FEATURE / BULK WINES: Tanks a lot

Environmental as well as financial considerations are accelerating the trend towards bulk-wine shipments, while logistical advances are making the transition increasingly painless, says Sally Easton MW

It’s been estimated that 1.6 million hectolitres of wine enters the UK in bulk, which is about 15% of the UK market. While this figure includes bulk imports for export in bottle, somewhere above 10% of the UK market is likely to be bottled at destination. The trend is upwards, which reverses the situation of a decade ago, when industry estimates were half of this share, and declining, as country of origin packaging was thought to add value.

Economic pressures, changing patterns of consumption and technical and quality innovations have all played their part in this logistical revolution. Green pressures are now being added to the mix as WRAP (Waste & Resources Action Programme) implements its wine programme to encourage more bulk wine shipments.

Seismic shifts in bulk wine movement are not happening in Europe. 2005 volume figures from ICE (Italian Trade Commission) report that bulk exports account for 30% of total wine exports, up 9% and in line with all wine exports. In Germany, bulk wine exports are less than 20% of total exports, but in the year to May 2006, exports declined by 1%, while bulk exports increased by over 4%. France and Spain calendar year 2005 exports for both bulk and total were in decline.

The vast proportion of growth in bulk trade originates in the New World. Peter Roberts, commercial director at Corby Bottlers, says, “The majority of Corby’s contract business is deep sea,” adding, “bulk importing from Chile incurs a saving on CCT of about 20p a nine-litre case on wines under 13% alcohol.”

Exports from the US highlight how figures can be skewed by major events. Calendar year 2005 data showed that while total exports declined more than 15%, bulk exports grew by 50%, with bottled exports down over 30%. And of the three biggest markets for bulk exports, which account for 80% share, Italy is up nearly 500%, while the UK is down 20%. In 2005, more than 90% of US exports to Italy were in bulk, up from 56% in 2004. During the same period, average prices for bulk declined by 25%. One such event was the relocation of Blossom Hill bottling to Italy during this time frame.

Shift to bulk

Total exports from Australia in the 12 months to July 2006 were up another healthy 9% by volume, but the move to bulk is dramatic.  Bottled exports were down 1%, with bulk exports up 50%. In this period bulk’s share of total exports rose from 18% to 25%, which is a massive change. Also the average price per litre for bulk declined by 12.5%, while the overall average price declined by less than 8%. China has jumped into the fourth most important bulk market slot for red wine with a more than 15-fold increase in volumes.

In the 12 months to June 2006, total exports from Chile were down nearly 10%, while bulk exports were down nearly double that, in a market where 30% of exports are accounted for by bulk. Michael Cox, director of Wines of Chile UK, explains, “Exporters have found it tough because the peso is at an all-time high based on a booming economy, especially exports of copper to China. The bad news is the US dollar is weak and most exporters are invoiced in US dollars. All their costs are in pesos and pesos received are 30% down on what they received two years ago. This has put a break on export figures.”

Argentina calendar data to 2005 show a 72% increase in bulk exports, compared to a 40% increase in total exports. MATs to June 2006 for South Africa show a 4% decline in bottled wine exports, but a 20% increase in bulk exports. New Zealand bulk exports don’t (yet) register on the radar.

Karen Wilson, commercial director of Kingsland Wines and Spirits says, “There is more bulk wine available than ever before, and with real improvements in quality levels. In the last couple of years we’ve seen far more interest in UK bottling. Because of pressures on margin, there’s a need to bring wine to shelf as quickly as possible in the best condition as possible.”
“There’s a massive opportunity for growth,” says Ron Young, account and UK supply director at WaverleyTBS. “Consumers are getting a good deal [with UK bottling]. Most bag-in-box is packed in the UK these days which gives them a fresher product, and the retailer gets extra shelf.” 

Andy Gale, Tesco’s category technical manager, says its UK-bottled wine is growing. He says the company is reviewing the whole supply situation: “We have production hubs in the UK for our New World lines, and in France and Germany for our ‘edlp’ Old World lines, for both bottle and bag-in-box. We’re looking in the longer term at evolving a sourcing strategy that best suits the needs of our developing global business.” 

Logistical and technological improvements have provided opportunity for growth. David Mawer, joint managing director of shippers FFG Hillebrand says, “The logistics of moving bulk wine have changed. A lot of growth is supermarket-led, and much of this is promotions, so demand is very variable. It’s difficult to satisfy that fluctuating demand with steel tanks … you can do them cost-effectively where you have a compatible export so the tank isn’t empty on one leg of the movement. Getting 20 loads of wine out of Australia at one time for a promotion may be fine, but having 20 loads going in at the same time has been increasingly difficult to manage.” 

Changing landscape
Flexitanks have changed the landscape.  Mawer says, “It’s not viable to have steel tanks sitting empty. We recognised the only way to provide service, flexibility and responsiveness was to look at an alternative.”

