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

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.

Submission

Please send your papers as PDF files to the editor, Victor Ginsburgh, at vginsbur@ulb.ac.be
Papers will be quickly reviewed, prior to potential posting on the website. Decision will be to post or not, possibly with short comments, but without referee reports. The decision will be based primarily on the suitability of the paper’s topic to the aims of the Association.
Such decisions are independent of publication decisions for the Journal of Wine Economics.

Working Paper publication requires that at least one author
is a regular member of AAWE.

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