Wine Prices Research Articles

Predicting wine prices based on the weather: Bordeaux vineyards in a changing climate

Each grapevine cultivar needs a certain amount of cumulated heat over its growing season for its grapes to ripen properly. In the 20th century’s Bordeaux vineyard, the average growing season temperature was not always sufficient, thus higher than usual summer temperatures were on average linked with higher grape and wine quality. However, over the last 60+ years, global warming gradually increased the vineyard’s temperatures up to the point where additional growing season heat is not required anymore, and can even become detrimental to wine quality: hence the positive effect of higher-than-usual summer temperatures has progressively vanished. In this context, it is unknown whether any weather variable is still a good predictor of a vintage’s quality. Here we provide a predictive model of wine prices, based only on weather data. We establish that it predicts a vintage’s long-term quality more accurately than a world-class expert rating this same vintage in the year following its production. We first design a corpus of features suited to the grapevine lifecycle to extract from them the most powerful drivers of wine quality. We then build a predictive model that leverages Local Least Squares kernel regression (LLS) to factor in the time-varying nature of climate impact on the grapevine. Hence, it is able to outperform previous models and even provides a better predictive ranking of successive vintages than the grades given by world-famous wine critic Robert Parker. This predictive power demonstrates that weather is still a very efficient predictor of wine quality in Bordeaux. The two main features on which this model is built—following grapevine’s phenological calendar and using an LLS architecture to let the input-output relationship vary over time—could help model other agricultural systems amidst climate change and adaptation of production processes.

Estimation of alcohol demand elasticity: Consumption of wine, beer, and spirits at home and away from home

AbstractMost of the previous research examined the demand for alcohol consumed at the off-trade (consumed at home). However, some consumers might prefer to consume alcohol on-trade (away from home) or switch between on-trade and off-trade consumption as a reaction to price or income change. We estimate the Quadratic Almost Ideal Demand System consisting of three broad alcohol categories, consumed on-trade and off-trade, to derive own-price, cross-price, and income elasticities. Selectivity due to the high censoring is treated, and special attention is paid to quality-adjusted price. Beer consumption is the most responsive to income as well as own price changes, while spirits are the least responsive. The own-price elasticity of wine is –0.66 and –1.00 at on-trade and off-trade, respectively. Beer is more price responsive, spirits are less price responsive, and consumption reacts weaker in the off-trade market. Own-price elasticities of demand range between –1.20 and –0.41 at the off-trade and between –1.51 and –0.63 at the on-trade alcohol market. Increasing the price of wine in one market decreases wine consumption in another one. Between the two markets, wine and spirits are complementary, and wine and beer are substitutes in both markets.

A dynamic analysis of wine pricing in Argentina

Purpose The purpose of the study is to investigate micro determinants for dynamic wine pricing in Argentina. We test whether attributes and time affect the price rate of change. The rate of change is selected given the inflationary context of the country. The analysis provides valuable information for wine marketing decisions. Design/methodology/approach The modeling approach relies on panel data analysis for exploiting the data cross-section and time dimension. The contribution explores a massive price dataset at a weekly frequency. The dependent variable is the weekly price variation rate for product/wine and covariates are attributes, time and nominal variables. Given that endogeneity issues arose, the estimations rely on a two-stage least squares and instrumental variables with cluster-robust errors. Findings Estimations show that attributes, time and cost variables are statistically significant, with clear seasonal patterns and quality segmentation affecting pricing: wines made out of specific grapes such as Chenin, Merlot and Seedling or composing a broad category such as red wine, exhibit price undershooting (price rate of change below average). On the other hand, wines out of grapes such as Bonarda, Margaux, Mistela, Moscatel, Oporto, Tannat and Sauvignon Blanc show price overshooting (rate of change above average). In summary, wine made from determined grapes and specific wineries show divergent pricing. Research limitations/implications Covariates such as alcohol content, label descriptor information, winery history, substitute competition and vintage, among others, have not been considered given that the research analyzes more than 750 wine products. Another limitation is that the work does not explore many time-series covariates, such as promotions and idiosyncratic shocks. Practical implications The contribution presents new information on wine pricing patterns affected by weeks, months and years, including the effect of the prolonged 2020 Argentine lockdown. It also analyzes estimations on pricing at the level of grape/blend and wineries previously unknown in this market. The information can influence inventory decisions on the side of the sellers and purchase decisions on the side of consumers. Social implications The analysis includes fine but also low-cost wines that form part of the diet of low-income families in the country. The work detects a divergent pattern in pricing divided by the quality/price of the wine. It also presents information on price timing that may help consumers in the best moment to buy. Originality/value The contribution analyzes unprecedented information on weekly wine prices and presents evidence of pricing tactics from a point-of-sale perspective: It identifies different adjustment speeds related to product features and time effects.

