Free DipWSET D2: Wine Business Flashcards
DECK Number 4
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 4
[i] DipWSET D2 – Wine Business Flashcards
SET 4
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=”4″] LEGISLATIONS IMPACTING THE COSTS OF WINES
[a] 1- TAXES
2- TRADE BARRIERS
3- MINIMUM UNIT PRICING
4- DUTIES
5- SUBSIDIES
6- LABELLING LAWS
[q unit=”2″ topic=”4″] EXCISE DUTIES IN THE UK
[a] PAYABLE ON WINE ENTERING THE UK UNLESS STORED IN A “BONDED WAREHOUSE”
[q unit=”2″ topic=”4″] 2 OPTIONS REGARDING DUTIES PAYMENT
FOR WINES ENTERING THE UK
[a]
1- IF STORED IN OWN WAREHOUSE = WHEN IT ENTERS THE COUNTRY
2- IF STORED IN “BONDED WAREHOUSE” = DUTIES PAYABLE WHEN WINE LEAVE THE BONDED WAREHOUSE
(when ordered)
[q unit=”2″ topic=”4″] DESCRIBE FINANCIAL ADVANTAGE OF “BONDED WAREHOUSE”
[a] 1- BONDED WAREHOUSE STORAGE COSTS COVERED LARGELY
BY ECONOMIES ON EXCISE DUTIES
2- CASH FLOW SITUATION IS IMPROVED
(not need for up front cash)
[q unit=”2″ topic=”4″] IMPACT OF IMPORT DUTIES ON PRODUCERS’ DECISION
[a] MAY DISSUADE TO EXPORT IN CERTAIN COUNTRIES
(abandon a market)
[q unit=”2″ topic=”4″] IMPACT OF TRADE TARIFFS IN THE E.U. MARKET
(regarding US wines)
[a] FEW MID-PRICED US WINES ON THE EUROPEAN MARKET BECAUSE THEY CANNOT COMPETE WITH WINES FROM CHILE & SOUTH AFRICA
(who benefits from Trade Agreements)
[q unit=”2″ topic=”4″] IMPACT OF CURRENCY FLUTUATIONS ON THE COSTS OF WINES
[a] CAN AFFECT WINE PRICES CONSIDERABLY
[q unit=”2″ topic=”4″] 8 OPTIONS TO PROTECT AGAINST CURRENCY FLUCTUATIONS
[a] 1- OPTION ON THE PHYSICAL WINE
(with the producer)
2- OPTION ON A CURRENCY
(with a Bank)
3- CONTRACT TO FIX THE PRICE
(with the producer)
4- CONTRACT TO FIX THE CURRENCY RATE
(with a Bank or the producer)
5- TRADING IN EUR or USD
6- OPEN FOREIGN CURRENCY ACCOUNT AT LOCAL BANK
7- OPEN ACCOUNT IN AN OVERSEAS BANK
8- BUY CURRENCY IN ADVANCE TO COVER A FUTURE ORDER
[q unit=”2″ topic=”4″] DEFINITION OF AN OPTION
(currency fluctations hedging)
[a] PAY A PREMIUM UPFRONT (option cost) IN ORDER TO RESERVE A CERTAIN AMOUNT OF PHYSICAL WINE (or currency) THAT COULD BE PAID AT A PRICE SET IN ADVANCE ON A SET DATE (or period)
IF THE OPTION IS ON PHYSICAL WINE (and not on a currency) THE PRODUCER MUST SET ASIDE THE AGREED VOLUME OF WINE
[q unit=”2″ topic=”4″] DIFFERENCE BETWEEN AN OPTION AND ENTERING A FIXED CONTRACT
(in currency fluctuations hedging)
[a] IN AN OPTION, THE IMPORTER CAN DECLINE THE WINE
IN A FIXED CONTRACT, THE IMPORTER MUST TAKE THE WINE
