WineNews was contacted by an industry participant who preferred to stay anonymous and whose own business is, it seems, in a predicament directly linked to the bottle shortage: “We were informed by Consol Glass that they only have 726 claret cork bottles until the end of this month and that they will not be producing until December,” his rather precise and desperate email reads.
Thierry’s Buying Manager in SA confirms this claim, saying their operations locally are short of almost half a million bottles for one order destined for the UK. “We will have to decide by the end of the week whether to export wine in bulk or to import glass bottles, which is 2,5 times the price,” Lucy Warner said last week.
What seems to make the wine industry irate, beyond the economic upshot of the shortage, is the way the issue is being managed by the relevant manufacturers. A question often posed is: When is Consol Glass, the largest glass manufacturer in Africa*, intending to engage with the wine industry in order to address this critical shortage? (*Consol Glass holds 75% of South Africa’s glass market share.)
Consol Glass Managing Director Mike Arnold told WineNews, that the group regularly interacts with their customers on a one-on-one basis. “Despite the injection of approximately 25% new capacity, which will be completed by early July this year [the group is rebuilding and expanding the Bellville furnace], the South African demand for glass containers on the back of a growing economy and increasing consumer preference for glass packaging will in the short term exceed local manufacturing capacity.
“The commissioning of Consol's fourth furnace, which is planned for April 2008, will take our total current capacity from 750,000 tons to 845,000 tons of glass per annum. Higher than expected domestic growth and a global glass shortage are among the reasons that contribute to the current glass packaging supply status. With specific reference to the wine industry, increased and unexpected requirements arising from export promotions, new entrants and transferred demand have further pressurized an already tight environment.
"This situation is anticipated to stabilize by early 2008 and we would expect to see back orders clearing accordingly. Consol is currently supplementing wine bottle supply with six-and-a-half million bottles to assist with this unexpected rise in demand.”
James Reid, Operations Director for Constellation Brands in South Africa, comments that the shortage is particularly challenging for the wine industry. “We have a promotions-driven approach, which implies uncertainty with regards to stock requirements. What happens when a winery can’t supply wines to a newly secured market?”
Warner concurs: “We received many new listings in the UK earlier this year, but now we are hit hard because we cannot supply. If we are seen as being unreliable, South Africa will never recover.” Arnold comments in this regard: “The forecast accuracy levels in the wine industry are around 71%. Whilst we acknowledge the volatility of the industry and the challenge in forecasting, marrying supply with demand is heavily dependant on these levels of accuracy.”
The prevailing perception in the industry appears to be that the sector is a secondary priority for glass manufacturers. “Historically, Consol’s relationship with the wine industry has been that of a frivolous hobby,” says an acerbic Graham Knox of Stormhoek. (Consol's glass production for alcoholic beverages excluding wine represents close on 60% of production; the wine sector 22%.)
Earlier this year, Consol Ltd became Consol Glass when private equity firm Brait invested R6,6 bn in the company, transforming Consol from a publicly listed to a privately owned entity. According to Mike Ratcliffe, Managing Director of Warwick and Vilafonté, this take-over precipitated the company’s drive on profitability at the expense of the wine industry. Says Ratcliffe: “The wine industry is not a priority for Consol Glass which has a quasi monopoly in glass production locally. We have no power to influence the bottling manufacturers, so all we can do is go into survival mode and budget for our bottling needs on a yearly basis, which is impossible for many wineries with limited cash flow and who only bottle on order."
Johan van Rooyen, CEO of the South African Wine Council sheds some new light on the issue: “Our industry has been keenly exploring alternative markets, thus mobilizing resources in a more sustainable way. The downside is that we may lose jobs in the process, especially in the packaging and labelling industries.”
In a global context, now that the carbon footprint of consumer goods is of ever increasing importance, it is vital that the SA glass industry – and by implication the wine bottling industry - retains convincing arguments for its own survival.
James Reid wonders aloud, as many others presumably are: “Isn’t it more environmentally friendly to ship wine in bulk to England and bottle it there where recycled glass is readily available, rather than shipping wine bottled in SA to the UK?”