After the Bell: The cheerful veritas of SA’s wine industry
South Africa’s wine industry shows not only the country’s resilience, but also what other industries might have to do to succeed.
South Africans become depressed easily. The amount of soul-searching, plan-making, and frustration-talking in SA is legendary, especially when, like now, there is plenty to be depressed about. When you see headlines like “Stage Six for the foreseeable future”, what option do you have but to vent? It’s totally understandable.
But if there is one contrary indicator, to me, it’s the SA wine industry. And you will see very little of this in the finances of the industry, or the level of exports, or even in production levels. But personally, I think the wine industry shows not only South African resilience, but also what other industries might have to do to succeed.
Why is that? Well, you have to throw into the mix the competitive environment. Few industries are as long-lasting, with such deeply entrenched participants, and with such enormous international competition as the wine industry. It is a head-to-head, global industry.
Yet, to cite one example, British wine writer Tim Atkin has just completed his 11th successive report on SA’s wines, coming to this conclusion: South Africa is producing the “greatest wines in its history”. Atkin has an extraordinary perspective to make this judgment; he does regular reports on Bordeaux, Burgundy, Rioja, Argentina and Chile, among many others. These are some of the greatest wine-making regions in the world.
He is exceptionally knowledgeable about global wines and is enthusiastic and insightful about not just the wine itself, but the industry and its people. He does a great podcast, by the way, interviewing well-known winemakers, called Cork Talk (which is only marginally less popular than the StandUP! Business podcast).
He is also a fabulously good judge of SA wines in particular and has not always been an unqualified enthusiast. But in this year’s report, he was fulsome in his praise, scoring a whole bunch of wines more than 95 out of 100. Obviously, there will be arguments and disagreements; but overall, I think he nails it.
Yet, to be honest, SA’s international recognition as a quality wine producer is middling, at least judging by comparative prices. As a wine enthusiast myself, I agree with Atkin that SA’s wines compare extremely well with the best the world produces at the moment — and that really hasn’t been the case in the past. There is a little bit of cultural cringe, lots of catch-up, and quite a bit of vested interest at work here, particularly in the European industry.
“It’s still significant that the wider world, let alone many South Africans, does not appreciate the quality of Cape wines, both white and red. Can they compete with the best from elsewhere? They can, they really can. And I say this as someone who tastes top wines on a regular basis,” Atkin says in his report.
Yet, the industry figures suggest an industry at best in a holding pattern, and at worst in contraction mode. A decrease in the size of the land under vines is actually not as bad as it sounds, because it suggests a better balance between consumption and production. The EU, for example, which pours millions into Europe’s wine industry, is spending about €200-million this year to reduce vineyard sizes in Europe. By contrast, SA farmers get nothing from the government.
SA produced about 1.35 million tonnes of grapes in 2011 and it produced that exact quantity in 2022. Exports are a little bit up, but not by much over the same period. So how do I get to the conclusion that this industry is a great example of resilience?
The problem is that the general industry figures are heavily influenced by bulk wine, which constitutes about 60% of SA’s production and exports. This is very cheap wine, typically exported in huge containers. That has been very static and disguises the revolution that has taken place at the top of the industry — a much smaller niche. Overall, the top end of the industry is showing all the great characteristics of businesses in competitive flux and growing stature.
The reasons, I suspect, for the flourishing top end is that it is flexible, experimental and well led by some excellent people and producers with great business sense. You can see this most clearly in the state’s tax revenue from wine sales, which has just exploded over the past decade — partly because the government keeps grabbing more! But fortunately, producers’ income has more or less kept pace and has also increased decently.
It’s easy to laud growth companies; everybody loves them, with good reason. But the tougher challenge is to thrive in a declining industry — and that is what the wine industry is; global consumption is declining sharply. SA’s wine industry, as struggling as it is, has great lessons for sectors much larger and more fashionable.
In vino veritas, the Romans used to say, meaning people may be more inclined to tell the truth when they are a bit tipsy. But the wine industry tells a different truth, IMHO: success, if it is real, is achieved, not granted. DM