Monday, May 14, 2012

In transportation veritas

University of Puget Sound economics professor Mike Veseth has a nice, illustrated, post on his blog The  Wine Economist about how shipping by the 'box' rather than by the bottle has revolutionized the wine industry;

The box I’m talking about is big [really big] as in 20 foot ocean shipping containers holding maybe 25,000 liters of bulk wine in a “flexitank” bag.Welcome to the New World of international wine trade — the ultimate ‘uncorked’ experience!
.... Bulk wine (the big box stuff) accounted for about 22% of New World wine exports in 2001 (the remaining 78% was shipped in bottle). By 2010 the bulk share increased to over 40% while the bottle share fell to less than 60%. That’s a near doubling of the bulk wine share of New World wine trade in less than a decade, an amazing shift that is all but invisible to consumers. 
 Which reminds one of Ida Tarbell's famous complaint about John D. Rockefeller in her horribly ignorant History of Standard Oil Company; that he was able to ship (via railroad) his petroleum products at a fraction of the unit cost of the small refineries (including her own family's) scattered throughout Pennsylvania, and that was unfair.

Of course, it resulted in 19th century consumers of kerosene--then the major product of refineries, as the automobile hadn't yet been invented--buying at prices that had been reduced by 80%.  Ms. Tarbell apparently didn't think much about consumer benefits, only her own self-interest as a producer.

Fortunately, Prof. Veseth is made of more compassionate stuff and does recognize the benefits for the consumer.  The shipping he's talking about is by water, not rail, but the principle is the same; economies of scale in transport and packaging make for a better life for almost everyone.  Which is why we don't live in caves and forage for food anymore; capitalism.

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