JWE-Articles

There 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 vari- ables 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.

Keywords: classification, logistic regression, text analysis, wine review.

This paper explores growers’ supply response to the 2005 “Sideways effect” demand shock (Cuellar, Karnowsky, and Acosta, 2009) triggered by the 2004 release of the movie Sideways. We use a modified difference-in-difference approach to evaluate the supply response in California and regional supply response differences within California. We use U.S. Department of Agriculture data for the period 1999–2012 and find evidence of a supply response in the post-release period that is consistent with the “Sideways effect” on wine demand. The positive supply response for Pinot Noir is stronger than the negative response for Merlot and concentrated in lower value Central Valley vineyards.

Keywords: California, grapes, Merlot, Pinot Noir, supply response, wine.

The modern era of wine journalism has provided abundant information about wines and wide- spread use of numerical rating systems. A tiny difference, especially at the top of the distribu- tion of ratings, may have striking consequences on wine sales and investment returns. This article provides a general framework to obtain a consensus among tasters’ opinions (reflected as numerical wine ratings) via three subsequent stages: normalization, approval, and aggregation. It is inspired by contributions in political science, social choice, game theory, and operations research. We apply it to the Judgment of Paris as well as to rank 2018 en-primeur Bordeaux wines, rated by five international experts.

Olivier Gergaud, Victor Ginsburgh and Juan D. Moreno-Ternero

Keywords: global wine score, Judgment of Paris, ratings, 2018 en-primeur Bordeaux wines, wines

Using a sample of New York City restaurants, we examine the relationship between a wine’s bottle margin and whether the restaurant offers that same wine by the glass. We find that restaurants offer less expensive wines by the glass but set higher margins on these bottles than for similar wines offered only in bottles. Overall, offering wine by the glass is associated with a 5.0% increase in the bottle price and a 12.2% increase in the bottle margin. We find similar results for retail and wholesale markups of wine bottles. Our results offer evidence that settles a theoretical ambiguity in the menu-pricing literature (Anderson and Dana, 2009) about whether to raise or lower the price of a high-quantity package when introducing a low-quantity package of a good, as it applies to restaurant wine pricing.

James A. Dearden, Xiaohui Guo and Chad D. Meyerhoefer

Keywords: product-line pricing, restaurant wines

The Italian market of sparkling wines increases as volume and assortment (such as brands, appellations, typologies) mainly because of sparkling Prosecco consumption. We investigate the repeated purchase behavior of sparkling wines in two years within the supermarket channel through scanner data collected from a consumer panel. We propose a Hidden Markov Model to analyze these data, assuming an unobservable process to capture consum- ers’ preferences and allowing us to consider purchases sparsity over time. We consider multi- variate responses defining types of purchases, namely price, appellation, and sugar content. Customers’ covariates influence the initial and transition probabilities of the latent process. We identify five market segments, and we track their evolution over time. One segment includes Prosecco-oriented consumers, and we show that loyalty to Prosecco changes strongly over time according to the region of residence, income, and family type. The findings improve the understanding of the market and may provide evidence to design successful marketing strategies.

As part of a classic article in this journal, Richard Quandt identified 123 wine descriptors that he deemed to be bullshit. In this paper, I examine whether wine consumers are willing to pay any more (or less) for wine if it is described by one of those “bullshit” descriptors. I use three methods to examine that. The first method involves applying a hedonic regression to a dataset of prices and expert descriptions for about 50,000 wines. The second method involves applying a match- ing estimator to the same dataset. The third method involves a stated-preference survey of about 500 wine consumers. The three methods suggest that for most of the descriptors Quandt deemed to be bullshit, most consumers’ marginal willingness to pay for a descriptor is zero or near-zero. Yet, for some of the descriptors, some consumers do seem to have a non-zero marginal willing- ness to pay, perhaps because the descriptors shape a consumer’s subjective experience or because they signal objective aspects of wine.

Kevin W. Capehart

This study provides a perspective on the market performance of divestitures in the global brewing industry. In 2018, the five largest players accounted for 60% of the global beer volume. We analyze to what extent the capital market values divestitures in an industry where players usually seek efficiency gains and growth through mergers and acquisitions. Based on a sample of 61 divestiture intent announcements in the period from 1999–2018, this study shows that publicly listed brewing groups experience significant positive abnormal returns of about 1.4%. We measure the influential effect of success determinants concerning the underlying industry, the divested business, the divestiture structure, and the divestor itself.

Ludwig Erl and Florian Kiesel

Keywords: brewing industry, divestiture, event study, industry consolidation.

