C10 - Factors that Affect the Price of Wine - Micky - completed Flashcards
What are the seven broad brackets into which winemaking costs can be split?
- Grape growing
- Winemaking
- Packaging
- Transport, distribution and sales
- Taxes
- Retailers
- Market forces
What are the costs associated with establishing a vineyard?
- The land (especially in high-reputation regions)
- Soil preparation
- Cost of vines
- Building the trellis (if one is to be used)
What is typically the largest production cost in an established vineyard?
Labour
How may the cost of labour be kept low?
By relying on a seasonal, casual workforce or mechanisation
How may labour costs be further reduced in an established vineyard?
By growers sharing labour or machines
Where are the money saving economies in vineyards less possible?
In steep vineyards and some isolated sites
Other than practical considerations, what else may affect the price of grapes?
Market forces
What are the most obvious costs involved in winemaking?
Equipping and maintaining the winery with necessary equipment
Give an example of winery equipment which can be shared (reducing costs)
Bottling facilities
Other than cost of equipment, what else must be considered regarding cost of winemaking?
Time kept at the winery before release
Why is time kept at the winery an important cost consideration in winemaking?
- Storage facilities can be expensive to maintain
- A lot of money is tied up in stock that cannot be sold to generate a profit straightaway (delay on sale is factored into the price of the wine)
Which main aspects of packaging factor into the cost of wine?
- Bottles
- labels
- capsules
- closures
- cartons
*all need to be designed and purchased
What kind of packaging is more costly?
Unusually shaped or heavy bottles
How can packaging costs be reduced?
By bottling in the market where the wine is to be sold
Why is it not always possible to bottle at the intended market?
- This is only possible for large producers
- It is not always permitted by local wine laws
Describe the role of taxes in the cost of wine
- Nearly every government taxes alcoholic drink
- Tax levels vary wildly from country to country
What is the logic behind taxation of alcoholic beverages?
- This tax is seen as essential to controlling alcohol consumption by increasing retail price
- The tax is an important source of government revenue
Describe the role of retailers in wine cost
Shops and generate will add money to the cost of wine so that they can make a profit
Why is wine generally more expensive in restaurants than shops?
- Restaurants expect to generate more profit from wine
- The price also reflects the occasion, the environment and the level/style of service
What is the broadest/largest determiner of the cost of wine?
Market forces (how much the destination market is prepared to pay)
Pertaining to market forces, when may the retail price of a wine far outweigh the costs?
Where high demand exists for a product available in limited supply
Example of which wine type has suffered the effects of high demand and limited supply
Bordeaux premium estate wines
Example of an area where some vineyards have been unable to sustain themselves due to demand being too low
Some steep vineyard Mosel sites
What are the three main types of wine producer?
- Co-operatives
- Merchants
- Estates
What is a wine co-operative?
A wine business owned by its members; typically grape growers
What is the major advantage for a grower of co-operatives?
They are guaranteed a buyer
What is the potential large disadvantage for winemakers of a co-operative?
They may not always have complete control over the quality of grapes supplied by their employers
What quality can one expect from co-operative wineries?
Any (some produce the best wines of their area)
Where are co-operatives most common?
In Europe
Why are co-operatives most common in Europe?
Because vineyard holdings in Europe are on average too small to run economically
Describe wine merchants’ roles
They buy grapes, juice or wine from growers or co-operatives
Why do merchants often have more control over their source material than co-operatives?
They have contracts with their suppliers
What challenge can wine merchants face with regard to grape supply? Under what circumstances is this applicable?
Producers can reject grapes that are not up to standard; but in areas where demand can outstrip supply, it can be difficult to guarantee a regular supply of grapes
On what scale do wine merchants operate?
They can operate on small, premium wine production or operate on a large scale, producing wines at different quality levels.
Where are wine merchants most common?
Outside of Europe
Why are wine merchants more common outside of europe?
Average vineyard holdings are larger and producers have to deal with less growers
Which type of wine producer is most common amongst many of the large wine brands?
Merchants
What is the French name for wine merchants?
Negociant
Describe an ‘estate’ merchant
They make wine from only the grapes they grow
Which type of wine producer typically makes on the smallest scale?
Estates
What is the result of wine estates producing on a small scale?
It gives the producer the most control over the production process
What is the big disadvantage for wine estates?
They tend to have fewer blending options as they rely purely on their own crops
When is it particularly disadvantageous for a wine producer to have fewer blending options?
In years when growing conditions have been poor
What is the french word sometimes used for estate?
domaine
