Top SA wine producers provide a happier place all round

WITH SOUTH AFRICA’S 2013 wine grape harvest fast approaching, many farmers are re-assessing their cost structures and modus operandi in the wake of wage demands that turned ugly. The following was first published in the Cape Argus newspaper last week…
 
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Published in the Cape Argus on 18 January 2013
As the smoke clears following the unrest in various fruit-growing areas of the Western Cape, and with the next round of protests demanding higher wages for farm labourers and seasonal pickers in particular on its way, the South African wine industry is weighing up the implications to its business model and to the way of life for many among the vineyards.

To date the strike for an increase in the minimum wage from R69 to R150 a day – which has involved the intimidation of farmers and their full-time employees, looting, the destruction of property and the loss of life – has largely been confined to fruit farms that do not produce grapes for making wine. But with cellars gearing up for the 2013 harvest and the pay dispute apparently no closer to resolution than it was when violence broke out in De Doorns, Wolseley, Grabouw and elsewhere last year, it seems inevitable that more wine farms – especially those using part-time workers – will soon become the focus of attention for the strike leaders as well as the political and criminal factions seeking to gain from the uprising.

Should the wine grape harvest this year be seriously disrupted, it is a very real possibility that some farmers could go out of business. Many will be among those whose only source of income comes from the grapes they sell to wine producers and whose business model revolves around low prices and large tonnage. Others up against the wall will be those making or selling wine whose success hinges more on offering the best prices than it does on the best quality, and who operate in sectors of the market where branding is not a factor. 
 
On the other hand, the SA wine industry also comprises large corporations as well as a number of private wine farm owners with the means to weather the storm. Many of these stakeholders are already paying way better than the minimum wage while providing their staff with decent accommodation and more, such as crèche and church facilities. But of as much concern to these stakeholders as the cost implications of having to pay more to their workers or hiring fewer people and opting for increased mechanisation, is the straining of the relationships they have with the farm hands and how to embrace a business model revolving more around quality and branding rather than tending to play the price card.
Earlier this month, Danie de Wet – the owner of Robertson wine estate De Wetshof, former chairman of the KWV, and a heavyweight in SA wine circles – wrote an article carried on his website about the local wine industry’s need to “commit to excellence at all costs”. Among the points made by De Wet was that wine “is not a bulk agricultural commodity whose origin and identity is of lesser importance to price and ease of access”. He feels that the wine industry should avoid “falling into the trap of producing cheap and cheerful wines at the behest of bargain-hunting retailers in foreign markets”.
De Wet warned that “alarm bells have already started ringing due to South Africa’s increased exports of cheap bulk wine for bottling in other parts of the world”. Yet Wines of South Africa (Wosa), the industry organisation promoting SA wine exports, has since gone public with an opposing viewpoint in proclaiming “a new sense of optimism on the back of record export levels and the likelihood of one of the best harvests this year…”
Su Birch, the chief executive officer of Wosa, says: “At this stage, all indications are that this year’s local crop could be the third biggest in recorded history. This is assuming that good weather conditions continue, there is a speedy and peaceful resolution to the farmworker strikes and harvests come in on time.” She reports that bulk (non-packaged) exports had grown to 59% of volumes in 2012 and reasons that while packaged wines generally offer higher returns, local producers have been forced to accept that to compete globally they have to provide what the mainstream markets want. “The reality we face also confronts Australia, Chile, Argentina and even New Zealand.”
Birch says that while the industry regretted the current labour unrest in the Western Cape, huge strides were being made to ensure decent working conditions on all wine-producing farms. But will these strides be big enough and will they take place fast enough?
By and large the wine farms where workers are already getting a fair deal from employers are where top quality wines are being made and sold at a profit bolstered by the added value that comes with a good image, sound branding and customer loyalty – a profit that benefits both worker and proprietor and makes for a happier place all round. The sort of bulk export business Wosa is proud of involves margins under downward pressure in a highly competitive global market – margins more likely to be cut to secure the business than grown to accommodate a brighter future for those toiling for their livelihood.
Perhaps De Wet is being unrealistic; maybe his dreams are too big. A more likely scenario for the future is one in which only a tiny segment of the industry will be able to claim that their wonderful wines are ‘made by hand’ for appreciative consumers willing to pay a premium for the “excellence” that the De Wetshof patriarch speaks of. Besides these top wine producers, the industry appears bound to take the alternative route in becoming ever more commodity orientated and one in which picking grapes and tending to vines will be increasingly less attractive as a means to put bread on the table and raise a family.
Wine farmers who find either route unsustainable will use their land for something else, sell up or go under – it’s the way of a capitalist system subject to the same market forces confronting democracies around the world.