D2C05 Reaching Consumer In Free Market - Retail Flashcards
List major retail outlets to end consumers
- Supermarkets
- Deep discounters
- Convenience retailers
- Specialist wine retailers
- Hybrids
- Online retailing
- Global travel retail
- Wine investment companies
Give a few examples of major supermarkets
In which markets do supermarkets have the largest share of wine sales?
- Walmart - USA
- Woolworths - South Africa
- Carrefour - France
- Sainsbury - British
Largest share: USA, UK and France
What can a producer expect if he sells his wine through a supermarket
Characteristics
Advantages
Disadvantages
Characteristics
- Most popular outlet for wine in some markets
- Attracts large producers /popular regions, varieties
- Styles appeal to wide range of customers - little knowledge
- Often dom by local wines,
- Brands easily recognisable (Barefoot, Jacob’s Creek) to attract
- Same brands avail everywhere = price pressure
- Supermarkets sell under own label to encourage some store loyalty
- No customer loyalty (wine or store)
- Must be available in large volumes ~ large vol prodcers
- Prem Supermarkets may sell artisanal wine/ fine wine
- mostly with an end date on range/ limited period
- useful route to market for niche producers
- Whole Foods an ex. now purchased by Amazon - puts the model at risk
Advantages
- Attractive ave to sell hi vol wine, hi market exposure, sometimes > one country
- No intermediary costs
- Supermarket-employed winemaker may work with prod to supervise prod / quality control
Disadvantages
- Highly competitive, supermarket has enormous nego power, prices offered wb low
- Any promo price / placement funded by producer poss at sub. fee
- Contract will have strict T&C (Q, time, delivery, labelling, packaging) if not met - penalties
- May be delisted if sales lower than required
Describe the characteristics, Adv, Disadv of DDiscounters
- Ex: Lidl, Aldi, Trader Joe (subject to 3-tier)
Model:
- Similar to supermarket, but offer permanently lower prices
- Rarely offer time-ltd price promotions
- Lower profit margin, rely on volume
- Basic shops: pallets, away from prime location = lower rent
- Limited, streamlined range - rarely many var of same prod
- Many products under private label - opp for producers to co-dev
- Rarely stock major brands, if so end of range (may appeal to producers with left over wine to sell)
- Small amount of expensive wine in more affluent areas or before holidays - attracts customers who may return for other products
Advantages
- often buy direct fm producer - cut out intermediary
- do not charge producer to stock their wines
- do strike hard deals but may still be better (vol) option for prod than supermarket
Characteristics of convenience retailers / stores
- Closer to where people live, often open 24hrs -popularity lies in their proximity
- May be independently owned or a part of franchise (Spar / 7-eleven)
- Stock brands pop with local customers, range of wine small, dom by big brand.
- Tend to be more expensive than s-markets
- Locations exp / prob designed tb something else so cb inefficient
- empl more staff than s-market relative to size and open longer
- Franchise arrangement - fee to franchise owner
Characteristics of specialist wine retailers
Specialists in wine, often also beer, spirits
- might have a cheese bar/ deli, usually artisan
- may be “country” themed/focussed
- Some large chains, mostly small chain / independent owner
- May specialise in organic/natural/biod
- Some specilise in only prem & super prem from presitge producers
- may also engage in en primeur offerings
- Not same purch power as large ret (may stick to a few brands)
- smaller producers , less well known regions / less well known varieties
- A good retail option for the above types of producers
- Can charge more - for the consumer segment which is:
- personal service oriented (relationships built by newsletters, trust, events, availability alerts)
- willing to spend more & becomes loyal…
- want to understand the “story” / increase knowledge
- appreciate broader range
- find out about pairings
- Highly dependent on retail staff (skilled / knowledgeable)
For producer this is a good avenue for high quality wines and a better profit than other routes, but given the large number of shops a distributor will probably be employed to distribute the wine.
