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Working Paper No. 246

Published: 2020
Category:
Economics

The Water of Life and Death A Brief Economic History of Spirits

Lara Cockx, Giulia Meloni & Johan Swinnen
Full Text PDF
Abstract
Spirits represent around 50% of global alcohol consumption. This sector is much less studied than other alcohol beverages such as wine or beer. This paper reviews the economic history of spirits and analyses recent trends in the spirits markets. The technology to produce spirits is more complex than for wine or beer. Distillation was known in ancient Chinese, Indian, Greek and Egyptian societies, but it took innovations by the Arabs to distil alcohol. Initially this alcohol was used for medicinal purposes. Only in the middle ages did spirits become a widespread drink and did commercial production and markets. The Industrial Revolution created a large consumer market and reduced the cost of spirits, contributing to excess consumption and alcoholism. Governments have intervened extensively in spirits markets to reduce excessive consumption and to raise taxes. There have been significant changes in spirits consumption and trade over time. Over the past 50 years, the share of spirits in global alcohol consumption increased from around 30% to around 50%. In the past decades, there was strong growth in emerging markets, including in China and India. The spirits industry has concentrated, but less so than e.g. the brewery industry. Recent developments in the spirits industry include premiumization, the growth of craft spirits and the introduction of terroir for spirits.

Working Paper No. 245

Published: 2020
Category:
Economics

Toward Valuing Willamette Valley Pinot Noir as a Cultural Good

Neal D. Hulkower & S. Lynne Stokes
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Abstract

This paper addresses the question of whether the price of Willamette Valley Pinot noir (WVPn) reflects its value as a cultural good as opposed to just another commodity or agricultural product. First, the characteristics of WVPn are matched to Throsby’s six cultural value characteristics: aesthetic, spiritual, social, historical, symbolic, and authenticity. Then two of Throsby’s assessment methods, expert appraisal and attitudinal analysis, are exercised. For the former, 681 scores assigned by Rusty Gaffney and the retail cost of WVPns are analyzed yielding an upper bound of $4.76 per Gaffney point above 85 for the economic value as a cultural good. The attitudinal analysis is based on a survey modeled after Throsby and Zednik and administered to visitors to four tasting rooms. Each respondent tasted 2 WVPns and completed the survey form for each. Regression models established the association between willingness to pay (WTP) and the various responses, demographic information, and attributes of the wines with aesthetic value (“I find this wine beautiful”) most strongly associated with WTP with an increase of about $9 for tasters who endorse this statement compared to those who don’t.

Working Paper No. 244

Published: 2019
Category:
Economics

Margins of Fair Trade Wines Along the Supply Chain: Evidence from South African Wine on the U.S. Market

Robin M. Back, Britta Niklas, Xinyang Liu, Karl Storchmann & Nick Vink
Full Text PDF
Abstract
In this paper, we analyze profit margins and mark-ups 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 on along 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 FOB 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.

Working Paper No. 243

Published: 2019
Category:
Economics

The Cost of Ignorance: Reputational Mark-up in the Market for Tuscan Red Wines

Maja Uhre Pedersen, Karl Gunnar Persson & Paul Sharp
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Abstract
This paper argues that imperfectly informed consumers use simple signals to identify the characteristics of wine. The geographical denomination and vintage of a wine as well as the characteristics of a specific wine will be considered here. However, the specific characteristics of a wine are difficult to ascertain ex ante given the enormous product variety. The reputation of a denomination will thus be an important guide for consumers when assessing individual wines. Denomination reputation is a function of average quality as revealed by the past performance of producers. The impact of past performance increases over time, since producers consider improved average quality to be an important factor in enhancing the price, but this necessitates monitoring of members in the denomination. The market for and pricing of Tuscan red wines provide a natural experiment because there are a number of denominations characterized by different type, age and quality standards. Furthermore, Tuscan red wines are easily comparable because of great similarities in climate and choice of grape varieties, soil and exposure to sun etc. We show that some denominations have a lower average quality score and that price differentials between denominations are linked to differences in average quality, although consumers tend to exaggerate the quality gap between prestige denominations and others. Thus, a producer in a prestigious denomination benefits from a substantial mark-up relative to an equally good producer from another denomination. We further show that denomination neutral wines have a stronger price-quality relationship than denomination specific wines.

