Cape drought: what it means for SA’s wilting wine industry
SA is the seventh-largest wine producer in the world — but that could soon change in the Cape. However, other countries are going through similar travails
As you lift that glass of Merlot to your lips — velvety with blackcurrant leaf, and perhaps a distinct cigar box spice — take a moment to consider how rare that taste might become.
Besides the three-year drought that has battered the Cape winelands, wine production in much of the world is falling. In the US, fires have wiped out half of Napa Valley, and over in France and Italy, frost has ravaged the vines. The upshot is that prices are likely to rise accordingly.
Last year, global wine production fell by 8%. The International Organisation of Vine & Wine calls it the worst wine shortage in 50 years.
SA is the seventh-biggest wine producer and ninth-largest wine exporter globally, exporting 440Ml a year, alongside the 400Ml sold at home. This makes it responsible for 4% of global production.
The drought will hit much of the industry hard. A smattering of rain this week won’t have radically altered the total dam levels in the Western Cape, which sat at 31% on January 1, compared with 46.5% a year ago.
However, some SA wine estates have come up with smart plans to manage the water crisis. And certainly, estates contacted by the Financial Mail say that at the top end of the market — fine wines costing more than R50 a bottle — the impact of the drought will be minimal and volumes will not be greatly reduced.
The global shortage of wine might present the opportunity for SA to secure sound export agreementsChristo Conradie
Johnathan Grieve, the owner of Avondale, was well prepared for the weather, and the estate bucked the trend thanks to its organic and bio-dynamic take on winemaking.
"We produce our own grapes and we have strong water management. Last year’s production was our best harvest in seven years," he says. "But this is not the norm. Avondale farms so differently that we can’t be compared with [estates where there is] normal production."
Producers of some other top-end wines, estates like Sutherland and Villiera, have also put in place strategies that should leave them largely unaffected by the Cape water crisis.
But at the bulk end of the market, where lower-priced wines are made, it’s far nastier. Francois Viljoen, manager of VinPro’s viticultural consultation service, says the SA wine industry expects a smaller wine grape harvest in 2018 due to the continued dry and hot weather.
This will have far-reaching consequences for the local business of SA wine.
According to SA Wine Industry Information & Systems, the total capital asset base of the industry in 2013 was R62bn — equal to 1.2% of the country’s GDP. The industry employed about 300,000 people, generating R23bn of private disposable income.
But with the yield of many vineyards expected to be down 25% to 50% this year, that is likely to fall.
Roland Peens, director of winecellar.co.za, expects much of the industry to take a serious hit. The beverage side of the sector — cheaper wines, including box wines — is going to suffer.
WHAT IT MEANS
The production of bulk wine is expected to drop dramatically because of the drought, but top-end producers could benefit from it
However, the drought does have a silver lining for viticulture, Peens says. The smaller crop should result in higher-quality wines, as the smaller grapes that emerge in dry and hot conditions have more intense colour and flavour. The fine wine industry will benefit from this, but not the far larger bulk wine industry. The effect of the drought on that sector will be "quite dramatic", Peens says.
This means other countries are likely to snap up SA’s market share of bulk wine, he says. The most likely to benefit are Chile and Australia, which are already bulk producers, while China has more vineyards than SA. China’s total vineyard area has just overtaken France’s to become the second-biggest in the world.
"We’re in a very fragile position [as far as bulk wine is concerned] and could soon be overtaken," says Peens.
Christo Conradie, manager of VinPro’s cellar division, says while part of SA’s market share may be up for grabs, the country’s travails should not be looked at in isolation. "It is not only current drought conditions in SA that might influence the industry, but also what is taking place in the rest of the world," he says.
Europe’s official figures indicate the lowest volumes in almost 45 years. This is owing to extremely cold weather through the spring as well as droughts in summer, which damaged the continent’s grape supply. It hit Spain, France and Italy in particular.
Conradie says the global squeeze could benefit SA. "This might present the opportunity to secure sound export agreements not only in terms of volumes, but also increasing value."
This is because, despite the drought, enough wine of good quality is being produced in SA even now to increase what it sends overseas.
Grieve agrees, pointing out that Avondale already exports 70% of its wine to various parts of the world, and constraints in the global market could create new openings for SA suppliers.
"SA undersells its wine, so the [lower] prices will go up. But with a global shortage, this is an opportunity for SA," he says.