The global recession is taking its toll on the wine industry. South African wine exports have risen by 36% over 2007 export figures as of September this year, but profit margins have remained relatively the same, said Su Birch, the CEO of Wines of Africa. The final figures for the year haven’t been calculated, but it’s believed exports will maintain momentum and finish considerably higher than the 2007 figures of 309 million litres. S he pointed out that most of the growth could be attributed to the weakening of the rand against major export currencies, which render South African wines more competitive in export markets.
“The weakening of the rand, however, is a two-edged sword,” said Birch. “On the positive side it’s helped reduce our wine surplus and increase the cash flow into the industry. the downside, it’s having a negative impact on input costs because most barrels, cork, packaging and bottles are imported.” irch added that the frightening thing is the huge downward pressure on costs due to the global recession. There has been a shift away from premium products to cheaper ones. A favourite product in the UK is three bottles offered for £10 (R152). “It’s absolutely ludicrous,” said Birch.
“Many suppliers can’t afford to sell their wines at these prices and are afraid of losing market share if they withdraw products.” L ocal prices also don’t reflect the true value of wine at the moment. Henk Bruwer, the chairperson of Wine Cellars Africa, said wine supply levels are at a historic low. However, market prices aren’t reacting to the supply levels and are remaining low. Bruwer doesn’t know how farmers will be able to weather the situation. – Glenneis Erasmus