Working Paper No. 242

Published: 2019
Category:
Economics

A Quest for Quality: Creativity and Innovation in the Wine Industry of Argentina

Julio Elías, Gustavo Ferro & Álvaro García
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Abstract
We study innovation and knowledge generation in the quality wine industry in Argentina. The approach followed provides a useful framework to understand innovation at the market and the individual innovator level. We show that the wine quality revolution in Argentina was driven by economic incentives. Wine producers seek for quality as a differentiation mechanism that allows them to appropriate, at least partially, of the return to innovation. We also show that the quality wine revolution of Argentina, involved a series of experimental and rapid conceptual innovations. All the former produced a radical change in the wine industry of Argentina.

Working Paper No. 241

Published: 2019
Category:
History

Before the Invention of the “New World” Argentinean and Chilean Wines in Sweden before 1950

Paulina Rytkönen
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Abstract
Before the new world became a concept related to the upswing of wines from Australia, Latin Amer- ica, New Zealand, South Africa and the United States, occasionally, wines from these countries could be sold in countries like Sweden. One such point in time was during WWII, when importing wines from Europe became impossible and a very short window of trade opened-up between Argentina, Chile and Sweden. This paper partially describes this story, based on the scarce sources found at the archive of the former Museum of Wines and Spirits in Stockholm. The purpose of the paper is to shed light on the amount of wine imports from Argentina and Chile during the trade window between Swe- den, Argentina and Chile caused by WWII. Some sources analyzed are sales statistics of the Swedish wholesale and import monopoly Aktiebolaget Vin & Spritcentralen, price lists of the regional alcohol monopoly in Stockholm (Stockholmssystemet) and by analyzing the labels of the wines found in the archive. Some of the questions to be answered are: How much wine from Argentina and Chile was sold during the studied period? Who were the exporters? Why was this trade window opened and closed?

Working Paper No. 240

Published: 2019
Category:
Business

Georgia Tells its Story: Wine Marketing Through Storytelling

Paulina Rytkönen, Lars Vigerland & Erik Borg
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Abstract
Storytelling is a powerful marketing tool. It represents a form of content marketing that appeals to the imagination of the consumer. We have studied the use of storytelling by Georgian wine makers. As a wine country, the former Soviet republic of Georgia has a compelling story to tell. The country represents the cradle of wine and has an unbroken 8000 year old history of wine production. In addition to the story of the origin of Georgian wine, the country is still producing wine in a tradition that dates from the antiquity. The Qvevry production method is still in use in Georgia and produces wine with a very characteristic taste. Furthermore, some of the vineyards in Georgia has a long history and is related to historical buildings often depicted on the label of the wine bottle. Finally, the grapes are originally from Georgia and has been grown here for thousands of years. We have followed four vineyards and their history in order to depict how storytelling is used the wine industry in Georgia.

Working Paper No. 239

Published: 2019
Category:
Economics

If This Wine Got 96 Out of 100 Points, What Is Wrong with Me? A Critique of Wine Ratings as Psychophysical Scaling

Denton Marks
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Abstract
The consumer’s problem in forming a willingness to pay (WTP) for wine, especially fine wine, is one of the thorniest in wine market analysis. The problem raises good questions from the philosophical—What does it mean to know something? How can we know a wine and communicate such knowledge?—to the practical—Is the wine market smaller because of this problem? If so, how much? Much of the problem involves the value and validity of wine ratings.
Because of the consumer’s problem, the content of wine economics—relative to viticulture or oenology or other fields that study wine—has given particular prominence to the role of experts and their ratings. Ashenfelter has characterized the role of experts as one of the two central questions in wine economics (2016), and one can imagine that it is at least as important in wine economics as in other areas of cultural economics (e.g., Ginsburgh 2016). Among the most popular themes in wine economics has been the determination of fine wine prices. Among the most prominent questions in that literature is the impact of expert ratings, although the evidence of a relationship is mixed and limited to a narrow, though financially important, segment of the wine market—results from commercial auctions of classified Bordeaux (e.g., Oczkowski and Doucouliagos, 2014; Luxen, 2018) which provide rare published data on “market-clearing” transactions. Despite that limitation, the attention ratings have received even in that context is good reason to scrutinize what is behind them.

