D2: Different options for getting the wine to the point of sale (3)

Question 1

once the wine is produced, the producer has to get his product to the end consumer:

Answer 1

1) Direct to Consumer
2) or through an intermediary
* due the additional work, costs and risks

Question 2

Governements put controls on the sale and distribution of alcoholic drinks for tax-raising purposes:

Answer 2

1) tax revenues (inkomsten) can be very lucrative (winstgevend)
2) also governement control the distribution and sale to minimize the harmful effects of alcohol abuse, by, for ex limiting the hours when alcohol may be sold and imposing a minimum legal drink age

Question 3

for the purpos of this book a free market is a market where the producers are relatively free to choose whether to sell directly to a consumer or retailer through an intermediary.

Answer 3

okido

Question 4

Producers are free to decide which retailers stock their wines. As a result, they can usually have the final say over how they are marketed, so retaining control over their brand image.

Answer 4

however this may not be possible with larger retailers such as supermarkets or large chains of bars and restaurants who may dictate how the wines are promoted.

Question 5

The main disadvantage of selling directly to the retailers:

Answer 5

1) increased administrative burden for producers

* will take up time they could be spending in the vineyard or winery or force them to hire additional staff

Question 6

Such administrative tasks include arranging collection, transportation and delivery of the wine.

Answer 6

1) the producer will also have to ensure that any import duties and taxes are paid and that the wine, its packaging and labelling comply with the relevant laws in the country where the wine is to be sold.
* this administrative burden(last) could be reduced if either the producer or retailer uses a competent freight forwarder but this adds to costs.

Question 7

In addition, depending on the arrangements between the producer and retailer, the producer may have to take the full financial risk of wine being lost or damaged in transit. again, this risk may be reduced by using a freight forwarder

Answer 7

okido

Question 8

if producer is exporting the wine to a foreign market:

Answer 8

1) it will take time to build up relationships with retailers and understand that market, its consumer preferences and legislation
2) to do this properly, many time consuming and costly visits to this country will be needed
3) however, attending trade fair or tastings in foreign markets, can offer an excellent opportunity for producers to meet many potential clients at the same time

Question 9

If producer wants to sell to a smaller number of companies: (supermarkets, large horeca chains)

Answer 9

1) administrative burden may not be too great

* some retailer may take over these tasks, but at a cost

Question 10

If producer want to target smaller retailers:

Answer 10

1) they will probably not have the time or resources to approach all potential retailers
2) This being the case, the producer may prefer to appoint an agent to act on their behalf

Question 11

Also en primeur, or bulk transportation is upcoming.

Answer 11

okido

Question 12

different options of getting the wine to the point of sale:

Answer 12

1) Selling directly to retailers
2) appoint a distributor
3) establish a joint venture
4) use a broker
5) selling directly to consumers

Question 13

A distributor:

Answer 13

1) buys wine from a range of producers and sells it to a range of retailers
2) theyre generally located in the same country as the retailers to which they sell (which may or not may to be the same country as the producer)
3) they may or may not hold stock of the products in their portfolio and may or not may have exclusive rights to import and distribute certain products in their market

Question 14

What are the benefits for the producer using a distributor?

Answer 14

1) They can take advantage of an distributor’s knowledge of that market
- - including key players, consumer preferences and current trends

2) the distributor will be able to introduce the producer to it’s contacts
- - saving the producer from having to go out and find potential customers themselves

3) also the distributor will also be aware of different retailers requirements and preferences, meaning they can focus on the most appropriate targets for a particular wine.

Question 15

Administrative benefits by using a distributor:

Answer 15

1) they can help with the administrative burden
2) the distributor will have a contract with a logistics company that can take care of collection, transportation and delivery of the wine

3) usually also absorb the risk of lost or damaged wine
4) if the wine is being imported, the distributor will have the experience and staff to deal with legal compliance issues (such as duty payments and labelling requirements)
5) having a local distributor can be particularly helpful where there is a language barrier

Question 16

What are the disadvantages of a distributor?

