STELVIN
Screw Caps for Wine
John Cristando | Shaun Mehtani | Kelly Shimizu | Chris Surdo | Ian Teh
Main Project
November 8, 2010
Executive Summary
In the past couple of centuries, wine production has not changed dramatically. The same basic
steps are needed: (1) plantation of a vine stock; (2) growing of grapes; (3) harvesting of grapes;
(4) de-stemming and crushing the grapes; (5) alcoholic fermentation of the liquid; (6) maceration
of red grape skins for color; (7) raking of the wine to remove any pulp or skins; and lastly (8)
bottling of the wine.
Traditionally during the bottling phase, wine has been sealed using natural corks. However,
screw cap closures for wine bottles, also known as Stelvins, was developed in the late 1960s and
gained popularity in certain regions as winemakers reacted to the presence of trchloroanisole
(TCA) in natural corks, which resulted in an odor that ruined the value of the wine. Additionally,
cork was also more permeable, which lead to over oxidization of wines. Cork taint affects
somewhere between 3% and 7% of bottles.
However, despite its benefits, Stelvins are used for only 11% of wine bottles.
This is in part due to consumers’ rejection of Stelvins. Firstly, consumers value the romance of
traditional cork and the ceremony of uncorking a bottle. Secondly, consumers associate low
quality wines with Stelvin closures. Finally, the technical superiority of Stelvin closures over
natural corks is also not unanimous. Some believe that natural cork closures allow for negative
gasses to escape the bottle while also allowing varying levels of oxidization to take place, which
can give rise to each bottle’s unique character and enhance the value of the wine.
Part of the challenge to mass
adoption can be attributed to
Wineries
Distributors /
Wholesalers
Sommeliers /
Restaurateurs
Consumers
Retailers
the structure of the wine
industry. In terms of market
approximately
enterprises
12,000
represent
global wine
Bottlers
producers represent 15% of
Stelvin
(AMCOR)
Cork
Producers
fragmentation, the top five
Aluminum
Manufacturers
industry while
(e.g., corkscrews,
closers)
NGOs
the
remaining 85% of market
Cork
Compliments
(e.g., World
Wildlife Fund)
Opinion
Leaders
Government
(i.e.,
Mediterranean
countries)
share.
Page 1
The majority of wine producers are small-scale, regional producers that are owned and operated
as family businesses. This structure makes it economically difficult for Stelvin to economically
alter long established processes among a significant number of small players to generate
adoption. Furthermore, winemakers bear the burden of consumer and channel education or face
the risk of consumer resistance to Stelvins. Most of these producers have limited capital and
aversion to risk due to their small scale and localized businesses. With so much uncertainty
around consumer adoption, the potential benefits do not outweigh the costs and risks from
moving towards the Stelvin.
Consumers do not fully appreciate the value of screw caps nor the scope of the problem (cork
taint) that they eliminate. Thus, they do not believe there is a relative advantage in adopting
screw caps over corks or other forms of wine closures. Furthermore, consumers may not be
predisposed to trialing the effects of the type of closures on the effect of the quality of wine. This
is particularly true amongst high-end wines that require long aging periods. The benefits of
Stelvins are not easily observable. Instead, one of the most easily observed characteristics of
screw caps is distinctly negative. Many consumers associate the mere presence of a screw cap as
an indicator of cheap, poor quality wine.
However, Stelvins have gained some success in certain regions, notably in Australia and New
Zealand. The success of Stelvins in this region have been preceded by high levels of horizontal
cooperation amongst top wine makers, sizeable studies on the influence of wine closures on the
quality of wine, and high levels of consumer education. These regions provide insights into the
strategies that can be replicated in the U.S. and other markets that have been slow to adopt screw
caps.
An estimate of the potential market size for Stelvins stands at approximately $2.31 billion. In
order to expand the share of Stelvins from the current market share of 11% of wine closures,
heightened levels of coordination will be required amongst manufacturers of Stelvin closures,
amongst key winemaking regions and amongst the intermediaries in the Stelvins ecosystem.
These parties will need to work together to (1) promote coordination amongst marquee
winemakers and winemaking regions, (2) generate irrefutable evidence of the relative benefits of
screw caps and (3) address end-consumer barriers to adoption. By acting promptly on these
initiatives Stelvins can secure a long-term position as a mainstay for wine bottle closures.
Page 2
Wine Making
The history of wine making spans the last 8000 years of civilization.1 In the past couple of
centuries, wine production has not changed dramatically. The same basic steps are needed: (1)
plantation of a vine stock; (2) growing of grapes; (3) harvesting of grapes; (4) de-stemming and
crushing the grapes; (5) alcoholic fermentation of the liquid; (6) maceration of red grape skins
for color; (7) raking of the wine to remove any pulp or skins; and lastly (8) bottling of the wine.2
Traditionally during the bottling phase, wine has been sealed using natural corks; however, in
recent decades synthetic corks and screw caps (or Stelvins) have also gained in popularity. The
purpose of sealing wine is simple - to keep oxygen from flowing in and out of the bottle. The
oxidation of wine is perhaps the most common of wine faults, “as the presence of oxygen and a
catalyst are the only requirements for the process to occur. Anthocyanins, catechins,
epicatechins, and other phenols present in wine are those most easily oxidized, which leads to a
loss of colour, flavour, and aroma.”3 All that is required is a slight break in the seal or the tiniest
of airways in the bottle closure for the wine to lose all of its value; thus the best closure for a
bottle of wine should be the one that over time allows the least amount of oxygen into the bottle.
