This article presents the main characteristics of a shipping method increasingly chosen by producers and importers around the world that is trading between 1.5 and 2 billion liters of wine each year.
After a successful grape harvest, wine producers around the world have to analyze all the possible logistics of transportation alternatives to export their products overseas. Wine can be either bottled at the winery of source, or sent abroad in a bulk tank for its subsequent packaging. At first this might sound like an easy task, but in reality there are many aspects to be taken into account. This article presents the most import features about the logistics of bulk wine trade, a phenomenon that had been rising from 560 million to 1.24 billion liters in a decade, according to Rabobank.
- It’s all about the bulk tank
When looking to an alternative way to exporting wine in a bottle, there is only one method available in the trade market: bulk tank. Indeed, there are two different kinds of bulk tanks: ISO tanks, which are reusable steel tanks; and Flexitanks, which are disposable plastic bags that are fitted inside a standard 20 ft. (6.25m) container.
ISO tanks are stainless steel vessels that fit directly onto standard trucks and can readily be transferred to rail or sea transport. These kinds of bulk tanks have a capacity of 26,000 liters; plus they are reusable and robust, since they can also be used to transport hazardous materials.
Flexitanks are flexible bags that are fitted into a standard container and have a capacity of 24,000 liters. Usually Flexitanks are used only once, although they can be re-used. The bags’ components might vary, depending on the product being transported. The latest systems are constructed of polyethylene with a barrier material of ethylene vinyl alcohol (EVOH) copolymer in order to hold wine without impairing its quality. Nowadays these bags offer a very low oxygen migration rate and are an effective barrier to the organic materials (such as naphthalene) that can taint wine.
- Quality or quantity: that is the question
At first sight we might think that shipping wine bottled at origin preserves better the quality of the product, while the only benefit of exporting it in a bulk tank is its large scale. Premium wine producers believe that their consumers’ negative perception on the quality of their products might seriously affect their brands. This fear is real; at the end of the day it takes years to achieve a good brand positioning, and only minutes to undermine it. In this sense, we must ask the question: which method of transportation is the best in terms of quantity and quality for your business?
According to a Wrap’s report of 2008 “apart from top end wine specifically made with bottle ageing and longevity in mind, wine effectively begins to deteriorate from the time it is filled into bottles and it is at this filling point that the shelf life is deemed to start. Bulk shipping defers the moment of bottling and thus the start of the shelf life. This has implications for the retailer in regards to stock levels and rotation, as the entirety of the shelf life is spent in the country of sale rather than during transport, which may be an advantage for entry level wines with a more limited shelf life”. In addition to this, a standard container holds between 12,000 and 13,000 bottles, while standard flexi-tank holds approximately 32,000 bottles and ISO tanks hold nearly 35,000 bottles. In this sense, bulk tanks do not appear to be the best option for wines produced and sold in small volumes.
Regarding quality, in the past years the wine industry has invested a lot in research and development (R+D) aspects regarding the potential quality risk associated with bulk transportation. As a matter of fact, the effect of oxygen, fermentation and the impact of temperature in a unique and complex beverage as wine is nowadays well documented, so it’s quality traceability is better managed.
Another paper written and published by Scorpex Wine Services considers that bulk shipping has helped to avoid or reduce some of the risks associated with transporting wine in bottles, such as oxidation, re-fermentation, contamination and taint and temperature variation. In spite of this, the paper identifies some significant risks that need to be taken into account, such as oxidation, re-fermentation (particularly in sweet wines), contamination and taint. All of these potential issues can be mitigated with the proper use of both bulk shipping methods: ISO tanks and Flexitanks.
- Markets, Costs & Stock Levels
There are many reasons why retailers and producers are increasingly choosing this trade method. In some cases the wineries have an oversupply that needs to be cleared. In others, wine from the new world is needed to be blended with local wines in order to balance expensive costs of production or to compensate a bad vintage. To produce a blend, one appellation of wine requires a specific varietal from another region and will source that.
According to a study from Rabobank in 2012, the estimated amount saved by shipping wine in bulk tanks and bottling it at the destination related to import duties, bottling costs and foreign exchange exposure and ranged from US$ 1.50 to US$3.00 per case. These are not small numbers when we take into account that between 1.5 to 2 billion liters of wine are shipped in bulk tanks each year, with a volume growing at 10–15% per year.
