Dry spell: wine under threat

DROUGHT: CONDITIONS EXPECTED TO DECREASE VOLUMES, INCREASE COSTS

Water scarcity adds to industry woes.

Yields in the wine beverage market will be down as much as 25% to 50% next year, according to two major players. A significant drop in yield on an already unprofitable model, means the industry will take a serious hit in 2018.

The lack of rain during winter has left vines across the Cape without the required water reserves through summer. Water quotas have also been slashed, meaning high-yielding vineyards from inland regions that produce most SA wine, will struggle to cope.

Black frost damage, specifically in the Breedekloof, disease pressure from small amounts of rain, and the continued drought will decrease overall volumes and increase costs. Unlike profitable fruit or nut production, SA wine has Chilean, Australian or even Chinese substitutes if the prices are nudged.

Michael Fridjhon’s Two Wine Industries keynote address at the Nederburg Auction was a resolute and welcoming call to the country: one of the major industries in the Western Cape is under serious pressure.

Economic and political ills have created a massive divide in the wine industry that is not unlike many others in today’s landscape. The drought is set to exacerbate this social inequality and hamper the export-based industry even further. Wine farming can be profitable, but add severe economic issues, lack of government support and one of the driest periods in the history, there is concern. Some commentators believe this will be a much-needed correction to our perpetual over-supply, but at what cost to the sector?

According to Vinpro, the average return from 3 139 producers across our 96 753 hectares is below 1%. Now add cost inflation, stagnant wine prices, huge competition and a prolonged and worsening drought. This is threatening the SA fine wine revolution at play. New releases at the premium level and more than R1 000 are selling faster than ever before. The 2015 vintage is the finest in the modern era and demand has been rampant.

While climate change is fuelling fires in California and increasing frost risk in France (producing the lowest yield ever in 2016), we may have another competitor to worry about. Domestic Chinese wine consumption is starting to grow, matching their thirst for luxury wines. According to Jancis, the “quality of the best Chinese wine has recently turned a corner”. A scary thought when China’s total vineyard area just overtook France to become the second biggest in the world. Don’t expect China to not compete in the huge international beverage market. In fact, like many industries, I believe they will likely dominate.

Roland Peens is director of WineCellar. co.za.

The 2015 vintage is the finest in the modern era