Fine wine pricing in a small and highly competitive market

PurposeThis study aims to identify the price determinants of fine wines in a small and competitive market. These characteristics are found in many lesser-known wine-producing countries and are often difficult to analyse because of lack of data.Design/methodology/approachThis study hand-collects and transcribes wine-related data for 149 Swiss wineries and 2,454 individual wines over the period 2014–2018 directly from wine lists provided by wineries. This study uses multivariate ordinary least squares regressions to analyse the relation between wine attributes and prices and to assess the effect of a currency shock caused by the sudden appreciation of the Swiss franc in 2015 as well as a reduction in information asymmetries induced by the novel coverage of Swiss wines by The Wine Advocate.FindingsPrices mainly depend on collective reputation, production techniques and product positioning. Surprisingly, following a sharp appreciation of the Swiss franc, producers did not reduce prices. The arrival of a highly influential wine expert on the market also had a positive price effect on rated wines and producers. Both hint at wineries attempting to position themselves relative to competitors.Originality/valueFew studies examine the price drivers in lesser-known wine markets, where competition is fierce. This study’s results show that wine pricing differs from other more famous and larger wine regions. In addition, to the best of the authors’ knowledge, this study is also the first to analyse the impact of a currency shock and a reduction in information asymmetries on wine prices.

Product differentiation and the relative importance of wine attributes: U.S. retail prices

AbstractThis paper investigates the relative importance of various attributes, including varietal, brands, and geographic origin, in explaining retail wine prices for the United States market. We use a metric based on the Shapely value, from cooperative game theory, in the context of an empirical hedonic price equation estimated using a large sample of retail wine sales for home consumption over the period 2007–2019. We find that brands alone explain more than 70% of the variation in wine prices, but geographic origin and varietals retain additional explanatory power. Furthermore, information about the geographic origin appears to be a considerably more important attribute than varietals.

Is lightweighting glass bottles for wine an option? Linking technical requirements and consumer attitude

AbstractWhen discussing glass bottles within the context of circular economy, reusability and recyclability are highlighted. However, it is recognised the relevant environmental footprint of glass production due to energy consumption and the impact of transportation of the empty bottles from the production site to the filling plants. Reducing the weight of the bottles has become possible through design and production technologies advances. However, consumer perceptions and technical requirements must be integrated and may conflict. This work aims at contributing to better understanding the relationship between the wine glass bottle weight, consumer perception of wine quality and acceptance of lighter bottles and recognition of sustainability factors related to packaging. Bordeaux shaped bottles are the lightest in the wine market, when compared to Burgundy or Conical, but also the ones with a wider weight range. Bordeaux bottles with 100 g of weight difference could be found for 750‐cL capacity. Design features, punt and finish/neck dimensions were found to limit the reduction in bottle weight. Consumer survey results indicate a correlation between the bottle weight and the wine price. Portuguese consumers tend to associate a heavier bottle with better quality and higher price, particularly those consumers with higher wine expertise. The three top concerns regarding packaging are, by order, being plastic‐free, recyclable and reusable. There is very low awareness on the importance of lightweighting glass bottles as a measure to improve sustainability. More than 80% of the respondents indicated the increase of recycled content as the measure contributing the most to sustainability.

