Wine Prices Research Articles

Organic wine purchase behaviour in Germany: Exploring the attitude-behaviour-gap with data from a household panel

Consumer surveys revealed positive attitudes towards organic wine in large consumer segments. Health, environmental and quality benefits were stated most often as drivers for purchase decisions. However, sales data show that the market share for organic wine is still far below 10% compared to the total wine market in all countries. Obviously, there is a gap between consumers’ attitudes and real purchase behaviour in daily decisions. So far, it is not clear whether there is congruence between consumers’ attitudes and their purchase behaviour and if the attitude-behaviour-gap differs among consumer segments. Consequently, the paper at hand explores the attitude-behaviour-gap with household panel data from the GfK Group by means of a cluster analysis. The results show that even though expenditure shares for organic wine were at a low level, attitudes were in line with purchase behaviour for five out of six clusters. For example, consumers who had the highest expenditure share for organic wine showed strong pro-environmental attitudes and a preference for sustainable products. Therefore, comprehensive communication about sustainability issues, which also includes social aspects, could help to further develop the organic wine market and lead to higher market shares. However, for the low-income consumer cluster, the price of organic wine seemed to be an effective barrier despite their positive attitudes towards environmentalism. Future studies need to consider that the extent of the attitude-behaviour-gap is segment specific.

Segmenting wine markets with diverse price functions: Evidence from California red and white wines sold in British Columbia

Previous hedonic price studies on wine market segments, exploring diverse price functions, are constrained by pre-determined price breakpoints, the total number of segments, or both. Using British Columbia Liquor Distribution Branch (BCLDB) retail price data of California red and white wines, this study adopts an endogenous approach to explore the total number of market segments and identify breakpoints in price dispersion simultaneously. Results show that red and white California wines are grouped into two (breaking at Can$14 per bottle) and three (breaking at Can$16 and $30 per bottle) price segments, respectively. Also, implicit prices of wine attributes such as grape variety and geographic origin differ for red and white wines across market segments.

Wine Analytics: Fine Wine Pricing and Selection Under Weather and Market Uncertainty

We examine a risk-averse distributor’s decision in selecting between bottled wine and wine futures under weather and market uncertainty. At the beginning of every summer, a fine wine distributor has to choose between purchasing bottled wine made from the harvest collected two years ago and wine futures of wine still aging in the barrel from the previous year’s harvest. At the end of the summer, after seeing weather and market fluctuations, the distributor can adjust its allocation by trading futures and bottles. This paper makes three contributions. First, we develop an analytical model to determine the optimal selection of bottled wine and wine futures under weather and market uncertainty. Our model is built on an empirical foundation in which the functional forms describing the evolution of futures and bottle prices are derived from comprehensive data associated with the most influential Bordeaux winemakers. Second, we develop structural properties of optimal decisions. We show that a wine distributor should always invest in wine futures because it increases the expected profit in spite of being a riskier asset than bottled wine. We characterize the influence of variation in various uncertainties in the problem. Third, our study empirically demonstrates for a large distributor the financial benefits of using our model. The hypothetical average profit improvement in our numerical analysis is significant, exceeding 21%, and its value becomes higher under risk aversion. The analysis is beneficial for fine wine distributors, as it provides insights into how to improve their selection in order to make financially healthier allocations.

Organic price premium or penalty? A comparative market analysis of organic wines from Tuscany

Previous literature suggests that the price of wine is a function of its intrinsic and extrinsic attributes. Studies have examined the price of wines from various wine producing regions using the hedonic price model to determine the correlation between wine attributes and price. However few studies have examined the relationship between organic production or certification and price. This study uses a hedonic pricing model to examine the price premiums associated with organic production and organic certification for Tuscan red wines produced between 2000 and 2008 in both the Italian and American wine markets. Controlling for a variety of wine attributes, the analysis finds that wines produced with organic practices, but not certified as organic and wines certified, but not labeled as organic receive a higher price compared to conventional wine, for wines with low quality ratings. However, as the wine’s quality rating increases, the positive effects of organic practices and certification on price decrease, and for wine with higher quality ratings, organic practices and certification is associated with lower prices relative to otherwise comparable conventional wines.