Furthermore, corks are known to be responsible to be a source of trichloroanisole or TCA, which
gives wine a mouldy taste. This effect, known as cork taint, develops due to improper treatment
of the cork bark. Cork taint affects somewhere between 3% and 7% of bottles.4 Though modern
studies have shown that other factors can also be responsible for taint – including wooden
barrels, storage conditions, and the transport of corks and wine – the cork is normally considered
to be responsible.5
As previously mentioned, there are three major types of closures: natural corks, synthetic corks,
and screw tops.
1
http://www.stonepages.com/news/archives/000498.html
http://www.terroir-france.com/wine/making2.htm
3
http://www.wineint.com/storyprint.asp?sc=1810
4
Packaging News Drinks report 2009. The turn of the screw? By Catherine Dawes
5
http://pubs.acs.org/doi/abs/10.1021/jf00110a037
2
Page 3
Natural Corks
Cork is a buoyant material that is harvested for commercial use primarily from the Cork Oak,
which is native to southwest Europe and northwest Africa. Portugal produces approximately
50% of cork harvested annually worldwide, with Corticeira Amorim being the leading company
in the industry.6 Studies conducted by Corticeira Amorim and non-government organizations
have concluded that cork is the most environmentally friendly wine stopper. Once trees are about
25 years old, the cork is stripped from the trunks every nine years. “The sustainability of
production and the ease of recycling of cork products and by-products are two of its most
distinctive aspects. Cork Oak forests also prevent desertification and are the home of various
endangered species.”7
Although the use of cork stoppers create the possibility of cork taint, some consumers some
consumers advocate that the use of cork allows for variations that may actually improve the
quality of the wine. Cork stoppers allow varying amounts of oxygen into a bottle, giving each
bottle of wine its unique personality. Also, cork stoppers also allow negative gasses to escape the
bottle thereby improving the taste. Wine
snobs have even commented that corks
provide a certain “je ne sais quoi”
quality that is important: “Wine does
collect a snob value as people think they
are connoisseurs, and that’s why they’re
against caps.”8
Furthermore, the romanticized experience of opening a bottle of wine is associated with the
ceremony of using a corkscrew to dislodge the cork from the bottle. Indeed, certain consumers
value the tradition of cork use and others associate the use of cork with a positive image. 9
6
http://www.uwec.edu/Geography/Ivogeler/Travel/Portugal/cork-article2.htm
http://news.bbc.co.uk/2/hi/europe/7623912.stm
8
David Robertson. Far Eastern Economic Review. Hong Kong: Aug 16, 2001. Vol. 164, Iss. 32; pg. 54, 1 pgs
9
Garcia, R., Bardhi, F., Friedrich, C., “Overcoming Consumer Resistance to Innovation”, MIT Sloan Management
Review. Summer 2007
7
Page 4
Stelvins
“But even if screw caps do become accepted in wine circles, you
can’t get away from the snobbiness – caps aren’t called caps in the
wine industry, they’re called ‘Stelvins.’ Sounds a whole lot
classier.”10 A screw cap is a metal cap that screws onto threads on
the neck of a bottle of wine, generally with a metal skirt down the
neck to resemble the traditional wine foil.11
“The most known brand of wine screw caps is Stelvin, a brand now
owned by Amcor, a packaging company based
in Australia. The brand is so common that it is
genericized in common use, with many in the
wine trade referring to screw caps as ‘Stelvin
closures’, regardless of brand.”
The obvious benefit associated with Stelvins is
the prevention of cork taint. Additionally, as
can be seen from the chart, Stelvins allow for
the lowest levels of oxygen transmission. Some
users, for example bartenders, prefer Stelvins
as closures for wine bottles as it allows them to
easily reseal
bottles
that
are
not
fully
consumed.
However, just as Stelvins are effective at reducing the level of oxygen transmitted into the bottle,
they are also effective in reducing the level of negative gasses that are transmitted out.12
Furthermore, Stelvins suffer from an image problem in certain regions, where consumers
associate screw cap closures with extremely inexpensive jug wines or non-fine wines, most often
with a reputation of poor quality.
10
David Robertson. Far Eastern Economic Review. Hong Kong: Aug 16, 2001. Vol. 164, Iss. 32; pg. 54, 1 pgs
12
http://www.winebusiness.com/wbm/?go=getArticle&dataId=75329
Page 5
Synthetic Corks
Synthetic corks are made from plastic compounds designed to look and "pop" like natural cork,
but without the risk of oxidation: allowing the customer to keep that romanticized feeling and
reducing the risk of oxidation. Unlike natural corks, synthetic corks are made from material that
is not biodegradable but is recyclable. However, the synthetic cork has its disadvantages as well.
