Currently, South Africa
exports more bulk than bottled wine. The shift towards bulk is a global
phenomenon affecting wine producers worldwide and has been driven mainly by the
international supermarket trade as a way of curtailing costs.
The bottling campaign
comes in the wake of the recently negotiated Economic Partnership Agreement
(EPA) that takes effect next year. From 2016, the country's duty-free quota of
wines exported to the EU will more than double from the present 48 million
litres to 110 million litres.
However, just 84
million litres of what the industry presently produces would in principle be
eligible for the duty-free exemption, as that is the annual amount of wine
currently shipped to the EU in packaging of 2 litres or less, and that would
therefore comply with existing EU regulations. To take full advantage of next
year's raised duty-free quota, the industry would need to increase its bottled
output to the EU by another 26 million litres, and that is the goal of the
campaign for next year.
The EU is South
Africa's biggest export market by far and accounted for 72% of exports in 2014.
Amongst the benefits
flowing from the new EPA will be the ability of producers to bottle locally and
export at less than the current cost to export in bulk and bottle in the EU.
This is according to Neville Carew, MD of Origin Wines, one of the country's
major exporters and the company spearheading the campaign to increase bottling
locally.
The country bottles to
world-class standards, according to Antonio Bertolaso, who manufactures
machinery for bottling used globally. The owner and president of MBF
Italy, he is a leading international supplier of highly advanced filling
technology and claims South African bottling plant technology and equipment are
on a par with anywhere in the world and meet all the international quality
standards.
In 2014, 303 million
litres of wine were exported to the EU, of which 62% was shipped in bulk. The
balance was filled locally in bottles or in bag in box. This contrasts
sharply with the pattern for most of the first decade of this century, when South
Africa's bulk exports to the EU hovered around 26% of the total.
The present bias
towards bulk has had a major impact on industry earnings. The loss in direct
revenue to the country in 2014 alone, (had the percentage of packaged
wine exports remained at levels achieved in earlier years) has been calculated
by SA Wine Industry Information & Systems (SAWIS) at almost R1,9 billion.
Carew said for each
additional 10 million litres bottled in 2016, an estimated
additional R200 million would be generated in direct income earned in the
Winelands. The initial target for the industry for 2016, would be to achieve
additional revenue of at least R550 million.
He confirmed that the
bottling drive has the backing of other big producers, as well as bottling,
label, closure and other dry goods manufacturers across the packaging supply
chain. Led by Su Birch, former CEO of Wines of South Africa (WOSA), the
campaign is targeting EU trade in the first phase of its activities, but will
be expanding its communication to include wine lovers in key markets across the
region with a follow-up social media strategy.
"With the EPA
operative from next year, we have the chance to bottle locally and still remain
cost-competitive, while protecting margins and the reputation of our individual
brands as well as of Brand South Africa. As importantly, we shall be creating
new jobs," said Carew.
He said the greater the
success of the campaign, the greater the economies of scale there would be from
boosting production to meet demand. This would further enhance the country's
price-competitiveness in all markets. Reduced volumes of packaged wine had
increased throughput costs, hindering price competitiveness.
Earlier this year, Alan
Winde, the Western Cape Minister of Agriculture, Economic Development and
Tourism, emphasised the importance of the agricultural sector – specifically
agri-processing – in driving growth and job creation in South Africa. The
country's wine industry currently provides jobs for just over 289 000 people.
The campaign to bring
bottling back to South Africa's wine industry is being called “creating value
at origin”. It will be launched with a seminar at the London Wine Fair in May
in the build-up to Cape Wine 2015, South Africa's showcase to the world, in
September, in Cape Town.