Pandemic drives winery demand for smaller bottles — if they can be found

Knights Bridge Winery has dedicated roughly a couple hundred of its roughly 7,000-case annual production to half-bottles, but the team at the high-end Sonoma County winery wished they had a lot more during the coronavirus pandemic.

Virtual tastings for consumers and trade accounts have become the norm for many vintners under travel, dining and on-site tasting restrictions intended to slow the viral spread over the past 11 months. And these producers have been caught between demand for ways to make these tastings happen and global supply chain challenges that have impacted the supply of smaller-format wine bottles.

“If we could have polished up our crystal ball, we sure would have bottled more in pre-pandemic times, because they have been a really popular item,” said Laura Kirk Lee, director of sales and marketing.

By late February, the tasting room didn’t have any more 375-milliliter bottles of 2015 Pont de Chevalier chardonnay left, and the winery was down to its final cases of half bottles for the 2018 West Block chardonnay and the 2011 Knights Valley cabernet sauvignon. Those had been key elements of three-bottle virtual tasting kits — starting at $100 — they vintner had been selling since the first shutdown of California tasting rooms last March.

But because there’s been reluctance over the last 11 months from wholesaler and other buyer representatives from meeting with Knights Bridge salespeople for tastings in person, the half-bottles have become a key part of those remote meetings too. Before the pandemic, one standard 750-milliliter bottle might last a whole day of such trade account sales calls, Kirk Lee said.

Yet just bottling more in the smaller bottles isn’t that simple. Like a number of North Coast vintners, Knights Valley doesn’t have its own winery — but it’s set to get one by harvest — and is dependent on the bottling schedule at its host winery. And because of delivery and availability delays for the smaller containers, that’s made such additional bottling runs unworkable, Kirk Lee said.

‘Bad timing’ for small-bottle demand

Bottlenecks in global supply have affected availability and pricing of smaller bottles, causing demand for them to taper off this after being hot through much of 2020 because of virtual tastings, according to Gustavo Beltran and Ryan Riewerts, sales and national sales managers for M.A. Silva USA, a Santa Rosa-based distributor for wine closures and containers.

With a surge in consumer purchases of beverage alcohol in the early months of the pandemic, container makers started to have a shortage of aluminum for beer cans, so there was a shift to glass, Riewerts said.

“The manufacturers, due to lack of capacity, don't want to shut their machines down and have constant changeovers,” Riewerts said about a glass plant’s shifting between production molds for standard-sized and smaller bottled. “They want to run their machines in single bottles, if possible, for as long as they humanly can to create economies of scale. So it's been very tough to get production of smaller format bottles that aren't used in the volumes that these 750(-milliliter bottles) are typically used, and for that matter, 12-ounce beer bottles.”

The Tax & Trade Bureau in late December added 355 milliliters, the metric equivalent for longneck beer bottles, as an allowed standard of fill for individual sale. Previously, a 375-milliliter-fill container was the closest allowable wine size to be sold by itself.

Though there has been demand for smaller bottles for virtual tastings, Beltran and Riewerts anticipate this will be a temporary surge — perhaps, 18 to 24 months — until consumers get more comfortable with getting together for meals and wine as the pandemic gets under control.

But vintners that want the smaller bottles likely will have problems getting them for the next six to 24 months, because of tariffs on Chinese goods and North American container makers focusing on standard-sized bottles, they said. And it’s not helping that big markets for smaller wine bottles normally — airlines, hotel wet bars and restaurants — also are closed or restricted during the pandemic, reducing demand for manufacturers.

“It’s a bad-timing situation,” Beltran said.

Big jump in sales for smaller wine containers

Smaller-format wine containers have been hot-sellers in stores and other off-premises consumptions venues, according to data from NielsenIQ. The overall U.S. sales of wine in 750-milliliter bottles in stores over 52 weeks was up nearly 21% to $15.6 billion as of Jan. 25 from a year before and up 15.5% to $4.53 billion in the previous 13 weeks, compared with a year prior.

Of the smaller formats, single-serving containers (187 milliliters) dominate at $515.1 million for the 52 weeks and $140.4 million for 13 weeks, up 12% and nearly 17%, respectively. Next biggest in the small format is 500-milliliter containers, popularized by energy drinks, at $238 million and $60.7 million, up 5.5% and 1.9% for the rolling annual and quarterly periods. But No. 3 in the small format is the half-bottle, with $201.8 million and $57.2 million in 52- and 13-week sales, up 50.9% and 52.4%, respectively.

Distillers also are seeking small bottles

Napa-based beverage alcohol packaging broker Erica Harrop said her firm, Global Package, has been asked for 100- or 200-milliliter bottles for spirits to make tasting kits but not for wine.

“For spirits, tasting rooms are encouraging more tasting of their products because laws only allow so many liters to be purchased at one time,” Harrop said.

That late December rule change from the Tax and Trade Bureau on standards of fill for wine and cider also allowed more sizes of spirits to be sold individually.

“This means an almost infinite number of bottle designs that are in small run series at 700 (milliliters) are now possible to use for the U.S.,” Harrop siad. “It should open up a lot of options for interesting packaging."

Jeff Quackenbush covers wine, construction and real estate. Before the Business Journal, he wrote for Bay City News Service in San Francisco. He has a degree from Walla Walla University. Reach him at jquackenbush@busjrnl.com or 707-521-4256.