wep – wine economics and policy just accepted manuscript 1 just accepted 1 2 3 4 re-visiting the concept of winescape through netnography: “a tale of two cities” 5 6 terziyska i.1 7 8 9 1 southwest university neofit rilski, bulgaria, email: lynnterziyska@gmail.com 10 11 12 13 14 correspondence concerning this article should be addressed to ilinka terziyska southwest university 15 neofit rilski, bulgaria, email: lynnterziyska@gmail.com 16 17 18 19 this article has been accepted for publication and undergone full peer review but has not been through 20 the copyediting, typesetting, pagination and proofreading process, which may lead to differences 21 between this version and the version of record. 22 23 please cite this article as: 24 25 terziyska i. (2022), re-visiting the concept of winescape through netnography: “a tale of two cities”, 26 wine economics and policy, just accepted. 27 doi: 10.36253/wep-12806 28 29 30 31 32 33 34 35 mailto:lynnterziyska@gmail.com wep – wine economics and policy just accepted manuscript 2 abstract 36 winescape is a central concept in wine tourism studies but is still under-researched, especially when 37 package tours are concerned. this study has a two-fold objective: 1) to identify the winescape 38 attributes of an emergent wine destination (bulgaria) as perceived by organized wine tourists and 39 compare them to a well-established old-world wine region (italy), and 2) to unveil the links between 40 winescape attributes and servicescape dimensions. to this end, we employed a netnographic approach 41 through the application of content analysis of tripadvisor reviews and a combination of closed and 42 open coding. seven categories of winescape were identified, which almost completely coincide with 43 the results of previous research. at the same time, some differences were found, mainly in the salience 44 of the individual elements, which suggests a different composition of the winescape depending on 45 several factors, among which the characteristics of the destination and the specifics of the tour 46 operator. the study complements existing knowledge by validating a previously proposed model, and 47 at the same time showcasing the context-dependent differences in attribute salience for two different 48 types of destinations. in addition, it is the first to identify the links between the traditional supply-49 driven winescape models and the more holistic concept of experienscape. 50 keywords: winescape; wine tours; qualitative research; netnography; bulgaria 51 1. introduction 52 wine tourism is often defined as a sub-type of gastronomy tourism ‘whose purpose is visiting 53 vineyards, wineries, tasting, consuming and/or purchasing wine, often at or near the source’ [1, p. 54 44]. consuming a product at the place it was produced enables the visitor to connect to the territory 55 and its culture. the complex blend of a destination’s landscapes, culture, food and wine products, 56 and the techniques employed for producing them shape its identity and are perceived as ‘the 57 foundation of the dna of the tourism experience’ [2, p. 9]. it is therefore no surprise that wine 58 tourism is seen not merely as a wine-related activity, but an immersion into the winescape [3]. 59 the concept of winescape is gaining increasing attention in the field of wine tourism. there are 60 several reasons for this on the one hand, it is broad enough to cover almost all aspects of this type 61 of tourism product, and on the other it is often used as a basis for analyzing the image of wine 62 tourism destinations [4], wine tourism experiences [5], or customer satisfaction [6]. at the same time, 63 its conceptualization is still considered to be in its nascent stage [7]. 64 in purely technical terms, wine tourism is usually perceived as a visit to wineries and vineyards, but 65 in fact its scope is far wider. in recent years, visits to wine bars and tastings in major urban centres 66 wep – wine economics and policy just accepted manuscript 3 have become increasingly popular, as well as the participation in various wine-related events wine 67 exhibitions, wine festivals etc. apart from that, wine tourism can be practiced both individually and 68 in the form of an organized trip. research on winescape has been mainly focused on the micro 69 (winery) and macro (wine region) level, while studies on wine tours and wine events remain scarce 70 [8]. 71 servicescape is perceived as the major source for constructing personally significant experiences [9]. 72 thus, it is directly linked to customer satisfaction [10] and perceived service quality [11]. being a 73 particular case of servicescape, winescape is sometimes defined as the environment where wine 74 tourism experiences occur [7], [8] and the numerous institutional arrangements and values in this 75 context play a significant role in deriving the benefits wine tourists pursue [5]. with this in mind, 76 knowledge of the winescape attributes and how they are perceived and appreciated by tourists is 77 essential for the successful operation of the winery and the wine destination. in this respect, the 78 following three trends have been observed in recent years – 1) a holistic approach, including analysis 79 of as many stakeholders as possible [12]; 2) an emic rather than an etic approach, where the study 80 does not employ ready-made, predefined models, but is informed by consumer-driven data [4]; 3) an 81 increasing variety of methods used to collect and process information [7], [9]. in line with the above 82 trends, this article focuses on a hitherto neglected stakeholder in wine tourism wine tour providers. 83 despite using a previously proposed model, the approach is predominantly emic in addition to 84 validating the model for a different context, the study is open to updating and supplementing it based 85 on consumer perceptions. 86 the winescape reflects the objective resources and features of a given wine establishment or a wine 87 region and it can be therefore presumed that different contexts will present varying configurations at 88 least in the salience of individual attributes. there has been a call for studies on the way tourists 89 assess winescape attributes in a specific wine region, which can also be done from the perspective of 90 package tours [13]. this study provides insight on the way winescape is perceived by organized wine 91 tourists in bulgaria – a wine region, which is worth studying because of its interesting pattern of 92 development as a wine producer and because of the fact that it is exemplary for an emergent wine 93 destination from an understudied region – south-eastern europe. once among the top wine exporters 94 in the world, the country had to totally rearrange its viticultural sector and start its development from 95 a very unfavourable base [14]. taking bulgaria as a basis for analysis, this study aims to: 1) identify 96 the winescape attributes of an emergent wine destination as perceived by organized wine tourists and 97 compare them to a well-established old-world wine region, and 2) provide some insight on the links 98 between winescape attributes and experienscape dimensions. to this end, the netnographic approach 99 wep – wine economics and policy just accepted manuscript 4 was taken, through thematic analysis of tripadvisor reviews. 100 2. literature review 101 the winescape appeared as a concept in the scientific literature in the 1970s, when peters [15] defined 102 it as a specific form of an agricultural landscape consisting of three main elements: the grapes, their 103 environment, and the vintners in the context of the cultural practices related to wine. this first 104 perspective was mostly geographical in nature and placed winescape into the broader framework of 105 cultural landscapes; later on, the concept evolved to adopt a more marketing-oriented focus. 106 in its present use, the winescape is actually more related to the broader term of servicescape, than to 107 the notion of cultural landscape [16]. the concept of servicescape was initially used in the field of 108 marketing of service organizations and denotes the built environment that affects both employees and 109 customers and whose dimensions can be controlled by the firm [17]. this model describes the 110 servicescape in three key dimensions: (1) ambient conditions; (2) spatial layout and functionality; 111 and (3) signs, symbols and artifacts, and excludes the social and natural dimensions. these were later 112 added by rosenmaum and massiah [18], who claimed that a servicescape was formed not only by 113 factors that can be controlled by the company, but also by immeasurable, and often managerially 114 unmanageable social, symbolic and natural stimuli. 115 in a similar vein, arnould et al. [19] defined two main attributes pertinent to the servicescape: the 116 substantive staging and the communicative staging. the former refers to the physical staging of 117 environment, while the latter is connected with its interpretation and transmits meanings from the 118 provider to the customer. 119 the winescape models for the macro (destination) and the micro (winery) level do not exhibit any 120 significant differences. scenery setting, the wine product, people and hospitality, ambience of the 121 region, wineries and wine estates are among the main attributes at the wine destination level [4]. the 122 micro level framework presents winescape as consisting of almost the same supply-related elements: 123 setting, atmospherics, wine quality, wine value, wine complementary product, signage, and wine 124 service staff [16]. the only difference is seen in the model of the wine tour servicescape, where tour 125 planning and logistics is one of the most salient attributes [8]. 126 so far, there has been only one study on winescape from the perspective of package tours [8]. it 127 offered a model consisting of six winescape attributes: tour guiding, core wine product, tour planning 128 and logistics, complementary activities, food and dining, and nature and scenery. these were 129 validated by a consequent study on wine tour success factors [13], which was performed for the same 130 wep – wine economics and policy just accepted manuscript 5 destination, but used totally different research methods (multidimensional scaling method, cluster 131 analysis, and sentiment analysis). 132 along with the obvious similarities, there are also some noticeable differences in the above models, 133 which mainly refer to the stated significance of individual attributes. at the destination/wine region 134 level, the nature was reported as the most prominent attribute (bruwer, et al., 2016). in contrast, staff 135 was identified to exert much more influence at the micro (winery) level [16] and in the case of 136 organized travel, where it was operationalized as ‘tour guiding service’ [8], [13]. 137 despite these differences, there are enough similarities to suggest a generic winescape framework 138 that encompasses the findings of various studies for the three levels – the micro, the macro and the 139 intermediary one, consisting of six attributes: destination features, wine, people, wineries, food and 140 dining, and signs and symbols [20]. composed of clearly identifiable attributes, it is supply-related 141 in its structure and content, but when assessed, the approach is usually demand-oriented, taking the 142 customer perspective by employing either structured surveys [6] or free text analysis [21]. 143 there is one more approach in conceptualizing winescape that differs from the attribute-based models 144 presented above – the wine-experiencescape [10]. it is premised on the theory of experienscape, 145 which is defined as the stimuli in a service environment (along with a hospitality culture) that shape 146 tourist experiences and affect customer reaction towards the product [12]. there are five types of 147 stimuli: sensory, functional, social, natural, and cultural. in the case of wine tourism, experienscape 148 has been operationalized in the following way [10]: 149 • sensory dimension: wine tasting, winemaking. 150 • functional dimension: attributes of utilitarian value such as layout, architectural design and 151 equipment of the winery, layout, signage, quality of the accommodation, and value for money. 152 • natural dimension: landscape, scenery, vineyards. 153 • social dimension: interaction with fellow travellers in the winery, communication with 154 winery staff. 155 • culture and hospitality dimension: heritage, attitude, and behavior of the employees and staff 156 toward the customers. 157 the model is entirely based on literature review and there has not been any empirical study to test 158 how the dimensions are linked to attributes identified in previous research. the present study will 159 attempt to fill this gap by constructing a model, which takes into account both the supply-related 160 attributes of traditional winescape frameworks, and the more demand-oriented dimensions of pizam 161 wep – wine economics and policy just accepted manuscript 6 and tasci’s and gunasekar et al’s concepts. the two research questions are: 162 rq1. are there any differences in winescape attributes’ perceptions for a well-established old-world 163 wine destination (tuscany) and an emergent destination from south-eastern europe (bulgaria)? 164 rq2: how are supply-driven winescape attributes and the experienscape dimensions linked? 165 3. material and methods 166 3.1. study area 167 the study is focused on a specific country – bulgaria, which can be used as exemplary for an 168 emergent wine destination with an interesting history as far as wine production is concerned. for 169 more than 20 years (1961-1985) the country almost consistently ranked among the world top 5 wine 170 exporters [22, pp. 176, 196]. gorbachev’s anti-alcohol campaign in the mid-1980’s ended this 171 positive trend, resulted in the loss of a major market and gradual decline of both production and export 172 [23, p. 265]. the decade after 1989 was marked by a dramatic restructuring of the sector and signs of 173 slow recovery were only seen after 2000. in recent years, the country is slowly regaining positions 174 on the world market but by 2021 it ranks only 34th in world wine exports [24]. there is a positive 175 trend of reorientation from quantity to quality, which is especially important for wine tourism. an 176 increasing number of wineries open their doors to tourists, although unfortunately there are no official 177 data on their total number. according to a study conducted in 2020, bulgaria is in the second stage 178 of the wine destination life cycle [25], visitor numbers are still small, but with a positive increase rate, 179 horizontal and vertical networks are insufficient, and there are initial steps in the launch of wine routes 180 and joint wine events [14]. there are only a few specialized tour operators offering mainly inbound 181 tour packages. most of them are small, family owned businesses emphasizing on private and small 182 group tours. 183 3.2. data collected 184 the main goal of the study is to gain a deeper understanding of the winescape, which is best achieved 185 through analyzing qualitative information. one of the relatively new methodologies in this regard is 186 netnography an interpretive method that adapts ethnography to the study of online societies [26] 187 and is very suitable for ‘generating rich, thick description through grounded interpretations’ [27]. in 188 tourism studies, the main sources for accessing the needed type of qualitative data are platforms 189 providing user-generated content such as tripadvisor, instagram, airbnb or flickr. in this particular 190 case, the most appropriate choice was found to be tripadvisor, because of its high degree of 191 wep – wine economics and policy just accepted manuscript 7 reliability [28], [29] and broad popularity worldwide, which brings in a sufficient number of 192 consumer reviews. one of the few bulgarian tour operators specializing exclusively in wine tourism 193 was selected as the object of the study – it was also the one with the greatest number of customer 194 reviews on tripadvisor. the reviews referred to several tours offered by the company, ranging from 195 one-day to multi-day ones. a total of 80 reviews (79 in english and 1 in french), posted from 196 november 2015 to november 2021 were subjected to thematic analysis. the analysis is based only 197 on the body text of reviews, while the title was omitted, because it would often contain information 198 present in the body text, thus leading to distortion of results. the company and its tours have an 199 outstanding traveller rating on tripadvisor – 77 reviewers have rated them as excellent and 3 – as 200 very good, using the tripadvisor 5-point rating system, ranging from 1 bubble=terrible to 5 201 bubbles=excellent. the majority of reviewers were foreign tourists coming from germany, uk, the 202 usa, australia, etc., with only 9% of all reviewers being domestic ones (figure 1). 203 204 205 figure 1. distribution of reviewers by country of origin 206 3.3. methodology 207 the identification of winescape attributes was premised on the notion of salience – the quality of 208 some attitudes and beliefs to be more prominent, to enter a person’s mind more readily and as a 209 consequence be more frequently verbalized [30, p. 163]. thus, following the identification of 210 categories and codes, the initial dataset (traveller reviews) were coded manually and the results were 211 quantified in terms of category and code frequency of mentions. the definition of categories and 212 codes was partially informed by previous research – the winescape model of terziyska and 213 uk 27% usa 27% australia 13% bulgaria 9% italy 7% other 17% reviewers' country of origin wep – wine economics and policy just accepted manuscript 8 damyanova [8], but also keeping the in vivo element – new categories and codes were added if 214 identified, which was done through thematic analysis, one of the most popular methods for 215 ‘identifying, analysing and reporting patterns (themes) within data’ [31]. reviews were then 216 qualitatively analysed to get additional insight on individual codes and identify possible links between 217 winescape attributes (named categories in the analysis) and the dimensions of the wine experienscape 218 model. finally, the results were compared to a similar study, conducted earlier in a different context 219 – a well-recognized old-world destination (italy). thus, the research went through seven stages, 220 starting from choosing the dataset and ending with comparison with findings from previous research 221 (figure 2). 222 223 224 figure 2. research stages 225 the advent of qualitative analysis software has enabled the use of mixed methods and the processing 226 of large datasets of unstructured text through automatic coding. a lot of recent studies in wine tourism 227 using a qualitative approach have taken benefit of this opportunity [10], [13], [32]. at the same time, 228 some authors claim that this may lead to a loss of ‘valuable, often nuanced, information’ and 229 recommend a more in-depth, traditional qualitative analysis of at least some part of the data [33, p. 230 649]. to answer this concern, the present study is based predominantly on pure qualitative analysis, 231 though some quantification is also included, using qda miner lite – qualitative data analysis 232 software for coding, retrieving and analyzing texts or images. 233 choice of dataset tripadvisor, bulgarian to extraction of traveller reviews a total of 80 reviews initial reading for categories and codes definition 7 categories and 22 codes were identified manual coding of data using qda miner lite quantification of categories and codes by frequency using qda miner lite in-depth analysis of coded segments entirely qualitative approach comparison of results with previous research wine regions compared – bulgaria and italy wep – wine economics and policy just accepted manuscript 9 4. results and discussion 234 4.1. winescape attributes for package tours: the case of bulgaria 235 the initial category and code definition resulted in the identification of 7 categories (winescape 236 attributes), and 22 codes pertaining to them. of these, the most salient was the core wine product, 237 which was mentioned in 84 % of cases (traveller’s reviews), followed by the tour guide – 83 % (table 238 1). 239 table 1. frequency distribution of categories and codes 240 category % cases code % cases core wine product 84% wineries 57,5% wine-based activities 25,0% wine 56,3% tour guide 83% knowledgeable 62,5% accommodating 20,0% friendly 21,3% passionate 13,8% general/unspecified 12,5% fun 5,0% english fluency 2,5% planning and logistics 45% general planning and coordination 33,8% booking 7,5% vehicle/driving 6,3% pick-up 6,3% choice of activities 2,5% destination appeal 41% nature and scenery 5,0% cultural attractions 36,3% food and dining 35% food 27,5% dining place 8,8% complementary activities 5% passive involvement 5,0% active involvement 0,0% accommodation 5% hotels 5,0% 241 core wine product 242 the core wine product is composed of three subcategories (described as codes) – wine, wineries, and 243 wine-based activities. of these, wineries and wines are the most salient, mentioned in 58% and 56% 244 of reviews respectively. this finding was quite expected, as wine tourism revolves around wine, and 245 the places and experiences related to it. at the same time, this is the first study reporting the core 246 product category as the most salient as far as winescape attributes are concerned. 247 248 wep – wine economics and policy just accepted manuscript 10 there are three types of reviews on wineries: 249 (1) posts that just include the word winery or wine cellar, but do not provide additional 250 information. these were only used for measuring the saliency of the attribute. 251 (2) posts that describe wineries using only a few adjectives. the most common words used are 252 quality, stunning, beautiful inside, small, authentic, organic. 253 (3) posts where the reviewers explain more elaborately what impressed them about their visit. 254 these are the segments that will be analyzed in depth to gain more insight and identify 255 possible links to wine-experienscape dimensions. 256 apart from the obvious references to wineries’ design, the other two prominent features that stood 257 out during the qualitative analysis were the attitude of wine staff/winery owners and the educational 258 aspect. a number of reviewers discuss the warmth and passion of the employees who welcomed them 259 on site: ‘at both locations we were shown round by very passionate vintners’ (fiona d, uk, july 260 2021), ‘the wineries we visited had the most informative staff’. the above reviews point to a 261 significant overlap of the role and desired features of the tour guide and the winery staff. 262 diversity is also a feature that seems to be highly appreciated by reviewers: ‘we visited several 263 different and contrasting vineyards’ (kevmcc655, uk, january 2017), ‘two very different wineries, 264 a great range of very good and very interesting wines. fully recommended!’ (twoa2017, germany, 265 2017). 266 wines are described as great and delicious. there is also an emphasis on the opportunity to taste 267 traditional local varieties: ‘we enjoyed our day tour from plovdiv and had a great experience tasting 268 wines from traditional bulgarian grapes, as well as other varietals.’ (ebhart, usa, july 2019). 269 wine tasting and winery tours are the most common wine-based activities mentioned by reviewers. 270 i have been to a fair share of wine tours and what made this trip even more unique is at 271 the end of the trip we learnt how to blend our very own wine with the enologist which we 272 bottled and brought home with us. (mila, croatia, august 2016) 273 however, what seems to be most valued is the opportunity to talk to the winemakers / winery owners: 274 we visited 11 wineries and received a very warm welcome from every one of them. the 275 passionate winemakers gave informative tours and we tasted almost 60 wines, some of 276 wep – wine economics and policy just accepted manuscript 11 which we could not resist taking home in our overloaded suitcases. (westbourne w, june 277 2019), 278 ultimately though it was vasil and the winery owners' kindness and warmth that made 279 this a really wonderful experience, and we would recommend anyone to try such a tour! 280 (johanmyst, the netherlands, september 2021) 281 the core wine product has obvious links to at least three of the experienscape dimensions – the 282 functional one (references to the design and character of the wine cellars and vineyards – small, 283 different, fantastic, beautiful), the social one (communication with winemakers, focus on warmth, 284 passion and informativeness), and the sensory one (wines, tastings). the cultural dimension can also 285 be seen through the mentions of traditional local wines. 286 tour guide 287 despite being ranked as second in terms of salience, in reviews the tour guide is often pointed as the 288 main reason for an unforgettable and meaningful experience: 289 vasil, who drove us around and acted as our guide and interpreter when needed, was very 290 knowledgeable about the ancient and recent history of bulgaria. this background made 291 our experience much more meaningful. (darby h, uk, june 2017) 292 of all the features that were mentioned, knowledgeable stands out as the most prominent one, seen 293 in 62% of all posts. apart from knowledge in history and culture of the destination (see above review), 294 the other most discussed aspect is expertise in wines and winemaking and the ability to communicate 295 it to an audience with varying degrees of proficiency: 296 our tour guide nicollet has a true passion for wines and bulgarian culture and history. 297 her enthusiasm was contagious as we soon felt like we were touring with old 298 friends. (pablo j, usa, june 2017). 299 friendly and accommodating are the two features that follow next in terms of saliency with almost 300 equal frequency of mentions: 21 and 20 percent respectively. in some of them the guide’s kindness 301 and responsiveness are directly linked to tourist satisfaction: ‘our guide nicolay was so kind and so 302 good and helpful, that we enjoyed this tour in this beautiful country’ (yiota123, cyprus, may 2018), 303 ‘first of all, the driver was one of the owners and it was a pleasure to spend the day with him. he 304 was friendly, knowledgeable and fun.’ (celisa b, usa, september 2018). 305 wep – wine economics and policy just accepted manuscript 12 the tour guide’s passion and enthusiasm for their job are mentioned in only 13 percent of reviews 306 but are always linked to a highly positive impression / experience: ‘the hosts were fantastic-they 307 know a ton about wine and you can't help but get swept away by their enthusiasm.’ (pablo j, usa, 308 june 2017), ‘he clearly had a huge passion for bulgarian wine which shone through throughout the 309 tour’ (pat m, august 2018). 310 fun is another quality of the tour guide, which has been articulated in 5 % of reviews. it is strongly 311 connected with the social dimension of the experienscape and the entertainment aspect of the 312 experience model of pine and gilmore [34]. 313 fluency in english was appreciated by 2 of reviewers, one of whom emphasizes how important this 314 is if you do not know the local language and the guide actually acts as a translator in contacts with 315 locals. 316 tour guiding has a pronounced relation with the functional, social and cultural dimensions of the 317 wine-experienscape dimensions defined by pizam and tasci [12] and gunesakar et al. [10]. in line 318 with previous research [35], the tour guides transcend their role as a one-way communicator, and act 319 as experience brokers who, in addition to conveying information (functional dimension), engage their 320 audience in emotional experiences through friendliness, enthusiasm and sharing, and connect tourists 321 (through interpretation) with the destination history and culture. 