Free DipWSET D2: Wine Business Flashcards    

DECK Number 3    

Instructions before starting:    

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

Read the Term on the Card and give your answer Click on “Check the Answer” button to check your knowledge Click on “Got It!” if your answer was correct    

Click on “Need more practice” to review the card at the end of the deck and try answering another time    

Click on “Shuffle” button to change cards order    

GOOD LUCK!!

[qdeck]

[h] DipWSET D2 SET 3

[i] DipWSET D2 – Wine Business Flashcards
SET 3

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

– Read the Term on the Card and give your answer
– Click on “Check the Answer” button to check your knowledge
– Click on “Got It!” if your answer was correct
– Click on “Need more practice” to review the card at the end of the deck and try answering another time
– Click on “Shuffle” button to change cards order

[start]  

[q unit=”2″ topic=”3″] EFFECTS OF THE SCALE OF PRODUCTION ON HIGH VOLUME INEXPENSIVE WINES (give 3 elements)

[a] 1- SOLD WITH LOW MARGIN TO KEEP PRICE LOW

2- INVESTMENTS IN EXPENSIVE EQUIPMENTS
(able to process high volumes)

3- COSTS OF EQUIPMENT RECOUPED BY HIGH VOLUMES

[q unit=”2″ topic=”3″] ECONOMIES OF SCALE (definition)

[a] WHEN INITIAL INVESTMENTS & EQUIPMENT COSTS ARE SPREAD OVER A LARGE VOLUME OF PRODUCTION = lower the cost per unit produced

[q unit=”2″ topic=”3″] EFFECTS OF THE SCALE OF PRODUCTION ON LOW VOLUME & HIGH MARGIN WINES (3 elements)

[a] 1- MINIMAL ECONOMIES OF SCALE


2- NOT ENOUGH VOLUMES = SMALLER VINEYARDS, LOWER YIELDS


3- INITIAL INVESTMENTS RECOUPED BY HIGHER PRICES

[q unit=”2″ topic=”3″] LOW VOLUME SUPER PREMIUM CABERNET COST STRUCTURE FOR GROWING GRAPES (3 main categories)

[a] 1- LABOUR COSTS WAY HIGHER
(more interventions & manual works)

2- HIGHER REAL ESTATE TAXES
(based on higher land value)

3- HIGHER DEPRECIATION OF ASSETS

[q unit=”2″ topic=”3″] LOW VOLUME SUPER PREMIUM CABERNET SAUVIGNON
COST STRUCTURE FOR WINE MAKING
(4 main categories)

[a] 1- GRAPE GROWING COSTS
(the most important cost)


2- HIGHER MATURATION COSTS
(aging)


3- LABOUR & CELLAR OVERHEADS
(water, electricity, depreciation,
longer period in cellar, smaller barrels take more space)


4- HIGHER PACKAGING COSTS (glass, closures, labels, packaging)

[q unit=”2″ topic=”3″] 2 KEY ADVANTAGES OF MAKING HIGH VOLUME & INEXPENSIVE WINES (advantages on direct costs)

[a] 1- ECONOMIES OF SCALE AT MANY POINTS
IN THE PRODUCTION PROCESS


2- BUYING MATERIALS IN BULK

[q unit=”2″ topic=”3″] GENERAL INDIRECT COSTS TO BE ADDED TO TOTAL COSTS
(4 examples)

[a] 1- SALES & MARKETING

2- COST OF TRANSPORT

3- TAXES & DUTIES

4- OVERHAEDS COSTS OF RUNNING THE BUSINESS
(depreciation of any assets not directly used in production)

[q unit=”2″ topic=”3″] WHICH OPTION TO PREFER FOR TRANSPORTATION
OF WINE IN BOTTLES & WHY

[a] 1- PREFER FREIGHT FORWARDERS

2- BECAUSE SPECIALISED IN WINE TRANSPORT
(dedicated insurances & structure…)

3- BECAUSE BETTER EXPERTISE
(fragile, spoilage risks, risk of loss & damage…)

[q unit=”2″ topic=”3″] DOWNSIDE OF USING FREIGHT FROWARDERS

[a] MORE EXPENSIVE

[q unit=”2″ topic=”3″] 3 MAIN RISKS OF SPOILAGE
(sources)

