QAD : Wine-ing About Today’s F&B Challenges and Opportunities

Recently, I had the opportunity to have a conversation with Lara Sowinski, who is the Executive Editor, and along with Pete Hurme, are co-founders ofVinRoutes.com, which provides news and events related to the global wine supply chain. Lara has many years of experience in not just the wine industry, but global supply chains, including the food and beverage supply chain and logistics.

Lara and I discussed a number of issues that are impacting theFood & Beverage industryand in particular, the winemaking industry and supply chain issues. Over the last several years, all manufacturers have faced tremendous disruptions and the wine industry is no exception. Our recent conversation covered a variety of interesting topics and included a great deal of brainstorming. This blog is a summary of that conversation.

A Conversation with VinRoutes.com Co-founder Lara Sowinski

Steve:Hi Lara, thanks for joining me today. As usual, I think we have a great deal to talk about, and I have a number of questions so, let's jump right in. Like most industries, the wine industry has experienced many disruptions, but it seems like they just keep going from one problem to another. What is the reason for that, and what are you seeing as the major issues impacting the industry today?

Lara:Thank you, Steve.The impact of Covid-19 was profoundly disruptive to the wine industry.Abrupt closures of in-person dining, bars, travel, business and entertainment events, coupled with the simultaneous spike in online ordering and direct-to-consumer (DTC) was really difficult from a supply chain perspective. The new parameters of "How, When and Where" wine was consumed affected transportation, warehousing, distribution, and evenpackaging. Further up the supply chain, we saw disruptions in the agriculture and shipping sectors as workers became ill and workforces were forced to socially distance and adhere to new guidelines.

Currently, we are still seeing severe disruptions in shipping, both internationally and domestically. In mid-September, for instance, the ports of L.A./Long Beach hit a record 56 vessels anchored or drifting and awaiting a spot to berth. Meanwhile,ocean freight rates are hitting historic highs. Truck transportation continues to be challenged with driver shortages, tight capacity, and warehousing is likewise finding it difficult to source workers. That's not all. We have aluminum shortages that are affecting canning, and wooden pallet shortages, too. Of course, last year we sawhistoric wildfires in Californiaand other western wine-producing states. Climate change, and with it, sustainability, are a big part of every conversation now in the wine industry, from changes to farming, to the best types of varietals for the hotter, drier climate.

Steve:How is the wine industry managing these issues, and what types of changes have they had to embrace to deal with these disruptions?

Lara:In my view, the wine industry is quickly coming to terms with the new realities, and they're more willing than ever to embrace solutions to address the challenges that have been thrust upon them. A morediversified supply chainis always a good starting point. Start with the basics. For example, look at both rail and truck for domestic transportation. For imports/exports, consider changes to trade policy under theBiden administrationthat areeasing retaliatory tariffs. Look at options with regards to ocean transportation. For example, bulk transportation offers compelling savings if it fits into your program. On the risk mitigation side, the chronic delays and missed sailings are proving problematic for all shippers, including wine shippers. What's your strategy?

At the same time, DTC and e-commerce. Are you taking full advantage of this growing sales channel? According to the annual Sovos ShipCompliant report, DTC wine sales jumped 27 percent last year compared to 2019. While the sudden spike was a response to COVID-19 closures and restrictions, the viability of this sales channel is indisputable. DTC sales are more profitable for wineries because they bypass wholesalers and retailers. Meanwhile, dedicated service providers like VinoShipper.com, WineDirect.com and Wine.com make it easy for wineries and consumers to use online platforms for purchasing wine for home delivery.

Steve: You and I have discussed this next statement many times. People in the wine industry do not like being called manufacturers; however, it might be time for this industry to "think" like manufacturers. Is that the philosophy today's wine producers should adapt?

Lara:The easy answer is YES. And you deserve credit for making the observation initially, which I think is brilliant.Manufacturing is essentially taking raw materials and turning them into finished goods. That's winemaking, too.The common threads are the nodes of the supply chain that are shared amongst all "manufacturers," such as procurement or growing, processing, packaging, transportation, warehousing, distribution, retailing, and even reverse logistics. Each node requires on-going evaluation and optimization. It's no different in the wine industry. I'd like to hear your take on it too, especially because QAD has a sizable presence in the wine space.

