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Conference on Reusable Beverage Packaging in Europe
Citation preview
Varga Winery Ltd. www.vargabor.hu
Bálint Varga
Brussels, 8/10/2008
Bottle Reuse In Hungary’s Wine Sector
Conference on Reusable Beverage Packaging in Europe
2 Varga WineryBrussels, 8/10/2008 www.vargabor.hu
Content
About us
Brief history of the Hungarian wine-bottle deposit system
Operation of bottle reuse system
SWOT-Analysis and conclusion
3 Varga WineryBrussels, 8/10/2008 www.vargabor.hu
Varga Winery can be found at the lake Balaton, in one of the most beautiful and famous wine regions of Hungary!
Map
Badacsonyörs
Varga Winery
Badacsonyörs
Budapest165 km
4 Varga WineryBrussels, 8/10/2008 www.vargabor.hu
Varga Winery: the number one Hungarian winery! Market leader since 2005 in Hungary.
Sales of 10-11 million bottles of wine and sparkling wine annually.
Working as a family firm.
Using up-to-date oenological technology.
The capacity of our filling line (including a bottle-washer machine and a rinser) is 10.000 bottles/hour.
97% of our domestic sales is sold in reuse bottle.
We collect 90% of reused bottles sold.
We’re committed to the use of refund bottles!
5 Varga WineryBrussels, 8/10/2008 www.vargabor.hu
Fully automated filling line including a bottle-washing system
6 Varga WineryBrussels, 8/10/2008 www.vargabor.hu
Content
About us
Brief history of the Hungarian wine-bottle deposit system
Operation of bottle reuse system
SWOT-Analysis and conclusion
7 Varga WineryBrussels, 8/10/2008 www.vargabor.hu
Bottle reuse (refill) system in socialism
1950 1970
Centralization Foundation of the fully centralized Wine Trust (one state owned company covers the whole wine industry).
Beginning of standardization (bottles are mainly standardized, bottle-cases not yet).
1990
Decentralization The appearance of several independent market participants, like state farms and co-operatives.
Launch of wine and sparkling wine bottle reuse (refill) system
Both bottles and plastic cases become standardized
Main facts
The reuse system is regulated by the government
Bottle deposit price is centrally determined
Technical parameters of reuse bottles and cases are specified by the regulator
Share of reuse bottles: approx. 96%
Major changes of the 90’s in food-retail, regulation and
company ownership structures affected the bottle reuse system
adversely.
8 Varga WineryBrussels, 8/10/2008 www.vargabor.hu
In the 90’s a plenty of factors made the market believe that the bottle reuse system will completely disappear soon…
Food-retail sector became dominated by multinational retail chains (Penny Market, Tesco, Plus ...), which prefer one-way bottles:
lack of empty bottle and plastic case storage area in warehouses and stores,
bottle reuse system can only work on regional or country level, it doesn’t fit into global procurement processes.
Bad condition of 20-30 years old plastic cases.
Lack of governmental regulation:
bottle types are not standardized any more (e.g. 17 different types of Bordolese bottles),
bottle deposit prices are not regulated any more.
The number of wineries increased from 100 to more than 10.000, new small and middle-sized wineries cannot afford an expensive bottle-washing system (cost is appr. 400.000 EUR).
Even large wineries built their new filling lines without bottle washing system!
CONS
9 Varga WineryBrussels, 8/10/2008 www.vargabor.hu
… and only a couple of factors indicated the survival of the system
Bottle reuse (refill) is much more cost effective compared to one-way system (shelf price benefit: up to 31%!).
Increasing green fee cost, based on company’s reuse rates.
Intensifying social demand for environmental-friendly solutions.
Bottle reuse system still operating, but on a lower scale!
PROS
10 Varga WineryBrussels, 8/10/2008 www.vargabor.hu
Content
About us
Brief history of the Hungarian wine-bottle deposit-refund system
Operation of bottle reuse system
SWOT-Analysis and conclusion
11 Varga WineryBrussels, 8/10/2008 www.vargabor.hu
Reusable bottle - Up to 31% shelf price benefit!
*Shelf price benefit is calculated with 40% sales margin and 20% VAT.
