Factors Affecting Price Flashcards
What happens to volume if supply exceeds demand?
Prices fall - consumers driven to cheaper alternative
Factors that influence wine demand?
Social
Economic
Legislative/Political
Top 5 wine consumption countries?
USA France Italy Germany China
Social reasons leading to a decline in wine consumption?
Younger people drinking less wine Health concerns Busy modern lifestyles Reduced availability of cheap wine Changing consumer preferences Changes in reputation Changes in spending pattern
Economic factors relating to demand?
Strength of economy
Currency fluctuation
Emerging producers/current market price
Legislative and political factors influencing the sale of wine?
Laws prohibiting/limiting alcohol sales Government policies on consumption (BAC/minimum unit price) Taxation International trade Wine laws/new GIs
Top 5 wine producing countries?
Italy France Spain USA Argentina
Potential challenges to the production of wine?
Area under vine Restrictions on new vineyards (EU) Conversion of vineyard land - more profitable crop Abandonment of rural areas Vintage conditions
Challenges of oversupply of wine?
Unsold wine
Sold for a loss to free space
Sell to a new market
Find a new method - second label
Challenges of undersupply of wine?
Strained business relationships
Switch to cheaper alternative
Examples of price sensitive markets?
Germany
UK
Countries with tariff-free trade with EU?
Chile
South Africa
Top 5 countries for area under vine?
Spain China France Italy US
What is the wine lake?
Surplus of wine in the 1980s in Europe due to overproduction
Describe the correlation between area under vine and production levels.
Used to be a closer correlation, but human factors have allowed increased production with less area under vine.
- Law changes, i.e. increased irrigation
- Correct varietal choices, rootstocks, clones
- Better treillising and training
What influences grape growing cost?
Vineyard establishment
Ongoing costs of maintenance and production
Costs of vineyard establishment?
Cost of land based on quality/availability
Surveying/clearing land
Building access roads
Buying/planting vines
Installing drainage/irrigation/trellising equipment
Hazard and pest protection
Buying machinery/equipment
What are capital costs?
Initial costs of setting up the vineyard, budgeted in advance
Costs of vineyard management?
Labor Machinery/equipment operating costs Treatments Water Electricity
Winemaking costs?
Building the winery Labor Machinery/equipment operating costs Materials for winemaking interventions Purchased fruit Water Electricity Maturation space/time/equipment Packaging
Four methods of transporting wine, most expensive to least?
Air
Road
Rail
Sea
Current import % of wine by bulk transport?
38% globally
- 58% German
- 35% UK
- 24% US
Options for bulk wine transport containers?
Plastic flexitanks in steel shipper (common)
Non-flexible ISO tanks
Litres transported in bottle vs bulk?
Bottle - 9000-10000L
Bulk flexitank - 24000
Bulk ISO tank - 26000
Importation costs?
Label adjustments to meet local laws
Distributor fees
Sales costs?
Property costs Labor Equipment/materials Storage Delivery Competitive margins
Marketing costs?
Labor
Design/production of bottles/labels
Marketing campaign
Define options.
Taking a reserve on a certain amount of wine at an agreed price
Ways to protect against currency fluctuation
Options Fixing price in importer's currency Buying currency to cover specific orders Entering fixed exchange rate contract Conducting trading in USD/EUR Opening a foreign currency account locally Opening an account overseas
