Chap 10: Factors that Affect the Price of Wine

Question 1

What are the seven broad categories into which winemaking costs can be split?

Answer 1

Grape growing
Winemaking
Packaging
Transport, distribution and sales
Taxes
Retailers
Market forces

Question 2

What are the costs associated with establishing a vineyard?

Answer 2

The land (especially in high-reputation regions)
Soil preparation
Cost of vines
Building the trellis (if one is used)

Question 3

What is typically the largest production cost in an established vineyard?

Answer 3

Labour

Question 4

How may the cost of labour be kept low?

Answer 4

By relying on a seasonal, casual workforce or mechanisation. If growers are able to share labour or machines then further savings are possible.

Question 5

How may labour costs be further reduced in an established vineyard?

Answer 5

By growers sharing labour or machines

Question 6

Where are the money saving economies in vineyards less possible?

Answer 6

In steep vineyards and some isolated sites

Question 7

Other than practical considerations, what else may affect the price of grapes?

Answer 7

Market forces

Question 8

What are the most obvious costs involved in winemaking?

Answer 8

Equipping and maintaining the winery with necessary equipment

Question 9

Give an example of winery equipment which can be shared (reducing costs)

Answer 9

Bottling facilities

Question 10

Other than cost of equipment, what else must be considered regarding cost of winemaking?

Answer 10

The time the wine may need to be kept at the winery before release for sale.

Question 11

Why is time kept at the winery an important cost consideration in winemaking?

Answer 11

Storage facilities can be expensive to maintain. Furthermore, a lot of money is tied up in stock that cannot be sold to generate a profit straightaway. Any delay in being able to take profit from the wine needs to be factored into the price of the wine.

Question 12

Which main aspects of packaging factor into the cost of wine?

Answer 12

Bottles, labels, capsules, closures and cartons all need to be designed and purchased.

Question 13

What kind of packaging is more costly?

Answer 13

Unusually shaped or heavy bottles

Question 14

How can packaging costs be reduced?

Answer 14

By exporting the wine in bulk and bottling in the market where the wine is to be sold.

Question 15

Why is it not always possible to bottle at the intended market?

Answer 15

This is only possible for large producers

It is not always permitted by local wine laws

Question 16

What are important features for a producer to consider when choosing partners to transport and distribute their wines?

Answer 16

They need to chose partners who offer both value for money and access to reliable sales.

Question 17

Describe the role of taxes in the cost of wine

Answer 17

Nearly every government taxes alcoholic drink

Tax levels vary wildly from country to country

Question 18

What is the logic behind taxation of alcoholic beverages?

Answer 18

This tax is seen as essential to controlling alcohol consumption by increasing retail price
The tax is an important source of government revenue

Question 19

Describe the role of retailers in wine cost

Answer 19

Shops and generate will add money to the cost of wine so that they can make a profit

Question 20

Why is wine generally more expensive in restaurants than shops?

Answer 20

Restaurants expect to generate more profit from wine

The price also reflects the occasion, the environment and the level/style of service

Question 21

What is the broadest/largest determiner of the cost of wine?

Answer 21

Market forces (how much the destination market is prepared to pay for the wine)

Question 22

Pertaining to market forces, when may the retail price of a wine far outweigh the costs?

Answer 22

Where high demand exists for a product available in limited supply

Question 23

Give a wine type, the price of which has suffered the effects of high demand and limited supply

Answer 23

Demand for premium estate wines from Bordeaux has put a pressure on supply, driving up prices substantially.

Question 24

Give an example of an area where some vineyards have been abandoned (unable to sustain themselves) due to demand being too low

Answer 24

Some steep vineyard Mosel sites have been abandoned because the cost of production could only be recovered by pricing the wines at a level consumers were not prepared to pay.

Question 25

What are the three main types of wine producer?

Answer 25

Co-operatives
Merchants
Estates

Question 26

What is a wine co-operative?

Answer 26

A wine business owned by its members; typically grape growers

Question 27

What is the major advantage for a grower of co-operatives?

Answer 27

They are guaranteed a buyer

Question 28

What is the potential large disadvantage for winemakers of a co-operative?

Answer 28

They may not always have complete control over the quality of grapes supplied by their employers

Question 29

What quality can one expect from co-operative wineries?

Answer 29

Any (some produce the best wines of their area)

Question 30

Where are co-operatives most common?

Answer 30

In europe

Question 31

Why are co-operatives most common in europe?

Answer 31

Because vineyard holdings in europe are on average too small to run economically

Question 32

Describe wine merchants’ roles

Answer 32

They buy grapes, juice or wine from growers or co-operatives

Question 33

Why do merchants often have more control over their source material than co-operatives?

Answer 33

They have contracts with their suppliers

Question 34

What challenge can wine merchants face with regard to grape supply? Under what circumstances is this applicable?

Answer 34

Producers may be more selective with grapes and 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 suitable grapes

Question 35

On what scale do wine merchants operate?

Answer 35

They can operate on very small scale and focus on premium wine production OR operate on a large scale and produce a range of different wines at different quality levels

Question 36

Where are wine merchants most common?

Answer 36

Outside of Europe

Question 37

Why are wine merchants more common outside of europe?

Answer 37

Average vineyard holdings are larger (compared with european growers) and this type of contractual arrangement is popular with producers who only have to deal with a relatively small # of growers.

Many of the large wine brands are made this way.

Question 38

Which type of wine producer is most common amongst many of the large wine brands?

Answer 38

Merchants

Question 39

What is the french name for wine merchants?

Answer 39

Negociant

Question 40

Describe an ‘Estate’

Answer 40

They make wine from only the grapes they grow

Question 41

Which type of wine producer typically makes on the smallest scale?

Answer 41

Estates

Question 42

What is the result of wine estates producing on a small scale?

Answer 42

It gives the producer the most control over the production process and consequently, in most regions, these producers are responsible for the best wines.

Question 43

What is the big disadvantage for wine estates?

Answer 43

They tend to have fewer blending options as they rely purely on their own crops. This can be a challenge in years where the growing conditions have been poor, ex: hail or frost.

Question 44

What is the french word sometimes used for estate?

Answer 44

Domaine