The corona pandemic has put an effective stop to wine trading, both in south Africa and internationally. Being the core business asset of the Stellenbosch wine region, the backlash of this lockdown on the region’s biggest income stream, will be hard felt.
But all is not doom and gloom and as farmers, and especially winemakers, are known for, innovative thinking will again steer this ship to weather a storm, a kind never negotiated before. The more than 160 wine producers in the area secured a healthy part of the total South African wine sales income of more than R5 billion (2018). Now all of this is under threat, albeit only temporarily. The fact is, however, that catch-up will have to be played to make up for lost time for production, distribution and local and international sales.
Stellenbosch winemakers ready for post-corona wine trading
Negotiations with the government by industry bodies, including Vinpro, the SA Liquor Brand Owners Association (SALBA), and Wines of South Africa (WoSA) made some lee-way in the sense that the 2020 harvest could be completed and production in cellars can continue. But, being a non-essential product, the wines had to be kept at the production facility and cannot be distributed.
As the trade regains its momentum and returns to what may well be a “new normal”, wine marketing will most probably see some new initiatives, with a big emphasis on online marketing through a variety of platforms.
“The biggest mind shift we have to make is that we rely mostly on our tasting room, hotel and cellar to market our wines, and this needs to be in a new realm,” says Edo Heyns, marketing director of Advini in whose portfolio L’Avenir wine estate resides.
“With a name like L’Avenir, which means the future in French, we are constantly exploring new ways of reaching and engaging customers. To a large extent we believe that the Covid-19 lockdown has simply fast-tracked shifts that would have happened – even without the pandemic. The quick shift to virtual tastings is very exciting. Winemaker Dirk Coetzee presented virtual tastings to customers all around the world – from inside our single block Chenin Blanc vineyard!
“Not only does this save on costs – both financially and to the environment – it also means that winemakers can creatively engage with customers, without having to travel away from their vineyards and cellars during crucial production periods. Our key partners from the hospitality industry – especially restaurateurs – have been hit hard. At L’Avenir we have partnered with chefs to use our products in virtual cooking presentations and will continue to support them to ensure the sustainability of their businesses.
“Our multigenerational farmworker community received meals through our partnership with Pebbles, also resulting in special engagement and support during this challenging time. We have seen how local vegetable farmers have created special weekly parcels of nutritious veggies. The wine industry can learn from these initiatives by benefitting from the trend of supporting local, by directly selling to customers,” Heyns says.
Heyns argues that social media engagement and online sales are going to become increasingly important.
“Brand equity of wine brands is also being tested during this time. The wineries with a loyal and engaged following should recover easier, because of relationships, engagement and authentic brand identity.
“We trust that new markets will be opened after the lockdown, thanks to forward-thinking activities such as virtual tastings, making it ‘easier’ to ‘travel’ to customers via the internet. However, the normal wine marketing activities will resume as before and there will always be wine shows and events, especially for consumer platforms.
“The positive outcome of the lockdown so far is that it has made our industry relook at how we do business.”
Carina Gous, marketing and sales executive for Kleine Zalze Wines, agrees.
“I think direct and on-line marketing, especially in international markets, will be the key in the new wine world. Consumers have also reassessed their needs and wants and will have to adapt. I think the restaurant industry will take a long time to recover. This effectively eliminates an entire sales and marketing channel as many premium wine brands focussed on the restaurant trade and are very active in the on-consumption trade. This will pose challenges and marketing will have to respond to get in line with new trends.”
Asked about a positive outcome for the Stellenbosch wine region, she is optimistic.
“Consumers tend to return to tried and trusted brands in tough times. We are a well-established region, and brand, with many well-known, established estates and trademarks – our region should benefit from this situation. Further mechanisation and technologies in the fourth industrial revolution will increase our competitiveness and bodes the Stellenbosch wine industry well in the longer term.
“But the main post-COVID-19 focus will be the rebuilding of core markets through other than the trusted marketing channels, which will stay intact, but with some shift between channels. Online will probably be more prominent, the restaurant trade will take a long time to recover, at-home will be stronger for a while,” said.
About the outcome of the Covid-19 pandemic and accompanying lockdown for the wine industry, industry players are uncertain and pretty much in the dark.
“This really depends on how the situation unfolds over the coming weeks. We have already had an exemption to export finished goods, much to the relief of many of our exporters and, as an industry, we are continually lobbying with the government for relaxed measures pertaining to the export and local off-consumption sales of alcohol. Should there be additional exemptions, or if the government were to reclassify alcohol as an ‘essential good’, that could possibly see the impact on our industry drastically minimalized,” Calow said.
Gous agrees: “It is extremely difficult to tell at this point. We do not even have clarity on how long lockdown will continue or how and when economic activity will be reintroduced or allowed. Either way, the economic impact on wineries will probably be pretty devastating for most. The wineries that are financially stronger and with a focus on and trust in their long term strategies will take strain but survive whilst for many others, it might be the final straw. Margins in the wine industry are small with most businesses dependent on cash flow from sales month to month – no income for 5 weeks is extremely tough.”
But there is light at the end of the tunnel. Calow explains: “Unless the measures are relaxed during the lockdown, there will definitely be a massive surge of buying after the lockdown is lifted. Many producers are already doing online sales for delivery after the lockdown is lifted. They are also running special offers. This means that all of the paperwork can be done in advance and delivery can take place as soon as the drivers are allowed to take to the roads.”
Said Gous: “After the buying surge when the lockdown lifts, patterns will return to more normal. However, sales that were lost, are lost in the local market as well as international markets. Locally we have the added complication of illicit trade of which the long-term effect is hard to judge.”
Mike Ratcliffe, chairman of Stellenbosch Wine Routes, is positive and expecting a change in marketing approaches.
“Premium consumers crave interaction with the wine production source and Zoom, Instagram or Twitch video chats provide that. Any producer that hasn’t embraced technology has already fallen behind.
“Stellenbosch is focused on unity via the mechanism of a strong coordinating body. This will form the foundation for a strong post-COVID recovery.
“Many producers will already be questioning the value of travel. Secondly, travel in the short- to medium term will be very different from the freedom that we are accustomed to. Social distancing, mandatory quarantines and restricted mobility will be the order of the day. Large gatherings will be slow to return and the value of a traditional trade show will be questioned. The biggest new market will be direct to consumer and still to be successful win producers and marketers will need to adapt and be innovative. Failure to do this is not an option if financial success is the desired outcome,” he said.