SA Wine: Fragile or Antifragile?

Nassim Nicholas Taleb (below) makes a couple of points well worth reading in his tour de force Antifragile: Things That Gain From Disorder, published by Radom House (who else?). For SA Wine, the observation that if everyone in the USA earned $50,000 per annum, there would be no luxury goods industry and in particular, no queues for Screaming Eagle or Harlan Estate wines. It is precisely those massive Gini Coefficients separating the haves from the have-nots that supply discretionary incomes for positions on Pétrus and going long on Latour.

nassim taleb 300x225 SA Wine: Fragile or Antifragile?

November export statistics confirm that SA wine has become a commodity when the largest growth comes from unlikely sources: shipments to Russia are up six fold: from 5.5 to 33 million litres and the USA take doubled from 12 to 23 million. In the case of Russia, its well over 95% bulk while the US is now nearly two thirds bulk. Even Australia is buying SA bulk – while bottled volumes to Down Under fell by half a million litres last year, total volumes increased by over a million.

This is a classic example of rising fragility as bulk wine is necessarily bought by a couple of large customers on the trail of the best deal while packaged wine sales are more robust as most sales are by case or bottle. The number of customers for SA wine, both trade and end-user, is dropping like a stone and with the Argentine economy widely predicted to implode next year (there is already looting in the streets) let’s see how SA bulk will compete next year.

Another lesson from Antifragile is that the activities of WOSA and the rise in total SA exports by 47% are most likely not a case of cause and effect. Although of course WOSA executives will try and cast the statistics in a favourable light to sustain their expensive cushy berths and perks. Already they’re cosying up to bulk producers, even tweeting that they are not anti-bulk. Well who cares? Their activities in this arena are simply noise in the system; they are an expensive irrelevance.