Black wine makers fight for their vines

2014-04-06 14:00

Farmers have to sell their wines overseas because the local market is still dominated by SA giants

Black wine farmers are finding the local industry to be a hard nut to crack.

Just more than a handful of black wine farmers are primary producers compared with 630 white primary producers, according to Matome Mbatha, the new chairperson of the Wine and Spirit Board and market manager for Africa and the Americas for Wines of SA (Wosa).

To be a primary producer, you have to own 100% of the land and production. Currently, the majority of black wine makers in South Africa are in the market as a result of empowerment projects.

“The wine industry is a capital-intensive sector and the dynamics of the industry make it difficult for new entrants to enter the market,” says Mbatha.

But he adds the black middle class is keen to explore the wine industry and is starting to look at wine as a lifestyle product rather than simply an alcoholic beverage.

“The black middle class is learning to appreciate the social and health benefits of wine. People travel and become exposed to international markets. And we have seen more South Africans becoming interested in wine farming,” he says.

Eleven years ago, Malmsey and Diale Rangaka left their careers and moved to Stellenbosch to become the first black owners of a wine farm in South Africa.

They took a loan from the Land Bank, bought a wine farm and started the M’hudi brand.

The brand has gained a modest international presence through major retailers, airlines and entertainment companies, and is carried in 42 US states as well as by a major grocery store in the UK.

According to Malmsey, M’hudi makes the bulk of its sales on the international market because the local market is still dominated by Distell, KWV and Douglas Green Bellingham.

She adds new wine producers have to compete for consumers’ attention against brands that have been around for generations. “Our strategy was that we would sell 70% of our wine locally and export 30%, but it didn’t work out like that.

The local market was more difficult than the export market. We ended up exporting about 90% of our products.

“Only now are we able to develop a local market.

We are at about 80% exports, 20% local. We are still exporting mainly to the UK, Germany and Switzerland, and recently to the US and Nigeria,” she says.

Despite the growing awareness of the M’hudi brand and other black-owned brands such as Seven Sisters, Thandi and Stellenrust, black wine farmers have yet to see consistent profits. This is partly due to the effects of low volumes, the volatile rand, import duties, international trade barriers and labour costs.

“Increasing labour costs concern us because at the end of the day, it is not sustainable. When you don’t make enough money and you see labour costs increasing, it hits your pocket and you sit with a cash-flow problem,” says Malmsey.

A recent PwC study found the South African wine industry was influenced by volatile exchange rates, increased global supply and labour legislation.

Volatile exchange rates make it difficult for wine producers to plan their long-term strategy and the unstable rand has a negative effect on pricing.

Mbatha says the weaker rand has made South African wines more favourable abroad, but that the instability of the exchange rate makes it difficult for exporters to benefit from the weaker rand.

He adds although wine farmers will always export to the traditional European and UK markets, Wosa will focus on taking its clients’ brands to the US, Asia and the rest of Africa.

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