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WSET Diploma 4 D2 > Factors that Affect the Price of a Bottle of Wine - Supply and Demand > Flashcards

Factors that Affect the Price of a Bottle of Wine - Supply and Demand Flashcards

1
Q

Name 3 broad groups of factors that influence the demand for wine

A
  1. Social
  2. Economic
  3. Legislative & Political
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2
Q

Factors that Influence the Demand for Wine

Name 4 categories of social changes that influence the demand for wine. Changes in:

A
  1. Consumption habits
  2. Consumer preferences
  3. Reputation
  4. Spending patterns
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3
Q

Social Factors: Change in Consumption Habits

Name 5 trends in global wine consumption during the 2000s

A
  1. Rapid increase in early 2000s
  2. Fall back after 2008 (not regained previous levels)
  3. Sparkling wine consumption has grown (02-18)
  4. Falling or static in traditional countries
  5. Increasing in other countries
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4
Q

Social Factors: Change in Consumption Habits

What country has the world’s largest wine consumption? Why did it become so in 2011?

A

USA

  1. Part of mainstream culture
  2. Increased globalisation of F&B products (MNCs, easier export, broadening of tastes)
  3. Increases and improvements in domestic products
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5
Q

Social Factors: Change in Consumption Habits

Which other country has seen rapid growth in wine consumption over past 2 decades? Why?

A

China

  1. Growing middle class (show wealth & status)
  2. Aspire to drink imported wines (at first FR but now AU / Chile etc thanks to free trade)
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6
Q

Social Factors: Change in Consumption Habits

Name 4 possible reasons why wine consumption is falling

A
  1. Younger people drinking less wine (old-fashioned? Less time in bars?)
  2. Health concerns (e.g. Loi Evin campaign in France)
  3. Changes in lifestyle (e.g. fewer longer meals, no alcohol at lunch)
  4. Reduced availability of cheap wine (e.g. vine pull schemes to reduce over-production > switch to other drinks)
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7
Q

Social Factors: Changing Consumer Preferences

Name 4 changing consumer preferences in recent years

A
  1. Increase in Rose in US
  2. Increase in Prosecco in UK / US
  3. Increasing demand for lower alcohol wines (health)
  4. Reduction in medium-sweet german wines
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8
Q

Social Factors: Changes in Reputation

Name 4 factors that can create a change in reputation

A
  1. Good reviews from publications and critics
  2. Online influencers and KOLs
  3. Presence in popular culture
  4. Peer opinions and behaviour
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9
Q

Social Factors: Changes in Spending Patterns

Describe one trend changing spending patterns? Where is it happening?

A

‘Premiumisation’

Particularly in US and even in price sensitive markets like UK

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10
Q

Factors that Influence the Demand for Wine

Name 3 economic factors that influence the demand for wine

A
  1. Strength of the economy
  2. Fluctuations in currency exchange
  3. Changes to the market (e.g. new companies and products entering & exiting)
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11
Q

Factors that Influence the Demand for Wine

Name 5 legislative & political factors that influence the demand for wine

A
  1. Laws prohibiting the sale of alcohol
  2. Government policies to reduce alcohol consumption (e.g. Loi Evin, Scotland ‘minimum unit pricing’, drink driving laws)
  3. Taxation (VAT, Excise - can vary between different categories of wine)
  4. International trade (Customs duties, trade wars, embargos)
  5. Wine laws
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12
Q

Factors that Influence the Demand for Wine: Legislative and Political

Explain 2 types of wine laws that can influence demand

A
  1. Creation of GI increasing recognition and demand - note: slow change in Europe
  2. Gifting laws in China
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13
Q

What are the two primary factors that influence the supply of wine?

A
  1. Production
  2. Legislation
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14
Q

Factors that influence the supply of wine: Production

What are the 3 production factors that infuence the supply of wine?

A
  1. Area under vine
  2. Human Factors
  3. Natural Factors
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15
Q

Factors that influence the supply of wine: Production

Name 4 factors that have contributed to reduction in area under vine

A
  1. Vine pull schemes (e.g. after 1980s wine lake)
  2. EU restrictions on planting new vineyards
  3. Conversion of vineyard land to other uses
  4. Abandonment of rural areas
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16
Q

Factors that influence the supply of wine: Production

Why have plantings in France and Italy started to rise again in recent years?

A

Since 2016, EU Member states can authorise planting of up to an annual growth of 1%

17
Q

Factors that influence the supply of wine: Production

Name 3 reasons & examples of vineyard land being converted to other uses

A
  1. Swith to higher value products (e.g. Elgin in SA & apples)
  2. Combat over-supply (e.g. USA & almonds / pistachios)
  3. Property development (e.g. Madeira, Silicon Valley)
18
Q

Factors that influence the supply of wine: Production

A decline in vineyard area need not result in reduced production. Give 7 reasons why this might be the case.

A
  1. Relaxtion of irrigation laws (e.g. Spain) > higher density planting
  2. Better site selection
  3. Clonal selection
  4. Improved canopy management
  5. Pest & disease control
  6. Machine harvesting
  7. Modern winemaking technology
19
Q

Factors that influence the supply of wine: Production

What are 2 natural factors that influence the supply of wine?

A
  1. Vintage variation (e.g. 2017 = Spring frost, hailstorm, heat wave > 14% fall in Europe)
  2. Climate change (e.g. droughts in SA & Cali, 95% of Chile vineyards short of irrigation water by 2050)
20
Q

Factors that influence the supply of wine: Legislation

Name 3 restrictions placed by the European PDO system that can limit the volume of wine produced

A
  1. What grapes can be grown
  2. Maximum yields
  3. Winemaking and maturation techniques
21
Q

Factors that influence the supply of wine: Legislation

Name 2 governing bodies that actively limit the amount of wine released in a year

A

Comite Champagne
Sherry Consejo Regulador

22
Q

Factors that influence the supply of wine: Legislation

Name one region where the permitted production area was increased to meet rising demand

A

Prosecco DOC

23
Q

Factors that influence the supply of wine: Legislation

Describe one benefit of GIs for reducing downward price pressure

A

Define syle of wine > Create uniqueness > reduce downward price pressure (e.g. Marlborough Sauvignon Blanc)

Note: Book does not explain this concept well

24
Q

Factors that influence the supply of wine: Legislation

Why was the French VdP system created? Describe it’s features? What is one region where it has been successful?

A

To give French winemakers the freedom to compete with counterparts in less heavily-regulated regions

Still requires 85% of grapes to come from region but:
1. Larger range of varieties permitted
2. No rules on viticulture and winemaking

South of France PGI wines

25
Q

Over-supply of wine

What are the challenges for a winery of falling prices?

A
  1. Less profit
  2. Devalued brand image (could offfer under different label to prevent)

Concepts not well linked in book

26
Q

Over-supply of wine

What options are available for a winery if they have unsold wine?

A
  1. Sell at lower cost
  2. Find new markets
  3. Bottle wine under different label (for supermarket, deep discounter, bar etc)

Concepts not well linked in book

27
Q

Give 7 potential outcomes of an under-supply of wine

A
  1. Disappointing clients
  2. Financial penalty or contract cancellation
  3. Increased price (e.g. Bordeaux Grand Clu Classe / Grand Cru Burg)
  4. Stricter allocation
  5. Consumers find alternatives (particualarly price sensitive markets)
  6. Large companies may offer alternative from within portfolio
  7. Large companies may choose to sell in other less price-sensitive markets

WSET Diploma 4 D2 (11 decks)

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