Agrilogics

South Africa wine industry ready to bounce forward

South Africa’s wine industry is as ready as ever to rebuild, with a focused plan, strategic actions and revised targets towards 2025 and beyond. This according to the respective wine industry organisations during a two-day engagement with producers, wineries and other stakeholders in Worcester and Stellenbosch on 3 and 4 November 2021.


“Despite the setbacks brought on by Covid-19 over the past nearly two years, we are committed to not only bouncing back to where we were before the pandemic hit, but bouncing forward to achieve our vision of a robust, adaptable and competitive South African wine and brandy industry,” says Vinpro MD Rico Basson.

The industry set specific targets in 2015 to realise this vision by 2025 through its Wine Industry Strategic Exercise (WISE) and has since revised its strategy and targets somewhat to the current realities. “The main strategic outcomes include boosting exports and local sales, promoting inclusive growth and responsible consumption, and striving for sustainability in all facets of business,” Rico says.

Stabilise supplies
One of the unintended consequences of Covid-19 restrictions on wine trade, has been an increase in stock levels, which have driven wine prices downward and added to producers’ financial challenges. Although the total wine stock at the end of October 2021 was at 520 million litres not much lower than the 526 million litres in December 2020, the industry has done well to reduce the volume of uncontracted wine stock from 155 million litres to 60 million litres in this time, which now only represents 11% of the total surplus.

“We are not out of the woods yet and will have to continue implementing measures to reduce our surplus stock for at least the next three years in order to start seeing an upward curve in terms of pricing. This includes reducing production, allocating a percentage of our harvest to grape juice concentrate or finding new markets for our products,” says Yvette van der Merwe, executive manager for SAWIS (SA Wine Industry Information & Systems).

Grow the global footprint
For South Africa to be globally recognised as premium quality, exciting and distinctive, everyone in the industry needs to collectively talk about the country’s unique selling proposition every opportunity they get.

“South Africa’s wine industry is diverse in terms of our people and culture, terroirs and varietals,” says Siobhan Thompson, CEO of WoSA (Wines of South Africa). “We combine old world heritage of more than 350 years through the Old Vine Project with new world innovations. South Africa is a global leader in production of distinctive varietals such as Pinotage and Chenin Blanc, has a strong reputation in terms of certification and responsible production and provides a unique, exciting and premium range of wine tourism experiences. East Africa, the UK and USA, Canada, China and Europe remain key markets.

Although China presents good opportunities for South African wine brands to gain traction at the moment, it remains a challenging market to enter. Add to this the fact that South Africa’s chances to conclude a free or preferential trade agreement with China are slim, as it may pose a risk to certain sectors in South Africa and its neighbouring countries in terms of the necessary trade-offs. “South Africa’s current free trade agreements with the UK post Brexit and the European Union have stood us in good stead and the eventual implementation of the African Continental Free Trade Area will open up markets in Africa,” says Michael Mokhoro, WineBiz stakeholder manager.

“When establishing and maintaining a market, we need to emphasise the importance of maintaining relationships with prospective and existing buyers. You won’t leave your child in the middle of Adderley Street, so don’t leave your brand unprotected in an overseas market,” Siobhan says.
The Cape Wine exhibition from 5 to 7 October 2022 will create a great opportunity to build relationships, with the theme Sustainability 360 focusing on people, place and prosperity.

“Apart from the world-class Integrated Production of Wine (IPW) scheme, the industry’s tremendous progress in terms of ethical trade is one of its most important differentiators when it comes to sustainability,” says Linda Lipparoni, CEO of WIETA (Wine and Agricultural Ethical Trade Association). In 2010 only around 10% of the country’s wine grape harvest was produced ethically, compared to 72% of the production in 2021. “There is so much going on in this space at farm and community level. I implore everyone in the industry to tell these positive stories at every chance you get,” Linda says.

Keep the local market open and gain loyal fans
Since the onset of the Covid-19 pandemic and accompanying restrictions on domestic alcohol trade, much of the wine industry’s efforts have focused on opening up the local market and keeping it open.