Flexitanks are essentially big bags designed to fit into standard 20-foot containers. They are single-use items, some of which can be recycled. One advantage over steel tankers is that flexitanks can be stored at the wine origin ready for use, whereas steel containers need to be co-ordinated in and out. A further improvement was the move from top to bottom loading and discharge, which is a simpler operation to manage than top load/discharge and it minimises the risk of oxygen ingression during loading.

Mike Williams, general manager for Europe at Trans Ocean Distribution (TOD), one of the largest bulk logistics companies, explains, “There were some false starts for the flexitank industry in the ‘80s and early ‘90s with regard to TCA and TBA contamination as tank material technologies were not clearly understood for the carriage of wine. The bulkhead inside the container was originally made of wood, which could get moist as a result of travel, potentially allowing fungal growth which increased the chances of TBA/TCA contamination of the wine.”

Big improvements in flexitank design, barrier technology, technical innovation and wine-compatibility have considerably improved the reliability and consistency of flexitanks which has directly facilitated the increase in bulk
wine shipments. 

Removing contamination
Williams says, “For three years on wine shipments TOD has used inorganic bulkheads which removed another source of potential contamination [from wooden bulkheads].” The EVOH (ethyl vinyl alcohol copolymer) barrier-membrane technology used by the company increases the oxygen barrier properties of the low linear density polyethylene bag. The container floor is also lined with aluminium foil as an additional barrier.

Similarly with the closures industry, alternative barrier-membrane technologies exist, and research is ongoing to identify further benefits. Gas barrier properties of EVOH are reduced with increasing temperatures. Another key structure is the big bag-in-box style embedding an aluminium foil, which is a good gas barrier, into the polyethylene laminate. FFG Hillebrand switched to this technology after the company’s tests showed it is effective at higher temperatures. As with some bag-in-box packaging, a risk here is “flex-cracking” which compromises gas barrier properties. Mawer explains, “Part of the manufacturing process is to include folds in the aluminium foil integral to the bag. As the flexitank is filled it needs to stretch.” The aluminium folds allow it to unfold with the stretch.

Gale says, “We’ve shipped 100% flexitank for a couple of years. It’s FDA-approved food-grade polyethylene with an EVOH barrier that provides protection against possible taint issues. The cost of flexis is so much cheaper. It’s a one-way trip, and the materials can be recycled.” He adds, “The availability of [steel] ISO tanks in some of the markets from which we take wine was problematic.”

While technical advances have provided forward momentum for bulk shipping, one of the constraints to the growth of UK bottling has been the level of investment required to set up bottling capacity along with its incumbent quality-control protocols. With added bottling capacity being provided by relative newcomer to the wine-bottling world, Quinn, alonside Constellation’s recent announcement to double its UK bottling capacity by 2008, the upward trend looks set fair. The battle lines between high-volume brands and supermarket own-label means that any potential cost savings could make the difference.

IT’S A WRAP (www.wrap.org.uk)
WRAP, the Waste Resource Action Programme, is targeting retailers and brand owners to increase UK bottling. Its argument is three-pronged:

1. cheaper costs of importing in bulk
2. environmental benefits of weight and fuel savings
3. use of lighter glass bottles to increase cost, transport and environmental benefis

By importing more bulk into the UK, it increases the demand for UK-manufactured glass bottles, and reduces the amount of green glass coming in, a double-whammy benefit.
   Recycling more glass is key. The triple-whammy benefit here is it melts at lower temperatures than virgin kit, giving an energy saving of over 15%; there’s less landfill because more is recycled, and there’s less need to quarry for virgin materials. Ron Young at WaverleyTBS believes closing the loop of recycling is important. He comments, “We’re trying to close the loop, whereby we buy glass from a UK supplier, pack the wine, for example for Sainsbury’s, whose customers bring back their empties to store and Sainsbury’s return the glass to the supplier as cullet [waste glass]. This makes a great deal of sense.”
  Research by WRAP suggests there is little evidence for loss of sales by lightweighting bottles at the high-volume end of the market, though cost benefits need to be weighed against the increased risk of breakage.
  One of WRAP’s goals is to increase the volume of clear glass bottles coming into the UK to help reduce the green glass glut. There is still a potential quality issue for wine bottled in clear or flint glass as some UV lightwaves degrade wine over time. Marks & Spencer has done a lot of work in this area but many questions remain regarding “lightstruck” character.
  WRAP is working with British Glass on a project to increase imports of wine in bulk. It will be overseen by a steering group made up of representatives from Constellation, Quinn Glass, the Wine and Spirits Trade Association (WSTA), Trans Ocean Distribution Ltd and Tesco, and a series of commercial trials with Asda and Tesco will form part of the project.

© db October 2006