The demand for wine is generally estimated on an aggregate level as a single commodity. However, as recent history shows us, the demand for wine not only varies considerably by varietal, but also by price point within each varietal. As a result, although estimates of the demand for wine may be beneficial to the wine industry as a whole, they provide little benefit to individual wine producers. Using scan data of purchases from US retail chain stores, this paper uses store keeping unit (sku) level data to overcome the limitations of prior research on the demand for wine by providing estimates for the demand for wine by varietal and price point. We also provide estimates of own price effects, income effects by color, varietal and price segment. Problems of endogeneity inherent in demand estimation are corrected by utilizing a novel instrumental variable technique using grape prices as the instrument. (JEL Classification: C23, D12)

The purpose of this study is to examine how restaurants determine the percentage of wine mark-up. Wine sales are a substantial contributor to restaurants’ profitability, therefore a better understanding of the factors affecting mark-up is critical for the industry. Here, the mark-up is expressed as a percentage over the cost and refers to a cost-plus pricing strategy. Sommeliers from around the world, the majority of whom were members of the International Sommelier Association, were approached to complete our Internet-based questionnaire administered between February 2014 and May 2014. Of the 800 who began the survey, 267 fully completed the questionnaire, generating 1,869 observations. We regressed the declared percentage mark-up against restaurant and wine list characteristics, including managerial practices and wine steward characteristics, and showed that if the restaurants apply a simple rule of thumb to set wine prices, focusing on every price segment, it appears that sommeliers do not have much impact on the percentage mark-up. (JEL Classifications: C23, D21)

This article analyzes consumer loyalty in the Italian market for Prosecco sparkling wines. In particular, we examine the relationship among wine appellation, price, and consumer loyalty. To that effect, we run a Dirichlet model on Nielsen scan data to estimate brand performance measures and study purchase patterns in the sparkling wine market. We find that Prosecco wines benefit from high-consumer loyalty, and that this loyalty can be explained by both the appeal of the Prosecco appellation and its upper-tier price point. We conclude that promotion strategies with deep discounts, as they affect the appellation's image, might hurt consumer loyalty in the long run. (JEL Classifications: D12, L11, L66, M31)

We evaluate the claim that bottle size formats signal quality changes by performing a controlled laboratory experiment in which we simultaneously auction two different sweet wines: a pomegranate wine and a grape wine. We vary the size of the bottle from 500 mL to 750 mL between participants, but we keep the amount of wine constant across the bottle sizes. We also explore the effect of expectations for the wines, blind tasting, and information about wine attributes on people's willingness to pay (WTP). For both wines, we find evidence consistent with diminishing marginal utility; for the pomegranate wine, we find a premium for the smaller bottle size, which is consistent with changes in the wine's perceived quality. We also find that information is adequate in offsetting the negative effect of the tasting treatment. (JEL Classifications: C23, C24, C91, D12, M31)

The inability of many wine judges to achieve perfect consistency by assigning the same rating to the same wine in a blind tasting is well established. Results for four wine tastings that include blind replicates are examined in this article. Although perfection is rare, the probability distributions of those results show that wine judges do tend to assign closer ratings to replicates than is likely due to chance alone. Approximately one-third of judges assign ratings that are within one rank of perfect consistency, and two-thirds assign ratings within two ranks of perfect consistency. This finding is sensitive to judges’ capabilities, the mechanics of the tasting protocol, and the extent to which the replicate is different from other wines in the tasting. Much wine-related research to date takes judges’ individual ratings as deterministic, yet these results show that those ratings are stochastic. These results yield a probability distribution that may guide future research concerning the uses and economic implications of wine ratings. (JEL Classifications: A10, C10, C00, C12, D12)

