Tuesday, January 26, 2016

Nedbank VinPro Information Day - how to turn grapes and wine into profit

VinPro is the service organisation for 3 600 South African wine producer and cellar members, striving towards their commercial sustainability, as well as that of the broader producer industry and its strategic role-players. See more at: http://vinpro.co.za/about-us#sthash.giZ6rMib.dpuf
We attended the annual conference last week and were much more impressed and buoyed up by this year's content and speakers, apart from the financial reporting module, which was a bit less optimistic, but realistic given the current world financial situation and our currency devaluation, which can also be seen as a huge positive for those exporting wine. We were particularly impressed by Prof David Venter talk on land reform and transformation. He spoke in metaphors but very cogent and recognisable ones to make the industry sit up and listen and try to work together with everyone from the bottom up in the industry.
Sounding off, again
It was held at the CTICC who, again, let us down. The food served was average at best and, in some cases, impossible to eat. Who puts a hunk of half cooked lamb on the bone in a small dish and offers a cake fork to eat it with? There was nowhere to sit down. It was like something out of The Flintstones. Lunch was brief and stand up outside the lecture theatre. And they froze us to death. Lynne swears she will wear a (fake) fur coat next year. It was 38ºC outside, so everyone was dressed in minimal, but smart, summer attire. The temperature inside the lecture theatre was 15ºC or less and we asked them at tea time if they would please turn it up a little. That happened for about an hour, then someone hit the cold button again and we froze for the rest of the day. Unacceptable, CTICC
The presentation was compered by Lee-Anne Davidson, VinPro Communications Officer
Opening - Abrie Botha, Chairman, VinPro reminded us that change is not new to the wine industry and this is not the first time we have faced the challenges of: The economy, exchange rate, job creation, transformation, drought and fires. He reminded us that the wine industry made a R6.1 Billion contribution to the economy in the last year, the third largest industry contribution.
Economic outlook - Isaac Matshego, Economist: Group Economic Unit, Nedbank
reminded us that we are all facing challenges in the global economy and that we are a small house threatened by a big storm coming from outside. We need to fix the small holes. He presented some grim facts on our economy & growth. His solutions are that government policy implementation needs to be more growth inducing, with more certainty & direction or we could tip into recession.. Amen
Seasonal overview and harvest expectations - Francois Viljoen, Manager, Consultation Service, VinPro
spoke about the reduction in vineyards, but also the fact that we have had record harvests in the last 4 years. We are uprooting unproductive vines and planting higher yielding ones. We have had good weather and technological advances. The drought and the heat may affect this year's harvest badly. More drought tolerant grapes being grown like Verdelho, Alvarino, Vermentino & Durif (but, we ask, do these make wines people will want to drink?) The harvest will be down and everyone will be chasing grapes
Producer and winery realities - Christo Conradie, Manager: Wine Cellars, VinPro spoke of the realities of selling our wine, especially to the large supermarket buyers. This is a team talk to the wine producers about the realities needed to work with the wine sales industry.. We must be open, honest and transparent to raise the producers' profits and stop losses, and we must understand the realities. Our wine is for sale. Deal with the concerns and the elephants in the room. Markets, mergers and acquisitions; transformation, who is making the money? Be inspired, challenge the business model, work together, take it forward. We also need the Government as a partner. They take 35% of the value of every bottle of wine sold, but give nothing back
VinPro Foundation - changing lives - Unathi Mantshongo, Transformation & Development Officer, VinPro
R38 million was spent by the wine industry on Social Development, but we need to co-ordinate the initiatives, we struggle to convince investors, we must work TOGETHER. Ethical compliance is 20%, we need 100%. 270 member farms are using the VinPro training DVD's; every wine farm should be using these, including the Eastern Cape. How are suppliers making efforts for transformation and compliance? What are your values? VinPro wants YOU to join them. VinPro can help the smaller companies and the JSE listed companies must not get left behind. We are changing the wine game
What Lies Ahead?
Overview of The SA Wine Industry Strategic Exercise (WISE)- Rico Basson, Managing Director, VinPro
WISE (Wine Industry Strategic Exercise) is part of everyday life. Use it or lose it or it will get stale. Back ourselves, we have a 366 year old wine industry; we have seen many challenges and overcome them all. It's a call to action. Time to collaborate and grow the pie and stop fighting for your own market share. Build the relationships, sing together and off we will go

