D2: Other types of Market (6) Flashcards
Monopoly Markets:
In some coutries (particularly in the Scandinavian countries and Canada) there is a governement- run monopoly for the retail sale of alcoholic drinks
- Systembolaget Is the only retail outlet allowed to sell alcohol
- there are also some specialist independent distributors in Sweden, licenced under special conditions
Bars and restaurants can buy from these monopoly markets:
1) who will often stock wines from small volume producers or less-common wineregions, particularly for bars and restaurants)
2) However, such countries usually impose hih level of tax on alcoholic drinks, making them very expensive
The aim of the retail monopolies:
1) limit alcohol consumption
2) this is achieved primarly through high pricing
3) By removing the incentive in a free market to compete with each other
* * these monopolies encourage the sale of alcoholic beverages at responsible prices
4) The store and their staff do not promote either individual products or producers, but simply advise customers, based on their requirements
* this removes any incentive for promotion or price reduction
For producers it is much harder to enter the retail sector in one of these markets and there is a considerable amount of bureacracy to deal with. for example to get a wine stocked by systembolaget:
1) a producer must first apply to become an approved supplier
* this does not guarantee that the producer can stock his wines
2) Four times a year systembolaget tender request for various styles or types of wine that it wants to add to its range
3) Approved producers may thenn submit samples of wines which they believe satisfy the tender request
4) the samples will be tasted by an blind pannel and then the selected wines will be tasted again and chemically analysed prior to launch to confirm that they are identical to the tasting samples
- this is a lengthy process and it can take seven to eight months from the original tender before the wine is launched in stores
- The final decision is based on quality alone, the process is intended to give smaller producers the same access to the market as larger ones
- also when the wine is accepted, it is available throughout Sweden and not just in a handful of small wineries, offering the potential to sell larger volumes
Also in Canada strict control on the retail of alc beverages eg: Ontario:
LCBO: Liquor Control Board of Ontario
- either through their own stores or by approved agencies
- a number of local producers, including wine producers , are licensed to sell their own brands outside LCBO stores
Alberta has now a private market for the wholesale distribution and retailing of alcoholic drinks
* also it is supervised closely by the alberta Gaming and Liquor Commission
Between 1919 and 1933 the Vostead Act prohibited the production, sale and consumption.
The three tier system was introduced in the USA in 1933upon the Repeal (afschaffing) of Prohibition with the aim of preventing the pre prohibition ‘saloon’ days of gambling, prostitutions, crime and drunkeness
* many of these saloons were in effect tied houses, required to buy all products sold from a particular brewer or distiller
The three tier system was intorduced to prevent direct sales from the producer/supplier to the retailer to avoid producer monopolies and increase prices. the three tiers are:
1) Producer/ Importer
2) Distributor (including wholesalers, brokers)
3) off premises retailer (eg supermarkets, wine specialists) or on premises retailer (eg bar, restaurants)
These laws generally limit or completely prohibit cross ownership between most retailer and the upper two tiers.
1) a producer may also be an importer (E.J. Gallo) but cannot be a wholesaler
2) a wholesaler can also import, but cannot produce (eg Republic National Distributing Company)
3) A producer cannot by-pass a wholesaler and sell direct to a retailer
4) an increasing number of states allow wineries (as well as other producers of alc beverages such as breweries and microdistilleries) from within the state and from outside to sell directly to consumers but usually with conditions attached
* * by contrast some states do not allow wines purchased in another state to cross their borders
One of the vestiges (overblijfselen) of the repeal (afschaffing) of prohibition in 1933 is that the Federal Governement Ceded (toegeven) control of beverage alcohol sales to the individual states.
Within the three tier system, this means that each stat of USA can have drastically different laws which are very complicated and have led to a need for
‘compliance officers’(iemand die er op toeziet of de geldende wet wordt nageleeft)
Following pressure from the Temperance Movement (outlaw the production and consumption of alc)
- some states remeined dry
- manufacture, distribution and sale of alc prohibited or tightly restricted at county level
** other established state alcohol monopolies
The strength and weakness of the three tier system are subject to debate:
1) The distributors specialize in logistical efficiency and the largest of them service huge areas of the country
2) they also provide a trained sales force and marketing materials and in these ways can potentially provide a producer with exposure that would be extremely costly (in time, effort and money) to gain otherwise
The US wine market:
1) in the last two decades the number of distributors has decreased by approximately 2/3 (from around 3000 to 1200)
* * while the number of US wineries seeking entry to the market has increased by a factor of five (from 2000- 9500)
This works as a disadvantage for smaller producers, seeing their product fade away and get lost in the massive portfolio of brands held by the major distributors
The distributors sales force reduces the producers control over the marketing and business-to-business selling of the product, in the same way as a distributor in a free market would
Although the number of US wineries has significantly increased in the recent years, many of the largest companies involve in wine production (the conglomerates) have also become bigger, generally through acquisition (overname) of smaller wineries
The benefit can be felt by the large companies throuhout the system.
1) the conglomerate can provide an attractive array of products for a large distributor (and indeed to importers in export markets
2) the large distributor only needs to deal with one large company to gain a range of desirable brands that need limited hand-selling
3) The multiple retailercan provide a range of products for their customers whilst only dealing with one or two large distributors
Small producers can seek out smaller specialist distributors that may be better equipped to sell low-volume, boutique brands.
1) however these distributors tend to be more limited in their scope without coverage across so many states
2) furthermore distribution contracts can be hard to break, and therefore, even if the producer feels they are not well presented by a distributor, they may not be able to be distributed by someoneelse
Consolidation (vastworden, versterken en compact worden van het three tier system)
1) has stimuled activity in the direct-to-consumer category
* both shipping to consumer and cellar door sales
2) gradually state by state, restrictions are loosened
3) while this is a popular option for wineries without the volume to justify participating in the three tier system
4) this route is not without its associated costs of labour,advertising, shipping and the burden of seeking to comply (voldoen) with the vagaries of each state’s regulatory framework
