Speaking on her return from Europe, Su Birch, CEO of Wines of South Africa (WOSA), said the export performance for the first nine months of the year would seem to suggest that volumes for 2004 would grow by at least 14% on last year's 237 million litres, instead of the 11% initially projected. Last year, volumes grew 10% on 2002.
Expressing cautious optimism she said: "After ten years of international trading, South African wines have come into their own among consumers in Europe. No longer do we have to sell the country as a wine producer before focusing on the wines themselves. Our reputation comes ahead of us. However, the challenge will be to build volumes and simultaneously protect margins."
And leading British drinks publication Harpers has praised the local wine industry for re-inventing itself in the post-apartheid decade. For the first time, South African retail wine sales in the UK exceeded the 10% mark in value and volume share, breaking through the all-important £5 price barrier by over 500 000 cases.
Despite the majority of producer countries having been forced to drop prices in UK retail, which remains the biggest market for most competitors, South Africa has instead pushed up selling prices to an average £3,80 per bottle from £3,68 a year ago. While market leaders Australia and France that have seen their value share of the market fall along with several other prominent players, South Africa has strengthened its value stake, moving up a notch to fourth place, edging out Italy into fifth position.
According to the most recent data released by ACNielsen, South Africa's value share of UK retail was 10,1% for the 12 months to the first week in August 2004, up from 9,4% for the previous 12 months. Over the same period, volume share moved up to 10,2% from 9,7%.
Birch says most significant has been the capacity of many South African producers to move beyond extreme value pricing to price categories with healthier margins, which in turn is helping to shift perceptions of South Africa as exclusively a source of mainstream value wines.
"We set ourselves a target in the UK of selling half a million cases of wine for £5 or more in 2005 and we reached the mark a year ahead of schedule. At the same time we are growing faster than any of our competitors in the £7 to £8 category. However, if we accept the projections that this year 7,8 million cases of £5+ will sell in the UK, we still have the potential to increase our share of this segment in a significant way. We are also aiming for an average retail price of £4,16 a bottle, critical to our goal of reaching a value share of over 13% next year."
In Germany, South Africa has moved from ninth to sixth place. Volume growth of 27,3% in 2003 over 2002 is being sustained this year, according to German wine market specialist researchers Macrom. The company's latest study showed that the appeal of South African wines lay in their European styling and 350-year-old wine history to distinguish them from other New World competitors, boosted by advertising and promotional activity. Moreover, the country's strong tourist appeal was impacting on wine sales, with over 180 000 German tourists visiting the Cape last year.
Birch said: "For the month of September, South Africa has moved up from sixth position in Sweden to third, driven largely by bag-in-box wine sales which account for over half of all wine sales in the country.
"For the first six months of the year, sales to the US increased 44% by value and 41% by volume on 2003, according to the US Bureau of the Census, Foreign Trade Division."
She emphasised that while growth was very encouraging and that relative to its global competitors, South Africa had much reason for pride and optimism, it was nevertheless important to remember that margins were under extreme pressure and even the biggest wineries were struggling with their bottom line. "For the smaller wineries the situation is even harder as they don't have the same resources to attract attention in an overcrowded marketplace."
BY DKC (DE KOCK COMMUNICATIONS)
FOR WINES OF SOUTH AFRICA (WOSA)
QUERIES SU BIRCH, CEO, WOSA (021) 883 3860, 082 563 0677
TESSA DE KOCK/PIPPA PRINGLE, DKC (021) 422 2690, 082 579 2358
*Wines of South Africa is the international marketing company of the South African Wine and Brandy Company.