Supply And Demand Flashcards
What are the social factors that affect the price of wine
- consumer behaviour so drinking less
- consumer preferences - they prefer drinking rose and sparkling and lower alcohol wine, and will pick alternatives if they can’t have that or if it’s too expensive So still whites and reds will suffer
- reputation: if a region goes out of fashion (think muscadet sur lies) then demand drops
- changes in spending patterns : people may no longer be willing to pay more (switching to price sensitivity)
Which country overtook Italy in 2011 to become the country with the largest vol of wine consumed globally?
USA
What are the reasons for reduced consumption levels?
- young people drinking less
- health concerns
- less cheap wine available
- changes in lifestyle (less time to wine) and wine no longer allowed during the working day
What are the economic factors that effect demand for wine
- currency : if a wine is imported from a Country with a volatile currency the cost of it can increase a lot unexpectedly. Likewise for the currency of the importing country.
- strength of the economy: how much money do people have to spend
- changes to the market:
Explain the economic factor “changes to the market “
this means how many competitors there are , if changes happen quickly etc. If there are plenty entering then it increases supply and This will affect demand. The contrary is also true.
What are the legislative and political factors that affect supply and demand
- government policies
- taxes
- International trade
- wine laws (GIs)
Give some examples of government policies that effect supply and demand of alcohol
- minimum pricing 50p per unit
- minimum age
- limited opening/drinking hours
- limited sale (monopolies or three tier system)
- limited locations to drink (not on the street or public transport)
- loi evin in France 1991
- maximum level for driving
How does a PGI affect the supply abs demand of a wine?
If a PDO is popular, or a soft brand, it can charge more as consumers will actively seek it out. This increases demand. Increased limitations through rigid PDO rules can also reduce supply, further pushing up demand and then price.
Do PDOs always lead to an increase in demand?
No - they also restrict flexibility of a winery to adapt to changing tastes. So if consumer favour switches from merlot to gamay, for example, non pdo regulated wineries / areas can respond more quickly.
What factors affect production (a very basic influencing factor on supply)
- weather
- taxes
- cost of maintaining the vineyard / winery
Is the size of a vineyard always relative to the volume produced? Explain
Non. Vines can be densely or sparsely planted. If they have high water requirements, they can irrigate and still keep dense plantings. Also the variety / clone will dictate how abundant the harvest might be.
What percentage of vineyards produce wine grapes as opposed to table grapes
90%
Does wine supply exceed or lag behind demand on a global level, and how has this changed in recent years.
Exceed.
Increased consumption in China and the us is reducing the gap but there are threats from decreased drinking in mature markets. The vine pull scheme and limits of plantings also helped reduce the gap.
In the case of oversupply what can producers do to mitigate the loss
Find new markets - but this is expensive and time consuming.
Sell cheaper than they wanted, sometimes at a loss. Change label and sell to a deep discounter / supermarket (if ou have the volume)
Try to find alternatives like selling the juice for brandy , or try to make a different wine for which there is less supply (by buying other grapes to blend it with etc) but that incus more cost and is risky.
What is the vine pull scheme
started in the 1980s, it incentivised farmers to all up their vines to plant other crops given the over production of wine, leading to the ‘wine lake’.
Which countries in particular were targeted with the vine pull scheme?
southern France, Italy and Spain
What government factors affected vine plantings?
- the vine pull scheme
- EU restrictions on new plantings
What change in the law allowed Spain to increase the production of grapes
a relaxing of the laws governing irrigation control.
What are the objectives of Europe’s stringent PDO rules?
- to maintain a base level of quality for a certain type of wine and ensure some level of consistency
- To keep supply and demand in check to reduce the risk of downward price pressure.
Give an example of who increased demand pressure has forced a chance in a PDO
- Prosecco: the GI was extended to allow increased production to meet the growing demand.
Why was the vin de pays status brought in in the 1970s
to support the farmers who produced wines that didn’t meet the PDO restrictions. The system formed the basis of the PGI system. There are still rules, but they are less stringent and more varieties are allowed, as well as more relaxed attitudes to winemaking and ageing
For a VdP, what percentage of grapes must come from a specific geographic area?
85%