For many purchases, consumers often possess only limited information about product quality. Thus, observable product characteristics are used to determine expected quality levels when making purchase decisions. We use more than 1 million weekly scanner-level observations from grocery stores across ten U.S. markets between September 2009 and August 2012 to examine how consumers value a wine bottle's closure type (i.e., cork or screw cap). We focus on lower-priced wines—those with sale prices less than $30 per 750 milliliter bottle—to more accurately evaluate decisions of consumers for whom seeking additional information about wine quality is likely more costly than the benefits derived from that information. Using both pooled ordinary least squares and quantile regressions to estimate price premiums for bottles with corks or screw caps, we find that U.S. consumers are willing to pay, on average, approximately 8% more (about $1.00) for a bottle of wine that has a cork closure. In addition, we show that the size of this premium increases as wine prices decline. (JEL Classifications: D81, M31, Q11)

Mid-Atlantic wine consumers participated in an Internet survey to determine which of three attributes (retail base prices, Botrytis cinerea [bunch rot] control measure, or weed-control strategy) and attribute levels (e.g., a retail base price of $12, $16, $22, or $26) were the most important factors in their decisions to purchase 750mL glass bottles of wine. Conjoint analysis was used to calculate average importance for the three attributes. Based on these calculations, the base retail price attribute had the greatest impact on participants’ decision to purchase the wine (57.40%), followed by bunch rot control measure (20.76%) and weed control strategy (21.49%). Participants were also asked to indicate how interested (not at all interested to extremely interested) they were in purchasing wines produced from grapes grown using minimal pesticides or with cover crops to control weeds. Separate conjoint analyses were then performed based on participants’ level of interest in the two sustainable production methods. In both instances, the average importance values for retail base price were still higher than the values for either bunch rot or weed control strategies. Average importance values for price were lower for participants who responded that they were “very” or “extremely interested” in purchasing wine produced with minimal pesticides or with cover crops than for participants who were “not all interested” in purchasing such wines. (JEL Classifications: Q18, Q11, M31)

Intangible assets can play a strategic role in the implementation of differentiated strategies in foreign markets. The literature has addressed the impact of intangible assets on both exports and financial performance and the effects of exports on company financial performance (profit and risk). This article aims to analyze the effect of exports on the relationship between intangibles and company performance in the wine industry. Empirical studies show that intangibles have a positive but diminishing impact on exports. The effect of exports on financial performance differs depending on whether we consider corporations or cooperatives. While intangible expenses reduce company risk in both samples whatever the level of export intensity, the effects are different with profit. In corporations, intangible expenses have a positive impact on profit only when there is a high level of expenses and a high level of export intensity. (JEL Classifications: G32, L25, Q12, Q13)

This article discusses key comparative advantages of wine-producing nations and suggest prospective views on their evolution. Our methodology is twofold. First, we study comparative advantages in 16 countries using Porter's diamond. Then, we report results from a survey in which wine economists are asked to assess the future trade performance of these countries. Results are relatively consistent across methods regarding the future “heavy weights” like China, but also New Zealand and Chile, countries show the greatest potential to succeed in the future global wine trade. It is also expected that Georgia, the United Kingdom, and Australia play an important role, although to a lesser extent. Our findings indicate that comparative advantages in wine trade are neither uniform nor static; especially, terroir is no longer sufficient. The diamond approach contradicts experts from two countries in particular, France and Argentina, suggesting that experts put great emphasis on demand and market structures as key trade determinants for the future. (JEL Classifications: F14, Q17)

This paper shows how the hedonic approach to vineyard site selection can be used in the adaptation of vineyard land to climate change, natural disasters or other exogenous events. The basic idea is that, if the relation between weather and grape quality is known for each grape type in existing growing areas, then it is possible to predict the quality of grapes that would be produced in other locations, or in the same location with a changed climate. This permits the optimization of grape type selection for a location and also provides an indication of the value that a particular planting should produce. The relation of grape quality to the weather is provided for several well-known viticultural areas, including Burgundy, Bordeaux, Rioja, and the Piedmont. An application of the method to a new vineyard area in the Czech Republic following the demise of Communism is used to demonstrate the method. (JEL Classifications: O21, Q16, Q18, Q54)

