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Article
Publication date: 8 June 2010

Steven S. Cuellar, Tim Colgan, Heather Hunnicutt and Gabriel Ransom

The purpose of this paper is to investigate the demand for wine and provide insight into the behavior of USA wine consumers.

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Abstract

Purpose

The purpose of this paper is to investigate the demand for wine and provide insight into the behavior of USA wine consumers.

Design/methodology/approach

This paper uses a fixed effect, instrumental variable approach to estimate the demand for wine in the USA, correcting for endogeneity inherent in demand estimation by using grape prices as the instrument.

Findings

Demand for the six top selling red wines and six top selling white wines was estimated. While the law of demand is confirmed, differences were found in the price elasticity of demand by varietal and price point. Also, these wines are found to be normal good as defined by economic theory and the results generally hold across color, varietal and price segment. There was a greater willingness of red wine drinkers to switch to white wines than white wine drinkers to switch to red wines.

Practical implications

No statistically significant cross price effects were found.

Originality/value

This paper provides an important contribution to the current literature by disaggregating the demand for wine by color, major varietal and price segment to analyze cross price effects.

Details

International Journal of Wine Business Research, vol. 22 no. 2
Type: Research Article
ISSN: 1751-1062

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Article
Publication date: 13 November 2007

Danny I. Cho, Mikhail Permyakov and Tomson Ogwang

The purpose of this paper is to investigate structural changes in the elasticity of demand for wine in the Province of Ontario and in Canada as a whole. It will provide…

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1234

Abstract

Purpose

The purpose of this paper is to investigate structural changes in the elasticity of demand for wine in the Province of Ontario and in Canada as a whole. It will provide academic researchers and practitioners with a better understanding about structural changes in the levels of wine demand elasticities over time. It will also help the relevant governments and wine business establishments in developing taxation policy and business decisions.

Design/methodology/approach

The Kalman filter method, in conjunction with the Chow test, is applied to investigate structural changes in the elasticity of demand for wine. The Chow test is used for primary investigations of structural changes in the elasticity of demand for wine over time, whereas the Kalman filter method provides information about the behavior of the elasticity coefficients over time.

Findings

The Chow test reveals that structural changes in wine demand for Ontario are more pronounced than those for Canada as a whole. The Kalman filter results indicate that increased (decreased) government taxation could be an effective tool for discouraging (encouraging) consumption of wine. The analysis of own‐price elasticity suggests that the effects of increased government taxation on wine consumption be totally unexpected. Cross‐price elasticity coefficients change their signs over time, suggesting that some of the goods that are considered to be complements may become substitutes. Income and unemployment levels have different effects on wine consumption in Ontario and in Canada as a whole.

Research limitations/implications

There may be variation in results by wine color (red or white), country of origin (imported or domestic), or price (premium or non‐premium).

Practical implications

Understanding changes in the elasticity of demand structure for wine over time would help policy makers at the provincial and federal levels come up with effective tools for controlling consumption of wine over time, including their taxation policies. For the wine business establishments, the information on consumer response is important for pricing purposes.

Originality/value

The Kalman filter has not previously been used to examine structural changes in the demand for wine in Canada.

Details

International Journal of Wine Business Research, vol. 19 no. 4
Type: Research Article
ISSN: 1751-1062

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Article
Publication date: 1 March 1999

Robert Eyler and Eric N. Sims

How individuals respond to changes in their economic condition varies from country to country. This paper explores the linkage between stock markets and wine sales. In…

Abstract

How individuals respond to changes in their economic condition varies from country to country. This paper explores the linkage between stock markets and wine sales. In particular, we look at the performance of exported wines in foreign markets. This paper hinges on the subtle distinction between wealth and income. We also provide an overview of each market analyzed. Our premise is that stock market fluctuations are correlated with wine demand such that changes in one series may change the other. Further, seasonality and price changes are also considered as components of international wine demand. Our results show that in certain countries, stock market returns are correlated with wine demand, positively in some cases, negatively in others.

Details

International Journal of Wine Marketing, vol. 11 no. 3
Type: Research Article
ISSN: 0954-7541

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Article
Publication date: 1 January 1997

Eric N. Sims

The free trade area between the US and Canada was extended in 1994 to include Mexico. This article examines Mexico's demand for wine produced in the US. The citizens of…

Abstract

The free trade area between the US and Canada was extended in 1994 to include Mexico. This article examines Mexico's demand for wine produced in the US. The citizens of Mexico do not traditionally consume wine. Brandy and rum are the preferred alcoholic beverages. But, Mexico has a large population and is expected to grow at a rapid rate in the future. Further, when the agreement took effect in 1994 the tariff on US wine was 20 percent The price of US wines will decrease significantly over the next ten years as the tariffs are eliminated. NAFTA also removed other wine specific trade barriers as well. The price elasticity of demand is −1.02 for the 1987–1994 period. The income elasticity is close to five and the cross price elasticity with EC wines was 0.3. Both the price and income elasticities portend a positive impact on the demand for US wines. The drawback to the optimistic predictions are the extremely low initial levels of consumption of wine in Mexico. So, even a doubling of consumption would still have a negligible impact on the US wine industry.