Working Paper No. 238

Published: 2019
Category:
Policy

Cooperating Grape-Growers and Wine – Makers

Edward J. O’Boyle
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Abstract
In the United States the role of cooperation in economic affairs often is overlooked because Americans see themselves as individuals, and organize their affairs in competitive fashion. Competition means acting alone for individual success.
Cooperation is much different. Enterprises in the same business see one another not as rivals but as partners. Cooperation means acting together because in acting alone the individual member cannot succeed at all or succeed as well.
Acting together is the distinguishing feature of an authentic cooperative. It is an intermediate stage between acting alone and turning to the government for protection or assistance.
Overwhelmingly U.S. wine production originates with vineyards and wineries acting alone. Nevertheless, we uncovered a few instances where grapes are grown and wine is produced by enterprises acting together. Additionally, we identified four other types of cooperatives: grape-to-juice, wine wholesale, wine marketing, and wine-maker philanthropic.

Working Paper No. 237

Published: 2019
Category:
Economics

Are Alcohol Excise Taxes Overshifted to Prices? Systematic Review and Meta – Analysis of Empirical Evidence from 29 Studies

Jon P. Nelson & John R. Moran
Full Text PDF
Abstract
This paper conducts the first comprehensive review and meta-analysis for estimates of alcohol tax pass-through rates. The review examines data coverage by country; econometric models; and results for under- or overshifting by beverage. Several primary studies indicate substantial overshifting of alcohol taxes. Median rates also suggest taxes are overshifted. Precision weighted- averages calculated for two samples show beer taxes are overshifted and wine-spirits taxes are fully shifted. Meta-regressions corrected for publication bias indicate, however, that full-shifting of alcohol taxes cannot be rejected for any beverage. Results are useful for alcohol tax policy and future research on tax incidence.

Working Paper No. 236

Published: 2019
Category:
Economics

Wine Descriptions Provide Information A Text Analysis

Bryan C. McCannon
Full Text PDF
Abstract
I use a computational linguistic algorithm to measure the topics covered in textual descriptions of wine. I ask whether there is information in the text that consumers value. Wine is a prominent example of an experience good. There is substantial product differentiation in the market and consumers only have limited information on the utility they will receive when consumed. Thus, information is expected to be valuable. Evaluating descriptions of wine produced across the U.S., I use a hedonic price regression to explore whether the descriptions provide any new information not already available to the consumer. Initial results suggest that text descriptions are shown to lose their explanatory value when varietal and numerical ratings are included as controls. I then show that once the varietal, region, and numerical ratings are adequately controlled for, there is information in the descriptions that consumers value.

Working Paper No. 235

Published: 2019
Category:
Business

Neuromarketing Meets the Art of Labelling. How Papers and Finishing on Labels Affect Wine Buying Decisions

Giulia Songa & Andrea Ciceri
Full Text PDF
Abstract
The aim of the study is to scientifically explore the role of paper and embellishments of wine labels in driving consumers’ visual behaviour on the shelf, their perception of the product and their purchase choices. Thirty labels were created combining six types of papers and six types of embellishments. Thirty target consumers explored the shelf first without any specific tasks, and then with the goal to choose a bottle of wine, while their visual behaviour were recorded through a wearable eye-tracker.
Subsequently, the consumers were exposed to each single bottle. They had to watch each bottle for 15 seconds and then to handle it for the same amount of time. During this phase their visual behaviour and their brain activation were recorded respectively by a wearable eye-tracker glasses and an EEG headset.
After the test, an in-depth interview was conducted to assess the rational perception, the expectations, the intention to buy and the willingness to pay for the wine bottles. Results highlighted the role of both paper and embellishment in enhancing label visual saliency and equity on the shelf and in influencing consumers’ perception, expectation and purchase behaviour. Moreover, an interesting reciprocal influence of visual and tactile features on each other was found.

