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WSET Diploma 4 D2 > Different Options for getting the Wine to the Point of Sale > Flashcards

Different Options for getting the Wine to the Point of Sale Flashcards

1
Q

What are the 5 methods a producer can use to reach the end consumer?

A
  1. Selling directly to retailers
  2. Appoint a distributor
  3. Establish a joint venture
  4. Use a broker
  5. Sell directly to consumers
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2
Q

Selling directly to retailers

What are the 2 main advantages of selling directly to retailers?

A
  1. Don’t need to pay intermediary costs and margins
  2. Free to decide who stocks their wines - retain control over brand image (except if large retailer or supermarket)
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3
Q

Selling directly to retailers

What are the 3 main disadvantages of selling directly to retailers?

A
  1. Administrative burden
  2. Take on financial risk of wine being lost or damaged in transit (reduced if using freight forwarder)
  3. Takes time to build relationships with retailers and understand market e.g. consumer preferences & legislation (if exporting to foreign market)
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4
Q

Selling directly to retailers

Name 3 administrative burdens if selling directly to retailers

A
  1. Arranging collection, transporation, and delivery of wine
  2. Paying import and export duties (if exporting)
  3. Ensure packing and labeling comply with local laws (if exporting)

Can use freight forwarder but adds to costs

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5
Q

Selling directly to retailers

When might a producer choose to / not to sell directly to retailers?

A

If only want to sell at small number of companies (e.g. high volume wine to supermarkets, chains etc)
> Admin burden not too great

f they want to target smaller retailers
> Likely won’t have the time to approach all of them so might prefer a distributor.

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6
Q

Selling directly to retailers

What has enabled high-volume producers to sell directly to retailers? What has been the impact?

A

Bulk transportation

Retailers can meet and retain competitive prices

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7
Q

Selling directly to retailers

Give 3 different timings when producers will sell their wine to retailers?

A
  1. Once bottled
  2. After maturation
  3. En primeur
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8
Q

Appoint a distributor

Describe a distributor (4 points)

A
  • Buys wine from a range of producers and sells to range of retailers
  • Typically located in same country as retailers
  • May or may not hold stock
  • May or may not have exclusive rights
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9
Q

Appoint a distributor

What are the market knowledge benefits of appointing a distributor?

A
  1. General knowledge of market (e.g. key players, preferences, trends)
  2. Introductions to contacts (don’t need to find customers themselves
  3. Awareness of different retailer requirements and preferences
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10
Q

Appoint a distributor

What are the administrative burden benefits of appointing a distributor?

A
  1. Distributor has logistics contact (collection, transportation, delivery)
  2. Absorb risk of lost or damaged wine
  3. Assistance with legal compliance (duty, labeling etc)
  4. Help with language barrier
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11
Q

Appoint a distributor

What are the promotion and marketing benefits of appointing a distributor?

A
  1. Greater resources
  2. Time-saving
  3. Being part of portfolio can increase exposure (e.g. through portfolio tastings)
  4. Retailers find it easier to buy through distributors
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12
Q

Appoint a distributor

What are the main disadvantages of appointing a distributor?

A
  1. Cost - Fee charged to achieve desired margin which will reduce profits
  2. Loss of control over how wine is marketed and where it is sold
  3. DIstributor can’t give undivided attention to one producer
  4. Marketing strategy may not be the ideal one for that particular wine
  5. WIne may be dropped if not selling in sufficient quantity
  6. Costs time and money to find the right distributor
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13
Q

Appoint a distributor

Which distributors typically have higher margins and more staff?

A

Those selling to hospitality

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14
Q

Appoint a distributor

What are some steps producers can take to make the relationship work with distributors?

A
  1. Spend time finding the right distributor (e.g. selecting distributor who specialises in particular region)
  2. Consider appointing different producers for different wines
  3. Create clear marketing and sales plan form outset and regularly review
  4. Attend trade fairs to meet distributors or get reccos from other wineries
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15
Q

Establish a Joint Venture

What are the advantages of a joint venture?

A
  1. Cost saving
  2. Greater control over different stages of supply chain
  3. Greater profitability (costs shared / intermediary costs avoided)
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16
Q

Establish a Joint Venture

What conditions need to be met to make a joint venture successful?

