Up to 350 wine producers, 30 wine cellar closures forecast
Hein Koegelenberg, CEO of La Motte and Leopard’s Leap, says the wine industry will take up to 18 months to recover and 21,000 people could lose their jobs.
Hein Koegelenberg, CEO of La Motte and Leopard’s Leap and chairman of the board of the Franschhoek Wine Valley Association, said the wine industry will take up to 18 months to recover and up to 21,000 people could lose their jobs. Retailing Africa caught up with him after the announcement of the move to Level 2 of South Africa’s lockdown regulations and the unbanning of alcohol sales. Koegelenberg is also chairman of L’Huguenot Wines, a joint venture between Leopard’s Leap Wines and Yangzhou Perfect, a division of Perfect (China) Co and China’s first investment in the South African Winelands. He writes a wine blog Hein On Wine on the business of wine.
RA: This must be a bittersweet moment; with the economic pressure the industry has been under since the 2nd sudden alcohol ban. How are you feeling?
HK: Relieved, but nervous. We are thankful, but the lifting of the ban comes too late for many; and for the rest, there is a very steep hill ahead. There is still a lot of uncertainty for the wine and tourism industries.
What does the wine industry need to do to support economic recovery in the sector?
We need our wines to be available. We can’t afford to lose listings. To ensure this, all the sectors have to work together. Cooperation has never been so important! The survival of each establishment is to the benefit of all. Bigger brands have to support smaller ones. Franschhoek vignerons are in the process of finding effective ways of support for smaller wineries. While keeping financial pressure and economic uncertainty in mind, it is very important that we don’t lose all the hard work that has gone into brand building over the last 15 – 20 years. Heavy discounts and a mere focus on product, will harm us in the long run. It is important to still focus on brand association and the wonderful experiences the South African wine industry created around its wines. The offering might be different, and guests and consumers might have other expectations, but the industry should not be afraid. We might have to adapt, but we have to reopen our experiences.
What can retailers do to support the alcohol brands, especially the wine industry?
The on-trade has taken an immense knock and retailers (internationally) – both in the traditional way and their online shops – are very important for the survival of SA wine:
- They can maintain our listings.
- Ensure shelf space.
- Allow us to work with them in advertising and promoting our wines.
- They should not employ irresponsible discounts or margins.
How long will it take for the wine industry to recover from the economic devastation of the past five months?
In my opinion, up to 18 months. If we work together and if we are wise about it, I think our situation will improve and we can survive. To recover? I don’t think we can really win back what we’ve lost. We need to cut our losses and start from fresh. Industry projections are that we have 300 million litres over supply. Many estates have an oversupply worth two vintages of value-added product. As an industry, we will have to be very strategic to make the best of the stock situation. When it comes to employment, projections are for 21,000 job losses across the total value chain of the wine industry. Expectations are that up to 30 wine cellar and 350 wine producers will not be able to survive.
What should brands be doing to regain lost market share, even in the current climate?
I think we need to take it step by step. The alcohol industry is in a very tight spot, but we have to work strategically. We have to rethink and reposition where required. We need to work together. Having a competitive and strong industry, is to the benefit of all – especially in wine tourism. Consumers want variety and they want options.
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