Businesses, Transportation, and Markets for Wine Flashcards
1
Q
What are 9 examples of businesses engaged in the production of wine?
A
- Estates
- Growers
- Grower-Producers
- Merchants
- Grower-merchants
- Co-operatives
- Custom Crush Facilities
- Virtual Winemakers/Wineries
- Conglomerates
2
Q
What is an estate producer?
A
Produces wines from own vineyard (wholly owned or leased)
3
Q
What are three advantages of being an estate producer?
A
- Control from grape growing to bottling (more effect over style)
- All profit belongs to the estate (if sell wines directly, then full profit to sale)
- Marketing benefits (“authenticity” and “story” of the wine because it is all known/controlled)
4
Q
What are two disadvantages of being an estate producer?
A
- Cost of managing the vineyard and equipping and managing the winery (may be too much for small estates)
- If a difficult vintage, may sell a tiny amount of wine and could lose money
5
Q
What are the most viable estates and why?
A
Larger estates, because they can take advantage of economies of scale.
6
Q
What is an example of when a company may operate in more than one category as a producer?
A
A company may choose to make wines both from estate-grown and bought-in fruit.
7
Q
What is an example of a grower that would not want to produce their own wine?
A
Small vineyards that cannot justify the cost of winery equipment and don’t want to have to market or sell their wines.
8
Q
What are 4 advantages for growers that do not produce their own wine?
A
- All efforts focused on producing the best grapes
- No need to buy or rent winery equipment
- No need to market or sell wine
- Better cash flow because payment is due when grapes sold
9
Q
What are two disadvantages of being a grower that does not make wine?
A
- Particularly at risk of vintage variation (so perhaps less fruit to sell)
- Particularly at risk from fluctuations of supply and demand (so perhaps lower prices or inability to sell grapes)
10
Q
What are two options for growers who want to sell their grapes?
A
- Contract (for one vintage or multiple)
- Spot market
11
Q
What is an example of a grower that does not produce its own wine that grows very high quality fruit?
A
Andy Beckstoffer and Beckstoffer Vineyards, who grow Cabernet Sauvignon on prime sites in Napa Valley and elsewhere in California
12
Q
What is one advantage and one disadvantage for a grower entering into a contract to sell grapes?
A
- Advantage: Gives some certainty that grapes will be sold at a specific price.
- Disadvantage: The grapes usually have to meet a quality standard or specification (e.g., min potential alc), or they will be rejected or receive a lower price
13
Q
What is a grower-producer and where is it common?
A
- A grower that produces wine from their grapes, but then sells to a merchant to mature and bottle
- Burgundy
14
Q
What is the advantage and disadvantage of being a grower-producer when compared with being an estate?
A
- Advantages: Don’t have to incur cost of maturing or of marketing wines.
- Disadvantages: Lose control of style of the finished wine, and smaller profit.
15
Q
What is the traditional role of the négociant?
A
Buy immature wine, mature it, possibly blend it, bottle it, and sell it under the merchant’s name.
16
Q
What was the chief risk to the traditional négociant and how was that managed?
A
- Little control over the grape growing or winemaking process
- Many now (i) produce their own wine from grapes or juice and (ii) provide technical support to their suppliers to ensure that the grapes, juice or wine they buy are of the required quality
17
Q
What are two key advantages to being a merchant?
A
- Avoid expense of buying and managing a vineyard (esp attractive in Burgundy or Champagne with difficult to buy and expensive land)
- Being able to buy from different growers or producers provides some protection and flexibility in bad vintages
18
Q
What are micro-négociants?
A
In Burgundy, merchants who specialise in small-production wines, usually from individual vineyards, that can achieve super-premium prices. Many work closely with particular growers to be assured of the best quality fruit.
19
Q
What do most merchants do to protect against price fluctuations of grapes?
A
long-term contracts with their suppliers, to whom they often provide technical support and advice
20
Q
What are two examples of regions where merchants operate differently?
A
- Burgundy: much more involved in the production of wine
- Bordeaux: tend to deal more in wine that has already been made (whether in bulk or already bottled)
21
Q
What is “en primeur” (wine futures)?
A
- A method of selling wine before it has been bottled.
- Purchasers buy the wine while it is still in barrel and it remains in the producer’s cellar until it is ready for bottling.
- The purchaser only receives the wine once it has been bottled, usually a few years later.
22
Q
What is the role of merchants in Bordeaux’s “en primeur”?
A
A wholesaler, buying a proportion of a château’s stock and selling and distributing that to a range of distributors and retailers
23
Q
What are the two advantages to purchasers of en primeur?
A
- Theoretically cheaper to buy (though prices can go down)
- Some wines are produced in limited qualities, so they may be the only opportunity purchase
24
Q
- What types of wines tend to be sole en primeur?
- What are some examples?
A
- Those that benefit from a period of maturation in barrel (usually 18 months or more) and those that are prized by investors
- Burgundy, Rhône, ‘Super Tuscans’ and Vintage Port
25
What are grower-merchants?
