South Africa Wine Summit: Repositioning for greater sustainability

Estimated reading time: 11 minutes

South Africa Wine, the national body representing wine grape producers, cellars, wine-related businesses, and wholesalers in South Africa, hosted its first Wine Summit at the Cape Town International Convention Centre in Cape Town. The theme of the summit was “Blend and Bond” and talk of sustainability was the order of the day.

The South Africa Wine Summit serves as a platform for industry leaders and stakeholders to come together to discuss the direction that will shape the future of South African wine. Local and international experts shared their insights, expertise, and vision.

A sustainable future on the cards

Topics included global challenges and approaches, thus crafting a sustainable future for global wine and crafting success in a multi-category business, Heineken Beverages’ vision for the South African wine industry. The programme also included a panel discussion that explored the transformative power of community engagement, inclusive business practices, and innovative approaches within the wine industry for meaningful change.

Rico Basson, chief executive officer of South Africa Wine, said the South African wine industry has transformed remarkably since 1994, evidenced by technological advancements and world-class cultivars. The sector generates 270 000 employment opportunities, with exports of 306 million litres worth R10 billion and domestic consumption of 474 million litres of wine and 29 million litres of brandy.

From the left are Sakkie du Toit, board member, and Rico Basson, chief executive officer of South Africa Wine, Dr Ilse Trautmann, deputy director-general of Agriculture Research and Regulatory Services at the Western Cape Department of Agriculture, and Francois Viljoen, manager of GEN-Z at Vinpro.

According to Basson, there are several must-win battles for the sector and various growth opportunities that, if implemented, can ensure a much-needed step change for growth. “Many of our grape producers and wineries remain under cashflow pressure due to higher-than-inflation cost increases, lower harvests, and low price increases. This, along with factors such as political uncertainty, has led to lower plantings and vineyard replacement over the past decade.”

Low return on investment

Basson expressed concern regarding the low return on investment (ROI) at farm level in the wine industry. Currently, the ROI at farm level is less than 1%, while it should be at least 7,5 to 10 %. The current low ROI of less than 1% means there isn’t enough money to invest in planting vineyards. Planting a vineyard now costs R300 000 per hectare.

Inadequate investment has resulted in a much smaller industry and this, in turn, puts pressure on cellars and other role-players in the value chain. “There is no short-term solution to the problem. If we can implement new strategies, the industry may enter a phase of re-investment within two to three years,” Basson pointed out.

A positive for the wine industry is that South Africa’s wine stock levels (363 million litres in 2024) are perfect in terms of supply and demand. Compared to the situation in Australia, Chili, and Argentina, South Africa is extremely well positioned. This creates huge opportunities for the South African wine industry, according to Basson.

An important role-player in agriculture

Daneel Rossouw, head of sales: Agriculture at Nedbank, said Nedbank’s commitment to the wine sector is driven by the bank’s appreciation for the fact that the wine value chain is very important in the agricultural sector, particularly in terms of contribution to gross domestic product and job creation. The total number of jobs throughout the entire value chain is around 500 000. “That is significant,” Rossouw said.

Nedbank was the main sponsor of the South Africa Wine Summit. The team from Nedbank are, from the left, Cobus de Bruyn, head of client value propositions: Agriculture, John Hudson, national head: Agriculture, and Daneel Rossouw, head of sales: Agriculture. With them are Conrad Schutte, chief executive officer of Vinpro, Jannie Strydom, chief executive officer of Agri Western Cape, and Annelize Crosby, head of legal intelligence at Agbiz.

“The theme of this year’s event, ‘Blend and Bond’, echoes Nedbank’s guiding principles of partnership and collaboration, which have informed the alliances we have nurtured with notable agricultural stakeholders such as South Africa Wine. These partnerships illustrate the bank’s commitment to supporting the entire agricultural value chain during its high points, and times of flux and difficulty,” Rossouw stated. 

Global wine production at low level

Dr John Barker, director-general of the International Organisation of Vine and Wine (OIV), said the organisation is the international scientific and technical reference for the vine and wine sector. The OIV has 50 member states (of which South Africa is one), and represents 87% of global wine production and 71% of global wine consumption.

Dr John Barker, director-general of the International Organisation of Vine and Wine.

He said extreme climate conditions and widespread fungal diseases severely impacted many vineyards worldwide, culminating in a historically low global wine production of 237 million hectolitres. This marked a 10% drop from 2022 and represented the lowest output since 1961. Very low production volumes were recorded in both the European Union (EU) (145 million hectolitres, a drop of 11%) and the Southern Hemisphere (47 million hectolitres, a drop of 15%).

Global wine consumption in 2023 is estimated at 221 million hectolitres, indicating a decrease of 2,6% compared to 2022’s already low figures. More than two-thirds (68%) of global consumption is concentrated in the top ten markets, with the top five consuming countries representing 51% of the world total. The EU (107 million hectolitres, a 2% drop) accounts for 48% of the global wine consumption, Barker said.

Barker emphasises the wine industry’s inclusive and global nature, highlighting the sector’s resilience through collaboration. “There is an opportunity to position wine as a global leader in sustainability in a world with so many conflicting messages. There is also a need to consider wine’s role and position in society, and recognise wine’s real cultural and economic value. We must acknowledge the health impact of harmful consumption and be champions of moderate and low-risk consumption,” Barker indicated.

