WSET Level 4 D2 Exam With 100% Correct And Verified Answers 2024, Exams of Advanced Education

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WSET Level 4 D2 Exam With 100%

Correct And Verified Answers 2024

Describe what happens when relative supply and demand change - Correct Answer-- When supply exceeds demand: price falls, consumer have greater choice of cheaper alternatives. Producers lower price to remain competitive. Fall in prices lead to increased demand in the long run

• When demand exceeds supply: price increase, consumers willing to pay higher for some wines; others simply switch to another wine or a different alcoholic drink The general factors affecting demand for wine - Correct Answer-- Social
• Economic
• Legislative
• Political List major social factors affecting demand for wine - Correct Answer-- Change in consumption habits
• Change in consumer preferences
• Change in reputation
• Change in spending patterns Describe how global wine consumption habits have changed since 2001 - Correct Answer-- Rapid growth in the first part of 2000
• Fall after 2008 financial crisis as many consumers reduce spending on non-essential products
• Slight decline in recent years and due to remain stable to 2021
• Strong growth in sparkling wine sales Top five countries for total wine consumption in 2017 - Correct Answer-- USA
• France
• Italy
• Germany
• China Explain the increasing wine consumption in USA in the last 20-30 yr - Correct Answer-- Increasing globalization of the food and drinks industry
• Consumers more able and willing to embrace new tastes
• Increases and improvement in wine production in the domestic market Explain the increasing wine consumption in China - Correct Answer-- Growing middle class showing wealth and status - move away from local drinks
• Aspire to drink imported wine
• Bilateral trade agreement with Australia, Chile etc

Give possible reasons for falling wine consumption in traditional wine-drinking countries

• Correct Answer-- Younger people drinking less wine: old fashioned; less time in bars, more on social media
• Health concerns: mostly due to government campaigns, e.g., Loi Evin in France
• Changes in lifestyle: less time for longer meals, less lunchtime drinking
• Reduced availability of cheap wine: reduce over-production, some consumers switch to cheaper alcoholic drinks List a few major changes in consumer preferences in recent years - Correct Answer-- Rose and Prosecco become popular
• Increased demand for lower-alcohol wines
• Medium-sweet German wines and fortified wines going out of fashion What factors could influence a wine's reputation? - Correct Answer-- Good reviews from leading publications and critics
• Online influencers and KOLs
• Presence in popular culture, e.g., films television series, music lyrics or celebrity lifestyle news
• Peer opinions What are price-sensitive markets? Give examples - Correct Answer-Markets where consumers are unwilling to pay more than the lowest price possible for the style of wine they want to buy. E.g., Germany, UK What can producers do to retain customers in price-sensitive markets? - Correct Answer-- Competition is fierce - reduce price or simply choose not to sell
• Reluctant to pass on increases in production costs to consumers
• Try to build up 'brand loyalty' Explain 'premiumization' - Correct Answer-- Consumers are increasingly willing to pay more for individual bottles of wine, often because they are buying less wine by volume
• Happens in USA even in UK List major economic factors that influence demand for wine - Correct Answer-- Strength of economy
• Fluctuations in currency exchange
• Changes to the market Give examples in which the strength of economy affect wine demand - Correct Answer-- 2008 financial crisis: champagne demand falls, Prosecco grew; trade wine for beer, cider etc
• Chinese economy growing: emerging middle class chasing aspirational wines In what kind of market does currency fluctuation have the most significant impact on the demand for wine? - Correct Answer-Price-sensitive market

When a wine-exporting country's currency gains value compared to that of the importing country, what can a producer do? - Correct Answer-- Increase wine price and losing sales

• Keep the price and lose profit When a wine-exporting country's currency loses value compared to that of the importing country, what can a producer do? - Correct Answer-- Lower price and boost sales
• Keep price stable and improve profits for future investment What is one downside of weak currency on the part of the producer? - Correct Answer- Costs more to import equipment and supplies such as barrels, corks and yeast, which may offset additional profits How does changes to the market affect demand for wine? - Correct Answer-- New companies/products enter, others disappear
• Opportunities for competition
• However, if supply is limited, price increase is possible List major legislative and political factors that affect demand for wine - Correct Answer-- Laws prohibiting or limiting alcohol sale
• Government policies to reduce alcohol consumption
• Taxation
• International trade
• Wine laws Give examples of laws that limit alcohol sale - Correct Answer-- Monopoly
• USA three-tier system
• Min drinking age
• Limit hours in the day for alcohol sale Give examples of government policies to reduce alcohol consumption - Correct Answer-- France: Loi Evin in 1991, restrict alcohol advertising
• Scottish: min unit price: GBP(75cl bottle with 12% considered to have 9 units)
• Blood alcohol concentration (BAC) What are two impacts of taxation on wine? - Correct Answer-- Reduce consumption
• Major venue generator for many governments List types of taxes applied to alcoholic drinks - Correct Answer-- Sales tax (VAT in EU)
• Specific excise duties on alcohol, payable at the point of manufacture
• Minimum pricing mechanism List one example in which reduced tax has boosted wine sales - Correct Answer-In 2008, Hong Kong abolished excise duty on wine with the aim of becoming wine trading hub of East Asia

