Eastern European countries have an important history of quality and tradition in winemaking. The radical economic modification that the wine sector had to face during communism exposed these countries to various problems during transition, when their market share in Western European markets shrunk. This paper aims to argue that an important cause of the decline is the inability of price to convey information about the quality level of the wine, as from the theory of asymmetric information.
This paper uses the econometric theory of hedonic pricing to explore the research question, relating price to the characteristics of the wine, including a quality rating from a respected British wine expert for the year 2006. Results are presented for a sample of 134 wines coming from different Eastern European countries (EEC) sold in the UK. The analysis also tackles the issue of understanding which parameters contributed to the quality level of Eastern European wines, modelling the qualitative description in order to identify the keywords that explains the change in quality level.
The results show evidence of no correlation between ratings and price in the considered segment of the UK wine market, suggesting an imperfect communication of quality via the price information. Moreover, Romania, which is a very important producing country, has a weak brand value, suggesting the need for restructuring the industry and improving quality management schemes to compete in their newly enlarged destination market. The quality model shows that fruity flavours are those playing a most important role in defining the quality level; hence a more targeted product supply should be encouraged.
No previous research has used hedonic modelling to the case of Eastern European wines. Furthermore, the context used here is to understand the weaknesses of the specific segment, and the tool is used to investigate the loss of competitive advantage of Eastern European products in the UK markets, focusing on the quality/price relation.
Panzone, L.A. (2011), "The lost scent of Eastern European wines in Western Europe: A hedonic model applied to the UK market", British Food Journal, Vol. 113 No. 8, pp. 1060-1078. https://doi.org/10.1108/00070701111153797
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