The devaluation of the Rand, especially since President Zuma’s Nenegate in December, is not all plain sailing, having negative effects on the wine industry too, warns Wines of South Africa CEO Siobhan Thompson. The weak Rand is expected to dominate for a year.

The positive benefit of the devaluation of the Rand in making the country’s wines more affordable in international markets, will be counteracted by the increased prices of imported corks, barrels, equipment, yeast, and closures.  Increased inflation will be likely to drive up wages too, adding to cost increases.

Local wine farmers were advised to hedge their businesses against currency fluctuations, to balance wine exports and local sales, and to increase sales of premium wines.

Ms Thompson warned that the exchange rate devaluation would severly affect international marketing budgets by up to 25-30%, either leading to reduced marketing activity in overseas markets, or a substantial increase in marketing budget will be required. She warned that this could negatively affect building brand ‘South Africa‘ in international markets. She also said: ‘We need to stand true to our strategy of building value over volume. South Africa is serious about growing its image and higher price tier offerings and we need to continue doing so and not be pushed to lower FOBs and price points due to the Rand devaluing’.

Source: The Drinks Business