What is tax on imported goods called? - Correct Answer-Custom duties / trade tariffs What non-member states have entered into trade agreements with EU? - Correct Answer-South Africa and Chile What is embargo - Correct Answer-An extreme form of protection in which a country bans imports from or exports to a particular country Give examples of wine laws - Correct Answer-Geographical Indications (GIs): Protected Denominations of Origin (PDOs) and Protected Geographical Indications (PGIs) How do GIs affect wine demand? - Correct Answer-- Reputation

• Increase recognition and demand for wines from that region
• Allow price increase How can wine laws negatively affect wine production? - Correct Answer-- Many limitations such as grape varieties, methods of production, maturation periods etc
• Slow to react to changes in consumer preferences What factors in production could influence wine supply? - Correct Answer-- Area under vine
• Human factors
• Natural factors Which country has seen the biggest growth under vine recently? - Correct Answer- China: now second largest area under vine, seventh largest producer What factors have resulted in the loss of vineyard land? - Correct Answer-- Vine pull schemes
• EU restrictions on planting new vineyards
• Conversion of vineyard land to other uses
• Abandonment of rural areas What is 'wine lake'? - Correct Answer-By the mid 1980s, EU wine production was much greater than demand, creating a surplus that came to be known as the 'wine lake' Where have vine pull schemes mainly occurred? - Correct Answer-- Southern France, Italy and Spain
• Australia, New Zealand, Argentina Give examples where conversion of vineyard land to other uses have occurred - Correct Answer-- Wine grapes are relatively low value
• Elgin, South Africa: replaced with apples
• Santa Clara Valley or Silicon Valley for business
• Property development, often for tourists, as in Madeira

Explain why Spain has increase wine production despite the area under vine decreasing

• Correct Answer-- Average yield has traditionally been low compared with France / Italy, due to very dry climate and the use of traditional low-density planting systems
• Relaxation of laws banning irrigation, which means that areas not previously able to support vines are now viable
• Increased use of modern high density planting List major wine production techniques that have helped wine production efficiency - Correct Answer-- Modern techniques for grape production, such as better site selection, clonal selection, improved canopy management, pest and disease control
• Modern winemaking technology What caused the significant reduction of wine production in Europe in 2017? - Correct Answer-Combination of spring frosts, hailstorms and severe heat waves What wine regions are affected by long-term climate mate change? - Correct Answer-- Serious droughts in South Africa and California
• More reliable sugar accumulation in certain regions in Europe
• New world regions too hot for certain varieties How do GIs limit wine production? - Correct Answer-Define where grapes of wine with specific geographical names can be grown, thus limiting the amount of wine that a can be produced
• European PDO dictate what grapes, max yield and winemaking and maturation techniques What are the major aims of GI? - Correct Answer-- Define wine style produced in a particular region
• Bring supply and demand more into line and reduce the risk of downward price pressure However, with rising demand, there is often pressure to extend the permitted production area How does the PGI system offer greater freedom to producers? - Correct Answer-- Based on the vin de pays system
• Still require 85% grapes from a particular geographical area
• Wider range of varietiesNo rules on viticulture and winemaking What could producers do when there is an oversupply of wine? - Correct Answer-- Sell excess at much lower cost
• Try to find new markets and outlets - takes time, only for someone with market or distributor
• Sell wine under different label and offer to supermarket, deep discounter, bar or restaurant as private label wine

How does the oversupply of wine cause damage to brand image? - Correct Answer-- If a producer is forced to sell at lower than usual price

• If retailer orders too much wine and has to lower the price to sell What are the problems associated with undersupply of wine? - Correct Answer-- Disappointing clients and constrained relationships. Potential penalty or cancellation of contract
• Increased price, but most issue wines to main distributors on allocation
• Cheaper alternatives from other grape varieties or countries, especially in price- sensitive markets Why do very large companies have advantage when there is an undersupply of wine? - Correct Answer-- They have wines at different price points, styles and origin
• They have alternative from within their portfolio
• Sell to different markets - less price-sensitive markets when price increases because of undersupply List major types of costs through the supply chain - Correct Answer-- Grape growing costs
• Winemaking costs
• Transportation costs
• Importation costs
• Sales costs
• Marketing costs Major types grape growing costs? - Correct Answer-- Vineyard establishment
• Vineyard management Major costs during vineyard establishment - Correct Answer-- Land purchase
• Surveying land to check suitability for viticulture and decide on grape varieties
• Site clearance: removing vegetation, large rocks etc
• Building access roads into the vineyard and between vineyard plots
• Buying and planting vines
• Buying stakes and wires etc for establishing and maintaining trellising
• Artificial drainageIrrigation system
• Protection against weather hazards
• Protection from animal pests: high fences, electric fences, netting
• Buying machinery and equipment What factors cause high land price? - Correct Answer-- Price reflects the land's potential to produce high-quality fruit
• Scarcity of land: prestigious regions; small GIs What works are involved in establishing irrigation system? - Correct Answer-- Drilling boreholes

