Chapter 4 - Different Options for Getting Wine to POS Flashcards
(31 cards)
1
Q
What are the 5 options for getting wine to point of sale?
A
- Selling Directly to Retailers
- Appoint a Distributor
- Establish a Joint Venture
- Use a Broker
- Selling Directly to Consumers (cellar door sales, events, online, wine clubs)
2
Q
What does collective term producer entail
A
producer, merchant, co-op
3
Q
why do many producer typically work through intermediary?
A
additional work, cost, risks for DTC sales
4
Q
Why are markets for alc beverages seldom totally “free”
A
- govts put control on sale & distro for tax raising purpose (revenue generation)
- govts control distro & sale to minimze harmful effects of alc abuse (eg limit hours, min legal age)
5
Q
What is considered a ‘free market’ in the textbook
A
- producers relatively free to choose whether to sell directly to consumer/retailer or through an intermediary;
- producer can cancel contract if not working out & find other route to market
6
Q
What are the two broad sectors for wine sales?
A
- retail (aka off-premise, off-trade)
- hospitality (aka: on-premise, on trade)
- all collectively called “retailers” in book
7
Q
What is HoReCa?
A
term used in some markets for HOtels, REstaurants, and CAfes/CAtering
8
Q
Describe selling directly to retailers in a free market
A
- Producers work directly, dont need intermediary
- free to decide which retailers stock their wines
9
Q
Advantages of selling direct to retailers
A
- BRAND IMAGE CONTROL: producer decides which retailers, so they usually have final say over how they are marketed = retain control over brand image (less so for supermarket/large chains)
- If working w/ large chain or supermarkets, less admin burden as retailer may take control over some tasks (but at a cost)
10
Q
Disadvantages of selling direct to retailers
A
- ADMIN BURDEN: increase admin burden for producers who have to get wine to retailer, takes up time away from vineyard/winery work or have to hire staff (eg arrange collection, transport, delivery of wine, compliance to duties/taxes, packaging, labelling laws); competent freight forwarder can help, but adds cost
- FINANCIAL RISK: producer may have to take full financial risk of wine being lost or damaged in transit (freight forwarder can help)
- BUILDING RELATIONSHIPS & MARKET UNDERSTANDING: if exporting, it take time to build relationships w/ retailers, to understand market, consumer pref, & legislation; time consuming/costly visits. Trade fairs/tasting can offer good opp to meet more potential clients at once
- CHALLENGE IF TARGETING SMALLER RETAILERS: If producer wants to target smaller retailers, prob dont have time/resources to approach all potential retailers - may appoint distributor
11
Q
What is the benefit of bulk transportation?
A
enables high vol producer to sell wines direclty to retailers (Eg supermarkets); in turn, retailers meet / retain competitive prices
12
Q
Describe the role of a distributor
A
- they buy wine from a range of producers and sell it to range of retailers, generally in same country as retailers
- may or may not hold stock and may or may not have exclusive rights to import and/or distribute
- can be known as: agent, importer, wholesaler (depending on market has slight diff meaning)
13
Q
Advantages of appointing a distributor
A
- DISTRIBUTOR’S KNOWLEDGE: producer entering new market can take advantage of distributor’s knowledge of market, incld key players, consumer pref, trends
- DISTRIBUTORS CONTACTS: can introduce producer to contact, saving producer frmo having to go out and find potential customers
- DISTRIBUTOR AWARENESS OF RETAILER PREF/REQS: they are aware of diff retailers requirements & preferences, so can focus on most appropriate targets for a wine
- HELP W/ ADMIN BURDEN: they’ll have contact w/ logistics company that handle collect, transport, delivery; usually absorbo risk of lost/damaged wine; have experience & staff to handle legal compliance
- LANGUAGE BARRIER: helpful when there’s a language barrier
- MARKETING RESOURCES: have greater resources to promote wine than the producer, take up less time for producer (producers still expected to attend trade fairs/other events, but takes up less time than sell direct, but lose control of how/where their wine is marketed)
- EXPOSURE: being part of larger portfolio increase exposure for producer; distribotrs organise portfolio tasting
- CONSOLIDATION: retailers often prefer buying through distributors, 1 POC vs many separate producers
- SMALL SPECIALIST DISTRIBUTORS: who specialise in particular region(s), helpful for producer looking to enter a new market
14
Q
Disdvantages of appointing a distributor
A
- COSTS & MARGIN: they charge a fee to achieve their desired margin, reducing producer profits; higher margin for selling to hospitality
- LOSE CONTROL OVER MARKETING: distributor take over marketing and where wine is sold; strategy may not reflect producer brand image (need clear agreed upon marketing/sales plan from getgo)
- ATTENTION SPREAD: distributors cant give undivided attention to any 1 producer; marketing strategy many not be ideal for one individual wine; they may drop wines from portoflio that they arent selling enough of
- Takes time to find right distributor; some appoint spearate ones for diff wines; process takes time and money
15
Q
Define joint ventures. What is the aim of joint ventures?
A
- wine companies looking to save costs, partcularly in price sensitive markets (UK)
- joint ventures can be btw companies at different stages in the supply chain - give the parties greater control at diff stages of potentially greater profitability as costs are shared and intermediary costs avoided
- need companies to be of comparable size (else its a takeover)
- contract terms - need to be clear on responsbilitiles; also harder to leave joint venture vs distributor arrangement
16
Q
What are examples of joint ventures
A
- Mentzendorff, a UK wine distributors w/ major shareholders like Champagne Bollinger & Fladgate Partnership; 2 businesses are not direct competitors, ensure no overlap
- producer join force w/ distrubors or large retailers to create new wine brands - Buckingham Schenk and winemakers created Argentinian brand Vinalba, now sold worldwide
17
Q
What is a merger
A
when 2 business join together to create a business w/ greater resources & capabilities that should be more competitive than on their own
18
Q
What is an aquisition, what are some reasons they happen?
