http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 14.17Change: 0.03
R/$ = 11.07Change: 0.01
Au 1238.28 $/ozChange: -4.47
Pt 1258.00 $/ozChange: 3.00
 
 
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|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||Africa||||Logistics|Packaging|Products|Services|Solutions|Transport||Environmental||
agriculture|engineering|africa-company|environment|packaging-company|rabobank|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 Trade News
Trade and Industry Deputy Minister Mzwandile Masina says the department has so far registered 18 qualifying black industrialists in a range of sectors to grow the South African economy. “We will continue to accept applications from industrialists, as we have set a...
Article contains comments
Trade and Industry Minister Dr Rob Davies
Trade and Industry Minister Dr Rob Davies on Thursday took a hardline stance against the European Union’s (EU’s) threat of a ban on South African citrus fruit by tabling the issue with the World Trade Organisation (WTO). The EU had been threatening to refuse entry to...
LODEWYK CILLIERS South Africa must adopt international best practice regarding IP protection and patent registration to accelerate research, development and commercialisation
Registration of patents and intellectual property (IP) supports innovation and the commercialisation of research and development (R&D) by supporting good business cases, says Spoor & Fisher partner and IP expert Lodewyk Cilliers. Good technology and patent...
Article contains comments
Article contains comments
More
 
 
Latest News
Updated 6 hours ago The Cape Town International Convention Centre (CTICC) has outperformed its targets over the past financial year and contributed R3.1-billion to the gross domestic product in the 2013/14 financial year. CTICC CEO Julie-May Ellingson said the convention centre had been...
Public Enterprises Minister Lynne Brown
Updated 6 hours ago Public Enterprises Minister Lynne Brown has released details of the remuneration of the chairpersons and nonexecutive directors of the various State-owned company boards falling under her Ministry. The remuneration figures, which are attached, are based on figures...
Updated 7 hours ago Installed wind power capacity could swell by 530% to 2,000 gigawatts (GW) by 2030, supplying up to 19% of global electricity, a report from a trade association and Greenpeace said on Tuesday. It said installed wind energy capacity totalled 318 GW at the end of last...
More
 
 
Recent Research Reports
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.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
 
 
 
 
 
This Week's Magazine
The broad-based black economic-empowerment (BBBEE) alignment process in the con-struction sector has begun, dur-ing which the sector codes of the Construction Sector Charter Council (CSCC) will be aligned with the revised Codes of Good Practice (CoGP), which come...
It is second time lucky for Toby Venter. Ten years ago he negotiated to buy the Kyalami racetrack, but “the deal did not materialise”.
Environmental solutions company I-Cat started construction work on its R22-million, 1 949 m2 environmentally sustainable office and warehouse facility, commissioned by I-CAT Environmental Solutions, at a launch event in October. The new sustainable I-CAT campus,...
IAN EVANS AirWatch file synchronisation and sharing system was initially designed for a large airline company
Effective file synchronisation and sharing across an organisation’s structures can provide the basis for robust mobile-device and document management while maintaining proper backup, version control and content distribution. These are the lessons learned by complex...
Hotel group Carlson Rezidor currently holds the largest hotel pipeline in Africa with 30 hotels and 6 300 rooms under development. The hotel group develops and operates Radisson Blu in the upper upscale segment and Park Inn by Radisson in the mid-market segment. With...
 
 
 
 
 
 
 
 
 
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