WSET LEVEL 4 D2 LATEST EXAM

WSET LEVEL 4 D2 LATEST EXAM

Describe what happens when relative supply and demand change - 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 - Answer-- Social

• Economic
• Legislative
• Political

List major social factors affecting demand for wine - 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 - 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 - Answer-- USA

• France
• Italy
• Germany
• China

Explain the increasing wine consumption in USA in the last 20-30 yr - Answer-- Increasing globalization of the food and drinks industry

• Consumers more able and willing to embrace new tastes

WSET LEVEL 4 D2 LATEST EXAM

• Increases and improvement in wine production in the domestic market

Explain the increasing wine consumption in China - 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 - 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 - 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? - 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 - 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? - 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' - Answer-- Consumers are increasingly willing to pay more for individual bottles of wine, often because they are buying less wine by volume

WSET LEVEL 4 D2 LATEST EXAM

• Happens in USA even in UK

List major economic factors that influence demand for wine - Answer-- Strength of economy

• Fluctuations in currency exchange
• Changes to the market

Give examples in which the strength of economy affect wine demand - 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? - 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? - 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? - 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? - 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? - 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 - 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 - Answer-- Monopoly

WSET LEVEL 4 D2 LATEST EXAM

• USA three-tier system
• Min drinking age
• Limit hours in the day for alcohol sale

Give examples of government policies to reduce alcohol consumption - 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? - Answer-- Reduce consumption

• Major venue generator for many governments

List types of taxes applied to alcoholic drinks - 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 - 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? - Answer-Custom duties / trade tariffs What non-member states have entered into trade agreements with EU? - Answer-South Africa and Chile What is embargo - Answer-An extreme form of protection in which a country bans imports from or exports to a particular country

Give examples of wine laws - Answer-Geographical Indications (GIs): Protected

Denominations of Origin (PDOs) and Protected Geographical Indications (PGIs) How do GIs affect wine demand? - Answer-- Reputation

• Increase recognition and demand for wines from that region
• Allow price increase

How can wine laws negatively affect wine production? - 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? - Answer-- Area under vine

• Human factors