3. Types of Business Engaged in the Production of Wine

Question 1

List the type of business engages in the production of wine.

Answer 1

1. Estate
   2.Growers
2. Grower- producers
3. Merchants
4. Grower- merchants
5. Co-operatives
6. Custom crush facilities
7. Virtual winemakers/ wineries
8. Conglomerates.

Question 2

What does estate mean and the pros and cons of this business type?

Answer 2

1. Control entire process.
2. Winemaking
3. Bottling
4. Choose style and quality control.
5. Van range from Estate grape and merchant grape.
6. Entire profit, no intermediaries
7. Marketing- story, process and connection to customer, authenticity.

But

1. High cost, vineyard, winery
2. Hire
3. Difficult vintage- no production, low production.
4. Rise price, customer not willing to pay.
5. Difficult to recover loss.
6. Lager estate more resilient, more plots, mass production reduce cost per litre.

Question 3

What are pros and cons doing business as a grower?

Answer 3

Pros
1. Lower capital, no winemakjng equipment.
2. Concentrate on growing best grape. Beckstoffer vineyard.
3. Better cashflow. Paid upon grape being sold or wine is made.
4. Contacts- certainty. Build relationship with winemakers. Supply quality grape.

Cons
1. Risk of vintage variation,
2. Fluctuation of supply demand.
3. Higher competition, reduce price, loss profit.
4. Bad vintage, low or no return, loss.
5. Spot sales, higher risk, higher rewards.

Question 4

Describe the grower- producers

Answer 4

Defination: Produce wine. Sell to merchant for maturation and bottling.

Advantages:
1. No maturation cost ( barrel, monitoring)
2. No marketing cost.

Disadvantages:
1. No control of style, wine blended by merchant.
2. Lower profit.

Question 5

Describe the grower- producers

Answer 5

Defination: Produce wine. Sell to merchant for maturation and bottling.

Advantages:
1. No maturation cost ( barrel, monitoring)
2. No marketing cost.

Disadvantages:
1. No control of style, wine blended by merchant.
2. Lower profit.

Question 6

What does merchant do in the wine business and the pros and cons of being a merchant.

Answer 6

Merchant buy immature wine, mature, blend and bottle under merchant’s name.

Pros:
1. no expense on vineyard inc equipment management.
2. Micro- negociant: super premium from best vineyard in burgundy.
3. Offer technical support to control production (vineyard, winemaking).
4. More flexible buying grape in bad vintages.
5. Blending to reduce vintage variation.
6. Large merchant, supply supermarket, deep discounters, restaurant etc…

Cons:
1. Little control on processes.

Question 7

What’s en primeur?

Answer 7

1. The type of wine trade that buying wine while wine is still in maturation process. Wine remain in producers cellar until bottling.

Pros.
1. Better cash flow.
2. Cheaper and easier to buy.
3. Limited quantity。price may go up.
4. Process is beneficial from maturing in barrel and investors.

Con.
1. Price not guaranteed

Question 8

What is grower merchant and the pros and cons.

Answer 8

Grower merchant refers to a wine business type that produces wine from not only growers’ own grape but also purchases grapes from other grower.

Pros
1. Different Ranges to suit different wine segments. Premium own grape. Entry level l, brought in.
2. Reduce vintage varieties, blending.
3. Control quality.

Cons
1. Investment on winery.

Question 9

What is cooperative?

Answer 9

A business model that is formed by a group of growers. That produces, sell, and markets under its own brand. The grower is paid base on quantity or quality of grape.

Pros:
1. Financially beneficial- larger, easier funding.
2. Ability to purchasing more advanced winemaking equipment for production.
3. Provide advice to grower for quality fruit, marketing, sales service
4. More dynamic, success own brand.
5. Can produce large volume of wine to suits different market segment.
6. More economical, reducing cost of production.

Cons.
1. Decisions making can be slow due to democrat process.

Question 10

Describe the term of custom crush facility.

Answer 10

The variant of co-operative but growers do not own facility. The grape is processed and return to grower. Size from small to large commercial scale.

Pros:
1. Grower pay each time
2. Do not invest in equipment.
3. Provide professional experience.
4. Fast decision making, the facility does not consult members for decision.

Cons.
1. Style may not match growers specification. Altered wine style.

Question 11

Describe the virtual wineries.

Answer 11

1. Type of business that do not own either vineyard or winery. Purchase grape and process in custom crush facility.

Pros
1. Lower investment
2. Focus marketing or other investment.
3. Flexible, small to large.

Cons.
1.difficult to buy grape if it is high demand.
2. Style altered, winery to busy.
3. No authenticity with customer.

Question 12

Describe conglomerate.

Answer 12

1. A large company that owns a numerous of small businesses from production to distribution. Wine is only a part of their business
2. Resources.
3. Negotiation power
4. Greater control at all stage of the route to market, set up regional office.
5. Reduced intermediaries.
   Eg. Moet Hennessey Louis vuitton