Good news for wine as foreign investors pile into SA
News24 | 13 March 2023
• There is a trend of consolidation in SA's wine industry and foreign investors are piling in, says local body Vinpro.
• Local wine operations offer value for money, and offshore groups are investing in medium-sized South African wine brands with growth potential.
• The Stellenbosch wine region is 'comparable with the best French areas,' which is attracting interest.
Foreign groups are making significant investments into South Africa’s wine industry, and industry body Vinpro says this will help local brands to go global.
At least 15 large South African wineries and related businesses have been acquired by foreign entities in recent years, with some notable deals in the past few months, according to Vinpro, an organisation that represents local wine producers and cellars.
In February, the local unit of French winemaking giant Grands Chais de France (GCF) bought Villiera, a well-known Stellenbosch farm. Just four months before that, GCF acquired the nearby Neethlingshof winery.
Another French group, Advini, has invested in Klein Zalze, Le Bonheur, Ken Forrester, Stellenbosch Vineyards, and L'Avenir.
American, German and other European investors have bought into the local industry as well. For instance, San Francisco-based investor Eileses Capital acquired Warwick Wine Estate in 2018.
"There is a clear trend of consolidation in the sector," says Vinpro MD Rico Basson.
Offshore groups are investing in medium-sized South African wine brands with growth potential, and the transactions will give local brands access to global distribution networks, Basson said.
Those entities are expanding their portfolios, and the Stellenbosch wine region is "comparable with the best French areas".
Moreover, South African estates offer "value for money from an investment perspective", and some deals have targeted farms that were struggling financially.
"The trend is in my view very similar to what is happening across the world, where global entities would integrate backward," Basson said.
In New Zealand – a world leader in sauvignon blanc wines – the top four brands belong to foreign multinationals such as Constellation. "This is partly the reason why New Zealand sauvignon blanc does exceptionally well in the US."
Aside from the brands that have been acquired, Basson said the wave of consolidation would elevate South Africa’s status in the global wine market more broadly.
"What I find interesting is that most of the foreign investors allow the domestic family to integrate in the business or continue. They also have a strong focus on the premiumisation of wine."
In most cases, the transactions include a strong focus on community projects, he added.
Basson said a number of other transactions involving local buyers had also been completed in recent years.
According to Wines of South Africa, the value of the country’s wine exports declined 2.4% to R9.9 billion in 2022.
The decline was attributed to shipping constraints at the port of Cape Town linked to bad weather in April 2022 and a two-week long strike by port workers in October.
South Africa’s largest wine export markets are the UK and Germany.
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