Wine_Business_Monthly_2013-12

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Wine_Business_Monthly_2013-12

WINE BUSINESS MONTHLY

December 2013 • $5.95 The Industry’s Leading Publication for Wineries and Growers www.winebusiness.com

Product Review:

Sparkling

Wine Equipment

Barrels & Oak Survey Report:

A Focus on Cabernet Sauvignon

What Wineries Need to Know

About Mobile Users

Year in Review:

Notable News, Deals and People Moves


sales & marketing

2013 Packaging Survey Report:

Focus on Glass & Kegs

Survey shows rising acceptance of kegs, Chinese glass suppliers and lighter bottles

Paul Franson

Paul Franson, of Napa, California, writes on wine and business.

WINE B U S INESS MONTHLY RE C E NTLY completed its annual study of

bottle usage and added questions about other packaging formats, like kegs. It

surveyed 256 names taken from the almost 8,000 wineries in North America

maintained by Wines & Vines Analytics and found that kegs are becoming

quite popular, as are lightweight glass bottles. Since we last surveyed about

glass, we have also found faster-growing acceptance of Chinese bottles.

The greatest number of respondents (43 percent) used standard 16- and

17-oz. bottles, with a slight increase this year compared to 2011 in use of

the lighter bottles, followed by the 22 percent who preferred 20.3 oz. bottles

(C HART 1).

In addition, 11 percent used 23 oz. bottles, though that number dropped

slightly since 2011, and only 2 percent preferred heavy 30 oz. bottles.

By contrast, 15 percent used 14 oz. bottles, up from 2011, while the number

opting for 11.6 oz. and 10.5 oz. bottles totaled only 9 percent, down from 2011.

In sum, the biggest increases were in use of the slightly lighter 16 oz. and

14 oz. bottles, with both the heaviest and lightest sizes losing ground.

While almost two-thirds of respondents didn’t change bottle weight,

19 percent of those that did said they changed their purchases to save money.

The actual ways they expected to save money included the cost of the glass,

shipping from the supplier and shipping the filled products. (C HART 2).

Ten percent fewer changed to reduce costs this year, perhaps reflecting

the improved market. In addition, 17 percent said they changed to reduce

environmental impact.

C HART 1

What is the weight of the glass bottle (750 ml) you use MOST?

30%

25%

2011 2013

C HART 2

If you moved to a lighter-weight glass in the last year, what was the

most important reason?

30%

25%

2011 2013

In

2011 2013

46% 36%

moved to lighter-weight bottles

20%

20%

15%

15%

10%

10%

5%

5%

0%

30 23 20.3 17 16 14 11.6 10.5

bottle weight in ounces

0%

Cost Reduction*

reason to change bottle weight

Environmental

2013 WBM PACKAGING SURVEY

* Cost reduction includes: The purchase price of the glass is cheaper, to save money on

shipping (from vendor/manufacturer), to save money on shipping filled product.

2013 WBM PACKAGING SURVEY

74 December 2013 WBM


2013 Packaging Survey Report: Focus on Glass & Kegs

A View From Users

of Lightweight Bottles

Trinchero Family Estates, maker of Sutter Home and many other brands,

uses lightweight bottles. Bob Torres, a principal and senior vice president of

operations for Trinchero Family Estates in St. Helena, California, said that

the company was a pioneer in lightweight glass.

“We owned the mold for our 1.5-L glass bottles and decided over 10 years

ago that we could make lighter, and therefore more environmentally friendly,

glass for other bottles. We are always looking for ways to improve our products

and our packages that can reduce waste and cost without compromising

quality or brand integrity,” he said.

Trinchero has been using lightweight 1.5 L bottles for more than 10 years,

and started using lightweight glass for 750 ml bottles about two years ago. The

company currently uses lightweight glass for brands such as Sutter Home, Fre,

Sycamore Lane and Trinity Oaks, and is converting other brands as appropriate.

The bottles weigh about 14 oz. for the 750 ml bottles. “There is lighter

weight glass available, but we felt that going from 16.5 oz. or 17.5 oz. down to

14 oz. was as low as we could go and still have the structural strength that our

consumers need and expect,” said Torres. “We worked closely with our glass

manufacturers and conducted extensive testing to get to the right weight.”