322 323 planning and logistics 324 this category is unique to the wine tour servicescape and for obvious reasons is not present in the 325 micro (winery) or macro (wine region) levels. with a share of 45% of mentions, it is the third most 326 important in terms of salience. apart from that, there are also clear verbal references to its significance 327 for the overall tourist experience. 328 the arrangements after the tour were also done very competently and appropriately, with 329 good hotels and transport arrangements, and excellent suggestions for things to do. the 330 whole experience couldn't really have been better. (kevmcc655, uk, january 2017) 331 in addition to the flawless arrangements of the tour, attention to detail and the excellent choice of 332 non-mainstream wineries are highly valued: ‘the tour was an outstanding success largely due their 333 efficient organisation and attention to detail coupled with a flair for finding smaller more interesting 334 vineyards’ (martin h, uk, june 2017). 335 wep – wine economics and policy just accepted manuscript 13 similar to the findings of terziyska and damyanova (2020), the pace of travel and the included 336 activities are also an important factor: ‘we packed a tremendous amount into the three days 337 without it feeling exhausting.’ (lucy l, march 2020). 338 the booking process has been mentioned in a relatively small number of reviews (7,5 % of all posts). 339 timely reply, responsiveness to individual preferences and suggestions/information on what can be 340 seen at the destination are appreciated. convenient pick-up arrangements and safe and comfortable 341 driving are the least salient, with only 6,3% of mentions each. 342 choice of activities is the least mentioned subcategory and comments mainly refer to diversity 343 and combining wine tastings with visits to historical sights: ‘each wine stop along the way was 344 slightly different making the tour all the more interesting.’ (liseylou82, australia, march 2016). 345 the planning and logistics category does not have a clear link to any of the dimensions of the 346 experienscape defined by pizam and tasci (2019). the most logical reference is the functional 347 dimension, as it refers to practical arrangements, which facilitate the creation of a satisfying 348 experience. 349 350 destination appeal 351 this category refers to the macro environment, or in other words – the appeal of the broader 352 destinations and the specific attractions included in the tour. there are clear cues to the importance 353 of this attribute for a more enjoyable trip and a way to get a more in-depth understanding of the 354 destination: 355 the countryside near the greek border is really quite beautiful and the walking tour of 356 the old town of plovdiv with its cobbled streets and roman theatre made a delightful 357 start to our first day. (westbourne w, june 2019) 358 the day was also broken up with a visit to the red church, which was a great way to 359 experience a little bit of the region’s history, while sobering up so we could enjoy the 360 wines at the next stop. (liseylou82, australia, march 2016) 361 the three day tour is an excellent way to get a feel of bulgaria in a very short time. (lucy 362 l, march 2020) 363 food and dining 364 food and dining have been mentioned in more than one-third of reviews and are thus ranked fifth of 365 all attributes. special attention is paid to the opportunity to taste local produce: ‘we had lunch at the 366 second vineyard which was delicious and comprised mainly locally sourced produce including goat 367 wep – wine economics and policy just accepted manuscript 14 which i can recommend!’ (fiona d, uk, july 2021), and traditional bulgarian cuisine: ‘we had a 368 delicious, traditional bulgarian lunch thanks to him’. as stated in gunasekar et al. (2021), this 369 attribute has an obvious sensory experienscape dimension, coupled with a cultural one. although 370 there are no cues linking it to the social dimension in this dataset, a previous study [8] points to the 371 existence of such a relation too. 372 the dining place is usually described as nice and traditional / local and has a slight reference to the 373 cultural dimension expressed through descriptions of style and setting ‘the tasting was in a beautiful 374 old town restaurant’ (r8574vypauls, january 2018). 375 376 complementary activities 377 this category entails activities that are not related to the core product (wine) and exclude visits to 378 cultural attractions, which are under the destination appeal category. of the two subcategories – 379 active and passive involvement, only four mentions of passive involvement were found, referring to 380 a visit to a folk festival, craft beer brewery, spa, and a meeting with a rose oil producer. most of these 381 could be linked to the cultural dimension of the experienscape. 382 accommodation 383 together with complementary activities, this is the least salient category (mentioned in only 5% of 384 all reviews). it is specific to the multi-day wine tours and is clearly lniked to the functional dimension 385 of the experienscape. seen in 5% of reviews, it is verbalized exclusively through comments on the 386 quality of hotels – excellent, wonderful, good, far better than most i have experienced. 387 4.2. two types of destination – similarities and differences in the perceived winescape 388 the present study has followed the same methodology as a previous one [8], which enables a direct 389 comparison of results. as the wine regions are very different in nature – the former one is a well-390 established old-world wine destination and a leading wine producer (italy), and the latter is a post-391 socialist country (bulgaria), which is striving to regain its position on the world wine market, and can 392 be seen as an emergent wine destination, still in its early steps of development [14]. the two 393 companies under study are of the same type – family wine tour operators, offering private and small 394 group packages. 395 there is an almost complete correspondence between the winescape attributes identified in the two 396 studies, the only difference being accommodation, which is not present in the study of terziyska and 397 damyanova [8], due to the fact that only one-day tours were analyzed. 398 wep – wine economics and policy just accepted manuscript 15 399 figure 3. winescape attributes’ salience in italy and bulgaria: a comparison 400 5. discussion 401 the winescape attributes identified in this study almost fully coincide with the model of terziyska 402 and damyanova [8], and the success factors presented by barbierato et al. [13], the only difference 403 being the “accommodation” attribute, which is present only in this study. “destination appeal” to a 404 great extent corresponds to “nature and scenery”, but has been extended to include cultural 405 attractions. 406 тhis conformity validates the winescape model, but at the same time, there are some significant 407 differences in the salience of individual attributes (figure 3) that can probably be explained by the 408 different nature and stage of development of the two destinations. 409 the most obvious differences (more than 20 percentage points) are seen in the following three 410 attributes planning and logistics, attractiveness of the destination and complementary activities, with 411 the latter exhibiting a difference of more than 40 percentage points. 412 in previous studies based on sentiment analysis, the logistical aspect has been associated more with 413 negative experiences and evaluation [13]. however, in the two studies discussed here, negative 414 ratings are virtually non-existent, and since this is an attribute that applies exclusively to the specific 415 tour company, the difference is probably due to the individual specifics of the two tour operators. in 416 any case, the conclusion that can be drawn is that a higher degree of salience is caused not only by 417 the low perceived quality of this attribute, but also by positive impressions. 418 47% 45% 19% 69% 97% 90% 5% 35% 41% 45% 83% 84% 0% 20% 40% 60% 80% 100% 120% complementary activities food and dining destination appeal planning and logistics tour guide core wine product category/node frequency: a comparison bulgaria italy wep – wine economics and policy just accepted manuscript 16 in the case of the destination appeal, expressed through the natural and cultural attractions, the 419 probable explanation lies in the different phases of wine tourism development in the two destinations. 420 bulgaria is a relatively new player on the wine tourism scene, with a wine culture still under 421 development. in this case, the increased presence of cultural tourism elements in wine tours 422 compensates for the shortcomings in the winery offerings. this observation is also confirmed by a 423 supply-based study [14], which shows a significant share of the wine&culture type of tours in 424 bulgaria. in this type of tours, a significant part of the programme is dedicated to cultural/heritage 425 attractions, sometimes at the expense of the number of wine tastings. 426 the great discrepancy in the salience of complementary activities can be attributed to the more general 427 nature of tourism supply in bulgaria, which is still focused on non-participatory activities and is 428 dominated by visits to natural and cultural attractions. 429 the lower salience of food and dining in bulgaria is destination-specific – while italy is a world 430 leader in gastronomy, in bulgaria this is still a problem area. 431 as for the two most important attributes – tour guide and core wine product, the score is higher in 432 the italian study, but the difference is not so significant. though not so well-known, bulgarian wines 433 have a noticeable rise in quality in recent years, attested by a number of international awards [36] and 434 attract with their novelty. at the same time, as evidenced by the rating in tripadvisor, the specialized 435 wine tour operators in the country offer products of extremely high quality. 436 as far as the relation between the winescape attributes and the experienscape dimensions is 437 concerned, the most obvious finding is that one and the same attribute can have several experienscape 438 dimensions (figure 4). having sensory, functional, social and cultural dimensions, the core wine 439 products is most complex one, followed by tour guiding and food and dining. 440 wep – wine economics and policy just accepted manuscript 17 441 figure 4. associations between winescape attributes and experienscape dimensions 442 in this study, the categories of “accommodation” and “planning and logistics” were found to be 443 related only to the functional dimension of the experiencescape, and “complementary activities” – to 444 the cultural dimension, but other settings or cases (destinations and individual operators) could 445 produce different results, especially as far as “complementary activities” are concerned. 446 6. conclusion 447 the results presented in this paper validate the winescape model of terziyska and damyanova [8] 448 and the success factors of barbierato et al. [13]. the leading role of the tour guiding service, which 449 dominates as an element of the winescape and is probably the most important factor for success, is 450 fully confirmed. of no less importance is the core wine product, consisting of wine, wineries and 451 wine-related activities. these are the two attributes with the most references to experienscape 452 dimensions. the core wine product is the most complex attribute, combining almost all dimensions: 453 sensory, functional, social and cultural. the social dimension of the tour guide is exhibited through 454 their role in involving tourists into an enriching and relaxing experience, providing both knowledge 455 and entertainment. a warm and friendly attitude and passion for their job are the most emphasized 456 facilitators to achieving a satisfying interaction and memorable experiences. tour guides also act as 457 cultural ambassadors of the destination and ensure a deeper insight into its culture and history. 458 although the set of attributes is nearly the same in the two studies, which validates the general 459 framework of the model, there are significant differences in the salience of individual attributes. the 460 main reasons for this are the specifics of the firm under study (the wine tour provider), the stage of 461 development and the features of the wine destination (the structure and nature of the viticultural sector 462 core wine product • sensory, functional, social and cultural dimesnion tour guide • functional, social and cultural dimension planning and logistics • functional dimension destination appeal • cultural and natural dimension food and dining • sensory, cultural and social dimension complementary activities • cultural dimension accommodation • functional dimension wep – wine economics and policy just accepted manuscript 18 and the tourist products offered by wine cellars) and the general trends in tourism development in the 463 broader destination. providers in bulgaria, which is an emergent wine destination, seem to rely more 464 heavily on attractions other than wine and this is reflected in the perceived winescape. the resources 465 of the destination also have their impact – in italy, the food and dining aspect is much more 466 pronounced. it was interesting to find out that wine popularity did not exert significant influence – in 467 the case of bulgaria it was compensated by novelty, quality and local character (the opportunity to 468 taste local varieties). 469 as winescape attributes are easily translated into success factors [13], the above findings can be very 470 useful for wine tourism practitioners (both wineries and tour operators) in analyzing their products 471 and adjusting them to customer needs. the model can also be used as a basis for measuring tourist 472 satisfaction for wine tours, because of the association between salient product attributes and customer 473 satisfaction and tourist experience [33], [37]. last but not least, the results can be used for future 474 comparative studies to identify context-specific patterns for different types of wine destinations. 475 the main limitation of the study is the fact that was conducted for a specific destination – bulgaria, 476 which hampers generalizability of results. however, most probably findings will also be valid for 477 other destinations of the same type – newcomers on the scene of wine tourism. 478 references 479 [1] world tourism organization (unwto), ed., unwto tourism definitions | définitions du 480 tourisme de l’omt | definiciones de turismo de la omt. world tourism organization (unwto), 481 2019. doi: 10.18111/9789284420858. 482 [2] world tourism organization (unwto) and basque culinary center, eds., guidelines for 483 the development of gastronomy tourism. world tourism organization (unwto), 2019. doi: 484 10.18111/9789284420957. 485 [3] m. sigala and r. n. s. robinson, “introduction: the evolution of wine tourism business 486 management,” in 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(2022), virtual wine experiences: is covid 31 extending the boundaries of wine tourism? wine economics and policy, just accepted. 32 doi: 10.36253/wep-12177 33 34 mailto:elena.zaghini@studenti.unipd.it wep – wine economics and policy just accepted manuscript 2 abstract 35 wine tourism has long been a strategic tool for italian wineries. the covid-19 outbreak jeopardised 36 its dynamics on multiple levels, creating physical (e.g., social distancing, travel bans) and 37 psychological barriers. online wine experiences constitute one of the key resilience strategies adopted 38 by wine tourism actors, being still a relatively unexplored phenomenon in the scientific literature. 39 the current study tackles this gap by analysing the drivers of interest in online wine experiences on 40 the demand side, i.e. among a sample of italian wine tourists (n=408), through structural equation 41 modelling (sem). notably, the model considers long-term (involvement with wine) and short-term 42 (covid-19 fear and anxiety) factors, digitalisation and willingness to support local wineries by 43 partaking in wine tourism. results highlight that the interest in online wine experiences is driven by 44 context-dependent factors like fear and anxiety linked to covid-19, and the involvement with wine. 45 diversely, willingness to go on a wine holiday is not a significant antecedent, even with covid-19 46 fear and anxiety as limiting factors. practical and managerial implications are discussed. 47 48 keywords: virtual wine tourism; online experience; covid-19 49 50 51 1. introduction 52 the covid-19 pandemic has profoundly impacted the tourism sector's dynamics, including rural and 53 wine tourism. notably, restrictions applied to slow down the diffusion of the virus, e.g., mobility bans 54 and social distancing, have revealed the sector's susceptibility [1]. accordingly, in 2020 the united 55 nations world tourism organization (unwto)1 reported that within a very short time, international 56 tourist arrivals in europe fell to their lowest level since the 1950s (-70% compared to 2019). this 57 was mainly due to the prolonged international travel and hotel closures limitations. 58 the italian wine tourism sector suffered the covid-19 effects, although some key characteristics 59 helped its resilience to the pandemic. for instance, proximity to the place of residence has long been 60 identified as a success factor in wine tourism [2], as visitors of wine regions are found to be largely 61 domestic tourists. indeed, except for during the lockdown phase, italian wine tourists were allowed 62 to circulate within the country. moreover, wine tourism usually takes place in rural areas, resulting 63 in a higher perceived safety of this form of tourism in the case of threats (e.g., terrorist attacks) than 64 urban destinations [3]. nevertheless, international tourism flows have gained increasing importance 65 for many italian wine regions: see, for instance, the prosecco region (worldwide known for sparkling 66 1 unwto (2021). https://www.unwto.org/covid-19-and-tourism-2020 wep – wine economics and policy just accepted manuscript 3 wine production), where almost 50% of tourists in 2019 were travelling from other countries [4]. 67 international tourism flows, though, have been jeopardised by the covid-19 outbreak. the pandemic 68 prompted the diffusion of fear and anxiety among the population [5,6,7], which have notably 69 contributed to changing tourists' travel patterns, including wine tourists. in 2019, italy recorded 15 70 million wine tourists (+9% over the previous year), for a total turnover of 2.65 billion euros [8,9]. 71 according to a recent study by garibaldi et al. [9], 44% of italian wineries declared an overall 72 financial loss between 10% and 50% following the covid-19 outbreak. the loss for wine tourism 73 activities reached -70% for almost 35% of the sample, raising concerns about the time needed to 74 restore to the pre-covid performance of the sector. 75 given that wine tourism is widely recognised as a core marketing channel for the wine sector [10], 76 many wineries and oeno-gastronomic tourism providers found alternative ways to bridge the gap 77 between producers and the final consumers (i.e., wine tourists) created by mobility restrictions and 78 social distancing measures. in this context, online oeno-gastronomic experiences emerged as a 79 strategic tool for remote communication and marketing to retain existing customers and attract new 80 ones. currently, this new trend is expanding from single wineries to consortia, which are offering 81 virtual wine tastings as a territorial marketing tool. in italy, consortia (or consorzi di tutela), are 82 associations of producers and processors in charge of governing, protecting and promoting 83 geographical indications. 84 thus, virtual wine tourism became a tool to overcome the deep uncertainty generated by the covid 85 outbreak, which after two years is still undefeated, and to boost the resilience of wine tourism actors. 86 however, whereas the producer side of online wine experiences has been addressed [11], their 87 attractiveness is currently unexplored from a wine tourist perspective. 88 as a novel contribution, this study allows this gap to be filled by exploring the interest in online wine 89 tourism experiences (intowe) and examining its long-term and short-term potential predictors 90 while focusing on italy, where wine tourism represents a stable and consolidated reality. 91 this research is of interest to the academic world as it represents the first attempt to investigate this 92 emerging topic in the literature, providing interesting insights for future research. finally, this study 93 is helpful to understand whether online oeno-gastronomic experiences' attractiveness is short term 94 and context-dependent or if it leaves room for long-term wineries planning. in this regard, the 95 information provided can support wineries, stakeholders, and regulators in making strategic decisions 96 and developing online wine experiences. 97 the remainder of the paper is structured as follows: the first section proposes a review of the extant 98 literature on the main antecedents of wine tourism intentions and presents the research hypotheses, 99 wep – wine economics and policy just accepted manuscript 4 while the following sections describe data and methods (second section), the results (third section), 100 and the discussion and conclusions (last section). 101 102 2. the covid outbreak and the main antecedents of wine tourism intentions 103 over the last decades, wine tourism has become an important segment of the wine industry [12, 13]. wine 104 tourism experiences are indeed strategic marketing tools for wineries to establish a direct relationship with 105 consumers (and customers), also at international level, gaining long-term benefits in terms of wine sales, 106 customer education and loyalty creation [14, 15, 16]. also, wine can be an essential way of presenting the 107 identity and local culture of many destinations [17], and wine tourism can contribute to a wine region's 108 economic development [18]. 109 the covid-19 outbreak has caused significant impediments to both wineries (e.g., limiting their 110 operating space) and wine tourists, who were impacted physically (e.g., the pandemic prevented wine 111 tourists from travelling) and psychologically. therefore, virtual (wine) experiences started to spread 112 in this extraordinary context, representing an essential tool for wine tourism stakeholders. 113 intended as virtual tours of the winery, wine tastings, and food and wine events, virtual wine 114 experiences imply consumers' engagement with wine and winemaking. for this reason, they fall 115 under the definition of wine tourism [19]. according to the literature, people partaking in wine 116 tourism activities are also involved with the product and presumably possess a pre-existing intention 117 to go on a wine holiday. traditional wine tourism activities are enjoyed by tourists looking for an 118 immersive activity and with the broader aim to experience the wine region as a whole, including 119 landscape traditions, culture, and heritage [2, 20]. 120 accordingly, the literature generally identifies wine tourists as a heterogeneous group of people 121 pursuing the full enjoyment from different aspects of a wine tourism experience [12, 21], and 122 characterised by a different level of involvement with wine [22, 23]. 123 the following paragraphs provide an overview of the main antecedents of wine tourism intention and 124 factors that can impact the interest in online wine tourism experiences. based on this, we present the 125 hypotheses that the study intends to test: for example, our path model involves testing the effect of 126 some variables on both the interest in online wine tourism and future wine tourism intentions. 127 moreover, due to the pandemic's extraordinary circumstances, we test some hypotheses for 128 exploratory purposes, as in the case of the role of fear and anxiety linked to covid-19 in (wine) travel 129 intentions. 130 131 2.1 profile of wine tourists 132 hall et al. [14], who cite johnson [24, p. 19], report that wine tourists are "visitors to vineyards, 133 wineries, wine festivals, and wine shows for the purpose of recreation". as highlighted in past studies 134 wep – wine economics and policy just accepted manuscript 5 [12, 20, 22], wine tourists possess a certain level of knowledge about wine. however, they are mainly 135 wine consumers looking for pleasant and relaxing sensations to fulfil a total experience in the so-136 called "winescape" – that is "the place where wine tourism activities take place" [20]. also, they are 137 characterised by the need to connect with the origin of the product and visiting the wine region where 138 a specific wine is produced [25]. wine tourism represents a social leisure activity [2, 26, 27, 28], as 139 tourists who engage in this are often accompanied by other people (e.g., spouse, partner, family 140 members, close friends) [22, 29]. among others, gender, age, education, wine consumption habits, 141 financial status, lifestyle, motivation, and involvement are relevant to characterise wine tourists [14, 142 25, 28]. however, scholars realised that other details are relevant to better profile wine tourists, such 143 as demographic factors, and the psychographic profile [14]. 144 145 2.2 involvement with wine 146 the literature extensively reported that one of the main antecedents of wine tourism intentions is the 147 product involvement, or involvement with wine (wi) [30, 31]. the concept of involvement refers to 148 "a person's perceived relevance of an object based on inherent needs, values, and interests" [32, p. 149 342]. for leisure activities as wine tourism, it is appropriate to consider ego-involvement, i.e., the 150 "unobservable state of motivation, arousal or interest toward a recreational activity or associated 151 product, evoked by a particular stimulus or situation, and which has drive properties" [33, p. 216]. 152 indeed, sparks [34] argued that ego-involvement might play a key role, acting as a motivator in wine 153 tourism. 154 brown et al. [35] further conceptualised ego-involvement in wine tourism in a wine involvement 155 (wi) scale, that is a 3-dimensional tool embodying symbolic centrality, enjoyment, and expertise, 156 adapted from the consumer involvement profile scale by laurent and kapferer [36]. 157 furthermore, zatori et al. [37] developed the concept of experience-involvement for referring to the 158 real-time involvement while undergoing a given experience. in fact, the most powerful phase in the 159 formation of the tourist experience is the on-site experience, as some experiences might be highly 160 involving and unleash positive emotions. as regards the consumer research field, scholars have found 161 that involvement with certain activities or products also increases involvement with the related 162 services [38, 39]. furthermore, previous studies have demonstrated the positive relationship between 163 product involvement and destination image [38, 40]. additionally, wi affects consumers motivations, 164 the perceived importance of wine sensory characteristics like bouquet and appearance [41] as well as 165 residents perceived the relevance of local production [42]. since wine tourism activities revolve 166 around wine tastings, it follows that wi is paramount to the sector. coherently, involvement is of 167 particular importance for hedonic products like wine, which consumption is complex and entails 168 wep – wine economics and policy just accepted manuscript 6 cognitive, affective and sensory dimensions that may assume a different relevance based on personal 169 involvement levels [43]. 170 given the above and following the literature, wine product involvement may directly or indirectly 171 affect consumers' wine tourism intentions [40, 44, 45], influencing their perception of the destination 172 and positively impacting on potential future travel intentions [38]. since wi is largely recognised as 173 one of the main drivers of wine tourism intention, focusing on both the interest in online wine tourism 174 experiences and future wine tourism intention, we test the following hypotheses: 175 h1: involvement with wine (wi) positively affects the interest in online wine tourism. 