Wal-Mart Wine Selling Is Key to South Africa’s U.S. Push
South Africa, the eighth-biggest wine producer, is seeking to regain a foothold in the U.S. market lost to imports from Australia to Argentina by promoting brands at Wal-Mart (WMT) Stores Inc. and Whole Foods Market Inc. (WFM)
“We used to have a quite substantial market presence in the U.S. and it went all the way down,” George Monyemangene, the consul general of South Africa in New York, said in an interview at Bloomberg’s headquarters. “Maybe we were not as responsive as we should have been to newcomers.”
Wal-Mart, the world’s largest retailer, started selling South African wines in August 2012 and now has bottles in 1,600 stores, according to Deisha Barnett, a spokeswoman in Bentonville, Arkansas. Whole Foods Market, the largest U.S. natural-foods grocer, is planning a South African wine promotion later this year, said Doug Bell, the company’s national wine and beer buyer.
South Africa’s share of the market for wines imported to the U.S. fell to 1.2 percent last year from a peak of “about 8 percent” in the 1990s, according to data from San Francisco- based Wine Institute and Monyemangene. Italian wines have about 29 percent of the import market, followed by France, Australia and Argentina. Imports of South African wine to the U.S. have risen fivefold since 2000, compared with a more than 12-fold jump for Argentina and New Zealand wine imports, according to the South African Consulate.
“South African wine has matured,” Bell said in a telephone interview from Blue Ridge, Georgia. “It’s time to showcase them. The quality is there. I don’t think they’re the little brother of the wine world anymore.”
In the U.S., Wal-Mart sells Seven Sisters wines, founded by seven sisters of South Africa’s Brutus family, Barnett said in a telephone interview. Wal-Mart entered Africa’s largest consumer market in 2011 with the acquisition of a majority stake in Johannesburg-based Massmart Holdings Ltd. (MSM)
The efforts to boost sales of South African wine in the U.S. are taking place as the rand trades at a four-year low against the U.S. dollar amid labor disputes in the mining industry, a widening budget shortfall and the threat of a downgrade of South Africa’s BBB credit rating, the second-lowest investment grade. The currency has slipped more than 8 percent this year, the most among 25 major emerging-market currencies compiled by Bloomberg.
The weaker currency will boost South Africa’s total wine exports 5.1 percent this year to 430 million liters, a level 23 percent higher than two years earlier, according to a USDA Foreign Agricultural Service report dated March 14. White wine makes up 81 percent of the country’s exports to the U.S., according to the report.
South Africa wine production dates back to the 1600s, when the Dutch East India Company established a supply station in the Cape of Good Hope. Exports began booming after countries stopped boycotting South African products in protest over apartheid, the white minority government that ended in 1994.
Monyemangene, the consul general, said producers may have lost market share by underpricing “top-end” wine. With the new agreements with U.S. retailers, sales are starting to increase, he said.
“We have some intermediate to long-term agreements within the export market,” Monyemangene said in the March 13 interview. “We have seen a rise in terms of volume of wines.”
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