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A Technical Guide for Wine Producers
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MARKETING : BUZZWORD OR SOLUTION ?
INTRODUCTION
The world currently produces more wine than it can consume. The per capita consumption of wine is falling, especially in the major producing countries. The wine economy, nevertheless, is the livelihood of grapegrowers and winemakers as well as those industries associated with its production and marketing.
The wine industry is production based. As a result it is poorly placed to facilitate change and to adjust to a rapidly changing competitive marketplace. Increasingly, across the wine producing nations of the world, the realisation is dawning that the wine industry's future is geared to meeting the expectations of the wine consumer.
Marketing is a matching process. It is the profitable matching of an organisation's resources with a customer's needs and wants. It includes:
THE WINE FACTS
Between 1981 and 1997, world wine production fell by 20.7%, and consumption by 20.4%. However, value of sales is rising, reflecting increased sales of better quality wines. Overall, sales have grown strongly in non wine-producing countries, whereas volume sales have declined in producer countries.
In terms of volume sales, the leading markets in the world are Italy, France, Germany and the USA - the top ten leading markets account for 77.7% of total global sales. In value terms, the leading markets for wine are the USA, France, the UK and Germany.
The most rapid growth in per capita alcohol consumption is evident in the world's developing economics, such as China, Iceland, India, Israel, Japan, Malaysia, Marocco, Singapore, Taiwan and Thailand.
Old world countries such as France, Italy, Spain and Germany are collectively seeing a decline in production, exports, as well as consumption. In contrast, new world countries, such as Australia, Chile, Argentina, New Zealand, USA and South Africa, are collectively seeing an increase in production, increased exports and growing consumption.
However, while South Africa is classified as a 'new world wine country', we are somewhere between the old and the new world (production and consumption are declining, but exports are growing. Refer Table 1 for a comparison). We are struggling to get rid of the sanctions/protection culture; the industry is fragmented; we are resource/product driven; and the industry's actions show that we don not understand the new drivers of a successful wine industry.
Table 1: Comparison of wine performance : South Africa vs Australia
The production figures are misleading. Looking at the classic varieties (Chardonnay, Cabernet Sauvignon, Merlot, Sauvignon Blanc, Shiraz, Pinotage) required by export markets, Australia produces almost 3.5 times more than South Africa.
Clearly, while South Africa is generally categorised as a new world wine country, characterised by new technologies; new innovation in wine production and marketing; and setting the direction for the future global wine business; our results indicate that we do not quite belong in that league. We are largely being categorised and judged on our potential rather than our reality. This, indeed, provides our biggest opportunity yet to make it "big" in the world wine business.
THE NEW CONSUMER DEMANDS
There is nothing subtle about the way the market, and consumers, have changed. Gone are the days where they will slavishly follow traditions, cultures, popular views and the opinions/beliefs of the wine-makers.
Wine is no longer a category on its own. It forms part of the broader category 'alcoholic beverages'. Today's consumer makes a choice between fruit juices, sparkling water, tea, wine, wine coolers, ciders and many more. For example, consumption of wine in the USA over the period 1980 to 1997 declined by 7.5% (to 7.4 litres per capita p.a.), while consumption of fruit juices increased by 25% to 35 litres, and soft drinks by 54.4% to 200 litres. In the UK soft drinks consumption increased by 107.3% (to 85 litres per capita p.a.), water by 1589% to 15.2 litres, and wine by 'only' 98.9% to 14.3 litres.
The new consumer, whether in the UK, USA, France, Australia or South Africa, prefers:
Wine is no longer an 'every day' beverage, but rather a 'lifestyle' drink in old wine countries. In new wine countries, what was once an elite drink is now regularly consumed. Gradually, the wishes of consumers in different countries are beginning to converge. New drinking patterns are being established.
On top of this, governments world-wide, are set to reduce alcohol consumption. In the European Union, their target is 50%. The health benefits of wine, and red wine in particular, are paling against the proven negative impact of alcohol abuse on health risks such as cancers' liver cirrhosis, traffic accidents, and other social problems. Indeed, indications are that the next big onslaught, after drugs and tobacco, could be aimed at alcohol, which include wine.
All of this contribute to a changing market and changing consumer behaviours. Indeed, success in the wine business has become a marketing issue, much more than a wine producing issue.
THE WAY AHEAD
The traditional European producers (France, Italy, Spain, Germany and Portugal) have dominated the world trade in wine, but in the last ten years this position has been challenged by new exporters from non-traditional wine trading countries (Australia, Chile, Argentina, New Zealand and South Africa) who initially benefited from the growth in wine consumption in non-wine drinking cultures and more recently are gaining market share at the expense of traditional exporters in both established and new export markets.
We can learn from the successes of the likes of Australia and Chile. They understand the role of marketing in overall success, much better than anybody else. In their context the elements of success are:
The four key success factors of introducing and developing brand recognition, are:
CONCLUSION
Marketing is concerned with adjusting the way you do business, albeit production methods, focus, beliefs, traditions and structures, in order to create value for selected consumers as the foundation of creating long term relationships with them. The middle segment, where consumers expect a reasonable quality/price ratio, is going to be the future battlefield. But success here will be determined by two factors: (1) well established brandnames in the top segment are required to provide overall image and reputation, and (2) the domestic market needs to be fully developed. Both these aspects provide interesting challenges to our wine industry.
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