Effectiveness of European Appellations of Origin on the International wine market

Abstract

The objective of this paper is to evaluate the role of the Appellation of Origin system on the international wine market, given i) the Geographic Indications international legal protection system, ii) the main aspects of world wine demand evolution and iii) the strategic choices of firms on the international market. On the demand side, we show through descriptive statistics and economic literature review, the increasing wine consumers' appreciation of reputation and origin attributes. On the supply side, we identify the main quality strategies implemented on the international wine market and show an increasing role of origin in firms' strategic choices worldwide. Finally, a direct survey on Italian Appellations of Origin concerning the AO registration on the international market shows an increasing risk of an imperfect use of geographical place names. The main consequences are identified for both producers and consumers. Firstly, a misperception of products' quality attributes can arise and menace the effectiveness of AO as informative tool. Secondly, the free riding phenomenon may arise and affect the AO collective reputation with a consequently long term demand drop. A public authority intervention is envisaged in order to reduce market distortions related to an imperfect use of geographical place names.