Details

International Journal of Wine Marketing, vol. 9 no. 1
Type: Research Article
ISSN: 0954-7541

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Article
Publication date: 21 August 2017

Linda Jiao

The purpose of this paper is to identify the macroeconomic determinants of fine-wine prices and estimate their impacts.

Abstract

Purpose

The purpose of this paper is to identify the macroeconomic determinants of fine-wine prices and estimate their impacts.

Design/methodology/approach

The author models the Liv-ex fine-wine price indices with the macroeconomic variables of emerging and developed markets on a monthly basis from 1996 to 2015.

Findings

The demand from emerging markets plays a key role in fine-wine pricing and, more precisely, in the price fluctuation of prestige Bordeaux wines. Furthermore, the continuous weakening of the US dollar in real terms favors an increase in fine-wine prices. Since 2011, the slowdown in economic growth in emerging markets, followed by the depreciation of national currencies, has negatively affected the luxury wine market. Along with the process of financialization in the fine-wine market, prices have become more volatile. Factors such as money supply, real interest rates and the growth of investment funds have started to show their influence on fine-wine pricing.

Originality/value

Complementary to the hedonic price modeling, this research can provide an analysis to wine-price modeling and forecasting within the macroeconomic approach.

Details

International Journal of Wine Business Research, vol. 29 no. 3
Type: Research Article
ISSN: 1751-1062

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Article
Publication date: 10 November 2021

Pierre-Yves Donzé and Sotaro Katsumata

The purpose of this study is to explore the relationship between income inequality and the demand for high-end luxury wine. The consumption of luxury goods has experienced…

Abstract

Purpose

The purpose of this study is to explore the relationship between income inequality and the demand for high-end luxury wine. The consumption of luxury goods has experienced dramatic growth since 2000 but inequality has been neglected by scholars working on luxury consumption. The exploratory research focuses on wine demand between 2000 and 2019 and analyzes the impact of income inequality among other factors, including gross domestic product (GDP) per capita and GDP growth. The authors want to discern whether highly unequal countries import more expensive wine when compared to countries with lower inequality.

Design/methodology/approach

The authors prepared different data sets based on the year and the trade value of each country to compare the differences and commonalities. The regression models incorporate particular foreign trade statistics (average unit price of wine) as an objective variable and the Gini coefficients to measure the relation between the demand for high-end luxury wines and inequality as an explanatory variable. The models also incorporate other control variables such as economic and institutional conditions.

Findings

The analysis demonstrates a positive relationship between the unit price of imported wine and the level of income inequality of the importers. This research suggests that conspicuous consumption, as a means of social distinction, is a major driver of the luxury wine market. Other significant factors include GDP per capita and geographic proximity. However, countries with a high power distance and bad governance do not purchase more luxury wines than others. Hence, rather than the social acceptation of wealth and corruption, the consumption of luxury wines is driven by the levels of economic development and inequality.

Originality/value

This paper is exploratory research that discusses an underexplored issue: the impact of income inequality on the consumption of luxury goods such as high-end luxury wines. It contributes to the literature on wine consumption, luxury business and income and wealth inequalities. These fields are rarely approached together and the research emphasizes the potential offered by such a perspective.

Details

International Journal of Wine Business Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1751-1062

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Article
Publication date: 21 November 2016

Benoît Lecat, Eric Le Fur and J. François Outreville

The purpose of this paper is to examine the purchase decision of consumers when faced with a perceived risk related to a “corked” wine for different levels of price. It…

Abstract

Purpose

The purpose of this paper is to examine the purchase decision of consumers when faced with a perceived risk related to a “corked” wine for different levels of price. It provides an example of a study of consumer behavior in the context of risk aversion and when a risk-reduction strategy is proposed. The empirical analysis examines the perceive risk as is a major determinant of the willingness to buy (WTB) and to pay (WTP) for corked bottles of wine.

Design/methodology/approach

The experimental investigation on consumer risk perception of corked bottles of wine is based on a choice-based questionnaire distributed to 310 graduate students in Bordeaux and Dijon in France. The context is the decision to purchase or not a bottle of wine at different price levels. Assuming the monotonicity of the demand function, the choice-based questionnaire is used to determine the maximum WTB and WTP for each participant.

Findings

Results demonstrate that when participants are asked simultaneously to reveal their perceived risk and purchase decision, the behavior significantly affects the WTB and WTP. At the same time, demand for risk-reduction devices (screw-caps in this study) also declines strongly with price and perceived risk.

Research limitations/implications

Although the experiment was replicated in a different region and students with a different profile, it cannot be generalized to other countries or region with a different wine culture.

Practical implications

The results have interesting behavior implications in the debate for screw-caps rather than corks. They confirm that screw-caps are associated with low quality, low value wines. Understanding the factors that influence consumers, wine purchase decisions are therefore important to wine producers, restaurant owners and retailers.

Originality/value

This is the first study that analyzes, in the context of risk taking when buying wine, the WTB and WTP for a bottle of wine when participants are required to reveal simultaneously their perceived risk and purchase decision.