Both own vineyards and produce wine from those vineyards alongside wines made from bought-in grapes, juice or wine.
26
What do grower-merchants often do?
* the vineyards owned by the merchant are used for premium wines
* grapes from other growers are used for inexpensive or mid-priced wines
27
What is a famous example of a grower-merchant?
* E. Guigal in the Rhône Valley
* single-vineyard wines from the Côte-Rôtie
* also, Crozes-Hermitage and Gigondas, and generic Côtes du Rhône from bought-in grapes
28
How can grower-merchants distinguish between their offerings, and what is an example?
Domaine Dujac in Burgundy, for example, produces wines from their own grapes under the **Domaine Dujac** name and uses **Dujac Père et Fils** for wines made from grapes from other growers
29
What are co-operatives?
Co-operatives are owned by a group of growers, and produce and sell wines made from grapes grown by their members
30
What are three advantages of growers joining a co-operative?
* Pool financial resources, so can afford more expensive winemaking equipment and expertise
* Co-ops give members access to expert viticultural and winemaking services
* Co-ops give members access to marketing, packaging, and sales services
31
How are co-ops managed, and what is a downside of that?
Managed democratically, which means change can be slow and cumbersome, and may not be the preference of some members
32
What are two ways that a co-op pays its profits to members?
* Share based simply on volume (traditional)
* Share based in part on quality
33
Where is the traditional model of co-op still important, and why?
* Spain and Italy
* Because vineyards are too small, so it is not economic for growers to produce and market their own wine
34
Can quality-focused co-ops be effective?
* Among most dynamic wine-producing businesses
* Can produce very good quality wine that is an excellent value
35
What is the range of size of co-ops?
From small (single town or village) to huge operations that are among the largest wine companies in the world
36
What is a custom crush facility, where is it found, and where has it been successful?
* variant of the co-operative model--growers do not own the winemaking facility, but rather pay each time they require its services
* finished wine returned to grower, who can market it however they like and take sales profit
* found mainly in North America, particularly in California
* wine regions with a number of small-volume wine producers (many of whom are new to wine production)
37
What are two advantages of custom crush facilities to growers?
* They do not need to invest in expensive equipment and can focus their attention on grape growing and marketing
* They can benefit from the expertise of the professional winemakers
38
What is a disadvantage of custom crush facilities to growers?
the grower is handing over production of their wine to a third party, so the grower needs a good working relationship so that the grower's requirements are met
39
What are virtual winemakers/wineries?
* mainly in North America, for winemakers who do not own vineyard land or winemaking facilities
* they buy in grapes or juice and may rent facilities in another winery or employ the services of a custom crush facility
* vary in scale from individual virtual winemakers who produce small batches of super-premium, high-quality wines to organisations that create larger-volume brands
40
What are conglomerates?
* own many smaller businesses across the various stages of the supply chain, from production (e.g. estate wineries, merchants) to distribution (e.g. distributors)
* set up regional offices in markets that are important to them to market and sell their wines in that country or region
41
Why are advantages of conglomerates (to conglomerates)?
* greater control at all stages of the route to market
* reduces the need to pay intermediaries
* significant negotiating power and can strike a hard bargain when buying grapes, juice and wine from suppliers and when selling to retailers
42
What is a recent trend with conglomerates, and what are examples?
Luxury good companies, like Moët Hennessy-Louis Vuitton, who owns:
* Champagne houses Moët & Chandon, Veuve Clicquot and Krug
* Cloudy Bay in New Zealand
Insurance companies, like AXA, which owns:
* a number of top estates in Bordeaux and Burgundy
* Quinta do Noval
43
What is a "free market" for purposes of D2?
one in which producers are relatively free to choose whether to sell directly to a consumer or retailer or through an intermediary
44
What are "retailers" for D2?
The total of retail and hospitality
45
What are 5 options for getting wine to the point of sale?
* sell directly to retailers
* appoint a distributor
* establish a joint venture
* use a broker
* sell directly to consumers
46
What are 4 primary ways of selling directly to consumers?
* cellar door sales
* events
* wine clubs
* online
47
What are two advantages of selling directly to retailers?
* Do not have to pay any intermediary's costs and margins, maximizing profit
* Usually have final say over how their wines are marketed, maintaining control over brand image (but not possible with supermarkets or chains of bars and restaurants)
48
What are three disadvantages of selling directly to retailers?
* Increased administrative burden: arranging transportation, export duties, labeling requirements
* Producer may bear financial risk of loss or damage in transit
* If exporting to foreign markets, will take time to understand the market and laws (will take many time-consuming and costly visits)
49
What is an advantage to attending trade fairs or tastings in foreign markets?
Meet many potential clients at the same time
50
When is the administrative burden of selling directly to retailers not too great?
* When selling to a small number of companies (like high volume wines to supermarkets or large chains)
* In fact, some large retailers will take over some of these tasks (like transportation and import logistics, but at a cost)
51
What has enabled high-volume producers to sell directly to retailers like supermarkets?