These include the risk of air entering the bottle during aging past eighteen months; the difficulty
in extracting the synthetic cork from the bottle; and the inability to reseal the wine using the
synthetic cork. James Laube of the Wine Spectator as well as countless other wine “snobs” have
commented that synthetic corks also impart a slight chemical flavor to the wine.13
A summary of the pros and cons of the three major types of wine closures is as below:
Pros
Natural Corks
Stelvins
Synthetic Corks
13
- Sustainable / Renewable
- Biodegradable
- Allow for negative gasses to pass
over time
- Romanticized feeling of opening a
bottle
- Lowest level of oxygen
transmission
- Eliminates “corked problem”
- Allows you to re-seal bottle
Cons
- 3% to 7% of wine has “corked”
smell/taste
- Difficult to extract from bottle
- Difficult to reseal after opening
- Does not allow for negatives gasses
to exit over time
- No romanticized feeling of opening a
bottle
- Suffers from image problem
- Not biodegradable
- Allows for romanticized feeling of - Does not allow for negatives gasses
opening a bottle
to exit until after eighteen months
- Eliminates “corked problem” for
- Decreased shelf life (bad for aging
first eighteen months, but seal can
wine)
loosen over time
- Not biodegradable
- Difficult to extract from bottle
- Difficult to reseal after opening
- Adds slight chemical flavor to wine
http://www.winespectator.com/magazine/show/id/11361
Page 6
Current Wine Closure Market
In 2008, there were approximately 33 billion 750-mL bottles of wine consumed in the world.14
Most wines are sold in glass bottles and are sealed using natural corks (or technical corks – a
slight variation on natural corks), synthetic corks, or Stelvins. Some wines are also packaged in
plastic bags within cardboard boxes, called box wine or cask wine.
As can be seen from the chart below, which details what percentage of wineries are using various
methods of wine closures, natural corks & technical corks have seen steady usage, whereas
synthetic closures have experienced a downward trend and Stelvins (referred to as screw caps in
the chart) are gaining in usage.
15
In 2009 The Wall Street Journal, citing statistics produced by Nomacorc Internal Estimates,
reported that 69% of 750 mL wine is bottled with natural cork closures, 20% with synthetic
closure, and 11% with Stelvins.16 It is imperative to note that Stelvins and synthetic corks are all
available in similar price points and varying degrees of quality, so the decision of usage is not
14
http://www.wineinstitute.org/files/WorldWine%20ConsumptionbyVolume.pdf
http://www.winebusiness.com/wbm/?go=getArticle&dataId=75329
16
http://online.wsj.com/article/SB10001424052702304172404575168120997013394.html
15
Page 7
solely based on price. However, because of their labor intensive nature, decent quality natural
corks are generally more expensive.
History of Stelvin
The screw cap was patented in the United Kingdom in 1889.17 Only in the last half century has
the screw cap been widely used as a wine closure. The Stelvin screw cap was developed by La
Bouchage Mecanique, with much of the development being driven by La Bouchage Mecanique’s
customers rather than the firm itself. In fact, Peter Wall, the Production Director of the
Australian Yalumba winery, is thought to have first approached La Bouchage Mecanique’s about
an alternative sealing system for wine bottles in 1964. Today, the Stelvin name is owned by
Amcor, an Australian packaging company.
Despite its French origins, the screw cap did not achieve meaningful levels of adoption by
French consumers. However, across the border in Switzerland the local wine industry was
closing millions of bottles with screw caps by the 1980s. At this time the screw cap was
associated with moderately priced wine.
Screw cap adoption received a major boost in 2000, when a group of winemakers in Australia’s
Clare Valley began bottling premium wines with these closures. A group of winemakers in New
Zealand soon followed. It was around this time that the use of screw caps became firmly
established. It is currently estimated that 85% of New Zealand wines and 45% of Australian
wines are sealed with screw caps.18 Rates of adoption in other markets such as France and the
United States remain much lower.
Structure of the Wine Industry
The structural characteristics of the global wine industry, including a highly fragmented
competitive landscape and a complex ecosystem with numerous parties, present challenges to the
large-scale adoption of the Stelvin screw cap.
In terms of market fragmentation, the top five global wine producers represent 15% of industry
revenue, or $9 billion, while approximately 12,000 enterprises represent the remaining 85% of
market share, or $50 billion. The following chart illustrates this point:
17
18
Courtney, Sue. “The History and Revival of Screwcaps.” Wine of the Week. December 2004
International Screwcap Initiative
Page 8
Breakout of Industry Revenue by Competitor
Consellation
Brands
5% Foster's Group
E&J Gallo
4%
4%
LVMH Moet
Hennessy
2%
Other 12,000
Enterprises
85%
Source: IBIS World
The majority of wine producers are small-scale, regional producers that are owned and operated
as family businesses. For Stelvin to generate significant adoption of its product, the company
would need to find a way to economically penetrate these smaller businesses that comprise the
majority of industry revenue. In addition to these logistical challenges, small family run
businesses lack the capital and risk appetite to alter a process that they have used for many years,
presenting further challenges to selling Stelvins into the market. This competitive landscape
makes it difficult for Stelvin to coordinate among players to generate significant adoption.
