News / Economy

South Africa Wineries Face Bulk vs. Bottle Dilemma

FILE - Bottles on display for a wine tasting at the Boschendal winery in Stellenbosch, about 80km southwest of Cape Town, November 24, 2009.
FILE - Bottles on display for a wine tasting at the Boschendal winery in Stellenbosch, about 80km southwest of Cape Town, November 24, 2009.
Reuters
At South Africa's Rostberg and Co., green bottles filled with a ruby liquid clink as they march along a conveyor belt, destined for wine-lovers from Paris to Shanghai.

But if a trend toward bulk shipping continues, the music of the Rostberg bottling plant may be about to stop.

Set in lush vineyards in Stellenbosch, one of South Africa's most famous wine communities, Rostberg has been operating below capacity for the past two years due to a shift to shipping wine in 24,000-liter polypropylene "flexitanks."

The trend has spread through other "New World" wine-producing countries like Chile, Argentina, Australia and New Zealand, which all have distant markets and, in the latter two cases at least, relatively strong currencies that are forcing them to cut costs to stay competitive.

Bottlers in South Africa are frantic about the likely loss of jobs. But another concern for some industry experts and government officials is the potential impact on South Africa's brand: when wine is bottled outside the country, winemakers lose control of a key part of the production process.

These are big concerns for South Africa, where the wine industry plays an outsized role in reshaping the country's image after years under apartheid, which ended in 1994.

"Wine has a tremendously important role to play in the development of Brand South Africa," said Anthony Budd, managing director of Cape Town-based wine exporter Diverse Flavours. "Wine is that much more romantic and seen as premium and coming from a beautiful location."

A worker checks the certification labels on wine bottles on a conveyor belt at the Rostberg bottling plant near Cape Town, November 29, 2012.A worker checks the certification labels on wine bottles on a conveyor belt at the Rostberg bottling plant near Cape Town, November 29, 2012.
x
A worker checks the certification labels on wine bottles on a conveyor belt at the Rostberg bottling plant near Cape Town, November 29, 2012.
A worker checks the certification labels on wine bottles on a conveyor belt at the Rostberg bottling plant near Cape Town, November 29, 2012.
The number of people working directly or indirectly in South Africa's wine industry has risen to more than 275,000 people from just under 160,000 in 2000, and now represents 1.5 percent of the workforce in an economy dominated by natural resources.

The industry has made huge inroads as a producer of high-quality wines since overseas markets opened up after apartheid, said Michael Fridjhon, visiting professor of wine business at the University of Cape Town's business school.

"In 1994, we were the darling of the world," he said."Everybody wanted to do something for the 'Rainbow Nation'... Since then, we've been on a steep learning curve."

Exports have soared more than 700 percent to a record 409 million liters in 2012. Now the country's biggest agricultural export earner, wine sets South Africa apart from other sub-Saharan African countries known for exporting predominantly raw materials.

Seventy percent of the 26 billion rand ($2.8 billion) it contributes to the national economy is focused on the Western Cape province, which boasts ideal conditions for wine-making with its Mediterranean climate, mountain slopes and valleys, and sea breezes from the Atlantic and Indian Oceans. The Western Cape is also where the majority of bottlers are located.

Trend Hits Bottling Jobs

Nearly half of all wine from South Africa, Australia, New Zealand, Chile and Argentina is shipped in bulk, up from around a fifth a decade before, according to a report published last year by Dutch bank Rabobank entitled "The Incredible Bulk. The Rise in the Global Bulk Wine Trade."
        
As recently as 2009, just over 61 percent of South African wine exports were bottled domestically but that share dropped to 40 percent last year, according to industry export and promotion group Wines of South Africa (WOSA).

Bulk exports overtook bottled shipments in Australia for the first time in January 2011, industry group Wine Australia said. Major Australian producers like Jacob's Creek are now bottling in Britain, the world's largest wine import market.

Bevan Newton Johnson, managing director at First Cape, the largest South African wine brand in Britain, said the company mothballed its own bottling facility nearly two years ago, laying off around 40 people.

"Our products were not profitable in the overseas markets," he said.

The South African government is concerned about the effect on employment. Close to 1,000 jobs were lost due to the shift to bulk as of the end of 2011, according to the Department of Trade and Industry, and industry representatives said the trend suggests that more cuts are coming.

In South Africa, where the unemployment rate has remained at 25 percent for years, that has a multiplier effect - the country has one of the highest "dependency ratios" in the world at an average of three non-working people supported by every worker, according to a January 2013 report by the South African Institute of Race Relations.

Two bottling plants in Stellenbosch have closed since 2010.

Consol Glass, South Africa's biggest glass manufacturer, is preparing to cut production this year because of the sharp fall in demand for wine bottles. Its wine sector business, which accounts for a quarter of revenues, has declined by more than 20 percent over the last three years.

