Category Archives: South Africa

Wine Wars in South Africa: Nederburg Auction Keynote

July 17, 2012 By in Shameless Self-Promotion, South Africa, wine auctions 1 Comment

I’m pleased to announce that I’ll be giving the keynote address at this year’s Nederburg Auction in Paarl, South Africa. I was already planning to attend Cape Wine 2012 as a guest of Wines of South Africa, so I was delighted to receive an invitation from the Nederburg Auction organizers to extend my visit by a day or two in order to address their international audience.

About the Nederberg Auction

A premier event on Cape Town’s wine calendar, the Nederburg Auction serves to showcase the spectrum of award-winning wines and rare Cape finds created by the country’s most talented winemakers. Since its beginnings in 1975 with the ‘famous five’ founding participants; Delheim, Groot Constantia, Overgaauw, Simonsig and of course Nederburg, and an offering of just 15 wines, the Auction has evolved into an international event where major local and overseas wine buyers bid for a stringently selected range of the finest wines created by South Africa’s most talented winemakers.This year marks the 38th year of this prestigious event.


Here’s a video about the 2011 Nederburg Auction.

The Press Release

Guests at this year’s prestigious Nederburg Auction won’t want to miss the keynote address by best-selling US author and wine expert Mike Veseth on Saturday 29 September at Nederburg in Paarl.

With the state of the global economy crisis posing many challenges to the wine world and the South African wine industry in particular, this acclaimed US economics professor and “wine economist” will bring his considerable expertise to the speaker platform, tailoring his keynote address around the subject of how South Africa can win the Wine Wars. This aptly follows the fresh insight presented by last year’s speaker, David White, into the changing wine landscape and the future implications for the industry and consumers.

He will discuss the market trends that are redrawing the world wine map and the terroirists (those focused on a wine’s terroir or place of origin) who resist them. Veseth believes that wine businesses are at a critical crossroads, shaped by the powerful forces of globalisation, corporate branding and the exploration of new markets.

As a professor in international political economy at the University of Puget Sound in Tacoma, Washington, Veseth is regarded as an authority on the political economy of globalisation and the global wine market, applying his sharp and astute mind to analyse and understand the complex dynamics of the international wine world.

Nederburg Auction Business Manager Dalene Steyn says: “While believing in preserving the essence and the soul of wine, Mike is also well-versed on breaking into new markets in China, Australia, France and the US. With this combination of a love for wine along with extensive business and economic acumen, we believe he will inspire and motivate wine lovers in South Africa – just like he has done elsewhere in the world.”

The editor of The Wine Economist blog and author of more than a dozen books has won critical praise for his recent book“Wine Wars: The Curse of the Blue Nun, the Miracle of Two Buck Chuck and the Revenge of the Terroirists (2011)”, which draws remarkable conclusions on the market forces that drive the wine industry. The book has won several awards and prizes, including being selected as Best American Wine History Book 2011 by Gourmand International and a Wine Book of the Year by JancisRobinson.com.

Mike Veseth will address guests of the Nederburg Auction at 09:00 on Saturday 29 September in the Graue Hall, prior to the start of the day’s bidding session. For further information visit http://www.nederburgauction.co.za. The Nederburg Auction is sponsored by Nederburg.

I’m honored to be asked to give this keynote address and pleased to be associated with such a prestigious event.

The Final BRIC: South African Wine

February 20, 2011 By in BRICs, South Africa 6 Comments

This series of posts has taken Goldman Sachs executive Jim O’Neil’s list of BRIC and New BRIC nations and examined them from the particular perspective of wine. All of the BRICs (Brazil, Russia, India and China) and New BRICs (South Korea, Mexico, Indonesia and Turkey) produce wine. They have glorious pasts, tempting futures, and face certain present challenges linking the two.

In a sense (but I don’t want to push this too far), the challenges and opportunities that these countries face in terms of wine reflect their overall national situation. In vino veritas? Yes, I think so, but not just in the usual sense. Read the individual posts and you will see what I mean.

