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VinPro(SA) Bulletin
April 2001
Constant growth in wine exports predicted
The South African wine industry once again showed a considerable increase in export volume in 2000 and the Industry Forecast Committee predicts further healthy growth in exports until 2002.
During the 12 month period to the end of November packaged red wine exports increased by 18,7%, packaged white wine exports by 13,5%, bulk white wine by 6% and total exports by 10%. The only exports to decrease were bulk red, which went down by 10%.
Currently SA exports total about 140 million litres of wine, the equivalent of 43% of our domestic sales of unfortified wines.
The Forecast Committee predicts that total red wine exports will grow from a total volume of approximately 59 million litres in 2000 to 73 million litres in 2002. Red wine exports in packaged form will increase from 44 million litres in 2000 to approximately 58 million litres in 2002. However, bulk exports of red wine are expected to decrease to approximately 15 million litres in 2002.
Expectations are furthermore that total white wine exports will increase from 77 million litres in 2000 to 90 million litres in 2002. Exports of white wine, both in packaged form and bulk, are expected to increase.
While a healthy growth of approximately 12% per annum is expected in packaged exports over the next two years, it is heartening to note that bulk exports are stabilising.
The question we have to ask ourselves, however, is whether growth of 12% is sufficient to neutralise the onslaught of other rapidly growing new world wine countries. Is SA, with its slow growth trend, not sacrificing potential market share to wine countries that are growing more rapidly, and should efforts not be made to accelerate the growth trend?
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UK in search of organic wine
According to the supermarket group Tesco, one of the biggest role players in the UK wine market, they are unable to satisfy the demand for organically produced products, wine in particular.
They confirmed that although keen to purchase more organic wines, they simply could not source sufficient volumes. Sub-standard wines were available, but both quality and price were unacceptable.
In the course of the last year there has been a significant increase in the demand for organic products, although Tesco has been selling these for quite some time already.
Tesco identified older, middle to upper class professional persons who are prepared to pay a premium for organic products as the biggest market for organic products. Another significant group that has been identified is younger adults with babies. Wealthier parents seem to purchase organic products, not only for their babies, but also for themselves.
The limited availability of organic wines prevents Tesco from doing any such promotions. They currently make use of every opportunity to encourage suppliers to produce organic wines.
Given the development of global wine surpluses, the production of organic wines could perhaps be a way of differentiating one producer from the competition and producing organic wines for these markets.
Source: The Australian Grapegrower and Winemaker
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The wine industry has a huge macro-economic impact on the Western Cape
The very important social and developmental role of the wine industry, particularly in a rural context, was once again emphasised by a recent study conducted by Conningarth consultants for SAWIS.
The study indicated that in terms of investment, job creation and income generating activities, the wine industry plays a cardinal role in South African economic subsistence, especially regarding the contribution that is being made to the economic subsistence of lower income groups, in particular on wine farms.
Turnover
Total liquor industry turnover amounted to almost R7,4 billion rand in 1999. Of this figure approximately R1,6 billion may be ascribed to direct exports. An additional amount of approximately R3,5 billion is estimated to have been generated indirectly by tourism.
Contribution to GDP
The wine industry contributes almost R14,6 billion to the annual GDP of South Africa.
Beginning on farm level, the original value of raw material in terms of income (GDP) generated amounts to approximately R443 million rand. By calculating the multiplication effect, the total GDP eventually generated by the industry amounts to almost R9,4 billion (tourism excluded). This illustrates the ability of the industry to create wealth.
The study indicates, however, that the ratio of the GDP generated, compared to the capital expenditure, is lower than the national average for all industries. Although this is not a gauge of the industry's profitability, it indicates that the wine industry's capital "productivity" is slightly below the average for the national economy.
Division of income
Household income of approximately R9,8 billion was generated by the wine industry, of which almost R1,8 billion was intended for the lower income groups.
Considered in the light of farmers' annual expenditure on production input, it is obvious why the wine industry forms the backbone of the economy in many Western Cape districts.
Job creation
The wine industry provides 208 298 job opportunities throughout the economy, 103 800 of which are directly linked to the wine industry. Tourism in the wine industry is directly and indirectly responsible for 48 346 job opportunities.
Capital ratio
A capital ratio of 6,33, which is 1,33 higher than the average for the SA economy, indicates that capital is being applied more effectively with regard to job creation.
Each R1 million investment in the wine industry creates 5,4 job opportunities.
Application of capital
The total application of capital in the wine industry to maintain the current level of production/turnover, amounts to approximately R11,2 billion.
Although very labour intensive on primary agricultural level, the wine industry is more capital intensive than it is perceived to be, especially in wine cellars.
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