During the last decade, however, moderate consolidation within the wine industry has taken
place that could create an opportunity for Stelvin. The number of wine producers has decreased
by 1,750 over the last five years. Multinational producers, such as Constellation Brands, have
exploited a lack of both geographical tradition and wine knowledge in markets like the U.S. to
gain market share. This strategy permits high volume and relatively low quality production at a
reduced cost per unit.
This trend of consolidation is expected to continue. As major brands continue to emerge and
grow, they will be positioned to acquire smaller wine producers. Economies of scale provide
these companies with improved bargaining power with wholesalers and retailers, production
Page 9
efficiencies, and marketing and advertising clout. Independent smaller producers will continue to
lose bargaining power with major wholesalers that prefer to do business with producers that can
sell large quantities. Highly advertised, mass produced, and consistent tasting wine will replace
smaller brands on retail shelves. As this happens, the number of players in the market will
decrease and potentially create a more favorable environment for the adoption of the Stelvin.
The complexity of the wine industry’s ecosystem requires numerous players to realize an overall
positive benefit of transitioning to the Stelvin, creating many hurdles to large scale adoption.
Stelvin Ecosystem
Wineries
Distributors /
Wholesalers
Sommeliers /
Restaurateurs
Consumers
Retailers
Bottlers
Stelvin
(AMCOR)
Cork
Producers
Cork
Compliments
(e.g., corkscrews,
closers)
NGOs
Aluminum
Manufacturers
(e.g., World
Wildlife Fund)
Opinion
Leaders
Government
(i.e.,
Mediterranean
countries)
Based on the costs and relative benefits of adopting the Stelvin, the most significant adoption
risk occurs early in the ecosystem with the bottling and packaging process and late in the
ecosystem with end consumer adoption. The following chart summarizes the impact of the
Stelvin on the major ecosystem players:
Cost Benefit Analysis of Stelvin Adoption
Ecosystem Player
Wine Producers
Major Costs
 If bottle in-house,
Relative Benefit
 Reduced cork taint
Net Impact
 Significant risk with
Page 10


Bottlers


develop process and
know-how to switch
bottling technique
Risk of perception of
low quality
Educate consumer on
benefits of screw cap
Develop process and
know-how to add
screw cap capabilities
Complicates business
 Potential subsequent
improvement in brand
 Easier transport
unclear upside
 Important decision
maker in ecosystem
 None
 Costly with no upside
 Important decision
maker in ecosystem
Distributors and
Wholesalers
 Inventory risk if
Stelvins are not
adopted by the market
 Easier transport and
storage
 Likely indifferent
 Will follow market
Restaurants, Hotels,
Sommelier
 Risk of perception of
low quality
 No “performance” and
ceremony when selling
and pouring
 Loss of “romance”
End Consumer
 Risk of perception of
low quality
 Loss of “romance”
 Reduced cork taint
 Ease of storage
 Sell smaller portions
of wine by the glass
 Improved quality, but
need customer
awareness
 Reduced cork taint
 No need to buy cork
accessories
 Overall positive
benefit
 Important decision
maker in ecosystem,
but not as significant
as end consumer in
terms of size
 Buying decision is
around “romance” and
quality so Stelvin
presents major costs
 Critical decision
maker in ecosystem
Wine producers and bottlers realize a net negative effect of adopting the Stelvin. Generally,
small scale wineries bottle and package their own wine while large scale producers outsource to
a third party bottler. In both scenarios, there is meaningful adoption risk in adding Stelvin
capabilities to the bottling process. Small scale producers need to develop the infrastructure and
know-how to transition to the Stelvin. Most of these producers have limited capital and aversion
to risk due to their small scale and localized businesses. With so much uncertainty around
consumer adoption, the potential benefits do not outweigh the costs and risks from moving
towards the Stelvin. Third party bottlers face additional challenges to developing the
infrastructure and know-how. If they chose to invest in Stelvin capabilities, they will likely
service wineries which have different types of corks, forcing bottlers to operate two separate
processes. This complicates their historically simple and predictable business model. All of these
costs and risks in addition to uncertain end consumer adoption make it unattractive for bottlers to
Page 11
adopt the Stelvin. Since this obstacle occurs in the production phase of the ecosystem, it presents
a tremendous challenge to the adoption of the Stelvin.
The end consumer’s adoption of the Stelvin is the most critical obstacle to the growth of the
Stelvin market. If sufficient demand was present, producers and bottlers would be more
incentivized to look past the costs and risks of the Stelvin and move forward with the transition.
