Material shortages and supply chain challenges impact the wine industry
Wineries and wine brands across the country and the world are reporting shortages in packaging and production materials, while simultaneously experiencing logistical challenges as they scramble to secure the resources they have. need to transport their wine to consumers. While that doesn’t necessarily mean there will be less wine available during the holidays – or that the prices for your favorite bottles will skyrocket – the challenges shine a light on the complicated dance wine producers perform behind the scenes for. deliver perfectly synchronized wine shipments to homes. , restaurants and shops.
Equipment shortages for the wine industry
Rich Chapman is the Supply Chain Director at Saxco, an international company that provides packaging solutions to the wine industry. He says the global supply chains that the wine industry relies on are currently being tested by some of the most extreme circumstances in his 20-year career in the field. In the past, the problems were more isolated – strikes, hurricanes, blackouts – but this problem has longer legs. âEverything from glass to transportation is completely strained,â says Chapman. âThe demand for glass is exploding. ”
Generally speaking, glass for wine bottles is made in ovens, where it can be melted and reused many times. According to Chapman, a commercial glass kiln can cost around $ 100 million. Once in operation, an oven operates 24/7 for ten years, until it stops at the end of its life. In other words, it’s not the kind of business that can be scaled up or down depending on changing circumstances.
For many wineries, âjust in time has turned into just in case,â says Sean Gallagher, Saxco’s general manager for the Western region. âSometimes by the time you know what you need, the decision point for securing containers is over,â he says. He recalls the ‘pantry loading’ mentality that influenced households during the pandemic. âPeople want to feel ready for unexpected events,â he says. And in winemaking, it can be difficult to predict a realistic view of future needs.
But that doesn’t automatically mean wineries can’t move forward with their cellaring and bottling processes. Gallagher says some wineries select bottles “close enough to deliver consistently,” even if their ideal packaging is not available. This could mean a slightly different bottle weight, shape or color, depending on the product.
Austin Beeman is vice president of marketing at Cutting Edge Selections, an importer and distributor in the Midwest. His company had a large order for Bordeaux wine which could not be shipped due to unavailability of shipping boxes. He says it has both short and long term impact. âThe retailers and restaurants that would have sold these wines are now selling something else,â Beeman explains. âOnce you lose a placement, especially a poured glass, it’s very difficult to get it back. “
Transport constraints in Europe
In some parts of the world, capacity is not the issue. But other shipping constraints weighed on the offer. Container ships stranded at ports, freight rate increases, labor shortages and other economic circumstances in part due to the pandemic have imbalanced the supply and demand for glass and other packaging products.
Reka Haros is the owner of Sfriso Winery, a family-run micro-business in northeastern Italy. She felt the pinch last year when her wine shipment to the United States took more than 100 days in transit due to a lack of containers and delayed processing when the wine finally arrived at the Port of Los Angeles. She now reports that she and other Italian winemakers have seen rising costs of not only glass, but also paper, wood, metal and energy services. âIt’s a situation in transition right now, so the price hike has already happened in some cases and will continue in others,â she says.
In addition to the pressure on international deliveries, Haros says the lack of commercial drivers in the European Union has resulted in delays in deliveries closer to home. âSo far we have started to experience delays, like two days from our winery in Verona, which is 180 km away,â says Haros. “This shipment should have been delivered the day after shipment.”
The mandatory health pass demonstrating a COVID-19 vaccination – the Green Pass – is now mandatory for working in Italy, which has also influenced a pre-existing driver shortage. Ivano Russo, Managing Director of Confetra, the Italian General Confederation of Transport and Logistics, told the European press that of the 900,000 truck drivers, couriers and storekeepers, “between 25 and 30%” do not hold the Green Pass and will therefore not be able to work in Italy.
Rising costs in the supply chain
So what does this mean for consumers, especially as the holiday season approaches? Wine producers are keen to keep costs stable and provide many products to their customers. “With our glass almost doubling, the hardest part will be for us to absorb this cost,” explains Julien Teichmann, winemaker at Keller Estate in Petaluma, California. He says the winery will try not to pass the increased costs of materials and shipping on to consumers if it can be avoided.
He also thanked the suppliers for doing their best to communicate clearly with the winery on prices and deadlines. Everyone is working behind the scenes to control the prices. âWe’re hoping consumers will order direct from smaller wineries because that will definitely help us in the long run,â he says.
Scott Smith is President and CEO of Plata Wine Partners, a wine producer and brand development company in Napa, California. He reports that his company’s costs from suppliers have increased by 5-20%, depending on the supplier and the timeliness of the bottling date. He says the wine industry has been resilient in dealing with the impacts of the pandemic, but the introduction of additional complications has raised the stakes.
Smith says the current issues center on plant capacity and labor shortages in all aspects of production and delivery: shipping, trucking, and offloading goods to a warehouse. âFor example, we had to do air freight [wine bottle] closures to the United States to complete production to meet our bottling date and new product launches, compared to normal shipping and unloading at ports, âhe said.
So when are things going to calm down? Chapman, the supply chain manager at Saxco, is in constant contact with his industry network around the world and he says at this point it’s wise to look at the horizon as a matter of years. âIf the container capacity becomes available in 12 months, the chain will come close to equilibrium, but it could be longer term, two or three years,â says Chapman. “It’s anyone’s guess.”