“Contrary to what people may believe, Government doesn’t have a vendetta against the wine industry. We need to strike a balance between the industry and Government’s needs and expectations,” says Christo Conradie, manager of Vinpro’s wine business division.
“Just like us, they are strongly opposed to alcohol abuse and related socio-economic harms, and therefore we need to work closely with the more than ten Government departments to help change this culture collectively, instead of waiting for new laws to be passed that will have a negative effect on the industry.”

In line with international best practices, the industry recommends stricter enforcement of existing legislation and zero tolerance for offenders. This, alongside the nationwide implementation of targeted awareness programmes and campaigns on responsible use and harm reduction such as those driven by Aware.org (Association for Alcohol Responsibility and Education), a collective of the wine and other alcoholic beverage industries.

“In all engagements with Government, as well as Vinpro’s court hearing in August 2021, we have also called for fact-based decision-making by Government in terms of liquor-related regulations, and we’re seeing some progress in this regard,” Christo says.
Apart from Covid-19 trade restrictions, the local wine tourism sector was hit hard by the closing of borders for international visitors and capacity limitations in these establishments in the past two years.

Marisah Nieuwoudt, Vinpro’s wine tourism manager, remains positive about the sector’s growth path. “Despite the tremendous setbacks wine tourism destinations have faced, we’re seeing a revival and it is estimated that this sector’s contribution would be back to its 2019 level of R7.2 billion to GDP (gross domestic product) by 2023, should no new vaccine-resistant Covid-19 variants surface,” Marisah says.

The industry’s recovery plan for wine tourism, in collaboration with the country’s 23 wine routes and their members, is aligned with the National Department of Tourism’s strategy. It entails sustaining supply by lobbying for funding and support from Government such as the Wine Tourism Support Stipend by the Western Cape Department of Agriculture that supported 1 362 people from 254 wineries at the beginning of 2021.

Demand is reignited through various marketing collaborations with partners such as Wesgro’s Get in a good space in the Cape Winelands destination marketing campaign launched in August and a new partnership with Mastercard launched in November to promote three wine routes. Finally, the sector aims to strengthen its capabilities through skills and business development programmes such as specific training for wine tourism staff from the end of November following a wine tourism skills audit earlier this year, in collaboration with the Cape Winelands District Municipality.

“The local market has been our saving grace during the pandemic, with South Africans accounting for nearly two thirds of our visitor figures. We will continue to create memorable experiences for these visitors in the hopes of turning them into loyal wine fans,” Marisah says.
At the same time, the brandy industry is also vying for the attention of a younger emerging local market in terms of its premium potstill offering. “We’re working closely with brandy ambassadors, sommeliers, mixologists, hotels and restaurants to provide training and promoting brandy as an aspirational product alongside cognac and malt whiskey, while exposing them to new innovative products, packaging and drinking occasions,” says Christelle Reade-Jahn, director at the SA Brandy Foundation.

The foundation also launched a Brandy Innovation Challenge that will see three new brandy entrepreneurs emerge with financial support and under the mentorship of experts in the field.

Inclusive, transformed and empowered
Inclusivity is a prerequisite for sustainable growth going forward. “There are so many opportunities to grow together and boost transformation at the same time through partnerships throughout the value-chain,” says Wendy Petersen, transformation operations manager of SAWITU (SA Wine Industry Transformation Unit).

SAWITU utilises the 20% statutory levies it receives from the industry to drive transformation at various levels. Priority areas include obtaining equitable access to land, infrastructure, cellar and warehouse facilities, as well as serviced land with water rights; unlocking market access opportunities, including conferencing and tourism facilities; achieving transformation across the value-chain through preferential procurement policies; as well as supporting skills development, learning and socio-economic development initiatives.

“With the limited funding available to drive transformation sustainably, we look at projects and strategic actions that will deliver the best return on investment and will have the greatest impact,” Wendy says.
One of these projects include the launch of The Wine Arc on 11 November 2021, a dedicated brand home for 15 black-owned wine brands, hosted in the tasting room and cellar complex at ARC Nietvoorbij in Stellenbosch.

Government remains an important partner in the industry’s endeavours to drive transformation. To this extent wine industry bodies such as Vinpro have been engaging closely with the AgriBEE Charter Council over the past few years to help align Government’s interpretation of progress in terms of the AgriBEE sector codes with what is workable at farm and cellar level.