Characteristics of hybrids (also in ch 6)
Specialist wine retailers with a bar area
- Specialist retailer, offering a small bar area / food offering e.g. tapas.
- Reliant on specialist staff.
Advantages
- Customer can try before they buy.
- encourage buyers too nervous to spend the money
- may offer wine by the glass
- also to showcase new varieties / wines
Disadvantages
- Need to trade longer hours (or open in evening) to attract the target segment.
- added bureaucracy where people eat and drink
Characteristics of online retailer
Popularity diff by culture 20% of wine sold online CN, 2% USA
- Many producers have online presence parallel with other routes to market
- Many retailers have parallel online offering - “Click & Mortar”
- Increasing no of online only entitites (incl wine clubs)
- online may mean wine is part of broader range (Amazon)
- Wine club may promote with free del after x value.
Must have
- reliable, well designed and well maintained website is crucial.
- conveys good image
- good tech support
- content well presented, helpful, up to date
- additional info provided (back label, pairing, tasting notes)
- mobile responsive (any device)
Advantages (sometimes means cons benefit frm better price and producer has bigger profit)
- no retail shop cost
- can warehouse wine in cheaper loc, poss bigger space offers more var/ range of wine as well as opp for niche producers
- can offer click and collect to save del cost and risk
- offering may include “wine advisor”
Disadvantages
- Delivery and risk of breakage (bottles are heavy)
- customers demand quicker and quicker timelines
Characteristics of global travel retail
Found at airports, sea ports, int railway stations
Sector prev known as “Duty Free” - now with EU open for free trade the use has become more finding fine wines not avail in home country
- presents opportunity to sell prem, super prem wines
Disadvantage
- expensive cost of retail space is high
- % of cost passed on to suppliers, erodes profit margin
- other routes to market often more attractive
Why and how do investers invest in wine?
Investors invest in wines
- mostly en primeur from prod/retailer, but can also be on release
- from exclusive wine clubs in CA e.g. Screaming Eagle /Harlan
because
- they may have 2ndary market .
- sometimes bought to mature and be drunk.
Investing in wine -increasingly important in recent decades
- starts wth growth of en primeur
- driven now by rapid growth in Chinese consumption
Considered safer than stock in uncertain times
- still has risk - even prestigious Bordeaux wines fall in price
Invest. wine sometimes called “fine” wine - no true def of this term - normally understood:
- wine from prestigious vineyards (Bordeaux, Burgundy, Australia, Napa) made in small qty, by leading producer, which demands super prem prices
Characteristics and examples of wine investment companies
Many co’s specialise in sourcing/selling wines for investment eg:
- Bordeaux premier cru classes
- Burgundy grand crus
- Top Napa Valley
London was traditionally the hub for wine investment.
Pressure from HK after law change in 2008 abolished excise duty on wine with objective of making HK the hub for inv trade of wine in East Asia
Examples of Businesses Involved in Inv Wine and their Forte
- Brokers, who operate on commision (Chapt 4)
-
Specialist Retailers - (Farr Vintners, Fine and Rare, Berry Bros & Rudd)
- allowed a small alloc ea year - bought direct from producer or via merchant
- offered to exclusive clients
- also act as brokers for investors wanting to sell
-
Trading Exchanges - where retailers/ brokers find a buyer/seller
- works like a stock exch, eg. Liv-Ex London based, serves the world
- Investment wine Dealers: - Cult Wines, Amphora Port Mgt
- Manage client wine portfolios
- souce wines, selling those they want to dispose of
-
Wine Investment Funds -
- managed fundswhich investors can buy into without any wine knowledge
-
Auction houses - sell wide variety (Sotheby’s, Christie’s)
- Auction issues:
- wine storage conditions not guaranteed,
- fraud - high profile cases in recent years related to inv wine sold through auctions.
- prod at all price points are using increasingly sophisticated counterfeiting techniques to protect their wine, lead by inv grade wine producers.
- Auction houses now seek to validate the PROVENANCE of the wines they offer.
