Foreign investment in South African wine farms is on the rise and shows no signs of slowing down.
A quick glance at any major property website reveals numerous wine farms for sale in the Western Cape, often priced upwards of R50 million.
Over the past decade, foreign investment has provided a much-needed boost to the struggling local wine sector.
The Cape region is attracting new investors like the Oddo family, who purchased three estates in Stellenbosch in 2017, including Taaibosch.
The Edmond de Rothschild Group has been active in South Africa since 1997, partnering with the Rupert family to create the Rupert & Rothschild Vignerons brand.
Inspired by Bertrand Otto of the Edmond de Rothschild Group, the Oddo family chose South Africa over Argentina and New Zealand for their “new world” wine investments.
Stellenbosch, with its unique terroir and high-quality Bordeaux grape varieties, remains a prime location for wine production, offering excellent value.
Major investments from global players like Les Grands Chais de France, which acquired Neethlingshof and Villiera, are driving the sector.
These investments are boosting production and expanding market reach, with AdVini’s acquisition of Kleine Zalze aiming to penetrate the US and Chinese markets.
Glenelly, a well-known French estate, exemplifies success with global distribution and recognition for its Bordeaux red grape varieties.
These investments are crucial for the growth and sustainability of South African wine farms, ensuring they remain competitive globally.
About 30 years ago, South Africa had 4,500 grape growers; today, there are 2,500. Almost 20 years ago, 112,000 hectares were planted to wine grapes; today, that number is 92,000 hectares.
Author and wine critic Michael Fridjhon noted that many producers are not making sustainable profits.
He attributed several factors, namely cost inflation, a lack of scale, ageing vines, load-shedding, policy uncertainty, and climate concerns.
The Covid-19 pandemic exacerbated these issues, with alcohol bans and travel restrictions severely impacting small wineries.
Foreign investors, including large companies and wealthy individuals, are injecting much-needed capital into the industry. This investment is helping to replace ageing vineyards and improve production facilities.
Roland Peens, CEO of Wine Business Advisors, notes that foreign ownership has shifted from lifestyle motives to commercial business perspectives.
Covid-19 played a significant role, with alcohol bans halting trading for 200 days, leading to lost income, stock surpluses, and a rise in illicit trade. Travel bans and border closures also impacted South Africa’s small wineries, which rely heavily on direct consumer sales and tourism.
Some estates are profitable, with about 20% running on strong margins, allowing for continued investment. However, about half are breaking even, and the rest are losing cash.
Industry association Vinpro reports that just 12% of wine operations are sustainable, 49% are treading water, and 39% are on the way to failure.
Currently, one-fifth of South Africa’s 528 wineries are foreign-owned. Notable investors include Grands Chais de France, which owns Neethlingshof and Villiera, and AdVini, which controls Kleine Zalze, Le Bonheur, Ken Forrester, L’Avenir, and Stellenbosch Vineyards.
Other investors include Eileses Capital, which bought Warwick Wine Estate, and various individuals like Hans von Staff-Reitzenstein, Laurence Graff, Analjit Singh, and Richard Branson.
Quoin Rock and Knorhoek Wine Estate came under the ownership of the Ukrainian Gaiduk family.
Few South African wineries produce more than 20,000 bottles a year that sell for upwards of R500. According to Peens, if you take a basket of 10 of the most highly rated South African wines, you’ll probably pay about R700-R800 a bottle.
In the US or France, you would pay 10 times that. A very good bottle of wine in New York is $1,000.
Local producers and companies continue to invest actively in vineyards, whether through ownership or partnerships.
Notable examples include the Motsepe family’s purchase of Hidden Valley, Van Loveren’s partnership with Blaauwklippen, and Leeuwenkuil’s new cellar capable of producing 36 million litres of wine per harvest.
DGB, which controls Boschendal, has acquired Fryer’s Cove and the Backsberg brand, and has initiated replanting programs in the Helderberg.
Additionally, Michael and Rose Jordaan have revitalized and purchased the historic Plaisir Wine Estate, spanning 970 hectares on the slopes of the Simonsberg Mountain.
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