Answer 16

1) all comes at a price
2) they will charge a fee to achieve its desired margin, which will reduce the producers profits

3) margins vary from company to company and from country to country
* * but those selling to the hospitality sector tends to have higher costs and a larger staff than those specialising in the retail sector and may therefore have higher margins

Question 17

Distributors will also have greater resources to promote a wine than the producer and usually take over the marketing.

Answer 17

This means that producer can loose control over how their wine is marketed and where it eventually ends up on sale
** so both parties agree a clear marketing and sales plan from the ouset and keep it under regular view for not damaging the producers brand image

Question 18

Also being part of a larger portfolio is an advantage as the wines comes in front of different retailers if you appoint a distributor.

Answer 18

And this could be difficult to achieve on their own

Question 19

What are the disadvantages of a distributor for a producer?

Answer 19

1) you’re one of many clients, so attention can be divided
2) the overall marketing strategy may not be the ideal one for an individual wine

3) also because they have a portfolio of wines, they may drop those which are not selling in sufficient quantities

Question 20

as a producer you need to choose wisely your distributor, this can be costly as you may need to find different distributors for different wines.

Answer 20

Trade fairs and tastings offer a good opportunity for producers to meet a number of distributors and getting recommendations from other wineries can help.

Question 21

Joint ventures (samenwerkingsverband tussen bedrijven)

Answer 21

1) The companies need to be of comparable size, otherwise the effect is more of a takeover

2) eg: mentzendorff: long established UK wine distributor whose major shareholders are Champagne Bollinger and the Fladgate Partnership (port)
- – these two businesses are not direct competitors and other companies represented by mentzendorff have been chosen carefully to ensure that they do not overlap

Question 22

Joint ventures can be for different stages of the supply chain, but another increasingly common type of joint venture has been:

Answer 22

1) producers joining forces with distributors or large retailers to create new wine brands
eg: UK distributor Buckingham Schenk and winemakers Hervé and Diane Joyaux Fabre created in 2007 the Argentinian wine brand Vinalba

Question 23

What is a merger:

Answer 23

1) this occurs when two businesses join together to create a business with greater resources and capabilities that should be more competitive than the individual businesses were on their own,
2) in theory at least, the two companies should form an equal partnership, however, in reality, this is rarely the case

Question 24

What is an acquisition?

Answer 24

1) takeover
2) usually when a big company buys another smaller company, which then becomes a subsidiary of the purchasing company

3) reason: usually to acquire capabilities (such as skills, resources, market share or prime vineyard locations)
4) some failing companies are taken over in an effort to save them from going out of business

Question 25

due acquisition the conglomerates (even the big ones) can get bigger. this is due

Answer 25

1) trying to reduce costs and keep down prices through economies of scale (op grote schaal) and simplification of the supply chain

Question 26

Despite the loss of control over their businesses, their are many attractions for a smaller producer who is approached by one of these big companies:

Answer 26

The acquisition will usually result in increased investment in the business being bought
– also because of the large distribution networks enjoyed by the conglomerates it can open up new routes to market

Question 27

Mergers and acquisition have not been limited to the production side of the business

Answer 27

there have recently been a number of high profile examples amongst distribution companies
* as they too look to consolidate (versterken) and reduce costs like: RNDC with breakThru Beverage in the usa and Conviviality with Matthew Clark/ Bibendum/ PLB in the UK

Question 28

A broker is different to a distributor.

Answer 28

A distributor is paid by the producer to sell wine on its behalf.

• • brokers are independent intermediaries who represent neither party
• • brokers do not enter any deals they merely (alleen) make them happen
• as they have a small office, a mobile phone, a laptop computor or tablet they charge smaller fees than distributors (usually 2% of the contract price, but it can range from 1-5% in different parts of the world

Question 29

The benefit for a producer to use a broker is that:

Answer 29

They have intimate (vertrouwelijk) 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
• They can bring together a buyer ( eg supermarket of merchant) and a seller (co op or grower)
• saving the part the time and the effort of seeking each other out

** they know what wine producers have available to sell and what prices they are willing to sell at

Question 30

In Bordeaux, brokers, or courtiers have legal status and play an imporant role, acting as intermediaries between the château and négociants.