Implicit prices of attributes of fine German Riesling: magnitude and heterogeneity

PurposeThis study aims to analyse how wine attributes affect prices of fine German Riesling wines, provide estimates of the magnitude and heterogeneity of the attributes' implicit prices and draw conclusions on the pricing of fine wine and the research methodology.Design/methodology/approachImplicit prices of attributes of fine German Rieslings are estimated with fixed-effects regressions and their heterogeneity across quantiles of the conditional price distribution is tested with quantile-regression techniques. The analysis is based on a unique online data set for prices and characteristics of collectible wines.FindingsQuality levels according to the German Prädikat system, additional quality awards for exceptional quality, the wine region, age or vintage as well as ullage and the bottle condition are relevant when explaining the price of cellarable wine. Additionally, the influence of the firm's individual reputation is very strong. Relative price premiums for some major attributes of fine German Riesling change significantly across quantiles of the conditional price distribution. Other attributes are characterised by a rather stable relative (but not absolute) price premium.Originality/valueThis is, to the best of our knowledge, the first hedonic price analysis which concentrates exclusively on fine German Riesling wine. By applying both classical and quantile regressions, the authors are able to derive new insights on quality-price linkages in this growing segment of collectible wine and on the research methodology.

Does quality pay off? “Superstar” wines and the uncertain price premium across quality grades

AbstractWe use data from Wine Spectator on 266,301 bottles from 12 countries sold in the United States to investigate the link between the score awarded by the guide and the price charged. The link between quality and price is positive, in line with the literature. In a deeper inspection, however, hedonic regressions show that the price premium attached to higher quality is significant only for “superstar” wines with more than 90 points (on a 50–100 scale), while prices of wines between 50 and 90 points are not statistically different from each other. Furthermore, an analysis performed through normal heteroskedastic and quantile regression models shows that the dispersion of quality-adjusted prices is described by an asymmetric U-shaped function of the score; that is, products with the lowest and highest quality have the highest residual standard deviation. Pursuing excellence is a risky strategy; the average price is significantly higher only for wines that achieve top scores, and the price premium becomes more volatile.

The impact of hail on retail wine sales: Evidence from Switzerland

AbstractThis paper uses a difference-in-differences approach to analyze the treatment effect of a hail weather shock in a specific Swiss wine-growing region. We exploit a natural experiment from Switzerland's Three Lakes wine region in 2013 and examine its impact on the country's retail market. We find statistically significant (1%-level) effects of –22.8% and +2.8% for the volume and price of wine consumed, respectively. These effects can be interpreted as average treatment effects, which is the difference in outcomes between treatment and control groups using a pre-post shock study methodology. Several robustness checks confirm the statistical significance of the estimated effects and the initial assumptions.

How sample bias affects the assessment of wine investment returns

AbstractWine investment returns can come from overall market trends or price increases with age. Because of the short wine price histories available, market and maturation effects are difficult to separate. Consequently, researchers often obtain dramatically different estimates of investment returns. We find that data sample bias may be the hidden cause of the disparate estimates. In wine auction data, the sample bias refers to a shift in the distribution of which wines are traded as a function of their age. Such sample bias in panel data sampled across many different wine labels can distort the estimation of price increases versus age and consequently impact the estimation of market trends. This analysis shows that segmenting the analysis such that the data panels contain wine labels with similar trading characteristics can lead to a more stable estimation.The analysis here looks at data from Bordeaux, Italy, Australia, and California. An Age-Period-Cohort (APC) analysis is applied to data panels from each region. Then the data in each region is segmented by a measure of popularity in order to reduce sampling bias. Data thus segmented is then re-analyzed to demonstrate the difference in estimating price appreciation lifecycles and market trends.