176 h2: involvement with wine (wi) positively affects future wine tourism intentions. 177 178 2.3 willingness to support local wineries 179 the covid-pandemic and the resulting socio-economic crisis have potentially induced people to 180 become more sensitive to society's problems [46]. therefore, willingness to support local wine 181 producers may play a role in making wine tourists inclined to both online and offline wine tourism 182 intentions. several studies [47, 48, 49] highlight how consumers often perceive locally produced food 183 or buying directly from the farmer (e.g., direct selling at the farm) as a means to support local farmers 184 and communities. in this sense, tourists contribute to the value creation and economic sustainability 185 of the territories [50]. in line with this, several authors [51, 52] argue that the direct interaction 186 between producers and consumers creates or reinforces sentiments of trust and mutual regard, leading 187 to a sense of commitment and solidarity. in this sense, tourists can concretely support the local 188 producers. in this context, online wine tourism experiences can be practical tools when in-person 189 meetings are not possible and/or challenging to achieve, as during the pandemic. the desire to support 190 a winery during the pandemic might thus arise from a pre-existing interaction with the winery, since 191 the product experience is a fundamental component of loyalty to a brand [53]. 192 moreover, the literature highlights that developing experiences that combine oeno-gastronomic 193 traditions in wine tourism destinations generate positive emotions [9, 54], and create a sense of 194 familiarity [55]. familiarity is, indeed, the result of previous experiences (experiential familiarity), 195 the extent of information used (informational familiarity), and how people self-perceive their 196 familiarity with a place (self-rated familiarity), and it is affected by the perceived quality of a tourism 197 experience [56]. according to baloglu [57], building an emotional connection with a place can 198 influence future behavioural intentions (i.e., future wine tourism visits). after the visit, online wine 199 tourism experiences can help wine tourism actors (producers or wineries) build long-term 200 relationships with their customers through long-distance actions that trigger trust and destination 201 attachment [58]. from this perspective, in a highly competitive sector such as wine tourism in italy, 202 wep – wine economics and policy just accepted manuscript 7 counting 408 wine protected designations of origin, online experiences can be a strategic tool to 203 establish new emotional bonds or reinforce existing ones, also stimulating future wine tourism 204 intentions. following this, we test the following hypotheses: 205 h3: willingness to support local wineries (suplocw) positively affects the interest in online wine 206 tourism. 207 h4: willingness to support local wineries (suplocw) positively affects future wine tourism 208 intentions. 209 210 2.4 covid related fear and anxiety 211 other than causing severe impediments to international mobility, the pandemic generated significant 212 psychological discomforts: these are due, among other things, to the ease of transmission of the virus 213 and the severity of the sars-cov-2 illness [59] and tend to be extensive and long-lasting [60]. 214 in this regard, the virus outbreak caused a general state of fear and anxiety [61]. mainly, fear reflects 215 in the individual awareness of a danger arising from pain and/or harm [5, 62], while anxiety represents 216 a response to fear [63]. the recent psychological literature proposes several tools to capture 217 individuals' fear of covid-19 [see, for instance, 7]. nevertheless, arpaci et al. [59] developed the first 218 self-diagnostic tool to detect the presence of both fear and anxiety towards the virus, the covid-19 219 phobia scale (c19p-s). notably, the original c19p-s comprises four dimensions: economic (i.e., 220 related to food security), psychological, psychosomatic, and social (i.e., referring to social 221 relationships). 222 since travelling implies a risk of contagion due to uncontrolled social contact with other people, 223 which is the leading way the virus spreads [64], it may represent a dangerous activity. in this sense, 224 the fear of covid-19 contagion might push scared tourists to participate in an online wine tourism 225 experience as a safer option. therefore, we formulate the following hypotheses: 226 h5: covid-related fear and anxiety (cph) positively affect the interest in online wine tourism. 227 h6: covid-related fear and anxiety (cph) mediate the relationship between future wine tourism 228 intentions and the interest in online wine tourism. 229 230 2.5 interest in online wine tourism experience 231 as mentioned, online wine tourism experiences (e.g., virtual tours of the winery, wine tastings, and 232 food and wine events) imply consumers' engagement with wine and winemaking just like in-presence 233 wine tourism activities. therefore, wine tourists are likely to be interested in joining them, especially 234 if pushed by covid-19 restrictions. research highlights that virtual reality (vr) is a valid marketing 235 tool for tourism destinations, since it allows consumers to experience a destination without physically 236 wep – wine economics and policy just accepted manuscript 8 visiting it, creating embodiment in the consumer, and acting as a trigger for wine tourism 237 development [16, 65]. petit et al. [66, p. 42] argue that digital interacting technologies are helpful 238 tools for creating the "webmosphere", that is "the conscious designing of web environments to create 239 positive effects". recently, wen and leung [16] conducted a lab experiment exploring the effects of 240 virtual reality (vr) and traditional videos of wineries and wine tours on young consumers' purchasing 241 behaviour, based on the theory of embodied cognition. the authors found that vr wine tours foster 242 stronger purchase intentions and a higher willingness to pay for wine by knowledgeable consumers, 243 especially when information on wine's sensory characteristics is provided. 244 regarding wine digitalisation, it is reasonable to believe that wine tourists familiar with digital wine 245 tools like wine e-shops and wine apps are more prone to approach online wine experiences as well. 246 notably, the literature highlights that highly involved wine consumers who consider themselves wine 247 experts are more prone to use technology for purchasing wine [67]. furthermore, since younger 248 consumers of generations y and z are particularly familiar with these technologies [16, 68], they 249 could be assumed to be more receptive to online wine experiences. 250 therefore, these consumers are reasonably more motivated to participate in an online wine tourism 251 experience, and we postulate as follows: 252 h7: having an app on wine/wine tourism on the smartphone (wapp) positively affects the interest 253 in online wine experiences (intowe) 254 h8: purchasing wine online (buywonline) positively impacts the interest in online wine 255 experiences (intowe) 256 h9: future intention to go on a wine holiday (futwtint) positively affects interest in online wine 257 experiences (intowe) 258 259 3 methodology 260 3.1 structural equation modelling 261 to test the abovementioned hypotheses, we used the structural equation model (sem), as it is 262 commonly used in the literature. indeed, this multivariate analysis allows for the simultaneous 263 relationships between different exogenous and endogenous variables, as hypothesised. in particular, 264 a preliminary exploratory factor analysis of the whole measurement model (mm) was conducted 265 through spss software, while confirmatory factor analysis (cfa) and the structural equation model 266 (sem) were performed with amos software. to provide preliminary evidence of the discriminatory 267 power of the mm, an efa with maximum likelihood as extraction method and oblique rotation was 268 run on all items of our latent constructs, i.e., cph, wi, futwtint, suplocw, and intowe. 269 moreover, mediation is analysed through bootstrapping (1000 bootstrapping intervals) with bias-270 wep – wine economics and policy just accepted manuscript 9 corrected confidence intervals (95%). this technique provides estimates without relying on 271 distribution, and it therefore constitutes a reliable tool to test for indirect effects [69]. mediation is 272 present when the relationship between two observed variables or constructs (a and b) is affected by 273 a third one (z), resulting in the presence of a significant indirect effect. relationships to be tested for 274 mediation are first run without including the mediator in the model to assess a->b path’s significance. 275 subsequently, the mediator is introduced in the model and the direct and indirect effect of a on b are 276 estimated. two types of mediation can occur in sem: complete mediation, when only the indirect 277 effect between a and b is significant while the direct effect is not; and partial mediation, in which 278 both effects (direct and indirect) are significant. in case of complete mediation, the third construct 279 (z) fully explains the relationship between a and b [70]. 280 281 3.2 data collection 282 data were collected through an online survey administered on a sample of italian wine tourists that 283 were reached through social networks and world of mouth snowball sampling. this sampling 284 technique, which is common in the social sciences, requires that participants share the questionnaire 285 (link) with other individuals. this allows for data collection in a short amount of time, and it is 286 effective for surveys in a rapidly changing environment like the covid pandemic [71]. specifically, 287 over 40 facebook groups dealing with wine, food and travel were involved, jointly with actors from 288 the italian wine sector, to target the segments of interest despite the extraordinary circumstances of 289 the covid-19 pandemic. data collection took place in italy between june and july 2020. we collected 290 515 questionnaires, but retained only complete ones from wine tourists, restricting the final sample 291 to 408 valid observations. the present study considered wine tourists as people who visited a wine-292 producing region and/or participated in a wine festival in the last three years before the pandemic. 293 for this purpose, we adapted the statement from brown et al. [35], who consider a 5-year timespan, 294 while restricting it to avoid the two years of mobility and operational barriers caused by covid-19. 295 to the best of our knowledge, there is no unique definition of wine tourist in the literature. therefore, 296 in this paper we considered a broader group than cellar door visitors (who are generally considered 297 wine tourists) by selecting people who recently engaged with wine-related events or visits to wine 298 festivals and wine holidays. this choice allowed us to collect reliable data from consumers who are 299 potentially interested in this new service, i.e. online wine tourism. 300 the survey investigates the following questions and factors: socio-demographics, wine digitalisation, 301 willingness to support local wineries (suplocw), involvement with wine (wi), covid phobia 302 (cph), future wine tourism intentions (futwtint), and interest in online wine tourism experiences 303 (intowe). 304 wep – wine economics and policy just accepted manuscript 10 more specifically, wi is captured through an adapted version wi scale by brown et al. [35], referring 305 to ego-involvement. in particular, the exploratory factor analysis (efa) and reliability analysis 306 (cronbach's alpha) are run on each scale separately, with principal component as extraction method 307 and oblique rotation. efa results on the wi scale led to dropping the 6 items representing symbolic 308 centrality as, in line with previous research [35], they were not consistent with the rest of the scale. 309 reliability statistics restrict the final scale to 7 items, which were measured on a 7-point likert scale 310 where 1 = totally disagree and 7= totally agree (cronbach's alpha = .96). 311 fear and anxiety towards covid (hereafter referred to as cph) are captured through an adapted 312 version of c19p-s from arpaci et al. [59]. mainly, this paper includes the psychological and social 313 dimensions of the original c19p-s (cronbach's alpha = .91) to assess the impact of covid-related fear 314 and anxiety on the individual interest in online wine experiences (intowe). the latter dimension is 315 particularly relevant as travelling is a social activity implying several and often uncontrolled social 316 interactions, the primary source of infection. based on cronbach's alpha, one extra item was dropped, 317 and the final cph scale includes five items measured on a 7-points (1 = totally disagree; 7 = totally 318 agree) likert scale. 319 future wine tourism intentions (futwtint) are captured through a single item adapted from sparks 320 [34] and measuring the willingness to take a wine trip in a future holiday on a 7-points agree-disagree 321 likert scale. 322 interest in online wine tourism experiences (intowe) is measured through two 7-points likert scale 323 type items (1 = totally disagree to 7= totally agree), capturing interest the most common types of 324 online wine experiences (i.e., wine tastings – intowe1, and food and wine events – intowe2). 325 finally, one item measured on a 7-points likert scale (1 = totally disagree, 7= totally agree) captures 326 the willingness to support local wineries by partaking in wine tourism (suplocw). 327 328 3.3 descriptive statistics of the sample 329 as described in table 1, men and women are almost equally represented within the sample. the 330 respondents are mainly aged between 30-50 (55%), and all age groups are adequately represented in 331 the sample except the over 60s (7%), presumably because data collection primarily relied on social 332 media. in line with past research [72, 73], most respondents are highly educated, and have a university 333 degree (49%). moreover, the average family income is either sufficient (48%) or good (43%), 334 highlighting that most of the respondents enjoy a good economic situation. half of the sample is 335 either married or in a couple. the level of digitalisation is remarkable, with over half of the sample 336 (52%) having an app dedicated to wine or wine tourism on their smartphone (wapp), and a relevant 337 share (45%) buying wine online (buywonline). the level of involvement with wine (wi) is 338 wep – wine economics and policy just accepted manuscript 11 rather high, albeit not remarkably (mean value = 5). both future intentions to partake in wine tourism 339 (futwtint) and the willingness to support local wineries (suplocw) record significant mean 340 ratings (both around 6). interestingly, both fear and anxiety towards covid (cph) and interest in 341 online wine tourism experiences (intowe) show low mean values (3.6 and 3, respectively). 342 343 table 1 descriptive statistics of the sample (n=408). 344 frequency % frequency % age wapp 18-29 74 18.1 no 197 48.3 30-40 121 29.7 yes 211 51.7 41-50 102 25.0 buywonline 51-60 82 20.1 no 225 55.1 ≥61 29 7.1 yes 183 44.9 education high school 12 2.9 mean st.dev college 127 31.1 wi 5.2 1.65 university 198 48.5 cph 3.6 1.66 postgraduate 71 17.4 intowe 3.0 1.39 gender males 191 46.8 females 217 53.2 marital status married.cohabiting 107 26.2 single 139 34.1 in a couple 96 23.5 separated.divorced 57 14 widowed 7 1.7 other 2 0.5 income insufficient 3 0.7 just sufficient 34 8.3 sufficient 194 47.5 good 177 43.4 strongly disagree strongly agree mean st.dev. 1 2 3 4 5 6 7 futwtint 0.7 1.5 2 6.6 8.8 16.2 64.2 6.3 1.23 suplocw 1.2 1.7 3.7 9.3 15.4 18.9 49.8 5.9 1.39 345 346 4. results 347 as regards the measurement model, efa confirmed the items of the 3 latent constructs load on 348 different factors. the two items of the intowe scale are significantly correlated between them [r = 349 0.84; 71], while being uncorrelated with all other items in the mm. single item measures futwtint 350 and suplocw are included in the model as single-item latent constructs with 0.85 best-guess 351 reliability [70]. table 2 shows the results of the cfa on the whole sample. construct reliability (cr) 352 and average variance extracted (ave) are above the recommended thresholds for all latent 353 constructs [70, 75], and all the standardised factor loadings are significant and above the ideal 354 threshold (0.7). therefore, convergent validity for each scale is confirmed. discriminant validity is 355 supported by ave exceeding inter-construct correlations [70]. 356 357 wep – wine economics and policy just accepted manuscript 12 table 2 factor loadings and reliability of the measurement model 358 factor loading a average variance extracted (ave)b construct reliability (cr)c fear and anxiety towards covid (cph) psyc1 0.90 82.8% 0.95 psyc2 0.84 psyc3 0.86 soc1 0.82 soc2 0.75 involvement with wine (wi) enj3 0.83 73.2% 0.95 enj2 0.89 enj1 0.89 exp1 0.90 exp2 0.87 exp3 0.85 exp4 0.76 note: a based on standardised regression weights from amos. b ave was computed based on the formula from hair et 359 al. [68]as an indicator of convergent validity. c cr was computed based on hair et al. [68]. 360 361 table 3 correlation matrix 362 intowe cph wi wtint suplocw intowe 3.0 (1.89) cph 0.195 3.6 (1.66) wi 0.376 0.024 5.2 (1.65) wtint 0.312 0.064 0.669 6.3 (1.23) suplocw 0.153 0.055 0.069 0.261 5.9 (1.39) note: mean (std. deviation) of each variable are reported in the diagonal. 363 364 single item measures like suplocw and futwtint are included in the model as latent constructs 365 measured by one item in order to account for measurement error. notably, factor loading is fixed at 366 the square root of 1 minus the best guess reliability (0.85), and error variance is computed subtracting 367 the best-guess reliability to 1 [70]. as regards intowe, a composite score of the two items is 368 computed (parcel) and used as indicator of this construct with factor loading fixed at 1 and error 369 variance calculated as follows: 370 θε = (1 − α) × 𝑠2 371 where α represents the construct reliability for intowe and s2 is the observed variance of the 372 composite score [76]. goodness-of-fit (gof) of the mm is evaluated through root mean square 373 error of approximation (rmsea) and standardised root mean residual (srmr) for absolute fit, 374 and tucker lewis index (tli) and comparative fit index (cfi) for incremental fit. overall gof of 375 the mm is acceptable (χ2 (408) = 494.47; df = 111; p < 0.001; χ2/df = 4.4; rmsea = .09; cfi = .92; 376 tli = .90; srmr = .05). according to hair et al. [68], the significance of χ2 is expected due to both 377 the large sample size (n = 408) and number of observed variables (m = 22). rmsea is also acceptable 378 [77]. 379 wep – wine economics and policy just accepted manuscript 13 the structural model (sm) is presented in figure 1. gof indices suggest an overall good fit (χ2 (408) 380 = 389.33; df = 130; p < .001; χ2/df = 2.99; rmsea = .07; cfi = .95; tli = .93; srmr = .05) and 381 the model explains 22% of the variance of intowe and 49% of futwtint. results highlight that 382 interest in online wine tourism experiences is positively affected by gender. specifically, female 383 respondents seem to be more interested in online wine experiences than male ones (β = .11; p = .03). 384 respondent’s familiarity with digital wine tools also emerged as a significant antecedent (h7: β = 385 .12, p = .03; h8: β = .13; p = .02). unexpectedly, the effect of age on intowe is not significant (β 386 = .05; p = .44). wi represents a significant predictor of both future wine tourism intentions (h2; β 387 = .62; p < .001) and intowe, although the effect on the latter is smaller in size (h1: β = .22; p = 388 .003). interestingly, futwtint does not significantly predict intowe (h9: β = .05; p = .47), while 389 the direct effect of fear and anxiety towards the virus (cph) is significantly positive (h5: β = .18; p 390 < .001). instead, cph does not mediate the relationship between futwtint and intowe since 391 the indirect effect between the two variables is not significant (h6: β = .01; p = .22). finally, 392 willingness to support local wineries (suplocw) has a significant positive effect on both intowe 393 (h3: β = .12; p = .02) and futwtint (h4: β = 20.0; p < .001). 394 395 figure 1 results of the sem analysis 396 397 note: *** p < .01; ** p < .05. 398 399 400 5. discussion and conclusions 401 wep – wine economics and policy just accepted manuscript 14 this study provides relevant information for a better understanding of people’s interest in online wine 402 tourism experiences, which has become a strategic tool for wineries in times of pandemic. in the last 403 decade, wine tourism gained increasing relevance for italian wine regions, but recently the covid 404 outbreak jeopardised its dynamics, pushing the actors (e.g., wineries) to find alternative solutions to 405 overcome the new barriers. the digitalisation of wine tourism experiences is one of these solutions. 406 nevertheless, designing similar experiences requires the proper infrastructure and knowledge of 407 virtual platforms and video making and financial investments to adopt this innovation. therefore, 408 there is an urge to explore the extent to which interest in such experiences is driven by context-409 dependent factors, and if there is potential for future developments. in the latter case, online wine 410 experiences can become a strategic marketing and communication tool for wineries and wine regions 411 to enhance their visibility. 412 although other attempts have been made to explore wine consumers' perception of online wine 413 tastings [78], this paper is among the first to examine the determinants of online wine tourism 414 attractiveness based on an extensive sample of wine tourists. therefore, its findings provide 415 interesting hints for both actors of the wine sector and policymakers. 416 descriptive statistics reveal that the profile of the wine tourists in our sample, mainly women, highly 417 educated and with a good income level, is in line with other studies [e.g., 19, 72, 79, 80, 81, 82, 83]. 418 as for the involvement with wine, it is above the average but not remarkably high, stressing the point 419 that wine tourists are not necessarily wine lovers [20]. 420 while future wine tourism intentions (futwtint) are strong, the average interest in online wine 421 tourism in the analysed sample is lower. in our opinion, this latter evidence can be explained by the 422 fact that online wine tourism experiences represented an innovative product at the time of data 423 collection, namely the timeframe immediately after the so-called "first wave" of covid infection 424 (from march 2020 to may 2020). due to this, it would be interesting to collect new data to explore 425 how the wine tourists' interest towards such innovative products has evolved with the progress of the 426 pandemic. 427 the primary result from this pioneering study is that the interest in online wine tourism experiences 428 (intowe) is apparently affected by several factors, and not all of them are related to the context of 429 the pandemic. notably, interest in online wine tourism is the result of a combination between general 430 fear and anxiety of the virus (cph) and a long-lasting involvement with wine (wi). indeed, although 431 wi shows a greater effect on futwtint, it also constitutes the major antecedent of intowe 432 among those analysed. 433 surprisingly, the effect of futwtint on intowe is not significant, meaning that the interest in 434 joining an online wine tourism experience like an online wine tasting is not necessarily consequent 435 wep – wine economics and policy just accepted manuscript 15 to the individual willing to go on a wine holiday in the near future. moreover, the relationship between 436 the two constructs is not mediated by covid-related fear and anxiety (cph). this result reveals that 437 interest in virtual wine tastings and oeno-gastronomic events does not arise in substitution of 438 conventional wine tourism when a greater fear and anxiety of covid-19 is present. 439 since intowe is predicted by wi but is not a result of futwint (i.e., intention to visit a wine 440 region in a future holiday), online wine tourism products may attract involved wine consumers who 441 are not (yet) regular wine tourists, and the two activities may be seen as two separate products by 442 consumers. future analyses should segment virtual wine experiences consumers based on their 443 personal involvement with wine to explore potential group differences in their intentions and 444 behaviour towards owes. 445 as previously reported, cph also directly impacts intowe with an effect size comparable to wi. 446 this effect can reasonably be linked to a higher perceived safety connected to online experiences 447 since the covid-10 outbreak, especially in light of the negative effect of covid-19 fear and anxiety 448 emerging in tourism-related studies referring to conventional travels [e.g. 5]. variables referring to 449 wine digitalisation (wapp and buywonline) have a significant impact on intowe, confirming 450 that being familiar with wine-related digital tools significantly increases interest in online wine 451 tourism. this finding suggests wine apps may be an effective channel to advertise online wine tourism 452 experiences and target potential consumers. in this respect, age does not seem to play a significant 453 role, while gender differences are present. finally, willingness to support local wineries predicts both 454 futwtint and intowe. the latter constitutes an encouraging signal for wine tourism 455 stakeholders, who might emphasise this aspect in their communication strategies, to improve their 456 effectiveness. 457 results of the present study refer exclusively to online wine tastings and oeno-gastronomic 458 experiences, while virtual wine tours seem to constitute a separate subject and represent an interesting 459 topic for future research. as previously mentioned, new data could assess changes in the relevance 460 of context-related antecedents with the pandemic's evolution. 461 the choice of snowball sampling has been widely applied to tourism and social science studies [84, 462 85], and like villacé-molinero et al. [86] is deemed the appropriate technique in light of the urge to 463 collect data on a rapidly evolving phenomenon under unprecedented circumstances (i.e., the covid-464 19 pandemic). however, it comes with limitations such as self-selection bias, over-representation of 465 subgroups having similar characteristics [87], and thus lack representativeness. in this study, data 466 have been collected online through social media and via email to personal contacts, with no 467 compensation for respondents: this feature may have led to pre-selecting respondents who are familiar 468 with digital tools and are interested in the topic. as a consequence, respondents’ age in our sample 469 wep – wine economics and policy just accepted manuscript 16 may be skewed towards younger wine tourists. the large sample size and the socio-demographical 470 diversity of respondents contribute to overcoming these limitations, although further research is 471 needed to assess the generalisability of our findings. 472 to sum up, our exploratory study suggests the presence of both a longand shortterm motivational 473 force behind the interest in online wine tourist experiences, which is not exclusively driven by fear 474 of the virus but is instead connected to long-term product involvement. therefore, the study leaves 475 room for future developments in the online wine experiences market. it also suggests this kind of 476 product should not be seen as a substitute for regular wine tourism but rather as a marketing tool to 477 keep connections with existing consumers alive or attract new potential visitors. indeed, online wine 478 tourism experiences can bring several advantages for wineries: first, they can overcome spatial 479 barriers, reach a broader audience of potential consumers, and boost the international diffusion of 480 wine and wine regions. second, unlike other digital marketing actions, they preserve the possibility 481 to establish direct contact with the final consumer as happens with in-presence visits. finally, virtual 482 wine tourism activities can also be provided during the low season, thus becoming a tool to attract 483 tourists during the pre-decisional and pre-actional stages of travelling [88]. in the latter case, the 484 benefits of online wine experiences can extend to the whole destination. 