WINE BUSINESS 📊 Flashcards

Question

Wine lake

Answer 1

Surplus of wine produced. The national government and then the EU itself paid growers to pull up poor quality vines, especially in southern France, Italy and Spain (1980s).

Answer 2

- Increasing of GIs – definition of where grapes for wines with specific geographical names can be grown, so limit in the production; several restrictions in the EU, no strict rules for AVAs in the USA or Wines of Origin in South Africa. - GIs define the style of the wine and find the right balance of supply and demand. - Usually, when demand for a specific wine is rising, there is pressure to extend the area (Prosecco), so planting on not suitable areas and drop of overall quality. - PDOs have a governing body which helps set and enforce the rules (Comité Champagne and the Sherry Consejo Regulador). - EU winemakers couldn’t compete with their counterparts in less heavily-regulated regions because of PDO, so France introduced the “vin de pays” system in the 1970s that requires 85% of the grapes from a particular area but doesn’t impose rules on viticulture and winemaking.

Answer 3

- reduced prices; - unsold wines; - storage space.

Answer 4

- reducing prices for the excess wine below production cost (it can devaluate the brand image); - looking for new markets and outlets (develop contacts is hard so it’s a good way only if there is already a presence in that market or a distributor that can find new customers); - different label (private label) for producers with a large volume.

Answer 5

- increased price for the product; - disappointed clients; - contracts can have a financial penalty otherwise retailer can cancel it.

Answer 6

- price of the final product increases; - loyal customers may move to another label (great portfolio); - final quality of the product may be compromised in order to meet volume demands.

Answer 7

- increased price of the final product; - wine is more likely to be sold on allocation; - increased exclusivity.

Answer 8

- Grape Growing. - Winemaking. - Transportation. - Importation. - Sales. - Marketing.

Answer 9

- Vineyard establishment. | - Vineyard management.

Answer 10

- the land’s potential to produce high-quality fruit and the name of the appellation (Napa Valley for premium and super-premium wines, while Central Valley for bulk wines); - scarcity increases the price (land in Champagne and Burgundy are rarely on the market); - capital costs (by loan, investors or incentives from countries) - costs to make the vineyard operational like surveying the land to check its suitability for viticulture, site clearance, building access roads, buying and planting vines, trellising system, drainage channels, irrigation systems, protection against weather hazards or from animal pests, buying machinery and equipment; - in some countries, governments are trying to encourage the establishment of vineyards and offer subsidies to prospective producers to help with capital costs.

Answer 11

- labour, it’s related to the topography and other factors (Mosel has steep slopes so no mechanisation); ↓ labour cost (Chile) ⇨ ↓ equipment investment, ↑ labour cost (Coonawarra) ⇨ ↑ equipment investment; hire a team of pickers during the harvest; small staff of highly skilled workers during the year; organic and biodynamic agricultures need highly skilled staff; - machinery and equipment running costs; - vineyard materials (replacement vines and trellising); - vineyard treatments (conventional agriculture use large amounts of agrochemicals); - water; - electricity (irrigation systems, bird scarers, frost protection).

Answer 12

- Winery establishment. - Winemaking costs. - Maturation. - Packaging.

Answer 13

- similar to the vineyard site (land); | - building and equipment (presses, tanks, pumps).

Answer 14

- labour (small or big staff, occasional workers for harvest); - machinery and equipment (fuel, electricity, maintenance); - winery materials (sugars, acids, yeasts, carbon dioxide, fining agents); - bought-in fruit (it can vary according to the quality of the grapes, the grape variety and the vintage); - water (for cleaning, investment in water treatment plants); - electricity (refrigeration, ventilation, presses, pumps, lighting).

Answer 15

- space to the storage; - new oak barrels are very expensive; - employ to monitor the maturation process; - loss of cash flow (a large amount of money tied up in maturing stock).

Answer 16

- materials (bottles, closures, labels, cartons, pallets); - bottling line (own or hired, send the wine to another estate); - labour (bottle, package, design of the labels).

Answer 17

- Transportation of wine in bottle. - Bulk transportation. - Insurance.

Answer 18

The most common way, packaged in boxes, loaded into crates and pallets, fragile products, use of specialised logistics companies (JF Hillebrand). Transport by air, road, rail, and sea.

Answer 19

- Air. - Road. - Rail. - Sea.

Answer 20

Cost depends on weight (bottles are heavy in relation to their size), used in special circumstances (competitions, samples for fair, high value wines, when deadlines are important such as Beaujolais Nouveau for Japanese market).

Answer 21

Very efficient for short journeys but expensive for long distances, quickest when cross a small body of water (ferry) but costs can be high.

Answer 22

Vary according to the length of the journey and how goods are loaded onto the train, loading and unloading of pallets can increase the cost, containerization can reduce the cost.

Answer 23

The cheapest method (in cost per mile) for long distances, containerization is essential, it’s slow (40 days from Australia to the UK).