Working Paper No. 234

Published: 2018
Category:
Economics

The Value of Terroir. A Historical Analysis of the Bordeaux and Champagne Geographical Indications

Catherine Haeck, Giulia Meloni & Johan Swinnen
Full Text PDF
Abstract
Previous studies on the value of terroir, or more generally geographical indications (GI), used hedonic techniques. We use historical data and exploit temporal and geographical variations in the introduction of wine GIs in early twentieth century France to study the impact on the price of specific wines in the years and decades following their introduction. We find large effects of GIs on prices of some Champagne wines, but no significant impact on Bordeaux or other Champagne wines.

Working Paper No. 233

Published: 2018
Category:
Policy

Stealing, Counterfeiting, and Smuggling Wine

Edward J. O’Boyle
Full Text PDF
Abstract
Our intent in this working paper is to explore the extent of stealing, counterfeiting, and smuggling of wine without exploring in depth the extent to which such illegal practices specifically influence the price and quality of the wine that American consumers are purchasing. Our attention focuses primarily on bottled wine produced in the United States or imported.

As long as there are large ill-gotten gains to be had from stealing, counterfeiting, and smuggling, there will be persons willing to pursue those gains even at the risk of fines, jail time, and public disgrace. Just as hackers are able to penetrate the most secured and encrypted data bases, thieves, counterfeiters, and smugglers will find ways around even the most sophisticated detection and anti-fraud technology. The issue is not how to stop them but how best to limit the damage they do. We suggest nine ways to limit the ill-gotten gains of thieves, counterfeiters, and smugglers.

Working Paper No. 232

Published: 2018
Category:
Business

How Should We Digitize the Wine Sector?

Damien Wilson, Réka Háros, Judith Lewis & Martin Wiederkehr
Full Text PDF
Abstract
This study provides preliminary insight into the challenges and opportunities present for wine in the process of adaptation to the modern business environment. This study is being conducted within the Swiss wine sector due to the unique characteristics and value of Swiss wine, culture, and the capacity to access key individuals within the Swiss wine sector and its supporting network. These specific features of the Swiss wine sector offer the potential to probe respondents for depth of information on digitization, whilst maintaining more control over extraneous variables that may otherwise impact research results.
This study utilizes the Delphi method for the purpose of investigating the opinions, ideas and suggestions of key individuals in the Swiss wine sector. Each respondent’s feedback is being collected for the convergence of ideas and process of implementation. Divergent responses will all be compiled and synthesized, before returning an anonymised compilation to every respondent for subsequent review and comment. Subsequent rounds of this process will continue until data saturation is achieved. The results of this study will be used to prepare a framework outlining the process and scope of considerations in the successful digitization of the Swiss wine sector.

Working Paper No. 231

Published: 2018
Category:
Business

The Presence of Women in Leadership Positions in California’s Wine Industry: A Survey

Barbara Insel & Alicia Hoepfner
Full Text PDF
Abstract
Data was sought from all wineries producing more than 10,000 cases per year across all of California wine regions. 219 such wineries were identified yielding a representative sample of 106 producers across the state. Women were found to represent 38.1% of all leadership roles in the industry. As wineries grow larger, the percentage of women tends to decline. Women tend to be over-represented in staff roles and under-represented in line positions, which is consistent with other US industry. California’s wine industry has made significant progress in bringing women into management roles in the industry. Recommendations are offered for further improvement.

Working Paper No. 230

Published: 2018
Category:
Economics

Does Blind Tasting Work? Investigating the Impact of Training on Blind Tasting Accuracy and Wine Preference

