4 Flashcards
Wine sales are primarily split into broad categories which are?
Retail -off premises – particularly in US
-off trade – particularly in UK
Hospitality -on Premises
- on trade
- HoReCa = HOtels, REstaurants, and CAfes/CAtering
In a free market, Government may add some controls like what?
Governments seldomly have a total ______
- controls on sale & distribution for purpose of tax raising
- controls to minimize harmful effect of abuse
- limit hours can be sold/ min drinking age
Free market defined
Producers can sell directly to retailer
Is one in which producers are relatively free to choose whether to sell directly to a consumer or retailer or through an intermediary
If relationship is not working (subject to legal obligations) can find another route to market
Advantages of a free market selling directly to retailers?
-avoid the costs of intermediary’s, margins, maximizing their profits
- free to decide which retailers stock their wines
- more control on how marketed/ build brand image
Disadvantages of a free market for the producer selling directly to retailers?
F A C T D E E L
Freight forward Delivery
Administrative Burden Extra staff
Collection Exported duties/ taxes
Transportation Label/ package compliace
What time savers and potential cost savings might the producer be missing by not using a 3rd parties in a free market?
-producer takes on risk of lost, damaged in transit
-may be reduced by using a freight forwarder
- takes time to develop relationships w/ retailers & understand the market, consumer preferences, legislation
- trade fairs or tasting in foreign markets gain clients
Producers choice between selling to a high-volume vs a low volume retailer?
High volume chain may dictate how wines are promoted
-administrative burden can be great
-Smaller retailers- producers may not have the time to approach all the potential retailers
-appoint an agent or wholesaler to act on their behalf
Define a wine distributor?
-buys wine from a range of producers & sells to a range or retailers
- generally located in the same country as the retailers
- may or may not hold stock of products in their portfolio
- may or may not have exclusive rights to import
Terms: importer, agent & wholesaler
Advantages for using a distributor?
C A L L K C
Contacts -timesaving for proucers
Admin burden relief
Logistics - collection, trans/ delivery / risk of damage
Language barriers -retailers like one point of sales
Knowledge of the market -key players, preferences, trends
Compliance Experience & staff to deal with legal
Disadvantage of a producer using a distributor in a market?
- will charge a margin- varies depending upon market
- hospitality cost > retail
- take over marketing strategy & may not be in line w/ producer
- don’t give single minded attention to any one producer in their larger portfolio
- distributor may drop producers that are not selling in quantities
Producer leverage distributor connections
-distrubutors can be a marketing resources to exposing the producer as long as what?
- attend trade fairs which saves time for producers finding customers
- producer can lose control on how marketed
- Unless strategy chosen by distributor reflect producer’s brand
- being apart of a larger portfolio can increase exposure
- retailers often prefer distributors 1 point of contact
Joint ventures in the wine industry?
- particular importance in price sensitive markets looking to save costs
- are established at different stages of the supply chain which give greater control & profitability – intermediary costs avoided
- for success- companies need to be of comparable size
Increasingly common _____ - producer & distributor or large retailers to create a new wine brand
Merger
Occurs when 2 business join together to create a business w/ greater resources & capabilities
-competitive advantage together vs. individually
acquisition
-takeover - occurs when one company buys another
Which then becomes a subsidiary of the purchasing co
- reason to do this- acquire capabilities of the purchasing co
- skill, resource, market share, prime vineyard location
- not limited to wine or alcoholic drink trade
Advantages of acquisitions in the wine industry?
Reduce cost/ keep prices down through economy of scales & simplification of the supply chain
-Conglomerates get even bigger
What is the advantage for a smaller producer to be bought in an acquisition by a much larger conglomerate?
- result in investments
- access to distro networks from conglomerate
Define broker in the wine industry
____ are independent intermediaries who represent neither party
- do not enter into any deals, merely make them happen
- low overhead, charge a smaller fee than distributors
Advantage of using a broker for producers
____ have intimate knowledge of a particular, specialized market
-some specialize on bulk wine sales/ others on small production wine
-can bring together buyer (supermarket/ merchant) & seller (co op / grower)
-save time& effort of seeking each other out -also know style & volume of wine buyer & what price willing to pay
Courtiers
In Bordeaux brokers or _________ have legal status
- act as intermediaries between Chateaux & Négociants
- Responsibility is to ensure the correct vat/ vats of wine are actually delivered
Advantage of producers selling directly to consumers?
- allows producer to take full profit from sale & retain control on marketing
- potential is off set by additional admin costs, logistical & staffing costs
List the options for direct sales?
C O E W
Cellar door sales
Online
Events
Wine clubs
Direct Sales- Cellar door sales
Producers that have set up facilities on their estates or winery to sell wine to visitors
Or set up a _____ in nearest large city to be located nearer to population that would be purchasing. Eg Seattle for Columbia Valley
-benefit the winery as no / little interruptions from winery work
Typical customer of a Cellar Door?
- Locals to tourist visiting the region
- come for the experience provided to see where wine is made
- to tour the winery, taste exclusive cellar door / reserve wines
- for the tourist, it may be too expensive to buy at home
Direct Sales- Benefits of the Cellar Door?
For producers:
- earn larger profits
- engage directly w/ consumer in tasting rooms
- tastings
Help build brand awareness
-people are more likely to recommend -word of mouth
Direct Sales- Events
Tasting fairs or food festivals
- importance is from a marketing perspective
- tend to be near towns & have other attractions like live music
- attract people who would not normally come to winery
- Producers pay a fee to participate & exhibit their wine Travel expenses, employee
- certain wine regions create this as a destination effect
Direct Sales- Wine clubs
Benefits for member not enjoyed by general public
- popular in New World regions US and Australia
- encouraged to join as you taste
-producer reduce need to find other outlets
- Marketing- continued way for producers to stay in contact
- A way for producer to sell large portion of stock
- may be the only way for consumer to experience wineries top end wines
Direct Sales- Wine Club
Potential cost from a producer’s perspective of a wine club?
- Producer’s extra workload
- newsletters, processing shipments, broken bottles, dealing with US’s 3-tiered system
- delivery costs / lost / broken in transit
- legislation concerning direct to consumer sales & deliveries of wine
Direct Sales- Online
-value of sales has increased greatly in recent years
-added cost of delivery, which may be paid by consumer
- producer earn larger profits
- other added cost is to set up and maintain website