Total Cost Benefit (TCB): 18,8 c
Shelf Price Benefit = TCB / ( 1- sales margin ) * ( 1 + VAT ) = 18,8 / 0,6 * 1,2 = 37,6 c
Main shelf price interval:
Shelf price benefit (%):
85 c 210 c
MIN MAX
31% 15%
One-way or refill: cost analysis on company level
(values in Eurocent) One-way ReusableBottle PRICE 20,0 15,8Calculated bottle COST 20,0 1,6Carton price 4,2 0,0Cost of bottle breakage on filling line 0,2 0,5Cost of plastic case breakage 0,0 1,7Washing cost 0,0 1,7Recollection cost 0,0 0,2Total cost 24,4 5,6
0% 90%90% Reuse rate (%)
Calculated bottle COST =
Bottle PRICE * ( 1 - Reuse rate )
12 Varga WineryBrussels, 8/10/2008 www.vargabor.hu
Co
nsu
-m
ersW
ineries
Wh
ole-
salersR
etailersOperation of the bottle reuse chain
Winery1
Retailer1
Wholesaler1
Consumer
Full bottle
Winery2
Retailer3Retailer2
Waste container
Empty bottle
13 Varga WineryBrussels, 8/10/2008 www.vargabor.hu
Characteristics of bottle reuse system in Hungary today
The bottle reuse system is not centrally regulated, it’s based on the free cooperation of the different market players - mainly producers.
Due to the lack of strong bottle standardization a couple of bottle types (e.g Bordolese) have to be manually sorted by size before filling.
Bottles are stored in 16-er plastic cases. Average age of cases: more than 30 years.
Only one thing is determined by right: stores, selling wine in reusable bottles are obliged to recollect them, and pay back the deposit fee in cash. In practice many retailers obstruct this process.
Refund prices among producers, wholesalers and retailers are normally the same, but retailers apply different deposit fees for consumers (from 4c to 12,5c).
Cheap wine is not sold in TetraPak and bag-in-box, because those packaging solution are expensive compared to reusable bottles. Economy packaged wine is sold in 2-5 liter PET.
14 Varga WineryBrussels, 8/10/2008 www.vargabor.hu
Main bottle & case types
Bo
rdo
lese
Rh
ein
Bu
rgu
nd
y
16-er wine case for 0,75 L bottles 8-er wine case for 1,5 L bottles
The 1,5 l magnum bottle as refund bottle was introduced by Varga Winery in 2003.
Plastic case for magnum bottles is manufactured with a Varga Winery logo on it.
By now it became a new reusable bottle „standard”, applied by many wineries.
Mag
nu
m
15 Varga WineryBrussels, 8/10/2008 www.vargabor.hu
Reuse (refill) rates in Hungary
Total sales in bottles
Recollection of reusable bottles
120
75
59
Company level (Varga Winery, 2007)
Total sales in reusable bottles
million bottles
%
100%
60%
50%
7,1
6,9
6,4
million bottles
%
100%
97%
90%
Market level (estimate)
Remarks:
Wine market size (total sales): 300 million litres annually
Sparkling wine bottles have been no longer refilled since 2005.
16 Varga WineryBrussels, 8/10/2008 www.vargabor.hu
Content
About us
Brief History of the Hungarian wine-bottle deposit-refund system
Operation of bottle reuse system
SWOT-Analysis and conclusion
17 Varga WineryBrussels, 8/10/2008 www.vargabor.hu
More then 30 years old plastic cases, reproduction is not solved.
Missing technical specification of bottle types.
The number of reusable bottle types are decreasing.
Only a few large wineries own an up-to-date bottle-washing machine.
WEAKNESSES
SWOT Analysis – Strengths & Weaknesses
Flexible: based on the cooperation of market players, (common refund price setting).
Cost-effective: large cost-advantage compared to one-way bottle cost.
Shelf-price benefit compared to bottled import wines and alternative wine packaging (TetraPak, bag-in-box etc.).
STRENGTHS
18 Varga WineryBrussels, 8/10/2008 www.vargabor.hu
SWOT Analysis – Opportunities & Threats
Pressure of multinational retail companies.
Many retailers obstruct the collection of reusable bottles.
Parallel bottle-deposit and recycling (selective waste collecting) systems, because the government is not really committed to either of them.
THREATS
Increasing bottle-shortage in EU.
Rising green fee on non-reused packaging (questionable, the Hungarian green fee system has been attacked by EU).
Social demand for environmental-friendly solutions.
OPPORTUNITIES
19 Varga WineryBrussels, 8/10/2008 www.vargabor.hu
Conclusion
The Hungarian government has to commit to bottle-reuse (refill) against bottle-recycling:
set higher green fee rates,
subsidize producers, retailers and wholesalers in creating the infrastructure for bottle reuse system (bottle-washing system, bottle storage area).
subsidize the reproduction of plastic cases,
strictly control the retail sector’s bottle deposit practice,
inform consumers and promote the bottle-deposit system.
We believe that bottle reuse will be the future’s solution in the EU because it’s the most eco-friendly and cost effective way of wine packaging!