http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 13.66Change: -0.01
R/$ = 12.37Change: -0.06
Au 1169.01 $/ozChange: 0.21
Pt 1077.00 $/ozChange: -5.00
 
 
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|transport|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|transport|Africa||||Logistics|Packaging|Products|Services|Solutions||Environmental||
agriculture|engineering|africa-company|environment|export|packaging-company|rabobank|sustainable|transport|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
Creamer Media Senior Deputy Editor Online
© Reuse this Comment Guidelines (150 word limit)
 
 
 
 
 
 
 
 
Other Trade News
International investors, dismayed by Nigeria's decision to delay a naira devaluation they see as long overdue, will hold back from its stock and bond markets, raising risks of a deeper crisis in Africa's biggest economy. The afterglow from March, when an incumbent...
ÖLFLEX CLASSIC 110 The Ölflex Classic 110 connection and control cables are appropriate for use in power chains and applications with torsional movements
Electrical equipment, industrial instrumentation and automation supplier Magnet’s electrical cable product offering was significantly enhanced by the company’s appointment as an official distributor for cable and cable connector producer Lapp Group, in March this...
In cooperation with engineering information technology services provider Cadenas, cable management solutions provider HellermannTyton announced last month that the three- and two-dimensional (3D and 2D) computer-aided design (CAD) data of thousands of its products...
More
 
 
Latest News
An end to wage negotiations within the local government sector could be in sight as a conciliator’s proposal, setting out a number of settlement suggestions to resolve the deadlock, was expected on Monday. The Independent Municipal and Allied Trade Union (Imatu)...
Development financier Eastern Cape Development Corporation (ECDC) executive Noludwe Ncokazi on Friday said the organisation had the “huge responsibility of ensuring business continuity”, following the resignation of ECDC subsidiary Automotive Industry Development...
South Africa’s second-largest oil refinery, Engen Refinery (Enref), is set to undergo a three-day planned maintenance outage from July 9 as part of an ongoing maintenance programme to ensure that the facility, which delivers a significant portion of South Africa’s...
More
 
 
Recent Research Reports
Real Economy Year Book 2015 (PDF Report)
There are very few beacons of hope on South Africa’s economic horizon. Economic growth is weak, unemployment is rising, electricity supply is insufficient to meet demand and/or spur growth, with poor prospects for many of the commodities mined and exported. However,...
Real Economy Insight: Automotive 2015 (PDF Report)
Creamer Media’s Real Economy Year Book comprises separate reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, gold, iron-ore and platinum sectors.
Real Economy Insight: Water 2015 (PDF Report)
Creamer Media’s Real Economy Year Book has been divided into individual reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.
Real Economy Insight: Construction 2015 (PDF Report)
Creamer Media’s Real Economy Year Book has been divided into individual reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.
Real Economy Insight: Electricity 2015 (PDF Report)
Creamer Media’s Real Economy Year Book has been divided into individual reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.
Real Economy Insight: Road and Rail 2015 (PDF Report)
Creamer Media’s Real Economy Year Book has been divided into individual reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.
 
 
 
 
 
This Week's Magazine
NHLANHLA NENE The main constraints to economic growth are domestic
Finance Minister Nhlanhla Nene earlier this month stated that, while South Africa’s 2015 economic growth target of 2% was achievable, it was not enough to deliver the tax revenue needed to combat the country’s challenges.
The World Steel Association has published the 2015 edition of the World Steel in Figures report, which shows an increase in steel production as well as provides an overview of steel industry activities from crude steel production to apparent steel use.
The 25-year master plan for Gauteng’s Aerotropolis project will go through a process of approval and adoption during June and July, says Aerotroplis project manager Jack van der Merwe. “We are also in the process of putting together a special purpose vehicle (SPV) to...
SOLAR PANELS The existing buildings in the Coega Industrial Development Zone lent themselves well to rooftop solar panel installations
The Coega Development Corporation (CDC) plans to fit 15 of its buildings, totalling 127 000 m2 of roof space, in the Coega Industrial Development Zone (IDZ), in the Eastern Cape, with solar panels.
The Supreme Court of Appeal’s (SCA’s) November 2014 judgment, ordering steel producer ArcelorMittal South Africa (AMSA) to hand over the 2003 Environmental Master Plan for its Vanderbijlpark steel plant to environmental pressure groups, confirmed the right of civil...
 
 
 
 
 
 
 
 
 
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