Vanessa Clark explores growth opportunities for the South African spirits market over the coming year.
Spring has sprung in the South African spirits market. Windows are being flung open, images revamped, and new markets introduced to novel ways of enjoying spirits.
This is despite a Euromonitor report, Spirits in South Africa, says that contrary to expectations that the 2010 FIFA World Cup would increase sales of alcoholic drinks across all sectors, beer was the only market to see any significant growth as a result of the event.
The report found that volumes of spirit sales were heavily impacted by the economic downturn in 2010, but that this is expected to reverse as consumers start seeing increased disposable income. Distell, South Africa's leading producer of spirits with a 32% market share, has a slightly different spin on this. The company believes the conspicuous consumption patterns of pre-2007 have been replaced with "more mindful consumption in line with today's tougher times" and that this has resulted in premium brands that offer quality, luxury and value doing well with consumers.
This certainly touches on two significant trends emerging in the South African spirits market: the rise of the premium and super-premium brand and a more sophisticated consumer realising spirits are not just for mixing with ice and a slug of soda. These have in turn led to a rise in popularity of sipping spirits, artisan distillers and spirits and food pairing, in line with international lifestyle trends.
The South African spirits staple, 'burnt wine' or brandy, provides a good insight into the rise of the premium spirits sector.
The brandy renaissance
Poor old South African brandy. Just like the Biblical prophets who were accepted everywhere except their home countries, at home brandy all too often still conjures up a picture of beer-bellied men standing around a braai knocking back brandy with lashings of Coke.
Around the globe however, South African brandy is recognised as being among the world's best, winning the International Wine and Spirits Competition's (IWSC) Best Worldwide Brandy trophy ten times in the past 13 years. Most recently this was won by Van Ryn's 20 Year Old Collector's Reserve in 2011, making this the fifth consecutive year a South African brandy has held this title. In addition, this year South African spirits won seven best-in-class golds and nine additional gold awards.
South African brandies also scooped six gold medals at the Concours Mondial de Bruxelles wine and spirit competition this year, up from two last year. In South Africa, which is the fifth largest brandy producer in the world, traditionally wine-orientated Veritas added a brandy category to its awards in 2010.
Christelle Reade-Jahn, director of the SA Brandy Foundation – set up in 1984 to act as a mouthpiece for the industry – says: 'The brandy industry is well-geared for growth. With brandy representing almost half of all spirits sold in South Africa, the soaring interest in premium brandies, as well as continuously being judged the finest in the world, the local brandy industry has a bright future.
'We are now entering a phase of intensified communication – talking to new and current consumers in new ways to get them really excited about brandy and the many ways to enjoy this versatile drink.'
One of the ways Reade-Jahn plans to do this is by tapping into the worldwide cocktail trend, appealing to a younger market, and, with only 25% of brandy drinkers being women, also a female market. The organisation ran a competition this year in conjunction with FHM to find the ultimate brandy cocktail, using digital and social media to promote the campaign. In addition, the Fine Brandy Festival, now in its fourth year, underwent a makeover, 'adding more luxe and fun lifestyle features which will appeal to the 'cool' crowd,' says Reade-Jahn. The plan is to extend the festival from its Gauteng base to other cities in
South Africa over the next few years.
Distell's head of spirits, Caroline Snyman, sings from the same song sheet when it comes to South African brandy, saying the local changes in the brandy market mirror the resurgence of cognac in emerging markets such as China, where VSOP (very special old pale) brandy products are considered a trade up from 12-year-old Scotch whisky.
She points to the rejuvenation of one of South Africa's most popular brandies, Oude Meester, via an ad campaign featuring Oscar and Grammy award-winning Jamie Foxx; as well as the alignment of Flight of the Fish Eagle alongside hip-hop artists and an imaginary executive airline Eagle Air, which takes invitation-only guests to glamorous cosmopolitan destinations.
What about whisky?
Snyman says the whisky market also continues to grow, but that this is not at the expense of the brandy market. South Africa is one of the leading global markets for whiskies and we have also seen some highly regarded local brands emerging, such as Three Ships, which are being well received both locally and internationally. International brands such as Scottish Leader, Black Bottle and the specialty Bunnahabhain range are starting to establish themselves in South Africa as well, she says.
As if to prove the point that the global and local market is moving towards premium spirits, Glenmorangie recently announced the release of Glenmorangie Pride 1981, which at 28 years is the oldest whisky released by the company. The single malt was matured in Sauternes casks for an additional 10 years and there are only 1,000 bottles available. It retails at a whopping R30,000. 'To recognise how key a market South Africa is, given the recent whisky boom in the country, there will be a bottle available at the SA Whisky Live festival in November', says the company.
