Pricing strategies for Italian red wine

Italian wine is one of the most famous products worldwide and yet very little is known about the pricing strategies and the characteristics of consumers on the domestic market. In this article we attempt to partially fill this gap via the estimation of a hedonic price function for Italian red wine sold in the domestic market for the period 2007–2008. In particular we assess the importance of label characteristics (that can be inferred from the bottle), chemical and sensory characteristics (that can be inferred through testing and tasting) and panel judgements. Our results have been obtained using an innovative procedure that consists in applying dimensionality reduction methods in order to construct latent variables to be used with hedonic price techniques. The analysis shows that price formation follows quite different patterns in the large-scale retail trade and in the wine shops. In the large-scale retail trade, the price mainly depends on the label characteristics (the alcohol content being the most relevant) of the wine sold; other indicators, even when statistically significant, are fairly irrelevant. For wine shops the story is rather different: the price depends also on the sensory characteristics of the wine and it is on this market that wines with particular tastes and characteristics may obtain a better selling price.     

Understanding consumption choice of prosecco wine: an empirical analysis using Italian and German Homescan data

This study analyses the degree to which wine consumers are truly able to intrinsically evaluate the meaning of a designation of origin certification or whether they generally consider such a certification to be a vague credence attribute. This issue was addressed through an empirical analysis of Homescan Panel data in the Italian and German markets, using a Heckman probit model to assess the role of consumers’ characteristics and habits in the choice of ‘Prosecco’ wines characterized by two different levels of the denomination of origin certification. Our results suggest that Prosecco sparkling wine is perceived as a product of medium-high positioning and is preferably purchased by households that buy wines with a higher unit price. In contrast, consumers who appreciate sparkling wine did not show any preference towards a specific type of Prosecco, especially outside the area of production, such as in the German market, which suggests that they still do not completely understand the difference between the certification levels.     

The value of quality clues in the wine market: evidences from Lazio,Italy

The purpose of the paper is to contribute to understanding the role and effectiveness of different quality clues in the creation of value for the main wines of the Lazio region. The study presents a hedonic price model. An ordinary least squares and a quantile regression models were estimated. The latter is able to detect additional patterns related to the effects of the covariates. Prices are regressed on wine color, sub-regional area of origin, the type of certification of origin, and on experts' evaluation. The analysis is based on data released by three major Italian wine guides: Gambero Rosso, l'Espresso, and AIS (Italian Sommelier Association). Results show that: (i) white and red wines follow two different price patterns; (ii) prices are correlated with experts' evaluation; (iii) the impact of the latter is higher when other quality clues, such as geographical indications, are less effective; (iv) the role of different quality clues varies at different price levels and it is different for red and white wines; overall, wines from the Lazio region are associated with poor to mediocre quality levels. This may explain the decline in reputation and in market share that these wines are experiencing after centuries of popularity.     

The influence of product knowledge on the relative importance of extrinsic product attributes of wine

The purpose of this paper is to examine the influence of product knowledge, both subjective and objective, on the relative importance of four extrinsic product attributes of wine, namely price, age, brand and region of origin. The relative importance of four product attributes is evaluated comparative to consumers’ self-reported and objectively measured knowledge of wine, using the conjoint analysis technique. The results suggest that product knowledge does influence the relative importance of extrinsic wine attributes in product evaluation, with the price of wine shown to be the dominant attribute regardless of the level of product knowledge expertise. Brand, age and region of origin received differing rankings of importance. Across all four levels of product knowledge, consumers navigate their evaluative product decisions according to the midpoint between most and least expensive wines in their consideration set. Price sensitivity appears to heavily impact consumer evaluation strategies, which serves to inform wine pricing strategies.     

Willingness to pay for red wines in China

China's rapidly expanding wealthy population has expressed a new desire for imported red wines. Using data collected in China's major red wine consumption region of Beijing, this study analyzes the impact of country of origin, price, wine age, and brand on consumer-derived utility and willingness to pay for red wines. Findings from a conditional logit model and a mixed logit model indicate that price remains the key factor in Chinese consumers' red wine choices. For gift purchases, consumers are willing to pay an additional $20 to move from a US wine to a French wine. For own consumption, French wines are preferable if their price is within a reasonable range of $13–20 above Chinese or US wines. Chinese consumers also strongly favor branded and matured red wines. China's rapid and sustainable economic growth and its stronger integration to the global economy have led to greater disposable income and the expanding consumer demand for luxury beverage of red wines.     

