2. Factors affecting price - Supply chain Flashcards
What are the 2 categories of grape growing costs?
1) Costs of establishing a new vineyard.
2) Ongoing costs of managing the vineyard and growing grapes.
What are the factors (8) that affect the price of a bottle of wine, from vineyard to POS?
1) Grape growing costs.
2) Winemaking costs.
3) Transportation costs.
4) Importation costs.
5) Sales costs.
6) Marketing costs.
7) Taxes.
8) Currency fluctuation.
What does the price of land reflect (3)?
1) The potential to produce high-quality fruit.
2) The name/specificity of the appellation itself (e.g. Bordeaux AOP vs Pauillac AOP).
3) The scarcity of the land
What is the definition of the supply chain network?
The network of organisations and activities that form the wine business from creation to distribution to sale.
What is the definition of capital cost?
Capital expenditure is the amount spent to generate new income i.e. land or property acquisition or improvement.
Where can the capital cost funding come from?
1) Personal wealth.
2) Loans (interest and repayments must be factored into LT biz plan).
3) Investors (Which may want some form of managing involvement / profits)
4) Some countries offer tax incentive or lump sum contributions to encourage the establishment of vineyards.
What are examples of an operating cost?
Wages, electricity, bottles, sprays.
What factors (2) may cause high land prices?
1) The limited availability due to constrained GI area designation.
2) The irregularity of land in prestigious regions becoming available for sale often being sold to the highest bidder.
Name 3 capital costs that must be considered prior to a establishing a vineyard
1) Surveying the land
2) Site clearance
3) Building access roads
What vineyard establishment costs are involved with surveying land?
Checking suitability for viticulture and appropriate grape varietal choices (satellite imaging and soil samples may be involved).
What vineyard establishment costs are involved with site clearance?
Removing vegetation, large rocks, etc.
What vineyard establishment costs are involved with establishing an irrigation system?
1) Buying reservoirs, pipes, pumps, sprinklers, dripper systems.
2) Drilling boreholes, laying pipes, installing pumps for underground water.
What vineyard establishment costs are involved with Weather Hazards?
1) Windbreaks.
2) Anti-hail protective mesh.
3) Frost protection (sprinklers, smudge pots, wind machines).
What vineyard establishment costs are involved with the prevention of:
1) Animals
2) Pest
3) Fungus
1) Animals: High fences, electric fences, netting.
2) Pests: Pesticides.
3) Fungus: Fungicides.
Where might low labour costs mean less incentive to invest capital in machinery?
Chile.
Where might low labour availability require capital investment in machinery?
Coonawarra.
Where might labour requirements be high due to inability to mechanise the vineyards?
Mosel.
What is depreciation?
The reduction in the value of assets over time based on their useful life and the cost incurred through replacement.
Name three areas of expenditure relating to ongoing vineyard maintenance
1) Agro-chemicals.
2) Irrigation water.
3) Electricity.
How might the use of agro-chemicals be reduced and what is the advantage?
Integrated pest management and better monitoring of changes in weather can reduce use of agro-chemicals and so reduce expense.
What might a winery do to achieve a wine at a low-cost price point?
Blend less expensive varieties with more a premium variety.
In areas where water is expensive or scarce, what might a winery do?
Invest in a water treatment plant to re-use as much water as possible.
Due to the high electricity requirements of a winery, what might an estate do?
Install their own power generators such as solar panels.
What consequence does maturing stock have on cashflow?
Reduces cashflow as money is tied up in maturing stock pending sale (en primeur can help with this).