[a] 1- HOT TEMPERATURES

2- DIRECT SUNLIGHTS

3- EXCESSIVE VIBRATIONS

[q unit=”2″ topic=”3″] COSTS OF AIR FREIGHT FOR WINE BOTTLES
(3 characteristics)

[a] 1- COST HEAVILY DEPENDENT ON WEIGHT
(bottles heavier than bulk alternatives)

2- BOTTLES TAKE MORE SPACE

3- BOTTLES MORE FRAGILE THAN CONTAINERS

[q unit=”2″ topic=”3″] WHEN TO USE AIR FREIGHT FOR WINE BOTTLES
(3 main circumstances of use)

[a] 1- SPECIAL CIRCUMSTANCES
(competition & fairs)

2- FOR HIGH VOLUME OF WINE WHEN PRODUCERS WANT
TO GUARANTEE THE QUALITY OF FINAL PRODUCT

3- FOR IMPORTANT DEADLINES
(e.g. beaujolais nouveau in Japan)

[q unit=”2″ topic=”3″] ADVANTAGE OF ROAD TRANSPORTATION

[a] VERY USEFUL FOR SHORT DISTANCE

[q unit=”2″ topic=”3″] ROAD TRANSPORTATION OVER LONG DISTANCE

[a] 1- MAY BE THE ONLY OPTION AVAILABLE
IN CERTAIN AREAS/COUNTRIES


2- LONG DISTANCE = VERY EXPENSIVE 

[q unit=”2″ topic=”3″] 2 OPTIONS OF RAIL FREIGHT

[a] 1- BY INDIVIDUAL PALLETS = EXPENSIVE

2- BY CONTAINERS = LESS EXPENSIVE

[q unit=”2″ topic=”3″] SEA TRANSPORTATION
(“Deep Sea”)

[a] 1- CHEAPEST METHOD

2- CONTAINERISATION ESSENTIAL

3- DOWNSIDE = SLOW

[q unit=”2″ topic=”3″] 2 MAIN OPTIONS FOR BULK WINE TRANSPORTATION

[a] 1- FLEXITANK = NON REUSABLE
(big plastic bag inside a regular container)

2- ISOTANK = REUSABLE
(non flexible)

[q unit=”2″ topic=”3″] KEY ADVANTAGES OF BULK TRANSPORTATION

[a] 1- CHEAPER
(less space & total weight than bottle equivalent)

2- MORE ENVIRONMENTALLY FRIENDLY

[q unit=”2″ topic=”3″] BULK TRANSPORTATION IS ATTRACTIVE FOR

[a] 1-SUPERMARKET & LARGE BUYERS
(keep low price point)

2- MAJOR BRANDS WHO SELL LARGE VOLUMES
(contribute to economies of scale)

3- FOR CHEAP WINES
(less risk of fraud & quality)

[q unit=”2″ topic=”3″] DISADVANTAGES OF BULK TRANSPORTATION

[a] 1- IF LESS THAN 15000 Liters = NO COST ADVANTAGE

2- ONLY FOR LARGE VOLUME OF SAME WINE

3- NO CONTROL OVER BOTTLING PROCESS
(format of bottles, labels…)