How much is a bottle of conventional,organic or biodynamic wine worth? Results of an experimental auction

Today, worldwide, we note a growing demand for wines made following techniques with an eye to environmental sustainability. Consumers readily find organic wines at sales outlets, along with other products made following techniques that comply with even more restrictive environmental constraints, such as biodynamic techniques. While on one hand, winemakers are encouraged to market products obtained in respect of certain environmental standards, on the other, they are asked to evaluate the economic convenience of this operation. In view of structuring coherent company strategies, and faced with clearly higher production costs, understanding the premium price consumers are willing to pay for sustainable wines assumes fundamental importance. Our paper focuses on this problem, attempting to analyse consumer preferences and willingness to pay for wines produced following conventional, organic, and biodynamic methods. Implementing a second-price experimental auction, we elicited the willingness to pay for the three types of wine and assessed premiums based on scenarios that considered both information and tasting. We found that the willingness to pay for biodynamic wines was lower than for organic wines, and higher than for conventional wines. With organic wines, credence attributes play a much more important role than experience attributes in determining consumer preferences. Moreover, familiarity with biodynamic wines positively affects the willingness to pay for them. Our study highlights interesting management and marketing implications for producers and retailers of organic and biodynamic wines: in particular, the importance of increasing knowledge about the production technique adopted and, specifically, developing information campaigns that target the biodynamic production technique.     

Expert reviews,peer recommendations and buying red wine: experimental evidence

The micro level behavioral foundation for how quality reviews of experts and word of mouth (WOM) affect demand for experience goods has received scant attention in previous research. Taking an experimental approach, the present study examines how quality reviews and peer recommendations influence consumers’ decisions to buy red wine. Four main findings are presented for a sample of Norwegian wine consumers. First, consumers prefer wines that have obtained very good quality reviews to wines getting OK quality reviews. Second, consumers prefer peer-recommended wines to non-recommended wines. Third, the effect of a very good quality review is greater for non-recommended wines than for peer-recommended wines. Fourth, some of these effects on wine buying decisions are contingent on price level, and there is also some heterogeneity to their magnitude. The results are mainly in concert with the proposed hypotheses.     

Consumers wine preferences according to purchase occasion: Personal consumption and gift-giving

We tested the hypothesis that individuals may act differently when buying a bottle of wine for themselves than they do when buying wine as a gift. Using a between-subject design, we estimated the differences in consumer preference for these two occasions. We conducted a choice experiment on 618 Italian wine consumers and included the attributes of price, geographical indication (i.e. IGT, DOC, or DOCG), organic claim, and brand (i.e. famous producer or a non-famous producer). By applying an error component random parameters logit model, we detected relevant differences between the two scenarios in terms of the relative importance of the studied attributes. The gift-giving scenario was further investigated using a latent class model, which identified three segments of consumers; we profiled these according to personal attitudes and wine knowledge. Our results show a relevant heterogeneity among consumers’ preferences for the gift-giving scenario, with geographical indication having a low impact and brand and organic claim playing a pivotal role. This study provides relevant insights for winemakers and retailers regarding diversifying marketing strategies.     

Tasting and Judging the Unknown Terroir of the Bulgarian Wine: The Political Economy of Sensory Experience

Some Bulgarian winemakers insist that their unique terroir (taste of place) and native grapes can deliver a “distinctive” product in the global market. Such beliefs are the driving force for marginal producers to continue with their wine production in a fiercely competitive global wine market despite the lack of brand equity and cultural capital compared to the world's elite wines. How can the global consumer sense this unique “taste of place” which is itself an elusive culturally cultivated concept? What does gastronomic connoisseurship entail in a highly globalized world where knowledge of local products and taste are exchanged and experienced in a standardized way as a global foodway? Understanding these questions from the viewpoints of the Bulgarian wine sector, this article discusses the intersection of the sensory experience and the implicit global hierarchy of value that wine producers and consumers employ to objectify and communicate the subjective taste knowledge and identity of place.     

The relevance and acceptance of green wines in South Africa: some marketing insights

This study provides insights into consumers' decision-making when purchasing green wine, and the market perceptions regarding green wines in terms of price, quality, trendiness and acceptance of green terms such as ‘carbon neutral'. Data were collected from 191 South African wine consumers through an online survey. Although greening is indeed recognised by the consumer as a social responsibility image cue that shapes their choices, its importance is relatively low compared with that of other conventional cues. Some of the most common green marketing strategies, such as green certification, were of relatively low significance to the consumer. Green wines were generally regarded as trendy and fashionable but are unlikely to play a significant role in the pricing of these wines. Consumer demographics are an important determinant regarding the relevance of greening as a purchasing consideration, with females attributing more significance to this purchasing factor. This study is of value to academic researchers and wine industry practitioners alike. It contributes to the knowledge base by providing new perspectives on consumer perception of green wines, the social responsibility aspects and its marketing, and is the first of its kind conducted in the South African environment.