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Talking Wine Business
Christo Conradie,Vinpro
• Who are YOU?
• Why are YOU/ME here today?
• Looking back – Information day 2018.
• Focus on some performance indicators.
• Shifts, trends … momentum … will it last?
• Assumptions, scenarios, themes …. challenges & opportunities.
• What can/must WE do to encourage economic growth?
• Pencil down your OWN/NOW next steps … let’s EXECUTE!!!
Content
• Water in the dams (climate change) a better cash flow for majority, but not all … thankful.
• Average of “90 + 10 = 50” - indication of trend/shift (analise both top and bottom .. also relevant).
• Ageing vineyards, shrinking industry (losing 180 mil litres in next 5yr) raw material/cultivar offering?
• Determine your position on the ROI bell-shaped curve … honest view to determine YOUR next step.
• Boils down to a variation of two business models: “Compete on Price” vs “Have a Story”.
• Business partners/models to be revisited – relationships in value-chain, heated kitchen/room for all?
• Playing at home and/or away … adapt to changing situations … not two years are the same (agility).
• Marketing problem, or not? – getting into the customer mind, prior he/she enters the liquor shop/on-line.
• Crosswinds/Risk Register - EWC, Brexit, Excise, Illicit/Ales, Health, Eskom, Exchange Rate, Cannabis.
• Opportunities – Tourism, De-alcoholised, Empowerment, Technology/Science, MINDSET!!!
”Give me the short version”
Infoday 2018 (Predictions & Questions)
• Tight supply to move R/litre upwards.
• Income adjustment of 25% to 30% needed (Farm gate).
• Something has to give (less hectares).
• Stock:Sales ratio lowest in 15 years (± 0.35 vs 0.60).
• Impact on market – local or export volumes (-4.3%) to be reduced.
• Will we experience an upward trend in wine imports (import parity high).
• Who will be the highest bidder? UK, Germany, France, Denmark.
Production cost (above inflation with stagnant wine price)
Sustainability under pressure
• Profitability of the wine producers have been under severe pressure for quite some time.
• * Silver lining starting to take shape during 2018/’19.
More than 80% of SA wine producers are farming below a sustainable
net farm income of R30 000 per hectare
* Source: Vinpro Production Plan 2018 (to be finalised)
63
09
60
65
50
52
42
48
37
42
31
16
30
84
32
68
33
87
30
98
28
01
27
63
24
03
21
01
12
11
38
33
40
96
40
62
39
58
41
18
40
75
36
89
40
20
40
72
42
59
33
64 3
97
7
40
61
55
15
36
13
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Plantings Uprootings Capital maintenance
SOMETHING HAS TO GIVE…..
Hectares
1,27%
Low profit deters investment to replace vineyards
15%
41%15%
13%
16%
2004
6%
21%
23%26%
24%
2017
• Age distribution in vineyards, 50% of
vineyards are older than 16 years, will
have to be replaced in the next ten years,
capital outlay of more than R10 billion.
PRICES OF BULK WHITE WINE (ex-cellar)
85,6101,9
119,1 115,7132,4
176,5 172,8196,7 193,5 187,9
56,7 52,1
418,96 434,37 431,43475,97 488,52 485,36 470,17 460,45 459,48 471,18 464,81 453,38
445,59472,72 469,90
