Category Non-Conformity and Reputation Risk Taking in the Scotch Whisky Industry

Abstract

Research on market categories suggests that category non-conformity may reduce consumers’ willingness to purchase. But research also suggests that producers may take advantage of the taken-for-grantedness assumptions by consumers that all products within a category possess expected core features to strategically introduce non-conforming products. In this paper, we argue that when producers consider the advantages of introducing non-conforming products they also consider potential damage to their reputation, and thus balance the risk to their reputation against the gains that can be generated. We therefore also argue that producers with high reputation are more likely to introduce non- conforming products than producers with lower reputation, and once producers have observed the costs of non-conformity, high reputation producers are more likely to introduce more non-conforming products than producers with low reputation. We test this hypothesis using panel data of single malt Scotch introductions in the Scotch whisky industry during the period 2007-2015. Age has been a core feature of single malt Scotch whisky category since its emergence. A severe imbalance between rising demand and a supply bottleneck has led many single malt Scotch producers to launch no-age-statement (NAS) whiskies. We show that distilleries with high reputation for quality based on their products with age statement (WAS), and distilleries with high reputation based on differentiation, are more likely to introduce NAS Scotch whiskies. We also show that distilleries with high reputation for quality based on their products with age statement (WAS) are more likely to increase number of NAS whiskies than distilleries with low reputation based on quality reputation, but there is no difference between high and low reputation distilleries that is based on differentiation. Our study contributes to research that examines links between firm reputation and product non-conformity at the market category level. Our study also makes a contribution to recent research that argues that categories research should shift from emphasis on category stability, to the dynamics of category change.