Cape Wine Report - Part 1
Premium South African brands from smaller estates are selling well in the U.S. but still represent small volumes, making brand-building in the market here a priority.
Editor's Note: This is the first part in a two-part series. Part 2 will run 4/27/09.
South African wines exported to the U.S. have increased from "virtually zero to more than a million cases" in five years, Wines of South Africa (WOSA) CEO Su Birch said during Cape Wine 2008, held recently in the Cape Town International Convention Centre.
The top South African wines seen here in the U.S. are mostly independent efforts from the top importers, such as Andre Shearer at Cape Classics, Peter Koff MW at Fairest Cape and Peter Clinton at Vinnovative Imports. They import the cream of the crop in South Africa and work hard to sell their brands.
The category is still small in a U.S. market that exceeds 330 million cases, but it is growing. There are roughly 200 or so South African brands in the U.S. though just a few in significant volumes. Leaders include Sebeka, imported by E&J Gallo, and Goats do Roam from Cape Classics, among others. Fosters has been importing some South African wine under the Lindemans label because of a supply shortfall in Australia, and Constellation Brands took on Kumala from South Africa when it acquired Vincor International. Golden Kaan, a joint venture between Racke International and South Africa's KWV Group that launched in 2003, has been making a big splash. Indaba, Excelsior and Two Oceans are also strong sellers.
"Our premium brands from smaller estates are selling very well in the U.S., but of course they represent small volumes," Birch said.
When asked about plans for the U.S. market, Birch pointed out that funding is an issue. "We have to find partners to help us. The top wines do well in the U.S. We need to have all levels of wines in the U.S., too."
Birch said WOSA has long identified the U.S. as an important market for South African wines and has worked with Wine and Food Associates in New York since 2002 to develop a presence there. Rory Callahan is the president of that organization. "We don't disclose budget figures by country, but given that WOSA's entire budget worldwide is $2.6 million, you can imagine how inadequate it is. Wine and Food Associates have done a great job on a shoestring budget. Rory's mandate is to increase the visibility of S.A. wines in key wine media to provide support to the importers and to give advice to WOSA on the market," Birch said.
South African producers are currently looking at funding a much bigger initiative in the U.S., Birch pointed out. "We will have to see whether this materializes given the current economic meltdown. We all recognize the importance of the U.S. market, but the investment level needed to really establish S.A. as a category in the U.S. is huge."
Birch outlined the difficulties. "The challenge has been to develop a South African category in a huge country where every state is effectively a different market and where South Africa as a country is barely known, much less our wine," she said. "We have had some notable successes ... The successes have been with our premium brands which, particularly in the Eastern states from Florida up to Boston, have developed an excellent reputation. The challenge has been to establish volume brands and to continue this growth by widening distribution and getting traction for volume brands."
Birch said WOSA plans to continue working with Wine and Food Associates, which is charged with maintaining relationships with the key wine media. "We are currently examining alternatives with the major players to see how best we can fund a more coordinated approach to building brand South Africa and invest to establish a meaningful S.A. wine category. This will include working with tourism authorities, which has been a successful strategy for us in other countries. It is significant that the U.S. is now the number two source of foreign (non-African countries) tourists to S.A. and one of the fastest growing," Birch said.