Wine industry hits doldrums
SA’s wine industry is in a slump, with only a third of grape producers farming at sustainable levels and return on income dropping below 1%, according to wine producer body VinPro.
VinPro chairman Anton Smuts said the average net farming income was about R45,000/ha compared with the R70,000/ha required in order to be financially 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 Smuts.
Wine is one of SA’s largest agricultural exports, with the county’s nearly 100,000ha of vineyards, mostly situated in the Western Cape near the coast, accounting for about 4% of world production.
VinPro MD Rico Basson said it was encouraging that export value grew 10% to nearly R9bn, 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.”
He emphasised the importance of the domestic market, which has seen a rise of 50million litres in the past two years to 400-million litres.
“Again, however, the biggest contributor to this increase is the bag-in-box segment, which is sold at lower prices and needs to be addressed.”
Nick Vink, dean of Stellenbosch University’s Agrisciences faculty, said: “If the wine industry is in a difficult spot, don’t worry – it’s normal.”
Producers and wineries have traditionally focused on driving quantity rather than quality and although this started to change in the 1970s, sanctions curtailed exports and domestic sales were primarily focused on the white consumer.
“Since 1994, the industry has become dependent on exports .... It’s time to get back to that earlier drive of quality and refocus on the domestic market to get us out of the slump,” said Vink.
SA’s agricultural sector is also reeling from the drought, but the wine industry expects a smaller albeit healthier crop.
Francois Viljoen, manager of VinPro’s viticulture consultation division, said with the smaller harvest, as well as an increase in local demand, stock levels were projected to be the lowest in five years at the end of 2017.