South Africa has gone through a true ‘revolution’ in wine quality in the last 10-15 years. In the 1980s, over 60 cooperative wineries supplied a large majority of wine to a small number of producer/wholesalers and marketers. A pool system in cooperatives and overall regulation gave incentives on the basis of volume, rather than price, with obvious implications for quality. With the end of apartheid and the re-opening of the export market, investment flowed in the industry, new farms and cellars were established, wine quality improved, cooperatives modernised themselves and export volumes increased dramatically. Major product and process upgrading took place. Demand-driven wine styles, volume and consistency have allowed the industry to grow in the basic quality segment of the industry, while the proliferation of higher quality wines has opened new niches. In short, South Africa in the space of a little over a decade went from a supplier- driven to a buyer-driven model of winemaking and marketing. At the same time, the package of ‘basic quality’ that South African suppliers have to deliver to retailers is becoming increasingly demanding and sophisticated. While this has inevitably stimulated innovation, better managerial practices, and more systematized quality management, its financial rewards have been limited. Many of the improved processes and obtained certifications are part of what is now expected as ‘a given’ by retailers, and do not provide a competitive advantage, just potential entry into a market or maintenance of an acquired position. The extras (promotional support) that need to be delivered to obtain or maintain a listing are expensive, and margins remain extremely low in the UK retail market. Furthermore, the industry is still far from a visible presence in the more lucrative US market and the domestic market is under-developed. Labour conditions are still an issue, especially for casual workers, and the industry has made only partial moves towards meaningful ‘Black Economic Empowerment’. This paper examines these dynamics and challenges in detail and offers some suggestions for future strategic direction. It provides a general and descriptive profile of the industry, its past and present geographic and input-output configurations, institutional framework, salient trends, and a short analysis of future challenges seen from the perspective of ‘upgrading’. A separate paper, published at the same time, provides a theoretical and analytical approach to understanding the South African wine industry through Global Value Chain (GVC) analysis. It examines individual links in the chain, contractual relations among actors, definitions and negotiations of ‘quality’, and broader processes of value chain governance.
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