Rostberg, located on the Rust en Vrede wine estate which produced the wine served at former President Nelson Mandela's Nobel Peace Prize dinner, had to shut down one bottling line in 2010, and was forced to lay off 35 staff, half its workforce.

"The only way we can create more jobs is if we could bottle our wine locally," said Leo Burger, Rostberg's managing director.

The government has threatened to retaliate against the U.K., the world's biggest market for imported wine, by importing bulk whiskey from Britain for bottling in South Africa.

"The big winners in this trend are the bottlers who operate in the UK and the EU," said Stephen Hanival, director of agro-processing at the Department of Trade and Industry. "Jobs and capacity have been lost in developing countries like South Africa."

Bottlers and the wine industry are trying to counter the growth in bulk exports by diversifying to China, Japan and other parts of Africa, where the demand for premium wine is growing.

South Africa exported 5.5 million liters of packaged wine to China in the year to February 2013, a 24 percent increase from the previous year.

Impact of Supermarket Labels

A big factor in the shift to bulk is the growing influence of supermarkets.

Retailers in Europe have been able to squeeze pricing from their suppliers to attract customers recovering from the recession, said Stephen Rannekleiv, Rabobank's executive director of food and agribusiness research.

Some have created competing private label wine brands using foreign-sourced bulk wine.

Fraser Thompson, head of the IPL Wine subsidiary at Asda, the British arm of U.S. retailer Walmart, said countries like South Africa have had no choice but to shift to bulk to stay competitive. Asda has increased its sourcing from South Africa in recent years, partly thanks to U.K. bottling, he said.

"South Africa is competing on a global stage with every other wine-producing nation," he said. "Without shipping in bulk there's a danger that South Africa would lose considerable export trade to the U.K. and across the world."

Around a third of the wine imported by Asda is now bottled in the U.K., where it set up its own bottling plant in December 2011 in Snetterton, Norfolk.

Worry about Industry Image

South African industry and government officials have expressed concern about what happens to the wine after it leaves the polypropylene tanks.

Hanival was particularly worried about the potential for South African wine to be blended with a lower quality wine and marketed as South African, which could have consequences for its hard-won reputation for high quality at the right price.

"In the past the U.K. consumer saw South African wine as moderate-to-low quality but at a very low price point," he said. "These days South African wine is seen as of moderate-to-good quality, still at a good price point ... I think we have managed to lose that label of cheap and cheerful, relatively low-quality wine."

A spokeswoman at Asda strongly denied any trans-national blending took place at Asda. Tesco and Sainsbury's, the two other big supermarket chains in Britain, did not respond to requests for comment on this story.

Bottling in South Africa includes a trackable certification seal, with various guarantees for the consumer, Rostberg said.

"Our wine certification system ensures the origin, cultivar [grape variety] and vintage only up to the harbour when it is exported in bulk, but no further," he said.

The reputational risk around the possibility of blending is uncomfortably high, some in the industry say.

"Odds are that it will adversely affect the reputation [of South African wine]," said Fridjhon. "Effectively what you're doing is turning wine into a ommodity."

You May Like

Kurdish President: More Needed to Defeat Islamic State

In interview with VOA's Persian Service, Massoud Barzani says peshmerga forces have not received weapons, logistical support needed to successfully fight IS in northern Iraq More

Sierra Leone's Stray Dog Population Doubles During Ebola Crisis

Many dog owners fear their pets could infect them with the virus and have abandoned them, leading to the increase and sparking fears of rabies More

Video New Brain Mapping Techniques Could Ease Chronic Pain

New methods for mapping pain in the brain not only validate sufferers of chronic pain but might someday also lead to better treatment More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
New Brain Mapping Techniques Could Ease Chronic Paini
X
Shelley Schlender
April 20, 2015 7:03 PM
Pain has a purpose - it can stop you from touching a flame or from walking on a broken leg. As an injury heals, the pain goes away. Usually. But worldwide, one out of every five people suffers from pain that lasts for months and years, leading to lost jobs, depression, and rising despair when medical interventions fail or health experts hint that a pain sufferer is making it up. From Boulder, Colorado, Shelley Schlender reports that new methods for mapping pain in the brain are providing validation for chronic pain and might someday guide better treatment.
Video

Video New Brain Mapping Techniques Could Ease Chronic Pain

From Boulder, Colorado, Shelley Schlender reports that new methods for mapping pain in the brain are providing validation for chronic pain and might someday guide better treatment.
Video

Video Hope, Prayer Enter Fight Against S. Africa Xenophobia

South Africa has been swept by disturbing attacks on foreign nationals. Some blame the attacks on a legacy of colonialism, while others say the economy is to blame. Whatever the cause, ordinary South Africans - and South African residents from around the world - say they're praying for the siege of violence to end. Anita Powell reports from Johannesburg.
Video

