Skyrocketing cost of glass bottles has some North Coast California wineries looking for alternatives

Clay Shannon, a winemaker and viticulturist from California’s north coast, is looking for alternatives to his heavy glass bottles after seeing those costs go up 20-50% — if he can find them.

Over the past year, bottle costs alone have added an additional $10-12 to every 12-bottle case for Shannon Family of Wines.

“It’s a kick in the teeth,” Shannon said. “And availability is difficult.”

What his Lake County wine group has experienced is in line with glass bottle price inflation for other U.S. winemakers, according to a Rabobank report released earlier this month. The price of packaging rose by a fifth, although some growers felt much less cost pressure, wrote Stephen Rannakleiv, the report’s author.

By comparison, inflation for consumers rose 8.5% overall in March from a year earlier to a 41-year high, and inflation for manufacturers generally rose 11.2% year-on-year. year in March, a record amount, according to the latest federal figures.

The rise in empty bottle prices is partly a consequence of soaring fuel prices, itself one of five major disruptions to the global wine supply chain since mid-2021, according to global strategist Rannakleiv drinks for RaboResearch. Rising fuel prices come on top of steep increases in transportation costs, which peaked last fall as demand rebounded from the pandemic faster than the supply chain. Other challenges have been labor, agricultural production and geopolitics, he wrote.

Natural gas is an essential fuel for glass furnaces, and in the weeks following the outbreak of the Russian-Ukrainian conflict, prices for natural gas in Europe, a key source of premium cylinders, jumped 550 %, according to the report. Fuel accounted for 10-20% of cylinder manufacturing cost in the United States and 30-40% in Europe. Countries caught up in the conflict are also a key source of aluminum, from which screw caps and some capsules are made.

Rannakleiv told the Business Journal that a cylinder producer in Spain saw a 1,200% increase in its cost of natural gas in 2016-2020, forcing the supplier to double its prices. Because of the higher proportion of the cost of glass in the cost of goods sold for European fine wine producers, this rise in the price of bottles hits them harder than it would for that glass coming to the United States.

“Europe exports a lot of what it produces in premium wine around the world,” Rannakleiv said of Old World winemakers. “If the cost of glass has increased by 50% and transport costs have exploded, how do you maintain the volume of exports in the world? Maybe there will be a discussion that to survive on the most expensive glass in the world, they might not need to ship glass around the world.

Some winemakers have spoken of raising retail prices for bottles due to rapidly rising costs. Executives at The Duckhorn Portfolio in Napa Valley discussed such a move on a conference call with analysts late last year.

The maker of the Duckhorn, Decoy and Kosta Browne brands told the Business Journal that grapes are the most significant cost of goods it faces, but that’s baked into its pricing strategy up to three years back. However, the company has seen an increase in costs from its glass bottle manufacturer. Duckhorn has therefore considered its existing cylinder inventory and does not expect the increase in cylinders to impact the cost of goods for most of the current fiscal year.

“In response to the current sustained inflationary range, we are accelerating the timing of certain planned price increases,” CEO Alex Ryan wrote in an email. “That said, we have a thoughtful pricing strategy for our wines that is designed to enhance the long-term growth of the business while maintaining sales momentum. We do not expect to deviate from this long-term strategy, although the timing of some of these increases has been and may continue to be accelerated by the broader environment and our objective to maintain a healthy margin profile in line with our cost structure over time. .”

In the report, Rannakleiv advocates exploring lightweight alternative packaging and bringing the supply chain as close to the consumer as possible. This could reduce costs and help reduce a winery’s total greenhouse gas emissions, which is becoming increasingly important to retailers and consumers.

“Wineries are often faced with the choice of economic sustainability or environmental sustainability,” he said. “If oil prices are going to be structurally higher in the future, then maybe they can balance greenhouse gas reduction with financial sustainability.”

Shannon has already looked into lighter glass bottles, as European markets demanded such measures. It could also help increase the number of crates that can be trucked to meet highway weight limits and help distributors and retailers increase worker safety, he said.

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