Drinking in style? Literature review of luxury wine consumption

PurposeThis paper aims to review and map the landscape of luxury wine consumption in multidisciplinary literature. It highlights the key themes of analysis, consumer markets and common behaviours of luxury wine consumption.Design/methodology/approachThe paper analyses 85 articles on luxury wine consumption using Leximancer and content analysis.FindingsSix main topics in the extant literature are identified as follows: product perception, wine price, wine information, consumption behaviour, group and China market. Our study revealed the shift in luxury consumption towards affordability, availability, middle-class, younger consumers and predominantly Asian markets.Research limitations/implicationsAs a follow-up to this research, empirical research on luxury wine consumption is needed to establish more precise definitions of terms.Social implicationsWine as a product is susceptible to social changes and preferences, positioning it between old and common luxury.Originality/valueThis research offers theoretical insights into research on luxury wine, including how the literature reflects recent societal changes. It also provides a roadmap for future research in this field.

Impact of introducing a minimum alcohol tax share in retail prices on alcohol-attributable mortality in the WHO European Region: A modelling study.

SummaryBackgroundAlcohol use and its burden constitute one of the largest public health challenges in the WHO European Region. Raising alcohol taxes is a cost-effective “best buy” measure to reduce alcohol consumption, but its implementation remains uneven. This paper provides an overview of existing tax structures in 50 countries and subregions of the Region, estimates their proportions of tax on retail prices of beer, wine, and spirits, and quantifies the number of deaths that could be averted annually if these tax shares were raised to a minimum level.MethodsReview of databases and statistical reports on taxes and mean retail prices of alcohol beverages in the Region. Affordability was calculated based on alcohol prices, adjusted for differences in purchasing power. Consumption changes and averted mortality were modelled assuming two scenarios. In Scenario 1, a minimum excise tax share level of 25% of the beverage-specific retail price was assumed for all countries. In Scenario 2, in addition to a minimum excise tax share level of 15% it was assumed that per unit of ethanol minimal retail prices were the same irrespective of alcoholic beverages (equalisation). Sensitivity analyses were conducted for different price elasticities.FindingsAlcohol is very affordable in the Region and alcohol taxes have clearly been under-utilized as a public health measure, constituting on average only 5·7%, 14·0% and 31·3% of the retail prices of wine, beer, and spirits, respectively. Tax shares were higher in the eastern part of the Region compared to the EU, where various countries did not have excise taxes on wine. Annually, the introduction of a minimum tax share of 25% (Scenario 1) could avert 40,033 (95% CI: 38,054-46,097) deaths in the WHO European Region (with 753,454,300 inhabitants older than 15 years of age). If a 15% tax share with equalisation were implemented (Scenario 2), 132,906 (95% CI: (124,691-151,674) deaths could be averted. All sensitivity analyses with different elasticities yielded outcomes close to those of the main analyses.InterpretationSimilar to tobacco taxes, increasing alcohol taxes should be considered to be a health-based measure aimed at saving lives. Many countries have hesitated to apply higher taxes to alcohol, but the present results show a clear health benefit as a result of implementing a minimum tax share.FundingThis work was supported by the National Institute on Alcohol Abuse and Alcoholism (1R01AA028224) and the Canadian Institutes of Health Research, Institute of Neurosciences, and Mental Health and Addiction (SMN-13950).

