Options of getting the wines to the point of sale Flashcards
Getting the wine to the point of sale
Selling directly to retailers
ADVANTAGES:
- Don’t pay any intermediary’s costs and margins = maximising profits
- Freedom in choice of which retailers stock thei wine
- Control over brand image = how the wine is marketed
- Large retailers/chains = May not be possible to dictate how wine is promoted
DISADVANTAGES:
- Increased administative burden : arranging collection, transportation, delivery / pay import duties and taxes / packaging and labelling to comply with country’s laws
- may need to hire additional staff
- May have to take on the full financial risk of wine being damaged or lost (using a freight forwarder may reduce this risk = additional cost)
- Foreign Market = Take time to build up relationships and understand the market
- Need to appoint a distributor = to approach all potential (small-ish) retailers (additional cost)
Getting the wine to the point of sale
Appoint a distributor
- Buys wine from a range of producers and sell it to a range of retailers (including HoReCa)
- generally in the same country as the retailers to which they sell
- may or may not hold stock of the products
- may or may not have exclusive rights to import and/or distribute certain products
ADVANTAGES:
- knowledge of the market (including key players, consumer preferences and current trends)
- Can help with the administrative burden: contract with logistics company taking care of collection, transportation and delivery / absorb the risk of lost or damaged wine / deal with legal compliance issues (duty payments, labelling requirement)
- Being part of a larger portfolio can increase exposure
DISADVANTAGES:
- Can loose control of how the wine is marketed / where is sold
- Large portfolio = distributor cannot give undivided attention to any one producer
- May drop producers that are not selling sufficient quantities
Getting the wine to the point of sale
Establish a Joint venture:
- Companies at different stages in the supply chain
- Greater control over those different stages
- Potentially greater profitability, as costs are shared and intermediary costs avoided.
- Need to be of a comparable size (avoid takeover)
- contractual arrangements need to be carefully agreed and documented (often through lawyers) to ensure each party knows their responsibilities and obligations.
Getting the wine to the point of sale
Use a broker
- Independent intermediaries who represent neither party
- different from distributors
- Do not enter any deals: merely make them happen
- Have very low overheads
- Charge smaller fee than distributors: between 1-5%
- Have intimate knowledge of a particular market
- In Bordeaux (known as Courtieres) act as intermediary between Chateaux and negotiants
Getting the wine to the point of sale
Selling directly to customers
- take the full profit from the sale of the wine
- retain control of how the wine is marketed
- additional administrative, logistical and staffing costs
Four main options:
* cellar door sales: wine tourism / direct engagement (tastings, estate tours) / help build up brand awareness and loyalty / way of promoting brand values / word-of-mouth marketing (free) / chance to trial new products and get dirct feedback / need a phisical place (sometimes off-estate)
* events: Tasting fairs, food and wine festivals / attract a wide range of people / additional costs (travel expenses, pay to exhibit, additional staff to run the stand) / competition with other producers
* wine clubs: offer members (for a small annual fee) the opportunity to purchase wine at reduced prices for delivery to their home / access to exclusive wines, free tours, exclusive tastings / popular in USA and Australia / Enable producers to stay in contact with memebers (newslettersm, websites, blogs) / additional work / Sometimes only way to access certain wines (Screaming Eagle)
* online: cheaper for consumers / added cost of delivery / no intermediary costs / need to set up and maintain a reliable website
