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New plantings give an indication of the direction in which the South African wine industry is heading. But could the emphasis on yield possibly be cause for concern?

 

What should the South African wine industry be known for? Wines that offer consumers good value for money? Or quality wines? Industry experts say that new plantings already show what is being aimed at, and according to some it points to a concerning trend.

 

Chenin Blanc, Colombar and Pinotage – and clones thereof known for high production – are on top of the list of cultivars currently being planted. On the other side, there is also concern about the sharp decline in plantings of grape varieties known for their quality, like Cabernet Sauvignon, while shortages are also predicted for quality Chardonnay.

 

What message does these trends project about the future of the South African wine industry? Judging by the above it appears that the country, which is responsible for only 4% of global wine production, is positioning itself as a low cost-high production wine country. And a growing number of industry stakeholders are voicing their concern about this trend.

 

Cultivate for quantity

The CEO of Voor-Groenberg Nursery, Johan Wiese, reckons that the industry’s focus is wrong: “I have to admit that I wonder whether we are heading in the right direction. There are too many short term decisions being made with regard to plantings, and quality suffers as a result.”

 

According to Johan economic pressure has contributed to the fact that producers concentrating on bulk wine production are currently making money, but it is dangerous if volume becomes the biggest motivation – especially in the long run. “The message being sent out is that buyers are not looking for A+ wine. They are looking for B wines, at a bargain price. It shows in plantings and general vineyard management,” he explains.

 

Because they are under so much pressure, producers are weary to take on the risk of lesser known cultivars, even if these other grape varieties might possibly be particularly suited to South Africa. “In order to understand whether options like Grenache, Verdelho, Aberino or even Malbec truly have potential, they have to be planted in different regions. Yet we still won’t know in 10 years’ time, as too few people are doing it!”

 

Foreign capital is critically important, according to Johan: “We are not unique – there are many foreign investments in Bordeaux. The same applies to Chili and Argentina, where foreigners build substantially larger cellars than in South Africa.”

 

Johan reckons that there is a big need for businesses that think more like family businesses and make longer term decisions, which will also bear fruit 30 years from now. “We have to start thinking more seriously about the consequences of what we are doing now, as many of the decisions we are currently making will do our descendants no favours.”

 

Head of Vititec, Nico Spreeth, agrees that the clear swing towards high production, with quality as an afterthought, is a very big risk for the industry. It has not, however, led to the quality of plant material and plant improvement being left behind. On the contrary, says Spreeth, the industry is geared for when the wheel turns and quality becomes a priority again, “as it should be”.

 

“Vititec has, among others, imported two new Sauvignon Blanc and three Grenache clones, exactly with the eye on quality. In the same way we are also looking at ‘new’ cultivars like Piquepoul Blanc and Vermentino, also for quality production,” Nico adds.

 

According to him the demand for new quality clones and cultivars lies with only a handful of estates, but these pioneers are busy paving the way for when the need also arises on a bigger scale.

 

The CEO of Lelienfontein Vine Growers, Petrus Bosman, attributes these short term decisions to a structural imbalance in the wine industry, for which there is no simple solution. “Producers who plant for yield do so to keep their heads above water, even if it is for the short term. A significant reason for this is that the fat in the value chain does not lie with the producer. Only if and when the producer is rewarded for quality grapes will we be able to rectify the situation sustainably,” explains Petrus.

 

Until that happens, tonnage continues to balance the books. It shows in vine sales. The demand for Ramsey has skyrocketed, despite the fact that it is one of the most expensive rootstocks. “Ramsey has a very low bud take percentage in the nurseries. Believe me, the growers will also welcome a return to Richter 110 and quality production,” Petrus jokingly states his interests.

 

From block selection to minimum inputs

In the 1990’s, everything revolved around quality: block selection and vineyard practices to yield the best quality – also at the producer cellars. It was, according to VinPro’s manager of consultation services, Francois Viljoen, visible in the nature of projects where he and his team were involved in those days.

