Nation in Conversation at Nampo Cape 2019

What are the challenges and opportunities in the wine industry?

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During the final session of Nation in Conversation at NAMPO Cape 2019 in Bredasdorp, it is only appropriate to talk about wine. The facilitator, Galileo Capital's Theo Vorster, spoke with Rico Basson, Vinpro managing director; Professor Nick Vink, an agricultural economist at Stellenbosch University; Daneel Rossouw of Nedbank Agriculture in the Western Cape; Anton Smuts, a Robertson winemaker and chairman of Vinpro; and Phillip Retief of Van Loveren and Vice-President of Vinpro.

Basson says there are about 95,000 hectares of vineyards in South Africa. The wine industry has been under a lot of pressure over the past decade, due to international overproduction and low prices. Many vineyards have been replaced with citrus and nuts, which have become more profitable. Basson says the severe droughts that plagued the major production regions led to a 15% drop in wine production. This is equivalent to 150 million litres less wine produced. However, he says the price of wine has increased by 30-40% in the last two years.

"Today we are in a better place. We are seeing plantings for the first time in ten years, and there are indications of more plantings," says Basson.

Rossouw says the return on capital in the wine industry is around 2%, but the wine industry is not unique in agriculture as far as this is concerned. "Wine earns a lot of foreign currency and is a great job creator," says Rossouw. He says there is strong competition for land and water in the Western Cape.

Retief says the reality is that the average consumer is under economic pressure, but there are always opportunities. The local wine industry exports about 50% of all production and the remaining 50% is consumed locally. Retief says this makes the local market very important. "In the past we have focused too much on each other as wine producers. Beer and other drinks have a large market share that we should rather compete with." Retief says the variation in the wine market is very large, from a five-litre box of wine for R150 to one glass of wine for R150. "The innovators are going to prove their strength in the long run."

Smuts says ten years ago things were difficult. "We lost one-third of growers in 15 years because other crops like citrus, berries and nuts had become more profitable. However, it now makes sense to farm with wine grapes again."

Smuts says it is important to reinvest in the wine industry and there is currently some consolidation. "We need to complement each other and improve value. We must participate in the entire value chain. There is cream we aren't getting to. Don't just deliver your grapes. Be involved right up to the international store shelf."

Prof Vink says that because South Africa exports half of all wine, the international market is very important. The pressure on the wine industry is also not unique to SA, and a quarter of all wine farmers have left the industry over the last decade, or switched to other crops. This is despite plantings in China that have grown from almost nothing to 600 000 ha at this time.

"The consumer market is moving towards quality. The days of strong demand for cheap wine are over. People drink beer when they are looking for a cheap drink," says Vink. "Australia has had a drought in their wine regions for ten years now. California's drought has been going on for about nine years, so we've actually come off quite lightly to date," says Vink.

According to Basson, 60% of wine is exported in bulk containers, and 40% is bottled with a brand. "We supply 2% to 3% of the world's wine. To put that into perspective, South Africa sells one million bottles of wine every day of the year. We are very competitive on many levels, but we are far from the biggest markets. The question is how much wine is marketed under a South African brand name?" Basson says bulk exports are not necessarily good or bad, there is room for variety.

Rossouw believes that a brand definitely puts a producer in a better position when financiers get involved. "Premium brands are strictly operated according to business principles," he says.

Retief says one limiting factor will always be the availability of water. "There isn't enough water and farmers have to consider where they will get their best return over time."
Basson says the industry is highly adaptable and the drought period has seen great strides in efficiency. He also says the wine industry is moving more towards the east. There are also producers who plant drought-resistant Greek cultivars and drought-resistant rootstocks.

Retief says the rest of Africa is also a huge opportunity on South Africa's doorstep, where Australia is well located to serve China, and Chile is close to the US and Canada. Basson says currently only 5% of South Africa's wine exports go to the rest of Africa, providing a great opportunity."

Prof Vink says the problem with policy uncertainty is that those responsible for making the policy are also uncertain. "Our economy has been on the turn for the past two years and everyone is waiting for it." Vink also says that when consumers' disposable income starts to increase, the wine industry can easily persuade consumers to indulge in its products.

Retief says there is no problem with the marketing of South African wine. "Our marketing is good, but our prices are still too low. Buyers tend to play us against each other. If you have few, sell at a higher price. We actually need a deficit to fix the price points," says Retief.

Basson concluded by saying that wine will become a little more expensive, but remember that you are supporting a proudly South African product of work.

Please visit www.nationingesprek.co.za or www.nationinconversation.co.za for the full discussions.

Wat is die uitdagings en geleenthede in die wynbedryf?

Tydens die finale sessie van Nasie in Gesprek by NAMPO Kaap 2019 in Bredasdorp is dit net gepas om te gesels oor wyn. Die fasiliteerder, Theo Vorster van Galileo Capital het gesels met Rico Basson, die besturende direkteur van Vinpro; Professor Nick Vink, 'n landbou-ekonoom van die Stellenbosch Universiteit; Daneel Rossouw van Nedbank Landbou in die Wes-Kaap; Anton Smuts, 'n wynboer van Robertson en voorsitter van Vinpro; en Phillip Retief van Van Loveren en ondervoorsitter van Vinpro.

Basson sê daar is sowat 95 000 hektaar onder wingerd in Suid-Afrika. Die wynbedryf was die afgelope dekade onder baie druk, weens internasionale oorproduksie en lae pryse. Baie wingerde is vervang met sitrus en neute, wat meer winsgewend geword het. Basson sê die ernstige droogtes wat die vernaamste produksiestreke geteister het, het gelei tot 'n 15% daling in wynproduksie. Dit is gelykstaande aan 150 miljoen liter minder wyn wat geproduseer is. Hy sê die prys van wyn het egter in die laaste twee jaar met 30-40% gestyg.