Wine indices in practice: Nicely labeled but slightly corked

This paper examines and compares wine price indices available on the wine market with those proposed in academia. We especially analyze the impact illiquidity has on the different indices and validate our findings using a simulation which allows us to define the biases induced by illiquidity on the statistical properties of the indices. We also propose adjustments to help market participants improve the reliability of wine indices and ultimately their decision-making. Our evidence indicates that both the volatility and the beta of fine wine is understated when estimated with existing wine index data. The true volatility and beta of the First Growths from Bordeaux appear to be close to 20%, respectively 0.45–0.60, suggesting that the diversification potential of fine wine is more limited than commonly believed.

Statistical optimization of ethanol fermentation parameters for processing local grape cultivars to wines

Grape juice from two local grape cultivars viz. Punjab MACS purple and H-144 was subjected to prefermentation skin treatment. Ethanol fermentation w.r.t agitation rate, temperature, inoculum size, and nutrient supplementation were optimized using Triple M medium following response surface methodology (RSM). RSM results were numerically optimized keeping temperature “in range” for red wine and “low” for white wine which showed agitation rate of 80 ± 1 rpm for 24 hr, diammonium hydrogen orthophosphate supplementation @ 150 mg/100 ml, inoculum size of 6.1 and 6.5% (vol/vol), and fermentation temperature of 24.6 and 21 °C as optimum for ethanol fermentation of red and white wines, respectively. Optimized results were validated on grape juice of Punjab MACS purple and H-144 cultivars that lead to 12.0 and 11.2 (%vol/vol) ethanol production, respectively. Gas chromatography mass spectrometry analysis revealed the presence of 41 volatile compounds in the form of phenols, alcohols, terpenes, esters, ketones, and amines that add to the nutraceutical and antioxidant value of the wines. Practical applications Present study provides the statistical optimized fermentation parameters for red and white wine production separately. Optimization of an efficient processing technology to produce local grape wines will help to reduce the price of wines so that they are available to common masses at affordable costs besides improving the economic status of grape growers in the state and providing valuable information to wine makers to establish winery under North Indian conditions. Use of synthetic grape juice (Triple M media; during off season of grapes) lead to optimization of ethanol fermentation parameters in two separate fashions considering fermentation temperature as key parameter. Gas chromatography mass spectrometry analysis showed the presence of flavonoids, terpenes, and esters increasing nutritive value of product, providing antioxidants to the consuming person.

Does brand market value affect consumer perception of brand origin in the purchasing process? The case of Tuscan wines

A plethora of studies have demonstrated that of origin is a significant factor in the purchasing process. It is not clear however how the various components of quality perception can affect the level of importance that a consumer might associate with a of origin. This paper aims to bridge this gap by investigating the buying behaviour of a luxury wine compared to that of a super-premium wine. We believe that the components driving consumer quality perception play an important role in reducing or reinforcing the of origin effect, but this role can vary in intensity according to the wine market price segment. The analysis was conducted on a sample of 5,173 consumers from the USA, Canada, Australia, Germany, UK, Sweden, Belgium and Italy. The results reflect that brand knowledge and brand attitude act differently on the of origin effect depending on the market price segment. On the other hand, results regarding brand image showed an overall reinforcing role of the of origin effect not affected by wine price. Some managerial implications arise from the strategic use of the of origin.