• Building reservoirs
• Laying pipes to bring water to vineyard
• Installing pumps to bring up underground water
• System of delivering water to vines What major machinery and equipment need to be purchased for the vineyard? - Correct Answer-- Tractors
• Spraying equipment
• Harvesting machines = Garages or sheds to store machinery List major vineyard management costs - Correct Answer-- Labor
• Machinery and equipment running costs: fuel and maintenance
• Vineyard materials: replacement vines and trellising
• Vineyard treatments: agro-chemicals, integrated pest management that requires regular weather update
• Water: pay authorities to extract water from a river or buy water
• Electricity: irrigation, bird scarers, frost protection, many winemaking equipment What kind of vineyards require more labor? - Correct Answer-- Steep vineyards
• Organic and biodynamic vineyards: additional procedures, highly skilled staff
• Where labor is expensive
• Harvest time What costs are involved in winery establishment? - Correct Answer-- Land purchase
• Cost of building winery
• Equipment purchase (presses, tanks, pipes, pumps, refrigeration, bottling line) What sources could funding for vineyard and winery establishment come from? - Correct Answer-- Vineyard owner
• Bank
• Investors List major winemaking costs - Correct Answer-- Labor: small number of skilled staff full- time; casual labor around harvest time
• Machinery and equipment running costs, e.g., fuel, maintenance
• Bought-in fruit
• Water, especially cleaning
• Electricity Why does maturing wine add significantly to production cost? - Correct Answer-- Barrels: new vs second-hand
• Oak chips or staves as alternative
• Storage space
• Labor to monitor maturation process
• Loss of cash flow: large amount of money tied up in maturing stock

Discuss costs involved in packaging - Correct Answer-- Materials: bottles, closures, labels, cartons, pallets

• Heavy or unusual bottles and more elaborate labels (embossed, textured paper) more expensive
• Bottling line: buy or rent, or send wine to another estate and pay to use their equipment
• Design fee Who carries out the job of moving goods around the world? Give one specialist wine transportation company - Correct Answer-Freight forwarders. JF hillebrand Why do specialist wine shippers are better suited for wine transportation - Correct Answer-- Wine is fragile, subject to hot temperatures, direct sunlight, excessive vibrations
• Specialist shippers take steps to limit the risk of loss/damage, e.g., temperature- controlled shipping containers List ways of transporting wine from the most to the least expensive - Correct Answer-- Air
• Road
• Rail
• Sea (deep-sea) In what condition is air transportation the favored method? - Correct Answer-- Sending bottles to competition
• Samples to trade/consumer fair
• Very high value wines
• When deadlines are important (Beaujolais Nouveau for the Japanese market) When is road transportation considered cheaper? Why? - Correct Answer-- Short distances since it takes the wine directly to the point of delivery
• Through port since the truck can drive directly on and off a ferry In what condition can rail transportation cost be reduced? - Correct Answer- Containerization, i.e. the good are loaded into a standard container which is lifted onto the back of a truck and then onto the rail wagon What is essential for deep-sea shipment? - Correct Answer-Containerization What is the major downside of sea transportation? - Correct Answer-- Slow
• Companies must factor in the time when ordering goods, especially for peak trading periods Containers for bulk wine shipping - Correct Answer-- Plastic flexitanks within standard steel shipping containers

• Non-flexible ISO tanks Compare shipping capability in bottle and in bulk - Correct Answer-In each container:
• Bottle: 9000-10000L
• Flexitank: up to 24000L
• ISO tank: up to 26000L List major advantages and disadvantages of bulk transportation - Correct Answer-- Advantages: much lighter, efficient, cheaper, environmentally-friendly
• Disadvantages: only suitable for moving large volumes of the same one, only cost advantage over 15000 cases Which party is usually responsible for insurance during transportation? - Correct Answer-Party sending the goods List major importation costs - Correct Answer-- Duty
• Labeling laws compliance: e.g., ABV rounded to nearest whole or half unit in EU, 1.5% variance in US; health warning in US
• Distributor fee Explain "margin" in the context of importation distributor - Correct Answer-- The fee charged by distributor
• Quoted as percentage, calculated as the profit of the distributor divided by distributor revenue Normal range of margin for distributor - Correct Answer-5-25% List major sales costs - Correct Answer-- Property
• Labor
• Equipment and material
• Storage
• Delivery
• Margin at the point of sale List major property costs involved in retail sales - Correct Answer-- Rent or premise purchase
• Decorating and furnishing
• Running costs, e.g., maintenance, security, water, energy, insurance
• Optional in certain countries: property taxes and waste disposal What is the normal range of margin for retailer? - Correct Answer-- Specialist: 30-50%
• Bars and restaurants: up to 66.6%
• Fixed corkage fee List major marketing costs - Correct Answer-- Labor: in-house or external marketing company

• Design and production of bottles and labels
• Marketing campaign: advertising and promotional materials, sample bottles to tasting, retail promotions List major types of legislation that can impact the cost of wine - Correct Answer-- Taxes
• Duties
• Trade barriers
• Subsides
• Min pricing
• Labeling laws What is a bonded warehouse - Correct Answer-Importer can store the wine in a bonded warehouse and only release it when someone wants to buy it (who will then cover the cost of taking the wine out of bonds, including duty payable List ways to mitigate the effect of exchange rate fluctuation - Correct Answer-- Options
• Fixing price in the currency of importer at the date of ordering
• Buying currency to cover specific orders
• Enter a contract to fix the exchange rate
• Trading in USD/EUR
• Opening foreign currency account in local bank
• Opening account in overseas bank Explain option - Correct Answer-- Retailer take an option/reserve on a certain amount of wine at an agreed price
• Producer must set aside the agreed volume of wine, and at an agreed time, the retailer may decide whether or not to take it
• Producer may want to charge higher price
• Large retailers have negotiating power When would opening a foreign currency account in a local bank make sense? - Correct Answer-- When all trades are in one currency such as EUR
• Not suitable where goods are bought in one currency and sold in another List major types of business engaged in the production of wine - Correct Answer-- Estates
• Growers
• Grower-producers
• Merchants
• Co-operatives
• Custom crush facilities
• Virtual winemakers/wineries
• Conglomerates What is an estate producer? - Correct Answer-It is an winery that produces wines exclusively from their own vineyards (wholly owned or leased)

