A recent press release from VinPro (sadly, the closest thing the Cape gets to an organisation representing its wine industry) highlighted the good news. Firstly, as everyone now seems to agree, as the last grapes trickle into cellars in the cooler areas, 2015 seems to have delivered a splendid harvest of great quality across the range of varieties and areas. Volume remains high, despite a continued small decline in the area under vine.
Arguably more importantly, “At the end of 2014, local wine sales volume was at the highest level in 20 years, the 353 million litres natural wine sales representing 7.3% growth from 2013.” Clearly, this improvement was primarily at the more modest end of the wine business, as the growth “was largely driven by bag-in-box packaging”.
This growth is obviously an important turnaround, and it’s good to have VinPro sounding positive. The press release did admit, though that the export market (particularly Europe) “remains challenging”.
And yes, we should note that big-volume producers have overfull cellars, stacked with unsold wine – following a bumper few years when South Africa helped fill the holes left by short harvests in Europe. I’ve also been looking at the May 2014 National Agricultural Marketing Council report on “Cost of wine grape production and producer profitability – 2013”, and that shows clearly the an overall picture where the light of a brilliant vintage doesn’t much alleviate the gloom. Slightly out of date the report is now, but things aren’t going to change much before the next report.
Prices of grapes have, as we know, not risen much over the past decade, and it’s the grape farmers who are suffering most, as cost increases over the same period have risen greatly, and a lack of sustainability is a real threat, as is a decline in the general quality of the Cape’s vineyards, as many producers neglect capital maintenance. “Net farming income” declined by nearly 50% between 2004 and 2013.
Yet, as a couple of recent reports have shown, South Africa is certainly not suffering alone in the southern hemisphere, and probably doing better than some. Take Argentina. A recent article in the Buenos Aires Herald had depressing news of “a steep crisis and a loss of competitiveness” in the country’s wine industry:
“Wine sales dropped 7.3 percent last year, according to the Argentine Wine Institute (INV). Exports fell 17 percent and sales in the domestic market decreased 4.15 percent. The drop comes as a consequence of a lower wine consumption, a trend seen worldwide to which Argentina isn’t the exception [but it appears South Africa is!]. Only 414 wineries have registered at the INV to participate in this year’s harvest, 55 percent fewer than the 918 registered in 2014 and 56 percent fewer than the 950 seen in 2013. At the same time, 52 wineries were closed down between June and February.”
As for Australia, Andrew Jefford, in another of his excellent weekly blogs on Decanter.com, reported on the latest work of Kym Anderson of the University of Adelaide’s Wine Economics Research Centre, looking at Australia’s past and present economic positions in the world conjuncture. (Jefford’s blog gives the relevant links.) Jefford quotes Anderson as saying that “the volume of winegrape production has not diminished over the past ten years despite the halving of the average winegrape price”, and he finds it remarkable that there has not been dramatic “disinvestment” from the industry, given that “more than half of Australia’s wine producers have not even covered their costs since 2012”.
I daresay, however (and probably this is dealt with by Anderson’s book, which I haven’t looked at properly), that there’s a deterioration in the quality of care of many Australian vineyards, parallel to what is happening here and no doubt also in Argentina.
Yet what the authors of the South African analysis calls “top achievers” are doing pretty well, and it is not to be doubted that something more than a handful of high-level local producers are doing extremely well on both the local and international markets. Really, South Africa (like everywhere, more or less) has not one industry but two, and that’s something I’ve been musing about elsewhere.