BMi Research wine report released
The water supply issue may further impede the category in future. Overall, there has been a reduction in the plantings over the past decade as farmers have struggled to maintain yields. Farmers may need to diversify to other crops should this continue, with the net result being wine shortages for the market in coming years.
According to the wine report, South African wines appear to be in a good position. There is growing demand internationally for these wines particularly, given the premium quality of the variants available. The reduced value of the Rand further underpins this dynamic. There is a move to pave the way for preferential trade agreements with North America and China that would underpin the export trade long term. There was also an agreement recently finalised between the EU and South African Customs that extends the current annual duty-free allowance. This bodes well for our local wine producers in terms of international sales and greater profitability. The international markets can afford to absorb price increases on South African wines.
Bulk and packaged wines
In addition, there is an active shift from bulk to packaged wine sales, which means that instead of South African wines being sold in generic format, they will increasingly be sold in branded packaging, thus offering them greater exposure and elevating the perceptions of these wines on the international market, as well as developing greater brand equity overall.
With this dynamic of greater sales and premium pricing in exports, it is likely that the local wine sales will see a knock-on effect in terms of price inflation in coming years as international pricing filters down to the local market. It is believed that this would apply more to upper-end offerings than the reasonably priced supermarket wines, as the latter are more price sensitive. In terms of current pricing, the wine category saw a notable increase in average pricing during 2016, and this translated into a significant growth in value for the category during the same time frame.
The increase in average selling price for wine during 2016 is well within general inflation figures for the year. As wine is increasingly sold in premium packaged formats rather than in bulk, it is expected that the category pricing and profitability will grow at higher rates in future.
Natural and sparkling wine
Natural wine (the lion’s share of the market) saw a growth in volume share during 2016 at the expense of both sparkling and fortified wines. Given the new, growing popularity of sparkling wine internationally, it is expected that the share of these wines will accelerate in future, possibly to the detriment of fortified wines.
Exports comprise a significant portion of South Africa’s wine sales, and it is envisaged that this will continue to be the case in future. However, it is anticipated that exports will become less bulk focused and will entail more packaged wine sales, congruent with efforts to grow the awareness of South African wine brands on the international market.
Gauteng and the Western Cape held the greatest shares of the local wine category for 2016. These substantial shares may be representative of both the greater relative population concentrations in these provinces, as well as the higher average income for resident consumers. Both these regions increased their shares during 2016 as they remained a key focus for producers. –BMi research report
Source: AgriOrbit
AgriOrbit is a product of Centurion-based agricultural magazine publisher Plaas Media. Plaas Media is an independent agricultural media house. It is the only South African agricultural media house to offer a true 360-degree media offering to role-players in agriculture. Its entire portfolio is based on sound content of a scientific and semi-scientific nature.
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