Sacrifice a businessman to save the wine industry

Every year in January, the wine industry gathers in the CTICC for a great big session of teeth-gnashing and hand-wringing about why the industry is in trouble. It is organised by VINPRO and is attended by wine industry people desperate for free food and a message of encouragement. Everyone is there. But if they are really looking for answers, they should pay close attention to who is NOT there.

The people not attending the VINPRO information day are the people that can’t be bothered about turning a profit on their wine farms. In other words, people who make enough profit elsewhere. These people are only in the wine industry for the fun, and if their hobby costs them a few million Rand every month, it is considered cheap. We are talking here about the bankers, the industrialists, the mining magnates and the IT entrepreneurs. They get enough return on equity from their core businesses, so what they are looking for then they enter the wine industry is something else: return on ego.

No rich guy has ever thought: “I am extremely successful, preposterously rich and marginally bored. Therefor I will buy a hardware shop”. No, they all buy wine farms because it gives them bragging rights around the boardroom table. And of course, most importantly, the dinner table. Nowhere is this more evident than in Stellenbosch. What was once a nice university town with quaint restaurants, sober architecture and drunk students has turned into a grotesque display of new wealth and bad taste. If this was confined to Dorp Street and De Zalze it would have been fine, but real money needs real space to show itself, and for that a wine estate is just the thing. Without reverting to boring things like research and statistics, I am willing to bet that less than 10% of Stellenbosch estates are owned by people that have the estate as primary business.

No industry can survive when normal market forces are thrown out the window. And that is exactly what has happened in the wine industry. Loss-making estates are being kept afloat by massive money injections from external sources, so they rob market share from the guys that are really dependent on the success of his wine farm.

Externally funded wine estates are making a mockery of the classic market forces of supply and demand. In any normal industry, the unprofitable businesses would go under and the profitable players would move in to fill the gap on the supply-side. But not in the wine industry. Here the unprofitable estates are kept going. And they compete at the top-end of the market – exactly the same space that the normal non-cooperative cellars have to compete in due to lack of scale. It’s a travesty – and while some will argue that the externally funded estates create jobs and boost the industry’s profile, the same can be accomplished by normal estates if their slice of the market was bigger.

The pity about all of this is that the externally funded wine estates have turned the wine industry into a celebration of mediocrity. You don’t have to be innovative if the supply of money behind you is limitless. The industry is filled to the brim with lavishly funded also-rans who only occasionally peek out from behind their lace curtains for a badly executed PR stunt, while excellent home-grown brands are doomed to drown in a sea of unfair competition and discounted prices.

Now you may laugh derisively at all of this and argue that more estates give you, the wine drinker, more choice. But let me leave you with this sobering bit: If you are serving your guests Diemersdal, you are serving them 100 years of authenticity. If you are serving them Lourensford, you are serving them Pep Stores.  

If VINPRO really wants to save the industry, maybe it’s time to force estates to follow corporate branding strategy where a new acquisition is re-branded to fall into the holding company’s overall brand. FNB Wine Estate. Capitec Wine Estate. You would not dare serve these wines to your braai guests – it would be social suicide. Rather, you would approach buying wine like you would approach a freshly discarded handkerchief in Wuhan – with utmost diligence and a deep interest in its origin.

Saving the wine industry? Obviously, it’s a bit more complicated. But we have to start somewhere. You can’t expect little Frikkie from Worcester Pre-Primary’s barefoot rugby team to survive a crash-ball from Duane Vermeulen. Therefor getting the playing field level is a very good start. We can sort out the rest over a glass of ABC Chemicals Shiraz.

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