7. Other Type Of Market

Question 1

What are the other type of wine market

Answer 1

1. Monopoly Scandinavian, Canada.
2. USA- tree tiers system

Question 2

Describe the monopoly system and list the examples of them.

Answer 2

Monopoly- Scandinavian.
1. Government owned systembolaget. Specialist distributors trade under special license.
2. Restaurant buys from systembolaget.
3. Specialist offers premium, rare wines.
5. Usually impose high tax.
6. Reduce accessibility, control alcohol consumption and price competition.
7. No promotion only simple advice base on consumer need.

Cons
1. Producer must register the interest with importer to attend the tender.
2. 4x tenders issued each year with desirable specifications.
3. Submit samples
4. Wine blind tasting to selection the best producer.
5. Tasting with analysis
6. Confirmed
7. Lengthy process 7 to 8 months.
8. Produce, opportunity, base on quality.

Canada
1 similar system, wine can only be sold through LCBO and its agencies, even the Producer’ retailer.
1. Except Alberta, private market controlled by Alberta gaming and liquor commission.

Question 3

What are the purposes of creating USA’s tree tier system.

Answer 3

1. The law is made to repeal prohibition 1912-1933.
2. Prevent the return of saloon days of gaming, prostitution crime and drunkenness.
3. Prevent producer monopoly and increase of price.
4. By implementing distributor create jobs, collect tax, tax revenue.

Question 4

List the type of 3 tiers.

Answer 4

1. Supplier (producer, importer)
2. Distributor (wholesaler, broker)
3. Retailer (supermarket, wine specialist, on premises bar and restaurant.

Question 5

How does 3 teir system work?

Answer 5

Limit or totally prohibit cross ownership between retailer and the upper two tiers.

Producer
1. can import, produce
2. Cannot wholesale
3. Cannot sale to retailer directly. Need distributor.
4. In some states allows producers to sell to consumers directly ( on premisses or off premisses. License required.

Wholesaler
1. Cannot be Producer
2. Can be importer

Question 6

tree tier apply differently state to state, what are the types of the states?

Answer 6

Control states:
1. The monopoly that holds one or more of 3 tiers.
2. The only licensed retailer is the state itself.
3. 17 states

Open state:
1. The tree tier law applies minimal effect on the business.
2. The state does not participate sales.
3. Producer can enter and exit the contract freely. No bonding.

Franchise state:
1. Restriction on the products er to change distributor.
2. Life tine commitment.
3. Protect distributors from financial impact by sudden change of suppliers
4. Supplier cannot terminate contract if distributor not agree. Even not preforming well.
5. Need find other distributors in the same state.
6. End up multiple distributor selling same wine.

Question 7

What are pros and cons of the 3 tier system?

Answer 7

1. Control alc consumption, reduce health system pressure, crime, drunkenness.
2. Increase tax revenue and tax collection.
3. Create job opportunities by setting up distribution positions.
4. Share workload with producer, more efficient on marketing, logistic.
5. Well trained staff provide better service to customers.

Cons
1. The law is very complex and vary estate to state.
2. Long-term contract with distributor. Difficult to change. Multiple distributor in same state.
3. Small supplier cannot complete, conglomerate if their wine is sold by a major distributor.

Question 8

What are challenges of the tree tier

Answer 8

1. Consolidation
2. Distributors decreased by 2/3
3. Producers increase by factor of 5
4. Small producers found their products lost among the massive profolios of brands held by major distributors
5. Conglomerates buy smaller producers and extend their product ranges, provide attractive array of product range.
6. Distributors only deal with conglomerates
7. Small producers, boutique distributors. Low volume, premium quality. But bond to distributors and cannot change distributor easily.
8. Franchise state.