In a quantitative sense, the Stelvin does not impose large costs on the end consumer. However,
consumers purchase wine around the perception of quality and the aura surrounding a bottle of
wine. Uncorking is a big part of this aura. Switching to screw caps would take this “romance”
away from the consumer. In addition, screw caps have a perception of low quality to consumers
who are unaware of the taste and quality benefits of the screw cap. Therefore, the consumer does
not understand the major benefits of the Stelvin. Additional benefits to the consumer include not
having to purchase complementary products related to uncorking and easier storage. Other
players within the ecosystem can influence the consumer’s perception of screw caps, such as
opinion leaders and connoisseurs who, therefore, also serve a major role in the adoption of the
Stelvin. If Stelvin could get consumers over these hurdles and drive sufficient demand, adoption
would likely take place through the ecosystem as risk and costs imposed on producers and
bottlers would be more than compensated for by a significant market opportunity.
The fragmented competitive landscape exacerbates these challenges of a complex ecosystem. If
there were fewer players competing in the market, wine producers could coordinate and
transition to the Stelvin in tandem, essentially forcing it upon consumers. The number of firms
using the Stelvin would give it credibility with the consumer and drive adoption. Currently, no
wine producers are willing to take this risk on their own and the industry’s structure prevents
them from coordinating the transition.
The Challenge of Innovation Diffusion
Successfully achieving screw cap adoption by consumers and distributors has remained a great
challenge. Rogers’ innovation diffusion curve19 helps place this challenge in context. Rogers
groups adopters of innovations into five categories: Innovators, Early Adopters, Early Majority,
Late Majority, and Laggards.
19
Rogers, Everett. Diffusion of Innovation. 1985
Page 12
Innovators are the first to
adopt and are willing to take
risks. Early Adopters are the
next to adopt and have the
highest level of opinion leadership amongst the rest of the population. Together, these first two
groups form the ‘early market.’ The Early Majority adopts a significant period of time after the
first two groups. The Late Majority is skeptical of the innovation and adopts later than the
average member of society. Lastly, the Laggards adopt.
According to Rogers, the rate of adoption is in large part determined by five attributes of the
innovation: Relative Advantage, Compatibility, Complexity, Trialability, and Observability. He
states, “Almost every innovation is evaluated by clients in terms of their prior experience with
something similar.”20 This seems to certainly be the case with regards to screw caps. Most
consumers’ evaluation of screw caps is heavily influenced by their experience with corks. Each
of the five attributes influences the rate of screw cap adoption, especially Relative Advantage.
Relative Advantage
The technical advantages of screw caps are known by wine producers and serious wine
consumers. But most consumers do not fully appreciate the value of screw caps nor the scope of
the problem (cork taint) that they eliminate. Thus, they do not believe there is a relative
advantage in adopting screw caps over corks or other forms of wine closures.
Compatibility
Screw caps face a major challenge in that they are not fully compatible with the values and prior
experiences of wine consumers. Specifically, many consumers feel that the romance of opening a
bottle of wine and hearing the cork pop are an integral part of the experience and are totally
lacking when screw caps are used.
20
Rogers, Everett. Diffusion of Innovations. 1995. p. 241.
Page 13
Complexity
Though the technology of the screw cap is incredibly simple, understanding its benefits is more
complex. Many consumers are not sufficiently familiar with the issues of oxidation and taint
when using corks, and therefore don’t understand the value proposition screw caps offer.
Trialability
Trialability of screw caps is somewhat limited. There is no way to test the wine without
purchasing the bottle first. However, given the low price point at which many wines are bought,
the risk of trying a bottle of wine and being disappointed is likely not a major barrier to adoption.
The trialability of screw caps becomes an issue with high end and wines that require long periods
of aging. Some wines benefit from multi decadal-aging periods. For these wines, the time and
effort required to test the benefit of screw caps over traditional closure techniques are necessarily
large.
Peter Gago, chief winemaker at Penfolds Magill Estate surmises the situation:21
“As far as I’m concerned, the 1953 vintage is the best drinking Grange at the moment –
and it’s still going under its original cork – so we need seals that will be reliable for fifty
years. That necessitates at least a forty year trial before Grange can go under Stelvin –
provided that trial is successful. We can go on a bit more confidently with Stelvin seals,
but for long-term cellaring we need to have greater confidence in order to commit fully.
That means we still have a while to wait.”
At the very least, this creates a significant lag in adoption. For some, it may even suffice as a
prohibitive barrier to adoption. Since wines that require aging are generally associated with
wines that are high in quality, the lack of adoption in Stelvins amongst this category creates a
side effect for other wines. Indeed, the lack of adoption in Stelvins amongst such high quality
wines accentuates the association of Stelvins with low quality wines. This is further discussed
below.
Observability
If the benefits of the screw cap are readily visible to others, the likelihood of achieving critical
mass and widespread adoption increases. Outside of the ease of opening the bottle, though, the
benefits are not easily observed by others. Opinion leaders are important, as they often serve as
21
Stelzer, T.,“Screwed for good? The case for screw caps on red wines”
Page 14
role models for other consumers. But evidence suggests that opinion leaders in the wine industry,
at least in the United States, have not publicized the benefits of the screw cap to such an extent
that they are easily observable by consumers. It should also be noted that one of the most easily
observed characteristics of screw caps is distinctly negative. Many consumers associate the mere
presence of a screw cap as an indicator of cheap, poor quality wine.