There are two main reasons to import this beverage in bulk tanks. First, a friendly wine packaging that matches its clients’ expectations and rapid product rotation are key aspects for the company’s profitability. Second, because the wine’s shelf life starts when the bottle is being filled. By importing wine in bulk tanks, companies have the opportunity to extend the shelf life by keeping stocks levels and rotation in a healthy rhythm that respects the life of a complex product like wine.
But, who is selling and who is buying? According to JFHillebrand, the world’s leading global beverage logistics company, the key trade lanes are from new world producing countries to Europe and the UK, which is the world’s largest wine importer. According to the US Department of Agriculture in 2012 South Africa led the bulk wine exports ranking by shipping 61% of its exports with this method; it was followed by Australia (53% of its wine exports), US (50%), Chile (39%) and New Zealand (30%).
- Looks matter
It’s not easy to indulge every wine customer in this rapidly changing world. Every market has its own secrets and every client has its own demands and expectations regarding a product and a brand. For instance, we can imagine how difficult it must be for a Latin-American winery to satisfy a Japanese and Swedish consumer with a single point of view born at the wine cellars. By transporting wine in a bulk tank to its final trading destination the company and the retailers have the opportunity to fill and pack the product with aesthetics that match the consumer’s demands and even enables the marketing team to respond to short term promotional campaigns. In many cases bulk wine is bottled and sold under the importer’s own brand or label.
In addition to this, when the product is filled locally, the possible damage of the bottle or its label is potentially reduced; and any trouble of this kind that might appear can easily be solved by local suppliers.
- Let’s be eco friendly
Last but not least the environmental factor must be analyzed. Firstly, the fact that a bulk tank can transport double the amount of wine than a container full of bottles has a positive impact on the environmental emissions associated with the transportation. According to another Wrap paper “the carbon footprint of alcohol consumed in the UK is 1.5% of the total UK greenhouse gas emissions, of which one-quarter is attributable to wine”. In this sense, one way to reduce carbon emissions from wine shipments is the development and use of bulk tanks.
Secondly, in some countries the color prolife of imported glass might be a big issue, since it won’t always match the requirements of the glass manufacturers who need cullet to produce more bottles for their local costumers. Wrap’s paper presents an example of this the case in the UK. It quotes that there “green glass accounts for only 20% (approximately 400,000 tones) of UK production but comprises 50% of the glass waste arising, so the current supply of cullet to the green furnaces is close to maximum demand”. “An increase in the bulk importation of wine into the UK could help address this color imbalance by creating a demand for green cullet for the bottles which will be needed to fill the wine in the UK”.
Conclusion: We can conclude that exporting wine in bulk tanks appears as a flexible and modern alternative with many advantages for producers and retailers. By handling the product with care and responsibility, the beverage should not lose any of it’s rich and complex characteristics; in other words quantity does not have to be the counterpart of quality. Having the opportunity to blend the beverage with a local one in order to balance production costs, produce an exquisite blend or filling the bottle in the market of destination allows the seller to strengthen their brand strategy. Bulk wine trade has an extra benefit that must not be forgotten: it’s environmentally friendly since ISO bulk tanks can be re-used and the glass recycling efforts can be mobilized by creating a high value market for green glass.
Facts and Figures
- From 560 million to 1.24 billion liters in 10 years raised global bulk wine exports.
- Britain, Germany, the United States and China have the greatest demand of bulk wine.
- Chile, Australia, Argentina, South Africa, the United States and New Zealand are the main exporters.
- Between 24,000 and 26,000 liters of wine can be transport in a single bulk tank.
- US$ 3.82 a liter in a bottle vs. US$ 1.06 per liter of bulk wine was last year average FOB price for Australian wine in the UK.
- 64% of South Africa’s wine exports arrive to Britain as bulk wine in 2013.
- From 23% to 43% increased the amount of wine shipped in bulk tanks by the new world wine producing countries between 2001 and 2010.
- US$142,300,000are the estimated saving related to bulk wine shipping in 2010 in comparison with 2001, according to Rabobank. That’s a savings of $2.25 for a standard 9-liter case of wine.
- Between 5 and 2 billion liters of wine are shipped in bulk each year.
- Approximately 50% of US wine exports are bulk shipped.
Gibson, R., Quality Risks – Shipment of Bulk and Bottled Wine, Scorpex Wine Services, 2006.
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