The annual publication of this indispensable trade guide by Hotel & Restaurant puts the spotlight firmly on the growth of premium, higher price brands – while providing a comparative framework to measure wine trends against the performance of other alcoholic beverages, from beer and brandy to whisky and white spirits.
In a mixed report, Editor Andrew Moth, a veteran observer of wine and spirits, identifies ten trends in domestic and export wine markets during 2006:
* Domestic wine consumption fell for the fourth year – recovery rests on new brand growth in the black market where wine is perceived as a 'highly aspirational category'.
* Almost half of South Africa’s domestic wine is now exported – albeit onto fickle markets flooded with a global white and red wine surplus and cut-price brands.
* Exports are down in established entry-level brand markets (UK/Netherlands) but growing strongly in more profitable high-value markets (USA, Canada and Germany).
* HP (high price – defined as over R20) wines grew at a sound rate of 7% on the domestic market – and premium wine brands are driving growth in newer markets.
* LP and MP (lower/medium price wine brands) continue to decline at home – though they still account for over two-thirds of wine sales.
* Red wines and rosé wines are increasing while white wines decrease in sales.
* The increased competition for shelf space by 700 producers with 5000 wine labels is overloading the domestic market – and leading to new marketing strategies by smaller producers which band together within distribution networks.
* The supermarkets have 'a pricing stranglehold' over HP wines - bad news for all the small-scale new cellars coming on line who struggle to get listings in limited categories.
* Consumers know about the surplus – accelerating downward pressure on brand prices; and
* There is a low level of wine brand awareness among conusmers relative to other beer and spirit brands.
In response to the growing global wine lake, Moth cautions wine producers, 'Too many attach too much importance to the plethora of domestic awards, competitions and critics that make them feel good but contribute very little to the bottom-line.'
The pecking-order of the market leaders in profitable wine brands was unchanged between 2005-2006. It might surprise wine critics and consumer media who focus only on super-premium wines to discover the real workhorses of the wine industry – namely Nederburg, The Saints, Graca, Grunberger, Chateau Libertas and Bellingham – the top-selling big six HP brands, respectively. The top-selling six wines are ranked as Graca, Chateau Libertas, Nederburg Baronne , Grunberger Rosenlese, St Anna and Nederburg Rosé. Good-value brands which increased market share were Chateau Libertas, Nederburg Baronne, Two Oceans, Van Loveren Four Cousins and the Saints.
Many key industry leaders – Distell, DGB, KWV, Pernod Ricard, NMK – contribute revealing analyses to the Alcoholic Beverage Review. Tim Rands, MD of Vinimark, predicts, 'Red wine is no longer this scarce commodity. It is just another beverage drunk alongside white and rosé wine, and it will have to compete at the same prices. More wine is being consumed in the HP wine market than we have ever seen before. It is difficult to justify the higher prices that some producers are charging ... There is simply no way that over 700 producers can effectively sell a proliferation of over 5000 wines. There will have to be some form of consolidation in the market.'
Distell owns seven of the top ten premium wine brands and four of the top five super-premium wines. Samantha Elsom from Distell echoes many commentators' concerns. 'Price points are migrating downwards as the trade deeply discounts products. The stronger Rand has also forced local producers to focus on the local market, where competition (for shelf space) has increased and margins are under pressure … The degree of consolidation differs from one price segment to another. Fewer large players dominate in the premium sector while the ultra-premium sector is characterised by multiple brands, each owning smaller slices of the pie.'
While R805,7m was spent on advertising alcoholic beverages last year – the spend on wine advertising was down to only 2,7%, with 60% going to support the ten big brands. In an insightful debate on the relatively low level of brand awareness of wine compared to beer and spirits, the report concludes 'the SA wine market is close to saturation and unable to support labels initially conceived for the export market.'
Vinimark’s Tim Rands warns producers of the high costs of marketing wine brands in an over-crowded commodity market with limited listings – and that success will depend on growing the black market. He concludes, 'Supermarket wine buyers will deal with some new labels in the short-term but long-term they will drive those brands that are supported by strategic advertising. They can’t deal with every wine producer.'
* Alcoholic Beverage Review 2006, 160pp, R185, with commentary, statistics, category analyses, a separate entry on the wine export sector, a directory and useful guide to who has what brand in all wine and spirits categories.
To order, tel: 021 530 3143, email raziya@rsp.co.za or see www.hotelandrestaurant.co.za