Section%20V:%20The%20Business%20of%20Wine

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Section V The Business of Wine

• Chapter 17 The Marketing and Distribution of Wine

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History of the Wine Business

• Wine has been made in America going back to the
  nineteenth century.
• During this time, Europe produced superb wines
  due to advances in chemistry and microbiology.
• France established its wine classification
  system.
• Wine industry expanded transportation methods
  improved
• Phylloxera struck in the mid-1800s.
• Prohibition was another serious setback in 1919.
• Prohibition was eliminated in 1933.

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State Laws on Selling and Transporting Wine

• Control states
• The state is the sole distributor of alcohol
• Open states
• Free enterprise private companies operate at
  each level
• Three-tiered system of distribution producer to
  distributor to retailer/restaurant
• On or off-premise licenses
• Partial control states

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Wholesale Sales Strategies

• Sales reps regularly visit their accounts to keep
  customers abreast of what is developing.
• Offer buyers a chance to taste current offerings
• Offer periodic discounts for certain wines
• A post off is a discount applied to a specific
  wine for a specific period of time.
• Provide additional opportunities for wine tasting
• such as Trade tastings.

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Profitability in the Wine Industry

• There are several basic formulas that show
  whether a pricing decision will be effective.
• Freight on Board price
• Laid-in-Cost
• Wholesale Price and Margin on Sell

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Strategic Marketing

• Cost Leadership The firm will deliver the same
  benefits as competitors but at a lower price
• Differentiation advantage A firm delivers
  benefits that exceed those of competing products
• Focus Strategy this is the most intense
  strategy, and addresses a specific segment of the
  market.

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Strategic Marketing in the Wine Industry

• Small boutique wineries depend on producing wines
  that are superior in quality to wines produced by
  competing wineries in the same, or a close,
  region.
• Such wines are unique in the level of their
  quality, their limited numbers and their regional
  identity.
• They have a distinct inherent differentiating
  advantage.
• Wines of this level of quality often have a
  demand that exceeds their supply, and therefore
  are expensive.

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Branding and the Wine Industry

• The majority of wines sold in the United States
  are brands that are able to deliver the same
  benefits as those of competing products but at a
  lower price.
• Brands employ the first marketing strategy known
  as cost leadership.
• Brand wines are often defined by the price at
  which they are sold.
• The wine industry has become dependent upon
  branding.

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Branding and the Wine Industry (cont.)

• Brands now control the US wine market.
• Branding helps differentiate a product from the
  competition by clearly defining its
  differentiating characteristic.
• Marketing team must convey a consistent message
  through all aspects of communication and
  promotion.
• In order to be successful today, all marketers
  must incorporate the Internet into brand
  promotion and sales efforts.

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Alternative Methods of Selling Wine

• Wine should not be shipped by ship, truck or
  plane during the summer or the depths of winter
  cold.
• Prior to the arrival of the newest vintage, many
  retailers seek to move the remains of the
  previous vintage to make room for the new wines
• There may actually be special discounts to the
  consumer.

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Buying Futures

• Buying futures means that the wine is purchased
  before it is actually released to the market.
• Ensure collectors have access to the wines
• Wine is purchased and paid for before the buyer
  can possess it.
• Helps the winery
• Buyer pays up front, thus supporting the winery
• Ensures the wine gets sold

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Buying From Auctions and Private Cellars

• The primary way for restaurants to acquire older
  wines is to purchase them at public auction.
• Bidding is highly competitive.
• Auctions offer access to rare caches of wine.