a secondary wine market. With the exception of the occasional parcels disposed of by deceased estates, there is only limited commerce in older wines. There are two focal annual events – the Nederburg auction (which dates back to 1975) and the sale of „reserve“ selections produced by members of the Cape Winemakers Guild. The Guild’s wines are absolutely current releases. What is sold at Nederburg tends to range in age from five to ten years old.

Until last year the two sales were separated by a gap of six months. However both now take place within a week of each other in the latter half of September. This year this coincided with the bi-annual generic South African wine trade promotion known as Cape Wine – and the meltdown of the world’s financial markets. This turned out to be the same week as the first major political shake-up in the country since the advent of democracy – altogether not an auspicious time for anything as discretionary as a wine auction.

As things turned out, the auction season provided a snapshot of the health and stability of the South African fine wine trade at a time of upheaval. Prices at the Nederburg sale continued to fall, settling at a round R106 per bottle ($12), down about 10% on 2007 but a full 35% lower than in 2005. At the Guild sale, on the other hand, prices were only marginally lower than 2007, averaging an astonishing $39 per 750ml bottle.

Since the Nederburg sale took place a week before the Guild (and could have taken cash out of the market, but obviously didn’t) – why the marked discrepancy between the two performances? Partly there’s an image problem – the bulk of what is sold at Nederburg still comes from the Nederburg winery – a large, very successful – but very commercial cellar. It has become increasingly difficult for the brand-owners to persuade the super-rich and new elites to pay a serious premium for a name which trades across all segments of the market. The Guild on the other hand comprises many of the cutting edge names of the boutique trade. While most of the volume of Nederburg is sold to supermarket groups and chain store operations (including popularly priced tourist restaurants), the Guild’s biggest customer is a super-premium steakhouse operation now opening outlets in the Gulf states.

In many ways, the auction season has provided something of a microcosm of the Cape Wine industry at this point in time. It is showing a reasonable domestic performance despite the weaker economy, buoyed by a strong tourism industry and a weak Rand. Exports have been particularly solid, assisted by strong growth in bulk sales. At the same time, there is certainly enhanced visibility for South African wine at price points well above the national average. This polarisation of strengths – good commercial volumes (but under price pressure) and an increasing profile in the super-premium segment – is a tale of two auctions – and a tale of two wine industries.

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