Buyers’ Guide to VINTAGES August 22nd, 2020

John Szabo’s Vintages Preview for August 22nd: Crisis in South Africa

By John Szabo MS, with picks from Sara, David, and Michael

“There’s no way to sugarcoat it. We are in serious trouble”, says Ken Forrester, of his eponymous estate in Stellenbosch, South Africa. While wineries around the world have been suffering from the vast ripple-on effects of Covid-19, South African wineries have been hit by a double calamity, and are facing a true existential threat. The pandemic not only shut down society, bringing life to a grinding halt in an industry that can’t simply be put on hold – vineyards can’t be paused. It also triggered the South African government’s decision to impose successive bans on all alcohol sales, a period totalling some 14 weeks since March 27th, effectively killing both domestic, and for a period, export sales as well. The long-term negative consequences for the South African wine industry are hard to over-estimate. But on the positive side, as Chris Mullineux of Mullineux Wines in Swartland points out: “The quality here has never been better or more exciting”. And this fact, coupled, with multiple factors that have kept prices shockingly low, means extreme value for consumers. With exports resuming, you can help rebuild the industry while also drinking great wines at absurd prices. Read on for eyewitness accounts of what’s happening on the ground, as well as for our top picks from the (admittedly weak) Vintages August 22nd South Africa-themed release. Beyond that, there are many other sharp buys already on shelves, including a couple of memorable fully mature reds and a brilliant old white, plus fine bottles from Uruguay, Spain, Germany and more.

Advertisements

South African Wine’s Covid-related Calamities: Total Sales Ban on Alcohol

South Africa’s wine industry may just be the hardest hit in the world, both a direct and indirect victim of Covid-19. While the pandemic is global, only South Africa has faced a period of total ban on alcohol sales for domestic and export markets, a decision which has caused irreparable damage to the industry. Underlying cracks in society have widened into chasms.

According to Vinpro, a non-profit company which represents 2500 South African wine producers, cellars and industry stakeholders, the [wine] industry is believed to have lost more than R7 billion ($550 million CAD) since the introduction of sales restrictions in March 2020.” Following the initial nine-week ban on local sales, five-week ban on exports and subsequent second domestic sales ban, Vinpro estimates that more than 80 wineries and 350 wine grape producers will go out of business over the next 18 months, with a potential loss of more than 21000 jobs across the value-chain, nearly 10% of the industry workforce.

Laurel Keenan, who runs Propeller PR and represents the promotional agency Wines of South Africa (WOSA) in Canada, has been closely watching the situation. “The second local ban on sales (which was lifted only last week Tuesday, August 18), saw a complete ban on all retail sales of alcohol, including from cellar door and on-trade. No alcohol could be sold or even transported in a private vehicle during that time”, she reveals, highlighting just how tight the sales restrictions were.

For an industry that represents 10% of SA’s tax revenue, it’s a serious blow. South Africa’s government declared the alcohol bans necessary in order to prevent people from spreading the virus in gatherings, and to free up hospital beds from alcohol-related trauma injuries for Covid-19 patients. “Let’s give alcohol a break,” said Nkosazana Dlamini Zuma, cooperative governance and traditional affairs minister, during a press briefing after the second ban was announced in July. “No soldiers can win a fight while drunk.”

Export sales became collateral damage. They were banned for fear that shipments would be hijacked and stolen en route to port, putting lives at risk.

Some within the industry understand the motivation behind the decision, but feel it was poorly thought out and handled. “Part of me can understand the rational behind the alcohol ban”, says Sebastian Beaumont of Beaumont wines in Bot River, in the Overberg region. “We have big problems with alcohol-related issues in our society, violence being one major part. I think the ban did help to limit the access to alcohol, but it is not the solution to fixing the problems in our society. Those issues are much bigger and deeper and will need to slowly and steadily be dealt with.”

Chris Mullineux, of Mullineux Wines in the Swartland region, agrees: “We do have a fragile health system and can understand the government’s need to protect it from being overwhelmed. But we strongly feel they could have been far more sensible in their handling of the situation. Just by enforcing a curfew and the laws that are already in place would have gone a long way to minimizing the impact of alcohol on the health system. But South Africa isn’t famous for enforcing regulations.”

