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The local wine industry has seen a general shift towards higher-value products, driven by millennials looking for novel, high-quality food and drink experiences, while wine grape producers are looking for ways to boost their earnings.
The profitability of wine production has been under pressure for some time due to rising input costs, tough market conditions and, recently, unfavourable climatic conditions.
This, in turn, has led to the area under wine grape production shrinking by 6% over the past five years and the number of wine grape producers declining by 34% to 2 874 over the past decade, according to the annual State of the South African Wine Industry 2018/2019.
Rico Basson, managing director of Vinpro, says the situation has sparked a renewed focus on higher-value products and higher price points per litre for both local and export markets, which should place the industry on a more sustainable growth path.
While local wine sales were down by 5% in 2018, primarily because of lower volumes being available due to the drought, the total value of sales increased by 1%.
The value of wine selling for under R30 a bottle, accounting for about 53% of the market, increased by 3%, whereas that of super premium (R72 to R108 and accounting for 7% of the market) and ultra-premium wines (more than R108 and accounting for 4% of the market) increased by 2%.
The value of basic wines (selling for R30 to R48, 32% of the market) was unchanged, while that of premium wines (R48 to R72, 4% of the market) declined by 8%.
Volumes were unaffected in the low price range, but declined 11% in the basic category, 14% in the premium category, 3% in the super premium category and 4% in the ultra-premium category.
Wine styles
According to SA Wine Industry Information and Systems (SAWIS), still white wines were the most popular wine style in 2018, followed by still red wine and perlé, or lightly sparkling wines.
Semi-sweet wines are still the most popular white category, accounting for about 42% of local consumption, followed by natural sweet wine, which accounts for 17% of consumption.
Sauvignon blanc is the most popular white wine varietal.When it comes to red wine, most consumers prefer red blends over specific varieties.
Dry red blends are the most popular, accounting for about 30% of the market, followed by naturally sweet red wines, which accounts for 17% of the market.
Women and urbanites are driving the demand for sweet rosé and red boxed wines, with rosé and sparkling wines now growing faster than any other wine categories.
Healthier options
The beer and spirits industry is catching on to the international trend towards healthier foods, resulting in a surge of wine, beers, and spirits that contain less or no sugar, alcohol, gluten and even animal by-products.
The cutback on alcohol has resulted in month-long abstinence, detox and sobriety events, such as Dry January and Mindful Drinking Festivals, even here in SA.
As a matter of fact, says Hein Koegelenberg, CEO of Leopard’s Leap, Dry January now seems to be extending into February.
“In the circles where I move the younger generation are drinking less and less alcohol.
They simply drink water – not flavoured water, just plain water,” he says.
The mindfulness trend resulted in many big players investing in non-alcoholic drinks, which has led to a surge of non-alcoholic beers from brands such as Heineken, Castle, Bavaria and Becks.
Diageo, one of the world’s largest distillers, bought a majority stake in Seedlip, a non-alcoholic gin, in 2016, while AB InBev, one of the world’s largest brewers, said it will grow its non-alcohol division to represent 20% of its global sales by the end of 2025.
Leopard’s Leap launched its first de-alcoholised wines in 2019 – a red blend made from cabernet sauvignon and cinsaut, and a white blend consisting of chenin blanc and muscat.
The product is a still wine, but most of the alcohol is removed through pressurised heat.
The wines contain less than 0.5% alcohol and only 30kJ per 100ml compared with ordinary wine that usually contains 364kJ per 100ml.
Van Loveren is another winery that has jumped on the bandwagon with its Almost Zero range, consisting of Ravishing Rosé, Radiant Red and Wonderful White.
Koegelenberg says the biggest challenge in making this “wine” is that consumers are looking for lower sugar content together with lower alcohol volumes, which is also why ordinary grape juice or grape cider is not a suitable replacement.
“Sugar, however, is needed to rebuild the drink into something more complex, otherwise it really does not taste good. Besides this, SA legislation does not allow winemakers to label zero or de-alcoholised products as wine or to mention the variety from which it was made, making it difficult to recognise the product,” Koegelenberg says.
Environmental awareness
Increased environmental awareness is also driving the demand for biodynamic, organic, vegan and more environmentally friendly packaged wines.
Uncanny Wines cashed in on this trend when they released SA’s very first premium wine in an aluminium tin can in October this year, with two ranges made from either chenin blanc grapes from the Swartland or merlot grapes sourced in Stellenbosch.
Arnold Vlok, co-founder of Uncanny Wines, says that sales have surpassed their expectations, with especially vegan shops, online publications and magazines responding to the product.
The wine has three selling points.
Firstly, no sulphur is added, which is a corrosive that could damage the cans.
Secondly, the carbon footprint of the products is much smaller than that of ordinary bottled wine.
Thirdly, plant instead of animal-derived products are used to stabilise the wine during production, resulting in a true vegan product.
He says the trend is in line with what is happening internationally, where canned wines have shown huge growth in the US, Australia and England over the past five years.
In the US alone, sales rose by 69% from June 2018 to June 2019, with the market estimated to be worth over R1.2bn.
Craft drinks
The boom in craft drinks has resulted in an influx of mass-produced products using “craft” labels as a marketing spin.
This has flooded the market with unauthentic products resulting in some consumers losing their appetite for the category and real crafters having to compete against mega-producers with huge marketing budgets.
The Real Craft Certification Authority, or just called RealCraft, was formed in 2019, to protect consumers against this bamboozling through certification.
In order to qualify for RealCraft certification, crafters are evaluated on business ownership, the way in which the product is produced and ingredients.
Gert Bosman of the Southern African Craft Distillers Institute, foresees that the craft beer market will consolidate in the short term, whereas the craft gin and rum markets will continue their growth spurts – but from more and smaller distilleries.
The outlook for the rum market is especially promising, according to him, as new legislation is in the pipeline that will allow for a greater diversity of rum styles in line with especially millennials’ search for new eating and drinking experiences.
This article originally appeared in the 12 December edition of finweek. Buy and download the magazine here or subscribe to our newsletter here.
