Wine Investment in South Africa - Cape Wine Academy

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
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