Brand SA local marketing strategy Nicky van Hille, Director, The Moss Group
Start addressing the potential wine market, who already drink high end liquor & beer brands like Johnny Walker Black & Heineken, but are confused & intimidated by the vast wine choices. We need to grab more of a market which drinks, on average, 22 beers, 8 alcoholic drinks & only 3 glasses of wine a week
Craig Irving, CEO, Consumer Insights Agency
Taking transformation forward David Venter, Infostrat
Some stunning metaphors by David Venter in his VinPro presentation, Taking Transformation Forward. Such clarity and sense deserved a standing ovation, but the audience is still absorbing his message. We must build success by being reactive and pro-active and not waiting for Government to get rid of the problems. We can fight and lose or play together. Summing transformation up, he quoted William James, "Believe it & you will see it". As long as we use Common Interest based bargaining, rather than offensive confrontational Positional bargaining, we can grow our markets. The Supermarket group model in Europe isn't working anymore, as they have driven prices so low that they only deal with one supplier. Bargaining is not negotiation. People are walking away with either very little or no shelf space. The solution is to speak to the interests that drive us both and meaningfully talking to each other about common interest and areas of confluence, not differences. What ties us together? If we work together we can build bakeries and share lots of cake, not a small piece of one. Talk the language of WE not I.
Growing wine globally - international perspectives Jane Robertson, Category Development Director, Accolade Wines
"Are South African wines sexy?" asks Jane Robertson of Accolade wines UK. Sadly, not really - but they can be... How do we make it sexy? Premiumisation was her theme, go for the aspirational middle classes, where there is growth in income and lifestyle. She spoke of how SA wines have dropped in profile, availability and profitability in the UK market. Brands can make a tribe out of us. People like brands, they expect to pay more for them. We need to build our on-con sales instead and, already, SA wines are appearing in some top restaurants. We need more higher-priced premium wines, available to the affluent market
There are three tiers of wine market. We are selling most to the bottom, entry level, and not making enough profit, and some into the top level. The middle market is where we should be aiming. There is growth potential in the over £6 market! Bulk wine in cheaper Supermarket brands is doing us no favours. We need to own Fair Trade and run with it, we have the biggest regional share of Fair Trade worldwide and it sells wine
Light Lunch
Takuan von Arnim of Haute Cabrière and Jacques Malan of Simonsig
All hands to the task of lunch, accompanied by some excellent wines
Two former managers of the Robertson Wine Route:
Elizma Botha and Bonita Malherbe, who is now Marketing manager at Van Loveren
Managing change in order to grow. Johan van Zyl, Strategic Advisor and former CEO, Sanlam
Johan van Zyl's main message to VinPro delegates is "You are in business to make profits.  Not volumes. Stop all business where you are not making money. The people you are dealing with are making the money." A breath of fresh air. He quoted Warren Buffet "Change is global, we are not the only ones. Hold onto your hats, it is going to be a wild ride". There is massive volatility in markets. However, the US is coming out of its dip, as is the UK with low inflation and better job growth. It's a great time of opportunity for us and entrepreneurs can make money if they are not afraid to take risks. But stick to your strategy and plan if the risks are acceptable to you. Play the long game, don't give up half way, but don't take on massive risk, only what you can live with. Use common sense. It is not common at ALL!
There are too many brands from a large number of farms; they confuse. You are dead if you have too many categories. You are not making money. You are in business for profit and NOT for volumes. The people who do this make money from you. Stop all business where you don't make money

More detail of the presentations can be seen at http://vinpro.co.za/news/presentations-at-the-nedbank-vinpro-information-day-2016
© John & Lynne Ford, Adamastor & Bacchus
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