Free DipWSET D2: Wine Business Flashcards (Deck 5)

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[h] DipWSET D2 SET 5

[i] DipWSET D2 – Wine Business Flashcards
SET 5

I RECOMMEND YOU LEAVE THE CARDS IN THE INITIAL ORDER AND USE THE “SHUFFLE” OPTION ONLY WHEN YOU MASTER THE WHOLE DECK (= 0 MISTAKE)

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[start]

[q unit=”2″ topic=”5″] CONGLOMERATES (definition)

[a] OFTEN OWN MANY SMALLER BUSINESSES ACROSS THE SUPPLY CHAIN  (production, distribution…)

[q unit=”2″ topic=”5″] LARGEST WINE CONGLOMERATE IN THE WORLD (Names + location)

[a] E & J GALLO (CALIFORNIA)

[q unit=”2″ topic=”5″] ADVANTAGES OF CONGLOMERATES

[a] 1- CAN SET UP REGIONAL OFFICES

2- GREATER CONTROL AT ALL STAGES OF THE SUPPLY CHAIN

3- MASTER MANY ROUTES TO MARKET

4- REDUCED NEEDS TO PAY INTERMEDIARIES

5- HAVE SIGNIFICANT NEGOCIATING POWER
(both with suppliers & retailers)

6- GREATER LOBBYING POWER

[q unit=”2″ topic=”5″] CURRENT TRENDS IN CONGLOMERATES

[a] MAJOR COMPANIES OUTSIDE THE WINE INDUSTRY
BUY PRESTIGIOUS WINE BRANDS
– LVMH (luxury)
– INSURANCE COMPANIES

[q unit=”2″ topic=”5″] E & J GALLO OVERVIEW

[a] 1- LARGEST WINE CONGLOMERATE IN THE WORLD

2- OWN MORE THAN 15 WINERIES IN CALIFORNIA

3- OWN GLASS COMPANY = GALLO GLASS (bottles…)

4- OWN EXCLUSIVE IMPORT RIGHTS OF MANY WELL-KNOWN WINES

5- STAFF ACROSS THE WORLD TO COVER REGIONAL MARKETS
– REPRESENTS OVER 40% OF PRODUCTION
OF CALIFORNIAN WINES
– REPRESENTS OVER 22% OF USA WINE
MARKETS BY VOLUME

[q unit=”2″ topic=”5″] CITE 3 DIFFERENT WINE CONGLOMERATES

[a] 1- E & J GALLO (California, USA) = LARGE SIZE

2- MICHELE CHIRALO (Piemonte, Italy) = MEDIUM SIZE

3- FELTON ROAD (Central Otago, New-Zeland) = SMALL SIZE

[q unit=”2″ topic=”5″] MICHELE CHIARLO

[a] MEDIUM SIZED WINE CONGLOMERATE PIEMONTE, ITALY

OWN BAROLO VINEYARDS BUY GRAPES FROM
LOCAL GROWERS LARGE VOLUME OF MID-PRICED WINES
(Moscato d’Asti, Barbera d’Asti)

[q unit=”2″ topic=”5″] FELTON ROAD

[a] SMALL SIZE CONGLOMERATE CENTRAL OTAGO, NEW ZELAND

OWN 4 VINEYARDS ONLY ORGANIC & BIODYNAMIC WINES
ONLY AMBIENT YEASTS AVOIDS FINING & FILTERING

[q unit=”2″ topic=”5″] WINE SALES SPLIT INTO 2 BROAD SECTORS

[a] 1- RETAIL
– OFF PREMISE (USA)
– OFF TRADE (UK)

2- HOSPITALITY
– ON PREMISES (USA)
– ON TRADE (UK) 

[q unit=”2″ topic=”5″] HORECA
(meaning)

[a] HOtel + REstaurants + CAtering (& CAfé) 

[q unit=”2″ topic=”5″] ADVANTAGES FOR PRODUCERS OF SELLING DIRECTLY TO RETAILERS

[a] 1- DO NOT HAVE TO PAY INTERMEDIARIES

2- MAXIMIZE THEIR PROFITS

3- CAN DECIDE WHICH RETAILERS STOCK THEIR WINES
& HOW WINES ARE MARKETED

4- RETAIN CONTROL OVER BRAND IMAGE
(but not possible with large buyers)

[q unit=”2″ topic=”5″] DISADVANTAGES FOR PRODUCERS OF SELLING DIRECTLY TO RETAILERS

[a] 1- INCREASED ADMINISTRATIVE BURDEN
(administrative tasks + export admin)

