23 Aug 2012 Is a wine war with the UK looming?
South Africa is mulling retaliatory measures to protect its centuries-old wine industry and counter job losses caused by a British retailers’ move to buy the product in bulk rather than in bottles, a trade official has said. British retailers including Tesco and Sainsbury are bottling the bulk wine themselves, leading so far to as many as 700 job losses in South Africa, said Stephen Hanival, chief director of agro-processing at the DTI.
“We certainly hope that the developments on bulk wine don’t lead to any kind of trade war between either South Africa, the UK or any of the European Union countries with whom we trade extensively,” Hanival told reporters this week.
“However, South Africa does have a responsibility to protect its trade interests. Our view is that this is a serious risk to the South African wine industry,” he said.
The bulk buying helps British retailers save costs and package the products in ways that may be more appealing for local customers.
“Why shouldn’t South Africa be importing bulk whisky from the UK and bottling it locally, so that we can at least attempt to prevent some of the job losses that we’ve seen up to now spreading to other parts of the economy,” he said.
According to the DTI, last year South Africa imported R1.7bn of British whisky. It exported wine valued at R993m to Britain during the same period, a significant trade imbalance, which Hanival suggested could be exploited to South Africa’s advantage.
Hanival added that the retailer’s moves were also being done “under the guise of environmental concerns”, and warned that such “quasi-environmental standards” could well spread to other sectors in South Africa, including fruit juice exports, and spirits such as brandy.
South Africa’s wine industry currently employs around 275 000 workers and has seen exports grow more than 200% between 1998 and 2010, with the major markets including Britain and other countries in the European Union.
A spokesman for Sainsbury’s said it is a “huge supporter” of South African agriculture and sources more than £200m of products from the country each year. He added: “Buying wine in bulk doesn’t reduce the quality of the wine and is common across wine producing countries.”
A Tesco spokesman said: “We buy less than a quarter of our South African wine in bulk. It helps to keep the cost down for our customers and also lowers the carbon footprint of the product by reducing the need to transport large quantities of glass to the UK.”
Government looks to assist
Cabinet, meanwhile, has approved steps to help counter the impact of UK retailers’ decision to switch from importing bottled wine from South Africa to bulk wine for bottling in the UK.
These include a process to develop a five-year industry strategy to help place the sector on a sustainable growth path trajectory, government spokesperson, Jimmy Manyi, told reporters on Wednesday, following the executive’s regular fortnightly meeting.
Other steps included a programme to reduce the environmental costs of producing wine in South Africa and in-depth cross-sectoral research and analysis of the wine value chain.
Manyi said the impact of possible bulk whisky imports from the UK would also be studied.
The wine and packaging industries would be engaged to develop innovative packaging solutions with the emphasis on sustainable packaging.
Initiatives would also be undertaken to help the industry speed up export marker diversification and measures taken to prevent possible job losses as a result of the UK retailers’ decision, he said.
Source: Fin24
Bulk wine is a necessary ‘evil’
Bulk wine now accounts for half of South Africa’s total wine exports. While some reckon this is a necessary shift in trying economic times, the lower value return of exports by volume is an increasing concern.
According to the latest Sawis statistics, February 2011 – January 2012, total bulk exports grew by 17.6%, while packaged exports dropped by 19.2% and total exports decreased by 4.6%. While getting accurate statistics about the volume of exports are readily available, the value of total exports – which is impacted by the bulk/packaged-ratio – are quite a different story.