Different Options for getting the Wine to the Point of Sale Flashcards
What are the 5 methods a producer can use to reach the end consumer?
- Selling directly to retailers
- Appoint a distributor
- Establish a joint venture
- Use a broker
- Sell directly to consumers
Selling directly to retailers
What are the 2 main advantages of selling directly to retailers?
- Don’t need to pay intermediary costs and margins
- Free to decide who stocks their wines - retain control over brand image (except if large retailer or supermarket)
Selling directly to retailers
What are the 3 main disadvantages of selling directly to retailers?
- Administrative burden
- Take on financial risk of wine being lost or damaged in transit (reduced if using freight forwarder)
- Takes time to build relationships with retailers and understand market e.g. consumer preferences & legislation (if exporting to foreign market)
Selling directly to retailers
Name 3 administrative burdens if selling directly to retailers
- Arranging collection, transporation, and delivery of wine
- Paying import and export duties (if exporting)
- Ensure packing and labeling comply with local laws (if exporting)
Can use freight forwarder but adds to costs
Selling directly to retailers
When might a producer choose to / not to sell directly to retailers?
If only want to sell at small number of companies (e.g. high volume wine to supermarkets, chains etc)
> Admin burden not too great
f they want to target smaller retailers
> Likely won’t have the time to approach all of them so might prefer a distributor.
Selling directly to retailers
What has enabled high-volume producers to sell directly to retailers? What has been the impact?
Bulk transportation
Retailers can meet and retain competitive prices
Selling directly to retailers
Give 3 different timings when producers will sell their wine to retailers?
- Once bottled
- After maturation
- En primeur
Appoint a distributor
Describe a distributor (4 points)
- Buys wine from a range of producers and sells to range of retailers
- Typically located in same country as retailers
- May or may not hold stock
- May or may not have exclusive rights
Appoint a distributor
What are the market knowledge benefits of appointing a distributor?
- General knowledge of market (e.g. key players, preferences, trends)
- Introductions to contacts (don’t need to find customers themselves
- Awareness of different retailer requirements and preferences
Appoint a distributor
What are the administrative burden benefits of appointing a distributor?
- Distributor has logistics contact (collection, transportation, delivery)
- Absorb risk of lost or damaged wine
- Assistance with legal compliance (duty, labeling etc)
- Help with language barrier
Appoint a distributor
What are the promotion and marketing benefits of appointing a distributor?
- Greater resources
- Time-saving
- Being part of portfolio can increase exposure (e.g. through portfolio tastings)
- Retailers find it easier to buy through distributors
Appoint a distributor
What are the main disadvantages of appointing a distributor?
- Cost - Fee charged to achieve desired margin which will reduce profits
- Loss of control over how wine is marketed and where it is sold
- DIstributor can’t give undivided attention to one producer
- Marketing strategy may not be the ideal one for that particular wine
- WIne may be dropped if not selling in sufficient quantity
- Costs time and money to find the right distributor
Appoint a distributor
Which distributors typically have higher margins and more staff?
Those selling to hospitality
Appoint a distributor
What are some steps producers can take to make the relationship work with distributors?
- Spend time finding the right distributor (e.g. selecting distributor who specialises in particular region)
- Consider appointing different producers for different wines
- Create clear marketing and sales plan form outset and regularly review
- Attend trade fairs to meet distributors or get reccos from other wineries
Establish a Joint Venture
What are the advantages of a joint venture?
- Cost saving
- Greater control over different stages of supply chain
- Greater profitability (costs shared / intermediary costs avoided)
Establish a Joint Venture
What conditions need to be met to make a joint venture successful?
- Companies need to be of comparable size
- Contracts carefully agreed and documented
Establish a Joint Venture
Give 2 examples of joint ventures between producers and distributors
- Producer being shareholder in distributor (e.g. Mentzenddorff & Bolli / Fladgate)
- Distributor and producer / retailer creating a new wine brand
Establish a Joint Venture
What are the advantages of an acquisition for the acquiring company?
- Acquire capabilities they believe they lack
- Reduce costs through scale and simplification
- To get bigger
- To compete in more sectors of their chosen markets
Establish a Joint Venture
What are the advantages of an acquisition for the acquired company?
- Increase in investment into the business
- Open up new routes to market
Establish a joint venture
What are 3 sources of M&A activity?
- Between producers (e.g. E&J Gallo)
- Between distributors (e.g. Conviviality)
- Private equity firms (e.g. Bain)
Use a Broker
What is the difference between a distributor and a broker?
Distributor paid by producer to sell wine on its behalf
Brokers are independent intermediaries who represent neither party
How much do brokers usually charge? Why?
2% (can range from 1-5%)
Very low overheads
Use a Broker
What are the advantages of using a broker?
- Intimate knowledge of a particular market
- Save time an effort for either party to seek the other out
- Know what producers have available and at what price they want to sell
- Know what style and volume buyers are looking for and price prepared to pay
Use a Broker
Name 3 other potential roles of brokers
- Intermediaries between chateaux and negociants (Bordeaux)
- Ensure correct vats of wines are actually delivered (bulk wine)
- Facilitating those who wish to buy/sell rare wine (fine wine tade)
Selling Directly to Consumers
What are the 4 primary methods of selling directly to consumers?
- Cellar door sales
- Events
- Wine Clubs
- Online
Selling Directly to Consumers
What is the overall trade-off that needs to be weighed when selling directly to consumers?
Take full profit & retain control vs. Admin / Logistic / Staffing costs
Selling Directly to Consumers
What are the benefits of a cellar door for consumers?
- See where wine is made
- Taste before purchase
- Taste exclusive cellar door or reserve wines
- Learn about story of wine
- Tours
- Food & wine pairings
- Source wines not available or more expensive in own country
Selling Directly to Consumers
What are the advantages of cellar doors for producers?
- Larger profits
- Can engage directly with consumers
- Increase sales through allowing people to taste
- Build brand awareness
- Build brand loyalty
- Drive WOM
- Trial new products and get feedback (= less market research needed)
Selling Directly to Consumers
What are some reasons for a wine producer not to offer cellar door sales?
- Lack of suitable location (can open in nearby town…)
- TIme and cost of running
- Prefer to focus on other routes to market
Selling Directly to Consumers
Where do events take place?
- In towns & cities
- In wine regions (e.g. Lodi AVA)
- At individual wineries (e.g. Denbies)
Selling Directly to Consumers
What is the benefit of events for producers and the 4 main disadvantages?
Large number and range of people
- Have to pay to exhibit
- Travel expenses
- Employ staff
- Compete with other producers for attention
Selling Directly to Consumers
What are the benefits of wine clubs to consumers?
- Access to wines not normally available
- Free tours
- Invitations to exclusive tastings
- Easy access to wines they enjoy
- May be the only way to buy the wine (e.g. Screagle)
Selling Directly to Consumers
What are the benefits to producers of wine clubs?
- Can sell large amount of stock - reduces need to find other routes
- Marketing
Selling Directly to Consumers
What are the disadvantages to producers of running wine clubs?
- Need to produce newsletters
- Have to send out details of what’s available
- Have to process orders and ship wine
- Take on risk of bottles getting lost or broken (need reliable freight forwarder)
- Admin difficulties (e.g. dealing with three tier system in US)
