The Business of Wine (D2 WSET
Quiz_________________?
"Duty-Free" / Global Travel Retail -
Answer✅
The sector was known as 'duty free' (and in some places this term is still used) because
national taxes (duty) were not chargeable on goods sold for personal use in another
country. Consumers therefore looked for low prices, especially when travelling from
countries with high rates of taxes on goods such as alcoholic drinks, tobacco and perfume.
More recently, with the introduction of free-trade zones such as the EU, 'duty free' has
become less important and customers in these shops are now looking for high-quality and
high-priced goods that they cannot find in their home market. Wine retailers have seen the
advantages of global travel retail for selling a range of wines, including super-premium wines.
On the negative side, selling through global travel retail is expensive. The cost of retail space
is high and retailers pass a percentage of that cost on to their suppliers, resulting in lower
profit margins compared to other routes to market. That could weaken the global travel
sector if suppliers choose to leave it.
Quiz_________________?
6 ways legislation can affect the cost of wine? -
Answer✅
1) taxes
2) duties (more specifically targeted than taxes)
-- sometimes too high to enter the market (mid-priced USA wines into the EU)
1
, 3) trade barriers (embargo)
4) subsidies
5) minimum pricing (as in Scotland)
6) labelling laws
Quiz_________________?
Advantages and disadvantages of growers who only grow -
Answer✅
Advantages:
1) generates better cash-flow because payment is due when the grapes are sold, rather than
when the wine is sold
2) no need for marketing and selling the wine and all of the equipment, time and labor that
go into that part
3) can focus all their energy on producing the best possible grapes
Disadvantages:
1) no diversification if there is a bad crop. Less/lesser grapes = less money
Quiz_________________?
Advantages and disadvantages of merchants -
Answer✅
Advantages:
1) flexibility in bad vintages
2) complications and costs of owning land and growing grapes is mitigated
Disadvantages:
1) costs of grapes continues to rise in premium areas
- merchants combat this by entering into long-term contracts
2
, Quiz_________________?
Advantages of selling directly to retailers? -
Answer✅
- avoids the costs of dealing with an intermediary, so profits are maximized for the
producer, and the retailer gets a lower cost as well without distributor margins
- the producer has direct control over what retailers can sell their product and therefore
more direct control over their brand image
Quiz_________________?
Aside from the wine itself, what else do people "want" when they buy wine? (4) -
Answer✅
it is often not simply the wine that the consumer wants but also
1) the experience the wine will bring
2) confirmation of social status
3) ownership of something perceived as valuable
4) or return on investment capital.
The marketing should therefore emphasise how the product can give the consumer the
experience they are looking for.
Quiz_________________?
Co-ops! -
Answer✅
form of ownership where the residents own a corporation that owns the property/produce
- all costs are shared, so are all profits
3
, - democratic control - management must consult members before decisions are made;
downside is that this is a slow process
- The more traditional co-operatives, which consider their role simply to make wine on
behalf of their members and then wait for someone to come and buy it, will pay on volume.
This model is still important in countries such as Spain and Italy, where vineyard sizes are
small and it is not economic for growers to produce and market their own wine
- Now many co-operatives are quality-focused and pay growers based on the quality of the
fruit. They do not pay all their profits back to members, instead investing in the latest
technology, research and effective marketing and labelling. These are some of the most
dynamic wine-producing businesses, producing very good quality wine that can be excellent
value.
Quiz_________________?
Conglomerates -
Answer✅
There is an increasing trend for major companies from outside the wine industry to buy into
the sector. A number of prestigious wine brands have been bought by companies
specialising in luxury goods: for example Moët Hennessy-Louis Vuitton, whose wine brands
include Champagne houses Moët & Chandon, Veuve Clicquot and Krug, and Cloudy Bay in
New Zealand. A number of insurance companies have also been investing in vineyards as
part of their portfolio: AXA, for instance, owns a number of top estates in Bordeaux and
Burgundy, as well as the Port house Quinta do Noval.
Also, E&J Gallo.
Quiz_________________?
Control states in the USA -
Answer✅
States in which the state itself holds monopoly over one or more of the three tiers are
called 'control' states. In these states, generally the only licensed off-premises retailer of
alcohol is the state itself, though in some states this might be only for spirits and not wine,
and many other exceptions. There are 17 control states currently in the USA.