(even if the actual rate is more interesting than the contracted rate)
[q unit=”2″ topic=”4″] ADVANTAGES OF TRADING IN USD or EUR
[a] 1- EUR and USA HAVE HISTORICALLY SHOWN TO BE MORE STABLE (and more widely accepted) CURRENCIES
2- IMPORTERS HAVE MORE CERTAINTIES ON PRICE
[q unit=”2″ topic=”4″] WHY PRODUCERS MAY CHARGE A PREMIUM WHEN ENTERING A FIXED CONTRACT WITH A FOREIGN IMPORTER
[a] BECAUSE IT SHITS THE CURRENCY RISK TO THE PRODUCER
[q unit=”2″ topic=”4″] BUYING CURRENCIES TO COVER SPECIFIC ORDERS
(characterictics)
[a] 1- REQUIRES PRO-ACTIVE STANCE
2- REQUIRES IN-HOUSE COMPETENCIES
3- NOT CONSIDERED SPECULATION
4- USUAL TECHNIQUE FOR LARGE IMPORTERS
[q unit=”2″ topic=”4″] DISADVANTAGES OF OPENING AN ACCOUNT IN AN OVERSEAS BANK
[a] ALL THE DISADVANTAGES OF OPENING
A FOREIGN CURRENCY ACCOUNT AT A LOCAL BANK
+
RISKS ASSOCIATED WITH THE DIFFERENCE
IN BANKING REGULATIONS
[q unit=”2″ topic=”4″] ADVANTAGES OF BEING AN ESTATE PRODUCER
[a] 1- CAN CONTROL THE ENTIRE PROCESS
(growing, producing, bottling)
2- CHOOSE THE STYLE OF WINE
3- ENSURE QUALITY
(at all stages)
4- KEEP ALL THE “PRODUCTION PROFIT”
5- IF SELLS DIRECTLY TO CUSTOMERS = KEEP ALL THE PROFITS
= PRODUCTION PROFITS + DISTRIBUTION PROFITS
6- AUTHENTICITY FACTOR VALUED BY CUSTOMERS
7- ENABLE STORY TELLING
[q unit=”2″ topic=”4″] MAIN DISADVANTAGES OF BEING AN ESTATE PRODUCER
[a] 1- SUPPORT FULL MANAGEMENT & INDIRECT COSTS
2- SUPPORT EQUIPMENT COSTS
(direct capital costs)
3- SUPPORT FULL COSTS OF RUNNING THE ESTATE
(direct operational costs)
4- SUPPORT THE FULL RISK OF VINTAGE VARIATION
(both quality & quantity)
[q unit=”2″ topic=”4″] BEING A GROWER IS ATTRACTIVE FOR
[a] OWNERS OF SMALL VINEYARDS
[q unit=”2″ topic=”4″] WHY VINEYARD OWNERS MAY DECIDE TO BECOME SOLELY GROWERS
[a] 1- BECAUSE THE VINEYARD SIZE IS TOO SMALL
2- BECAUSE OF THE HIGH CAPITAL COSTS REQUIRED
(buying or hiring equipments)
3- BECAUSE THEY DO NOT WANT TO MARKET & SELL THEIR WINES
[q unit=”2″ topic=”4″] KEY ADVANTAGES OF BEING A GROWER
[a] 1- GENERATES EARLIER CASH FLOWS
(payment due when grapes are sold)
2- NO HEAVY WINEMAKING INVESTMENTS
3- NO WINEMAKING OPERATING COSTS
4- NO NEED FOR MARKETING
5- GROWERS CAN FOCUS THEIR EFFORTS
ON PRODUCING THE BEST GRAPES POSSIBLE
[q unit=”2″ topic=”4″] DISADVANTAGES OF BEING A GROWER
[a] 1- HIGH RISK OF VINTAGE VARIATIONS
(quality & quantity)
2- FLUCTUATIONS IN SUPPLY & DEMAND
(reduced prices + not able to sell all)
[q unit=”2″ topic=”4″] 2 OPTIONS FOR GROWERS TO SELL THEIR GRAPES