Bulk transportation of wine
52
* What does a distributor do?
* Where are they located?
* A distributor buys wine from a range of producers and sells it to a range of retailers (including HoReCa)
* Generally located in the same country as the retailers to which they sell
53
What three things may vary for distributors?
They may or may not:
* be located in the same country as the producer
* hold stock of the products in their portfolio
* have exclusive rights to import and/or distribute products in their portfolio
54
What are three different terms used for distributors?
importer, agent and wholesaler, which, depending on market, may have slightly different meanings
55
What are two benefits of using distributors?
* They have market knowledge
* They can help with the administrative burden
56
What are 6 benefits of distributors' market knowledge to producers?
* Know the key players
* Consumer preferences
* Current trends
* Awareness of different customers' requirements (and therefore the best fit for the product)
* Usually take over marketing
* Can get in front of retailers that they would not have been able to on their own
57
In what 4 ways can distributors help with the administrative burden?
* Have a contract with a logistics company that can take care of collection, transportation, and delivery
* Will usually absorb the risk of lost or damaged wines
* Will have experience and staff to deal with legal compliance (like importing and labeling requirements)
* Helpful with any language barrier
58
What are 4 disadvantages to using a distributor?
* Pay a margin (varies, but usually more in the hospitality sector)
* Lose control over marketing and where it is sold (so producer and distributor should decide on a marketing/sales plan and review it regularly)
* Part of a larger portfolio, so attention to one product may languish
* A wine may be dropped by a distributor
59
What are two examples of distributors that specialize?
* Large distributors may prefer large producers
* Smaller producers may specialize in a country or region (esp beneficial to smaller producers looking to enter a new market)
60
What might a producer with multiple wines do with respect to picking a distributor?
Might pick multiple distributors for multiple wines
61
What are two ways for producers to meet distributors?
* Trade fairs and tastings
* Recommendations from other wineries
62
What is a joint venture?
An arrangement between companies at different stages of the supply chain
63
What is an example of a joint venture? Why does it work?
* **Mentzendorff** is a long-established UK wine distributor whose major shareholders are **Champagne Bollinger** and the **Fladgate Partnership**
* They do not directly compete, and other companies represented do not overlap
64
What is necessary for a successful joint venture?
* the companies need to be of comparable size
* contractual arrangements also need to be carefully agreed and documented (often through lawyers) to ensure each party knows their responsibilities and obligations
65
* In addition to distribution-oriented joint ventures, what is another type of joint venture?
* What is an example of this?
* producers joining forces with distributors or large retailers to create new wine brands
* in 2007 UK distributor Buckingham Schenk and winemakers Hervé and Diane Joyaux Fabre created the Argentinian wine brand **Viñalba**, which is now sold in multiple countries worldwide.
66
Despite loss of control, what is an attraction for a small producer of being acquired by a larger company?
* increased investment
* open up large distribution networks and therefore new routes to market
67
How does a broker differ from a distributor?
A broker does not enter into any deals; they just make them happen
68
What are the fees generally charged by brokers?
* 2% (but can be 1-5% in different parts of the world
* much less than distributors
69
What are the benefits to producers of using a broker?
* they have intimate knowledge of a particular, often specialised, market
* some concentrate on bulk wine, others on small-production wine
70
How do brokers bring together a producer and a buyer?
* They know what wine producers have available to sell, and what prices they are willing to sell at
* They also know what style and volume of wine buyers are looking for and what price they are prepared to pay
71
What role do brokers play in Bordeaux?
brokers (or courtiers) have legal status and play an important role, acting as intermediaries between the châteaux and nègociants
72
What do brokers do when it comes to bulk wine?
ensure the correct vat or vats of wine are actually delivered
73
What are the two advantages and one disadvantage for producers of selling directly to the end consumer?
Advantages:
* Keep full profit from sale of wine
* Retain control over marketing
Disadvantage:
* Additional administrative, logistical, and staffing costs
74
What are cellar door sales?
Sales by the winery to consumers on facilities at the estate or the winery or in a nearby town
75
What are two examples of "remote" cellar door facilities?
* Sonoma or Napa Valley
* Columbia Valley wineries with cellar doors in Seattle (150 miles away)
76
Who are typical cellar door visitors?
* Locals who come to buy wine
* Tourists (wine tourists and other general tourists)
77
What are 6 benefits of cellar doors for consumers?
* See where the wine is made
* Possibly tours
* Learn the story behind the wine
* Taste before they buy
* Taste exclusive or reserve wines (and sometimes food/wine pairings)
* For foreign tourists, possibly access to unavailable or wine subject to duties (e.g., Alsace hosts tourists from Belgium, Luxembourg, and Germany)
78
What are 6 benefits of cellar doors for producers?
