C10 - Factors that Affect the Price of Wine

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

Question 4

How may the cost of labour be kept low?

Answer 4

By relying on a seasonal, casual workforce or mechanisation

Question 5

How may labour costs be further reduced in an established vineyard?

Answer 5

By growers sharing labour or machines

Question 6

Where are the money saving economies in vineyards less possible?

Answer 6

In steep vineyards and some isolated sites

Question 7

Other than practical considerations, what else may affect the price of grapes?

Answer 7

Market forces

Question 8

What are the most obvious costs involved in winemaking?

Answer 8

Equipping and maintaining the winery with necessary equipment

Question 9

Give an example of winery equipment which can be shared (reducing costs)

Answer 9

Bottling facilities

Question 10

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

Answer 10

Time kept at the winery before release

Question 11

Why is time kept at the winery an important cost consideration in winemaking?

Answer 11

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 12

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

Answer 12

Bottles, labels, capsules, closures and cartons (design and purchase)

Question 13

What kind of packaging is more costly?

Answer 13

Unusually shaped or heavy bottles

Question 14

How can packaging costs be reduced?

Answer 14

By bottling in the market where the wine is to be sold

Question 15

Why is it not always possible to bottle at the intended market?

Answer 15

This is only possible for large producers

It is not always permitted by local wine laws

Question 16

Describe the role of taxes in the cost of wine

Answer 16

Nearly every government taxes alcoholic drink

Tax levels vary wildly from country to country

Question 17

What is the logic behind taxation of alcoholic beverages?

Answer 17

This tax is seen as essential to controlling alcohol consumption by increasing retail price
The tax is an important source of government revenue

Question 18

Describe the role of retailers in wine cost

Answer 18

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

Question 19

Why is wine generally more expensive in restaurants than shops?

Answer 19

Restaurants expect to generate more profit from wine

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

Question 20

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

Answer 20

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

Question 21

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

Answer 21

Where high demand exists for a product available in limited supply

Question 22

Give a wine type, the price of which has suffered the effects of high demand and limited supply

Answer 22

Bordeaux premium estate wines

Question 23

Give an example of an area where some vineyards have been unable to sustain themselves due to demand being too low

Answer 23

Some steep vineyard Mosel sites

Question 24

What are the three main types of wine producer?

Answer 24

Co-operatives
Merchants
Estates

Question 25

What is a wine co-operative?

Answer 25

A wine business owned by its members; typically grape growers

Question 26

What is the major advantage for a grower of co-operatives?

Answer 26

They are guaranteed a buyer

Question 27

What is the potential large disadvantage for winemakers of a co-operative?

Answer 27

They may not always have complete control over the quality of grapes supplied by their employers

Question 28

What quality can one expect from co-operative wineries?

Answer 28

Any (some produce the best wines of their area)

Question 29

Where are co-operatives most common?

Answer 29

In europe

Question 30

Why are co-operatives most common in europe?

Answer 30

Because vineyard holdings in europe are on average too small to run economically

Question 31

Describe wine merchants’ roles

Answer 31

They buy grapes, juice or wine from growers or co-operatives

Question 32

Why do merchants often have more control over their source material than co-operatives?

Answer 32

They have contracts with their suppliers

Question 33

What challenge can wine merchants face with regard to grape supply? Under what circumstances is this applicable?

Answer 33

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 34

On what scale do wine merchants operate?

Answer 34

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

Question 35

Where are wine merchants most common?

Answer 35

Outside of Europe

Question 36

Why are wine merchants more common outside of europe?

Answer 36

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

Question 37

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

Answer 37

Merchants

Question 38

What is the french name for wine merchants?

Answer 38

Negociant

Question 39

Describe an ‘estate’ merchant

Answer 39

They make wine from only the grapes they grow

Question 40

Which type of wine producer typically makes on the smallest scale?

Answer 40

Estates

Question 41

What is the result of wine estates producing on a small scale?

Answer 41

It gives the producer the most control over the production process

Question 42

What is the big disadvantage for wine estates?

Answer 42

They tend to have fewer blending options as they rely purely on their own crops

Question 43

When is it particularly disadvantageous for a wine producer to have fewer blending options?

Answer 43

In years when growing conditions have been poor

Question 44

What is the french word sometimes used for estate?

Answer 44

Domaine