C10 - Factors that Affect the Price of Wine (reviewed)

Question 1

What are the seven broad brackets into which winemaking costs can be split?

Answer 1

Grape growing
Winemaking
Packaging
Transport, distribution and sales
Taxes
Retailers
Market forces

Question 2

What are the costs associated with establishing a vineyard?

Answer 2

The land (especially in high-reputation regions)
Soil preparation
Cost of vines
Building the trellis

Question 3

What is typically the largest production cost in an established vineyard?

Answer 3

Labour
Cost can be managed -
relying on a seasonal, casual workforce or mechanisation
By growers sharing labour or machines (e.g., Bottling facilities)
Less possible in steep vineyards and some isolated sites

Question 4

What are the most obvious costs involved in winemaking?

Answer 4

Equipping and maintaining the winery with necessary equipment

Question 5

Other than cost of equipment, what else must be considered regarding cost of winemaking?

Answer 5

Time kept at the winery before release
Storage facilities can be expensive to maintain
A lot of money is tied up in stock that cannot be sold to generate a profit straightaway (delay on sale is factored into the price of the wine)

Question 6

Which main aspects of packaging factor into the cost of wine?

Answer 6

Bottles, labels, capsules, closures and cartons (design and purchase)
Unusually shaped or heavy bottles are most costly
Can be reduced by bottling in the market where the wine is to be sold (only possible for large producers and not always permitted by local wine laws)

Question 7

Describe the role of taxes in the cost of wine

Answer 7

Nearly every government taxes alcoholic drink
Tax levels vary wildly from country to country
This tax is seen as essential to controlling alcohol consumption by increasing retail price
The tax is an important source of government revenue

Question 8

Describe the role of retailers in wine cost

Answer 8

Shops and generate will add money to the cost of wine so that they can make a profit

Question 9

Why is wine generally more expensive in restaurants than shops?

Answer 9

Restaurants expect to generate more profit from wine

The price also reflects the occasion, the environment and the level/style of service

Question 10

What is the broadest/largest determiner of the cost of wine?

Answer 10

Market forces (how much the destination market is prepared to pay)

Question 11

Pertaining to market forces, when may the retail price of a wine far outweigh the costs?

Answer 11

Where high demand exists for a product available in limited supply

Question 12

Give a wine type, the price of which has suffered the effects of high demand and limited supply
Give an area where some vineyards have been unable to sustain themselves due to demand being too low

Answer 12

Bordeaux premium estate wines

Some steep vineyard Mosel sites

Question 13

What are the three main types of wine producer?

Answer 13

Co-operatives
Merchants
Estates

Question 14

What is a wine co-operative?

Answer 14

A wine business owned by its members; typically grape growers
Grower of co-operatives are guaranteed a buyer
Winemakers of a co-operative may not always have complete control over the quality of grapes supplied by their employers

Question 15

Where are co-operatives most common?

Answer 15

In Europe - Because vineyard holdings in Europe are on average too small to run economically

Question 16

Describe wine merchants’ roles

Answer 16

They buy grapes, juice or wine from growers or co-operatives
They have contracts with their suppliers so they often have more control over their source material than co-operatives
Producers may be more selective with grapes, but in areas where demand can outstrip supply, it can be difficult to guarantee a regular supply of grapes

Question 17

On what scale do wine merchants operate?

Answer 17

They can operate on small, premium wine production or operate on a large scale, producing different wines

Question 18

Where are wine merchants most common?

Answer 18

Outside of Europe

Average vineyard holdings are larger and producers have to deal with less growers

Question 19

Which type of wine producer is most common amongst many of the large wine brands?

Answer 19

Merchants (Negociant in France)

Question 20

Describe an ‘estate’ merchant

Answer 20

They make wine from only the grapes they grow
Small scale
Have the most control over the production process
Tend to have fewer blending options as they rely purely on their own crops
Fewer blending options is disadvantageous in years when growing conditions have been poor

Question 21

What is the french word sometimes used for estate?

Answer 21

Domaine