Torres said that the company originally adopted the new bottles because

it knew it was better environmentally. “We saved 50,000 barrels of oil the

first year by greenhouse gas calculations. It uses less energy to make it, less

freight to get it here and ship out, and less cost to produce. It also reduces the

cardboard needed for cartons, so the environmental and financial benefits

are numerous.”

There have not been any problems but, of course, they had to adjust the

cartons, bottling machinery, etc.

Customers have been receptive. “I think both the industry and the customer

are gradually becoming aware of the environmental advantages of lightweight

glass and other technological advantages in packaging, such as recycled

content of labels and cartons, alternative closures and TetraPak packaging,”

said Torres. “We never compromise on the quality of our wines—but if we

can reduce the impact on our environment and save the customer money, it’s

the right thing to do.”

Constellation Brands has used lightweight glass for a number of years.

Director of global procurement Stephen Krimont said the move was made

to save money, but “it was the right thing to do from an environmental

viewpoint.” He added, “All the wineries are shifting to lighter glass except for

luxury brands. All the glass makers are supplying them.”

Though they use different glass for different products, the glass is typically

in the 14 oz. range, and Krimont reports no problems in production. He also

hasn’t heard of any complaints from customers.

Fetzer Vineyards in Hopland, California began to use lightweight bottles

in 2008 for its principal brand, Fetzer, and marketing director Rodrigo

Maturana said that change meant a 17 percent reduction in the weight of

the bottles, which in the moment translated to 2,173 tons of glass per year.

The weights of the bottles used are:

• 750 Claret–14.0 oz./397.9 gm

• 750 Burgundy–16.0 oz./453.6 gm

Maturana says that the main reason for the switch is Fetzer’s history and

philosophy of sustainability and the benefits to the environment.

76 December 2013 WBM


2013 Packaging Survey Report:

Focus on Glass & Kegs

“Using lightweight bottles for the highest volume within the company had

the biggest impact on our carbon footprint,” he said.

He added that consumer acceptance has been positive because it allows

Fetzer to compete well at its price point. “It also communicates our constant

pursuit of taking sustainable actions for the Fetzer brand.”

He added that, “As the lightweight bottles were developed to run on fast

production lines, there have been no complications. They run smoothly on

all our bottling lines.”

Ste. Michelle Wine Estates’ transition to lightweight eco-glass started in

2011, beginning with higher-volume, value wine brands Columbia Crest,

Two Vines and Red Diamond. The Two Vines and Red Diamond glass

weight was reduced by 2 oz. in 2012. In 2013 Snoqualmie also transitioned

to eco-glass.

Chateau Ste. Michelle went to the lightweight glass for its Columbia Valley

tier wines this year. The glass weight was reduced by 3 oz. on the Rieslings

and Sauvignon Blanc and 0.5 oz. on the Chardonnay. A spokesperson said

that they did not encounter any significant production problems.

Imported Glass and

Environmental Factors

By far, the largest number of wineries bought their glass from U.S. suppliers,

though that percentage dropped 10 percent from two years ago to 38 percent.

By contrast, 12 percent increased their purchases from China to a total of

27 percent. (C HART 3) Purchases from Mexico remained constant at 22

percent while those from Europe dropped 2 percent to 10 percent, perhaps

reflecting the continued strong euro.

Those who responded to the survey reported that the most important

factor in choosing a glass supplier was quality, followed by price, reputation

of supplier and availability of glass molds. Glass originating from China and

C HART 3

What percentage of your glass is sourced from:

50%

2011 2013

C HART 4

What influences your glass choice most? (Choose from most important

to least important: 1=not important, 5=very important).

2011 2013

Price 4.2 4.3

40%

Where it’s made/ shipped from 3.3 3.2

(China, U.S., etc.)

30%

Environmental considerations 3.3 3.0

(carbon footprint, recycled material, etc.)

20%

10%

Reputation/reliability 4.1 4.2

of the glass supplier

Availability of specific molds 3.8 3.9

0%

U.S. Europe China Mexico Other

country of your glass source

2013 WBM PACKAGING SURVEY

Quality/consistency of the glass 4.5 4.5

2013 WBM PACKAGING SURVEY

WBM December 2013 79


2013 Packaging Survey Report: Focus on Glass & Kegs

environmental issues—like carbon footprint and use of recycled material—

are less significant factors than in 2011 (C HART 4).