A
- aka ‘takeover’ - when 1 company (usually larger one) buys another company (usually smaller), which then becomes a subsidiary of the purchasing company
Reasons:
* acquire capabiities (skills, resources, market share, etc) that the purchasing company lacks, creating a more competitive business
* save failing companies from going out of biz
* reduce cost & keep down prices through economices of scale & simplification of supply chain
* grow their business so they can compete in more sectors of their chosen markets
19
Q
Give example of acquisitions in wine industry
A
- Gallo purchased a number of producers
- Jackson Family Wines - use acquisition to grow their business so they can compete in more sectors of their chosne markets
- Private equity firm Carlyle Group in the US bought accolade wines
- Failed acquisition of Convivality & Bibendum
20
Q
What is the benefit of producers being acquired by larger companies?
A
- despite losing control over their biz, acquisition usually results in increased investment in business being bought
- the larger distribution networks enjoyed by conglomerates can open new routes to market for producer
21
Q
How do wine brokers work?
A
- while called distributor in some markets, they don’t sell wine on behalf of the producer. they are indepedent intermediaries who represent neither parties; they dont enter into any deals, they merely make them happen
- low overhead, small office, mobile phone, laptop, so they charge smaller fees than distributors (usually 2% of contract price; ranges from 1-5%)
- in bordeaux, broekrs have legal status and play important role in acting as intermediary btw chateaus and negociants
- can play key role in fine wine trade, facilitate deals btw buyers & sellers
22
Q
Benefits of using a broker
A
- brokers have intimate knowledge of a particular, often specialised market
- range of specialties, some concentrating on bulk wine, other in small production
- help bring together a buyer (eg supermarket) and a seller (eg coop/grower), saving both parties time & effort seeking each other
- understands needs of both parties: they know what producers have to sell and prices they’re willing to sell at and know what style/vol buyers are looking for & what price they’ll pay
23
Q
What is the advantage & disadvantage of selling directly to consumers?
A
- producer can take full profit from sale of wine
- retain control of how wine is marketed
- the potential benefit has to be offset against additional admin, logistical, staffing costs they will incur (see selling directly to retailers)
24
Q
What are the 4 main options for direct sales to consumers?
A
- cellar door sales
- events
- wine club
- online
25
Describe **cellar door sales**
* producers set up facilitie on estate or at winery to sell wine to visitors
* sometime visitor quite literally pick up the wine from the cellar door, others invest money in attractive shops/tourism facilities
* customers range from locals to tourists
* some provide small tours, taste of exclusive cellar wines, food/wine pairings
* for producers w/ issues of location/acess, they open cellar doors in nearby towns (Eg sonoma, napa)
26
Whats the benefit of **cellar door sales** for **consumers**?
* can see where wines made, taste wine b4 purchase, learn story behind wine
* change for foreign tourist to try/buy wines not avail in home country or may be more expensive there (import & intermediary costs)
* can have more unique experiences like tours, exclusive to cellar or reserve wines, food & wine
27
Whats the benefit of **cellar door sales** for **producers**?
* earn **larger profits** from the wine
* **direct engagement** w. consumers, good way trial new products & secure feedback, reduce need for expensive market research
* **tastings as marketing tool** wine to increase sales
* builds **brand awareness & loyalty** (particularly valuable for new wineries)
* can **promote brand's values** and forge more **personal connection**, and people likely to buy again in future
* **WOM** marketing: those who visit, more likely to recommend to friends & family; FREE for producers
28
Why do some producer choose not to have cellar doors?
* lack of suitable location
* cellar take too much time to run
* requires additional staff
* focus on other routes to market
29
Describe **events** as an option for direct to consumer sales. What are the advantages & disadvantages?
* events are way for producer to engage with consumer directly
* consumers can try & buy wine at event such as tasting fairs or food festivals
* important from marketing perspective (see marketing section)
**Advantage**:
* tend of take place in towns and have other attractinos like live music, attracting larger number & wide range of ppl
* event can be used to create a "destination" effect in certain regions & individual wineries
**Disadvantage**:
* producer has to pay to exhibit their wine, incur travel expenses and employ additional staff for their stand
* will be competing w/ other producers for attention
30
Describe **wine clubs** as an option for DTC sales. What are its advantages & disadvantages?
* wine club offer members (usually small annual fee) the opp to purchase wine at reduced prices for delivery to their home
* members enjoy other benefits (access to special wines, free tours, exclusive tasting etc)
* consumers generally encouraged to join these clubs while tasting wine at cellar door
**Advantage**:
* many producers sell large portion of their stock this way, reduce need for other outlets
* useful for marketing - enable producer to stay in contact w/ members who they hope will continue to buy their wines, intro to their friend & fam
**Disadvantage**:
* requires additional work - producing newsletter, send out details of wines avail, processing orders, shipping wine;
* producer take on risk of bottles getting damange in transit
* USA - adminitration involved in dealing w/ 3-tier system can be onerous; some states don't allow DTC sales
31
Describe **online** as an option for DTC sales. Explain advantage & disadvantages
* online wine sales increased grealty in recent years - consumer welcome buying wine from comfort of home, producer embrace trend and now sell wine online as additional route to market
**Disadvantage**:
* added cost of delivery (paid by consumer or met by producer)
* producers need to set up/maintain website, may hire expert designer to stand out
**Advantage**:
* delivery cost but no intermediary costs means still may be cheaper than consumers to buy online than retail
* producers can earn larger profit
