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How wine’s value can grow

The following article was first published as my “Liquid Assets” column in Personal Finance magazine.

Growers have to keep their ears to the ground, but consumers can pick up unique little collectibles on auction.

It’s true that you can make money more easily from the wine industry than in the wine industry. Bottle suppliers, distributors, exporters, traders, machinery and engineering suppliers, overseas agents, retailers… the list goes on and on. These guys inevitably make bigger margins, carry less stock as a percentage of turnover, face less risk, fight fewer competitors, and even have more of a family life than the majority of winemakers and wine brand owners.

Even wine consumers can sometimes turn more of a profit by collecting a few desirable cases and flogging them after five or 10 years. If this appeals, it is easier than you think. The only challenge is knowing what to buy. If you get that right, finding a customer down the line is surprisingly straightforward.

I will declare my interest upfront and say that although I am a member of the Cape Winemakers Guild (CWG), this is still the best place to buy South African wines that fall into the “collectors” category – the category that ensures appreciation of the financial, as well as the sensorial, kind.

These CWG wines (generally the reds) inevitably appreciate in value and can generate a nice little return for those lucky enough to purchase them. Each year the guild holds an auction where selected tiny parcels of unique wines are sold. Specifically made for the auction, they cannot be bought through any other channel.

To get a wine on the auction, members twice submit proposals to critical tasting workshops where other guild members give their feedback on the wines. These workshops are not for the thin-skinned. This is followed by a blind tasting where a guild member’s final wine for auction is put forward. The wine must get a 66-percent yes vote by all the other members. If it fails to achieve this, the wine will not progress to the auction. And if a member fails to get a wine on to the auction for three years in a row, he or she is asked to leave the guild. That’s a harsh set of rules, but they ensure buyers get something special. This year the auction is on October 3 at the Spier Conference Centre in Stellenbosch. You can find more details on the guild and the auction at www.capewinemakersguild.co.za.

To make money inthe wine industry is a little more challenging. There is an old saying in this industry: if you want to make a small fortune, start with a big one. I must have heard this said a hundred times, sometimes by people with a great deal of experience in our strange line of work. It almost feels like a self-fulfilling prophecy sometimes. And it is an odd thing to say, because it isn’t necessarily true.

I work with a bit of a legend called Chris Keet. Many of you will know him as the winemaker/ viticulturalist who established the Cordoba winery on the Helderberg. Chris helps me out with the viticultural management of all our Flagstone growers dotted around the landscape and some of our core Kumala growers.

Chris believes you need to start with dirt under your fingernails. This means that if you don’t spend time in the vineyards, you never really get to grips with this business. Also, you won’t communicate with the plants. And weird as it may seem, that’s where most wine businesses start to go wrong.

Vines can talk. They aren’t very loud of course. They talk with the colour of their leaves and the direction they face. Sometimes the leaves curl in on themselves and face away from the sun, sometimes they go yellow, sometimes they grow big and leathery, and sometimes they have tell-tale crinkly brown edges. All these are speeches to the winemaker. The vine is telling us it’s happy, or it’s thirsty or it isn’t getting enough minerals from the soil, or it’s simply having a grumpy day and needs a bit of love.

Vines talk with their tendrils – the little green fingers that God gave the vine to climb trees and find the sun. Sometimes the tendrils droop forlornly; sometimes they are raised to the sky like a prize fighter in a Hemingway story. You can let a tendril curl around your pinkie, like a cat’s tail. Vines talk most intellectually with their fruit. The fruit of a vine is like a speech bubble in an Asterix and Obelix book – every now and then you have to get out your old school Latin dictionary to get the joke.

From the moment a bunch of grapes starts softening and changing colour, you can start the dialogue. You watch the red grapes colour up, changing from an almost impossibly verdant bright green to pink, then red, then purple, then black. You taste. You chat about the acid balance and say nice things about the flavours you pick up. They change almost daily, so there are always new things to talk about with a vine.

But access to the wine industry was problematic in the past. Even today, one of the main barriers of entry to this game is the ability to invest heavily and to have the means to sit out the time it takes to affect a return – in many cases this is generational, so you can forget about quarterly reporting. Despite this critical consideration, it is practically easier to enter the ethereal world of wine in South Africa than ever before.

Things started changing only after the first democratic elections. Prior to that, regulation, direction and policy were controlled by the KWV (in its old guise). After 1994, we started seeing the collapse of a stifling set of outdated restrictions, which restricted, for example, where we could plant grapes.

Thirteen years ago I remember being at a launch of the Australian Wine Industry 2010 Visionto students at the iconic Roseworthy Campus, where I was a post- graduate student. In that document, the Australians wrote us off as competition because they decided we had planted all the area available to us.

I asked the presenter where he got that information and he said it came from his contact at the KWV. An unfortunate piece of misinformation as it turns out. We hadn’t planted in Elim, Standford or extensively in Elgin or the breathtaking Overberg valley. We hadn’t planted in Bamboes Bay way up on the west coast or the Langkloof outside of Oudtshoorn… all these plantings have happened in the past 10 years. These areas are now making world-class wine, and we haven’t really started looking in between. We are only just scratching the surface of what’s available in this majestic land. And now we can plant anywhere we want to.

Despite the odds, my advice for anyone with some spare cash lying around, therefore, is that now is actually a good time to invest in the wine industry. You might not make any money for a while, but imagine all the new friends you will have to talk to on your morning walks up and down the rows.