Answer 24

The goods are loaded into a standard container which is lifted onto the back of a truck and then onto the rail wagon or ship.

Answer 25

Very common in past (barrels), increase in the last decade (38% in 2016), transport in either plastic flexitanks or non-flexible ISO tanks, much lighter than in bottle, much more efficient (9000/10000 l of bottled wine, 24000 l wine in bulk, 26000 l ISO tanks), much cheaper (reduction of fuel required), more environmentally-friendly, suitable only for large volumes of the same wine, ideal over 15000 cases, not suitable for smaller-production wines, usually for cheaper wines.

Answer 26

Wine should be correctly insured throughout its journey, in case it is lost, damaged or spoiled; usually, winery is responsible for the journey to distributor and distributor is responsible for retailers; using a specialist freight forwarder include insurance in its services.

Answer 27

24,000 litres - flexitank 26,000 litres - ISO tank 9,000/10,000 litres - in bottles

Answer 28

- Different labelling laws (ABV in EU is whole or half unit instead of the US that allows 1.5% variance, the US requires health warning). - Time to learn all the requirements (importer knows them and have a list of potential clients). - Distributors charge a fee (margin, the profit divided by the revenue, in percentage) of 5-25% (higher for those selling to the hospitality sector than retail); possibility to avoid margins if retailers buy directly from producers but no benefits of using a distributor.

Answer 29

The profit divided by the revenue, in percentage. Usually, it's between 5% and 25% for distributor and 30-50% for wine retailers.

Answer 30

- Retailers – buy or lease property (bar and restaurants need premium locations), business image (decorating and furnishing), additional running costs (maintenance, security, energy). - Online-only retailers – buy or lease warehousing space (usually away from city centres, so cheaper). - Labour – training staff (supermarkets don’t need staff so cheaper costs, fine dining restaurants require highly skilled staff). - Equipment and materials – based on the type of retailer. - Storage costs (bars and restaurant have expensive fridges, while supermarkets have centralised warehouses). - Delivery costs (depending on distance, free over a certain amount). - Margin at the point of sale – usually, 30-50% for specialist wine retailers, corkage fee to avoid large margins.

Answer 31

- Labour – marketing team or external company. - Industry association or generic trade body (they market their member’s wines collectively). - Design and production of bottles and labels. - Marketing campaign.

Answer 32

- taxes; - duties; - trade barriers; - subsidies; - minimum pricing; - labelling laws.

Answer 33

- In the UK, excise duty when wine enters the country unless it is stored in a “bonded warehouse” (excise duty is paid when someone wants to buy the wine, this action helps cashflow situation of importing companies). - Legal factors have an impact on the producer’s decision to enter or not in a market (a few mid-priced US wines in the EU, they cannot compete with Chilean and South African wines). - Onerous labelling laws may put off new entrants to a particular market.

Answer 34

- 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.

Answer 35

A key strategy in currency edging; the retailer takes an option/reserve on a certain amount of wine at an agreed price; producer reserves a stock to the retailer, the decision is based on the currency exchange, the retailer may not buy the wine, so high risk for the producer and he can set a higher price than under a normal contract; larger retailers have the negotiating power; possibility to take an option on a certain amount of currency at an agreed price, rather than stock.

Answer 36

Risk for the producer (he may not agree or charge a premium as it shifts the currency risk to him), prices are usually in the currency of the producer, it’s preferred by many retailers because they have the certainty of knowing how much they are paying and can work out their retail price based on that figure.

Answer 37

Only large companies (they have the skills necessary to manage currency).

Answer 38

Common in currency edging; ideal for retailers which conduct a lot of business in a particular currency; contract with bank/other supplier of foreign currency, legally committed; fixed rate on a specified date.

Answer 39

Ideal for producers in countries with unstable currency, attractive for retailers who have greater certainty about the price of wine; it reduces the number of exchanges, less exposition to the fluctuations.

Answer 40

Not really suitable where goods are bought in one currency and sold in another, ideal if Italy-UK-Germany.

Answer 41

Disadvantages of foreign currency account and an added cause for caution; banking regulations differ greatly in different countries, so be careful.

Answer 42

- They produce wine exclusively from their own vineyards. - From small to huge sizes (not related to the size of the companies). - Larger estates are more financially viable than smaller ones (same equipment for more wines, mechanization). - Average vineyard is still very small (historical factors, geography). ✅ Control over the entire process, chose the style of the wine, quality control at every stage, max profit, marketing (storytelling), authenticity for the consumer. ❌ High capital cost (possibility to hire the equipment), small estate producers risk high percentage crop loss due to vintage variation which impacts on cash-flow, economies of scale disadvantageous to small producers, succession laws.

