Government as a strategic partner for South African wine industry in the US market

Mvemve, Mzokhona (2009-12)

Thesis (MBA (Business Management))--University of Stellenbosch, 2009.

Thesis

ENGLISH ABSTRACT: The global wine market has faced varying challenges in the first decade of the 21st century; over production brought a power shift in favour of buyers which resulted in a decline in profit margins per bottle sold. The main gainer in these uncertain times has been the consumer. As more regions enhance their wine making skills and embrace superior technology, the wine quality has improved and competition intensified. The growing consumers' wine knowledge has altered quality expectations, placing an added pressure on new brands entering the market. The United States of America (USA, but hereafter referred to as US) remains a growing wine market, with a population size of 303 million people and an appetite for luxury goods and services it continues to be a popular export destination for other wine regions. The latter trend persist despite a cost of entry into the US market being regarded high as a result of the country's three tier system, which allows for further three segments of the value chain from the producer to add their mark-ups on an exported bottle of wine before it reaches the end consumer. The pricing system has proven to be insufficient a deterrent, particularly to the New World wine producers. Australia has remained the most successful producer of the New World wines in the export market for the past three decades; the same cannot be said for South Africa wine industry. While market and strategic orientation, industry plan and interorganisational collaboration are identified as key factors in the Australian success, the partnership between government bodies and wine industry bodies are credited for their unified approach to the US market. The South African government have programmes aimed at promoting the county's export of goods and services. The adequacy of such programmes remains in doubt, particularly in the eminent challenges in the global wine market. The study investigates the extent and nature of a partnership between government bodies and the South African wine industry with regard to effective promotion of the country's wines in the US market. A qualitative methodology is employed to ensure credibility and accuracy of the primary data. Five participants are selected for a discussion, including an exporting wine producer, wine cellars association, wine export council and two government agencies. The Vision 2020 strategy by the South African wine industry is reviewed, with the main focus on the US market and the role of the exporting country's government given the changing international trade regime. The study concludes that the US remains a critical market for South African wine producers despite the high cost of entry, global wine surplus and economic recession, and that success for the country's wines is partly dependent on a unified approach by the industry, attainable though partnerships with government agencies. While acknowledging the continuing government support, it makes recommendations on how to strengthen existing partnerships with regard to the US export market for South African wines. The study lacks generaliseability; however since it is meant to assist design effective export promotion programmes for South African wines in the US market, the absence of generaliseability is considered unproblematic.

AFRIKAANSE OPSOMMING: Die globale wynmark het in die eerste dekade van die 21ste eeu voor verskeie uitdagings te staan gekom. Dit sluit in oorproduksie wat tot 'n magskuif ten gunste van kopers gelei het en winsmarges per bottel wyn wat verkoop is laat daal het. Die grootste voordeeltrekker in hierdie onsekere tye is die verbruiker. Soos al meer streke hul wynproduksievaardighede versterk en die beste tegnologie benut, verbeter die gehalte van wyn en word mededinging strawwer. Soos verbruikers se kennis van wyn toeneem, verander hul verwagtinge ten opsigte van gehalte. Dit plaas bykomende druk op nuwe handelsmerke wat tot die mark toetree. Die wynmark in die Vereenigde State van Amerika (VSA) groei steeds. Met 'n bevolkingsgrootte van 303 miljoen mense en 'n aptyt vir luukse goedere en dienste bly die VSA 'n gewilde uitvoerbestemming vir ander wynstreke. Die tendens om wyn na die VSA uit te voer, bly sterk ondanks die hoë koste om tot die VSA-mark toe te tree. Dié hoë koste is die gevolg van die VSA se drie-vlak stelsel wat dit vir produsente moontlik maak om die waardeketting verder te segmenteer en hul prysverhoging by 'n bottel ingevoerde wyn te voeg voordat dit die eindverbruiker bereik. Hierdie prysbepalingstelsel blyk egter onvoldoende te wees as 'n afskrikmiddel, veral vir wynprodusente van die Nuwe Wêreld. Australië was die afgelope drie dekades die suksesvolste produsent van Nuwe Wêreld-wyne vir die uitvoermark. Dieselfde geld egter nie vir Suid-Afrika se wynbedryf nie. Hoewel strategiese en markoriëntasie, bedryfsplanne en interorganisatoriese samewerking as sleutelfaktore vir sukses in Australië geïdentifiseer is, kry die vennootskappe tussen dié land se regeringsliggame en wynbedryfsliggame die krediet vir hul verenigde benadering tot die VSA se mark. Die Suid-Afrikaanse regering het programme wat die land se uitvoer van goedere en dienste bevorder. Die gepastheid van sodanige programme bly onseker, veral in die lig van die groot uitdagings in die globale wynmark. Die studie ondersoek die omvang en aard van 'n vennootskap tussen regeringsliggame en die Suid-Afrikaanse wynbedryf ten opsigte van doeltreffende promosie van die land se wyne in die VSA-mark. 'n Kwalitatiewe metodologie word gebruik om die geloofwaardigheid en akkuraatheid van die primêre data te verseker. Vyf deelnemers is vir 'n bespreking gekies: 'n produsent wat wyn uitvoer, 'n wynkeldervereniging, wynuitvoerraad en twee regeringsliggame. Die Visie 2020-strategie deur die Suid-Afrikaanse wynbedryf word hersien en sterk klem word ook gelê op die VSA-mark en die rol van die uitvoerland se regering in die lig van die veranderende internasionale handelsregime. Die studie kom tot die gevolgtrekking dat die VSA 'n kritiese mark vir Suid-Afrikaanse wynprodusente bly ondanks die hoë koste van toetrede, die globale wynsurplus en die ekonomiese resessie, en dat sukses vir Suid-Afrika se wyn deels van 'n verenigde benadering tot die wynbedryf afhang wat deur vennootskappe met regeringsagentskappe moontlik gemaak kan word. Hoewel die verslag erkenning gee aan voortgesette regeringsondersteuning, word aanbevelings ook gedoen oor hoe om die bestaande vennootskappe ten opsigte van die VSA as uitvoermark vir Suid-Afrikaanse wyne te versterk. Hierdie studie het 'n gebrek aan veralgemeenbaarheid. Omdat dit egter daarop gerig is om doeltreffende promosieprogramme vir die uitvoer van Suid-Afrikaanse wyne na die VSA-mark te help ontwerp, word die afwesigheid van veralgemeenbaarheid as onbelangrik geag.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/1027
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