Challenges of Over-supply and Under-supply

Question 1

Why has oversupply reduced in recent years?

Answer 1

-growth in consumption in USA and China
-limitations on production

Question 2

What happens when there is more wine to sell than there is to buy?

Answer 2

Prices fall- consumers find cheaper alternatives

Question 3

If a producer has an oversupply of wine, what do they need to do?

Answer 3

-increase income and free up equipment for next harvest
-by selling at much lower cost/below production cost
-proactive producers= sell to new markets/outlets- but takes time to develop contacts= distributer

Question 4

If a producer has large vols of wine, what else can they do?

Answer 4

-bottle wine under diff label- supermarket/deep discounters/bar/restaurants etc as private label

Question 5

if a producer is forced to sell at lower than usual price what can this do?

Answer 5

-devalue ‘brand image’
-create lasting damage to brand

Question 6

Undersupply is unusual, but give an example of when this happened?

Answer 6

After bad harvests in europe in 2017

Question 7

Other than not having enough wine to sell, what is another problem of under supply?

Answer 7

-disappointing clients and leading to strained relationships

Question 8

If a producer has a contract with a large retailer, what can happen if there is an under supply of wine?

Answer 8

-penalty/cancel contract
-if origin of a wine isn’t important- can find cheaper alternative

Question 9

What can large companies (give examples) do if there is an under supply of wine?

Answer 9

-Accolade Wines, Treasury Wine Estates, E&J Gallo
-offer alternative within their portfolio (have wines at diff price points etc)
-sell to diff markets