Cheers to the wine industry harvesting a recovery

The wine industry is gearing up for increased export opportunities, but recovery is still under way due to a severe drought, the pandemic and local challenges.  

The sector is targeting exports of more than 400-million litres of wine to about 140 countries, which if achieved, will take it back to 2018 levels.

Beyond that, opportunities in China and other African markets, and prospects of increased demand from the UK after President Cyril Ramaphosa's recent state visit, could lift sales even higher. 

In 2018 the industry exported 420-million litres of wine, but it dropped significantly in 2019 to 320-million litres because of lower production, a direct result of the 2015 to 2018 drought in the Western Cape.

During the pandemic in 2020, 319-million litres were exported due to a five-week ban thereon and the long-term closure of restaurants worldwide.

The industry regained some ground last year, with exports reaching 388-million litres, said Maryna Calow, communications manager at Wines of South Africa, which represents exporters of the product.

Local oversupply due to the ban on alcohol sales during the peak of the pandemic has also eased significantly, thanks to favourable market conditions, she said.

There are opportunities for growth elsewhere in Africa, the Far East and US, Calow added.

Vinpro MD Rico Basson said: “Africa specifically is a very exciting market for us and we are seeing good growth. Our fellow Africans are very supportive and there is great value in getting engaged with them as they’re learning to embrace wine in less-developed markets."

China and the US also present "exciting opportunities", he said, adding that "it is important that our producers ensure they do their homework when doing business here. With the right information and knowledge of these markets, the opportunities are myriad.”  

Vinpro is a non-profit company that represents about 2,600 South African wine producers, cellars and industry stakeholders.

The wine industry could get a major boost from the UK, the biggest export market for South African wines, after Ramaphosa visited the country. There, he discussed export opportunities for a number of products with prime minister Rishi Sunak.

The president wants wine exports to the UK to double per quarter.

We do remain focused on the end goal of supplying quality wine to our markets and to continue our positioning as a world-class producer of wine

—  Maryna Calow, communications manager, Wines of South Africa

While it is early days, Calow said “we are very grateful and heartened that we have his support and that he sees this opportunity for South African wine”.

Distell spokesperson Dennis Matsane said the company has not “experienced any increase in enquiries since the president’s visit to the UK. We do appreciate that he raised the issue of South African wines during... Distell is already selling its products to numerous customers in the UK and constantly looking to expand distribution of its branded wines.”

The company's products include Nederburg, Durbanville Hills, JC Le Roux, Drostdy-Hof and Fleur du Cap. Its largest markets outside Africa are Canada, the Nordic countries, Germany, the UK, Denmark and the United Arab Emirates (UAE).

While there are opportunities to boost export sales, the wine industry is still not trading at pre-pandemic levels, with load-shedding and rising costs hampering recovery. 

“While there is a slight improvement in the financial position of producers, full recovery will need some time. In the current season producers are dealing with an increase of 15.4% in cash expenses, while prices are below inflation, [causing] significant cash-flow pressure.

"We do, however, foresee that the situation will improve in 2023 as the industry reaches equilibrium regarding stock levels and [continued] strong exports and domestic sales, combined with a recovery in tourism,” said Basson. 

The biggest challenges the industry faced recently, according to Basson, were water availability, which may impact the 2023 crop, and continued load-shedding. The latter had a material impact on the ability to pump water for irrigation and ensure wineries' operational effectiveness. 

Producers have invested in generators and green energy on a large scale and ongoing discussions with Eskom are taking place as wine producers pre-plan for the 2023 harvest, he said.  

The Cape Town port remains a challenge due to operational ineffectiveness, old infrastructure, unreliability and the cost of shipping lines.

This remains a massive challenge for the industry to ensure it improves its international reputation and continues to grow its 400-million litres of exports worth R10.5bn.

“Formal engagements with Transnet and related parties continue,” said Basson.

Calow said pre-harvest calculations show yields are likely to be a little down on last year, but quality is looking good.

"We do remain focused on the end goal of supplying quality wine to our markets and to continue our positioning as a world-class producer of wine.”