493,63524,09 523,35 510,25 500,82 503,47 497,89
521,52 505,46504,53536,26 550,55
591,70620,91
661,88 642,96 657,19 652,93 659,11
0,00
50,00
100,00
150,00
200,00
250,00
300,00
350,00
400,00
0
100
200
300
400
500
600
700
Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec
c/lit
re
Diff 2016 2017 2018
% of total in region
PRICES OF BULK RED WINE (ex-cellar)
120,3
220,3195,9
224,3
266,3288,7 298,3 289,2
97,5
168,4
579,17542,21
584,59
619,33
585,63 611,35 607,68 597,76 584,84 581,38
629,22 628,19 640,92 667,43 667,74 663,35 686,79 669,40 682,33749,76
699,47762,55 780,46
843,62 851,95900,00 905,94 886,96
0,00
100,00
200,00
300,00
400,00
500,00
600,00
0
100
200
300
400
500
600
700
800
900
1000
Mar Apr May Jun Jul Aug Sept Oct Nov Dec
c/lit
re
Diff 2016 2017 2018
% of total in region
BULK PRICE OF WHITE WINE (REALITY vs INFLATION)
2,98 3,11 3,14 3,153,45
3,65 3,72 3,834,11
4,38 4,45 4,604,97
6,10
2,98 3,123,34
3,723,98
4,164,36
4,614,87
5,175,41
5,756,06
6,37
0
1
2
3
4
5
6
7
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018*
R/l
itre
White Inflation
% of total in region
Average 12yr – 4.35%Average 13yr – 5,66%YTD Average – 22,74%
*October
BULK PRICE OF RED WINE (REALITY vs INFLATION)
4,404,06
3,74 3,87
4,595,03
5,345,58 5,57
5,80 5,78 5,88
6,61
8,16
4,40 4,614,94
5,515,90
6,156,46
6,827,21
7,658,00
8,518,97
9,42
0
1
2
3
4
5
6
7
8
9
10
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018*
R/l
itre
Red Inflation
% of total in region
Average 12yr – 3,45%Average 13yr – 4,87%YTD Average – 23,45%
*October
PRODUCER CELLAR SALES – 2009 (776 mL) vs 2017 (946 mL)
65,5%
9,2% 9,8%6,6%
8,8%
60,7%
6,6%10,6%
5,4%
16,7%
0,0%
10,0%
20,0%
30,0%
40,0%
50,0%
60,0%
70,0%
To wholesalers -wine
To wholesalers -grapes
Local market -packaged
Exports -packaged
Exports - bulk
2009 2017
*Producer cellar bound wholesalers included
TRENDS IN WHITE BULK WINE PRICES, UNPACKING THE AVERAGE
0%
10%
20%
30%
40%
50%
60%
70%
250 < 300 300 < 350 350 < 400 400 < 450 450 < 500 500 < 550 550 < 600 600 < 650 650 < 700 700 < 750
% s
har
e o
f to
tal v
olu
me
Price ranges (cents per litre)
Dry white wine
2017 2018
2017 Avg - R4,24/litre2018 Avg - R5,13/litre
YTD Avg – 20.99%
TRENDS IN WHITE BULK WINE PRICES, UNPACKING THE AVERAGE
0%
5%
10%
15%
20%
25%
30%
35%
40%
400 < 450 450 < 500 500 < 550 550 < 600 600 < 650 650 < 700 700 < 750 750 < 800 800 < 850 850 < 900 900 < 950 950 < 1000 > 1000
% s
har
e o
f to
tal v
olu
me
Price ranges (cents per litre)
Chenin Blanc
2017 2018
2017 Avg – R4,82/litre2018 Avg – R6,15/litre
YTD Avg – 27,59%
TRENDS IN WHITE BULK WINE PRICES, UNPACKING THE AVERAGE
0%
5%
10%
15%
20%
25%
400 < 450 450 < 500 500 < 550 550 < 600 600 < 650 650 < 700 700 < 750 750 < 800 800 < 850 850 < 900 900 < 950 950 < 1000 > 1000
% s
har
e o
f to
tal v
olu
me
Price ranges (cents per litre)
Sauvignon Blanc
2017 2018
2017 Avg – R7,02/litre2018 Avg – R8,41/litre
YTD Avg – 19,80%
TRENDS IN WHITE BULK WINE PRICES, UNPACKING THE AVERAGE
0%
5%
10%
15%
20%
25%
400 < 450 450 < 500 500 < 550 550 < 600 600 < 650 650 < 700 700 < 750 750 < 800 800 < 850 850 < 900 900 < 950 950 < 1000 > 1000
% s
