South Africa facing record high wine surplus with 300m litres of unsold stock
South African stock levels are up to 300m litres in excess of demand, with total wine stock up by nearly half and reaching a new record level.
There is a particular suplus with rose wine, which has seen its levels of stock increase by 75% compared to 2019 levels, while white wine stocks have risen by 56% and red wine by 37%.
As of December 2020 there were 645m litres of South African wine in storage, of which 300m litres was uncontracted, posing a significant challenge for the storage and processing capacity for the forthcoming 2021 harvest.
The glut is down to a combination of factors, according to Kleine Kalze marketing and sales executive Carina Gous, speaking at Wine Future 2021 yesterday, who pointed to the short term increased production in 2020, which saw volumes increase by 6.7%, weak buying power and sales restrictions during the alcohol sales bans.
As a result of these factors, stock levels are now about 250 – 300 m litres above demand, and having an impact on prices - not to mention the ongoing effect of sales restrictions and a relatively weak consumer sector. As a result, average bulk wine prices in the domestic market dipped notably in April during the first hard lockdown as trading pretty much dried up. However, prices bounced back in the middle of the year, but trading remained weak, and as stock levels surged, the average bulk wine price softened towards the end of the year.
From September onwards prices dropped to 2018 levels or even less, as trading slowly resumed. By November, bulk white wine was selling for 7.2% less than in the same month in 2019, while bulk red wine was selling for 12% less.
As for overseeas exports, volumes last year were roughly in line with 2019 levels, but value growth was up by 8% during the year. Average bulk wine export prices in rand per litre softened in the second half of 2020 as a result of the high stock levels, local sales restrictions and a normalisation of the exchange rate. Prices rose in the second and third quarter on the back of a weaker rand exchange rate.
In stark contrast, the average rand price per liter of packaged exports largely managed to escape the downward price trend unscathed, with notable strong growth in the price of red blends and Chenin Blanc.
Photograph: Daniel Vogel