Supply costs are on everybody's minds these days, from grapegrowers contemplating planting to winemakers evaluating their bottle choices (see, "Beating the High" "Looking Forward, and Back"). 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. And these rising costs are only compounded when the dollar slips lower.

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.

What's Behind Capsule Prices

Tin Capsules: Prices for Raw Materials
Feb. 2002											$3,600/ton
Dec. 2005											$6,600/ton
Jan. 2008											$16,500/ton
Importation Costs: Average per 40-foot Container
Jan. 2006											$4,100
Jan. 2008											$5,200
Number of Wine Capsules per 40-foot Container (approx.)
Tin:											460,000
Polylam:											3,700,000
PVC:											7,400,000
Exchange Rate
End of 2005											1 euro = US$1.16
Jan. 2008											1 euro = US$1.48
Source: Lafitte Cork and Capsule

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."

Although he does sell polylam capsules in the U.S., Bell of Rivercap USA noted historical problems with applying polylam capsules on the bottling line. Janson, however, cited developing technology that has rendered them "Similar in appearance and touch to tin capsules. (They) adapt easily on the bottling lines with no major adjustment. Because of printing sophistication, and raw material improvement, polylam capsules provide high quality finishes, and spin nicely on the bottles."

Stephen Forrest is managing director of EsvinWine Resources, Ltd., in Auckland, New Zealand. Esvin sells polylam and PVC capsules, as well as about 5% tin capsules, sourcing the tin product from Europe. PVC costs have risen a mere 10% in recent years, he noted. He remarked that in screwcap-happy New Zealand, "There has been a considerable decline in both PVC and tin capsule sales."

Frederic Catteau, general manager of Alcan Packaging Capsules of California in Napa, which provides both tin and polylam capsules, and is probably best known as the supplier of the (aluminum) Stelvin screwcap, said, "The currency (exchange between) euro/dollar had much more impact than the raw material price itself--example: aluminum."

Will tin remain in?

Catteau said, "There's clearly a switch to some other alternatives, such as polylam and Stelvin screwcaps….If we look at some other countries such as Australia, New Zealand, South America, even in Europe, we see a switch." He estimated there were some 2 billion bottles of wine under screwcap in 2007: 65% of Australian wine, 90% of New Zealand wine. "South America is booming," he said, and the U.S. market for screwcaps grew 24% in 2007, 2.3 times more than the wine market itself.

Forrest of EsvinWine noted, "The most significant change we have seen is that smaller wineries now tend to purchase plain capsules, instead of decorated." He credits that to the high cost of producing small runs, which can be three times that for plain, undecorated capsules.

"It's difficult to say where the tin market will end up, given the cost of tin capsules compared to the alternatives. While I would not want to predict a swing back to tin any time soon, environmental considerations may ultimately have more of an influence on market direction."

Janson mentioned that in recent months, "We have been contacted by various customers in order to transfer their tin capsules to polylam, due to the rising cost….This is a more and more noticeable trend in the U.S. and in Europe. We have a feeling that for a segment of premium wines, there will be a transfer from tin to polylam capsules."

Graham Wilson, president of long-time capsule supplier A.O. Wilson, Ltd., Ontario, Canada, commented, "We have just recently experienced a winery like that. The customer bought tin capsules for the first introduction of their package to the market, and now for the re-order has switched to polylam capsules. The price is definitely the reason."

"We have seen wineries convert from tin to aluminum as well as polylam," said Hanson-Jerrard at Lafitte. "This has been especially so for wineries that have used tin for an extended length of time, and have for the first time tested these two alternatives and found (that) the improvements that have been made in quality have made them viable alternatives, which have saved them costs with minimal differences in quality."

Although Lafitte reported a 40% sales growth in tin capsules in 2007, primarily from boutique wineries, "As the year went on, more and more wines finished in tin that retail at $20-25 and under began asking to look at alternatives," Hanson-Jerrard said. "I think that as we move forward, sales of tin in the U.S. market will decline in 2008, based upon the losses to other materials in the under $20 per bottle range. However, at the higher end of the price spectrum, I think the future of tin is relatively safe, and we do not see many wineries in the over $25/bottle segment currently looking seriously at the alternatives. Of course, the bottom line is if the raw material prices continue to increase at the current rate, the story in two years may be somewhat different."

