July 5, 2022 | Business insights
With supply chain issues expected to persist through the coming year, winemakers worldwide should get a head start on glass, label, and cork orders for this and next year's harvests. Many wine producers have shifted from just-in-time to just-in-case model in order to combat the glass shortage.
After the stressors of recent days, many Americans are looking to kick back at the end of the day with a glass of something big, bold, and red to calm their nerves. However, bad news: the supply chain crisis has affected every industry—and wine is no exception. Thanks to the rippling shortage effects of the Covid-19 pandemic, wine producers are having trouble importing the materials they need to bottle and export harvests.
Glass orders have sat backed up for 12 months, and the wine in turn stays sitting in barrels unsold. Bottles, corks, and labels continue to elude winemakers at every turn. So, how can business owners within the industry prepare for 2022? And how long do experts predict the challenges within the wine supply chain might persist?
What's Causing the Current Wine Shortage?
Thankfully, for the majority of producers, the so-called “wine shortage” has nothing to do with the wine itself. While natural phenomena have caused some untimely devastations in certain heritage regions like Champagne and the Ahr valley, the overwhelming crux of the problem for American producers lies in packaging the wine. A shortage in packing materials has slowed the process of moving wine to stores to a crawl.
Rich Chapman, the chief supply chain officer for Saxco, a company that provides packaging solutions for the industry, has first-hand experience with the ongoing shortage. He's experienced plenty of supply chain hiccups in the past, from worker strikes to natural disasters. However, the current pandemic-induced crisis is unlike anything he's seen in two decades. "Everything from glass to transport is completely strained," he says.
The demand for glass continues to rise every day. In addition, American wine producers see energy prices and delivery costs following the same rising trend—all of which have played a significant role in the wine shortage.
Wine Packaging And The Supply Chain
As a result of the ongoing packaging shortage stemmed by the pandemic, producers are unable to keep up with the high demand of their product. They are well aware that spending too much time in barrels causes the wine to take on an oaky—and unintended—flavor. "Too much oak throws the wine out of balance… It overshadows characteristic fruit flavors and tastes overwhelmingly woodsy," according to Phil Long, owner of California's Longevity Wines.
In the midst of the shortage, Long resorted to purchasing extra glass from nearby distilleries with bottles to spare to meet his orders. He's even bought bottles with another maker's name, anything to keep his wine from going to waste.
And glass bottles aren't the only source of frustration for American winemakers. Logjams plague every packaging ingredient, from adhesive labels to cardboard boxes. Furthermore, prices for those goods are higher than ever, with glass up 45% from 2019.
What's Ahead for 2022? Creative Solutions
As many expect the shortage to remain in 2022, wine producers large and small must plan for this and next year's harvests. American business owners within the industry are turning to innovative solutions to better cope with the unpredictability of the supply chain.
Some manufacturers are rethinking bottle design to combat rising shipping costs. It's pretty straightforward—the less a bottle weighs, the less it costs to ship. Simultaneously, lighter bottles leave a smaller carbon footprint. Depending on the amount of recycled glass used, lightweight bottles can reduce your carbon footprint by 1g of carbon per 1g of glass.
Ready to Drink
Many producers are also jumping onboard the “ready to drink” (RTD) trend to take repackaging a step further. Last year saw trending upticks for canned wine, and experts believe those trends will continue in 2022. Whether malt-, spirit-, or wine-based, RTD beverages have become a popular choice for consumers. Instead of a bottle of wine, many opt for a single-serve, low-alcohol formula that transforms the traditional glass into a wine-based sparkling drink.
On-Shore Glass Suppliers
American producers may consider sourcing their glass from alternative suppliers to combat the glass shortage. Those ordering from off-shore manufacturers may need to turn domestic to get their product out to their distributors.
Waterloo Container, a New York-based supplier of wine packaging items, is a stocking supplier—meaning they do not follow just-in-time practices and therefore keep inventory on hand. Their 90% reliance on domestic glass manufacturing has seen their orders double this year in the face of supply chain issues.
It’s worth noting that while larger manufacturers like Jackson Family Wines can secure contracts with scarce domestic glass producers in the U.S., smaller wineries are left to fend for themselves. Smaller producers (classified by production of less than 10,000 cases/year) struggle to combat rising delivery costs for glass bottles—when they're able to find them.
Prepare Today to Reap the Best Harvest Tomorrow
With supply chain issues expected to persist through the coming year, winemakers worldwide should consider getting a head start on glass, label, and cork orders for this and next year's harvests. Many wine producers have shifted from just-in-time to just-in-case model in order to combat the glass shortage.
However, that shift could also disrupt available cash flow and future money managing projections. A firm understanding of the supply chain situation as well as future cash flow will enable business owners to follow industry trends and stay ahead of the curve.
That's why it's imperative to have a reliable financial partner like Rocky Mountain Bank with insight into the ever-changing landscape. Reach out to Rocky Mountain Bank today to speak with a commercial banker with in-depth industry knowledge.