Empirical estimation of per capita brandy demand in Armenia

Abstract The empirical estimations were based on linear and double-log regression models, which identified the factors influencing the average per capita brandy demand in Armenia. The model was estimated using quarterly time-series data on per capita brandy consumption, disposable income, prices of various alcoholic beverages for 1997–2015 periods. This is quantitative study based on secondary annual, quarterly and monthly data, and 5% significance level. The average annual per capita brandy consumption data for 1997–2007 periods was obtained from WHO's website, whereas the 2008–2015 data was extracted from the National Statistical Service of the Republic of Armenia. For annual, quarterly and monthly periods from 1997 through 2015, the price data related to various alcoholic beverages, consumer price index were provided in NSS statistical publications of “Socio-Economic Situation of RA”, ”Consumer price indexes (prices) in the Republic of Armenia”, “Prices and tariffs in the Republic of Armenia”. For 1997–2015 periods, the average monthly per capita monetary income data was obtained from “Living Standards of Population and Social Sphere” section of statistical yearbooks. The latter substituted the average per capita monthly disposable income data, since these data were unavailable. Meantime, since the data included numerous years, therefore, the nominal price and income data were adjusted for inflation using consumer price index with 2005 as base year. In conclusion, the average real prices of wine and vodka were statistically significant determinants of the average per capita brandy demand in Armenia, and the demand for brandy was inelastic.

A Relationship Between Price and Quality Rating of Wines From the Czech Republic

ABSTRACTThis report focuses on the relationship between the prices of wines and quality measured on a 100-point quality scale. Only wines from the Czech Republic evaluated during the first round of the Prague Wine Trophy 2015 competition were included in this study. In total, 114 wine samples from five wine categories were examined. Two types of statistical methods were used to obtain results. Chi-square test of independence in contingency table did not show any statistically significant relationship between the commonly used price categories and the quality of wines expressed as medal awards obtained in the competition. Correlation coefficient was used to examine the relationship between price and quality within individual categories of wines. Medium correlation was found in the categories of white cuvée and sparkling wines, and moderate correlation was observed in the Blaufränkisch category. For the category with the highest value of correlation coefficient, regressive function was formed.

How intrinsic values influence wines prices

The use of hedonic price indices is quite common in the wine economics literature, yet they mainly include scores of organoleptic tests and some dummy variables representing varieties and quality signs as geographical indications. This study focuses on the relation between the composition and the price of wines on the example of Hungarian wines. In Hungary, the wine law renders chemical analysis compulsory for all wines released to the market. The study includes five main compounds: actual alcoholic strength, total sugars, total acidity, sugar free extract and pH value and is based on hedonic price indices calculated on a sample of 2,453 wines. Results of several regressions – using different model specifications – consistently show that actual alcoholic strength, sugar content, sugar free extract and pH value are related with the price. Some characteristics have an optimal level, while in other cases the relation is linear.

Italian red wine in the Japanese market: a hedonic price analysis

This study applies the hedonic pricing model to examine important objective attributes appearing on the label of Italian wines influencing average customer wine prices in Japan. Data on 829 red Italian wines sold in the Japanese market were collected through the wine searcher dataset, and the information included on the wine labels, useful for assisting in the selection and appreciation of wines, has been included. A log-linear model was esteemed and the proposed hedonic equation accounted for 43.5% of the variation in wine prices. The results indicate that international grape varieties, alcohol content and the year of production explain most of the price difference. On the other hand, the appellations of origin linked to specific Italian territories negatively affect the medium price of wine. The proposed model will provide useful information for export-oriented Italian wineries in order to establish effective marketing strategies.

Italian red wine in the Japanese market: a hedonic price analysis

This study applies the hedonic pricing model to examine important objective attributes appearing on the label of Italian wines influencing average customer wine prices in Japan. Data on 829 red Italian wines sold in the Japanese market were collected through the wine searcher dataset, and the information included on the wine labels, useful for assisting in the selection and appreciation of wines, has been included. A log-linear model was esteemed and the proposed hedonic equation accounted for 43.5% of the variation in wine prices. The results indicate that international grape varieties, alcohol content and the year of production explain most of the price difference. On the other hand, the appellations of origin linked to specific Italian territories negatively affect the medium price of wine. The proposed model will provide useful information for export-oriented Italian wineries in order to establish effective marketing strategies.