In this paper, we analyze profit margins and markups of Fair Trade (FT) wines sold in the United States. We are particularly interested in whether and to what extent the FT cost impulse in production is passed along to the supply chain. We draw on a limited sample of about 470 South African wines sold in Connecticut and New Jersey in the fall of 2016; about 90 of them are certified FT. For these wines we have free on board export prices, wholesale prices, and retail prices, which allows us to compute wholesale and retail margins and analyze the FT treatment effect. We run OLS, 2SLS, and propensity score matching models and find evidence of asymmetrical pricing behavior. While wholesalers seem to fully pass-through the FT cost effect, retailers appear to amplify the cost effect. As a result, at the retail level, FT wines yield significantly higher margins than their non-FT counterparts. (JEL Classifications: L11, L31, L43, L81, Q17)

This paper studies the risk attitudes of winegrowers in France. In French viticulture, most of the production is done under an appellation regime that constrains maximum authorized yields. We consider a trans-log cost function under the constraint of this maximum yield and estimate winegrowers' attitudes to risk. Our estimates are based on the European Farm Accountancy Data Network database (2005–2014) and data from the French National Institute of Origin and Quality. We find that winegrowers are risk averse. For the majority of winegrowers, risk aversion is declining with expected profit. In the Champagne region, however, where expected profits are far higher than in the other regions, we observe the reverse relation: winegrowers become more risk averse as expected profits rise. (JEL Classifications: C13, C33, O33, Q16).

The yeast, Brettanomyces bruxellensis (Brett) is a significant cause of quality defects associated with red wine spoilage. At least some wine producers spend significant resources to prevent, detect, and mitigate damage from Brett, and many express concern about it, but some producers and consumers say they like it in small doses. Brett damage is especially of concern in premium red wine and has become more of a concern to producers in recent years as consumers have become better informed about it. We combine information from diverse sources to develop an initial understanding of the economics of Brettanomyces and management practices to mitigate its consequences. An analysis of detailed confidential data from three wineries in California reveals that at least some wineries are incurring significant costs to reduce the risk of infection with Brettanomyces. Some other wineries that opt not to spend so much on prevention are incurring higher costs in treating infected wines and in lost value from wines being downgraded to lower-valued blends. Results from an online survey of industry participants reinforce the analysis of the detailed data from the three wineries and suggest that the findings may be indicative of conditions more generally across the industry. (JEL Classifications: D22, D24, L66)

Much literature shows that the ratings assigned by wine judges are uncertain, some authors have proposed that judges be tested, and a few wine competitions do test judges. However, no literature or competition has yet proposed a test or rating for judges based on realistic competition conditions. This article uses coefficients of multiple correlation to rate each of 54 judges who assigned ratings to 2,811 wines entered in a commercial competition. Results show that there is a strong and positive correlation between the ratings assigned by most judges to most wines. However, those correlations also show that the ratings assigned by approximately 10% of judges are indistinguishable from random assignments. Using correlations to rate the raters, a program is underway to monitor those judges and variations in competition protocol that may affect their ratings. (JEL Classifications: A10, C00, C10, C12, D12)

Wine tastings inevitably involve some form of grading or ranking the wines, since the objective of tastings is to determine which wine is best, second best, etc., at least among the tasters on that particular occasion. Much has been written about the care that has to be taken that judges are not influenced by extraneous and irrelevant factors and that they do not influence one another. Ultimately, of course, the views of the judges need to be congealed in a single ranking that expresses the “social preference” among the wines. And therein lies the rub: how to aggregate individual preferences into a social ranking.

In comparison with other organizational forms, cooperatives have been found to offer poor product quality and suffer from low reputation. The main reasons discussed in the literature are information asymmetries, which leads to adverse selection and moral hazard, as well as the absence of profit orientation due to poorly specified and diluted property rights. However, although, in reality, many cooperatives indeed perform poorly, and some are apparently able to completely avoid or at least reduce the problems that are considered prototypical for this hybrid organizational form. Therefore, the purpose of this study is to identify the characteristics required to reduce the problems resulting from poorly specified property rights and information asymmetries and, hence, to successfully compete in the market. The data we use to identify the characteristics that separate “good” and “bad” cooperatives encompass 136 organizations in Austria, Germany, and northern Italy. Our logistic regression estimations show that older and larger cooperatives (in terms of acreage) have a significantly higher probability to be listed in at least one of two highly respected wine guides. Moreover, German cooperatives have a significantly lower probability of being listed than either Austrian or northern Italian cooperatives. The findings suggest that differences in performance can be explained by the management of cooperatives. (JEL Classifications: D23, D82, D86, J54, L22, L25, L66, P13, Q13)