485 with this in mind, the actors of the wine tourism sector should try to implement and promote an offer 486 of virtual wine tastings and food and wine events having a long-term perspective in view. indeed, 487 online wine experiences offer greater opportunities than just allowing to cope with covid restrictions. 488 on their end, policymakers could facilitate farmers to overcome the objective technological 489 boundaries characterising the sector, both at a national and firm-level. particularly, both financial and 490 technical support are crucial to implement broadband infrastructures, jointly with specialised training 491 for wineries and small-medium wine tourism enterprises (e.g., farms), to level up their digitalisation. 492 wineries' digitalisation and proximity tourism, intended as travels close to tourists' place of residence, 493 are indeed two significant steps fuelled by covid-19 that can have considerable repercussions on 494 future sector dynamics, especially for pursuing sustainability goals. 495 496 497 wep – wine economics and policy just accepted manuscript 17 references 498 [1] gössling, s., lund-durlacher, d. 2021. tourist accommodation, climate change and mitigation: an 499 assessment for austria. j. outdoor recreat. tour. 34, 100367. 500 https://doi.org/10.1016/j.jort.2021.100367 501 [2] getz, d., brown, g. 2006. critical success factors for wine tourism regions: a demand analysis. tour. 502 manag. 27(1), 146-158. https://doi.org/10.1016/j.tourman.2004.08.002. 503 [3] song, h., qiu, r.t.r., park, j. 2019. a review of research on tourism demand forecasting: launching 504 the annals of tourism research 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accepted 1 2 3 4 what do women like? a quantitative study of the female behavior of sparkling 5 wines consumers 6 miriam de oliveira dornelles1, cláudio vinícius silva farias2, shana sabbado flores3 7 8 9 1 ifrs – federal institute of rio grande do sul, porto alegre, brazil. e-mail: 10 miriamdornelles23@gmail.com, 11 2 ifrs – federal institute of rio grande do sul, porto alegre, brazil. e-mail: 12 claudio.farias@poa.ifrs.edu.br 13 3 ifrs – federal institute of rio grande do sul, bento gonçalves, brazil. e-mail: 14 shana.flores@bento.ifrs.edu.br 15 16 17 18 correspondence concerning this article should be addressed to shana sabbado flores ifrs – federal 19 institute of rio grande do sul, bento gonçalves, brazil. e-mail: shana.flores@bento.ifrs.edu.br 20 21 22 this article has been accepted for publication and undergone full peer review but has not been through 23 the copyediting, typesetting, pagination and proofreading process, which may lead to differences 24 between this version and the version of record. 25 26 please cite this article as: 27 28 de oliveira dornelles m., silva farias c.v., flores s.s. (2022), what do women like? a quantitative 29 study of the female behavior of sparkling wines consumers, wine economics and policy, just 30 accepted. 31 doi: 10.36253/wep-10416 32 33 34 35 36 37 38 mailto:miriamdornelles23@gmail.com mailto:claudio.farias@poa.ifrs.edu.br mailto:shana.flores@bento.ifrs.edu.br mailto:shana.flores@bento.ifrs.edu.br wep – wine economics and policy just accepted manuscript 2 39 abstract 40 the purpose of this paper is to investigate the purchase process of the sparkling wines female 41 consumers, in order to understand the variables that influence the purchase process of this 42 product. the consumer behavior in the purchase decision process is one important topic of the 43 marketing studies, to the extent that it helps to explain how decisions are made and what 44 elements determine them, it can support strategic marketing decisions. the importance of 45 gender segmentation has been highlighted in several studies; in addition, women have made 46 most purchases and their influence in purchase decision has been highlighted. this study uses 47 data from a survey carried out on a representative sample of 1,003 female consumers from 48 brazil. it was used a five levels likert scale; independent tests and correspondence analyses 49 were performed. the study could identify the five main factors influencing the choice. also, 50 the results contribute to elucidate points such as confidence to choose and consumption 51 occasions and contexts. 52 53 keywords: brazil. consumer behavior. purchasing decision. gender. 54 55 1. introduction 56 the consumer behavior in the purchase decision process is one of the main topics of the marketing 57 studies. the consumer behavior can be defined as a set of physical and mental activities, carried out 58 by goods consumers that result in decisions and actions, such as how to search, choose, purchase and 59 use products and services in order to satisfy a latent need [1, 2]. according to solomon, consumer 60 behavior is the study of the processes involved when individuals or groups select, buy, use or discard 61 products, services or ideals to satisfy their needs and desires [3]. 62 when an organization proposes to study consumer behavior, it seeks the purchase’s motives, how 63 decisions are made and what elements (internal and external) determine such decisions [4, 5]. thus, 64 several factors, such as individual differences, environmental influences and psychological processes, 65 can affect purchasing and consumption behavior [6]. this topic is one of the most complexes of 66 marketing and the work for understanding it stimulates an increasing number of researches in this 67 wep – wine economics and policy just accepted manuscript 3 field. 68 the importance of gender segmentation has been highlighted in several studies, including online 69 shopping and services [7, 8]. women are responsible for most of the purchase and an important part 70 in purchasing decisions, which indicate that this segment can be better considered in terms of 71 advertisements, products, marketing strategies and studies. 72 the purpose of this paper is to investigate the sparkling wines, in order to understand what are the 73 variables that influence this product’s purchase process. the brazilian female sparkling wines 74 consumers represented the study group. 75 the wine production in brazil was introduced by portuguese and spanish in xvi century and was 76 consolidated starting with xix century due to italian immigrants’ direct participation. the brazilian 77 vineyards occupy an area of 86 thousand ha, in 6 main regions. [9]. the wine production is 78 concentrated in the south, the state of rio grande do sul gives almost 90% of national production of 79 wines and grape juices, an annual harvest between 600 and 700 million tons. the country has 1100 80 wineries, mostly small properties, with an average of 2ha [10]. 81 in the international context of wine consumption decline, the official data indicated a 50% increase 82 in the marketing of brazilian sparkling wines between 2010 and 2018 [10]. the situation was different 83 for the still wine, which fell by 28% in the same period [11]. another element of interest, in brazil, 84 is represented by the relation between imported and local wines: official data indicates that 75% of 85 the sparkling wines consumed in the country have national origin, despite only 12% of still wines 86 [12]. this data reinforce the importance of studying the sparkling wines’ consumer behavior, 87 providing a better understanding of this rising market, as well as data that can support more effective 88 marketing actions. 89 this research aims to help marketers, as well as sparkling wine producers, to consolidate the possible 90 guidance of female consumers. it also aims to add knowledge about the behavior and preferences of 91 women in terms of most relevant factors of their decision making at the time of this purchase. a better 92 understanding of female behavior allows the use of market segmentation techniques to highlight 93 specific groups of consumers and the monitoring of purchases [8, 13, 14]. in this sense, the work 94 intends to comprehend different profiles and preferences, contributing to a more effective 95 segmentation of the studied group. 96 97 wep – wine economics and policy just accepted manuscript 4 2. background 98 2.1 woman’s consumer behavior 99 the transformations experienced in the technological, economic and social environment in recent 100 decades have changed the manner how consumers, in particular females, have been buying. experts 101 like peters [15] have advised companies to focus their strategies towards women, as this market 102 segment is an excellent business opportunity for any organization [15]. women are still a depreciated 103 segment in terms of advertisements and in various commercial groups, even though they represent 104 more than half of the world’s population and are responsible for an important part in purchasing 105 decisions [16, 17]. 106 historically, women have made most purchases. they buy for the family, including products for 107 husband and children, but the last decades have witnessed important changes in the woman’s social 108 and professional life [14, 18]. the first changes of the female’s role took place in the family, when 109 millions of women were launched into the labor market and left their homes, to spend more time 110 outside [19]. the social change brought by the inclusion of woman into the labor market has a 111 significant role in spending on food, as well as on alcoholic beverages [20]. 112 in terms of buying and consuming behavior, women have been dealing with products considered 113 “masculine”. for example, researches prove the influence of the female market in the purchase of 114 vehicles and alcoholic beverages [21]. in the case of wine, researches have highlighted the role of 115 women and the importance of segmentation by gender. in the “old world” countries, wine 116 consumption has been associated to the men, but to the “new world” women have been increasing 117 the consumption, becoming even more representative than men [22, 23]. thus, researches indicate 118 that women buy 80% of the wine sold in the usa [24]. 119 the influence of gender on wine buying and consumption behavior has been examined in some prior 120 research. forbes highlight that even if several studies propose relation between wine attributes and 121 gender, there is lack of consistency in terms of results and practical implications of gender 122 segmentation [21]. for instance, this exploratory and cross-country study about the influence of 123 gender on wine buying and consumption indicates that gender has no significant impact in terms of 124 number and importance of attributes, and little impact on the frequency. on the other hand, the results 125 pointed that women are more sensible by price discounts while men pay attention to region of origin 126 [21]. otherwise, study based on sociodemographic profiles of wine consumers indicate that gender 127 is a determinant factor to the frequency of wine consumption [22]. 128 wep – wine economics and policy just accepted manuscript 5 among the factors considered no buying behavior are: factor of time, economic situation, long term 129 consideration, influence of advertisements, post purchase experience and past regrets related to the 130 purchase [13]. in terms of practical imprecations to marketing, women like a collaborative, 131 conversational style dialogue. in this sense, advertisements are often more detailed, considering 132 women tend to ask more questions and they have a longer decision process. also women appreciate 133 very fine distinctions as consequence of being more sensitive, registering higher level of sight, sound 134 and touch [13, 17]. 135 in terms of wine buying and consumption behaviour, women are more to associate wine to the context 136 of consumption while men associate it with convivial and sensorial pleasure. in the moment of choice, 137 women seems to carry more about brandy and previous experience and they are more willing to 138 dialog, seeking information from store personal, sommelier or a server [24, 25]. labels and shelf tags 139 are also significantly more important for women than man, according to atkin et al. [24]. these are 140 some findings and indications from previous studies and literature that can provide some orientations 141 to marketing professionals. overall, it is also important to understand that there are differences inside 142 this large group of “women” and that marketing strategies should consider it into the segmentation’s 143 decisions. 144 145 2.2 women and the preference for sparkling wine 146 in the sparkling wines market, 60% of brazilian sparkling wines’ consumers are females [26]. in 147 addition to brazil, in australia women are the biggest wines consumer, according to the australian 148 bureau of statistics; more women than men bought wine [27]. in the united states, study that 149 retrieved data from 2010 to 2016 indicates that 50% of americans women who consume alcoholic 150 beverages prefer wine, comparing to 18% of men [28]. 151 it is necessary to understand a little more about the female universe, in order to understand these 152 statistics. for example, women can have better tastes and smells than men. their capacity to 153 distinguish different odors is up to 20% higher than that of men; so, women taste wines more subtlety. 154 they have a better olfactory sensitivity than men and can better understand the complexities of wine 155 [29]. they also feel the subtleties of white wine more often than men [30]. 156 therefore, the significant differences in wines types are explained by the physical and sensory 157 differences of the different genres. this fact defines preferences, as white wines tend to have more 158 subtle acidity and lower tannins, while red wines, in most cases, have a lot of tannins. women's 159 wep – wine economics and policy just accepted manuscript 6 palates tend to be more sensitive. this may explain why many women prefer white wines, which 160 have more subtle acidity and lower tannins content. on the other hand, within red wines, they find 161 higher tannins content, astringency and bitterness. 162 therefore, women prefer less potent wines, because they are easier to consume and to enjoy; 163 consequently, they are more likely to consume white and sparkling wines than men [24, 29, 31, 32]. 164 men tend to look for red wine and women for delicate wines [30, 33]. a study of australian wine 165 consumers found that women are more likely to drink sparkling and white wines [32]. similar results 166 were found in a canadian study [34]. also, women consume significantly more white wine than men 167 [29]. 168 there are several academic studies on wine consumer behaviour in countries such as the united 169 states, portugal, england, france, new zealand, peru, australia [29, 35–40], however, there are few 170 studies that focus their aim on women who consume sparkling wines. unfortunately, the role of 171 women as wine buyers is often poorly understood and underestimated; gender-specific segmentation 172 is therefore an important issue in wine marketing [41]. 173 174 3. materials and methods 175 3.1 research design 176 this study is based on quantitative approach, collected quantitative data from individual respondents 177 using on-line survey. the questionnaire was developed and refined during a two-phased pre-testing 178 approach. in the first phase, the construct validity was checked by 3 expert participants. the 179 identification of participants’ names and characteristics are reserved in order to preserve 180 confidentiality commitments. the experts were two women and one men, age between 30-40, with 181 research in customer behavior, wine management and wine marketing. in the second phase the 182 questionnaire was pilot tested, being possible to correct some problems arising from the consumer’s 183 interpretation, as well as technological problems. 184 a non-probabilistic sampling research was carried out for convenience, with female consumers of 185 sparkling wine in brazil (state of rio grande do sul, rs), using survey online. data collection 186 included 1,003 women who consume sparkling wine and live in brazil (rs). the final sample had 187 1000 answers, 3 questionnaires were discarded due to inconsistency. the data collection covered the 188 period from march 26 to april 26, 2018. 189 wep – wine economics and policy just accepted manuscript 7 the questionnaire had 31 questions, seeking to find the variables that influence the decision making 190 at the time of purchase. the variables were divided in 3 blocks: socioeconomic characteristics, 191 consumption characteristics and behavioral aspects. the information on socioeconomic and 192 consumption characteristics was collected using mainly categorical questions. 193 behavioral aspects were measured in this study using five-point likert scales. the main observed 194 aspects were: the recommendation, the consumption on special dates, the daily consumption, the 195 preference for organic and the difficulty in sparkling wine selection. the choice of the five-point 196 scale was based on the fact that it is metric accurate and, at the same time, easier and faster to use 197 than other types of scales (shorter or longer, as is the case of the three and seven points scales). 198 different studies have been carried out to support such a decision [42]. 199 the collected data were organized and analyzed using excel. the analysis initially used descriptive 200 statistics, including the frequency distribution, the mean and the standard deviation. cross-analysis 201 was performed for better understanding the consumption and purchasing behavior, using the χ2 202 independence test, with significance being tested at the 0.01 and 0.05 levels. this test shows whether 203 there is a relationship between sociodemographic aspects or consumption frequency and other 204 variables that indicate habits and consumption preferences. the evaluated aspects were found to be 205 reliable when tested, with a cronbach’s a of 0.780. 206 3.2 data analysis 207 the sociodemographic characteristics of all respondents are shown in table 1. 208 table 1. socioeconomic profile of sample group 209 variable % age (years) 18-25 14.1 26-33 26.6 34-40 26.1 41-50 20.9 51-64 11.6 65+ 0.7 education post-graduation (specialization, master or phd) 39.6 complete higher education 25.4 incomplete higher education 22.9 high school 11.2 elementary school 0.9 occupation employee in the private sector 29.0 public functionary 26.6 wep – wine economics and policy just accepted manuscript 8 freelancer or independent professional 22.8 businesswomen 7.4 trainee 5.0 unemployed 9.2 revenue (us$) under 850 27.0 850-1700 32.1 1700-2850 14.1 over 2850 8.6 no information 18.2 marital status single 29.7 stable union/married 46.0 in a relationship 16.8 separated or divorced 5.8 widow 1.7 children yes 52.8 no 47.2 regarding the age group, it can be noticed a concentration, well distributed among the segments, 210 between 26 and 50 years old, summing just over 73% of the studied group. this finding corroborates 211 with the previous consulted data, which indicated that sparkling wines represent an attraction for all 212 ages, concentrating a large part of their consumption among the population between 25 to 64 years 213 old, but are common in all groups [10]. 214 215 4. results and discussion 216 4.1 consumption characteristics 217 table 2 summarizes consumption characteristics from the sample analysis. 218 table 2. consumption characteristics 219 characteristic % type brut 22.8 brut rosé 18.0 demi sec 14.2 muscatel 39.2 pro secco 2.9 nature 2.4 season summer 84.1 spring 32.5 autumn 24.9 winter 21.9 wep – wine economics and policy just accepted manuscript 9 frequency (glasses/month) 1-2 33.6 3-4 22.7 4-6 19.4 7-10 11.4 10+ 12.9 place of purchase border and free shops 27.3 cellar and specialized stores 20.1 directly from producer/wine maker 11.9 pubs and bars 10.8 restaurants 6.0 internet and online purchases 4.6 place of consumption residence 80.6 family events 36.4 social events 33.2 pubs and bars 15.7 restaurants 5.2 trips 4.3 on terms of sparkling wine type, the muscatel is the most consumed, with 39,2%. such preference 220 corroborates with the literature: women prefer delicate and less potent wines, since muscatel has a 221 higher sugar content comparing to other sparkling wines [24, 30, 33] [24, 30, 33, 43]. however, it is 222 interesting to note that brut and brut rosé are the segments with the highest consumption after 223 muscatel, summing 22.8% and 18%, respectively, while demi sec is only in fourth place with 14.2%. 224 this data indicates that the relationship between women and sugar content is not linear, which means 225 that women would prefer sweeter sparkling wines. if added the brut category (white and rosé), it is 226 obtained a higher value than muscatel. in addition, both brut have values higher than demi sec, the 227 second category in sugar content. 228 regarding the season, the women consume sparkling wines particularly during summer, summing 229 84% of the total. therefore, the higher the temperatures are, the greater the consumption of sparkling 230 wine by women is. it is important to add that although brazil is known for being a tropical country, 231 the research was carried out in the southernmost state of the country, which has a humid subtropical 232 climate, with well-defined seasons. another aspect to note is that summer is also the period of the 233 christmas and new year celebrations, which are moments identified with the consumption of 234 sparkling wines in general. 235 in terms of frequency, the average was calculated for all year long and not for the months or for the 236 period of consumption. the concentration in the lower segments (just over 56% consume up to 4 237 glasses per month) reflects the national trend, with an average annual wine consumption of 1.9 l/per 238 wep – wine economics and policy just accepted manuscript 10 capita [44]. the relation between frequency and other variables regarding consumption factors is 239 presented below. 240 in terms of place of consumption, the participant’s or her partner’s residence was indicated by more 241 than 80% of the studied group, which is quite representative. family and social events are in the 242 second place. they represent together almost 70% of the participants, reinforcing the idea of a relation 243 between sparkling wine and festive moments. the lack of representativeness of commercial 244 establishments, such as pubs and bars (15.7%) or restaurants (5.2%) drew attention and it can be 245 explained by values, availability or package. such hypotheses can be tested in future works. 246 247 4.2 purchase factors 248 women were asked about the factors that most influence the sparkling wine choice, having the 249 possibility to choose up to 3 alternatives. table 3 summarizes the results. 250 table 3. factors that most influence the choice 251 factors % flavor 49 having tasted the sparkling wine before 41 brand 39 someone’s recommendation 35 price 33 sparkling wine’s origin (region or country) 19 promotional highlight in shops 17 medals and awards 8 have read posts / comments on the internet / social networks 5 information on the back label 3 packages and accessories (glasses, boxes) 3 having read about the sparkling wine in a guide 3 alcoholic content 2 attractive front label 1 the sparkling wine being organic 1 information on the shelf 1 the main factors that influence consumption are taste, having tasted sparkling wine before, brand and 252 someone's recommendation, which corroborate with results found in literature. for example, the 253 results of a research carried out in portugal showed that the most valued factors at the time of purchase 254 are the price, the origin region and the friends’ and family’s recommendation [40]. a cross-country 255 study in four countries already showed that the main factors influencing female consumption were 256 the price, the type, have/having tasted the wine, applied discounts, the variety and the brand [21]. 257 however, the price is the first attribute in both studies, but does not apply in present research, where 258 wep – wine economics and policy just accepted manuscript 11 price is ranked on 5th place. 259 for women, having tasted the wine before has more weight at the time of decision [45]. in addition, 260 women use the friends’ and family’s recommendation and their own knowledge as their main 261 strategies to reduce the risk when buying [40]. thus, the research showed the women's priority in 262 appealing to their prior knowledge to support the purchase decision, this factor being even more 263 important than the price. 264 sparkling wine’s origin (region or country) was the 6th factor in purchase decision. previous studies 265 pointed out that men were more concerned with origin than women, which can’t be confirmed in this 266 study [46–48]. even if research findings have not always been so conclusive, this point is a lack to 267 be explored in further studies. 268 4.3 behavior aspects 269 the influence of age on the sparkling wine consumption frequency was the first behavioral aspect 270 analyzed. the relationship was validated through a χ2 independent tests. table 4 presents the results. 271 table 4. influence of the age group on the frequency of consumption (% of consumers) 272 frequency (glasses/month) 1-2 3-4 5-6 7-10 over 10 χ 2 18-25 y 40.7 15.0 27.1 10.0 7.1 47.96 26-33 y 40.8 19.5 23.2 7.1 9.4 34-40 y 29.0 15.6 24.4 13.7 17.2 41-50 y 26.2 21.9 21.0 14.3 16.7 51-64 y 31.6 29.8 15.8 11.4 11.4 over 65 y 28.6 14.3 28.6 28.6 0.0 note: n=1000; significant at 1 per cent level 273 regarding age, the choice of different products and services is linked to this characteristic, as there 274 is a change in habits and new expectations arising from maturity [49]. a premise found in the 275 literature of this study area is that the frequency of consumption increases with the woman's age [29, 276 50, 51]. analyzing the data, it can be noticed that the quantity of 1 to 2 glasses drops, while the 277 consumption of 7 to 10 glasses per month increases, as the age advances. 278 in a qualitative research carried out in portugal, based on an in-depth interview with 15 women aged 279 between 23 and 35 years old, it was revealed that the majority of the interviewees increase the 280 frequency of consumption with age. women said they felt more comfortable drinking wine and 281 wanting to try new wines. other women revealed that consumption remained constant and increased 282 wep – wine economics and policy just accepted manuscript 12 in quality and not necessarily in quantity [40]. the hypothesis of increased quality was tested, 283 considering quality as a synonym for willingness to pay higher prices, and validated through a χ2 284 independent test. there is evidence of a relationship at 5% significance between age and quality 285 (higher prices). 286 another aspect analyzed was the consumption on special occasions or daily. the instrument proposed 287 that consumers position themselves in two antagonistic statements the first showing the sparkling 288 wine consumption more daily and the second relating the sparkling wine consumption only to special 289 occasions. as it can be seen in table 5, both statements had a high degree of disagreement, which 290 means that the sparkling wine consumption does not occur only on special occasions, but also that it 291 does not happen more daily. 