4 Biggest Challenges to UK's Bulk Wine Supply Chain in 2018
Based on current bulk wine trends & events, JF hillebrand, UK in an interview with BTN describes the 4 biggest challenges to the UK's bulk wine supply chain in 2018
“2018 will be a challenging year for the UK’s bulk wine supply chain” says Marc Graham, Branch Manager, JF Hillebrand UK.
The combination of several trends – lower global wine inventory, changing sourcing models, variable container availability and the ongoing consolidation of shipping lines – create a challenging outlook for companies that buy and transport bulk wine. In this article we look at these four major trends and how they will affect the supply chain and logistics environment in the year ahead.
Challenge 1: Tighter global supply
In 2017 the global wine harvest was at a historic low, with late frosts and other weather events hitting crops across the major wine producing countries including France, Spain, Italy and Germany. According to the Organisation Internationale de la Vigne et du Vin (OIV) there was 8.2% less inventory globally than in 2016.
For the bulk wine industry, which accounts for more than a third of global trade and almost 15% of wine in the UK, the poor harvest could easily disrupt the sourcing model. With lower availability and higher pricing, particularly from major European producers, bulk wine buyers may need to look to new markets to secure their supply.
Challenge 2: Logistical issues at specific origins
From the perspective of JF Hillebrand as a supply chain partner to the drinks industry, scaling up the logistics and following the changes to the container and shipping market will be key.
For example, Argentinian wines from Mendoza are shipped via Chilean ports, Valparaiso and San Antonio rather than Buenos Aires due to the latter being a 1,100 km distance by either road or rail. However, the road connecting Mendoza with Chile passes through the Andes, which is 3,000m above sea level and becomes a bottleneck during winter months. Daily traffic is around 650 trucks, with authorities implementing an alternating one-way traffic flow for 12 hours in each direction to ease congestion.
In the winter months, advanced planning is essential. It is simply not possible to scale up at short notice between May and October.
Challenge 3: Container availability
From New World destinations, the primary mode of transport is food-grade flexitanks, which are extremely strong and flexible polyethylene bags that fit inside a container. When it comes to the container that can be used to ship flexitanks, those can often be in short supply.
These 20 ft containers must be clean and odour free, without hazardous cargo stickers, free from signs of damage or repair and with full wise wall corrugation without any dents that may impact the shipment. Many New World origins are export markets, meaning that there is an imbalance of container traffic. This requires the shipping lines to reposition the containers to the right locations.
New Zealand is a market where there can be too few containers. From Marlborough, New Zealand, wine is trucked to Blenheim for a transshipment to Tauranga Port on North Island for export. During the annual Q1 export peak when the wineries free up storage capacity for the coming harvest, there can be a particular shortage of containers and vessel space. JF Hillebrand works closely with our customers and the shipping lines to ensure containers are re-positioned according to demand.
Challenge 4: Shipping line consolidation
Due to many years of overcapacity and downward pressure on freight rates, global shipping lines have been rapidly consolidating. From four major alliances and 17 shipping lines in December 2016, the industry had reorganised into three major alliances and nine shipping lines by October 2017. As a result, shipping industry sources project increased freight rates in 2018.
Another trend is the introduction of larger vessels and the earlier scrapping of older vessels as a way for the shipping lines to rein in supply. This can lead to port congestion and longer loading and unloading times that wine buyers should also factor into their planning.
Strategic partnerships and securing longer term freight contracts with the shipping lines is vital for managing price volatility and assuring space on particular routes.
All these factors added to ongoing uncertainty around post-Brexit trade terms with key wine producing countries, it is undoubtedly going to be a challenging year ahead. Understanding the physical, legal and logistical environment at every stage of the supply chain is key.
JF Hillebrand is a key partner to the International Bulk Wine and Spirits Show and will be exhibiting at the show’s first UK edition in London on 26 and 27 February 2018 – Table 27. Register here to meet them at IBWSS London.