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Bottle Reuse In Hungary’s Wine Sector


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Conference on Reusable Beverage Packaging in Europe

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Bottle Reuse In Hungary’s Wine Sector

  1. 1. Bottle Reuse In Hungary’s Wine Sector Conference on Reusable Beverage Packaging in Europe
  2. 2. Content <ul><ul><li>About us </li></ul></ul><ul><ul><li>Brief history of the Hungarian wine-bottle deposit system </li></ul></ul><ul><ul><li>Operation of bottle reuse system </li></ul></ul><ul><ul><li>SWOT- A nalysis and conclusion </li></ul></ul>
  3. 3. Varga Winery can be found at the lake Balaton, in one of the most beautiful and famous wine region s of Hungary! Map Badacsonyörs Varga Winery Badacsonyörs Budapest 165 km
  4. 4. Varga Winery: the number one Hungarian winery! <ul><li>Market leader since 2005 in Hungary. </li></ul><ul><li>Sales of 10-11 million bottles of wine and sparkling wine annually. </li></ul><ul><li>Working as a family firm. </li></ul><ul><li>Using up-to-date oenological technology. </li></ul><ul><li>The capacity of our filling line (including a bottle-washer machine and a rinser) is 10.000 bottles/hour. </li></ul><ul><li>97% of our domestic sales is sold in reuse bottle. </li></ul><ul><li>We collect 90% of reused bottles sold. </li></ul>We’re committed to the use of refund bottles!
  5. 5. Fully automated filling line including a bottle-washing system
  6. 6. Content <ul><ul><li>About us </li></ul></ul><ul><ul><li>Brief history of the Hungarian wine-bottle deposit system </li></ul></ul><ul><ul><li>Operation of bottle reuse system </li></ul></ul><ul><ul><li>SWOT-Analysis and conclusion </li></ul></ul>
  7. 7. Bottle reuse (refill) system in socialism 1950 1970 <ul><li>Centralization </li></ul><ul><li>Foundation of the fully centralized Wine Trust (one state owned company covers the whole wine industry). </li></ul><ul><li>Beginning of standardization (bottles are mainly standardized, bottle-cases not yet). </li></ul>1990 <ul><li>Decentralization </li></ul><ul><li>The appearance of several independent market participants, like state farms and co-operatives. </li></ul><ul><li>Launch of wine and sparkling wine bottle reuse (refill) system </li></ul><ul><li>Both bottles and plastic cases become standardized </li></ul>Main facts <ul><li>The reuse system is regulated by the government </li></ul><ul><ul><li>Bottle deposit price is centrally determined </li></ul></ul><ul><ul><li>Technical parameters of reuse bottles and cases are specified by the regulator </li></ul></ul><ul><li>Share of reuse bottles: approx. 9 6 % </li></ul>Major changes of the 90’s in food-retail, regulation and company ownership structures affected the bottle reuse system adversely.
  8. 8. In the 90’s a plenty of factors made the market believe that the bottle reuse system will completely disappear soon… <ul><ul><li>Food-retail sector became dominated by multinational retail chains (Penny Market, Tesco, Plus ...), which prefer one-way bottles: </li></ul></ul><ul><ul><ul><li>lack of empty bottle and plastic case storage area in warehouses and stores, </li></ul></ul></ul><ul><ul><ul><li>bottle reuse system can only work on regional or country level, it doesn’t fit into global procurement processes. </li></ul></ul></ul><ul><ul><li>Bad condition of 20-30 years old plastic cases. </li></ul></ul><ul><ul><li>Lack of governmental regulation: </li></ul></ul><ul><ul><ul><li>bottle types are not standardized any more (e.g. 17 different types of Bordolese bottles), </li></ul></ul></ul><ul><ul><ul><li>bottle deposit prices are not regulated any more. </li></ul></ul></ul><ul><ul><li>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). </li></ul></ul>Even large wineries built their new filling lines without bottle washing system! CONS
  9. 9. … and only a couple of factors indicated the survival of the system <ul><ul><li>Bottle reuse (refill) is much more cost effective compared to one-way system (shelf price benefit: up to 31%!). </li></ul></ul><ul><ul><li>Increasing green fee cost, based on company’s reuse rates. </li></ul></ul><ul><ul><li>Intensifying social demand for environmental-friendly solutions. </li></ul></ul>Bottle reuse system still operating, but on a lower scale! PROS