Cite advantages of estate producers - Correct Answer-- Retain control over entire process - choose final style of wine

• Total profit
• Marketing benefits: 'estate-bottled' authenticity, tell story Cite disadvantages of estate producers - Correct Answer-- Cost of managing vineyard and equipping and running winery: some need to hire
• Difficult vintage: reduced production, higher price, which customers may not be willing to pay Why are large estates financially more viable than smaller ones? - Correct Answer-- Producer greater volume of wine more cheaply - economy of scale
• Easier to mechanize List some reasons why the average vineyard tend to be small in many traditional wine- producing regions - Correct Answer-- Historical factors: French succession laws
• Geography: in hillier regions, vineyards are limited by the terrain What kind of business is particularly attracted to the grower option? - Correct Answer- Owner of small vineyards who cannot justify the cost of buying or hiring expensive winery equipment and do not want to have to market and sell wine Cite advantages of growers - Correct Answer-- Better cash flow: payment due when grapes are sold
• Focus all efforts on producing best possible grapes Cite disadvantages for growers - Correct Answer-- Vintage variation
• Fluctuation in supply and demand What are two options for growers to sell grapes? Cite advantages and disadvantages - Correct Answer-- Enter into contract with producer or merchant: certainty, security, strong working relationship; need to meet certain standard, cannot obtain higher price when demand increases
• Sell on the spot market: higher risks but greater rewards What are grower-producers? - Correct Answer-Growers that produce wine from their grapes but sell to a merchant to mature and bottle, common in Burgundy Cite advantages and disadvantages of grower-producers - Correct Answer-- Advantages: no cost of maturation or marketing
• Disadvantages: smaller profit; lose control over style of finished wine; may be blended with wine from other producers What is merchant? - Correct Answer-- Traditional: buy immature wine, mature and sell under merchant's name, often blend different producers prior to bottling

• Now there are also grower-merchants who own vineyards alongside making wines made from bought-in grapes, juice or wine Cite advantages of merchants - Correct Answer-- No cost of buying and managing vineyards, especially beneficial in Burgundy, Champagne etc
• Protection and flexibility in bad vintages
• To have quantities large enough to supply private label wines, which means another outlet Cite disadvantages of merchants - Correct Answer-- Little control over grape growing or winemaking process - mitigate by offering technical support to their suppliers
• Spot market price can be high - mitigate by long-term contracts with suppliers Explain the rise of micro-négociant in Burgundy - Correct Answer-- Land is seldom sold and price is very high
• Micro-négociant therefore specialise in small-production wines usually from individual vineyards that often achieve super-premium prices
• Some work closely with particular growers, others buy on the spot market to be assured of best-quality fruit What is en primeur? - Correct Answer-- Wine futures, a method of selling wine before it has been bottled
• Purchasers buy the wine whilst it is still in barrel and it remains in the producer's cellar until ready for bottling
• Purchase receives the wine once bottled, usually a few years later Cite advantages of en primeur - Correct Answer-- For producers: generate cash-flow earlier, get a sense of the market for setting price = For purchasers: cheaper and easier to buy wine What kind of wines are sold en primeur? - Correct Answer-- Those that benefit from a period of maturation in barrel (usually 18 months or more)
• Those prized by investors, such as Bordeaux, Burgundy, Rhône, Super Tuscans, Vintage Port What are co-operatives? - Correct Answer-Owned by a group of growers and produce and sell wines made from grapes grown by their members Cite benefits of cooperatives - Correct Answer-- Pool financial resources: afford more expensive winemaking equipment and expertise; access to expert viticultural and winemaking services and advice as well as marketing, packaging and sales services
• Marketing collectively can be more efficient and effective, e.g., Plaimont in south-west France, Badischer Winzerkeller in southern Germany
• Can make own-label wines since they can make a large volume of entry-level wine, e.g., La Chablisienne in Chablis, Mont Tauch in Fitou

Cite disadvantages of co-operatives - Correct Answer-- Democratic control means that management must consult members before major decisions are made - slow and cumbersome decision making process, not always to the liking of individual members

• Some are not quality focused if paid by weight Discuss the models of cooperatives - Correct Answer-- Pool resources
• Democratic control
• Members are usually paid a share of the co-operative's annual profit but the method of calculating that varies: traditional pay on weight (Spain and Italy) but may not be quality- focused; some pay on the quality of fruit, save profits and invest in latest technology, research and effective marketing and labeling What is custom crush facility? - Correct Answer-- A variant of the co-operative model found mainly in North America, particularly California
• Growers do not own facility but pay each time they require its services Cite advantages and disadvantages of custom crush facilities - Correct Answer-- Advantages: none of the downside of cooperatives; do not need to invest in expensive equipment, can focus on grape growing and marketing; benefit from expertise of professional winemakers
• Disadvantages: communication is vital. Otherwise grower will pay to have a wine style not wanted What are virtual winemakers/wineries? - Correct Answer-- Winemakers who do not own vineyard land or winemaking facilities
• Buy grapes and juice and rent facilities in another winery or employ the service of a custom crush facility What are conglomerates? - Correct Answer-- Very large companies who own many smaller businesses across various stages of the supply chain, from production to distribution
• Some of them have interest across all the alcoholic products List top 10 wine-producing companies in 2016 - Correct Answer-- E&J Gallo, USA
• Constellation Brands, USA
• The Wine Group, USA
• Treasury Wine Estate, Australia
• Vina Concha y Toro, Chile
• Castel Frères, France
• Accolade Wines, Australia
• Pernod Ricard, France
• Grupo Penalor, Argentina
• FeCoVitA, Argentina Cite major advantages of conglomerates - Correct Answer-- To have businesses across the supply chain

