African Roots Wines, a black economic empowerment company based in the Western Cape, is to supply US retail giant Walmart with its locally produced wine, Seven Sisters.
The deal, which could be worth millions of rand once all the details are finalised, is likely to change the fortunes of African Roots, which has struggled to penetrate the local wine market traditionally dominated by white males.
African Roots Wines, owned by seven sisters, each of whom have a stake in the business, has a turnover of more than R2m a year. The company will this month be shipping the first order of more than 5,000 nine-litre cases of its wine to the US. Walmart will carry five varieties of the wine in about 300 stores.
South African wine exports have steadily increased in recent times. According to Wines of South Africa, the wine industry association, South Africa’s wine exports increased the most since 2008 in the first half of this year, bolstered by a better harvest and a weaker rand that made the price of locally produced goods more attractive. Total shipments climbed 40% in the six months through June.
The UK, Sweden, Germany and the Netherlands remain the four biggest markets for packaged wine, while sales to China increased 36% and to Nigeria by 50%.
African Roots Wines founder member and CEO Vivian Kleynhans said that supplying Walmart would be significant for the company, which has struggled to penetrate the local market since 2005.
"The local wine market is already saturated and it is very difficult -- especially for a black-owned company to break through," Ms Kleynhans said. "Breaking into the local market is enormously difficult, but we have succeeded with Makro and we have appointed a national wine distributor -- PB Liquors-Bidvest Group -- but survival is all about competing in the global market. Being accepted by Walmart signals a turning point in how the local industry should view black-owned wine businesses," she said.
Ms Kleynhans said Walmart had agreed to take five out of the seven ranges of wines produced by African Roots. "They will see how these five sell then perhaps they will take all seven thereafter … Walmart has identified 500 stores throughout the US that the wine will go to," Ms Kleynhans said.
She said the US retailer had asked her company to "upgrade" the packaging of the wine as part of the deal.
Ms Kleynhans said Walmart had come to South Africa looking for supplier diversity, and "Seven Sisters Wine ticked all the boxes -- female owned and a development project".