Sunday, May 02, 2010

Just Two Words: Plastic Corks; Reinventing an Old World Industry and Breaking The Cork Monopoly

ZEBULON, N.C. WALL STREET JOURNAL - "In a nondescript factory in this small, wooded town, 10 giant machines worked around the clock last year to churn out 1.4 billion plastic corks, enough to circle the earth 1.33 times if laid end-to-end. Unknown to most American wine drinkers, the plant's owner, Nomacorc, has quietly revolutionized the 400-year-old wine-cork industry. Since the 1600s, wine has been bottled almost exclusively with natural cork, a porous material that literally grows on trees in Portugal, Spain and other Mediterranean lands.

But over the past 10 years, an estimated 20% of the bottle stopper market has been replaced by a new technology—plastic corks that cost between 2 and 20 cents apiece (see chart above). More than one in 10 full-sized wine bottles sold worldwide now come with a Nomacorc plug, while another 9% or so come from other plastic cork makers. Screw caps took another 11% of the market. "We infuriated the cork industry," says Marc Noel, Nomacorc's chairman.

The story of how Nomacorc and other stopper upstarts broke the centuries-old cork monopoly is a lesson in how innovation, timing and hustle combined to exploit an opening in a once airtight market. It shows that any dominant industry can be vulnerable to competition, especially if it grows complacent about its position."

MP: Great example of: a) creative destruction, b) how market competition is often the best form of regulating monopolies, c) how even long-standing monopolies and dominant firms are eventually challenged by innovation, competition and young upstarts, d) American ingenuity and entrepreneurship, and e) why U.S. manufacturing is alive and well and entering a new cycle of growth.

HT: Gene Hayward

13 Comments:

At 5/02/2010 2:32 PM, Blogger JMG said...

"... enough to circle the earth 1.33 times if laid end-to-end."
Replacing a natural product by litter, what an improvement!

 
At 5/02/2010 3:03 PM, Anonymous Anonymous said...

And no doubt you'd be complaining about the use of natural cork leading to the destruction of cork trees.

 
At 5/02/2010 3:45 PM, Anonymous Anonymous said...

At some point you've made enough wine.

 
At 5/02/2010 4:15 PM, Blogger OA said...

As the wine cork business has started declining, it's now being marketed as sustainable flooring. Turns out even the old world industries adapt if they have to.

 
At 5/02/2010 4:39 PM, Blogger JMG said...

Apparently the ilustrious commentators know nothing about cork.
Cork is the bark of a tree (quercus suber, "sobreiro" in Portuguese). Removing the bark periodically (every nine or ten years) is in no way detrimental to the health of the tree.

 
At 5/02/2010 5:09 PM, Blogger Marko said...

JMG - if you characterize the plastic corks as litter, what do you think the natural cork is after it is used? Are you suggesting that because it is natural a used cork is not litter? It takes up the same land fill space, unless you are aware of a market in used natural corks that I am ignorant of. Once in a landfill, it won't matter much what the cork is made of.

As for the "renewable" nature of natural cork, do you think that because is literally grows on trees that it doesn't require some kind of input? Soils become depleted, and fertilizer is needed. More often than not, inorganic fertilizers are used, which use natural gas or coal, which I am guessing you don't like.

 
At 5/02/2010 5:54 PM, Blogger Benjamin said...

I think the rap on plastic corks, like all small plastic items, is that they easily are discarded into the environment, not landfills. They bob up on shore, they go into waterways etc.

It would be a wonderful world if no one littered. So far, there is no sensible price mechanism for fighting plastic litter, other than returnable bottle fees, and a few other incentives.

Plastic litter is an unintended consequence of the free market system. There is nothing in the price signal to capture the full cost of the product.

The manufacturers and litterers, in a sense, are communists--they force the whole community to bear the costs of production.

BTW, you can visit far flung islands in the Pacific, and washing up on shore is plastic flotsam, sometimes a lot of it. I've seen it myself.

Natural corks quickly degrade in the environment.

It would be great if the free market system developed a plastic that bio-degraded after use. Not sure how that would ever work for plastic corks---you would not want one to degrade while the wine sat on the shelf for a few years.

The wine you get in screw-top bottles is better anyway.

The free market is full of unintended consequences, and plastic litter is one of them.

 
At 5/02/2010 6:36 PM, Blogger JMG said...

Marko:
i) Cork is biodegradable; plastic is not in the same time frame; ii) Sobreiro DOES NOT require any kind of input - no fertilizer, inorganic or otherwise; iii) If in the natural forests in the USA there was a tree with precisely the same characteristics (by the way, this is a variety of oak), removing its dead bark (that's what cork is) would require nothing, other than work and the proper tooling; iv) The sobreiro revels in poor lands; v) You seem to imply that I am some sort of wacko ecologist. Well, I'm not, I simply happen to know what I'm talking about in this instance.
You might think this is a miracle, because apparently there are no downturns (by the way, the fruit is edible, roaming pigs feed on it - one or two grilled chops of this pork breed would leave you, I believe, a grateful memory). But there are: the land is expensive and the bark can be removed from each tree only once every nine years, on average; the trees can't be too close from one another; removing the bark is quite labour consuming; in such a tiny country as Portugal most lands were never affected to this use, either because the product could not compete with food staples or because the climate was not appropriate.

 
At 5/02/2010 7:16 PM, Anonymous Anonymous said...

After reading the sanctimonious environmentalist gibberish of JMG, I'm going to go out and buy a thousand plastic corks and toss them out my car window at intervals. Screw you, I will not submit!!

 
At 5/02/2010 9:25 PM, Anonymous Anonymous said...

I prefer the corks.

 
At 5/02/2010 9:26 PM, Blogger Benjamin said...

Anon-
You must be a Tea Party Man, and a Republican. Viva Litter!

 
At 5/02/2010 11:49 PM, Anonymous Anonymous said...

It's not litter, the Universe wanted plastic

 
At 5/03/2010 7:15 PM, Blogger Marko said...

Cogent response JMG, thanks. Benji, not so much.

 

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