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Working Paper No. 276

Published: 2023
Category:
Economics

The extent of “deceptive” advertising by wine retailers: Caveat venditor

Omer Gokcekus
Full Text PDF
Abstract
Since the start of the Covid-19 pandemic, online wine sales, and the volume of associated email advertising from wine retailers, have increased significantly. In this observational study, I analyzed 258 emails received between April and November of 2022, for $10,016 worth of wines from two major wine retailers in New Jersey, USA. Specifically, I determined the accuracy of two major claims that were made in these emails: (1) that all wines have 90+ scores; and (2) that these wines are offered at a deeply discounted price. Both claims were accurate in only 3.9% of cases; at least one of the claims (either price discount or score) was accurate in 31.4%; and both claims were inaccurate 64.7% of the time. Additionally, for 49.3% of the wines advertised there was at least one concealed critic’s score under 90 points. Most strikingly, based on what the emails claimed, recipients of these emails would save 37.2% if they purchased from the advertising retailer. However, recipients could have purchased these wines by spending 12.7% less than the advertised “discounted” price, by purchasing elsewhere.

Keywords: Online wine sales, deceptive advertising, observational study

Working Paper No. 275

Published: 2022
Category:
Economics

How Much Will Preferential Tariff Entry Into India Boost Australia’s Wine Exports?

Kym Anderson and Glyn Wittwer
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Abstract
With grapes left on the vine this vintage for want of tank space following the loss of China’s wine market, the industry cheered then news on 2 April 2022, of an interim Comprehensive Economic Cooperation Agreement (CECA) between Australia and India being signed by the two countries’ trade ministers. The possibility of such an agreement has been talked about since 2011 but negotiations lapsed in 2015, before re-opening in June 2020. Many still had low expectations of an agreement being reached promptly, and few expected wine import tariffs to be among those lowered most.

India has a whopping 150% tariff on all wine imports, but has agreed to reduce that on Australian bottled wine from the outset of this agreement coming into force. The tariff will be immediately lowered to 100% for bottles in the US$5 to $15 range and to 75% for bottles above US$15, and then lowered further, by 5 percentage points, every year for a decade. Since Australia’s wine exports to India are almost all are in the bottled commercial premium range, it means by the early 2030s those entering India’s market will face a tariff of just 50%, and of just 25% for super-premium wines. Moreover, India has committed to extend to Australia any market access improvements it may offer other countries in future bilateral, regional of multilateral trade agreements.

To see how that might boost Australia’s wine exports and offset the loss of the China market, this article first provides a summary of the Indian market and then uses our model of global beverage markets to assess the wine trade impacts of CECA.

Working Paper No. 274

Published: 2022
Category:
Economics

Wine rankings and the Borda method

Salvador Barberà, Walter Bossert and Juan D. Moreno-Ternero
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Abstract
Abstract. We propose to use the classical Borda rule to establish wine rankings. Unlike alternative approaches, this method has a powerful attribute: it is well-defined even if the panelists’ quality relations are not required to exhibit demanding properties such as completeness or transitivity. We apply the method to rank Bordeaux wines assessed by different experts, some of whom do not rate all of the wines under consideration. Journal of Economic Literature
Classification Numbers: C18, D71, L15, L66.
Keywords: Wines; Ratings; Rankings; Opinions; Borda rule.

