The South African wine industry has registered a quick and exciting period of transformation. However, winemakers are more worried about day-to-day issues and forget the key strategic ones. And some challenges are huge, among others climate change impact and changes in consumer trends.
A leap forward since 1994
In 1994, South Africa became a democracy and accessed the international wine markets. From there on, a quick transformation took place. The first challenge was to restructure the vineyards, which were totally out of alignment with global demand. In less than two decades (1992 – 2012), red wine grape varieties plantings increased from 18% to 45% and white wine varieties were also adapted to demand, with the appearance of sauvignon blanc and chardonnay.
At the same time, South African winemakers started gaining global experience on the main wine producing countries and applying in South Africa the best practices they earned abroad. As a result, quality improvement of the wines was recognized, with exports growing form 22 M liters in 1992 to an estimated 380 M in 2012. Number of export countries rose accordingly, from 20 to a 134 during that period.
While expanding and making better wine, South Africa has also learned to make wine better, with initiatives like the Biodiversity and Wine Initiative (BWI) launched in 2004 and that now protects 130.000 ha of farmland. As a result, nature returns to a better balance and inputs costs are dramatically reduced. WIETA initiative is another remarkable one. WIETA is an independent association comprising trade unions, NGOs and wine producers. The seal is issued to wines whose entire supply chain has been audited for compliance to an ethical code of conduct. In 2012, the first 30 wines were given the go-ahead to use the seal, and more wines are being certified since then.
An overview on how the industry looks at itself
Every year, pwc publishes a survey on the state of the wine industry in South Africa. One of the questions asked to CEOs and winery top executives was: How concerned are you about the following factors? These are listed below with their corresponding answers.
What is striking is that operational issues come first: energy costs, labor productivity, labor cost and land reform. In the mean time, long-term issues such as changes in consumer patterns and climate change come as the least important.
Operational factors such as those mentioned above are issues that can be dealt with on a winery basis. Each CEO might organize work procedures, staff training and manage land the best way possible so as to get the maximum profit per hectare of cultivated land. Moreover, once operational decisions regarding these factors are taken, they will have an impact on overall costs – but a limited one: think about how much the cost of energy represents on the total cost of a bottle of wine: just a few cents of rand – the local South African currency.
Climate change and changes in consumer patterns are strategic issues, and most likely more complicated to deal with. They require time, the ability to look well into the future and to cooperate with others - official bodies, other wineries, university researchers and the like.
Climate change: an indisputable impact on the South African industry
Across regions, when looking at the figures, the situation is dreadful: from 1967 to 2006, the main wine producing regions in South Africa have registered a considerable increase in the annual maximum temperatures, going from +1,7 ºC in Stellenbosch to +0,5ºC in Robertson.
Source: Bonnardot, V. and Carey V.A, 2008. Observed climatic trends in South African wine regions and potential implications for viticulture.
This not only translates into a potential crop loss of up to 90% in 2100, according to some studies, but also in increasingly challenging and changing weather patterns year after year. Looking at the three past vintages, 2014 was a wet and wild year, with a growing season marked by rainy conditions early and higher than usual disease pressures. Botrytis became a threat. Yield was up 15% than average. In 2015, there was an early harvest in most regions. It was the driest and earliest season in years marked by water shortages, being also the healthiest season in years. However, in spite of grapes with low pH, harvest had good acidity and sugar levels, with yield was down 1 – 2% compared to 2014. 2016 also registered an early harvest, with lower sugar levels (lower alcohol) but with low acidity levels. Heat and water shortages were also common, with low rainfall in winter and a restricted growth along with sunburn damage. Crop was reduced by 6,7% compared to 2015 on average.
All these changes require a constant adaptation in both vineyard and cellar practices, which does not clearly appear as being a huge concern for the main wineries surveyed by pwc.
Like other successful examples across the globe, South African winemakers have to adapt their practices in both vineyard and cellar. Here follow some best practices coming form around the world.
