Photo: Lindi Botha
The wine industry is tough. One needs only to visit a local liquor store and be overwhelmed at the product offering to realise what a feat it must be to have your label capture the consumer’s attention, and keep it long term.
South Africa boasts around 1 100 individual wine brands, compared with whisky that only has about 15. This makes wine highly competitive, and wineries require a whole arsenal of tools to keep their product in wine glasses around the country.
As a result, the industry is rapidly consolidating, with Vinpro stating that 100 primary producers have been exiting the industry each year since 2003.
The trend is not unique to South Africa as wine countries the world over turn to economies of scale to beat the cost-price squeeze. “Europe has always been the biggest consumer of wine, but that has changed,” says Phillip Retief, CEO of Van Loveren Vineyards (VRL), in Robertson in the Western Cape.
“Their population is ageing and the younger generation, which is more health conscious, drinks less and enjoys alternative products to their parents. Despite consolidation in the global industry, wine production is actually increasing, which means that in most years there is more supply than demand.”
Spotting opportunities
VRL has been making wine since 1937, with the Retief family building the business into the successful company it is today. Today the third generation is at the helm, comprising brothers Hennie and Bussell, and Phillip and Neil. Together they are the famous four cousins, whose faces adorn the label of their most popular wine.
It is the Four Cousins range that has brought them much of their recent success, providing a springboard for many more successful ventures. Hennie muses that a designer, asked to make a label for that particular range of wine, used their faces, with the cousins reluctantly agreeing, since none liked to be in the spotlight. “But it just worked and it created familiarity with our customers.”
The Four Cousins sweet rosé wine was about to be bottled when a 1,5ℓ bottle came onto the market. The Retiefs decided to use the bigger bottle to give consumers more value, copying producers in the US who saw much success with this format. With 70% of South Africa’s wine being consumed at entry level and popular premium, and sweet, it became their biggest seller.
Since then VRL has done a remarkable job in catering for all aspects of the market. And it’s not a case of quantity rather than quality – the variety of offerings have been carefully considered to meet the exact needs of each product category.
This includes 12 ranges of wine, competing in premium and lower-end markets, 10 spirit labels that include creams, gin and whisky, and two coolers catering to the ready-to-drink (RTD) market. Some of these are produced in partnership with the local community to boost transformation.
Phillip notes that part of their success is that they have been able to tap not only into a popular, but lower-priced category, but a popular and premium category as well. “If we were only an entry-level wine, we would be floundering, caught up in a price war that leads to a race to the bottom.”
The success of the Four Cousins label has however been a double-edge sword, and their venture into the premium market has not been easy.
“You can’t diversify if your core products are not stable, and the success of Four Cousins meant we could innovate into new arenas. But in a way Four Cousins was also our nemesis because it meant much of our energy was being channelled to that brand rather than developing a premium brand.
“In focusing on premium wine, we also had to overcome our own reputation: we were the Four Cousins making premium wine, instead of being premium winemakers that also make Four Cousins. It’s a narrative that can be used against you by other premium winemakers vying for market share. Over time, however, and through a quality offering that holds up in international markets, we have established ourselves in the premium market,” says Phillip.
VRL today has a production capacity of 17 million litres and winery capacity of 22 million litres, exporting wine to 68 countries.
At the heart of the family is a remarkable ability to spot opportunities, innovate and expand. VRL has many ‘firsts’ they can claim. They were the first to sell sweet rosé in a 1,5ℓ bottle, first to sell wine in environmentally friendly plastic bottles in their Tangled Tree range, and first to market a non-alcoholic wine.
The venture into spirits and RTD has meant that VRL can compete in the larger drinks market. Phillip believes that winemakers often make the mistake thinking that they are only competing with each other, when in actual fact they are competing against all other drinks.
“South Africa is a beer-drinking country, so by volume, beer is the most sold alcoholic beverage at 71% of all alcoholic beverages. Wine comes in at 10%, ciders 10%, RTD 6%, and spirits 3%.
“But you can innovate to the end of the earth without being sustainable. More is not always better, and it’s important to review our product offering from time to time and make sure everything has its place,” he cautions.
The value of marketing
Despite a good reputation in the international market as makers of good-quality, good-value wine, the majority of South Africa’s wine that is exported is done so in bulk, where the value is added abroad. Phillip believes this is because South Africa has been relatively poor in marketing itself, compared with countries like France, Australia and the US.
“We went through a honeymoon period when the market opened after 1990, and it was easier to sell wine because everyone wanted our wine.
“As a result, few developed a long-term, structured marketing plan. Instead, South Africa positioned itself as one of the cheapest wine sellers in the world, regardless of the quality, which was some of the best. Today, we still don’t enjoy the market footprint or esteem we should have.”
The US, UK and Germany remain the biggest markets for wine, making them important markets for South Africa. While South Africa has generic marketing campaigns abroad presented at industry level, budgets are minuscule when compared with other countries, especially once the rand conversion rate has come into play.
Finding the most profitable route to the consumer remains a key factor in a winery’s success. Phillip explains that having presence on a supermarket shelf is immensely important, but it’s the least profitable route since retail collects a large margin. Going direct is therefore favoured.
“Online was initially good, but courier costs take a larger chunk than one would think. Consumers have also adjusted to marketing tactics like Black Friday and seasonal sales and wait for prices to drop before they buy. So getting the consumer on your farm and buying direct, combined with the personal experience, is still the best option.”
Connecting with consumers
Besides the value in having consumers buy directly from the cellar, wine tourism has a significant impact on the South African economy, generating R7,2 billion per annum and employing 36 406 people. This supports the 300 000 people who are employed in the wine industry as a whole.
