Global Supply Chain Issues Plague the Wine Industry

Container port at San Pedro in Los Angeles / Getty

Market trends have created a problem perhaps best appreciated by wine lovers: a bottleneck.

As the economy recovers and consumers spend again, the increased volume of imported goods is arriving too quickly for the global supply chain to handle. Add our collective love affair with direct shipping and you get the delays you know, plus more to come, and dramatically higher costs at every logistical link.

Variations and storage requirements aside, a global wine supply chain generally looks like this: grape grower > producer > packer > exporter > shipper > importer > trucker > wholesale distributor > retailer/restaurant/bar.

Roughly speaking, currently, a process that used to take 30 days can take three months.

Cutting Edge Selections
Cutting Edge Selections’ warehouse / Photo by Austin Beeman

Part of the problem is business itself. Many distributors historically operated on a just-in-time system, receiving items as close as possible to when they are actually needed, to keep costs low. Today, “just in time no longer exists,” says Serge Lozach, managing director at Wine in Motion, a New Jersey-based importer.

Containers full of goods now wait in ships outside of U.S. ports, something unheard of before the pandemic. On October 13, the Port of Los Angeles announced it would start operating 24/7, a schedule the Port of Long Beach started last month. These two ports receive some 40% of shipping containers entering the U.S.

The West Coast isn’t where most wine arrives, but these are not the only ports with severe delays. According to Sea-Intelligence, a supply chain analyst, the schedule reliability of global ocean liners hit an all-time low in August 2021.

Don’t blame the ships, though. And don’t think workers unloading 3,500 containers in the wee hours each night means every bottle will immediately be on its way.

“We have enormous pressure from the market to execute orders in much shorter time than normal and necessary.” —Antonio Mendonça, Bacalhôa Vinhos de Portugal

Ann Boucher, the European Portfolio Director of Cutting Edge Selections, an Ohio-based distributor, attributes slowdowns to friction and shortfalls along the entire chain. She recently postponed a large Bordeaux order at the last minute because the producer had no boxes in which to pack the wine.

Antonio Mendonça, export director for Bacalhôa Vinhos de Portugal, producer of wines like Alianca Vinho Verde, says disruptions started last year with issues like rusty containers with holes. There’s now a growing lack of materials for everything necessary for wine production, including glass, label inks, paper and cardboard.

“Many imported components are in short supply everywhere, and industries are constantly lagging behind as the imbalance of shipments globally is having a knock-on effect on production,” says Mendonça.

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Everyone in the industry is facing the same issues. “From the production end to getting dry goods to fulfill orders, it’s a nightmare,” says Lozach.

And, says Mendonça: “We have enormous pressure from the market to execute orders in much shorter time than normal and necessary.”

Boucher estimates that shipping costs have increased by 55%. Plus, “because our containers languish at port waiting for a driver, we now regularly pay demurrage charges,” she says, referring to the use of a storage container within a terminal. At the Port of Savannah, for example, some 80,000 containers are awaiting to be unloaded.

Bacalhoa Vinhos de Portugal
Barrels at Bacalhôa Vinhos de Portugal / Photo by Filipe Faleiro

Another part of the problem is a lack of truck drivers.

According to the American Trucking Associations, before the pandemic, the U.S. was already short some 60,000 drivers. This number is predicted to grow to 100,000 in coming years, in part because of pandemic-timed early retirements.

This summer, the U.S. government and trucking industry began considering options, including lowering the minimum commercial driver licensing age from 18 to 21 for interstate drivers, and easing DMV processes that can delay licenses and learner’s permits.

While we wait for teenagers to start hauling oversize vehicles across the country, there are fuel shortages at filling stations and airports, space shortages at warehouses and container shortages, including some instances of pre-holiday hoarding of empty containers.

Roughly speaking, currently, a process that used to take 30 days can take three months.

The unpredictability of container supply is the biggest challenge now, says Julie Peterson, managing partner of Marq Wine Group, a Washington D.C.-based consultancy. “Being nimble has been the key.” She recalls having 10 days to fill a container that she hadn’t expected to have for two months with 1,250 cases from 26 Georgian wineries in the middle of harvest.

“It’s hardest on the wineries,” says Peterson. “It puts enormous burden on them especially during their busy seasons.”

Erwan Leteurtre is the president of VignoblExport, a France-based freight forwarder that handles transport and logistics. In early 2021, due to lack of space on ships and a significant uptick in orders, he shifted his business from overseas to air shipments. However, there’s a backlog in the sky, too, says Leteurtre. “The carriers increase the means but the costs explode and this creates tension for the future.”

He’s talking about the price of gasoline, raw materials and space for shipping companies and airlines, and the tension of passing these costs to consumers.

“It’s indeed a complicated situation,” Leteurtre says. “These costs become a problem of market price.”

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The entire industry is concerned.

“Increases in costs are not trivial and will have to be accounted for at some point,” says Boucher. Like her peers, she is frustrated by missed opportunity; money left on the table. Supply chain constraints negate the possibility of financial gain due to pent-up demand.

Enter the possibility of ordering too much or reordering wine already in shipment to prevent out-of-stocks.

“We are optimistic the sluggishness will improve as countries come out of lockdown, manufacturing increases, and more truckers are being hired,” says Boucher. “However, we fear inflationary pressures will take quite a while longer to come back into proper alignment.”

As the holidays approach, it’s hard to imagine an upside for anyone, from producers to importers to distributors to retail and hospitality outlets to customers. Dry January may need to be rescheduled—products intended for end-of-year purchase and consumption could be in stores in early 2022.

Published on October 25, 2021
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