Can we sustain our vineyards with bulk? Or should we be blunt, brave and even arrogant and change the current status quo?

Over the past 15 years the wine industry has spread a message of doom and gloom with low profit margins grabbing headlines. But no sooner had the post-Zuma cabinet been reshuffled and the industry faced a new onslaught: journalists!

News agencies far and wide are reporting on the tight supply and decrease in wine production globally. These reports have been backed up by tweets, posts and blogs on the effect of these shortages on wine prices, especially when it comes to our loyal Sauvignon and Merlot lovers up north.

Well, in many cases it’s said you should rather have one SKU too little than too many, so this is perhaps the first real opportunity we’ve had in a long time to unlock value. But as the media hype subsides, is there really an impact on price and, if so, is it purely driven by production shortages or in combination with better quality?

Let’s face it, the average consumer doesn’t worry about the great weather during bud break, small berries or even a cooler harvest period. Consumers’ behaviour is even more confusing than South African politics, but one thing is certain: they’re not happy about the price of their favourite wooded Chard increasing.

But have we as an industry capitalised on the current opportunity provided by the short supply? Have we succeeded in moving away from overdelivery at the price point? Over the past 15 years we’ve produced fantastic wines for the price. Even our ultrapremium products are much more affordable compared with our competitors’ products.

How do we change this? The current landscape won’t be maintained by overdelivering on quality at the price point. Primary grape producers are in dire need of a 15-20% price increase for their product, but I doubt our fragmented value chain will absorb this.

The only solution seems to be to increase the shelf price. But that’s easier said than done. The decrease in the average price for our packaged export products year on year is also concerning. These are our brand ambassadors that tell our unique story. Currently only the bulk trade has shown double-digit growth, which fuels the long-term sustainability debate. As we know the bulk trade is like a seesaw: as soon as there’s an increase in volume, prices drop; if supplies are tight, it’s smiles all round for producers.

So is price driven purely by global shortages or does an improvement in quality also play a role?

As the seventh biggest wine-producing country in the world we have much less bargaining power in the bulk war compared with the mighty EU. Time will tell whether we capitalise on this opportunity to build value or fall back in our old speculative ways.

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