• Can set up regional offices in markets important to them
• Greater control at all stages of the route to market
• Reduce need to pay intermediaries
• Significant negotiating power, can strike hard bargain Cite examples of major companies buying into the wine sector - Correct Answer-- Moët Hennesy-Louis Vuitton: Moët Chandon, Veuve Clicquot, Krug, Cloudy Bay
• Insurance company AXA: top estates in Bordeaux and Burgundy, Quinta do Noval Why are markets for alcoholic beverages seldom totally free? - Correct Answer-- Government control on sale and distribution for tax-raising purposes
• To reduce alcohol abuse Define free market - Correct Answer-- One in which producers are relatively free to choose wether to sell directly to consumer or retailer or through an intermediary
• If relationship with intermediary or retailer not working, producer can cancel contract and find another route to market List three types of market - Correct Answer-- Free market
• Monopoly market
• USA three tier system Define off-premises and on-premises sales - Correct Answer-- Off-premises: retail, off- trade in UK = On-premises: hospitality, on-trade in UK, HoReCa List different routes to market - Correct Answer-- Selling directly to retailers
• Appoint a distributor
• Establish a joint venture
• Use a broker
• Selling directly to consumers Cite major advantages of selling directly to retailers - Correct Answer-- No intermediary costs and margins, maximizing profits
• Producers have final say over how wine is marketed, retain control over brand image - not possible with larger retailers or large chains of restaurants Cite major disadvantages of selling directly to retailers. How to mitigate? - Correct Answer-- Increased administrative burden for producers - time away from vineyards, additional staff, legal compliance in other countries - freight forwarder
• Financial risk of lost or damaged wine - freight forwarder
• Take time to build relationship and understand market in foreign countries - trade fair and tasting in foreign countries List three different models for selling directly to retailers - Correct Answer-- In bottle
• En primeur

• In bulk What is a distributor? - Correct Answer-- Distributor buys wine from a range of producers and sells to a range of retailers
• Generally in the same country as retailers to which they sell
• May or may not be the same country as producer
• May or may not hold stock of products in portfolio
• May or may not have exclusive rights to import / distribute certain products Cite other names for distributor - Correct Answer-- Importer
• Agent
• Wholesaler Cite major benefits of using distributor - Correct Answer-- Knowledge of market: key players, consumer preferences, current trends
• Introduces producer to contacts
• Distributors aware of different retailers' requirements and preferences, focus on appropriate markets
• Helps with administrative burden
• Absorbs risk of lost or damaged wine
• Legal compliance with foreign countries: duty, labeling
• Language barrier
• Increased exposure Cite disadvantages of using distributors - Correct Answer-- Fee - reduce profits
• Distributor take over marketing - lose control over marketing and brand image
• Cannot get undivided attention
• May be dropped if not selling in sufficient quantities
• Large distributors may prefer to deal with large producers Why would companies set up joint venture? - Correct Answer-- To save costs particularly in price-sensitive markets
• Greater control over different stages of the supply chain
• To avoid intermediary costs Cite major requirements of joint venture - Correct Answer-- At different stages of the supply chain
• Companies of comparable size (otherwise more of a takeover)
• Contractual arrangements need to be carefully agreed and documented to ensure each party knows their responsibilities and obligations Give an example of joint venture - Correct Answer-- UK distributor Mentzendorff has major shareholders as Champagne Bollinger and Fladgatge Partnership, who are not direct competitors
• UK distributor Buckingham Schenk and winemaker Herve and Diane Joyaux Fabre create Argentinian wine brand Vinalba, which is sold in multiple countries worldwide

What is a merger? - Correct Answer-- Two businesses join together to create a business with greater resources and capabilities that should be more competitive than the individual businesses were on their own

• Should be equal partnership in theory What is acquisition? - Correct Answer-- Also know as takeover
• When one company buys another company, which then becomes a subsidiary of the purchasing company
• Reasons: usually to acquire capabilities which the purchasing company believes it lacks, creating a more competitive business; or to save small company from going out of business Cite benefits of small company in a takeover - Correct Answer-Despite loss of control, there is usually increased investment, and new routes to market because of the large distribution networks How does a broker differ from a distributor? - Correct Answer-- Distributor is paid by producer to sell wine on its behalf
• Brokers are independent intermediaries who represent neither party. They do not enter into any deals, they merely make them happen. Low overheads - smaller fees (2% of the contract price usually) Cite benefits of using broker - Correct Answer-- Intimate knowledge of a particular, often specialized market
• Bring together buyer and selling, saving the parties time and effort of seeking each other out
• Know wines available and prices willing to sell at
• Also know style and volume buyers are looking for and price they are prepared to pay Describe broker's role in different contexts - Correct Answer-- Bordeaux: courtier, have legal status, intermediaries between Chateaux and négociants
• Bulk wine: ensure correct vats are delivered
• Fine wine trade: facilitate deal between those who buy and sell rare wine Cite advantages and disadvantages of selling directly to consumers - Correct Answer-- Advantages: full profit
• Disadvantages: additional administrative, logistical and staffing costs Cite options for selling directly to consumers - Correct Answer-- Cellar door
• Events
• Wine clubs
• Online Why are cellar door sales attractive to customers? - Correct Answer-- The experience: see where the wine is made, tasting, learn the story

