Wine Tourism in the & COVID-19 Business Continuity, Mitigation & Recovery Input 29 April 2020

Index Page

1. Introduction 3 2. Economic Contribution & Value Chain 4 3. COVID-19 & Tourism: Global and local outlook 4 4. Wine Tourism Business Continuity Planning & 5 Mitigation Measures: 5. COVID-19 Schedule of Services: Proposed Sector 12 Framework 6. First Steps Towards Recovery 14 7. Signatories 16

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1. Introduction:

Traditionally, wine farms are involved in the production (primary and secondary activities) and harvesting of wine grapes and the making of wine. The addition of commercial developments (for example restaurants, retail shops and accommodation) and the commodification of farm resources or features (for example historical buildings, hiking trails and venue hire) resulted in wine farms not only changing their production orientation by adopting these tertiary and quaternary retailing and service activities, but also expanding their wine farm to become places of visitation and consumption.

Wine tourism is therefore defined as travel to wineries, wine regions or wine festivals and events for the purpose of enjoying food and drink, hospitality, activities, scenery, culture and local South African lifestyles. boasts a well-established network of twenty-three diverse and well-run wine routes across three provinces; the Western Cape, Northern Cape and Kwa-Zulu Natal. The vast majority (20) and most developed of these routes are located in the Western Cape. Wine routes in South Africa is organised in line with terroir based Wine of Origin (WOO) designation.

The Routes Forum (SAWRF) is made up of representatives of the wine routes. The group meets bi-monthly to exchange ideas, share learnings and plan joint research and marketing initiatives. Representatives from Vinpro, Wosa and Wesgro are also co-opted.

There are 566 wine cellars, consisting of private wine cellars and producer cellars, operating in South Africa of which approximately 450 are members of an official wine route.

451 wine route members 23 wine routes

566 wine cellars (private wine cellars & producer cellars)

3 232 primary grape growers

Graph 1. Wineries in South Africa

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2. Economic Contribution & Value Chain:

Wine tourism is a significant revenue generator for the South African economy and contributed in excess of R6 billion to the country’s GDP. The sector provides many business and employment opportunities. Preliminary results from our 2020 survey to quantify the sector’s contribution suggests that wine tourism employs upwards of 8,000 people on a permanent basis and more than 3,000 people on a casual basis.

Wine tourism comprises of an array of sectors, all forming a value chain. For the purposes of our strategy, and this document, we focus mainly on tourism services that take place at farm gate.

Tours & Events & Tasting Room Restaurants Accommodation Experiences Festivals

Graph 2. Wine tourism services at farm gate

3. COVID-19 & Tourism: Global and local outlook:

The outlook for tourism is a sobering one at present. The United Nations World Tourism Organisation (UNWTO) estimates that international tourist arrivals could decline between 20% and 30% in 2020.

This would translate into a loss of 300 to 450 US$ billion in international tourism receipts (exports) for the year. The World Travel and Tourism Council (WTTC) estimates that these losses could result in a loss of 50 million jobs in travel globally.

At a provincial level, a 64% loss in tourism’s Gross Value Added (GVA) to the Western Cape economy is anticipated along with an estimated loss of 45% of tourism jobs by the Department of Economic Development and Tourism (DEDAT). They have identified tourism and entertainment as one of the three worst affected sectors of the economy. Wine tourism in particular is a strong driver of rural development as acknowledged by the UNWTO and the OIV when they entered into a recent agreement to mobilise wine tourism as a rural development tool.

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4. Wine Tourism Business Continuity Planning & Mitigation Measures:

Our objectives with the business continuity planning and mitigation summary are to:

 Report on the readiness of our winery members to resume operations during a phased exit from the COVID-19 lockdown.  Demonstrate their commitment to putting the health and safety of their team members, customers and supply-chain first when resuming business.  Safeguard the economic survival of our wineries to sustain the tourism value chain in order to support future demand, whether domestic or international, when it recovers. This extends to safeguarding as many tourism jobs in our wineries as possible, despite stifling odds at the moment.

We used an online survey to provide comprehensive feedback on the possible impact on staffing, health and safety conditions and the value-chain by wineries operating their tasting rooms and restaurants (on-site only) in the early phases of a staggered exit from lockdown.