Answer 43

- Focus on growing grapes, so they sell grapes to a winemaker or a merchant. - Ideal for owners of small vineyards. - Two options to sell the grapes: 1. Contract (for one or multiple vintages) ✅ Certainty to sell the grapes at given prices, security for the contract, strong working relationship. ❌ Vintage, rejection or lower prices for grapes without standard requirements. 2. Spot. ✅ Higher prices if shortage of grapes. ❌ Lower prices if glut of grapes. ✅ No costs for cellar equipment, better cash flow, high-quality grapes (all the efforts in the viticulture, e.g. Andy Beckstoffer for Cabernet Sauvignon on prime sites in Napa Valley). ❌ Vintage variation, fluctuations of demand/supply.

Answer 44

- They produce wine and sell it to a merchant to mature and bottle (common in Burgundy). ✅ No costs for maturation and marketing (maybe limited skills in marketing). ❌ Smaller profit than to sell the finished wine, lose control over the style.

Answer 45

- They buy immature wine, mature it and sell it under the merchant’s name (usually blend of different producers). - Long-term contracts with their suppliers. - Premium wines from the owned vineyards and inexpensive wines from other growers in order to have a range of wine at all price points (Guigal is a grower-merchant in Rhône Valley, no different name if wine is made from owned grapes but distinction on vineyard: single vineyard for owned grapes, regional appellation for bought grapes; Domain Dujac in Burgundy diversifies the brand, so Domain Dujac for owned grapes while Dujac Père et Fils for bought grapes). - If large quantities of wine, private labels for supermarkets, deep discounters and bars/restaurants. - They operate differently from region to region (in Burgundy they’re much involved in the wine production than in Bordeaux). ✅ No expense to buy and manage vineyards, protection and flexibility in bad vintages (high prices). ❌ Little control over grape growing (technical support to their suppliers to achieve standard quality) or winemaking.

Answer 46

- Method of selling wine before it has been bottled. - Purchasers buy the wine in barrel and it remains in the producer’s cellar until it’s ready for bottling. - Selling wine whilst it is still in barrel can generate cash flow earlier (en primeur covers the costs from wine production to bottling). - Fixed price for purchasers, wine in limited quantities so en primeur is the only occasion to buy that wine.

Answer 47

- They are owned by a group of growers and produce/sell wines from the members’ grapes (democratic control). - Payment on weight or quality-fruit. - From small to large companies. ✅ Expensive equipment is shared, expert viticultural and winemaking services, marketing. ❌ Slow process of decision-making.

Answer 48

- Variant of the co-operative model, present in North America (California). - Growers don’t own the facility but rather pay each time they require its services. ✅ No investment in expensive equipment, focus on grape growing and marketing, benefit from professional winemakers. ❌ Wine production to a third party.

Answer 49

- Typical in North America, winemakers don’t own vineyard land or winemaking facilities. - From small batches of super-premium and high-quality wines to large productions. - They buy in grapes or juice and may rent facilities in another winery or employ the services of a custom crush facility.

Answer 50

- They cover the full range of price points. - Smaller business across the various stages of the supply chain, from production to distribution. - E&J Gallo (2.7%), Constellations Brands (1.7%), The Wine Group (1.5%), Treasury Wine Estate (1.12%), Viña Concha y Toro (1.03%). - Trend for major companies from outside the wine industry to buy into the sector (LVMH, AXA). ✅ Great control at all the stages, significant negotiating power.

Answer 51

- Selling directly to retailers. - Appoint a distributor. - Establish a joint venture. - Use a broker. - Selling directly to consumers.

Answer 52

- Usually, wine is sold when it’s bottled and matured, but there is the possibility to sell it en primeur. ✅ No intermediary’s costs and margins for producers and retailers, retaining control over brand image (not possible with large retailers), less administrative burden for producers to large chains. ❌ Increased administrative burden for producers, import duties and taxes if exporting (forwarder), time to build up relationships and know the market if exporting, producers need an agent if want to sell to small retailers.

Answer 53

- Distributor buys wine from a range of producers and sells it to a range of retailers. - Usually, distributor stays in the same country as the retailers to which sell, which may or may not be the same as the producer. He may or may not hold stock of the products in his portfolio, and may or may not have exclusive rights to import and/or distribute certain products in his market. - Large distributors with large producers. ✅ Distributor’s knowledge in new markets (for producers), the distributor can help producers with the administrative burden (contract with logistic companies, experience in imports, language barrier), distributor has greater resources than producer, the producer is part of a great portfolio. ❌ Less producer’s profits (hospitality sector have higher margins), undivided attention to anyone producer and the overall marketing strategy may not be ideal for the producer, time to find the right distributor for the producer (fairs), producer can lose control over the brand image.

Answer 54

- Both the companies need to be of comparable size (otherwise it’s a takeover). - Each party should know their responsibilities and obligations. - Mentzendorff (wine distributor) is owned by Champagne Bollinger and the Fladgate Partnership (Port). - Producers joining forces with distributors or large retailers to create new wine brand (Viñalba was created by the UK distributor Buckingham Schenk and winemakers Hervé and Diane Joyaux Fabre). ✅ Great control (companies at different stages), great profitability (costs are shared and intermediary costs avoided). ❌ Half profits, contractual arrangements.

