Types of businesses engaged in the production of wine and options for getting wine to the point of sale

Question 1

Estate production

Answer 1

An estate producer produces wine exclusively from their own vineyards
(vineyards that are wholly owned or leased)

Question 2

Advantages of Estate Production

Answer 2

• retain control from vineyard to bottle
• can choose the style of wine made
• ensure quality assurance and quality control
• profit belongs to the estate
• control over marketing, potentially reducing the need for intermediaries
• consumer can look for authenticity relating to the ‘story’ of a wine

Question 3

Disadvantages of Estate Production

Answer 3

• high capital cost
• risk of high percentage crop loss due to vintage
  variation which impacts on cash-flow
• economies of scale disadvantageous to small producers

Question 4

Grower

Answer 4

Some growers choose not to produce their own wine, concentrating solely
on growing grapes which they then sell to a winemaker or merchant.

Question 5

Grower-producer

Answer 5

Some growers also produce wine from their grapes but then sell it to a
merchant to mature and bottle

Question 6

Merchants

Answer 6

Merchants buy immature wine, mature it and sell it under the
merchant’s name.

Question 7

Grower-merchant

Answer 7

Grower-merchants own vineyards and produce wine from those
vineyards alongside wines made from bought-in grapes,
juice or wine.

Question 8

Co-operatives

Answer 8

Co-operatives (co-ops) are owned by a group of growers
and produce and sell wines made from grapes grown by
their members.

Question 9

Custom crush

Answer 9

A variant of the co-op model found mainly in North America,
particularly in California. The difference is that growers do
not own the facility but rather pay each time they require its
services.

Question 10

Virtual wineries

Answer 10

Winemakers who do not own vineyard land or winemaking
facilities.

Question 11

Conglomerates

Answer 11

• large companies
• may have interests across a range of products (within
  or outside the alcoholic drinks sector)
• may own companies in the various stages of the
  supply chain
• significant negotiating power

Question 12

Direct-to-consumer sales

Answer 12

1. Cellar door
2. Wine clubs
3. Online
4. Events

Question 13

Selling direct to retailers: Advantages

Answer 13

• no intermediary costs
• producers free to decide which
  retailers stock their wines
• producers free to decide how
  wines are marketed

Question 14

Selling direct to retailers: Disadvatages

Answer 14

• administration and logistics
  (delivery, tax, duty, freight,
  forwarders, labelling issues)
• takes time to understand the
  selling market and skill to broker
  deals

Question 15

Retail options

Answer 15

• supermarkets and deep discounters
• specialist and hybrid retailers
• online retailers

Question 16

En primeur

Answer 16

Method of seeling wine before it has been bottle
* purchasers buy the wine while it is still in barrel and it remains in the producer’s cellar until it has been bottle
* usually received a few years later

Question 17

Types of restaurants

Answer 17

• non-destination
• casual
• fine dining

Question 18

Other options for producer to
reach the point of sale

Answer 18

• distributors
• broker
• joint venture