Selling South African (RSA) Wines Overseas

One can grow the greatest grapes, and make the greatest wine, but ultimately the wine must be sold, drunk, appreciated, and hopefully more of it purchased. While we have been making surprisingly good headway in getting the Silkbush brand established in South Africa and some adjoining countries, we don’t anticipate such sales to ever approach the level possible in certain major foreign markets. Under the guidance of and with the exceptional business relationships developed by our lead US importer, Ms. Selena Cuffe, we are starting, finally, to get some recognition and sales in major US markets, especially New York and Illinois. However, our shipments to the US have been in multiple pallet loads (56-70 cases of 12 bottles); in August 2017 we will bring in our first full container, of 700 9 liter cases.

Since 1994, RSA wine quality has risen quite steadily to very high levels. Extensive replanting of vineyards has taken place, and wine making technology and training has improved dramatically. Accordingly, the acceptance, and more recently, the sustained accolades of the international wine journalist community have been attained. Despite these achievements, the penetration of foreign wine markets with consumer sales of RSA branded wines has not kept pace. In the US, bottled RSA wine sales have remained at approximately 1 million cases/year for over 10 years, while the total USA wine market continues to grow, presently more than 399 million cases per year, including sparkling wine, and that over 14% alcohol. Annual US wine sales growth, however, has slowed to about 2.5% to 3%+ in recent years, which does not make things easier and many more US wineries are created annually. (Total US wineries, which exist in all 50 states, is fast approaching 10,000.) With more US producers in the market every year, and extensive local promotional efforts by US wineries, many large US grocery store chains no longer carry any selections from RSA; retail distribution has shrunk in numerous areas. Imported wines constitute 33% of US wine sales, but clearly those sales proceeds are largely going to other wine producing regions of the world. (RSA wine share of US market is a meager 1/4 of 1%!)

In general, there are three significant stumbling blocks for all imported wines in the US. The bureaucratic and legal issues that all wineries, be they domestic or foreign, have in attempting to gain market share in the US are relatively well known. The first, and very significant hurdle, is that the 21st Constitutional Amendment (in 1933) permitted each US State to establish its own rules and regulations for the sale of alcoholic beverages. This ugly stepchild of the repeal of Prohibition and then widespread religious antipathy to “demon rum,” created a legal compliance nightmare that continues up to the present. What is legal in one state may represent a felony in another, and small producers, in attempting to comply with the labyrinth of multiple state rules, often find it prohibitively expensive and time consuming. The second hurdle is the ever-consolidating distribution system of interstate wholesalers. Some thirty years ago there were almost as many US distributors as wineries; now there are about 10,000 domestic wineries and little more than 300 distributors. And fewer than 10 giant wholesalers sell over 90% of the bottled wine in the US! Obtaining attention of capable distributors is very difficult for all wineries.

Thirdly, the advantage of having a depreciated Rand, when pricing export wines, is not helpful when it comes to the expense of personnel required to represent RSA wines in the US. Any continuing promotional marketing programs (while funded in Rand but paid in Dollars) must be well thought out and justified. Further still, maintaining a RSA wine sales presence sufficient to sell in the US is no easy undertaking. New York is seven time zones to the west of Cape Town, and 40 degrees north of the Equator, versus 33 degrees south for Cape Town. Almost all Cape producers must fly to Jo’berg to get a nonstop flight to New York or Atlanta; the minimum travel time of 24 hours, just to the US eastcoast, and resulting jet lag impacts are very real. (The author can attest to this as he has made close to 40 round trips over the past 23 years from the US to RSA.) Accordingly, since few producers want to make the expensive and exhausting trip (and recovery) more than once a year, if that, relatively few RSA wineries have a personal presence in the US. Therefore, “Brand South Africa,” the overall presence of all RSA wineries in the US is limited.

Because we do not anticipate significant change, if any, in these conditions, we do not hold much hope for increased RSA wine sales in the US wine market (albeit the largest in the world) for many years.

