5. Wine Sales in the Retail Sector Flashcards
What % of wine is sold BY VOLUME through retail in the UK?
What % by value?
80% by vol.
60% by value.
Identify the different types of retailer in a Free Market:
DoGSS CHOW
Deep Discounters Convenience Retailers
Global Travel Retail Hybrids
Super markets Online Retailing
Specialist wine retailers Wine Investment company
Define Supermarket:
some e.g.s?
A larger store selling groceries and household goods, allowing consumers to buy everything they need under one roof.
e.g. Wal-Mart (USA), Woolworths (S. Africa), Tesco (UK), Carrefour (France).
NOT to be confused w/Deep Discounters e.g. Aldi, Lidl.
What types of wine do Supermarkets typically stock (3)?
- generally wines from well-known/popular regions, made by well-known brands e.g. Jacob’s Creek, Barefoot, Oyster Bay.
- wine styles that appeal to wide range of customers, many of whom have litte/no wine knowledge.
- in wine-producing countries, selection often dominated by local wines.
Key ADVANTAGES of selling wines at a Supermarket (5):
- supermarkets have the largest market share of wine sales in many regions (USA, UK, France) = ability to sell large vols of wine.
- high levels of market exposure, often in more than one country.
- if bought direct from winery = no intermediary costs.
- wineries can benefit from winemakers employed by supermarket = quality improvement/control
- for consumers, many brands widely available = ability to compare prices.
Key DISADVANTAGES of selling wines at Supermarkets (5):
- supply often exceeds demand (supermarket wants to offer varied product range, not lots of similar wines at same price) = supermarket wine buyers have enormous negotiating power, producers typicall receive less $ for their wines vs through other outlets.
- producers expected to pay substantial $ for the privilege of being stocked + any additional promotion (desirable placement, coverage in store mag.)
- producers expected to pay for reduction in profit due to reduced retail price.
- again, supermarket often has the upper hand; ability to refuse wine if quality, labeling, delivery requirements are not met.
- wines can be delisted swiftly if not achieving desirable sale volume/margins = producer left with large unsold stock.
How do Supermarkets reduce the consumers’ ability to compare prices of wines (5)?
- since consumers will often seek the cheapest price available (especially for big, widely-available brands), they will seek out the cheapest prices.
- supermarkets can then bottle wine under a label exclusive to them: PRIVATE LABEL WINES.
- supermarket’s name may not appear on label, and actual wine itself may be available widely under different labels.
- e.g.s Walmart/Costco (Kirkland) in USA.
- some supermarkets prominently display their name, e.g. ‘Taste The Difference’ by Sainsbury in UK, creating customer loyalty.
How does wine offered by premium supermarkets differ from that offered by standard ones (4)?
e. g. Whole Foods
- wines from artisan producers under producer’s label.
- bought in smaller quantities w/understanding that once wine runs out = no more available.
- appeals to consumers w/strong interest in wine; useful route to market for artisan producers.
What is the business model of Deep Discounters (2)?
4 e.g.s?
- similar to supermarkets, but products sold at lower prices.
- prices are set permanently low, rarely (if ever) offering any form of price promotion or ‘sale’.
e. g.s Aldi, Lidl in Germany, Netto in Denmark, Trader Joe’s in USA (subject to 3-Tier system).
How do Deep Discounters manage to keep their costs down? (5)
- lower margin, higher volume sales.
- basic presentation, locations far from prime areas.
- range of products is limited (usually only 1 type of each thing), most wines are private label, e.g. Two Buck Chuck.
- no major brands, buying up stock of lesser-known producers for less $$
- direct purchasing from producers = no middle-man costs
What are the key ADVANTAGES of selling wines at a Deep Discounter (3):
- opportunity to work with deep discounters via private labels, e.g. Charles Shaw’s ‘Two Buck Chuck’ for Trader Joe’s.
- opportunity for producers to sell off surplus stock.
- no price reductions + ‘stocking fee’ = greater profits
What is an exception to the rule that Deep Discounters only stock inexpensive wines?
What has this resulted in (2)?
- deep discounters may buy small amounts of more expensive wine in stores located in more affluent areas, or ahead of times of greater spending, e.g. Christmas.
- this has attracted customers with a strong interest in wine, many of whom purchase inexpensive wines in addition to the $$ one.
- in Britain, wine purchases at deep discounters are increasing:
2012: 23% of drinkers purchased from DD;
2018: 37%
How do Convenience Retailers differ from supermarkets/deep discounters (2)?
What is the typical product range offered by these?
Why do prices tend to be higher (4)?
Key ADVANTAGE?
- usually located in more prime areas (where more people live) and are usually open longer (sometimes 24 hrs).
- can be independently owned, e.g. common in India, or part of a franchise, e.g. Spar, found in many countries.
Product Range: similar to but smaller than supermarkets; popular, major brands (some, e.g. 7-Eleven have their own exclusive brand).
Prices: tend to be more expensive vs SM/DD; rents proportionately higher, less efficient (originally designed for other purposes), larger staff relative to size, franchise arrangement = fee to franchise owner.
Consumers willing to pay for convenience.
Define Specialist Wine Retailer (2):
Retailers that specialize in wine (sometimes specific regions/styles), and often carry specialty spirits and beer as well.
Some also carry cheese/deli items, often from artisan producers.
Using examples, identify some different types of Specialist Wine Retailers (4):
- some are larger chains (Oddbins, UK or O’Brien’s in Ireland).
- most are independently owned/part of small chain.
- some specialize in particular styles, e.g. organic/biodynamic wine (Les Caves de Pyrène, UK, La Cave des Papilles, Paris).
- some specialize in premium/super-premium/’en primeur’ wines, e.g. Hedonism, UK, Millesima, Bordeaux.
