D2C04 Options For Getting Wine To POS Flashcards
LEARNING OUTCOME 2.2 Understand the options for getting wine to the point of sale. ASSESSMENT CRITERIA 2.2.2 Evaluate different options for getting wine to the point of sale.
Why are markets for alcoholic beverages seldom totally free
Government control on sale and distribution:
for tax-raising purposes
To reduce alcohol abuse
Define free market
One in which producers are relatively free to choose wether to sell directly to consumer or retailer or through an intermediary
If relationship with intermediary or retailer not working, producer can cancel contract and find another route to market
List three types of market
Free market
Monopoly market
USA three tier system
Define off-premises and on-premises sales
Off-premises: retail, off-trade in UK
On-premises: hospitality, on-trade in UK, HoReCa
List different routes to market
Selling directly to retailers Appoint a distributor Establish a joint venture Use a broker Selling directly to consumers
Major advantages of selling directly to retailers
No intermediary costa and margins, maximizing profits
Producers have final say over how wine is marketed, retain control over brand image - not possible with larger retailers or large chains of restaurants
Major disadvantages of selling directly to retailers. How to mitigate?
Increased administrative burden for producers - time away from vineyards, additional staff, legal compliance in other countries - freight forwarder
financial risk of lost or damaged wine - freight forwarder
Take time to build relationship and understand market in foreign countries - trade fair and tasting in foreign countries
List three different models for selling directly to retailers
In bottle
En primeur
In bulk
What is a distributor
Distributor buys wine from a range of producers and sells to a range of retailers
Generally in the same country as retailers to which they sell
May or may not be the same country as producer
May or may not hold stock of products in portfolio
May or may not have exclusive rights to import / distribute certain products
Other names for distributor
Importer
Agent
Wholesaler
Major benefits of using distributor
Knowledge of market: key players, consumer preferences, current trends
Introducer producer to contacts
Distributors aware of different retailers’ requirements and preferences, focus on appropriate markets
Help with administrative burden
Absorb risk of lost or damaged wine
Legal compliance with foreign countries: duty, labeling
Language barrier
Increased exposure
Disadvantages of using distributors
Fee - reduce profits
Distributor take over marketing - lose control over marketing and brand image
Cannot get undivided attention
May be dropped if not selling in sufficient quantities
Large distributors may prefer to deal with large producers
Why would companies set up joint venture
To save costs particularly in price-sensitive markets
Greater control over different stages of the supply chain
Avoid intermediary costs
Major requirements of joint venture
At different stages of the supply chain
Companies of comparable size (otherwise more of a takeover)
Contractual arrangements need to be carefully agreed and documented to ensure each party knows their responsibilities and obligations
Give an example of joint venture
UK distributor Mentzendorff has major shareholders as Champagne Bollinger and Fladgatge Partnership, who are not direct competitors
UK distributor Buckingham Schenk and winemaker Herve and DIane Joyaux Fabre create Argentinian wine brand Vinalba, which is sold in multiple countries worldwide
What is a merger
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
Should be equal partnership in theory
What is acquisition
Also know as takeover
When one company buys another company, which then becomes a subsidiary of the purchasing company.
Reason: usually to acquire capabilities which the purchasing company believes it lacks, creating a more competitive business; or to save small company from going out of business
Benefits of small company in a takeover
Despite loss of control, there is usually increased investment, and new routes to market because of the large distribution networks
How does a broker differ from a distributor
Distributor is paid by producer to sell wine on its behalf, brokers are independent intermediaries who represent neither party.
Brokers do not enter into any deals, they merely make them happen
Low overheads - smaller fees (2% of the contract price usually)
Benefit of using broker
Intimate knowledge of a particular, often specialized market
Bring together buyer and selling, saving the parties time and effort of seeking each other out
Know wines available and prices willing to sell at
Also know style and volume buyers are looking for and price they are prepared to pay
Describe broker’s role in different contexts
Bordeaux: courtier, have legal status, intermediaries between chateaux and négociants
Bulk wine: ensure correct vats are delivered
Fine wine trade: facilitate deal btw those who buy and sell rare wine
Adv and dis of selling directly to consumers
Full profit
Additional administrative, logistical and staffing costs
Options for selling directly to consumers
Cellar door
Events
Wine clubs
Online
Why are cellar door sales attractive to customers?
The experience: see where the wine is made, tasting, learn the story
Foreign tourists: wine may be unavailable or expensive in their country
