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Organizational Structure and Operation of the Illinois Wine Industry

Published online by Cambridge University Press:  15 September 2016

Jason R. V. Franken  and
Kevin J. Bacon
Jason R. V. Franken*
Affiliation:
School of Agriculture at Western Illinois University
Kevin J. Bacon
Affiliation:
School of Agriculture at Western Illinois University
*
Correspondence: Jason Franken ▪ School of Agriculture ▪ Knoblauch Hall 313 ▪ 1 University Circle ▪ Macomb, IL 61455 ▪ Phone 309.298.1179 ▪ Email [email protected].
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Abstract

This study examines vertical coordination in the wine industry emerging in Illinois. We find that quality matters as temporal issues related to grape perishability increase the probability of written contracts being used to procure grapes. Holdup concerns related to sourcing adequate quality grapes and at-risk investments in grape storage and winemaking equipment lead to vertical integration. In general, larger wineries must obtain some grapes from outside vineyards and sell wine predominantly through tasting rooms and distributors. Smaller wineries rely more on direct sales to retailers, festivals, and farmers' markets. Marketing outlet selection also reflects the types of wine produced.

Keywords

contractgrapesvertical integrationwine
Type
Selected Papers
Information
Agricultural and Resource Economics Review , Volume 43 , Issue 1 , April 2014 , pp. 104 - 124
Copyright
Copyright © 2014 Northeastern Agricultural and Resource Economics Association 

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