In sum, an analysis of these five attributes helps explain why achieving widespread screw cap
adoption has been a challenge. Relative Advantage is especially important in the case of screw
caps. Consumers do not fully perceive the value creation offered by screw caps, and find the
innovation squarely at odds with their prior experiences with corks.
Crossing the Adoption Chasm
Many of the challenges facing screw caps stem from the fact that screw caps are arguably a
discontinuous innovation. That is, they require consumers to make a significant change in their
behavior. Moore22 found that
disruptive
innovations
often
struggle to make the transition
from adoption by the early
market (Innovators and Early
Adopters) and adoption by the
Early Majority. Crossing this
“chasm” requires a different
approach to the two groups. The
early market is characterized by consumers who are comfortable with taking risks and breaking
away from the pack. They have no problem being contrarians; in fact, this is probably a key part
of their identity. Conversely, consumers in the Early Majority tend to be significantly more
conformist and risk-averse. Thus, effectively promoting the innovation to these two groups
requires different approaches. Two aspects of the wine industry have made it difficult to cross
the chasm and attain widespread adoption by the more risk averse Early Majority. 23 First, the
lifetime of the current technology, corks, has lasted for centuries. Many consumers rarely
22
23
Moore, G.A. Crossing the Chasm. 1991.
Marks, B. & Mortensen, W. The failure of a wine closure innovation: a strategic marketing analysis. 2003
Page 15
purchase wine sealed with anything other than a cork. Second, wine is often heavily marketed as
a product steeped in tradition, offering connections to the customs and experiences of the past.
For the Early Majority (and consumers who adopt after them), screw caps create a wine
experience that is materially different from what they have experienced in the past.
How can the chasm be crossed? Moore suggests establishing a beachhead in the mainstream
market where the needs of that particular niche of consumers makes the innovation more likely
to succeed. Once this group of mainstream consumers has adopted, it should be easier to achieve
widespread adoption across the rest of the market. The results of wine industry efforts to cross
the chasm in different parts of the world are discussed below.
Strategies Employed to Drive End Consumer Adoption
The differences in rates of screw cap adoption around the world highlight the unique structure of
the innovation ecosystem. As opposed to other innovations, the challenge with screw caps is not
that there is an intermediate value chain partner that is stubbornly refusing to adopt. The
difficulty lies in getting the end consumer to adopt. Wine producers have addressed this through
a number of approaches and have achieved mixed results. Analyzing strategies that resulted in
significant screw top adoption will provide insight as to what needs to be done to drive adoption
in markets in which it has lagged. In particular, examining the history of adoption in Australia
and New Zealand and comparing it to the less successful results in the United States will prove
instructive.
Australia
Several Australian wineries, especially Yalumba, played a major role in the testing and
commercialization of the screw cap. More than two dozen Australian wineries were using screw
caps by the late 1970s, driven by test results indicating this new type of closure nearly eliminated
the problems of cork taint and oxidation. But while these benefits were understood amongst wine
producers, they were not communicated to consumers. An industry observer noted:
The industry loved Stelvin: retailers could stand bottles upright on display shelves, as
there was no cork to keep moist. Restaurateurs and events organizers loved Stelvin: a
quick flick of the wrist and a bottle was open. Winemakers loved Stelvin because their
wines aged slowly and gracefully without the risk of premature oxidation, which can
occur when poor storage conditions allow the cork to dry out. And of course winemakers
loved Stelvin as it eliminated the danger of cork taint. But consumers hated Stelvin. They
Page 16
thought it looked cheap and, more importantly, there was no magical “pop” as the cork
was drawn.24
Consumer reaction against screw caps was so strong that by 1984 they had virtually disappeared
from the Australian market. Yalumba’s brand image took a particular beating.
The technical superiority of screw caps was not in question, however, and in the early 2000s they
reemerged in force. In 2000 a group of Australian wineries from the Clare Valley began using
screw caps on their premium Rieslings. They formed a collaborative alliance and launched
marketing campaigns aimed at distributors, retailers, consumers, and opinion leaders. This latter
group was targeted because they could act as change agents and convince others of the benefits
of screw caps over other closures. Only a year later, the majority of Australian wineries were
using screw caps on at least one of their product lines and the consumer response was largely
positive.25 The horizontal cooperation between Australian wine producers and the strong
marketing efforts focused at consumers were keys to the success of this effort.
New Zealand
Following on the heels of the reintroduction of screw caps into the Australian market, a group of
New Zealand wineries formed the New Zealand Wine Seal Initiative in 2001.26 Like their
Australian counterparts, New Zealand wine producers set about educating the entire industry on
the benefits of screw caps. Their message to the market was uniform: producers were moving to
screw caps, and these closures led to a higher quality of New Zealand wine. By 2005 the
Initiative included more than 50 large and small wine producers across New Zealand.
United States
In contrast to the approach taken by wine producers in Australia and New Zealand, United States
producers have focused on vertical and not horizontal cooperation.27 Some wineries devoted
their efforts to establishing niche markets such as wine connoisseurs. Others educated their
channel members, hoping this would boost sales. Still others focused on product positioning.