har
e o
f to
tal v
olu
me
Price ranges (cents per litre)
Chardonnay
2017 2018
2017 Avg – R6,71/litre2018 Avg – R8,63/litre
YTD Avg – 28,61%
TRENDS IN RED BULK WINE PRICES, UNPACKING THE AVERAGE
0%
5%
10%
15%
20%
25%
30%
400 < 450 450 < 500 500 < 550 550 < 600 600 < 650 650 < 700 700 < 750 750 < 800 800 < 850 850 < 900 900 < 950 950 < 1000 > 1000
% s
har
e o
f to
tal v
olu
me
Price ranges (cents per litre)
Dry red wine
2017 2018
2017 Avg – R6,01/litre2018 Avg – R7,32/litre
YTD Avg – 21,80%
TRENDS IN RED BULK WINE PRICES, UNPACKING THE AVERAGE
0%
5%
10%
15%
20%
25%
450 < 500 500 < 550 550 < 600 600 < 650 650 < 700 700 < 750 750 < 800 800 < 850 850 < 900 900 < 950 950 < 1000 > 1000
% s
har
e o
f to
tal v
olu
me
Price ranges (cents per litre)
Pinotage
2017 2018
2017 Avg – R6,80/litre2018 Avg – R8,27/litre
YTD Avg – 21,62%
TRENDS IN RED BULK WINE PRICES, UNPACKING THE AVERAGE
0%
5%
10%
15%
20%
25%
30%
450 < 500 500 < 550 550 < 600 600 < 650 650 < 700 700 < 750 750 < 800 800 < 850 850 < 900 900 < 950 950 < 1000 > 1000
% s
har
e o
f to
tal v
olu
me
Price ranges (cents per litre)
Shiraz
2017 2018
2017 Avg – R7,33/litre2018 Avg – R8,89/litre
YTD Avg – 21,28%
TRENDS IN RED BULK WINE PRICES, UNPACKING THE AVERAGE
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
350 < 400 400 < 450 450 < 500 500 < 550 550 < 600 600 < 650 650 < 700 700 < 750 750 < 800 800 < 850 850 < 900 900 < 950 950 <1000
> 1000
% s
har
e o
f to
tal v
olu
me
Price ranges (cents per litre)
Cabernet Sauvignon
2017 2018
2017 Avg - R7,70/litre2018 Avg – R9,84/litre
YTD Avg – 27,79%
0,00
50,00
100,00
150,00
200,00
250,00
0
20
40
60
80
100
120
140
160
180 R/hlmillion litres
Producer sales Price/hl
PRODUCER SALES OF DISTILLING WINE @10% a/vSPIRITS AND EAU D’VIE INCLUDED
* YTD
Huge Concern for Brandy!!!
2017 Avg – R2.01/litre2018 Avg – R2.19/litre
YTD Avg – 8,96%
0,00
50,00
100,00
150,00
200,00
250,00
300,00
350,00
400,00
450,00
0
20
40
60
80
100
120R/hlmillion litres
Producer sales Price/hl
Huge Concern for Brandy!!!
PRODUCER SALES OF WINE FOR BRANDY WINE @10% a/v
* YTD
2017 Avg – R3,68/litre2018 Avg – R4,07/litre
YTD Avg – 10,60%
0
2
4
6
8
10
12
2010 2011 2012 2013 2014 2015 2016 2017 2018
Wine Spirits Beer
annual inflation rate
Indices are represented as 12-month moving averages
CONSUMER PRICE INFLATION FOR ALCOHOLIC BEVERAGES
WINE
LOW PRICE
<R30
BASIC
>R30 - <R48
PREMIUM
>R48 - <R72
SUPER PREMIUM
>R72 - <R108
ULTRA PREMIUM
>R108
STILL WINE SOLD IN PRICE CATEGORIES R/LITREJAN - OCT 2018
49%
33%
7%
6%
5%
150 158 172 litres
99 279 234 litres
21 301 725 litres
18 222 276 litres
14 655 291 litres
Low Price ≤R30
Basic >R30 - R48
Premium >R48 - R72
Super-Premium >R72 -R108
Ultra-Premium >R108
0% 5% 10% 15% 20% 25% 30% 35%
Sauvignon blanc Chardonnay Chenin blanc
LOCAL MARKET – WHITE VARIETIES
Jan-Nov 2018
Low Price ≤R30
Basic >R30 - R48
Premium >R48 - R72
Super-Premium >R72 -R108
Ultra-Premium >R108
0% 5% 10% 15% 20% 25% 30% 35%
Shiraz Cabernet Sauvignon Pinotage Merlot
LOCAL MARKET – RED VARIETIES
Jan-Nov 2018
2015 2016 2017 Dec 2017 - Nov 2018
R/L 19.49 20.99 19.43 21.16
