December is here and now 2012 is really rushing to its end. I am interested in how the SA Wine Industry has performed this year and this week my focus is on how we we have been facing challenges in the international market.
In Business Day Live, renowned South African Wine Writer, Michael Fridjhon wrote an article Cape wine industry has proven its mettle in tough times: “The Cape wine industry must be among the most dynamic in the world: despite one of the longest and most emasculating recessions in almost a century, it has proved resilient, creative, even optimistic.”
I can’t help but agree. There is no denying the challenges the South African Wine Industry has been faced with the past few years, but it is interesting to look at how we reacted to these.
SAWIS figures show that while bottled wine exports have declined in 2012 (-7.65%), bulk wine exports increased (47.1%) and the overall performance has increased with 18.33% (Follow the link below to see the SAWIS comparison for export figures for December 2010 – November 2011 with December 2011 – November 2012).
Download Sawis stats
While the industry stays worried about pricing and profit margins, it is facing up to its challenges. The increase in bulk export figures is due to the industry shipping wine more cost effectively in bulk and bottling overseas in order to be more competitive in the market place. And while traditional markets are becoming less and less viable for South Africa due to the European economic crisis, the increase in Old World wine exports and also high excise duty and VAT in SA’s traditional focus market, the UK, we are shifting our focus to other markets.
Rabobank’s Wine Quarterly reports as follows: “The major story of 2011 was the growth in exports (both in volume and value) of Old World suppliers and the decline of many major New World exporters aided in large part by significant shifts in currency competitiveness. France, Italy, Spain and Argentina registered healthy growth in 2011, while Australia and to a lesser degree Chile, saw notable declines. While Old World wines are enjoying strong growth on the international scene, this is in many ways more a sign of the challenges these suppliers face than one of strength. The accelerated decline in domestic consumption, particularly in Spain and Italy, creates and increased urgency to seek new markets, and the increased focus on exports has been supported by the weakness of the euro.”
And this has been very much the same for 2012. In an attempt to escape the pitfalls of the traditional export markets for SA wine, producers are focussing on new markets.
According to Rabobank: “Declines in key markets such as UK, Sweden and the Netherlands outpaced growth in Germany, Denmark, France and others. While South Africa’s position remains challenged in many of its traditional markets, it is seeing notable growth in many emerging markets including Russia, China, Kenya, Angola and Nigeria”
Although the industry is a long cry from booming, it is surviving due to hard work and clever marketing initiatives. Perhaps the answer is in the new emerging markets such as China – we have sure seen the potential! – but working together as an industry and perhaps some government support, would definitely help a very willing industry.