Global Drinks Industry Logistics - Part I: Europe
In part one of this month's management briefing, London-based Alan Osborn looks at the condition of the logistics sector for drinks companies in Europe.
Changes in drink industry logistics in Europe have largely been driven by two factors in recent years: The broad economic recession, and the growing importance of green policies.
In the wine and spirits sector, these influences have led to a fairly constant switch to bulk shipments. “Bulk movements account for a great deal of low-end Australian products, [and] third country wines coming into the UK," says John Corbet-Milward, wine policy director of the UK’s Wine and Spirit Trade Association. "Cumulatively, they have more market share than the Europeans now.
"The drivers for that are basically economics, but there are obviously also green reasons for it, with fewer journeys needed to move wine from one side of the world to another.”
However, coming up on the horizon, he says, is “the grip of the regulators, which is getting stronger with regard to environmental issues.” This, says Corbet-Milward, will significantly and increasingly influence how European drinks products are moved in the future. He predicts that the wine business will look more closely at the whole supply chain, “putting in infrastructure to make itself more efficient …putting in electric vehicles to move wine around wineries, using more efficient ships, and so on.”
One particular effect of this, says Corbet-Milward, would be the greater use of lighter bottles, made from cullet – scraps of broken or waste glass gathered for remelting. Although around 97% of wine is sold in glass bottles, changes to wine packaging, “including lighter weight packaging, increases in recycled content and other pack formats such as liquid cartons, aluminium cans, bag-in-box and PET, can lead to cost effective options and a lighter carbon footprint,” according to the UK-based WRAP, a non-profit organisation set up to reduce waste. With the food and drink sector using more packaging than any other industry, and the UK ranking as the world’s largest wine importer, recyclability and reusability in the country is now crucial.
These factors have had less impact in the soft drinks, bottled water and juice sectors, however, where logistics matter proportionately less. “It’s quite a local industry," says Union of European Soft Drinks Associations (UNESDA) spokesperson Sam Rowe. "We try to have production sites relatively near to the market.”
According to Andy Blair, sales manager at Swiss-based global logistics company Swisslog, the non-alcoholic drinks logistics sector “is of course subject to the same pressures that have influenced the wider warehousing industry: shorter lead times, increased online ordering, advanced stock control, greater use of automation etc.”. He adds that a wider range of beverage products are now being handled in warehouses than ever before.
“Picking is being pushed back from distributors and retailers to manufacturers who now produce more to order, thus producing in smaller batch sizes and small production runs,” says Blair, noting that this means the accuracy of both orders and picking is critically important. “At the other end of the scale, you have micro-brewers and specialist retailers filling niche markets and taking advantage of the developments in technology that was once the exclusive domain of the bigger boys. It’s a trend that’s unlikely to end soon - we are a nation that expects choice.”
He also highlights “big changes in the materials used for packaging beverage products”, including an overall reduction in materials and a growth in cartons or - ‘bag-in-box’ - packaging.
“This in itself may lead to warehouse managers having to consider a greater use of totes and bins or even looking at the issue from an even wider perspective," says Blair.
A manufacturer needs to consider where the most efficiency can be achieved, he says, by looking at the supply chain as a whole - from procurement through to sales and to the end consumer. “A standard container makes automated handling easier in the suppliers’ and producers’ systems, as well as for any intermediate distribution platforms in the chain," Blair continues. "It also includes the individual shops in which, in an ideal world, the goods arriving can be placed straight from the lorry onto the display without further handling, unpacking, or assembly. You can see that, as customers get used to these types of packaging appearing on the shelves, it gives manufacturers a way to reduce their materials, but across the complete supply chain, it can risk loads becoming less stable."
Overall, though, the critical factor in retaining business in today’s “challenging trading conditions – particularly in the independent free on-trade”, is customer service, according to Gavin Murdoch, MD at UK drinks logistics company Tradeteam. “We’ve carried out customer service refresher training and now have all our customers on a single integrated IS [information systems] platform that enables detailed visibility of delivery performance across the network on a daily basis,” he says.
And, while there have been no major changes as of late in terms of beer industry logistics, according to the Brewers of Europe, there is currently a major row in the UK over the sharp rise in cheap, non-duty-paid alcohol. This has taken business away from the legitimate supply chain “massively”, according to the UK’s Federation of Wholesale Distributors. The organisation has called for a fiscal label for beer, to help stamp out a huge rise in the resale of beer bought free of duty for “export” from brewers, and subsequently, fraudulently diverted to UK retail outlets.
Click here to read the second part of this briefing.
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