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- Before the next harvest, South African wine producers still have a surplus of stocks of 280 million to 300 million liters of wine.
- This is the equivalent of total wine sales in the country in the last year.
- Wine prices have already started to fall as producers try to switch product, while next year’s grape harvest could end up in juice or hand sanitizer.
- For more articles, go to www.BusinessInsider.co.za.
Before the start of the new harvest next month, South African winemakers are still stuck with a massive glut of unsold wine in the country.
The prolonged freeze on sales in the country and an export ban during the first phase of closure have left South African wine producers with a surplus of stocks of 280 million to 300 million liters, says Daneel Rossouw, divisional manager of agriculture. from Nedbank in the southern part of South Africa. .
To put this in context, total wine sales in South Africa reached 288 million liters in the year to October.
Local sales in that period were 21% less than in the previous year, according to new data from the industrial body SA Wine Industry Information and Systems (Sawis), according to Netwerk24.
The demand for South African wines from abroad was also not enough to compensate.
European demand is stable but definitely not growing as in the past to restore balance to South African stock levels, says Philip Retief, CEO of Van Loveren Vineyards. The continent now has its own large surplus after it had a bumper season and Covid effectively canceled its tourism season, hurting demand.
The excess of wine in the local market is already putting pressure on prices. Retief hopes that consumers will see that wine will get cheaper next year. Prices for boxed wine will fall sharply, and there should be a shift from other alcoholic beverages, particularly beer and spirits, towards wine as it becomes comparatively less expensive.
At these low prices, winemakers should be able to trade the 2020 surplus next year, but the big question is what will happen to the 2021 harvest, says Retief.
He expects more of the white grape harvest to go to juice producers, but at “unsustainable” prices, 40% lower than they could get for wine.
Some of the alcohol could also go to industrial manufacturing, in particular to make hand sanitizers and other cleaning products, again at prices that won’t save winemakers, it adds.
But while European demand for wine from South Africa may not help absorb the local surplus, there are some hopes pinned on China.
Last month, China imposed import tariffs of between 107% and 212% on Australian wines as part of a tense and growing trade war between the countries. Australia is the largest wine exporter to China, and local industry players believe this will leave a niche for South African wines.
“With Australian wines now subject to interim export tariffs in China, there is a great opportunity for South African wines to grow beyond their 1% market share in this market,” says Rossouw. “There are also prospects in emerging markets in Africa and demand from overseas retailers, while the weak exchange rate makes our exports more attractive and increases profitability.
READ | South African wine could be a winner as China slaps Australia with massive import tariffs
But this prospect will not save many wine producers, and industry organization Vinpro estimates that 80 wineries and 350 producer groups could exit the industry in the next 18 months.
“Smaller wineries that rely on wine tourism for sales and income from wineries such as wedding venues and accommodation have been hit hard by global travel bans and an estimated 20,000 jobs are in risk, ”says Rossouw.
READ | SA’s New 5-Star Wines Just Been Named by Platter’s, and These Wineries Got High Scores
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