Working Paper No. 273

Published: 2022
Category:
Economics

Does ‘Price Framing’ Influence Empirical Estimates in Discrete Choice Experiments? A Case Study for the South African Wine Industry

Lydia Chikumbi and Milan Scasny
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Abstract
The approach and survey used to examine non-market value in a stated preference study can influence the outcomes and impact the validity and reliability of value estimates. While prior research has investigated the impact of 'price framing' on decision-making in other disciplines, (i.e. marketing & psychology), little is known about its validity and reliability in Discrete Choice Experiments (DCEs) and environmental valuation. The study explores the effect of 'price framing' on DCE measurements. The tests are carried out using data from a choice experiment on preferences for natural preservatives in wine. The same respondents completed a nearly identical DCE survey, one with a real price and another with a percentage price change as cost attribute. 611 respondents completed the survey, and a panel mixed logit model was used for the analysis. Results demonstrate that 'price framing' remarkably influenced respondents WTP changes in attributes. The data reveals that while the rank order of importance of attributes, signs, and significance levels are similar for the two samples, they differ in the parameter magnitudes. The study sheds light on the establishment of guidelines for developing valid cost attributes in DCEs studies.

Keywords: Price framing, Discrete Choice Experiment, Mixed Logit Model

Working Paper No. 272

Published: 2022
Category:
Economics

Revisiting the Judgment of Paris
The Rise and the Fall of Stag’s Leap Wine Cellars

Olivier Gergaud, Victor Ginsburgh and Juan D. Moreno-Ternero
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Abstract
In this short note, we show that the results of the famous 1976 Judgment of Paris, a blind wine tasting of ten wines by eleven judges which ranked a Californian wine, Stag’s Leap Wine Cellars as first, do no longer hold. The “best” wines are French (Château Haut-Brion, Château Léoville Las Cases, and Château Mouton Rothschild). Two Californian wines (Ridge Vineyards Monte Bello and Heitz Wine Cellars) are very close to some of the Great Grands Crus de Bordeaux, but Stag’s Leap is far behind. It is not celar what happened. Either the wine was overated in 1976, or its quality decreased over time.
Keywords: Judgment of Paris 1976; Ranking of wines tasted in 1976

Working Paper No. 271

Published: 2022
Category:
Economics

A climatic classification of the world’s wine regions

German Puga, Kym Anderson, Gregory Jones, Firmin Doko Tchatoka & Wendy Umberger
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Abstract
Using a dataset with 16 climate variables for locations representing 813 wine regions that cover 99% of the world’s winegrape area, we employ principal component analysis (PCA) for data reduction and cluster analysis for grouping similar regions. The PCA resulted in three components explaining 89% of the variation in the data, with loadings that differentiate between locations that are warm/dry from cool/wet, low from high diurnal temperature ranges, low from high nighttime temperatures during ripening, and low from high vapor pressure deficits. The cluster analysis, based on these three principal components, resulted in three clusters defining wine regions globally with the results showing that premium wine regions can be found across each of the climate types. This is, to our knowledge, the first such classification of virtually all of the world’s wine regions. However, with both climate change and an increasing preference for premium relative to non-premium wines, many of the world’s winegrowers may need to change their mixes of varieties, or source more of their grapes from more-appropriate climates.

Working Paper No. 270

Published: 2021
Category:
Economics

Does quality pay off? “Superstar” wines and the uncertain price premium across quality grades

Stefano Castriota, Stefano Corsi, Paolo Dyno Frumento & Giordano Ruggeri
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Abstract
We use data from Wine Spectator on 266,301 bottles from 12 countries sold in the United States to investigate the link between the score awarded by the guide and the price charged. In line with the literature, the link between quality and price is positive. In a deeper inspection, however, hedonic regressions show that the price premium attached to higher quality is significant only for “superstar” wines with more than 90 points (in a 50-100 scale), while prices of wines between 50 and 90 points are not statistically different from each other. Furthermore, an analysis performed through normal heteroskedastic and quantile regression models shows that the dispersion of quality-adjusted prices is described by an asymmetric U-shaped function of the score; that is, products with the lowest and highest quality have the highest residual standard deviation. Pursuing excellence is a risky strategy: the average price is significantly higher only for wines that achieve top scores, and the price premium becomes more volatile.

