South Africa’s wine industry needs a “champion” with access to global distribution and marketing channels‚ says Chris Logan of Opportune Investments‚ who punts a takeover of a local brand by luxury goods companies such as LVMH or Richemont.
“The local wine and brandy industry has continuously lost out to more astute competitors – first locally to South African Breweries and then to the global whisky brands and the global wine brands. To turn it around we need a champion.”
LVMH‚ the world’s largest luxury goods maker whose brands include Louis Vuitton‚ TAG Heuer and Dior‚ has a wine and spirits arm with brands such as Moët & Chandon‚ Hennessy and Glenmorangie. It supplies about 13% of LVMH’s revenues and 20% of profits.
“When LVMH buys brands‚ first of all the brands get all of LVMH’s marketing expertise‚ their industry skill and their global distribution. It’s just not a contest‚ they’ve got huge scale and distribution and really competent marketers.
“Then you’ve got South African wines who have never really outgrown just being [the products of] good producers‚” Logan says‚ adding that French company Pernod Ricard or drinks company Diageo could also look to acquire underdeveloped South African brands.
“LVMH and Pernod Ricard own top wine brands in Australia and New Zealand‚ why not South Africa?”
Both wine and brandy consumption per capita have fallen over the past 20 years in South Africa‚ with beer holding the lion’s share of the country’s drinks market while whisky has grown its share. Industry statistics show premium South African wines do not have the pricing power of counterparts from Italy‚ France‚ Chile and other countries.
“If you look at KWV‚ it still remains a producer organisation. They’re producing the best brandies in the world‚ which go up against and often beat cognacs like Hennessy‚” Logan says‚ flagging poor marketing which offsets the quality of many local brandy and wine brands.