Answer 55

When two businesses join together to create a business with greater resources and capabilities that should be more competitive than the individual businesses (skills). The two companies should form an equal partnership.

Answer 56

- When one company buys another company, which then become a subsidiary of the purchasing company. - It could be to acquire capabilities (skills, resources, market share) or to save a company from going out of business. - Try to reduce costs and keep down the prices. - Small producer loses control of his business but acquires all the expertise of the big company, so new routes to the market.

Answer 57

- Depends on the market, it could be a synonym of distributor. - Independent intermediary who represents neither party. - It doesn’t enter into any deal, smaller fees (1-5%). - It has legal status in Bordeaux, intermediary between châteaux and nègociants. - Also used for rare wines. ✅ Intimate knowledge of a particular market, particular skills (someone is good to sell bulk wine, others for small wine production), saves time and effort of seeking the party.

Answer 58

``` Four main options in wine-producing countries: - cellar door sales; - events; - wine clubs; - online. ✅ Full profits, control of the sells. ❌ Like retailers. ```

Answer 59

Attractive shops and wine tourism facilities, experiences (see where the wine is made, tasting before purchasing, food pairing), foreign visitors could not find the wines in their country, large profits, engage directly with consumers (feedback), build brand awareness and loyalty (people who buy wine from the cellar are more likely to buy again from that producer), some producers don’t promote this business because it disrupts important work in the vineyard and winery (cellar door in a nearby town).

Answer 60

Tasting fairs or wine food festivals, larger number of people (other attractions), producer pays to exhibit (plus travel expenses), competition with other producers.

Answer 61

Small annual fee to buy wine at reduced prices, wines in limited edition, popular in New World (the USA and Australia), useful for marketing purposes (producers continue to stay in contact with members), cost of time and staff, delivery costs can be onerous (three tier system), sometimes it’s not possible that producer sends wine directly to the consumer.

Answer 62

Increased in the last years, cheaper for consumers, large profit for producers, reliable website.

Answer 63

- Supermarkets. - Deep Discounters. - Convenience Retailers. - Specialist Wine Retailers. - Hybrids. - Online Retailing. - Global Travel Retail. - Wine Investment Companies.

Answer 64

- They represent the most important retail outlets for groceries and household goods in many markets (Wal-Mart, Woolworths, Carrefour, Tesco). - In many markets (USA, UK, France), they have the largest market share when it comes to wine sales (an attractive option for producers wanting to sell large volumes). - Wines from well-known and popular regions, more local wines in wine producing countries. - Range of well-know brands to attract consumers (different prices between retailers, so no promotion of customer loyalty to a particular supermarket). - Large producers (large volumes) realize private labels (consumers cannot compare prices) to promote customer loyalty: new brand (Walmart and Costco in the USA, Marks & Spencer in the UK) or own-brand range (Sainsbury’s Taste the Difference in the UK). - They can employ winemakers to supervise production and ensure quality control. - High negotiating power from supermarket (varied product range), so producers may not receive the right profit. - Substantial fees for any promotion (for the producers). - Contract with strict requirements regarding quality control, time and manner of delivery, packaging and labelling. Supermarket can refuse the wine or penalise the producers if requirements are not respected. - Delisting the wine if no expected sales volumes and profit margins. - Premium supermarkets like Whole Foods (small quantities from artisan producers).

Answer 65

- Like supermarkets but lower prices (Aldi or Lidl). - Lower profit margins. - Shops are basic (goods on pallets), away from prime retail locations. - Limited product range (one type per product). - No major brands (more expensive), private labels or wine from small producers (perfect for those who have a surplus). - They buy directly from producers (no intermediary costs), no charge on the retail price (no costs for promotion). - A small amount of more expensive wine to attract consumers (Christmas). - Increasement of wine drinkers in discounters, from 25% in 2013 to 39% in 2017 (UK).

Answer 66

- Located where people live, open for longer (24h, but local laws to limit the sale of alcoholic drinks at certain times). - Independently owned or part of a franchise group (Spar is in 34 countries). - Similar range (popular brands) but smaller than those of supermarkets. Some convenience retailers (7-Eleven or Spar) have their own exclusive brands. - More expensive than supermarkets (higher rent, designed for other purposes, higher proportion of staff).

Answer 67

- Specialized in wine (sometimes in a particular wine style), but also spirits, beers and foods (artisan producers). - Some larger chains (Oddbins or O’Brien’s) but most are independently-owned or part of a small chain. - Berry Bros & Rudd and Hedonism in the UK, Millesima in Bordeaux (en primeur). - Some retailers have a focus on small producers (high purchasing power). - Higher prices than supermarkets (more cultured consumers), so more profits for producers (distributors). - Consumers are willing to spend more because they appreciate the broader range of wines and the more personal service they enjoy (well-trained staff, so strong relationship with customers). - Hold special events for customers like tastings or wine education classes.

