The South African wine industry can expect a turning point in 2018. Wine producers and cellars face harsh realities such as a smaller wine grape crop and increasing financial pressure, but are ready to take on challenges with a renewed focus and seize opportunities on the global, political and economic horizon.
“We are now entering a new growth phase in the wine industry’s cycle,” said Rico Basson, Vinpro managing director at the wine industry body’s 13th annual Nedbank Vinpro Information Day on 18 January.
Smallest crop in 12 years
“The 2018 wine grape crop is expected to be the smallest since 2005, due to a decline in vineyard area, an ongoing drought and crop losses due to frost and hail,” said Francois Viljoen, manager of Vinpro’s viticultural consultation service.
As a result, the industry is expecting a R700 million shortfall at farm gate – this at a time when production cost has doubled in the past decade and the minimum wage for farm workers is set to increase by 17% in May.
Wine shortage demands higher prices
On the plus side, wine prices are expected to rise due to a looming wine shortage.
According to Basson, stock levels will be the lowest in 15 years. “Take advantage of this by negotiating higher price points. 2018 should be the new baseline year from which we should grow value going forward,” Basson said during his annual state of the wine industry review, which measures the industry’s progress against 2025 targets of the Wine Industry Strategic Exercise (WISE).
It is encouraging that local wine sales volume grew by 2.8% to 406 million litres in 2017, but even more positive that the value increased by 8.6% to R13.2 billion.
Create a brand that people remember, and you will be successful. Lulie Halstead, CEO of UK-based market research company Wine Intelligence, said wine brands need to a recognizable, pronounceable and memorable name or icon.
“Universally, wine is synonymous with reward, treat, relaxation and celebration. Wine tourism and hospitality create the perfect opportunity for you to make your brand part of your consumer’s lasting memories,” she said.
For the industry to stay afloat it needs fewer individual brands, but rather more focused and stronger brands at every price point, said Mike Ratcliffe, managing director of Warwick Wines. “I truly believe that we should make an industry wide commitment to protecting against fragmentation. We should be fighting dilution and moving towards an era of greater specialisation.”
The sustainability of the South African wine industry is in the hands of every person or entity in the value chain, said Vinpro chairman, Anton Smuts.
“Producers and boards need to take full ownership and responsibility of their product, by being informed regarding market trends and pricing structures,” he said.
At the same time, it is the industry’s collective responsibility to drive transformation and talent development at every level. Basson said close to R72 million (20%) of the wine industry’s statutory levies were invested in transformation in the past four years, and the private sector spent R125 million on corporate social investment (CSI) in 2016.
Two thirds of the wine grape harvest is produced under ethical conditions as per the Wine and Agriculture Ethical Trade Association (WIETA).
“Talent development and retention in the wine industry remains a priority for Vinpro. We are actively working with other stakeholders on fast-tracking this,” said Basson.
Political and economic outlook positive
Political commentator Max du Preez said the election of Cyril Ramaphosa as the new leader of the ANC is a critical turning point in South Africa’s history. “He shouldn’t be seen as a messiah, but will certainly restore the country’s natural order.”
The global economy is in South Africa’s favour, but growth has been slow due to political and policy uncertainty, said Isaac Matshego, economist at Nedbank.
The proposed Land Expropriation Bill will not only affect job creation and income generated by the agriculture, mining and manufacturing industries, but also the banking sector, as these are capital intensive industries. “We need to nurture these industries to ensure that they boom,” Matshego said.
Ramaphosa’s possible election as the country’s president during the 2019 national elections is set to decrease uncertainty and increase confidence for a more sound economy.
Work together, grow together
In keeping with the theme of growth and new beginnings, Vinpro – now in its 15th year – announced a new logo and brand positioning to strengthen its continued emphasis on sustainable growth.
As main sponsor of the Nedbank Vinpro Information Day for the 12th consecutive year, Nedbank reiterated the importance of working together to ensure sustainability. “Nedbank is committed to the continued support of the wine industry and events such as this are crucial in helping us to understand the landscape and how we can work together to increase profitability, global competitiveness and sustainability in the wine industry,” said Herman de Kock, executive head: Business Banking Sales at Nedbank.
“We are proud to be associated with the wine industry; more so that this goodwill has been recognised and reciprocated. Our commitment to the sector is evidenced by the substantial market share the bank has gained, and we continue to partner with the industry for good through a number of initiatives.”
Old Mutual and Old Mutual Agri Insure were also involved as sponsors.
Issued by: VinPro
Media enquiries: Wanda Augustyn
VinPro Communications Manager
Tel: 021 276 0463