Why SA wines don't lead the pack

This was the uncomfortable message given by an expert in brand valuation to a group of marketers at a breakfast organised by the Institute of Marketing Management recently.

Professor Roger Sinclair, Professor of Marketing at Wits University and Managing Director of BrandMetrics (Pty) Ltd, used the case study of South African wine co-operatives in the early 1990s, who were suddenly thrust into doing business in a deregulated market. Approached by wine buyers from the United Kingdom in the early years of the decade, many enthusiastically sold their wine lots without consideration as to how they were to be marketed by the purchaser.

It was not long, however, before the UK purchasers found cheaper sources of wine in Chile, and abandoned their South African suppliers. Sales dried up and SA wine co-operatives learnt a harsh lesson from which many have not yet recovered and some never will.

"The object of the lesson is that they sold an unbranded, replaceable commodity. The buyer was buying wine, and not a brand. It meant little to him where he bought it from and the end user¹s only loyalty was to the store.

"They [the South African wine co-operatives] had no brand. There was only short term value to the community they sold," he said.

Responding to the case study, Institute of Marketing Management Chief Executive, John Arnesen, said: "Branding is a vital aspect of marketing. Marketers and business leaders need to have a deep understanding of the value and purpose of brands. This lesson is often learnt the hard way. The IMM believes that a powerful and truly professional body of marketers and marketing orientated organisations will directly and hugely positively impact the SA economy."

Professor Sinclair compared the marketing of South Africa and its products, in particular wine, to that of OBrand Australia.

"One area in which they [Australia] dominate is wine. From beer drinks and plonk producers, they have become the huge wine success in the world. Their wines now produce in excess of $1-billion a year in revenues and they are second only to France in the UK.

"They led the charge in Europe and now the United States with powerful, well supported brands such as Rosemount, Jacob¹s Creek and Brand Australia. Brand Australia, their generic promotion of the country¹s wines, is given well over one million pounds a year; South Africa¹s budget is 0,290 million pounds and dropping with the Rand."

Professor Sinclair said that although there is no formal accounting reason at present to value brands, some firms are looking at the future and preparing for the time when this is a requirement.

He added that the accountants do not want to have to learn about brand valuation when it is suddenly compulsory to have them conducted, pointing out the twenty-first century way of dealing with brand equity is to place a financial value on the brand.

BrandMetrics had in the past two years valued brands well in excess of R8-billion for some of the country¹s largest companies, in a range of sectors including FMCG, soft drinks, paints, industrial equipment, parastatals, banks, insurance companies and sports clothing.