Qian Janice Wan & Domen Prešern
Full Text PDF
Abstract
Blind wine tasting refers to the practice of tasting a wine without seeing the label, and deducing the grape variety, location of origin, and vintage of the wine based on what one perceives and infers from the glass. We had the opportunity to analyse data from Oxford University Blind Tasting Society’s 2018 training season, where 15 participants attended 18 training sessions over 36 days. A total of 212 wines (104 white, 108 red) were tasted and a total of 2271 tasting notes were processed. The aim of this study was to assess whether blind tasting training can improve accuracy, both in terms of within-participant accuracy of guesses and wine structural elements, and in terms of group-wide accuracy (e.g. variance of guesses within a group). The results showed that over time, guesses for grape variety increased in terms of accuracy as well as within-group agreement. On the other hand, guesses for vintage decreased in terms of accuracy as well as within-group agreement. No change in accuracy was observed for place of origin (country and region) guesses. Moreover, it was demonstrated that for grape variety, country, region, and vintage, the chances of the most common within-group guess being correct was significantly higher than the underlying frequency distribution, e.g., if participants had just guessed the most frequently occurring grape/country/region/vintage. Structurally, participants’ estimation of acidity level increased in accuracy over time, while the average error in acidity and alcohol estimations were not statistically different from zero. Finally, we assessed how wine preference is related to wine attributes as well as the taster’s wine experience. It was demonstrated that, overall, wine preference was positive correlated with wine age, acidity, sweetness, and colour (red wine was preferred to white). Over time, we observed a shift in preference towards older wines, and a decrease in the importance of wine colour. Those with little initial blind tasting training also experienced a change in preference towards greater acidity and alcohol, and decreased their preference for oak. These observations have important implications for the acquisition of wine expertise, and for growing wine markets with an increasingly educated consumer population.

Working Paper No. 229

Published: 2018
Category:
Economics

Uncorking Expert Reviews with Social Media: A Case Study Served with Wine

Alex Albright, Peter Pedroni & Stephen Sheppard
Full Text PDF
Abstract
The growth of social media outlets in which individuals post opinions on publicly consumed goods provides an interesting and relatively unexplored area for examination of the role of crowd sourcing amateur opinions in areas traditionally relegated to experts. In this paper we use wine as an illustrative example to investigate the interaction between social media and expert reviews in the market for high end consumer goods. In particular, we exploit a novel data set constructed from the social media website CellarTracker, which is composed of the averaged individual reviews for 355 distinct wines on a quarterly basis from 2004 through 2017, and pair this with a similarly dimensioned panel of average auction prices for these wines as well as the reviews from three leading experts. We develop a signal extraction model to motivate the interaction between amateurs and experts in revealing a measure of the quality of the wine. The model is then used to motivate the adaptation of an empirical panel structural VAR approach based on Pedroni (2013) by embedding the expert reviews as an event analysis within the panel VAR, which is used to decompose information into components that signal the quality of the liquid in the bottle versus other aspects of the wine that are valued by the market. The approach also allows us to decompose the influence of the expert reviews into components associated with what we define as the quality of the wine versus the pure reputation effect of the expert. The results on expert reviews are consistent with the idea that experts can substantially impact prices through channels other than their signals of quality.

Working Paper No. 228

Published: 2018
Category:
Economics

The Hedonic Price for Whisky: Distiller’s Reputation, Age and Vintage

David Moroz and Bruno Pecchioli
Full Text PDF
Abstract
Using an original dataset hand collected on an online trading platform specialized in whisky investment, this article aims to estimate the main determinants of price differences for whiskies. We find strong evidence that distiller’s reputation, age of whisky and vintage affect positively the price. Other findings include a negative effect for independent bottling (i.e. not in-house by the distiller) and a positive “collector” effect for bottles identified as “extremely rare” by the website.

Working Paper No. 227

Published: 2018
Category:
Economics

Does Excellence Pay Off? Quality, Reputation and Vertical Integration in the Wine Market

Stefano Castriota
Full Text PDF
Abstract

We investigate the effect of excellence on firm profitability focusing on markets where vertical integration is necessary to achieve product quality and there is limited business scalability. Using data from Italian wine guides, we show that excellence – as measured by wine quality – and vertical integration – as measured by private instead of cooperative ownership – do lead to higher prices of the bottles sold. However, in a second exercise we study the determinants of Italian wineries’ Return of Invested Capital (ROIC) and obtain mixed results. We show that excellence – as measured by firm and collective reputation – is irrelevant. Vertical integration – as measured by in house production of grapes and wine – ensures a better performance, but the most profitable firms are bottlers, which deliver the worst products. Results suggest that excellence and vertical integration are valuable assets, but also that their importance might heavily depend on the scalability of business.

