Cork closure makers adjust to costs

North Coast California vintners have been looking to cut costs any way they can for the past two years, with bottle closures and other production consumables such as other packaging and barrels also coming under scrutiny.

It’s gone from a question of preference to a question of price,” said Daryl Eklund, director of sales and marketing for Amorim Cork America, the Napa-based distributor for the giant European closure producer.
“When times were good, wineries buy the best cork they can, but now they’re picking the next grade or two down or moving from natural cork for a $15 chardonnay to twin-top stoppers.”
He said the approach parallels what he witnessed in winery purchasing during the economic recession of the early 1990s. That cycle had a quick rebound in the latter half of that decade as the dot-com boom helped ignite sales of high-end wine until 2001.
M.A. Silva Corks USA in Santa Rosa finishes and sells nine grades of natural and agglomerate corks in four length options, and increasingly more wineries have been adjusting the quality purchased to save a few pennies per stopper over tens or hundreds of thousands of corks on ultrapremium brands, according to Jeff Barnell, sales and marketing manager.
“We’re seeing that more in glass, capsules and labels that many wineries are looking to maintain brand position while driving cost out of consumables,” he said.

Yet brand image and communicating value have become more important than ever for higher-end wines, so vintners are being cautious about changing to cork alternatives such as screw caps and synthetic stoppers or even picking a slightly lower-quality cork stopper, according to James Herwatt, chief executive officer of Cork Supply USA, which distributes cork, synthetic and aluminum screw cap closures.
“Wineries are going to more traditional marketing, so they want traditional packaging,” he said.

But cost flexibility for the “traditional” look can be adjusted via sourcing bottles from lower-cost suppliers and selecting different grades of paper, he said.
The move to traditional packaging also has brought back demand for capsules from the flange-topped, wax-sealed bottles that dominated store shelves until recent years, according to Jeremy Bell, general manager of Rivercap USA, part of the Cork Supply Group.
Stable tin prices at $16,000 to $18,000 a ton since the 2008 peak of $25,000 a ton has helped with costs of tin capsules commonly used for wines selling for more than $25 a bottle, he said. For less expensive wines, plastic capsules dominate, with polylaminates for wines retailing for more than $5 a bottle and PVC for wines selling for less.
To keep up with demand for plastic capsules for growing lower-priced wines, the Spain-based Rivercap and France-based Sparflex will start making polylam capsules by October at Sparflex’s 3-year-old Ukiah plant, according to Mr. Bell. The 17-employee plant makes 200 million PVC capsules a year, and it will start polylam production at 120 million capsules annually.
As sales of higher-end wine sales started slowing in 2008, many vintners started putting off closure purchases as long as possible to avoid purchasing more than required for bottling a particular brand program, according to closure suppliers.
This has prompted distributors to acquire more storage to have product ready to ship when needed and keep in closer contact with wineries to get as much warning as possible when a large bottling run is needed.
“June through August is the busiest time for us, but we’re seeing wineries bottling into September, October and the new year to not add incremental cost to bulk-wine inventory, which they may have too much of,” Mr. Barnell said.
An April report of wine industry financial footing by Silicon Valley Bank found that 35 percent of the wineries surveyed had more wine in tanks or barrels at the beginning of this year than their projected sales would recommend. Net inventory “imbalance” was reported by 26 percent of Sonoma County vintners the bank surveyed, 32 percent in Napa County and 39 percent in Mendocino and Lake counties.
That imbalance has led to demand for custom winemaking and bottling from North Coast winegrape growers whose grape contracts haven’t been renewed or scaled back, according to Mr. Barnell.
As for overall demand for wine closures, transition from natural cork to alternatives seems to be only about 5 percent of total volume, partly because of the cost of bottling line parts and the time needed for wineries to conduct qualitative and market tests, according to Mr. Herwatt.
Of the 18 billion wine closures produced annually worldwide, 69 percent are natural or agglomerate cork, 20 percent synthetic stoppers and 11 percent screw caps, according to estimates by synthetic stopper maker Nomacorc, which Cork Supply distributes.
Screw cap usage for lower-priced wines or those intended to be consumed soon after purchase such as certain white wines has growth to dominate New Zealand closures and be more than half of Australian closures. However, U.S. cap coverage is estimated to be 5 percent to 7 percent, or 250 million to 350 million units a year.
The Portugal Cork Association and the Cork Quality Council, made up of several North Coast cork distributors, recently launched a media campaign called 100 Percent Cork to tout the environmental advantages of natural cork over caps or synthetic stoppers. Some consumer surveys have put natural corks and screw caps on nearly equal footing in preference as a wine closure.