The survey was completed by 104 wineries in three days. Simultaneously, we encouraged all of our wineries to conduct a risk analysis and prepare a practical business continuity plan for the weeks to come. Security will need to receive attention in the risk assessments if wineries are going to operate with a reduced number of staff e.g. offer a cashless service to reduce the risk. Please find the wineries surveyed’s feedback below.

4.1. Which hygiene and health & safety measures would you put into place with respect to each of these three groups in order for your tasting room or restaurant to be exempted from the lockdown?

Team Members/Staff Customers Supply-chain

Training of all staff, especially Compulsory temperature COVID-19 business front-of-house (FOH) team screening continuity and mitigation members, on COVID-19 plan to be received hygiene protocol before deliveries/services take place Compulsory temperature Sanitation stations at entrance Compulsory screening to and exit from tasting room temperature screening or restaurant of driver and assistant Social distancing measures Social distancing measures of Limited service to between staff. All staff to keep 2m between tables customers will reduce a safe 1.5m distance apart at number of buy-ins and all times deliveries Opportunity to frequently wash Limit the size and number of Deliveries to take place hands and hand sanitizer to groups in the venue at all to one area only e.g. dry be freely available times store or outside

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Health & safety officer to Keep customer record of all Sanitation stations to be monitor compliance with SOPs visitors with contact details set up PPE such as masks and Sanitise all surfaces before Contactless delivery gloves to be made available to and after customer visit protocols all staff Stagger workstations on either Remove all spittoons from Digitally sign invoices side of processing tasting stations lines so that food workers are not facing one another Maintain frequent washing and Communal areas and surfaces Drivers to have sanitizing of all food like door handles, credit card sanitisers and PPE in contact surfaces and utensils machines, bathrooms, their vehicles entrance doors, welcome desk etc. are cleaned regularly Washing of crockery, cutlery, Staff to throw away stemware in dishwasher at packing material e.g. high temperature in line with boxes immediately and WHO recommendation gloves used Require food service workers Keeping doors open where to frequently clean possible to minimise and sanitise counters, serving contact utensils and condiment containers Urge all guests to follow the Notices in building to Control & Prevention protocols communicate health and (no handshakes/ hugging/ hygiene steps taken and best touching) practice behaviour Only FOH staff to have Investigate no-touch bins for contact with visitors restrooms All equipment to be sterilised Offer disposable menus or every single morning and display a chalk board to evening before opening or eliminate touching menus closing of the farm Limit the number of staff on Urge all guests to follow the duty and keep scheduled work Control & Prevention protocols rosters (no handshakes/hugging/touching) Supply transport to work to Gift pens used for signing avoid public transport credit card slips Work stations, offices, the Disposable tasting cups tasting room and all work areas must be sanitised regularly and cleaned Sick staff to self-isolate Self-guided wine tastings set immediately up for limited exposure to staff

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4.2. If your tasting room or restaurant was re-opened, what other industries in your value- chain also need to be re-opened? Please list all applicable industries.

 Food and beverage suppliers  Input suppliers i.e. bottling, labelling, cartons, capsules, corks  Glass, cutlery and crockery suppliers  Imports of chemical products, dry goods, wine bottles and barrels  Cleaning and hygiene services  Gas, plumbing and electricity services suppliers  General kitchen equipment technicians  Refuse and garden services  Waste removal and recycling operators  Courier service sector  Transportation for staff and goods  Warehousing for wine  Consumables (office supplies, stationery)  IT support  Banking and cash-in-transit services  Tourism support services  Schools, crèches and after-school care for staff’s children

4.3. Is it possible for you to operate viably at a percentage of your total capacity?

 83% of wineries indicated that it would be viable for them to operate at a percentage of their total capacity during a phased exit from lockdown.