Wine Review Descriptors as Quality Predictors: Evidence from Language Processing Techniques

AbstractThere is an ongoing debate on whether wine reviews provide meaningful information on wine properties and quality. However, few studies have been conducted aiming directly at comparing the utility of wine reviews and numeric measurements in wine data analysis. Based on data from close to 300,000 wines reviewed by Wine Spectator, we use logistic regression models to investigate whether wine reviews are useful in predicting a wine's quality classification. We group our sample into one of two binary quality brackets, wines with a critical rating of 90 or above and the other group with ratings of 89 or below. This binary outcome constitutes our dependent variable. The explanatory variables include different combinations of numerical covariates such as the price and age of wines and numerical representations of text reviews. By comparing the explanatory accuracy of the models, our results suggest that wine review descriptors are more accurate in predicting binary wine quality classifications than are various numerical covariates—including the wine's price. In the study, we include three different feature extraction methods in text analysis: latent Dirichlet allocation, term frequency-inverse document frequency, and Doc2Vec text embedding. We find that Doc2Vec is the best performing feature extraction method that produces the highest classification accuracy due to its capability of using contextual information from text documents. (JEL Classifications: C45, C88, D83)

Exploring Relationships between Aroma, Tasty Components Properties, and Marketing Price of Chinese Cabernet Sauvignon Using Gas Chromatography Mass Spectrum and High-Performance Liquid Chromatography

The purpose of this paper was to find the relationship between aroma and tasty component properties and marketing price of Chinese Cabernet Sauvignon red wines. One-way ANOVA was used to compare differences ( p < 0.05 ) between concentrations of phenolic compounds, organic acids, monosaccharides and total acidity, total polyphenols, total sugars, and total reducing sugars in various Chinese Cabernet Sauvignon red wines with different marketing prices. Principal component analysis revealed that the presence of higher amount of alcohol appears to be the characteristic feature for the wine samples, which have a lower marketing price, and the higher level of esters and acids were the features of the wine samples with a higher marketing price. Moreover, samples in marketing price area 39 to 79 RMB and samples in marketing price area 188 to 258 RMB can be totally clustered into their own marketing price area by volatile compounds with OAV > 1. Acetic acid, succinic acid, and glucose made a great contribution to most of the wine samples in the marketing price area ranging from 39 to 79 RMB, and glycerol, fructose, and malic acid were the features of most wine samples in the marketing price area ranging from 188 to 258 RMB. Concentrations of total acidity, total polyphenols, total sugars, total reducing sugars, and alcohol content seemed to have no significant distinguishing ( p < 0.05 ) ability on different samples belonging to different marketing price areas.

Wine quality and pricing in the global wine export market: the case of Chilean wines

ABSTRACT This paper hypothesizes that, from 1985 to 1999, Chilean export wine producers achieved significant quality improvements, which led to successful product differentiation in the global export market. Concomitantly – as the monopolistic competition theory predicts – they increased their wine prices, which represent the value wine consumers attach to the wine attributes (including the quality). Using the wine rating score as an approximation of quality, the paper tests this hypothesis using the nonparametric Wilcoxon rank-sum test. The results strongly support the hypothesis.

The Influence of Economic Policy Uncertainty and Business Cycles on Fine Wine Prices.

This study investigates the impact of both economic policy uncertainty (EPU) and business cycles on the fine wine market. We use a nonlinear autoregressive distributed lag model to measure the influence of these two variables on three major Liv-ex indices over the period 2005M01–2020M12. Our results are multiple. First, fine wine prices are relatively unaffected asymmetrically by EPU, while the economic cycle has a more pronounced asymmetric effect, especially in the short run. Second, uncertainty in Europe and the USA affect fine wine prices more than in China. Third, in the short term, fine wine prices react more strongly to changes in business cycles than to uncertainty. Finally, prices of the five first growths of Bordeaux are asymmetrically influenced by EPU, unlike of the rest of the most prestigious Bordeaux wines. The study also has implications for investment. We argue that a strong and professional strategic intelligence watch would help stakeholders in the secondary wine market to improve their returns, especially when European and US wines are involved. While short-runners should focus on information relative to changes in the business cycle, long-term investors would find it more interesting to closely monitor policy decisions liable to have long-term effects on wine prices (such as taxation, monetary measures…).