Answer 68

- Specialist wine retailers + bar area. - Customers can taste the wine before purchasing, combining it with some food (encourage to purchase). - Regularly-changing selection of wines by the glass (good way to show new wines). - Open later into the evening, additional staff, additional bureaucracy.

Answer 69

- 5% of all wine purchases happen online, but this will continue to grow. - Many retailers (supermarkets or specialist wine retailers) offer online retailing (easy access for consumers, possibility to buy online and take in the shop). - Online retailers are increasing (The Wine Society and Laithwaite’s in UK, Wine9.com and Pinjiu.com in China). - Not only specialized wine retailers (Amazon.com). - Many require customers to order a certain amount of wine each year. - No cost for an expensive retail store, stock in a warehouse (cheaper than buildings in town centres and possibility to stock a larger and more varied range of wines). - Similar opportunities for smaller producers as with specialist wine retailers. - Larger customer base (not only people that live near the physical store). - Staff to deal with customer queries, take orders and despatch orders (wine advisor). - Expensive cost for delivery (risk of wine being lost or damaged in transit); consumers expect quicker delivery deadlines. - Click and collect, so order online and collect the wine from the store (saving costs). - Easy-to-use and reliable website, distinctive and convey the retailer’s brand image (cost for the design and technical support), well presented and helpful contents (description, additional info like food pairing or competitions, suggestions on similar wines). - Content must be kept up-to-date. - Mobile app to purchase more wine than websites in China (WeChat and Pinduoduo for a wide range of products, while Bottles XO for only wine).

Answer 70

- Where customers are travelling from one country to another (airports, seaports, railway stations). - It’s usually located after check in (a passenger has free time between check in and boarding) or in the arrival area (no put in the hand luggage). - Duty-free – before for the lower prices (no taxes) and now for products that cannot be found in home market. - Expensive retail (cost for space, a percentage of the cost is passed to suppliers so low profit margins).

Answer 71

- Companies specialised in sourcing and selling wine for investment. - Some specialist wine retailers (Farr Vintners, Fine & Rare, Berry Bros & Rudd) have small allocations of rare wines (bought either directly from the producer or via a merchant). - Only deal in investment-grade wine (Amphora Portfolio Management and Cult Wines). - Some companies work such as a broker (commission).

Answer 72

- Bars. | - Restaurants.

Answer 73

- Specialist wine bars. | - General bars.

Answer 74

Similar to specialist wine retailers, knowledgeable and well-trained staff, small producers and less common wine regions (high involvement consumers), usually focus on particular countries or styles of wine (in Paris a lot of bars specialised in natural wines), food pairing (from artisan cheese to full three-course meals and can reach the standard of fine dining restaurant), regularly-changing selection of wine, usually no big brands (private labels).

Answer 75

Limited range of wine (major companies), inexpensive or mid-priced wines, with or without food, local wines in wine-producing countries, same wines available through retail outlets therefore producers create brands exclusively for the hospitality sector (no comparison), specific theme (common for beer, less prominence in wine).

Answer 76

- Non-destination restaurants. - Casual dining. - Fine dining.

Answer 77

Meal is not the focus (theatre, cinema), part of chains (some are independently owned), wines from well-known regions and major brands (wide range of consumers), inexpensive or mid-priced wines, local wines in wine-producing countries, country-based theme.

Answer 78

From quick to longer meals, independently owned (often being an individual business or part of a small chain), high quality for food and wine but without the formality of fine dining, more mid-priced to premium wines than non-destination restaurants, wines are chosen for food pairing, the wine list is a mix of well-known and less-known regions, training for the staff, local wines in wine-producing countries, if themed cuisine so wines from that country.

Answer 79

Experience and meal are the focus, one or more Michelin stars, prestigious head chef, food and wine pairings are particularly important, highly-skilled staff, tasting menu, high quality and super-premium wines (limited quantities), sometimes brokers to find the wines.

Answer 80

- Free market. - Monopoly market. - Three tier system.

Answer 81

A market in which producers are relatively free to choose whether to sell directly to a consumer or retailer or through an intermediary.

Answer 82

