HILTON TARRANT: China has made its first investment in the South African wine industry. Perfect China, which owns 51% of Perfect Wines of SA, has bought the wine cellar at the Val de Vie estate in the Cape Winelands between Franschhoek and Paarl. Hein Koegelenberg, chairman of perfect Wines of South Africa, joins us now. Hein, did this transaction take long to put together?
HEIN KOEGELENBERG: Yes, Hilton, from when we started our efforts into China it’s probably eight years now. That was about eight years ago that we decided not to sell in the US any more, but rather focus our distribution efforts into China and Asia, mainly because of the financial crisis. Yes, it took us quite a long while to establish relationships with the right people and at the end it turned in our favour.
HILTON TARRANT: How much wine does South Africa export annually and what portion of that does perfect wines make up?
HEIN KOEGELENBERG: If you look at the Chinese wine market at the moment, about 18% of the total wine production or wine consumption in China is imported wines, and of that 18% about 45% is French wines. So I think it’s only 2% of that portion. So it’s still very, very small.
When we started, the first two years, the first shipment was to export eight million bottles for L’Huguenot, our brand. At that stage it was about 50% of South Africa’s volume into China. Now, the follow-up shipment this year of 1.4m bottles will be about 25% of South Africa’s volume to China.
HILTON TARRANT: And the growth of consumption in China, not only of South African wine, not only of imported wine, but the general market growth – is that market growing strongly?
HEIN KOEGELENBERG: For sure. The market in China is growing very strongly, especially on the imported wines. It’s growing at about 65%.
HILTON TARRANT: Hein, why Val de Vie? What was so attractive about the seller there?
HEIN KOEGELENBERG: When we started two years ago with this project the idea was to focus on the heritage of the Huguenots that arrived in South Africa more or less around 1688; most of them settled in the Franschhoek valley. Now, as you all know, Val de Vie is part of the Franschhoek valley, and Gabriel Le Roux also came in 1688 from France, and settled around the Val de Vie area. So that farm was part of the bigger farm that they had.
So when we started the brand, it just made sense to talk to Val de Vie because they have a small winery with 24ha of vineyards and a polo facility, a conference faculty, and security estate. So that did make sense for us to talk to a partner like Val de Vie.
HILTON TARRANT: No doubt you are going to be taking up that capacity quite quickly and probably to capacity. Plans to expand the cellar capacity at Val de Vie?
HEIN KOEGELENBERG: We will use the existing facility only to harvest the existing grapes that we have there. But yes, we will expand into the barrel maturation facility and also the tasting facility to accommodate the Chinese customers that we accommodate in South Africa. Part of this deal is to really work the network in China. Remember our partner, Perfect China, is the second biggest direct organic product company in China. They have about 5 000 outlets with just more than one million salespeople working, buying their products and selling their products in their network.
Part of our strategy is to put incentives in place and bring out between 700 and 1 000 Chinese people to experience South Africa in a way that they can be called ambassadors of South Africa when they go back to China. And we are bringing the first 700 of them to come and visit us the first week in September this year.
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