Wine makers look to China to boost sales in slow export market

SOUTH African wine producers are pushing to get their products into China to boost sales and open new markets following a drawn-out economic recovery in Europe and reduced income due to a strong rand, says Don Tooth, CEO of Vergelegen winery.

While the UK remained by far SA’s largest export market, demand from China — a new market — was "very encouraging", Mr Tooth said earlier this week.

SA’s wine industry contributed at least R26,2bn to gross domestic product, or 2,2%, and accounted for 275606 jobs in 2009. The country imported wines to the value of R237m in 2009 , according to VinPro, a service organisation for South African wine producers.

However, VinPro announced last month that the net wine farming income had declined over the past few years from R12236/ha in 2004, to R5781/ha in 2005 and R3696/ha last year.

Mr Tooth said a tough export market and overcrowded low-margin domestic market had forced South African producers to look to new markets such as China, with some success.

China’s imports still lagged the UK’s, but "what we have seen is a willingness on the part of the Chinese to invest in top-end wines", while the UK market tended to insist on cheaper prices for very high quality products.

Mr Tooth said their vineyard’s products now reached 31 countries, including Latvia and South Korea. The UK was still the biggest buyer by volume, followed by Scandanavian countries, the United Arab Emirates and Germany and the Netherlands.

He said the company’s China strategy was to make sure their products were available in the country’s big cities and ensure "we’re listed in top hotels".

Zhong Jianhua, the Chinese ambassador to SA, earlier this week said he believed South African wines could be better positioned to penetrate the Chinese market than many European wines if they agreed on a common strategy.

This strategy should involve collectively focusing on growth in a few cities or provinces , until Chinese consumers understood the terroir and South African products.

"While the Chinese market is available for anyone to explore, it seems to me little would be achieved if each producer or company approached it individually… They are also unlikely to have sufficient volumes to consistently supply a vast market if they approached all cities and town simultaneously."

Mr Zhong said working together to promote local wines as a country or province should include choosing a common emblem, such as Table Mountain, to represent SA .

This would help Chinese people identify South African wines . "And they should not be cheap or over priced because the market appreciates paying the right price for good quality wines," he said.

Mr Tooth said declining demand, falling prices and the strong rand had resulted in some local producers withdrawing from the UK market and selling their export wines at home where they could get better prices. "Prices in the UK have now stabilised but at nowhere near pre- recession levels," he said.

Mr Tooth said there were limited opportunities in the traditional export markets as old world producers would quickly capitalise on any recovery. However, there was scope to expand to new markets.

He also conceded there were too many labels, but said that the investment required to break into the wine business and the fact that "some estates have been in families for generations means the cost of exit is high".

radebeh@bdfm.co.za

They should not be cheap or over priced because the market appreciates paying the right price for good quality wines