The R25 million SA spends on marketing wine overseas each year needs to be urgently refocused (or indeed focused). Lack of analysis and guidance for SA producers when Tesco hit a retail iceberg in the English Channel last week, is symptomatic of a marketing strategy that is at sea. In addition to being a popular dance genre in the UK (Tesco is a synthesis of Techno and Disco), Tesco the supermarket, is the leviathan of the UK retail scene and until SA wine exports to Blighty wither some more (as they surely will this year) the UK remains the largest customer for SA wine, domestic market aside.
Most of those sales pass through supermarket checkouts and as Tesco accounts for 30% of that market – it is twice the size of second placed ASDA (owned by US behemoth Walmart who own Game and Makro in SA) – Tesco is the largest SA wine retailer in the world. Yet last week, £5 billion was wiped off its market capitalization in a single day after festive season sales were reported down 2.3%. The sales slump is negligible – market reaction was severe as a turnover increase was expected – with the elephant in the boardroom the question “is Tesco ex-growth?”
Tesco re-jigged its wine offering last year, arranging bottles by style rather than country of origin, which confirms that marketing SA as a generic national supplier is silly. That gravy train left the station a decade ago. Punters buy dry reds, Shiraz at a push, not South Africa (or Stellenbosch, which they likely think is a place in Germany). Improved results could be expected if producers abandoned their national focus and marketing cash was given to various industry organizations like the Chenin Blanc Producers Association and the Pinotage Association to get on with a job that is quite clearly beyond the abilities of WOSA, increasingly acting like an ostrich with avian ‘flu, head buried firmly in the sand.
But the kicker is perhaps closer to home. With the UK supermarket scene ex-growth, directors in the Tesco boardroom will be following Walmart’s SA success story with envy – Massmart reported sales up over 15% to R32 billion in the last half of 2011. Which local supermarket group could they invest in to establish a bridgehead in Africa, a continent clearly nowhere near ex-growth?
Shoprite/Checkers is firmly controlled by Christo Wiese and CEO Whitey Basson’s R2m a day pay check may make even Tesco baulk. Woolies would be a better fit for Sainsbury’s which leaves Pick ‘n Pay as my bet for a vampire kiss from the disco-trance dancers.
Disclosure: the author owns shares in Pick ‘n Pay Holdings.
“Walmart who own Game and Makro in SA”
Dear Dr Zeek
Massmart owns Game and Makro. Walmart owns Massmart. QED.
Tesco made a profit of 3.7 BILLION Pounds. Some disaster,
Incidentally, I shopped in Tesco’s throughout last year — their table wines are grouped by country and always have been. SAf is with the new world.
There was an off licence chain who tried grouping wines by style rather than country. It was a short-lived experment because they went bust.
Peter, in April Off License News quoted Tesco wine category manager Claire Lorains: “Changing focus away from country and towards product type will enable us to continue our industry-leading work of providing value at every price point.”
Did you receive your Pinotage invitation yet?