Wine Investment in South Africa - Cape Wine Academy

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Wine Vintage Platter’s Wine Wine Decanter IWSC Rating SA Spectator US Enthusiast US UK UK ( stars / 5) ( points/100) (points/100) Boekenhoutskloof 2004 5 90 92 Cabernet Sauvignon 2005 4.5 92 90 2006 5 92 91 2007 5 2008 5 Kanonkop Paul Sauer 2004 4.5 90 92 Trophy Gold 2005 4.5 94 Trophy 2006 5 92 2007 4.5 92 Gold 2008 4.5 Silver Gold Ken Forrester FMC Chenin 2004 4.5 91 Trophy 2005 5 92 2006 5 93 Silver 2007 4.5 93 SA Top 10 Trophy 2008 5 92 5 stars Silver Table 11. Selected SA investment wines showing consistency over time in international ratings This is an area that Johann Krige of Kanonkop feels puts off potential overseas wine investors. He feels that SA wines lack credibility, buyers are unsure as to their reliability, quality and ageing potential. It will take many years and lots of blind tastings of older vintages to show that they have investment potential. Krige holds vertical tastings of his Paul Sauer red for his distributors around the world in their home countries to prove its quality and often finds that his wine is most preferred when pitted against Bordeaux first growths. Bruce Jack concurs, ‘ I’ve drunk ( SA ) Cabernet blends from the 1960’s that are still alive and magical’ ( Jack, 2006 ) and Beyers Truter recently enjoyed a ‘delightful’ Tassenberg red from 1969. The world seems slow to accept this, however, there appears little change in the five years since Vergelegen’s UK agent wrote, ‘give it time…it took many years before Grange took its place in fine wine trading circles’ ( Strachan, 2006 ). 8.2.9 Lack of awareness A lack of awareness refers not only to the international investor recognition of SA wines but also to a domestic lack of realisation of investment potential in domestic wines. Rob Morris 59
found an even more serious lack of understanding of investment in en primeur amongst SA producers in a 2007 survey. Morris found that many wineries said they offered en primeur wines but did not understand what this meant and were really only offering secured allocations at the release price ( Morris, 2008 ). Johann Krige of Kanonkop supports this; ‘South Africa doesn’t understand en primeur’ ( Krige, 2011 Appendix E ). International investment in SA wines on any real scale is still a long way off. This may be partly because of a lack of awareness of SA fine wine quality. The reference website Wikipedia sums up why this is so, ‘For much of the 20th century, the wine industry of South Africa received very little attention on the world stage’ ( Wikipedia, 2011 ). Now, attention is being drawn to SA fine wines but with competition from California and Australia as well as the classic regions it could take many years for them to be considered amongst investible wines. Many wine consuming nations do not have access to SA wines and in major markets their visibility is poor. Mike Fisher writes to potential investors in the US; ‘South Africa is the least known of the major wine-producing regions amongst US consumers. Go into any grocery store and of the 300 wines on the shelves, you will be lucky to find more than one or two of South African origin’ ( Fisher, 2011). Familiarity with SA branded wine is the basis for people to trade up and if the consumer is unaware of SA wines, there is no basis for investment as there are no customers for the secondary trade. The founder of the first wine investment company in the US, Michael Wigley clearly identifies the problem, “A wine can be great but if no one’s ever had it, it’s not a good investment’ ( Wigley, 2007 ). There is also a lack of awareness by SA investors of the potential returns from wine investment and of a lack of understanding of how asset investment in wine can be easily achieved by novice investors. People might not invest money in anything which is new and unknown to them and for some it may be that they are completely unaware that wine investment is so successful abroad and that such returns can be made. This may be because the returns on wine have often been understated ( Fogarty, 2006 ). In a report on Australian wine investment, James Fogarty proposes that wine returns are better than most literature shows because investors mostly avoid poor vintages and thus are not subject to analyses of wine prices which include all vintages. Also, Fogarty points out that in many countries wine returns are not taxed whereas other assets are, so ‘as the comparisons of 60
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Wine Investment in South Africa Dav
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Acknowledgements The following all
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Contents Acknowledgements………
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List of Tables Table 1 Key investme
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1.2 Scope of Assignment Wine invest
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The barriers that seem to exist whi
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meet future market demand. The 1855
Page 15 and 16: after seller’s premium ) giving t
Page 17 and 18: Hence the growth of dozens of inves
Page 19 and 20: Table 5 above shows an even more im
Page 21 and 22: Thus 1 case brokered personally or
Page 23 and 24: would avoid the need for the invest
Page 25 and 26: For the top châteaux, returns have
Page 27 and 28: ‘bargain’ prices. This requires
Page 29 and 30: Ratcliffe, though, believes that,
Page 31 and 32: 2e) buying through an investment co
Page 33 and 34: worldwide and hugely increased the
Page 35 and 36: 6.1.2 Securing a release price High
Page 37 and 38: Other vintages should be considered
Page 39 and 40: Indices Level MOM YTD 1yr 5yr Liv-e
Page 41 and 42: may be legally more deserving than
Page 43 and 44: Even with the best intentions, wine
Page 45 and 46: Ullages (Level of Wine) For Bordeau
Page 47 and 48: Section 2 Chapter 7 7.1 South Afric
Page 49 and 50: people distrust wines of age and do
Page 51 and 52: 8.2.3 Domestic recognition of SA fi
Page 53 and 54: ‘It would be depressing indeed to
Page 55 and 56: some top producers do not enter the
Page 57 and 58: found in numerous bottle shops - an
Page 59 and 60: cR50,000 in SA or an underground ce
Page 61 and 62: The need for investment from abroad
Page 63 and 64: Krige is selling previous vintages
Page 65: ‘South Africa may not have as muc
Page 69 and 70: important to establish to the world
Page 71 and 72: cases the CWG wines achieved higher
Page 73 and 74: ecession. Table 16 below shows wine
Page 75 and 76: seeing négociants make huge profit
Page 77 and 78: wine market. De Toren’s will be m
Page 79 and 80: For this reason, savvy investors mi
Page 81 and 82: Section 4 Summary and conclusions T
Page 83 and 84: References 90pluswines. (2011) http
Page 85 and 86: Goode,J. (2009) http://www.wineanor
Page 87 and 88: Norman, R. MW (2011) Chenin Challen
Page 89 and 90: Van Rensburg, A. (2011) The Big 5 S
Page 91 and 92: Appendices Appendix A Interview wit
Page 93 and 94: CT has still got 2/3rds of the fore
Page 95 and 96: We were one of the first to offer e
Page 97 and 98: There is no way forward for SA wine
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Wine Investment in South Africa - Cape Wine Academy

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