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Economic slowdown fails to stem the sales of SA wines as consumption rises.
Economic slowdown fails to stem the sales of SA wines as consumption rises.

Wine sales defy shrinking grape acres

ECONOMIC NEWS

By Ray Ndlovu - Aug 21st 2017, 10:52

South Africa's land under tillage for grapes is on the decline, and this has presented the country's wine industry with a challenge - how to use less land while still increasing wine volumes and sales for both the domestic and international markets. 

Local demand for wine, despite tough economic conditions, has so far not declined in line with lower consumer spending.

According to VinPro, a non-profit company that represents 3500 wine producers, cellars and industry stakeholders, the wine industry sold 401 million litres of natural wine locally in the year ending June 2017 - up 4% in volume and 7% in value over the previous year.

Exports worth R9-billion - a 9.8% revenue increase from 2015 - were earned last year and South Africa exported 428.5 million litres of wine, which was an increase of 2% in volume.

South Africa is the world's seventh- largest wine producer and contributes about 4% to global wine production.

The UK, Germany and the Netherlands are the three biggest consumers of South Africa's wine, spending R1.7-billion, R1.2-billion and R701-million respectively.

"We're seeing significant growth in the Asian market and in Canada. There is a strong drive towards growing our value offering of wine exported in bottles as opposed to bulk wine exports," said Maryna Calow Strachan, communications manager for Wines of South Africa.

"South African wines are still being sold very cheaply, which does not reflect the quality of our produce. This is something that the industry is working hard to change in all of our export markets."

Wine industry experts this week said financial pressures on producers, a drought, ageing vines and competition from other agricultural enterprises contributed to the decline in land under tillage for grapes.

About 95,775ha of land is in use for grape production, a drop of 6,371ha from the peak land usage of 102,146ha in 2006.

Rico Basson, managing director of VinPro, said the industry was uprooting vineyards and realigning business such that the area under vines was likely to shrink by another 10% from the current level.

"However, this trend is not exclusive to South Africa. In Australia producers have uprooted close to 20% or 32,000ha of the area under vines over the past five years," Basson said. "On the plus side, however, the improved balance between supply and demand means the pendulum will swing towards demand-driven production."

"Grape prices at farm level are expected to trend upwards due to raw material available as well as a strong focus on value growth at higher price points, areas that the industry and key brands are investing significant focus in to reposition."

This year's grape harvest increased by 1.4% following last season's drought, with healthy grapes, intense flavours and colours promising great wines.

Francois Viljoen, VinPro's consultation services manager, said dry and windy conditions resulted in healthy vines that needed fewer pesticides.

© BusinessLIVE MMXVII 

Read more about: wine | sales | liquor news | consumer spending

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