2 Flashcards
Challenges of Oversupply and Undersupply
-What challenges is there on Oversupply?
The level of ___ has been reduced in recent years due to consumption in US and China
- excess produce causes prices to fall b/x consumer find cheaper alts. -producers look for new markets
- draw back is that it might take time to develop
- produces may choose to package in different label & offer it in supermarkets or deeper discounts
- risk of devaluing the brand image
Challenges of Oversupply and Undersupply
-What challenges if there is an Undersupply on winery side
- it may happen as it did in 2017 issued which produces a _____ year
- problem of disappointing clients,
- business strains, financial penalty from retailer or cancelation
- eg. Bordeaux Premier Cru Classe
- most cases producers prefer to issue allocations
Challenges of Oversupply and Undersupply
-What challenges if there is an Undersupply on retailer side
- Retail shops customer may choose origin is not important
- most industries would result with an increase in price
- price sensitive markets especially true
- larger producers that experience an ____ in one price point are able to offer an alternative from within their portfolio
Factors influencing Supply of wine
-What is considerend in the cost of grape growing?
Cost of _____ are broken into two categories
-initial costs of establishing the vineyard
-Ongoing costs of managing it and producing the grapes
Factors influencing Supply of wine -grape growing costs
-An inital cost is purchasing the land. What factors go into the value of the land?
- can reflect potential to produce high quality
- named appellation
- how specific / level the appellation?
-scarcity of land
Factors influencing Supply of wine -grape growing costs
-Beyond purchasing the land, what are other initial costs of establishing the vineyard?
S C A B S W I M P
- Survey -Stakes/ trellising
- Clear -Weather hazzards
- Access roads -Irrigaion / drainiage
- Buying plants -Machinery / equipment
- (Purchase land) -pest protection
Capital costs- funds to establish a vineyard may come from where?
- can be from personal wealth
- can be in the form of loans w/ investors
Which may want some form of managing involvement / profits
-some countries offer tax incentive or lump sum contributions
Factors influencing Supply of wine -grape growing costs
-ongoing costs of managing the vineyard and producing grapes that may start as soon as the vines are planted & before productivity?
T I M E M e L d -Treatments: Conventional: herbicide, fungicide, insecticides Organic/ biodynamic; may use Sulphur powder or Bordeaux mix
-Irrigation if needed -Materials: vines & trellising
-Electricity- irrigation systems, bird scares, frost protect, equip
-Machinery / equipment fuel & maintenance
-Labor costs - seasonal, annual skilled
Factors influencing Supply of wine -grape growing costs
- ongoing costs of managing the vineyard and producing grapes
- What are labor costs factors to consider?
range due to a variety of factors:
-topography (hand/ machine pick). steep hills=hand pick= more cost over machine pick
- organic/ biodynamic more $ than conventionally farmed
- may be cheap at harvest time unless scarcity of harvesters exists
Unskilled picker & Skilled annual
Factors influencing Supply of wine -winemaking costs
I P M P
-Initial costs of establishing the winery
-producing wine
-maturing wine
-packaging wine
Factors influencing Supply of wine- wine making costs:
-winery establishment costs include?
-purchase land to build the ____
-fitting with equipment
Presses, tanks, pipes, pumps, refrigeration, bottling line
Funds can come from owner, bank, or investors
Factors influencing Supply of wine- wine making costs:
-producing the wine costs include?
L e M M F E W *Labor- FT & harvest labor *Machinery & equip-fuel, mainten
*Materials- sugar for enrichment, de-acidification agents, yeasts, carbon dioxide, inert gasses, fining and filtering agents
*Fruit-buying vary w/ quality & vintage. Blend cheaper varieties
*Electricity- frige, ventilation, presses, pumps, lighting
*Water- uses large volumes of water for cleaning, invest in water treatment plants
Factors influencing Supply of wine- wine making costs:
-maturing the wine
Costs include building a storage space
- new oak barrels from top barrel producers can be expensive -cheaper 2nd hand, give less flavor & characteristics
- use oak chips or staves
- employ labor to monitor
-long term investment- the cost of _______ is the loss of cashflow -money tied up
Factors influencing Supply of wine- wine making costs:
-packaging wine
Buy materials: bottles, closures, labels, cartons, pallets
-bottling line
May choose to hire a bottling line and the labor to operate it
-or send to another estate and rent equipment
Factors influencing Supply of wine
-transportation costs
Bottle moved by air, road, rail or sea
Bulk moved by ship
-insurance
Factors influencing Supply of wine -transportation costs
-bottle transportation costs?
The job of a freight forwarders - may charge more than multinational logistics but have more expertise on moving fragile bottles
Considerations include:
**Breakage, spoilage due to heat, direct sunlight, excessive vibrations
**Need temp controlled shipping containers.
Factors influencing Supply of wine -transportation costs
- What are the ways to get wine bottles around the world?
