Phillip Retief is the CEO of Van Loveren Vineyards. He relates the wonderful story of a very modest beginning in 1937 when his grandfather bought a small 22-hectare farm in the Robertson wine valley of the Boland. It was not primarily a grape farm, but a mix of pigs and cows, citrus and ostriches. A small winery was built and for many years it produced wines in bulk format. The wines were sold to the wholesalers of those days. When his father and uncle joined in the 1960s they bought two more farms, again smallish, and started making dry white wines on a small scale.
The Van Loveren CEO was interviewed by Theo Vorster, Chief Executive of Galileo Capital, on the weekly Nation in Conversation Forum on kykNET, Soweto TV and Business Day TV. Nation in Conversation aims to foster a better understanding of the agricultural sector and its impact on everyone’s lives, and to demonstrate the importance of a healthy agricultural sector for South Africa’s food security and continued existence.
Phillip Retief recalls how in 1980 his father wanted to launch his own wine. “We produced 100 cases of premier grand cru under the Van Loveren label. And that was really the catalyst for the growth of Van Loveren to where we are today.”
In 1984 they still produced 90 percent of their wine in bulk to sell to wholesalers, but when Van Loveren started competing on the local retail shelves, the wholesalers demanded that they stop selling their wine in bottled format. “They laid it to us that we had to make a choice. Either we sold in bulk or they wouldn’t take our product. They would buy it in bulk and put it on the shelf under their own brands and labels.”
It was a blessing in disguise, Phillip says. It put pressure on his father and uncle, but one evening after two bottles of wine they decided to make the call to focus totally on the bottle market. That was the real turning point. They managed to change Van Loveren from an agricultural business supporting trademarks, to a trademark-driven business supported by agriculture. It created opportunities for expansion, growth and further investment. Robertson has the advantage of being a dry area where irrigation can be manipulated. There is sufficient water through the river and other water systems system. Yields are slightly higher with more tons per hectare. Van Loveren has managed over the years to improve and maintain quality, which is crucial on the local and international stage.
During the so-called honeymoon period following former President Mandela’s release from prison, Phillip says, everybody wanted South African products. “We were the new kids on the block, but as the markets got used to South Africa the energy was not the same. We started competing head-on with the likes of Australia and Europe. In the local market, many more producers got involved in the wine industry. There were plenty of offerings, competition was rife and prices came down. Some businesses were ruined during exchange rate spikes and increases. Van Loveren is a medium-sized business. but in international terms we are very tiny. It is extremely difficult to create an international brand on the European or American stage. Although we have success in certain areas, especially Africa, we are not a brand in Europe.”
In 2004 Van Loveren launched its first land reform project when it purchased a 138-hectare farm in the area. The company received funding from the Department of Land Reform, managed through an employee trust vesting in the interests of 116 employees, both current and retired, who own 52% of the farm and project. The partners have managed for the past ten years to be profitable, to declare a dividend every year, and to create value and capital growth on their shares. “We embrace the National Development Plan and the chapter on agriculture” Phillip continues. “We are part of land expansion, either as a minority shareholder or equal partner, but we are also looking at projects in the value chain. Three years ago we invested in a winery close by. We are negotiating a transaction which will give our workers or certain groups of them shares in the value chain, and also in our trademarks going forward. We are investing, creating jobs, and creating economic wealth for the region. It is an opportunity for us to be involved in what we believe is the right thing to do.”
Phillip says the grape farmer today is not doing very well. Thirty to sixty percent of grape farmers are seriously under pressure. While they are surviving, they diversify into other products like citrus or canned peaches or vegetables. The industry can change significantly over the next ten to fifteen years when farmers replant, and they will not replant vines. They will look at other diversified industries in which to invest.
Internationally, the South African wine industry has a great image, Phillip says, but he believes that there is still plenty of potential. “The consumer in the States or Europe does not always realise that South Africa is a country on its own. They associate us with Africa and we compete against the image of Africa, but we do have wonderful wines of top-notch quality. Wine writers are saying that South Africa has re-invented itself. There is a new focus on South Africa, but we are a small player. We export only about two and a half percent of the world market. We should be able to sell at a higher price, but it comes down to fragmentation with too many players competing for a slice of the same pie. That is why we down trade the industry and undersell ourselves.”
Phillip mentions that for seventeen years, from 1997 to 2013, the local wine industry has been flat and stable., but currently there is a six to eight percent volume growth in the local market. New, younger lifestyle consumers are entering the market at different price points, not only at the brand image level but also in the volume-driven brands. “Once we capture the imagination of the new middle class it will stand us in good stead going forward. That is the exciting point where we are today from a South African perspective.“