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South African Winemakers Targeting China, Canada as Sales to U.K. Decline

South African winemakers are increasing sales to “non-traditional markets” such as Canada and China to compensate for declining purchases in the U.K., according to Wines of South Africa, which represents exporters.

An increased focus on South Africa during the soccer World Cup, held in the nation during June and July last year, “meant more was written about South African wines in these non- traditional markets,” boosting exposure for both the country and its wines, said Chief Executive Officer Su Birch by phone yesterday from Stellenbosch, in South Africa’s main wine region.

South Africa is the world’s seventh-largest wine producer, accounting for 3 percent of world production, according to South African Wine Industry Information & Systems. The country mainly grows white wine grapes, including chenin, chardonnay and sauvignon blanc, while its red varieties include pinotage, which is indigenous to South Africa.

Between January and June last year, 31 percent of South Africa’s packaged wine was exported to the U.K., the biggest export destination, down from 40 percent in 2009 and 50 percent in 2003, said Wines of South Africa yesterday. Packaged wines are branded by the producer, while bulk wines are bottled or boxed by a supermarket or wholesale buyer before being sold on.

While there has been a rise in bulk exports to the U.K., with South African brands move bottling operations there to cut costs, changing consumer tastes have also contributed to the overall drop, said Jo Wehring, U.K. market manager for Wines of South Africa, in an e-mailed statement.

‘Exports Won’t Shrink’

British consumers are buying less “entry-level” wine, at about 3 pounds ($3.69) a bottle, she said. “We’re not able to keep supplying at this price,” Wehring said.

In total, sales of packaged wine to the U.K. have dropped 19 percent during the past seven years, according to statistics from the industry group. At the same time, sales to Sweden, Denmark and Canada have doubled.

While total exports fell 4 percent last year, the decline was offset by increased sales of packaged wines to Germany, Japan, Kenya, Nigeria, Russia and China, the group’s data shows. On average, these countries bought about 30 percent more wine last year, according to the statistics.

“I think South Africa’s performance will be pretty much the same as last year with little or no growth, but I don’t think exports will shrink much further,” Birch said.

The key factor will be the strength of the South African rand relative to its main export markets, Wehring said.

Napoleon Bonaparte

The rand gained 12 percent against the U.S. dollar last year, making it the second-best performer among more than 20 emerging-market currencies tracked by Bloomberg.

During the next five years the U.S. and Canada will see the largest increases in sales in terms of volumes, Birch said. “Growth rates out of Africa and Asia are the highest but this is off very small bases.”

South Africa’s first vines were planted in 1655 near Cape Town, where Dutch settlers set up a station to supply ships plying the spice routes. The Cape’s first famous wine was Constantia, a sweet fortified muscat that was shipped to Europe, where Louis XVI and Napoleon Bonaparte became fans.

Wine routes around the university town of Stellenbosch take tourists past more than 140 producers, including family owned Meerlust and Vergelegen, owned by London-based Anglo American Plc, the world’s second-largest mining company.

Italy is the world’s biggest wine producer.

To contact the reporter on this story: Lauren van der Westhuizen at at lvanderwesth@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net

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