Tim James: Look also to trends when explaining the current “catastrophe”

By , 18 January 2021

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The current ban-time woes of South African wine (and lets not forget beer and cider and spirits) are something it’s important to understand. I say that a bit defensively, as I write about them again after doing so last week, and also after Michael Fridjhon’s more recent piece. The real significance, I think, goes beyond even the hopefully shortish-term sufferings of a large number of grapegrowers and farmworkers and those in the ancillary industries (hospitality, retail etc), however real those sufferings may be.

We who are interested in the industry need to be alert to fundamental, longer-term changes that are already developing as a result of lockdowns and bans. There are many (and probably more than we can be aware of now) – from the growth of online sales, to restaurants moving to shorter winelists and – of wider effect – to such things as the progressive decline in the size of the South African vineyard, as Michael pointed out.

Crucially, we also need to see which of these changes are merely a speeding-up of tendencies that were already present in the wine industry. That would be true, for example, of the declining vineyard size, which has been happening inexorably for well over a decade now – and will in all likelihood see a spike as a result of the disaster of 2020. Incidentally, it’s worth pointing out that many of the vines are being exchanged for lemon trees, blueberry tunnels, grazing areas, and wheatlands – in many cases arguably a good thing for an industry that hasn’t learnt in 350 years not to overproduce poor quality wine.

Another interesting potential change occurred to me this last week, while I was investigating the resilience of the top end of Cape wine. Because another tendency that’s being taken further is the division of the industry into two (perhaps more) segments, with fundamentally different prospects and interests. By far the lesser of these segments (in terms of volume, employment creation, overall income, etc) is fine wine. I had the impression that it had not suffered much overall in the past year, and my admittedly limited research bore that out.

One important, far from minuscule producer even told me that they had had their best year ever, overall, and were benefiting from, among other things, customers trading up. Some did stress the amount of work involved in keeping things going at least reasonably well. Chris Mullineux, for example, is clearly tired after all the efforts involved. In fact, though, as a result of them, Mullineux turnover was up, even if revenue was down because so much less wine was sold from the tasting room, an obviously more profitable activity than selling at wholesale prices. (Producers heavily dependent on cellar door and on-farm restaurant sales have suffered greatly, of course.) Developing new export markets (after the blip of banned exports) was the route to Mullineux’s success: they’re up in total to about 75% of production now, from about 50%.

Greater exports was a common story I heard amongst the sexier, established micro-producers. Lukas van Loggerenberg of Van Loggerenberg Wines, for example, told me that his exports to the UK almost doubled during the pandemic, and he also found many new places to export to. Plus, his online sales also increased greatly. But his wines already had a fine track-record, which made this possible – as he said, he’d have hated to be a new producer trying to establish a business at this time, though others that he knew of in a similar position to his had also thrived.

All this success, largely based on exports, is surely going to have a continuing effect – one that will not please local lovers of these wines. The producers are going to be reluctant to give up their new, hard-won export orders. And, as many of the wines are strictly limited (being from single vineyards), there will be less of them available for the local market. Look out for wines on strict allocation, folks, not to mention higher prices. (Get on the relevant mailing lists, I’d suggest.)

Talking of exports, it’s worth thinking further about the overall picture of South African wine exports. I pointed out last week that, despite the brief ban on exports and the troubled markets in places where restaurants were also frequently restricted, South African exports for the year to end-November 2020 were very nearly equal to what they were the year before.

Usefully, Michael Fridjhon, in his apocalyptic article, put a number to that comparison: “In 2019 exports dropped by 24% compared with 2018”, he said. To repeat: 2019 – not the Covid year of 2020. Surely that in itself counts as the disaster preparing the way for the current huge unsold inventory. (Michael speaks of an “unsold inventory of close to 300m litres”, which relates a touch pessimistically to the “official” (VinPro) report of “more than 250 million litres of uncontracted wine”. Winemaker Bruce Jack, in a widely publicised recent article – very personal and wordy, unsurprisingly! – speaks of “more than 640 million litres of wine in stock”, but where he got that extreme number from is not explained.)

Why was 2019 such a disastrous year for Cape wine exports? It’s not 2020’s actually rebounding figures that need explaining, but 2019’s slump. The 2020-21 bans on local sales, and briefly on exports, obviously had a terrible effect on stock, but it’s very difficult to think that if they hadn’t been in place somehow all the 2019 unsold wine would have found a home.