A more discerning palate
The SA Brandy Foundation's Reade-Jahn also sees consumers trading up to premium and super-premium brands, with most growth taking place in the luxury sector. South Africa's super-premium spirit sector is worth around R1.52 billion, with premium brandies amounting to a quarter of that.
Roger Jorgensen, a Wellington-based micro-distiller, concurs that South African consumers' palates and preferences are becoming more sophisticated, and like our international counterparts, we are seeing the appeal of spirits as a sipping drink, rather than served as a shooter or with a mixer.
Although his distilling roots are in potstill brandy, Jorgensen has subsequently turned his hand to vodka – specifically the up and coming Primitiv Vodka – as well as absinthe, gin and limoncello. But he is concerned that legacy liquor regulations in South Africa may stifle manufacturers' – and especially smaller distillers' – ability to meet consumer demand for a premium and super-premium product, and also halt the growth of this sector of the industry, when it comes to vodka.
From Russia with love
'The great northern concept of drinking spirits neat, but always with food and friends, is finding credence here: chilled premium vodka with Cape sushi, or yellowtail gravad lax, or oysters, for example,' says Jorgensen. 'Following the craft revolutions in the US and Europe, there are more and more local producers of spirits daring to put their toes in a traditionally difficult market.'
Despite this, Jorgensen is concerned that the current South African liquor legislation (that insists that vodka be sold with an alcohol content of 43%) will stunt this new market sector. A danger is the legislation could squash the nascent premium vodka market by ruining the subtlety of the flavour of the sipping drink with the high alcohol content.
'The flavour and subtlety of sipping vodka, like a pot still brandy, or Cognac, and many single malt whiskys, is better appreciated with an alcohol content lower than in a 43% spirit. At the higher level the fine flavour and delicacy of the product is masked by the burn of high alcohol content,' says Jorgensen. 'Given that vodka is a highly rectified and relatively neutral tasting product, these flavours are indeed subtle, and tend to be significantly masked at 43% alcohol.'
In addition, this ruling is at odds with international standards, and in order to import vodka into South Africa, international distillers may have to produce a South Africa-specific version of their spirit, reducing our exposure to the premium end of the market. Finally, South African distillers, obliged to produce a 43% product, are prevented from entering international competition where the maximum alcohol level required to compete is 40%.
Jorgensen is actively lobbying for the legislation to be amended to allow more flexibility when it comes to the alcohol levels for vodka and to allow a lower minimum alcohol level, or to recognise a separate premium vodka sector that allows bottling at 40% or lower. In addition, he has urged the South African Liquor Brands Association (SALBA) to take into consideration the changing tastes of the public, and its prediliction for premium vodka, when next consulting with the Department of Agriculture on recommended changes to the legislation.
As well as these concerns, Jorgensen also faces the challenge of artisan producers everywhere: how to market and distribute his products in the face of the industry giants with their deep wallets and extensive distribution networks. He is making a name for himself through clever use of social media, introducing his products to early-adopting networks, and teaming up with restaurants and hotels that support local spirits and don't demand pricey listing or pouring fees.
What is certain is that the South African spirits market is in the middle of a massive transformation, starting from a very solid base. With more variety and more choice, we may just start viewing our local market in the same way our spirits are viewed abroad.
What's your favourite flavour?
It probably started with Patrón XO Café, the tequila and coffee liqueur. Suddenly tequila wasn't only for slamming or mixing, but instead for rather civilised sipping. Since then, a deluge of flavoured spirits has entered the South African drinks market.
Most recent to follow in Patrón's footsteps with a flavoured tequila is Pernod Ricard's Olmeca Fusion Dark Chocolate Tequila. Released in September, the drink has a relatively low alcohol level at 35% and is described as having "a smooth, silk-like texture that perfectly accompanies the rich dark chocolate flavour, balanced with a dash of tequila." Serving suggestions include as chilled shooter, on the rocks, or as the basis for a cocktail.
Two flavoured vodkas have recently been launched into the South African market:
Local brand Lovoka offers a caramel and chocolate flavoured vodka-based liqueur that is aimed at both the shooter and the cocktail markets. The brand makes much of its distinctive, BPA-free aluminium packaging. It is suggested the spirit be kept in the freezer compartment and served ice cold. As well as being served as a shooter or cocktail, it is also recommended that it be poured over ice and sipped. DGB looks after sales and distribution for Lovoka.
Europe's Thunder Toffee Vodka has also made it to South African shores. With its roots in après ski society, the producers claim to have developed a recipe that delivers a silky smooth, balanced flavour. The spirit is free of additives and preservatives, and scooped a gold medal at Vodka Masters and the Spirits Business Magazine Awards. At 29.9% Thunder is also recommended served chilled or can be used in toffee flavoured cocktails.