Factors That Affect The Price Of Bottle Of Wine

Question 1

Explain the definition of demand and supply

Answer 1

1. Demand - the products that satisfy consumer’s wants and needs and are willing to pay.
2. Supply the products or services that are available on the market.

Question 2

List the factors that affect consumer’s demand.

Answer 2

1. Social factors.
2. Economic
3. Legislative and political
4. Government policies to reduce alcohol consumption

Question 3

How do social factors affect the demand of wine?

Answer 3

1. Due to change of consumption.
2. Younger people drink less wine - old fashioned, spend less time in bar, more time on social media
3. Change in lifestyle-less longer meals, not acceptable drink during work, which was ok before.
4. Reduce available of cheap wine- vine pull scheme, consumer shift to other beverages.
5. Health concerns- awareness of alc damage health.
6. Change consumer preference - lower sugar in wine, prefer sparkling
7. Change in reputation- gaining reviews from opinion leader social media.
8. Change in spending patterns, sensitive market UK, Germany not willing to pay more than lowest price. Premiumlisation of store boost some sales of premium wine.
9. Urban living

Question 4

Describe how economic factors affect the demand of wine.

Answer 4

1. The strength of the economic recession is to buy cheaper alcohol. Economic improve buy aspirational wine, burgundy.
2. Fluctuation of currency exchange. Producer gain value, keep stable price may loss customer, less value. Reduce price, losses of profit. Producer gain value, keep price and boost sales. Better value or increase price for future investment. However, the cost of imported equipment and yeast are more expensive to buy.
3. Change to the market- constantly change, producers leave the market will boost sales of the other due to less competition,increase price possible. New producers enter the marker impact the low price, better value wine.
4. Legislative and political-change from country to country. Eg. China.
5. Laws prohibiting, limiting of alc. Nordic, monopoly, restric trading hours. Similar in USA 3 tiers system .
6. Government policy to reduce alcohol consumption, illness, strain
   Health service. Criminal behaviour. Eg. LOI Evin 1991, Scottish minimal unit pricing 9 unit 4.5
7. Taxation- tax duty, government major revenue. VAT value added tax, point of sale. Excise duty point of manufacture eg. Tax free place hk to build a wine centre in Asia
8. International trades fluctuation, impose duty prorect domestic product. Tariff free eg, south Africa，or Chile to EU. UK free to Australia after leaving EU. ARGENTINA, TAX ON wine, equipment.
9. Wine laws, Geografical indication, denominination, protected geographic indication may restrict plant, variety, wine maturation process. Rapid change in non EU

Question 5

Factors that influence the supply of wine.

Answer 5

1. Production
2. Human factors
3. Natural factors
4. Legislation factors

Question 6

How do production factors influence the supply of wine?

Answer 6

1. The area under vine.
2. Vine pull scheme mid 1980 in Europe.
3. Change of la d use- Elgin for apple, California for almond.
   Madeira for tourism.
4. Abandonment of rural area - young people work in urban areas.

Question 7

How do human factors influence the supply of wine ?

Answer 7

1. Relaxation of irrigation.
2. Higher planting density to replace the low density vineyard.
3. Better site selection.
4. Better clone and rootstock selection.
5. Better canopy management to combat pest and disease,healthier fruit increase quality and quantity.
6. Better winemaking technology, better wine recovery from lees.
7. Urban living abandon vineyard

Question 8

How do natural factors influence the supply of wine?

Answer 8

1. Good favourable weather.
2. Rainfall- Australia.
3. European susceptible to vintage variation.
4. Drought- south Africa, Australia.
5. Hail- Argentina
6. Bushfire- Australia california.

Question 9

How does legislation influence the supply of wine?

Answer 9

1. European regions - strict laws on yield, variety, maturation period. For example, PDO ( protected designation of origin) eg. DoCG, AOC.
2. Less strict in European (PGI), eg. IGP.
3. State found organisation, monopoly in Sweden, Norway, Canada.
4. USA three tiers system. To reduce alcohol consumption, control demand, and supply by applying strict trading hours.

Question 10

What are the challenges if there is an oversupply in the market?

Answer 10

1. Reduce price, price fall, loss of profit.
2. Consumer buys alternative wine in the market with better value.
3. Take up storage spaces and machinery. Producer reduces price to free the space.

Question 11

What’s are the solutions to combat the oversupply of wine?

Answer 11

1. Find the other market, emerging market- southeast Asia.
2. For high volume inexpensive wine, bottle with different labels for supermarket, deep discounters, and restaurant. But damage image for premium wine.
3. Other land uses.

Question 12

What are the challenges if there is undersupply of wine?

Answer 12

1. Likely on super premium wine.
2. Damage relationship with distributors. Damage producer’s brand image.
3. Loss contracts ok penalties may apply according the the terms in the agreement.
4. Loss of customers, seeking for alternative.
   5.financisl penalties.

Question 13

What are the options to solve the challenges of the undersupply of wine.

Answer 13

1. Increase price.
2. Wine allocation.
3. Sourcing wine from other regions or producers.