“The local wine industry is running the risk of producing too low volumes over the next three years, especially with regard to the more expensive wines – in other words, the category that South Africa is hoping to increase in order to boost its reputation overseas. This is the opinion of Hein Koegelenberg, CEO of La Motte, near Franschhoek.”
This is the opening paragraph in the article on strategic growth in the SA wine industry that was published in the 26 November 2015 edition of finweek. Buy and download the magazine here. An excerpt from the article was also published on fin24.com
Wine exports is very important to the economy of the country – and especially the Western Cape. According to Jacques Claassen’s finweek article, when it comes to agricultural products, SA’s wine exports are only exceeded in value by citrus exports.
Regardless of the export figures however, the profitability of the industry is under pressure, old vines are removed without being replanted and wine production costs are predicted to increase by 10% year-on-year. And with the dry 2015 winter, a smaller 2016 wine grape crop is expected to add more pressure to the profitability of a wine farm.
Claassen indicates two important issues the wine industry are facing:
- With a weakened Rand, the value of wine exports should have been significantly better.
- Despite an increase in export volumes, price points are still low.
What can we do to change this? In my opinion, it is not up to individual brands. As much as I am passionate about site-specific wines and embracing niche products, individual brands are not what will save the SA wine industry. Strong international brands are important but we have to learn from the mistakes of others. What is a strong brand? The Australian Yellowtail is very well known and sells in big volumes, but it has damaged the quality perception of Australian wines. We cannot afford that, not when we are already struggling to sell our more expensive wines and get out of the cheap and cheerful segment.
In my opinion, there are a few important issues we should address:
- South Africa’s diversity. We should introduce the world to the beauty of site-specific wines – the quality potential is amazing.
- From a socio-economic perspective shareholding in the industry should be investigated – ensure newcomers have a vested interest.
- Trade agreements will greatly support the South African wine industry – the SA government should get involved.
- South African wine tourism is of an exceptional standard and will help position the wine quality perception as well.
- An industry body is important. Hopefully Vinpro‘s WISE (Wine industry Strategic Exercise) will be a good starting point.
Do read the complete article: Strategic growth required in SA wine industry by Jacques Claassen.