Is it possible for you to operate viably at a percentage of your total capacity? 100%

90% 83% 80%

70%

60%

50% 40% 30% 20% 17% 10% 0% Yes No

Graph 3. Viability of operations at reduced capacity

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Comments:  Operations are scalable to the number of customers allowed in the tasting room.  Wineries can rely on alternative channels like wine club, online and cellar door sales to bolster their income while limited tourism services are being offered.  Operations can be managed by a limited number of staff with administrative support staff working from home.  Certain areas of the business, like wine sales, would operate viably from a financial point of view more easily than others e.g. restaurants due to the high running cost.  The wine tourism industry is heading into winter season which is typically a quieter time of year with less visitor numbers and less team members on site.  Suggestions of a reduced tasting and food offering were made to reduce risk in the tasting room.  A great deal of concern was expressed over their ability to retain all of their staff and continue to support their families and community.

4.4. If you answered yes to question three above, what percentage of your total capacity would be viable for your winery to operate at?

 Nearly half of the wineries surveyed indicated that it would be viable for them to function at 50% of their total capacity.  A further quarter of wineries indicated that they would need to operate at between 60% and 70% of their total capacity to make it financially viable.

Viable Percentage of Total Capacity

Other 80% of Capacity 70% of Capacity 60% of Capacity 50% of Capacity 40% of Capacity 30% of Capacity 20% of Capacity

0 5 10 15 20 25 30 35 Number of Responses

Graph 4. Percentages of total capacity that limited operations are viable at

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4.5. If you answered yes to question three above, what would your staffing requirement be while operating at a reduced capacity?

 Social distancing would be possible for on-site staff. The kitchen area would be the most difficult to control in terms of social distancing.

Tasting Room:

Tasting Room Staffing Requirements

More than 50 Staff Members

41 - 50 Staff Members

31 - 40 Staff Members

21 - 30 Staff Members

11 - 20 Staff Members

1 - 10 Staff Members

None

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Working on the business premises Working from home

Graph 5. Tasting room staffing requirement at reduced capacity

Restaurant:

Restaurant Staffing Requirements

More than 50 Staff Members 41 - 50 Staff Members

31 - 40 Staff Members 21 - 30 Staff Members

11 - 20 Staff Members 1 - 10 Staff Members

None 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Working on the business premises Working from home

Graph 6. Restaurant staffing requirement at reduced capacity

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4.6. Please rank the following channels in order of importance during a phased exit from lockdown.

 The graph below shows the average ranking for each answer choice; the answer choice with the largest average ranking is the most preferred choice.  This question was answered by 100 of the participating wineries who ranked wine exports as the most important channel for their business, followed by domestic off consumption, destination and then domestic on consumption.

Importance by Channel

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3.01 3 2.78 2.52

1.9 2

1

0 Destination (Tasting Domestic On Domestic Off Export Room, On site Consumption Consumption restaurant) (Restaurants, (Grocers, retailers, hotels, catering, liquor stores, taverns, night clubs, shebeens, bars) wholesalers and re- distributors)

Graph 7. Importance by channel during lockdown phased exit

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4.7. For your winery, what is the viability of having only delivery services (i.e. packaged wine or prepared food delivered to the door of the customer) if the customer orders either online or telephonically?

 87% of wineries surveyed believe that a delivery-only option would be viable for their tasting room and would help them generate income.  By comparison, delivery-only was a viable option for only 37% of winery restaurants. Factors that played a role was the rural setting of many wineries, resultant delivery time and the suitability and price range of the type of food currently on offer.

Viability of Delivery-only by Facility 100% 90% 80% 70%

60%

50% Tasting Rooms

40% Winery Restaurants

30% 20% 10% 0% Delivery-only is viable

Graph 8. Viability of a delivery-only service by tourism facility

4.8. Do you have any solutions of your own about how to reduce risk or prevent COVID-19 transmissions if your tasting room or restaurant was allowed to operate again?

 Visitors to wineries accommodated by appointment only.  The wide-open spaces of working wine farms can be utilised to create greater social distance and offerings like picnics in separate areas creates further space.  Wine tastings offered at specific times or in sittings to better manage the number of people in the tasting room at a given time to protect customers and staff alike.  Reduced operating hours serving only breakfast, lunch and tapas and no dinner. Closing time by 17.00.  Make more than one pay-point available to create social distance.  Use Zapper QR code for payment as no-touch option for the credit card machine.  Explore guests buying their tasting glass to take home to limit potential spread when clearing and washing glasses.  Advance orders of wine with set pick-up times for the consumer.

