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WSET D2 Wine Business > 4 > Flashcards

4 Flashcards

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1
Q

Wine sales are primarily split into broad categories which are?

A

Retail -off premises – particularly in US

-off trade – particularly in UK

Hospitality -on Premises

  • on trade
  • HoReCa = HOtels, REstaurants, and CAfes/CAtering
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2
Q

In a free market, Government may add some controls like what?

A

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
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3
Q

Free market defined

A

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

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4
Q

Advantages of a free market selling directly to retailers?

A

-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
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5
Q

Disadvantages of a free market for the producer selling directly to retailers?

A

F A C T D E E L

Freight forward Delivery

Administrative Burden Extra staff

Collection Exported duties/ taxes

Transportation Label/ package compliace

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6
Q

What time savers and potential cost savings might the producer be missing by not using a 3rd parties in a free market?

A

-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
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7
Q

Producers choice between selling to a high-volume vs a low volume retailer?

A

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

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8
Q

Define a wine distributor?

A

-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

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9
Q

Advantages for using a distributor?

A

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

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10
Q

Disadvantage of a producer using a distributor in a market?

A
  • 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
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11
Q

Producer leverage distributor connections

-distrubutors can be a marketing resources to exposing the producer as long as what?

A
  • 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
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12
Q

Joint ventures in the wine industry?

A
  • 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

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13
Q

Merger

A

Occurs when 2 business join together to create a business w/ greater resources & capabilities

-competitive advantage together vs. individually

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14
Q

acquisition

A

-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
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15
Q

Advantages of acquisitions in the wine industry?

A

Reduce cost/ keep prices down through economy of scales & simplification of the supply chain

-Conglomerates get even bigger

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16
Q

What is the advantage for a smaller producer to be bought in an acquisition by a much larger conglomerate?

A
  • result in investments
  • access to distro networks from conglomerate
17
Q

Define broker in the wine industry

A

____ 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
18
Q

Advantage of using a broker for producers

A

____ 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

19
Q

Courtiers

A

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
20
Q

Advantage of producers selling directly to consumers?

A
  • allows producer to take full profit from sale & retain control on marketing
  • potential is off set by additional admin costs, logistical & staffing costs
21
Q

List the options for direct sales?

A

C O E W

Cellar door sales

Online

Events

Wine clubs

22
Q

Direct Sales- Cellar door sales

A

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

23
Q

Typical customer of a Cellar Door?

A
  • 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
24
Q

Direct Sales- Benefits of the Cellar Door?

A

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

25
Q

Direct Sales- Events

A

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
26
Q

Direct Sales- Wine clubs

A

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
27
Q

Direct Sales- Wine Club

Potential cost from a producer’s perspective of a wine club?

A
  • 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
28
Q

Direct Sales- Online

A

-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

WSET D2 Wine Business (12 decks)

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