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Section V: The Business of
Wine
Chapter 17: The Marketing
and Distribution of Wine
History of the Wine Business
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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.
State Laws on Selling and
Transporting Wine
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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
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Partial control states
Wholesale Sales Strategies
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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.
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Provide additional opportunities for wine tasting
such as Trade tastings.
Profitability in the Wine
Industry
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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
Strategic Marketing
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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.
Strategic Marketing in the
Wine Industry
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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.
Branding and the Wine
Industry
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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.
Branding and the Wine
Industry (cont.)
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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.
Alternative Methods of Selling
Wine
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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.
Buying Futures
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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
Buying From Auctions and
Private Cellars
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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.