* Larger profits on direct sales
* Ability to engage directly with consumers
* Tasting rooms are an important tool in increasing sales
* Build up brand awareness and loyalty - forge personal connection with consumers
* Increase recommendations by cellar door visitors to friends and family (free "word of mouth" marketing)
* Ability to trial new products without the need for expensive market research
79
What are 3 reasons why a producer would not open a cellar door?
* Lack of suitable location
* Fear that cellar will take too much time to run or require additional staff
* Focus on other routes to market
80
What are examples of events where producers can sell direct to consumers?
Tasting fairs or wine and food festivals
81
What is an advantage and 4 disadvantages for producers of events where they can sell to consumers?
Advantage: In towns and have other attractions, so attract a large number of people who would not be willing or able to travel to visit cellar doors.
Disadvantages:
* Will have to pay to exhibit wine
* Will incur travel expenses
* May have to employ additional staff
* Will be competing with other producers (unlike at cellar door)
82
What happens when events increase in certain wine regions and individual wineries?
It creates a "destination" effect
83
What is an example of a wine region and an individual winery that have created a destination effect via events?
* Lodi AVA
* Denbies Wine Estate in the UK
84
What is a wine club?
Clubs that offer members (usually for a small annual fee) the opportunity to purchase wine at reduced prices for home delivery, and possibly exclusive access to wines
85
What is the benefit to the consumer of joining a wine club?
Easy access to wines they enjoy
86
Where are wine clubs popular?
In wine producing countries (like USA and Australia) as part of wine tourism. Consumers encouraged to join at cellar door.
87
What are the advantages to a producer of a wine club?
* Possibly sell a large proportion of stock via the club, reducing need to find other buyers
* Useful for marketing--both staying in touch with consumers and encouraging word of mouth
88
What are disadvantages of running a wine club?
* Additional work in producing newsletters and selecting wines
* Additional work in processing orders and shipping wines
* Risk of lost or broken bottles
* In USA, dealing with the three-tier system (can be very onerous)
89
What types of estate wineries operate clubs?
* Screaming Eagle: prestigious, only way to access wines, long waiting list
* Many others--all types
90
What is the advantage to producers to sell online?
Even with delivery, may still be cheaper for consumers given no intermediary, and thus more profit to producer
91
What is the disadvantage to producers of selling online?
Have to set up and maintain a reliable and up to date website
92
What are 8 ways to reach the end consumer in the retail sector within a free market?
* Supermarkets
* Deep Discounters
* Convenience Retailers
* Specialist Wine Retailers
* Hybrids
* Online Retailing
* Global Travel Retail
* Wine Investment Companies
93
For purposes of D2, what is the definition of "retail/retailer"?
selling wine to the end user for consumption, whether in the retail sector or in the hospitality sector, as opposed to selling wine to another part of the wine trade (importer, distributor, wholesaler)
94
For purposes of D2, what is the definition of the "retail sector"?
selling wine in shops or on the internet to the end user (for consumption or investment), in contrast to the hospitality sector
95
What are examples of countries where supermarkets have the largest market share of wine?
* USA
* UK
* France
96
What kinds of wines do supermarkets generally stock?
* wines from well-known and popular regions and/or grape varieties
* styles that appeal to a wide range of customers, many of whom have little wine knowledge
* in wine-producing countries, the range will often be dominated by local wines
97
Why do supermarkets produce private label wines?
Well known brands (like Jacob’s Creek, Barefoot and Oyster Bay) are widely available, so:
* consumers can easily compare cost and buy wherever they are cheapest
* thus no consumer loyalty to the supermarket
98
What are two types of private label wines?
* Wine brands that do not have the supermarket name (favored by Walmart and Costco in the US and Marks & Spencer in the UK)
* Own-brand wines (that clearly show the supermarket's name on the label) (example: Sainsbury's Taste the Difference in the UK)
99
What kinds of producers do private label wines tend to come from and why?
Large producers because the wines need to be available in large volumes
100
For what 4 reasons might producers want to sell to supermarkets for private label wines?
* Can sell large volumes of wine
* Enjoy high levels of market exposure, sometimes in more than one country
* Sell directly to supermarkets (so no intermediary costs)
* Supermarkets often employ winemakers that work closely with producers to supervise production and ensure quality control - may help improve the quality of all of the producer's wines (including that sold elsewhere)
101
What are 5 risks for producers selling to supermarkets for private label wines?
* Supermarket buyers have enormous negotiating power, especially when it comes to price, so producers often get less than through other channels
* producers are usually expected to pay substantial fees to have their wine stocked by the supermarket and for any additional promotion, such as desirable product placement in the shops or coverage in the supermarket’s magazine
* producers are expected to pay for price promotions (i.e., make up to the supermarket for lost profits)
* contracts have strict requirements on quality control, time, and manner of delivery, packaging, and labeling - if breached, supermarket can refuse to take the wine
* supermarket placement is competitive, so a wine can easily be dropped if it does not achieve desired volumes or profit margins
101
What is a supermarket channel for artisan producers to sell in the retail sector under their own label?
Premium supermarket chains (like Whole Foods)
102
What is deep discounters' business model?
