All Working Papers

In this paper we provide a simple and transparent non parametric methodology to express the scores of each wine expert (15) on the same rating scale. We discuss the advantage of this methodology over a linear transformation. The non paramatric method ensures the comparability of scores among experts and allows for a relevant average calculation of available wine scores. This approach may be usefuel to wine professionals who seek to reduce uncertainties leading to improved market efficiency. Uniform scores for many Bordeaux en primeur wines can be freely accessed at globalwinescore.com.

This paper investigates the motives behind the entrepreneurial activity in the Italian beer industry between the late 1980s and mid-1990s. The paper argues that the evolutionary dynamics of the new producers (microbreweries and brewpubs) must be connected to the dynamics of consumption, which have gradually changed consumer preferences and lifestyles since the 1980s. On the one hand, increasing revenues, growing interest in food knowledge, and the rise of new cultural and social meanings attached to food consumption generated a new demand for variety. On the other hand, international integration increased the knowledge of beer typologies and styles. These changes enabled new small firms to enter the market and produce differentiated specialised products. This paper suggests that more research is required on the role of demand to interpret the dynamics of industries. The argument and discussion are based on original in-depth interviews with the pioneering entrepreneurs in Italy’s craft beer segment.

Women are a powerful economic force in the world’s wine market, with marketing of wines made by women to female consumers increasingly important. It is widely assumed that women winemakers in California have shattered the glass ceiling, but few studies have addressed their progress in what remains a male-dominated field. This paper reports on three separate studies assessing their progress. Study 1 assessed the perception that women winemakers have shattered the glass ceiling. Results showed that only 9.8% of California wineries have a woman as the lead winemaker, illuminating a discrepancy between perception and fact. Study 2 investigated whether winery acclaim was associated with this discrepancy. Coding of winery data in Opus Vino (2010) provided support for the hypothesis of proportionally greater acclaim for wineries having women as their lead winemakers. Study 3 tested the hypothesis that the recent increased recognition and visibility received by lead women winemakers is opening doors for other well-qualified women. Using the wineries included in Wine Spectator's California Wine (1999) for a case study, the same set of major wineries was investigated at two times—1999 and 2014. Two approaches were taken to assessing progress: comparing the percentage of wineries with lead women winemakers at both times, and comparing the percentage, taking into account position availability and pattern of gender hiring into available positions. Results showed some increase, 10% in 1999 to 14.7% in 2014 overall, and 20.5% when considering only available positions. Progress appears steady but slow.

In 2008, the EU voted to liberalize its system of planting rights which has strictly regulated vine plantings in the EU. However, after an intense lobbying campaign the liberalization of the planting right system was overturned in 2013 and new regulations created an even more restrictive system. European wine associations complained about the detrimental effects of the new regulations. There is a precedent in history. In 1726, the French political philosopher and landowner Montesquieu complained to the French King about the prohibition on planting new vines. Montesquieu was not successful in his demands to remove the planting rights. Old and recent history suggests that political forces against liberalization of planting rights are very strong. Only the French Revolution in 1789 led to a fundamental liberalization of planting rights. The “liberal period” of the 19th century was sustained by the combination of the French Revolution’s liberal ideology, the thirst for wine of Napoleon’s armies and diseases that wiped out most of the French vineyards.
That said, in the past and the present, enforcement of planting rights is a major problem. In fact, despite the official restrictions, Montesquieu managed to plant his vines, allowing him to become a successful wine producer and merchant and to travel and to spend time thinking, discussing and ultimately writing up his ideas which influenced much of the Western world’s constitutions.

Despite the growing importance of geographical indications (GI) for wines, cheeses, etc., relatively little attention has been devoted to studying the optimal size of a GI region, as well as how lobbying by interest groups may affect the actual size. We develop a political economy model of the size of geographical indications, taking into account possible effects on perceived quality as well as on cost sharing among producers. We show that the political process may result in a GI area that is smaller or larger than the social optimum, not just depending on the relative political influence of existing and potential producers, but also on how changes in quality affect consumer welfare.

The United States and the European Union (EU) have embarked on ambitious negotiations to create a comprehensive free trade agreement known as the Transatlantic Trade and Investment Partnership (TTIP). Agricultural markets receive relatively high levels of support and protection in both regions, and therefore are sensitive to the discussions surrounding the TTIP. Wine is the highest valued agricultural product traded between the United States and the EU, and any reduction in trade barriers resulting from the TTIP has the capacity to generate additional trade in this sector. We carefully develop parameters to characterize the effects of tariffs and domestic regulations that affect production and consumption of wine in these two regions. Results show that reductions in tariffs would have relatively small effects in these wine markets, whereas reductions in EU domestic policies that affect wine grape production would have much larger trade and welfare implications.

