Wine is a multi-billion dollar business and the logistics of wine tests more than the pallet.
Vinters Logistics trucks ply the back roads of the Pacific Northwest, dropping off French oak barrels to wineries, picking up grapes from vineyards, transporting cases and cases of wine to its sophisticated warehouse. The trucks form part of a complex supply chain that marks the US wine industry, a logistics network that is both extensive and exacting.
“We take care of a little more than 1,000 wineries,” said Robert Thompson, Vinters Logistics owner, by telephone, from his office in Kennewick, WA. “That’s a lot of cats to herd.”
Wine is big business. According to the San Francisco-based Wine Institute, retail sales last year in the US of both domestic and imported wines in the US topped $59 billion. That equaled a tad below 400 million cases.
It’s also a business that is highly diffused. For every giant producer, such as E&J Gallo or Robert Mondavi, there are hundreds of smaller wineries tucked into the hills of Napa and Sonoma counties in California or the valleys of Washington. There are more than 9,000 wineries in the US, according to the industry publication Wines & Vines. However, more than three-fourths of these are considered very small. Almost 40% make less than 1,000 cases annually, and another 40% produce only 1,000 to 5,000 cases.
Logistics handlers must deal with both extremes. “We go from our largest client, who produces 12 million cases a year to the guy producing 50 cases a year in his garage,” said Thompson.
Geography plays a role as well. As Thompson explains, the grapes are harvested in eastern Washington, but the winemakers may reside in Seattle, 250 miles to the west.
Gallo or Constellation Brands staffs their operations with logistics specialists. But when it comes to smaller wineries, the personnel are craftsmen and artists, not logisticians.
“Their expertise is working the product, not in transportation, not in logistics,” said Jakob Hervel, procurement and pricing manager for JF Hillebrand USA, part of one of the most prominent beverage logistics groups in the world. “The guy who makes the wine sometimes is the sales guy and he’s the same guy I talk to about sending out cases.”
Add to that the thousands of wineries that import into the US from Europe, South America, Australia and South Africa.
The Sea of Compliance
“There’s a lot more competition. There are newer players in the marketplace,” said Alexi Curlee Cashen, co-founder and CEO of T. Elenteny Imports, which provides logistical services for wine importers. “The industry is more robust and healthier.”
Wine-related logistics starts with an agricultural product and ends with a bottle that can be both extremely valuable and highly fragile. “You’re dealing with a living, organic product,” said Cashen. “It definitely has a lifespan of its own.”
The logistics is complicated because of handling, because of regulations and because of a multi-tiered distribution system. “It’s highly regulated, highly breakable, highly perishable,” explains Dave Dobrow, vice president of marketing and business development at Copper Peak Logistics.
In addition to federal regulations, each state has different rules governing the sale, distribution and taxation of wines. Warehouses must be bonded. Excise taxes collected.
“Navigating this sea of compliance is daunting,” said Cashen.
Add to that ecommerce. Direct-to-consumer sales have opened up a huge market. A report issued in February jointly by Sovos ShipCompliant and Wines & Vines put that marketplace at more than five million cases for a value of $2.33 billion in 2016, an 18.5% jump over the previous year.
But it’s made logistics all the more convoluted.
“We’re doing a two bottle pack, a four bottle pack, a 12 bottle pack,” said Dobrow, whose company handles direct-to-consumer wine shipments from warehouses in Napa County, California and Saint Louis. For consumers, “it becomes a highly anticipated experience,” he said. “If something goes wrong, the whole experience can come undone.”
As it does with other specialist logistics endeavors, technology plays an increasingly important role.
Take Vinters Logistics. According to Thompson, his temperature-controlled warehouse is constructed of phenol-free products to prevent mold and other contaminants and his fleet of trucks equipped with air-ride suspension to prevent wine barrels from rotating during transport. He offers clients inventory management software that includes real-time GPS tracking or loading software that takes into account each grape varietal’s skin thickness to reduce the possibility of overloading and puncturing.
In Northern California, wine warehouses such as Orion Warehousing Services cool their operations through what is called night air induction. This technique allows storage facilities to pump in cold night air as a kind of natural air conditioner.
Software related to compliance, sales and inventory is becoming more and more sophisticated, and customer demands escalate proportionally. “When they want to look at their inventory at 2 in the morning, we have to be able to provide that,” said Thompson.
The wine industry utilizes some of the same technology that do other beverage manufacturers in bulk moving. That includes flexitanks, which enable a 20-foot container to be converted into a bulk liquid transportation system. These polypropylene sleeves or bladders are steadily eroding the use of steel tanks or containers, which are more expensive to use. “Over the years, [flexitanks] have definitely taken off,” said Hervel.
Nuts, Bolts and Bulk
The nuts and bolts of wine transport and storage reveal a balancing act between cost and effectiveness.
Bulk wine is being exported more and more from the US. “It’s about economies of scale,” said Hervel “Sending the wine in bulk to other countries and then bottling it there is cheaper.”
In this case, a Flexipack container contains 6,340 gallons of wine. Spoilage isn’t a major concern, either. “It would have to be in constant sun for 90 days,” said Hervel.
For smaller bulk shipments, the industry uses intermediate bulk containers, also known as IBC cotes or pallet tanks. These are reusable plastic tanks, about the size of a pallet, which can carry 264 gallons.
Perhaps surprisingly, refrigerated trucks or containers aren’t the norm when it comes to transporting cases of wine.
“What a lot of people don’t realize is that the majority of wine is being shipped in dry containers,” said Hervel. “Only high-end wine is shipped in reefers.”
JF Hillebrand, for one, developed something it calls “VinLiners.” These are protective liner foils, placed in dry containers. They help avoid the spike in temperature that can cause thermal shock and damage the wine.
JF Hillebrand offers data to its customers that projects trade lane temperatures based on historic weather patterns.
Cashen said her shipments rely on refrigerated containers, with temperature gauges monitoring for excess heat. “We do a lot of consolidated shipping from Europe to Oakland via the Panama Canal,” she said. “We take it very seriously.”
Last mile shipment is also an issue. “It’s myth that every truck out there has temperature control,” said Dobrow. “Imagine the cost of FedEx converting every truck.”