South Africa needs to raise prices and its image for a sustainable future
South Africa needs to change its international image as a country that produces “cheap and cheerful” wine if it is to really push on and help not only its producers’ future but make its industry sustainable in the long term.
It is not just an international problem but the price of wines sold in the domestic market is also a concern for winemakers and is forcing some growers to increase yields, thereby reducing quality and putting pressure on already stretched water supplies, according to Jonathan Steyn, of the UCT Graduate School of Business
In an article in Business Day he said it was essential the industry as a whole takes more steps to increase prices to cover rising production costs rather than building their brands, reputations and regional identities.
South African producers are also at a disadvantage as they enjoy fewer trade preferences compared to some of their New World rivals. Chile is now said to be the biggest imported wine in to China thanks to the new trade agreements between the two counties.
Trudi Hartzenberg, chief executive of the Law Centre, said Australian wine producers will by 2019 be enjoying nearly zero import tariffs to Chinese markets – something South Africa does not have despite being a member of the Brics group.
China does not, as yet, have any preferential trade agreements with African countries.
“There is enormous untapped potential for SA to exploit its advantage in proximityh and connection to other African markets, which have been earmarked as key for future growth,” said Distell corporate strategy analyst Tina Swigelaar.
There are also concerns about consumption levels of South African wine in its domestic market compared to other drinks, notably beer.
Current per capita consumption is only around 6l litres per head, and to address this an industry wide strategy driven by a number of key industry organizations including VinPro and Wines of South Africa is in place to increase consumption to 9l litres per head by 2025 to help the industry to sustain itself and make it less reliant on the export market.