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South Africa's record bulk wine growth slows

Published:  09 July, 2014

South Africa's record growth in bulk exports of wine to the UK has slowed, with figures from VinPro showing no increase on last year.

However packaged wine exports to the UK have grown by 38%, while falling back in most other countries from June 2013 to May 2014 compared to the previous period.

The latest figures from South Africa's VinPro, which represents 4,000 producers across South Africa, show the UK's imports of bottled South African wines have grown 38% from 30.7 million litres to 42 million litres, while on the bulk side the figure remains unchanged at 67 million litres. But Germany has experienced growth of 11%, while France has seen bulk imports rise by 54% - driven by an increased appetite for cheap base wines to make fruit-flavoured wines. 

South AfricaSouth Africa has experienced a slowdown in its bulk wine exportsSouth Africa’s weak Rand has contributed to a return to domestic bottling, which has lowered bulk wine exports and pushed packaged wine up. WOSA insists that more premium wines are also in growth, further fuelling this trend.

Jo Wehring, UK market manager for Wines of South Africa, attributed the change to a combination of growth in premium South African wines and bottling shifting back to South Africa as it becomes more cost effective.

"We've got more premium South African wine coming to this market. There's definitely been an interest in smaller boutique producers - those that deal uniquely in packaged wine," said Wehring.

Recent Nielsen figures show value growth has outstripped volume, with South Africa has been outperforming the market at higher prices, she added.

Greg Wilkins, managing director of Brand Phoenix, which owns the First Cape brand and is one of the UK's largest importers of South African wine, said most of the changes were tied to currency shifts.

"Hedging and making the correct decision about where we pack is so crucial and wine doesn't sustain massive margins," he added.

"The Rand is extremely volatile - there's a 25% to 28% swing on the currency," which is why, according to Wilkins, most people will hedge for at least six months. This six-month period is about the same time required to make a decision about whether to pack in South Africa or at destination.

Wilkins said that some producers, although not Brand Phoenix, start looking at bottling in South Africa again when the Rand goes over the 17.00 Rand to the Pound FX mark and stays there for a period of six months or more. This would result in a decline in bulk shipments and an increase in packaged goods.

As for Germany's bulk increase of 11%, Wilkins said "that's us, frankly for a lot of it" as the firm mostly packs in Germany, alongside a host of UK-based operations. Wehring added that it is now difficult to separate what is happening in Germany and other European markets from the UK given many wines bottled in Germany are destined for this market.

Wehring said the 2014 harvest starting two weeks late also "has an impact" on export data for the year to date.

"2013 was a bumper harvest with bumper exports, but we're not expecting to see export growth again in 2014, if anything we're expecting it to be slightly down, especially on the bulk side as the harvest was slightly down."