We examine the role of repetition in government regulation. Using Florida restaurant inspection data from 2003 to 2010, we find that inspectors new to the inspected restaurant report 12.7-17.5% more violations than the second visit of a repeat inspector. This effect is even more pronounced if the previous inspector had inspected the restaurant more times. The difference between new and repeat inspectors is driven partly by inspector heterogeneity in inherent taste and stringency, and partly by new inspectors having fresher eyes in the first visit of a restaurant. These findings highlight the importance of inspector assignment in regulatory outcomes.

In this article, we show that a small innovation in inspection technology can make substantial differences in inspection outcomes. For restaurant hygiene inspections, the state of Florida has introduced a handheld electronic device, the portable digital assistant (PDA), which reminds inspectors of 1,000 potential violations that may be checked for. Using inspection records from July 2003 to June 2009, we find that the adoption of PDA led to 11% more detected violations and subsequently restaurants may have gradually increased their compliance efforts. We also find that PDA use is significantly correlated with a reduction in restaurant-related foodborne disease outbreaks.

This note seeks to compare across countries the various excise taxes that are applied to wholesale prices for wines and other alcohols. Many of those taxes are volumetric (x dollars per litre of product or of the alcohol therein) while only a few are ad valorem, such as Australia’s 29%. To make the specific taxes comparable with the ad valorem ones, it is necessary to nominate wholesale price points in a common currency (AUD) and average alcohol contents (12.5% for wines, 5% for beers, 40% for spirits).
We present two types of comparisons of what we call the consumer tax equivalent (both of which ignore the GST or VAT that might then also be added at the retail level). One is the percentage by which the tax raises the wholesale price at particular price points. The other is the number of cents by which the tax raises the wholesale price per standard drink (=0.0125 litres of pure alcohol).

We study the structure and performance of the coffee export sector in Ethiopia, Africa’s most important coffee producer, over the period 2003 to 2013. We find an evolving policy environ-
SUMMARY | APRIL 201
ment leading to structural changes in the export sector, including an elimination of vertical integration for most exporters. Ethiopia’s coffee export earnings improved dramatically over this period, i.e. a four-fold real increase. This has mostly been due to increases in international market prices. Quality improved only slightly over time, but the quantity exported increased by 50 percent, seemingly explained by increased domestic supplies as well as reduced local consumption. To further improve export performance, investments to increase the quantities produced and to improve quality are needed, including an increase in washing, certification, and traceability, as these characteristics are shown to be associated with significant quality premi- ums in international markets.

This working paper provides a compilation of statistics on international wine consumption, production and trade from the mid-nineteenth century until the beginning of the Second World War. The statistical data is structured in three parts dealing with consumption, production and trade both at the world level and for a broad sample of countries. The data presented for Spain, France and Italy, the leading three nations in the wine market, are especially wide-ranging.

Marketing and packaging are substantial expenditures in many consumer products industries. We look at one such industry, mass-market lager beer, and show that when consumers taste blind, they cannot distinguish between three major competing beer brands. Our results suggest that brand loyalty in this market is likely to be driven largely by marketing and packaging, and not by the underlying sensory properties of the competing products.

The author compared two methods for assessing the reliability of blind wine tastings of South African Sauvignon Blanc and Pinotage white and red wines.
The first method required the taster to rank each of the 8 white and red wines from 1 for the most preferred to 8 for the least preferred, with tied ranks permitted when 2 or more wines were equally preferred. The second used scores representing a taster’s perceived quality of wine as: 50%-69% =Poor/Unacceptable;
70%-79%= Fair/Mediocre; 80%-89%= Good/Above Average; and 90%-100%= Excellent to Superior. Results indicated that the two methods provided quite different results with respect to the critical issue of identifying replicate wines; while the identification of replicate white and red wines proved successful when wine scores were used, not a single wine taster could successfully identify replicate white or red wines when using ranking methods. This finding, plus the fact that very different scorings can produce the very same rankings, such as 1, 2, and 3 being given scores of 60, 64, 66 (Poor/Unacceptable); 70,72, 76 (Fair/Mediocre);
80, 83, 87 (Good/Above Average; and 90, 95, 98. (Excellent to Superior), led to the conclusion that such flaws in the ranking method render it of very limited usefulness in the evaluation of the results of blind wine tasting.