PlumpJack Winery, for instance, used screw caps on $135 bottles of cabernet, using the cue of
Bourne, P. The ACI ‘Stelvin’ Story: Status Report 1979-80. 1980
Bardhi, F., Friedrich, C., & Garcia, R. Overcoming Consumer Resistance to Innovation. MIT Sloan Management
Review. Summer 2007. P. 86.
26
Ibid
27
Ibid
24
25
Page 17
price to denote high quality. These piecemeal efforts failed to significantly change the way
consumers viewed screw caps, and adoption rates in the mid 2000s remained in the single digits.
Comparing the Experience of Australia, New Zealand, and the United States
Differences in industry structure partly explain the varying approaches taken by wine producers
in Australia, New Zealand, and the United States. The former two are smaller, younger, and less
fragmented than the US industry. New Zealand and Australian wine producers wanted to
promote not just screw caps but also their regional brands. Because the industry in the US is so
much more established, this issue is not a concern. Consequently, there is less incentive to be as
cooperative as the industries in New Zealand and Australia. Consumer preferences are also
different. American consumers are more attached to the tradition of corks than consumers in
Australia and New Zealand.28
Despite these differences, the approaches used in New Zealand and Australian offer insight into
strategies that can be replicated in the US and other markets that have been slow to adopt screw
caps. If screw caps are to be widely adopted, US wine producers need to increase their horizontal
cooperation and create a unified message to the entire industry that articulates the relative
advantage of screw caps. This is most critical at the level of the consumer. These marketing
messages will need to highlight not only the technical advantages of screw caps, but also reduce
the general population’s risk aversion to anything that is a departure from the traditional wine
and cork experience that they know and love. Australia and New Zealand bombarded consumers
with flyers, placards on bottlenecks, emails, web sites, and wine tasting events: the American
wine industry will need to do the same because it is dealing with a consumer even more bound to
tradition.
What Will it Take?
Data on the market opportunity for Stelvins is scarce. However, given estimates of
approximately 33 billion 750-mL bottles of wine consumed in 2008 worldwide29 and given the
average screw cap unit cost of 7 cents30, an estimate of the potential market size for Stelvins
28
Garcia, R. A Multinational Study of the Diffusion of a Discontinuous Innovation. Working Paper No.: 05-003.
Institute for Global Innovation Management, Northeastern University.
29
http://www.wineinstitute.org/files/WorldWine%20ConsumptionbyVolume.pdf
30
Brown, S., “Wines are Getting Screwed”, http://www.winegeeks.com/articles/13
Page 18
stands at approximately $2.31 billion. However, despite the benefits espoused, only 11% of wine
bottles are closed using Stelvins.
The low levels of adoption can be attributed to the hurdles of adoption discussed above. In
summary, the key obtacles include: (1) consumers value for tradition and ceremony of cork
closures; (2) lack of consumer knowledge of (or concern for) the benefits of Stelvins; (3)
negative image and quality associated with Stelvins; (4) unclear net positive benefits of Stelvin
(although it reduces cork taint and oxidization, it also reduces variability that improve the quality
of wine, and restricts the transmission of negative gasses from the bottle); (5) and high levels of
fragmentation amongst wine producers.
In the case of Australia and New Zealand, wine makers formed alliances to overcome some of
these hurdles. It is apparent that the conditions that lead to such cooperation were endogenous
and not engineered by sellers of Stelvins. However, while the winemakers appeared to benefit
from the adoption of Stelvins, the clear winners were the makers of Stelvin closures.
The following discusses potential initiatives that makers of Stelvins can pursue to increase
adoption rates.
Promote coordination amongst top winemakers
The level of horizontal cooperation amongst top winemakers in Australia and New Zealand
played a large role in creating a unified message that articulates the relative advantage of screw
caps. Furthermore, mass adoption by top winemakers helps reduce the association of Stelvins to
low quality wines.
While global coordination may be difficult to achieve, given the fragmentation of the
winemaking industry, makers of Stelvin closures should formulate a strategy to target prominent
winemaking regions. Subsidizing trials and promoting adoption amongst leading old world
winemaking regions (for example: France), can help fortify consumer associations of quality
with Stelvin closures. Furthermore, adoption by such old world regions could provide the
catalyst required for consumers to abandon the tradition associated with the use of cork closures.
Page 19
Generate irrefutable evidence of the relative benefits of screw caps
Though the technical benefits of Stelvins are
known, it is still clear whether they are superior
to alternative closures in every aspect. For
example, while Stelvins are strongly rated for its
ability to prevent oxygen transmission into wine
bottles, it is not clear that oxygen transmission is
entirely bad. In fact, as the chart illustrates,
certain
winemakers
believe
that
oxygen
transmission is very important in the process of
aging wine. Moreover, the chart illustrates that
opinions on this changes through time. As a
result, Stelvins face the difficulty of aiming for
goals that are subject to the vagaries and
transience of the ever changing opinions of winemakers (and perhaps also the taste of the
masses).
