-By Elke Zeki
For most of us there is something romantic about being a wine farmer. I find it amusing how the wine farmer always seems to get the most letters on the popular local dating show “Boer soek ‘n vrou”. Yet earning a living as a wine farmer in South Africa has become hard. So much so that many industry experts believe it’s unsustainable. At the current rate many wine farms will not survive.
A recent video by DGB called “The Inconvenient Truth – South African wine industry” revealed a few alarming statistics. It seems the current average return on investment for a wine producer is 1%. It doesn’t take an investment guru to know that this is not enough for any business to survive. Many producers are replacing their vineyards with better-yielding fruits.
An alarming 35% of wine producers in South Africa are making a loss. They’re simply not getting enough for their grapes. Johann Krige from Kanonkop says that on average wine producers get $1 200 a ton for their grapes compared to $10 000 a ton in the US.
For producers to charge more for grapes, the price per bottle needs to increase. The report reckons a structural increase of at least 30% would be necessary.
The South African wine industry is a global leader in terms of traceability, compliance and sustainability. Yet the world pays much less for a similarly rated South African wine compared to other regions.
Why is it that the world and South Africans are not willing to pay more for their favourite bottle of Cab Sav?
It all comes down to perception. Even though our wine industry is old, the world has only been exposed to our wines since the early 90’s, when we became a democracy. Since then, the world was flooded with cheap and cheerful South African wine. This created a perception that we are now struggling the shake off.
Yet we’re making some of the best wine in the world. These winemakers can easily compete with the world’s best. Recently, the acclaimed global wine critic Tim Atkin rated the 2015 Kanonkop Paul Sauer a perfect score of 100 points. Kanonkop has also been the only winemaker to be crowned the international winemaker of the year three times. Yet we pay considerably less for a bottle of Kanonkop Paul Sauer than we do for similarly rated international wines.
Surely this is not sustainable. It’s a complicated issue with many moving parts. We need to produce more and better-quality grapes. There needs to be support from government and a focus on tourism. But most importantly, we need to start paying prices that South African winemakers deserve. So the next time you select your favourite bottle of wine, think about what you would be willing to pay for that bottle.
<Foundation Family Wealth is an Authorised Financial Services Provider>