Innovative Strategies for Wine Estates

The recent positive election outcome should aid investment into the Cape Winelands, as investors seek a more stable political environment and reduced risk. The recent net inflows into the JSE (Johannesburg Stock Exchange) were the longest streak in 7 years, already signaling investor optimism. But, wine properties are often large, long-term, and complicated assets, making strategy key to sustainability and growth potential. ?

WBA advocates a streamlined product range and a specialisation strategy in a grape variety, style, or place. This is a strong message to the customer and efficient operational strategy. Careful capital expenditure and investing in brand equity is key to long-term value creation. What other strategies can be considered in this competitive market? ?

Leaning into the tourism industry and diversifying your cellar door offering is a strong strategy in this growing market. Record visitor numbers into Cape Town and the semigration down to the Western Cape mean more potential visitors and an opportunity for increased spend. A neighbouring farm hosts music festivals over season for instance, and this has become the cream on top of their multiple income streams. Winelands tourism is a world-class, competitive and diverse offering, therefore considering partnerships can also unlock value.

Regenerative Agriculture is the new buzzword in natural farming. The strategy of building a food system on your farm results in more resilience in the vineyard. “Increasing soil humus levels can significantly improve a plant’s resistance to disease and water stress," says leading farmer Johan Reyneke Wines . Mixed farming can lead to multiple income streams, fewer inputs and more outputs.

Developing regenerative agriculture today requires a long-term and holistic approach. This strategy of increasing diversity strives to use as few inputs as possible; the output of cattle, for instance, becomes the input of your vineyards or gardens, as well as highly valuable grass-fed beef. My partner Jessica Saurwein and I follow regenerative farming methods, and it’s rewarding to replace increasingly more of our food requirements with our own farm products.

A more severe strategy is to rezone and redevelop a portion of your farmland and pursue residential opportunities. According to the property24 data above, vacant land has vastly outperformed existing homes around the Winelands, rising by c.10% per annum in Somerset West since 2015. While preserving nature and farmland is essential, some farms were built under different market conditions and redevelopment could be the only sustainable outcome.

There are opportunities other than subdivision. The relatively new 99-year leasehold agreements, such as Waterfall City, have proved successful and deliver dividends to the owner without triggering a land sale. Redevelopment can, of course, be an expensive and long-term strategy, but the rewards may significantly increase sustainability.

WBA is a specialist in fine wine assets from valuation, through to M&A and advisory. WBA has identified two significant Cape properties where new strategies could unlock a new level of value.

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See our latest opportunities here, or contact me for more information.

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Roland Peens - CEO Wine Business Advisors ?