A
  1. Companies need to be of comparable size
  2. Contracts carefully agreed and documented
17
Q

Establish a Joint Venture

Give 2 examples of joint ventures between producers and distributors

A
  1. Producer being shareholder in distributor (e.g. Mentzenddorff & Bolli / Fladgate)
  2. Distributor and producer / retailer creating a new wine brand
18
Q

Establish a Joint Venture

What are the advantages of an acquisition for the acquiring company?

A
  1. Acquire capabilities they believe they lack
  2. Reduce costs through scale and simplification
  3. To get bigger
  4. To compete in more sectors of their chosen markets
19
Q

Establish a Joint Venture

What are the advantages of an acquisition for the acquired company?

A
  1. Increase in investment into the business
  2. Open up new routes to market
20
Q

Establish a joint venture

What are 3 sources of M&A activity?

A
  1. Between producers (e.g. E&J Gallo)
  2. Between distributors (e.g. Conviviality)
  3. Private equity firms (e.g. Bain)
21
Q

Use a Broker

What is the difference between a distributor and a broker?

A

Distributor paid by producer to sell wine on its behalf

Brokers are independent intermediaries who represent neither party

22
Q

How much do brokers usually charge? Why?

A

2% (can range from 1-5%)

Very low overheads

23
Q

Use a Broker

What are the advantages of using a broker?

A
  1. Intimate knowledge of a particular market
  2. Save time an effort for either party to seek the other out
  3. Know what producers have available and at what price they want to sell
  4. Know what style and volume buyers are looking for and price prepared to pay
24
Q

Use a Broker

Name 3 other potential roles of brokers

A
  1. Intermediaries between chateaux and negociants (Bordeaux)
  2. Ensure correct vats of wines are actually delivered (bulk wine)
  3. Facilitating those who wish to buy/sell rare wine (fine wine tade)
25
Q

Selling Directly to Consumers

What are the 4 primary methods of selling directly to consumers?

A
  1. Cellar door sales
  2. Events
  3. Wine Clubs
  4. Online
25
Q

Selling Directly to Consumers

What is the overall trade-off that needs to be weighed when selling directly to consumers?

A

Take full profit & retain control vs. Admin / Logistic / Staffing costs

26
Q

Selling Directly to Consumers

What are the benefits of a cellar door for consumers?

A
  1. See where wine is made
  2. Taste before purchase
  3. Taste exclusive cellar door or reserve wines
  4. Learn about story of wine
  5. Tours
  6. Food & wine pairings
  7. Source wines not available or more expensive in own country
27
Q

Selling Directly to Consumers

What are the advantages of cellar doors for producers?

A
  1. Larger profits
  2. Can engage directly with consumers
  3. Increase sales through allowing people to taste
  4. Build brand awareness
  5. Build brand loyalty
  6. Drive WOM
  7. Trial new products and get feedback (= less market research needed)
28
Q

Selling Directly to Consumers

What are some reasons for a wine producer not to offer cellar door sales?

A
  1. Lack of suitable location (can open in nearby town…)
  2. TIme and cost of running
  3. Prefer to focus on other routes to market
29
Q

Selling Directly to Consumers

Where do events take place?

A
  1. In towns & cities
  2. In wine regions (e.g. Lodi AVA)
  3. At individual wineries (e.g. Denbies)
30
Q

Selling Directly to Consumers

What is the benefit of events for producers and the 4 main disadvantages?

A

Large number and range of people

  1. Have to pay to exhibit
  2. Travel expenses
  3. Employ staff
  4. Compete with other producers for attention
31
Q

Selling Directly to Consumers

What are the benefits of wine clubs to consumers?

A
  1. Access to wines not normally available
  2. Free tours
  3. Invitations to exclusive tastings
  4. Easy access to wines they enjoy
  5. May be the only way to buy the wine (e.g. Screagle)
32
Q

Selling Directly to Consumers

What are the benefits to producers of wine clubs?

A
  1. Can sell large amount of stock - reduces need to find other routes
  2. Marketing
33
Q

Selling Directly to Consumers

What are the disadvantages to producers of running wine clubs?

A
  1. Need to produce newsletters
  2. Have to send out details of what’s available
  3. Have to process orders and ship wine
  4. Take on risk of bottles getting lost or broken (need reliable freight forwarder)
  5. Admin difficulties (e.g. dealing with three tier system in US)

WSET Diploma 4 D2 (11 decks)

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