Is it time for wine boxes? - bag-in-box wine growing in popularity
Wines & Vines, May, 2002 by Larry Walker
Tony Norskog, owner and winemaker of Nevada County Wine Guild in Nevada City, Calif., has a challenge for some daring Napa County winemaker: Bag it. That is, put a Napa County Cabernet Sauvignon in a bag-in-box. "The first Napa County Cabernet Sauvignon sold in bag-in-box will reap a million dollars in publicity," he said.
Norskog is something of a pioneer himself when it comes to bag-in-box. His 1.5 liter Our Daily Red is, as far as can be determined, the first organic wine ever to be sold in a bag-in-box.
I admire his courage (and his wine, too), but it must feel kind of lonely out there. People in the wine trade know that most U.S. wine sold in a box is, to put it mildly, not likely to win any gold medals. The attitude in California (unlike Australia) seems to have been "any wine will do as long as it hasn't actually turned to vinegar yet."
But there are signs that may be changing. Jon Fredrikson of Gomberg, Fredrikson & Associates noted that the overall market for bag-in-box in 2001 grew about 2%. However, the interesting numbers are for box varietals. White Zinfandel grew by 14%, and on a small base, box Chardonnay grew by 16%. There is a new box Shiraz from Franzia, and Franzia and Almaden box Merlot are both doing well, Fredrikson said.
Also, he believes that the average consumer seeking value is attracted to the 5-liter box where wine can be found that would cost only about a $1.60 a bottle in a 750m1.
"We have an enormous supply of wine around now, waiting for somebody to come out with a good quality wine, even if it was priced at the equivalent of $3 a bottle," he said.
Fredrikson said that technically bag-in-box is better than ever as a means to keep wine fresh. "I guess the paradox is that even though it is a good package, people in the United States won't pay more because of the box image."
Fredrikson said that 17 million units (5-liter bags) were sold in food stores last year at a dollar value of about $171 million. Fredrikson estimated that the 5-liter bag accounts for 95% to 98.5% of the market.
The Major Players
The three major players in the market are Franzia (which has a number of different labels), Canandaigua (Almaden) and Gallo's Peter Vella. Industry sources calculate that Franzia holds some 60% of the market; Almaden, 22%; and Vella, 17% but moving up fast. In fact, Peter Vella appears to be the leader in the White Zinfandel and Chardonnay market segments.
On Jan. 1, 2001, a change in regulations led to a major change in the market, Fredrikson said. Until that time, the "other special natural wines," which are wines with added flavoring and no minimum actual wine content, were allowed to list a wine varietal on the box. "The big story last year was the loss of that market," he said. "When they had to conform to minimum varietal labeling standards, Gallo jumped it."
Norskog said his organic box was selling well. When I spoke to him in February, the product was sold out in the San Francisco Bay Area. But it has the advantage of following the success of Our Daily Red in a bottle, which sells for about $6 on the West Coast and about $8 on the East Coast. The wine is made from Central Valley organic grapes. No sulfites are added, and the wine has good distribution in natural food stores.
Asked why he went for the box technology, Norskog said, "I've always thought the box was an abused package. Look at Australia and how well they do with 'cask' wines. It just has a low quality image in the U.S."
(Our Daily Red is a blend of Carignane, Cabernet franc and Carmine. It's a deep red color with lively blackberry and black pepper spice on the nose; it's medium weight in the mouth, with added dark berry fruit and a lingering finish. In short, a wine that I would be happy to have in my glass anytime. Or in my bag.)
Norskog added that the trade itself has more bias toward the package than the consumer. "You know, in the U.S., we have to sell wine three times. First to the distributor, then to the store and finally to the consumer. Only about half of my distributors picked it up, then about half the stores picked it up. That's one problem I'm facing," he said.
"I think the consumers really appreciate it for what it is. They can buy a box wine and drink a glass a day or a glass a week," Norskog said. He said he has tested the package and found the wine was still good a year after being put in the box.
Norskog said he had not made a decision yet about continued use of the box despite some success in the market. "The cost of producing one 1.5 liter package equals the cost of bottling a case of bottles," he said. Each box must be assembled manually, another person fills the interior bag and another stuffs it into the box and glues the box shut--a labor-intensive operation for sure. Norskog uses a Scholle AF900 semi-automatic, single-vale filler and a DuraShield 45 Scholle bag. Norskog admitted that it would make more sense from a labor standpoint to use a larger box size, 3 or 5 liter. "But I decided on the 1.5 to keep my price under $10," he said. "On a larger box, I would have better margins, but will people spring for an $18 box of wine?"
