Achieving industry sustainability through an effective premiumisation strategy for South African wines in global markets

by | Mar 17, 2021 | South Africa Wine Scan

Despite a recent significant quality leap, the comparatively low status (e.g., “cheap and cheerful”) and value of South African wine on international markets remains a considerable source of concern for industry leaders. However, it is not entirely certain what factors account for this situation, why they are important, how they interact and therefore what effective differentiating factors can the SA category employ to improve value and status across the board in global value chains. Similarly, what can we learn from successful premiumisation strategies both within the SA and global context that will better inform future industry strategy and sustainability?

Improving quality is only one aspect of the reputational challenges that wine categories face in order to influence their market status and the premium they can charge. Strategies such as category re-interpretation, signalling, allusion, niche-width reduction and so forth, may be good options to pursue. However, it is uncertain whether these can be successfully applied in the case of the SA country brand and categories that fall under it, e.g., Chenin Blanc, Pinotage, Old Vines etc.

Premiumisation refers to the action of improving the consumer appeal of a category (in this case, South African wine), as well as its status (market position) and value (average price points) through differentiation. Arguably, the South African category needs to move towards a more differentiated strategy: from commodity (highly elastic) to premium pricing (inelastic) orientation. The responsibility for premiumisation falls largely with WOSA but cannot be successfully achieved without the commitment from several institutional and private stakeholders. The old vine category serves as a good example of a successful premiumisation strategy and the purpose of the research will be to determine whether any further lessons can be drawn to inform the country brand strategy.

There is also a need to address the economic sustainability of grape growing in South Africa and the culture of vineyard removal. If additional value can be created especially in primary production, it is likely to improve economic sustainability across the wine value chain in the next decade.

Researcher: Jonathan Steyn, Graduate School of Business, UCT

Image: Pixabay

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