- Scandinavian countries and Canada have a government-run monopoly for the retail sale of alcoholic drinks. - Systembolaget in Sweden is the only retail outlet allowed to sell alcohol (also some specialist independent distributors licensed under special conditions). - Bars and restaurants can buy from the monopoly or from specialist independent distributors (high taxation). - The aim is to limit alcohol consumption by having high prices; no competition between stores related to prices, but encouraging the sale at responsible prices. - Stores and staff don’t promote either individual products or producers, but advise customers (no incentive for promotion or price reduction). - It’s hard for the producers, a lot of bureaucracy (Systembolaget – producer become an approved supplier, company sends 4 tender requests every year to the producers about style or type of wine that it wants to add to its range, a blind tasting of the wine sent from the producer, new tasting and chemical analysation before the final confirmation). - Long process (7/8 months). - Small producers have the same access as large producers, then the wines will be available all over the country and not just in some small wine shops. - Liquid Control Board of Ontario (LCBO) to control retail sales in Ontario. - Alberta is the exception in Canada, having a private market for wholesale distribution and retailing (Alberta Gaming and Liquor Commission).

Answer 83

- A system used within the USA to control the direct sale of alcoholic beverages. - Volstead Act prohibited the production, sale and consumption of alcohol between 1919 and 1933. - Three Tier System was introduced in the USA in 1933 with the aims of preventing a return to the pre-prohibition saloon days, to prevent direct sales from producer/supplier to the retailer to avoid producer monopolies and increase prices. - The three tiers are: 1. Producer/Importer; 2. Distributor (wholesalers, brokers); 3. Off Premises Retailer (supermarkets, wine specialists) or On Premises Retailers (bars, restaurants). - Laws limit or prohibit cross ownership between most retailers and the upper two tiers. - Producer may be an importer (E&J Gallo) but not a wholesaler. A wholesaler can import but cannot produce (Republic National Distributing Company). - A producer cannot by-pass a wholesaler and sell directly to a retailer. - An increasing number of states allow wineries from within the state and from outside to sell directly to consumers but usually with conditions attached. By contrast, some states still do not allow wines purchased in another state to cross their borders. - Federal government ceded control of beverage alcohol sales to the individual states in 1933, so different laws. - The distributors specialise in logistical efficiency and the largest of them service huge areas of the country. They also provide a trained sales force and marketing materials and, in these ways, can potentially provide a producer with exposure that would be extremely costly (in time, effort and money) to gain otherwise. - Number of distributors has decreased in the US (from 3000 to 1200) and wineries has increased (from 2000 to 9500), so disadvantage for small producers who will be lost among the massive portfolios. - The distributor sales force reduces the producer’s control over the marketing and business-to-business selling of the product, in the same way as a distributor in a free market would. - Many of the largest companies have become bigger (acquisition of small wineries) and it’s a benefit for all the system; large distributor needs only to deal with one large company and retailer deals with one or two large distributors. - Small producers can seek out smaller specialist distributors but they can be limited without coverage across so many states and distribution contracts can be hard to break. - Consolidation has stimulated activity in the direct-to-consumer category (both shipping to consumers and cellar door sales) and gradually, state by state, restrictions are being loosened.

Answer 84

The management process responsible for identifying, anticipating and satisfying consumer requirements profitably. - Chartered Institute of Marketing (CIM)

Answer 85

1) Identifying the product/brand to be marketed. 2) Analysing the current market. 3) Identifying the target market. 4) Setting the objectives of the marketing strategy. 5) Revising the marketing strategy (marketing mix). 6) Implementing and monitoring the marketing strategy.

Answer 86

- Introduction – getting the product into the market and gaining recognition and reputation (limited distribution); - Growth – increasing the distribution and aiming at a broader target market, to encourage strong growth; - Maturity or stabilisation – highlighting the differences between the product and the other competing products; - Decline – extending the life cycle by improving the product, updating the packaging or reducing the price.

Answer 87

The set of physical attributes of a product or service, together with the beliefs and expectations surrounding it - a unique combination which the name or logo of the product or service should evoke in the mind of the audience.

Answer 88

- Substance. - Consumer trust. - Consumer engagement. - Brand story. - Price premium. - Longevity. - Strong brand name.

Answer 89

An abstract concept that includes brand awareness (the extent to which consumers are familiar with the brand) and brand image (how consumers perceive the brand).

Answer 90

- Brand position. - Private label. - Ladder brand. - Soft brand. - Luxury brand.

Answer 91

Where a brand sits within a market and the cues used to indicate that position (retail price usually at the launch); value, standard, premium, super-premium.

Answer 92

Supermarkets, deep discounters and larger chains have their own wines (Sainsbury’s Taste the Difference in the UK), no name of the producer on the label.

Answer 93

Easy-to-understand ‘rungs’ to help them trade up to a higher-priced and better-quality expression of the brand, it works with consumers with a high-level of engagement (they know all the lineup). - Accessible – the least expensive, great distribution, the most sold (Pol Roger NV). - Stretch – affordable for special occasions (Pol Roger vintage). - Aspiration – the most prestigious expression (Pol Roger Cuvée Winston Churchill).

Answer 94

