Sweden is an industry success story, with South Africa boasting the second spot for wine imports by volume in the largest Scandinavian wine market. Innovation, adapting to consumer demands, and a better presence in higher priced categories will be required, however, as competitors make inroads at our expense.
Like neighbouring Norway and Finland, the Swedish alcohol industry is governed by a state-run monopoly, Systembolaget. Recent statistics from this gatekeeper’s 2014 sales report indicate that while an impressive 28 million litres were sold last year, this figure is 14.2% lower than in 2013. Meanwhile, the Italians have strengthened their spot at the top by growing their volumes by 11.32%.
Beware of the box
Bag-in-box is big business in Sweden, with Sawis stats indicating that this format accounts for the majority of South African exports, followed by bulk and bottle. The two biggest brands, Zumbali Chenin Blanc and Umbala red – both bag in box products, sold by Mare Magnum – are exported in bulk, which has resulted in an increase in the relative bulk wine exports. The Systembolaget report indicates that combined, these two brands represent 27% of South Africa’s market share. In fact, without these massive volume brands, South Africa will drop to fourth place by volume.
According to Wosa’s market manager in Sweden, Maja Berthas, when it comes to market share in Sweden, most of the volume comes from a handful of brands. “This was the case with South Africa and now Italy has followed suit. When the top five brands are starting to decline, it looks really bad in terms of statistics and bag in box volumes are now trending towards Italy,” explains Maja.
Styles and stats
In terms of value, South Africa is the third biggest wine exporter – behind France and Italy – which have both shown value growth in 2014, while South Africa dropped by 12.3%. Significantly, South Africa saw price increases per litre across all categories every year from 2010 to 2014.
For South Africa bulk rosé was the best performing category in 2014, in total growing by 46.57% in value. Sparkling wine tumbled 23.81% in value terms. From a higher base, the red wine category was probably the biggest disappointment. Bulk and bottled red wine dropped by 21.58% and 19.82% respectively in value terms, representing the biggest losses for South Africa in terms of value and volume.
With regard to new world wine regions, Australia has also lost significant market share in terms of value and volumes, but Chile, Argentina and New Zealand are making meaningful inroads, albeit from a lower base.
Maja suggests that Swedes are turning back to Old World, European wines. “Italy has always had a good reputation in Sweden, also for more expensive wines. Amarone has been considered a quality wine, but it was too expensive for every day consumption. About four years ago we saw a couple of wines made using the appassimento method entering the market. They were pretty low priced and they were also marketed as “mini-amarones”. This caught the Swedish consumer’s eye and started to get really popular. When we saw the success of the first brands, more followed,” comments Maja.
A shift towards the Old World is also evident in the French category, which is enjoying remarkable value growth at 9.64%, even though volume increased by only 5.32%.
Lessons from Larsson
While South Africa was previously seen as a crusading cause, loyally supported by Swedes post-apartheid, South African wine brands need to steer clear from becoming run-of-themill at a time when the competition has been sporting quirky and striking brands and innovative, value for money product offerings. South Africa has work to do, particularly to grab the attention of Swedish millennials.
A delegation of leading South African wine producers, as well as Wosa CEO Siobhan Thompson, met with Systembolaget’s Johan Larsson at Prowein to discuss the state of the South African category. Larsson assured them that it was still strong and shared key tips on how it could be improved.
Serious about certification
Larsson advised that ethical certification was absolutely crucial, adding that Wieta – which is not currently recognised as an official ethical certification like Fair for Life and Fairtrade – was certainly viewed favourably by Systembolaget.
In an interview with WineLand, Larsson highlighted that as “a system for the industry, by the industry”, Wieta had a unique appeal. He added that it would, however, have an even greater impact if the entire industry could be certified, which would reflect a real unified industry effort.
The drive for certification is not only limited to ethical requirements, with environmental sustainability also high on Systembolaget’s checklist. He urged South Africa to go organic, adding that the organic category was here to stay and bound to grow. South Africa currently has a limited organic offering, which could become an increasingly important limitation.
Systembolaget values traceability – a unique selling point, with South Africa boasting a system that is envied globally.
Sell up and sell Chenin Blanc
“It can be misleading to judge the state of the South African category purely based on export or depletion volumes. I would even argue that it is currently more important that South African wine attains higher prices and that an impressive array of wine is sold,” Larsson explained.
He said that higher end South African wines were in fact doing well and that this sector was doing better than ever, adding that exciting top end wines also bode well for boosting Brand South Africa, including lower end wines.
“Chenin Blanc could become South Africa’s signature wine. South African Chenin sells better than Sauvignon Blanc, with the latter facing fierce competition from NewZealand. The fact that it can produce big volume entry level wines, as well as top-end stunners is particularly pertinent, since everyday Swedish drinkers, as well as connoisseurs find it appealing.
“I have never met a rude South African. They are easy to work with and remarkably adaptable,” commented Larsson, highlighting the importance of good business relationships.
According to Siobhan, it was evident that Systembolaget was listening to consumers and changing their product offering accordingly. “It is important that the South African industry collectively and constructively engages with both Systembolaget and the end consumer. Johan was a familiar face among South African producers at Prowein – a very important event for the Swedish market. These relationships are crucial,” she remarked.
Some of the positive, technical amendments include a longer evaluation period of nine months, instead of the conventional six month period. A significant percentage of South African wine sold in Sweden is procured through Systembolaget’s tender process, while Italy is in fact making inroads through order assortments, whereby end-consumers order products that do not necessarily go through a tender process.
Many of the Italian brands that can now be found on the shelves are a result of the ordering assortment. This means that a product can move its way from the ordering assortment on to the shelves if enough people order it in a shop.
The tale of the Swedish market features several recurring themes in the current South African wine trade, such as a real need for growth in premium categories, innovation and of course ethical and green certification. Perhaps it’s time that “run-of-the-mill” South Africa comes up with a few exciting “mini-amarone” concepts of its own.