Italian bulk wines are usedsurreptitiously to beef up anaemic French wines, and the UK supermarkets appreciate the costsavings and sourcing flexibility of tanker deliveries. Italy’s apparent shame is everyone’s gain,says Brian Jordan
THE BULK WINE market is something of a skeleton in the cupboard of Italian wine producers. In fact the existence of such products is usually swept under the carpet, if not denied outright, and large producers blush when forced to confront the facts.
But why is this something to be embarrassed about? For decades bulk wine production has been the bulk revenue generator in the southern half of the second-largest wine producing country in the world. Now that’s a lot of wine to ignore.
Travel back just 10 years, and wine export figures were divided into 4,500,000hl of bottled wine versus 8,900,000hl in bulk – and that 9 million hectolitres (mhl) is just the exported bulk wine, not including the lake washing around inside Italy.
Back in those days, Germany was Italy’s largest export market, with France in second place. Germany was taking half of her Italian imports in bulk and France almost 100% – but you never saw a bottle of Italian wine anywhere in France, despite the flood of red stuff pouring over the border.
Most of Italy’s bulk wine production has historically been red. True, the Alcamo Plain produced huge quantities of white wine originally destined for Marsala production but (until the arrival of the IGT classification in 1996) was widely available by the tanker-load, and Puglia produced significant quantities of white wines fated to travel north as the mainstay ingredient for vermouth.
The majority of Italian bulk wine production is now simply a means of selling the results of glorious southern sunshine ripening some previously underrated but now deservedly recognised southern varieties like Primitivo, Negroamaro and Nero d’Avola.
So much so that to wander round many large producers in the southern provinces is to walk past tanks and vats labelled with a directory of the big names of the north – their bulk allocations, their transfusions of colour, body and alcohol into otherwise potentially anaemic wines, Italy’s perceived shameful habit.
Can it still be so shameful? It’s still Italian wine, and in the current climate of heavy discounting in the UK, shipping in bulk may be the one remaining way for retailers to make a sensible margin.
"I think people are looking for ways of cutting down costs as much as possible and I think the next stage they’re looking at is bottling cost," says Ellie Graham, marketing manager at Eurowines. "There are certainly potential cost savings," she continues.
"It gives you the freedom to look around for cheaper ways to bottle and keep down the cost of bottling and dry goods. We’re agents for a wine that is shipped from Italy in bulk and bottled in Germany, before being sold to a national account in the UK. They have it in bag-in-box as well.
I think a lot of people do this for bag-in-box because the costs for that kind of thing are cheaper here or in Germany." Italy’s share of the UK off-trade over the last year has remained static at around 11.5% by volume and 10% by value (MAT to WE 27.11.04), and the on-trade share has been static at 15% since 2002.
Perhaps surprisingly, UK sales of Italian wines at over £5 have risen by 8.4% (MAT to WE 27.11.04), and yet they still account for only a paltry 7.4% of total Italian sales.
With a bottle of Italian wine selling for an average price of £3.36 at the end of last year, it is clear that lower priced wines are dominating the market, and logic and price points dictate that a significant proportion of these must be finding their way into the UK in tankers.
Broadland Winery in Norfolk has been operating as a contract bottler for 15 years, processing 20 to 25 million litres of growth," says Anthony Chapman, national sales manager at Broadland.
However, "The vast majority of what we fill is actually for the third parties [agents or importers], not directly for the supermarkets." But what are the savings to be made? "It goes in phases depending on the cost of dry goods in various countries, and exchange rates of course," comments Tara Neil, wine buyer at Asda.
"But at the moment there is very definitely a saving to be had on New World wines by bringing them into the UK and packing in the UK.
We do it to a certain extent on deep sea opening price point wines, which have a very quick rotation, because we’re not convinced that there isn’t an impact on the quality of the product when it’s shipped in bulk into the UK, because essentially there is more handling involved."
The quality question
The question mark over quality assurance is, of course, the main reason that shipping in bulk has had a bad reputation, but this has less impact for high volume wines where price is the driving issue.
"The only thing that we ship in bulk from Italy goes into bag-in-box," says Neil. "Our Liebfraumilch is packed in Germany and we have a French Cabernet Sauvignon that’s packed in France.
It’s kind of weighing up whether it is really worth adding another layer of handling when you’re only shipping it from the neighbouring country." However, as exchange rates continue to squeeze this is looking like a more attractive possibility.
