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VinPro(SA) Bulletin
June 2001
Confidence index is neutral - Agri SA
The Agricultural Chamber of Commerce has just released the first round of results disclosing the Agri SA confidence index for the first quarter of 2001.
The results indicate business confidence of Agri SA to be neutral to slightly positive, compared to the first quarter of 2000. The confidence is rated on an index of 0 - 100, representing negative and positive business confidence respectively. The total index point amounted to 51,9.
Agri SA expects increased exports, bigger turnovers and better economic growth, indicating positive business confidence. The three key factors that impact negatively on business confidence are employment, new investment and an increase in bad debt.
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Trends in the wine market
The need for a shift in emphasis from a production oriented to a market oriented wine industry cannot be sufficiently emphasised.
Wine writer Oscar Foulkes stresses that the focus should be on the market in the light of the following obvious trends, which are, however, very easily disregarded.
The product
- Increasing demand for red wine and a bigger price sensitivity as far as white wine is concerned.
- As new releases increase, different packaging styles create more and more confusion among consumers.
The consumer
- Is becoming more and more discerning and better educated.
- The smallest segment of consumers falls in the 20-29 age group.
- Consumers spend less on wine as a result of a more frugal lifestyle necessitated by economic pressure.
- Consumers purchase increasingly at supermarkets offering lower prices.
Supply and demand
- The demand for red wine is currently exceeds the available supply.
- White wine is oversupplied.
- The result is an increase in red wine prices, while white wine prices are becoming increasingly sensitive.
- The industry reacted by planting more red cultivars, but the present composition is nevertheless still in the vicinity of 74% white cultivars and 26% red cultivars.
The value factor
- The market for good quality wine (cultivar wine in particular) in 1 litre cartons appears to be growing. The reason for this is the convenience factor and the value for money offered by this kind of packaging.
- The USA trend of so-called "downshifting", where consumers are less concerned with image and more with good value, is also reflected here.
Market statistics
- South Africa's best sellers: dry white; semi-sweet and red blends
- South Africa's worst sellers (currently): Cap Classique; Merlot and Shiraz, although possibly due to limited availability
Source: 2000 Alcoholic Beverage Review
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What happened to brandy?
In 1997 brandy sales reached an incredible peak of 56 million litres, but scarcely three years later sales slipped back to 13,5 million litres - levels last experienced in 1992/93.
With only 42 million litres of brandy consumed in 2000, this is the fastest declining category in the total South African market for alcoholic beverages. However, brandy remains the most popular spirit by far, followed by whisky and vodka.
The last few years a concerted effort has been made to find answers to the decline in consumption and eventually it boils down to price. Brandy suffers from the same economic pressure experienced in all segments of the market.
Except for the fact that the average disposable income has decreased over the past few years, money traditionally spent on alcohol must now be divided to deal with increased petrol prices, gambling, cell phones, satellite television, home computers, internet and lottery tickets.
The biggest brandy market, being black consumers, experienced additional pressure as a result of new financial empowerment and the deployment of government housing schemes. House bonds are one of the reasons why these consumers have less disposable income to spend on brandy. Status is another priority, as may be seen from the billions spent on cell phones and brandy drinkers' shifting consumption pattern, from premium brown spirits to a more affordable premium brand, the most conspicuous being Smirnoff vodka.
In taverns consumers used to buy a "nip" (200ml) or a few clubbed in to buy a bottle. In recent years, when a "nip" could no longer be bought for under R10, consumers would rather buy two "quarts" of Castle at approximately R4,20 each for their R10, or perhaps even a 5-litre foil bag for R13.
Almost all premium brands have established their foundations in the black consumer market. Those who did otherwise and are being consumed mainly or exclusively by white consumers, are Wellington VO, Chateau VO and Klipdrif. In SA Klipdrif still remains the biggest brandy, both in volume and value, with Edward Snell's Wellington VO occupying second place.
BRAND MARKET LEADERS
1 Klipdrif
2 Wellington VO
3 Richelieu
4 Viceroy
5 Bertrams VO
6 Oude Meester
7 Martell VO
Source: 2000 Alcoholic Beverage Review
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