292 table 5. special occasions or daily consumption (% of consumers) 293 likert scale (“strongly disagree” to “strongly agree”) 1 2 3 4 5 mean consumption just on special dates 48.9 23.4 12.9 8.4 6.4 2.0 daily consumption 40.6 26.9 15.0 7.7 9.8 2.2 note: n=1000 294 the association between sparkling wine and celebration moment can be seen in this research, since 295 more than 67% of women disagree that they consume more on a daily basis. on the other hand, the 296 research also identified a new behavior the sparkling wine consumption also on a daily basis 297 indicated when more than 72% disagree that they only consume on special dates. thus, it can be 298 observed that the relationship between sparkling wines and special dates occurs again, but that the 299 sparkling wine is also part of other moments. 300 301 4.4 sparkling wine choice 302 one of the results that surprised the most in the research was in relation to the decision to buy or to 303 choose the sparkling wine. women were asked about the level of knowledge of sparkling wines and 304 who made the decision to buy or to choose the sparkling wine. tables 6 and 7 present the results. 305 table 6. level of knowledge of sparkling wines (% of consumers) 306 characteristic % wep – wine economics and policy just accepted manuscript 13 expert 1.0 very good 4.2 good 16.1 week 39.2 medium 34.7 null 4.8 previous studies indicated that choosing a wine is a difficult and uncomfortable activity and that self-307 confidence would be an aspect to consider supporting the decision-making process [50, 52]. the 308 results of this research do not indicate any evidence that the task of choosing sparkling wine is 309 difficult to be accomplished for women. even though more than 78% consider themselves to have 310 little knowledge about sparkling wines, more than 65% disagree with the statement that choosing a 311 sparkling wine is a difficult task. 312 table 7. confidence in the sparkling wine purchase decision (% of consumers) 313 likert scale (“strongly disagree” to “strongly agree”) 1 2 3 4 5 mean i consider choosing a sparkling wine a difficult task 37.1 28.3 17.0 11.7 5.9 2.2 note: n=1000 314 on the other hand, the studies also show that younger women are more likely than men to be 315 influenced in their purchasing decisions by family, friends and other third parties [29]. this trend can 316 also be seen in the present study. the influence of the age group on the purchase decision is significant 317 and validated through a χ2 independent test, significant at 1 per cent level (table 8). 318 table 8. who chooses sparkling wine by age group (% of consumers) 319 18-25 y (14%) 26-33 y (26.7%) 34-40y (26.3%) 41-50 y (21%) 51-64 y (11.3%) over 65 y (7%) χ2 me 55.7 76.0 77.6 74.8 74.3 57.1 61.19 friends 5.7 6.7 6.5 10.0 7.1 14.3 partner 17.1 10.1 11.4 11.4 9.7 0.0 family 18.6 5.6 4.2 3.3 8.8 28.6 waiter or salesmen 2.1 0.7 0.0 0.5 0.0 0.0 others 0.7 0.7 0.4 0.0 0.0 0.0 note: n=1000; significant at 1 per cent level 320 a greater influence of third parties on younger women can be seen, although in all age groups the 321 majority of women claim to make the purchase decision. the partners and the family are the main 322 influencers for the youngest. the influence of the family decreases and the participation of friends 323 wep – wine economics and policy just accepted manuscript 14 increases between 26 and 50 years old. 324 in an overview, when it comes to make the decision of which sparkling wine to buy, about 73% of 325 women make this choice. this result contradicts previous studies which find that women deliberately 326 give up responsibility for the purchase of wine in several situations of public purchase and 327 consumption [29, 36]. in this regard, the present research shows a group of consumers who make the 328 purchase decisions, not transferring this choice to partner or family members. 329 330 5. conclusions, implications, limitations and future research 331 when an organization proposes to study the behavior of women in relation to a specific product, it is 332 necessary to understand that they have gone through and continue to go through several social 333 changes. the insertion of women on the labor market influenced the most the beverages market and 334 provided greater financial independence and increased social participation at events, clubs and 335 restaurants. thus, it transformed the lifestyle of modern women and stimulated the consumption of 336 drinks, especially sparkling wine. 337 this study was based on a convenience sample and limited to a wine producing area. further studies 338 can expand the sample and test the findings in other contexts. also, this study had an exploratory 339 approach and future research can use established consumption scales. in addition, this study was 340 based on a female sample; further studies can include a comparison between women and men in the 341 same analytical basis. 342 it is important to highlight that data collection was carried out in 2018, before pandemic scenario. in 343 our analysis the pandemic does not change the main conclusions, to the extent that it contributes to 344 increases consumption and not the factors of choice, according to local marketing research. 345 this research showed that women have no difficulty with choosing the product and do not find it a 346 complicated task. they do prefer to choose the product, not leaving this decision to a partner, 347 boyfriend, friend or family member. women choose and they are not influenced by them either; 348 simply, they choose for them. major influencers in consumption were not observed, excepting their 349 own will. also, it was a surprise that the price was not the most important influence on this product’s 350 consumption, as imagined. 351 the most interesting information for sparkling wine producers is that there is a market potential that 352 wep – wine economics and policy just accepted manuscript 15 differentiates daily consumption and consumption on special dates. women assume that they not only 353 consume on special dates, but also, that they do not consume more on a daily basis than on special 354 occasions. this is very important, as sparkling wine has always had the stigma of being a seasonal 355 product. 356 further studies are needed. in addition to gender issues (an important theme and still little explored), 357 other elements need to be unveiled, including understanding whether there is an economic divide, 358 which 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spain, email: dbarrio@ugr.es 16 5 university of alicante, department of marketing, crta. san vicente s/n. 03690, alicante – spain, 17 email: ana.casado@ua.es 18 19 correspondence concerning this article should be addressed to felipe ruiz-moreno, university of 20 alicante, department of marketing, crta. san vicente s/n. 03690, alicante – spain, email: 21 felipe.ruiz@ua.es 22 23 this article has been accepted for publication and undergone full peer review but has not been through 24 the copyediting, typesetting, pagination and proofreading process, which may lead to differences 25 between this version and the version of record. 26 27 please cite this article as: 28 29 penagos-londoño g.i., ruiz-moreno f., sellers-rubio r., del barrio-garcía s., casado-díaz a.b. 30 (2022), consistency of expert product reviews: an application to wine guides, wine economics and 31 policy, just accepted. 32 doi: 10.36253/wep-12400 33 34 35 36 37 38 mailto:penagosi@javeriana.edu.co mailto:felipe.ruiz@ua.es mailto:ricardo.sellers@ua.es mailto:dbarrio@ugr.es mailto:ana.casado@ua.es mailto:felipe.ruiz@ua.es wep – wine economics and policy just accepted manuscript 2 abstract 39 purpose. the purpose of this study is to examine the internal consistency of wine guides by 40 comparing the judgements of expert wine tasters and reviewers. a classification of wines is provided 41 to establish whether expert reviews of similar wines are coherent. 42 design/methodology/approach. sentiment analysis based on natural language processing 43 techniques was used to compare quantitative and qualitative reviews between experts. in addition, a 44 finite mixture model was used to classify wines into categories to analyse internal consistency 45 between ratings. 46 findings. the results for a sample of more than 200,000 wine enthusiast ratings reveal significant 47 differences between expert reviews. this finding indicates that there are no standard criteria for 48 reviewing wines included in the guide. 49 originality. wine guides are amongst the most widely used marketing resources in the wine industry. 50 they provide a signal to consumers about the quality of wines, guiding their purchase decisions. they 51 also influence the reputation of brands and the performance of companies producing these wines. the 52 main contribution of this study is to propose a new way to compare the reviews of wine guide experts. 53 54 keywords: reputation, wine, expert ratings, sentiment analysis, finite mixture model, wine guides 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 wep – wine economics and policy just accepted manuscript 3 1. introduction 73 information influences users’ decision-making processes. however, information asymmetry 74 generally exists in the buyer-seller relationship because each party has a different amount of 75 information about products [1]. research on experiential and hedonic consumption has shown that 76 consumers’ behaviour is affected by “social influence including peer input (word-of-mouth) and 77 judgments of respected experts (professional evaluations)” [2, p.180]. 78 wine is an experience product whose quality cannot be assessed by consumers before purchase and 79 consumption [3, 4]. this feature of wine increases the complexity of the purchase decision process. 80 thus, information asymmetries arise between consumers and winemakers in relation to product 81 quality. accordingly, highand low-quality products can coexist in the market [5]. wineries employ 82 different marketing strategies to reduce these asymmetries and inform the market about the quality 83 of their products [6]. some use advertising in the mainstream media and encourage positive word-of-84 mouth communication amongst consumers [7, 8]. they also use awards in national and international 85 competitions as part of their branding and communication strategies [6]. finally, receiving high 86 ratings in well-known wine guides, which are managed by experts and prescribers, can also help 87 reduce information asymmetries between winemakers and consumers. 88 this study focuses on the social influence of experts in wine guides. wine guides offer thousands of 89 reviews of wines from around the world, basing their reviews on the opinions of panels of experts 90 who taste these wines. the assumption is that consumers use judgements of wine quality by expert 91 reviewers in wine guides as a source of information to make purchase decisions [9]. these expert 92 reviewers might consequently influence the performance of the wine-producing companies. previous 93 research has in fact shown that there is a relationship between online reviews and consumer choice 94 and firm sales [10, 11]. however, despite the potential impact on consumers and wineries, the nature 95 and effects of expert opinions in wine guides remains an under-researched topic. 96 wine experts usually provide a quantitative (score) and a qualitative (comment) review. the aim of 97 this study is to test the consistency between these two assessments (quantitative and qualitative) of 98 tasted wines. for wine guides to offer a credible source of information, both assessments of the same 99 wine should match. that is, higher scores should be aligned with more positive comments. this 100 analysis can confirm the role of expert evaluations as a credible source of information for consumers. 101 to test the consistency of wine experts’ reviews, the qualitative content (i.e. tasting notes) is 102 examined using sentiment analysis based on natural language processing techniques. then, these 103 reviews and other relevant variables (origin and grape variety) are used to establish whether expert 104 reviews of similar wines are coherent. coherence is examined by classifying wines according to 105 reviews and wine-related variables. a finite mixture model is employed for this classification. the 106 wep – wine economics and policy just accepted manuscript 4 study context is the wine enthusiast guide, one of the most prestigious wine guides in the world. the 107 results show significant differences between expert reviews, which raises doubts about the usefulness 108 and credibility of wine guides as a source of information. 109 110 2. literature review 111 2.1. wine guides as a marketing tool 112 guides are extremely popular in the wine industry because they offer a point of comparison across 113 brands [12] and provide consumers with a signal of wine quality. wine guides are based on the 114 opinions of experts and professional tasters, who follow standardised, systematic procedures that aim 115 to provide a rigorous assessment of wines. these experts and tasters are assumed to be independent 116 of wineries, thus helping consumers make informed purchase decisions, as the learning process 117 necessary for consumers to become wine experts themselves takes time [13]. 118 research has highlighted the effect of wine expert recommendations from a marketing perspective. 119 parsons and thompson [14] showed that consumers attribute high credibility to independent wine 120 expert recommendations. friberg and grönqvist [15] found a significant effect of positive reviews by 121 experts on the sales of the wines they had tasted. the scores that wines receive in these guides can 122 also influence other marketing variables. a line of research has focused on the effect of expert reviews 123 on wine prices [16]. for instance, studies have shown a positive effect of this type of evaluation on 124 product prices, associated with a greater product reputation [7, 17]. ashenfelter and jones [18] 125 showed that the influence of expert ratings on the price of wine is even greater than that of other 126 factors such as terroir conditions or climate, which are commonly used to predict wine prices [19]. 127 wine research has also used the sensory reviews of experts in wine guides to measure wine quality 128 and brand reputation [20]. dressler [21] analysed the reputation of german wineries, individually and 129 collectively, using three wine guides (feinschmecker, gault millau and eichelmann) and found 130 consistent judgements across all three. focused on sicilian wines, roma et al. [9] used experts’ scores 131 in wine guides as a proxy of firm (wine) reputation. this approach is common in the wine literature 132 [22]. however, despite this evidence, the impact of a positive expert review on the price of a wine 133 may depend not only on the reputation of the wine itself but also on the reputation of the expert [23, 134 24] because not all experts or guides have the same reputation and prestige [25]. 135 136 2.2. the expert-consistency effect 137 according to dual-process theory [26], individuals’ opinions and even behaviours are based on 138 informational and normative influences such as those from expert reviews [27–29]. information has 139 wep – wine economics and policy just accepted manuscript 5 a greater impact on the receiver if the sender is perceived as credible. expert information is believed 140 to be more credible and accurate (i.e. consistent) than non-expert information [30, 31]. 141 in the context of wine, it is difficult to identify the factors that each expert considers when making 142 judgements and rating wines because there is no common frame of reference across guides [16, 32]. 143 an expert’s rating is not necessarily an objective indicator of the quality of a wine because experts 144 make judgements based on their own personal preferences. thus, when an expert gives a high rating 145 to a certain wine, it is not intended to convey the idea that the wine is of a higher quality than another 146 wine with a lower rating. this lack of comparability arises because ratings of wines are conditioned 147 by several factors such as origin, vintage, winery, price and even the expectations of the expert. 148 therefore, a higher score for one wine than for another simply indicates an expert’s greater preference 149 for that wine. 150 consequently, despite their alleged objectivity (as stated in wine guides), expert reviews cannot be 151 considered absolute objective assessments of wine quality. for instance, they may be biased by 152 experts’ personal preferences [33]. evidence regarding the consistency of expert judgements is 153 somewhat mixed. some authors have found consistency between different experts’ reviews of the 154 same wine (e.g. [34]). however, other authors have expressed concern about inconsistencies between 155 different experts’ opinions of wine quality and even inconsistencies in reviews by the same expert 156 over time (e.g. [35–37]). cao and stokes [38] reported that personal bias in wine expert reviews 157 translates into different ratings, discriminatory capacity and variability in the ratings of different 158 wines. likewise, ashton [35, 39] observed that wine guides focus on a few wines and cannot be 159 considered fair representations of the entire market, noting that even the number of tasters used to 160 issue a rating can influence the rating. these guides continue to be highly important in many markets 161 and are used as a reference by consumers around the world. therefore, further investigation of the 162 effects of expert consistency/inconsistency is warranted. 163 164 2.3. sentiment analysis: a tool for analysing the consistency of expert reviews 165 in recent years, natural language processing research techniques have allowed researchers to perform 166 textual and sentiment analysis of reviews by both experts and consumers (e.g. [40–46]). sentiment 167 analysis is a subfield within natural language processing techniques that focuses on automatically 168 classifying a text through its valence [47]. it enables the extraction of information on opinions about 169 a subject (from users or experts) for a certain product [48, 49]. previous research has shown that this 170 type of analysis based on the characteristics of the product can provide more precise information than 171 a general analysis of the overall (numerical) assessment [50]. recent literature reviews have 172 wep – wine economics and policy just accepted manuscript 6 highlighted the importance and uniqueness of sentiment analysis in marketing research [51] and in 173 hospitality and tourism [52]. 174 in the context of wine guides, users typically find two ratings or judgements of a given wine. the 175 first is a numerical score, usually on a scale of 0 to 100 points or 0 to 20 points, depending on the 176 guide. some guides only publish wines that receive a minimum score of 80 or 85 points. the second 177 rating is a qualitative review based on tasting notes for the wine. these tasting notes consist of a brief 178 literal description of the sensory and organoleptic qualities of the wine [53]. although numerical 179 scores are easily interpretable, the natural limitations of language hinder and complicate the task of 180 using words to convey what a wine is really like and to describe the sensations that the expert wants 181 to convey [54]. sometimes, the sensory characteristics of wines are so special or unusual that there 182 may not be the right words to describe it. furthermore, some authors suggest that the language of 183 professional tasting, which is used to describe the sensory properties of a wine, is based on jargon 184 and vocabulary that is so complex and difficult to decipher that only the experts themselves or the 185 most experienced consumers can understand it. in fact, peynaud and blouin [55] found that for 186 professional tasting notes to be effective, consumers must have a high level of understanding about 187 tasting, which is not always the case. sometimes, these tasting notes may be pretentious, offering 188 little informational validity for consumers [56]. 189 therefore, sentiment analysis based on each of the characteristics considered in the tasting notes 190 could offer a broader and more accurate illustration of how experts review a wine. from an analytical 191 perspective, the opinions of experts require analysis at the sentence level [57]. this sentence-level 192 focus is necessary because experts who review wines consider different characteristics or attributes 193 and generally have a different opinion on each of these aspects. although many sentiment analysis 194 tools can easily divide comments into negative, positive or neutral, a textual review of a given wine 195 may contain phrases with different polarities because experts may have different feelings about each 196 characteristic of the wine. for instance, the standard tasting phases (i.e. sight, smell and taste) may 197 have different polarities, with some aspects being rated positively, others negatively and others 198 neutrally. in addition, there may be different degrees of positive or negative opinions. accordingly, 199 reviews cannot be qualified simply as positive, negative or neutral. instead, they include a series of 200 additive perceptions that create a nuanced rating and provide specific information on each of the 201 aspects evaluated by the expert. for instance, some characteristics of the wine (e.g. in the olfactory 202 phase of tasting) may be rated positively, whereas others (e.g. related to the palate) may be negatively 203 rated. 204 in sum, sentiment analysis techniques could lead to precise inference of the overall numerical score 205 for the wine. therefore, these techniques are particularly useful for examining the opinions of experts 206 wep – wine economics and policy just accepted manuscript 7 about the wines in a guide. nguyen et al. [58] recently employed a similar approach, focusing on so-207 called online expert users. 208 209 3. method 210 this study focuses on reviews by 19 professional wine tasters from the wine enthusiast guide 211 between 1999 and 2019. wine enthusiast magazine is one of the most prestigious international 212 magazines in the sector, together with the wine advocate (robert parker). each review included 213 qualitative tasting notes, in which the expert gave a judgement on the tasted wine, a quantitative score 214 of the wine (from 80 to 100 points), and some additional characteristics such as price, origin and 215 grape variety (see figure 1). the wines were from 43 countries and their price ranged from 4 dollars 216 to 3,400 dollars. after the elimination of outliers and missing cases, the final sample contained 217 201,004 reviews. 218 219 figure 1. sample wine enthusiast guide review 220 221 source: wine enthusiast website (2021). 222 223 the method had two stages. the first stage involved that quantitative ratings as well as qualitative 224 reviews were compared among the different experts in the guide. reviews published in the guide 225 were made by 19 experts, as well as some other anonymous reviewers. although the comparison of 226 quantitative ratings was straightforward, the comparison of qualitative reviews required prior analysis 227 of tasting notes using sentiment analysis. this analysis was carried out using the afinn lexicon. 228 afinn consists of 2,477 words in english that express a certain degree of positive or negative 229 sentiment. this corpus of words, produced by finn arup nielsen between 2009 and 2011, contains a 230 rating for words ranging from −5 (most negative sentiment) to +5 (most positive sentiment). this 231 wep – wine economics and policy just accepted manuscript 8 lexicon displays the information in two columns: the word next to its corresponding value (e.g. 232 “awesome” 4 or “awful” -3). in this study, the sentiment value of the expert review was calculated 233 as the sum of the polarity of each of the words used in the review. in essence, each review was divided 234 into sentences, and each sentence into words. to evaluate one sentence of the review, each word was 235 assigned a value according to the afinn lexicon. adding up the values of all words in the sentence 236 gave an evaluation of that specific comment. once this process had been performed for all sentences 237 in the review, the evaluations of each sentence or comment were summed to give an overall score for 238 the review. because an expert review covers different aspects, different opinions can be found in the 239 same review. that is, the same review might contain both positive comments (e.g. regarding palate) 240 and negative comments (e.g. regarding nose). however, the additive procedure employed in this study 241 gave an overall evaluation of the intensity (value) and polarity (positive/negative) of the review based 242 on the evaluation of each comment in the review. compared to the alternative of using the average 243 of the individual evaluations of each word, this additive procedure accounted for the length of the 244 review because there is evidence that longer reviews provide greater added value to the tasting note 245 of the wine [53]. in addition, it provided a broader ranking of the review than a simple classification 246 as positive, negative or neutral. 247 in the second stage, the wines were classified according to their characteristics using techniques based 248 on cluster analysis. the starting assumption was that wines in a given group were homogeneous but 249 different from the wines in other groups. each wine was defined by a set of variables related to its 250 review (qualitative and quantitative), origin and grape. the objective of this stage was to group similar 251 wines by comparing specific vectors for the set of variables used in this study. an 𝑁 × 𝑑 matrix was 252 created for this analysis, where the columns were the variables, and the rows were the observations. 253 each observation (i.e. row) was a vector of dimension 𝑑, denoted as 𝑥𝑖. the data set was denoted as 254 𝑥 = (𝑥𝑖)𝑖∈{1,⋯,𝑁}. each observation had 𝑑𝑐𝑜𝑛𝑡 continuous variables in ℝ 𝑑𝑐𝑜𝑛𝑡 and 𝑑𝑐𝑎𝑡 categorical 255 variables, with {1,⋯,𝑚𝑗} levels for each nominal variable 𝑗. hence, 𝑑𝑐𝑜𝑛𝑡 + 𝑑𝑐𝑎𝑡 = 𝑑. 256 to classify the observations into groups that could be interpreted in a meaningful way, an 257 unsupervised learning method was used. it was hypothesised that there existed hidden or latent 258 variables (unobserved random variables) for all data points in the data set that associated a specific 259 cluster to each observation. thus, the latent variable model was a mixture model. 260 in a mixture model, 𝐾 distributions are mixed, and it is assumed that each observation belongs to one 261 of them. the latent variable 𝑧𝑖 for observation 𝑖 corresponds to one of the distributions in the mixture. 262 in other words, the latent variable 𝑧𝑖 is the cluster to which observation 𝑥𝑖 belongs. if the number of 263 clusters is 𝐾, then 𝑧𝑖 ∈ {1, ⋯,𝐾}, and the set of latent variables is denoted as 𝑧 = (𝑧𝑖)𝑖∈{1,⋯,𝑁}. in a 264 mixture model, the data generation process is assumed to be 𝑝(𝑧, 𝑥) = 𝑝(𝑧𝑖)𝑝(𝑥𝑖|𝑧𝑖 = 𝑘). here, 265 wep – wine economics and policy just accepted manuscript 9 𝑝(𝑧𝑖) is a multinomial distribution, where 𝜂𝑘 = 𝑃𝑟(𝑧𝑖 = 𝑘) is the probability that observation 𝑖 266 belongs to cluster 𝑘. the set of probabilities 𝜂 = (𝜂𝑘)𝑘∈{1,⋯,𝐾} are referred to as the mixing weights. 267 furthermore, 𝜙𝑘(𝑥𝑖|𝜃𝑘) = 𝑝(𝑥𝑖|𝑧𝑖 = 𝑘) is the probability distribution of the data in cluster 𝑘, and 𝜃𝑘 268 are the parameters of this distribution. the probability density function is given as follows: 269 𝑓(𝑥𝑖|𝜃) = ∑ 𝜂𝑘𝜙𝑘(𝑥𝑖|𝜃𝑘) 𝐾 𝑘=1 270 where 𝜃 = (𝜃𝑘)𝑘∈{1,⋯,𝐾} is the set of all parameters for the distributions in the mixture, including the 271 mixing weights. 272 for continuous variables, the cluster distributions were multivariate gaussian distributions 273 𝜙𝑘(𝑥𝑖|𝜃𝑘) = 𝑁(𝑥𝑖|𝜇𝑘,σ𝑘), where the parameters of the distribution 𝑘, 𝜃𝑘 = {𝜇𝑘,σ𝑘} were the mean 274 vector 𝜇𝑘 and covariance matrix σ𝑘. categorical variables were assumed to be independent 275 multivariate multinomial variables distributed conditional on the latent variable. therefore, 276 𝜙𝑘(𝑥𝑖|𝜃𝑘) = ℳ(𝑥𝑖|𝛼𝑘) for 𝛼𝑘 = (𝛼𝑗𝑘)𝑗∈{1,⋯,𝑑𝑐𝑎𝑡} , where 𝛼𝑗𝑘 is the vector of parameters (event 277 probabilities) for the multinomial distribution associated with variable 𝑗 in cluster 𝑘, and its 278 dimension is 𝑚𝑗. 279 for the estimation of the parameters, the r package rmixmod version 2.1.5 was used. this package 280 maximises the log-likelihood with an expectation maximisation (em) algorithm as follows: 281 ℒ(θ) = ∑ ln𝑓(𝑥𝑖|𝜃) 𝑁 𝑖=1 282 for θ = {𝜂,𝜃}, the set of all parameters of the mixture. 