It describes any cue used by a consumer when choosing to buy one product in preference to another (country of origin, region, grape variety), it shares many of the characteristics identified as features of leading brands (small producers use PDO to promote themselves).

Answer 95

Super-premium priced, scarcity, idea of luxury (quality of the grapes), the marketing strategy promotes the idea of luxury (luxury events and fine dining restaurants).

Answer 96

Delivering the same level of quality and style (Champagne NV).

Answer 97

Giving the consumers what they want although cheaper alternatives.

Answer 98

Strong relationship between brand and consumer, also the smallest change will be significant.

Answer 99

Creating an emotional attachment between brand and consumer.

Answer 100

Existence for a long time

Answer 101

Higher prices as a guarantee of quality (for the consumer).

Answer 102

Easy to remember and to pronounce in all the relevant languages, no different meanings (Mist brand stands for Made in Saint-Tropez while in Germany it means excrement), different brand names in different markets (to get a better appeal and resonate with the target market), references to geographical features (Cloudy Bay, Felton Road, Terrazas de los Andes), name of the founder to give a sense of longevity (Krug, Taylor’s Port).

Answer 103

Model to analyse the current market: - Strengths (e.g. high quality, unique style); - Weaknesses (e.g. high production cost, limited resources); - Opportunities (e.g. new markets, premiumisation); - Threats (e.g. competitors, changing consumer tastes).

Answer 104

The process to identify the target consumers for the product.

Answer 105

- Geographic variables – where the consumers live; - Demographic variables – age, gender, ethnicity, family status, income, level of education, occupation, socioeconomic status; - Psychographic variables – lifestyle, personality, values and beliefs, interests; - Behavioural variables – what benefit do they want from wine, when do they buy wine, how often do they buy wine and in what volume, what is their level of brand loyalty, what is their level of interest in wine, are they early adopters or late adopters.

Answer 106

- Wine lovers – those with a great interest in, and knowledge of wine, high income and high level of education; - Wine-interested – those with a great interest in wine, moderate wine knowledge, university-educated with moderate income; - Wine curious – those with a moderate interest in wine but limited knowledge, moderate income and medium level of education, wine is an opportunity to maintain social relations.

Answer 107

- Experienced explorers. - Millennial treaters. - Premium brand suburbans. - Bargain hunters. - Senior skippers. - Kitchen casuals.

Answer 108

- The gathering and analysis of data about a particular market segment in order to understand what that segment wants or needs. - It can be useful at all stages of the marketing process, it takes time and effort and it can happen through survey, focus group, interviews, observing consumer behaviour (find out the needs and wants of consumers, moving around a shop, web analytics, store loyalty cards), secondary research.

Answer 109

- What type of marketing strategy does the company want to pursue? (Undifferentiated or mass, niche, multiple) - What are the aims of the marketing strategy? - How will the success of the strategy be measured? - Within what time period should the objectives be achieved?

Answer 110

Product, Price, People, Place and Promotion.

Answer 111

Product, Price, Place and Promotion.

Answer 112

Product, Price, People, Place, Promotion, Physical Evidence and Process (for services and not products).

Answer 113

When there are already enough products to satisfy consumers’ needs and there are few gaps in the market.

Answer 114

Setting a low price on a new product to undercut the competition and rapidly reach a wider section of the market, the expectation is that consumers will permanently switch to the new brand because of the lower price.

Answer 115

The amount which a consumer pays for a product; a balance between the producer’s desire to make a reasonable profit and the price that sufficient numbers of consumers are willing to pay for it; it can influence the consumers' purchase decision.

Answer 116

- attitudes and behaviours of the target consumer; - relationship between the company, its staff, its partners, and its customers, including aspects such as employee attitudes and skills, and customer service.

Answer 117

Where the product is sold; consumers with different involvement buy wine in different places (high-involvement in wine specialist retailers via specialist intermediaries, low-involvement in supermarkets via larger intermediaries); taste varies from country to country; legislation, taxation, duty, restriction on distribution.

Answer 118

- Mature markets – saturated with stable or declining volumes (Germany, France, UK). - Established market – strong historical growth which is tailing off (Australia, Netherlands, Japan). - Growth markets – wine is a mainstream product (USA, Canada, Italy). - Emerging markets – growth from a low base (China, Russia, Brazil). - New emerging markets – unknown beverage but has potential (Malaysia, Vietnam, Thailand).

Answer 119

They have the greatest amount of saturation and least growth, reliable trade structures and route to market, established wine culture.

Answer 120

They have the potential for the most growth, carry the most risk, no structures in place for an easy route-to-market.

Answer 121

- Price promotions. - Free merchandise. - Limited edition packaging/presentation. - Competitions. - Consumer tastings. - Staff training and incentives.

Answer 122