Working Paper No. 226

Published: 2018
Category:
Economics

How to become a leader in an emerging new global market: The determinants of French wine exports, 1848-1938

María Isabel Ayuda, Hugo Ferrer-Pérez & Vicente Pinilla
Full Text PDF
Abstract
When studying the emergence of new global markets it is essential to consider how countries and companies compete to obtain advantageous positions. Our objective is to study how France obtained an initial leadership position in the new global wine market which it subsequently consolidated. We will also analyse the main determinants of its exporting success. In order to do this we have quantified its exports and examined its evolution and its principal export markets. We have also used a gravity model for both ordinary wine and high quality wine in order to establish the key variables that explain this evolution. The article highlights the great efforts made by the exporters to improve the quality of their products and increase their sales using modern marketing techniques. Our econometric results also show some significant differences between the determinants of exports for the two types of wine. However, the exports of both products suffered the strong impact of a series of major events, such as The First World War, the Russian Revolution, the Prohibition in the United States and the Great Depression. The case of wine shows that the collapse of the first globalisation was not the same for all types of product.

Working Paper No. 225

Published: 2018
Category:
Economics

The Political Economy of the World’s First Geographical Indications

Giulia Meloni & Johan Swinnen
Full Text PDF
Abstract

The world’s first geographical indications (GIs) were in the wine sector and focused on the delineation of the location of production, the ‘terroir’: the Burgundy wines in the fifteenth century, the Port wines and Chianti wines in the eighteenth century, and the Champagne wines in the early twentieth century. We analyze the causes for the introduction of these GIs (‘terroirs’) and for changes in their delineation (expansion) later on. Our analysis shows that trade played a very important role in the creation of the ‘terroirs’ but not always through the same mechanisms. For the Port and Chianti GIs it was exports to Britain that were crucial; for Burgundy it was domestic trade to Paris; and for the Champagne GI it was not exports but pressure from wine imports and new wine regions that played a crucial role. For the expansions of the GIs later in history, other factors seem to have been equally important. Expansions of the GIs in the years and centuries after their introduction followed major changes in political power; the spread of a new philosophy in liberal and free markets across Europe; and infrastructure investments which opened up markets and made exports cheaper from “new” producers.

Working Paper No. 224

Published: 2018
Category:
Economics

Risk attitudes in viticulture: the case of French winegrowers

Joël Akay, Adeline Alonso Ugaglia & Jean-Marie Lescot
Full Text PDF
Abstract
The aim of this paper is to analyze risk attitudes of winegrowers in France. An inter- esting feature of French viticulture is that most of the production is carried out under an appellation regime, bearing constraints in terms of maximal yield authorized. We estimate a translog cost function under the constraint of this maximal yield. We jointly estimate cost function parameters, factor share equations and winegrowers’ attitudes to the risk function. Our estimates are based on the FADN database (2005-2014), data from the National Cultural Practices survey (2006, 2010, 2013), data from the French National Institute of Origin and Quality (INAO) and data from guides on production costs in viticulture and œnology (from 2005 to 2014). We find that pesticide demand is inelastic and all types of winegrowers are risk-averse. For the majority of them, risk aversion declines with expected profit (DARA), but for the Champagne region, it is the contrary. Expected profit is far higher than in the other regions and these winegrowers are more averse to risk when expected profit increases (IARA).