The contract between growers and merchants for the exchange of grapes on the Champagne market is a long-term agreement based on quantities. Commitments on quantities are made for several years and negotiated individually between growers and merchants. Each year, prices are negotiated at the interprofessional level, the interprofessional committee including members of the growers union, members of the merchants union and a government commissioner. It turns out that industrial organization theory, and more precise mechanisms outlined by incomplete contract theory are relevant to the analysis of such contracts in which prices and quantities are negotiated sequentially and by different groups of actors. We show that imposed pricing by the interprofessional organization can, in some cases, balance the bargaining power between growers and merchants and thus increase social welfare. At a time when the European Common Organization of Wine Markets casts doubt on interprofessional organizations, this result tends to justify their positive role. (JEL classifi cation: L42, L50)

Global consumption patterns for alcoholic beverages are evolving, with some convergence in per capita consumption among nations, as traditionally beer-drinking nations increase their consumption of wine and, conversely, wine-consuming nations shift towards beer. In a forthcoming article (Hart and Alston, 2019), we explore regional patterns of alcoholic beverage consumption within the United States. One purpose is to see if similar patterns of spatial convergence in consumption patterns can be observed within countries as have been documented in international comparisons. A more fundamental purpose is to explore the converse question and seek to better understand the persistent differences in alcoholic beverage consumption among groups. These issues are addressed using annual U.S. national and state-level data over four decades and, for the more recent period, supermarket scanner data at finer scales of geopolitical aggregation. This proceedings article focuses on the analysis using supermarket scanner data. We find that socioeconomic and demographic variables appear to play significant roles in accounting for the spatial differences in consumption patterns. (JEL Classifications: D12, L66)

Wine grapes contribute significantly to the economy of California, with a gross production value of more than $2 billion in 2010. Studies on economic issues in the industry require measures of demand response to price, but despite the economic importance of this industry, estimates of elasticities of demand for wine grapes have not been published. We use a flexible-form inverse demand system model to estimate elasticities of demand for wine grapes from three grape-growing regions in California, representing three different quality (price) categories. The resulting estimates of own-price elasticities are high, ranging from −2.6 for grapes in the low-price region to −9.5 for grapes in the high-price region. Such high elasticities are plausible given the role of international trade in wine, and they are consistent with synthetic estimates that we computed based on a combination of economic theory, data on market shares, estimates of some pertinent parameters in the literature, and informed guesstimates of values for other parameters. (JEL Classification: Q11, Q12, Q13)

An impartial assessment of the quality of the wine produced over the years in a region (vintage quality) is an essential tool for producers, consumers, investors, and wine researchers to understand factors influencing quality and make purchasing or investing decisions. However, scoring the overall wine quality over the years does not necessarily produce a consensus of which year or years are best. Several critics, magazines, and organizations publish vintage charts that assign a score to each vintage, representing the corresponding perception of the wine quality. Often, the scores given by different institutions reveal little consensus with respect to the relative quality of the vintages.

In this work, we propose the utilization of a rank aggregation method to combine a collection of vintage charts for a region into a ranking of the vintages that represents the consensus of the input vintage charts. As a result, we obtain an impartial ranking of the vintages that represents the consensus of an arbitrary number of independent vintage charts. We illustrate the method with the scores from three wine regions.

The proposed method produces a ranking of vintage-to-vintage quality that represents an impartial consensus of a collection of independent sources, each using a different rating format, scale, or classification. Such a ranking has the potential to be useful for the research community, which needs a relative measure of wine production quality over the years. Therefore, we make publicly available a software tool that implements the method (Borges, 2011). (JEL Classification: C38, C61, C88)