2- CARRY THE RISK OF LOSS, SPOILAGE & DAMAGED WINES
(reduced if use freight forwarders)

3- THE MORE DISTRIBUTORS DELT WITH
THE HIGHER THE ADMINISTRATIVE BURDEN

[q unit=”2″ topic=”5″] MAIN ADVANTAGE OF BULK TRANSPORTATION
FOR LARGE BUYERS & LARGE PRODUCERS

[a] MEET & RETAIN COMPETITIVE PRICE POINTS 

[q unit=”2″ topic=”5″] DISTRIBUTOR
(definition)

[a] INTERMEDIARY THAT BUYS WINE FROM A RANGE OF PRODUCERS AND SELLS IT TO A RANGE OF RETAILERS
(including HORECA)

MAY OR MAY NOT HOLD STOCKS

MAY OR MAY NOT HAVE EXCLUSIVE RIGHTS TO IMPORT
OR DISTRIBUTE CERTAIN PRODUCTS

[q unit=”2″ topic=”5″] DISTRIBUTOR
(other usual names)

[a] = IMPORTER / AGENT / WHOLESALER

[q unit=”2″ topic=”5″] BENEFITS OF USING A DISTRIBUTOR
(for producers)

[a] 1- EASIER TO ENTER A NEW MARKET

– TAKE ADVANTAGE OF DISTRIBUTOR
MARKET KNOWLEDGE
(clients, buyers list, consumption habits…)

– DISTRIBUTOR HELP FOR
ADMINISTRATIVE BURDEN
& LEGAL REQUIREMENTS

– DISTRIBUTOR ABSORB RISK OF LOSS,
SPOILAGE, DAMAGED WINES

– DISTRIBUTOR OFFERS LOGISTICAL EFFICIENCY

– GREATER RESOURCES TO PROMOTE WINE
(portfolio tastings…)

– GREATER RESOURCES FOR MARKETING

HELP FOR LANGUAGE BARRIER

– LARGE BUYERS PREFER DEALING WITH DISTRIBUTORS
(cannot reach them otherwise)

– NOT POSSIBLE TO ENTER SOME MARKETS WITHOUT DISTRIBUTORS
(USA 3-Tier System)

[q unit=”2″ topic=”5″] DISADVANTAGES OF USING A DISTRIBUTOR

[a] 1- REDUCED PROFITS

2- MARKETING & SALES STRATEGY CHOSEN
BY THE DISTRIBUTOR MAY NOT BE IN LINE
WITH IN LINE WITH PRODUCER’S BRAND IMAGE

3- DISTRIBUTOR CANNOT GIVE UNDIVIDED
ATTTENTION TO ANY ONE PRODUCER

4- DISTRIBUTOR MAY DROP LOW PERFORMING
PRODUCERS FROM PORTFOLIO

5- PRODUCERS NEED TO SPEND TIME TO SELECT
THE RIGHT DISTRIBUTOR

6- PRODUCERS MAY SELECT SEVERAL
DIFFERENT DISTRIBUTORS FOR EACH
OF THEIR PRODUCTS

[q unit=”2″ topic=”5″] JOINT VENTURE
(definition)

[a] WHEN TWO DIFFERENT COMPANIES AGREE TO COMBINE RESOURCES TO PURSUE A COMMON GOAL BY CREATING THIRD COMPANY ASIDE IF THE INITIAL 2 COMPANIES
(the initial 2 founding companies remain in existence)

[q unit=”2″ topic=”5″] JOINT VENTURE
(conditions to be successful)

[a] 1- COMPANIES NEED TO BE OF COMPARABLE SIZE
(otherwise effect of a takeover)

2- EACH RESPONSIBILITIES & OBLIGATIONS NEED TO BE CLEARLY AGREED, DETAILED  & DOCUMENTED

3- BETTER IF THE 2 COMPANIES ARE NOT DIRECTLY COMPETITORS

4- BETTER IF THE 2 COMPANIES DO NOT OVERLAP

[q unit=”2″ topic=”5″] 2 EXAMPLES OF JOINT VENTURES

[a] 1- METZENDORFF (UK distributor) + CHAMPAGNE BOLLINGER
= FLADGATE PARTNERSHIP PORT

2- BUCKINGHAM SCHENK (UK distributor) + HD JOYEUX FABRE 
= VINALBA (ARGENTINIAN WINE BRAND)

[q unit=”2″ topic=”5″] MERGERS

[a] OCCURS WHEN TWO BUSINESSES JOIN TOGETHER COMPLETELY
INSIDE A NEW COMPANY WITH GREATER
RESOURCES & RESPONSIBILITIES

[q unit=”2″ topic=”5″] ACQUISITION
(synonymous)

