Local wine industry focuses on Western markets

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Johannesburg - South African wine executives believe North American and EU countries remain their primary markets although Africa does offer growth opportunities.

PwC’s SA Wine Industry Insights survey, released yesterday, suggests that although African countries pose logistical and regulatory challenges, the continent remains an untapped market.

It also reveals that while the local industry is targeting North America and the EU, its international counterparts are looking into Asia and South America as their focus markets for growth.

Global supply and demand and the volatility in exchange rates remain the factors that influence strategic decisions.

Respondents indicated that land reform and climate change were key factors that wine businesses should consider.

They expected market conditions to remain stable in the short to medium term, with only a small number anticipating a downturn within the next year.

Last year about 98 percent of respondents were confident about revenue growth in the following 12 to 36 months. This optimism was influenced by the fact that cellars had increased their revenue by 22 percent on average over the previous year.

This year, the survey found that participants who were not confident about revenue growth had increased to 20 percent.

Record harvests for red and white cultivars were recorded in some areas in 2013. Revenue per producing hectare breached R40 000 for the first time and was well above average production costs, the report stated.

This has been attributed to marginally higher prices per litre and a better absorption of costs in the vineyard, largely due to the record harvest.

Rising energy costs, labour costs and productivity, ageing vineyards and illicit trade in alcohol were some of the challenges that concerned industry players.

PwC’s agribusiness industry leader, Frans Weilbach, said: “It is positive to note that 70 percent of survey respondents expect market conditions for the local wine industry to remain stable for the next 12 months.”

About 75 percent of the global wine executives anticipated that the industry would remain the same within the next year.

However, about half believed there would be an improvement in the next three years. “Given recent economic uncertainty and labour unrest as well as new technological advancement, it is not surprising to see energy and labour costs as the expenses that executives are mostly concerned about this year,” Weilbach said.

Local companies said they had made use of the Department of Trade and Industry’s Enterprise Investment Programme and Manufacturing Competitiveness Enhancement Programme.

“Encouragingly, all survey respondents have made use of at least one of the programmes offered,” Weilbach said.


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