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Retail Ring Lower for Eco-Label Wines

organic wineIn something of a paradox in green marketing, a study of California wine prices shows that bottles carrying an eco-label tend to bring about 7 percent less at the register.

The average price for California wines with eco-labels was $37.65. By contrast, an organically certified wine without an eco-label commanded an average retail ring of $40.54, according to the study by researchers at UCLA.

The study included 13,426 wines from 1,495 California wineries, with vintages ranging from 1998 to 2005. More than 30 varietals and 25 appellations were among the wines tested.

For less expensive wines, certification and eco-labels had no impact on pricing or ratings, the study found.

But for wines costing $25 or more, an organic or “eco” tag brought down the price.

Wines made from organic grapes but not carrying an eco-label brought a 13-percent higher price than conventionally produced wines of the same varietal, appellation and year.

This may not be news to vintners, however. The study found that only a third of vintners using organically certified grapes clearly advertised so on wine labels.

“Producers of two-thirds of these wines must suspect that consumers, for whatever reason, wouldn’t appreciate the use of organically grown grapes,” said Magali Delmas, a UCLA environmental economist and the study’s lead author. “Otherwise, why would they refrain from drawing attention to this benefit on their labels?”

In a 2007 study, only 10 percent of shoppers said it was very important to buy organic in the categories of beer and wine.

That hasn’t stopped wine grape growers from adopting sustainable agriculture methods.

Abou 80 percent of the vineyard representatives participating in a 2008 survey said they used sustainable farming practices on at least part of their acreage.

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One thought on “Retail Ring Lower for Eco-Label Wines

  1. Readers should be aware that this article is summarized from the researchers’ comments about their own paper. It’s useful to downloaded the entire report and read it.

    There are also some missing details, that when highlighted, bring a little clarity to the confusing conclusions. This appears to be a case of trying to apply complex theoretical statistical models to solve a more simple question. It would have been far easier and more accurate to use IRI or Nielsen scan data. Here are some issues one might consider when reviewing the research:
    *Accuracy: The researchers say “when wineries do use ‘eco-labels’, prices plummet.”
    Their research paper found eco-labeled wines actually received a 6% price premium to average priced wines, it’s just a lower price premium than ‘eco-wine’ using no ‘eco-label’ received.
    *Timeliness: The report was published 14 months ago and reflects wines produced from 98-05
    -Dramatic changes in eco offerings and consumer awareness / behavior have happened since many of these wines were produced 10 years ago (32% of wines from the 1990s).
    *Sample Size: 13,426 SKUs were analyzed.
    -That many SKUs bring a lot of noise from the outliers (volumetrically insignificant) that really don’t help to determine market trends.
    -A better approach may have been to look at the leading 200 SKUs in each price segment.
    *Assumptions: The researchers assert that better wine comes from eco-grapes for horticultural reasons.
    -That is opinion. Numerous studies (UC Davis) have demonstrated no direct causation.
    -That is to say, all grapes grown with the finest practices, eco-certified or not, deliver the same quality.
    -The average Wine Spectator score was 1 point higher for organic grapes which is not a significant deviation for such a subjective measurement and suggests a contradiction in their assertion about increased quality.
    *Price: The real crux of the paper is the pricing model. There are a series of controls added to adjust the pricing rather than reflect actual retail pricing.
    -They applied the “hedonic price model” with an apparent additional factor for “winery skill.”
    -It’s rather confusing and there is no stated justification for this or definition of how “winery skill” was assigned (although “winery reputation” is alluded to).
    -Ln Price(its) = ? •Eco-Label(s) + ? •Cert(s) + ? •X(its) + ?(i) + ? •Varietal(s) + ?•Appellation(s) + ?(its)
    -where i = winery, t = vintage, s = wine, x = vintage, score, issue year and cases
    *The mean price of wine in the study was $35.48 from wines that varied from $5-$500.
    -The average price for domestic wine during that time period was ~$5.60
    -With a sample this large, wouldn’t it have been better to use weighted average, not mean, broken down by price segment to represent what consumers are actually buying.
    -Price was determined by MSRP not actual prices paid, which could provide wide variances for popular items that are price promoted at retail.

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