Wine exporters walk a logistics tightrope

Ensuring that wine is competitively priced in the local and export markets is a fine juggling act – and logistics costs can be the difference between success and failure. “It’s becoming exceedingly difficult to pass on logistics costs to the consumer,” says Marius Louw, managing director of Du Toitskloof Wines. “We have extremely high logistics costs in the country and in our experience it is not necessarily at the ports that the costs lie, but rather with the primary and secondary transportation of our product.” Passing that cost on, however, is not as easy as one would think. “If one looks at those transport costs – moving it from the farm to a bottling plant, warehousing, transport to and from the ports, to the retailers and so on, the costs sits at around R4 a bottle. Maybe with a bit of effort one could shave the cost down to around R3.60 – but that is not going to make such a difference,” he said. “It is however going to make a huge difference should that R4, for example, be added to the price of a R25 bottle of wine. As the logistics costs continue to increase, the margins are decreasing and it is not as simple as just adding the price on to the consumer who is ultimately just not going to buy the bottle of wine if it exceeds a certain price.” Logistics costs remain one of the biggest challenges for exporters, he said, and it is a cost that is continuously increasing. “If one looks at our total logistics cost, it sits at around R10 per 750ml per bottle. That cost is going to be the same for a bottle of wine selling at R25 or R50 or R100. So proportionately logistics costs make a massive impact on how we drive our business model and a small increase can make our product unaffordable.” It is for this very reason that the bulk exporting of wine has gained such popularity in South Africa in that it addresses the high logistics cost to some extent. “We can move larger quantities of wine so it has a major cost benefit,” said Louw. “There are also other cost benefits in that one has fewer breakages with less warehousing and other costs involved. “The sort of markets we are approaching are so pricesensitive that for you to be able to put the product on the shelf, you need to be able to do it as cheaply as possible. We take the time and the effort to build sustainable relationships with our logistics providers who are partners with us in achieving that goal.” INSERT R10 The total logistics costs per bottle of wine. INSERT & CAPTION It is not as simple as just adding the price on to the consumer who is ultimately just not going to buy the bottle of wine if it exceeds a certain price. – Marius Louw