Drinking cheaply: the demand for basic wine in Italy

The wine market has evolved dramatically over the last three decades. The premium wine segment has expanded significantly to the detriment of basic wines. Nevertheless, in traditional wine producing and consuming countries, inexpensive wines still account for a large market share, both in volume and value. Marketing strategies for such wines are changing in an attempt to tap this increasingly crowded market segment. Despite its importance, the basic wine segment has not been studied in‐depth and is often assumed to have no product differentiation. This paper tried to ascertain the existence of a possible degree of heterogeneity within nonpremium wines and to measure, by means of elasticity computation, the relationships among categories of wines aggregated with criteria that go beyond price. A demand system (censored QUAIDS) was estimated, using a statistically representative panel of 6,773 Italian households, to see to what extent, if any, substitution occurs in home consumption of basic wines, which is the main channel of distribution of inexpensive wines in Italy. Although price is an important lever in supply policies, our results also suggest the importance of packaging, such as carton as an alternative to glass.     

Latent Class Analysis of Consumer Preferences for Wine in Tirana,Albania

This research aimed to determine wine attributes preferred by consumers in Tirana, Albania, and consumer segments based on preferences and sociodemographic factors. To accomplish these objectives, a conjoint choice experiment was designed. Data were analyzed with the latent class approach. Initial results showed a 5-class model fit best. Results indicated that younger people tend to prefer Italian wines over domestic wines, whereas some older consumers strongly prefer domestic, lower priced wines. Other domestic wine consumers sought higher prices, possibly indicating a niche demand for high-quality Albanian wines. The wine industry and its marketers might use this information to strategically market their wine to different groups. Overall, the majority of the respondents preferred Italian wines, but many might be persuaded toward domestic wine. Government assistance in standardizing the quality of wine and introducing new grape cultivars and efficient farming practices should aid long-term competitiveness of domestic wine in Albania.     

Segmenting the Wine Market Based on Price: Hedonic Regression when Different Prices mean Different Products

Many economists have estimated hedonic price functions for red and white wine. However, estimating a single hedonic price function imposes the assumption that the implicit prices of the attributes are the same for any red or white wine. We argue that even within these two categories, wines are differentiated, and disregarding this heterogeneity causes an aggregation bias in the estimated implicit prices. By estimating hedonic functions specific to price ranges, we show that the wine market is segmented into several product classes or market segments. We find that a model accounting for the existence of wine classes has greater ability to explain the variability in the data and produces more accurate and interpretable results regarding the implicit prices of the attributes.     

In Vino ‘No’ Veritas: impacts of fraud on wine imports in China

China is one of the largest wine importing countries in the world and is poised for continued import growth in the future. Increased wine purchases throughout China have given rise to persistent fraud where fake wines are packaged and sold with counterfeit contents and labels. For exporting countries like France, counterfeit wines displace market share, damage foreign brand reputation, and cause distrust in consumers who are aware of counterfeiting problems throughout the country. We examine the impact of fraudulent wine events (as measured by negative media reports) on Chinese wine demand differentiated by supplying country. We employ the Rotterdam demand system and a switching regression procedure to estimate import demand and compare results across different media variable specifications. Results consistently show that negative reports disproportionately affect French wine regardless of how the media variable is specified. This is not surprising because most fraudulent events involve French wine counterfeits.     

Imports versus Domestic Production: A Demand System Analysis of the U.S. Red Wine Market

The U.S. wine market experienced rapid growth in all facets—production, consumption, exports, and imports—over the past decade. Red wine imports more than tripled while consumption of domestically produced red wines doubled. This research estimates demand elasticities of U.S. red wine imports from five countries accounting for over 90% of imports—Italy, France, Spain, Australia, and Chile—using the first-difference version of the almost ideal demand system (AIDS). These elasticities are compared with those for domestically produced red wine. Results for conditional expenditure elasticities indicate that the U.S. red wine industry gains over imports when U.S. consumers' total expenditures on red wine increase. However, comparing own- and cross-price elasticities reveals an increase in the price of U.S. red wine results in a decline in quantity demanded six times greater than for French and Italian red wines and over 20 times greater than other import countries, thus harming the U.S. red wine industry. Empirical results suggest that U.S. red-wine producers could increase their total revenue by decreasing prices, while Italian and French producers can increase total revenues by increasing them.     