Nevertheless, the purpose of this wide-ranging discussion is not to dwell on the marginalized role of RSA wine in the US wine market, but also to observe on some alternatives for selling more RSA wine in other foreign markets. We will address these market potentials as we continue this series.

Texas Hill Country Wineries

Texas AVA
















While I have been visiting South Central Texas regularly (some 35 years now), my personal experience with the “Texas Wine Country” has been quite limited. San Antonio friends have told me since 1980 that wine grapes were being grown out in the Lubbock desert area, but their early bottled wine efforts I tasted were not very impressive. (Mediocre, would almost be too kind…) But in the last 10-15 years, evidently, things had started to improve a bit, and I visited two TX wineries west of Austin around then. Much better wine, yet nothing to scare us NorCal grape growers.

Recently, however, things have changed quite a bit, all for the better. A friend from Austin, Alissa Leehner, the noted SAHMilier blogger, and some favorable newspaper reviews whetted my curiosity: have Texans really started to make some wine worth drinking, and even start buying? Then I heard that a goodly number of wineries in the Texas Hill County (W/SW of Austin and N/NW of San Antonio) were producing some decent Viogniers, a white grape originally from the Rhone river valley area of France. The Rhone, in SW France, is generally a much warmer grape growing area than Bordeaux or Burgundy; aahah, the Texans were finally catching on, and planting grapes from that region, as well as varieties from Spain and Italy, in general also warmer weather grape regions. Since our South African vineyard, Silkbush, while 93% a red grape producer, has started to grow and produce Viognier, my curiosity increased: we must see for ourselves what was going on in the Lone Star state.

Accordingly, a San Antonio friend who also enjoys wine, but who was not a local winery visitor, and I set out on a November Sunday and generally headed NW on Interstate 10 for Fredericksburg and thence East on Highway 290. While we made an initial stop in Comfort to visit the first cellar (about an hour from San Antonio), most of the wineries we saw were along Hwy 290 and about 1.5 hours from SA. San Antonio is a big convention city, and it is likely tours of the wineries in the area we visited will become increasingly popular. That understood, Austin is perhaps the most efficient “jumping off” point for TX wine touring as the vast bulk of the wineries are within an hour’s drive west of Austin.

The Hill Country has been a popular TX recreational area for many years; there are many small ranches accommodating visitors, lots of upscale homes and restaurants, and it is a generally very attractive area visit. The driving distances are comparable to those of Napa and Sonoma from San Francisco, so as more Texans start drinking better wine, and want to learn more about their home state’s wine efforts, wine touring year round will increase markedly.

There are some constraints, however, which need to be addressed straight off. First, the reportedly 46 TX Hill Country wineries are strewn about in a very large area; we heard there are at least 50% more venues with applications into the State. (There are over 350 TX wineries over the very large state.) Visiting a representative number in any “sub area” of the Hill Country is going to take the better part of a week, so careful pre-planning of your visit(s) is mandatory. The Texas Hill Country Wineries Guide & Map we picked up along the way was very helpful, but directing prospective visitors to first visit will assist in planning. Trying to visit more than four cellars per day is probably undoable for most, and even hitting four can make it a bit of a drill. If the driving distances between stops is very long, a lot of the fun of the adventure starts to go out of the outing.

Secondly, many TX wineries now require appointments and a $15 tasting fee; these are arranged in advance on relatively sophisticated websites. This is somewhat a positive as it will keep the tasting rooms from being overcrowded and provide for a better visitor experience. (We speak from personal experience in NorCal, where tasting rooms often are overcrowded on summer and fall weekends, and tasting charges are often much higher, especially in Napa.)

Thirdly, you are not going to see many acres of vineyards as you do in most other wine growing areas of the US and the rest of the world. Most of the over 9,000 acres of TX vineyards are still located south of Lubbock, or some five hours west. The growing conditions in near desert conditions, with chilly nights and warm days, and low risk of grape pests, means the best grapes will largely be too far away to visit. Some vineyards are planted in the Hill Country, but reportedly most of these vines are frankly intended to serve as simply amenities for their winery tasting rooms.

