South Africa aims to boost bottle over bulk

One of South Africa’s biggest wine producers is spearheading a campaign to boost the country’s exports of bottled wine in a bid to raise the country’s reputation as a premium producer, and take advantage of a new trade agreement.

Led by Origin Wines, the “creating value at origin” campaign follows a recently negotiated Economic Partnership Agreement (EPA) that will come into effect in the country next year. From 2016, the country’s duty-free quota of wines exported to the EU will more than double from the present 48 million litres to 110 million litres.

However, currently just 84 million litres of what the industry produces would be eligible for the duty-free exemption, as that is the annual amount of wine currently shipped to the EU in packaging of two litres or less. To take full advantage of next year’s raised duty-free quota, the industry would need to increase its bottled output to the EU by another 26 million litres, which is the goal of the campaign.

“With the EPA operative from next year, we have the chance to bottle locally and still remain cost-competitive, while protecting margins and the reputation of our individual brands as well as of brand South Africa. As importantly, we shall be creating new jobs,” said Neville Carew, managing director of Origin Wines.

One of the benefits that will come from the new EPA is that producers will be able to bottle locally and export at less than the current cost to export in bulk and bottle in the EU. Currently, South Africa exports more bulk than bottled wine, with the EU by far South Africa’s biggest export market accounting for 72% of exports in 2014.

A release announcing the campaign said the “current bias” toward bulk had had a major impact on industry earnings, with the loss in direct revenue to the country in 2014 alone estimated by SA Wine Industry Information & Systems at almost R1,9 billion. In 2014, 303 million litres of wine were exported to the EU, of which 62% was shipped in bulk, compared to 26% in the first decade of this century.

Carew said for each additional 10 million litres bottled in 2016, an estimated additional R200 million would be generated in direct income earned in the Winelands. The initial target for the industry for 2016, would be to achieve additional revenue of at least R550 million. Carew said the bottling drive has the backing of other big producers, as well as bottling, label, closure and other dry goods manufacturers across the packaging supply chain.

The campaign to bring bottling back to South Africa’s wine industry, called “creating value at origin”, will be launched with a seminar at the London Wine Fair in May, ahead of the Cape Wine 2015 in September.