Adapt and innovate in a challenging wine business world

ADAPTATION, ENTREPRENEURSHIP AND innovation were the keywords during the recent Nedbank VinPro Information Day in Somerset West, where top-notch experts from diverse fields shared their views. This followed a volatile year in the wine business, as low profit margins, decreasing bottled wine sales and a shrinking area under vines 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 10 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 winegrape 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,' Viljoen said.
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 10 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,' Purchase said.
'We have reached a crossroad 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.'
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