[a] 1- ENTER INTO A CONTRACT
(1 or more vintages)
2- SELL GRAPES ON SPOT MARKET
[q unit=”2″ topic=”4″] ADVANTAGES FOR GROWERS TO ENTER INTO A CONTRACT
TO SELL THEIR GRAPES
[a] 1- GIVES GROWER CERTAINTY TO SELL GRAPES
2- LONGER TERM CONTRACTS
(greater security & strong relationships)
[q unit=”2″ topic=”4″] PROS & CONS OF SELLING GRAPES ON SPOT MARKETS
(for growers)
[a] 1- PRO = HIGHER REWARD
(if supply < demand) = HIGHER PRICES
2- CON = HIGHER RISK
(if supply > demand) = LOWER PRICES
[q unit=”2″ topic=”4″] GROWERS-PRODUCERS
(definition)
[a] GROWERS THAT PRODUCE WINE FROM THEIR GRAPES & SELL IT
TO MERCHANTS THAT MATURE & BOTTLE IT
[q unit=”2″ topic=”4″] GROWER-PRODUCER FAIRLY COMMON IN
(which region)
[a] BURGUNDY
[q unit=”2″ topic=”4″] GROWER-PRODUCER MAIN CHARACTERISTICS
[a] 1- LOSS OF CONTROL OVER THE FINISHED WINE
2- MERCHANTS CHOOSE THE LENGTH & TYPE OF MATURATION
3- MERCHANTS CAN BLEND WINES FROM DIFFERENT PRODUCERS
[q unit=”2″ topic=”4″] GROWER-PRODUCER ADVANTAGES
(for grower-producer)
[a] 1- DO NOT NEED TO INCUR COSTS OF MATURATION
2- DO NOT SUPPORT MARKETING COSTS
[q unit=”2″ topic=”4″] GROWER-PRODUCER MAIN DISADVANTAGE
(for grower-producer)
[a] MAKE A SMALLER PROFIT THAN IF THEY WERE TO SELL FINISHED WINE
[q unit=”2″ topic=”4″] MERCHANTS
(definition)
[a] = NEGOCIANT
= BUY IMMATURE WINE (or grapes) TO MATURE IT (+make wine if buying grapes) AND SELL IT UNDER MERCHANTS’ NAMES (or merchants’ brands)
[q unit=”2″ topic=”4″] ADVANTAGE OF MERCHANT ROLE
(for merchants)
[a] 1- DO NOT NEED TO BUY THE VINEYARDS
(no capital costs)
(beneficial in expensive wine regions)
2- DO NOT NEED TO MANAGE THE VINEYARDS
(no operating costs)
3- CAN BUY GRAPES or UNFINISHED WINES
FROM MULTIPLE SOURCES
(flexibility & security)
4- CAN MAKE THEIR OWN WINES
ALONGSIDE THEIR MERCHANT WINES
[q unit=”2″ topic=”4″] RISKS OF BEING A MERCHANT
[a] 1- NO CONTROL OVER GRAPE GROWING PROCESS
2- NO CONTROL OVER WINEMAKING PROCESS
(when buy unfinished wine)
3- MAY BE FORCED TO TURN TO THE SPOT MARKET
[q unit=”2″ topic=”4″] HOW MERCHANTS CAN REDUCE THEIR RISKS
[a] 1- PRODUCE THEIR OWN WINES ALONGSIDE THEIR MERCHANT ACTIVITIES
2- GIVE TECHNICAL SUPPORT & ADVICES TO GROWERS
(to ensure quality)
3- ENTER LONG-TERM CONTRACTS WITH PRODUCERS
4- CAN MIX WINES (or grapes) FROM DIFFERENT SOURCES
(flexibility & protection)
[q unit=”2″ topic=”4″] MICRO NEGOCIANTS
(definition)
[a] SPECIALISE IN SMALL PRODUCTION WINES,
USUALLY FROM INDIVIDUAL VINEYARDS
