The Challenges of the Wine Industry in South Africa

Johann Fourie reflects on the wine industry during these uncertain times, considering the romantic approach, vintage variations, and survival of wine!

"A quick Google search shows that wine is one of the oldest industries. Studies conducted in 2017 found evidence of wine production in Georgia nearly 8000 years ago. To put that into perspective: it took nearly 2000 years for humans to domesticate horses, 2600 years before we invented writing, and 3300 years before we completed the first pyramid. Moreover, Georgian winemakers today largely use the same tools and methods as their ancestors did eight millennia ago!

Why is wine timeless?

Hein Koegelenberg, CEO of La Motte Wine Estate, where the French Huguenot Gabriël du Toit planted the first vines in 1752, explained to me that much of the romance of wine lies in its age. Wine is generally vintage-specific. Each year possesses a unique character based on the growing conditions. This sense of history, combined with the fact that wines of each vintage can be unpredictable, adds to the mystique.

Yet, the wine industry in South Africa is struggling. Covid-19, lockdowns, and alcohol bans re-imposed when South Africa entered lockdown level 4 in July have significantly diminished sales. There are evident short-term consequences. Koegelenberg states: "Whether people have lost their jobs, had to close their businesses, or simply due to a general sensitivity in spending, Covid-19 has led many to purchase cheaper products. At the same time, wineries face the risk of overproduction due to the alcohol sales ban. Some premium brands are offering discounts they previously wouldn’t have, affecting mid-range selections as well. This change may be temporary but still influences the market."

How is the wine market changing?

When asked if there have been noticeable changes in consumer preferences, such as shifts in taste or preferences as consumers are now drinking more wine at home, Fourie suggests, "Consumer preferences haven’t changed. The consumer profile has changed! There’s a new category of wine drinkers who may know less about wine, take it less seriously, yet focus their attention on branding. The challenge for the wine industry is to connect with this new consumer. Winemakers and wine professionals often focus on traditional tastes and preferences, referencing terms like terroir and tannins. We need to pursue a new mindset about wine, or we risk missing an entire generation of wine consumers.”

However, the decline in wine is not just a Covid-19 induced effect. According to Wines of South Africa, the non-profit organization promoting the export of South African wine, the number of grape producers in South Africa has decreased from 4360 in 2005 to 2693 in 2020.

What explains this? And what can prevent further decline?

“It’s more profitable to plant other products like lemons and plums, leading many traditional wine growers to choose the more lucrative options. Consumers are accustomed to a specific price range for wine and are not willing to pay much more. Inflation is a serious issue affecting manufacturers. Over the years, producers have strived for better yields to ensure profitability, but at some point, yield affects quality. Many wine growers now produce double what they did 10 or 15 years ago. We can’t push this trend indefinitely. Moreover, inflation makes South African producers less competitive compared to their international counterparts.”

Higher yields have indeed enabled producers to increase their output. Between 2005 and 2019, exports surged by 153%. A recent study by a team of South African economists indicates that South African wines are increasingly utilizing geographical indicators (GIs) as value propositions. "Protected wine GI names command higher prices because some consumers may be interested in wines with specific origins and quality characteristics that differ from standard wines."

South Africa produces top-quality wines

Koegelenberg also sees the geography of South Africa as an advantage: "What makes South Africa the most exciting wine region in the world is its diversity and the discovery of new peaks. While we know that certain regions and climates work better for specific grape varieties, there are still many more to explore. Areas like Stellenbosch and Franschhoek are evolving as they grow. Even if traditional vine growing may be affected, I believe technologies like satellite mapping in the wine industry open up new opportunities. We could soon be operating in a smarter and more competitive way!”

It seems almost contradictory to consider technology and this ancient industry together. What does the future hold for wine? "While wine production technology is constantly evolving, the online space is the most exciting advancement for wine. It’s about understanding online behavior and how wine can make the most of this category. Covid has opened the online world for wine – from shopping to virtual experiences – and we cannot afford to neglect it.” An industry that has perfected its craft over eight millennia must adapt quickly. Whether it can market its timelessness to a busy generation will be crucial for continuing to produce exceptional vintages.