Why bulk wine is now so important to the US and global wine market?

Sid Patel, chief executive and founder of Beverage Trade Network and the International Bulk Wine and Spirits Show, gives his take on the US bulk wine market in an article that first appeared in Meininger Wine Business International.

Tim Hanni MW, a wine educator and consultant, says the challenge for international producers who want to enter the US market is “learning the intricacies of how bulk wine business is transacted”. Hanni MW, who has helped to  establish the USA’s first bulk wine trade fair, adds that it’s critical to establish “a network of connections to the brokers, buyers and sellers.”

The process starts with understanding how the US bulk wine market operates.

What is bulk wine?

Bulk wine is defined as wine that is shipped in containers (ISO tanks, Flexitanks etc), rather than in bottles or smaller packaging. Some organizations describe any wine that’s shipped in containers larger than two litres as bulk wine but, strictly speaking, bulk wine is wine that’s shipped in large containers and then repackaged at its destination.

Buyers can include wineries, importers, exporters or bottling facilities. Retail stores can also be significant bulk buyers, particularly if they’re selling ‘private label’ wines – the home brand wines created and sold by many liquor retail chains, supermarkets and grocery chain stores. The main advantage that private label wine offers retail chains is that it gives them control over the product, and eliminates the price competition from other retailers.

After all, if they’re the only ones selling that brand of wine, then they don’t face pressure to discount it. Bulk wine is typically traded in the US in one of three ways.

Tier One

The first and most important tier of the US bulk wine trade belongs to wine negociants or brokers. Turrentine Brokerage, Mancuso Wine Brokerage and The Ciatti Company, all based in California, are leading names in this space.

Such brokers offer services ranging from grape and bulk wine brokerage to global bulk wine trading, evaluations and strategic branding. It’s not surprising that San Francisco is the hub of the bulk wine business, both domestically and internationally, given that it’s both within reach of more than 4,000 Californian wineries, as well as being a significant entry point to the US.

Brokerage firms may also offer ‘services as contract manufacturers or private label makers, a part of the business known as ‘custom crush’. This involves a buyer stating the profile of the wine required, which is then made to order by a winery. The buyer usually provides cartons and labels and the winery produces the finished goods.

The brokerage firms offer a great starting point for international bulk producers seeking to enter the US market, given their experience, knowledge and connections.

Tier Two

Wine industry classifieds make up the second strata of the bulk wine business. These classifieds may appear in newspapers, industry publications or online, through websites like winebusiness.com and Wine Country Classifieds (also distributed in print).

The classifieds will list available bulk grapes, or the specifications of ready-made wines, and potential buyers then contact the supplier directly. Many wineries list bulk grapes and wines for sales on their regional association’s website. There are also web portals like VINEX and VinsenVRAC where buyers can negotiate on grape and bulk wine listings.

International producers may certainly list their products through these avenues, as long as they are able to take care of the legalities, logistics and price negotiations themselves.

Tier Three

The third section of the bulk wine trade market is known as the ‘whisper market’, where trade is conducted via personal relationships only. Products are not listed anywhere and nor is transactional data publicly available; nevertheless, this market accounts for a sizeable share of the bulk wine trade.

Insider information is circulated about how many gallons of wine are available for sale at which price, and buyers privy to this knowledge can arrange to taste the product and proceed with the purchase. Wineries can also let brokers know what wines they have for sale, and trust that the brokers will sell the product discreetly, without revealing where it came from.

Similarly, wineries or buyers looking to buy bulk wine can make their exact requirements known to a brokerage firm or negociant, who will then put the buyer in touch with a relevant winery.

This would be a trickier channel to explore for international bulk wine producers, at least until they have spent more time in the market and made deep connections within the network of bulk grape and wine buyers and sellers.

Why bulk wine?

Bulk wine is traded for many reasons, from the need to create a blend using a varietal that’s not available locally, to a need for more wine because of a poor vintage, all the way to private label. On the other side, producers sometimes have excess grapes or wine that they can’t use themselves, and the bulk wine market offers them a way to sell that excess. Wineries – unfortunately – also occasionally find themselves stuck with excess wine because a buyer has failed to make a payment or pick up the stock.