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4.9. How would your tasting room and restaurant staff get to work every day during a phased exit from lockdown?

 70% of employees working in the tasting room or restaurant would travel to work with their own transport or with private staff transport arranged by their employer.  A further 15% of these employees live on the wine farm and can walk to work.  It is estimated that only 15% of employees would need to take public transport during a phased exit from lockdown and return to operations.

Tourism Employees Transport Types

15%

38% 15%

32%

Own Transport Private Staff Transport Public Transport Live on-site

Graph 9. Transport types to be used by tourism employees

5. COVID-19 Schedule of Services - Proposed Wine Tourism Sector Framework:

On receipt of the ‘Schedule of Services: Framework for Sectors’ document issued by the national government on 25 April, we identified the tourism services permissible at each of the five levels, referencing the relevant clauses, and accounting for the whole value chain pictured above.

Earmarking the re-opening of tasting rooms for level one only was influenced by the trading of alcohol, type of food service and level of personal movement permitted at each level of the schedule. It has since become clearer from stakeholder engagements, including the National Department of Tourism and South African Tourism webinar that took place on 29 April, that most tourism activity country-wide would only resume during level one and beyond the COVID-19 lockdown. Please see the proposed Wine Tourism Sector Framework below.

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WINE TOURISM SERVICES & FACILITIES: Level 5 Level 4 Level 3 Level 2 Level 1 Closed for on- Closed for on- Open for on- consumption. Convert consumption. Convert consumption and sit- Brand homes / licences for off licences for off down food service. Open Wine Estates’ Closed [E20] Closed [E20] consumption sales - consumption sales - for off-consumption. Tasting Rooms online retail/click & online retail/click & Subject to licencing and collect [E18] collect. [E1] trading hours. [E1] Walking, hiking and Walking, hiking and cycling trails to re- Winery Tours cycling trails to re- open.[R5] and Attractions open.[R9] Other recreational, e.g. Hiking Closed [R2 - R3] Closed [R2 - R3] Closed [R2 - R3] Other recreational and cultural and sporting Trails, Art cultural facilities activities and facilities, Galleries (indoor) to remain re-opening closed [R2 - R3] subject to directions. [R1 & P10] Restaurants only for Restaurants only for food food delivery services delivery services (9am- Restaurants permitted, Restaurants, including Winery On-site (9am-8pm) and Closed [I2] 8pm) and subject to only for take-away and sit-down, take-away and Restaurants subject to curfew (no curfew (no sit down or delivery [I3] delivery, permitted [I2] sit down or pick-up pick-up allowed) [I2] allowed) [I2] Accommodation permitted for Quarantine & Quarantine & Winery On-site Quarantine & Essential quarantine, essential Accommodation Essential Services Essential Services Accommodation Services Only [I1] services and business permitted [I1] Only [I1] Only [I1] travel, except conferences. [I1 - I2] Winery On-site Closed [R11] Closed [R12] Closed [R12] Closed [R11] Closed [R7] Conferences & Events Facilities

6. First Steps Towards Recovery:

This document was compiled shortly after the Services Schedule for a phased exit from the COVID-19 lockdown was published. It should please be seen as a working document that we’ll expand on over time and as more information on the global pandemic becomes available.

6.1. Sustain the Wine Tourism Supply Chain Ensuring the financial survival of our wineries safeguards the economy, jobs and ensures that the wine tourism supply chain remains intact to support demand when it recovers.

The survey that we conducted shows that the majority of wineries could operate from a financial point of view at 50% plus of their total capacity during a phased exit from lockdown. The number of staff needed for reduced services is low and 85% of these staff members would not require public transport to get to and from work. Strict health and safety measures will be prioritised. These are all factors mitigating the risk of spreading COVID-19.

Recommendations for recovery measures:  Policy support for the wine industry to resume exports and domestic online wine sales to improve cash flow and carry tourism facilities and services.  Policy support for changes to business operations based on the COVID-19 response e.g. to convert tasting rooms’ liquor licences from off consumption sales to online retail during phases three and two of the Services Schedule.  Include tourism businesses in stimulus programmes (e.g. tax reductions) and provide financial support for tourism businesses beyond the Tourism Relief Fund and temporary economic relief provided through the Unemployment Insurance Fund (UIF).  Formalise temporary, operational funding for Local Tourism Organisations (LTOs) that are facing reported municipal funding cuts as well as the loss of commission earned on tourism bookings and income generated by major festivals and events. With South Africa’s bottom-up approach to development, LTOs are vital for sustainable development that includes local communities.  Invest in skills training of employees in the wine tourism sector who will see their roles and environment change in the coming months.