Ken Forrester is less circumspect: “Our government adopted a “one size fits all” policy and sadly it’s literally destroyed 100s of 1000s of jobs. We are close to a 50% unemployment rate!!!! There’s no way to sugarcoat that. We are in serious trouble and need to ensure that somehow we can create opportunities to get these people re-employed.”

As could have been predicted, during the sales bans many wineries resorted to bootlegging just to cover employee wages and non-deferrable expenses. And similarly, many restaurants were converted into speakeasies, with wine and other booze being served from coffee mugs and teapots. But that’s little more than a drop in the sales bucket, which could do little to stem what is quickly becoming a national employment emergency. “The real tragedy is in the whole chain of people who live off selling and delivering wine. Our agents, our logistics partners and our restaurant partners who have had little to no business to trade with”, Chris Alheit of Alheit Vineyards tells me via email.

Short and long term problems have been further compounded by the closing of the country’s borders. “The wine industry is very dependent on local and international tourism, and although restrictions on local tourism have been lifted since last Tuesday, it is still uncertain when international travel will resume,” says Kobie Lochner of Graham Beck, a sparkling wine specialist in Robertson, fearing that the worst is yet to come as the pit grows deeper.

Alheit echoes concern for the restaurant industry: “Even the really good restaurants depend on tourists in season for most of their customer base. Tourists won’t be travelling to SA any time soon, and the ban on alcohol sales has already crippled many restaurants. But it will hit them even harder later in the year I think. It will hit us all harder then.”

As we’ve seen elsewhere, the pandemic has surfaced pre-existing, systemic problems in both South African society and industry. “The cold fact is that the majority of the Cape wine industry wasn’t in great shape pre-Covid”, says Chris Alheit. “Many of the large-scale producers were struggling with slow sales and tight margins.  Many were hardly profitable prior to the lockdown, which in turn precipitated a classic avalanche effect. There will be major fall out in the months to come. “

“I think the only thing Covid 19 highlighted in the world is the poor standard of leadership across all sectors.” Eben Sadie, Sadie Family vineyards

Eben Sadie, of Sadie Family Vineyards in Swartland, believes that more problems, rather than solutions, have come down from above, fingering poor leadership for the situation: “I think the entire strategy that was followed throughout was not properly analysed nor interpreted and it is crazy to think that an event like Covid-19 is likely to shut down some companies in wine that have been around for more that 5 generations. Many of these companies have already faced the Spanish Flu, First & Second World War and the depression, as well as a global economic meltdown. And yet in 2020, with all the global resources we have, we seemed to have failed ourselves, which does not say much about current leadership.”

Cases of wine piling up in Sadie Family Wines’ cellar, waiting for the the ban on alcohol sales to lift. Photo courtesy of Sadie Family Wines

Wine Dumping

One of the main concerns for many producers is the likelihood that unsold wine will be dumped on the market at cut-throat prices, which could cause irreparable damage to the image of South African wine. “It goes without saying, the lack of sales will most likely result in a surplus, especially in the bulk wine market. One can only hope that this would not put too much downward pressure on the price of SA wine and that buyers and consumers would still be willing to pay the level of pricing that the quality demands”, says Kobie Lochner.

“The biggest issue is that many wineries sit with many litres unsold in tanks, and with the harvest only 5 months away, it will be trying times to find space in cellars to accommodate the next harvest,” continues Sadie. In Spain, where Sadie also used to make wine under the collaborative label Terroir al Límit in Priorat, he reports that some winegrowers have “actually opted to just cut down the fruit for there is simply no way in producing a bigger lake of wine and completely destroying the value of the wine. It will be hard and I think wine prices in the bigger bulk market will plummet. There is unfortunately no other reality unless a national distillation process gets rid of the excess. But for that you need serious input from government and somehow I fail to see that currently happening.”

The trickle on effect will spread the crisis further: “This will leave grape growers in the lurch as wineries renege on grapes, in turn taking bread out of the mouths of farm workers. This will hit the fan in about 6 months from now when the real damage becomes clear, save some miracle’” says Alheit.

Domestic E-commerce

While countless companies are in deep trouble, some of the smaller, quality operations have been better positioned to weather the storm. The dramatic circumstances have forced a rethink of their business strategies, and those who adapt, stand a chance of survival. One relatively new sales channel that has evolved at light speed in many wine-producing countries around the world is e-commerce. Such sales were almost non-existent six months ago in South Africa, but online wine sales have now become a material revenue source for those able to implement them as soon as the sales ban was lifted.