But although there are good reasons why the bulk market exists, there’s also a good reason why the whisper market exists. It’s commonly believed –wrongly – that excess wine is always poor quality. As a result, engaging openly in the bulk wine market has the potential to tarnish the reputation of a winery otherwise known for its award-winning wines.

This scenario presents an opportunity for buyers to procure bulk wines of excellent quality and use them judiciously to build new brands, or flesh out an existing wine portfolio – provided all players can navigate this complex market.

Bulk wine show

That’s why the International Bulk Wine and Spirits Show was created in the US – to put buyers and sellers together.

“The IBWSS gives an advantage to international bulk wine buyers and sellers: access to the key players in the bulk wine business for both long- and short-term opportunities with the bonus of educational and informational seminars on important issues and how to expand their business in the US in a single location,” says Tim Hanni MW.

“Attendees and exhibitors can save hundreds of hours and thousands of dollars by having everything, and everyone, in one convenient place.”

The US, whose consumption is estimated at 31m hL, has now broadly established itself as the largest domestic market in the world.

At present, it buys international bulk wines mainly from Argentina, Chile and Canada. But given the growing strength of the US dollar and the emergence of powerful US retailers looking to build private label brands, there is a great opportunity for other countries to make a splash in the market.

France, the largest bulk wine exporter in terms of value (29% of the world’s value) and Spain, the largest bulk wine exporter in terms of volume (23% of the world’s volume), are wine producing countries with a lot to offer this market, for example.

The International Bulk Wine and Spirits Show (IBWSS) is an annual trade show and conference which will give wineries, importers, supermarkets, retailers, restaurants, distilleries and other buyers a premiere international platform to source bulk wine and spirits and meet private label suppliers. Book now and save on exhibitor rates

Only 10 Spots are left to become an Exhibitor at the 2017 International Bulk Wine and Spirits ShowRegister Now and Join the show as an Exhibitor.

Steps to Success: How to Choose a Contract Manufacturing Partner

Every company starts with the goal of growing larger and more successful. No matter what field you’re in, scaling means bringing more people into the fold, as well as reaching out to strategic partners to help you in areas where you have no capacity or expertise.

In the beverage industry, this means partnering with a contract manufacturer. Moving from an operational structure where you make your own product to one where you contract it out is a daunting task, but it’s also one that’s unavoidable if you’re going to continue to grow.

Why Do I Need a Manufacturing Partner?

For those who are hesitant to reach out to a contract manufacturer, know that your company is not alone in taking this step. All small beverage companies run into the same barrier sooner or later.

At a certain point, small companies begin experiencing growing pains. They operate under cash constraints and have limited product development options. Marketing is tough without a full marketing department and is often limited to small, grassroots campaigns. Expansion into adjacent categories can seem impossible. Limited market access and distribution opportunities add to the obstacles.

Despite all of this, your business is picking up and is beginning to outgrow the do-it-yourself manufacturing operation that’s worked thus far. You can’t simply build a factory, so you must find a manufacturing partner to help you get over the hump and scale your production.

A Strategic Decision

Next to choosing investors, deciding which manufacturer you will work with is one of the most important decisions for your company. This should be a board-level decision and it’s important to do your homework in advance. Once your company decides on a manufacturer, changing this decision in the future will an expensive, time-consuming and potentially brand-damaging undertaking.

What can go wrong if you choose the wrong manufacturer? Simply put: everything can go wrong. You can have production disruptions due to poorly-maintained equipment or because they prioritized a larger customer ahead of you. Operational missteps and process deviations such as formulation errors and recalls can impact your ability to put products on the shelf—or can be devastating to your reputation with customers. Manufacturers can experience raw material quality problems due to poor vendor management.

While many of these things might be a minor headache to a huge company, they can be fatal to a startup that’s struggling to gain brand recognition and make a first impression on customers.

Manufacturing Partner

Set-It-and-Forget-It Manufacturing

When researching various contract manufacturing partners, know that your team’s number one focus is to be able to spend time focusing on what you do best: developing distribution, brand-building and product innovation. You shouldn’t have to spend time worrying about manufacturing.

