Adapt and innovate in a challenging wine business world

Friday, 1 February, 2013
Vinpro
Adaptation, entrepreneurship and innovation were the keywords coming to the fore during the Nedbank VinPro Information Day in Somerset West, where top-notch experts from diverse fields shared their views. This followed a volatile year in wine business, as low profit margins, decreasing bottled wine sales and a shrinking area under vines still persist.
Altogether 570 delegates from the whole wine industry value-chain attended this event, presented for the eighth consecutive year by VinPro, the wine producers’ representative organisation.

Nedbank senior economist Nicky Weimar started proceedings by stating that the 2013 economy is expected to be very similar to that of 2012, as production in general is under strain and domestic spending is growing. With the country’s total imports exceeding exports, the economy becomes unsustainable and the rand is yet again under severe pressure. The recent strikes proved not to be the only problem –  domestic spending has outpaced production and although consumer debt is 76% of income, consumer spending is still rising.

Scenario planner Clem Sunter explained three “red flag” scenarios, which firstly pictured a globally flat economy for the next ten to 15 years; then a new world economy in which the world’s attitude toward Africa has changed and the economy grows three times faster than the normal rate; and the final flag, one of upheaval and violence.

Sunter’s advice is, “Keep the majority and minority together. For that, you need an inclusive leader. Create a balanced economy, create jobs through investing in innovation and entrepreneurship. And finally, create a climate to help stimulate small business.”

With regard to the 2013 wine grape harvest, Francois Viljoen, VinPro’s Consultation Service manager, stated that the extraordinary hot and windy weather during December 2012 had an impact on the growth of wine grape vineyards, but with minimal sunburn damage. “However, thanks to the outstanding 2012 winter and the favourable pre-harvest weather conditions, we expect a very promising harvest of 1 379 352 tonnes – the third biggest in history and only 1% smaller than the 2012 harvest,” said Viljoen.

According to Makro wine buyer Carolyn Barton, 2012’s retail trends will continue well into 2013. “The market reality is that domestic share is up 3%, but producers are under pressure, which makes it difficult to stand out with your brand. You have to engage with shoppers and back winning formats. Don’t miss any opportunity; focus on selling, not marketing. Put less effort into where the product came from and more effort into where it’s going. Work within trends.”

Rico Basson, executive director of VinPro, added that of the top 10 industries in agriculture, the wine industry is the biggest employer of permanent workers. “This has to work in our favour. We need a closer partnership with Government. We have the ability to earn foreign currency revenue, as well as increase productivity and be a multiplier of jobs in the value-chain.

“We create jobs and contribute to economic development; we will also keep on transforming and focusing on social responsibility. But we need Government to step in by providing safety, creating an environment for investment, facilitating trade strategy and programmes to train and increase productivity, as well as investing in research, water supply, infrastructure and resources.”

For Dr Johan Bruwer from WineValueChain Insights, South Africa is at a tipping point. His advice? More control of the supply-chain at the right margins, the right vineyard economics relative to the wine’s retail price, as well as brand ownership, especially amidst the bulk wine tsunami.

“Producer consolidation needs to take place to control grape to glass. Innovation is also needed – especially with lower alcohol wines sold at lower prices to dodge the tax bullet. As for the Chinese wine market, you’ve got to be in it to win it, but don’t gamble. Focus on the US market – the pulse of the world wine market for the next five to ten years – and remember, bulk is here to stay; fit it into your business model or diversify.”

The message from Dr John Purchase, chief executive officer of the Agricultural Business Chamber, was that integrated, cohesive and coherent evidence-based policy development is needed in South Africa. “Business as usual is not sustainable; if you want to continue making a living in agriculture and grow your enterprise.

“We have reached a cross-road into broader transformation of the sector. Agribusinesses will need to deal with tough questions this year. There certainly are opportunities in agriculture and the wine industry specifically – just be smart and adapt,” said Purchase.

Nedbank recognises agriculture’s vital contribution
“This is the seventh consecutive year that Nedbank has been involved as sponsor of the Nedbank VinPro Information Day and it was a privilege to show the bank’s involvement in the wine industry in such a concrete manner,” said Daneel Rossouw, divisional manager Agriculture at Nedbank Business Banking.

Nedbank has substantial exposure to the wine industry and also sponsors the Cape Winemakers Guild and the Green Wine Awards. It is committed to financing the wine industry on a responsible and sustainable basis.

Nedbank Business Banking recognises the vital contribution that agriculture makes towards economic growth and offers a banking partnership that is client-centric and solutions-driven designed to support agri-business. Nedbank is widely recognised as the green bank and is actively involved in promoting sustainable agriculture that contributes towards reducing environmental and natural resource impacts. This is why Nedbank is partnering with the WWF-SA Sustainable Agriculture Programme as a further commitment and investment to supporting environmental and social sustainability initiatives.

Nedbank also recognises the role it plays in adding value to the lives of farm workers as well as employees of agricultural businesses. The Nedbank@Work offering facilitates convenient banking at the workplace through bankers or consultants on site, in the branch or via Nedbank’s call centre and Internet channels.  It also provides non-financial support to clients and their employees free of charge, including financial fitness training to employees at all levels through customised education programmes.

Download the presentations at www.vinpro.co.za or contact Lee-Anne Morris at 021 807 3267 or e-mail morris@vinpro.co.za.

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LTR: Dr John Purchase, CEO of the Agricultural Business Chamber; Rico Basson, VinPro executive director; Carolyn Barton, national wine buyer at Makro; Clem Sunter, chairman of the Anglo American Chairman’s Fund; Daneel Rossouw, divisional manager Agriculture at Nedbank Business Banking; Dr Johan Bruwer, WineValueChain Insights; Francois Viljoen, VinPro Consultation Service manager; Abrie Botha, VinPro chairman



Rico Basson, executive director of VinPro.
Rico Basson, executive director of VinPro.

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