The Losh Cause – South Africa needs stronger brands
As they gather in London for their annual tasting, Cape wine producers have two rather unpalatable facts to contemplate - falling sales in the UK and the country's failure to build its presence in the GBP5-plus category. Chris Losh believes the absence of strong power brands lies at the root of both problems.
News that South Africa's sales in the UK have gone backwards has sent a shiver through the Cape's winelands. It's not just that the country's sales seems to have ground to a halt well short of the 10m case mark many still think a realistic goal in the key UK market, but the sheer scale of the fall - 1m cases in the last year - that is so worrying.
Currency, for sure, has been a factor here. The rand has been consistently strong for the last 18 months (around ZAR12 to the pound) which has caused companies to tighten their belts and, often, cut back on the promotional work that is the only guaranteed way of driving volume in the UK.
Yet this is only part of the story. With the exception of Kumala, which is currently being intregrated into the Constellation portfolio, South Africa has clearly failed to create sufficient powerful brands. There are plenty of them out there, but none seems to have much real resonance with the consumer. Over half of South Africa's 13 biggest brands have seen double-digit declines over the last year.
It's the big players who have let the country down. The likes of Distell and KWV have signally failed to have any impact in creating power brands in the UK. Just compare their track record in brand development to their counterparts in other New World countries. Does Roberts Rock compete with Montana? Nederburg with Casillero del Diablo? Not even close. Even Kumala was a UK creation.
Yet while it's clear that producers haven't done enough to connect their products with wine consumers, the efforts of the generic body Wines of South Africa (WOSA) have come under fire too.
For the last two years, their strategy has been to leave the mass market largely to the brand owners and to work with retailers to promote wines over GBP5 (US$9.33). It's a laudable aim - and two years ago, when South African sales at this level were taking off, there was even a certain logic to it.
The only problem is that it hasn't worked. In early-2005, WOSA was talking confidently of passing the half-million case mark for wines over GBP5. Nearly two years - and a lot of money - later, the country's sales in the GBP5-plus category remain stalled at 465,000 cases, and actually fell last year.
WOSA is hoping that its biodiversity campaign - unveiled at Cape Wine in April and rolled out to the public this summer - will reinvigorate the higher price bands, by getting consumers to focus on aspects other than price.
While the initial focus of the biodiversity campaign - linking The Cape's wide variety of terroirs (as evidenced by its floral kingdom) to wine - is almost certain to prove too esoteric for all but wine nerds, there might be some mileage in the eco-farming aspect.
"This is a long-term positioning," says Sophie Waggett of WOSA in the UK. "I can see the campaign going on for maybe ten years. After all, it took New Zealand a long time to build up their image."
Ah yes. New Zealand. The South Africans are quick to point out that they see the Kiwis, rather than the Aussies or Chileans as a business model; to be a niche, rather than mass-market player. And since both countries have a fragmented and relatively high-cost wine industry there are parallels.
But there are two key differences as well: firstly, New Zealand has a much smaller vineyard area than South Africa, secondly, when it started exporting 20 years ago, its industry was tiny. It has been able to create a niche position from a situation where demand constantly outstripped supply.
Neither of these is the case for South Africa, whose 100,000 hectares might not be much compared to Australia, but are five times more than the Kiwis. It means that if South Africa is, indeed, to be a niche player, it will be a big one - and current trends are not encouraging.
If the country hasn't broken the half-million case barrier for GBP5-plus wines this year, it makes the hoped-for aim of 750,000 cases a year by 2009 look wildly optimistic.
Everyone wants to sell more expensive wines - of course they do. But South Africa, frankly, hasn't done the groundwork yet. It needs a solid base of half a dozen mass-market, 500,000-case-a-year brands from which people can trade up, not airy ads about soil and flowers.
And the sooner it realises that, the better…
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