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 whether 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, aka “off-trade” in UK
On-premises: hospitality, aka “on-trade” in UK or HoReCa in some markets
List different routes to market (5 ways)
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, maximising 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; mitigated if using a freight forwarder.
> Financial risk of lost or damaged wine; mitigated if using a freight forwarder.
> Takes time to build relationship and understand market in foreign countries; mitigated by attending trade fairs and holding tastings 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 are 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, labelling
> Overcome language barrier
> Can provide product with Increased exposure (e.g. distributor runs tasting)
Disadvantages of using distributors
> Distributor will take a cut of some sort: explicitly reduces profits
Distributor takes over marketing - lose control over marketing and brand image
Distributor has a portfolio of products; therefore any given product will not receive undivided attention
Product 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
> Companies are at different stages of the supply chain
Companies are 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