Nevertheless, neither driving distances nor lack of vineyards is a fatal flaw, but wine tourists should be aware of this in advance. In a sense, this sort of reminded me of our visit to Mendoza, Argentina, in 2008. I had researched about a dozen winery websites in advance, contacted them all via email, and had been warmly invited to visit by almost all of them. On the websites, I had noticed mainly photos of stylish, relatively new wineries, and then photos of the impressive, ever present Andes Mountains in the distance. However, there were relatively few shots of vineyards and surrounding area shots, which are rather standard for the 1,000 of so wineries in Napa and Sonoma. When we got there, there were vineyards adjacent to the wineries, but when they ended, it was almost all DESERT! Water comes in canals from melting glaciers in the Andes, but it is all carefully measured, and not in any abundance. The TX Hill Country is far prettier than most of the grape growing areas of Greater Mendoza, but visually neither area is as stunning as the Napa Valley, Champagne, or the Winelands of South Africa.

That understood, Texas wineries are fun to visit; I will continue to return with friends for enjoyable days on future TX trips. More significantly, like wine tasting facilities everywhere, they are doing an important role in educating Texans and others about wine, especially the more exotic varieties, teaching wine/food pairings, and generally “demystifying” wine drinking. In general, this will sell more TX wine and create more informed, enthusiastic consumers for wines from elsewhere.


Due to the length of the foregoing introduction to visiting TX wineries, we will discuss TX Viognier in a separate blog posting.


wine pic 3

For those interested in trying Republic of South African (RSA) wine in the US, it is often a challenge to even find a few local bottles to buy and  try. Why is this, you may wonder, given the enormous array of wines available on the grocery store aisles or in major wine shops? Well, first, while the entire US wine market is about 370 million cases sold per year, bottled RSA wine is just under 1 million cases, so less than 1/3rd of 1%! (There is enough bulk RSA wine imported for another 2+ million cases yet it may well be blended to upgrade other wines. If so, in the process, its origin is lost and its heritage becomes invisible to the consumer.)

Next, the average retail price of a bottle of wine sold in the US is about $6.25 and perhaps 80% of all wine sold is $10/bottle or less. Since it costs about $1/bottle to bring wine from South Africa to the US, most importers have given up on selling any decent RSA wine for retail prices under $10. Since distributors and retailers receive at least 50% the retail cost of the wine, the transportation cost comes right out of the winery’s pocket. (More typically, an RSA winery will gross only $5/bottle that sells for $15 in the US, and their costs may easily be $3-$4/for the bottle.) Given all the other expenses, few foreign wineries can afford to compete in the US with Gallo and Bronco (“Two Buck Chuck”) unless they are working through great oversupplies of grapes. (And even that usually is a temporary condition, even for Australia’s [Yellow Tail].)

The other side of the coin is the simple fact few wine buyers “experiment” with wines costing more than $20 retail. (This applies equally to US domestic wines as well.) There are some wonderful RSA wines in the $20-$40 range but they will only be purchased by the very knowledgeable and loyal RSA wine consumers.

That then places most South African wine within the $10-$20 price range where most of the good yet affordable wines in the US are being sold today. The SILKBUSH wines we are importing (Pinotage and Viognier) are usually sold in the $14-$18 range, where there is lots of competition with many very good domestic wines. So clearly RSA wines cannot differentiate on price alone.

Very simply, a consumer must be interested in buying a South African wine before they enter a wine shop, a tall order. Further, there is so little experience with RSA wines in the US (essentially just the past 20 years) there is seldom a “South African section” in most wine departments, or if there is, it is just a few facings on a bottom shelf. With so little attention  paid by retailers and consumers alike, there has been little RSA sales growth in most regions.