A Rational Approach to Alcohol Taxation

Excessive drinking creates costs to public services which the government can recoup through alcohol taxes, thereby making drinkers internalise the costs. However, in Britain, the alcohol duty regime is excessive and illogical. Not only do revenues from alcohol duty far exceed the costs to public services, but units of alcohol are taxed at dramatically different rates depending on what type of drink they are in. The tax on a unit of alcohol ranges from 7p to 34p. A flat rate of 9p on every unit of alcohol sold would raise approximately £4.6 billion (at current rates of consumption), totally off-setting the external costs of drinking to public services. Alcohol would continue to earn the government additional revenue in the form of VAT on the product, VAT on the duty, and other taxation on the alcohol and hospitality industry. A 9p/unit tax would pay for all the costs incurred to public services by alcohol abuse and would incentivise the development of lower strength drinks across the board. It would also effectively create a minimum unit price of 11p (inlcuding VAT on the duty). Alcohol duty evasion, currently valued at £1.8 billion per annum, would likely fall as a result of the lower price of beer, wine and spirits. A 9p/unit tax would ensure that alcohol duty is a tax on alcohol, not an arbitrary tax on fluids. EU regulation currently prohibits this system of alcohol taxation. Outside of the EU, Britain will no longer be constrained.

On the effects of search attributes on price variability: An empirical investigation on quality wines

The choice of a bottle of wine is affected by the presence of attributes that are searched by consumers and can be evaluated before the purchase. The aim of the paper is to analyze the effect of some search attributes on wine price variability applying the Hedonic Price Model. It allows explaining how the price of wine varies depending on its main quality attributes. The analysis has been based on a sample of wines made in Puglia, Italian region characterized by a tradition in wine production and consumption. Data have been collected from a wine guidebook considering the years 2008–2013. The study provided a measure of the market value of some search attributes for wines produced in Puglia. Attributes as alcoholic content, age and score given by experts, influence price variability allowing wines to obtain a premium price, such as the most known Protected Designation of Origin (PDO) and some Protected Geographical Indication (PGI). The name of the variety seems not to have high influence with the exception of less known and locally grown varieties. Results may be of interest for marketers and policy makers of wine industry. Managerial implications could refer to the importance of differentiation strategies aimed to market segmentation and to the pricing strategy. Policymakers could also find interesting hints about the influence of the different appellations and the importance of minor autochthonous grape varieties.

Determinants of Wineries’ Decisions to Seek VQA Certification in the Canadian Wine Industry

AbstractThe establishment of quality assurance systems is an important development in the wine sector, particularly so for new and emerging wine regions. Focusing on the Canadian wine industry, this article examines the determinants of a winery's decision to adopt Vintners Quality Alliance (VQA) certification for wines. The analysis also examines whether wineries seek VQA certification for higher-priced wines or whether VQA certification leads to higher wine prices. To examine the certification decision, a probit model is applied to a detailed data set of Canadian wines sold in Ontario over the period 2007–2012. Wines from wineries that supply large volumes of wines (more than 1,000 cases) are more likely to have VQA certification, as well as ice wines and wines from specific regions. A Hausman specification test for endogeneity suggests that VQA certification leads to higher wine prices and not the other way around. (JEL Classifications: D22, L15, L66, Q13)

Semiparametric versus parametric hedonic wine price models: an empirical investigation

ABSTRACTIn this article, we conduct formal statistical tests to compare a semiparametric hedonic wine price model with its parametric counterpart using a Canadian data set. The relevant test results turn out to be overwhelmingly in favour of the semiparametric specification. The estimated semiparametric model also provides clear evidence of nonlinearity between wine prices and quality when other wine attributes are controlled for.

