Bulk wine exports keep local industry competitive

Overall exports of natural wine from South Africa has increased by 2% over the past year due to the rapid increase in the amount of bulk wine exports. According to South African Wine Industry and Information Systems (SAWIS), bulk wine exports increased by more than 20% from around 177 million litres exported between June 2010 and June 2011 to 196 million litres over the following 12 months.

During this time packaged wine exports decreased from 196 million litres per year to 163 million litres which means that more wine was exported in bulk from South Africa over the past year than bottled wine. “The main reason for the increase in bulk wine exports is that it is cheaper to export in bulk and packaging material is cheaper overseas,” said Spier cellar master, Frans Smit.

According to him, Spier was one of many local wine producers which has opted to export some of its wine in bulk rather than in bottles. “One shipping container can hold 24 000l of bulk wine while that same container can only take about 12 000 bottles – that is a difference of 9 000l. So it is much cheaper to export the wine in bulk and have it bottled overseas.

“This has also helped local wine exporters to remain competitive in the international market,” said Smit. His sentiments were shared by André Morgenthal, communications manager at Wines of South Africa (WOSA). He said that the main reason for exporting wine in bulk was cost efficiency. “Overseas, huge volumes are bottled with very low input costs at sophisticated, ultra-modern plants where quality can be maintained.

“This is mainly being driven by the supermarkets and it indicates a structural change in the industry. We can expect to see more and more exporters opting for bulk exports in the future,” he said. According to Morgenthal this trend was not unique to South Africa, but was also happening in Chile, Australia and New Zealand.

“A large percentage of the wine exported in bulk gets bottled in Germany and then exported to the UK or it gets bottled in France and then sent to the UK, China and the Netherlands.” Riaan Kruger, CEO of South African Liquor Brand Owners Association (Salba) agreed with Morgenthal that bulk wine exports were increasing in many countries. But he said that more than 50% of wine exported from Australia was in bulk, and this was not necessarily the case across the board.

“While overall figures show an increase in bulk wine exports from South Africa, the situation differs from one importer country to the next. “For example, the latest export statistics show that packed wine exports to Germany, China, Russia and the US have increased,” said Kruger. Most industry players agree on the cost-effectiveness of bulk wine exports, but warned that this trend could hold some long-term negative consequences for the industry.

“Over the long term, jobs will be lost because less value adding takes place locally and this can create socio-economic challenges in the wine growing regions. “Also, wine exported in bulk is not certified, so that value addition – of the current drive to enforce the use of seals that guarantee social and environmental responsibility, also gets lost,” said Morgenthal.
Apart from the possibility of job losses in the packaging supply chain, Kruger indicated that South Africa was also losing out on foreign currency because the product was being exported before further value addition could take place locally.

According to Morgenthal, to be more profitable going forward, local wine exporters will have to find markets and sell more bottled wine, directly from the source country. However, over the short term, exporters will do what they have to in order to sell wines overseas at competitive prices, said Kruger.

“I believe that as long as the necessary control measures in terms of monitoring the quality of the wines being exported remain in place there are more benefits to bulk wine exports than possible disadvantages for the industry over the long term.”