http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 14.21Change: 0.38
R/$ = 11.52Change: 0.14
Au 1209.28 $/ozChange: 13.19
Pt 1212.50 $/ozChange: 12.00
 
 
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?








Start
 
End
 
 
And must exclude these words...
Close Main Search
Close Main Login
My Profile News Alerts Newsletters Logout Close Main Profile
 
Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science and Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Tenders Suppliers Directory Research Jobs Announcements Contact Us
 
 
 
RSS Feed
Article   Comments   Other News   Research   Magazine  
 
 
Nov 16, 2012

Bulk wine shipments impacting on local wine industry

Back
Agriculture|Engineering|Africa|Environment|Packaging|Rabobank|Sustainable|Africa|Asia|Germany|Russia|South Africa|United Kingdom|United States|USD|Agribusiness Financial Services|Food|Logistics|Packaging|Products|Services|Solutions|Transport|Transportation Perspective|Environmental|Jimmy Manyi|Rico Basson|Su Birch|South Africa
Agriculture|Engineering|Africa|Environment|Packaging|Sustainable|Africa||||Logistics|Packaging|Products|Services|Solutions|Transport||Environmental||
agriculture|engineering|africa-company|environment|packaging-company|rabobank|sustainable|africa|asia|germany|russia|south-africa|united-kingdom|united-states|usd|agribusiness-financial-services|food|logistics|packaging|products|services|solutions|transport-industry-term|transportation-perspective|environmental|jimmy-manyi|rico-basson|su-birch|south-africa-region
© Reuse this



The South African wine industry’s future competitiveness will depend on the country’s ability to access new markets through government support, increase its productivity, maintain the local identity of its wines and maintain sound wine quality, says wine producer consultation organisation VinPro executive director Rico Basson.

As global trade flows have changed over the past two decades, supply chain logistics have had to evolve accordingly and developing the ability to ship wine in bulk has had increasing implications for the way in which the wine industry operates.

The significant rise in bulk wine shipments, as opposed to bottled wine shipments, was a result, to some extent, of how the world’s major wine import markets had evolved over the past decade, food and agribusiness financial services provider Rabobank stated in January.

In South Africa, bulk wine is quickly gaining market share of total South African wine exports, with bulk wine pricing and producer gross margins remain low, highlights the financial services provider.

Bulk Export Implications
In recent years, many of the imported wines consumed by major import markets such as Germany, the UK and the US, have been exported from the country of origin in bulk and packaged at the desti- nation market, says Basson.

The move from bottled to bulk wine exports have significantly impacted on the attribution of value along the supply chain. Instead of generating most of the revenue at the source of production, a larger share of the packaging value and wholesale margin is now captured in the destination market, he says.

This shift equates to more than $1-billion in yearly revenue being generated at the destination market rather than at the source of production, notes Rabobank.

However, in cases where bulk wine is exported from South Africa and packaged overseas, but sold as imported South African wine, the advantage is that the wine keeps its South African identity, says Basson.

Strategic decisions in terms of exporting bulk wine, such as setting up bottling plants in foreign countries, have been taken by South African wine producers. This is advantageous from an environmental and transportation perspective, as this can be financially profitable.

Nonprofit industry organisation Wines Of South Africa (Wosa) CEO Su Birch agrees, adding that the strategy to bottle wine in the destination country increases the competitiveness of exporters.

South Africa is located far from the main markets and expensive transport costs have a significant impact on the decision to export the wine, either bottled or in bulk, says Basson.
Further, the local cost of packaging material and the environmental footprint of bottling can also play a role in this decision, adds Birch.

Basson notes that the local industry remains focused on exporting quality products and retaining the South African identity of its wines.

However, selling bulk wine at more affordable prices has often been a necessity for many producers, as wine has been in abundant supply globally between 2004 and 2010, driven first by a series of large global harvests that started in 2004 and then by declining consumption during the global recession that started in 2008.

For a brand owner in this situation, shipping wine in bulk reduces transportation, glass and bottling costs, import duties, working capital and even foreign exchange exposure, owing to the cost of packaging being conducted in the destination market currency, notes Rabobank.

Meanwhile, Basson says there have been several bulk export contracts at good profit margins for new developing wine markets, like Russia.

However, the negative effects of bulk wine exports are the job losses in the up-and downstream industries and its effect on the economy. This also results in lower foreign revenue earnings, as bulk exports have a lower total value than that of the packaged product.

The South African wine industry loses about 107 jobs for every ten-million litres of bulk rather than bottled wine exported, says Birch.

Basson states that this is a concern, as the wine industry is one of South African agriculture’s largest employers with 65 000 farm and cellar workers and an additional 205 000 jobs created through- out the value chain.

The sector’s ability to retain and fulfil its role of employment, however, will largely be driven by financial profitability and revenue growth through sales and a partnership with government through the creation of a friendlier regulatory environment.

