Segmenting Wine Market: California Red and White Wine Retail Prices in British Columbia

Abstract

Previous hedonic wine studies have employed conventional regression models to show the effects of objective and subjective attributes such as sensory characteristics, expert quality panel assessments, and regional reputation on wine prices. This paper employs a market segmentation approach based on price to show how lower, mid-priced and higher priced California red and white wines sold in British Columbia (BC) are influenced by objective attributes including geographical origin, grape variety, family brand names, alcohol content, and volume sales. Results show that red and white wine prices are segmented differently and the price segments for either wine type vary from those reported by earlier studies. Also, the effects of numerous attributes on wine prices vary significantly across wine types and price segments. The study findings show higher priced California Cabernet Sauvignon wines fetch a sizeable price premium compared to similar priced varietal wines like Merlot. Higher priced California white wines from Napa are discounted relative to wines labeled with a generic California appellation, whereas higher priced California red wines from Sonoma, Central Valley and Central Coast earn a price discount. Moreover, alcohol content is negatively related to higher priced California red wines, while positively associated with prices of mid-priced and higher priced California white wines.