Western Cape Business News

Send  Share  RSS  Twitter  29 Apr 2010

HOSPITALITY: Groot Constantia A Profitable Icon


Recent Western Cape Business News

HOW big a business is the iconic Groot Constantia Estate (GCE)? GCE (non-profit organisation), can make several claims as the ‘root’ of the SA wine industry – including being the oldest wine producing farm in SA and holding the longest history of uninterrupted wine production.

GCE’s claim to be a prime Cape tourism destination can also not be disputed. Over 300 00 visitors flock to the estate every year.

But – compared to other tourism/leisure assets like hotels, casinos and restaurant chains – Groot Constantia is (relatively speaking) ‘small fry’. Although it’s not a huge enterprise, GCE looks very robust.

GCE’s annual report to end June 2009 shows sales of R23.7 million and a gross profit of almost R12 million.

This is not half-bad considering the drop-off in tourist numbers after the global financial crisis and the fact that GCE, which exports 60% of its wine production, also had to cope with the effects of a stronger rand.

After administrative and selling/marketing costs are stripped out, GCE finished the 2009 financial year with an after tax surplus of some R5.2 million.

Now R5.2 million may not sound like a lot, but one has to recognise that more than a few ‘tourism/leisure’ companies have found themselves in nasty pinches in the aftermath of the global financial crisis of 2008.

For instance, rumours abound that boutique wine farms - and here we might include Uitsig, the Constantia-based winefarm that is home to some of SA’s top restaurants – are struggling to make profits.

Chairman Ernest Messina says Groot Constantia was at no time in crisis during the past year.

Indeed GCE’s balance sheet shows current liabilities of R4.4 million are comfortably covered by current assets of R27 million – of which R21 million comprises inventories.

That would suggest GCE is capable of delivering on its mandate, which requires the company to “fund, operate on a commercial basis as well as promote and protect Groot Constantia as a cultural and historical monument, an educational asset and a wine producing estate.”

It seems one of the great successes during the year were GCE’s ability to ratchet up the prices of its award winning wines in a tough market.

CEO Jean Naude says GCE was able to increase the average selling price per bottle of wine by 22%.

The general improved quality of our products, confirmed by our wine competition results, made it an easy task to increase the selling value of our products.”

Naude says this allowed GCE to maintain positive cash flow throughout the financial year and produce a surplus in unfavourable economic conditions.

Naude is also positive about wine production going forward.

He says above average rainfall during the past winter followed by a dry summer ensured the 2009 crop is of excellent quality.

We are expecting future crops to slowly grow in quantity as our bearing hectares increase over the next few years, with the necessary positive effect on our financial situation.”

Naude says the past year’s production of 535 tons was a huge increase on the previous year’s 343 tons.

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