Article by Lucille Botha, published in Landbouweekblad (South African agricultural magazine), 10 June 2016. (Translated to English from original Afrikaans)
Mr. Hein Koegelenberg established La Motte and Leopard’s Leap as internationally acknowledged wine brands. “In order to achieve this, one needs to have a quality product in a style that people trust, as well as a unique selling point”, he says. “But without proper distribution, profit is not possible.” This is a lesson of which farmers who market their products themselves can take note. Even if you have the best product, you won’t be able to sell it unless your marketing and distribution methods are of an excellent standard. Farmers would be wise to take firmer control of these aspects of their brands.
When Mr. Koegelenberg and his father in law, the late Dr. Anton Rupert, started putting heads together about the family’s wine brands, Dr. Rupert said: “Remember, it’s a lifestyle business and we will probably not make money out of it.” But by then the entrepreneur in Hein, who had studied viniculture, was fired up! He was excited about the opportunities in the wine industry – especially with the correct distribution channels in place to ensure that the products reach the market.
I said to Dr. Rupert: “Give me eight years, and I will break even and probably be making money”, says Hein. He was involved in establishing the local wine distribution undertaking Meridian Wine Merchants, as well as Historic Wines of the Cape, a company that handles wine storage, labelling and shipping. With Hein’s guidance, La Motte and Leopard’s Leap also became international brands.
“Needless to say, it did not happen in eight years. It takes much longer to make money in the wine industry.”
- You may have whatever brands, but without distribution and marketing you cannot succeed.
- Consumer behaviour has changed dramatically and the wine industry has to adapt. With social media, everyone who enters a tasting room these days is, as it were, a journalist.
- South African wines are not necessarily known for a certain style, but it can favour the industry if wine farmers would manage their brands well.
During the marketing seminar of the Sauvignon Blanc Interest Group, Hein said that, while wine quality was vital, marketing and distribution and good marketing channels were equally important. “It’s amazing to be passionate about wine and wine-making, but selling your product is as important. Your brand is just as strong as your distribution allows it to be”, he said during an interview.
Hein believes that wine-makers should position their products in a way that they will remain permanently in consumers’ minds. This is achieved through being consistent, otherwise consumers do not know what to remember about the brand. La Motte produces almost a million bottles of Sauvignon Blanc per year and its main goal is to produce a specific, significant La Motte style, year after year.
“Customers out there do not mind vintage differences and diversity. When they buy a bottle of La Motte Sauvignon Blanc, their biggest concern is that it must taste the same as the previous bottle. They must be able to trust the taste; they must be able to distinguish, with closed eyes, the wine as La Motte Sauvignon Blanc.”
In Hein’s opinion, one of the major problems is that the local wine industry is not known for any characteristic or property in particular.
“I remember the New-Zealanders visiting South Africa during the 1980’s – they were interested in the tropical flavours in our Sauvignon Blancs, but not in theirs. They then decided what a New Zealand-style Sauvignon Blanc is, and established that style – whether it was a wine originating from Marlborough or Cloudy Bay. This is very constructive, because they are now known for something specific. If you are not known for something, you will not be remembered. In South Africa we bottle anything, from Chenin Blanc to Colombar, Riesling and Pinotage and a number of other varieties, but we don’t become known for something specific.” This can benefit the wine industry, should wine farmers manage their brands well.
“Our industry has a diversity that the New-Zealand industry lacks. When I order a New-Zealand Sauvignon Blanc, I’m not really particular about the brand. I simply ask for a New-Zealand Sauvignon Blanc. In South Africa you have to ask for a specific brand, because of our diversity. We enjoy the influence of different oceans and we can produce varied wine styles. We can see and promote, from an industry perspective, diversity as something constructive, because consumers want diversity in their wines.
“For own brands, however, we must look inwards and make sure that our style focuses on something specific. Sauvignon Blanc wines originating from the West Coast have a distinctive salty character, specific to that area. If producers are consistent about this characteristic, they can become known for it.
Marketing has, for years, been all but optional if you want a firm footing in your business, says Hein.
“To me, marketing starts when you create a product for which, you know, there is a target market. If you make a wine without having a target market in mind, you have a problem. You cannot simply produce a wine and tell people the quality is excellent. Quality is relative. Whether you want to sell 500 or a million bottles successfully, you must know your audience.”
When Hein established Leopard’s Leap in 1999, he spent R350 000 (at the time, an amount unheard of) on market research in Britain.
“The year before the market research we shipped 7 000 cartons of Leopard’s Leap. The market research cost me a lot of money, but armed with that I could approach supermarkets such as Tesco and Sainsbury and show them why my product belonged on their shelves. The next year I shipped 80 000 cartons, just because I had a market profile and could connect a brand to my audience.”
Since then, Hein conducts market research every second year. I spend R150 000 a year, just to understand the market out there. Sometimes I find it strange, but it is most interesting when you begin to understand consumers’ perception of your product.”
It is especially relevant to what Hein does in China and the platform he created there. He now endeavours to create the same platform in America.
“For the first time now I understand why South Africa has such a problem selling wine in America. We do not understand their taste profile. We produce wine for Europeans who have a preference for dry tannins and high acids. The Chinese and Americans won’t touch it – they want a different taste.”
Hein says that, over the past ten years, the experience that has come with the product has carried more weight, largely thanks to social media.
“In the past it was all about the product, but these days everybody can be an expert, thanks to social media and its applications. You only need to take a photograph of a product, load it, and suddenly you have all the information. Anybody who enters your tasting room is suddenly a journalist. On social media they tell about their experiences and people believe them. It has now been eight years since the first app store was developed, and consumer behaviour has changed altogether. If we as producers do not understand this, we won’t sell wine, because then we cannot speak to new consumers.”
DISTRIBUTION IS THE BOSS
“Distribution is definitely not sexy, but it’s king. You can have the best product and marketing at your disposal, but without the best distribution you won’t sell a single bottle of wine.“
Hein employs four people in China to develop a distribution network over there. He does not believe in solely working through agents. “If you want to do business you have to understand the customer’s culture, otherwise you cannot sell wine in a sustainable way. I even have a Chinese name!”
“Agents and other people make money out of products and will sell the products that render the most money; not necessarily your brand. If you want to grow your brand, be part of it. If you are not part of the distribution, you have a problem. “
For wine there are three distribution channels: on trade, off trade and online.
In the case of the on trade channel – the restaurant business – you have to pay a tariff to appear on the wine-list. A waiter who receives a tip of 10% makes more money out of a bottle of wine than me, while the restaurant’s profit margin is about 200%. It is not a fair or easy business – you have to understand it well in order to sell wine.
“At present, the off trade market is also very tricky. Large supermarkets are just getting bigger and bigger and establish their own brands, such as Checkers with its Odd Bins wine range. We now have to sell our own brands to people who not only own their own shelf space, but also have their own brands. This is only the beginning; from now onwards, supermarkets will just get larger and the market more challenging.
“Online distribution is the interesting one that is growing at the moment. The online kitchen store, Yuppie-chef, was highly successful in selling kitchen appliances, but now they are also selling wine. Amazon sells wine and has also taken over the British online supermarket Morrisson’s. Therefore, shortly, they will be selling fruit and vegetables and salads alongside books.
“Online opportunities are consistently developing and brand owners must take note. There are many benefits for both: You can communicate directly with your consumer through social networks and your own communication system, and they employ a delivery service. Over the next ten years, things will become most interesting.”