4
Quiz_________________?
"Duty-Free" / Global Travel Retail -
Answer✅
The sector was known as 'duty free' (and in some places this term is still used) because
national taxes (duty) were not chargeable on goods sold for personal use in another
country. Consumers therefore looked for low prices, especially when travelling from
countries with high rates of taxes on goods such as alcoholic drinks, tobacco and perfume.
More recently, with the introduction of free-trade zones such as the EU, 'duty free' has
become less important and customers in these shops are now looking for high-quality and
high-priced goods that they cannot find in their home market. Wine retailers have seen the
advantages of global travel retail for selling a range of wines, including super-premium wines.
On the negative side, selling through global travel retail is expensive. The cost of retail space
is high and retailers pass a percentage of that cost on to their suppliers, resulting in lower
profit margins compared to other routes to market. That could weaken the global travel
sector if suppliers choose to leave it.
Quiz_________________?
6 ways legislation can affect the cost of wine? -
Answer✅
1) taxes
2) duties (more specifically targeted than taxes)
-- sometimes too high to enter the market (mid-priced USA wines into the EU)
1
, 3) trade barriers (embargo)
4) subsidies
5) minimum pricing (as in Scotland)
6) labelling laws
Quiz_________________?
Advantages and disadvantages of growers who only grow -
Answer✅
Advantages:
1) generates better cash-flow because payment is due when the grapes are sold, rather than
when the wine is sold
2) no need for marketing and selling the wine and all of the equipment, time and labor that
go into that part
3) can focus all their energy on producing the best possible grapes
Disadvantages:
1) no diversification if there is a bad crop. Less/lesser grapes = less money
Quiz_________________?
Advantages and disadvantages of merchants -
Answer✅
Advantages:
1) flexibility in bad vintages
2) complications and costs of owning land and growing grapes is mitigated
Disadvantages:
1) costs of grapes continues to rise in premium areas
- merchants combat this by entering into long-term contracts
2
, Quiz_________________?
Advantages of selling directly to retailers? -
Answer✅
- avoids the costs of dealing with an intermediary, so profits are maximized for the
producer, and the retailer gets a lower cost as well without distributor margins
- the producer has direct control over what retailers can sell their product and therefore
more direct control over their brand image
Quiz_________________?
Aside from the wine itself, what else do people "want" when they buy wine? (4) -
Answer✅
it is often not simply the wine that the consumer wants but also
1) the experience the wine will bring
2) confirmation of social status
3) ownership of something perceived as valuable
4) or return on investment capital.
The marketing should therefore emphasise how the product can give the consumer the
experience they are looking for.
Quiz_________________?
Co-ops! -
Answer✅
form of ownership where the residents own a corporation that owns the property/produce
- all costs are shared, so are all profits
3
, - democratic control - management must consult members before decisions are made;
downside is that this is a slow process
- The more traditional co-operatives, which consider their role simply to make wine on
behalf of their members and then wait for someone to come and buy it, will pay on volume.
This model is still important in countries such as Spain and Italy, where vineyard sizes are
small and it is not economic for growers to produce and market their own wine
- Now many co-operatives are quality-focused and pay growers based on the quality of the
fruit. They do not pay all their profits back to members, instead investing in the latest
technology, research and effective marketing and labelling. These are some of the most
dynamic wine-producing businesses, producing very good quality wine that can be excellent
value.
Quiz_________________?
Conglomerates -
Answer✅
There is an increasing trend for major companies from outside the wine industry to buy into
the sector. A number of prestigious wine brands have been bought by companies
specialising in luxury goods: for example Moët Hennessy-Louis Vuitton, whose wine brands
include Champagne houses Moët & Chandon, Veuve Clicquot and Krug, and Cloudy Bay in
New Zealand. A number of insurance companies have also been investing in vineyards as
part of their portfolio: AXA, for instance, owns a number of top estates in Bordeaux and
Burgundy, as well as the Port house Quinta do Noval.
Also, E&J Gallo.
Quiz_________________?
Control states in the USA -
Answer✅
States in which the state itself holds monopoly over one or more of the three tiers are
called 'control' states. In these states, generally the only licensed off-premises retailer of
alcohol is the state itself, though in some states this might be only for spirits and not wine,
and many other exceptions. There are 17 control states currently in the USA.
4