The Undiscovered BRIC

So now I turn at last to the overlooked BRIC: South Africa. With a relatively modest population (less than 50 million), it was probably too small to qualify for O’Neil’s signature group in terms of market size. But South Africa punches above its weight in many fields and has great symbolic importance, too, which is one reason it was chosen to hold the 2010 soccer World Cup.

If South Africa is too small to be a BRIC in gross domestic product terms, it towers over many of the other countries with respect to wine. South Africa was listed at #8 on the world wine league table for 2007 according to OIV statistics, with 9.7 million hectoliters of wine production, just behind Germany and head of Australia and Chile. Among the BRICs only China produces more wine (12 million hl, #6 on the list), although it isn’t clear that all Chinese wine is actually wine or really made in China.

Like many of the BRICs, South Africa has a deep wine past and a sunny future — it’s the present that’s problematic. The first wine was pressed on April 6, 1652. The famous Groot Constantia wine estate was established outside of Cape Town in 1682. By the 18th century its eponymous Muscat-based sticky was one of the three most sought-after wines in the world (Tokaji from Hungary and Cotnari from Romania completed the tasty trio).

South Africa’s wine history has been filled with peaks and valleys, both the usual ones for wine producers  and some that are country-specific. Phylloxeria, persistent over-production, and difficulty breaking out of the fortified wine cycle to produce quality dry table wines are familiar stories.  Apartheid — the notorious South African exception –  damaged the industry by effectively shutting off export markets and distorting domestic demand.

South Africa’s  fast emergence in the world of wine in the last 20 years  has been exception in a good way. South Africa surpassed France (France!) in U.K. wine sales in early 2010.

Good News / Bad News

I would like to say that South Africa is poised to beat all the BRICs and assume a place at top of the wine wall, but I hesitate just a bit. Part of it is due to the exchange rate. South Africa has a reputation for good value wines and it is suffering just now from a case of the Dutch disease. The Rand’s value has increased by more than 40% in the last two years (higher gold prices are part of the story) and the higher exchange rate has cut South Africa’s competitive advantage.

But there are lots of disturbing factors.  If you search the Decanter.com website for “South Africa” you get lots of good news (booming sales, distinctive varietals, demand so high there have been grape shortages) and bad news, too (burnt rubber aromas, persistent grape surpluses, Pinotage image problems). U.S. sales of South African wines have actually fallen by about 10 percent in the past year according to Nielsen data published in the most recent issue of Wine Business Monthly.

Perhaps it would be the same with a news search for any wine region — lots of good, bad and ugly news to go around — but coming off the Apartheid era of dreadful news, South Africa needs more than a bit of sunshine just now.

So I am left a bit uncertain, honestly. Optimistic but realistic, too.

And I think this is my opinion of the BRICs and New BRICs generally. The wines and the countries that produce them will succeed, no doubt, but not without a struggle, if only  because the times we live in are so uncertain. Mother nature and human nature are both very fickle and wine cannot help  but reflect them both.

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The video up top shows how South African winemakers used the occasion of the World Cup to try to market their wines abroad. A good idea, but I think there was a better one that they missed.  These days South Africa is trying to use wine as part of their program of Black Economic Empowerment by promoting black owned wineries and vineyards. It’s still in the early stages, but I like the idea. Given this, it seems to me that Invictus is a better image for South African wine than Bend It Like Beckham.

Vineyard Plague: The Dutch Disease

October 31, 2010 By in Australian wine, economic crisis, Economic impact, exchange rates, South Africa Leave a comment

As if things weren’t bad enough in Australia, now there’s this: the Dutch Disease. No, it isn’t a fungus spread when you plant tulip bulbs in the vineyard or something you saw on the television series House MD. It’s much more serious than that. And it’s hitting South Africa, too. Look out!

