Different Options For Point of Sale Flashcards
Pros/cons for a producer choosing to sell directly to a retailer?
Pro:
- More control over brand image and marketing
- Higher profits, no cost of intermediaries
Con:
- Higher administrative cost (either in time away from production or $ on hiring staff)
What are the additional costs that come with choosing to sell directly to a retailer?
- Arranging collection, transport and delivery
- Import taxes & duties
- Compliance with local laws
- Full financial risk of wine damages or loss up to delivery
- Building relationships in new/foreign markets
What are some ways that producers can lower the cost of selling directly to retailers?
Pay extra for a competent freight forwarder
- Lowers admin costs of transport & risk of damage
- Adds additional costs for shipping
Attend trade fairs/tastings
- Builds relationships with multiple retailers at once
Sell to a small number of larger retailers
- Less admin work in developing relationships
- Move higher volume
- Less control over brand image
Sell en primeur/bulk
- Only works for high volume producers
What is a distributor?
- Buys wine from a range of producers to sell to retailers
- Have established relationships in their respective local markets
- Might hold stocks of products in their portfolio
- May have exclusive rights to import/distribute in their market
For producers, what ADVANTAGES come with appointing a distributor?
- Save costs in becoming familiar with local market (key players, retailer/consumer preferences, current trends)
- Lessen administrative costs because distributors will have contracts with logistics companies
- Assume risk of lost/damaged wine
- Helps with language barriers
- Greater exposure in larger portfolio
For producers, what DISADVANTAGES come with appointing a distributor?
- Distributors’ and retailers’ margins add to the price
- Loss of control over how product is marketed and must outline clear marketing strategy with distributor
- Larger portfolios have less attention given to any single wine, might drop wines that don’t sell well enough
- Distributors might only work with producers of a specific size/region
What is a joint venture?
It is a partnership between companies at different point in the supply chain (more of a merger than an acquisition)
Intent it to cut out intermediaries, share (and lower) costs, and give greater control over respective stages in supply chain
Why are joint ventures an attractive opportunity?
They lower costs in competitive and price-sensitive markets, resulting in greater profits
What steps are important in establishing a joint venture?
- The companies must be of comparable size
- The agreement must be carefully agreed and documented
Why are joint ventures trickier to negotiate than distributor arrangements?
The responsibilities and obligations are greater for each party, and it is more difficult to leave the partnership once it is created
What are two examples of joint ventures?
- Taylor Fladgate and Champagne Bollinger are major shareholders of Metzendorff, a distributor in the UK
- Vinalba is an Argentine label created between winemakers Herve and Joyaux Fabre and the UK retailer Buckingham Schenk (producer-retailer partnerships increasingly common)
Why would a larger company acquire a smaller company?
It is to acquire capabilities that the acquiring business lacks
- Resources
- Skills
- Market Share
- Vineyard locations
- Saving the smaller company from going out of business
What are benefits to a conglomerate acquiring more subsidiary companies?
- Simplifies the supply chain
- Keep prices down through economies of scale
- Can compete in more sectors of their market
What are the pros/cons for a producer being bought out by a larger company?
Pro:
- More investment in the business and better access to resources
- Larger distribution networks
Con:
- Loss of control of business
What is an example of a firm outside the beverage industry acquiring within the wine trade
In 2018, amidst a trade war between US and China, Carlyle Group (US equity firm) purchased Accolade (Australian-focused bev conglomerate) to profit off of free trade between China and Australia
How is a broker different than a distributor?
A broker doesn’t represent either the buying or selling party (producer or distributor/retailer), they just connect the two for a fee of 1-5%
Why is a broker an appealing option for producers?
It saves them the time and money looking for a suitable distributor
- Brokers have connections within specialty markets (larger or smaller boutique retailers/distributors)
- Have an understanding of volume and price each side is looking for
What is a broker’s (courtier) role in Bordeaux
They act as an intermediary between chateau and negociants.
For bulk wine, brokers are liable for the delivery of the correct vats to the buyer
What are the options for producers selling direct to consumer?
- Cellar Door
- Events
- Wine Club
- Online
Why are cellar door sales attractive to consumers?
- A chance to see where the wine is made
- Possible tours, tastings of reserve wines, food pairings
- Cheaper prices for foreign tourists
Why are cellar door sales attractive for producers?
- Larger profits on wines
- Engage directly with consumers
- Tastings are important for consumer confidence
- Builds brand loyalty
- Word of mouth marketing (reduces costs of marketing)
- Trial new products/get immediate feedback
Why would a producer not offer cellar door sales?
- Not a suitable location
- Worried about time running the shop/hiring new staff
What’s one option for a producer without a suitable location for a tasting room?
Open a small tasting room in the nearest town/urban area (eg. Columbia Valley producers in Seattle)
What are the pros/cons of showing wines at an event?
Pro:
- Exposure to many consumers at once (some who might not be willing to travel to individual wineries)
- Can create a “destination effect”
Con:
- Pay for travel of wine and staff to run stand
- Surrounded by competition
Why are wine clubs an attractive option for consumers?
- Reduced prices
- Delivery direct to home
- Access to wines not otherwise available to the public
- Other experiential perks (free tastings/tours, events)
Pros/cons for producers running a wine club
Pros:
- Low cost of marketing, most club member sign-ups happen at cellar door
- Continuous engagement and opportunity to build brand loyalty
- Better for word of mouth marketing
- Builds hype for highly allocated brands that only sell through club
Cons:
- Extra labor in planning club shipments, writing newsletters, processing
- Takes on risk of damage to bottles during shipping, might have to pay additional $ for good freight forwarder
- Must navigate state-specific laws, which might prohibit DTC sales
Why are online retail sales attractive for buyers?
- No need to leave home
- Might be cheaper due to lack of intermediary costs
Con: Pay for delivery
Pro/cons for producers selling their wines through online retail
Pro:
- Consumer loyalty
- Higher profits
Con:
- Must maintain up-to-date website
- Might opt to pay for expert website designer
- Must figure out all logistics involved in processing/shipping