We conducted an in-store experiment to test the hypothesis that Colorado wines may suffer from reputational stigma. The context relates to marketing challenges faced by novel wine regions entering the competitive retail environment, even in a local context, and the possibility of being stuck in a “bad reputation trap.” Adopting a 2×2 design where we varied region of production (Colorado vs. California) and grape variety (familiar vs. unfamiliar), we adminis- tered a between-subject information treatment that revealed the origin of production to only half of the participants. We measured taste perceptions using Likert scales, and we elicited val- uation via a multiple price listing. Our results are consistent with the presence of stigma against wines produced in Colorado. In the discussion, we draw from the literature on stigmatized markets to suggest plausible strategies to remove or avoid stigma.L1, L15, Q1, Q13

This article examines how selected attributes of Bordeaux fine wines (producer, vintage, quality, bottle size, case, flaws, and transaction volume) affect prices in three types of trading venues: auc- tions, electronic exchange, and the over-the-counter (OTC) market. The findings indicate a price differentiation across the venues. Wine aging leads to relatively higher prices at auctions than on the electronic exchange or the OTC. There is a nearly linear relationship between prices and wine ratings, the strongest of which is found in the case of auctions. The bottle size effect is mostly positive for supersized formats and is the strongest on an electronic exchange and the weakest at auctions. The transaction volume negatively affects wine prices in all the trading venues. The simulation results facilitate the construction of more realistic trading models and may help traders make more informed decisions on the choice of a trading venue, depending on the wine characteristics.

This paper analyzes the nonlinear relationship between the advertising investment and repu- tation of collective brand members in an experience goods industry, as well as the moderating role of their market share within the collective brand. The central assumption is that the quality reputation of collective brand members has a positive effect on their advertising invest- ment until a reputation threshold is reached, after which the effect on advertising investment becomes negative. This change in the slope is explained by the information sets (firm reputa- tion and collective reputation) used by consumers to reduce uncertainty, which leads to a weaker motivation for the firm to invest in advertising. In addition, scale economies of adver- tising mean that the market share of collective brand members negatively moderates the cur- vilinear relationship between quality reputation and advertising investment. The results for a sample of 176 companies in a Spanish experience goods industry (i.e., winemaking) between 2004 and 2014 show an inverted U-shaped relationship between the advertising investment and reputation of collective brand members. The results also show that market share nega- tively moderates this curvilinear relationship.

This article documents how the COVID-19 crisis has affected the drinking behavior of Latin European wine consumers. Using a large online survey conducted during the first lockdown in France, Italy, Portugal, and Spain (n = 7,324 individuals), we reconstruct the purchasing and consumption patterns of the respondents. The number of people who maintained their wine consumption frequency is significantly higher than those who increased or decreased their con- sumption. Wine consumption frequency held up better than other types of alcohol (beer and spirits). We analyze heterogeneities among countries and individuals by employing the Marascuilo procedure and an ordered logit model. The latter identifies the impact of demo- graphic, commercial, and psychosocial factors on wine consumption frequency. The results shed light on changes in wine consumer behavior during the first lockdown and consider pos- sible post-lockdown trends that could be useful to industry players.

This article provides an empirical case study of the impacts of the COVID-19 pandemic on global beverage markets, particularly the wine sector. Both international trade and domestic sales have been adversely affected by temporary shifts away from on-premise sales by social distancing measures and self-isolation that led to the closure of restaurants, bars, and clubs, plus declines in international travel and tourism. Partly offsetting this has been a boost to off-premise and direct e-commerce sales. We first estimate those impacts in 2020 and their expected partial recovery in 2021 using a new model of global beverage markets. Further recent disruption to the global wine trade has been the imposition by China in late 2020 of prohibitive tariffs on its imports of bottled wine from Australia. Its diversionary and trade- reducing effects are compared with those due to COVID-19.

This issue of the Journal of Wine Economics opens with two COVID-related papers.

First, Glyn Wittwer and Kym Anderson analyze “COVID-19 and Global Beverage Markets: Implications for Wine” (Wittwer and Anderson, 2021). The authors employ a model of global beverage markets to simulate the respective effects of the COVID-19 pandemic (Wittwer and Anderson, 2020). They find that both international trade and domestic sales have been adversely affected by temporary shifts away from on-premise sales. These losses have partially been offset by gains in off-premise and direct e-commerce sales. “Further recent disruption to the global wine trade has been the imposition by China in late 2020 of prohibitive tariffs on its imports of bottled wine from Australia. Its diversionary and trade-reducing effects are compared with those due to COVID-19” (Wittwer and Anderson, 2021, p. 117).

Magalie Dubois and collaborators shed light on the question, “Did Wine Consumption Change during the COVID-19 Lockdown in France, Italy, Spain, and Portugal?” (Dubois et al. 2021). Drawing on an online survey of more than 7,300 individuals conducted during the first lockdown phase, the authors analyze purchasing and consumption patterns. They find that more people reduced their wine consumption frequency than maintained or increased it. Further analyses highlight various aspects of heterogeneity among countries and individuals and their determinants.

In “Reputation and Advertising of Collective Brand Members in the Wine Industry: The Moderating Role of Market Share,” Ricardo Sellers-Rubio, Francisco Mas-Ruiz, and Franco Sancho-Esper analyze the nonlinear relationship between advertising investments and reputation of collective brand members (Sellers-Rubio, Mas-Ruiz, and Sancho-Esper, 2021). They draw on a sample of 176 Spanish wineries and show that the quality reputation of collective brand members has a positive effect on their advertising investment until a reputation threshold is reached. In addition, scale economies of advertising mean that the market share of collective brand members negatively moderates the curvilinear relationship between quality reputation and advertising investments.

In their paper entitled “On Fine Wine Pricing across Different Trading Venues,” Paweł Oleksy, Marcin Czupryna, and Michał Jakubczyk shed light on how selected attributes of fine Bordeaux wines affect prices in three types of trading venues: