Wine estates feel economic pinch:”worst year” since 1970!


The Weekend Argus this past weekend screamed in its front page story:”Cape Wine farms fight to survive”, telling the sad story of how hard wine farms have been hit by the state of the economy, the poor exchange rate, and the rising costs in running the businesses. The article quotes Jan Booysen of Winetech in saying that it is the worst year in the ’40 years since I’ve been in the industry‘.

Reflective of the impact of the tough economic times is that more than 100 wine farms are for sale in the Stellenbosch region alone, with price tags ranging from R4 – R200 million, reportedly with few buyers. Prestigious and long-established wine farms such as Simonsig, Kanonkop, and Delheim are reported to be in a ‘serious predicament‘, according to VinPro, an organisation representing 4000 wine producers.  Added to the average loss of R6000 per hectare, wine exports have dropped by 25 % this year alone, but also every year in the past four years, this year being the largest drop. The strong Rand and the economic crunch in Germany and the UK have led to lower prices achieved for South African wines overseas.  Domestic wine sales have increased by 3 %, but this is not enough to counter the export losses.

At a Vinpro meeting last week Francois Malan of Simonsig expressed the concern about the potential impact of Walmart’s take-over of Massmart, and the potential dumping of cheap overseas wines onto the local market.  A survey has shown that wine farmers have made R36000 income per hectare this year, but the costs run at an average of R37000 per hectare.  To stay in business, the wine farms need to generate an income of R50000 per hectare.  Farms smaller than 60 hectares appear to be in greatest trouble.

POSTSCRIPT 15/11: The Weekend Argus published two reactions to its original article of a week prior. VinPro Executive Director Jos le Roux sent a Letter to the Editor, denying that Delheim, Simonsig and Kanonkop were named at a meeting as wine estates that were in trouble.  He did however acknowledge that many wine farmers are under ‘severe financial pressure’. An article reported on a request of a government subsidy for ‘primary wine producers‘, due to the financial crisis, and specifically the cost of housing farm workers, suggests Francois Malan, one of the Simonsig owners.  The report states that the wine industry provides 275000 jobs and generates R15 billion per annum to the Western Cape economy.

Chris von Ulmenstein, Whale Cottage Portfolio: Twitter: @WhaleCottage

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5 replies on “Wine estates feel economic pinch:”worst year” since 1970!”

  1. as everyone says what is the best way to make 10 million rand from a wine estate….start with 20 million rand

  2. Hi Chris,

    Sadly what you report is all too true. As
    an example, a particular favourite of mine, Meerlust Merlot 2007 Stellenbosch, is currently retailing at nearly ZAR 260 (£20.00) per bottle. My wine merchant has cut right back on the variety of SA wines which he stocks because the prices are no longer competitive, particularly when compared with the South American producers.

  3. Thank you for your feedback Nick – it just makes things worse for our local farmers.

    At those prices we hope that you will be supporting our wine farmers by drinking more of our lovely SA wines!


  4. No worries Chris, in March I will be markedly reducing your stocks of wine. That’s why the vacation commences in Stellenbosch!! 😉

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