4. Options For Getting Wine To Point Of Sale Flashcards
What are the different options for getting the wine to the point of sale
- Selling directly to retailers
- Appoint a distributor
- Establish a joint venture
- Use a broker
- Selling directly to consumers
What are the advantages of selling directly to retailers
- No need to pay a margin to an intermediary
- More control for the producer how the wine is marketed (unless selling to large supermarkets etc)
- Especially when shipping high-volume in bulk, competetive prices are possible
What are the disadvantages of selling directly to retailers
- Administrative burden (spend more time or hire more staff) such as transport, taxes, labelling laws (solution: freight forwarder)
- Financial risk of wine lost/damaged in transit (solution: freight forwarder)
- Takes time to get to know foreign market (solution: trade fairs/tastings)
What does a distributor do
Buy wine from a range of producers, and sell it to a range of retailers. They are usually located in the country of the retailer.
They may, or may not hold stock.
They may, or may not have exclusive rights to import into their market.
What are the advantages of using a distributor
- Knowledge of the market (key players, consumer preference, current trends etc)
- Administrative burden
- Financial risk during transit
- Taxes and legislation
- Language barrier
- Marketing
- Exposure (e.g. when distributor organises tastings)
- Small producers may find a small distributor specialising in a particular region
What are the disadvantages of using a distributor
- Charge a fee (reduce profit) Margin depends on country, company and intended retailer (hospitality means higher margin)
- Less control over marketing (solution: marketing and sales plan, regularly reviewed)
- Large portfolio means less undivided attention, and dropping wines that don’t sell well
- Money and time spent on looking for the right distributor (solution: trade fairs and recommendations of other wineries)
-
What is a Joint Venture
When companies of comparable size, at different stages in the supply chain, join forces through a contractual arrangement. Costs are shared, and intermediary costs are avoided.
Give examples of joint ventures
- Menzendorff: UK distributor + Bollinger + Fladgate Partnership Port
- Viñalba (2007, Argentinia): Buckingham Schenk UK distributor + Hervé & Diane Joyaux Fabre
What does M&A stand for
Mergers (When 2 businesses join together to create a business with greater resources)
Acquisitions (when 1 company buys another, smaller company)
Give examples of acquisitions
Conglomerates using acquisitions to get even bigger:
- E&J Gallo, one of the 10 biggest wine-producing companies
- Jackson Family Wines
Failed acquisition:
- 2016 in UK: Conglomerate Conviviality acquires conglomerate Bibendum PLB
- 2018: financial difficulty, C&C Group and Bestway acquire Conviviality
Private equity firms:
- 2018: USA Carlyle Group acquires Australian Accolade Wines, to benefit from free trade during trade war with China
What are the advantages of acquisitions
- Acquire capabilities such as skill, resources, vineyard locations etc
- Save companies from going out of business
- Increased investment
- New routes to the market because of large network
What is the difference between a distributor and a broker
- Distributor: paid by a producer to sell wine on its behalf, margin of 5-25%
- Broker : independent intermediary who represents neither party, margin of 1-5%
What are the advantages of using a broker
- Low overheads means low margins
- Specialised market, such as bulk of small-production wine
- Bring together buyer and seller
Give an example of brokers
- Courtiers in Bordeaux are the intermediary between Châteaux and Négociants
- Fine wine trading: facilitate the deal between buyer and seller of rare wines
- Wine in bulk: facilitate the deal for supermarkets
What are the main options when selling wine directly to consumers
- Cellar door sales
- Events
- Wine clubs
- Online
What are the advantages of cellar door sales
- Tourists can possibly buy wines that are not available in their country, or at a lower price
- Engage with consumers
- Brand awareness
- Increase sales through tastings
- Word of mouth marketing
- Trial and receive direct feedback
What are the disadvantages of cellar door sales
- The need for a suitable location
- Takes time to run/ additional staff
Give examples of cellar door sales
- Tourists from Belgium, Luxembourg and Germany, buying wine directly on the estate in Alsace with a good deal
- Some wineries in isolated Columbia Valley in Washington State, USA, have opened cellar doors in Seattle 240km away
What are the advantages of events such as tasting fairs
- Attract a wider range of people
What are the disadvantages of events
- Pay to exhibit the wine
- Travel expenses
- Additional staff to run the stand
- Competition with other producers
Give examples of events that create a destination effect
- Lodi AVA in California
- Denbies Wine Estate in UK
What are the advantages of wine clubs
For consumers:
- Reduced prices
- Delivery at home
- Acces to wines normally not available
- Free tours
- Exclusive tastings
For producers:
- Sell a large proportion of stock, if not all, this way
- Stay in contact through newsletters/blogs etc
- Marketing
What are the disadvantages of wine clubs
- Additional work: newsletters, details of what is available etc
- Process orders and ship wine
- Risk during transit (solution: reliable freight forwarder)
- Administration, not all states allow direct consumer sales
Give examples of wine clubs
- Screaming Eagle in Napa Valley, with a waiting list of years