283 once the wines had been classified into similar groups, the differences between the expert reviews of 284 the wines belonging to each cluster were analysed. the data processing and estimation was carried 285 out in matlab. 286 287 4. results 288 in the first stage, the quantitative and qualitative expert reviews in the guide were compared. the 289 average score of the tasted wines was 88.81 points (sd = 3.03), with a minimum of 80 points and a 290 maximum of 100. the experts used an average of 40.56 words in their descriptions of wines (sd = 291 11.28), with a minimum of three words and a maximum of 135. the average sentiment score was 3.2 292 points (sd = 7.02), with a minimum of -33 points and a maximum of 41. the average price was 36.62 293 dollars (sd = 43.17), with a minimum of 4 dollars and a maximum of 3,400 dollars. 294 table i presents the average quantitative and sentiment ratings for each expert. it also shows the 295 average number of words used by each expert in the tasting notes. there are statistically significant 296 wep – wine economics and policy just accepted manuscript 10 differences between the experts’ quantitative ratings. there are also differences in the nuances 297 provided in the tasting notes, as reflected by the differences in the number of words used and the 298 sentiment ratings for the experts. 299 300 table i. ratings of wines according to experts 301 expert no. of wines tasted average quantitative score average of sentiment rating average number of words alexander peartree 1,637 87.14 -1.28 41.26 anna lee c. iijima 8,061 89.37 0.83 41.38 anne krebiehl mw 7,661 91.02 5.27 47.17 carrie dykes 268 86.45 1.10 42.75 christina pickard 2,349 88.97 1.72 57.00 fiona adams 408 86.72 -3.91 49.77 jeff jenssen 783 88.08 -1.39 35.75 jim gordon 9,083 88.71 4.71 38.12 joe czerwinski 5,842 88.66 0.24 40.96 kerin o’keefe 20,055 89.12 -1.88 38.03 lauren buzzeo 2,886 88.00 3.18 50.53 matt kettmann 13,910 90.21 -0.43 44.40 michael schachner 20,004 86.99 0.28 42.42 mike desimone 956 89.07 -0.44 43.21 paul gregutt 13,824 89.34 4.61 43.48 roger voss 40,124 88.90 8.58 37.47 sean p. sullivan 9,197 88.67 1.74 38.39 susan kostrzewa 1,170 86.89 6.03 39.71 virginie boone 17,578 89.67 2.75 38.71 nameless 25,208 87.81 4.10 38.96 total 201,004 88.81 3.20 40.55 f 1158.84 (p < 0.000) 3534.31 (p < 0.000) 1351.94 (p < 0.000) source: authors 302 303 in the second stage, the wines were classified according to their characteristics using techniques based 304 on cluster analysis. the proposed model was estimated for k = 2, . . . ,7 clusters in relation to the 305 wines appearing in this guide. to identify the clusters, four variables were used: the quantitative 306 rating, sentiment score of the tasting note, country of origin of the wine and grape variety. the model 307 selection criterion was the bayesian information criterion (bic; [59] schwarz 1978). this criterion 308 suggested that k = 4 was the number of groups that best fit the data (see table ii). external validation 309 is also desirable to confirm the usefulness of the cluster solution. external validation consisted of 310 examining whether there were also intercluster differences in variables other than those used to 311 wep – wine economics and policy just accepted manuscript 11 classify the wines. this external validation served as an exploratory investigation of the influence of 312 the cluster structure and main characteristics [60]. to this end, the price variable was also examined 313 (see table ii). 314 315 table ii. descriptive analysis of clusters with mean and standard deviation (in parentheses) 316 variables used in the cluster analysis external validation quantitative rating qualitative (sentiment) rating main country origin main grape variety price best quality n = 56,043 90.09 (2.77) 10.26 (5.74) france red & white 41.50 (65.01) affordable n = 48,321 85.29 (1.74) 1.33 (4.47) america, france and spain red & white 21.10 (16.40) over-priced n = 67,789 90.00 (2.23) 0.08 (5.75) united states and italy red 47.24 (37.42) smart choice n = 28,851 89.41 (2.15) -0.02 (5.65) united states white 28.80 (25.02) total n = 201,004 88.81 (3.03) 3.21 (7.02) n.a. n.a. 36.62 (43.16) source: authors 317 318 the empirical findings reveal some interesting differences between the clusters. the first group, “top-319 of-the-range wines (best quality)”, consists of wines with a well-above-average rating based on both 320 sentiment and quantitative ratings. these wines are also on average more expensive. it consists of red 321 and white wines, mainly from france. the second group, “low-price wines (affordable/low cost)”, 322 consists of wines with a below-average quantitative score but with a slightly positive sentiment rating. 323 the average price of wines in this group is well below the average for the entire sample. this group 324 includes white and red wines from north and south america, france and spain. the third group, 325 “overpriced wines”, consists of wines with a neutral sentiment rating but a roughly average 326 quantitative score. these wines’ average price is well above the average for the entire sample. they 327 are mostly red wines from the united states and italy. finally, the fourth group, “best-value wines 328 (smart choice)”, consists of wines with a roughly average quantitative score and a below-average 329 qualitative rating. they also have a lower-than-average price. this group mainly consists of white 330 wines from the united states. 331 the differences between the four groups were significant for the four variables considered in the 332 analysis. in addition, for the external validation of the four clusters, anova was used to test whether 333 the prices differed between clusters. the price variable (4064.87; < 0.0001) was significantly different 334 between clusters, thereby externally validating the classification presented in this research. 335 wep – wine economics and policy just accepted manuscript 12 once the wines had been classified into homogeneous groups, the average sentiment evaluations of 336 the tasters were calculated for each group. the results indicate that the differences between the 337 experts’ reviews differ significantly, which shows that there are no standard criteria for reviewing the 338 wines in the guide (see table iii). this result reinforces the earlier idea (see table i) that tasting notes 339 might differ amongst wine experts, even when the tasted wines are similar and receive a comparable 340 quantitative rating. 341 342 table iii. test of differences of experts’ sentiment ratings 343 f p value group 1. best quality 382.65 p < 0.001 group 2. affordable 110.97 p < 0.001 group 3. overpriced 295.44 p < 0.001 group 4. smart choice 151.12 p < 0.001 source: authors 344 345 5. conclusions 346 wine guides written by professional and expert tasters are widely used in the wine industry to market 347 wine, providing important information signals for consumers around the world. however, despite the 348 importance of these guides, some authors have expressed doubts about the consistency of the scores 349 and reviews they provide. the objective of this study was to analyse the internal consistency of the 350 scores and reviews of the experts and professional tasters writing for a specific guide. the method 351 included sentiment analysis of the tasting notes and a novel clustering technique that identified groups 352 of wines with similar characteristics. 353 the results show considerable divergence between the qualitative and quantitative assessments by 354 professional tasters in the wine enthusiast wine guide. although most consumers trust the guide to 355 reduce their information asymmetries with respect to winemakers, disparity in the criteria used by the 356 guide’s experts raises doubts over its effectiveness as a source of reliable, verified, standardised 357 information for consumers. in fact, even when wines are grouped according to their characteristics, 358 there are still discrepancies amongst experts. therefore, it cannot be said that the guide follows a 359 single, uniform set of criteria for its wine reviews. 360 these results have managerial implications for the wine sector. first, the results have implications 361 for wineries whose wines are tasted by experts writing for this guide. these wineries should be aware 362 that experts’ personal preferences may affect their judgements. hence, knowing the personal tastes 363 and background of each expert could help wineries improve the ratings of their wines. second, these 364 results are important for the management of the guide itself. the reputation and prestige of a particular 365 guide is the basis of consumers’ trust in that guide, which is considered a reliable and independent 366 wep – wine economics and policy just accepted manuscript 13 source of information. if the reviews in the guide are inconsistent and the experts do not reach a 367 consensus when rating wines, doubts may arise about the reliability of these reviews, depending on 368 which expert tasted the wine. these doubts could ultimately affect the publication’s reputation. 369 finally, regarding the limitations of this study, only one guide (wine enthusiast) was analysed. it is 370 not possible to extrapolate these results to other specialist publications within the sector. furthermore, 371 the sentiment analysis was carried out using a specific lexicon. although this lexicon has been widely 372 used in academic studies, it is not the only available alternative, nor is it specific to the wine sector. 373 these limitations open new research opportunities that should be addressed in the future. future 374 research could also explore the effect of reviewer expertise in the context of wine guides. reviewer 375 expertise has already been shown to influence reviewer ratings in the context of hotel and restaurant 376 review platforms [58]. finally, future research could extend this analysis to other markets where 377 guides based on expert reviews are also common. examples include the film and television industry, 378 where sentiment analysis 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(2022), how are vineyards management 29 strategies and climate-related conditions affecting economic performance? a case study of chilean 30 wine grape growers, wine economics and policy, just accepted. 31 doi: 10.36253/wep-12739 32 33 34 35 36 mailto:rjara@utalca.cl wep – wine economics and policy just accepted manuscript 2 abstract 37 in wine grape production, growers decide between alternative management strategies of the vineyard 38 that have direct consequences on competitiveness. the aim of this study is to evaluate the impact on 39 economic performance of four management strategies: training system, reserve quality production, 40 irrigation method, and mechanization of labors. the data used in the study comes from face-to-face 41 interviews to 336 wine grape growers of central chile, which was complemented with climatic 42 variables retrieved from geographic information systems. a log-log regression model of total value 43 product (tvp) for the main variety grown in the vineyard was estimated, using production factors, 44 vineyards’ attributes, management strategies and climate-related conditions as explanatory variables. 45 an interesting contribution of this study is the identification of tvp functions for land, fertilizers, 46 fungicides, other agrochemicals, labor, and age of vines. our results show that the training system 47 has the most impact on tvp, where tendone-trained vineyards demonstrated 50% higher tvp than 48 those vertically trained. reserve quality production also has a positive effect on tvp, increasing it 49 by 22% compared to vineyards producing varietal quality grapes. in contrast, the use of pressurized 50 irrigation systems and mechanization in harvesting do not present a significant effect on tvp. the 51 findings of this paper represent an advance in the understanding of the economic performance factors 52 associated with wine grape growing and could serve to guide on-farm decisions and sectoral policies 53 in pursuing the competitive development of wine grape growers. 54 55 keywords: economic performance, production function, vineyard management, wine grape growing 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 wep – wine economics and policy just accepted manuscript 3 1. introduction 71 one of the main components of competitiveness in wine grape production lies in the capacity to 72 innovate [1] and to improve performance using available resources [2, 3]. the process of innovation 73 at the vineyard level has played a prominent role in emerging countries from south america, south 74 africa, asia and oceania [4, 5, 6]. these countries have expanded their vineyard production, albeit 75 not neglecting wine quality, to the extent that they are not only challenging the old world’s leaders 76 but also are increasing their domestic market share [7, 8, 9, 10]. hence, there is evidence of 77 improvements in competitiveness because of technological modernization processes, which has been 78 especially relevant in developing countries. 79 an interesting example of this is chile, a south american country that has experienced rapid 80 development of its export-oriented wine industry in recent decades [11]. indeed, wine grapes are one 81 of the most important crops in the country [12]. between 1990 and 2015, vineyard plantations 82 doubled, wine production increased fivefold, and wine export volume grew from 22 to 1,445 million 83 liters [13]. as a result, chile has become an important player in international markets, being an 84 example of how a traditional industry can become highly competitive in a short period of time by 85 implementing important changes in technologies and production systems. 86 despite the overall progress of the chilean wine grape industry, there are some concerns in the 87 domestic market from producers’ associations regarding an oligopsony market structure (i.e., few 88 grape buyers) that would generate competitiveness problems for wine grape growers [14]. for that 89 reason, on-farm competitiveness has turned to be an extremely relevant issue for the viticultural sector 90 and a better understanding is required of the factors affecting vineyards’ economic performance, such 91 as the impact of innovations and management strategies. in this regard, management strategies are 92 considered among the most important determinants of vineyard profitability [3, 15, 16, 17]. within 93 this category we distinguish between production technologies, such as pressurized irrigation or 94 mechanization in harvesting, that are generally more affordable for larger producers because of 95 economies of scale and financial access [3], and cultivation techniques, such as training systems and 96 reserve quality growing, that are generally less demanding in financial capital. 97 this study seeks to understand the role of vineyards management strategies on the economic outcome 98 exhibited by wine grape growers, controlling for other production factors (e.g., land, labor, and 99 inputs) and climate-related conditions (i.e., potential evapotranspiration, precipitation, and chilling 100 hours). using chile as a case study, the aim of this paper is to provide insights about vineyard-level 101 drivers of competitive performance in emerging countries. prior research analysing vineyards 102 outcomes related to economic performance, efficiency, or productivity, have focused mainly on the 103 effect of economies of scale [5, 10, 18]; to the best of our knowledge, there are no studies analyzing 104 wep – wine economics and policy just accepted manuscript 4 management strategies implemented by wine grape growers in explaining economic performance. 105 the study of urso et al. [19] is one of the few that evaluates several production unit and contextual 106 factors of vineyards; however, it is focused on production efficiency rather than analyzing the 107 contribution of growers’ production decisions on performance. instead, our paper examines to what 108 extent management strategies implemented by wine grape growers affect the tvp at the vineyard 109 level, considering the heterogeneity of production units’ attributes and climate-related conditions 110 under which they operate. 111 the vineyards management strategies analyzed in this study were: a) training system (tendone vs. 112 vertical structures), b) wine grape destination (reserve vs. varietal wines), c) irrigation method 113 (pressurized vs. gravity irrigation), and d) mechanization in harvesting (mechanized vs. hand-picked). 114 these vineyards’ strategies are of different scope and nature, some of them represent structural (fixed) 115 decisions while others are more related to flexible (alternative) decisions. for instance, wine grape 116 destination is a flexible decision that might be defined each season, though it involves an array of 117 practices aiming to regulate vine yield and grape quality, such as canopy management (e.g., 118 pruning/mooring, de-sprouting, canopy defoliation, tipping of shoots) [20, 21], agrochemical use and 119 irrigation regimes, among others. in contrast, the training system is a structural decision that must be 120 made when wine grape growers establish the vineyard and is not (easily) modifiable. 121 the paper is structured as follows. the next section details the data used to perform the analysis and 122 finishes with the empirical model. the third section presents and discusses results, and the last section 123 summarizes the most relevant conclusions of the study. 124 125 2. materials and methods 126 127 2.1. sampling procedure and data collection 128 the study area covers the o’higgins and maule regions in central-south chile (33° 50’ and 36° 33’ 129 s, wgs84 datum), located in central chile in the heart of the fruit and vineyard production (figure 130 1). combined, both regions comprise 73% of the national planted area of vineyards, distributed 131 among three important valleys, from north to south: rapel, curicó, and maule (a brief description of 132 the weather conditions prevailing in these valleys is presented in appendix 1). the area under study 133 has a temperate mediterranean climate, characterized by a six month dry season (septmar) and a 134 rainy winter, with precipitation between 600 and 700 mm annually. the primary data used in this 135 study was generated at the vineyard level, administering a georeferenced survey on-site to 436 wine 136 grape growers between october 2014 and march 2015. this survey was restricted to vineyards from 137 irrigated lands, growing at least one hectare. the sampling procedure consisted of a stratified random 138 wep – wine economics and policy just accepted manuscript 5 sample across 16 municipalities, where the number of surveys administered was determined 139 depending on the relative number of vineyards in each municipality. the municipalities were, in order 140 of number of surveyed producers: san javier, sagrada familia, curicó, nancagua, villa alegre, santa 141 cruz, talca, palmilla, san clemente, peralillo, río claro, requínoa, chimbarongo, maule, san 142 vicente, and peumo. after the field data collection process, in september 2020, using the 143 georeferenced point of each survey, the dataset was supplemented with spatialized data of climate-144 related conditions 2015/2016 from the chilean natural resources information center (ciren) [22]. 145 ciren is a public institution that provides information on the natural and productive resources of the 146 country through the use of geospatial data and applications. in this paper, the data from ciren 147 referred uniquely to environmental information for the years 2015-2016. as result of merging the 148 primary and secondary data, the final sample with complete information was reduced to 336 149 observations because the geographic information system (gis) used in this study did not cover the 150 total distribution of surveyed vineyards. 151 152 153 figure 1. map of the study area and locations of the vineyards included in the sample (black dots). 154 155 2.2. survey data 156 the questionnaire administered to wine grape growers collected detailed economic and agronomic 157 information for the main variety grown in the vineyard, such as planted area, yield, grape price, and 158 wep – wine economics and policy just accepted manuscript 6 (per hectare) intensity of use of inputs and labor. growers were asked about the number of 159 applications, doses, and unitary prices in the case of agrochemicals (i.e., fertilizers, herbicides, 160 insecticides, fungicides, and acaricides) and number of working-days or agricultural 161 machines/equipment in the case of labor (i.e., harvest, pruning/mooring, tipping of shoots, de-162 sprouting, canopy defoliation, physical weed control, and other labor), which were valued at fixed 163 market prices. 164 regarding growers’ performance, the yield obtained by each grower (kg ha-1) was multiplied by the 165 average grape price of the variety in the sample ($ kg-1). as in our sample growers identified 19 166 different varieties, we used the average price for each variety to estimate their incomes. the reason 167 for using fixed grape prices and fixed market prices for inputs and labor was to avoid differences in 168 bargaining power or personal skills among wine grape growers, which are beyond the scope of our 169 analysis as the objective of our paper is to estimate the impact of technical decisions on technical 170 outcomes using an economic model. 171 subsequently, to convert the monetary measures per hectare for inputs, labors, and output to the plot 172 level, they were scaled-up (values were multiplied by the planted area of the main variety grown in 173 the vineyard). hence, the economic output variable analyzed in this paper is the total value product 174 (tvp) generated by the main variety of the vineyard, considering that there are important differences 175 in prices between grape varieties within the sample. for the purposes of this study, expenditures and 176 total value products were converted to us dollars using the average exchange rate of 2015 (654 177 chilean pesos per us dollar), the year in which the field survey process finished. 178 179 2.3. gis spatial data 180 an important feature of this study is the inclusion of climate-related variables as controls in the 181 econometric model. in particular, we included three variables: potential evapotranspiration, 182 precipitation, and chilling hours; a description is presented in table 1. the selection of these 183 variables, representing referential production conditions for vineyards, is expected to exert an 184 influence on vineyard yields. the climate-related variables were retrieved from high spatial resolution 185 data of the o’higgins and maule regions of chile, using layers and isolines of agroclimatic districts 186 (1:250,000 scale) gathered from the chilean natural resources information center (ciren) [22]. 187 an intersection algorithm able to cross climatic layers and the georeferenced sampling site of each 188 vineyard allowed us to add secondary information to our dataset of surveyed wine grape growers. 189 this procedure was performed using the qgis software (open-source geospatial foundation 190 project: http://qgis.osgeo.org). 191 192 http://qgis.osgeo.org/ wep – wine economics and policy just accepted manuscript 7 3. calculation 193 according to chinnici et al. [23], evaluating the operational choices of a vineyard involves knowledge 194 of the potentials and restrictions of both a technical and economic-managerial nature. indeed, growers 195 face different alternatives in which to invest but they have certain restrictions imposed by their own 196 attributes and other territorial characteristics, ranging from natural resources to the availability of 197 production factors and techniques [1]. therefore, this paper considers that growers’ tvp is a function 198 of production factors (i.e., land, input, labor) attributes of the productive unit, climate-related 199 variables, and management strategies. 200 to model the tvp generated by wine grape growers, we adopted a cobb-douglas functional form 201 estimated using a multiple linear regression, in logarithms for all continuous variables. the empirical 202 model in natural logarithms for the i-th wine grape grower can be expressed as follows: 203 𝑙𝑛 𝑌𝑖 = 𝛼 + ∑ 𝛽𝑗𝑖 𝑙𝑛 𝑋𝑗𝑖 5 𝑗=1 + ∑ 𝛾𝑘𝑖 𝐴𝑘𝑖 3 𝑘=1 + ∑ 𝜑𝑚𝑖 𝑀𝑚𝑖 4 𝑚=1 + ∑ 𝜋𝑙𝑖 𝐸𝑙𝑖 3 𝑙=1 + 𝑣𝑖 (eq. 1) 204 the dependent variable in our study is the total value product of wine grape growers (y), which 205 comes from the multiplication of yields (kg ha-1) per planted area (ha) and grape price ($ kg-1). the 206 model is expressed as a function of five inputs: land (x1), fertilizers (x2), fungicides (x3), other 207 agrochemicals (x4), and labor expenditures (x5). in the case of other agrochemicals, this category 208 represents the sum of expenditures in insecticides, acaricides, and herbicides; fertilizers and 209 fungicides were incorporated in isolation into the model because of their agronomic importance in 210 vineyard production. in the empirical model, there are also three sets of control variables for: a) 211 attributes of the productive unit, b) climate-related variables, and c) management strategies. first, a 212 set of three variables representing productive unit attributes was considered: grape color (a1), age of 213 the vines (a2), and valley where the vineyard is located (a3). following, a set of four dummy 214 variables for management strategies: pressurized irrigation (m1) and mechanized harvest (m2), 215 training system (m3), and type of wine for which the grapes are intended (m4). and finally, a set of 216 three climate-related variables, namely: potential evapotranspiration (e1), precipitation (e2), and 217 chilling hours (e3). the last term of equation 1, v_i, is the normally distributed error that accounts 218 for statistical noise in the model. 219 to test the robustness of our empirical model and observe the contribution of the different sets of 220 variables included in the model, several progressive specifications for the above explained sets of 221 explanatory variables were estimated and compared through maximum likelihood ratio tests. a 222 complete explanation of the covariates included in the equations is shown in table 1. the described 223 model was estimated in stata 15.1 [24]. 224 wep – wine economics and policy just accepted manuscript 8 225 4. results and discussion 226 227 4.1. vineyards’ total value product and explanatory variables 228 table 1 presents a description and summary statistics of the variables included in the models. it is 229 worth noting that values are reported for the main grape variety at the plot level. 230 231 table 1. variable description and summary statistics of variables used in models of vineyard 232 production for three wine grape growing areas of chile (data at the plot level for the main grape 233 variety of the vineyard; n= 336). 234 variable description mea n s.d. media n mi n max d v tvp total value product (1,000 usd) 65.6 0 104.4 7 29.36 0.6 0 1213.7 6 p ro d u c ti o n f a c to rs land planted area (hectares) 16.7 4 20.28 9.90 1.0 0 140.00 fertilizers fertilizer expenditure (1,000 usd) 4.34 7.36 1.70 0.0 0 52.95 fungicides fungicide expenditure (1,000 usd) 2.89 5.63 0.99 0.0 0 51.38 agrochem . expenditure in agrochemicals to control insects, spiders and weeds (1,000 usd) 5.99 17.29 1.52 0.0 0 201.38 labor labor expenditure (1,000 usd) 16.4 9 21.05 8.13 0.2 8 137.61 v in e y a rd s’ a tt ri b u te s grape color grape color (red=1; white=0) 0.82 0.38 1 0 1 vineyard age age of planting (years) 29.8 4 26.28 19 4 116 rapel valley rapel valley (yes=1; no= 0). 0.35 0.48 0 0 1 wep – wine economics and policy just accepted manuscript 9 curicó valley curicó valley (yes=1; no= 0, excluded category in models) 0.20 0.40 0 0 1 maule valley maule valley (yes=1; no= 0). 