Steve: I appreciate your comments. But I believe it is obvious that any company that "makes", "produces" and or "processes" a product sold in the consumer retail market space today needs to analyze all aspects of their business and be ready to make changes. Given the nature of the consumer goods industry and the amount of disruptions, companies need to ensure their processes and systems are adaptable to almost any issue in the market. So, with that said, if the wine industry does in fact proceed with thistransformation, who, in your opinion, should the key players be to make this happen?

Lara: In my opinion, each and every stakeholder in the wine supply chain has a role to play. You need to look upstream and downstream in the wine supply chain and identify both the bottlenecks and the opportunities for improvement and optimization. On the regulatory compliance front, for example, each stakeholder is affected by different regulatory bodies, from USDA, to OSHA, to CBP and DOT at the federal level, to a host of state and local governing bodies. Non-compliance can be extremely costly financially and damaging to an organization's reputation. Producers need to look downstream to the end consumer. They need to analyze the demographics and overall changing consumer behaviors and then adjust their overall strategy to the changing market. Today's consumers want different things and their desires are changing, especially post-pandemic, and the wine industry needs to adapt accordingly. Again, the fundamentals are important. Remember to take a holistic view of your wine supply chain to continually drive out inefficiencies and costs and strive for trueend-to-end visibility.

Steve: Sustainability has been a hot topic for several years now. Since the outbreak of Covid-19, the interest and attention being placed onsustainabilityhas increased tremendously. And the depths of this topic have changed as well. When we talk about sustainability today, we are not just talking about the insensitive person who throws a candy wrapper out of a car window. How is sustainability impacting the winemaking industry and what changes (if any) are you seeing?

Lara:You're absolutely right. The expectations surrounding sustainability have certainly expanded, and the results are more easily measurable today, too. With regards to winemaking, first and foremost it's an agricultural endeavor. So water conservation and stewardship is a key factor and consideration. And, while sustainability applies to transportation and packaging, more broadly, sustainability also applies to organizations themselves. A sustainable organization is one that is diverse, empowering and somewhat decentralized, and is built to respond to risks, challenges and shocks in the supply chain. In other words, sustainability applies to operations just as much as it does to the people who comprise the organization.

Equally important today is the software and technology innovationsthat are supporting sustainability. Better analytics, improved visibility, predictive and prescriptive tools, improved materials and processes from the "grape to the glass," continual improvements with regards to ERP, TMS, WMS, AI, automation and robotics, are all helping organizations achieve higher levels of sustainability across the supply chain.

Steve: You just touched on another topic in regards to sustainability and that is packaging. How are consumer's demands for new innovations insustainable packagingimpacting the industry?

Lara:Raw material costs, such as aluminum, for instance, are rising sharply, while recyclability and weight considerations are also more important now. We're also seeing more emphasis on designing cost-effective-and sustainable-packaging that can withstand harsh conditions, including multiple touch points and handling throughout the supply chain. Aesthetics remain very important, of course, but are different for today's consumers. And, while the traditional corked bottle and labeling design remains prominent, we really are seeing an array of new packaging designs that speak to a new generation of wine consumers.

Finally, there are new advancements with regards to tracking and tracing that are supported by packaging, fromQR codesand other info embedded or printed on the label, to "smart bottles" that have sensors incorporated into the corks that monitor the condition of the wine as well as its location. Simply put, there are lots of exciting things going on with regards to bottling, canning and packaging!

Steve:So much for a couple of quick questions and a brief conversation. It looks like the wine industry right now is craving solutions and seriously needs to adopt adaptive solutions and processes to help with managing these disruptions and become agile enterprises. In your opinion, what should be the starting point?

Lara:I'm always fond of saying: Every business threat is an opportunity. Indeed, the wine industry has encountered so much disruption in such a short time. However, it's also a resilient industry and one that is absolutely determined to thrive in the new environment. This really is an opportunity for the wine industry to shine, and I know it will!

Steve:I think that is an excellent point and really Lara, you have just covered all manufacturing and to a degree, society. We have really been tested in the last 18+ months and are bouncing back. The manufacturing and supply chain worlds have learned what it takes to be an effective enterprise in a crisis. They must be agile and nimble and having the integrated and adaptive processes and systems in place is the start. Great talking to you as usual and thanks for your incredible insight.

I hope you found this conversation interesting and insightful. If you want to hear more from me or other QAD experts, please submit your questions in the comments section below.