While the Covid-19 crisis has delivered an unprecedented blow to the local wine industry, the sector faces a further existential threat: it is stuck between a weak position in global markets and a strengthening global climate regime, which is hindering its market access.
The economic fallout linked to the pandemic response has been well documented, with the industry losing about R500m a week during the initial six-week alcohol ban, which also prevented exports. The current prohibition will further jeopardise the survival of the sector, of which about 80% is characterised by small and medium-sized companies that rely heavily on domestic consumption and are unable to survive on exports alone. This in a sector that accounts for 1.2% of the country’s economy and employs, directly and indirectly, about 300,000 people, predominantly in the Western Cape.
Regarding the overall state of the sector preceding the pandemic and how this will inevitably shape its long-term development, local wines are in a weak position internationally. While SA is the world’s sixth-largest exporter of wine by volume, large volumes have not translated to equivalent export value. The country is only the 12th-largest exporter by value.
In a value chain controlled by large importers and retailers, SA producers have historically struggled for shelf space in European markets. Wine exported from SA is commonly used in blended varieties in Europe, creating a false perception of poor quality. The limited marketing budget of the local industry in this respect is unable to flip the scale in highly competitive markets.
Click HERE to read the full article