0.45 0.50 0 0 1 m a n a g e m e n t st ra te g ie s irrig. method irrigation method (pressurized= 1; gravity= 0) 0.39 0.49 0 0 1 mech. harv. machinery use for harvest (yes= 1; no= 0) 0.17 0.38 0 0 1 training syst. training system (tendone=1; vertical=0) 0.18 0.39 0 0 1 grape dest grape destination (reserve=1; varietal=0) 0.11 0.32 0 0 1 c li m a ti c c o n d it io n s evapotran sp. cumulative evapotranspiration from dec-15 to feb-16 (mm) 456 21 461 40 8 512 precipitati on cumulative precipitation from dec-15 to feb-16 (mm) 22.8 1 7.23 24 8 45 chilling hours cumulative chilling hours in 2016 (hours) 1,28 7 303 1,380 75 0 1,830 235 as shown in table 1, growers’ tvp and input and labor expenditures exhibit considerable differences 236 between the mean and median, which reveals the skewed distribution to the left of these variables. 237 planted area is also a skewed variable, where the mean surface is 16.7 ha, and the median is 9.9 ha. 238 the use of logarithms, besides its convenience in estimating partial elasticities of productive factors, 239 helps to avoid the skewed distribution of the data. 240 turning to descriptive statistics, at median values at the plot level wine grape growers spent about 241 us$ 1,700, us$ 990 and us$ 1,520 on fertilizers, fungicides, and other agrochemicals, respectively. 242 the expenditure in labors – including harvest, pruning/mooring, tipping of shoots, de-sprouting, 243 canopy defoliation, physical weed control, and rest of labors – reached a median of us$ 8,130 in the 244 sample. the sum of expenditures on fertilizers, fungicides, other agrochemicals (to control insects, 245 spiders, and weeds), and labor represents an approximation of the operational costs incurred by grape 246 growers in a year, which reach a median value of us$15.005. on the other hand, the median tvp 247 was us$ 29,360. note that the median planted area was 9.9 ha, which informs about an approximate 248 wep – wine economics and policy just accepted manuscript 10 per hectare outcome of us$ 2,965 (this calculation is close to the actual median of the sample used 249 to estimate the model, which corresponds to usd$ 3,058 per hectare). 250 regarding vineyards’ attributes, most wine grape growers cultivate red grapes (82%) rather than 251 white grapes (the remaining 18%). the median age of the vineyards was 19 years, within a range of 252 4 and 116 years old. regarding wine valleys, the distribution of the vineyards among rapel, curicó, 253 and maule was 35%, 20%, and 45%, respectively. 254 in terms of management strategies, 39% of the sample had pressurized systems to irrigate the vineyard 255 and 17% used machinery to perform the harvest. the tendone training system was a minority 256 compared to the vertical system (18% vs 82%, respectively), and only 11% of the growers produced 257 reserve quality grapes while the remaining 89% produced varietal quality. 258 as for climate-related conditions, the average potential evapotranspiration and precipitation of the 259 three warmest months in chile, during the stage of veraison in grapes (period of accumulation of 260 sugars), were 456 mm and 23 mm, respectively. concerning annual cumulative chilling hours, the 261 sample mean was 1,287 hours with a wide range (750 to 1,830 hours). 262 263 4.2. contribution of production factors, vineyards’ attributes, management strategies and 264 climate-related conditions 265 as mentioned in section 3, three sets of explanatory variables were progressively added to the basic 266 production function (model a) to select the most appropriate specification to explain wine grape 267 growers’ tvp. four specifications, one for each set of regressors, were estimated and compared 268 through maximum likelihood ratio tests. table 2 reports the tvp model for the main variety of the 269 vineyard under the four alternative models. 270 271 table 2. cobb-douglas estimates for total value product of chilean wine grape growers under four 272 alternative models (n=336). 273 model a: model b: model c: model d: production factors a + vineyards’ attributes b + management strategies c + climatic conditions variable coeff. a coeff.a coeff.a coeff.a ln land 0.603 *** 0.806 ** * 0.913 *** 0.917 *** ln fertilizers 0.033 0.018 0.018 0.020 wep – wine economics and policy just accepted manuscript 11 ln fungicides 0.049 *** 0.028 ** 0.025 ** 0.022 ** ln agrochem 0.110 *** 0.066 ** 0.060 ** 0.054 ** ln labor 0.274 *** 0.156 ** * 0.056 0.050 grape color -0.381 ** * -0.384 *** -0.371 *** vineyard age -0.163 ** * -0.112 *** -0.109 *** rapel valley 0.262 ** * 0.246 *** 0.137 maule valley -0.189 ** -0.168 ** -0.161 ** irrig method 0.088 0.117 * mech harvest -0.018 -0.019 training system 0.492 *** 0.513 *** grape dest 0.227 ** 0.222 ** ln evapotransp 0.066 ln precipitation -0.275 ** ln chilling hours 0.123 constant 1.394 *** 2.011 ** * 1.674 *** 1.246 obs (n) 336 336 336 336 adjusted r2 0.831 0.864 0.880 0.876 bic 635.68 7 587.49 9 567.751 580.63 7 a significance: ***=1%; **=5%; *=10%. first, model a – the basic production function including land, inputs, and labor – presents significant 274 parameters for all the covariates except for fertilizers. the base model was complemented with 275 covariates representing vineyards’ attributes (i.e., grape color, vine age, and wine valleys) resulting 276 in model b. to compare models a and b, a likelihood ratio test was performed to verify the 277 hypothesis that the former nested in the latter (i.e., additional covariates do not add to the explanation 278 of growers’ tvp). the test rejected the null hypothesis (p-value of 0.000 with 4 degrees of freedom), 279 giving support to the inclusion of vineyards’ attributes. subsequently, we included the set of 280 management strategies (i.e., irrigation method, training system, mechanized harvest, and grape 281 destination) into model b to produce model c. the null hypothesis that model b is nested in model 282 wep – wine economics and policy just accepted manuscript 12 c is rejected (p-value of 0.000 with 4 degrees of freedom), supporting the consideration of 283 management strategies in modelling growers’ tvp. finally, climate-related variables (i.e., 284 evapotranspiration, precipitation, and chilling hours) were included in model c to produce model d. 285 the likelihood ratio test in this case did not favor model d (p-value of 0.207 with 3 degrees of 286 freedom), which explains that adding climate-related variables did not contribute to explaining 287 growers’ tvp. 288 in addition, we tested the inclusion of climate-related conditions in models a and b to corroborate 289 whether these variables have an effect in alternative models (results not shown but available upon 290 request). only in model a was the inclusion of climate-related conditions supported by the likelihood 291 ratio test (p-value of 0.000 with 3 degrees of freedom), while in model b it was not (p-value of 0.704 292 with 3 degrees of freedom). thus, the inclusion of climate-related variables into the tvp models was 293 not supported by statistical tests, except for the base model. although somewhat unexpected, we 294 believe that there is a competing effect between climate-related conditions and the variables 295 controlling for vineyard location (i.e., the categorical variables for wine valleys). indeed, analyses of 296 variance demonstrate statistically significant differences for the climate-related variables across 297 valleys (see appendix 3). each valley has distinct characteristics that are captured by the climate-298 related variables (for a further description of valley characteristics see appendix 1). an additional 299 possible explanation for the non-significant effect of climate-related variables in model d is the date 300 of the primary and gis data, which differed in one productive season. specifically, the survey was 301 administered to grape growers in 2014-2015, and the environmental information from gis referred 302 to 2015-2016. although the timing of these two sources of information is not exact, due to gis data 303 availability, climate-related variables in this study contribute to characterizing the microclimate of 304 the wine valleys included in the sample. 305 from the above, we can conclude that model c is preferred over the four confronted specifications, 306 being selected as the most appropriate to explain growers’ tvp. it should also be noted that goodness 307 of fit statistics reported at the bottom of table 2 confirm that model c is the best alternative 308 (maximum adjusted r-squared and lower bayesian information criterion). hence, model c is further 309 discussed in the following section. 310 311 4.3. results and discussion of the selected model c 312 table 2 shows that nine out of 13 covariates were significant (p<0.05) and explained 88% of the 313 variance of growers’ tvp. the estimated parameters must be interpreted as partial elasticities of 314 production (or percentage impact after exponentiating coefficients in the case of dummy covariates) 315 because of the logarithmic metric used in the model. the parameters of conventional inputs, here 316 wep – wine economics and policy just accepted manuscript 13 referred to land, inputs, and labor, are all positive and less than one, and thus consistent with economic 317 theory [25]. the sum of these coefficients was 1.073, which was tested for constant return to scale. 318 the null hypothesis was rejected (p-value of 0.014 with 1 degree of freedom), hence we concluded 319 that the production function exhibits increasing returns-to-scale. this result is consistent with the 320 findings of galindro et al. [18], who analyzed vineyard size in the demarcated douro region of 321 portugal, and with the findings of sheng et al. [26] who found increasing returns to scale using a 322 sample of different agricultural establishments in australia. 323 the parameter of the variable land had a significant contribution in the explanation of growers’ tvp, 324 with an average elasticity of 0.91, meaning that a 10% increase in planted area translates into a 9.1% 325 higher tvp, when holding all other variables constant. concerning other inputs, pesticides (i.e., 326 fungicides and other agrochemicals) were all significant, while fertilizers were not. these results may 327 be explained by the inherent characteristics of the crop (i.e., the vitis genus), as wine grapes are highly 328 attractive to pests and diseases due to their elevated content of water and sugar, and vines have a 329 natural tendency to grow vigorously. fertilization management, as in the case of irrigation, must be 330 carefully administered to the vineyard in order to have a correct balance between vegetative growth 331 and fruit production [27]. the latter seems to be supported by the data used in our study since 332 fertilizers, compared to pesticides, represent a smaller fraction in the total expenditure (sample 333 average sum of fungicides, insecticides, acaricides, herbicides, and fertilizers; see table 1). the use 334 of fungicides increases the tvp with an average elasticity of 0.025 (i.e., a 10% increase in fungicide 335 expenditure translates into a 0.25% higher tvp). as for other agrochemicals – that includes 336 insecticides, acaricides, and herbicides – the growers’ tvp increases by 0.6% when the expenditure 337 in this item rises 10%. these results are expected since grapes are very sensitive to fungus, such as 338 powdery mildew, botrytis, and grapevine trunk diseases [28, 29, 30] and pests, such as lobesia 339 botrana, brevipalpus chilensis, pseudococcidae spp. [31, 32, 33]. 340 concerning labor expenditure, corresponding to the sum of expenses of performing the different 341 management activities evaluated in this study, the estimated parameter was not significant. this result 342 was unexpected since models a and b showed a significant contribution of labor expenditure in 343 explaining growers’ tvp. the only difference between these models and model c is that the latter 344 includes management strategy variables; therefore, it is likely that its inclusion has diluted the effect 345 of labor. indeed, alternative training systems and grape destinations have implications in terms of the 346 use of labor (i.e., harvest, pruning/mooring, tipping of shoots, de-sprouting, canopy defoliation, 347 physical weed control, and other labors). for instance, the tendone training system imposes several 348 limitations for mechanizability [34], which translates into a greater dependence on manual labor. 349 then, management strategies may act as confounding variables with labor expenditure. to illustrate 350 wep – wine economics and policy just accepted manuscript 14 the differences in labor expenditure by training system and grape destination, tables a.2 in appendix 351 2 present a complete characterization of the vineyards, respectively. 352 as mentioned above, the training system and grape destination played a relevant role in our tvp 353 model, while pressurized systems and mechanized harvesting were not statistically significant. 354 according to our results, the training system is a determinant variable in the explanation of growers’ 355 tvp, increasing it by 63% when vineyards are trained as tendone compared to vertical training 356 systems (the marginal effect of binary variables correspond to their exponentiated parameter estimate 357 in model c). grape destination was also significant in the model, showing that vineyards producing 358 reserve grapes (i.e., of superior quality) demonstrated a 25% increase in tvp compared to varietal 359 oriented vineyards. appendix 2 show that tendone training systems exhibit considerably higher yields 360 and harvest expenditure and lower prevalence of mechanized harvesting and agrochemical 361 expenditure. the reserve quality grape destination, for its part, presents lower yields that are 362 compensated by higher prices to demonstrate a higher tvp (compared to varietal). as expected, it 363 also presents a higher aggregate labor expenditure (see item other labors). 364 as for vineyards’ attributes, all the variables included within this category were significant in 365 explaining growers’ tvp. it was found that vineyards growing red grape varieties generate 32% less 366 tvp than vineyards growing white grapes, holding all other variables constant. this is because white 367 grape varieties receive higher prices and present higher yields than red grape varieties in our sample: 368 the average price per kilo is usd$ 0.292 vs usd$ 0.246, respectively, and the average yield per 369 hectare is 16.7 tons and 14.5 tons, respectively. the age of the vineyard also plays a relevant role in 370 the model, indicating that tvp is reduced by 1.1% when the age is increased by 10%. in the empirical 371 literature there is mixed evidence on this topic, particularly on yield effects rather than on grape 372 quality effects. some studies have found that vine age may reduce yields [35], while others have 373 found a positive [36] or no significant effect on yields [37]. 374 in terms of production valleys, using curicó as a reference, wine grape growers from rapel exhibit 375 28% higher tvp while those from maule are 16% lower. that is to say, the growers’ tvp increases 376 as moving north in the study area. this result corresponds with average data displayed in table a.3 377 (see appendix 3), showing that growers from the northernmost valley (i.e., rapel) present higher 378 average grape prices and yields. the same table shows that growers from rapel face a lower incidence 379 of precipitation and higher evapotranspiration between december and february, which may affect 380 positively quality and yields, respectively. 381 382 4.4. total value product functions derived from model c 383 wep – wine economics and policy just accepted manuscript 15 figure 2 displays several tvp functions for the production factors considered in this study (i.e., land, 384 fertilizers, fungicides, other agrochemicals, and labor) and the age of the vines. they represent the 385 relationship between each of these variables and vineyards’ outcomes, by showing the average 386 prediction of tvp in the sample (fitted value) at increasing values of the variable, holding all other 387 covariates in the model constant at observed values. in each tvp function, the pair of coordinates 388 that correspond with the median value of the variable (x-axis) and their expected tvp (y-axis) is 389 presented. for example, in the case of land, the median value is 10 hectares, which is associated with 390 an expected tvp of us$ 29.854, holding all other covariates in the model constant at observed values 391 (see figure 2.a). it can also be seen that there is a positive and almost linear (barely concave) response 392 of tvp as the quantity of hectares of vineyard increase. notwithstanding, in the case of fertilizers, 393 fungicides, other agrochemicals, and labor, the concavity of the tvp function is very clear, which 394 indicates that the marginal effect of these variables is positive but decreasing. as for the age of vines, 395 the relationship is negative and convex, showing a decreasing marginal effect on tvp as the number 396 of years increase (see figure 2.f). 397 a) b) c) d) wep – wine economics and policy just accepted manuscript 16 e) f) figure 2. total value product functions from a sample of 336 chilean wine grape growers for: a) 398 land, b) expenditure in fertilizers, c) expenditure in fungicides, d) expenditure in other agrochemicals, 399 e) expenditure in labor, and f) age of vines. in each graph there are plotted five data points that, from 400 left to right, correspond to the 10th, 25th, 50th, 75th and 90th percentiles. therefore, coordinates (x, 401 y) represent median values in x and the associated values in y. 402 403 5. conclusions and production implications 404 the economic analysis carried out in this study showed the impact of alternative management 405 strategies and cultural practices, controlling for vineyards’ structural variables and production 406 conditions, using a sample of 336 vineyards. among significant variables, the results reveal that the 407 vineyard training system, grape color, grape destination, and vineyard age play an important role in 408 explaining growers’ total value product (tvp). in particular, a better economic performance is 409 expressed by vineyards using tendone training systems, growing white varieties, producing reserve 410 quality grapes, and having younger aged vines. these results have direct implications for both wine 411 grape growers and sectorial policy makers aiming to improve the competitiveness of viticultural 412 production by providing management strategies that result in better outcomes. in addition, we 413 improve on the existing literature as our results are based on a diverse, comprehensive, and relatively 414 large dataset, while previous studies tend to focus on specific or narrow factors of economic 415 performance (e.g., testing the effect of a particular management practice) and generally use purposive 416 samples that do not guarantee diversity or representativeness. in this regard, we disentangle the role 417 of a diversity of factors affecting viticultural production and estimate their impact on growers’ tvp, 418 which at the end is the ultimate goal of a vineyard. 419 we also included in the econometric model a set of climate-related variables from a gis, which do 420 not appear to be significant in explaining growers’ tvp. this result was unexpected since agricultural 421 systems are naturally determined by climatic conditions, especially in recent years as they are 422 wep – wine economics and policy just accepted manuscript 17 increasingly challenged by climate change. we believe that the joint inclusion of climate-related 423 variables in the econometric models with other crucial variables for wine grape growing (particularly, 424 the valley of production) competed in explaining the variance. in this regard, the study area of this 425 paper is centered in three important and traditional wine valleys of central chile, the core of the 426 country’s vineyard production, which at some point capture climate-related conditions. the results 427 indicate that vineyards located in northern wine valleys – characterized by a lower on-season 428 precipitation, lower annual chilling hours, and higher evapotranspiration – demonstrate a higher 429 growers’ tvp. another potential reason for the non-significant effect of climate-related variables, 430 apart from the competing effect by the variance with the valley of location in the statistical models, 431 is that vineyards are not as sensitive as other crops to the climate-related variables analyzed in this 432 paper. we suggest more research on this topic; deeper analyses are needed to explore this eventual 433 trait of vines as our data and analyses are limited in this regard. future research might explore the 434 adaptive capacity of vines compared to other crops in light of the climate change phenomena affecting 435 our planet. 436 437 despite the contributions of this paper, there were some inherent limitations that can be considered 438 by future investigations. first, in this study we use the main grape variety plot of the vineyard as the 439 unit of analysis, but it is likely that growers produce several grape varieties within a vineyard. future 440 studies might consider this complexity when analysing economic performance by modelling 441 simultaneously the different outcomes of vineyards. second, we believe that subsequent studies may 442 improve the findings presented here by including soil heterogeneity variables that may have an 443 important effect on vineyards’ economic performance. although our model barely captured this effect 444 through the variable valley of location, we suggest the consideration of specific measures of the terroir 445 aiming to isolate this source of variability. third, today’s digital technologies, such as gps, pda, 446 remote sensing or gis, are becoming relevant in agricultural systems as they generate valuable 447 information to make better decisions and thus turn production processes more efficient. in our study, 448 we did not consider the adoption of these technologies as a management strategy that allows for 449 making precision agriculture at the sub-plot level. we acknowledge it as a shortcoming that could be 450 addressed in future research on this topic. 451 the main contribution of this paper is to advance in the understanding of economic performance 452 factors in wine grape growing, by simultaneously considering management strategies, production 453 conditions, and vineyards’ attributes. capturing the effects of on-farm decisions made by the 454 vineyards, using a relatively large sample distributed in three different wine valleys, represents 455 valuable information to develop a strategy for the primary sector in chile, which faces significant 456 wep – wine economics and policy just accepted manuscript 18 competitiveness challenges compared to other agents of the marketing chain. hence, our findings are 457 hopefully valid for other emergent countries in the global wine industry, and especially for those that 458 enjoy a mediterranean climate. the practical implication of identifying what factors allow vineyards 459 to be more profitable serves to guide on-farm decisions of the private sector, both growers and 460 investors. notwithstanding, the above is especially relevant for policy makers, to the extent that 461 improved economic performance at the vineyard level can have an aggregate impact on the 462 commercial success of the whole industry. 463 464 acknowledgments 465 this study was financed by the national fund for scientific and technological development, 466 fondecyt, project n° 1140615, from the national commission for scientific and technological 467 research, conicyt, chile. 468 469 conflict of interest 470 the authors declare no conflict of interest. 471 472 wep – wine economics and policy just accepted manuscript 19 appendices 473 474 appendix 1 475 valley surveyed producers characteristics rapel 164 composed by the sub-valleys cachapoal and colchagua, both are located in the o’higgins region of chile and are characterized by their sub-humid, mediterranean temperate climate, ideal for the production of red varieties. the hours of light, high thermal oscillation, and the existence of various microclimates allow for growing different wine varieties. this region has a pronounced seasonality, where winter concentrates the most of annual rainfall. it has an average temperature of 22 °c and precipitation around 600 mm. the soils are alluvial in origin. these valleys are located north of the curicó and maule valleys. curicó 91 located in the maule region of chile, curicó valley is considered the center of the chilean wine growing because of its high concentration of vineyards. it has a temperate mediterranean climate with a dry period five months a year, precipitation around 700 mm, and an average temperature of 20 °c. white varieties are best grown in the coolest areas of the valley. it has numerous water sources and the soil is alluvial and volcanic in origin. maule 181 located in the maule region of chile south of curicó valley and considered the "cradle of chilean wine" because of its origin during the time of spanish colonization. it has a temperate mediterranean climate with rainy winters. the soils are acidic and clayed, which partially reduces productivity to benefit the quality of the grapes. it has many rivers that also exert influence on the quality of their wines. total 436 476 477 478 479 480 481 wep – wine economics and policy just accepted manuscript 20 appendix 2 482 483 table a.2. vineyards’ characterization by training system and grape destination. 484 485 training system grape destination vertical tendone varietal reserve variable n mean n mean n mean n mean grape price (usd kg-1) 275 0.260 61 0.229 298 0.235 38 0.409 yield (ton ha-1) 275 12.609 61 26.000 298 15.554 38 11.011 planted area (ha) 275 17.297 61 14.249 298 16.644 38 17.527 fertilizer expenditure (1,000 usd) 275 4.228 61 4.818 298 4.468 38 3.291 fungicide expenditure (1,000 usd) 275 3.111 61 1.904 298 2.807 38 3.560 expenditure in agrochemicals to control insects, spiders and weeds (1,000 usd) 275 6.453 61 3.883 298 5.674 38 8.435 labor expenditure (1,000 usd) 275 15.680 61 20.116 298 16.226 38 18.521 expenditure in pruning/mooring (1,000 usd) 270 4.616 61 7.181 295 5.174 36 4.392 wep – wine economics and policy just accepted manuscript 21 expenditure in harvesting (1,000 usd) 265 5.789 60 10.373 287 6.567 38 7.154 expenditure in desprouting (1,000 usd) 232 1.722 47 1.355 247 1.645 32 1.777 expenditure in thinning of shoots (1,000 usd) 217 0.895 26 0.489 214 0.858 29 0.808 expenditure in physical weed control (1,000 usd) 200 0.985 52 0.953 229 0.971 23 1.048 expenditure in other labors (1,000 usd) 167 4.436 27 1.508 167 3.665 27 6.276 grape color (red=1; white=0) 275 0.829 61 0.803 298 0.829 38 0.789 age of planting (years) 275 32.335 61 18.574 298 29.658 38 31.237 irrigation method (pressurized= 1; gravity= 0) 275 0.378 61 0.459 298 0.396 38 0.368 machinery use for harvest (yes= 1; no= 0) 275 0.200 61 0.033 298 0.178 38 0.105 training system (tendone=1; vertical=0) 275 61 298 0.201 38 0.026 grape destination (reserve=1; varietal=0) 275 0.135 61 0.016 298 38 486 487 488 wep – wine economics and policy just accepted manuscript 22 appendix 3 489 490 table a.3. mean comparison of grape price, yield and climate-related variables across valleys. 491 492 variable rapel curicó maule grape price (usd kg-1) 0.30 a 0.25 b 0.22 b vineyard yield (ton ha-1) 17.42 a 15.22 a 12.63 b precipitation (mm) 15.24 a 27.16 b 26.65 b evapotranspiration (mm) 464.28 a 453.27 b 450.06 b chilling hours (hours) 1009.13 a 1542.43 b 1395.87 c * different letters within the same row means statistically significant differences (p< 0.05) 493 494 495 496 497 498 499 500 501 502 503 504 505 506 507 508 509 510 511 512 wep – wine economics and policy just accepted manuscript 23 references 513 514 515 [1] pappalardo, g., scienza, a., vindigni, g., d’amico, m. 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(2020). a gis-605 based multicriteria index to evaluate the mechanisability potential of italian vineyard area. land, 606 9(11), 469. 607 [35] white, r. (2003). soils for fine wines. oxford university press. 