Keywords: Wine, price, quality
JEL codes: L11, Q11, L66

Working Paper No. 269

Published: 2021
Category:
Economics

A Maximum Entropy Estimate of Uncertainty about a Wine Rating

Jeff Bodington
Full Text PDF
Abstract
Much research shows that the ratings that judges assign to wines are uncertain and an acute difficulty in ratings-related research, and in calculating consensus among judges, is that each rating is one observation drawn from a unique and latent distribution that is wine- and judge-specific. A simple maximum entropy estimator is proposed that yields a maximum-entropy probability distribution for sample sizes of none, one, and more. A test of that estimator yields results that are consistent with the results of experiments in which blind replicates are embedded within flights of wines evaluated by trained and tested judges.

JEL Classifications: A10, C10, C00, C12, D12
Keywords: wine, judge, ratings, statistics, random

Working Paper No. 268

Published: 2021
Category:
Economics

Contre-degustation Olympiades du Vin According to Borda

Neal D. Hulkower
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Abstract
The rankings derived from the averages of points assigned by the judges of the red and white wines at the 1980 Contre-degustation Olympiades du Vin are compared to those determined using the Borda Count. For the white wines, Borda reversed the order of wines ranked second and third, and eleventh and twelfth by the averages. This put two California Chardonnays in the top two places and one in last place. For the red wines, Borda reversed the order of the two Burgundies in third and fourth place and breaks a tie in fifth place moving an Australian Pinot noir to sixth place behind a Burgundy. The difference in rankings is traced to the distortion caused by the wide spread of points awarded by the judges compared to the constant difference in the Borda Scores between non-tied adjacent alternatives.

Working Paper No. 267

Published: 2021
Category:
Economics

Untapping Beer Terroir: Experimental Evidence of Regional Variation in Hop Flavor Profiles

Aaron J. Staples, J. Robert Sirrine, Alec Mull, Scott Stuhr, Alex Adams & Trey Malone
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Abstract
Thanks in part to the push for localized supply chains, U.S. hop production is becoming more regionally diverse. Differentiation in geographies implies changes in growing climates and other environmental factors known to alter the flavor profiles of agricultural commodities used in food and drink. We use a chemical analysis, blind taste test, and choice experiment to identify whether the same hop cultivar grown in different regions induces a unique sensory profile in hops and beer. The chemical analysis and taste test provide evidence of hop terroir, while we find that brewers are willing to pay a premium for local hops.

Working Paper No. 266

Published: 2021
Category:
Economics

Globalization and Political Economy of Food Policies: Insights from Planting Restrictions in Colonial Wine Markets

Giulia Meloni & Johan Swinnen
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Abstract
Globalization transforms not just the economics of production and exchange in the world, but also the political economy of public policies. We analyze how wine regulations, and more specifically planting rights restrictions, have been affected by globalization, in particular colonial expansions of wine producing empires. We study several historic cases and find that (a) planting right restrictions and compulsory uprooting of vineyards are introduced to deal with falling wine prices as colonial wine production takes off and expands; (b) that enforcement of the restrictions and uprooting was difficult and often imperfect; and (c) that there was a strong persistence of the policies: after their introduction the restrictions remain in place for a long time (often centuries) and they are only removed after major shocks to the political economy equilibrium.

Working Paper No. 265

Published: 2021
Category:
Economics

The Signaling Values of Nested Wine Names

Jean-Sauveur Ay & Julie Le Gallo
Full Text PDF
Abstract
Unobserved quality challenges the empirical content of signaling theory, and often precludes the valuation of quality signals such as wine names. This paper uses the location of vineyard plots to control for unobserved wine quality when estimating the causal value of wine names on vineyard prices. The identification tackles unobserved spatial heterogeneity by newly combining a multi-cutoff spatial regression discontinuity design with plausibly exogenous name variations. We deal with standard requirements of causal inference – unconfoundedness and overlap – with instrumental variables and high-dimensional propensity models in a double robust framework. For the Burgundy region of France, we then recover the full causal signaling scheme of nested wine names with both a horizontal and a vertical dimension. This typical structure of names is monotone and complementary, as the names are consistently ordered within each dimension (rank preservation) and they present spillovers between them (umbrella effect). We find a high importance for unobserved wine quality, which produces heterogeneous signaling values.

