With the rand continuing to maintain its strength against major international currencies, local prices of bottled wines should fall in line with decreasing input costs, and those wine producers who opt to hike the prices of their brands are liable to lose market share to other wines, Colin Collard, managing director of Cape-based direct wine marketer the Wine-of-the-Month Club, warned on Thursday.
“While some economists are predicting the rand will weaken against the dollar, some are stating that it will remain strong,” he observed. “During most of February it was well below the R7 to the dollar mark, sometimes flirting with the R6 mark.”
This means that the cost of many imported components used by local producers has dropped significantly, such as wine barrels, specialised wine bottles and corks. On top of this, the latest wine reports are showing that the 2004 harvest will be a good one, in terms of both quality and volume.
“Exporters whose sales have been affected by the strength of the rand, and who were relying on being able to charge higher local prices due to the weak rand, are going to have to think twice,” cautioned Collard. “Hiking their prices too much — if at all — could blow up in their faces as this could result in them losing floor space to other producers who pass on pricing advantages to consumers.
“I can’t really comment on the cheaper wines, especially those that are sold by retailers in jugs and boxes, but bottled wine prices should definitely not rise this year. Consumers should be able to benefit this year from the effects of the strong rand.”
Collard added that he is still waiting for importers of champagne to pass on price benefits to consumers.
“This doesn’t seem to be happening. But the price of champagne should also come down.” — I-Net Bridge