Factors that Affect the Price of a Bottle of Wine -- Costs through the Supply Chain

Question 1

What are the major factors that add cost through the supply chain?

Answer 1

Grape growing costs
Wine making costs
Transportation costs
Importation costs
Sales costs
Marketing costs
Legislation costs
Currency fluctuations

Question 2

What are the key elements that influence the cost of growing grapes?

Answer 2

Vineyard establishment
Vineyard management

Question 3

What factor most influences the establishment of a vineyard?

Answer 3

Cost of the land

Question 4

What are the capital costs associated with establishing a vineyard?

Answer 4

Surveying the land, may include satellite imaging and soil samples
Site clearance
Building access roads to the vineyard
Buying and planting vines
Buying and maintaining trellising
Drainage if necessary
Irrigation if necessary
Protection against weather hazards
Protection from animal pests, (e.g. fencing, netting)
Equipment and machinery and housing facilities. (e.g. equipment barns, etc.)

Question 5

What factors influence the cost of vineyard land?

Answer 5

Potential to produce high quality fruit
Prestige of the appellation
Scarcity of the land (e.g. small appellation, or land seldom on the market)

Question 6

What are the major vineyard management costs?

Answer 6

Labor
Machinery and fuel
Supplies (e.g. pruning shears, gloves, trellising repairs)
Vineyard treatments
Water (if irrigation is being used)
Electricity
Insurance and depreciation

Question 7

What factor most influences vineyard operating costs?

Answer 7

Labor

Question 8

Labor costs are most impacted by which factors?

Answer 8

Vineyard size
Vineyard topography
Type of viticulture (e.g. biodynamic, organic vs. traditional)
Balance between labor availability and machine costs
Level of skill needed (e.g. hand pickers vs. pruners and winery staff)

Question 9

Winemaking costs are impacted by what factors?

Answer 9

Grape growing costs and/or the cost of buying fruit
Labor
Machinery and equipment running costs
Winery materials (e.g. sugar, fining and filtering agents, carbon dioxide, yeasts, etc.)
Water
Electricity
Maturation (e.g. barrels, storage space, cooling)
Packaging
Depreciation

Question 10

Describe the pros and cons of sea transportation of wine.

Answer 10

Pro – least expensive method of transporting bottled wine.
Con – slowest method of transportation of bottle wine.

Question 11

Describe the advantages of transporting bulk wine.

Answer 11

Wine in a tank is much lighter than wine in a bottle.
Bottles in a container =~ 9,000 to 10,000 L
Flexitanks =~ 24,000 L
Isotanks =~ 26,000 L
Uses less fuel to transport
Cheaper and more ecologically friendly
Safer for the wine

Question 12

What are the disadvantages of bulk transportation?

Answer 12

Only suitable for large volumes of the same wine.
Less control over bottling.

Question 13

What are the types of costs associated with sales of wine?

Answer 13

Property costs
Labor
Equipment and materials
Storage Costs
Delivery Costs
Margin at the point of sale

Question 14

Describe marketing costs incurred in the sale of wine?

Answer 14

Labor
Design and production of bottles and labels
Marketing campaign

Question 15

List the ways an importer can mitigate the effects of currency flucuations.

Answer 15

Options – reserve an amount at a certain price
Fixing the price at the date of ordering (in the currency of the importer)
Buying currency
Contract a fixed exchange rate
Trading in USD/EUR
Foreign currency account in a local bank
Use an overseas bank