Poor Rainfall Is Good For Booming South African Wine Industry

Poor Rainfall Is Good For Booming South African Wine Industry

South African wine exports were up 5 percent in 2015, and the industry is predicting more growth in 2016 — a bright spot in a gloomy economy as winemakers win new markets around the world, CNNMoney reported.

The country received the lowest rainfall between January and December 2015 since records began in 1904, according to the South African Weather Service, AfricaCheck reported.

Commodities prices tanked, unemployment rose, but winemaking excelled.

South Africa’s wine industry is enjoying one of its most exciting phases in history, said Roland Peens, director of wine retailer Winecellar.co.za, in a January guest column in Moneyweb.

Wine exports have increased 20 percent over four years.

South Africa is the seventh largest wine producer in the world, according to data from June 2015 — the most recent available — by Paarl-based SA Wine Industry Information & Systems.

Annual wine production in South Africa for 12 months to June 2015 was 959 million liters, with 423 million liters sold for export and 395 million liters sold domestically.

China in particular has become the promised land for South African winemakers, Reuters reported. All the bottles are labelled in Mandarin at South African billionaire Koos Bekker’s Babylonstoren vineyard.

Bekker is chairman of Internet and media group Naspers, whose investment in Chinese media company Tencent resulted in Naspers being named Most Valuable Company In Africa in May 2015 with a market cap of almost $66 billion.

South Africa’s wine quality has increased dramatically over the last five years, Peens said. Winery costs have risen, but the battered rand has pushed many struggling wineries into a profitable position. South African wine now offers great value in export markets. Profits have allowed for more investment and you can expect the quality to keep improving, he reported in Moneyweb:

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El Niño and climate change are causing large vintage variation in the Cape and across the globe, already resulting in two of the earliest harvests (2015 and likely 2016) on record. The “every year is a good year” notion is no longer valid and fine wine consumers are better appreciating and understanding vintage variation. Both 2009 and 2012 were excellent recent vintages, but many producers believe 2015 could be superior. 2015 enjoyed favourably dry conditions and grapes were harvested with remarkable health and excellent acidity. Early tank and barrel samples suggest a richly textured, pure and lively vintage with lower alcohols. As the 2015s reach the market, will it prove to be our finest vintage yet?

Predictions for South African winemaking

Peens makes the following predictions:

  • South African wine will get more expensive.
  • Increased quality and higher prices will segment the market.
  • Vintage wines will grow as an investment market.
  • Water will become more important.

Vintage wine as an investment

As South African wines get more attention and higher prices, there is increased interest in the great wines of old. Most wines from the ’80s, ’90s and early 2000s have not aged with grace, but rare wines from the ’60s and ’70s are getting rave reviews, Peens said. Today’s leading wineries have massive potential for investment gains, he said. In rand terms, these wines are too cheap compared to their international counterparts.

Water and wine

While the drought did not dramatically affect the wine industry in 2015,  some parts of the Cape got half their annual rainfall. Peens predicts water will become more important, especially in vineyards without irrigation. Water management shift the focus from the cellar to the vineyard for quality and quantity. Wine growers with consistently poor yields and low prices may be forced to consider other farming options.

South Africa’s top export markets

These are South Africa’s biggest export markets for wine in the 12 months to June 2015, according to SA Wine Industry Information & Systems:

U.K.: 109 million liters
Germany: 79 million liters
Sweden: 25 million liters
France: 25 million liters
Netherlands: 22 million liters
Denmark: 20 million liters
Canada: 18 million liters
U.S.: 11 million liters
Belgium: 9 million liters
China: 9 million liters
Japan: 6 million liters
Switzerland: 6 million liters