When we had small kids, we often felt bad about working so hard and not spending enough time with them. We then reassured ourselves with the concept of quality over quantity and hoped that we made the most of the time we did spend with them. But this sentiment applies to more areas of life – also wine. Consumer trends show that younger generations like the much-discussed Millennials, drink less wine, but that those who do, buy better quality and are more engaged with all wine’s lifestyle associations. It is about quality over quantity and that is good news for SA wine.
While most industries rely on both the top and bottom end, for SA wine, the bottom end has been where the volume of business could be found. Industry bodies like WOSA preach the importance of the premium segment, rather than selling everything through retail promotions, but what to do if you have a lot of wine to sell and the perception of SA wine is often cheap and cheerful? Post Covid, we’ve seen that premium is the only growing category for wine. On the one hand it is because the disposable income at the middle and lower end might be under pressure, while the upper income groups have been less affected by Covid’s economic impact. On the other, our two strong wine buying groups seem to be focused on enjoying wine rather than just drinking wine, putting the focus on premium categories. And Carter is right, that is what we’ve said we wanted all along.
The Wine Intelligence trends report confirms Carter’s remark. Younger generations drink less in general and they drink less wine. But when they do choose wine, they invest – financially and, let’s say, emotionally. The older, traditional wine drinkers who might have been neglected in the continued focus on younger target markets, have become relevant again. People live longer, they work longer and many appreciate wine. They dine out, they travel and they are willing to spend more on a good bottle of wine.
This is good news. Other than surviving financially, having a focus on more premium wine suits the South African wine landscape. We have such diversity of terroir and attractive niche pockets that make it easy to have a variety of interesting wines. But what does this mean for the traditional volume producers? Premium doesn’t necessarily imply small volumes and I believe that there will always be room for bigger volume, everyday wines. I think South Africa manages to make exceptional quality in big volumes, but we don’t have to sell at giveaway prices. We have also been worried about SA’s diminishing area under vine for a while now. Vineyards are being uprooted to be replaced by more profitable options like fruit trees. Perhaps, in the long run, this is not all bad. It is not sustainable to farm with wine grapes when you sell at too low a price. While consumers might enjoy competitive retail wine prices, many farmers and wineries are unable to survive.
Does premium not exclude many regular wine drinkers? It is important to differentiate between premium and luxury. While premium might mean a higher price than some alternatives, it is because consumers see the value in the higher price. The competitive advantage of premium brands lies in their high price to quality ratio and unique characteristics. That is why consumers who are interested in wine are willing to pay a premium price. This does not mean that these wines are luxury products where the price is validated only by a point of difference or the brand’s heritage and prestige. (Read more)
Another benefit of this whole shift lies in the trend for moderation. While drinking habits are becoming more moderate, excess consumption was never the focus of the wine industry. Some might see wine as just another alcohol category, but I believe most wine people disagree. This was one of the reasons why we were so disappointed by Government’s liquor bans. From an industry perspective, wine is a lifestyle product, something to enjoy, a product that adds quality to life, to quote the slogan of Leopard’s Leap wines. We do, however, care about the negative outcomes of excessive drinking and we are committed to preventing abuse. (Read more) Selling wine at a premium price is also a step in the right direction when it comes to addressing irresponsible consumption.
Like everything in life, balance is key. You need good enough volumes for economy of scale and to service markets well. The industry can’t survive on boutique and niche products alone. But a more premium focus eliminates some of the evils and promotes what we believe wine is all about – quality over quantity.