Despite these inherent adversities, South Africa’s exotic image, wild animal TV series on Discovery Channel and National Geographic, and  increasing tourism (some of which is “wine tourism”), are all leading to increased awareness of the Beloved Country. The 2010 World Cup soccer championship, the recent passing of former President Nelson Mandela, and the attendance of most world leaders at his memorial services: all these exposures increase international awareness. If the Western Cape can become a sufficiently attractive international tourism destination, its beautiful Winelands are only 30 minutes from Cape Town and are usually visited. This is a long, slow way to promote RSA wine in the US but one that should work and develop permanent fans. Only time will tell.


Dave Jefferson

Reverse Wine Snobbery and Wine Supply Chain Economics

Reverse Wine Snob logo
Today we wish to feature an interesting and valuable wine blog, The Reverse Wine Snob, ( updated quite frequently by Jon Thorsen, located in our former home state of Minnesota.  (Yes, they do have very long winters and chilly springs up north, but those former Nordics purchase and drink a lot of wine, partly as a result of being indoors much of the year.)  Jon’s subscribers are largely wine drinkers who want the greatest wine quality for the lowest prices, starting with the cost of subscription to his service, which is ZERO. For those of us who years ago had a smattering of economics/price theory, we understand it is impossible to solve this equation (as quality and price are both variables), but Jon does a decent balancing job: he rates wines he reviews for both quality and price, comes up with a final score, and then makes consumer suggestions to purchase, purchase in quantity, or “Saturday Night Splurge” for the highest quality, and forget the price once a week.  (We like this approach!)

We think his wine blog is quite valuable for many, especially for those considering purchase of imported wine in the $12-$22 range with which they have no prior experience.  Many in the wine business are regular readers as it is a very interesting approach, especially as most wine buyers are far more price sensitive than the wine business likes to discuss publicly.  The average retail price of a bottle of wine in the US is around $6.25, and perhaps 80% of the wine is sold for less than $10/bottle.  As growers of premium grapes in Napa, Sonoma, and South Africa, we are not very interested in the sub $10 market, but even the occasional sub $10 reviewed by Jon can be rated quite highly for low prices, hence his “Reverse Wine Snob” blog name, and his Bulk Buy category.  But if the wine quality is only so-so, his overall rating is usually under about 7.3, perhaps his median score for wines reviewed on his site.  (Lower quality wines are usually not reviewed.)

Because the wine business ultimately is a business, and at a minimum each participant must recover their costs (or permanently subsidize a very expensive hobby, which clearly a number do), we thought a thorough discussion of wine economics may prove interesting to some.  We will leave that exercise for a later day, however, and just supply some conclusions based on our own experience.

Supply chain economics/observations:

  1. Your retail $15/bottle of imported wine contains at most wine costing $1-$1.50 (10% at most) at the winery level, and frequently less than $1 (6% of the retail price per bottle). We hope the consumers do not begrudge the growers/wine makers this pittance of total wine bottle cost. Packaging at least triples the winery cost to somewhere between $3 and $5, FOB some major port.
  2. The wine sold by the foreign winery for $5 then sees the cost at least tripled again to $15 if not $17 or more at the US retail store. (As there are thousands of wineries competing to get into the US wine market, and only about 300 significant distributors, and perhaps 30 major ones, the distributors and retailers are able to compete imported supply prices to the lowest possible levels.)
  3. Most imported wine sold for $10/bottle or less is pretty much a “semi-industrial grade” product; and when you get down to $4.99 to $6.99 wine, wine reviews are irrelevant! (It may be red, 14% alcohol, and in a 750ml bottle, but that’s about it.) Admittedly, it is far better wine than available 20-30 years ago at these prices, but usually not very remarkable.
  4. We see little high quality imported wine selling for much below $12-$15/bottle for these reasons; and since there is real consumer resistance to experimenting much above $20/bottle, it appears that most of the imported retail game will likely be played in this range for the next several years.
  5. As more Internet-hip Millenials on limited budgets take up wine drinking, blogs such as Jon Thorsen’s will become increasingly popular. And while imported wine today in the US is about 33% of total wine sales, many have projected imported wines taking at least 50% of the US wine market within another 15 years. If so, blog-informed consumers will become increasingly happier with having taken the time in advance to sort the wheat from the chaff.

