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WSET D2 > Factors That Contribute To Price Of Wine > Flashcards

Factors That Contribute To Price Of Wine Flashcards

1
Q

What are the issues for a producer of

oversupply of wine?

A

reduced prices
unsold wines
storage space

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2
Q

What could a producer do to sell more wine?

A

reduce prices
sell to another market
sell under another label

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3
Q

If there is a long-term oversupply of wine, what business alternatives do the vineyard owners have?

A

conversion of land to other uses or more positive agriculture
tourism

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4
Q

What legislation has been put in place to reduce the oversupply?

A

EU restrictions on plantings

restrictions on irrigation

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5
Q

Consequences of undersupply

A
  • increased prices
  • strained relationship with customer (wholesale/retail)
  • potential financial penalty (from wholesaler/retailer)
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6
Q

Consequences of undersupply for producers of large-volume,

inexpensive, varietally labelled wine

A

• price of the final product increases
• loyal customers may move to another brand/variety/beverage
• final quality of the product may be compromised in order to meet volume
demands

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7
Q

Consequences of undersupply for producers of

super-premium, single-vineyard wine

A
  • increased price of the final product
  • wine is more likely to be sold on allocation
  • increased exclusivity
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8
Q

What are the reasons for a decrease in

area under vine in the EU?

A
  • vine pull schemes
  • EU restrictions on planting new vineyards
  • conversion of land to other uses
  • abandonment of rural areas
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9
Q

What are the reasons for the increase in

area under vine in China?

A

Table grapes

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10
Q

What natural factors can negatively affect

yield across a vintage?

A
  • spring frosts
  • hail
  • heatwaves
  • fires (short- and long-term impact)
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11
Q

What long-term natural factors can

cause an undersupply?

A

• drought

south Africa and california

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12
Q

How can a producer increase yield without increasing

vineyard area?

A
  • site selection
  • clonal selection
  • canopy management
  • pest/disease control
  • modern winemaking techniques
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13
Q

Why is wine consumption declining in Traditional wine-consuming countries

A

Younger people are drinking less wine
regard wine as old-fashioned
other drinks available e.g. gin, beer, non-alcoholic drinks
spend less time socialising in bars

Health concerns
increasing awareness of negative health effects of alcohol
government campaigns or policies
drink drive laws

Changes in lifestyle
less time for longer meals at which wine was traditionally drunk
daytime drinking often forbidden by employers

Reduced availability of cheap wine:
steps to reduce over-production
switching to cheaper alcoholic drinks

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14
Q

Area under Vine: top 5 countries

A 
Spain
China
France 
Italy
Usa
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15
Q

Top Wine Producing Countries

A 
Italy
France
Spain
Usa 
Argentina
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16
Q

Top Wine Consuming Countries

A 
Usa 
France
Italy
Germany
China
17
Q

Other reasons for wine consumption decline

A

Consumer preferences
* decline in consumption of fortified wines
* increase in consumption of sparkling wines

Economic

Legislative and political
* laws limiting or prohibiting consumption
* government policies to reduce consumption
* taxation
* trade agreements
* local laws e.g. anti-gifting laws in China, minimum pricing in Scotland
* laws relating to GIs

Fluctuations in currency

18
Q

Methods a producer may use to reduce the effect of currency fluctuations

A
  • options
  • fixing the price in the currency of the importer at the date of ordering
  • buying currency to cover specific orders
  • entering a contract to fix the exchange rate
  • trading in USD/EUR
  • opening a foreign currency account in a local bank
  • opening an account in an overseas bank
19
Q

What are the costs associated
with establishing a vineyard?

A

cost of land
* status of wines from the area
* appellation
* potential for high-quality fruit
* scarcity
* established vineyard area or new land?
* consultants’ fees, labour and specialist labour, construction fees
* surveying land and understanding which grapes are suitable
* clearing the site and access roads
* buying and planting vines
* materials for vineyard (trellising, wires) and storage
* drainage and water systems (reservoirs, pumps, irrigation)
* weather hazards (nets, windbreaks, frost prevention)
* animal pests (fences, netting)
* machinery (tractors, harvesting, spraying)

20
Q

Identify growing environments and grape-growing practices that would require labour?

A
  • topography
  • organic/biodynamic production, integrated pest management
  • hand harvesting
  • machinery
  • vineyard materials
  • vineyard treatments
  • access to weather station information
    water (AUD 3,000 per megalitre)
  • electricity
    1. * irrigation
    2. * bird scarers
    3. * frost protection
  • fuel
21
Q

What are the costs are associated with establishing a winery?

A

land
building design/construction
winemaking 
equipment
bottling line 
(optional)

22
Q

Ongoing costs associated with
establishing a winery

A

Other costs
* labour
* electricity
* water
* wine making materials

What materials would be required?
* sugar for enrichment
* de-acidification agents/acid for acidification
* cultured yeast
* carbon dioxide or other inert gasses
* fining and filtering agents
* buying in grapes
* storage and maturation costs
* space
* barrels
* labour for maintenance

23
Q

What are the packaging costs?

A
  • bottles, closures, labels, cartons, pallets, plastic wrapping
  • design of labels
  • labour
24
Q

Bottling line options

A
  • in-house bottling
  • rental or mobile bottling line
  • external bottling
25
Q

What is the capacity of each of the following bulk containers?
* Flexitank
* ISO tank
* container filled with bottles
*

A

24,000 liters
26,000 liters
9-10,000 liters

26
Q

Importer margin

A

additional fee per bottle from the importer e.g. EUR 1 on every EUR 10 bottle of wine raises cost to EUR 11 = 9.09% margin (range from 5–25% common)

27
Q

What are the three sales costs common to both retail and bar/restaurant sales?

A

premises
labour
training

28
Q

Marketing costs

A

labour (in-house vs third party)
design of packaging
marketing campaign

29
Q

Supply Chain

A

network of organisations and activities involved from the creation of a product to its distribution and final sale to the consumer

30
Q

Grape growing costs: Vineyard Management

A

Labour
Machinery Fuel
Supplies
vineyard treatments
water
electricity
insurance
Depreciation

31
Q

Winemaking Costs

A

grape growing/ purchasing
labour
machinery and equipment running costs
water
electricity
maturation
packaging
depreciation

32
Q

economies of scale

A

initial investmet is spread across a very large production

33
Q

Methods to mitigate effects of exchange rate fluctuations

A

Options
Fixing the price in the importer’s currency at date of ordering
buying currency to cover orders
entering into a contract to fix the exchange rate
trading USD/Eur
Opening a foreign currency account at a local bank
opening an account in an overseas bank

WSET D2 (3 decks)

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