Premiumisation trend masks predicted increase in value sector, while South Africa struggles to achieve top prices
The trend towards premiumisation, in which consumers are drinking less but better quality wines is one which has been widely reported across many countries.
But for many producers around the globe the challenge is not a lack of interest in lower priced products but how to achieve conistently higher prices.
Behind the fashion for upmarket drinks, the bulk wine sector is burgeoning, and the consumption of low priced wine is predicted to increase by 1.15% in South Africa and 0.6% in Italy between 2018 and 2022 according to new data from the IWSR, which added that demand is falling slightly in Germany, France, the US and China.
However, the predicted drop in demand in these countries is largely less than 3%, with only China bucking that trend – predicted to dip by 5.2%
Bulk wine now accounts for 40% of all wine exported globally, and is worth over 30000m Euros in total. South Africa is still predominantly a bulk exporter of wine, while the value of Spain and Italy’s bulk wine exports have also increased in recent years.
“The world’s supermarkets rely on entry-level brands, both private label and independent, as important loss leaders,” claimed the ISWR. “It is a vital part of their business model, as is repeated discounting and promotion-led marketing, much to the chagrin of the Champagne industry. It is unlikely that this segement of the market will simply evaporate any time soon.”
However, the problem for South African wines isn’t so much the shrinking value market as the price ceilings which stymie efforts to market brands above a certain price point in key export markets.
“The recurrent gripe in South Africa is a lack of premium image, rather than falling demand for lower priced brands,” said the IWSR.
“I believe that key industry players have done great work in expanding the wien consumer base; whether the industry can leverage this and create more value through trade up is a key challenge and opportunity for us all,” said KWV’s CEO Boyce Lloyd.
However, his counterpart at DGB is more pessimistic. “If we don not get the necessary price increases, we might as well just shut up shop,” said Greig Guy, DGB’s international director. “It is time for the leading players in the industry to realize that South Afirce must not be seen as the number one destination for cheap and cheerful wine.”