Video Italy Rescues Migrants After Separate Deadly Capsize Incident

Italy continued its massive search and rescue operation in the Mediterranean Monday for the capsized boat off the coast of Libya that was carrying hundreds of migrants, while at the same time rescuing Syrian migrants from another vessel off the coast of Sicily. Thirteen children were among the 98 Syrian migrants whose boat originated from Turkey on the perilous journey to Europe.
Video

Video New Test Set to Be Game Changer in Eradicating Malaria

The World Health Organization estimates 3.4 billion people are at risk of malaria, with children under the age of five and pregnant women being the most vulnerable. As World Malaria Day approaches (April 25), mortality rates are falling, and a new test -- well into the last stage of trials -- is having positive results in Kenya. Lenny Ruvaga reports for VOA from Nairobi.
Video

Video Are Energy Needs Putting Thailand's Natural Beauty at Risk?

Thailand's appetite for more electricity has led to the construction of new dams along the Mekong River to the north and new coal plants near the country's famous beaches in the south. A proposed coal plant in a so-called "green zone" has touched off a debate. VOA's Steve Sandford reports.
Video

Video Overwhelmed by Migrants, Italy Mulls Military Action to Stabilize Libya

Thousands more migrants have arrived on the southern shores of Italy from North Africa in the past two days. Authorities say they expect the total number of arrivals this year to far exceed previous levels, and the government has said military action in Libya might be necessary to stem the flow. VOA's Henry Ridgwell reports.
Video

Video Putin Accuses Kyiv of ‘Cutting Off’ Eastern Ukraine

Russian President Vladimir Putin, in his annual televised call-in program, again denied there were any Russian troops fighting in Ukraine. He also said the West was trying to ‘contain’ Russia with sanctions. Henry Ridgwell reports on reactions to the president’s four-hour TV appearance.
Video

Video Eye Contact Secures Dog's Place in Human Heart

Dogs serve in the military, work with police and assist the disabled, and have been by our side for thousands of years serving as companions and loyal friends. We love them. They love us in return. VOA’s Rosanne Skirble reports on a new study that looks at the bio-chemical bond that cements that human-canine connection.
Video

Video Ukrainian Volunteers Search for Bodies of Missing Soldiers

As the cease-fire becomes more fragile in eastern Ukraine, a team of volunteer body collectors travels to the small village of Savur Mohyla in the what pro-Russian separatists call the Donetsk Peoples Republic - to retrieve bodies of fallen Ukrainian servicemen from rebel-held territories. Adam Bailes traveled with the team and has this report.
Video

Video Xenophobic Violence Sweeps South Africa

South Africa, long a haven for African immigrants, has been experiencing the worst xenophobic violence in years, with at least five people killed and hundreds displaced in recent weeks. From Johannesburg, VOA’s Anita Powell brings us this report.
Video

Video Apollo 13, NASA's 'Successful Failure,' Remembered

The Apollo 13 mission in 1970 was supposed to be NASA's third manned trip to the moon, but it became much more. On the flight's 45th anniversary, astronauts and flight directors gathered at Chicago's Adler Planetarium to talk about how the aborted mission changed manned spaceflight and continues to influence space exploration today. VOA’s Kane Farabaugh reports.
Video

Video Badly Burned Ukrainian Boy Bravely Fights Back

A 9-year-old Ukrainian boy has returned to his native country after intensive treatment in the United States for life-threatening burns. Volodia Bubela, burned in a house fire almost a year ago, battled back at a Boston hospital, impressing doctors with his bravery. Faith Lapidus narrates this report from VOA's Tetiana Kharchenko.
Video

Video US Maternity Leave Benefits Much Less Than Many Countries

It was almost 20 years ago that representatives of 189 countries met at a UN conference in Beijing and adopted a plan of action to achieve gender equality around the world. Now, two decades later, the University of California Los Angeles World Policy Analysis Center has issued a report examining what the Beijing Platform for Action has achieved. From Los Angeles, Elizabeth Lee has more.
Video

Video Endangered Hawaiian Birds Get Second Chance

Of the world's nearly 9,900 bird species, 13 percent are threatened with extinction, according to BirdLife International. Among them are two Hawaiian honeycreepers - tiny birds that live in the forest canopy, and, as the name implies, survive on nectar from tropical flowers. Scientists at the San Diego Zoo report they have managed to hatch half a dozen of their chicks in captivity, raising hopes that the birds will flutter back from the brink of extinction. VOA’s George Putic reports.
Video

Video Exhibit Brings Renaissance Master Out of the Shadows

The National Gallery of Art in Washington has raised the curtain on one of the most intriguing painters of the High Renaissance. Mostly ignored after his death in the early 1500s, Italian master Piero di Cosimo is now claiming his place alongside the best-known artists of the period. VOA’s Ardita Dunellari reports.

VOA Blogs

World Currencies

EUR
USD
0.9247
JPY
USD
118.78
GBP
USD
0.6657
CAD
USD
1.2190
INR
USD
62.395

Rates may not be current.