Capsules in transition: will elevated cost drum tin out of the competition?
Supply costs are on everybody's minds these days, from grape-growers contemplating planting to winemakers evaluating their bottle choices (see stories on page 26 and page 46). But although steel prices have forced growers to consider other options for grapestakes, and producers of mid-priced wines are now less likely to use imported glass bottles, it's doubtful that any commodity has risen as steeply in price recently as tin, for many years the preferred material for wine bottle capsules.
The cost of this raw material has risen an astounding 250% in the last two years, according to David Hanson-Jerrard, president and general manager of Lafitte Cork and Capsule in Napa, Calif. How has this affected suppliers and their clients? Are wineries opting for other types of capsules, or other closures completely? Hanson-Jerrard is among several capsule suppliers who shared their viewpoints for this article.
Not only has tin risen to $16,500 per ton as of January, 2008, Hanson-Jerrard said, but shipping costs to import the capsules have also risen about 27% in the past two years, from an average of $4,100 to $5,200 per 40-foot shipping container, a fact that affects tin capsules much more than their rivals, polylam and PVC (see box on page 39). And these rising costs are only compounded when the dollar slips lower (see box).
Lafitte has a diversified line, producing capsules of tin, aluminum, polylam and PVC at its two factories in France. Because of this, Hanson-Jerrard said, "We have been in a position where we can take a longer-term view of price increases, and have attempted to minimize the increase we have had to pass onto our customers." He commented, however, that he had heard of some wineries whose costs for tin capsules had gone up 30%, presumably from other suppliers.
History, supply and demand
Tin, of course, has not always been the gold standard of wine capsules. Until the early 1990s, lead capsules were the norm. Lead was phased out at that time, not because, as per urban legend, there was any risk of it contaminating bottled wines, but rather because of its proven danger in landfills. Tin stepped in, and later, polylaminate, (polylam), aluminum and PVC as substitutes. Capsules have, throughout wine history, provided the "seal of approval" on cork- and synthetic cork-sealed wine bottles. And although alternative closures have made great strides in the marketplace, it's interesting to note that the most successful, up-scale screwcap closures are made to mimic the appearance of cork-sealed wines, including capsules. A bottle without a capsule appears to some like a wingtip oxford without a sock--under-dressed.
Because of its pliability and sheen, tin proved well adapted for secure and decorative wine capsules. But it's never been considered a precious metal. Granted, wine consumption is rising, but surely that's not enough to cause such radical price hikes.
According to Jeremy Bell, general manager for the Rivercap USA division of Cork Supply USA in Benicia, Calif., "The main uses are for soldering in the electronics industry (the old lead-based solder is being phased out in favor of tin) and tin-plate for food packaging. The demand from China has increased dramatically, largely due to the increased production of electronics, and there has also been a certain amount of speculation, which has pushed up the price of metals. At the same time, the supply has decreased, as many pits have closed in some of the politically sensitive parts of the world."
The main countries producing tin, Bell said, are Indonesia, Bolivia, China and Malaysia. Rivercap sources and contracts its tin through the London Metal Exchange and various European metal brokers, and manufactures the capsules at its factory in Spain. Although the company also supplies polylam capsules in the U.S., and PVC capsules, principally in Europe, tin capsules comprise roughly 70% of its sales by revenue, Bell reported.
Although, he acknowledged, the price for tin capsules "has risen substantially" over the past two years, increases passed along to customers have not been by the same extreme percentage as the cost in materials, since some has been absorbed, "and some has been offset by production efficiencies." Bell commented that the prices of polylam and PVC have also risen, but not to the same extent as tin.
Alternative materials
As Bell mentioned, the price for alternative capsules like polylam and PVC has also gone up. Janson Capsules, the third largest wine capsule manufacturer in Europe, produces capsules exclusively of these materials, according to president Stephane Janson. The company has three factories in France and another in Alabama.
"The PVC material has increased due to the oil price rise," Janson explained. "Polylam capsules are made of both polyethylene and aluminum. Both of these materials have increased according to the oil increase. Aluminum price (has risen) because of the increase in aluminum consumption in China."