"We haven’t taken it to that next level yet but as with everyone we’re looking at where there are economies to be had," Neil continues. "Something we are considering at the moment is actually consolidating our bulk packing in the UK and looking at whether there are other wines that we can bring into that without compromising quality."
The value of the saving is dependent on the origin of the wine. For example, the price of shipping a container holding 1,000 9-litre cases from Australia is comparable to the cost of shipping a flexitank holding 25,000 litres of wine for bottling in the UK. You do the maths.
"The further away the bulk wine is coming from the better, the greater the saving," says Chapman. "We import a wine from Australia that we have bottled in Italy because it works out as more cost effective," comments Graham.
"We do such a minimal amount from Australia that it’s better for us than having to pay all the charges involved in bottling in Australia. We can take it [in bottle] from our winery in Italy because we do such a high volume turnover from there.
It works out a lot cheaper and simpler when you’re bringing over container loads from Italy rather than having to bring over a pallet at a time from Australia."
Economies of scale
Large scale importers and multiple retailers take bulk shipments into consideration as part of their ongoing logistics schedule, but in volume terms over the last decade exports of bulk wines and bottled wines have actually reversed positions from 3.3mhl of bottled wine and 7mhl bulk in the early 1990s, through near parity around the millenium, to 7.2mhl of bottled wine and 3.7mhl bulk in 2003.
It seems that scale of production and convenience of distribution channels have as much to do with it as price. "If you’re not doing massive amounts it is certainly a lot cheaper, but then on the other hand, with economies of scale, it also works out a lot cheaper when you are doing a very large amount of volume if you can get a cheaper bottling price in, for example, Germany," says Graham. It appears to be a winning idea all round.
In 1995, Puglia alone would have qualified as the world’s sixth largest producer country, yet it was sending a mere 195,000 cases of bottled wine across its provincial boundaries. Now that figure is more in the region of five million, and Sicily is pretty much a parallel example.
The successful Inycon brand from Sicily is produced – and bottled – by the Cantine Settesoli co-operative, but the 2,300 members still export a decent volume of wine in bulk as well. Cooperatives are inevitably the best places to shop for bulk wines in large quantities for UK distribution.
In Trentino, CAVIT (a central co-operative for all the Trentino co-ops) was the company E&J Gallo went to when it wanted a supplier for its Italian Ecco Domani brand because CAVIT as the only one big enough to handle Gallosized quantities, but there are few such arrangements.
The point is that when flying winemakers and consultants start getting involved, the bulk wine tends to become bottled IGT. Yet sales of bulk wines to the UK are once again edging upward, and it would seem there are other financial benefits as well.
"If you have bottled stock sitting in the UK you can manage your stock more effectively and give your customer a very rapid reponse in terms of delivery. Okay, you could ship quantities in bottle from Australia and keep them in bond here, but if you bring bottled stock into a bond you are then paying rent and RH&D [receiving, handling and delivery]," explains Chapman.
"Our way, you pay a one-off cost for it to come in. If we take bulk wine in this week, we bottle it next week, we then give six weeks free storage, so that’s a benefit. Everything here is bonded, so customers only have to pay duty once they remove the stock from our premises."
However cost-effective it is, there are also further considerations to bear in mind and additional benefits to be enjoyed. "I think if you’re shipping in bulk, particularly with large wholesalers for the on-trade, then it allows you to source your wines from different places," explains Graham.
"It’s another dimension of not being tied to taking a particular wine from a particular winery because you can simply ship in bulk. You’ve got your bottler that you can use whenever, and you can buy from whichever winery has got the wine.
So if there is a shortage of a particular wine – for example there hasn’t been much Sauvignon Blanc this year – then it allows you to take it from different places, as you’re not tied to bottling at a particular winery."
From the consumer’s point of view, bulk shipments seem beneficial all round in that value for money should be maintained, if not improved, and the style of wine you enjoy can always be available – even if it’s not exactly the same wine that you had last time.
It may mean purchasing more own-label wines than ndividual estates or designated regional wines, but the great British wine buying public has never let aesthetic considerations cloud their price-driven buying decisions. And in the case of Italy, a country where branded wines are conspicuous by their absence, it provides the UK retailer with what the public seems to want – safe, reassuring consistency.