1 Flashcards
Supply > demand
Prices tend to fall as consumers have a greater choice of cheaper alternatives
- producers’ lower prices (reduce profits) to remain competitive
- fall in prices may lead to a demand which benefit produces in the long run
Supply < demand
Prices are likely to increase
- generally, they perceive there is no alternative available
- others may not be willing to pay more and simply switch to another wine or alcoholic drink altogether
What are the contributing factors that are factored into the price of a bottle of wine? (Demand side)
What demand factors affect the price of a bottle of wine?
-social factors
-economics factors
-legislative and political factors
Factors influencing the demand for wine – social factors
What are the social factors that affect the demad for wine?
S H a R P
S -changes in spending patterns
H -consumption habits
R -changes in reputation
P -consumer preferences
Factors influencing the demand for wine – social factors
Describe snapshots of Consumption habits in recent hisory?
____ increased rapidly in the 1st part of 2000s
- fall back in global financial crisis of 2008
- graph- wine consumption is falling (France / Italy)
- static (Germany) in traditional wine drinking countries
-increasing in USA & China
-US consumers more willing to embrace new tastes in last 20-30 years
2011 the US overtook France and Italy in wine consumption, what lead to that?
P I E
-improvements in wine Production in the domestic market
- Increasing globalization of the food & drinks industry
- consumer more able and willing to Embrace new tastes
Reasons for China’s consumption of wine increase?
-growing middle class
- way to show status is by moving up from local drinks to wine
- drink imported is better status
- at first French but increasing elsewhere- Australia, Chile
Reasons for consumption of wine to be falling?
C H e R r Y
-changes in lifestyle- shorter mealtime, traditional of drinking at lunch is increasingly forbidden by employers
- health concerns- increasing awareness of negative health effects
- reduced availability of cheap wine
- younger people drinking less- old fashioned & turn to other drinks – Spending less time in bars, contact friends through social media
Reasons for consumption of wine to be falling
Younger people drinking less wine because?
-drinking age to mid-thirties
- regard wine as old fashioned -in Spain drinking Gin is old
- have turned to other alcoholic drinks
- eg. UK _____ spend less time in bars and not prefer contact with friends via social media
Reasons for consumption of wine to be falling
Health concerns
- increasing awareness of the negative health affects
- usually due to the Gov campaigns or policies
- Loi Evin in France contributed to a significant drop in wine consumptions
The alcohol policy law, the Loi Evin, was passed in France in 1991 in order to control the advertising of alcohol and tobacco.
Reasons for consumption of wine to be falling
Changes in lifestyle
Often less time for longer meals where wine would be consumed
Consuming alcohol during the workday becoming increasingly forbidden
-changing culture
Reasons for consumption of wine to be falling
Reduced availability of cheap wine
- traditional wine producing countries have been taking steps to reduce over-production
- eg Vine Pull schemes
- resulting in small volumes of wine but better quality - some countries have just simply switched to other, cheaper alcoholic drinks
Factors influencing the demand for wine – social factors
Consumer preferences
- increase in rose – especially in US
- increase in Prosecco sales in UK
- increase in sparkling wine globally (despite reduced wine consumption)
- increase demand for lower alcohol wine (fortified wine down)
- decreased demand for medium sweet German wines Liebfraumilch -had been popular in US & UK in 50s-70s.
Factors influencing the demand for wine – social factors
Consumer reputation
- as the ____ grows of a produce or a wine grower the demand will also increase & justify higher prices
- good reviews from publication/ critics
-key opinion leaders
-television series, music lyrics, celebrity lifestyles
-peer opinions & behaviors
Define Price sensitive markets?
A market where customers are unwilling to spend more than the lowest price possible
Germany &UK
-fierce competition / can make market unprofitable for producers
-often reluctant to pass on increases in production costs for fear of losing consumer- brand loyalty
Factors influencing the demand for wine – social factors
Consmumer generlly have what two Spending patterns phillosophies?
Lowest $— Price-sensitive markets- customers willing to only pay the lowest price
Most value—- Premiumisation market – the action or process of attempting to make a brand or product appeal to consumers by emphasizing superior quality & exclusivity
Premiumisation market – define
the action or process of attempting to make a brand or product appeal to consumers by emphasizing superior quality & exclusivity
Describe the trend for premiumsation?
Customers (in US and price-sensitive like UK) are willing to pay more for individual bottles of wine
- Because they are buying less wine in volume
- Better quality buyers àUS
- Willing to pay more for something perceived to be better quality than the cheapest option
- willing to pay more for less bottles of better wine
Factors influencing the demand for wine- economic factors
What are the economic factors that affect the demand for wine?
F a C E
-fluctuation in the currency exchange
-changes to the market
-economy strength
