Having spent seven and half months in Tanzania earlier this year working for MMI Tanzania (MMI is part of the Emirates Leisure Group, headquartered in Dubai), I had the privilege of living and working in this beautiful East African country experiencing at first hand the trials and tribulations of trying to sell premium wine in a country that is beginning to find its feet amongst the wine drinking nations of the world.
Whilst Tanzania in no way represents all the learnings one can make about selling wine in Africa, it does provide a good case study as to how wine is being consumed and sold, especially since MMI carries a good proportion of non-South African wines. My comments below need to be contextualised to accommodate these realities, as well appreciating the rest of the African landscape for wine. And whilst I have been travelling in Africa for almost 30 years, those that have sold wine face to face in Africa for far longer than I have, should also be encouraged to air their views on this oft misunderstood sales landscape.
But first a reality check: South Africa’s export volumes to Africa for August 2016 showed a 12% decline compared to the twelve months to August 2015, with Angola, previously seen as the beacon of South African wines sales, declining by 56%. Angola’s decline has been in packaged sparkling wine where 3.5mil litres alone was lost in the twelve months to end of August 2016. If one removes the negative effects of this one statistic, then African export volumes as a whole would have actually increased by 3.5% to the end of August 2016. This is a sobering thought for all brand owners looking to increase their market share on the continent as success and failure can often occur within one business cycle. In Tanzania for example, in the seven months of me being there, consumer liquidity evaporated as the governments’ austerity and anti-corruption drives impacted the man on the street dramatically.
Tanzania is the fourth largest African market for South African wine according to SAWIS (Aug 2016 data). The current state of play with regards to South African wine sales into Tanzania is healthy, but the market is in need of a boost from the major brands present in the country. The volumes year to date January 2016 declined by 18% year on year, but by the end of August 2016, this trend was now just -2%, with strong growth in Rosé and Sparking wines especially. The good news is that Rosé and Sparkling wines are not exported in bulk to Tanzania, probably due to the fact that they collectively contribute a little over 4% of total exports to Tanzania, so the growth of these categories is in packaged product and therefore has brand equity attached to it. White wine continues to dominate the landscape; in August 2016 it represented 62% of all volume, with Red wine’s share declining in August 2016 compared to January 2016, from 36% to 32%.
In terms of pricing however, my own observations were that very few premium wines (i.e. above R65.00 to R75.00 per bottle SA retail pricing), were in strong demand. There is a lot of brand activity at the equivalent of R35 to R55 a bottle price point, but this tends to take the form of “made” brands. The equivalent retail price in Tanzania is sadly nowhere near these prices – a factor of around 2.5 can be applied to South African retail pricing. MMI has two retail shops in Tanzania so I was also able to observe at close hand how consumers reacted to premium wine offers and brands in particular. Whilst the MMI shops are clearly wine destinations and therefore reflective of the premium wine engaged consumer so observations are skewed towards this market segment, what I can tell you is that these consumers know South African wines and wine personalities, with many having visited the wineries themselves and are active participants in much of the wine activity. What was also encouraging was the growth of Tanzanian residents from all walks of life i.e. not just ex-pats, who were fully immersed in the wine category. In Dar itself, Tanzanian’s first wine bar, Vino, opened in April 2016, with the owners promising to open more in the future elsewhere in the country. There is a large portion of the market that is corporate and tourist focused and therefore not reflective of the larger Tanzanian wine consumer sector as a whole, but Tanzania is a market that is embracing wine at the premium end and dipping its toes in at the entry level. There is lots to be positive about but with challenges aplenty.
In terms of the total liquor category, premium wine is sold to ex-pats in all the major centres, the bourgeoning middle class present in these areas, and to tourists. There is currently very little wine drunk in the Mainstream segment with cheaper and sweeter wines beginning to grow in these outlets, albeit off of a small base, and entry/entry-plus brands dominate this segment. The key South African context is to seek out the premium brands’ opportunity, or to fight amongst the cheaper and sweeter entry and above segments.
Beer continues to dominate the share of liquor throat in Tanzania, however tourists don’t want to drink imported beers, they want to drink locally produced beers. Imported beers are for the aspiring young guns who want to badge their beer behaviour as much as they badge their car, clothes or watch. Similarly, premium Spirit products with brand credence sell well in their associated outlets, with growth in Mainstream segments occurring on the back of aggressive activation by key brands. Cheaper Spirit brands abound, including the likes of Konyagi, but it is clear that this market segment review the alcohol:price ratio as being the key buying decision to be interrogated – higher and lower being the operative drivers in this decision matrix!
South African wine is very much seen as being a local African product by tourists to the region. South African brands enjoy high consumer recall and a largely very positive appeal to Tanzanian consumers in all FMCG categories. Whilst Cape Town Fish Market, Game, Spur, and Food Lover’s Market may not represent the entire spectrum of what South Africa’s food and wine environment can deliver, their very presence (and success) in Dar and Arusha marks them out as positive contributors to the Brand South Africa story. Being a South African product provides a market positive brand position in Tanzania and can be exploited if positioned correctly.
The more nuts and bolts issues in Tanzania also apply in the rest of Africa, and for that matter to most markets around the world. Choosing the right partners is key. Protecting and investing in your brands is vital and the most important work you can do in market is to utilise shoe leather and enjoy face time with your customers and consumers. This counts for a lot when your customer is a remote lodge or hotel at the end of a dusty road who hasn’t seen a winemaker or brand owner for months. The old adage of wine being a people business is nowhere more apt than in Africa. Business flows to those who make the effort to engage with customers and consumers alike.
Africa is also an expensive place to do business with hotel accommodation costing the same if not more than equitable hotels in Europe and North America. Buying a round of drinks can make your eyes water when paying in US Dollars! Logistics are a challenge to be understood and it is imperative that brand owners remain on top of any issues in this environment and do not leave this part of the value chain to partners who may not view your wine shipment as being as important as the car parts that they are waiting to have clear customs. Brand recognition takes time and the volumes are small when compared to the larger and quicker wins in other markets, but brands that have been successful, understand the investment cycles and utilise A and P funds as seed capital, rather than brand building per se. It goes without saying that having an appreciation for the history, culture and norms of the society that you are selling into should always be at the forefront of your business dealings. Above all however, have patience, in all things. The metre and pace of doing business in Africa is very different to almost any other place on Earth, and West Africa is as different from East Africa, as Central Africa is to Southern Africa, as Tanzania is to Kenya. One size or solution, or indeed wine brand, does not fit all markets in Africa.
From a Brand South Africa perspective, Chile and Spain in particular are eating into South Africa’s wine potential at a rate of knots, and France and Italy enjoy a long held positive country brand position that can be difficult to dislodge in many instances when the gatekeepers have sold these countries wines for generations. More work is surely needed in this country by all concerned.
As much as Pliny the Elder is alleged to have said, “ex Africa semper aliquid novi”, or “Always something new out of Africa”, doing business on the African continent is about relying on old sales’ habits done well, and brought up to date with drive, patience, and a clear picture as to what your version of success looks like. Before embarking on any African adventure however, be sure that you understand what success means for your business in Africa. The vistas, sights and sounds of Africa are mesmerizing, but the rewards of doing business in Africa are hard earned.