The purpose of this paper is to introduce the Danish wine industry and then concentrate on production and discuss which factors are of importance for producing high‐quality wines. Historically, Denmark has not been a wine‐producing country primarily due to sub‐optimal climate conditions, but during the latest decade, entrepreneurial growers have entered the business of wine production by establishing small wine fields and investing in professional production facilities.
Using a rich longitudinal micro data set from the Association of Danish Wine Growers, an econometric model is set up in order to explain the chances of obtaining awards at the yearly Danish Wine Contest, i.e. signalling “quality”.
Contrary to the authors' hypotheses, field slope, field direction, size and commercial status of the producer have no influence on quality. However, the natural sugar content at harvest, grape variety, soil and growers' experience have the anticipated influence. But unobservable characteristics seem important. Spirit and entrepreneurial enthusiasm of the growers in an emerging wine industry also appear to be of importance.
Awards at wine contests signal quality to the market, which can be used in the sales strategy of the growers, thereby getting higher prices for their wines and overcoming potential “lemon‐market” effects due to asymmetric information on the market. Furthermore, noting that awards can be explained by specific factors, this may be an efficient guide for the producers to optimize their quality‐costs relationship.
The analysis of the Danish wine industry is carried out by the use of a longitudinal micro data set. A hedonic model of wine quality is estimated by using econometric methods.
Smith, V. and Bentzen, J. (2011), "Which factors influence the quality of wine produced in new cool climate regions?", International Journal of Wine Business Research, Vol. 23 No. 4, pp. 355-373. https://doi.org/10.1108/17511061111186514
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