Define:
Supply
The amount of a good or a service available for sale.
Define:
Demand
The willingness of consumers or businesses to buy a good or a service.
Select the correct answer.
Widely speaking, when a wine’s supply exceeds demand, prices tend to:
- Decrease
- Increase
- Stay the same
- Decrease
Select the correct answer.
Widely speaking, when the demand of a wine exceeds supply, prices tend to:
- Decrease
- Increase
- Stay the same
What will some consumers do when faced with these rising prices?
Increase
- Some consumers will be willing to pay the higher prices, usually when they feel there is no good substitute or alternative;
- Some consumers will not be willing to pay the higher prices and will switch brands or choose a different category altogether.
Fill in the blank:
As the reputation of a region, producer or even an individual wine grows, demand will ______ and producers may be able to do what?
- Increase;
- Justify higher prices.
Give three reasons why a producer can justify higher prices.
- Improved reputation of the brand or region;
- Positive reviews from media publications;
- Online influencers or Key Opinion Leaders - these influencers can impact brand desirability via their lifestyle and placement of the brand.
Demand for wine – be it a particular brand, grape, or style, or from a particular country or region – is affected by several factors which all must be considered together.
What are those four factors?
- Social;
- Economic;
- Legislative;
- Political.
Give two reasons why the U.S. has become the country with the largest consumption of wine worldwide.
- Over the last generation, wine drinking has progressively become more mainstream, driven by increasing globalization*;
- Wine production improvements and growth in the domestic market.
*growth of multi-national corporations; increased ability of companies to export
products across national borders; consumers more able and willing to embrace new tastes
Give four reasons why wine consumption continues to fall in countries that have already witnessed decreased wine consumption.
- Younger people are drinking less wine;
- Health concerns;
- Lifestyle changes;
- Reduced availability of cheap wine.
Consumer preference swings over the last decade or so.
- Which styles have become more popular?
- Which have become less popular?
- More popular: Rosé, Prosecco
- Less popular: Fortified wines, medium-sweet German wines
What is a ‘price-sensitive market’?
A market where many consumers are unwilling to pay more than the lowest price possible for the style of wine they want to buy.
The UK and Germany are examples of ‘price-sensitive markets.’
Name three hurdles for producers in ‘price-sensitive markets’ where consumers are only willing to spend money on the cheapest, most rock bottom prices.
- Competition amongst producers is fierce within this reduced price range;
- Reluctance to pass cost increases to consumers for fear of losing sales to competitors;
- These markets may be unprofitable for the producer.
If the economy of a country is in decline and consumers’ disposable income shrinks, what typically happens with consumers’ wine spending habits?
They are likely to choose less expensive wines or switch to alternate, cheaper alcoholic drinks, such as cider or beer.
When an economy is seeing economic growth and consumers’ disposable income increases, what typically happens with consumers’ wine spending habits?
They are willing to spend more on wine (and buy more expensive bottles).
For wine producers, name two downsides if their country experiences a weak or devalued currency?
- Costs increase;
- It will be more expensive to import equipment and supplies (barrels, corks and yeast), which may offset any profits.
If a producer is in a country whose currency gains in value (compared to that of the importing country to which they are exporting their wine), what are some options a producer can exercise?
- Keep the price stable and therefore risk losing sales as the product represents less value for money in the importing market;
- Decrease the price of the wine and lose profit.
If an exporting country’s currency loses value against that of an importing country, what are 2 potential options a producer can exercise?
- A producer can either keep the price stable, which should boost sales as the product represents better value for money in the importing market;
- Increase the price and improve profits for future investment.
When new, lower-priced or better-value wines are introduced to a market, name three impacts this has on existing brands within the same category?
- Demand for the existing brands may decrease;
- It may force producers to lower their prices to remain competitive;
- Brands may look to alternative markets.
List four ways in which legislative and political factors can affect wine availability and pricing.
- Laws prohibiting or limiting the sale of alcohol;
- Government policies to reduce alcohol consumption;
- Taxes/tariffs;
- International trade.
In counties, regions, or countries where the sale of alcohol is tightly controlled, what effects does that have on the supply and pricing of alcohol?
- Supply of wine is limited;
- Prices increase or are high.
Name four policies governments have implemented to reduce alcohol consumption.
- Restricting the advertising of alcohol;
- Setting minimum pricing;
- Imposing blood alcohol limits;
- Taxation.
What is the difference between tariffs and an embargo?
- Tariffs are customs duties.
- An embargo is when a country bans imports from or exports to a particular country.
What are two benefits of tariffs for the country imposing them?
- They’re a form of revenue;
- Encourages sales of domestic goods rather than imported goods.
Geographical Indications that are widely recognized have the potential to enhance the following three aspects:
- The reputation of that GI;
- Demand for wines from that GI;
- Prices for wines from that GI.