Aurelio Montes, in Chile has tested dry farming on a large scale. He has reduced the use of water by 65% and seen that the size of the cluster and berries decrease, getting more concentration and equilibrium, in the wines. The side effects is that there is less need to drop crop artificially to concentrate grapes; berry weight goes from 1,1 g to 0,7 g and skin/pulp ratio goes from 12% to 37%.
Cavit is the largest cooperative in Trento. It has developed a data-driven regional mapping system (Called PICA) that monitors water levels and adjusts irrigation based on the unique needs of each soil and vine type all over the Northern Italy Valley; the system reduces water usage and increases overall consistency of the grapes.
Nick Glaetzer left his family's business in the Barossa region, South Australia in 2003. In 2008 he opened up an offshoot business, Glaetzer-Dixon wines in Tasmania. Initially, Mr Glaetzer's family thought he was crazy trying to grow the grapes down south, which have their roots in the hot and dry Barossa and are famous for their full flavors. Tasmania is a region that is about 38 percent cooler than in the traditional grape-growing region Barossa Valley in southern Australia.
Increased heat and dryness in the Barossa are impacting the quality of grapes, making it difficult to produce wine. The result is that the Tasmanian shiraz industry is growing at a rate of close to 10 percent per year, while Australia’s wine industry has steadily shrunk 1.9 percent annually for the last five years. The shiraz produced in Tasmanian is less alcoholic, Glaetzer said — about 15-20 percent lower in alcohol content than the shiraz produced in the Barossa. It is also more subtle in flavor.
Due to water restrictions and the increased risk of drought, in Mendoza, Argentina, winemakers will have to either plant higher or in more southern locations. Donald Hess, has planted his highest vineyard at 3.111 meters. A vineyard called La Joya, mostly planted with Pinot Noir. The idea is to get fresher wines
Altitude has a major impact on the wine profile. The higher the altitude, the strongest the solar radiation. The higher the temperature shift between day and night (up to 20ºC). Ripening is even and slow. Grapes have thicker and darker skins giving the wines a darker color, more intense aromas and flavors.
These are some of the practices that the South African winemakers can adopt and successfully cope with climate change in their regions.
Changes in consumer patterns: adapting supply to demand, work still under way
Wineries and marketers alike were accustomed to cope with baby boomers’ needs. They now have to get ready to fulfill millenials’ needs.
Robert Parker has addressed the Baby Boomers’ needs for decades. Baby Boomers wanted to be reassured regarding their personal wine choices. His personal taste for high alcohol, oaked wines with ripe tannins has made that his followers have privileged this kind of wine styles. His simple 100 point score system has made that questions about alcohol and acidity levels were not raised.
Millenials look for emotions, are more engaged and they want to know the story behind the wine. Now, a series of structural changes have combined in the past ten years, making that the consumer is more thoughtful about alcohol levels and “freshness” of the wines. The use of social networks to communicate about wine is more common than ever. The appearance of a new breed of wine communicators (bloggers, tasters, new online journalists, …) and the need for a new approach to wine led by millenials ended the Robert Parker era and. People like Gary Vaynerchuck and his daily video blogs, appealing consumers to trust their own palate (a revolution at the time), made that the world of wine was never going to be the same again. Besides, the increasing impact of “cultural” creations on the way new consumers think about wine also paid a role in the end of Robert Parker era. Movies like Sideways and manga series like The Drops of God are new ways of transmitting information and emotions to the consumers. The Boekenhoutskloof winery has understood this very well, with a comic strip called The Steen Affair, with now three chapters and communicating its story through it.
Conclusions for the South African Industry
Within the next twenty years, that is up to 2037, South African wine industry will have to pursue its efforts taking into account that the only way forward is towards premiumization. Scarcity of water will make that growth will be organic rather than come from new vineyard plantings. Production of entry level wines sent in bulk by flexi-tanks to UK retailers will have to be avoided. Along this initiative, the path towards increased sustainability – both in the vineyard and cellar but also in the way people are managed – will have to be continued. This will give the South African wine industry – making increasingly exciting and incredible wines – the arguments to convince a new breed of consumers looking for novelty, emotion, drinkability and a memorable experience.