The latest market research shows South Africans’ alcohol consumption has gone down. Elias Holtzkampf looks at what’s driving the trend in collaboration with SAWIS.

The South African alcoholic beverage market is a mature market with few changes between beer and other liquor categories. With a population growth of +2% and annual volume growth of only 1% the per capita consumption is declining by at least 1% per year.

The domestic wine market has however grown by 7.7% over the 12 months to October 2015 and if the trend continues for another year it will result in small changes in the liquor category structures. The increase is due to new consumers in the sweet red and rosé sector (see below).

The spirits market has been turned on its head. Over the past few years whisky was the star performer, taking volumes from the brandy market. This changed in 2014/2015 with whisky losing volumes and brandy volumes stabilising.

Beer represents nearly 80% of the market in volume terms and 55% of the market in value terms. These figures have been stable over the past few years.

Feedback from the market place is that an increasing number of Chinese couples are buying liquor stores.

Two company moves were significant in 2015.

The SAB/Annheuser-Busch merger resulted in Brandhouse being split into two separate entities. Windhoek, Amstel and Heineken beers will go their own way under Heineken (Beer Sector) and the spirit products will fall under parent company Diageo. The head office will move to Johannesburg.

In the beer sector SAB made two important moves. It has entered the craft-beer market with an unpasteurised beer called Castle Tank beer. Unpasteurised beer has a short shelf life, but a pleasant taste. SAB also launched a Carling Blue Label single malt beer, taking its queue from Johnnie Walker Black and Blue.

Brandy has until recently been under pressure from mostly whisky but this trend was reversed during the latter part of 2015.

During 2014 whisky was the only category to gain volumes – brandy volumes were down by 5% and the other categories flat. This changed during 2015 with brandy going up by 1% and whisky down by 7%. Gin is well up mostly due to Gordon’s and Old Buck and there’s good growth from Smirnoff vodka. The growth of the premium vodkas has tailed off somewhat, but Skyy volumes are still on the increase.

Distell took a brave decision in February last year to not increase the price of Klipdrift Export, Commando and Viceroy brandies. These products are popular in the mainstream market and the stabilisation of brandy market volumes can be attributed to Commando and Viceroy’ growth. Pegging the price is however not sustainable long term and the effect of an inevitable price increase remains to be seen.

Popular products in the mainstream spirits market, such as Johnnie Walker Black and Jack Daniels, have become expensive. A premium vodka such as Skyy costs the same as Johnnie Walker Red. Given the current rand/dollar and rand/pound exchange rates these products will become even more costly, which should result in the growth of more affordable products such as Viceroy, Commando, Gordon’s, Old Buck and Smirnoff.

The SA domestic wine market increased by 7.7% in volume terms over the 12 months to October 2015. This was mainly due to female consumers in urban areas entering the sweet red and rosé sector.

Distell marketing director for wines Carina Gous says market research indicated there was a gap in the market for sweeter style wines. The company believed the route to go was with a sweet rosé aimed at females aged 20 – 40 who aspired to a sophisticated urban lifestyle. It originally launched 4th Street in 750 ml and 1.5 litre packs, but growth was slow. A three-litre and five-litre box were added and volumes exploded. In 2014, 4th Street had half the sweet red and rosé markets in the medium-priced wine sector. In 2015, 4th Street grew by 150%, compared with only 24% for other brands, and now commands 66% of the mediumpriced market. Overall the mediumpriced wine market in the sweet red and sweet rosé sector increased by 86%, mainly due to 4th Street. The growth in the wine market is currently biased towards female consumers in urban areas and in the sweet red and rosé sector.

Carina says 4th Street can repeat what Lieberstein did for the wine market in the sixties by introducing new consumers to wine through an uncomplicated yet sophisticated brand and a taste profile that appeals to them. Only now the opportunity is probably 10 times greater than what it was in the sixties.

As far as the main brands are concerned in the high-priced sector, Four Cousins is ahead of Robertson, Douglas Green and Nederburg in volume terms, while in value terms Four Cousins leads the pack, followed by Nederburg, Robertson and Douglas Green. Distell is the biggest producer/distributor, followed by Vinimark in both volume and value terms. In the medium-priced market 4th Street was the sixth largest volume brand in 2014. It trebled its volumes year on year in 2015 to become the biggest brand on the domestic market market leader and the biggest success story for the year. It’s followed by Robertson, Namaqua and Rusthof. The biggest producer/distributor is Distell, followed by Vinimark and Namaqua.

NOTES ON HOW TO READ TABLE 11 – SA LIQUOR MARKET

• This table represents an estimate of liquor consumption in South Africa and does not include Namibia, Botswana, Lesotho and Swaziland.
• All volumes are in thousands of litres.
• The 12 months are from July to June.
• The historic trends are year-on-year indices and if lower than 100, reflect a volume decline and if over 100, reflect a volume growth. For instance in the 12-month period from 1 July 2014 to 30 June 2015 it is estimated that 30 150 000 litres of brandy were consumed. This is a decline of 4.5% on the previous year (95.5 – 100). Likewise, vodka over the same period sold 22 million litres at a growth rate of 20.9% compared with the previous year (120.9 – 100).
• High-priced wine is classified as all wine selling at prices above R33 per 750 ml. Graca and the Saints range are at the lower end of this market.
• Medium-priced wine is classified as wines in the R19 – R32 per 750 ml price range and most of the boxed wines. Drostdyhof and Obikwa are at the top end of this market.
• Standard-priced wines are five-litre boxes selling at less than R77 each.
• AFBs are products such as Savanna and Hunters. Spirit Coolers are products such as Smirnoff Spin and Klippies and Cola.