Analysis: Constellation's high hopes for South Africa
By Chris Losh | 9 October 2007
Following Constellation Brands' announcement yesterday (8 October) that it plans to acquire the South African winery Flagstone, Chris Losh fears that Flagstone's distinctive personality may be dulled by corporate homogenisation. But if it is allowed to retain its unconventional character, the move could be positive for both parties, and bringing Flagstone's charismatic owner Bruce Jack into the fold could be a significant boon for Constellation's Kumala brand.
News that US-based drinks combine Constellation has snapped up the South African winery Flagstone for an undisclosed sum will have raised a few eyebrows - not least among the press corps for whom the ramshackle winery, with its garrulous bon vivant owner Bruce Jack, has been something of a favourite stop-off point for years.
There will doubtless be fears that this successful, quixotic winery will have much of what made it special beaten out of it by the corporate love of conformity. Yet assuming Jack retains power over the winemaking, as has been promised, it could be a good move all round.
For starters, even Flagstone's most ardent admirers would probably admit that it could do with a bit of love and attention from a decent range designer. Currently, it's not so much a ladder-brand as an assault course.
It should also mean an injection of cash that will allow Flagstone to grow. Currently, volumes stand at 300,000 six-bottle cases. With some investment in staff and the winery, there is no reason why it couldn't double that over the next five years, transforming it into the kind of powerful opinion-leading and critic-friendly mid-price-plus brand that South Africa so desperately needs.
Attached to the Flagstone deal is the winery's 26% stake in the empowerment project wine, Sesfikile. At 18,000 cases, this is still a small operation, but putting a social project in the hands of a genuinely powerful operator for the first time opens up some intriguing possibilities.
The chance to do some work in this area apparently appeals to Constellation, but the company's record with small brands is patchy at best. For any number of reasons, it is very much to be hoped that Sesfikile is bigger and better in two years' time, and hasn't been struck off by a bean-counter's pen in Guildford, where Constellation Europe is based.
The final element of the deal - and probably the most significant - is that Jack is taking over the production of Kumala. Prior to Constellation's acquisition of the brand, South Africa's runaway biggest wine was bought pre-made and pre-bottled from a broker. It worked tolerably well for the standard wines, but the quality of juice in the Reserve wines never came close to stacking up and looked like what it was: a crude marketing ploy.
Jack, though, plans to take the brand "back to the land", and "give it a South African soul".
"Having the opportunity to do good is what motivates me," he says. "It might sound naïve, but it's very African."
Such airy idealism is not, it must be said, usually associated with 2m-case brands, and given that plans to incentivise the growers do not appear to involve much more than enthusiastic communication, and certainly do not stretch to paying them any extra, it may not work. But it's a laudable objective nonetheless.
Certainly Kumala needs something. Sales have fallen by 20% from their 2.5m-case peak of a few years ago, with the quality of the wines unable to sustain across-the-board price rises.
Key to the wine's renaissance is surely the US, where it would be building from a low base and Constellation's distribution network is at its strongest. On the downside, there are no cultural links between America and South Africa, barring a partially-shared language, and the brand is entering an already crowded marketplace where other New World brands already have a solid foothold.
Jack, interestingly, is talking about revitalising the brand's growers to make their viticulture sustainable and their business models ethical. South Africa has officially-audited accreditations for both of these - Integrated Production of Wine (IPW) and the Wine Industry Ethical Trade Association (WIETA). Yet take-up for both has been lamentably slow in the Cape, largely because growers have been unable to see any benefit to subscribing to them beyond altruism.
Jack, though, sees his position at the sharp end of such a powerful brand as a way of pushing growers into going the extra mile, whether there is extra money at the end of it or not.
"My job is imposing wine values onto a commodity," he says. "Unless the growers are motivated, you're going to struggle. But they're ready for it."
We shall see whether they are or not. But certainly, the possibility of a large, ethically-sourced, viticulturally sustainable brand would be a mouth-watering prospect, and would surely play well in the States.
The trouble is that it would be far easier to introduce the wine to the US fully 'greened up', rather than pushing Kumala now and adding the eco-message later. It is doubtful that Constellation will wait a few years while growers are chosen and accreditations are finalised, so any ethical/sustainable moves may well remain a cute idea rather than an actuality, whatever the well-intentioned Bruce Jack might wish for at the moment.
Nonetheless, this is a good move for a brand that has long been in need of some soul to back up its spin.
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Analysis: Constellation's high hopes for South Africa