WORK CLOSELY WITH GROWERS FOR BETTER QUALITY
CAN ACHIEVE SUPER-PREMIUM PRICES
RISE OF MICRO-NEGOCIANTS IN BURGUNDY
[q unit=”2″ topic=”4″] 2 REGIONS WHERE MERCHANTS OPERATE DIFFERENTLY
[a] 1- IN BURGUNDY = MORE INVOLVED IN PRODUCTION
2- IN BORDEAUX = DEAL MORE IN WINE
THAT HAS ALREADY BEEN MADE
[q unit=”2″ topic=”4″] EN PRIMEUR
(definition)
[a] = WINE FUTURES
= METHOD OF SELLING WINE BEFORE IT HAS BEEN BOTTLED
= BUYING WINE WHILE IT IS STILL IN BARREL A
ND REMAINS IN THE PRODUCER’S CELLAR
UNTIL READY FOR BOTTLING. THE WINE WILL BE DELIVERED
ONCE IT HAS BEEN BOTTLED, FEW YEARS LATER
[q unit=”2″ topic=”4″] ADVANTAGE OF THE “EN PRIMEUR” SYSTEM FOR THE SELLER
[a] 1- EARLIER CASH FLOW
2- ESPECIALLY INTERESTING FOR WINES
WITH LONG MATURATION
3- BENEFITS FROM AN ALREADY ESTABLISHED MARKET & BUYERS (merchants…)
[q unit=”2″ topic=”4″] ADVANTAGES OF THE “EN PRIMEUR” SYSTEM FOR BUYERS
(e.g. merchant)
[a] 1- CHEAPER & EASIER TO BUY WINE AT THIS STAGE
2- PRICES CAN GO UP ONCE MATURED & BOTTLED
3- MAY BE THE ONLY OPPORTUNITY TO BUY CERTAIN WINES
(small quantities, prestigious, high demand…)
[q unit=”2″ topic=”4″] DISADVANTAGE OF “EN PRIMEUR” SYSTEM FOR
[a] EARN SMALLER PROFITS
[q unit=”2″ topic=”4″] DISADVANTAGE OF THE “EN PRIMEUR” SYSTEM FOR THE BUYER
(e.g. merchant)
[a] EVEN THE MOST PRESTIGIOUS WINES CAN SEE THEIR PRICES GO DOWN
(no guarantee)
[q unit=”2″ topic=”4″] USUAL TYPES OF WINES SOLD “EN PRIMEUR”
(give 2 criteria + give 4 examples)
[a] 1- WINES WHO BENEFIT FROM CELLAR AGING (usually > 18 months)
2- THOSE WHO ARE PRIZED BY INVESTORS
EXAMPLES: BURGUNDY, BORDEAUX, SUPER TUSCANS, VINTAGE PORTS
[q unit=”2″ topic=”4″] GROWER-MERCHANT
(definition)
[a] WHO OWN VINEYARDS AND PRODUCE WINES FROM THEM
ALONGSIDE WINES FROM BOUGHT-IN GRAPES
[q unit=”2″ topic=”4″] EXAMPLE OF FAMOUS GROWER-MERCHANT IN THE RHONE VALLEY
[a] E. GUIGAL
COTE ROTIE, CROZES-HERMITAGE & GIGONDAS = OWN VINEYARDS
STANDARD COTE DU RHONE = BOUGHT-IN GRAPES
[q unit=”2″ topic=”4″] EXAMPLE OF FAMOUS GROWER-MERCHANT IN BURGUNDY
[a] DOMAINE DUJAC
[q unit=”2″ topic=”4″] 2 STRATEGIES OF GROWER-MERCHANTS BRANDING
[a] 1- E. GUIGAL = own wine + bought-in = UNDER SAME BRAND NAME
2- DOMAINE DUJAC = UNDER DIFFERENT BRAND NAMES
= from bought-in = DUJAC PERE & FILS
= from own vineyards = DOMAINE DUJAC
[q unit=”2″ topic=”4″] CO-OPERATIVES
(definition)
[a] 1- OWNED BY A GROUP OF GROWERS
2- PRODUCE & SELL WINES
FROM GRAPES GROWN BY ITS MEMBERS
[q unit=”2″ topic=”4″] ADVANTAGES OF THE CO-OPERATIVE
