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SA Wine: A Taste of Success

Time Magazine recently ran an article about the woes facing the global wine market with too much wine chasing too few consumers. Amidst the gloom, the South African wine market shone. Here is an edited extract from the magazine.

Time_wine “During the apartheid era, South African wine was controlled by a government monopoly that set rules on viticulture that were every bit as strict as those in France. But in the last decade and a half, the industry has been essentially reborn as it has rushed to embrace the global market. The old monopoly has gone, and producers have replaced over 40% of the nation’s vines — ripping out the white grapes long favored for domestic consumption and planting a wide range of reds for export. And they’ve learned the hard way how to improve marketing and respond to changing world demand.

It has been a wildly successful time; South African wine exports have grown almost eightfold since the early 1990s, a stronger performance even than Australia’s (albeit from a lower base). Innovative marketing has helped.

But South Africa, too, is now facing a squeeze. The global wine glut has caused a drop in grape prices, and producers had to scramble to deal with a 50% appreciation in the rand between 2002 and 2005 that pushed them out of the sector in which they initially made their name: cheap and cheerful supermarket wines for the U.K. That hurts, but the glut’s impact isn’t as severe as it is in Australia or France.

The South African solution has been to stake out the middle ground, where it hopes it can offer good quality and good value. It wants to avoid the massive scale of the Australian industry, and concentrate instead on smaller volume but much more complex wines. South African producers are pushing hard into new markets, too, including Germany, Russia, the U.S. and Sweden, which alone now takes 10% of South Africa’s exports. So far, the strategy is working fine. "Our capacity to grow is fairly limited," says Sue Birch, chief executive of the industry body Wines of South Africa, "so if we’re going to be a niche player it is important to make a really premium product."

Producers still have one problem in common with the French: even as their exports continue to grow, their domestic market is shrinking. Wine consumption in South Africa, already relatively low for a producer country, is dropping, as some 1 million whites have left the country over the past decade or so and as tastes have changed. Reversing that trend could take years, but it won’t be for lack of effort.

One Saturday night in Soweto, local businessmen and women, trendy professionals and giggling teenagers are sipping, swirling, sniffing and sometimes guzzling bottles in a gymnasium. It’s the second annual Soweto Wine and Brandy Festival, designed to encourage the nation’s black middle class to embrace wine. Such consumers splurge on luxury cars, clothes and homes, but stick with traditional beer and spirits.

"There are at least 10 wine festivals per year in Johannesburg, and you can count on one hand the number of people of color who attend them," says Marilyn Cooper, who runs the local branch of the Cape Wine Academy and is one of the festival’s organizers. "We have got to get our black population drinking wine."

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