Graham Wilson predicted: "Tin will eventually be phased out if there is no market for it…due to the high prices. Polylam material is a good and cheaper replacement…the looks are very much alike."

But Jeremy Bell at Rivercap observed, "So far, there has been no change in the buying patterns of our customers. Tin is seen as the top quality material for capsules, and will always be the first choice for boutique wineries. Even among larger producers, tin is the preference for premium wines in the $15 and up range. It clearly has the best appearance, and is easier to apply than polylam, with fewer problems on the bottling line."

Bill Bronson at Diablo Valley Packaging in Fairfield, Calif., said his company is primarily a supplier of glass containers, but sells tin capsules as a secondary item. "My observation," he said, "is that some vintners feel the necessity to go for tin, (just) as they feel obligated to purchase heavyweight bottles. It is an image that they want to portray."

Bell agreed. "Packaging is a critical part of the wine business, and the majority of designers would prefer to use tin for its flexibility and the ability to achieve elegant and intricate designs," he concluded. "I do not see tin being replaced by any other material for premium wine packaging, as there is nothing else that works as well or looks as good."

Capsule Suppliers

ALCAN Packaging Capsules of California (707) 257-6481 stelvin.alcan.com	Global Package, LLC (707) 224-5670 globalpackage.net
Alvis - Closures by Esvin (707) 636-2530 esvin.com	Janson Capsules, Inc. (707) 330-0679 jansoncapsules.com
Battistella USA (805) 785-0200 battistellacapsule.com	G.W. Kent, Inc. (800) 333-4288 gwkent.com
Brentacork (514) 339-1662 brentacork.com	Lafitte Cork & Capsule, Inc. (707) 258-2675 lafitte-usa.com
Brick Packaging (231) 947-4950 brickpackaging.com	Maverick Enterprises, Inc. (707) 463-5591 maverickcaps.com
C & E Capsules (707) 603-2500 cecapsules.com	North American Packaging (866) 488-6117 napproducts.com
California Glass, a Saxco Co. (510) 635-7700 calglass-pcc.com	Novembal, a Tetra Pak Co. (415) 474-1061 novembal.com
Canals Packaging (707) 433-4398 canalspackaging.com	Oeneo Closures USA (707) 256-2830 oeneoclosuresusa.com
Collopack Solutions (707) 258-3940 collopack.com	Phoenix Packaging (800) 661-6481 phoenixpackaging.com
Cork Supply USA, Inc. (707) 746-0353 corksupplyusa.com	Wine Cap Company (707) 939-3930 winecap.com
Cortica Benicia (800) 532-2207 cbcork.com	Pickering Winery Supply (415) 474-1588 winerystuff.com
Diablo Valley Packaging, Inc. (707) 422-4300 dvpackaging.com	Ramondin USA, Inc. (707) 944-2277 ramondin.com
ECI - European Cork Industries (415) 848-3023 eci-cork.com	Rivercap USA (800) 961-2000 corksupplyusa.com
Elnova Ltd (800) 361-9579 elnova.com	Scott Laboratories, Inc. (707) 765-6666 scottlab.com
Encore! (707) 745-4444 encoreglass.com	Scott Laboratories, Ltd. (905) 839-9463 scottlabsltd.com
Enocapsule, Inc. (450) 424-2131 enocapsule.com	Sparflex California (707) 255-6718 sparflex.com
European Closure Industries (707) 863-0648 europeanclosures.com	Tecnocap (304) 845-3402 tecnocapclosures.com
Fleming-Potter, Inc. (905) 294-3620 flemingpotterinc.com	Vinotheque (514) 684-1331 vinotheque.ca
G3 Enterprises (800) 321-8747 g3enterprises.com	Waterloo Container Co. (315) 539-3922 waterloocontainer.com
Globalcap/Guala Closures Group (707) 718-3987 globalcap-wineclosures.com gualaclosures.com	A.O. Wilson, Ltd. (905) 857-1511 aowilson.ca