Chart describing the reverse wine snob rating system

Demystifying Wine & Other Fool’s Errands

#15 Just the Vines

It has been my personal experience over the years that the more wine drinkers learn, the more questions they have.  Some wine drinkers have an insatiable appetite for more wine knowledge. Virtually all of us in the wine business learn that in social settings, once the word gets out about what we do, we are inundated with questions for the balance of the day or evening.  Wine advertising is chiefly wine education, and the first step in demystifying wine which happens during cellar tours, in store and trade tastings and even in media coverage.

Some wine producers believe the mystery and romance of wine is part of its allure, and if more is explained it will erode higher prices for wine.  Some of them enjoy telling a tale that only their small corner of the world grows the best grapes, and that generations of growers and wine makers have a monopoly on the secrets. If this works for a chateau, fine, but many of us believe that more knowledge of wine growing increases the benefits for both wine drinkers and wine producers.

This, of course, is not to denigrate beautiful wineries in glorious settings, and the influence of tasting wines in such surroundings: romance is definitely relevant in the marketing of any luxury good or experience. Mystery, however, is often the product of complexity and the wine business is full of complexity.

Only wine drinkers who want to learn a little more about wine grape growing need to read any further.

Let’s take two different river valleys where we (my partners and I) produce grapes, the Russian River Valley in Sonoma County, CA, and the Breede River Valley in the Western Cape, South Africa.

In Sonoma, the first 10-15 miles from the Pacific Ocean is often so foggy and chilly that most grape varieties will not ripen unless the grapes are grown on a warmer knoll or hillside. The next 10-15 miles (the “Middle Reach”) is some of the best land in the world for growing colder weather varieties, such as Pinot Noir, Chardonnay and Sauvignon Blanc. But by the time you get to and past the town of Healdsburg, and into the Alexander Valley (with the Russian River running through it), perhaps 30 miles from the coast, the fog burns off too early and arrives too late for these cool weather grapes to do well. “A quality” Chardonnay grapes suddenly become C+ quality, but warmer weather grapes, such as Cabernet and Zinfandel just love these conditions. Thirty miles along one river valley makes for huge variations in growing conditions and grape quality.

In South Africa, in the Breede River Valley, which has steep mountains on both sides, we are far inland from the Atlantic Ocean so fog does not appear. However, the mountain sides  impact the amount of sunlight on the grapes grown in this valley. We have a large vineyard on the east side of the valley where we have 93% red grapes planted because we get wonderful midday and afternoon sunlight. Perhaps 10 miles to the west, on the other side of the valley, grapes are shaded by other mountains from the sun by early afternoon. Accordingly, these vineyards work very well for white grapes but poorly for red grapes.

Local knowledge of terroir is essential in knowing what to plant and where and for wine drinkers who want to know why the wines grown in particular regions can vary widely, these are major insights. In terms of price, there is a limited amount of plantable land in both river valleys for wine grapes, hillside land is limited still further, which of course, affects prices. Additionally, spacing of vines in rows, and between rows, various types of rootstocks, different clones of the same grape varieties, types of trellising and irrigation systems, soil preparation that may have occurred (or not), frequency of irrigations, and how ground water is measured, and more, are all factors. Grape growing is very complex and I have not even mentioned the importance of harvest conditions or what happens in the  winery itself.

Most of the mystery of wine growing is due to complexity and most people aren’t interested in spending the time to learn 1% of this stuff. (“Just give me a glass and I’ll judge for myself.”)  There are days I fit into this group and I don’t ponder the mysteries of wine, I just enjoy the wine in my glass.