AIR
ROAD
RAIL
SEA
Factors influencing Supply of wine -transportation costs
-considerations to moving wine by AIR
- dependent on weight
- Method only used in special circumstances
competitions, samples for trade/ consumer fair, very high value
-Beaujolais Nouveau
Factors influencing Supply of wine -transportation costs
-considerations to moving wine by ROAD
most travel short distances good, long distances expensive
Especially if crossing water can increase costs
Consider the cost may outweigh the quickness
Factors influencing Supply of wine -transportation costs
-considerations to moving wine by RAIL
cost vary due to length of journey –
minimalized if utilize containerization
-cost reduced if container can be lifted off train and put on truck
Factors influencing Supply of wine -transportation costs
-considerations to moving wine by SEA
cheapest method for long distances.
Use Containerization essential.
Downside is slow
Factors influencing Supply of wine -transportation costs
-bulk transportation
Wine was often shipped around the world in barrels
- 2016 58% German, 35% UK, 24% US imports
- plastic flexitanks w/in a standard steel shipping container
-non-flexible ISO tanks
-at first favored for cheaper wines (35% world’s volume=8% world value
Factors influencing Supply of wine -transportation costs
-bulk transportation advantages
-lighter than bottles and more volume of liters / space
-Reduce fuel = more eviro friendly
More efficient = a shopping container can hold 9,0000-10,000 L wine bottled
Flexitanks =24,000L of wine in bulk
ISO=26,000 L of wine in bulk
Factors influencing Supply of wine -transportation costs
-bulk transportation disadvantages
- only suitable for moving large volumes of same wine
- attractive for supermarkets, not so for smaller production
If a single consignment is less than 15,000 case there is no cost advantage
Factors influencing Supply of wine -transportation costs
-insurance
The party taking out the ____ should be the one which assumes the risk for loss or damage
- Normally the sender of goods
- winery will be responsible for ensuring wine makes it to distributor
-distributor takes responsibility to ensure wine makes it to retailers
Factors influencing Supply of wine
-importation costs
-customs duties & taxes
-labeling laws
Factors influencing Supply of wine
-importation costs -what are labeling laws to consider?
The importing company will need to comply
- EU – the ABV must show the nearest whole or half unit
- US- the ABV permits a 1.5% variance
–US wine will have to be relabeled when going into the EU market.
-US requires a health warning on labels
Factors influencing Supply of wine
-importation costs- advantages for a producer to use a distributor?
-reduce producer’s learning curve for requirements into a market
-producer to take advantage of distributor’s market knowledge and established clients
Factors influencing Supply of wine
-importation costs- distributor fees?
-margin fee usually a percentage (profit / revenue) X100 =%
-varies from country to country 5-25%
-hospitality sector tend to have higher margins
-charge for warehousing costs
-logistics of delivery
Factors influencing Supply of wine
-sales costs
P L E a S e D M
Property costs for on/ off prem
Labor Delivery
Equipment & material Margin
Storage
Factors influencing Supply of wine
-sales costs - what are property costs for retailer on premises / off premises
Buying property- capital costs, funded through loan / mortgage/ lease
-restaurants tend to be in prime location which are most expensive to buy / lease
- decorating / furnishing to suit image
- running costs, maintenance, security, water, energy, insurance
-online retails ___ can be less expensive away from city centers
Factors influencing Supply of wine
-sales costs - labor
-training staff is a business cost
-Cost according to type of outlet -Some must be paid minimum wage or level of skill & expertise
-supermarket – low skilled staff
-Wine retailer -highly knowledgeable staff who can engage w/ customers and advise them
-bars & restaurants labor costs also include wait staff & cleaning staff -wine person wage at restaurant depends on elegance of restaurant
Factors influencing Supply of wine
-sales cost -Equipment & material
Will differ depending on restaurant or retail
Retail: till system, fridge, shelving, display cabinets, Material to enhance displays and cleaning equipment
Restaurant: kitchen/ bar equipment, tableware, glasses
Oxidizing prevention, food service
Factors influencing Supply of wine
-sale cost -Storage
On premise: wine fridges, storage on prem
- sometimes lack of storage on prem causes external storage requirements which is additional costs
- larger chains will have centralized warehouse
Factors influencing Supply of wine
-sales cost -Delivery
____ to consumer is the most expensive element of the supply chain
- fragile bottles / ricks of breakage/ spoilage in transit
- end consumer will be expected to pay for delivery
Retailer often charge fixed fees knowing that some cases will cost more than others.
Factors influencing Supply of wine
-sales cost - margin
To be financially viable need to make a profit
Retail= 30-50%
Bars & restaurants more like 66.6% Eg. 3x what paid
- Profits are usually higher on wines available by the glass -Once opened risk of spoilage before the bottle has been emptied
- some allow customers to bring own ‘corkage’ fee
Factors influencing Supply of wine
-marketing costs
-labor
-design and production of the bottles and labels
-marketing campaign
Factors influencing Supply of wine
-marketing costs - labor
-team either in house or external company
-Industry association - eg. Consorzio in Italy or VDP in Germany
-Generic trade body- eg wines of Australia
-Organization is to market members’ wine collectively
-Funded by levy paid by members, usually on the value of sales
Factors influencing Supply of wine
-marketing costs- Designing & production of bottles and labels
- many small producers can be successful with little budget
- larger producers/ brands can run expensive marketing campaigns which may add to the prices
Factors influencing Supply of wine
-marketing costs- Marketing campaign
-ad or promote material
-Send sample bottles to tastings/ competitions
-price promotions (important in larger retailers)