[a] TAKEOVER

[q unit=”2″ topic=”5″] ACQUISITION
(definition)

[a] OCCURS WHEN ONE COMPANY BUYS ANOTHER ONE,
WHICH THEN BECOMES A SUBSIDIARY
OF THE PURCHASING COMPANY

[q unit=”2″ topic=”5″] 6 REASONS FOR A MERGER
(2 categories)

[a] 1- TO ACQUIRE CAPABILITIES
– skills
– brands
– resources
– market shares
– vineyard locations

2- TO SAVE A COMPANY FROM GOING BANKRUPT

[q unit=”2″ topic=”5″] 2 ADVANTAGES OF A MERGER

[a] 1- LOSS OF CONTROL

2- CAN OPEN NEW ROUTES TO MARKETS

[q unit=”2″ topic=”5″] DISADVANTAGE OF MERGER

[a] LOSS OF CONTROL

[q unit=”2″ topic=”5″] BROKER
(defintion)

[a]  – INDEPENDENT INTERMEDIARY WHO
REPRESENTS NEITHER PARTY
AND DO NOT ENTER ANY DEAL.

– IT ACTS AS A FACILITATOR
WHO MAKES DEALS HAPPEN.

– IT ALSO CHARGES SMALLER FEES.

[q unit=”2″ topic=”5″] EXPLAIN THE DIFFERENCE BETWEEN A BROKER AND A DISTRIBUTOR

[a] A BROKER IS AN INDEPENDENT INTERMEDIARY
WHO REPRESENTS NEITHER PARTY

THE DISTRIBUTOR IS PAID BY A PRODUCER
TO SELL WINE ON HIS BEHALF 

[q unit=”2″ topic=”5″] USING A BROKER
(benefit for producers)

[a] 1- HAS INTIMATE KNWOLEDGE OF A PARTICULAR,
OFTEN SPECIALIZED MARKET

2- KNOWS WHAT OTHER PRODUCERS (competitors)
HAVE FOR SALE AND AT WHICH PRICE THEY ARE WILLING TO SELL

3- KNOWS WHAT STYLE, VOLUME
& PRICES BUYERS ARE LOOKING FOR

4- BRING TOGETHER BUYERS & SELLERS

[q unit=”2″ topic=”5″] USING A BROKER
(benefit for the buyer)

[a] 1- KNOWS WHAT WINES AT FOR SALE (types, volumes & prices)
ON THE MARKET

2- KNOWS WHAT OTHER BUYERS ARE LOOKING FOR

3- BRING TOGETHER BUYERS & SELLERS

[q unit=”2″ topic=”5″] BROKERS ROLE IN BORDEAUX

[a] 1- HAVE LEGAL STATUS

2- PLAY AN IMPORTANT ROLE

3- INTERMEDIARIES BETWEEN CHATEAUX
& NEGOCIANTS

4- WHEN BULK-BUYING = IN CHARGE OF ENSURING
CORRECT VATS ARE DELIVERED TO BUYERS

5- IN FINE TRADE = FACILITATE DEALS
BETWEEN SEEKERS & SELLERS

[q unit=”2″ topic=”5″] 4 OPTIONS FOR SELLING DIRECTY TO CUSTOMERS

[a] 1- CELLAR DOORS SALES

2- EVENTS

3- WINE CLUBS

4- ONLINE

[q unit=”2″ topic=”5″] CELLAR DOOR SALES
(definition)

[a] SET-UP FACILITIES ON ESTATE OR AT THE WINERY
TO SELL WINES TO VISITORS

[q unit=”2″ topic=”5″] CELLAR DOOR SALES
(type of customers)

[a] 1- LOCALS

2- REGULAR TOURISTS

3- WINE TOURISTS

[q unit=”2″ topic=”5″] CELLAR DOOR SALES
(experiences provided)

[a] 1- SEE WHERE THE WINE IS MADE

2- TASTING BEFORE PURCHASING

3- STORY BEHIND THE LABEL

4- WINES NOT AVAILABLE ELSEWHERE
FOR SOME TOURISTS

5- ADDITIONAL ACTIVITIES (extra fees)
(tours, exclusive tastings, reserve wines, food & wine pairing)

[q unit=”2″ topic=”5″] CELLAR DOOR SALES
(benefits for producers)

[a] 1- EARN LARGER PROFITS

2- ENGAGE DIRECTLY WITH CUSTOMERS

3- TASTING = IMPORTANT FOR MARKETING

4- BUILD BRAND AWARENESS

5- BUILD LOYALTY

6- PROMOTE BRAND VALUES

7- INCREASED CHANCE OF RETURNING CUSTOMERS
(buy again in the future)

