WSET LEVEL 4 UPDATED FINAL PAPER QUESTIONS AND
ANSWERS MARKED A+
✔✔Who carries out the job of moving goods around the world? Give one specialist wine
transportation company - ✔✔Freight forwarders. JF hillebrand
✔✔Why do specialist wine shippers are better suited for wine transportation - ✔✔- 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 - ✔✔- Air
- Road
- Rail
- Sea (deep-sea)
✔✔In what condition is air transportation the favored method? - ✔✔- 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? - ✔✔- 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? - ✔✔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? - ✔✔Containerization
✔✔What is the major downside of sea transportation? - ✔✔- Slow
- Companies must factor in the time when ordering goods, especially for peak trading
periods
✔✔Containers for bulk wine shipping - ✔✔- Plastic flexitanks within standard steel
shipping containers
- Non-flexible ISO tanks
✔✔Compare shipping capability in bottle and in bulk - ✔✔In each container:
- Bottle: 9000-10000L
- Flexitank: up to 24000L
- ISO tank: up to 26000L
,✔✔List major advantages and disadvantages of bulk transportation - ✔✔- 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? - ✔✔Party
sending the goods
✔✔List major importation costs - ✔✔- 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 - ✔✔- 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 - ✔✔5-25%
✔✔List major sales costs - ✔✔- Property
- Labor
- Equipment and material
- Storage
- Delivery
- Margin at the point of sale
✔✔List major property costs involved in retail sales - ✔✔- 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? - ✔✔- Specialist: 30-50%
- Bars and restaurants: up to 66.6%
- Fixed corkage fee
✔✔List major marketing costs - ✔✔- 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 - ✔✔- Taxes
- Duties
- Trade barriers
- Subsides
,- Min pricing
- Labeling laws
✔✔What is a bonded warehouse - ✔✔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 - ✔✔- 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 - ✔✔- 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? - ✔✔-
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 - ✔✔- Estates
- Growers
- Grower-producers
- Merchants
- Co-operatives
- Custom crush facilities
- Virtual winemakers/wineries
- Conglomerates
✔✔What is an estate producer? - ✔✔It is an winery that produces wines exclusively
from their own vineyards (wholly owned or leased)
✔✔Cite advantages of estate producers - ✔✔- Retain control over entire process -
choose final style of wine
- Total profit
- Marketing benefits: 'estate-bottled' authenticity, tell story
✔✔Cite disadvantages of estate producers - ✔✔- 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? - ✔✔- 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 - ✔✔- 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? - ✔✔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 - ✔✔- Better cash flow: payment due when grapes are
sold
- Focus all efforts on producing best possible grapes
✔✔Cite disadvantages for growers - ✔✔- Vintage variation
- Fluctuation in supply and demand
✔✔What are two options for growers to sell grapes? Cite advantages and
disadvantages - ✔✔- 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? - ✔✔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 - ✔✔- 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? - ✔✔- 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 - ✔✔- No cost of buying and managing vineyards,
especially beneficial in Burgundy, Champagne etc
- Protection and flexibility in bad vintages
ANSWERS MARKED A+
✔✔Who carries out the job of moving goods around the world? Give one specialist wine
transportation company - ✔✔Freight forwarders. JF hillebrand
✔✔Why do specialist wine shippers are better suited for wine transportation - ✔✔- 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 - ✔✔- Air
- Road
- Rail
- Sea (deep-sea)
✔✔In what condition is air transportation the favored method? - ✔✔- 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? - ✔✔- 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? - ✔✔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? - ✔✔Containerization
✔✔What is the major downside of sea transportation? - ✔✔- Slow
- Companies must factor in the time when ordering goods, especially for peak trading
periods
✔✔Containers for bulk wine shipping - ✔✔- Plastic flexitanks within standard steel
shipping containers
- Non-flexible ISO tanks
✔✔Compare shipping capability in bottle and in bulk - ✔✔In each container:
- Bottle: 9000-10000L
- Flexitank: up to 24000L
- ISO tank: up to 26000L
,✔✔List major advantages and disadvantages of bulk transportation - ✔✔- 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? - ✔✔Party
sending the goods
✔✔List major importation costs - ✔✔- 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 - ✔✔- 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 - ✔✔5-25%
✔✔List major sales costs - ✔✔- Property
- Labor
- Equipment and material
- Storage
- Delivery
- Margin at the point of sale
✔✔List major property costs involved in retail sales - ✔✔- 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? - ✔✔- Specialist: 30-50%
- Bars and restaurants: up to 66.6%
- Fixed corkage fee
✔✔List major marketing costs - ✔✔- 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 - ✔✔- Taxes
- Duties
- Trade barriers
- Subsides
,- Min pricing
- Labeling laws
✔✔What is a bonded warehouse - ✔✔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 - ✔✔- 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 - ✔✔- 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? - ✔✔-
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 - ✔✔- Estates
- Growers
- Grower-producers
- Merchants
- Co-operatives
- Custom crush facilities
- Virtual winemakers/wineries
- Conglomerates
✔✔What is an estate producer? - ✔✔It is an winery that produces wines exclusively
from their own vineyards (wholly owned or leased)
✔✔Cite advantages of estate producers - ✔✔- Retain control over entire process -
choose final style of wine
- Total profit
- Marketing benefits: 'estate-bottled' authenticity, tell story
✔✔Cite disadvantages of estate producers - ✔✔- 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? - ✔✔- 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 - ✔✔- 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? - ✔✔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 - ✔✔- Better cash flow: payment due when grapes are
sold
- Focus all efforts on producing best possible grapes
✔✔Cite disadvantages for growers - ✔✔- Vintage variation
- Fluctuation in supply and demand
✔✔What are two options for growers to sell grapes? Cite advantages and
disadvantages - ✔✔- 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? - ✔✔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 - ✔✔- 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? - ✔✔- 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 - ✔✔- No cost of buying and managing vineyards,
especially beneficial in Burgundy, Champagne etc
- Protection and flexibility in bad vintages
