http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 13.14Change: -0.15
R/$ = 12.05Change: -0.20
Au 1200.03 $/ozChange: -6.12
Pt 1139.50 $/ozChange: -16.00
 
 
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 Letters 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|Export|Packaging|Rabobank|Sustainable|Africa|Asia|Germany|Russia|South Africa|United Kingdom|United States|USD|Agribusiness Financial Services|Food|Logistics|Packaging|Products|Services|Solutions|Transportation Perspective|Environmental|Jimmy Manyi|Rico Basson|Su Birch|South Africa
Agriculture|Engineering|Africa|Environment|Export|Packaging|Sustainable|Africa||||Logistics|Packaging|Products|Services|Solutions||Environmental||
agriculture|engineering|africa-company|environment|export|packaging-company|rabobank|sustainable|africa|asia|germany|russia|south-africa|united-kingdom|united-states|usd|agribusiness-financial-services|food|logistics|packaging|products|services|solutions|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 Trade News
The South African government needs to take urgent steps to address ongoing trade concerns – particularly the long-running dispute over antidumping duties on American chicken – before US lawmakers start drafting 2015 trade legislation, the US Embassy’s Minister...
Article contains comments
Over 26 companies active in the logistics, support services, oil and gas contracting and drilling, marine and rig building, fabrication and repair and wells specialist industries have shown interest in relocating their businesses to the Saldanha Bay Industrial...
The long-term outlook for Nigeria is a country that has the potential to be very strong. So affirmed International Monetary Fund (IMF) Nigeria Mission Chief and Senior Resident Representative Dr Gene Leon on recently. "But we are starting from a point of huge...
Article contains comments
More
 
 
Latest News
South Africa's only nuclear plant, Koeberg
Updated 2 hours 51 minutes ago The Department of Energy (DoE) announced on Tuesday that the pre-procurement phase for South Africa’s proposed roll-out of a nuclear new build programme had been completed, following the latest in a series of workshops with vendor countries and their companies....
Updated 2 hours 58 minutes ago The Competition Commission has appointed Bukhosibakhe Majenge legal services divisional manager, effective April 1. The commission advised on Tuesday that Majenge would take over from Wendy Ndlovu, appointed manager in the office of the Commissioner. Majenge had...
Updated 3 hours ago Aim-listed energy provider Ncondezi Energy has been granted an extension for meeting certain conditions relating to the conditional commercial deal signed between it and Electricidade de Moçambique (EdM) for its 300 MW power plant. Ncondezi was establishing an...
More
 
 
Recent Research Reports
Steel 2015: A review of South Africa's steel sector (PDF Report)
Creamer Media’s Steel 2015 report provides an overview of the key developments in the global steel industry and particularly of South Africa’s steel sector over the past year, including details of production and consumption, as well as the country's primary carbon...
Projects in Progress 2015 - First Edition (PDF Report)
In fact, this edition of Creamer Media’s Projects in Progress 2015 supplement tracks developments taking place under the Renewable Energy Independent Power Producer Procurement Programme, which has had four bidding rounds. It appears to remain a shining light on the...
Electricity 2015: A review of South Africa's electricity sector (PDF Report)
Creamer Media’s Electricity 2015 report provides an overview of State-owned power utility Eskom and independent power producers, as well as electricity planning, transmission, distribution and the theft thereof, besides other issues.
Construction 2015: A review of South Africa’s construction sector (PDF Report)
Creamer Media’s Construction 2015 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; the key participants in the sector; local construction demand; geographic diversification;...
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.
 
 
 
 
 
This Week's Magazine
Projected capital expenditure (capex) in the South African automotive assembly industry should reach a record R7.48-billion this year, says the National Association of Automobile Manufacturers of South Africa (Naamsa) in its 2014 fourth quarter business review. Capex...
After several years of navigating project-threatening red tape and currency fluctuations, the 4.4 MW Bronkhorstspruit biogas power plant, which will supply clean energy to a leading automotive manufacturer in Gauteng, is expected to enter production before June....
RESOURCEFUL The raw material for the pilot plant would be supplied from the dissolving wood pulp plants at Sappi’s Saiccor and Ngodwana mills, in South Africa, and the Cloquet mill, in the US
South African paper and pulp producer Sappi reported earlier this month that it would build a pilot plant for the production of low-cost Cellulose NanoFibrils, or CNF (nanocellulose) at the Brightlands Chemelot Campus in Sittard-Geleen in the Netherlands.
The long-term outlook for Nigeria is a country that has the potential to be very strong. So affirmed International Monetary Fund (IMF) Nigeria Mission Chief and Senior Resident Representative Dr Gene Leon on recently. "But we are starting from a point of huge...
Poor infrastructure planning and inadequate maintenance are becoming increasingly problematic for new developments and the associated infrastructure required to support such developments. In many urban and rural municipalities, the state of infrastructure has been...
 
 
 
 
 
 
 
 
 
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
Subscribe Now for $96 Close
Subscribe Now for $96