Wine Investment in South Africa - Cape Wine Academy
Wine Investment in South Africa - Cape Wine Academy
Wine Investment in South Africa - Cape Wine Academy
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Appendix B<br />
Interview with Ken Forrester<br />
Why is there currently little or no <strong>in</strong>vestment <strong>in</strong> SA w<strong>in</strong>es<br />
Firstly, there is not enough market size. In SA there are probably only 3m white and<br />
200,000 black <strong>South</strong> <strong>Africa</strong>ns who are economically active, perhaps 20% of that<br />
population would be active w<strong>in</strong>e dr<strong>in</strong>kers who might consider <strong>in</strong>vest<strong>in</strong>g. That’s about<br />
600,000 people - it’s t<strong>in</strong>y compared to European markets or the US or Asia.<br />
Also, there is not an educated w<strong>in</strong>e dr<strong>in</strong>k<strong>in</strong>g market here. People don’t have<br />
discern<strong>in</strong>g palates.<br />
And there is decl<strong>in</strong><strong>in</strong>g w<strong>in</strong>e consumption. So, there are fewer dr<strong>in</strong>kers dr<strong>in</strong>k<strong>in</strong>g less<br />
w<strong>in</strong>e.<br />
And no trad<strong>in</strong>g facilities for SA w<strong>in</strong>es<br />
SA w<strong>in</strong>es are currently trad<strong>in</strong>g at about 1/10th of their <strong>in</strong>ternational real value, judged<br />
on quality compared to foreign w<strong>in</strong>es. Because prices are cheap there is not enough<br />
marg<strong>in</strong> <strong>in</strong> SA w<strong>in</strong>es. To receive 20% return on a w<strong>in</strong>e you need expensive w<strong>in</strong>es to<br />
make it worthwhile. 20% on a R30 bottle is R6 – not attractive enough. 20% return on a<br />
R500 w<strong>in</strong>e is R100, that’s more attractive.<br />
This creates another problem, one of entitlement. Because w<strong>in</strong>es are cheap, people<br />
expect them to be, and stay, cheap. People feel entitled to cheap w<strong>in</strong>e, especially<br />
liv<strong>in</strong>g amongst v<strong>in</strong>eyards. There is a resistance to <strong>in</strong>creas<strong>in</strong>g prices – even though<br />
w<strong>in</strong>es are better, v<strong>in</strong>es are replaced, costs have <strong>in</strong>creased. Look at the reaction to the<br />
R1000 w<strong>in</strong>es out there, but a Margaux would cost you six times that.<br />
There is also a view of people overseas that SA w<strong>in</strong>es are cheap ie poor quality. This<br />
is an historical problem, go<strong>in</strong>g back decades.<br />
As an experienced restaurateur, can I ask why the on-trade doesn’t use auctions or the<br />
secondary trade <br />
The restaurant trade is probably divided up so that 50% of the trade is <strong>in</strong> Gauteng,<br />
20% <strong>in</strong> <strong>Cape</strong> Town, 15% the Garden Route, 15% KZN. So some areas have most of the<br />
trade.<br />
Consider <strong>Cape</strong> Town. The competition is fierce. There are about 4,000 restaurants for<br />
about 120,000 regular clientele. That means some 30 regulars for each restaurant, so<br />
imag<strong>in</strong>e what that means each week or month Why <strong>in</strong>vest <strong>in</strong> expensive w<strong>in</strong>es which<br />
might or might not sell – especially <strong>in</strong> hard times And why buy foreign w<strong>in</strong>es when<br />
people will look for the cheaper local alternative I’ve been told the One & Only <strong>in</strong><br />
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