SA-UK wine war looms

Johannesburg -

A surge in the amount of SA wine being exported to the UK in bulk is posing a “serious risk” to the industry – and the cabinet has approved a range of steps to avert job losses.

File photo: Reuters. Credit: REUTERS

“Our view is this is a serious risk to the SA wine industry,” the Department of Trade and Industry’s Stephen Hanival said at Wednesday’s post-cabinet briefing.

Preliminary analysis by the department had found that up to 250 people had lost their jobs at bottling plants and up to 400 more were at risk in associated industries such as packaging.

But Andrew Morgenthal, communications manager for Wine SA, which markets SA wine abroad, said the jobs risk could be far greater. A three-year-old study had found that for every 10 million litres of SA wine exported in bulk, 107 jobs would be lost.

Hanival warned that the bulk-import approach – cheaper for UK retailers – could spread to other SA beverages such as fruit juices and spirits.

Measures approved by the cabinet on Tuesday include that a study be done on possible bulk imports of whisky from the UK, in what could be seen as a tit-for-tat move.

Hanival said 36 percent of SA certified wine that left the country in 2006 had been exported in bulk, rather than in individual, labelled bottles.

In the 2011/12 financial year, this figure had risen to 52 percent – “a significant swing”.

Having SA wine bottled and labelled in the UK rather than at home put jobs at risk at bottling plants and businesses producing corks and packaging in South Africa.

It meant SA lost out on adding value to its exports and loss of brand identification with high-quality wine.

While labels might still show SA as the country of origin, the bottles would not be linked to the country’s famous wine brands.

He said the UK’s Waste and Resource Action Programme (Wrap) had campaigned for retailers there to import wine in bulk “under the guise” of environmental concerns.

UK wine retailers liked to import in bulk as it was cheaper and allowed value to be added in their country. Local wine producers had been “pressured” by retailers to agree to bulk exports.

Hanival hoped a “trade war” was not looming, as the countries had enjoyed a long economic relationship.

Between March 2011 and March 2012, SA had imported R1.7bn of whisky from the UK and exported R900m of wine, a “significant imbalance”.

Western Cape Agriculture MEC Gerrit van Rensburg did not believe it was a threat for the wine industry, as the wine was still sold by producers. But it could impact on jobs in associated industries.

Not exporting in bulk would result in loss of business, “but I think our best quality wines we will still bottle ourselves and export”.

However, it was important to establish new jobs and protect any from being lost.

Morgenthal said 40 percent of SA’s wine export had been in bulk and 60 percent packaged in bottles until three years ago, when the ratio reversed as retailers squeezed profit margins.

For some SA producers – especially those exporting entry-level priced wines – it made economic sense to export in bulk and have their wine bottled in Europe.

Political Bureau