“We were luckily already geared for online shopping”, Jenna Bruwer of family-owned and operated Springfield Estate in Robertson, tells me. “But we saw our online sales grow tenfold. The sales have remained high which is great considering our tasting room sales (and until recently, our restaurant sales) have all been dead in the water. I do think one positive of this pandemic is that it has really driven a lot more customers towards e-commerce, and has forced us to update and streamline our systems – in South Africa, both our online shops and our online shoppers are still a bit in the dark ages (no Amazon same day delivery here!).”

With the restaurant trade collapsing, Sebastian Beaumont has also been driven to develop his direct to customer business. “We always had some sales through our tasting room, but this has now changed with the added demand from direct orders. It’s not massive and certainly won’t save our business. But it will help us more than we expected with the extra margin.”

Mullineux even reports that local customers having been willing to pre-order wine and take delivery once prohibition was lifted. “This has been truly appreciated”, he says.

Worldwide Support

“Our cash flow has been hammered, but we will recover.” – Chris Alheit

Exports, too, have been business-saving in some cases for wineries with existing international distribution, and will continue to be. Although export sales had been banned during a five-week period at the beginning of lockdown, alongside domestic sales, they have since been able to continue. And as Kobie Lochner reports, “Many of our international partners have gone above and beyond to support the SA wine industry. Great initiatives were put in place to create awareness for the category and it seemed to have been embraced by consumers who showed their support.”

Sadie, too, has been among the fortunate: “I cannot thank enough our importers and national partner and above all our private clients, it was amazing and humbling to see their commitment to our wines.”

Despite the struggle, Forrester also sees hope for the future: “When one stands at a river and watches the water flowing under a bridge – there is the awful reality that one can never see or meet or gather that water again – it’s flowed under the bridge. I fear that life will never be the same. but we will carry on, and with the incredible support of our export markets we hope to build and create the new normal.”

Quality, No Compromise or Charity

There’s more than a little irony, and tragedy, in the fact that at a time when the quality of South African wine has never been better, or the offer more exciting, the industry is facing such an existential threat. Consumers can of course do their part to support the industry by buying South African wines. But don’t think of it as disaster relief or charity. The best wines offer outstanding quality and represent extreme value. So, it seems, a win-win. Let’s hope they can stay in the game, and ride the wave without falling off. It’s a good thing so many South African winemakers are also seasoned surfers.

This is a time of seismic shift. This is going to be one massive wave of change around the globe and we will have to ride it as best we can and not fall off. My surfing skills will hopefully help. – Sebastian Beaumont


Buyers’ Guide August 22nd: South Africa

Almenkerk Wine Estate 2014 Syrah WO Elgin, South Africa
$17.95, Loyal Imports
John Szabo – From the heavy bottle alone you’d think this was expensive wine, and the wine inside, too, could certainly fetch a higher price in the market. This means you can pull it out at your next dinner party and have guests thinking you’ve dished out far more than you have. Widely appealing, applicable for drinkers from novice to seasoned.
Sara d’Amato – From the cooler region of Elgin, this meaty, lightly smoky syrah is delightfully aromatic and notably elegant while remaining typical of this rather hearty grape variety. Mid-weight with silky tannins and very good length.


Paid ContentThere are 16 other VINTAGES Release recommendations this week that are currently only available to our premium members. This complete article will be free and visible to all members 30 days after publication. We invite you to subscribe today to unlock our top picks and other Premium benefits.

Unlock our Top Picks

Please take a moment to understand why we charge for this service.

“For the cost of a good bottle of wine we’ll help you discover hundreds of great ones.”

Paid Content


That’s all for this report. See you around the next bottle.

John Szabo, MS

Use these quick links for access to all of our Top Picks in the New Release. Non-Premium members can select from all release dates 30 days prior.

Sara’s Sommelier Selections
Michael’s Mix
Lawrason’s Take
Szabo’s Smart Buys

New Release and VINTAGES Preview

 

Don’t forget to follow us on Instagram for the latest WineAlign recommendations, tips and other interesting wine information.