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Vinpro: ‘Cellar capacity and financial viability remain a big concern”

Published:  01 February, 2021

Vinpro has announced that South African wine producers and viticulturists are optimistic about the quality of this year’s vintage following favourable weather conditions. 

However, the South African wine body warned that “cellar capacity and financial viability” remained a big concern due to the continued alcohol ban.

“Producers will have to make tough decisions in the vineyards with cellar capacity under severe pressure due to the continued alcohol ban,” said Vinpro MD Rico Basson.

The 19 week cumulative domestic alcohol ban since March 2020 has had a negative effect on wineries’ sales volumes and led to higher stock levels. 

Now, a month into the third alcohol ban and with the 2021 harvest commencing this week, Vinpro said the industry has more than 640 million litres of stock of which 250 to 300 million litres are uncontracted.

“This poses a material risk of insufficient processing and storage capacity for the new harvest and threatens the sustainability of the wine industry,” said Basson. 

While larger cellars have contingency plans which include renting additional capacity, allocating a portion to grape juice concentrate and lowering prices, smaller producers may have greater difficulty creating storage and processing capacity. 

“Slower moving stock due to lower sales figures, cash-flow challenges and the need for additional bridging finance that comes at a cost will all put a huge strain on the sustainability of the industry. This will inevitably result in many businesses and farms closing down, along with an estimated 27,000 job losses which will force those most vulnerable in our communities into a poverty trap,” added Basson.

The wine grape crop is at this stage expected to be only somewhat larger than in 2020, but still below the 15 year industry average of 1.37 million tonnes, according to the latest estimate by Vinpro and South African Wine Industry Information & Systems (SAWIS).  

The estimate in January was the second of five annual estimations before the harvest report will be released in May this year.

Last week, Vinpro announced it had approached the Cape High Court in a bid to save the beleaguered South African wine industry. The hearing is set for 5 February.