 

“Today it is an entirely different matter. It is production, production, production, with minimum inputs and mechanisation on top of the list. Quality does not pay, therefore long term thinking has been largely wiped off the table,” says Francois. According to him, boards of directors are under pressure to survive and consequently short term decisions are made purely to keep afloat.

 

Francois asks whether the industry is not shooting itself in the foot: “There are few people who would disagree that quality elevates an entire industry, any industry. The sustainability of the direction in which we are currently moving is a concern for me.”

 

The statement of “increased yield, while maintaining quality” has according to Francois been blown completely out of proportion, with the limits of production continually being shifted. “The sustainability of this is the big question. How long will vines be able to keep it up?” asks Francois, whose sentiments are backed by more than 30 years of experience.

 

It’s all about sales

A better understanding of the full value chain is increasingly important for meaningful decisions, also in the vineyard. DGB’s viticulturist, Stephan Joubert, says that while the principle of production according to wine objective was on everyone’s lips in the 1990’s and early 2000’s, it is only now truly being applied.

 

This is evident looking at the increase in Smart Dysan and other alternative systems, after practically all vineyards were previously trellised using vertical shoot positioning systems – which is used for quality production.

 

He agrees with Francois that there are limits to achieving higher yield while still maintaining quality – although a vineyard-specific approach can result in sustainable successes. “On the one hand we have success stories of quality Sauvignon Blanc blocks that make the numbers add up with yields that have been increased by Smart Dysan systems from 7 to 11 tons per hectare. The opposite of this also happens, however, where vineyards with an excessive crop load folded completely during heat waves,” says Stephan.

 

As far as new cultivars are concerned, Stephan has a simple explanation: “Malbec has incredible potential in South Africa, but how do you justify more plantings when it is actually Merlot that sells? Any cellar can only sell as much Malbec as the market wants. The rest it will be compelled to sell as ‘dry red’, at a lower price.”

 

DGB’s quality wines are made at their own cellars – like Boschendal and Franschhoek – while entry level wines are bought in, exactly for the reason that production costs are higher at their own cellars than producer cellars where the focus is on high volumes. “Detailed forecasts are very important. If we are guaranteed that a certain premium wine will sell, we can confidently pay more for the grapes. But if it does not happen, it is a risk that we have to make provision for,” explains Stephan.

 

Limited leverage

With more pressure on producers to supply grapes at a low cost, higher tons per hectare is one of the few levers for profitability still at the producer’s disposal.

 

The market determines, according to Erhard Wolf, chief grape and wine buyer at Distell, against which price points wine can be sustainably purchased, and this in turn has an effect on the price and quality of the wine Distell buys. “If our prices were to now increase by R2 per litre, we will only be able to sell half of the wine and then ultimately buy less grapes and wine. This is dictated by the market, and ‘the market’ is not only wine, but includes all alcoholic beverages,” explains Erhard.

 

Distell’s growth, according to Erhard, is currently in low price range products, which creates a demand for grapes grown at a lower cost. With regard to the question of high yield while maintaining quality, Erhard reckons that a decade ago red cultivar vineyards in particular were managed to produce low tonnage, although this was not necessarily the suitable approach. It was a mistake,” emphasises Erhard.

 

He says that there are now instances where, in contrast, excessive production is occuring. “VinPro’s production plan indicates, however, that some production units are too small to be sustainably profitable. There are producers who have had to step out of business and there are also producers who have had to re-establish,” he explains.

 

Erhard warns that it is a mistake to consider production alone. “The industry must look at other levers. Excise is one of them, especially where brandy is concerned, while international trade agreements are also of paramount importance.”

 

Erhard says that the Wine Industry Strategic Exercise (Wise) will be crucially important for the aforementioned, but also to help South Africa to gain traction on higher price points. Even despite the fact that there is a clear shift in production from quality to higher volumes, Erhard reckons that there are enough vineyards that can produce top quality wine for when a greater need for quality occurs. “I am convinced that South Africa will be able to make the leap, especially with white wine. There is enough hidden quality that is yet to be unlocked,” he concludes.

 

 

Published in the July 2015 issue of WineLand magazine.

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