4. Getting Wine to Point of Sale Flashcards
Generally, wine sales are split into which 2 categories?
Retail
- Off premises – US
- Off trade – UK
Hospitality :
- On Premises - US
- On trade - UK
- HoReCa = HOtels, REstaurants, and CAfes/CAtering
What are the Advantages of Selling Directly to Retailers?
Advantages of Selling Directly to Retailers :
- Bigger profits : No intermediary costs to pay. Beneficial for both producer and consumer.
- Control over marketing : Producers are free to decide who stocks their wine
- Admin burden is light if only selling to a small number of companies, e.g. only supermarkets.
- Trade fairs/tastings gives producers excellent opportunity to meet many potential clients at once.
What are the Disadvantages of Selling Directly to Retailers ?
Disadvantages of Selling Directly to Retailers :
- Marketing : Can be costly (time and skilled labour)
- Information : Own market research has to be done
- Retailers Contacts : Difficutly to engage many retailers, especially big ones
-
Import/Export :
- Language barrier can be an issue
- Legal compliance issues for imported wine (duty payments and labelling requirements)
- Administrative : Admnistrative burden (logistic, marketing, contracts …)
- Logistic : Collection, transportation and delivery of the wine. May have to take on the full financial risk of wine being lost or damaged in transit. This risk may be reduced by using a freight forwarder.
Explain the role of a Distributor :
Distributor :
- Buys wine from a range of producers and sells it to a range of retailers, including HoReCa.
- May/may not hold exclusive rights to import/distribute certain products in their market.
- aka Importers / Wholesalers / Agents.
What are the Advantages of using a Distributor :
Advantages of using a Distributor : (MIRIAL)
- Marketing : Distributors will also have greater resources to promote a wine than the producer and usually take over the marketing
- Information : Knowledge of the market (key players, consumer preferences, current trends, retailers’ requirements and preferences)
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Retailers Contacts :
- Distributors organise portfolio tastings attended by a wide range of potential customers.
- Retailers prefer to do business with one point of contact than many separate producers.
-
Import/Export :
- Local distributor are helpful where there is a language barrier.
- Help with legal compliance issues for imported wine (duty payments and labelling requirements)
- Administrative : Deal with all the admnistrative burden (logictic, marketing, contracts …)
- Logistic : The distributor will take care of collection, transportation and delivery of the wine, absorb the risk of lost or damaged wine and deal with the admnistrative burden that goes with it.
What are the Disadvantages of using a Distributor :
Disadvantages of using a Distributor :
- Costs : The distributor will charge a fee to achieve its desired margin, which will reduce the producer’s profits.
- Marketing : Producers can lose control over how their wine is marketed and where it eventually ends up on sale. The strategy chosen by the distributor may not therefore reflect the producers’ brand image and it is therefore vital that both parties agree a clear marketing and sales plan from the outset and keep it under regular review.
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Competition :
- Distributors cannot give undivided attention to any one producer
- Overall marketing strategy may not be the ideal one for an individual wine.
- May drop those which are not selling in sufficient quantities.
- May add new producers to their book that are direct competitors
Explain how a producer will choose the right Distributor :
The right distributor :
- Size matters : larger distributors prefer larger producers, smaller producers may specialize in particular wines, can be beneficial for smaller producers.
- May be necessary to find multiple distributors if producer has a range of wines, depending on what the distributor specializes in.
- Though this process is costly, appointing the wrong producer can be more problematic in the long run.
- Get information by attending trade tastings, getting recommendations from other wineries.
In which market are Joint Ventures particularly important?
What’s the point?
What is necessary for success?
What common form do these take?
Joint Ventures :
- Important in Price sensitive markets, e.g. UK, for companies trying 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 JVs = producer & distributor or large retailers to create a new wine brand.
2 e.g’s of prominent Joint Ventures:
e. g. Metzendorff; UK distributor, joint venture of Champagne Bollinger/Fladgate Partnership. Not direct competitors, other companies in portfolio don’t overlap.
e. g. “Viñalba”; new wine brand created through JV of Buckingham Schenk (UK distributor) and Hervé and Diane Joyaux Fabre.
What is the difference between a Merger and an Acquisition?
Merger: 2 businesses form a (theoretically) equal partnership to create a new business with greater resources/capabilities than individual businesses had.
Acquisition: aka ‘Takeover’, when one company (usually much larger) buys another company, which then becomes a subsidiary of that company.
What are the benefits of Acquisitions :
Benefits of Acquisitions :
- Reduced costs = lower prices due to economies of scale, simplification of supply chain.
- Method of growing business in order to compete in more sectors of chosen markets.
- For smaller producers being bought = increased investment, large distribution network, new routes to market.
2 e.g’s of wine congomerates getting bigger via Acquisitions:
e.g. of distribution company consolidation:
e. g. E&J Gallo purchasing number of smaller producers.
e. g. Jackson Family Wines
e. g. Conviviality w/ Matthew Clark/Bibendum/PLB in UK.
e.g. of how Acquisitions do not always work out well:
What happened (3)?
Conviviality in UK.
2016: Conviviality (major UK distributor+several retail chains) acquired Bibendum PLB = UK’s largest wine distributor.
2018: Company was in serious financial difficulty, put into administration.
Various subsidiaries were sold off to new owners C&C Group and Bestway to allow them to continue trading.
e.g. of company OUTSIDE the wine trade acquiring wine brands:
What was a key benefit of this acquisition (2)?
2018: Carlryle Group (US Private Equity Firm) purchased Accolade WInes.
Acquisition occured during trade war btw/US and China = tariffs placed on US wines entering China.
However, Australian wines = large part of Accolade brand, benefits of free-trade agreement.
Define the role of a Broker:
What is the key difference between a Broker and a Distributor?
A Broker is an independent intermediary that “makes deals happen” without entering into any deals themselves.
Distributor is paid by producer to sell wine on its behalf; brokers represent neither party and make commision (usually 2% but can be 1-5%) based on contract price.
