While the local wine market has grown more than 14%, or by 50-million litres, over the past two years, to more than 400-million litres at the end of December, continued pressure on the local economy could hamper the industry’s future growth.
The wine industry is currently in a slump, with only one-third of grape producers farming at financially sustainable levels and return on income dropping below 1%.
The average net farming income is at around R45 000/ha, compared with the R70 000/ha that is required to be sustainable.
“We need to increase wine prices collectively to get to that level. Stop dumping wine at cheap prices in our export markets – it hurts the industry as a whole,” said wine producers association VinPro chairperson Anton Smuts at th eNedbank VinPro Information Day, in Cape Town, this week.
VinPro MD Rico Basson noted that it was encouraging to see that the industry has seen export value growth of 10% to nearly R9-billion, compared with volume growth of 3% to 428-million litres in 2016. “However, bulk wine which is sold at lower prices remains the biggest contributor in terms of volume.”
The Wine Industry Strategic Exercise target for the bulk versus packaged wine ratio by 2025 is 40:60, compared with the current 61:39.
DON’T WORRY
“If the wine industry is in a difficult spot, don’t worry – it’s normal,” said Stellenbosch University Agrisciences faculty dean Professor Nick Vink, noting that since the start of the industry in the seventeenth century, contractions would last for a decade and be much more severe than expansions that lasted around 8.5 years.
Producers and wineries have traditionally focussed on driving quantity rather than quality and although this started to change in the 1970s, sanctions curtailing exports and domestic sales were primarily focused on the white consumer.
“Since democracy in 1994, the industry has become heavily dependent on exports, which is now seeing slow growth. It’s time to get back to that earlier drive of quality and refocus on the domestic market to get us out of the current slump,” said Vink.
FARMING ECONOMICS
Owing to the smaller harvest, as well as an increase in local demand, stock levels are projected to be the lowest in five years at the end of 2017.
Wine producers and viticulturists expect a harvest close to last year’s size of 1.4-million tonnes, owing to heat, drought, black frost, wind and a decline in area under vines.
On the upside, the dry, windy conditions resulted in healthy vines, uneven bunches and smaller berries with greater colour and flavour intensity. “We can really expect good quality wines from this harvest,” said VinPro viticulture consultation division manager Francois Viljoen.