Working Paper No. 264

Published: 2021
Category:
Economics

Is the Second-Cheapest Wine a Rip-Off? Economics vs. Psychology in Product-Line Pricing

David de Meza & Vikram Pathania
Full Text PDF
Abstract
The standard economic analysis of product-line pricing by Mussa and Rosen (1978) implies that higher-quality varieties command higher absolute mark-ups. It is widely claimed that this property does not apply to wine lists. Restaurateurs are believed to overprice the second-cheapest wine to exploit naïve diners embarrassed to choose the cheapest option. This paper investigates which view is correct. We find that the mark-up on the second cheapest wine is significantly below that on the four next more expensive wines. It is an urban myth that the second-cheapest wine is an especially bad buy. Percentage mark-ups are highest on mid-range wines. This is consistent with the profit-maximising pricing of a vertically differentiated product line with no behavioral elements, although other factors may contribute to the price pattern.

Working Paper No. 263

Published: 2021
Category:
Economics

Covid-19 Lockdown and Wine Consumption Frequency in Portugal and Spain

João Rebelo, Raúl Compés, Samuel Faria, Tânia Gonçalves, Vicente Pinilla & Katrin Simón-Elorz
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Abstract
This study aims to analyse how psychological factors related to the Covid-19 lockdown affected the frequency of wine consumption among Portuguese and Spanish consumers. To achieve this goal, we used data collected from an online survey in Europe comprising 4489 observations from Portuguese and Spanish samples. Using an ordered probit model, we analysed the wine consumption frequency as a function of a set of explanatory variables related to psychological factors and also sociodemographic variables, motivation-related variables and consumption characterisation. The results allow us to conclude that for Spanish respondents the fear of isolation was a decisive factor in increasing the probability of a higher frequency of wine consumption. Meanwhile, in Portugal, the fear of an economic crisis was the psychological factor leading to a higher consumption frequency. In both countries, psychological factors influenced the frequency of wine consumption during the lockdown due to Covid-19. However, the impact of the Covid-19 crisis has been felt differently in Spain and Portugal. Differences can be observed in both psychological and behavioural attitudes that have influenced the frequency of wine consumption and could also indicate significant cultural differences.

Working Paper No. 262

Published: 2021
Category:
Economics

Sacramental Wine: Fruit of the Earth

Edward J. O’Boyle
Full Text PDF
Abstract
Among the Jewish people wine has been a symbol of joy and so significant in their sacred rituals that on feast days they were obligated to see that everyone regardless of means was provided for. Among Christians wine in abundance dates from the marriage feast at Cana.
In the following we address sacramental wine from a secular perspective. Our efforts are intended to answer the following questions. What types and brands of sacramental wine are produced, who are the producers, and how much do they charge? What procedures are used by the Roman Catholic Church to validate the wine for use at Mass? How is the wine marketed and distributed? It’s not so much the technology behind the process that differentiates wine for sacramental use from wine for secular use. It’s the people and their connectedness to the end use of the wine.
Our research leads to three principal conclusions. First, the production of sacramental wine is in the hands of five vineyards and wineries that likely will remain in production for some time to come: Cribari, Joseph Filippi, Mont La Salle, O-Neh-Da, and San Antonio. Second, the distribution of altar wine through Catholic supply stores also appears to the assured for years to come, though some may fail under competitive pressure from direct sales, supermarkets, and other wine-specialty stores. Third, retail prices today for sacramental wines and mustum are relatively inexpensive, ranging from $60 to $80 per case.
Our research leads to three unanswered issues. First, do all wines labeled “altar wine” or “sacramental wine” comply with the Church’s validation specifications? Second, how big is the market for sacramental wine? Third, which winery is the oldest producer of sacramental wine?

