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Bulking up

More and more wines on UK shelves are bottled not in South Australia, the Western Cape or Chile's Central Valley, but in Norwich or Northamptonshire. It might not be a shock to hear that this happens with 1.5-litre bottles of French vin de table, but the trend is taking a hold of many famous names: Diageo/Percy Fox began bottling Blossom Hill in Italy in winter 2004/5, and E&J Gallo's Turning Leaf is UK-bottled now, too.

Supermarket own-label is another highly competitive area where UK bottling is a fact of life, but Tesco is now using it at higher price points, including Argentinian wines in its Finest range which sell for well over 5. A shame, then, that Tesco turned down the chance to discuss the issue by declining to contribute to this feature.

Sainsbury's was not so reluctant. Howard Winn, its beer, wine and spirits quality manager, points out that packaging in the UK is not new, particularly in the case of bag-in-box, and that huge quantities of bulk wine are also exported to Germany and France. And, as he says, that fact is not hidden - the relevant information has to be stated on the label (although how many consumers notice such small print is another matter).

Economies of scale

But while Sainsbury's might not be sourcing more UK-bottled wine for own-label purposes, market forces are pushing more suppliers to do just that.

UK bulk wine imports from South Africa, for instance, were up 25% last year, while bottled imports fell 11% (SAWIS figures). Competitive pressures are forcing more producers to consider UK or European bottling, with reports that Western Wines has considered it for leading brand Kumala.

For the moment, the company has decided to stick with bottling at source, but for how long? If a dominant brand like Kumala moves to the UK, the consequences for the promotion and image of South African wine here could be serious.

Why is this happening? Simple, says Hugo Campbell, buying director at Ehrmanns: 'Due to economic pressures, there is more margin for all parties in the supply chain when off-shore bottling.' Savings depend on the country involved, says Campbell.

Historically, bottling in Chile or South Africa has been less competitive, so shifting to the UK would bring greater savings than with Australia, for instance. 'Savings are made not just in bottling charges, but also dry material, such as labels, bottles and shipping rates,' he says, adding that there is a continental European dimension. 'Germany seems to be more competitive than the UK for bottling rates, even including onward delivery charges.'

Quality factor

But it's not a purely economic decision, says Simon Lawson, director and general manager at Percy Fox, which has bottled Piat d'Or in Italy for ten years or more, with Blossom Hill joining it more recently.

'The reasons [for moving Blossom Hill] were, firstly, to shorten lead times for our customers from date of order to delivery (reduced by five weeks), with the resultant reduction in stock-holding,' he says.

'Secondly, because we had invested in a state-of-the-art bottling line, we had more flexibility on producing market-relevant pack sizes. Quality was a critical element in the decision and we needed to be sure quality would not be compromised in any way. In fact, we are delighted that because of the investment in handling equipment, storage tank and filtration, the quality is better than before.'

There seems to be broad agreement.

Winn says quality is the main reason for packaging bag-in-box in Europe, where technology is often better. 'Too much of the life of the product is lost in transit and, due to the more delicate nature of the package, it's not possible to achieve good container utilisation, as not many layers of boxes can be shipped without suffering crush damage.'

Consistency is also improved by consolidating bottling operations, he adds, particularly when dealing with producers who do not have their own on-site bottling and labelling facilities. Quality control can become costly and complicated.

Likewise, Campbell says there should be no quality issues, except perhaps for sweeter styles which can be contaminated in transit or undergo secondary fermentation.

Bottle Green managing director Jerry Lockspeiser sees it as a balancing act: 'As a general rule, there are more quality risks in moving wine in bulk than in bottle, but, on the other hand, a well-supervised bulk transport and UK bottling procedure can produce a better finished product in bottle than the same wine moved around within the source country and bottled badly there - or simply bottled badly at the production point.'

And buyers, of course,want the highest quality control standards anyway. 'All the supermarkets will demand that the bottling installation has British Retail Consortium accreditation,' says Stephen Walder, quality assurance director at PLB.

'Obviously there are a lot of foreign bottling installations that have this, but it's easier to drive this upwards if it's in the UK.'

HwCg marketing manager Henry John adds just one caveat: 'The way that wine can be stabilised and treated, I don't think it's as much of an issue. It's fantastic to have the flexibility, to be able to manage everything from here. But if our winemaker says it won't travel, then we don't do it.'

Price perception

If we accept that the quality concerns with low-priced wines in particular are negligible, how will consumers feel if they discover that their favourite Chardonnay is bottled on a faceless industrial estate north of Watford?

The simple, if cynical, answer is that they almost certainly won't find out, although, as John acknowledges, it might take away some of the mystique if someone told them. At Sainsbury's, Winn puts it more bluntly: 'So long as we continue to deliver great value-for-money wines, we achieve repeat sales.' While Campbell is even more forthright: 'Consumers do not give a monkey's.'

So, if consumers don't care and there are no wine quality implications, what's to stop more wines being bottled in the UK - and at higher and higher price-points? 'It's likely to grow both for us and the industry,' agrees Lawson.

'It gives us flexibility of production format, a reduction in customer lead times, as well as better quality management. There is nothing to stop more premium wines being handled this way as the technology of wine handling continues to improve.'

'Our view would be a pragmatic one,' adds John. 'At the moment, all we do is wines below 5. We don't have a rule that anything over 5 we wouldn't consider doing.'

But perhaps there is still a perception problem - that wines above a certain value should have provenance, including being bottled at source - although not directly from the consumer. 'The customer doesn't know the difference,' argues PLB's Walder, 'but the buyers do. Their perception is that over 5 it should be bottled at source, but I think it's misguided.

The UK bottling companies have become more aware of how to control things like dissolved oxygen, and how to improve or freshen wines with carbon dioxide. The handling has improved, and I don't think there's any reason to doubt the quality.'

Meanwhile, Campbell sounds a cautionary note about supposedly more expensive wines such as the Tesco Finest Argentinian bottles.

'Most of these 7.99s are for deep discounting, and consumers (if the current promotional climate continues) will get wise and take the view that many 7.99s are not far off in quality delivery to wines half their price. This might hamper higher-value shopping.'

And before we all get too exercised about 10 Aussie Shiraz coming across in vast container loads, Lockspeiser makes an excellent additional point. 'These 7.99 wines may also be deep price-cut lines and bogofs, rather than smaller-volume, premium wines.

Bulk shipping for UK bottling is only economical for larger-volume wines - shipping in 25,000-litre containers being the norm - and 7.99 is not a larger-volume price point unless it's combined with a deep price promotion that generates the volume.'

Ethics and economics

Another concern has to be the knock-on effects on producer countries, with jobs at risk in countries such as South Africa and Chile - a potentially sensitive area at a time when the 'fair trade' issue is growing in importance.

Campbell is mindful of this, but suggests serious effects will only be felt if and when big brands bottle in the UK. 'This will create further issues in the country of origin and make them less competitive,' he says. Put another way, home producers without access to offshore facilities will be at a commercial disadvantage.

But the realities of the marketplace will, as ever, have their say. 'It's not a question of reputation, it's a question of objective economics,' states Lockspeiser.

'The best countries for bottling wine, where the best means cost-efficient and best-quality wine in bottle, are those where there is an established infrastructure to carry out this task. These tend to be the more developed economies and/or wine industries. Any country can achieve it if the resource is put in, but it's unlikely to be a priority for a relatively smaller wine industry or less-developed country,' he says.

So, not only is bottling at destination rather than source here to stay, it is likely only to increase in sectors where the quantities involved make it economically worthwhile. And, with margins under ever-increasing pressure, that's a large and growing slice of the UK wine market.

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