22 Oct 2015 SA’s wine schizophrenia threatens industry sustainability
South Africa’s wine industry is schizophrenic….
On the one hand international wine critics are raving about the country: “South Africa’s time to shine on the wine stage has come. It’s our time to enjoy exploring these delicious and fascinating wines,” Dave McIntyre the wine columnist for the Washington Post said recently.
Tim Atkin, British master of wine and world renowned wine expert added, “It’s time the best Cape wineries were recognised for what they are: world class.” And, “ is the most dynamic and exciting New World country,” says Neal Martin a wine writer at Robert Parker, one of the most influential wine websites in the world.
On the other hand the average UK selling price of a bottle of South African wine is still about £4.25, well off the £10.00 plus mark of a status wine. The need to increase the average selling price of South African wine is essential for the sustainability of primary wine grape producers – and for the entire, complex value chain.
Despite increasing exports, many primary producers are under pressure as the cost of labour, water, diesel, glass and other inputs has risen steeply in recent years.
“This is not the healthiest industry,” says Wendy Appelbaum, owner of DeMorgenzon Estate. “With only long term returns and high initial capital expenditure, entering the industry without outside capital or grants is limited to those who can afford it.”
What makes it more difficult, she says, is that local wineries are competing with international players, many of whom receive subsidies, unlike the South African producers.
The average return on investment for wine grape producers is 2%, which is lower than many other crops. It costs R250 000 per hectare to plant wine grapes, and takes between ten and 12 years to reach break even, while many vineyards are replanted after 15 to 20 years, because of the lower yields of older vines, says Rico Basson, CEO of wine industry support body Vinpro.
Currently the grape producer gets an average of about R0.52 for each bottle of wine sold, while the government gets R5.50 for that same bottle. In fact, even the waiter that sells that same bottle is likely to get more than the primary grape producer, by way of their gratuity, he says.
Thus as the industry has evolved over the last decade it has been each man, woman and dog for themselves. Different segments of the market – from the big, bulk wine producers, to the estate growers and the small rock star wine-makers – have pursued their own interests, sometimes to the financial detriment of the whole industry.
As a consequence, it was left largely up to individuals to handle other important and sensitive issues like transformation, education and land reform, on their own…..