• Foreign tourists: wine may be unavailable or expensive in their country Cite benefits of cellar door sale to producers - Correct Answer-- Larger profits
• Engage directly with consumers: good for marketing since there is chance to taste
• Build up brand awareness and loyalty: cellar door customers more likely to buy in the future
• Word-of-mouth marketing
• Trial new products and get feed back - reducing market research cost Cite disadvantages of cellar door sales - Correct Answer-- Disrupt important work
• Take up space and need to be staffed
• To overcome: cellar door in nearby town Cite benefits of event sale to consumers - Correct Answer-- In towns and cities with other attractions
• Attract larger number and wider range of people
• "Destination effect" in wine regions Cite disadvantages of event sale to customers - Correct Answer-- Producer need to pay to exhibit wine
• Travel expenses and additional staff
• Competition with other producers Cite benefits of wine clubs to customers - Correct Answer-- Opportunity to purchase wine at reducer price for delivery
• Other benefits such as access to wines not normally available to the general public, free tour, invitation to exclusive tastings
• Easy access to wine they enjoy Cite benefits of wine clubs to producers - Correct Answer-- Offered as part of wine tourism, reducing the need to find other outlets
• Marketing purposes: continue to stay in contact with members, word-to-mouth marketing Cite disadvantages of wine club sales - Correct Answer-- Additional work
• Send out wine details
• Process order and ship wine
• Risk of lost or damaged bottle
• Administrative in dealing with 3-tier system in USA Cite benefits of online sales - Correct Answer-- Customers have the comfort of buying at home
• No intermediary costs - larger profit Cite disadvantages of online sales - Correct Answer-- Added cost of delivery
• Set up and maintain reliable website

List major retail outlets to end consumers - Correct Answer-- Supermarkets

• Deep discounters
• Convenience retailers
• Specialist wine retailers
• Hybrids
• Online retailing
• Global travel retail
• Wine investment companies Give a few examples of major supermarkets - Correct Answer-Walmart - USA Woolworths - South Africa Carrefour - France T'escortait - British Which outlet has the largest share of wine sale? - Correct Answer-Supermarkets, in USA, UK and France What kind of wines can be found at supermarkets? - Correct Answer-- Large producers
• Well-known and popular regions and varieties
• Style that appeal to a range of customers, who may have little knowledge
• Local wines in producing countries
• Small amount of wine from artisan producers under the producer's label - on the understanding that when they sell out, there is no more available - attractive to consumers with a strong interest in wine Compare the use of well-known brands and private label wines in supermarkets - Correct Answer-- Well-known brands: attract customers; do not promote customer loyalty
• Private labels: promote customer loyalty; need to be available in large volumes and need to be from large producers What is private label wine? - Correct Answer-- In order that customers cannot easily compare prices, supermarkets stock wines bottled under labels exclusive to them (even if they are available elsewhere under different labels)
• Promote customer loyalty
• Need to be available in large volumes, from large producers Cite advantages of private label wine for producers - Correct Answer-- Attractive opportunity to sell large volume
• High level of market exposure, sometimes in more than one country
• No intermediary costs
• Supermarket-employed winemaker may work closely to supervise production and ensure quality control - help improve quality of other wines

Cite disadvantages of private label wine for producers - Correct Answer-- Competition to stock in supermarkets means that supermarket wine buyers have enormous negotiating power, especially when it comes to price - low profit

• Substantial fees to have wine stocked, and desirable placement
• Cover price promotions
• Contracts with strict requirements regarding quality control, time and manner of delivery, packaging and labeling - or may be refused or penalized
• May be delisted if not selling sufficient quantities What are deep discounters? Give examples - Correct Answer-- Share many features of supermarket but sell at lower price
• Offer permanently lower prices, rarely offer price promotions
• E.g. Trader Joe's; Aldi and Lidi (Germany) ; Netto (Danish) How do deep discounters achieve lower price points? - Correct Answer-- Lower profit margin, rely on volume
• Shops are basic: goods stacked on pallets rather than shelves
• Away from prime retail location - lower rent
• Limited product range - more streamlined, easier to maintain
• Many private labels - opportunity for producers
• Rarely stock major brands, work with less well-known producer with lower overheads, buying up whatever stocks may be available What kind of wine can be found at deep discounters? - Correct Answer-- Private labels
• Small-producer wines with low overheads
• Small amount of expensive wines in more affluent areas or before holidays - attract customers with stronger interest in wine, who may discover other products they like Cite benefits of producer working with deep discounters - Correct Answer-- Private label-large volume
• Work with less well-known producer with smaller overheads, who have a surplus of wine to sell
• Buy directly from producers, cutting intermediary costs
• Though strike hard bargain, do not charge suppliers for stocking their products
• No promotion costs Cite features of convenience stores - Correct Answer-- Closer to where people live
• Open longer
• May be independently owned or a part of franchise
• Store popular brands, similar to supermarkets but smaller
• Tend to be more expensive Why do convenience stores tend to be more expensive than supermarkets? - Correct Answer-- Smaller premises - rents proportionately higher
• Premises designed for other purposes, less efficient
• Higher proportion of staff relative to their size

