Geography versus brands in a global wine market

Producer brands increasingly dominate global wine markets, while generic advertising promotes regionality and exports (e.g., Australia, Spain). We analyze U.S. price data and quality indicators for 24 wine regions within 11 countries using a hedonic model. We assess the value of producer brands vs. geographical indicators, defining an indicator for high, average, and low quality producers (brands) within a region based on relative peer performance, i.e., whether they consistently produce qualities above or below their regional average. In contrast to high quality producers from France and Italy, their counterparts from the New World never exceed prices for high quality Napa Valley brands. Thus, New World wine still has to catch up with the Old World in terms of regional reputation, but leading brands are able to pick up much of the price differential. Generic promotions, export quality controls, and regional quality leaders emphasizing origin in their own marketing may level the playing field for laggard regions. lEconLit citations: D400, Q130, L140r. © 2006 Wiley Periodicals, Inc. Agribusiness 22: 363-374, 2006.

[1]  E. Oczkowski.  Hedonic Wine Price Functions and Measurement Error , 2000 .

[2]  Guenter Schamel,et al.  Individual and Collective Repuatation Indicators of Wine Quality , 2000 .

[3]  A. Venables,et al.  The Spatial Economy: Cities, Regions, and International Trade , 1999 .

[4]  Stuart Landon,et al.  The Use of Quality and Reputation Indicators by Consumers: The Case of Bordeaux Wine , 1997 .

[5]  Michael Visser,et al.  Estimation of a Hedonic Price Equation for Bordeaux Wine: Does Quality Matter? , 1997 .

[6]  Marc Nerlove,et al.  Hedonic price functions and the measurement of preferences: The case of Swedish wine consumers , 1995 .

[7]  E. Oczkowski.  A Hedonic Price Function for Australian Premium Table Wine , 1994 .

[8]  Nestor M. Arguea,et al.  Econometric issues of estimating hedonic price functions: With an application to the U.S. market for automobiles , 1993 .

[9]  C. Shapiro.  Premiums for High Quality Products as Returns to Reputations , 1983 .

[10]  S. Rosen.  Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition , 1974, Journal of Political Economy.

[11]  D. Heien,et al.  The world's wine markets - North America. , 2004 .

[12]  K. Anderson,et al.  Global wine production, consumption and trade, 1961 to 2001 : a statistical compendium , 2003 .

[13]  P. Krugman,et al.  The Spatial Economy , 1999 .

[14]  Stuart Landon,et al.  Quality Expectations, Reputation, and Price , 1998 .

[15]  Jean Tirole,et al.  A Theory of Collective Reputations (with applications to the persistence of corruption and to firm quality) , 1996 .

[16]  J. Tirole.  The Theory of Industrial Organization , 1988 .

[17]  J. Brander,et al.  Market structure and foreign trade , 1985 .