Quiz - Getting Wine to the Point of Sale Flashcards
Wine sales are usually split into two broad categories: retail and hospitality.
For the hospitality sector, the abbreviation HoReCa is often used. What does this abbreviation stand for?
Ho = Hotels
Re = Restaurants
Ca = Cafès/Catering
There are pros of selling wines at different points of sale. Imagine you’re a producer, what are the pros associated with different routes to market?
Appointing a Distributor
* Producers access knowledge of that market, including key players, consumer preferences and current trends
Selling Directly to Retailers
* Producer and retailer do not have to pay any intermediary’s costs and margins, maximizing their profits
* Producer is free to decide which retailers stock their wines
Selling Directly to Consumers
* Producers can engage directly with the consumers of their wine -
* Producers get full profits from sales and can control marketing
There are cons of selling wines at different points of sale. Imagine you’re a producer, what are the cons associated with different routes to market.
Appointing a Distributor
* Undivided attention will not be paid to any one producer and the overall marketing strategy may not be the ideal one for an individual wine.
Selling Directly to Retailers
* Increased administrative burden e.g. arranging collection, transportation and delivery of the wine to the retailer.
Selling Directly to Consumers
* Encouraging tourism to the producer’s site can disrupt important work in the vineyard and winery
Establishing a Joint Venture
* Producers can lose control over their business if the other one is bigger/more powerful
Briefly outline the benefits and problems a producer may encounter if they try and sell their wine directly to a retailer in a foreign market.
Advantages
* There’s the option to sell the wines en primeur, which can create a steady cash flow.
* Introducing the wines to new markets can create increased sales/interest in the producer’s wine.
* Having their wine available in different markets spreads the risk if one market is to fail (if wines are only sold in one territory this could be a problem).
* The producer does not have to pay any intermediary’s costs and margins,
* Potentially maximising their profits.
* Producers are free to decide which retailers stock their wines.
Disadvantages
* Paying import duties and taxes will be the responsibility of the producer - which takes time and resource.
* The producer is responsible for making sure packaging and labeling comply with the relevant laws in the country where the wine is to be sold - which again takes time and resources, as well as costs associated with potentially producing different labels.
* It takes time and effort to build relationships in other markets with retailers on an individual basis.
* There is also a significant cost associated with visiting different regions, either to visit retailers or for trade fairs.
* The producer will need to be aware of local legislation, customs and consumer preferences.
* The producer may be responsible for any wine that is lost or damaged in transit (although the cost of this can be alleviated).
Briefly outline how, by employing a distributor, it might help a producer alleviate some of their administrative tasks.
- A distributor will take on the burden of approaching multiple retailers and the administrative work that this involves.
- The distributor will be available to attend trade fairs in the market they are based and to organize their own trade fair to represent the producers and their wines.
- Local knowledge of a market that a producer from another country is hoping to gain a presence in, is a distinct advantage.
- Local knowledge of the market means more contacts and targeting retailers that would suit the wine they are representing.
- The logistics of transport is generally managed by the distributor which reduces the administrative burden on the producer and they absorb any damage to goods.
- Have knowledge of labeling requirements and taxes to advise the producer.
- The language barrier becomes less of an issue.
How does a broker differ from a wholesaler?
- Whereas a wholesaler is paid by the producer to sell wine on its behalf, brokers are independent intermediaries who represent neither party.
- Brokers do not enter into any deals; they merely make them happen. As they have very low overheads, they charge smaller fees than wholesalers (usually 2 per cent of the contract price, but it can range from 1 to 5 per cent in different parts of the world).
Name some major supermarkets with substantial wine sales including the countries where they are most closely associated.
Walmart – USA
Woolworths - South Africa
Carrefour – France
Tesco – UK
What is the correct definition of a private label wine?
Wines bottled under a label/brand exclusive to the retailer.
These wines need to be available in large volumes and therefore usually come from larger producers.
True or false: Well-known brands try and promote loyalty to particular supermarkets.
False
Well-known brands will be sold in many different supermarkets. Therefore, loyalty to the brand, not the supermarket is promoted. Consumers will have the options to compare and contrast the prices of their chosen wine/s at different retailers.
True or false: There is often an excess of supply over demand for supermarkets (more choices of wines available than they require).
True
Although supermarkets give the opportunity for good exposure of a wine, supermarket wine buyers have enormous negotiating power, especially when it comes to price. This means producers may not receive much money for their wines.
True or false: Supermarkets are usually responsible for marketing producers’ wines and covering the cost of price promotions.
False
This is a risk to producers as they can incur substantial costs when selling their wines through supermarkets. Margins can be very tight.
Identify differences between supermarkets and deep discounters. Think about how their business models differ.
Differences:
* Deep discounters sell at lower prices.
* Deep discounters rarely stock major brands (due to costs associated with marketing) and often don’t have more than one option from a brand.
* Often deep discounters will buy up the stock of wine from a producer. This means the offerings in the stores will be constantly changing.
* Premium lines are only really introduced around holidays, etc.
* Deep discounter retail outlets tend to be more sparse, with products being displayed in pallets rather than shelves. This saves costs from overheads.
* Deep discounters rarely have price promotions, as prices are already low.
* Although supermarkets and deep discounters have low prices, supermarkets rely on profit margins whereas deep discounters rely on volume of sales.
Compare convenience stores and supermarkets.
- Convenience stores tend to be more expensive than supermarkets.
- Overheads like rent are often higher for convenience stores as they’re often located inside town/city centres, whereas supermarkets tend to be in less expensive areas.
- Convenience stores are often independently owned, whereas supermarkets are often part of chains.
- Convenience stores often stock similar brands to their nearby local supermarket.
- Local consumer tastes have a large influence on what’s stocked in convenience stores.
- It is fairly rare for convenience stores to have their own brand of wine.
Identify the pros and cons of selling through a specialist wine retailer for a producer.
Pros:
* Smaller brands will likely get better exposure as specialists tend to focus on interesting grape varieties/producers/regions rather than big brands.
* Specialists often cater for consumers that are more interested in what they’re buying, and are willing to pay more for wine. This means they are likely to get a better margin.
* Producer’s wines will often be ‘hand sold’ by knowledgeable staff, which helps create brand loyalty.
* There’s the option for producers to showcase their wines at events etc. held by the specialist.
Cons:
* Producers will probably have to employ and pay a distributor to sell their wine to specialists as there are many outlets to target. Trying to do business on an individual basis with all of them would be very time consuming.
* Major producers may not be appropriate for specialist retailers, partially as they don’t require the quantities that supermarkets/discounters do, and specialists don’t have the buying power.
Give two supporting example points for each of the following topics.
- How do hybrids differ from specialist retailers?
- Why might a retailer choose to follow the hybrid model?
- What are the downsides of the hybrid model?
-
How do hybrids differ from specialist retailers?
o They often have a bar area in the shop where customers can drink the wines on sale at a slightly higher price.
o They usually also sell food (often cheese or tapas). -
Why might a retailer choose to follow the hybrid model?
o Consumers can try the wines before they buy them, which gives the opportunity for upselling and encouraging consumers to try different wines.
o Consumers can be encouraged to buy bottles of wines after trying them by the glass. This is a good way of getting customers interested in different regions/grape varieties/producers. -
What are the downsides of the hybrid model?
o Stores that allow consumers to drink alcohol and eat food on the premises are often subject to more strict legislation and legal practices.
o The stores will usually have to stay open later to cater to consumers wanting to eat and drink outside normal working hours.
