Chapter 2 - Costs through the Supply Chain

Question 1

Supply chain

Answer 1

Network of organizations and activities involved from the creation of a product through to its distribution and sale to the final consumer

Question 2

Capital

Answer 2

The money invested in a business to general income

Question 3

Capital costs

Answer 3

Money spent by a business in acquiring, improving, or maintaining long-term assets (land, building, equipment, etc.)

Question 4

Operating costs

Answer 4

Day-to-day costs relating to producing and packaging wine

Question 5

Grape growing costs

Answer 5

1. Vineyard establishment

2. Vineyard management

Question 6

Vineyard establishment costs and considerations

Answer 6

1. Cost of land
2. Surveys
3. Site clearance
4. Buying and planting vines
5. Irrigation systems (possibly)
6. Protection from weather and pests

Question 7

Vineyard management costs and considerations

Answer 7

1. Labor
2. Machinery and fuel
3. Supplies
4. Vineyard treatments
5. Water
6. Electricity
7. Insurance and depreciation

Question 8

Winemaking costs

Answer 8

1. Grape growing
2. Labor
3. Machinery and equipment running costs
4. Winery materials
5. Water
6. Electricity
7. Maturation
8. Depreciation

Question 9

Transportation costs

Answer 9

Depends on wine in bottle or bulk transportation

Question 10

Transportation of wine in bottle

Answer 10

Very expensive to transport by air; road, rail and sea used most often

Question 11

Cheapest method for transporting wine over long distances

Answer 11

Sea

Question 12

JF Hillebrand

Answer 12

Freight forwarder specializing in wine transport

Question 13

Bulk transportation

Answer 13

Suitable for moving large volumes of the same wine (> 15,000 cases)

Question 14

Margin

Answer 14

Fee charged by distributors - operating costs and profit divided by revenue and multiplied by 100 for a percentage

Question 15

Sales costs

Answer 15

1. Property
2. Labor
3. Equipment and materials
4. Storage
5. Delivery
6. Margin at the point of sale

Question 16

Margin at the point of sale — retail

Answer 16

30-50%

Question 17

Margin at the point of sale — bars and restaurants

Answer 17

up to 3x the purchase price

Question 18

Marketing costs

Answer 18

1. Labor
2. Design and production of bottled and labels
3. Marketing campaign

Question 19

Impact of legislation on cost of wine

Answer 19

taxes, duties, trade barriers, subsidies, minimum pricing, labeling laws

Question 20

How to mitigate effects of exchange rate fluctuations

Answer 20

1. Options
2. Price fixing at date of ordering
3. Buying currency to cover specific orders
4. Entering a contract to fix exchange rate
5. Trading in USD/EUR
6. Opening a foreign currency account in a local bank
7. Opening an account in an overseas bank

Question 21

Options

Answer 21

An agreement between importer and producer on a certain volume of wine — price and timing