This paper aims to assess the role of wine as a financial asset in the diversification of French investors’ portfolios. Our 2007-2013 monthly database is composed of Liv-ex indexes and the WineDex indexes from iDealwine, an online platform for wine investment in France. We also include stocks, bonds and a risk-free asset and constitute several portfolios based on the degree of investor risk aversion, as proposed by Canner et al. (1997). Moreover, we compare wine to another alternative asset, gold. Using both mean-variance (Markowitz 1952) and mean value-at-risk (Favre and Galeano 2002) portfolio optimization, we find that portfolios with wine (or gold) are more efficient than portfolios without it. Moreover, we use the Sharpe (1964) and modified Sharpe (Gregoriou and Gueyie 2003) ratios to calculate performance and find that the higher the proportion of wine (or gold), from 5% to 50%, the higher the portfolio performance is. We also find that French wine indexes, particularly WineDex Bordeaux, are more profitable than gold or Liv-ex indexes. This suggests that French investors should invest in wine through iDealwine and not through Liv-ex.

The purpose of this research is to examine the relationship between market structure and performance in the wine sector using data from two Canadian provinces. Investigation is conducted on alternative hypothesis defined as the Structure-Conduct-Performance (SCP) hypothesis, the Relative-Market-Power (RMP) hypothesis and the Efficiency Structure (ES) hypothesis. The performance is measured by the number of awards gained by wineries. Using regression analysis, we find support to the ES hypothesis. The empirical findings suggest that more research should be done on the efficiency structure of wineries in their respective markets.

The use of oak barrels to improve the quality of wine and to aid in the maturation process has a long history (Garde-Cerdán and Ancín-Azpilicueta, 2006), and has become a core part of the expertise of wine makers globally. Wine barrels are expensive, and constitute a considerable share in the cost of making a fine wine - this is why it is estimated that only 4% of wineries world-wide use them (Anson, 2013). Yet there is not much in the literature on the financing models available to wine makers, or on how they decide on the optimal financing strategy, although some authors do address the issue tangentially (e.g. Carter, 2012; Monday and Wood-Harper, 2010; Blake et al., 1998). This is arguably because there are really only two financial models in use around the world: buy the barrels with own funds, or borrow directly or indirectly from a bank using a conventional loan instrument with collateral. This neglect exists despite the more recent emphasis on value chain financing in the literature (e.g. Miller and Jones, 2010).
Elsewhere in the world wine makers have the option of a) buying barrels with their own funds; b) of borrowing in the form of a collateralised loan or a lease from the traditional banking sector or from a wine industry-specific bank; or c) of taking out a lease in the form of barrel-specific lending. The second of these options represents a conventional financial model. The lease option works much like vehicle finance. The owner of the equipment (in this case wine barrels), also called the lessor, gives a client the opportunity to rent the equipment over a fixed time period against an agreed rental payment. The lessee has the option to return the equipment after the expiry of the agreed term, or to take over ownership in the event that there was a buyout option (Kirkham, 2011). The lessor typically gains a tax advantage in writing down the value of the capital asset. The lessee frees their capital for other uses, especially after the harvest when wine making incurs a host of other costs. In a lease the equipment itself is the collateral for the loan, unlike a regular loan, where additional collateral may be required.
The third option, barrel-specific lending, is found in different variations in France and in South Africa. The purpose of this paper is to describe the origins of the rental model in use in these two countries, and to describe the business model that has been put in place to gain access to the market. The attention then shifts to the identification of those characteristics of the market in wine barrels that make the South African version of the model suited to the needs of the local market. The paper ends with some information on international trade in wine barrels as an indication of market size and some reflections on how to grow the business.

We examine the degree of consensus in quality ratings of US among prominent wine publications. Ratings are an important source of information for both wine consumers and wine researchers. For the purpose of wine research, are ratings on the ubiquitous 100 point scale reliable, objective measures of quality? The value of expert judgment has been called into question by a number of studies, especially in the context of wine competitions and tasting events. Our study is part of a much smaller literature focusing on ratings by expert critics. We look at four publications: Wine Spectator (WS) and Wine Enthusiast (WE), which review a broad selection of the wine market, and Wine Advocate (WA) and International Wine Cellar (IWC), which are more selective and focus more on the high-end of the market. We find a similar level of consensus, measured by the correlation coefficient, between some pairs of critics regarding wines from California and Washington as Ashton (2013) does for critics of Bordeaux wine. However, among other pairs the correlation is much lower, suggesting almost no consensus. Consensus is not found to be related to the blinding policies (or lack thereof) of the critical publications. Our findings show that quality ratings have a substantial degree of objectivity to them.

