It appears that a truce of sorts has been called in the simmering ‘wine-whisky’ war between South Africa and the UK and that imbibers of both in their respective countries will be able to raise a cheer or two over the Christmas period.
So close to the season of goodwill, a breakout of hostilities between South Africa’s wine merchants and the UK’s whisky purveyors would seem churlish and a betrayal of the yuletide spirit. But the signs are good that a glass or two of cheer will still salute the centuries- old tradition across the continents that separate the leafy vineyards of South Africa and the peaty soils of Scotland.
In a dazzling display of smoke and mirrors, South Africa’s Trade Minister Rob Davies and the UK Secretary of State for Business, Innovation and Skills, Dr Vince Cable, publicly kissed and made up leaving everyone, however, wondering about the peace that had been won and what it actually consisted of. The problem, very close to boiling over into a tit-for-tat trade war, was clear for all to see. The solution on the other hand, worked out by Davies and the good doctor, left everyone scratching their heads.
It all started earlier this year when UK alcohol beverage traders announced that they intended to increase the volume of South African wine imported in bulk, to be repackaged into smaller units at destination. South Africa’s Department of Trade and Industry already alarmed that more than half the 3.5bn litres sold annually to the UK was dispatched in bulk containers regarded the decision as a serious risk to the local wine industry. The South African vintners’ industry has watched with growing anger the insidious increase in bulk shipments.
Five years ago the level of South African wine exported in bulk containers stood at about 45% against 55% that was bottled and adorned with the estate’s labelling. By the end of last year, the bulk quotient had jumped to 56% of wine exported in bulk, and by July this year bulk exports had risen 31% with bottled wine exports falling by 9%. When, by June this year, the number of jobs lost in the South African wine packing and bottling industry threatened to reach 1,000 the department of trade and industry intervened.
The issue, however, was not as cut and dried as it seemed. For the UK’s importers, shipping bottled wine is not cost effective and eats into profits. And anyway, they argue, bulk shipping is a positive way of dealing with environmental concerns. Beneath it all lies an unspoken peril that the South Africans are only too aware of. Bulk shipping of the so-called New World wines has become accepted practice and raises no objection from producers in South America and Australia. The implied threat is that should South Africans kick up too much of a fuss, they might just find find themselves out of the UK’s wine trade loop.
With the game stacked against him, the South African trade minister decided to play his ace of trumps. He let it be known that if the UK insisted on more bulk shipping of South African wine, South Africa could insist on importing Scottish whisky in bulk as well.
It was a finely considered move. South Africa imports Scotch to the value of R1.7bn ($200m) from the UK each year, and exports R997m ($120m) in wine to Britain. But it was the notion of Scotch whisky being bundled off in bulk containers that really got the sporrans in a spin. Whisky marketing revolves around its heritage reflected in superlative packaging, and brand names built up over centuries of tradition. Fine whiskys rest quietly, sometimes for decades, before being presented in their distillery liveries to the discerning buyer. South Africa, however, reasoned that packaging jobs lost to bulk wine exports could be made up in packaging whisky imports. Such gathering trade war clouds sent Cable scurrying to South Africa to broker the peace, even as the heavy artillery was being rolled out.
“This is a fraught issue and I do understand why this matter is so critical in South Africa,” Cable told a media briefing on his arrival in Cape Town. “We have investigated this and understand the commercial imperatives, but we need to engage with our supermarkets to ensure that they understand the implications of those commercial decisions.”
Ecological red herring
It was the UK importers’ thinly disguised ecological red herring that really irritated the South African industry, regarding claims of environmental awareness and responsibility as camouflaged UK protectionism. Cable appeared to be on South Africa’s side as the environment issue unfolded, pledging that London would not take on the green shipping argument as official trade policy.
“It would be completely wrong to incorporate into trade policy these ideas around food miles,” he said, adding, “I want to make it absolutely clear that we’re not going there.”
South Africa’s DTI has requested a three-way dialogue with British supermarkets and Cable, a suggestion the British minister says he subscribes to.
“We do need to have a proper dialogue with the industry, with the wholesalers and supermarkets, so they understand the social implications of what they would regard as commercial decisions,” said Cable. “ We need to talk to them about how we can mitigate that. It’s not a government issue but they need to be aware of the consequences.”
So what exactly was resolved in this diplomatic flurry and rattling of sabres? What everyone in the trade want to know is whether or not there is deal around bulk shipping, either of wine or of whisky, and what happens now? To most watchers of Anglo-South African diplomacy and trade, at best some breathing space and an uneasy truce looks to be the only outcome. The line in the sand remains.
As a parting shot, Davies observes: “What’s good for exports is good for imports, but we don’t want to go in for a tit-for-tat process if we can avoid it. And while there may not be a need for us to take corresponding steps on whisky and gin, it’s always in the background.”