In fact, your contract manufacturing partner should run “lights out.” You should be able to let them do what they do while you flip the lights off and go to bed at night without having to lay awake worrying about it. Have they maintained their equipment? Will they make a mistake when making your batch? Will your packages will be damaged or leak? Will you have product spoilage out in the field? When you choose the right manufacturer, these should’t be things that worry you.

All manufacturers claim that quality is their number one concern. However, talk is cheap. This is why homework is important. Here are the things to look for as you research options for a contract manufacturing partner.

Take a Look at Their Team

Is the company composed of one compelling salesperson/founder and a team of medium-quality employees? An ideal manufacturer will have an entire team that’s full of knowledgeable competent people who are strong and well-respected in the company. How long have the employees been with the company? Has the company built a good reputation in the industry? Have they won external awards for quality? Do they have external certifications?

Responsiveness Is Key

The next item to look at is the manufacturer’s responsiveness. When you are looking at your watch and counting down the hours and minutes, do they share your sense of urgency? Do they answer the phone whenever you need to reach them—even if you’re calling someone’s call phone at night or over the weekend?

In addition to responding in a timely manner, will they be flexible when the unexpected happens (and the unexpected will always happen, sooner or later). Contracts can’t possibly cover every difficult situation you will encounter. Can you expect a manufacturer to respond appropriately, behave honorably and do what’s right if a problem arises?

Who Are/Were Their Customers?

Also look at a manufacturer’s current and past customers. Have they worked with other customers that are similar to you, or are you the first company of your type and size that they’ve worked with? Are their other customers happy? Do they maintain customers longterm? Do they have top-tier customers?

Be leery of doing business with a manufacturer that isn’t happy to offer to connect you with other customers as references. Also ask them for a list of past customers. Contact the past customers and ask them why they stopped doing business with that particular manufacturer.

Look at the Total Landed Cost

When you’re pricing various manufacturers, know that the total cost will have many components. It will include things such as the manufacturing fee, ingredients, packaging/materials, yield loss, transportation and storage.

In order to compare apples to apples from one manufacturer to the next, you need a simple contract that is inclusive of all costs. Ensure that your manufacturing fee is all-inclusive and that nothing else can/will be added on later. Your yield loss should allow for around 3% on ingredients and a percent or two on packaging materials. Also ensure that the total landed cost includes procurement, storage, quality assurance and waste disposal.

Manufacturing Partner

Helpful Things to Look For

A manufacturer with strategic locations is a must. Where is your market compared to where the manufacturer is located? Transportation can greatly drive up the cost if the co-packer is not located in your market area.

Know that big manufacturers have better purchasing power with suppliers. This can provide you with a savings on ingredients and packaging supplies, but only if the manufacturer doesn’t mark up the materials.

Speaking of packaging, always look towards the future. As your company grows and you expand your product lineup, you may want different bottle sizes and different kinds of packaging. If a manufacturer has a whole menu of things they can offer, that will work better for your growing company than a manufacturer that can only do one thing.

As you look towards the future, also consider manufacturers who can help you extend your brand. Can they assist with executing warehousing and distribution or help you get licensed partnerships into new channels? Will a manufacturer take you under their wing and help you avoid common rookie mistakes? Do they have strategic relationships with large industry players that might be interested in acquiring your company at some point?

Entering into a contract with a manufacturer is like a marriage—it’s a longterm, multi-year, strategic relationship. After you do your homework and look at the numbers, much of your choice will be based on an instinctive gut feeling. You need to like them and you must be able to trust them. When things go wrong, you need to know without a doubt that they will do the right thing. Your entire brand—and the future of your company—will depend on it.

Only 10 Spots are left to become an Exhibitor at the 2017 International Bulk Wine and Spirits ShowRegister Now and Join the show as an Exhibitor.

Key Retailers Like Marks & Spencer Drives Own Label Wine Growth

Mark & SpencerAndy Crossan, consumer insight director at Kantar Worldpanel told db that despite the challenges facing still wine from other drinks, especially sparkling wine and the booming popularity of gin, premium own labels had made strong gains in the latest 12 week-period as consumers trade up from cheaper branded lines and private label tiers.