Working Paper No. 261

Published: 2021
Category:
Economics

The market for wine quality evaluation: evolution and future perspectives

Magalie Dubois
Full Text PDF
Abstract
Most economic studies on expert wine evaluation focus on this evaluation as a determinant of wine prices, whereas most management research on the topic tackles its impact on the perception of wine quality: wine consumers use expert evaluation as an external quality cue. In the present research, we intend to fill the gap in valuation studies. We propose a first extensive exploration and categorization of five decades of research on wine quality signaling and evaluation through market analysis. We review the emergence and evolution of a consumer- oriented wine evaluation market, providing a critical account of demand, and unveil the market structure and mechanisms. The parallel development of scientific knowledge and technical practices over the last few decades has had a significant impact on wine quality definition and evaluation. It also influenced the way consumers obtain information about wine quality. We provide a historical perspective, exploring the emergence and standardization of wine quality evaluation and identifying the 1970s as the turning point from a production-driven market to a consumer-oriented one. Important changes are afoot on the market for wine evaluation: in areas traditionally set aside for experts, the roles of social media and experts have evolved meaningfully over the past decade with the growing self-confidence and self-reliance of wine consumers and the disappearance of the demarcation between marketplace and prescription.

Working Paper No. 260

Published: 2020
Category:
Economics

Estimating supply functions for wine attributes: a two-stage hedonic approach

Edward Oczkowski
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Abstract
A vast body of literature exists on estimating hedonic price functions which relate the price of wine to its attributes. Some studies have employed producer specific variables such as quantity sold and producer reputation in hedonic functions to potentially capture supply influences on prices. This paper recognizes that the original Rosen (1974) hedonic theoretic framework excludes producer specific variables from the hedonic price function and justifies their inclusion only for second-stage attribute supply estimation. We use the two-stage Rosen approach employing data from multi-markets for the same wines to identify supply functions. The application to Australian produced wines demonstrates the importance of a wine's quality and age as attributes in inverse supply functions. Counter to expectations a direct relation between producer size and marginal attribute costs is estimated which appears to be due to the method employed rather than the peculiarities of the data.

Working Paper No. 259

Published: 2020
Category:
Economics

The Latent Distribution of a Rating Observed

Jeffrey Bodington
Full Text PDF
Abstract
While much literature shows that the ratings assigned by critics and judges to wines are stochastic, no author has yet proposed and tested a probability mass function (PMF) to describe the distribution of those ratings. This article presents a discrete and bounded normal PMF for wine ratings. That PMF is then tested using the ratings that 72 wine judges assigned to blind triplicates. The results can be employed to improve wine-related research by recognizing and including the effects of the uncertainty that surrounds a rating observed. Results also show that the distributions of judges’ ratings are usually and significantly different from the distribution of random draws.

Working Paper No. 258

Published: 2020
Category:
Economics

What are the Major Journals for Wine Economists?

Jean-François Outreville, Lara Agnoli and Eric Le Fur
Full Text PDF
Abstract
What are the major journals for wine economists? Which ones are the most influential? Journal rankings are intended to reflect the place of a journal within its field, the relative difficulty of being published in that journal, and the prestige associated with it. A survey for a peer evaluation of journals by wine economists was launched on June 19 this year. The information and link to the survey was sent to 440 valid email addresses of academic researchers who participated at recent annual meetings of academic associations active in the field of wine economics. The objective of this survey is to present different approaches to list the best journals that researchers in the field of wine economics care about or value the most for their publications. This is an attempt to offer more than yet another journal ranking. This exercise is of potential merit for the field of wine economics and those active within it, especially young scholars who are facing a competitive environment.