The relation between Australian wine show results and prices

This paper assesses wine show results and their relation with wine prices across seven Australian shows. Consistent with previous studies, only a moderate degree of agreement for medals exists among shows. The correlation of wine show points across shows is also only moderate. Hedonic wine price functions, which employ show medal/points as direct measures of quality, indicate that for some shows estimated premiums are statistically significant and may possibly be practically important. The relation of show opinion with prices, however, is reduced for models which recognise the separate impact of objective quality and show opinion on prices. The results imply that producers should seek to improve the objective quality of their wines to achieve price premiums. Producers could also selectively target some wine show opinions to gain additional higher prices.     

U.S. Demand for Imported Wines

The U.S. is viewed as a lucrative market outlet for surplus wines produced in the leading wine exporting countries in the world. Structural U.S. import demand functions were estimated for French, Italian, Spanish, Portuguese, and German wines as well as for those that are U.S. produced. The equations were estimated with two-stage least-squares because of simultaneity between quantity demanded and price. Direct price, cross, and income elasticities were calculated to determine the degree of competiveness among the various wines of differing origin. Two separate groups of wine were identified. First, U.S. produced, French, and German wines were in one group. Spanish, Portuguese, and Italian wines comprised the second group. The latter group also encountered competition from the first group of wines.     

The Importance of Intrinsic and Extrinsic Sparkling Wine Characteristics and Behavior of Sparkling Wine Consumers in Croatia

ABSTRACT

Sparkling wines accounted for 7.7% of the total wine consumption in 2011 in the world. Even though sparkling wine remains a long way behind still wine in total volume of production, world consumption of sparkling wine is expected to grow at a faster rate with an 8.5% increase by 2016. Although Croatia is a country with a high residual per capita consumption, the share of sparkling wine consumption compared with total wine consumption amounts only 1.3%. To collect data on Croatian sparkling wine consumers’ behavior and attitudes, we performed online research with 273 consumers. The research confirmed the low frequency of sparkling wine consumption. The most important characteristics of sparkling wines for Croatian consumers are their intrinsic characteristics (taste, smell) together with price:quality ratio, while visual appearance, expert reviews, or wine prizes are less important. Consumption of sparkling wines is generally associated with specific celebrations. Due to such perception of exclusive wine use, there is a need to break down this prejudice by better sparkling wine promotion through wine-tasting events, seminars, and gastronomy offers, especially for younger consumers.     

The Value of Product Attributes,Brands and Private Labels: An Analysis of Frozen Seafood in Germany

It is well known that the price of a food in general and fish in particular is a function of a number of attributes such as species, product form, processing form and size. However, limited attention has been given to the influence of private labels, production method, eco‐labels and promotions. We use a unique dataset which identifies these attributes in the German seafood market. We estimate a hedonic price function, and our results highlight the importance of brand and labels for seafood prices in Germany. Our results also suggest that private label products are discounted by 20%, while branded products achieve substantial price premiums, as do fish products from aquaculture.     

The Pricing of Experience Goods: The Example of en primeur Wine

The market for "primeur" wine in the Bordeaux region allows producers to sell wine that is still in barrels. As with all experience goods, producers send quality signals to uninformed buyers. Using original data on Bordeaux wines, we show that the pricing behavior of producers depends to a large extent on their reputation, and much less on short-term changes in quality (as measured by experts' grades). We also find that the primeur price has an informative role, since a 10% increase in primeur price leads to a 3% increase in prices on the market for bottled wine.     

Product Differentiation with Credence Attributes and Private Labels: The Case of Whitefish in UK Supermarkets

The retail market for seafood is dynamic with substantial competition both amongst retailers and between private labels and national brands. New product attributes are added in attempts to differentiate products and to attract consumers. Credence attributes, in particular those related to eco‐labels and fishing method, have become more common. But little is known about how these and other credence attributes are valued in the retail market. In addition, little is known about price differences between private labels. To estimate the value of these attributes, weekly in‐store observations of selected frozen whitefish products were conducted in seven UK retail chains in the city of Glasgow. An estimated hedonic model shows a substantial price premium for fishing method (line‐caught), a premium for both home (Scottish) and non‐home country of origin (Icelandic) and a premium for the Marine Stewardship Council eco‐label. An uncertified eco‐label owned by a large seafood manufacturer leads to reduced price. The study also reveals substantial price differences between private labels for whitefish. The results contribute new insights regarding opportunities for differentiation by credence attributes which may lead to more sustainable and effective resource use along the value chain for frozen whitefish.     