To offer permanently low prices, with rarely (if ever) having time-limited price promotions
103
What are 5 ways that deep discounters keep their costs down so they can charge low prices?
* take a lower profit margin, instead relying on volume
* basic: away from prime retail locations, and items stacked on pallets
* product range is limited - most products are private label (e.g., Charles Shaw)
* rarely stock major brands. Often work with less known producers with lower overheads, buying up excess supply
* often buy directly from producers, cutting out intermediaries
104
What are examples of deep discounters?
Aldi and Lidl (German), Netto (Danish), and Trader Joe's (US)
105
Are deep discounters increasing their market share?
Yes: according to Wine Intelligence, in 2012, 23 per cent of British wine drinkers had bought wine from a discounter; in 2018, this had risen to 37 per cent
106
What might a deep discounter do to attract consumers with a stronger interest in wine?
* stock a small amount of a more expensive wine, in more affluent areas or at times of increased spending such as Christmas
* many of the customers buying that wine have also tried the less expensive wines in the range and, finding they like them, gone back to buy more
107
What two things distinguishes convenience retailers?
* located where people live
* open for longer than other retailers, perhaps 24 hours (though alc may not be sold the whole time)
108
How are convenience retailers owned?
* Some independently (e.g., in India)
* Part of a franchise group
* Some by major supermarket chains
109
What do convenience retailers stock?
* Range similar to supermarkets but smaller (brands popular with local customers)
* Some have their own exclusive brands (like 7-11 or Spar)
110
How are convenience retailers priced and 4 reasons why?
Usually but not always more expensive than supermarkets because:
* Smaller premises, so rent is proportionately more expensive
* Premises often designed for other purposes, so less efficient
* Higher proportion of staff relative to size
* If a franchise arrangement, fee has to be paid to franchisor
But can command a higher price because of convenience
111
* What are specialist wine retailers?
* What is their typical size?
* Specialize in wine, sometimes with premium spirits and beer
* Some larger chains (e.g. Majestic Wine in the UK or Total Wine & More in the USA), most are independently owned or part of a small chain)
112
What are examples of different specialties of specialist wine retailers?
* Some specialize in wine and food from specific countries
* Particular styles of wine, such as organic, biodynamic and natural wines (e.g. Les Caves de Pyrène in the UK and La Cave des Papilles in Paris)
* Premium and super-premium from prestigious producers, often en primeur (Berry Bros & Rudd and Hedonism in the UK or Millesima in Bordeaux) - "fine wine retailers"
113
What kinds of wine do specialist wine retailers stock and why?
* smaller producers, including those from less well known wine regions and less common grape varieties
* may stock a few major brands (particularly of sparkling and fortified wines), but lack purchasing power of large retailers
114
What is the price of wine at specialist wine retailers and why?
* higher than at supermarkets
* their customers are more interested in wine, and more willing to spend more per bottle
115
What are two advantages and a disadvantage to a producer of specialist wine retailers?
Advantage:
* Stock smaller producers
* Higher prices
Disadvantage:
* Usually have to pay a distributor given the number of potential outlets
116
What are two reasons why high involvement consumers are more willing to spend more at a specialist wine retailer?
* Appreciate broader range of wines sold
* More personal service
117
What are four ways in which the retail staff at specialist wine retailers sell to consumers?
* tell the story of the wine
* give information about lesser-known regions or variety
* suggest food pairings
* build a relationship with regular customers (suggesting new wines they might like or alerting them when favorite wine is available)
118
How do customers react to specialist staff at specialist wine retailers?
* trust to staff to guide them to wine they will enjoy
* willing to buy an unknown wine based on a recommendation
119
What are two things that a specialist wine retailer can do to enhance customer service?
* Special events, like tastings
* Running wine education classes
120
What are "hybrid" retailers?
* specialist wine retailers that also have a bar area where customers can drink wine they buy in the shop (at a higher price than if they were taking it away)
* usually sell food, mainly cheese and delicatessen items, although some offer tapas and more substantial dishes
121
What are two benefits of a hybrid model to a retailer?
* consumers can try wines before they decide to buy, encouraging consumers, especially those with less wine knowledge, to purchase wines they might not otherwise have bought
* usually offer a regularly-changing selection of wines by the glass (showcase new wines and wines from less well-known regions or grape varieties)
122
What are two downsides of a hybrid model to a retailer?
* stay open later into the evening and require additional staff to serve customers
* also additional bureaucracy
123
What is an example of a high and low percentage of wine sales that are online by country?
* China: 20%
* US: 2%
124
What are 3 types of online wine retailers?
* Bricks and mortar retailers who supplement with online sales
* Online only (or predominately online) focused on wine
* Online only that sell a wide range of products in addition to wine
125
What are three examples of online only retailers focused on wine?
* Laithwaite’s in the UK
* several apps and retail website in China
* wine clubs set up by newspapers, like the NY Times Wine Club and the Sunday Times Wine Club
126
What are three examples of online only retailers that sell a wide range of products in addition to wine?