4- LOSS OF CONTROL OVER QUALITY OF FINAL PRODUCTS 

[q unit=”2″ topic=”3″] TRANSPORTATION INSURANCES USUALLY COVER

[a] 1- RISK OF LOSS

2- RISK OF DAMAGE

3- RISK OF SPOILAGE

[q unit=”2″ topic=”3″] ISSUES WHEN EXPORTING WINE

[a] 1- DUTIES

2- TAXES

3- LABELLING LAWS

4- THE MORE EXPORTING MARKETS INVOLVED
= THE HIGHER THE COMPLEXITY

5- BUILDING CLIENT LIST

6- COSTS OF MARKETING & SALES

7- DIFFERENT LOCAL CUSTOMER HABITS & TRENDS

8- RISK OF LOSS, SPOILAGE & DAMAGE

[q unit=”2″ topic=”3″] KEY ADVANTAGES OF USING DISTRIBUTORS

[a] 1- DEAL WITH LEGAL & LOCAL REQUIREMENTS

2- PROVIDE MARKET KNOWLEDGE & EXPERTISE

3- PROVIDE ESTABLISHED CLIENT LISTS

4- CARRY THE RISK OF LOSS, SPOILAGE & DAMAGE

5- EASIER TO ENTER NEW MARKETS

6- PROVIDE LOGISTICAL EFFICIENCY

7- TAKE UP SALES & MARKETING

8- MAY BE THE ONLY WAY TO ENTER SOME MARKETS
(e.g. USA 3-Tier System)

9- CAN INCREASE EXPOSURE TO SMALL PRODUCERS
(Portflio tastings)

10- SOME WINE BUYERS NOT REACHABLE OTHERWISE

[q unit=”2″ topic=”3″] EXPLAIN HOW DISTIBUTOR “MARGIN” IS COMPUTED

[a] 1- QUOTED AS A PERCENTAGE

2- Example = 1 euro of fee charged by distributor
= 1 + 10 (initial wine price)
Margin = 1/11 = 9.09% 

[q unit=”2″ topic=”3″] 5 MAIN CATEGORIES OF RETAILERS COSTS

[a] 1- PROPERTY COSTS

2- LABOUR

3- EQUIPMENT & MATERIALS

4- STORAGE COSTS

5- DELIVERY COSTS

[q unit=”2″ topic=”3″] BARS & RESTAURANTS PROPERTY COSTS

[a] VERY EXPENSIVE DUE TO THE LOCATION

[q unit=”2″ topic=”3″] COMPARISON BUYING A PROPERTY vs. RENTING IT

[a] 1- BUYING = NEED UPFRONT INVESTMENT
ASSET DEPRECIATION
PROPERTY OWNED

2- RENTING = CHEAPER INITIALLY
HAS TO MOVE AT THE END OF THE LEASE

[q unit=”2″ topic=”3″] PROPERTY COSTS FOR ONLINE-ONLY RETAILERS

[a] LESS EXPENSIVE BECAUSE WAREHOUSING AWAY FROM CITY CENTERS
(cheaper locations)

[q unit=”2″ topic=”3″] VARIABILITY OF STAFF COSTS OF RETAILERS

[a] 1- VARY ACCORDING TYPE OF RETAIL OUTLETS

2- STAFF SKILLS & EXPERTISE NEEDED
(the higher the skills & expertise the more expensive)

[q unit=”2″ topic=”3″] LABOUR COSTS ASSOCIATED TO SUPERMARKET RETAILERS

[a] LABOUR COSTS ARE LOW
(does not require high skills & expertise)

[q unit=”2″ topic=”3″] LABOUR COSTS ASSOCIATED WITH WINE RETAILERS & WINE SHOPS

[a] 1- EXPENSIVE
(high knowledge, engage with clients, advise clients)

2- STILL LOWER THAN BARS & RESTAURANTS

3- LOWER THAN FINE DINING RESTAURANTS

[q unit=”2″ topic=”3″] LABOUR COSTS ASSOCIATED WITH BARS & RESTAURANTS

[a] HIGHER COSTS THAN WINE SHOPS BECAUSE NEED ADDITIONAL STAFF
(to wait, clean, wash up…)

[q unit=”2″ topic=”3″] LABOUR COSTS ASSOCIATED WITH FINE DINING RESTAURANTS

[a] 1- THE HIGHEST COSTS OVERALL

2- HIGHER THAN BARS & RESTAURANTS BECAUSE HIGHER SKILLED & EXPERTISED STAFF + HEAD SOMMELIER (very costly)

[q unit=”2″ topic=”3″] HEAD SOMMELIER
(main characteristics)

[a] 1- OPERATE GENERALLY IN FINE DINING RESTAURANTS

2- HIGHLY KNOWLEDGEABLE? QUALIFIED & SKILLED

3- VERY EXPENSIVE

4- SELECT THE WINE LIST

5- MAKE PERSONNALIZED & DETAILED CLIENT ADVICE

[q unit=”2″ topic=”3″] GRADATION OF LABOUR COSTS ACCORDING TYPES OF RETAILERS
(comparison scale)