Working Paper No. 257

Published: 2020
Category:
Economics

Wine Ratings

Olivier Gergaud,Victor Ginsburgh & Juan D. Moreno-Ternero
Full Text PDF
Abstract
Wine ratings are extremely important for the wine industry but, nowadays, they have flourished to the extent that they complicate wine merchants’, stores’ and consumers’ decisions. There is, thus, an increasing need to compromise among them. This paper explores alternative ways to do so, inspired by contributions in political science, social choice, game theory and operations research. We apply our methods to rank 2018 en- primeur Bordeaux wines, rated by five international experts.

Working Paper No. 256

Published: 2020
Category:
Economics

Old World and New World Sparkling Wines: Consumer Decisions and Insights for Retailers

Aaron Adalja, Florine Livat, Bradley Rickard & Alex Susskind
Full Text PDF
Abstract
The objective of this research is to examine consumer demand for sparkling wines.
We developed a lab experiment to collect data on consumers’ willingness to pay (WTP) for selected wines from France, Spain, and the United States (Finger Lakes) under different information treatments. Our results suggest that expenditures and consumption frequency for all wines are most important to WTP, and notably that familiarity with sparkling wines was relatively important for the “local” U.S. wine among the consumers in our sample. We discuss the important implications of our findings for managers of small U.S. wineries building their reputations and for restaurants and other food service outlets interested in attracting a broader consumer base.

Working Paper No. 255

Published: 2020
Category:
Economics

Premium Price for Natural Preservatives in Wine: A Discrete Choice Experiment

Lydia Chikumbi, Milan Ščasný, Edwin Muchapondwa & Djiby Thiam
Full Text PDF
Abstract
Recently, the South African wine industry launched the world's first ‘no sulphite added’ wine made from indigenous Rooibos & Honey bush toasted wood chips. This wood chip contains antioxidants properties known to protect the wine from oxidation. On the other hand, SO2, as a preservative, is often perceived by wine consumers as causing headaches and migraine. Differentiated wines based on their SO2 content may be a profitable marketing avenue for the struggling industry. We interviewed more than 600 wine consumers to investigate perceptions on wine preservatives and to elicit willingness to pay for the innovative alternative based on Rooibos & Honey bush wood chips. Alongside the wine preservatives, we also examine consumers’ preferences for organic wine attribute and wine quality measured by 100-points quality score, and the cost. Based on the results from the mixed logit model, we find that consumers are willing to pay additionally R56.48(€3.53)per bottle of wine with natural Rooibos & Honey bush wood chips, while they are ready to pay R19.52(€1.22) more for organic wine and R1.60(€0.10) for each point on quality score. Consumer preferences are not statistically different between red and white wine but differ considerably across consumers, in particular, those who believe SO2 in wine cause headaches are willing to pay for replacing sulphur-based preservatives by a natural one at least three times more. Marketing implications are offered for the wine industry.

Working Paper No. 254

Published: 2020
Category:
Economics

What Can I Still Afford to Drink?

Neal D. Hulkower
Full Text PDF
Abstract
Using data from a sample of 450 records of wines the author tasted between 1969 and 1979, an analysis was conducted to determine which of those that are still available and which of more recent vintages that are the same age as those tasted in the 1970s are affordable. Average prices were obtained from wine-searcher.com on 30 April and 1 May 2020. These were compared to those predicted by the Bureau of Labor Statistics wine price inflation factors. The highest price paid for a bottle in the author’s collection as of 1 May 2020, $142.50, was used as the upper limit of affordability. Of the 92 wines tasted between 1969 and 1979 that are still available, 17 cost less than $142.50. Of the 105 wine of recent vintages, 68 are under the limit. Current price over the inflated price of the original wines ranges from 2.42 to 260.72. The price of recent vintages over inflated price ranges from 0.62 to 60.67 with 88 of the 105 over 2. These ratios suggest that the wine inflation factors are poor predictors of future prices.

Working Paper No. 253

Published: 2020
Category:
Economics

At what price should Bordeaux wines be released?