Trend % 8% -7% 9%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
18.50
19.00
19.50
20.00
20.50
21.00
21.50
RAND PER LITRE - TOTAL
2015 2016 2017 Dec 2017 - Nov 2018
R/L 7.47 7.58 7.46 8.53
Trend % 2% -2% 14%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
6.80
7.00
7.20
7.40
7.60
7.80
8.00
8.20
8.40
8.60
8.80
RAND PER LITRE - BULK WINE
2015 2016 2017 Dec 2017 - Nov 2018
R/L 36.32 41.54 38.17 40.39
Trend % 14% -8% 6%
-10%
-5%
0%
5%
10%
15%
20%
33.00
34.00
35.00
36.00
37.00
38.00
39.00
40.00
41.00
42.00
RAND PER LITRE - PACKAGED WINE
RSA EXPORT MARKET - BULK
79
6826
14
13
12
6
6
6
5
2
Germany
UK
France
Denmark
Canada
Russia
Belgium
Switzerland
The Netherlands
Sweden
Africa
mn litres
-20.4
-19.1
-19.7
+109.2
+12.3
-39.2
-22.7
+9.4
+2.3
-2.7
+27.0640
585196
197
91
121
52
42
44
39
17
mn Rand-17.6
-4.0
-2.5
+127.5
+21.6
-25.8
-12.5
+8.4
+21.1
+14.9
+39.4
% growth 201712-201811
% growth 201712-201811
RSA EXPORT MARKET - PACKAGED
36 18
16
15
13
10
9
8
7
5
5
UK
Africa
Germany
The Netherlands
Sweden
USA
China
Canada
Denmark
Russia
United Arab Emirates
mn litres
1 273 592
711
651
468
527
452
369
216
167
177
mn Rand+1.7
-4.3
+3.9
-3.6
-13.9
-5.2
+8.5
+15.7
+13.6
+7.4
+5.5
% growth 201712-201811
% growth 201712-201811
-5.7
-10.4
-1.3
-3.8
-12.5
-5.1
-2.4
+13.6
+9.9
-4.3
-2.5
-11.5
+6.2
-10.5
-18.0
+6.6
-8.4
+14.4
+2.4
+22.4
+13.0
+7.2
-45.2
-23.6
-49.9
-34.4
-7.9
-17.8
+8.5
-8.5
+2.8
+17.1
-2.8
RSA EXPORT MARKET - TOTAL
104
95
27
21
21
21
21
18
17
13
13
UK
Germany
France
The Netherlands
Africa
Denmark
Canada
Sweden
Russia
U.S.A
China
mn litres
1 858
1 351239
696
609
413
460
507
288
562
486
mn Rand% growth
201712-201811% growth
201712-201811
TOP WORLD WINE EXPORTERS - TOTAL WINE
Spain 1.22
Italy 2.77
France 5.88
Chile 1.89
Australia 2.17
South Africa1.27
Germany 2.64
USA 3.80
Portugal 2.60
New Zealand 4.15
Argentina 3.18
Others 4.54
0,00
1,00
2,00
3,00
4,00
5,00
6,00
7,00
0 250 500 750 1 000 1 250 1 500 1 750 2 000 2 250 2 500
Euro
/ li
tre
Millions of litres
Sources: Comtrade & Trade Map
TOP WORLD WINE EXPORTERS – BULK WINE
Spain 0.44
Italy 0.65
France 1.11
Chile 0.77Australia 0.77
South Africa 0.52
Germany 0.99 USA 1.08
Portugal 0.60
New Zealand 2.44
Argentina 1.32
0,00
0,50
1,00
1,50
2,00
2,50
3,00
0 250 500 750 1 000 1 250 1 500
Euro
/ li
tre
Millions of litres
Sources: Comtrade & Trade Map
TOP WORLD WINE EXPORTERS – PACKAGED WINE
Spain 2.15
Italy 3.50
France 6.50
Chile 2.70
Australia 3.37
South Africa1.95
Germany 2.71
USA 6.34
Portugal 2.96
New Zealand 5.16
Argentina 3.52
Others 5.02
0,00
1,00
2,00
3,00
4,00
5,00
6,00
7,00
8,00
0 250 500 750 1 000 1 250 1 500 1 750 2 000
Euro
/ li
tre
Millions of litres
Sources: Comtrade & Trade Map
PRODUCTION OF WINE GRAPES (1990 – 2018*)% certified as cultivar wine
0
50 000
100 000
150 000
200 000
250 000
300 000
350 000
400 000
Cab
ern
et
S
Ch
ard
on
nay
Ch
en
in
Cin
sau
t
Co
lom
bar
Me
rlo
t
Pin
ota
ge
Sau
vign
on
B
Shir
az
tons
72%
57%66%
58% 61%
5%
81%
30%
74%
* 2018 preliminary
Optimal “basket mix” to win the game?
• +12% on 2017• Harvests in France, Spain and
Italy (top producing countries) are back to historic levels.
