Modal Shifts in Transportation: Wine Shipments

Truckers need not worry too much yet, as most wine still moves coast to coast via truck. The thought of putting precious wine cargo on the rail, in a boxcar, is still a rarity. In the past, rail was considered too slow, or too hot, or too cold, or just too much trouble. However, with diesel fuel currently hovering between $4 and $5 per gallon, rail transport is gaining favor among some of California's fine wine producers. Of course, intermodal (to differentiate between "sea" and intermodal boxes) containers have been used to transport wine via rail, but box cars are more daunting in their size and sometimes troublesome loading and unloading.

Northern California's best-known wine-producing areas, Napa and Sonoma counties, produce about 30 million cases of wine annually. Statewide, the total is in excess of 219 million cases. This represents an astounding 2.5+ billion bottles.

If the winery or wine consolidator does not have a rail siding, loading must be done at the rail site from truck to railcar. Likewise, most wine distributors do not locate adjacent to rail sidings, so trucks are likely needed at both origin and destination. Why the switch to railcar? Fuel costs! The escalation of diesel prices has pushed the cost of moving a 53-foot trailer from California's wine country to Florida to nearly $5,000. A box car can hold three and a half to four trailer loads, and moving the boxcar the same distance costs only $4,000. Even if an additional $200–300 is needed at both origin and destination for transfer of the boxcar load, the savings are still substantial and very worthwhile. As a point of reference, a boxcar can load 4,300–5,000 cases of wine, while a 53-foot truck trailer loads about 1,235 cases.

Another benefits is that for every railcar utilized, four trucks are removed from the highways, lowering congestion and saving over 2,000 gallons of fuel the trucks would have consumed. In fact, according to the Association of American Railroads (AAR), freight trains can, on average, move a ton of freight 436 miles on one gallon of diesel fuel. This makes rail tremendously economical, comparably speaking. Trucks move, on average, 46,000 pounds of cargo around six miles on one gallon of fuel, or about 0.25 miles per gallon per ton.

The most evident drawback to rail shipping is time in transit. Inventory carrying costs are minimal compared to the savings in transport costs. While the wine will ride securely in the newer, better insulated railcars, speed to market does suffer until a routine inventory replacement system is in full use. Rail service to mid-America and the East Coast takes 7.0–14.0 days, while a truck can cover the same ground in 1.5–5.0 days. For distances over 500 miles, rail makes economic sense. Shorter distances are best via truck, as this mode serves the need for a quick delivery. Trucks also offer temperature-controlled, or refrigerated, trailers. In the summer months, this puts at ease the winemakers' fear that higher temperatures could harm the wine. However, these added services also add to the costs.

One "wine consolidator" based in Napa told us that he moves around 30 million cases of wine annually, about 25% by rail. In 1998, his company loaded nearly 100 railcars; this year, he will load over 5,000 railcars. His company actually invested their own money to build the spur line from the short-line railroad that connects Northern California to the long-line rail route to the East Coast. This reduced the costs of loading and transferring the cases from the wineries to the warehouse to the railcar.

A "consolidator," incidentally, is a logistics company that works for a number of wineries. Their job is to bring wines from the various winery locations together for final shipment to distributors, who can be independently-owned companies or state-owned ABC distribution centers. The consolidator usually can choose the shipment mode and exists to get the best service at the best price and lowest cost for the wineries he represents.

Kendall-Jackson and The Jackson Family Wines are major supporters of rail shipping. Gallo wine group has been involved in rail shipping for over 75 years in some form or other. Gallo dates back to the days when wine was bulk shipped in casks and barrels, so their history covers lots of shipping innovations. Today, they use primarily insulated boxcars, shipping over 10,000 of these annually. These cars are very effective in controlling heat and cold temperature swings.

Other wineries and consolidators are still skeptical, pointing out that rail service and tracking and tracing have been unreliable for years. Some are true believers that nothing can protect and transport their fine wines better than refrigerated truck trailers, and that until a train can make the journey to Texas in a day and a half, or to Chicago in two, trucks will remain the mode of choice.

Time will tell as to the real potential for rail boxcar shipment of wines. However, as long as diesel fuel is as costly as it is today, look for more and more of your favorite wines to ride the rails on their journey to your table.