[a] 1- POOL FINANCIAL RESOURCES
2- AFFORD MORE EXPENSIVE EQUIPMENTS & EXPERTISE
3- REDUCED COSTS BY BULK-BUYING
4- POOL MARKETING & SALES EFFORTS
5- CAN CREATE, MARKET & VALUE SUCCESSFUL BRANDS
6- CAN GIVE MEMBERS ACCESS TO
– expert viticultural services
– expert winemaking services
– advice on Marketing, Packaging
& Sales services
7- OWNED BY MEMBERS
8-WORK ON DEMOCRATIC PRINCIPLE
= MANAGERS MUST CONSULT
MEMBERS BEFORE KEY DECISIONS
[q unit=”2″ topic=”4″] DOWNSIDE OF THE CO-OPERATIVE
[a] DECISION-MAKING PROCESS CAN BE SLOW & CUMBERSOME
[q unit=”2″ topic=”4″] 2 OPTIONS OF PAYMENT FOR CO-OPERATIVE MEMBERS
[a] MEMBERS RECEIVE A % OF ANNUAL CO-OPERATIVE’S PROFITS BASED ON
– OPTION 1 = VOLUME OF GRAPES BROUGHT
– OPTION 2 = BASED ON THE QUALITY
OF THE FRUITS BROUGHT
[q unit=”2″ topic=”4″] CUSTOM-CRUSH FACILITIES
(definition)
[a] IT IS A VARIANT OF THE CO-OPERATIVE MODEL
WHERE GROWERS DO NOT OWN THE WINEMAKING FACILITIES.
THEY ARE OWNED BY A PRIVATE INDEPENDENT COMPANY
THAT WHO CHARGES GROWERS
EACH TIME THEY WANT TO USE ITS SERVICES.
[q unit=”2″ topic=”4″] WHERE CUSTOM-CRUSH FACILITIES ARE MAINLY FOUND
[a] IN NORTH AMERICA (CAFLIFORNIA)
[q unit=”2″ topic=”4″] INTRINSIC ADVANTAGES OF THE CUSTOM-CRUSH FACILITIES
(compared to the co-operative model)
[a] 1- CAN MAKE QUICK DECISION
2- DOES NOT REQUIRE AGREEMENTS OF THE MEMBERS
[q unit=”2″ topic=”4″] ADVANTAGES OF THE CUSTOM-CRUSH FACILITIES MODEL FOR GROWERS
[a] 1- NO NEED TO INVEST IN EXPENSIVE
WINEMAKING FACILITIES & EQUIPMENTS
2- GROWERS CAN FOCUS ATTENTION ON GROWING
THE BEST FRUITS POSSIBLE & ON MARKETING
3- CAN BENEFIT FROM WINEMAKING EXPERTISE
OFFERED BY THE CUSTOM-CRUSH FACILITY COMPANY
[q unit=”2″ topic=”4″] DISADVANTAGES OF THE CUSTOM-CRUSH FACILITIES
[a] 1- LOSS OF WINEMAKING AUTONOMY
(dates of crushing linked to availabilities…)
2- PAY EACH TIME USES THE FACILITY
3- NEED GOOD RELATIONSHIP WITH GROWERS
TO UNDERSTAND AND MEET
THEIR RESPECTIVE SPECIFIC REQUIREMENTS
[q unit=”2″ topic=”4″] VIRTUAL WINEMAKERS/WINERIES
(definition)
[a] WINEMAKERS WHO DO NOT OWN THE VINEYARDS
NOR THE WINEMAKING FACILITIES
[q unit=”2″ topic=”4″] VIRTUAL WINEMAKERS/WINERIES
(where are they mainly found)
[a] MAINLY IN NORTH AMERICA
[q unit=”2″ topic=”4″] VIRTUAL WINEMAKERS/WINERIES
(how do they work)
[a] 1- BUY GRAPES OR JUICE
2- RENT SOME WINEMAKERS FACILITIES
(or custom crush facilities)
3- MARKET & SELL THE WINE
UNDER OWN BRAND
[x] GOOD JOB!! [restart]
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