“The trend to export in bulk, although continuing at a lower rate, will most likely continue into the future and will be part of the global export strategy of wine- producing countries.

“The local industry must ensure that it partners with government to ensure market development through free trade agreements, local capital expenditure programmes, a more friendly legislative environment, labour law, excise duties and tax,” says Basson.

Further, Wosa affirms government’s acknowledgement of the threat of bulk wine sales on the industry and welcomes its support and initiatives to assist the industry to be more competitive and profitable, adding more value and jobs.

To reduce the impact of bulk wine exports, Cabinet has decided to embark on numerous interventions.

Engineering News reported in August that former Cabinet spokesperson Jimmy Manyi said it planned to implement a five-year strategy to assist in placing the industry on a sustainable growth trajectory, a programme to reduce the environ- mental cost of producing wine in South Africa and a consumer awareness programme to improve consumers’ under- standing of the holistic environmental indicators.


Other steps taken by Cabinet include in-depth cross-sectoral research and analysis of the wine value chain, engage- ment with the wine and packaging industries to develop innovative, sustainable packaging solutions and initiatives to assist the industry in accelerating export market diversification.

Wosa says that, to stay cost competitive, bulk wine exports – which totalled 172.6-million litres in 2011 out of a total of 357.4-million litres exported – are a means to retain South African wine pro- ducers’ competitiveness and that the solution lies in continuing to diversify into new markets, such as in the rest of Africa, the US and especially in Asia, where the country can sell more premium wine.

Edited by: Chanel de Bruyn
© Reuse this Comment Guidelines (150 word limit)
 
 
 
 
 
 
 
 
Other Brewery and Winery News
Brewing and bottling company SABMiller CEO Alan Clark initiated further realignment of responsibilities within the group’s executive committee last month, following the combination of the company’s South Africa and Africa business unit into a single region. The...
BIODIVERSITY AND WINE INITIATIVE The BWI encourages wine producers to farm sustainably and express the advantages of the Western Cape’s abundant diversity in its wines
The winners of this year’s Nedbank Green Wine Awards were announced at Cape Town-based Myoga restaurant last month. The awards honour wine farmers who endeavour to reduce the impact of farming on their land and farm more sustainably. Sixteen top achievers were...
Hotel group Tsogo Sun spent just under R3.2-million at two wine auctions this year, namely the Nederburg and Cape Winemakers Guild auctions, highlighting its commitment to offering guests at its hotels an exceptional quality food and beverage experience. The group...
More
 
 
Latest News
Updated 3 hours ago The Labour Court in Johannesburg has set aside the 2011-2014 metal sector wage agreement, the National Employers' Association of SA (Neasa) said on Thursday. The 2011-2014 wage deal was the result of an agreement between the Steel and Engineering Industries...
South African cement firm PPC on Wednesday named a mining industry veteran as chief executive, ending a three-month leadership vacuum that has hit its shares. PPC's former CE Ketso Gordhan abruptly resigned in September after clashing with the board. He then...
anzania's attorney general resigned late on Tuesday, becoming the first political casualty in an energy corruption scandal in the east African country that has led Western donors to delay aid and weakened the currency. The resignation followed a vote in parliament...
More
 
 
Recent Research Reports
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
 
 
 
 
 
This Week's Magazine
South Africa remains an important manufacturing and export platform for Ford Motor Company, says executive chairperson Bill Ford. However, he adds that other countries on the continent are “becoming interesting”, and that the US carmaker is casting its net wider for...
TO BE PHASED INTO SERVICE The first MeerKAT dish, with another 63 to come
Germany’s Max-Planck-Society (MPG) and the Max-Planck-Institute for Radio Astronomy (MPlfR) are investing €11-million (about R150-million) into South Africa’s MeerKAT radio telescope array programme. The money will be used to design, build and install S-band radio...
Infrastructure spend in sub-Saharan Africa will grow from $70-billion in 2013 to $180-billion by 2025, says PwC capital projects and infrastructure Africa leader Jonathan Cawood. This is one of the findings of PwC’s Capital Projects & Infrastructure report on East...
Private-owned defence and aerospace manufacturer Paramount Group and the Ichikowitz Family Foundation unveiled its Anti-Poaching Skills and K9 Training Academy in Magaliesburg last month.
MATT BARKER Wireless networks should enable users to engage and must provide relevant information to them based on their activity and location
The inclusion of Bluetooth to provide sub-three meter accuracy and heightened functionality for users is one of the ways to change existing wireless networks into engagement networks. An engagement network differs from common wireless networks in that it enables the...
 
 
 
 
 
 
 
 
 
Alert Close
Embed Code Close
content
Research Reports Close
Research Reports are a product of the
Research Channel Africa. Reports can be bought individually or you can gain full access to all reports as part of a Research Channel Africa subscription.
Find Out More Buy Report
 
 
Close
Engineering News
Completely Re-Engineered
Experience it now. Click here
*website to launch in a few weeks