* Amazon.com (multiple markets)
* Tmall
* JD.com/Jingdong (China)
127
Do online retailers require minimums?
* Many (like newspaper wine clubs) require a minimum per year)
* Now most do not, though some require minimum number of bottles per order
128
Why can online retailers stock a larger and more varied range of wines?
Lower cost of space than in retail shops
129
What are the advantages of online retailers to smaller producers?
* Opportunity to sell given larger stock (like specialist wine retailers)
* Much larger customer base than specialist wine retailers
130
What is the primary disadvantage to online retailers?
Expense of delivery, which customers may not want to bear the full cost of (and thus it may be borne partly or entirely by the retailer)
131
How can an online retailer avoid delivery costs?
"Click and collect"--i.e., order online but the customer picks up the wine in person at a shop
132
What are the requirements for a website for an online retailer?
* Easy to use and reliable
* Distinctive and conveys brand image
* Ongoing technical support
* Website content that is up to date
133
What 5 items can website content for wine sales include?
* Detailed description of wines
* Food and wine pairing suggestions
* Scores from wine critics or medals from competitions
* Suggestions for other wines
* Permit customer reviews
134
In addition to websites, how else can wine be sold online?
Via apps, like in China
135
Where are global travel retail shops located?
Where customers are traveling from one country to another:
* Most at airports
* sea ports
* international railway stations
* onboard ships
136
What is the advantage for the retailer of airport shops?
passenger has time, after check-in and before boarding a flight, to view a shop’s products at leisure
137
What is the advantage to a customer of a retail shop at an airport after arrivals and before border control?
they do not have to carry and stow extra hand luggage on their flight
138
Why was global travel retail called "duty free"?
because national taxes (duty) were not chargeable on goods sold for personal use in another country. Consumers therefore looked for low prices, especially when travelling from countries with high rates of taxes on goods such as alcoholic drinks, tobacco and perfume
139
Why is global travel retail no longer focused on duty free, and what are customers looking for instead?
* because of free trade zones like the EU
* high-quality and high-priced goods that they cannot find in their home market
140
What are disadvantages of global travel retailers for producers?
cost of retail space is high, so less room for retailers to charge a margin, so less margin for producers (i.e., lower profit margins for producers than other channels)
141
What is a wine investment company?
specialise in sourcing and selling wine for investment
142
What are examples of wines that wine investment companies deal in?
Bordeaux Premier Cru Classés, Burgundy Grands Crus and the top Napa Valley wines
143
What are brokers in the wine investment company space?
* customers tell them what they are looking for
* brokers try to put them in touch with sellers, and then take a commission
144
What are 4 examples of businesses in the wine investment trade?
* retailers that specialize in selling and brokering investment-grade wine (like Cult Wines)
* companies that manage wine portfolios for clients (buying and selling) (Amphora Portfolio Management and Cult Wines)
* managed wine investment funds (like Sommelier Capital Advisors)
* auction houses (e.g., Sotheby’s and Christie’s)
145
What are two risks that affected wine auctions?
* Risk that the wine was not stored in the best conditions (though top auction houses now carry out detailed investigations)
* Risk of fraud
146
What are two examples of fraudsters?
* Hardy Rodenstock, who sold bottles of wine that he claimed had been part of the collection of Thomas Jefferson (even managing to get them authenticated by an expert)
* Rudy Kurniawan, who was eventually caught when trying to sell vintages of Clos St Denis from Domaine Ponsot that had never been produced.
147
What can be done to authenticate wine?
increasingly sophisticated anti-counterfeiting techniques, led by producers of investment-grade wine
148
Do only investment grade wines suffer from fraud?
No--even Jacob's Creek has suffered from fraud
149
What are the two key sub-sectors of the hospitality sector?
* bars
* restaurants
150
What is the price of a bottle in hospitality vs. retail, and what is a consequence?
* higher in hospitality
* in UK: only 20% by volume, but 40% by value
151
From a wine perspective, what are the two main types of bars?
* specialist wine bars
* general bars
152
How are specialist wine bars typically owned?
usually independently owned, or form a part of a small chain
153
What are typical staff of a specialist wine bar?
knowledgeable, well-trained staff who can hand-sell wine to customers
154
What producers are specialist wine bars an ideal route to market for?
smaller producers from less well-known regions and less common grape varieties, with very good and outstanding wines
155
What two kinds of approaches to stocking wines do specialist wine bars take?
* small, regularly-changing selection
* wide range of wines at different price points (sometimes including super-premium, hard to get wines)
156
Why do specialist wine bars tend not to offer big-name wine brands (other than sparkling and fortified)?
They can't compete with larger bar chains that have more purchasing power
157
What is an examples of chains of wine bars?
* Davy's in the UK (have own-label wines--good option for med-sized producers)
* Vino Volo in US and Canada (airport lounges)
158
What wines are usually offered by general bars?
