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Campaign set to raise South Africa's bottled wine exports

MARCH 2015 - A new initiative aims to see more bottled wines exported from South Africa in a bid to raise the country's reputation as a premium producer and promote job creation.

Currently, South Africa exports more bulk than bottled wine. The shift towards bulk is a global phenomenon affecting wine producers worldwide and has been driven mainly by the international supermarket trade as a way of curtailing costs.

The bottling campaign comes in the wake of the recently negotiated Economic Partnership Agreement (EPA) that takes effect 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, just 84 million litres of what the industry presently produces would in principle be eligible for the duty-free exemption, as that is the annual amount of wine currently shipped to the EU in packaging of 2 litres or less, and that would therefore comply with existing EU regulations.
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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, and that is the goal of the campaign for next year.

The EU is South Africa's biggest export market by far and accounted for 72% of exports in 2014.  

Amongst the benefits flowing from the new EPA will be the ability of producers to bottle locally and export at less than the current cost to export in bulk and bottle in the EU. This is according to Neville Carew, MD of Origin Wines, one of the country's major exporters and the company spearheading the campaign to increase bottling locally.

The country bottles to world-class standards, according to Antonio Bertolaso, who manufactures machinery for bottling used globally.

Photo credit: Malcolm Consulting
  The owner and president of MBF Italy, he is a leading international supplier of highly advanced filling technology and claims South African bottling plant technology and equipment are on a par with anywhere in the world and meet all the international quality standards.

In 2014, 303 million litres of wine were exported to the EU, of which 62% was shipped in bulk.

The balance was filled locally in bottles or in bag in box.

This contrasts sharply with the pattern for most of the first decade of this century, when South Africa's bulk exports to the EU hovered around 26% of the total.

Buying bulk impacts industry earnings

The present bias towards bulk has had a major impact on industry earnings. The loss in direct revenue to the country in 2014 alone, (had the percentage of packaged wine exports remained at levels achieved in earlier years) has been calculated by SA Wine Industry Information & Systems (SAWIS) at almost R1,9 billion.

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.

He confirmed that 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. Led by Su Birch, former CEO of Wines of South Africa (WOSA), the campaign is targeting EU trade in the first phase of its activities, but will be expanding its communication to include wine lovers in key markets across the region with a follow-up social media strategy.

"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 Carew.

He said the greater the success of the campaign, the greater the economies of scale there would be from boosting production to meet demand.

This would further enhance the country's price-competitiveness in all markets.

Reduced volumes of packaged wine had increased throughput costs, hindering price competitiveness.

Earlier this year, Alan Winde, the Western Cape Minister of Agriculture, Economic Development and Tourism, emphasised the importance of the agricultural sector – specifically agri-processing – in driving growth and job creation in South Africa.

The country's wine industry currently provides jobs for just over 289 000 people.

The campaign to bring bottling back to South Africa's wine industry is being called “creating value at origin”. It will be launched with a seminar at the London Wine Fair in May in the build-up to Cape Wine 2015.
Article Source: DKC (De Kock Communications) for Creating Value at Origin
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