Facts and figures
Between 2011 and 2021, South Africa's vineyard area shrank by 10% to 90,500 ha. There is one main reason for this: the lower profitability of viticulture compared to other agricultural products.
This is also shown by the fact that the number of grape growers has dropped by 26% in the same period. Small producers in particular stopped growing grapes. A process that will continue due to economies of scale, since most grape producers (983 or 37.6%) still produce less than 100 tonnes. Another 33.9% do not reach 500 tonnes.
The situation is different for wine producers. The number of cellars also declined between 2011 and 2021 to 536, but the dynamic is nowhere near as strong (- 8%) and the trend is not steady. For example, in 2021, some private businesses reopened, while some wine traders closed their doors.
In addition, there is the phenomenon of 'renting winemakers', who are responsible for a lot of dynamism in the South African wine scene. They do not have the capital for their own cellar but rent barrels and buy wine from winemakers before using their know-how to produce sometimes spectacular wines. Hence, the number of producers entering the industry is even higher.
Profit despite inflation?
If you look at the situation of the winegrowers, it doesn't look so bad at first glance. Between 2011 and 2021, the average price for a tonne of grapes rose by 67%. However, the inflation trend in this period was 63% (calculation according to Statista). Not only that, but prices were also 11% higher in 2018.
The price of grapes is not only influenced by harvest volumes. It is true that the drought-stricken 2018 vintage was very small, as was the subsequent 2019 vintage. The price collapse in 2020, on the other hand, was not related to a large harvest because it was still below average yield.
The collapse in 2020 of the South African wine industry was due to the Corona pandemic. Several weeks-long bans on the sale of alcoholic beverages were imposed to relieve the health system of alcohol-related cases. Wine consumption in the domestic market, already in decline, plummeted by 20%.
Once again, the two sharply contrasting sides of the South African wine industry was apparent. The slump mainly affected the entry level below 30 rand (approx. €1.64). Its share of the total market fell from 69% to 33%, while the premium segment from around €6 grew by at least 44% in absolute figures.
A return to normal in 2021
On the positive side, the top segment continued to grow as South African wine consumption returned to a recent normal, while the entry level was the only segment to lose further ground. With a total consumption of 3.92mill. hl of wine in South Africa, 2021 is below the peak phase of 2015-2019, but above the consumption level of the years before 2015.
Salvation through exports?
Exports do not provide a clear picture. Already in 2019, export volumes had slumped by 24% and only recovered in 2021 with an increase of 22%.
Adjustment to harvest volumes
Harvest volumes can only be assessed as a limiting factor to a certain extent: It is true that the small 2018 and 2019 harvests are a reason for the weak phase. However, the South African wine industry showed itself to be very adaptable, especially in the larger 2021 vintage when, as is common with large harvests, grapes are increasingly processed as distillates and grape juice.
- Plus in grape harvest: +8.7
- Plus in the wine harvest: +1.5% (9.12mill. hl)
- 37% of the increase went into distillation and 52% into grape juice production.
In addition, exports also suffered from outdated port facilities in Cape Town and the difficulties of shipping during the pandemic, so that a recovery could only begin in 2021.
Bulk wine exports
The majority of exports are still bulk wine. In the UK, which leads the way with 92.5mill. l, the rate was 64%, slightly above the average of 62.5%. The front-runner here is Germany: of the 65.2mill. l shipped to Germany, 84% were bulk wine.
The two worlds of South African wine are evident in the revenues. Bottled wines, which account for 37.5% of the volume, generate 76% of the export value. With a converted average price of €2.94 per l, they generate twice the overall average of €1.44 and more than five times the bulk wine average of €0.54.
The extreme contrasts of South Africa's wine industry are a mirror of the entire country. Rich and poor stand side by side. Next to companies with a high reputation there are virtually unknown sleeping giants, next to companies that are thriving there are business closures due to poor profitability. The recent positive mood stems from the fact that all sectors grew strongly in 2021.