Australia’s Perfect Storm

I’ve written several times about Australia’s continuing wine crisis. It seems like everything that could go wrong has gone wrong. Too much heat, too little water, excess capacity, collapsing demand — even smoke-tainted grapes caused by runaway brush fires. Yikes!

Now there is more bad news and it’s the result of too much good news? Good news is bad news? Yes. Read on.

The Dutch Disease is the name economists give to the problem of too much good news in one industry and its negative impact on the rest of the economy. If one sector of the economy gets hot on global markets (think oil exports, for example) one effect can be that export sales increase the demand for the country’s currency, causing it to appreciate in real terms. The rising currency value makes all the nation’s other products more expensive on foreign markets, sending them into a tail-spin.

The Good News the Bad News

That’s how good news in one part of the economy can backfire. The Economist magazine apparently invented the term to describe the dilemma of the Netherlands after a big gas field was found there in 1959.

The good news / bad news in Australia is clearly the fact that China’s economy is growing rapidly and sucking in the natural resources that Australia has in considerable abundance. But big purchases of the Australian dollar needed to pay for these products has pushed the currency up, making Australian wines more expensive here in the U.S.

This helps explain why off-premises sales of Australian wines are still falling here even though many other segments of the wine market are recovering. Recent Nielsen retail data show the U.S. wine market growing by 4.3 percent in the period ending in August, but sales of Australian wine fell by 7.5 percent (data from the November issue of Wine Business Monthly).

As the chart above shows, the Australian dollar has continued to appreciate since these data were compiled, magnifying both the Dutch Disease problem and the sense of crisis in the Australian wine industry.

South Africa Also Hit

South Africa seems to be experiencing the Dutch Disease as well. There are many factors that have contributed to the sharp rise of the Rand against the dollar, but surely the surge in gold prices must be the most important one. As speculators and investors who have worried about inflation turn to gold, their purchases have driven up the value of South Africa’s currency as well.

This helps explain why sales of South African wine in the U.S. have been in a bad slump. Nielsen data indicate that South African wine sales fell by 8.3 percent in August and by 9.4 percent in the last year.

The U.S. dollar’s rapid recent fall will affect all countries that depend on our huge markets for exports, but inevitably some will be hit more than others.  Those like Australian and South Africa who suffer the Dutch Disease will be challenged the most.

We’ve entered an era of extremely unstable currencies, reflecting both the inherent instability of international financial flows and the increasingly cut-throat battles in the global currency wars. Inevitably many industries — including wine — will get caught in the cross-fire.

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Fair Trade Wine’s Long Journey

August 8, 2010 By in Argentina, Fair Trade wine, South Africa, wine distibution, wine exports, wine markets 3 Comments

In this global age we are accustomed to having the world’s assorted products (including wine) wash up conveniently on our local supermarket shores. We seldom give much thought to how they got there or why, but wines don’t make, move or sell themselves so there is always a story to tell.

Case in point: this bottle of 2008 Fairhills Mendoza Vineyards Carbernet Sauvignon purchased last week at a Cost Plus World Market store in Tacoma, Washington. It is the product of a rather complex process of globalization.

Uncorking a Bottle’s Biography

The Fairhills brand is South African, but the wine is from Argentina. Must be a story there. The logo at the bottom proclaims that it is Fair Trade certified – wine with an ethical intent. You don’t see Fair Trade wines every day. The red tag up on the bottle’s shoulder indicates market reality: marked down from $9.99 to $8.88.

(Some studies suggest that wine buyers are not willing to pay more for “ethical” organic or biodynamic wines. In fact, one study found that wines labeled “organic” sold for less than identical wines without the ethical indicator. I wonder if this inverse price/ethics relationship holds for Fair Trade wine as well?)

Fair Trade products, like this wine, ask us to think about supply chains more seriously because they promise to return a bit more to the original producers to help build sustainable communities. I’m interested in the Fair Trade wine movement (I wrote about Fair Trade wines here, here and here), so I thought I’d try to learn a bit about this particular bottle’s long journey.

