The Value of South African Wines: Are They Too Cheap?

Let’s take a closer look at this topic. There are many aspects to consider. Firstly, why do wines cost what they do? Secondly, why do some South African wines come cheap while others are more expensive? Are they generally too inexpensive? Do they provide real value? And thirdly, is there really a cultural undercurrent?

Affordable South African Wines

To thoroughly explore this issue, we should segment the market a bit. In Europe, there are many inexpensive South African wines. For instance, you can find delicious options at Tesco, Morrisons, or Sainsbury's, typically around €7 to €10. These wines offer good value in their price category.

The pricing of these wines is generally non-negotiable. They are often produced in large quantities, meaning manufacturers need retailers more than the other way around – it’s their only access to market. If they were to increase prices, they risk losing buyers who know they can sell 100,000 bottles of Wine X for €7, but only 1,000 bottles of the same for €9. This is not just an issue for South African wine, and thus is not the primary focus here.

Why Do Wines Cost What They Do?

On one side, wines have a certain price point. Producers either sit on considerable assets (owning the vineyard, paying off a purchased one, renting, or sourcing grapes). Agriculture incurs costs from labor, equipment deprecation, maintenance, and care. Additionally, they possess a winery with pricey machinery that is operational for only a few months a year. All these expenses accumulate and must be divided by the number of bottles produced yearly for producers to derive their production costs.

Another perspective is: A wine costs what it costs because there are customers willing to pay that much. This brings the laws of supply and demand into play. The market value of the wine is determined by its demand. If demand exceeds supply, the market value rises accordingly. Conversely, it works the other way too. Ideally, producers should price their wines to match what the market is willing to pay.

On our first trip to South Africa in 2000, everything from food to wine seemed extraordinarily cheap. The strength of the Euro against the Rand meant that items in South Africa that would be prohibitively expensive in Europe felt within reach – we could enjoy fine dining and order the finest wines available, not just those on top of the menu. Although the Rand has fluctuated over the years, South Africa still feels very accessible price-wise.

How Much Do South African Wines Cost in South Africa?

Here, you can enjoy world-class wines. These wines are considered quite expensive in the South African market, often priced between 250 and 500 Rand. You can also find decent wines for about 100-150 Rand.

This isn’t a cultural quirk: it simply reflects that local wines in South Africa are cheaper because many things there are less costly. For instance, compare this with fine wines from California, which can seem very expensive for a European visiting. Yet the local market pays those prices.

What About More Expensive South African Wines?

Currently, there are wines that exceed 1,000 Rand in price. This can be due to two reasons. The first is actual demand, with producers setting high prices as a line of customers are waiting to purchase these wines and can afford them. If these valuable bottles were sold cheaper, they could potentially end up on a secondary market with others profiting instead of the manufacturer.

The second reason is ambition, ego, or sheer audacity: A producer aspires to create their iconic wine and thus sets a hefty price – ultimately, the market decides whether this high price will be successful or not.

(Source: Wines of South Africa)