By far, the largest number of respondents (53 percent) used three to six styles

of glass bottles this year. The number of respondents dropped to 18 percent for

those using two styles, 19 percent for six to 11 styles, 6 percent for only one

type of bottle, and 4 percent bought more than 10 styles. (C HART 5).

When wineries order bottles, bottling considerations are major factors, but

on-time delivery is still most important, followed by label application, glass

tolerance, stability of the bottle on the line and finally whether the parts to

change bottles are on hand. (C HART 6). The latter may partly reflect the

popularity of mobile bottling lines that assume that responsibility, especially

for smaller wineries.

Interestingly, all factors rose this year, though on-time delivery rose the

most, perhaps again reflecting a better economy.

C HART 6

When ordering your glass, rank the following bottling line

considerations: (Choose from most important to least important:

1=not important, 5=very important).

2011 2013

Glass tolerances 3.2 3.6

Label application 3.2 3.9

C HART 5

How many different styles of glass will your winery use this year?

2013

1 6%

2 18%

3-6 53%

6-11 19%

10+ 4%

2013 WBM PACKAGING SURVEY

Stability of bottles on the line 2.8 3.3

Change parts on hand 2.3 2.8

On-time delivery 3.2 4.3

2013 WBM PACKAGING SURVEY

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80 December 2013 WBM


2013 Packaging Survey Report:

Focus on Glass & Kegs

Kegs Dominate “Other Types

of Packaging” Category

Slightly more wineries are using packaging other than glass this year:

31 percent compared to 29 percent in 2011.

Of those using some other kind of packaging, 83 percent are shipping

wine in kegs, a large increase from the last survey. This may reflect the ease

of filling kegs for small wineries compared to using other technologies, like

TetraPak, bag in a box, Astra Pouch, aluminum and PET bottles, which are

primarily the province of large manufacturers (C HART 7).

As expected, more large wineries are packaging wine in kegs (50 percent)

than smaller wineries (25 percent).

Of those wineries shipping wine in kegs, more than 80 percent use stainless;

the others use PET. Though there’s been a lot of attention paid to

one-way kegs, wineries that use kegs overwhelmingly have the kegs returned

for re-use. This may reflect the popularity of local consumption, especially

for smaller wineries.

C HART 7

Are you using anything other than glass to package your wines?

Yes 29% 31%

2011 2013

If yes, what?

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

TetraPak

Bag/box

AstraPouch

Aluminum

Flasq 375 ml

PET bottle

Keg

Other

packaging other than glass

2013 WBM PACKAGING SURVEY

WBM December 2013 83


2013 Packaging Survey Report: Focus on Glass & Kegs

C HART 8

If using kegs, who are your customers? (please check all that apply)

Small

2013

Mid and Large

Restaurants 96% 100%

Wine bars 67% 56%

Cruise lines 6% 0%

Sporting events 10% 6%

Resort/Hotels 20% 31%

2013 WBM PACKAGING SURVEY

Most small wineries (89 percent) handle their own logistics, though larger

wineries also use third parties, roughly 44 percent of the time. In total,

77 percent of those who use kegs take care of their own filling and logistics.

Restaurants are by far the biggest customers for wineries of all sizes;

97 percent report selling kegs to restaurants. Large wineries are more likely

to supply wine bars, hotels and resorts while small wineries deliver more to

sporting events (C HART 8).

Trefethen Family Vineyards in Napa has been putting wine in kegs since

2005, originally supplying the dry Riesling in 16 gal. beer kegs for Two

Urban Licks in Atlanta, a pioneer in the practice that now has more than

30 wines on tap.

Vice president of sales Joseph Cusimano said that the company switched

to the present format with Free Flow Wines last year and now offers both the

popular Riesling and Chardonnay that way. “They’re perfect, fresh white wines.

I don’t think we’ll use it for reds,” he admits. “They need different treatment.”

Part of the initiative for the kegs came from Millennials Hailey Trefethen

and Loren Trefethen, the third generation in the family business. “They are

into innovation and find other Millennials are, too,” Cusimano said.

Cusimano admits than many of the distributors weren’t comfortable with

the new technology, “They were driven by the accounts. They wanted kegs.”

Now the company has kegs at about 50 accounts.

Unlike Trefethen, most users of kegs have used them only for a short time.