The Chinese demand for fine wines

In this presentation, we analyze the Chinese demand for fine wines. First of all, we present what the academic literature says about the definition of fine wine. Then, we show the importance of Asian and especially Chinese richness. These wealthy households are willing to invest in luxury assets and particularly in fine wines. In this context, we also present consumer preferences in the Chinese wine market. Although Chinese demand for fine wines is growing, there is almost no academic literature on this subject. Next, we present our database of the five first growths of Bordeaux over the 2013-2017 period. The first exploratory statistical analyses indicate that the volumes traded are important and that the average prices of the different wines seem to evolve in a similar way. The Chinese auction market for fine Bordeaux wines seems to have been dynamic over the period studied.

Estimating Supply Functions for Wine Attributes: A Two-Stage Hedonic Approach

AbstractA vast body of literature exists on estimating hedonic price functions, which relate the price of wine to its attributes. Some existing literature has employed producer-specific variables such as quantity sold and producer reputation in hedonic functions to potentially capture supply influences on prices. This practice is inconsistent with the original Rosen (1974) hedonic theoretic foundation. To overcome this deficiency, we extend the literature by using the Rosen two-stage approach, employing data from multi-markets for similar wines to estimate inverse supply functions. The application to Australian produced wines sold in different countries demonstrates the importance of a wine's quality and age as attributes in inverse supply functions. Results imply the additional costs of producing better quality and older wines are increased as both quality and age are increased. Estimates also suggest that lower marginal costs for attributes are associated with a smaller producer size and older more established producers. (JEL Classifications: C21, Q11)

METHODS AND METHODOLOGY FOR ANALYSIS AND ASSESSMENT OF COMPETITIVENESS OF WINE PRODUCING ENTERPRISES

Depending on the objective of assessing the competitiveness of wine-producers, different methods can be applied. Methods for assessing the competitiveness of enterprises in the wine sector may be based on one or several indicators, on one or several parameters. Тhe factors most influencing the competitiveness of wine producers are: terroir, quality and price of wines, productivity, financial stability, growth, innovation, production and marketing flexibility, corporate image, advertising, adaptability to the market, etc. Ranking wine producers based on their competitiveness is essential to properly assess and analyse the state and position of each at a particular point in time, judging the outcomes of past events on this basis and laying a good foundation for planning future efforts. The aim of the article is to study the methods and methodology for analysis and assessment of competitiveness of wine producing enterprises.

High-end luxury wine demand and income inequality

PurposeThe purpose of this study is to explore the relationship between income inequality and the demand for high-end luxury wine. The consumption of luxury goods has experienced dramatic growth since 2000 but inequality has been neglected by scholars working on luxury consumption. The exploratory research focuses on wine demand between 2000 and 2019 and analyzes the impact of income inequality among other factors, including gross domestic product (GDP) per capita and GDP growth. The authors want to discern whether highly unequal countries import more expensive wine when compared to countries with lower inequality.Design/methodology/approachThe authors prepared different data sets based on the year and the trade value of each country to compare the differences and commonalities. The regression models incorporate particular foreign trade statistics (average unit price of wine) as an objective variable and the Gini coefficients to measure the relation between the demand for high-end luxury wines and inequality as an explanatory variable. The models also incorporate other control variables such as economic and institutional conditions.FindingsThe analysis demonstrates a positive relationship between the unit price of imported wine and the level of income inequality of the importers. This research suggests that conspicuous consumption, as a means of social distinction, is a major driver of the luxury wine market. Other significant factors include GDP per capita and geographic proximity. However, countries with a high power distance and bad governance do not purchase more luxury wines than others. Hence, rather than the social acceptation of wealth and corruption, the consumption of luxury wines is driven by the levels of economic development and inequality.Originality/valueThis paper is exploratory research that discusses an underexplored issue: the impact of income inequality on the consumption of luxury goods such as high-end luxury wines. It contributes to the literature on wine consumption, luxury business and income and wealth inequalities. These fields are rarely approached together and the research emphasizes the potential offered by such a perspective.