Details

International Journal of Wine Business Research, vol. 28 no. 4
Type: Research Article
ISSN: 1751-1062

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Article
Publication date: 1 March 2003

Carlos A. Benito

Demand for US wine imports, import planning process. Nerlovian adjustment model, short and long run elasticities, forecast The increase in wine imports, poses questions…

Abstract

Demand for US wine imports, import planning process. Nerlovian adjustment model, short and long run elasticities, forecast The increase in wine imports, poses questions about a possible trend, and its implications for future investment opportunities of US wine companies in other wine producing countries. This article presents a model to explain the demand for wine imports in the US. Using econometric procedures we estimate coefficients of the major explanatory factors such as relative wine import prices, exchange rates, real per capita income, wine production capacity, and population. The model is used to forecast likely wine import volumes from 2003 to 2012. Even under conservative assumptions about trends of those explanatory variables we predict an important increase in US wine imports.

Details

International Journal of Wine Marketing, vol. 15 no. 3
Type: Research Article
ISSN: 0954-7541

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Article
Publication date: 12 December 2019

Gioacchino Pappalardo, Giuseppe Di Vita, Raffaele Zanchini, Giovanni La Via and Mario D’Amico

The initial hypothesis of the exploratory paper lies in the fact that there exists a demand for healthier wines due to the higher presence of natural compound which…

Abstract

Purpose

The initial hypothesis of the exploratory paper lies in the fact that there exists a demand for healthier wines due to the higher presence of natural compound which potentially bring benefits to the consumer’s health. To satisfy this hypothesis, the research questions that paper tried to answer are the following: Do there exist a demand for naturally resveratrol-enhanced wine? What variables do influence the preference of consumers toward a naturally resveratrol-enhanced wine? As a consequence, the purpose of this paper is to explore what variables naturally influence resveratrol-enhanced wine consumption.

Design/methodology/approach

A structured questionnaire was administered through face-to-face interviews to a sample of 250 regular wine consumers which were randomly selected to achieve balanced socio-demographic characteristics. Subsequently, an econometric analysis was performed to estimate the effects that selected attributes, extrapolated from the literature, have on resveratrol-enriched wine consumption. With this aim, a logistic regression model was developed through the assessment of willingness to consume naturally resveratrol-enhanced wine.

Findings

The findings of this paper suggest that respondents consider wine as source of beneficial and healthy properties and they are willing to consume enriched-resveratrol wine. The study found a direct correlation between resveratrol and wine extrinsic attributes (organic label, brand) as well as any intrinsic attributes (tannins content). In addition, solely female consumers expressed to consider label information in their preference for resveratrol-enhanced wine. Among socio-demographic factors, only age and gender have an interaction effect on the consumption of these wines.

Research limitations/implications

Since this study has some limitations due to the limited number of observations and to the specific regional geographical context, the findings should be generalized in theoretical terms with a certain caution. Before to extend the results to all Italian consumers, future research should test the robustness of the findings by assessing the effect of the attributes that the authors have examined in this study in other environmental contexts, e.g. in other wine regions.

Practical implications

The results have important implications for wine producers, since the adoption of production practices explicitly related to the higher natural content of resveratrol can lead to a value augmentation and enhance business income of companies. Moreover, there exists implication also for wine managers, given the knowledge of factors affecting consumers’ attitudes toward naturally resveratrol-enhanced wines can lead to an increase in wine demand that should allow to reach a focused differentiation strategy in specified market segments. This suggests the need to indicate on the label the content of resveratrol as a distinctive signal of the “additional health information” of a wine.

Originality/value

While a substantial body of research has analyzed the healthy attributes that affect purchasing process of wine, no other known study has examined the effects of attributes on consumers’ willingness to purchase naturally resveratrol-enhanced wine. The study is the first that explores the consumers’ willingness to buy wine naturally enriched with resveratrol. Previous works took into account only resveratrol-enriched wines. The authors believe that in the eye of consumers there are significant differences between a natural enhancement and a simply technological enrichment, since the concepts and the technological aspects behind the two processes are strongly different. To fill this gap, the authors explored for the first time what variables can influence the preference of a naturally resveratrol-enhanced wine.

Details

British Food Journal, vol. 122 no. 8
Type: Research Article
ISSN: 0007-070X

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Article
Publication date: 1 February 1994

Grant Battersby

Grape types grown in Australia have changed as a reflection of changes in consumers' tastes. Theres have been major changes in the Australian wine market in recent…

Abstract

Grape types grown in Australia have changed as a reflection of changes in consumers' tastes. Theres have been major changes in the Australian wine market in recent decades. The proportion of fortified wines has fallen from 81 per cent to ten percent of production and the popularity of different types of wine has varied. This has led to rapid changes in the types of grapes planted. The pattern of grape type use from 1972–91 at a small, long‐established winery gives a perspective on the general market trends. This winery adapted its use of particular grape types more quickly than the national average and has now established a pattern reflecting its expertise with fortified and red wines and regional characteristics.

Details

International Journal of Wine Marketing, vol. 6 no. 2
Type: Research Article
ISSN: 0954-7541

Keywords

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