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

Photogallery Americans Celebrate Thanksgiving With Feasts, Festivities

Holiday traditions include turkey dinners, 'turkey trots,' American-style football and New York parade with giant balloons More

Video For Obama, Ferguson Violence is a Personal Issue

With two years left in term, analysts say, president has less to lose by taking conversation on race further More

Video Italian Espresso Expands Into Space

When Italian astronaut Samantha Cristoforetti headed for the ISS, her countrymen worried how she would survive six months drinking only instant coffee More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
South Africa Sees Male Circumcision as Way to Reduce HIV Infectionsi
X
November 28, 2014 3:31 PM
South Africa remains plagued by AIDS despite massive government and NGO efforts on prevention and life-sustaining Anti-Retro-Viral programs. But the country has opened up another front to reduce new HIV infections: promoting circumcision. Emilie Iob reports for VOA News from a pioneering circumcision center in Orange Farm, Johannesburg.
Video

Video South Africa Sees Male Circumcision as Way to Reduce HIV Infections

South Africa remains plagued by AIDS despite massive government and NGO efforts on prevention and life-sustaining Anti-Retro-Viral programs. But the country has opened up another front to reduce new HIV infections: promoting circumcision. Emilie Iob reports for VOA News from a pioneering circumcision center in Orange Farm, Johannesburg.
Video

Video To Make A Living, Nairobi Street Vendors Face Legal Hurdles, Physical Violence

The Nairobi City Council has been accused of brutality in dealing with hawkers in the Central Business District - in order to stop them from illegally selling their wares on the streets. Lenny Ruvaga has more for VOA News from the Kenyan capital.
Video

Video For Obama, Ferguson Violence is a Personal Issue

Throughout the crisis in Ferguson, Missouri, President Barack Obama has urged calm, restraint and respect for the rule of law. But the events in Ferguson have prompted him to call — more openly than he has before — for profound changes to end the racism and distrust that he believes still exists between whites and blacks in the United States. VOA White House correspondent Luis Ramirez reports.
Video

Video Online Magazine Gets Kids Discussing Big Questions

Teen culture in America is often criticized for being superficial. But an online magazine has been encouraging some teenagers to explore deeper issues, and rewarding their efforts. VOA religion reporter Jerome Socolovsky went to this year’s Kidspirit awards ceremony in New York.
Video

Video US Community Kicks Off Thanksgiving With Parade

Thursday is Thanksgiving in the United States, a holiday whose roots go back to the country's earliest days as a British colony. One way Americans celebrate the occasion is with parades. Anush Avetisyan takes us to one such event on the day before Thanksgiving near Washington, where a community's diversity is on display. Joy Wagner narrates
Video

Video Aung San Suu Kyi: Myanmar Opposition to Keep Pushing for Constitutional Change

Myanmar opposition leader Aung San Suu Kyi says she and her supporters will continue pushing to amend a constitutional clause that bars her from running for president next year. VOA's Than Lwin Htun reports from the capital Naypyitaw in this report narrated by Colin Lovett.
Video

Video Mali Attempts to Shut Down Ebola Transmission Chain

Senegal and Nigeria were able to stop small Ebola outbreaks by closely monitoring those who had contact with the sick person and quickly isolating anyone with symptoms. Mali is now scrambling to do the same. VOA’s Anne Look reports from Mali on what the country is doing to shut down the chain of transmission.
Video

Video Ukraine Marks Anniversary of Deadly 1930s Famine

During a commemoration for millions who died of starvation in Ukraine in the early 1930s, President Petro Poroshenko lashed out at Soviet-era totalitarianism for causing the deaths and accused today’s Russian-backed rebels in the east of using similar tactics. VOA’s Daniel Shearf reports from Kyiv.
Video

Video Hong Kong Protests at a Crossroads

New public opinion polls in Hong Kong indicate declining support for pro-democracy demonstrations after weeks of street protests. VOA’s Bill Ide in Guangzhou and Pros Laput in Hong Kong spoke with protesters and observers about whether demonstrators have been too aggressive in pushing for change.
Video

Video US Immigration Relief Imminent for Mixed-Status Families

Tens of thousands of undocumented immigrants in the Washington, D.C., area may benefit from a controversial presidential order announced this week. It's not a path to citizenship, as some activists hoped. But it will allow more immigrants who arrived as children or who have citizen children, to avoid deportation and work legally. VOA's Victoria Macchi talks with one young man who benefited from an earlier presidential order, and whose parents may now benefit after years of living in fear.
Video

Video New Skateboard Defies Gravity

A futuristic dream only a couple of decades ago, the hoverboard – a skateboard that floats above the ground - has finally been made possible. While still not ready for mass production, it promises to become a cool mode of transport... at least over some surfaces. VOA’s George Putic reports.
Video

Video Falling Gas Prices Impact US Oil Extraction

With the price of oil now less than $80 a barrel, motorists throughout the United States are benefiting from gas prices below $3 a gallon. But as VOA’s Kane Farabaugh reports, the decreasing price of petroleum has a downside for the hydraulic fracturing industry in the United States.

All About America

AppleAndroid

World Currencies

EUR
USD
0.8010
JPY
USD
118.31
GBP
USD
0.6371
CAD
USD
1.1397
INR
USD
62.122

Rates may not be current.