The industry is also attracting much foreign investment, with large portions of vineyards around Stellenbosch and Franschhoek under foreign ownership. Phillip notes that these substantial investments bode well for the local economy and job creation.
With many South Africans investing away from South Africa, why foreigners would do the opposite is puzzling. Phillip relays the answer given by these investors: “South Africans pay too much attention to negative news, and don’t see all the positive aspects of their country. You have wonderful people in your employment and it’s a beautiful country.
“Of course, the bang for their buck also plays a role, since dollars and euros go far when converted to rand. As such, many foreign wine businesses buy wineries here to expand their volume and piggyback on the market share they already have in foreign markets. Phillip notes that for every 10 tourists visiting from abroad, one job is created.
“Tourism is the low-hanging fruit that we can capitalise on to grow the economy and create more jobs.”
VRL was an early innovator in making wine farms more family friendly, which enabled them to capture a larger portion of the tourism market, rather than just those of legal drinking age.
The tasting room in Robertson offers sparkling grape juice tastings for children or those of sober habits. This is paired with locally produced sweets. Wine drinkers too can delight in pairings with locally produced cheese, chocolates and nougat.
Tastings are done in a modern and bright tasting room, or under centuries-old trees in the manicured garden. Hiking, mountain biking and picnic opportunities are also on offer.
“Wine tourism allows you to get closer to your customer, build your brand and increase sales,” says Phillip.
Diversifying
A key factor to the generational success of the Retief family is that rewards earned from successful ventures have been ploughed back into not only the business, but agriculture as a whole.
“The idea has never been to take the success and run. It’s always been richly rewarding for us to grow the local economy,” says Phillip.
VRL runs three successful transformation projects and employs 688 permanent workers. Sustainability is another key focus, with 2 500ha of the farm in Robertson under conservation. They have also invested much in attaining carbon hero status, where emissions have been drastically reduced.
Just as diversification shouldn’t be considered if the core product is not stable, supporting the economy can’t be achieved if the business itself is not profitable.
VRL’s story is therefore as much about running a successful winery as it is about controlling the supply chain. The business has systematically built a vertically integrated model that has control over grape production, winemaking, brand development, sales and marketing, and distribution.
“It is ideal for any business, especially as only 10% of retail pricing for agriculture ends up with the primary producer,” says Phillip.
With the wine business being in an unfavourable supply and demand environment, further opportunities to expand led the Retiefs into fruit production. This includes cherries, almonds, nectarines and avocados. While the latter seems highly unlikely in the Robertson Valley, the unique microclimate of one particular stretch of land between the mountains makes it feasible, especially since harvest takes place when volumes on the market from South Africa are low.
Cherries are also an unlikely selection, and Phillip notes that 20 years ago it would never have been feasible. “But with new cultivars coming onto the market that have low chill units better suited to a drier climates like ours, it is entirely possible. Like avocados, we also have an advantage in the market because our harvest is earlier than the bulk of the cherries in the Western Cape.”
Any new venture comes with its teething problems, and Phillip notes that many a lesson was learnt as the family took on fruit farming. “We didn’t have a full understanding or control of the whole value chain, which led to some problems. We realised again how important it is to have such control.”
Through partnerships with well-established brands and packhouses, the fruit division has now come into its own.
A new project the winery is excited about is its vine-by-pole vineyards. By planting a single vine alongside a pole, it can climb and allow for 360° sun penetration and more aeration.
Vines can be planted at a higher density since their growth is vertical, and not horizontal like traditional vines. Although the vines produce fewer bunches each, the overall quality per hectare is better, says Phillip.
The downside of this method is that it is expensive to establish, and the fruit must be harvested by hand. However, the premium wine that can be made from such vineyards makes up for the higher cost.
Attitudes for success
Family businesses are notorious for picking up conflict and failing as a result. Maintaining and growing the success of a farming business is also not easy to achieve across multiple generations. So what makes the Retiefs successful in both? “We look for solutions, not trouble,” smiles Hennie.
Phillip adds that being raised by parents who were liberal, open-minded, and always exploring new opportunities, conditioned the cousins from early on to value collaboration.
Indeed, it is relationships to which all the family’s success can be attributed. “Relationships must never be the reason why a partnership has failed.
“Start with a good heart and be kind in everything you do. That doesn’t mean you can never be right or you don’t try to negotiate the best deal possible. Just make sure you walk away from a discussion with a measure of kindness, not making enemies. Kindness is a basic part of it, and I think that is why our businesses work.”
The VRL farm has been a fixture in the Roberson community for generations, and every year brings new changes, expansions and economic growth for the local community. The down-to-earth cousins are central to this success and it is clear that they play a big role in endearing the visiting public to the brand. The family is actively involved on the farm, and despite busy schedules, seemingly always have a moment for personal interaction with visitors.
“We grew up going to wine shows with our fathers, so we are used to interacting with a lot of people,” says Hennie.
Walking through the vineyards and around the farm with the cousins however reveals something more than just comfort among crowds. Each cousin is hugely passionate about the business and the farm’s heritage.
They take the time to point out the differences in the appearance of leaves between wine cultivars, explain the history of particular species of trees in the garden, and share stories about family antics on the farm.
The conviviality of staff at the winery and bistro speaks to a warm-hearted business culture that runs through the organisation. After a day spent on the farm, visitors are likely to feel more like the fifth cousin than a passing tourist. And that’s a recipe for success that money can’t buy.
Email Van Loveren Vineyards at [email protected].