French Going for Bags
There is apparently a growing market for box wines in France, both for the national market and export market. According to Roberta Morris of Scholle, the French bag market is currently only 1% of the wine market, but on a volume basis, it's almost as big as the U.S. market. The 3-liter package tops the market in France, though there are also 5-liter boxes and 10-liter boxes, sold mostly for home consumption. Scandinavia and the United Kingdom are major markets for French box wines. Morris said Scholle had also been pitching box wines for use in wine-by-the-glass programs.
In Australia, truly premium wine is sold in 2-liter boxes, and the 5-liter box is known as the party box. The 10-liter size is also popular.
Morris said that Scholle is looking for a mid-sized California winery to use bag-in-box to break into a new market and help create and expand the wine market.
Scholle is introducing a new clear film for their bags called Dura-Shield45. Morris said the new film provides better protection and extended shelf life for the wine. The Scholle bags also have a new dispenser called the FlexTap, which Morris says is durable and easier to use.
Christophe de Carbonnieres, the business development manager with Smurfir Bag-in-Box USA, says his company is one of the only companies to offer a one call bag-in-box package. Smurfit can do the whole number, from graphic design to the final product ready for the retail shelf, including the box, the bag and the pour spout. The company, which was formed in Europe, has been in the U.S. market for about tow years.
"We really feel that the winemakers in the U.S. will come to realize that bag-in-box packaging can be used to serve wine lovers and the food service industry here, just as it does in Europe, Australia and Canada," he said.
He said that the Smurfit product has a shelf life of at least 10 months and will keep the wine fresh six or seven weeks after opening. "We are trying to make the U.S. wine industry understand that bag-in-box packaging can be very successful, especially in a wine-by-the-glass program, for example," he said in a telephone interview.
Another plus for bag-in-box packaging mentioned by several suppliers and producers is the opportunity for added graphics and information to be displayed. For example, the entire box turns into point-of-sale for Our Daily Red. The graphics are attractive, and winemaker Norskog uses the back of the box to point out the advantages of buying wine in a box and explains just what organic grape growing is. The best wine marketing tells a story about the wine, and Norskog's package does just that.
Bag-in-Box Market Share for 2001
PRODUCT % OF MARKET
White Zinfandel 17
Chablis 17
Other Special Natural 16
Blush chablis 13
White Grenache 11
Chardonnay 8
Merlot 3
Cabernet Sauvignon 3
Other 12
Source: Gomberg, Fredrikson & Associates
RELATED ARTICLE: Putting It In A Box
Bag-in-box wines would be a mess without boxes, and Pacific Southwest Container is one of the major suppliers of boxes. According to Brian Smith, executive vice president and sales manager, the company makes the boxes for Gallo, Canandaigua and The Wine Group.
The company has a graphics department, although Smith said most wine companies did the graphics design. Smith said there is a constant effort to make the box more user-friendly and to work with wineries to increase the impact of the graphics.
"I know there are some wineries now researching and testing putting good quality wines in bag-in-box," Smith said. "There is a movement toward better quality."
Pacific Southwest Container did the box for Our Daily Red from the Nevada County Wine Guild. For more information, contact Pacific Southwest Container at 4530 Leckron Road, Modesto, Calif. 95353, phone (209) 526-0444, fax (209) 522-8746 or visit the Web site teampsc.com.
Almaden Targets Japanese Market
In February, Almaden announced plans to introduce bag-in-box wines to Japanese consumers. To distribute the brand in Japan, Canandaigua Wine Company formed on alliance with Japan's Asahi Breweries, Ltd., which also serves as a major wine importer.
In a press release, Doug Kahle, VP of Canadaigua Wine's International Division, said, "we believe this product is being introduced at the right time in the Japanese market. Wine consumption is growing steadily in Japan, and consumers are looking for accessible, quality wines at affordable prices. For these reasons, we believe that Almaden Bag-in-the-Box will attract and satisfy consumers in this market."
Almaden bag-in-box wines will be available in 5 liters in both red and white wines.
Cribari Cooking Wine In A Bag
Canandaigua Wines has introduced an innovative box wine designed for restaurant kitchens. The Cribari Cellars 5-Liter Bag-in-the-Box offers a Marsala or Sherry style wine exclusively for chefs. The new culinary boxes build on the Cribari reputation for cooking wines, and the recyclable cardboard containers eliminate glass in the kitchen. The culinary bags also ensure that the wine stays fresher than it would in a bottle.
"We are very excited about Cribari Cellars 5-Liter Bog-in-the-Box," says John Heinz, vice president of National Accounts and On-Premise Sales for Canandaigua Wine Company. "Orders for the new package hove already been secured with independent restaurants and national accounts. Cribari Cellars 5-Liter Bag-in-the-Box is an affordable, easy-to-use premium cooking wine for every on-premise establishment."
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