What factors explain the price of top quality wines?

Abstract

Dada la creciente oferta de vinos y la gran cantidad de nuevos consumidores con poder adquisitivo pero que carecen del conocimiento de las sutilezas de los vinos de alta calidad, las opiniones de los expertos se utilizan para los consumidores como indicadores de calidad. Este estudio tiene como objetivo determinar los determinantes de los precios en el mercado de vinos de alta calidad. Los autores también buscan estimar el papel del país de origen, la uva, la región productora y la bodega en los precios. Y, por último, intentan mostrar cómo países, regiones y bodegas pueden ayudar a incrementar su posición en los rankings internacionales. Los autores estiman un modelo econométrico de precios hedónicos utilizando una muestra de 14 años de los 100 vinos mejor calificados de Wine Spectator para el mercado estadounidense entre 2003 y 2016, con un total de 1400 observaciones. La contribución de los autores es doble: la determinación de los valores explicativos de los precios y la identificación y atribución de las diferencias de precios por país, uva, región y bodega. Además, detectaron uvas, países, regiones y bodegas sobrevaloradas o infravaloradas con respecto a la predicción media del modelo. Los resultados son útiles para comprender el papel de las variables explicativas de los precios, así como para tomar decisiones políticas y de gestión. Del modelo se pueden derivar acciones colectivas o gerenciales para incrementar las posiciones de determinados vinos en los rankings internacionales. Los resultados son útiles para comprender el papel de las variables explicativas de los precios, así como para tomar decisiones políticas y de gestión.

Purpose: Given the growing supply of wines and the large number of new consumers with purchasing power but lacking knowledge of the subtleties of high-quality wines, expert opinions are used for consumers as proxies for quality. This study aims to determine the determinants of prices in top-quality wine market. The authors also seek to estimate the role for country of origin, grape, producing region and winery in prices. And, finally, the authors try to show how countries, regions and wineries can help increase their position in international rankings. Design/methodology/approach: The authors try to answer: What factors explain the price of top-quality wines (defined as best rated in a standardized ranking)? To some extent, in the hands of producers influence prices, which imply long-term decisions or large investments in land and marketing. Other variables that consumer value does affect prices. The authors try also to detect undervalued or overvalued wines, grapes, regions, wineries or producer countries. The authors estimate an econometric model of hedonic prices using a 14-year sample of the Wine Spectator’s 100 top-rated wines for the American market between 2003 and 2016, totaling 1,400 observations. The sample is a great cross-section because each wine is unique. Findings: The authors’ contribution is twofold: the determination of the price explanatory values and the identification and attribution of price differences by country, grape, region and winery. Also, the authors detected grapes, countries, regions and wineries which are overvalued or undervalued with respect to the average prediction of the model. Research limitations/implications: The findings are useful to understand the role of price explanatory variables, as well as for making policy and managerial decisions. From the model, collective or managerial actions can be derived to increase particular wines’ positions in international rankings. The proxy for “quality” in the study is not the only possible definition. Practical implications: In some cases, managerial choices could be conditioned by the policies or history. There is some room for collective action and public policies to improve regions’ and countries’ reputation. Social implications: There are clear synergies for policies that can raise the prestige of countries and regions and their spillovers on the brand name reputation of individual wineries. Originality/value: The results, policy and managerial implications are of interest for business, countries interested in improving their position in international rankings and for consumers to make more informed decisions.