• Consumption estimated at 244 m hl.
• “Surplus” 4 m hl.• Pressure ease on bulk wine
prices.• Spain – prices are declining,
underperforming initial expectations.
• Italy – generic bulk table wine prices are easing off.
• France – prices depend on the specific product and quality.
• Southern Hemisphere –international prices (US$) mainly affected by weak emerging markets currencies.
2018 WORLD OVERVIEW
279
266
257264
298
278283
268 269273
264268
258
290
270 273266
248
279
230
250
270
290
310
World wine production – Total (mhl)
0
100
200
300
400
500
600litres
Packaged Bulk
RSA still wine exports
-
100
200
300
400
500
600
700
800
900
1 000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Mill
ion
Lit
res
Baseline wine market outlook
Ending Stock Drinking Wine production Domestic Wine Consumption Wine ExportsSource: SAWIS, BFAP, BER
FORECAST – NOMINAL PRICES
3,11 3,14 3,15 3,45 3,65 3,72 3,83 4,11 4,38 4,45 4,60 4,905,40
5,816,14
6,647,15
7,618,04
8,498,99
4,06 3,74 3,874,59
5,03 5,34 5,58 5,57 5,80 5,78 5,886,48
6,97
7,998,73
9,3810,15
11,01
11,8012,51
13,18
0
2
4
6
8
10
12
14
16
18
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Ran
d/L
itre
Drinking wine - white Drinking wine - red
Average cellar door bulk wine prices to increase: 17% - 19% in 2018. 11 - 13 % in 2019. 6 - 8% increase 2020 – 2022.
2015 2016 2017 2018 2019 Average 2020-23
Gross value of drinking wine production (Rand Million) 4217.14 4051.39 4507.91 4673.69 5459.45 6959.68
Average bulk wine price (rand per litre in nominal terms) 4.52 4.69 5.13 5.99 6.65 9.08
• THANK YOU!!!
• Wieta Code
• Accredited volumes
• Social Dialogue Forums
• Round Table
• Producer Workshops
• Nordic Monopolies
Ethical
• Euro1 export certificates.
• Metrology – Quantities <500ml.
• Water – Clanwilliam/Brandvlei.
• Eskom load shedding.
• Liquor Products Act.
• EWC (AgBiz/Agri-SA) – Need to get it right.
• Brexit – Soft/Hard (pro-rata/+35million).
• Excise, Illicit & Ales.
Advocacy
• Health - De-alcoholised wine (WSB).
• BEE-initiatives/Transformation - SME’s.
• Hortfin Funding – Inclusive growth, jobs.
• Harm reduction - Aware.org.za.
• Social Workers (x9) - Vinpro Foundation/Aware.org
• IPW – Integrity & Sustainability.
• Wine Tourism.
Opportunities
• Wine Tourism Growth Strategy.
• Tourism Task Team.
• Wesgro, SAT, SAWRF & WoSA.
• Wine Tourism Toolkit.
• Skills Audit.
• SA Wine Routes Map.
• Marketing Milestones.
• www.visitwinelands.co.za & x40 Blogs
Tourism
Visitation | Revenue | Market Share
Wine Tourism Growth
95% 96%
17%
42%
4%
20%
2%
11%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2013 2014 2015 2016 2017
Regional Dispersal International Visitors 2013 - 2017
Cape Town Stellenbosch Hermanus Paarl
Our Road Map
20% 5.
EXPAND VALUE
CHAIN
6.
SKILLS
DEVELOPMENT
RESEARCH
1.
DEVELOPMENT
2.
MARKETING
3.
ENGAGE TRADE
4.
Marketing Milestones
Digital marketing
drives awareness
3637
5105
1332
1052
0 1000 2000 3000 4000 5000 6000
Website: Visitors by Month
Facebook: Total Followers
Instagram: Total Followers
Twitter: Total Followers
Digital Platform Growth
Dec-18 Sep-18 Jun-18 Mar-18
WISE
“A revised strategic framework with
aspirational targets needed to ensure an
adaptable, robust, globally competitive and profitable SA wine industry”
• richard rushton (@richardmrushton) tweeted at 9:40 PM on Thu, Dec 20, 2018:
A common view of ‘one’ wine industry would increase the likelihood of building strong, differentiated and sustainable
positions across markets and price points. Collaboratively working together in unison is the best way forward.
YOU to do list ....
Quality drives Profitability
(The Post – Meryl Streep)