"Vandag is ons op 'n beter plek. Ons sien aanplantings vir die eerste keer in tien jaar, en daar is aanduidings van meer aanplantings," sê Basson.

Rossouw sê die opbrengs op kapitaal in die wynbedryf is rondom 2%, maar die wynbedryf is nie uniek in landbou wat dit betref nie. "Wyn verdien baie buitelandse valuta en is 'n groot werkskepper," sê Rossouw. Hy sê in die Wes-Kaap is daar sterk mededinging vir grond en water.

Retief sê die werklikheid is dat die gemiddelde verbruiker onder ekonomiese druk is, maar daar is altyd geleenthede. Die plaaslike wynbedryf voer ongeveer 50% van alle produksie uit en die oorblywende 50% word plaaslik verbruik. Retief sê dit maak die plaaslike mark baie belangrik. "Ons het in die verlede te veel op mekaar gefokus as wynprodusente. Bier en ander drankies het 'n groot markaandeel waarteen ons eerder moet meeding." Retief sê die variasie in die wynmark is baie groot, van 'n vyf liter boks wyn vir R150 tot een glas wyn vir R150. "Die innoveerders sal sterker in die langtermyn deurkom.

Smuts sê tien jaar terug het dit swaar gegaan. "Ons het 'n derde van produsente oor 15 jaar verloor," sê hy, omdat ander gewasse soos sitrus, bessies en neute meer winsgewend was. Hy sê egter dit maak nou weer sin om met wyndruiwe te boer.

Smuts sê dit is belangrik om te herbelê en daar is tans 'n mate van konsolidasie. "Ons moet mekaar aanvul en waarde verbeter. Ons moet aan die hele waardeketting deelneem. Daar is room waarby ons nie uitkom nie. Moenie net jou druiwe aflaai nie. Wees betrokke tot op die buitelandse winkelrak."

Prof Vink sê omdat Suid-Afrika die helfte van alle wyn uitvoer is die internasionale mark baie belangrik. Die druk op die wynbedryf is ook nie uniek aan SA nie, en wêreldwyd het 'n kwart van alle wynboere oor die laaste dekade die bedryf verlaat, of na ander gewasse oorgeskakel. Dít ten spyte van aanplantings in Sjina wat in hierdie tyd gegroei het van byna niks tot 600 000 ha.

"Die verbruikersmark beweeg oor na gehalte. Die dae van sterk vraag na goedkoop wyn is verby. Mense drink bier as hulle 'n goedkoop drankie soek," sê Vink. "Australië het nou al 'n tien jaar droogte in hul wyngebiede. Kalifornië se droogte loop al so nege jaar, so ons het eintlik sover lig daarvan afgekom," sê Vink.

Volgens Basson is 60% van wyn wat uitgevoer word in grootmaat houers, en 40% is gebottel met 'n handelsmerk. "Ons lewer 2% tot 3% van die wêreld se wyn. Om dit in perspektief te plaas, Suid-Afrika verkoop elke dag van die jaar een miljoen bottels wyn. Ons is baie mededingend op menige vlakke, maar ons sit ver van die grootste markte. Die vraag is, hoeveel wyn is onder 'n Suid-Afrikaanse handelsmerk?" Basson sê grootmaat uitvoere is nie noodwendig goed of sleg nie, daar is ruimte vir verskeidenheid.

Rossouw is van mening dat 'n handelsmerk 'n produsent beslis in 'n beter posisie plaas wanneer finansierders betrokke raak. "Premium handelsmerke word streng volgens besigheidsbeginsels bedryf," sê hy.

Retief sê een beperkende faktor sal altyd die beskikbaarheid van water wees. "Daar is nie genoeg water nie. Ek moet dink waar gaan ek my beste opbrengs oor tyd kry."
Basson sê die bedryf is baie aanpasbaar en met die droogte is groot vordering gemaak in doeltreffendheid. Hy sê ook dat die wynbedryf meer ooswaarts begin beweeg. Daar is ook produsente wat droogtebestande Griekse kultivars en droogtebestande onderstokke plant.

Retief sê die res van Afrika is 'n reuse geleentheid op Suid-Afrika se voorstoep, waar Australië goed geleë is om Sjina te bedien en Chili naby aan Amerika en Kanada is. Basson sê tans gaan slegs 5% van Suid-Afrika se wynuitvoere na die res van Afrika. "So daar is 'n reuse geleentheid."
Prof Vink sê die probleem met beleidonsekerheid is dat die ouens wat die beleid moet maak ook onseker is. "Ons ekonomie draai nou al die afgelope twee jaar, almal sit en wag daarvoor." Vink sê wanneer verbruikers se besteebare inkomste begin toeneem, kan die wynbedryf verbruikers baie maklik oorreed om wyn te drink.

Retief sê daar is nie 'n probleem met die bemarking van Suid-Afrikaanse wyn nie. "Ons bemarking is goed, maar ons verkoop teen te lae pryse. Kopers speel ons teen mekaar af. As jy min het moet jy teen 'n hoër prys verkoop. Ons het eintlik 'n tekort nodig om die pryspunte reg te stel," sê Retief.
Basson het afgesluit deur te sê dat wyn 'n raps duurder gaan word, maar onthou jy ondersteun 'n trots Suid-Afrikaanse produk van werk skep. 

Besoek gerus www.nasieingesprek.co.za<http://www.nasieingesprek.co.za> of www.nationinconversation.co.za<http://www.nationinconversation.co.za> vir die volledige gesprekke.

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