Philippe Masset & Jean-Philippe Weisskopf
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Abstract
This paper models optimal release prices of an experience good recurrently issued on markets. Using a large sample of Bordeaux wines, we find that not only intrinsic but also extrinsic attributes affect release prices. We observe a significant relationship between primary market release prices and secondary market prices and general economic conditions. Release prices can deviate from secondary market prices in the short run but remain aligned over the long run. On average, Bordeaux wine producers have excessively increased wine prices leading to an 18% overpricing between 2004 and 2018. Finally, following the Covid-19 pandemic, Bordeaux wine should be offered at a 20% price discount in 2020.

Working Paper No. 252

Published: 2020
Category:
Economics

Impact of Crowd-Sourced Wine Ratings on Purchasing Behavior in a Retail Environment

Christopher P. Cheng & Martin R. Reyes
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Abstract
Crowd-sourced ratings are becoming pervasive in the wine industry with 100M+ 5-star reviews accessible online. An online exercise simulating the retail environment collected data from 21,636 wine “purchases” from 1202 participants. Using discrete choice modeling and regression analysis, this study investigated the influence of crowd-sourced ratings relative to rating-volume, shopper demographics, and wine attributes. Results show that crowd-sourced ratings influence wine purchasing decisions for all wine categories, although to varying degrees, and even surpass the influence of professional ratings with sufficient rating-volume. Younger generations with middle to high incomes, greater wine knowledge, who purchased wine at higher-than-average volumes and prices were generally more likely to be influenced by crowd-sourced ratings. The relative influence of the rating is correlated to a combination of familiarity of the wine variety/origin, price, and the manner in which wines are arranged on a shelf (i.e. mixed vs pre-sorted shelving). The quantitative findings open powerful possibilities for new marketing strategies for retailers, producers, distributors, and restaurants/bars.

Working Paper No. 251

Published: 2020
Category:
Economics

The Role of Perceptions, Goals and Characteristics of Wine Growers on Irrigation Adoption in the Context of Climate Change

Nina Graveline & Marine Grémont
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Abstract
While climate change affects both water demand for agriculture and water resources, implementing irrigation at farm level is one straightforward option for agriculture adaptation. Yet, in drought- prone areas, widespread development of irrigation may strengthen water scarcity and thereby further increase farmers’ vulnerability to water stress. In this context, understanding the conditions of the adoption of irrigation is of outmost importance to characterize the process, the risks and the policy implications of climate change adaptation. This paper presents an empirical approach for understanding the factors driving current and envisioned irrigation at farm level, by combining Internet-survey data and terroir data (rainfall, temperature, and soil-water capacity) characterizing wine growers and farms in southeastern France (Languedoc-Roussillon). Survey data include current and future practices concerning soil-plant water management, the perceptions of past economic, regulatory, technical and climate changes, and socio-economic characteristics such as wine growers' main objectives regarding the management of their farms. The sample gathers 28% of growers that are already irrigating their vines, 39% that are considering this option for the future and 41% that would implement irrigation by 2050 when faced with a climate change scenario. Results of different econometric models show that both terroir and socio-economic factors such as perceptions and objectives play significant roles in the adoption of irrigation. Specifically, perceptions of water scarcity seem to drive future irrigation projects much more than real water scarcity. These results carry important policy implications for water-demand forecasting and water- supply planning.

Working Paper No. 250

Published: 2020
Category:
Economics

Covid-19 What Is Next for the Market for Fine Wines?

Jean-Marie Cardebat, Philippe Masset & Jean-Philippe Weisskopf
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Abstract

Covid-19 has only been officially declared a pandemic since March 11, but its effects on the economy are already dramatic. For some industries, such as the travel & leisure industry, the current crisis is likely to become the most severe since the Great Depression. In this article, we investigate the impact of Covid-19 on the fine wine market (the upper segment of the wine market). The market for fine wine is dominated by France, with Bordeaux and Burgundy accounting for close to 50% and 20% respectively of the trading activity in 2019 (Liv-ex.com, 2019). Other major players include Italy, Spain, Germany, the U.S. (for production and consumption) and China (mostly for consumption). Buyers typically include fine-dining venues – whose revenues are currently down to zero; as well as consumers, collectors and investors – whose purchasing power suffers from the economic and financial turmoil. Given the context, it appears obvious that the fine wine market will experience negative effects due to the pandemic.

