Types of Business Engaged in the Production of Wine

Question 1

Types of Business Engaged in the Production of Wine

ESTATES

Answer 1

Produces wine from it’s owned/leased vineyards

ADVANTAGES:
- full control over the entire process (from grape-growing to winemaking)
- choose the syle of wine
- ensure quality control
- may have a range of estate wines and one from bought-in grapes (negotiant)
- gains all of the profits
- If market and sell wines directly, gains all the profits from sales
- Marketing benefits (“authenticity” (estate bottled) / “tell the story of the wine”)

DISADVANTAGES:
- costs of managing vineyard and winery
- purchase or hire of machinery (harvest machine / bottle line)
- Difficult vintage due to hail/frost = need to sell wine at a higher cost (may not recover form the costs anyway)
- larger estates more financially viable than small ones (more wine can be produced using the same equipment)

Question 2

Types of Business Engaged in the Production of Wine

GROWER

Answer 2

No wine production / Only production of grapes to sell to winemakers or merchants

• small vineyard owners = cannot justify costs of winemaking equipment / do not want to market and sell wine
• generates better cash flow = payment when grapes are sold rather than after wine is made and sold
• Focus on producing high quality fruit = prized by winemakers
• Heavily affecter by vintage variation and fluctuation in supply and demand

Two options for selling grapes:
- contract with a oparticular producr or merchant: either for 1 or multiple vintages / certainty to sell grapes at a given price / must meet the required quality standard / lead to strong relationship between the parties
- sell the grapes in the spot market: higher risk but greater rewards / in a shiortage vintage can achieve higher prices than a contract and viceversa

Question 3

Types of Business Engaged in the Production of Wine

GROWER-PRODUCERS

Answer 3

Produce wine from their own grapes but then sell it to a merchant to mature and bottle

• fairly common in Burgundy
• lose control over the style of the finished wine (lenght and type of maturation)
• Merchant can blend wines from different producers
• do not incur in the costs of maturation (barrels, cellar space) or marketing the wine
• make a smaller profit than if they were to sell the finished wine

Question 4

Types of Business Engaged in the Production of Wine

MERCHANTS / NÉGOTIANS

Answer 4

Buy immature wine, mature it and sell it under the merchant’s name

• Have little control over the grape growing or winemaking (nowadays many produces their own grapes / provide technical support (viticolturists)
• Do not have the expense of buying and managing vineyards
• Can buy from different growers/producers = provides protection and flexibility in bad vintages
• long-term contract with grape growers to protect themselves from grape price fluctuations

Question 5

Types of Business Engaged in the Production of Wine

GROWER-MERCHANTS

Answer 5

Own vineyards and produces wine from those vineyards alon gside wines from bought-in grapes, juice or wine

• Produce a range of wines at all price points: vineyard owned usually used for premium wines / bought-in grapes for entry to medium level wines
• Guigal: Cote rotie as well as croze-hermitage and gneric cote du rhone
• Dujac: Domaine Dujac = super premium / Dujac Pere at fils = wines made from grapes from other growers

Question 6

Types of Business Engaged in the Production of Wine

CO-OPERATIVES

Answer 6

Owned by a group of growers and procued and sell wines made from grapes grown by their members

• can pool their financial resources: can afford more expensive winemaking equipment and expertise
• give their members access to services and advices (viticoltural, winemaking, marketing, packaging, sales)
• more efficient collective marketing
• can make own-label wines (La chablisienne)
• worj on principle of democratic control: decision making can be slow and cumbersome
• pay members a share of the co-operative annual profit