Growing the Consumption of Wine Amongst Emerging Market Consumers in South Africa
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Growing the consumption of wine amongst emerging market consumers in South Africa Mary-Lyn Foxcroft Assignment submitted in partial fulfilment for the Cape Wine Master Diploma January 2009 Abstract South Africa is currently not considered a wine drinking nation. It’s consumption per capita is low, especially for a wine producing country. The substantial growth of wine exports since 1994 has provided an outlet for producers who no longer need to rely solely on the waning interest of the domestic market. As a result, there has been little effort in the past decade by the industry to develop the domestic market which has in part resulted in a decline in consumption of wine per capita. When considering the improved socio-economic status of the nation due to steadily growing GDP and the growth of the middle class - who are status and lifestyle oriented - one must conclude that South Africa is ripe for an increase in wine consumption. The main issue lies with the fact that the majority of South Africans choose not to drink wine, partly as a result of minimal exposure to wine in comparison with beer, the ready-to-drink category, and brandy. Efforts to drive domestic consumption of wine would therefore need to rely on competing with these alcoholic beverages. The emerging wine consumer also presents many challenges to the industry. In order to address these challenges, the wine industry requires a strategy surrounding growing domestic wine consumption. A collective effort within the wine community is required to set common goals, establish an industry structure to drive interventions and measure progress. A township distribution infrastructure should also be established to ensure the regular delivery of wine of a consistent quality to the township market. The potential of the South African domestic market lies essentially untapped. It will require significant effort and intervention by the entire wine community to band together to find ways of capturing the appeal of the emerging wine consumer. At the heart of the challenge though is the desire to do so for the greater good of the industry. ii Acknowledgements I wish to express my thanks to all the industry stakeholders who kindly agreed to being interviewed and who provided valuable insight into the South African wine industry and consumer market. These include: Desmond Seoposengwe and Kobus Visser from Distell, Mnikelo Mangciphu from Morara Wines, André Morgenthal from WOSA, Eion du Toit, Jacques Roux from DGB, Phillip Retief of Van Loveren, Greg Rietoff from Somerset Beverages, Trevor Pocock from Liquid Assets, Caryn White from Wine Logistics and Liz Budd from Cape Wine Selections. Particular thanks must also go to Vivienne Quann from Hot Salsa Media who kindly made available material and research on the Soweto Wine Festival and the Black Diamond segment. Thanks are also due to my fellow CWM students from the Wild Yeasts Club who have encouraged me throughout my CWM experience. I’d like to particularly thank my partner Wayne and friend Mariana for reading the initial drafts of this paper. Wayne’s unfailing support of all my ‘projects’ is gratefully acknowledged and much appreciated. iii Contents Abstract ............................................................................................................................................ ii Acknowledgements ........................................................................................................................ iii Contents.......................................................................................................................................... iv List of Tables ................................................................................................................................... vi List of Figures ................................................................................................................................. vii 1. Introduction ............................................................................................................................ 1 1.1 Scope and contribution.................................................................................................... 2 1.2 Overview of document .................................................................................................... 3 2. Wine consumption – factors and trends................................................................................ 4 2.1 Factors playing a role in the consumption of wine ......................................................... 4 2.2 Global wine consumption ................................................................................................ 5 2.3 South African wine consumption trends ...................................................................... 11 2.4 Summary of worldwide consumption trends ............................................................... 13 3. Country analysis .................................................................................................................... 14 3.1 Australia .......................................................................................................................... 14 3.2 Russia .............................................................................................................................. 17 3.3 India ................................................................................................................................ 19 3.4 China ............................................................................................................................... 22 3.5 Summary of the country analysis .................................................................................. 25 4. Profile of the South African consumer ................................................................................. 26 4.1 The South African consumer market ............................................................................ 26 4.2 Consumption expenditure ............................................................................................. 29 4.3 Alcohol consumption among South African consumers .............................................. 30 4.4 The Black Middle Class ................................................................................................... 32 4.5 Future expectations for the Domestic market ............................................................. 34 4.6 Factors relied upon to increase consumption in South Africa ..................................... 36 4.7 Summary of the Profile of the South African consumer .............................................. 37 5. Current initiatives to increase consumption of wine in South Africa ................................. 38 5.1 Producer and Distributor interventions ........................................................................ 38 5.2 ‘Accidental’ Success in the Black market ...................................................................... 41 5.3 Soweto Wine Festival ..................................................................................................... 43 5.4 Industry body to drive domestic consumption ............................................................. 44 5.5 Summary of interventions to increase domestic consumption ................................... 46 6 Recommendations for future initiatives and intervention ................................................. 47 iv 6.1 Recommendations ......................................................................................................... 47 6.2 Summary of future initiatives and interventions .......................................................... 51 7. Summary and conclusions .................................................................................................... 52 References ..................................................................................................................................... 54 v List of Tables Table 1: Percentage growth in global wine consumption ...................................................... 7 Table 2: Top wine consuming countries per capita ................................................................ 8 Table 3: Difference between wine production and consumption of the main producer countries (in thousands of hl) ................................................................................................ 9 Table 4: Factors influencing the growth of wine consumption in Russia .............................. 18 Table 5: Average monthly household income ..................................................................... 28 Table 6: Composition of consumption expenditure categories by population group ........... 29 Table 7: Percentage of adults in LSM groups consuming Table wine ................................... 31 Table 8: Summary of Black Diamond segmentation ............................................................ 33 Table 9: Percentage growth of exported wine ..................................................................... 35 Table 10: Projected future growth rate of domestic consumption....................................... 36 Table 11: Estimates by population group and gender, 2008 ................................................ 36 Table 12: Estimated annual population growth rates, 2001 – 2008 ..................................... 37 Table 13: Examples of actions to be taken by the wine industry .......................................... 48 vi List of Figures Figure 1: Global Wine consumption .....................................................................................