• Franchise arrangement - fee to franchise owner What kind of producers are attracted to specialist wine retailers? Why? - Correct Answer-- No purchasing power of larger retailers - focus on wine from smaller producers
• Average price sold is higher - high involvement consumers
• Can have hand sell What are high involvement consumers? - Correct Answer-Those who are more interested in wine, willing to spend more per bottle than the general population Cite major features of specialist wine retailers - Correct Answer-- Specialise in wine, sometimes premium spirits and beers, some sell cheese and delicatessen foods
• Most independently owned
• Some specialise in particular styles of wine; some deal with premium wine, en primeur
• Small producers, high involvement customers, higher price
• Personal service: hand sell, build up relationship with regular customers, learn about likes and dislikes, suggesting new wines and let them know when their favorite wine is on offer; customers trust staff
• Special events such as tasting and educational class What is hand sell? - Correct Answer-- Tell story of wine
• Provide information about wine, variety, food pairing Cite disadvantages of producer working with specialist wine retailer - Correct Answer-- Smaller quantity
• Need to employ distributor
• Highly dependent on retail staff What are hybrids? - Correct Answer-- Specialist wine retailers with a bar area where customers can drink the wine they buy in the shop
• Usually sell food too Cite advantages and disadvantages of hybrids - Correct Answer-- Advantages: consumer can try wine before buying; wine by glass - showcase new wine and wine from less well-known regions or varieties
• Disadvantages: stay open later; additional staff; additional bureaucracy where people eat and drink Cite advantages of online retailer - Correct Answer-- No need for expensive retail stores
• Warehouse with lower rent - lower overheads - stock a larger and more varied range of wines
• Chance for small niche producers
• Larger and more varied customer base

Cite major issues of online retailers - Correct Answer-- Delivery expensive: use click and collect

• Need to ensure easy to use, reliable website: distinctive and convey retailer's band image; make sure content is well presented and helpful to customers; kept up to date
• App management in some countries Cite advantages of global travel retail - Correct Answer-- Passenger has leisure time
• After arrival: Do not have to carry and stow extra hand luggage Why has the concept of duty free become less important? - Correct Answer-- Introductions of free-trade zones such as EU
• Customers look for high-quality and high-priced goods not available in their home market - premium wines Cite disadvantages of global travel retail - Correct Answer-- Expensive - high cost of retail space - lower profit margin to producers
• Supplier may choose to leave it What kind of companies are involved in wine investment? - Correct Answer-- Specialist wine retailers (Farr Vintners, Fine & Rare, Berry Bro's & Rudd) who are allowed a small allocation
• Companies which only deal with investment-grade wine (Amphora Portfolio Management, Cult Wines)
• Brokers What are investment-grade wines? - Correct Answer-- Most sought-after and expensive wines in the worldE.g., Bordeaux Premier Cru Classés, Burgundy Grand Crus, top Napa Valley wines
• Rarity value What are "fine wine"? - Correct Answer-- From prestigious regions
• Made in small quantities by leading producers
• Command super-premium prices
• There is a secondary market Cite routes to buy investment grade wines - Correct Answer-- Purchase en primeur
• From specialist retailersTrading exchanges that work like stock exchanges: for retailers and brokers who want to find buyer or seller of particular wine
• Companies that manage wine portfolios of clients, sourcing and selling
• Auction houses: not possible to know storage condition; wine fraud Give two famous examples of wine fraud - Correct Answer-- Hardy Rodenstock: sell wine he claimed to be Thomas Jefferson collection
• Rudy Kurniawan: caught when selling vintages of Clos St. Denis from Domaine Ponsot that have never been produced

Cite major sub-sectors of hospitality - Correct Answer-- Bars - specialist wine bars, general bars

• Restaurants - non-destination, casual dining, fine dining Cite key features of specialist wine bars - Correct Answer-- Specialize in selling wine
• Independent or small chain
• Knowledgeable staff
• Wine of smaller producers, less well known regions / varieties
• High involvement customers
• Many offer food What kind of producers could be attracted to specialist wine bars? - Correct Answer-- Small producer from less well-known regions / varieties
• Medium sized producer producing high quality wine - to larger chains of wine bars who have their own-label wines Why do specialist wine bars not usually have big-name wine brands? - Correct Answer- They can't compete on price with larger bar chains with stronger purchasing power Cite features of general bars - Correct Answer-- Limited wine range from well-known regions / varieties
• Inexpensive or mid-priced
• Local wine in producer countries
• Wine cost considerably more than in shops - some producers have brands sold only to hospitality sector
• May have specific theme that skew the range of drinks on offers Cite features of non-destination restaurants - Correct Answer-- Customer not making meal main focus of lunchtime or evening
• Usually part of chain
• Wine from well-known regions / varieties, major brands
• Inexpensive / mid-priced
• Local wine in producer countries
• May have country-based theme - wine from relevant country Cite features of casual dining restaurants - Correct Answer-- Most independently owned
• Very high quality food and wine, without the formality of fine dining
• Mid-price to premium
• Food and wine pairing in mind
• Mix of better-known and less well-known
• Sufficiently trained staff
• Themed restaurants - relevant country + carefully chosen wine from other countries Cite features of fine-dining restaurants - Correct Answer-- Destination restaurants: experience and meal are the reasons for the visit
• Food and wine pairings particularly important

