17
Sep

Reverse Processes on Wine Sector. II.The Market.

Escrito el 17 septiembre 2010 por Jesus Guerro en General

Dealers do not accept the purchase of white wines of past vintages, because neither are in turn supported by quality establishments. Over time, white wine loses its level of acidity, freshness and aroma that characterize their quality.
Surplus bottled white wine therefore bring a considerable problem for wineries.
Sometimes they are sold out through the second main sales channel, Hypermarket Chains. In these cases the reception processes are not rigorous and wineries take advantage of this circumstance to sell their vintage excess. Knowledge and experience of the consumer, in this case, lack thereof, will determine whether these outputs are adequate and profitable.
It is therefore advisable to always check the vintage when buying a white wine in linear, ebing aware about these destinations as explicitly determined by the wineries.

In other occasions the winery agrees a discount price to foster rapid sales. When doing at time, it cloud result an efficient decision, but being late, the brand image might be considerably wounded.

Some wineries have a policy not to start selling the “new” wine until completely selling out the stocks of the previous vintage. The purpose is to prevent excessive stock of ending product which is particularly complex to treat as we shall see later. However, this same policy can be very counterproductive in the face of sales targets, as the “old” wine in the market can “plug” out those forecasted for the new vintage and expected sales slow during that period. Even by implementing strong promotions and reducing profitability, selling “old” wine is certainly complicated in quality channels. Basically, because the experimented customer does not want it.
By contrast, other wineries prefer to remove all the “old” wine “out of distribution channel. Then, launching the new vintage capturing the share market and selling at a better rate. This, however, involves increasing the logistical costs of collection and post sale treatment that wine requires when returning from the market.
At this point, there are two alternatives. To find secondary markets and re-labeling with a second brand or to completely empty bottles and mix the content with new wine tanks. The index of mix permitted depends on the decision of the “Council of regulation” ruling the appellation of Origin. Usually it varies between 10% and 15 % of “old” wine mixed with the new wine. Even, it is advisable to do it during fermentation, but it takes place in November, very early to know what will happen with sales.
Production reverse processes in wine are time consuming and costly. The replacement of the label is a very slow process and the casting itself, which in many cases is performed manually.
Thus, wineries opt to produce in two phases. In the first stage, the wine is only bottled and stored in cages. Thus, a single bottle can be used later for various brands if it become surplus. Labeling with a second brand protects the image of the primary brand.
Emptying bottles means losing the price paid for all “dry” raw materials dry. Wineries will not have opportunities for reuse. Some companies have equipment for the cleaning of the used bottle but they are expensive and space-consuming, so rarely used.
In the case of red wine, market pressure is much lower. The wines aged in oak barrels have sufficient longevity for a chance to adjust to new productions based on the results of the previous. The overlap of different vintages of the same red wine in the market is not penalized as it occurs in the case of white. Even a young red wine that has not been aged in the winery, has a market life of 2-3 years, so 2 or 3 wineries to adjust productions to past inventories. Even some consumers think, the older the wine, the better it is. But this belief rarely works.

Controlling the evolution of sales to consumers, thanks to a proper support and monitoring, is essential to run these strategies efficiently. Some wineries and companies commit the mistake of considering the sale to distributor as definitive. If the distributor doesn´t sell the product, he will return it, probably at the end of the season, when the product has lost past of its value and the company has shorter time to reaction.

 
Both confluent and very particular as in the case of white wine, that sales forecasts not only help to maintain profitable sales price during the life cycle of the product, but at the same time, to avoid the cost of reverse logistics, which can represent a dramatic cost for business.

Comentarios

Mari 15 octubre 2012 - 14:54

An intriguing discussion is worth comment. I think that you should publish more on this subject matter, it may not be
a taboo subject but usually people don’t discuss such issues. To the next! Many thanks!!
Mari

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