Brand Personalities of Global Wine Exporters: A Collective Reputation Theory Perspective

This study examines the perceptions of the personalities that wine drinkers attribute to the wines of the six top exporting countries. An exploratory study with an inductive approach was used, and data were collected from 757 wine consumers from 22 countries. Based on the collective reputation theory, we question the use of standardized versus localized strategy when approaching international markets by the top producers of the world. By means of correspondence analysis, our results indicate that each wine producer country tends to have a different positioning among consumers from different regions of the world. Besides, it is evident that a standardized approach to marketing and promotion of a specific country’s wines to global markets could be viewed as rather myopic, representing a gross oversimplification of reality, and contradicting what our findings reveal about differences in global consumers’ perceptions of wines from the big six producers.     

Alcohol Tax,Price–Quality Proxy and Discounting: A Reason Why Alcohol Taxes May Rebound

The increasing concern about the external costs of alcohol consumption has often led economists and policy‐makers to advocate taxes to internalise the social costs and target consumption. However, in certain markets for alcoholic drinks – particularly wine – price is not only a cost but also an indicator of quality, guiding consumer choice. There is, perhaps, a higher probability of ex post satisfaction with products at higher prices in a market with potential adverse selection. The price–quality proxy interacts with discounts, where the full price of the product before discount (referred to as the External Reference Price in the marketing literature) is used as a quality reference. This study shows that an alcohol tax in the presence of discounting may increase the perceived value of the product, and therefore persuade consumers to prefer the purchase of more expensive wines with the highest discount. As a consequence, consumers could favour products with higher alcohol content – which contradicts the objectives of the policy. Consequently, for an alcohol tax to be effective discounting of alcoholic beverages (in particular, wine) should be regulated to avoid the policy backfiring.     

The Importance of Geographic Wine Appellations: Hedonic Pricing of Burgundy Wines in the British Columbia Wine Market

To examine the buying habits of British Columbia (BC) wine consumers and their appreciation of French wine attributes, we estimate a hedonic price function for Burgundy wines which comprise an array of different appellations, vintages, and alcohol levels. BC ranks among the top three wine-consuming provinces in Canada and residents' wine preferences are likely linked to an emerging sophistication in tastes. This study uses weekly retail sales data and attributes of Burgundy wines reported by the BC Liquor Distribution Branch. The results confirm the collective reputation effects of the Burgundy wine region and show that the implicit values differ between white and red Burgundy wines with village designation and vintage having a relatively larger effect on white wine prices than in the case of red wines. Burgundy white wines, such as Aloxe-Corton, Chassagne-Montrachet Premier Cru, Meursault Premier Cru, and Chablis Grand Cru, were associated with larger price premia. Afin d'examiner les habitudes d'achat des consommateurs de vin de la Colombie−Britannique et leur appréciation des caractéristiques des vins français, nous avons estimé une fonction de prix hédoniste des vins de Bourgogne d'appellations, de millésimes et de degrés d'alcool variés. La Colombie−Britannique figure parmi les trois provinces canadiennes où l'on consomme le plus de vin, et les préférences des consommateurs de vin découlent probablement d'un raffinement des goûts. Dans la présente étude, nous avons utilisé les données des ventes au détail hebdomadaires et les caractéristiques des vins de Bourgogne fournies par la Société des alcools de la Colombie-Britannique (BC Liquor Distribution Branch). Les résultats confirment les effets de la réputation de la région viticole de la Bourgogne et montrent que les valeurs implicites diffèrent entre les vins de Bourgogne blancs et rouges, et que l'appellation «village» et le millésime influent davantage sur les prix des vins blancs que sur ceux des vins rouges. Les prix des vins de Bourgogne blancs, tels que Aloxe-Corton, Chassagne-Montrachet Premier Cru, Meursault Premier Cru et Chablis Grand Cru, ont présenté des primes plus élevées.     

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

This 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.     

Consumer response evaluation of a greek quality wine

This paper reports on the attempt made to identify consumer response on certified quality wine with a destination of origin (PDO) indication. Given that the current consumer interest in quality food has increased, it is important to measure their level of awareness of and overall behaviour towards these products. Emphasis is given on quality wine, produced in the region of Peza, Crete, which is labeled as a cooperative PDO product with high quality standards. A survey that utilized a self-administered questionnaire was designed to obtain the data needed for the study that took place in the Attiki region. Consumers who participated in the survey were asked to indicate (i) their general level of knowledge on PDO products and on Peza cooperative wine in particular, (ii) their attitudes towards several quality attributes, considered when buying and consuming wine, (iii) their intention to purchase a higher priced Peza cooperative wine with a quality certification and PDO indication label. The results seem to be important for all the market bodies that are involved in the supply chain of this product since they may be a guide to developing production and marketing strategies that instil consumer confidence, assure consumer satisfaction and therefore satisfy demand.     