6.2. A Market Focus

Wine tourism in South Africa comprises 70% of domestic travel, of which a strong component is intra-provincial travel. This segment is likely to recover first with a comparatively low risk profile. Unlocking the domestic day-tripper market, with all of the necessary health and safety protocols observed, will already be hugely beneficial to our sector.

Based on the Services Schedule, this graph is a likely scenario for tourism market recovery, subject to a linear progression along the levels, with the dates forecast by NDT today.

Level 2 – Level 1 Level 1 Beyond COVID-19

Domestic International Domestic Regional Domestic Overnight: (VFR Expats Overnight: Daytrippers Business (E.g. & Repeat VFR Travel Namibia) Travel)

December 2020 January 2021 Onward

Graph 10. A tourism market recovery scenario based on the Services Schedule

The competitiveness of the domestic market is likely to increase drastically as disposable income shrinks due to the economic climate. Cuts to marketing budgets should be limited as far as possible to retain the high yield segment of the domestic market (paid accommodation) that the Western Cape historically attracted.

It is likely that the regional market will recover before the international market. Our top international source markets will need to be reviewed against their rate of COVID-19 infections, air access, how open or closed their own borders are and the state of their post- COVID economy i.e. the size of the outbound opportunity. It is very likely that VFR will form the main driver of international travel initially, especially from countries with large expatriate populations, and that leisure holidays will be driven by repeat travellers who love our country.

Recommendations for recovery measures:  Invest in market research post COVID-19 to come to grips with the changed consumer mind-set. Psychographic instead of demographic profiling might offer more value-for- money as it can be applied across country markets. E.g. Canada’s ‘Explorer Quotient’.  Incentivise domestic and international business travel trade to sell our offering.  Design value-driven packages for the domestic market with low cost airlines like Kulula and online booking agents like Lekkeslaap to encourage VFR motivated travel.  Increase wine tourism industry know-how of digital marketing tools, CRM and how to use their direct-to-the-consumer channels, like wine clubs, to encourage travel.  Invest in digital marketing to target fully independent international travellers.  Develop marketing collateral and two way communication platforms for international leisure travel trade to stay top-of-mind for brochuring and contracting.

In conclusion, wineries are the #2 most visited attraction (as a collective) in the Western Cape after the V&A Waterfront. Tourists visiting Cape Town for the first time rank two activities highly: riding the cable car to the top of Table Mountain and visiting the Winelands. Our offering is an essential part of South Africa’s tourism landscape and we are committed to playing our part in our country’s COVID-19 response and the recovery of the tourism sector.

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7. Signatories:

André Morgenthal Melissa Nelsen Melody Botha Agulhas Wine Triangle Bot River Wine Route Breedekloof Wine Valley [email protected] [email protected] [email protected]

Carryn Wiltshire Grant Newton Wine Route Durbanville Wine Route [email protected] [email protected]

Nicky Wallace Reinher Behrens Elgin Valley Wine Route Wine Valley [email protected] [email protected]

Bernice Zietsman Ellen Marais Hemel-en-Aarde Wine Route Klein Karoo Wine Route [email protected] [email protected]

Monika de Jager Annelize Stroebel Patty Butterworth Namaqua West Coast Wine Route Wine Route Plettenberg Bay Winelands [email protected] [email protected] [email protected]

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Beatrix Galloway South African Brandy Homes Robertson Wine Valley Christelle Reade-Jahn [email protected] [email protected]

Elmarie Rabe Jolene Janse van Rensburg Patty Nieuwoudt Wine Routes Swartland Wine & Olive Route Tulbagh Wine Route [email protected] [email protected] [email protected]

Marisah Nieuwoudt Xania van der Merwe Riana Wium Vinpro Wellington Wine Route Worcester Wine & Olive Route [email protected] [email protected] [email protected]

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