* Very limited, usually from major companies and from well-known regions and grape varieties
* inexpensive and mid-priced
* meant to appeal to a wine range, with and without food
* in wine-producing countries, typically local wines
159
Are wines sold in general bars the same as those in retail outlets?
* Sometimes
* Other times, producers have brands sold only in the hospitality sector to avoid price comparisons
160
What are three categories of restaurants?
* non-destination
* casual dining
* fine dining
161
What is a non-destination restaurant?
A restaurant where those eating at it are not making the meal the main focus of their lunchtime or evening
162
What is typical ownership of a non-destination restaurant?
Many are part of chains, but some are independently owned
163
What types of wine do non-destination restaurants tend to serve?
* well-known regions and varieties, meant to appeal to a wide range of consumers
* inexpensive and mid-priced
* in wine-producing countries, local dominates
* often have a country theme, in which case the country's wines feature
164
What are casual dining restaurants?
* In between non-destination and fine dining
* Can be used in a variety of situations from quick meals to longer meals
* Offer high quality food and wine but without the formality of fine dining
165
What is the typical ownership of casual dining restaurants?
often being individual businesses or part of a small chain
166
* What is the price range for wines at casual dining?
* How will they have been chosen?
* Mid-priced to premium
* Chosen with food and wine pairing in mind, and the menu often includes suggested pairings
167
What is the wine list for a casual dining restaurant like?
* offers a mixture of wines from better-known regions and varieties and less well-known ones
* in wine-producing countries, often dominated by local
* if themed around a cuisine, then dominated from wines of that country (though also likely some well-chosen wines from other countries as well)
168
What are staff at casual dining restaurants like?
trained to advise customers on which wine might suit their particular taste, price range, or food choices
169
* What are fine dining restaurants?
* What are typical attributes?
* What are three examples?
* ‘destination’ restaurants, where the experience and the meal are the reasons for the visit.
* many will have one or more Michelin stars or have a very prestigious head chef
* Le Bernardin in New York (USA), The Fat Duck in Bray (UK) or El Celler de Can Roca in Girona (Spain)
170
What is particularly important at fine dining restaurants, and how is this supported?
* food and wine pairings are particularly important
* trained sommelier and highly skilled staff on hand to make recommendations
171
What do fine dining restaurants often offer?
‘tasting menus’ which offer food and wine pairing
172
* What are typical wines at fine dining restaurants?
* What do producers think of being offered at such restaurants?
* How to such restaurants often find these wines?
* highest quality and are often super-premium wines available in very limited quantities
* great source of pride for a producer to have their wine listed in such restaurants
* often use brokers to seek out hard-to-find wines
173
* What retailers are likely to sell a high-volume, inexpensive branded Chardonnay?
* What are not likely?
Likely:
* Supermarkets
* Convenience shop
Not likely:
* Deep discounters (as they have private labels)
* Casual dining restaurants (as the price difference with retail is obvious)
174
What retailers are likely to sell a low-volume, super-premium Cab Sauv?
* Specialist retailer
* Fine dining restaurants
(appealing to high-involvement consumers)
175
How is a producer of high-volume, inexpensive branded Chardonnay likely to get it to market in a relatively free market?
* Direct to retailers (supermarkets or chain of convenience stores)
* Via an agent, distributor, or broker (though this adds cost)
* Not direct to consumer via cellar doors, wine clubs, farmers' markets
176
How is a producer of low-volume, super-premium Cab Sauv likely to get it to market in a relatively free market?
* Not likely directly to retailers (as there are too many specialist shops)
* More likely an agent, distributor, or broker (and the cost is more easily absorbed)
* Likely selling via cellar door or wine club
* Unlikely selling via consumer events (as most consumers wouldn't spend a lot on an impulse purchase), and unlikely offered to the general public on a website (as too little is available)
177
What are the two types of markets that are not free markets?
* Government-run monopoly markets
* USA's 3-tier system
178
* Where are government-run monopoly markets most likely?
* What are examples?
* Scandinavia and Canada (all but Alberta)
* Systembolaget in Sweden and Liquor Board of Ontario (LCBO)
179
In a monopoly market, where can bars and restaurants buy? And what is typically a downside for them in monopoly markets?
* From the monopoly or from specialist independent distributors
* These countries often impose high taxes on alc, so they are expensive
180
What is the aim of a monopoly system, and what three ways does it do so?
Limit alc consumption
Ways:
* Private market leads to greater accessibility
* Private market leads to lower prices
* Staff just advises, and don't have an incentive to sell or promote
181
What is it like for a producer to enter the retail sector in a monopoly market?
* Lots of bureaucracy and can take a long time
* Sweden: 7-8 months from the original "tender" (request for product of a specific style)
* But once it is accepted, it is carried in all outlets, so possibility for large volume
182
What and when was the Volstead Act?
US law prohibited production, sale, and consumption of alc in US between 1919 and 1933 (with religious exception).
183
Why was the three-tier system introduced--primary benefit and three other benefits?
