Does Vintners Quality Alliance (VQA) certification benefit winemakers in British Columbia (BC), Canada?

Abstract

PurposeThis paper aims to analyze the significance of British Columbia Vintners Quality Alliance (BC VQA) certification that constitutes BC’s wine appellation and its influence on wine prices, the volume of wine sales and winemakers’ revenues.Design/methodology/approachA three-stage endogenous dummy variable specification that addresses the endogeneity of the VQA certification is used. The data used in this research come from the BC liquor distribution branch, and it is composed of a monthly scanner wholesales data of all wines sold by the BC estate wineries located in the Okanagan and Similkameen Valleys of BC in 2011-2015.FindingsThe obtained results suggest that VQA certification has a positive and marginally significant effect on the average volume of sales of BC produced wines, but it seems not to influence the average wine prices and the average revenue share. The results imply then that VQA certification allows rent dissipation via over-certification, which, in turn, allows arbitraging away of producers’ rents.Originality/valueThe research constitutes the first attempt of the use of three-stage endogenous dummy variable modeling approach to correct for the endogeneity of the VQA certification in BC. The analysis is essential for BC winemakers as it can inform them about the current role of the VQA certification in BC. This knowledge is especially important now when the BC wine region is developing its collective, regional reputation and is in the process of introduction of new appellations and sub-appellations.