``` Increase sales of existing products, gain volume sales for new products or attract new customers through reduction of the price, help shift old stock of discontinued lines (bin ends), multi-buy option (pay less buying more than one piece). Limited period (specified amount or percentage discount on all or selected items, seasonal sales, discount on certain days, discounts for certain groups). The success of promotion is judged when the period is ended and the price returned normal (good if higher sales than before price promotion). Consumers view price promotions as ways to buy cheap products, with no loyalty to the product. Price reduction can damage the brand’s image. The multi-buy option has seen to encourage excessive alcohol consumption (banned in some places, e.g. Sweden and Scotland). Alternatives are link saves (reduced price on another product from a different category) or discount on delivery costs. ```

Answer 123

No reduction of the product price, usually before a national holiday (bottle with two glasses). Available to everyone, so no value for consumers.

Answer 124

Super-premium wines with exclusive cases which contribute to the luxury brand image, wines linked to the major events. Only fun, no sales increase in the longer term.

Answer 125

Buy wine to win something, helpful to collect consumers’ contact details which they can be used for further promotions (data protection laws).

Answer 126

More value offering in-store tastings (new products or new vintages), cost of opening bottles, consumers are more inclined to buy wine after the tasting, in-store tasting to promote the wines (also with the producer).

Answer 127

Educated staff help to promote the product with more confidence and enthusiasm. It’s provided by the retailer, the distributor or the producer. Some incentives to sell more, such as visit the wine region (illegal in China). It’s a good practice only in places where the staff is in contact with consumers (no supermarkets or discounters).

Answer 128

- Advertising. - Sponsorship. - Websites. - Social media. - Smartphone apps. - Wine tourism. - Events and festival. - Reviews and awards. - Public relations.

Answer 129

It draws attention to and promotes a specific product or range of products, a successful campaign can remain in consumers’ minds for a long time. It can be very expensive, especially with an advertising agency. Different channels: television or cinema (the most powerful, the largest audience, very expensive, product placement has a lower cost), radio (slightly less effective, less expensive, lack of images so less memorable), press advertising (a striking full-page image with little or no text, more details, non-specialised press to reach many people as possible, some brands publish on specialist wine and food publications in order to have high-involvement consumers, use of respected wine writers), online (easy way, global audience, costs of creating the advert and if the advert is on another company’s website), billboard (strike images, simple messages, more details in railway stations and bus stops). Adv conforms to the country’s laws.

Answer 130

Sporting and cultural events (Carbon for F1), logo or served in hospitality, sponsor television programmes (beginning or end), same legal restrictions of adv.

Answer 131

New promotional possibilities (new markets), information about the business (story of the wine, food pairing, upcoming events, online shop), attractive and easy to navigate, an essential part of the brand image and must be consistent, use of IT experts (cost), SEO, legal drinking age.

Answer 132

Dialogue with the consumers rather than talking to consumers, not only promotion (alienate followers), sharing experiences, choose the right social media, pay attention to negative reviews.

Answer 133

Useful to find info or write wine reviews (high-involvement consumers in this case), business promotion for companies (shops).

Answer 134

Engages with public, particularly beneficial for new producers and those in up-and-coming wine regions, wine experiences, increases the sales, very expensive to develop the infrastructure (staff), some wine regions involve also other businesses (restaurants, hotels), high-involvement consumers visit more wineries than low-involvement consumers.

Answer 135

Opportunity to taste several producers’ wines, high-involvement consumers, other entertainments (a broader range of consumers), cost to exhibit, possibility of vouchers for consumers (no drink as much as possible), if generic event low possibilities to generate sales or find new customers.

Answer 136

Boost sales of a particular wine, useful to find new customers between low-involvement consumers, some competitions require sample bottles (cost).

Answer 137

Give the business the most favourable image possible in the mind of consumers, activities of press release, social media, newsletter. Brand ambassador (Federer for Möet & Chandon).

Answer 138

Advertising seeks to draw attention to and promote a specific product or range of products whereas the aim of PR is to give the business the most favourable image possible in the mind of consumers.

Answer 139

- In-house marketing team. - PR company or advertising agency. - Internal person. - Industry association or informal trade grouping.

Answer 140

It will help create and drive the marketing strategy, used by the largest companies.

Answer 141

It outsources some or all of the marketing functions, cheaper than skilled marketing staff, used by many smaller companies.

Answer 142

Not enough marketing to justify paying external advisors, limited activity, can take up valuable time (limited marketing knowledge), used by smaller companies.

Answer 143

Wine producers become a member of the association (Consorzio, VDP, VIGNO), these associations help to promote members’ products, they may have a marketing team, fee, cheaper than use own marketing expert, increased exposure thanks to the larger portfolio of wines.

Answer 144

- Conversion of land to other uses or more positive agriculture. - Tourism.

Answer 145

- EU restrictions on plantings. | - Restrictions on irrigation.

Answer 146

Italy, France, Spain, USA, Australia.

Answer 147

Spain, China, France, Italy, USA.

Answer 148

- Producer approval, tender and blind-tasting selection system. - Lengthy process (seven to eight months from a successful tender). - Final decision.

Answer 149

- Producer/Importer; - Distributor (wholesalers, brokers); - Off Premises Retailer (supermarkets, wine specialists) or On Premises Retailers (bars, restaurants).

Answer 150

Scandinavian countries and Canada (except Alberta).

Answer 151

Markets where consumers are unwilling to pay more than the lowest price possible for the style of wine they want to buy. For example, Germany and the UK.

Answer 152

- prevent a return to the pre-prohibition saloon days; | - prevent direct sales from producer/supplier to the retailer avoiding producer monopolies and increased prices.

Answer 153

Limit alcohol consumption by applying high prices, removing the incentive in a free market for stores to compete with each other and the incentive for promotion or price reduction.

WINE BUSINESS 📊 Flashcards

(179 cards)