Stelvin makers would benefit from an internationally renowned study on the best practices for
winemaking. Additionally, Stelvin makers can also prove its relative benefits through high
profile and comprehensive trials. The ACI Stelvin Project provides a good example where the
Australian Wine Research Institute, the Australian Consolidated Industries launched and seven
Australian wine companies launched a study into the influence of closures on quality of bottled
commercial wine.31
However, given the subjective nature of taste and winemaking, finding a proven recipe may
prove evasive. As such, Stelvin makers are embarking on initiatives that allow for winemakers to
control for the characteristics of Stelvin closures. For example, Alcan examined the use of
different liners within Stelvin enclosures that allowed for varying degrees of gas permeability. 32
Continued product innovation in this vein can help emphasize the superiority of Stelvins over
traditional wine closures.
Stelzer, T.,“Screwed for good? The case for screw caps on red wines”
Goode, J., “Finding Closure”, August 2008 Issue of Wines & Vines,
http://www.winesandvines.com/template.cfm?content=57269&section=features
31
32
Page 20
Address end-consumer barriers to adoption
Overcoming consumer barriers to adoption remain the most important challenge to gaining
adoption within the innovation eco-system. Strong end-consumer demand will provide the
necessary incentives for winemakers and other intermediaries to adopt Stelvin closures. Gaining
visibility amongst end consumers and educating consumers about the relative benefits are critical
steps in encouraging consumer adoption. Furthermore, educating consumers will enable
consumers to more readily identify and value the benefits wines closed by Stelvins.
However, since consumers are significantly swayed by a perceived negative image of Stelvins, it
is important for Stelvin makers to pursue marketing strategies that are covert in nature.33
Winning opinion leaders will be a critical step. Additionally, Stelvin makers can pursue
ingredient marketing strategies that help attribute the quality of the wine to the type of closures
used by the wine bottle. Finally, Stelvin makers can seek to develop ceremony and tradition
associated with opening Stelvin closures. For example, Alcan developed non-cork closures for
Champagne bottles that still produce the iconic 'pop' sound when it is opened.
The number and type of consumer marketing strategies available to Stelvin makers are broad
ranging. The importance of consumer within the context of the eco-system participant warrants
more attention from Stelvin manufacturers.
Other considerations
Executing on the initiatives discussed above can be highly lucrative to makers of Stelvins.
However, this requires coordination at a number of levels: amongst the makers of Stelvins,
amongst winemakers and also amongst the intermediaries (distributors, sommeliers, restaurateurs
and retailers). Such coordination requires the formation of alliances that require strong leadership
and organizational skills, which is likely to entail significant costs. Moreover, the reward of
success is likely to be distributed disproportionately to the costs of coordination amongst the
alliance members. As such, a group dynamic may exist that impedes alliance formation.
33
Bardhi, F., Friedrich, C., & Garcia, R. Overcoming Consumer Resistance to Innovation. MIT Sloan Management
Review. Summer 2007.
Page 21
Moreover, there are exogenous risks, which are beyond the control of eco-system participants.
For example, large changes in raw material costs can alter the economics of Stelvins, making
Stelvins an unfeasible alternative for wine bottle closures from a cost standpoint.
Additionally, socio-political and regulatory uncertainty also contributes to the adoption risks of
Stelvins. Oeneo, a French maker of technical cork commissioned a study that examined the
carbon footprint of various bottle closures, revealing screw caps as the worst performer. 34
Regulatory changes, and shifts in consumer values for environmental credentials may also alter
the landscape for Stelvin manufacturers and users.
Furthermore, cork producers and their beneficiaries are also responding to the increasing
prominence of Stelvins. Amorim, a Portugese cork manufacturer, has commenced initiatives to
economically manufacture cork closures with lower levels of TCA and to also produce cork
closures that can be opened without the use of a corkscrew.
35
APCOR, a Portuguese cork
association has also established numerous programs to promote Portugese cork products. (Cork
is a key export of Portugal).36 In short, the innovation of Stelvins is being met with organized
retaliatory efforts.
Such efforts support the case for prompt and unified action by makers of Stelvins. Furthermore,
Stelvin makers should seek to fortify their industry position, particularly as the winemaking
industry consolidates and their power to negotiate against Stelvin makers rise. By acting quickly
on the suggested initiatives, Stelvin manufacturers can secure a share of mind amongst the end
consumers, thereby improving their own power to negotiate. Furthermore, by establishing
indisputable technical superiority over alternative closures, as well as gaining acceptance
amongst top winemakers and top winemaking regions, Stelvins can secure a long-term position
as a mainstay for wine bottle closures. While there are obvious risks to such a venture, the risks
should be considered against the magnitude of the opportunity. Stelvin makers have much to
gain by cooperating and acting sooner rather than later.
Goode, J., “Finding Closure”, August 2008 Issue of Wines & Vines,
http://www.winesandvines.com/template.cfm?content=57269&section=features
35
“The Turn of the screw?”, Packaging News Drinks Report 2009, P54
36
The 2009 Import and Export Market for Agglomerated Cork and Articles Thereof in Portugal. ICON Group
International, Aug 2009, Pages: 63
34
Page 22