“Premiumisation is a major theme in alcohol right now,” Crossan told db.”Still wine continues to face challenges from competing sectors like sparkling wine and gin, which have made significant gains from shoppers switching out of the sector.  However, there are promising signs as premium own label still wines gain more traction with shoppers in this vital period running up to Christmas.”

He highlighted that in the 12 weeks to 4 December, premium own label bottles – wines over the £8 price mark – had attracted 440,000 more households than in the same period last year.

“Shoppers returning to the still wine aisles have traded up from cheaper branded and private label tiers to these more premium options some 700,000 times,” he said.

One of the key drivers of this was UK retailer Mark & Spencer, he noted, which had seen a resurgence at this price point  “Just under half of still wine volume for the retailer has come from bottles over £8 in the last 12 weeks – up from 30% this time last year and taking shopper numbers within this tier to an all-time high of 1.1 million households,” he said.

“Of the big four, Tesco and Morrisons have seen penetration increase in premium private label, as has Aldi, which continues to expand its premium offering and appeal to an even wider range of shoppers.

Earlier this week the market analysts predicted strong growth of top tier own label lines across the board for Christmas.

M&S recently bolstered its range fine wines ahead of Christmas, after reporting “phenomenal” sales growth of over 40% sales growth in its fine wine range, and is set to boost the number of Simply Food outlets by 200 in a major two-year overhaul of its store estate.

In September, Tesco added more than 20 new lines to its own label range, which it said saw “significant” growth over the summer. The retailer has invested in its premium own-label range this year, with a successful Soho pop-up to promote its finest* range.

Only 10 Spots are left to become an Exhibitor at the 2017 International Bulk Wine and Spirits ShowRegister Now and Join the show as an Exhibitor.

Meet Ancient Lake Wine Company at IBWSS

Ancient Lake Wine CompanyAncient Lake Wine Company is a custom-designed facility built to preserve the quality of the grapes. The processing starts with a gentle belt driven receiving system feeding state of the art Bucher presses.

These presses, utilizing the “Organ” system, use fewer pressing cycles to extract optimum juice yields without excessive pressures that will release unwanted phenolic characteristics. From there, juice is sent to their stainless steel tanks, which are all individually insulated creating a micro-climate for each lot of wine produced, allowing them to apply specific techniques (native or non-native fermentations, variable fermentation temperature control, etc.) to each tank.

Additionally, optimum yields are desirable for most of their customers, so they installed a ceramic plated high solids cross-flow filter to capture close to 95% of the product, which protects any non-desirable characteristics that all Diatomaceous Earth filters introduce to the wine. Because of these systems, they are able to provide all customers uniquely sophisticated, vineyard specific, high quality, high yield wines that will be sure to meet and exceed all expectations.

List of services offered by Ancient Lake Wine company –

  • Bulk Wine
  • Custom Crushing
  • Press & Go/Pressing
  • Custom Winemaking
  • Wine Storage
  • Bottling

Ancient Lake Wine CompanyThey are taking  natural products in its prime, and helping it show its maximum potential through the art of winemaking to reach their clients’ goals.  They have a strong passion in allowing the grapes to speak for themselves through the wine, helping consumers identify the region they were grown and the different characteristics each site’s terroir promotes.

In their pursuit for excellence and their client’s success, they take many educated risks to help reach an optimum flavor profile for each block of grapes they process, narrowing down winemaking techniques that are uniquely desirable.  Hence, culminating a structurally balanced, terroir expressive wine which all wine enthusiasts are sure to never forget.

Meet and Explore Ancient Lake Wine Company’s services at IBWS Show. The International Bulk Wine and Spirits Show (IBWSS) is an annual trade show and conference which will give wineries, importers, supermarkets, retailers, restaurants, distilleries and other buyers a premiere international platform to source bulk wine and spirits and meet private label suppliers. Book now and save on exhibitor rates 

Only 10 Spots are left to become an Exhibitor at the 2017 International Bulk Wine and Spirits ShowRegister Now and Join the show as an Exhibitor.