A hedonic price analysis for the Portuguese wine market: Does the distribution channel matter?

João Rebelo,Lina Lourenço-Gomes,Tânia Gonçalves,José Caldas

doi:10.1080/15140326.2018.1550596

João Rebelo, Lina Lourenço-Gomes + Show 2 more

Open Access

https://doi.org/10.1080/15140326.2018.1550596

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Abstract

ABSTRACTPrice is a core component of both wine firms’ and consumers’ decision-making and so there has been a lot of analysis of the determinants of wine price. Most of the research has used the hedonic price function and assumed that the wine market is homogeneous with respect to both distribution channel and price segments. In this paper, a hedonic price function is estimated using data from a specialist retailer and a large supermarket, i.e., retailers in two different consumer market segments, niche and mass market, respectively. We conclude that the wine market is heterogeneous, and the importance of the various price determinants differs between distribution channels and, in the case of the specialist retailer, throughout the conditional statistical distribution of the price. This result may help the wine companies to place themselves in the market value chain.

Highlights

The wine market is becoming more and more competitive, as a result of the entry of new firms into the market and increasing competition with other alcoholic beverages, such as beer and spirits
We conclude that the wine market is heterogeneous, and the importance of the various price determinants differs between distribution channels and, in the case of the specialist retailer, throughout the conditional statistical distribution of the price
This change occurs in the context of the globalisation of the wine market, a decline in per capita wine consumption in the traditionally producing countries, and a change in consumption patterns

Summary

Introduction

The wine market is becoming more and more competitive, as a result of the entry of new firms into the market and increasing competition with other alcoholic beverages, such as beer and spirits. This change occurs in the context of the globalisation of the wine market, a decline in per capita wine consumption in the traditionally producing countries, and a change in consumption patterns (wine consumers are becoming increasingly sensitive to both quality and price). The combination of the difficulties of processing this information and the presence of unfamiliar products/features explains why consumers link wine prices to a quality indicator (Williamson, Lockshin, Francis, & Loose, 2016)

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