SA is the gateway to Africa

Jordi Borrut, managing director of Heineken.

Jordi Borrut, managing director of Heineken, said the company sees huge growth opportunities in the domestic wine market and beyond. Heineken’s focus is on growing market segments that will have a positive impact on the profitability and sustainability of the entire wine value chain.

“If we can grow the domestic wine drinker population by 3% in five years, it could result in 530 000 additional wine drinkers and 78 million litres of additional volume.”

Heineken views South Africa as the gateway to Africa, and this family-owned company is committed to making significant investments in the future. This translates into a strong focus on sustainability, aiming for net zero emissions by 2030, and investing in responsible alcohol consumption programmes.

According to Borrut, taxation is a major challenge for the wine industry in South Africa, where a much higher excise on alcohol is levied than in most other wine-producing countries. This needs to be reconsidered as a recently published study, including a cost-benefit analysis, has shown that the legal alcohol industry makes a net positive annual contribution to society of R62 billion.

It is all about resilience

A panel discussion exploring the transformative power of community engagement, inclusive business practices, and innovative approaches within the wine industry for meaningful change transpired. The panel included Daphne Neethling, owner and director at Paardenkloof Estate, Rydal Jeftha, chief executive officer and managing director of Koopmanskloof Vineyards, and Denzel Swarts, founder of Son of the Soil Leadership Foundation and director at the Pinotage Youth Development Academy.

From the left are Denzel Swarts, founder of the Son of the Soil Leadership Foundation/Wines, Kachné Ross, people development manager, and Gerard Martin, manager of technology transfer and training at South Africa Wine.

Neethling said PaardenKloof Estate places a particular focus on conservation as its contribution to the future. Biodiversity is one of their unique selling points, with a strong emphasis on technology and innovation, especially in the client space.

She shared some of her experience as a woman of colour and brand owner in the wine industry. Neethling commented: “Being an owner of a wine farm comes with a lot of responsibility. One is to be an icon of excellence and to showcase that quality does exist and that you can run a successful business. Resilience, looking forward, and making sure you have a vision are all important and will form your decisions and the actions you take.”

Innovation is cutting edge

Jeftha said innovation is cutting-edge in the wine industry. If you have an innovative mind, you go so much further because you build resilience in the process. “The wine industry is all about resilience,” he said.

Jeftha told a story of resilience after a long career with few growth opportunities. He underscored the importance of resilience in the wine industry and the need to inspire the youth. A step of faith led him to a successful career at Thandi Wines. Seeing how his passion inspired his daughter to become a winemaker brought everything into perspective. “We are doing it for the next generation,” said Jeftha.

The approach at Koopmanskloof is, therefore, to listen to be heard. “I want to impress people with stories and the quality of our wines, but quality is not enough. You also need consistency, vintage after vintage. You can’t be complacent; you must stay on top of things. And you have to add value to the lives of the people, the vineyards, and the cellar.”

Farm children need their own identity

Swarts said life skills are one of three fundamental pillars of the foundation. You have to build a farm child to give them their own identity. Every child who goes through the programme must be able to say: “I am an African, a South African within the global world.”

He pointed to the importance of studying and earning qualifications to empower change. His business focusses on a solid community, fostering crucial life skills, and establishing a strong identity among young people. Education equips them with the tools they need and instils a mentality of paying it forward to improve the future.

The panel discussion exploring the transformative power of community engagement, inclusive business practices and innovative approaches within the wine industry for meaningful change were, from left to right, Denzel Swarts, founder of Son of the Soil Leadership Foundation/Wines, Daphne Neethling, owner and director of PaardenKloof Estate, and Rydal Jeftha, chief executive officer and managing director of Koopmanskloof Vineyards.

“It was important to be the change I wanted to see. We do not accept handouts; we accept hand-ups that speak of intent and responsibility. We cannot talk about transformation in isolation; it comes with the personal responsibility to contribute to an inclusive environment,” Swart expressed.

Shortage of no-alcohol wine

Felicity Carter, founder of Drinks Insider, said the market for no-alcohol wine is growing and there are not enough no-alcohol products to satisfy demand. No-alcohol drinks enjoyed a strong year in the United States (US) in 2023, with overall volumes rising by 29% versus 2022. This is well ahead of the 7% growth of low-alcohol drinks. This growth was driven by no-alcohol beer/cider which rose in volume terms by 30%. No-alcohol wine volumes increased by 28%, she indicated.

Felicity Carter, founder of Drinks Insider.

According to Carter, health concerns are significantly influencing drinking habits, with many people noticing poorer sleep quality from alcohol consumption, often tracked via smartwatches. The World Health Organisation’s declaration that no level of alcohol is safe has further intensified scrutiny. Consequently, alcohol consumption rates are plummeting in many countries, particularly the US, due to these health perceptions.

“These statistics and trends challenge the wine industry, which must navigate the pushback by emphasising wine’s role as a farm-to-table beverage integral to the Mediterranean diet and promoting moderate consumption. Wine’s cultural value as a shared experience can help counteract declining consumption trends,” Carter concluded. – Hugo Lochner, Plaas Media

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