Working Paper No. 223

Published: 2018
Category:
Economics

The Causal Impact of Medals on Wine Producers’ Prices and the Gains From Participating in Contests

Emmanuel Paroissien & Michael Visser
Full Text PDF
Abstract
The objective of this paper is threefold. First, we estimate the causal effect of wine medals on pro- ducers’ prices. Second, we calculate the expected profit obtained by producers from participating in competitions. Third, we investigate the efficiency of wine competitions by measuring to what extent the attributed awards are good quality indicators. Our dataset combines information on transactions be- tween wine producers and wholesale traders (these data are registered by a wine broker who acts as a middleman in this market), with the records from eleven important wine competitions. Our identifica- tion strategy exploits a particularity in our data, namely that medals are not only awarded before the transaction dates but sometimes also thereafter. Under weak restrictions, a regression of price on dum- mies indicating past and future medals (plus controls) allows to uncover two interesting features: i) the difference in the respective dummy estimates identifies the causal effect of a medal, ii) the estimate of the future medal coefficient identifies the correlation between unobserved quality and medal. We find a strong medal impact: our preferred estimate indicates that producers of medaled wines can increase their price by 13%. The impact for gold is much larger than for silver and bronze, but we cannot reject that the correlation with quality is the same across the three colors. Only a minority of contests attribute medals that are significantly correlated with quality (primarily the ones founded a long time ago, and whose judges are required to evaluate relatively few wines per day). Our profit calculations show that the incentives to participate in wine contests are high.

Working Paper No. 222

Published: 2017
Category:
Business

Concentrated or Competitive? An Overview of the Wine Industry in British Columbia, 2011-2015

Katarzyna Pankowska
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Abstract
The fact that Canada domestically grows Vitis vinifera and produces various types of table wines may still come to some as a surprise, yet it is true. The geographic location and common association of Canada with a cold climate, the relatively small size of the Canadian wine industry (especially in comparison to wine giants like France or the United States (US), for example) are the main reasons why the industry still lacks international exposure. Because of that, to the average wine consumer in the world, Canada still is not known as being able to grow vinifera and supply domestically made table wines. If anybody in the world happens to know that Canada produces wines, it is usually because of ice wines. Canadian ice wines remain the most frequently recognized in the world as being Canadian-made and associated with Canada (Canadian Vintners Association Website statistics accessed on December 5, 2016: http://www.canadianvintners.com/info-centre/wine-statistics/).

Working Paper No. 221

Published: 2017
Category:
Economics

When do climatic changes matter? An investigation of impacts on product market strategies in the wine industry

Jeremy Galbreath
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Abstract
Little empirical research has considered the impact of physical changes in the climate on firm behaver nor relied on natural stakeholder-based theory (NSBT) to explore such a relationship. For a sample of 2,348 wine firms operating in Australia, this study captures changes in both temperature and rainfall for the year 2012 relative to the year 1982 (30 years), and finds that these climatic changes are positively associated with organic products. Further, because of their sensitivities to the natural environment and positions of influence, the study predicts that women in leadership will moderate the relationship between climatic changes and organic products. This postulate finds support. The study advances research on climate change and the use of NSBT. Contributions of the findings are discussed along with limitations and future research opportunities.

Working Paper No. 220

Published: 2017
Category:
Economics

The impact of climate change on firm adaptation: A study of wine firms in South Australia

Jeremy GalbreathThe impact of climate change on firm adaptation: A study of wine firms in South Australia
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Abstract
This study explores a relatively little understood aspect of climate change: to what extent physical changes in the climate impact on firm behavior. To explore the impact of physical changes in climate, changes in both temperature and rainfall are studied with respect to adaptive behavior. For a sample of 207 wine firms operating in South Australia, this study finds that changes in temperature and rainfall are associated with adaptive practices. Further, because of the nature of acquiring and leveraging information and knowledge on climate change to affect adaptation, the study predicts that absorptive capacity will moderate the relationship between climatic changes and adaptive practices. This postulate finds support. The study advances research on climate change and firm behavior. Contributions of the findings are discussed along with limitations and future research opportunities.