  10. 10. Content <ul><ul><li>About us </li></ul></ul><ul><ul><li>Brief history of the Hungarian wine-bottle deposit-refund system </li></ul></ul><ul><ul><li>Operation of bottle reuse system </li></ul></ul><ul><ul><li>SWOT-Analysis and conclusion </li></ul></ul>
  11. 11. 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 re fill : cost analysis on company level 0% 90% 90% Reuse rate (%) Calculated bottle COST = Bottle PRICE * ( 1 - Reuse rate )
  12. 12. Operation of the bottle reuse chain Consu- mers Wineries Whole- salers Retailers Winery1 Retailer1 Wholesaler1 Consumer Full bottle Winery2 Retailer3 Retailer2 Waste container Empty bottle
  13. 13. Characteristics of bottle reuse system in Hungary today <ul><ul><li>The bottle reuse system is not centrally regulated, it’s based on the free cooperation of the different market players - mainly producers. </li></ul></ul><ul><ul><li>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 . </li></ul></ul><ul><ul><li>Bottles are stored in 16-er plastic cases. Average age of cases: more than 30 years. </li></ul></ul><ul><ul><li>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. </li></ul></ul><ul><ul><li>Refund prices among producers, wholesalers and retailers are normally the same, but retailers apply different deposit fees for consumers (from 4c to 12,5c). </li></ul></ul><ul><ul><li>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. </li></ul></ul>
  14. 14. Main bottle & case types Bordolese Rhein Burgundy 16-er wine case for 0,75 L bottles 8-er wine case for 1,5 L bottles <ul><li>The 1,5 l magnum bottle as refund bottle was introduced by Varga Winery in 2003. </li></ul><ul><li>Plastic case for magnum bottles is manufactured with a Varga Winery logo on it. </li></ul><ul><li>By now it became a new reusable bottle „standard”, applied by many wineries. </li></ul>Magnum
  15. 15. 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) <ul><li>Remarks: </li></ul><ul><li>Wine m arket size (total sale s ): 300 million litres annually </li></ul><ul><li>Sparkling wine bottles have been no longer refilled since 2005. </li></ul>
  16. 16. Content <ul><ul><li>About us </li></ul></ul><ul><ul><li>Brief History of the Hungarian wine-bottle deposit-refund system </li></ul></ul><ul><ul><li>Operation of bottle reuse system </li></ul></ul><ul><ul><li>SWOT-Analysis and conclusion </li></ul></ul>
  17. 17. SWOT Analysis – Strengths & Weaknesses <ul><ul><li>More then 30 years old plastic cases, reproduction is not solved. </li></ul></ul><ul><ul><li>Missing technical specification of bottle types. </li></ul></ul><ul><ul><li>The number of reusable bottle types are decreasing. </li></ul></ul><ul><ul><li>Only a few large wineries own an up-to-date bottle-washing machine. </li></ul></ul>WEAKNESSES <ul><ul><li>Flexible: based on the cooperation of market players, (common refund price setting). </li></ul></ul><ul><ul><li>Cost-effective: large cost-advantage compared to one-way bottle cost. </li></ul></ul><ul><ul><li>Shelf-price benefit compared to bottled import wines and alternative wine packaging (TetraPak, bag-in-box etc.). </li></ul></ul>STRENGTHS
  18. 18. SWOT Analysis – Opportunities & Threats <ul><ul><li>Pressure of multinational retail companies. </li></ul></ul><ul><ul><li>Many retailers obstruct the collection of reusable bottles. </li></ul></ul><ul><ul><li>Parallel bottle-deposit and recycling (selective waste collecting) systems, because the government is not really committed to either of them. </li></ul></ul>THREATS <ul><ul><li>Increasing bottle-shortage in EU. </li></ul></ul><ul><ul><li>Rising green fee on non-reused packaging (questionable, the Hungarian green fee system has been attacked by EU) . </li></ul></ul><ul><ul><li>Social demand for environmental-friendly solutions. </li></ul></ul>OPPORTUNITIES
  19. 19. C onclusion <ul><ul><li>The Hungarian government has to commit to bottle-reuse (refill) against bottle-recycling : </li></ul></ul><ul><ul><ul><li>set higher green fee rates, </li></ul></ul></ul><ul><ul><ul><li>subsidize producers, retailers and wholesalers in creating the infrastructure for bottle reuse system (bottle-washing system, bottle storage area). </li></ul></ul></ul><ul><ul><ul><li>subsidize the reproduction of plastic cases, </li></ul></ul></ul><ul><ul><ul><li>strictly control the retail sector’s bottle deposit practice , </li></ul></ul></ul><ul><ul><ul><li>inform consumers and promote the bottle-deposit system. </li></ul></ul></ul>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!