Business booming as SA wine quality improves

SOUTH African wine exports are booming — and it has nothing to do with the fragility of the rand. Overseas buyers shop at fixed prices — determined largely by what they believe consumers will be prepared to pay.

Many of these were set at the time that Cape wine made its way back into international markets.

However, since the second half of the 1990s, the average quality of what comes from our vineyards has improved immeasurably.

Sadly for growers, hard currency prices have not increased proportionately. In fact, their recovery as a percentage of the selling price of a bottle has actually declined. Supermarket buyers — especially in the UK — generally don’t budge on prices.

When excise, value-added tax and handling costs increase they expect the suppliers to carry the cost. Of course, producers who have other customers and other markets move on. For many now the UK — and especially its big chains — is a client of last resort.

When the rand was at R10.50/£, most of these exports recovered little more than their production cost. Now that the rate is more than R18, they’re earning real money. The exchange rate does nothing except make the business more or less interesting for the suppliers.


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