“A Green Paper is set to be released within the next few months with the proposed amendments to the sector codes, and we implore all wine industry stakeholders to provide their feedback during the public commentary process. The quality of these measurement controls depend on your input,” says Phil Bowes, Vinpro’s enterprise development manager.

Another initiative that will help the industry reach its goal to increase access to black-owned land and water, is the finalising of the Brandvlei dam project in the Worcester region which could expand irrigated agriculture in the Greater Brandvlei Region by 4 500 – 5 000 ha.
Apart from helping establish and grow new business ventures, people remain the cornerstone of the wine industry, with industry body Winetech Learning & Development focusing on creating a culture of learning, continuous professional development and career advancement. “We encourage all wine-related businesses to tap into the great projects available in the industry aimed at cultivating this culture,” says Kachné Ross, Winetech Learning & Development manager.

These include the online SA Wine and Brandy Learner Management System which provides information on various learning opportunities and service providers available in the industry and helps persons working in the industry create their own online CV as they complete training; as well as the SAWIPB (South African Wine Industry Professional Body) that liaises closely with SETA (Sector Education and Training Authority) at national and sector level.

Sustainability at the core
The South African wine industry is seen as a world-leader in terms of adapting to climate change – one of the most prominent concerns with regard to sustainability. “Our specialists have been invited to share best practices on world stages, international delegations visit our winelands to learn from us and publications from South Africa have received global awards for the work done in this field,” says Conrad Schutte, manager of Vinpro’s consultation service.

Terrain selection, soil and irrigation management, as well as drought-resistant cultivars have been the main drivers of climate change adaptation in the industry. These are also some of the major outcomes of the Gen-Z Vineyard Project, a knowledge transfer project that connects wine growers, viticulturists, suppliers and researchers to the latest practices, technology and vineyard tools by establishing small-scale field demos across South Africa’s wine regions.

“Most notably, Stellenbosch University and Vinpro, through Gen-Z, launched a world-class platform for vineyard training and research at the Welgevallen experimental farm in Stellenbosch earlier this year, including six different vineyard block demonstrations,” Conrad says.
Gen-Z also works closely with Vititec Grapevine Nurseries to continu ously bring new drought-resistant cultivars and clones into South Africa, establishing demo sites across the winegrowing regions to determine how these cultivars fare under certain conditions before propagating it at a commercial scale. Some of these new cultivars that are now commercially available in the South African wine industry include Assyrtiko, Agiorgitiko, Aglianico, Counoise, Macabeu, Marselan, Piquepoul Blanc, Terret Noir, Vermentino and Xinomavro.

“TerraClim, an online tool that combines a wide range of climate, weather, soil, crop and other data at regional level is one of Winetech’s flagship projects aimed at addressing climate change and a great resource to aid decision-making in terms of how producers manage their vineyards,” says Gerard Martin, executive manager of Winetech (Wine Industry Network for Expertise & Technology). “We encourage producers to include their data and use this tool to improve their efficiencies.”

Winetech has shifted its traditional research approach towards taking on more purpose-driven research projects as prioritised by producers, cellars and wine-related businesses, and turning the research outcomes into practical applications and innovations for the industry in terms of products and services.

Apart from the environmental component of sustainability, wine-related businesses also need to prosper financially in order to leave behind a robust, adaptable and competitive industry for the next generation.

“There’s no straight answer if someone asks you how the wine industry is doing, as there is such a great variation across the industry in terms of business models. Some producers have struggled to survive, while others have managed to expand since the start of the pandemic,” Christo says. “The key lies in learning from those who have managed to survive and even thrive, and applying those principles that will work for your business case.”
One of the common characteristics of these business owners and managers across regions and business models include that they have their finger on the pulse of what is happening in the wine landscape in terms of market trends, stock levels and pricing, as well as cultivars. These producers and cellars make the most of knowledge transfer opportunities such as webinars and information days; they spend time in their key markets and continuously monitor, evaluate and adapt to improve vineyard and cellar efficiencies. They act swiftly in making a business decision, and have a clear vision and sound action plan with deliverables and milestones in place. These owners are also actively involved in the business, focusing on strategic partnerships.


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