Estimating the willingness to pay for a sustainable wine using a Heckit model

Sustainability is an important challenge for wineries. Although sustainability represents a way to differentiate wines and to meet some market segment demands, it also constitutes a necessary strategy to guarantee the future development of the wine sector. However, some wineries state that production costs are higher for sustainable wines than for conventional wines. Thus, the goal of this paper is to analyze the premium price that consumers are willing to pay for a sustainable wine with respect to the price of a conventional wine with similar characteristics. An experiment based on contingent valuation was designed to test the differences in the willingness to pay for sustainable wines among market segments. Further, a Heckit model was estimated, which avoids the problems of the methodologies applied to date. Results reveal that most consumers are willing to pay a higher price for sustainable wines, and that there are differences among the main market segments. In addition, several variables regarding socio-economic characteristics of the consumer (age, gender and income) affect the willingness to pay. Results show that as consumers’ knowledge increases, willingness to pay a premium decreases and that consumers that are more concerned about the environment are willing to pay a higher premium.

Desirability bias and perceived effectiveness influence on willingness-to-pay for pro-environmental wine products

Purpose Consumer marketing suggests that greater concern for the environment is impacting purchase behavior. Recent surveys into US pro-environmental (PE) purchase patterns show a considerable gap between consumers’ attitude and actual behavior regarding PE products. What these products have in common is a normative component. This research aims to understand whether perceived consumer effectiveness (PCE) and social desirability bias (SDB) influence consumers’ purchase decisions regarding PE wine products and willingness to pay (WTP). Design/methodology/approach To assess whether PCE and SDB influence consumer’s actual WTP for PE and conventional wine despite normative beliefs (NBs), two studies with sample sizes of 117 and 124 were conducted in the USA. The first part of each study involved surveying participants as to their NB, SDB, PCE and demographics. The second part of the study measured their actual WTP through participation in an experimental auction. Findings Consumers with high levels of NBs were significantly more likely to pay higher premiums for PE wines compared to non-PE wines and had higher levels of PCE, suggesting that they believe their purchase behavior makes a difference to the environment. However, this same group is strongly influenced by SDB, indicating that they may “over-report” desirable behaviors. Controlling for PCE and SDB, the significant difference in price for PE wine and non-PE wine was mitigated. Those with lower NBs were just the opposite, less concerned whether their purchase behavior directly impacts the environment, feeling that non-PE wine may be a better value proposition. Research limitations/implications The use of an auction method to assess actual behavior may be skewed by the attempt to get a winning bid, and this research was conducted in one particular part of the USA, which limits the generalizability of the results to other parts of the country or world. Originality/value The findings from the current research provide important information for wine producers, distributors and retailers, specifically the development of marketing and branding strategies, and as a method for normative product/brand differentiation in a competitive marketplace.

Identifying the Effects of Objective and Subjective Quality on Wine Prices

AbstractThis study examines a framework developed by Cardebat, Figuet, and Paroissien in a 2014 Journal of Wine Economics article for identifying the impacts of both objective and subjective quality on wine prices. We recognize how various specifications are observationally equivalent and that the interpretation of model estimates depends crucially on the posited assumption for the relation between price and objective and subjective quality. The proposed framework is applied to Australian premium wines. Results indicate that the price impact of expert personal opinions is similar to the impact of objective quality as estimated via weather, vintage, and producer fixed effects. The relative importance of objective quality compared with subjective quality depends crucially on the ability of expert scores to accurately reflect objective quality. (JEL Classifications: C21, Q11, Q54)

Do High-quality Wines Capture Higher Prices? A Hedonic Price Analysis on DLG Quality Tests

With data from the Quality Tests by Deutsche Landwirtschafts-Gesellschaft (DLG) for wine, i.e. Deutsche Bundesweinprämierung, we analyze to what extent quality awards lead to higher wine prices. The empirical analysis reveals that DLG Awards in Silver, Gold and Gold Extra are associated with statistically significant price premia. Apparently, a successful participation in the Quality Tests raises consumers’ marginal willingness to pay for a wine and producers may realize higher net prices. It is crucial here how quality is communicated to buyers in the decision-making process. Price premia due to DLG awards suggest that it is more important to establish a reputation over time than just signaling quality by showing award labels on the bottle. The quantitative results show that quality grades, regional origin, grape variety, wine style and sweetness are further product characteristics that strongly affect wine prices due to their impacts on winegrowers’ marginal costs and/or on consumer preferences.