Wine Investment in South Africa - Cape Wine Academy

More documents

Recommendations

Info

Appendix B Interview with Ken Forrester Why is there currently little or no investment in SA wines Firstly, there is not enough market size. In SA there are probably only 3m white and 200,000 black South Africans who are economically active, perhaps 20% of that population would be active wine drinkers who might consider investing. That’s about 600,000 people - it’s tiny compared to European markets or the US or Asia. Also, there is not an educated wine drinking market here. People don’t have discerning palates. And there is declining wine consumption. So, there are fewer drinkers drinking less wine. And no trading facilities for SA wines SA wines are currently trading at about 1/10th of their international real value, judged on quality compared to foreign wines. Because prices are cheap there is not enough margin in SA wines. To receive 20% return on a wine you need expensive wines to make it worthwhile. 20% on a R30 bottle is R6 – not attractive enough. 20% return on a R500 wine is R100, that’s more attractive. This creates another problem, one of entitlement. Because wines are cheap, people expect them to be, and stay, cheap. People feel entitled to cheap wine, especially living amongst vineyards. There is a resistance to increasing prices – even though wines are better, vines are replaced, costs have increased. Look at the reaction to the R1000 wines out there, but a Margaux would cost you six times that. There is also a view of people overseas that SA wines are cheap ie poor quality. This is an historical problem, going back decades. As an experienced restaurateur, can I ask why the on-trade doesn’t use auctions or the secondary trade The restaurant trade is probably divided up so that 50% of the trade is in Gauteng, 20% in Cape Town, 15% the Garden Route, 15% KZN. So some areas have most of the trade. Consider Cape Town. The competition is fierce. There are about 4,000 restaurants for about 120,000 regular clientele. That means some 30 regulars for each restaurant, so imagine what that means each week or month Why invest in expensive wines which might or might not sell – especially in hard times And why buy foreign wines when people will look for the cheaper local alternative I’ve been told the One & Only in 85
CT has still got 2/3rds of the foreign wines it bought on opening still on its shelves after more than two years and they are fantastic wines. Also, most on-trades are tied into distributors’ contracts. That means they buy from a list – however restricted it might be. Most owners wouldn’t buy at auction, especially if it undercut agent’s prices. Auctions here at present wouldn’t answer this, the Nederberg ( auction ) is an example. It wouldn’t meet on-trade needs, some 70% of the wines there are Nederberg’s ( Distell’s ) own. Appendix C Interview with Bennie Howard CWM Why is there currently little or no investment in SA wines SA’s wine history is still in minds. The trade is very price conscious. The quality of a wine does not determine its price. This is a leftover from the days of the KWV. Price controls lasted until the 90’s. Then, 70 co-ops produced on the basis of a minimum price, quality was not a concern. When international markets opened up to SA many saw it as a chance to dump poor quality wine overseas to get rid of excess. Foreign markets probably still see SA as a mass producer of average or poor wine. But in Sweden, where the state monopoly of alcohol prevented the dumping of wine into the country SA has had real success because they selected on the basis of quality / price. On this basis SA has been the number one imported country for the last three years. Also, there is no cohesive view of how to sell SA wine overseas and not enough quality wines to show. There is also a lack of understanding of how to position our top wines against those of, say, Australia. As a consultant to the Nederberg Auction, can I ask how this impacts on investment wine Well, its volumes are too small to impact market prices, but it gives other benefits. It gives the producer an idea of what the trade will pay for their older wines and how sought after they are. It also creates a confidence in the brand and that the trade believes and has confidence in older wines. 86
Page 1 and 2:
Wine Investment in South Africa Dav
Page 3 and 4:
Acknowledgements The following all
Page 5 and 6:
Contents Acknowledgements………
Page 7 and 8:
List of Tables Table 1 Key investme
Page 9 and 10:
1.2 Scope of Assignment Wine invest
Page 11 and 12:
The barriers that seem to exist whi
Page 13 and 14:
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 and 66: ‘South Africa may not have as muc
Page 67 and 68: found an even more serious lack of
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: Appendices Appendix A Interview wit
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
show all

Wine Investment in South Africa - Cape Wine Academy

Create successful ePaper yourself

Delete template?

Save as template?