Working Paper No. 249

Published: 2020
Category:
Economics

COVID-19 and Global Beverage Markets: Implications for Wine

Glyn Wittwer & Kym Anderson
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Abstract

Policy responses to the coronavirus COVID-19 pandemic in the first half of 2020 have caused a global economic recession, the severity of which has not been seen since the 1930s. How is that affecting the world’s beverage markets, and what does it mean for the wine industry this and next year?
Of course no-one can answer this question with any precision, because it depends on many factors that remain very uncertain. Nonetheless, the European Commission (2020) has warned that the volume of wine consumption in the European Union (EU) would be 8% lower in 2020 than the previous five years’ average, bearing in mind that the 70% of sales that are off-premise are expected to be a little above average this year as many people self- isolate at home and avoid restaurants, bars and pubs. Social distancing makes large celebrations and partying impossible and so is especially damaging to sparkling wine sales. Maxime Toubart, Chairman of the Champagne producers’ organisation SGV, suggested on 5 May that Champagne sales in March and April were down 80%.
How might sales declines compare with EU wine production? What about in other parts of the world? How different will those impacts for wine be from those affecting beer and spirits? With the help of a global model of a new model of global beverage markets (Wittwer and Anderson 2019), this article specifies hypothetical shocks and estimates their effects on various nations’ beverage production, consumption, trade and prices. The latest global macroeconomic projections from the IMF (2020) are drawn on to simulate the market impacts of (i) a downturn in incomes in 2020 on beverage demand and the response of suppliers and (ii) an optimistically assumed reversal as early as 2021. In what follows we explain the nature of the exercise, present global results (including their sensitivity to alternative consumer responses in China), highlight caveats and stress that these are not forecasts but simply projections based on explicit assumptions about a very uncertain environment, and draw out implications for wine producers.

Working Paper No. 248

Published: 2020
Category:
Economics

The blue water footprint of the Spanish wine industry: 1930- 2015

María-Isabel Ayuda, Encarna Esteban, Miguel Martín-Retortillo & Vicente Pinilla
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Abstract
The impact of economic growth on natural resources and the environment constitutes a fundamental topic in current research. In particular, water, a fundamental resource for human beings, has been subject to intense pressure in recent decades. Within this context, this article examines the growth of the blue water footprint of the Spanish wine industry and its environmental impact. In order to do this, we will first calculate the blue water footprint of wine, using a bottom-up methodology. Our methodology introduces certain advances with respect to those usually used. Our results show a very fast increase of the blue water footprint from 1995, which has multiplied six-fold in twenty years with an extreme concentration in the region of Castilla-La Mancha, which accounts for 70% of this increase. The expansion of irrigated vine growing in this region has played a relevant role in the serious problems suffered by its aquifers.

Working Paper No. 247

Published: 2020
Category:
Economics

Regulation and Purchase Diversity: Empirical Evidence from the U.S. Alcohol Market

Shuay-Tsyr Ho & Bradley J. Rickard
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Abstract

The repeal of the Prohibition Act in 1933 introduced state-level regulations on the retail availability of alcoholic beverages. Recently there has been much debate among industry stakeholders on how changes to these laws will affect consumer choices. We develop an index to measure purchase diversity for alcoholic beverages that considers similarities in product attributes. Following a set of households that moved between regulatory environments during the 2004 to 2016 period, we examine the effect of alcohol availability on purchase diversity. Our key finding shows that consumers further diversify their product selections in states that allow alcohol sales in grocery stores.
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