Chapter 4: Options for getting the wine to the point of sale Flashcards
What are the five main options for getting wine to the point of sale?
- Selling directly to retailers
- Appointing a distributor
- Establishing a joint venture
- Using a broker
- Selling directly to consumers
Main advantages of selling directly to retailers?
-Main advantage to both producers and retailers is that they do not have to pay any intermediary’s cost and margins, maximizing profits.
-Producers are free to decide which retailers stock their wines, therefore usually have final say over how they are marketed - retaining control over brand image.
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Main disadvantages of selling directly to retailers?
- Main disadvantage is the increased administrative burden (arranging collection, transport, delivery of wine) for producers which take up time they could be spending in the vineyard or winery.
- May need to hire additional staff
- If wine is exported, ensuring compliance with duties, taxes, proper labelling
- Admin costs could be reduced if the producer uses a competent freight forwarder (logistics company)
- Producer may assume liability for damage/loss in transit. Which may be reduced by using freight forwarder.
- If exporting to a foreign market, it takes considerable time to build relationships with retailers and to understand that market, it’s consumer preferences, and legislation. Time consuming, expensive trips to do this.
- If a producer only wants to sell to a small number of companies (ex: high-volume wines to a supermarket) the admin burden may not be too great. Some retailers may want to take control over some of these tasks, at a cost.
What are the benefits of using a distributor?
- Take advantage of a distributor’s knowledge of the market: key players, consumer preferences, current trends
- Distributor will be able to introduce producer to it’s contacts, saving producer from having to find customers themselves.
- Distributor will be aware of different retailers’ requirements, meaning they can focus on most appropriate targets for a particular wine.
- Distributors can help with administrative burden: logistics companies, absorbing risk of lost or damaged wine
- If wine is being imported, dist will have experience and staff to deal with legal compliance issues
- Helpful where there is a language barrier.
- Greater resources to promote a wine than the producer, however producer may lose control over how their wine is marketed and where it ends up for sale which may affect brand image. Vital that both parties agree on a plan.
- Distributors may organize portfolio tastings attended by a wide range of potential customers.
- Retailers often prefer dealing with a distributor because of one point of contact vs several different producers.
What are the disadvantages of using a distributor?
- Being one of several client means that distributors cannot give undivided attention to any one producer and the overall marketing strategy may not be ideal for the individual wine.
- Dist may drop wines which are not selling in sufficient quantities
How does a distributor reach it’s desired margin?
Distributor will charge a fee to achieve it’s desired margin, which will reduce the producer’s profits. Margins vary from producer and country and from hospitality to retail. Hospitality usually have higher margins.
Large distributors vs small?
Larger distributors may also prefer to deal with larger producers. However, there are also
smaller distributors who specialise in particular wines from particular countries or regions: this
can be especially beneficial to smaller producers from those countries or regions looking to
enter a new market.
How is a broker different than a distributor?
Whereas a distributor is paid by the producer
to sell wine on its behalf, brokers are independent intermediaries who represent neither party.
For the producer, what is the benefit of using a broker?
For producers, the benefit of using a broker is that they have intimate knowledge of a
particular, often specialised, market. Brokers have different specialities, some concentrating
on sales of bulk wine, others on sales of small-production wine.
Describe what a broker does
Brokers do not enter into any deals; they merely make them happen. As they have very low
overheads – a small office, a mobile phone, a laptop computer or tablet – they charge smaller
fees than distributors (usually 2 per cent of the contract price, but it can range from 1 to 5 per
cent in different parts of the world).
Brokers can bring together a buyer (e.g. a supermarket or merchant) and a seller (e.g. a
co-operative or grower), saving the parties the time and effort of seeking each other out. 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.
Why are brokers important in Bordeaux?
In Bordeaux, brokers (or courtiers) have legal status and play an important role, acting as
intermediaries between the châteaux and nègociants. Where bulk wine is concerned, it is the
broker’s responsibility to ensure the correct vat or vats of wine are actually delivered. Brokers
also play a key role in the fine wine trade, facilitating the deal between those who wish to buy
and/or sell rare bottles of wine
What are the 4 methods of selling directly to consumers?
Cellar door sales
Events
Wine Clubs
Online
Describe “cellar door sales”
An increasing number of producers have set up facilities on their estate or at the winery
to sell wine to visitors. Whatever form these facilities take, they are collectively referred to
as ‘the cellar door’. Whilst in some cases, visitors quite literally pick up their wine from the
cellar door, many producers have invested a lot of money in attractive shops and other wine
tourism facilities.
Who are “cellar door” customers?
Cellar door customers range from locals who have come specifically to buy wine or
tourists (whether or not wine tourists) who are visiting the region. The attraction for these
customers is the experience provided by the cellar door, with the chance to see where the
wine is made, take part in a tasting of the wines before purchasing, and learn about the story
behind the wine. Some cellar doors take the experience further and provide tours for small
groups, a tasting of exclusive cellar door or reserve wines, and sometimes food and wine pairings, all usually at an additional cost. For foreign tourists, the wines may not be available
in their home country or may be more expensive there (due to import and intermediary costs).
For example, producers in Alsace do an excellent trade with tourists visiting from nearby
Belgium, Luxembourg or Germany
Describe the benefits for producers for cellar door sales
+Earning larger profits on their wine
+Engaging directly with consumers, forging a personal connection.
+Build brand awareness
+Direct engagement with consumers is an excellent way to trial new products without market research.
+Some producers choose not to do this. Lack of suitable location, staffing, etc
+Woodinville: producers are located 150 miles away, but the wines are right here.
