Wine: Waking up to a new world The wine business in South Africa used to be simple. The farmers planted the vines and sold the grapes. It was a good business based on the quantities grown. Then sanctions lifted and the rest of the world discovered South Africa and the South Africans discovered the rest of the world's wine industry was light years ahead of their own. The overgrown and mismanaged industry needed severe pruning and in the last few years that is what it has been getting. Those who can't or won't change to meet increasingly de-manding consumer expectations ­ particularly in the UK ­ will not survive. Some of the growers are going out of business, but most are adapting. And so is the industry. White varieties still dominate but there is no future for the sea of low priced poor quality Chenin Blanc. However it is not too late for the South Africans to join the red wine bandwagon. Pinotage, the red varietal specific to the Cape, has yet to prove itself as a great wine and it may not be South Africa's answer to California's Zinfandel, Australia's Chardonnay or even Argentina's Malbec. However the SA winemakers have been honing their skills and have been demanding quality grapes to make premium wines. The leading operators have also responded to the wind of change. KWV ­ for a long time the country's only major exporter ­ has relinquished its regulatory functions and has become a private company. Its main competitors, Stellenbosch Farmers Winery and Distillers Corporation, are in the final stages of a merger. There are constantly fresh approaches to business methods, such as Winecorp which is benefiting from major inward investment. The merger between SFW and Distillers is taking longer than expected but when it goes through it will create a R4.5bn (£450m) turnover company set to be called South African Distillers and Wine. It will be South Africa's biggest spirits and wine supplier, while South African Breweries remains the largest overall supplier of alcoholic beverages. Distillers export director Don Gallow says the merged company will have the critical mass to compete effectively on the international stage. It will be in a position to promote its brands and will also be able to make cost savings in the local market because the two companies have many areas of duplication. "We will be putting money behind key brands in specific markets." Among these will be Two Oceans which is handled by UDV's Percy Fox wine division in the UK. It will also be looking at a range from the company's new Durbanville Hills winery which will be launched this autumn. Distillers has invested R70m, creating the custom built, high-tech winery at Durbanville. SFW's Nederberg range is also set to get a higher profile internationally. It is the top selling wine in SA but sales overseas have so far been limited. Gallow agrees the price points in the UK for SA wines have generally been too low. He says: "Problems have been caused by a fragmented approach, but now the possibility for more generic advertising is getting greater and there is momentum getting behind brands such as Two Oceans. The shareholders know that investment in international markets is key and they are aware that it requires an enormous amount of money to establish brands." He is aware that SA is behind the rest of the world in red wine production and says: "There are a lot of new areas going under red vines and in the last couple of years quality has improved, particularly the latest vintage of reds." Getting bigger is one solution, thinking differently is another. Winecorp has wrapped up the problems facing the wine industry with those of the African social structure and come up with its own answers. Last year the company merged the interests of Longridge, Savanha and Spier Cellars and put the focus on developing world class wine brands. At the same time it is taking a distinctively ethical approach which is driven by the majority shareholder, the investment group, Capricorn. It has owned Spier since 1993 and has set about transforming a run down estate into what it hopes will be the jewell in the crown on the Cape. So far it has spent R150m and the investment is increasing. It has just begun a R400m programme and in the next 10 years it will have spent in the region of R1bn. It is already becoming a major tourist destination and runs its own steam engine from Cape Town to the estate. Its plans include two hotels, a golf course, craft village and the creation of 2,000 jobs. It is also investing in organic vineyards and agriculture on its land. Executive director Eve Anneke explains: "The vision is about sustainability, not only financially but in terms of social equality.and environmental integrity. This is a 21st century development in which we are reinventing ourselves as Africans and we don't want to wait for politicians or governments to shift things." This includes building homes for the workers and giving them equity in the land they are working on. But she emphasises: "We are not naive or idealistic. Whether we use it as a marketing tool or because people want it, people here on the land have a better chance to survive." The ideology is extended into the vineyards. Chief winemaker Ben Radford says: "It is about bringing the wine industry back into balance and getting the growers to understand the way ahead is producing less but better quality." He now buys by the hectare not the tonne and sets yields well ahead for the next season. Next year he will be producing 400,000 cases of branded wine and and further 500,000 for own label. The key brands are Longridge, Savanha and Bay View. A joint venture was formed with Private Liquor Brands to create and market the Dumisani range launched in the UK this year. KWV is the most visible face of the South African wine industry on international markets. But it too perceived the need to change to meet the demands of world markets. It has relinquished its regulatory functions, now handled by the Wine Industry Trust, and has become a private company. Executive director Theo Pegel says: "We are becoming a fit and lean business. Those who are not transforming and who are not market oriented and have the wrong stuff in the ground will be in trouble." Managing director Vernon East recognises the problem SA has in maintaining its profile in the face of the competition from the rest of the New World. "We have to work with the multiples. It is expensive but the game is decided by the competition and we must not dodge the issues. "People are expecting us to do something very positive with South Africa as a brand. "The wine making community in SA is learning fast. "In the early 1990s we should have established what was happening in the rest of the world. We are catching up quickly. "The quality of our wines is good but the marketing is poor." {{Z SUPPLEMENTS }}

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