The snowball effect and wine tanks

The Snowball Effect

Posted on 27 March 2017 by Jim Wilkes

A ‘Snowball Effect’ is a process that starts small, builds momentum and ends up big. And no, I’m not talking about compound interest and Warren Buffet’s bank account. I’m talking about the way compound risk develops in a winery. It’s a silent, under-the-radar risk faced by many wineries because of poorly designed wine tanks.

Structural & Seismic Design

Over time a lack of attention to structural and seismic design can add up. A winery can end up with many wine tanks that are vulnerable to earthquakes. These risks are hidden from view and only become obvious after an earthquake event. At this point, design flaws become obvious.

This situation arises from an under-investment in wine tank and anchor design. Winery owners have in the past had few proven options and, as a result, have stayed with the status quo. This is particularly concerning for wineries in active seismic zones because the chances of their winery surviving a significant event are poor. Marlborough winery owners have just experienced this situation first-hand.

The Snowball Effect

But back to the Snowball Effect. Over time, the risk of a damaging earthquake occurring increases. Seismologists call this the ‘return period’. It is also known as the ‘recurrence interval’ or as most winery owners know it… ‘disruptive, expensive and very scary’.

Stainless steel tanks have been used in the wine industry since the 1950s, which begs the question: Why hasn’t poor tank design been addressed before now?

Stainless steel wine tanks were originally chosen for their ease of cleaning, chemical inertness, improved control over the fermentation process, and for their premium appearance. (There is some irony surrounding their ‘appearance’, given what they look like after an earthquake.)

In the beginning, stainless steel wine tanks were not designed with earthquakes in mind. Originally, the ease of construction and the ability to make a tank with minimal material formed the primary design criteria. There were no earthquake codes, no consideration for seismic resilience, and very little attention was paid to risk mitigation. These days, and once again driven by time, everything has changed.

Time For A Change

The recent magnitude 7.8 earthquake sequence in New Zealand provided more evidence that wine tank design needs to change. This experience is a lesson to winery owners that fixing a winery will cost more than they budget and take longer than they think. The whole disruptive process creates a myriad of headaches and problems that cannot be predicted. These disruptive consequences flow through the entire business causing significant balance sheet trauma.

The industry is impacted as well. Hard won markets can be put at risk, secure businesses can fail, and jobs can be lost. Even insurance companies have to recalibrate. Big payouts are something they try to avoid where possible, so their best and brightest risk analysts are now hard at work studying the Snowball Effect. They’re plugging in brand-new sets of numbers, and coming up with brand-new algorithms. Time will have its say here too…watch this space.

A System That Works

The great news is, the innovators at Onguard have designed a seismic system that works. It’s a proven technology too. It saves wine tanks and winery owners from a lot of unnecessary grief. All wine tanks fitted with the new Onguard system survived the recent magnitude 7.8 event in Marlborough. Zero, none, nada Onguard tanks were damaged, while traditionally designed tanks failed at an alarming rate. The stark differences in design capability were very evident. Finally, winery owners have an option that works.

Ends.