Global wine inventories are mounting up.
Christian Eedes’s editorial entitled “SA’s wine quality gap widens” published earlier this month highlighted the key elements of what I think is an impending and massive crisis affecting the Cape wine industry. It is easy to extrapolate from his commentary that the situation is not limited to South Africa. We are part of a worldwide contraction and polarisation. However, our circumstances are also different – and in this we may see the faintest glimmer of light at the most distant margins of the horizon. What is certain is that the world of wine as we know it is in the midst of tumultuous change, some of which has been a long time coming, some has arrived as unexpectedly as a tsunami.
In his article, Christian drew attention to the ever-increasing gap between the high end of the Cape wine market, and the entry level (from a price perspective) far below. While the small volume, ultra-premium, players appear to be doing very well they represent a very small percentage of the total South African wine business. They burnish the image of the industry, but their wines reach very few households in South Africa and only a tiny sprinkling of international collections.
The prices they attain are comparable with mid-level products from France, Italy, Australia and California where, to be blunt, they enjoy a stable but unexceptional status. On a pricing pyramid where there are perhaps five wines in the world which attain prices over R150k per bottle on release and perhaps another 50 over R50k, there are tens of thousands in the highly contested space between R1,000 and R2,000.
This is the territory in which perhaps 100 of the Cape’s rarest and most sought after releases are positioned. Given how few there are, and how small their production, the best that can be said about the significance of their being there is that they are disproportionately visible flag-bearers for Brand SA.
The rest of the industry comprises the large wholesale merchants, the larger and smaller estates, private producers and cooperatives, and a diminishing number of grape growers (who are fruit suppliers rather than wine producers). This is pretty much the structure of most of the wine industries of the world: the percentages (and the profitability) may vary but this is the model on which wine is produced everywhere.
The market – that is to say the consuming side of the equation – has been changing dramatically. In the 1960s the average annual per capita consumption of wine in France and Italy was over 130 litres. These numbers are now down to around 40. People, we are told are drinking less, and drinking better, and this would partly explain this change. When I was a student living in France supermarkets and grocers sold most of their wines with unbranded labels in returnable glass – the alcohol level serving as a descriptor: Vin Rouge 10° or Vin Rouge 11°
Much of this wine was produced along Southern Europe and delivered in tanker loads to industrial bottlers. Italian wine was added to the French wine to increase the strength of the lighter, thinner bulk sourced from around Bordeaux. The wine itself was a grocery purchase – like bread – bought for its nourishment/effect, a staple of diet rather than a luxury.
For the past forty years or so, as the table wine business declined, new middle class consumers – firstly in the UK but then in the USA, Russia, Australia and Asia – drove a demand-led boom for high-end wines. Prices increased by many multiples: the 1982 Lafite was released for the equivalent of 26 Euros; the 2022 for 580. The same pattern – to a lesser extent perhaps than the First Growths – is discernible across all the important appellations. As prices increased, so did wine property values (which saw plenty of high-priced acquisitions, an extraordinary number of ego-driven re-building programmes, and a massive increase in inheritance taxes).
The roller-coaster has now hit the proverbial brick wall, pretty much everywhere. Champagne volumes have already shed around 20% in the past two years, and they are tracking a further decline in 2025. The 2024 Bordeaux vintage is largely unsold (some chateaux reported that not a single bottle was bought at this year’s primeurs campaign). Those who have avoided the temptation of leveraging their assets, or who haven’t spent all of their windfall, will survive. But in the next five years – even without the prospect of the ever-shifting Trump tariff scenario – chaos will ensue.
As a measure of what is already happening, the USA has actually exported bulk wine to South Africa for blending into some of our generic reds. Consider for a moment the implications of this: to clear unsaleable wine from their cellars, US producers have shipped wine from California through the Panama Canal to the Cape (where it pays duty as an import) and it has then been blended away into the cheapest of everyday wine. Their loss is vast but they have to get some cash for their production.
They – and Spanish, French and Italians, as well as many others – have been and will be dumping wine for some time. Buyers should be in wine heaven except, as we have already discovered – consumption isn’t increasing. Gen Z hasn’t taken over the wine drinking habit of the Baby Boomers. It can’t afford to, or doesn’t want to, or prefers marijuana. So prices and volumes will drop until they attain a new equilibrium. Along the way, the attrition everywhere will be dramatic.
Unlike European producers we cannot expect our government to provide subsidies. So things are looking pretty grim – but for the aforementioned glimmer of hope on the horizon: unlike the more mature wine markets of Europe, we have a whole new middle class discovering wine for the first time. Any visitor to WineX cannot but have noticed the changed demographic of the Gauteng market. Enthusiastic, eager to learn, and willing to spend money en route to discovering everything there is to know about wine. Our producers should recognise – as swiftly as possible – the prospective redemption on its doorstep. They should perhaps also do everything within their power to ensure that we have a government which recognises the importance of a more vibrant economy.
Then there are the markets beginning to track the same trajectory elsewhere on the continent of Africa. They will require harder and more arduous work than cruising the capitals of Europe and dropping in to see distributors in the USA. Hopefully the need to survive will help those dragging their heels to overcome their inertia.
Central to the survival of our wine industry as we know it is the synergistic working together of its component parts. The formal structures must assist producers, from growers to small scale producers, to get through the next few years. Everyone must work to nurture the newly emerging domestic market, by helping to enhance product knowledge, by exposing consumers to the full range of options, by de-mystifying the jargon and by making wine more accessible. We need to shift our focus from the international markets facing their own existential crises to building and developing wine sales and wine culture closer to home. And we have very little time to do this. As Ernest Hemingway memorably observed: “How did you go bankrupt?” Bill asked. “Two ways,” Mike said. “Gradually and then suddenly.”
Michael Fridjhon has over thirty-five years’ experience in the liquor industry. He is the founder of Winewizard.co.za and holds various positions including Visiting Professor of Wine Business at the University of Cape Town; founder and director of WineX – the largest consumer wine show in the Southern Hemisphere and chairman of The Trophy Wine Show.