Like the market around it, the wine industry's supply chain is evolving rapidly. David Skalli of the Paris and London-based Skalli & Rein Consulting Firm talks to just-drinks about the changes and the pressures they are bringing to bear on everyone from logistics companies to wine producers.

just-drinks: When people talk about 'logistics companies' in the wine industry, who do they mean? 

David Skalli: Currently you still have to make a distinction between local wholesalers and freight-forwarding companies. They both deal in logistics for the wine industry but they have a different relationship with producers and retailers or restaurants.  

J-D: Focusing on local wholesalers, their role traditionally extends beyond logistics doesn't it, but are there signs it is changing?

DS: This will be one of the main issues over the next few years. Consolidation in the wholesale industry is becoming more and more of a reality. In the US, for example, only a few of the larger players, such as Southern, Charmer (Sunbelt) and National, could still be in business by the end of the decade. As these companies carry larger and wider portfolios of brands, they will focus less on selling wine and more on supplying chains - high-street retailers and restaurants. As an example, in the UK, CERT- Octavian is already a pure logistics player. 

J-D: So who will sell wine locally then?

DS. Importers, agents and/or local sales teams from big groups will be in charge of pushing wines in major markets. Wholesalers will be in charge of delivery at the lowest cost.  Companies such as Constellation Brands can now offer wines by themselves from a variety of sources. You have one company there that has a sales team that can push wines from Mondavi, Kumala or BRL. 

J-D: Are more traditional logistics companies being forced out the market then?

DS: In logistics, Darwinism will always be the rule: small guys will have to merge or grow rapidly to offer a global (or at least a nationwide) convenient network to big players in the wine industry at the best cost. Standardisation of service is a factor but who would expect to see a low-quality player survive in this modern environment?   

J-D: How will this affect those wine companies seeking a route to market?

DS: With middlemen getting more concentrated it will become harder for small players with low value-added products to find a route to market. You need to be big and very competitive or small and highly sought after by the final customer to survive in tomorrow's wine market. 

J-D: Are we seeing a fundamental change in the supply chain of the wine industry?

DS: Absolutely. The implosion of wholesale between local sales teams and logistics professionals will add a level of mediation, but will lower the margin taken by this level in the traditional three-tier system. Local sales teams will be integrated into the cost of selling for wineries and logistics specialists will have a low correlation to the price of bottle they carry. This will make the wine industry more profitable or more competitive.   

J-D: JF Hillebrand has been for the last 20 years the only pure wine and spirits-focused freight forwarding company (FFC), do you think they can stick to this business model?

DS. JFH is a success story in terms of the service it provides to the fine wine industry. It is also a very profitable company for its shareholders. But this may be a short-term situation. The rules of the games are rapidly changing in the business  - oil costs, sea and road congestion, new tax stamps, these are all adding new pressures. Moreover, JFH has to face a much bigger challenge from the integration of the entire supply chain in coming years. The logistics chain running between Foster's Wine Estates and Tesco, for example, cannot act in the same way as the one between Bordeaux First Growth Chateaux and Berry Bros. & Rudd. It's a different business and JFH may not be ready for this kind of business if it refuses to run local warehouses.

J-D: Is the logistics industry in general adapting fast enough to the modern wine industry? How could it improve?

DS: Logistics can really adapt dramatically to any industry. Imagine Fed-Ex using special planes for important documents and other planes for less important ones. The only question is time and cost. Boutique wineries are very interested in having a high-end service and are willing to pay for it. Big wineries need to have a low cost, standardised service. Temperature, humidity and potential oxidation during transportation are a high risk for wine, corks and packaging. But flexi-tanks and final bottling has been a major improvement for the industry.     

J-D: Do you think that growth in Asia will change the face of logistics for the wine world?

DS. Yes and no. Yes, because shipping in Asia has created huge concerns in terms of quality; having wine stay on a boat in 40°C heat for a month cannot be good for an oxidation sensitive product. A few freight forwarding companies, such JF Hillebrand, have already improved things dramatically. However, because wine has always been shipped all around the world, the drinks and logistics businesses have been dealing with similar challenges throughout history.

J-D: What are the challenges for the wine industry in terms of logistics?

Wineries have to start thinking about the whole supply chain from the vineyard to the consumer. They have to use labels that will support high humidity and corks that won't become dry in high temperatures during freight forwarding. Bag-in-box, screwcap and synthetic corks are sometimes a way for wineries to reduce that kind of risk. At the end of the day, customers buy a branded wine with a certificate of guarantee linked to it. If your wine is tainted it's the winery that you'll blame. 

The Paris and London-based Skalli & Rein Consulting Firm regularly publishes business reports on the wine industry's major issues. It is currently preparing a "Wine Logistics Report" that will be published by the beginning of 2007.

For more information about the Wine Logistics Report visit: