South Africa

“Local suppliers need to remember buyer relationships are built on trust over time”

Wednesday July 11 2018 by Sharon Nagel

Gerhard Van der Watt, CEO of Perdeberg Cellar : 'I think we will have at least a normal crop in 2019 if not above normal. 'Gerhard Van der Watt, CEO of Perdeberg Cellar : 'I think we will have at least a normal crop in 2019 if not above normal. ' - Photo credit : DR
According to the latest estimate by Vinpro, South Africa’s 2018 crop was down 15% on last year to 9,483,000 hl, with large disparities between regions. Although the lowest forecasts at the end of last year, which predicted a return to 2005 levels (9.05 Mhl), did not materialise, the overall decline still translates to a loss of 1,700,000 hl compared to 2017. Vitisphere asked Gerhard Van der Watt, CEO of Perdeberg Cellar, a member of the Bulk Wine Centre, to describe the current situation.

How have you coped with the grape shortage this year? 

This has been a very difficult year as overall South Africa is 15% down on last year. But the large drop is located mainly in the Olifants river area, Swartland and Paarl regions which are drought-related. Other areas were marginally down and Breedekloof, a large contributor actually increased by 6%.  

 

How do you see crop levels in the future - is 2018 a one-off or the sign of more decreases to come?

I think we will have at least a normal crop in 2019 if not above normal. To date we have had excellent rains and if this trend continues and water reservoirs recover, it should be fine. Critically though, if water resources cannot recover, irrigated areas will be impacted, although I do believe these areas will work smarter with limited resources having learned a few things from 2018.

 

How are your prices trending?

Prices have increased substantially – around 25% to 35% overall I estimate, and this was well overdue. However, unfortunately there are some unsustainable crazy offers being made, partly because the extent of the drought was substantially overstated in the early months to running up to harvest, but also due to the extraordinary needs from buyers that could not service their volumes from Spain, Italy and France due to their poor 2017 crops.

 

What is the reaction of international buyers to the shortage of wines and price trends? 

Buyers had to react by paying or simply not getting wine for reasons mentioned. I do believe however that there are a number of things that will impact pricing going forward that are presently conveniently ignored. Local suppliers need to remember buyer relationships are built on trust over time and overexploitation in a year like this one will lead to a negative reaction. Unfortunately, local suppliers are being led to believe that 2019 will be a continuation of current pricing trends but the following realities need to be factored in: 1. The 2019 crop could recover and we could have a supply that exceeds normal demand curves 2. European crops in 2018 are only a few months away and all signs are they will be back to normal so many buyers that were sourcing in South Africa due to short volumes in 2017 in Europe, will revert back to their traditional suppliers. 3. South Africa prices are now reaching the levels of other supply regions, so it is no longer a sought-after, cheaper supply but simply an alternative to Chile, Argentina, Spain etc. Many buyers are not married to a country of supply but follow price/quality wherever they can get the best ratio.

 

How do you see the way forward?

My hope is that sanity will prevail because we were put in very difficult positions this year due to above-realistic expectations being created which resulted in us being unable to service long-standing customers fully. Strangely enough, recently we are finding pockets of 2018 wine becoming available at slightly better prices already, which seems to indicate the market has already started to push back on some unrealistic pricing. The market cannot be fooled for too long, I guess.

 

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