Wine Industry’s Cheap Headache

Always on the look-out for a bit of a stir, South African wine commentators spent a good part of the past year harping on about the local industry’s increasing penchant for bulk exports. The concern centred round a bulk-focused export scenario being about as conducive to building image and perception for Brand South Africa as rabble-rousing wineland activist Pastor Nosey Pieterse’s contribution to positive labour relations.

Bulk exports have, however, done much for producer profits especially those in high-yielding grape areas and have subsequently kept a large of the wine industry ticking over quite nicely in a perilous global market.

Looking over recent newspaper advertisements, it would appear that the image of the product that is local wine is actually being hammered on our very own doorstep. Two supermarkets are currently running British-style promotions, offering batches of five and 12 bottles of wine at R20 per 750ml bottle, a trend that looks set to continue.

Being an unashamed lover of the drop, I am not going to go into monastic Democratic Alliance mode bemoaning the presence of cheap alcohol and all the fighting, shouting, dog-kicking, STD’s and irresponsible tattooing it leads to. Although it is a pity that the noble product of the grape finds itself firmly in this cess-pool of sluttish booze, eradicating the committed efforts we in the industry show in trying to position wine as a product with legacy, gravitas and heritage.

From a wine-producer’s point of view, this sort of cut-throat pricing in the supermarket arena is a disaster. It basically means that there is always somebody out there willing to take a financial loss by offering wine at a lower price than another producer and that there never ceases to be a wine-buyer demanding bargain basement stuff, with the basement-level dropping lower and lower.

Of that aforementioned wine being sold for R20 a bottle in the supermarket, R2,50 ends-up in the producer’s pocket after mark-ups, distribution, packaging etc have been accounted for. To give one an idea of how low this realised price is, consider that South African producers from far-flung, high-yielding wine regions get over R1 more per liter for cheap, un-packaged, un-bottled bulk wine pumped into mass flexi tanks than the supermarket dumpers receive for their budget bottled offerings.

This is not loss leading it is loss implosion. And as said, it sets a precedent. With the number of independent, disparate wine producers compared to those consolidated organisations offering spirits, coolers or beer, there is always going to be some sucker undercutting wine price just to shift stock. The retailers understand this, and they have become spoilt in demanding it – irrespective of this situation being about as sustainable as a rhino sanctuary in China and turning a blind eye to an impending crisis.

What happens in the cellars and the vineyards, not to mention to communities and people, appears to be irrelevant, as long as the price is right.

If this situation of undercutting and dumping at a loss in the local market continues, the industry is set for long-term problems. Fragmentation. Conflict. Labour unrest. Ripping out of vines. Erosion of producer confidence. Neglecting wine standards and progress in the fields of oenology and viticulture.

Industry bodies did show a desire to protect the perceived image of South African wine when they banned the notorious papsak. There is also concern at so-called ?+¦?+º?+¦ales?+¦?+º?+æ, fermented fruit-juice trying to pass itself off as cheap wine in an alcohol-thirsty local market.

Such proactive concern should now also be aimed at what is happening at the moment where bottled wine is being dumped and bought at ridiculously low prices that not only harm wine’s image as a unique lifestyle product, but if it continues will change the local wine business model for the worse.

At a time when there is so much opportunity out there to grow it,?+¦-+?+¡ the industry should not allow this to happen.




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