By: Anna Majavu
Virtual wineries can be a real “stepping stone” into the wine industry for SMEs, and black- and women-owned businesses, new research by Oxfam and the University of Johannesburg’s Centre for Competition, Regulation and Economic Development (CCRED) has found. A virtual winery is a business model that does not require land, vineyards, or cellars, so start-up capital costs are lowered. Internationally, virtual wineries sometimes sell a blend of existing wines, heavily marketed as a new brand.
South Africa is the world’s eighth largest wine producer, creating around 4% of the world’s wine by volume. The country’s wine has traditionally been exported to the United Kingdom, European Union countries, Canada and America, but new export market opportunities exist in China and on the African continent, creating possibilities for SMEs to enter the industry or expand their businesses.
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CCRED economist and associate professor Reena Das Nair and researcher Shingie Chisoro found that the advantage of setting up a virtual winery is that the business owner does not need to own land, vineyards, or cellars. Instead, a virtual winery can be set up based on a business partnership with established wine producers who have their own vineyards, wine production, and bottling facilities. Virtual wineries can also leverage a wine producer’s existing logistics and distribution networks, the researchers found.
However, a virtual wine producer may still need land and facilities to set up wine tastings to build their brand, the researchers said. One way around this can be for SME wine producers to come together as collectives such as The Wine Arc, which is a Stellenbosch premise housing 13 black- and entrepreneur-owned wine brands that support the marketing of the individual brands, and trade show access. It was established by the South African Wine Industry Transformation Unit (WITU) as the first home for black winemakers.
Virtual wineries aside, “government needs to play a key role” in supporting SMEs to enter the wine business, the research found. WITU and Wines of South Africa (WoSA), a non-profit body that promotes South African wine in international markets, cannot be expected to support SME wineries to access trade shows and local and export markets alone, according to Das Nair and Chisoro. Government intervention is also needed in supporting SME wineries to sell their products on the African continent and in helping them access initial finance and ongoing working capital.
There is also an emerging market for domestic young, black and urban consumers of wine. Small wineries can also do well by venturing into wine tourism. “For small wineries who have an annual revenue range of between R10-million and R50-million, wine tourism accounts for a significant proportion of their revenue, making it an important source of income for smaller players. For those with less than R10-million in terms of revenue, the proportion attributable to wine tourism is even higher,” said Das Nair.