8- INDIRECT RECOMMENDATIONS TO ENTOURAGE

9- WAY TO TRIAL NEW PRODUCTS
-direct feedbacks
– no need for market research

[q unit=”2″ topic=”5″] WHY SOME PRODUCERS DECIDE NOT TO OFFER CELLAR DOOR SALES

[a] 1- LACK OF SUITABLE LOCATION

2- REQUIRE ADDITIONAL STAFF

3- FOCUS ON OTHER ROUTES TO MARKET

[q unit=”2″ topic=”5″] ALTERNATIVE TO STANDARD CELLAR DOOR SALES

[a] OPEN A “CELLAR DOOR” IN A NEARBY TOWN
(no need to visit the estate)

[q unit=”2″ topic=”5″] 2 MAIN TYPES OF DIRECT SALES EVENTS

[a] 1- TASTING FAIRS (salons)

2- WINE & FOOD FESTIVALS

[q unit=”2″ topic=”5″] ADVANTAGES OF EVENTS FOR PRODUCERS
(direct sales context)

[a] 1- ATTRACT LARGE NUMBER OF PEOPLE

2- ATTRACT WIDER RANGE OF PEOPLE

3- GET ACCESS TO PEOPLE THAT COULD NOT
BE REACHED OTHERWISE

[q unit=”2″ topic=”5″] DOWNSIDE OF EVENTS
(direct sales context)

[a] 1- PAY TO EXHIBIT

2- TRAVEL EXPENSES

3- NEED ADDITIONAL STAFF

4- LOGISTIC BURDEN

5- COMPETE FOR VISITORS’ ATTENTION

6- NEED CAREFUL MANAGEMENT
(accident with overdrinking)

[q unit=”2″ topic=”5″] SUCCESSFUL EVENTS IN CERTAIN WINE REGIONS CAN CREATE

[a] A DESTINATION EFFECT

[q unit=”2″ topic=”5″] WINE CLUBS
(definition)

[a] EXCLUSIVE CLUB WHO OFFER MEMBERS THE OPPORTUNITY TO PURCHASE WINE AT A REDUCED PRICE TO DELIVER TO THEIR HOMES

[q unit=”2″ topic=”5″] ADVANTAGES OF WINE CLUBS

[a] 1- ACCESS TO WINES NOT NORMALLY AVAILABLE
TO THE GENERAL PUBLIC

2- GET FREE TOURS

3- GET INVITATION TO EXCLUSIVE TASTINGS

4- PRODUCERS CAN STAY IN CONTACT WITH CUSTOMERS
(newsletter, website, blog)

5- POSSIBLE TO SUBSCRIBE TO PRODUCERS’ WINE CLUBS
AT CELLAR DOOR

[q unit=”2″ topic=”5″] CONSTRAINTS OF WINE CLUBS

[a] 1- RUNNING COSTS
(additional costs, send details…)

2- PROCESS ORDERS

3- SHIP THE WINES

4- PRODUCERS CARRY THE RISK OF LOSS,
SPOILAGE & DAMAGE

5- USA = ONEROUS ADMINISTRATIVE BURDEN
(3 Tier System)

[q unit=”2″ topic=”5″] WINE CLUBS FOR SOME PRESTIGIOUS PRODUCERS
(peculiarity)

[a] MAY BE THE ONLY WAY TO GET ACCESS TO THOSE WINES
(exclusive members’ clubs)

[q unit=”2″ topic=”5″] ADVANTAGE ONLINE SALES FOR PRODUCERS
(direct selling to customers

[a] LARGER PROFITS FOR PRODUCERS

[q unit=”2″ topic=”5″] DISADVANTAGE ONLINE SALES FOR PRODUCERS
(direct selling to customers)

[a] 1- COSTS ASSOCIATED WITH SETTING UP
& MAINTAINING RELIABLE UP-TO-DATE WEBSITE

2- ADDED COSTS ON DELIVERY

[q unit=”2″ topic=”5″] DIFFERENCE BETWEEN RETAILER AND THE RETAIL SECTOR

[a] 1- SELLING THROUGH A RETAILER MEANS
SELLING DIRECTLY TO THE END USER
(vs. distributor, importer…)

2- RETAIL SECTOR = IN CONTRAST
WITH THE HOSPITALITY SECTOR

[q unit=”2″ topic=”5″] RETAIL SECTOR IN THE UK
(% of total sales)

[a] 80% OF WINE SALES BY VOLUME

[x] GOOD JOB!! [restart] Return to page view

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