Subscriber login Close [x]
remember me
You are not logged in.

Strength in numbers, by Joanne Simon

Published:  18 January, 2007

After what has been described as a near-perfect' growing season, it seems that South African wine will be the first of the 2007 vintage to reach Europe. What's more, the crop appears to be 0.5% lower than in 2006 - smaller than originally feared.

That's some good news in an industry rather low on morale at the moment. With bulk red wine prices having plummeted by some 35% across all varieties over the past four years, farmers who previously earned up to R7,500/ton for red grapes when they were in short supply now get as little as R1,500/ton. It's no wonder there are reportedly at least 50 farms on the market in Stellenbosch alone.

It's the cooperatives, which account for roughly 70% of the country's total wine production, that are most affected by the current market conditions. But five of them must be feeling less of a pinch than the others - namely De Wet, Goudini, Stettyn, Badsberg and Aan de Doren which, together with Newton Johnson Wines and UK agents BrandPhoenix, own FirstCape.

While much has been said about top SA brand Kumala's drop in UK off-trade sales over the past year (down 30% by volume and 29% by value according to Nielsen, MAT to 27/01/07), considerably less of a fuss has been made of FirstCape's meteoric rise (up 110% by volume and 119% by value). Perhaps this isn't entirely surprising. After all, as FirstCape PR director Bevan Newton Johnson puts it: When Kumala sneezes, the industry catches a cold.' But this doesn't make FirstCape's achievement any less impressive. The star performer in the UK top 20 by far, it has toppled Namaqua to become the number 13 brand by value.

Created in 2002 as a UK/SA joint venture to allow growers to supply their own brand into the UK market, FirstCape started out with one co-op - De Wet - and 38 growers. Our family had worked with them for years to produce our Cape Bay label, and they had told us they were interested in any opportunities to work more directly with the market,' says Newton Johnson.

At the same time, it was felt - locally and overseas - that one thing lacking in SA brands was long-term quality and consistency due to bulk wine being bought only on the basis of price. We thought this problem could easily be changed if the growers became co-owners, making them care about brand quality beyond the price-per-litre value and a yearly negotiation.'

Today all five co-operatives making wine for FirstCape, representing 200 family farms, are frontline' shareholders. And everyone says SA is fragmented!' laughs Newton Johnson, admitting that this very important' co-operation is unique for a large SA brand. It's not a question of us trying to buy their wine as cheaply possible; the system is designed so that the better FirstCape does, the better their returns. De Wet told us they had one of their best financial years ever last year!'

Newton Johnson describes the farmers as hungry' for any information that he (from a marketing perspective), winemaker brother Gordon and consultant Newald Marais (ex-Nederburg) can feed back to them. As far as consistency goes, it helps that the growers are all neighbours in the Breede River Valley, and FirstCape plans to invest in winery facilities for 4.5 million litres. Long-term quality must be a given, not a nice-to-have.'

With the range's mid-priced Limited Release wines now at the heart of the brand (duties mean entry-level is no longer the major driver'), he says flexibility is also important: If consumers want to move into a different style of wine or price level, you need be able to move with them.'

In less than five years, FirstCape has grown from zero to 637,000+ cases - a feat Newton Johnson attributes to staying lean and focused' during tough times. No sooner did we have our first listing at Sainsbury's than the Rand started going backwards. But it was a blessing in disguise because we learned some hard lessons very quickly.'

He says FirstCape's aim is not to be the fastest-growing brand in the UK - because what goes up' - but the goal is certainly to move into the UK top 10, which means distribution needs to grow from its current 59% (compared to Kumala, which has 90% distribution) by moving into the convenience sector. Our aim is be a definitive, global SA brand - as sustainable as, for example, Jacob's Creek.'

Newton Johnson's greatest wish is that more big brands emerge from SA to bring a platform for the smaller guys to work off by providing [SA wine generally] with more exposure, momentum and economies of scale'.

He goes on: FirstCape has shown that it's possible to cut it in the UK. I only hope that our story becomes more of a South African story'