Twists and Turns

The story begins, unexpectedly, at the Du Toitskloof Winey in South Africa, founded in 1962 as a cooperative by six wine families. Originally a bulk wine producer in the bad old days of South African wine, DTK as it is known has moved upmarket in the post-apartheid export-driven era and Fair Trade wines are part of its strategy.

Since 2005 DTK has worked with the Fairhills Association to produce Fair Trade wine. Fairhills brings together a group of South African vineyard owners and their workers, with the workers having a majority of votes. Fairhills wine farmers supply the grapes, DTK makes the wine and Origin Wine, the third partner, provides logistical and market support. The growers receive a premium for their Fair Trade grapes and funds are returned to the Fairhills Association for community investments, a typical Fair Trade practice.

The initial market for Fairhills wines seems to have been Great Britain, since they worked closely with the UK-based Fair Trade certification group there. Susy Atkins,  the Telegraph’s wine critic, reports that Fair Trade wines have good penetration in London through supermarket chains including Co-op and Sainsbury’s and are featured in annual Fairtrade Fortnight programs. Click here to view a list of Fair Trade wines available in the UK. Fairhills has the largest listing (44 wines).

Fair Trade Pipeline

The South Africa-UK wine pipeline proved very robust (South African wines are now the fastest growing segment of the British market) and helped to expand the market both in terms of supply (drawing Chile and Argentina into the mix) and demand (introducing Fair Trade wines to the U.S. and other markets). Argentina is the biggest supplier of Fair Trade wines to the U.S. and the Fairhills Mendoza Vineyards Cab that I purchased at Cost Plus is part of that pattern. Organic Wine Trade Company distributes Fairhills here along with their other “ethical” wine products.

Whole Foods Market is one of the most important retailers of Fair Trade wine in the U.S., which makes sense since they sell so many other Fair Trade products (coffee, tea, chocolate, sugar, energy bars, body care products, flowers and rice according to one list). Other national retailers that stock Fair Trade wine include Sam’s Club, Target and of course Cost Plus World Market where I bought this bottle.

TransFair USA reports that over 120,000 cases of Fair Trade wine were sold in the U.S. in 2009, up from about 20,000 cases in 2008. The growth rate is a source of optimism, but the absolute quantity is relatively modest  – about the production of a single medium-sized domestic winery. TransFair says that the 2008-2009 sales produced a “premium” of over $130,000 that was returned to the grower cooperatives — quite a lot relative to the low wages they receive as farm workers. The distributor website reports that:

Fairhills Cabernet Sauvignon benefits the local farmers of Bodegas y Viñedos de Marañon and three small producers along with their farm worker community in Mendoza, Argentina.  The Fair Trade initiative is dedicated to ten farms to improve the quality of life for 210 members and 300+ children. The initiative is one of the first in Argentina and has used their sales to upgrade various schools in the region, purchasing new toys, establish a soup kitchen, and purchase an ambulance for the local health care center.  Future plans are to convert from conventional farming to all organic, building a sports club, and continue improving health care clinics and schools.

The journey that brought this bottle to my cellar is thus quite complicated. The wine comes from Argentina, but it wouldn’t have got here without help from people in faraway London and South Africa. The fact that this complex web can return community benefits to Mendoza farm workers is heartening, even if the amounts are quite modest at present.

The Future of Fair Trade Wine

Fair Trade coffee is easy to find these days — in fact it is impossible to buy anything other than Fair Trade coffee on my university campus. Fair Trade chocolate is everywhere, too. But Fair Trade wine remains a tiny (but growing) market niche. I wonder if this will change and what barriers Fair Trade wine must overcome to achieve the success of Fair Trade coffee? With this question in mind I’m starting a small research project to learn more about Fair Trade wine’s present market condition and future prospects. Watch this space for occasional related posts in the coming months.

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Thanks to Kazuko Golden at TransFair USA for helping me with statistics about the Fair Trade wine movement. Thanks to Leigh Barrick for sharing her research on Fair Trade wine with me.

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