Answer 30

where bulk wine is concerned, it is the brokers responsibility to ensure the correct vat or vats of wine are actually delivered

** they also play a key role at wine trades, facilitating the deal between those who wish to buy and/or sell rare bottles of wine

Question 31

An increasingly number of producers sell their wine directly to the end consumer rather than using an intermediary.

Answer 31

1) this allows them to take the full profit from the sale of the wine and also retain control of how the wine is marketed
* however the potential benefit has to be offset against the additional administrative, logistical and staffing costs the producer will incur

Question 32

Direct sales are a particularly important optionn in wine-roducing countries. there are four main options:

Answer 32

1) Cellar door sales
2) events
3) wine clubs
4) online

Question 33

Cellar door sales:

Answer 33

1) many producers have invested a lot of money in attractive shops and other wine tourism facilities
2) customers range from locals to tourists
- the attraction ffor these customers is the experience provided by the cellar door, with the chance to see where the wine is made or a tasting before buying

Question 34

For foreign tourists the wine buyed at the cellar may not be available in their home country or more expensive due iportation costs other.

Answer 34

for example producers in alsace do an excellent trade with tourists visiting from nearby Belgium, Luxembourg, or Germany

Question 35

An benefit of cellar door sales is engaging directly with their consumers and organizing tastings.

Answer 35

This is an important part of wine marketing, as the consurs can be nervous about buying the wine without knowing whether they will like it or not

Question 36

Also Cellar door sales help build brand awareness and loyalty,

Answer 36

1) which is particularly valuable for new wineries
2) studies have shown that people who buy wine from the cellar door are more likely to buy wine from that producer in the future

3) also people who visited the cellar, are likely to recommend the producer to their friends and family
- - this so-called word of mouth marketing has become increasingly significant and, importantly for producers, is free

Question 37

Some chose not to open the cellars to sell wines, as it can:

Answer 37

1) disrupt important work in the vineyard and even the most basic cellar door facilities can take up space and need to be staffed

Question 38

some producers has opened a cellar door in a nearby town so that people do not need to visit the estate

Answer 38

eg some wineries in the isolated Columbia Valley Washington State, have opened cellar doors in seattle, over 150 miles away

Question 39

Events:

Answer 39

1) because the evnts take place in towns and often have other attractions, such as live music, they attract a larger number and wider range of people

2) the downside of hese events, however is that the producer will have to pay to echibit their wine
- - travel expenses
- - additional staff to run their stand
- - also competing with other producers for the visitors attention

Question 40

Wine clubs:

Answer 40

1) popular in new world producing countries, USA and AUS
- - consumers are usually encouraged to join these clubs whilst tasting wine at cellar door
* many producers sell a large proportion of their stock in this way, reducing the need to find other outlets for their wine

2) also good for marketing purposes: they stay in contact with their members (newsletter, blogs,etc) and in the hope they recommend the winery to their family and friends

Question 41

Runnig a wineclub does involve additional work:

Answer 41

1) producing newsletters,
2) processing to order and ship the wine (so also the risk on transit problems, the winery takes the risk n them as the customer pays delivery cost, so good freight forwarder is needed)

Question 42

Legislation is evolving, but not alls states in USA allow direct to consumer sale and deliveries of wine from producer wineries.

Answer 42

holy moly

Question 43

Wine clubs are operated by all types of estate winery

Answer 43

1) in the case of some prestigious producers (screaming eagle Napa)
* their wine clubs can be the only way to buy their wines ad are therefore more likely exclusive members with often very long waiting lists of aspiring members

Question 44

Online:

Answer 44

1) added cost of delivery (may be paid by consumer or producer)
2) The additional issue for online, they need to set up and maintain a reliable website