Chapter 1 and 2 Flashcards
Factors that influence supply and demand
Cost of growing grapes / producing wine ,getting it to consumer , price to sell
Demand for wine is affected by
Social, economic, legislative and political factors
Name some examples of social factors
Consumption in new emerging markets, US increased due to globalisation of food and drinks, increased trade and imports, consumers open to new taste, higher spending, also China- growth sector in middle class, bilateral trader agreement with Australia and Chile
Reasons for Decline ( Social )
Younger people drinking less wine, health concerns, changes in lifestyle ( busy modern lives) , reduced availability of cheap wine, vine pull schemes, changing consumer preferences, changes in reputation, changes in spending patterns
Give examples of Economic Factors
Strength of the economy ( disposable income, Recession, emerging middle class) , fluctuations in currency exchange, changes to market ( new products, competition ) ,
Give examples of Legislative and Political Factors
Laws prohibiting the sale and consumption of alcohol, ( Us three tier, monopoly) governement policies to reduce alcohol consumption ( 1991 Loi Evin, restricted advertisements, Minimum unit pricing, drinking driving laws, ) Taxation ( sales tax VAT - abolishing excise tax to increase trade, ) , International Trade ( trade tariffs, to encourage domestic sales, Embargo Country bans) , Wine LAws (eg. 2012 Anti- Extravagance “ law banning lavish gifting from China. , PDOS setting limits for production and growing of grapes ( 1970 Vin de Pays - 85 % of grapes must come from the area, permitted wider range of grapes and varieties)
Factors that influence the SUPPLY of wine
Production - ITaly, France, Spain, USA and Argentina at the top, ARea Under Vine ( Top countries - Spain, China, France Italy , USA ), Vine Pull Schemes ( wine lake in the 1980’s) , EU restrictions on new vineyards, conversion of land to other uses ( eg Elgin Turing to apples = greater profit ) , abandonment of rural areas, Human Factors( workers, winemaking, irrigation, winemaking techniques ) , Natural FActors ( climate change ,,2017 Spring frost , hail and hot summers in EU = lowest volumes in 50 years)
Give examples of Legislation
GI’s , DOC, AVA etc, defining style and terroir, ( eg. Demand for Prosecco increased area under vine )
Challenges of Over and Under Supply
Over supply = decrease in prices, potential unsold wine, devaluation of brand image, turn to private label ,
Under supply= 2017 example, usually specific to wines from a certain region
Wine out of stock, disappointment, penalties if there is a supermarket contract, increase in price for the product, consumers may turn to cheaper products, large companies will have different tiers in the case of undersupply. .
Costs through the supply chain: Vineyard establishment ;
Buying , renting land, land survey, soil samples, satellite imaging, site clearance, rocks, trees, building roads, planting vines, buying vines, drainage channels, pipe works, irrigation, boreholes, wells, rainwater tanks, pipes, pumps from dams, dams, hoses, sprinkles, protection against frost, hail, wind breaks, protection from pest, endangered animals, machinery, equipment, tractors, harvests, shed, garages, sprayers, takes 3 years to establish vines, funded by loans, inheritance, ,
What are the Vineyard Management Costs
Labour, mosel vs Central Valley, Machinery and Fuel, Supplies, Vineyard treatments ( Argo chems, weather station access, organic and bio treatments , water, electricity, insurance ( for fire flood etc) , depreciation ( replacement of trellises and tractors)
What are the winemaking costs
Costs to establish Winery, grape bought in or grown, labour, winery materials, ( sugar, acid, argon, finin and filtering, Co2, yeasts, ) ,water, electricity ( pumps, fridge, presses, lights, ventilations, ) , maturation ( storage, vesssels, skilled labour, chips, staves, cashflow, ) , Packaging , Depreciation ( cellar overheads, electric, Scale of Production ( eco monies of scale, margin, )
What are the transportation methods
Road, Air, Rail, Bulk ( deep sea) = large increase in the last 20 years. Tanks can hold up to 10,000L , flexi 24,000, ISO 26,000
Cheaper, but need 1mill cases to make it worthwhile, Costs= Insurance needed to cover the trip
Importation Costs
Custom and duties, labeling laws, health warnings, using a distributor ( charge 5-25 %) to help import ( covers these costs)
Sales Costs
Property, Labour, equipment ( tills, fridges, shelving, display, ), storage cost, delivery costs* very huge, margin at POS ( resto/bars 66.6% , retail 30-50%)