[a] SUPERMARKETS < WINE SHOPS < BARS & RESTAURANTS < FINE DINING 

[q unit=”2″ topic=”3″] HORECA
(meaning)

[a] HOtel + REstaurants + CAtering (CAfé) 

[q unit=”2″ topic=”3″] 6 EXAMPLES OF MAIN EQUIPMENT & MATERIAL COSTS FOR RETAIL SHOPS

[a] – TILL SYSTEM
– FRIDGE
– SHELVING
– DISPLAY CABINETS
– DISPLAY MATERIALS
– CLEANING EQUIPMENTS

[q unit=”2″ topic=”3″] EQUIPMENTS & MATERIALS COSTS ASSOCIATED WITH BARS & RESTAURANTS

[a] SAME AS FOR RETAILERS SHOPS 
+
TABLEWARE
+
GLASSES
+
EXPENSIVE WINE PRESERVATION SYSTEMS

[q unit=”2″ topic=”3″] STORAGE COSTS ASSOCIATED WITH RETAILING ACTIVITIES

[a] 1- STORAGE SPACE

2- TEMPERATURE CONTROL EQUIPMENTS

[q unit=”2″ topic=”3″] OPTIONS FOR STORAGE COSTS IN RETAILING ACTIVITIES

[a] 1- LOCAL STORAGE

2- EXTERNAL STORAGE
(additional costs)

[q unit=”2″ topic=”3″] LARGE CHAINS & SUPERMARKETS STORAGE COSTS

[a] SHARED COSTS THROUGH CENTRALIZED WAREHOUSES

[q unit=”2″ topic=”3″] DELIVERY COSTS ASSOCIATED WITH RETAILING ACTIVITIES

[a] 1- ONE OF THE MOST EXPENSIVE ELEMENT IN THE SUPPLY CHAIN

2- SURPLUS FOR
– extra fast delivery
– specific day delivery

3- FREE DELIVERY OVER CERTAIN TOTAL AMOUNT
(hidden discount)

[q unit=”2″ topic=”3″] MARGIN AT THE POINT OF SALE

[a] 1- VARIES ACCORDING COUNTRIES, COMPETITION, TYPE OF RETAILERS

2- USUALLY BETWEEN 30 & 50%

[q unit=”2″ topic=”3″] MARGIN AT THE POINT OF SALE FOR HORECA RETAILERS

[a] 1- MUCH HIGHER THAN NON HORECA

2- BECAUSE OF OPERATING COSTS

[q unit=”2″ topic=”3″] 3 MAIN CATEGORIES OF MARKETING COSTS

[a] 1- LABOUR COSTS

2- DESIGN & PRODUCTION
(labels + bottles)

3- MARKETING CAMPAIGNS

[q unit=”2″ topic=”3″] LABOUR COSTS ASSOCIATED WITH MARKETING ACTIVITIES
(large producers vs. small producers)

[a] 1- LARGE PRODUCERS = CAN HAVE THEIR OWN IN-HOUSE TEAM

2- SMALL PRODUCERS = USE EXTERNAL SERVICES

[q unit=”2″ topic=”3″] SOLUTION TO LOWER INDIVIDUAL MARKETING COSTS
& WHY IT LOWER COSTS

[a] BECOME A MEMBER OF

– Industry Association
(Consorzio in Italy & VDP in Germany)

– Generic Trade bodies
(Wines of Australia & Wines of South Africa)


BECAUSE IN CHARGE OF MARKETING MEMBERS’ WINES COLLECTIVELY
(reduced individual costs because of pooled efforts)

[q unit=”2″ topic=”3″] 4 CATEGORIES OF COSTS ASSOCIATED WITH CARRYING MARKETING CAMPAIGNS

[a] 1- ADVERTISING

2- PROMOTIONAL MATERIALS

3- SAMPLE BOTTLES
– tastings
– campetitions

4- PRICE PROMOTIONS
(important for large retailers)

[x] GOOD JOB!! [restart]

[/qdeck]

 

 

 

 

 

 

 

 

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