Eighty years after Prohibition, the United States of America has become the world's largest consumer of wine and the fourth largest producer. The role of the country is comparable at the world level to the role of England in the eighteenth and nineteenth centuries in Europe: a hub within the wine-producing economy, with a leading role as taste-maker, with a remarkable effect of construction or transformation of the territories of wine. American cinema tends to reflect this new passion for the wine in the society. The whole point is to understand the discourse it holds, as well as the imaginary which it builds around this drink. Wine has become almost commonplace regarding its appearances on screen, not in what it means. In order to be more democratic, America seeks to get rid of old codes that rule all that surrounds wine.

The price of wine grew at a fast rate between 2001 and 2010 and has since been stagnating. The period of growth may be explained by the rise in the demand from emerging markets and from richest people (the top 1% and 10%), while the stagnation may come from the entry of new varieties causing a crowding/competition e ect on the market. We estimate the gen- eralized model of ideal variety proposed by Hummels and Lugovskyy (2009) that combines these two elements and nd support for this explanation. A 1% increases in GDP per-capita (income e ect) generated an increase in price of 1.13% between 2001 and 2011. In contrast a 1% increase in market size (competition e ect) reduced price by 1.10% over the same period. This paper also analyses these e ects by considering exports of wine according to mode of transport and indirectly evaluates economies of scale in transport of wine exported by plane, boat and road.

The implications of climate change for regional innovation remains understudied. Exploratory in nature, this study examines climate change innovations in two regional wine clusters in Australia. In South Australia, the evidence suggests firms in the wine industry are implementing climate change innovations at a higher rate than their counterparts in Western Australia, even though Western Australian firms appear to be experiencing more disruptive effects of climate change. To help explain these differences, key variables are examined. Knowledge exchanges (including types of knowledge) in the region and firm-level absorptive capacity explain the uptake of climate change innovations in South Australian firms, whereas knowledge exchanges alone (including types of knowledge) explain innovations in Western Australian firms. A discussion of the findings is offered along with future research opportunities for climate change research in regional studies.

An archival analysis of evaluations of wines provides a unique context in which to investigate social influence in a naturalistic setting. We conducted analyses
based on 6,157 notes about 106 wines posted by wine drinkers at a wine social networking site. Our findings suggest that social influence on private wine evaluations occurred by communicating a descriptive norm via written information. We provide empirical evidence that there is social influence on private wine evaluations that is greater than the effect of experts’ ratings and prices combined. This influence comes mainly from the first few group members, and increases as a function of source uniformity. Together with a lack of evidence that more credible or expert members have more influence, these findings suggest that influence in this setting is normative rather than informational. Results have implications for widespread effects of social influence on consumer and other websites where we are subject to the power of others’ opinions.

In this article we provide an overview of the extensive literature on the impact of weather and climate on grapes and wine with the goal of describing how climate change is likely to affect their production. We start by discussing the physical impact of weather on vine phenology, berry composition and yields, and then survey the economic literature measuring the effects of temperature on wine quality, prices, costs and profits and how climate change will affect these. We also describe what has been learned so far about possible adaptation strategies for grape growers that would allow them to mitigate the economic effects of climate change. We conclude that climate change is likely to produce winners and losers, with the winners being those closer to the North and South Poles. There are also likely to be some substantial short run costs as growers adapt to climate change. Nevertheless, wine making has survived through thousands of years of recorded history, a history that includes large climate changes.

The creation of new, sub-AVAs within Oregon’s Willamette Valley AVA may indicate a desire on the part of well-established wineries to “split” or separate their social grouping from those with lesser qualifications. Once their social cluster has been differentiated, we theorize that these wineries would be able to capitalize on their newly developed distinctiveness and collect a larger regional reputation premium. Based on 2,221 Wine Spectator rated pinot noir wines between 1984 and 2008, regression analyses demonstrate that indeed regional reputation premiums have significantly increased with the creation of sub-AVAs; and that the price-quality ratio gap between sub-AVAs and the rest of Willamette has widened.