Case#17 South African Wine

Posted: March 27th, 2020

Case#17 South African Wine

The local profit margins for domestic wine were 2%, which is a dismal performance compared to worldwide sales. Domestic wine sales were up by 6.8% in 2014 from the previous year. However, beer is consumed at a greater rate compared to wine, as nationwide consumption is ten times more compared to wine consumption, at a ratio of 1:10. The country has experienced increased global sales as well. Exported wines were sold more profitably globally by as much as 400% more than was sold domestically. The country has managed to increase exports to Texas and China by 60% and 40% respectively. South Africa managed to increase its exports to China despite the fact that China was experiencing a recession at the time. There is a global demand for South African wine.

If I were a local winery, I would choose to focus on the global market. Different countries around the world have shown an interest in South African wine as expressed by increased sales. Moreover, they are willing to pay more for the product compared to domestic consumers. Therefore, this would make it possible for the winery to realize high revenues even if it exported fewer bottles. This is important, especially in overcoming some of the local challenges such as high taxes and changing climatic conditions, which lead to higher production costs. I think I would choose to focus more on the US compared to other markets. The country has a big market for wines, which is already established. The fact that South African wine continues to do well there despite the presence of other local and global competitors proves that the south African product appeals to the local market because of quality.