Spellbound, one of the Michael Mondavi Family Estate wines, supplies

wine in kegs in Massachusetts, Georgia, Texas and other states. “Chardonnay

and Cabernet are most popular,” said general manager Geoff Whitman. “It’s

taken off in urban pockets, starting with Two Urban Licks in Atlanta, where

Rob Mondavi [Michael’s son] used to live.”

He thinks the kegs are perfect for wines by the glass that sell for under $20 to

$25 per bottle that allow consumers to try wines that they normally can’t get.

He admits that, in the quantities they’ve supplied, they don’t save a lot of

money—about 40 cents per equivalent bottle—but “it’s good for the environment.”

With higher volume, they could have done better.

Whitman said that he’s “cautiously optimistic about wines on tap. We’re

pretty happy with the progress, but there’s not a lot of choice out there. It’s

mostly Chardonnay; there’s no Marsanne or Viognier or other wines, though

I do see Pinot Grigio.”

The company originally filled its own kegs since it was doing only 10 to 15

at a time, but it was a messy deal. “The fillers got covered with wine!” Now it

uses Free Flow.

Free Flow Wines of Napa is one of the most popular third party keg logistics

companies. Free Flow actually started with its own brand, Silvertap, but

has since sold it to concentrate on serving other wineries. Co-founder and

chairman Dan Donahoe said that the firm supplies more than 250 premium

wines to more than 1,500 restaurants, hotels, sports and entertainment

venues nationwide, and will have 50,000 kegs by the end of this year.

The company is moving into a new 22,000-sq.-ft. facility in Napa and

installing a new kegging line. The two-year-old company also plans a filling

line in the east; now 70 percent of its business is west of the Mississippi, and

they’d like to build it in the east.

Clos La Chance Winery in San Martin started using kegs six months ago

for its Cabernet, Merlot and Sauvignon Blanc, as well as a private label. “I

think this is something that will really take off. Almost all new restaurants

put in taps for wine,” said vice president of marketing Cheryl Murphy Durzy.

She likes the reduction of spoilage as the kegs maintain quality, and they’re

also good for the environment. She has the kegs filled by Free Flow Wines,

which also handles logistics to get the kegs to Clos La Chance’s distributor in

California, Young’s Market. Still, she believes kegs work best in local markets.

Don & Sons, the negociant turned winemaker started by Don Sebastiani,

supplies three wines in kegs through Free Flow and Young’s Market. Like the

others, he uses Free Flow for logistics and distributes the wine through his

usual wholesale, Young’s Market in California. He’s been putting the wine

into upscale places; they’ve been approached by a large chain but so far have

turned them down.

One user that’s not completely convinced is Robert Craig Winery in

Napa. The winery tried kegs as an experiment but doesn’t plan to continue

packaging in kegs, said CEO Elton Slone. “We had a few extra gallons of wine

available that did not fit into the program for our regular 2011 production,

so we decided to do a one-time offering to three restaurants that have carried

our wines and expressed interest in kegs. It was much better financially than

selling the wine in the bulk market.” The total was 35, 5-gallon kegs.

“What we had available was snapped up very quickly,” he said, adding, “we

don’t plan on having a ‘Robert Keg’ future but never say never. The wine is

delicious, and obviously there is a demand for higher-end wine in kegs. It’s

been a nice opportunity to meet new consumers in a low-key way.”

He feels that realistically, kegs make sense if done in large volume and on

a continuous basis, and Craig doesn’t have the production for that. “Kegs

need to be kept fresh so the wines don’t start tasting ‘keggy’, meaning that

inventory has to move through quickly. That is probably a better scenario for

the large corporate players with high-volume distribution,” he added. WBM

METHODOLOGY

The responses came from 256 sources, all but 14 from wineries. The

2011 responses came from that year’s survey.

The respondents had many roles, though three-quarters were involved

in winemaking. However, many of their duties overlapped, and 61

percent were owners or presidents, 37 percent each in sales/marketing

or working in the cellar, and 30 percent were involved in the vineyard and

27 percent in the tasting room. This duplication undoubtedly reflected

the smaller wineries in the survey.

The largest number of responses, 34 percent total, came from wineries

with 2,500 to 9,999 annual case production, with all under 10,000

cases, representing 65 percent. Only 8 percent of responses were from

wineries with production of more than 100,000 cases, but obviously their

influence would far outweigh the purchases of the small wineries.

84 December 2013 WBM

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