* Primary: avoid producer monopolies by preventing direct sales from producer/supplier to retailer
* Additional jobs
* Easier regulation and collection of taxes
* Tax revenue generated at another tier of business
184
What are the three tiers?
* supplier (including producers, importers)
* distributor (including wholesalers, brokers)
* retailer (including off-premises licencees, e.g. supermarkets and wine specialists, and on-premises licences, e.g. bars and restaurants).
185
What are five common elements of the three-tier system?
* limit or prohibit cross-ownership between retailers and the top two tiers (suppliers and distributors)
* sometimes separation between suppliers and distributors
* a producer can also import (e.g., Gallo) but can't wholesale
* a wholesaler can also import, but cannot produce (Republic National Distributing Company)
* a producer can't bypass a wholesaler and sell direct to a retailer
186
What is a point on which US states differ?
* an increasing number of states allow wineries, from within and from outside the state, to sell directly to consumers (either through an on-premises licence, an off-premises licence or both)
* some states still do not allow wines purchased in another state to cross their borders
187
What is are consequences of state-by-state regulation of alc bev sales?
* very complicated laws, and a need for "compliance officers" within companies
* some counties are still dry
188
What are three categories of states?
* control states
* open states
* franchise states
189
* What are "control" states?
* How many of them are there?
* Where the state itself has a monopoly over one or more of the three tiers
* In general, the state is the only licensed off-premises retailer (though sometimes this is only for spirits but not wine)
* 17
190
What are four examples of control states and their regulations?
* Idaho: monopoly on off-premises sales of beverages with greater than 16% abv
* Michigan: monopoly only on wholesale sales of spirits
* New Hampshire allows beer and wine to be sold in grocery and convenience shops only and operates state package shops (shops that sell prepackaged alcoholic beverages), but also allows a small number of private off-premises permits, which tend to specialise in smaller brands that the state shops do not carry.
* Pennsylvania: one of the strictest controls, with all spirits sold in state package shops, and bars and restaurants must buy from the state package shops
191
What is an "open" state?
* state involvement in the regulation of the three-tier system is relatively minimal
* suppliers and distributors are free to enter into and exit out of agreements to sell and distribute brands freely
192
What is a "franchise" state?
* they have strong franchise laws that severely restrict the freedom of suppliers to change distributor arrangements
* in a franchise state, an appointment of a distributor by a supplier is almost tantamount to a ‘lifetime appointment’ due to the strength of these laws
193
Why do franchise laws exist in franchise states?
to protect distributors against sudden and massive changes to their business
194
What is a danger to distributors in open states?
* a distributor may enter into an agreement with an industry leading supplier, and in doing so be compelled to drop distribution rights of other brands, invest heavily in trade marketing of that supplier’s brands, make investments in staffing and infrastructure, and so on
* If that supplier abruptly decides to change distributors, the immediate loss of revenue could be catastrophic to the distributor
195
What is a danger to suppliers in franchise states?
* even if there is a legitimate reason to be dissatisfied with the performance of a distributor, there is little recourse if the distributor does not agree to release the supplier
* so the supplier may appoint an additional distributor of their choosing in the same state, and in some instances a brand may be sold simultaneously by multiple distributors
196
What are 6 examples of laws of Connecticut regarding alc?
* very strong franchise law
* restricts the number of off-premises licences that can be held by any entity,
* restricts the number of licences available in each city and town according to population (restricted supply--small shop may be purchased solely for license)
* prohibits quantity discounts given by distributors (so less competitive advantage for larger shops)
* ‘minimum bottle pricing’ for each of the tens of thousands of bottles sold by retailers
* Until recently, Connecticut prohibited the sale of alcohol by an off-premises retailer on Sundays as well
197
What do critics of CT's laws point to?
‘border wars’ between Connecticut’s shops and those across state lines, where:
* prices may be significantly less
* hours of operation may vary and
* availability of products may be greater
198
What is a challenging characteristic of the US wine market over the past two decades?
* Consolidation of distributors: decreased by 2/3rds (from 3k to 1.2k)
* Increase in US wineries seeking entry to market: increased 5x (from almost 2k to over 9.5k)
* This bottleneck disadvantages smaller producers--they get lost and lose control over marketing and selling
199
How have the largest producers (conglomerates) in the US grown, and what is the impact on other players?
* grown primarily through acquisitions of smaller wineries
* benefits large companies throughout the system as they can provide an array of products for distributors or importers, and then retailers need only deal with 1-2 large distributors
200
What are challenges faced by small producers in the US market?
* can seek out small distributors, but they tend to be more limited in their scope without coverage across so many states
* distribution contracts can be hard to break
201
What has consolidation of distributors in the US stimulated?
* direct-to-consumer (both shipping to consumers and cellar door sales)
* gradual loosening of state laws
202
How much wine can be transported in:
* Shipping container with bottles
* Flexitank
* ISO tank
* 9-10k liters
* 24k liters
* 26k liters