Wine market prices and investment under uncertainty: an econometric model for Bordeaux Crus Classés

This paper describes an econometric assessment of wine market prices for 21 of the Crus Classés châteaux in the Bordeaux region of France. The model developed in the analysis attempts to define the relationship between factors that influence wine quality and those that influence wine prices. Characteristics of the models are: (1) climate influences on grape composition (acid and sugar levels), (2) grape composition influences on market prices, (3) subjective quality evaluations (Parker‐points) on market prices, and (4) the effects of age of the wine on market prices. The results indicate that composition levels of Merlot‐dominated wines are more climate sensitive than those from Cabernet Sauvignon‐dominated wines. Overall, warm, dry summers result in high sugar and low acid levels at harvest which in turn lead to higher quality wines. Wine market price sensitivity to Parker‐point ratings indicates that properties with high Cabernet Sauvignon‐dominated wines are highly dependent on the external ratings while Merlot‐dominated wines have a decreased rating sensitivity. Smaller properties tend to gain over proportionally from high ratings indicating great jumps in price from year to year. Additionally, châteaux that have experienced high ratings for past vintages exhibit great sensitivity to point steps in ratings for current vintages. Aging has a positive effect on Bordeaux wine pricing. This is due to the increasing maturity as well as the increasing absolute scarcity. Absolute scarcity of product is expressed by the size of the property, with small properties producing less per vintage and therefore having less in the market. Additionally, Merlot‐dominated wines exhibit more maturing potential and profit more from aging than Cabernet Sauvignon‐dominated wines. Average per château real annual profit ranges from 1 to 10%. High levels of grape ripeness, absolute scarcity, and smaller properties that are dominated by Merlot in their blend lead to the highest profits. Forecasts for a vintage not yet on the market indicates that 1995 is better than 1994 for both Cabernet Sauvignon and Merlot‐dominated wines, but that 1996 and 1997 are not as good as 1995, especially for Merlot‐dominated wines.     

Hedonic wine price functions with different prices

This study examines the impact that recommended retail prices, actual market prices and the release of a prominent wine guide have on Australian wine hedonic price estimates, for attributes such as sensory quality, winery reputation and grape region. In general, hedonic price estimates appear to be independent of prices employed. The main identified differences in estimates relate to the size of the producer and some regional impacts. For market prices only, increases in producer size are estimated to reduce prices. This implies the existence of supply chain quantity discounting price practices. The impact of an authoritative wine guide appears to have a negligible influence on prices in Australia. In the absence of market transaction prices, the common practice of employing recommended prices for hedonic wine price estimation is defendable.     

Protecting Quality of Wine Exports to China: Barriers and Bridges

There is a great potential for wine to deteriorate during shipment and storage of wines being exported from the United States to China. Certification of storage conditions such as that provided by the Hong Kong Quality Assurance Agency (HKQAA) is a key bridge to protecting quality and maintaining value in the auction market there. A literature review and semistructured interviews with winery managers, freight forwarders, transportation experts, and representatives of HKQAA provide qualitative analysis of barriers and bridges to protecting quality. The article presents a strong case for the adoption of storage and transportation standards for wine, such as the Wine Storage Management System implemented by HKQAA. Looking at wine exports through the lens of Total Quality Management provides the basis for recommending formal certification.     

WINE QUALITY DIFFERENTIALS IN HEDONIC GRAPE PRICING

The paper focuses on identification and evaluation of wine quality characteristics of grapes. A pricing schedule that rewards producers for quality attributes is developed. This quality-based pricing schedule would serve to reduce the production of poor-quality wines by giving farmers a correct and powerful incentive to provide better grapes. The research evaluates the proposed grape price schedule in two steps. The hedonic qualities of Israeli grapes are estimated by relating the contribution of each grape characteristic to wine quality. Then the price of wine quality is estimated, and the hedonic prices for Israeli grapes are calculated. Results show that the current pricing system pays little premium for a better-quality product.