Letter to the editor: Saving old vineyards and reducing barriers to entry into the wine industry
By Christian Eedes, 17 October 2022
-
Share:
4
The following received via email from Anthony Hamilton Russell, proprietor of Hemel-en-Aarde Valley property Hamilton Russell Vineyards:
Sometimes a simple idea, new or not, followed by a simple legislative change can have a large and lasting positive impact. And I would like to propose one.
Sometimes a simple idea, new or not, followed by a simple legislative change can have a large and lasting positive impact. And I would like to propose one.
Background:
At the best of times, the wine industry worldwide is one that faces a multitude of challenges. We gamble with nature on a large scale and if this is combined with political uncertainty, economic and exchange rate uncertainty and a small under-resourced, overcrowded, local market the challenges mount further.
Despite these obstacles, many new, resourceful individuals have entered the South African wine industry and added to the almost electric excitement among wine-writers and critics, at the extraordinary quality and value of South African wine. It will only take greater volumes of these top wines to be made, and more makers of them, for this excitement to trickle down to the consumer, internationally and locally. How do we enable this exciting new wave of winemakers to expand and have more significant balance sheets to borrow against for growth?
The typical model for low cost entry into the industry is to find undervalued, often old-vine, grapes in an interesting site, from a farm that is usually struggling to make ends meet and then vinify them in a shared or rented facility. Growth is difficult without an asset to borrow against. Credibility and long-term security are lessened by not owning the source of grapes. The result generally turns out to be a fragmented range of small production wines which may well excite writers and critics, but which are not made in large enough volumes to excite consumers worldwide. The international disconnect between writer and critic excitement and consumer excitement remains significant. And one of the results has been an ongoing South African “wine of origin discount”. Lower international prices for the best South African wines than they deserve.
And from the grape growers’ point of view, what is the incentive to maintain their vineyards if other forms of agriculture prove more profitable? Across the country some of the best vineyards – old and less old – are at risk of being pulled out because of poor returns.
How to calculate grape pricing? It was the famous Californian grape grower, Andy Beckstoffer, who developed an “rule of thumb” in this regard. Take the retail price of the wine made from the grapes and multiply by 100 for the price of the grapes per ton. So a producer of a $100 bottle of Californian Cabernet should have paid $10,000 for a ton of grapes. And that is an American ton. A bottle of South African wine selling for R300 should, based on his rule, be paying R30,000 per ton. There are some rare examples of South African grape growers getting their fair share of the value chain, but not many at all. Compounding this poor pay per ton for the grape grower is the fact that the most exciting wines are often made from older vines with very low yields per hectare.
So many young entrepreneurial, gifted, winemakers struggle to grow and attract international attention and many grape growers struggle to stay in business and consider removing some of South Africa’s most exciting vineyards – or even selling their properties.
Proposal:
1. The government should allow grape growers to sell a single vineyard, planted or resting, or even a few rows of a single vineyard to any wine producer they choose at a price the market would establish. There is a precedent for this in many countries, France being a good example.
2. SAWIS in conjunction with Vinpro could determine the geographic areas where this would be allowed. It is understood that the laws on subdivision of agricultural properties are designed to prevent a proliferation of farms that are too small to be viable. This does not apply to vineyards that make expensive wine.
3. The vineyard land subdivided in this way would have to be used for the growing of grapes only and no buildings would be allowed on the land.
Likely results:
1. The long-term preservation of the best vineyards and the protection of the best vineyard sites against other forms of agriculture.
2. Struggling grape growers would be able to keep their properties and be re-capitalised through the sale of some of their vineyards.
3. Less resourced winemakers would be able to become landowners and would likely have an appreciating asset to borrow against for faster growth. The better the wines, the more their land asset would appreciate.
4. With the much lower cost of entry for vineyard ownership, the industry would have even more small “high-end” producers. You would no longer have to buy and entire property.
5. Overall industry employment would probably increase and there would be additional opportunities for contract vineyard management companies.
-
Share:
Related articles
Opinion & Analysis
The new Pinotage
4 February 2016
From the February issue of Decanter: Those keeping a close watch on the South African wine scene will have noted the very fine own-label wines of David and Nadia Sadie,...
4
Opinion & Analysis
Hemel-en-Aarde Pinot Noir Celebration 2016 reviewed
1 February 2016
The third annual Hemel-en-Aarde Pinot Noir Celebration took place this past weekend and the keynote tasting saw producers in the three wards of Hemel-en-Aarde Valley, Upper Hemel-en-Aarde Valley and Hemel-en-Aarde...
1
Reviews
Southern Right Pinotage 2014
7 October 2015
“2014 was a lighter vintage and Pinotage plays well to this,” says Anthony Hamilton Russell, co-owner of the Southern Right brand, his point being that given the variety's abundant fruit...
BvR | 26 October 2022
I really like this concept, but I fear it will never ever happen unless this gets served on a plate to all stakeholders that ultimately will decide its fate. I suspect there is a very diverse range of skillsets amongst the readers of Winemag and possibly the only way to achieve such a bold change of legislation is for those that can add value to the process, to organise themselves and do the work. From the white paper and commercial case, all the way through to feasibility studies and ultimately the exact wording that needs to go into legislation. It needs to be served with a bow and a ribbon and even then it might never happen. But unless such action is taken, this will forever only be a discussion for late nights around fires accompanied by wonderful glasses of wine. I’d be happy to throw my skillset in if this ever gets organised.
Pieter Carstens | 19 October 2022
Another option is long-term lease, done very successfully in numerous Sub-Saharan countries.
The “huur gaat voor koop” principle ensures that any contract with a tenant, whose lease has not yet expired must be honored if and when the property is sold. This applies whether or not there is a bond on the home and whether or not the purchaser knew of the lease when he signed the deed of sale.
There are unfortunately many gray areas when sharing a vineyard or land, being by virtue of rent on buy. Hence the reason why a ship has only one captain!
Water, especially if used for irrigation, poses a huge challenge. Another is the farming philosophy, ie organic vs conventional. Organic vineyards need a proper buffer zone to prevent chemical drift and that’s almost impossible to achieve when sharing a farm, let alone when sharing a vineyard.
Successfully sharing land or vineyards is most probably only possible when working with like-minded people – like most things in life.
Su Birch | 18 October 2022
Great idea. It also has the advantage that it will make the industry more accessible to winemakers of colour. The industry should ask Vinpro to promote this with government.
Greg Sherwood MW | 18 October 2022
Great idea. After recently visiting the Jakalsfontein property bought between Adi Badenhorst and Eden Sadie, you see what a massive undertaking it is to buy an agricultural entity these days. Eben has around 20 hectares but Adi has around 220 hectares apparently. A massive undertaking which he will no doubt exploit for the benefit of his entire range including Secateurs etc. But small sub-divisions for only viticultural purposes could be the way forward and would allow growers and land owners to access some of the latent capital tied up in their land allowing them to avoid pulling up old vine vineyards to plant alternative cash crops. Small units of premium vineyard land can be made to pay in a way that it doesn’t for other agricultural crops that rely on economies of scale. Let’s hope this proposal gets some traction in government circles!