Furthermore, as Michael also pointed out, “domestic wine sales were down 7%” in 2019. The slump in 2020 we know about and regret – but what about that 2019 drop and its contribution to “unsold inventory”? And, as I said last week, domestic wine sales for 2020 were nearly 90% of what they were in 2019 (all these figures are on Sawis.co.za, by the way). They rebounded nicely once the ban was lifted, to a much higher level than 2019 – as I’m sure they will again once the current ban is lifted.

What I’m suggesting is this: Firstly, we can safely ignore all the absurd conspiracy stuff about the government trying to destroy the wine industry (even at the cost of destroying the cider and beer ones too) – though I do accept, and pointed it out at the time of the first ban, that there is an austere government tendency to favour prohibition, for various reasons. Unquestionably, the ban on liquor sales is having a major depressing effect. Probably the fairly short-lived export ban also had some effect. Those hardly need arguing.

But the tendency to big problems in the industry was there already. Look at the figures. VinPro has been whingeing for ages about the sufferings of the farmers (and helping them to squeeze more juice out of their ageing vineyards for wine on the bottom shelves of Europe’s supermarkets). It’s not ok to blame the ban for doing more than it is – making a bad situation worse, that is. A bad overall situation, but not a bad one everywhere – many of the fine wine producers seem to be doing pretty well.

  • Tim James is one of South Africa’s leading wine commentators, contributing to various local and international wine publications. He is a taster (and associate editor) for Platter’s. His book Wines of South Africa – Tradition and Revolution appeared in 2013

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  • Mike Ratcliffe21 January 2021

    A very interesting article. Very thought-provoking too. Thank you.

    The South African wine industry is tiny by global standards – one could question why our industry feels that it can (or should) compete for space on the bottom shelf? Surely it would be logical that we should strive for a ’boutique country’ brand positioning? Even the biggest volume brands currently produced in South Africa would never fall into a global top 10. Our best brands need to grow in volume, not in range.
    What I am really trying to say is that if the size of our national vineyard shrinks, we should naturally be trending closer to ‘ boutique country’ status. Conversely, we should be gravitating away from being seen as a suitable source industry for bulk wines and bottom-of-the-shelf brands.
    The biggest assumption to the above is that a shrinking vineyard area is resulting from a loss of the weakest vineyards and a commensurate improvement in the quality of our national juice. If this assumption isn’t accurate, then I worry that we are engaging in a race to the bottom.

  • Neil Tabraham18 January 2021

    Some great points but I think the 28% increase in exports values published today is a welcome sign for South African wine. For too long the industry has complained that it doesn’t reach values that will make more producers more profitable. As the situation improves, it will be a shame that the best wines will have less availability in the domestic market, but one cannot be achieved without the other. Let’s be honest, no wine region that produces premium wines operates in such a narrow price structure. Bordeaux, for example, typically sells from around 8 euros (R150) to around 1500 euros (R290000), nearly 200 times the price of the cheapest. A top Stellenbosch Cabernet will be barely 20 times that of the cheapest. The same couldn’t be said of Burgundy, Napa, Australia, Barolo etc., regions that readily attract top prices for their best wines. In a time when South Africa needs to increase employment and opportunity, every extra Rand in the economy will surely help.

    The Bordelaise don’t complain that they are unable to get hold of any Chateau Margaux when most are unable to afford it anyway. Quite the opposite, in fact, they wish them bon voyage, with the help of the CIVB, because they help to increase the value and demand of all others, merely by association. In a global context, wine is still relatively inexpensive in South Africa, especially when comparing quality to price. Maybe it’s time to say “geniet die reis” to the very best wines we can offer in the hope that we all benefit in the long run? There is still much to enjoy.

    While 2019 was a difficult year, it came against the backdrop of the widely publicised drought which would have seen buyers look elsewhere for bottom and mid shelf wines. In fear that they would not have any wine to sell, should we blame them when they would lose their job if that had happened? Perhaps we should now be celebrating good news in a year which saw global economies crash due to Covid, but with the continued support of our international markets, and that they are finally realising that they must pay fairly for the privilege? Instead of painting bleak pictures without context, I believe we should be positive that South African wine is finally making waves with consumers in our international markets, rather than the trade based ripples we hear in our own echo chambers?

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