Having over-zealously planted red grape varieties over the past ten years, South Africa now finds itself with a glut of red wine, writes Richard Woodard. Meanwhile, there is insufficient capacity to meet rising demand for white varieties such as Sauvignon Blanc, Chardonnay and even the country's "workhorse" Chenin Blanc.

South Africa has undergone a major planting programme of red wine varieties over the past ten years, but in its haste to build up its red wine capacity critical mistakes were made, in terms of the choice of varieties and the locations selected.

The rush to red was not necessarily chaotic, but Winecorp group winemaker Frans Smit believes that Shiraz and Merlot were over-planted, and planted in the wrong areas. Now, with so much red wine swilling around, lower-quality juice struggles to find a home anywhere other than in bulk. "Those people will have to pull out their vines if they don't change their viticultural practices," says Smit. "There's an over-supply of the poorer quality Shiraz and Merlot right now."

The situation is similar with Cabernet Sauvignon, and yet South Africa has planted comparatively little Pinot Noir, a variety that is in great demand internationally. Smit sees "huge" quantities of Cabernet Sauvignon at the moment, which explains the freefall in Cabernet grape prices over the past two years. But while the worldwide love affair with the Pinot Noir continues to fuel demand, the variety is not widely planted in South Africa beyond areas like Walker Bay/Hermanus.

Pinotage is a different story. It is the one high-profile varietal for which trade organisation South Africa Wine Industry Information and Systems is predicting a production decrease through to 2010, and is currently not suffering supply problems, with excess quantities being channelled into rosé production and red blends.

Danie De Wet, chairman of KWV, believes there could soon actually be a problem with under-supply. "We pulled out too many Pinotage vineyards and they haven't been replaced," he says. "We bought into Cabernet and Shiraz." He also predicts a shortage of quality Merlot.

While over-supply is clearly a worrying problem with a number of red varieties, the white wine situation could not be more different, with even large companies finding it difficult to source wine across a number of white varieties.

The situation is most critical with Sauvignon Blanc. Just about everyone in the world wants more Sauvignon Blanc at the moment, and the fact that South Africa has carved out a lucrative niche with its own take on the variety - part NZ gooseberry, part steely Sancerre - makes it even more sought after.

Frans Smit is bullish about the prospects for Sauvignon Blanc from warmer regions which are often overlooked for the variety, in favour of the cooler, coastal areas currently in vogue and winning many awards. For Smit, 2006 has proved that areas like Worcester/Breede Valley can also come up with the goods.

"It was a fairly cool vintage, but they got their viticultural act together," he explains. "These are areas where the production cost is low, but they can produce good quality and make a margin. Then we can, on the Sauvignon Blanc side, take a big chunk of the market from the likes of Australia and New Zealand."

Smit estimates that production costs here are 10% to 15% below the norm for Sauvignon Blanc. The region is already turning out credible GBP4.99 wines, and Smit believes that GBP7.99 quality is "no problem" either.

Positive news, but it doesn't solve the shortage problem. Smit bottled 2006 Sauvignon Blanc in May to avoid delisting because of running out of stock.

In such a situation, even bigger companies can have problems sourcing their needs. KWV chief executive Willem Barnard acknowledges that the company will "have its work cut out" to source sufficient quantities of the right quality white wines in general, including Sauvignon Blanc, Chardonnay and Chenin Blanc.

Distell group general manager for wines Linley Schultz also acknowledges that there is a "major problem" with regard to white wine supply, but says the company is better-placed than most to find a solution. "We've got what we wanted through contractual agreements," he says, adding that the company is helped by the spectrum of its buying power, including rebate and distillation wine, with a winemaker travelling around the country to track down extra juice. "If I say we're needing x amount of Sauvignon Blanc, he goes off and gets it."

Chenin Blanc, meanwhile, had long been reviled as the workhorse of poorly-made, cheap and cheerful South African white wines. Throughout the 1990s, it was gleefully ripped out in favour of sexier red varieties, but now the industry can't get enough of it, with prices doubling between 2000 and 2005.

Smit admits there is much new planting of Chenin and indeed Colombar, although the latter is at least partly for brandy distillation. Barnard sees the humble Chenin as simply a victim of changing fashions. "It was killed by wine writers," he says. "It was not fashionable to say anything good about it. The market was not prepared to buy it and the farmers stopped planting it."

Ripping out so much Chenin has only drawn attention to the fantastic quality achievable in good sites and with older vines, but De Wet says the old farmer mentality, that Chenin had poor yields and no fruit, has done a lot of damage at the lower levels too. "We are going to enter a time with a shortage of Chenin Blanc easy-drinking wines," he says. "It's the same story as with German Riesling - and the same can happen with South African Chenin Blanc. People like us will have to say something nice about it again."

Barnard agrees with his colleague. "I think there is a business opportunity to follow that trend, and mould Chenin Blanc into what it can be," he says. "You can produce a fair volume of very high-quality wines. Chenin is a workhorse, but if you treat it well and you take care of the viticulture, you can produce fruit that will make it possible for winemakers to make better and better wines out of it."

Meanwhile, Linley Schultz is also interested in life outside the "big six" of Chardonnay, Sauvignon Blanc, Cabernet Sauvignon, Merlot, Shiraz and Pinotage, drawing attention to the small but growing amounts of Viognier, Grenache and Mourvèdre on the South African scene. Smit echoes this, professing an interest in Mourvèdre and Petit Verdot, both of which are being encountered in different areas around the Cape.

This feature is taken from 'Southern Hemisphere grape supply and wine production - forecasts to 2010', a 65-page report which includes analysis of the 2006 harvest, current and future production trends, relationships with growers and pricing patterns in Australia, New Zealand, South Africa, Chile and Argentina. For further information, click here.