Working Paper No. 219

Published: 2017
Category:
Business

Insurance for Growers of Wine Grapes

Edward J. O’Boyle
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Abstract
The glass of wine that you are having with your dinner, whether in your own home, at a friend’s or a restaurant, is subsidized by the federal taxpayer whenever the growers who produced the grapes that went into the wine protected themselves from a financial loss due to crop failure by purchasing crop insurance. The subsidy has the effect of lowering the price of that glass of wine by reducing the full cost of growing the grapes provided the resulting economic gain is passed along at least in part to the winery and in turn to the vintner, retailer, and finally the consumer.
It follows that crop insurance is a blend of private and social insurance because the cost to the grower of insuring against a crop failure, which is included in the cost of production, no longer is entirely privatized. It is shared with the public through a taxpayer-supported subsidy.
Our objective in the following is to describe the need for crop insurance and its origins, the specific details of the protection for U.S. growers, the private and social costs of producing grapes, and the role of the Agriculture Department. In the following, we do not address table grapes, raisins, damaged vines, or federal area-wide crop insurance. That type of insurance protects the individual producer, not on the basis of his own personal loss, but on the average losses across the area where his vineyard is located. (ProAg nd, np).1 Much more research is needed for a more detailed account of insurance that focuses on wine grapes than is provided herein. To help facilitate that research we provide links to articles and books that examine in greater detail reinsurance, the history of wine grapes, licensing agents and brokers, the history of crop insurance prior to the New Deal, and written agreements between growers and insurers.
Our primary emphasis in the following is not on the grapes or the wine but on the human agents involved: the grower, the insurer, and the taxpayer.

Working Paper No. 218

Published: 2017
Category:
Business

Use of Knowledge Intensive Services in the Chilean Wine Industry

Fulvia Farinelli, Karina Fernandez-Stark, Javier Meneses, Soledad Meneses, Nanno Mulder & Karim Reuse
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Abstract
Since the early 1990s, there has been a remarkable export boom of natural resource- based products from Chile, including wine, farmed salmon, forestry and wood prod- ucts. This phenomenon is surprising, considering the monopolistic role played by ad- vanced countries in these industries (e.g. Italy, France and Spain in the wine industry; Norway, Scotland and Canada in the salmon industry). It also raises questions on whether the conditions under which it is taking place are any different from those that in the past led to the repeated failures of a development model based mostly on the exports of natural resources.
From a traditional sector totally oriented to the domestic market and in deep crisis due to political and economic instability, the Chilean wine industry has gained international recognition since the early 1990s. It has become a large export-oriented industry -over 60 percent of the production is currently exported- together with other non-traditional industries such as salmon. Chile has been gradually identified by international con- sumers as an ideal country for producing modern varietal (fresh and fruity), good- value-for-money wines, and it has won worldwide recognition in the wine community faster than any other country in modern history (Phillips, 2000). This is a striking achievement, considering that until the 1970s Chilean wines were confined to the niche of decent-but-not-great wines, based on few varieties cultivated and the relative homo- geneity of their taste.
This paper analyses whether and how, under the globalizing trends that began in the last quarter of the twentieth century, Chile was able to transform some of its primary commodities such as wine into high-quality, diversified, processed goods, with increas- ing value-added content and export price per unit, thus becoming a platform for devel- opment. In particular, as a complement to previous studies, this paper looks specifically at the role of knowledge intensive services in the Chilean wine sector. It is based on the hypothesis is that these services have allowed Chilean wineries to add value to their wine exports and constantly improve their operations along the different stages of the value chain.
This paper is structured as follows. Section 2 describes Chile’s remarkable wine export performance and reviews previous studies regarding the main factors that explain this expansion. Section 3 provides a description of the five main segments of the wine value chain and the multiple service inputs within each one of them. The motivations to produce these services in-house or subcontract are discussed in section 4. The results of a survey, carried out in the context of this study, to assess which services are produced in-house or outsourced are discussed in section 5. The last section con- cludes and provides suggestions for future research.

Working Paper No. 217

Published: 2017
Category:
Business

Drivers of Green Innovations: Evidence from the Wine Industry

Jeremy Galbreath
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Abstract
Little research has considered the potential influence of distant, external pressures on the implementation of firms’ ‘green’ innovations, nor how internal firm resources might moderate this relationship. By combining institutional and resource-based theories and examining 649 firms in Australia, I find that export intensity is positively associated with green innovations. Further, as women in leadership roles increases in firms, the relationship strengthens between export intensity and green innovations. The results also suggest that greater levels of absorptive capacity among firms strengthens the relationship between export intensity and green innovations. Contributions of the findings are discussed along with limitations and future research opportunities.
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