• Highly-skilled staff
• Wine of highest quality, super premium
• Use brokers to seek out hard-to-find wines Define other types of market compared with free market. Give examples - Correct Answer-- Certain countries have adopted legal structures which limit the supply chain options available to producers and control the sale of wine to the end consumer
• E.g.: monopoly, USA three-tier system Cite examples of countries with monopoly markets - Correct Answer-- Canada, except Alberta - Liquor Control Board of Ontario (LCBO)
• Sweden - Systembolaget is the only retail outlet allowed to sell alcohol; specialist independent distributors licensed under special conditions Cite benefits of monopoly markets - Correct Answer-- Limit alcohol consumption through high tax and high pricing
• Encourage responsible prices by removing incentive to compete
• Staff advise customers based on their requirements
• Final decision to stock is based on quality alone - chance for small producers
• Once adopted, available throughout the country Cite disadvantages of monopoly markets - Correct Answer-- Reduced sale because of high price
• Very difficult to enter and considerable amount of bureaucracy to deal with What is the Volstead Act? - Correct Answer-Between 1919 and 1933, the Volstead Act prohibited the production, sale and consumption of alcohol in the USA, with the exception of wine used for religious purposes Cite the reasons for introducing the three-tier system - Correct Answer-- To prevent a return to the pre-prohibition 'saloon' days of gambling, prostitution, crime and drunkenness
• Many saloons were tied houses, required to buy all products from a particular brewer or distiller
• Three-tier system prevents direct sales from producer/supplier to the retailer to avoid producer monopolies and increase prices What are the three tiers? - Correct Answer-- Producer/importer
• Distributor, including wholesalers, brokers
• Off Premises Retailer (e.g. supermarkets, wine specialists) or On Premises Retailer (e.g. bars, restaurants) What is the key rule of three-tier system? - Correct Answer-- A producer cannot bypass a wholesaler and sell direct to retailer
• Producer can be importer but not wholesaler
• Wholesaler can import but not produce

Cite advantages of the three-tier system - Correct Answer-- Distributors specialize in logistical efficiency and the largest of them service huge areas of country

• Trained sales force and marketing material - potentially provide producer with exposure that would be extremely costly to gain otherwise Cite disadvantages of three tier system - Correct Answer-- Complicated state-level laws to deal with
• Higher price
• Consolidation: distributor decreased by two thirds in the last 20yr (3000-1200), US wineries seeking to enter market increased by a factor of five (2000-9500); this bottleneck works to the disadvantage of smaller producer: product lost in the massive portfolio of large distributors; reduced control over marketing and selling; direct sale to consumer but additional costs of labor, advertising, shipping, legal compliance Why is there a trend for conglomerates throughout the supply chain in the US? - Correct Answer-- The conglomerate can provide an attractive array of products for a large distributor (and indeed to importers in export markets)
• The large distributor needs only to deal with one large company to gain a range of desirable brands that need limited hand-selling
• The multiple retailer can provide a range of products for their customers whilst only dealing with one or two large distributors Give one definition of marketing - Correct Answer-CIM (Chartered Institute of Marketing): The management process which is responsible for identifying, anticipating and satisfying consumer requirements profitably In the context of marketing, what does consumer requirement involve? - Correct Answer-- The wine
• The experience that the wine brings: confirmation of social status, ownership of something perceived as valuable, return on investment capital What is the goal of marketing? - Correct Answer-To create profits either through volume of sales or value of sales What is considered a successful campaign? - Correct Answer-Marketing campaign costs money and resources. A successful one achieves adequate level of profit within a specified timetable Cite key stages of successful marketing - Correct Answer-- Identifying the product/brand to be marketed
• Analyzing the current market
• Identifying the target market
• Setting the objectives of the marketing strategy
• Devising the marketing strategy (the marketing mix)
• Implementing and monitoring the marketing strategy

What are the stages of product life cycle? - Correct Answer-- Introduction

• Growth
• Maturity of stabilisation
• Decline What is the marketing strategy for the introduction phase? - Correct Answer-- Focus on getting product into market, gaining recognition and reputation
• Distribution limited to a few carefully selected channels to begin with What is the marketing strategy for the growth stage? - Correct Answer-- Aim at broader target market, encourage strong growth
• Increasingly widely distributed What is the marketing strategy for the stabilization stage? - Correct Answer-Highlight the difference between the product and other competing products What is the marketing strategy for the decline phase? - Correct Answer-- Extend life cycle
• Improving product
• Update packaging, reducing price to make it more competitive
• Seek new markets What is the purpose of branding? - Correct Answer-- It seeks to move a product away from being a commodity to the extent that consumers will want to buy that product even if it costs more than the minimum possible price
• E.g. Marlborough Sauvignon Blanc - Cloudy Bay compared with others Give one definition of brand - Correct Answer-CIM (Chartered Institute of Marketing): the set of physical attributes of a product or service, together with the beliefs and expectations surrounding it - a unique combination which the name or the logo of the product or service should evoke in the mind of the audience List methods to create a positive brand image in the consumer's mind - Correct Answer-- Substance
• Consumer trust
• Consumer engagement
• Brand story
• Price premium
• Longevity
• Strong brand name Explain substance in the context of brand. Give example - Correct Answer-- Consistently deliver same level of quality and style
• E.g. Champagne NV