608 [36] grigg, d., methven, d., de bei, r., rodríguez, c., dry, p., collins, c. (2018). effect of vine 609 age on vine performance of shiraz in the barossa valley, australia. australian journal of grape and 610 wine research, 24(1), 75-87. 611 [37] considine, j. (2004). grapevine productivity and yield components: a case study using field 612 vines of zante currant. australian journal of grape and wine research, 10(2), 108-115. 613 wep – wine economics and policy just accepted manuscript 1 just accepted 1 2 3 4 u.s. wine consumer interest in wine ingredient and nutritional information 5 terry m. lease1 (corresponding author), deirdre sommerlad-rogers2 6 7 8 9 1 college of agriculture, food and environmental science, california polytechnic state university 10 1 grand avenue, san luis obispo, ca 93407 usa, e-mail: lease@calpoly.edu 11 2 college of agriculture, food and environmental science, california polytechnic state university 12 1 grand avenue, san luis obispo, ca 93407 usa, e-mail: dsommerl@calpoly.edu 13 14 15 16 correspondence concerning this article should be addressed to terry m. lease, college of 17 agriculture, food and environmental science, california polytechnic state university 1 grand 18 avenue, san luis obispo, ca 93407 usa, e-mail: lease@calpoly.edu 19 20 21 22 this article has been accepted for publication and undergone full peer review but has not been through 23 the copyediting, typesetting, pagination and proofreading process, which may lead to differences 24 between this version and the version of record. 25 26 please cite this article as: 27 28 lease t.m., sommerlad-rogers d. (2022), u.s. wine consumer interest in wine ingredient and 29 nutritional information, wine economics and policy, just accepted. 30 doi: 10.36253/wep-12577 31 32 33 34 35 mailto:lease@calpoly.edu mailto:dsommerl@calpoly.edu mailto:lease@calpoly.edu wep – wine economics and policy just accepted manuscript 2 abstract 36 37 in the united states, labelling for wine containing at least 7% alcohol by volume is regulated by the 38 tax and trade bureau, which does not require wine labels to include ingredient or nutrition labelling, 39 except for added sulfites. with the european union moving toward mandatory disclosure of nutrition 40 and ingredient information for wine, one may expect the level of debate in the u.s. to increase. we 41 conducted an online survey of consumers in the u.s. who are at least 21 years old (legal drinking age 42 in the u.s.) and consume wine at least once every two or three months to determine their interest in 43 wineries disclosing ingredient and nutrition information for wine. we asked about the importance of 44 ingredient information when deciding which wine to purchase and when determining willingness to 45 pay, and we asked about the importance of nutrition information when deciding which wine to 46 purchase. we separately regressed three dependent variables against wine consumption (frequency), 47 price, physical activity, diet, wine knowledge, age, income, and education. overall, respondents 48 indicated that having ingredient and nutrition information was only somewhat important, with mean 49 responses 3.04 on a 5-point scale (1 = not important, 5 = very important) for ingredient information 50 when choosing a wine, 3.01 for ingredient information when determining willingness to pay, and 2.48 51 for nutrition information when choosing a wine. the factor with the greatest impact on interest in 52 ingredient information was price, with consumers who buy a higher-end wine at least monthly having 53 a higher level of interest, followed by diet, with consumers with a healthy diet having a higher interest 54 in ingredient information, and age, with older consumers having less interest in ingredient 55 information. price, diet, and age also had the greatest impact regarding interest in nutrition 56 information, following the same direction but with age being the most significant. 57 58 keywords: ingredient and nutrition information, u.s. wine consumers 59 60 61 1. introduction 62 63 in the united states (u.s.), the labelling requirements for prepared or processed food products are 64 regulated by the food and drug administration (fda). the fda generally requires food 65 manufacturers to list all ingredients of a food product on the label and requires most foods to bear 66 nutrition labelling. however, labelling for wine containing at least 7% alcohol by volume is not 67 covered by fda regulations and is instead regulated by the tax and trade bureau (ttb). the ttb 68 does not require wine to bear nutrition labelling, and the only ingredient requiring listing is added 69 wep – wine economics and policy just accepted manuscript 3 sulfites. alcohol by volume must be listed, but alcohol is neither an added ingredient nor a nutrition 70 category. 71 in europe, the european commission has rejected self-regulation proposals from the beverage 72 alcohol industry, and the european union (eu) is moving forward with a proposal for mandatory 73 ingredients and nutrition labelling on alcoholic beverages. the european commission’s proposal is 74 part of the “europe’s beating cancer plan” adopted on february 3, 2021, with a 2021 – 2025 75 timeframe for the alcohol-related initiative. the debate on the issue in the u.s. has been building over 76 the past few years, but as of now the ttb has not indicated interest in expanding wine labelling 77 requirements for ingredients or nutrition information. 78 public opinion on the topic in the u.s. is unclear. forbes [1] quotes john gillespie of the market 79 research company wine opinions as saying, “i can say from a number of consumer research projects 80 in the past, ‘involved wine drinkers’—those who account for the greatest percentage of wine 81 purchases—are usually interested in having more information and detail, especially as concerns 82 health or wellbeing issues. i do think that would have an impact on how wineries respond to the 83 possibility of mandatory ingredient labeling.” 84 however, in a survey conducted by the wine market council (wmc) in may 2020 [2], 41% of 85 regular wine drinkers said they rarely want to know nutritional information or the ingredient list, and 86 only 21% said they always want to know. when asked to choose the top five categories of information 87 they wanted to see on a wine label, only 4% put nutritional information and ingredient list as most 88 important, and 81% did not include it in the top five. interest in ingredients and nutrition information 89 was positively correlated with level of education and negatively correlated with age. core wine 90 drinkers expressed more interest than marginal wine drinkers in this information, but they expressed 91 more interest in most forms of information, and nutrition information and ingredient list were not 92 highly ranked in the list of types of information they want. moreover, core wine drinkers valued 93 having additional information for the sake of knowing more about the wine and did not place much 94 value on having information as an aid in making wine purchasing decisions. 95 with the eu moving toward mandatory disclosure of nutrition and ingredient information for wine, 96 one may expect the level of debate in the u.s. to increase, as illustrated by a pair of posts on the wine-97 searcher.com website in which wine writer w. blake gray argued that the u.s. should follow the eu 98 on this issue [3] while wine maker adam lee responded with a list of challenges such regulation 99 would create and reasons why the labels could potentially cause consumer confusion [4]. this study 100 seeks to contribute additional information to the debate in the u.s. on adding the ingredient list and 101 nutrition information to required disclosure for wine and to add insight into the value of such 102 disclosure from a policy perspective. 103 wep – wine economics and policy just accepted manuscript 4 104 2. literature review 105 106 much of the academic literature related to nutrition information and ingredient list disclosure for wine 107 has centered on europe, which is not surprising since the eu is closest to making such disclosure 108 mandatory. bazzani, et al., [5] conducted an online survey of italian red wine drinkers that included 109 questions on consumer attitudes toward wine and health-related aspects and a choice experiment 110 using attributes that are often associated with more natural and healthier foods. they found that health 111 consciousness is an important driver in the use of wine labels, but they did not specifically include 112 nutrition information or an ingredient list on the label. 113 multiple studies show that the usefulness and value of nutrition and ingredient information vary 114 across countries. employing a discreet choice experiment with representative samples of wine 115 consumers from germany, italy, and australia, pabst, et al., [6] found that consumers across all three 116 countries had a significant positive utility for detailed nutrition information. ingredient information, 117 on the other hand, received a positive utility only in italy, and a short ingredient list was preferred to 118 a long ingredient list. grunert, et al., [7] utilized an online survey in denmark, germany, netherlands, 119 poland, spain, and uk to examine consumer wants and use of ingredient and nutrition information 120 from a range of non-label sources. information wants and use varied between the countries, was 121 highest in spain, and was lowest in denmark. product involvement was a stronger predictor of 122 information wants than health interest. the effect of product knowledge was lower still and decreased 123 with more product knowledge. previous ingredient knowledge led to lower ingredient information 124 wants, while previous nutrition information knowledge led to higher nutrition information wants. the 125 strongest predictor of information use was information wants. 126 annunziata, et al., [8] conducted a survey in france, spain, italy, and the u.s. and found that interest 127 in receiving additional information on wine labels (e.g., about ingredients or nutrition information) 128 differed significantly between consumer groups based on the consumer’s country. among 129 respondents in the u.s. panel, 40% said they seldom change a habit because of the nutritional label, 130 and the mean response for the question “i find it difficult to understand nutritional labels” was 3.1 on 131 a 5-point scale (5 = strongly agree). only 25% said they always read the front label on a bottle of 132 wine, and only 18% said they always read the back label. still, the mean interest in having nutritional 133 information was 3.6, and the part-wise utility value for nutritional information was higher than for 134 price, health warnings, or units in bottle and units not to exceed. 135 another consistent result in research studies is that the usefulness and value of nutrition and 136 ingredient information are not identical across consumer segments. escandon-barbosa and rialp-137 wep – wine economics and policy just accepted manuscript 5 criado [9] used eye tracking to study a sample of 114 individuals in a simulated supermarket with 138 more than 100 wines at a university in columbia, focusing on purchase intention, related to wine 139 label information on denomination of origin, nutritional information, and health warnings. expert 140 wine consumers used all three pieces of information to make a purchase decision. non-expert wine 141 consumers, by contrast, made much less use of this information to make a purchase decision and 142 tended to focus on the origin information and health warnings and not make use of nutritional 143 information. the intent to purchase wine increased with the use of all three pieces of information for 144 both men and women. however, the effect was stronger for men. women and men processed the 145 information differently, and the mean time to make a purchase decision was less than half as much 146 for men as it was for women. 147 annunziata, et al., [8] found that interest in receiving additional information on wine labels differed 148 significantly between consumer groups based on the consumer’s socio-demographic variables, wine 149 consumption habits, attitudes towards nutritional information in general, and the degree of 150 involvement with wine. in a survey of italian wine consumers, annunziata, et al., [10] found that 151 consumers who already have better knowledge of wine nutritional properties and a greater awareness 152 of the links between wine and health preferred a more detailed nutritional label than other consumers. 153 those who generally find it more difficult to understand nutritional labels either show higher interest 154 in health warnings or prefer the specification of the number of glasses not to exceed and did not value 155 more detailed information. pabst, et al., [11] assessed consumers’ reactions to new back-label 156 information on ingredient and nutrition labelling in three focus groups with a total of twenty-one 157 wine-involved participants in three different cities in germany. of those participants who looked at 158 the back label (81%), almost two-thirds said they did not detect the nutrition or ingredient listing. 159 pabst, et al., [12] conducted an online survey of german wine producers to examine producers’ 160 expectations about consumer reactions to new label information, the consequences of mandatory 161 labelling on production processes, and relative competitive advantages for different producer sizes. 162 they found that producers expect the labelling regulations to create consumer confusion and 163 uncertainty; weaken wine's image as a natural product; and increase costs due to changes in 164 oenological practices, the increased need for laboratory analyses, and more challenging labelling 165 processes. producers believe the regulations will create opportunities for wineries to focus on clean 166 labelling strategies by completely avoiding additives that require labelling and that large wineries 167 will be better able to react to the regulations. 168 producers’ concern for how consumers will react to the new labelling requirements is not unfounded. 169 pabst, et al., [9] found that focus group participants who recognized the nutrition labelling and 170 ingredient list initially reacted to this information with insecurity, confusion, and incomprehension. 171 wep – wine economics and policy just accepted manuscript 6 pabst, et al., [6] found that presenting negative media information resulted in subjects in all three 172 countries surveyed significantly increasing their rating of importance of ingredients while also 173 increasing their preference for clean labelled products without ingredients. further, a significantly 174 higher share of consumers in germany and italy prefer not to buy any wine. the effect of reading 175 positive media information on consumers’ wine choice is significantly lower than that of reading 176 negative information. 177 hayward, et al., [13] studied the influence an ingredient list had on the sensory perception of red 178 wines from nova scotia. in this study, participants used attributes associated with liking the wine 179 more often when the ingredient list was shorter and familiar. hayward and mcsweeney [14] studied 180 the influence calorie information had on the sensory perception of rosé wines from nova scotia and 181 found that the calorie information did not influence consumers’ sensory perception. 182 one factor that is still undecided in the e.u. is the format of the disclosure, with producers generally 183 hoping that technology-enabled disclosure will be allowed in lieu of labelling on the bottle. vecchio, 184 et al., [15] conducted an incentive compatible artefactual field experiment that indicated that italian 185 wine consumers most prefer to have nutritional information presented in a panel and least prefer 186 having only a link to a website that contains the information. grunert, et al., [7] found that the level 187 of both information wants (for ingredient and nutrition information) and information use was higher 188 for websites (product, public, and health) than for advertising, apps, or in-store sources. 189 robinson, et al., [16] conducted a rapid systematic review and meta-analysis of eighteen studies to 190 assess consumer knowledge of energy content (calories) of alcoholic drinks, public support for energy 191 labeling, and effect of such labeling on consumer behavior. they found consistent evidence that 192 consumers tend to overestimate the number of calories in an alcoholic drink and that people are more 193 likely to support than oppose energy labeling of alcoholic drinks, but there was a high degree of 194 heterogeneity. (two thirds of the studies used for this analysis examined nutrition information that 195 included calories, and one third looked specifically at calorie information disclosure.) the authors 196 concluded that the studies they included suggest that energy labeling did not affect consumer behavior 197 but that the overall quality of the evidence supporting that conclusion was very low. generally, the 198 authors found that the use of self-reported information and lack of real-world settings resulted in most 199 (72%) of the studies they reviewed provided low evidential value with high levels of uncertainty. 200 overall, the body of work shows there is inconsistency across consumers in the important of both 201 nutrition and ingredient labeling. this includes how they might use it and how much content on the 202 labels they would find important. additionally, much of the research had been conducted in europe. 203 the current project seeks to continue to fill the gap in how important information is to consumers, 204 targeting a u.s. sample. 205 wep – wine economics and policy just accepted manuscript 7 206 3. material and methods 207 208 we conducted an online survey of consumers in the u.s. who are at least 21 years old (legal drinking 209 age in the u.s.) and either consume or purchase wine at least once every two or three months. a 210 professional panel recruitment agency recruited respondents across the u.s. using its internal 211 recruiting platform. respondents who did not finish the questionnaire, including respondents who 212 failed a quality control check embedded in the survey, were eliminated. we received 331 completed 213 surveys. thirteen respondents were rejected based on a speed test (completing the survey in less than 214 half the median time in a soft launch of the survey), and we obtained 318 useable responses, with an 215 average completion time of 10 minutes, 38 seconds. see table 1 for demographic information on our 216 sample. 217 to verify that our respondent set is representative of regular wine drinkers in the u.s., we compared 218 it to the wine market council’s (wmc) u.s. wine consumer segmentation study, one of the most 219 thorough such studies in the industry. comparing our respondent set to wine drinkers in the 20191 220 u.s. wine consumer segmentation study [17], our set skews older. our respondents have an average 221 age of 53.8 compared to 48.2 for the wmc study, and we have a lower percentage of respondents in 222 each 10-year age group (21 – 29, 30 – 39, etc.) below 60. females are overrepresented in our 223 respondent set, 66% compared to 54% in the wmc study2. in terms of educational attainment, our 224 respondent set is highly comparable to the wmc study, with the same proportion of respondents who 225 did not earn any degree beyond high school (44%) and the same proportion with postgraduate work 226 or degree (20%). we have slightly more respondents with a technical or two-year degree (13 v. 11%) 227 and slightly less with a four-year degree (23% v. 25%). respondents who identified as non-hispanic 228 caucasian are overrepresented (79% v. 67%). blacks and african americans are almost equally 229 represented in our study (10% v. 11%), but we have proportionately about half as many hispanics 230 (7% v. 14%), asians (2% v. 4%), and respondents identifying with another designation (2% v. 5%). 231 232 table 1. demographic characteristics of the sample 233 frequency percent gender female 208 65.409 male 110 34.591 1 the most recent study available as of this writing 2 none of the 318 respondents either identified as non-binary or preferred not to indicate a gender. wep – wine economics and policy just accepted manuscript 8 race caucasian/non-hispanic 252 79.245 hispanic or latino 21 6.604 black or african american 31 9.748 asian 7 2.201 mixed race 4 1.258 other 3 0.943 marital status married, in an official civil union, or in a registered domestic partnership 148 46.541 living with a partner 31 9.748 single, never married 64 20.126 separated or divorced 51 16.038 widowed 24 7.547 income < $35,000 106 33.333 $35,000 – $49,999 56 17.610 $50,000 – $74,999 48 15.094 $75,000 – $99,999 44 13.836 $100,000 – $149,999 37 11.635 $150,000 or above 21 6.604 prefer not to state 6 1.887 education high school graduate or less 68 21.384 some college 71 22.327 completed technical/2-year degree 42 13.208 completed 4-year degree 74 23.270 some graduate school 11 3.459 completed graduate degree (e.g., ma, ms) 43 13.522 completed terminal degree (e.g., phd, md, jd) 9 2.830 n = 318 note: percentages may not add to 100% due to rounding 234 235 geographically, the northeast u.s. is slightly underrepresented compared to the wmc study (17% v. 236 20%), with the difference divided nearly equally as overrepresentation of the mid-west, south, and 237 wep – wine economics and policy just accepted manuscript 9 west regions. however, our sample set closely mirrors the distribution of the entire u.s. population, 238 with less than one percentage point difference in any region (table 2). 239 240 table 2. sample and u.s. population distribution by region 241 sample u.s. frequency percent frequency percent midwest 66 20.755 68,329,004 20.817 northeast 53 16.667 55,982,803 17.055 south 120 37.736 125,580,448 38.259 west 79 24.843 78,347,268 23.869 n = 318 note: percentages may not add to 100% due to rounding 242 table 3 reports the frequency of wine consumption for our sample. the 318 usable responses include 243 six whom the wine market council would not consider a wine drinker, since four drink wine less 244 than every 2 – 3 months and two never drink wine. we initially included these in the respondent set 245 because they purchase wine regularly, at least once every 2 – 3 months. because the number of 246 respondents in this category was too small to analyze as a sub-group, we excluded them from further 247 analysis. none of the six purchased wine at a high level of frequency, five only once every 2 – 3 248 months and one 2 – 3 times per month. 249 250 table 3. wine consumption frequency 251 frequency percent every day 36 11.321 not every day but more often than once a week 79 24.843 once a week 69 21.698 2-3 times a month 74 23.270 once every 2-3 months 54 16.981 less than once every 2-3 months 4* 1.258 never 2* 0.629 n = 318 (* excluded from further analysis) 252 wep – wine economics and policy just accepted manuscript 10 the wmc defines core wine drinkers as those who report drinking wine at least once per week and 253 marginal wine drinkers as those who drink wine less often (but at least once every 2 – 3 months) and 254 say that they like wine. the wmc definition of total wine drinkers also includes those who report 255 drinking wine at least once every 2 – 3 months but say that they do not like wine. of the 312 256 respondents in our sample whom the wmc would classify as total wine drinkers, 184 (59%) are 257 core wine drinkers, 113 (36%) are marginal, and 15 (5%) did not report liking wine3. we conducted 258 a pearson's chi-squared test to compare our respondent set with the wmc 2019 segmentation study 259 regarding the proportion of core wine drinkers, marginal wine drinkers, and others in the total wine 260 drinker category. base on χ2 (2) = 4.655 we rejected the null hypothesis that the two groups are 261 different at p = 0.098. for the remainder of our analysis, we define core and marginal wine drinkers 262 based only on the frequency of wine consumption and disregard whether they report liking wine. 263 to determine the importance of having information about a wine’s ingredients, we asked respondents 264 to indicate the level of importance of knowing the wine’s ingredients when purchasing wine for each 265 of five different occasions: giving wine as a gift; bringing wine to a large gathering; bringing wine to 266 a small dinner with friends; buying wine for a special occasion at home; and buying wine simply to 267 drink at home. using a 5-point likert scale, respondents indicated whether, for each occasion, 268 knowing a wine’s ingredients is (1) not important, (2) slightly important, (3) somewhat important, 269 (4) important, or (5) very important. 270 we first asked about the importance of having information about a wine’s ingredients when deciding 271 which wine to purchase. then we asked about the importance of having information about a wine’s 272 ingredients when deciding how much the respondent would be willing to pay for the wine. we 273 calculated the mean response for each respondent across all five occasions for each question as the 274 dependent variables ing-choice and ing-pay, respectively. 275 to measure the importance of having nutritional information about a wine, we asked respondents to 276 indicate the level of importance on the same 5-point likert scale of thirteen nutrition elements4 when 277 deciding which wine to purchase, and we calculated the mean response for each respondent as the 278 dependent variable nutrition. 279 for each dependent variable we ran a separate regression using the following independent variables 280 that had some significance during preliminary bivariate analysis: 281 • wine consumption: we divided respondents into (1) core or (2) marginal wine drinker as 282 defined earlier. 283 3 one respondent reported being too new to wine to have a decided yet whether he or she would claim to like wine. we included that respondent in the third group for the chi-square analysis. 4 the thirteen nutrition elements were calories, total fat, cholesterol, sodium, potassium, total carbohydrates, sugar, protein, calcium, iron, vitamin b-6, magnesium, and phosphorus. wep – wine economics and policy just accepted manuscript 11 • price: we categorized respondents based on the highest price level at which they purchase 284 wine at least monthly: (1) do not purchase wine at least once a month, (2) purchase wine at least 285 once a month costing under $15 per 750 ml bottle, (3) purchase wine at least once a month costing 286 $15 – $24.99 per 750 ml bottle, (4) purchase wine at least once a month costing $25 or more per 750 287 ml bottle. 288 • physical activity: we asked respondents whether they regard themselves as (1) much less 289 active, (2) less active, (3) about the same, (4) more active, or (5) much more active compared to 290 others their age. this was dummy coded into healthy (4 or 5 = 1) and all others (0) to compare those 291 who were intentionally engaging in a healthy lifestyle to everyone else. 292 • diet: we asked respondents whether they would describe their diet as (1) very unhealthy, (2) 293 unhealthy, (3) neutral, (4) healthy, or (5) very healthy. this was dummy coded into a healthy diet 294 (4 or 5 = 1) and all others (0) to compare those who were intentionally engaging in a healthy lifestyle 295 to everyone else. 296 • wine knowledge: we asked respondents to describe their level of wine knowledge and 297 familiarity as (1) almost none at all, (2) low, (3) average, (4) connoisseur, or (5) expert. 298 • age: we asked respondents for their year of birth and calculated their age as of their birthday 299 in 2021. all respondents had to be the legal drinking age in the u.s. (minimum 21) at the time of the 300 survey. 301 • income: we asked respondents to report their annual household income as (1) under $35,000, 302 (2) $35,000 $49,999, (3) $50,000 $74,999, (4) $75,000 $99,999, (5) $100,000 $149,000, or (6) 303 $150,000 or more. 304 • education: we asked respondents to report their highest level of completed education as (1) 305 high school graduate or less, (2) some college, (3) completed technical/2-year degree, (4) completed 306 4-year degree, (5) some graduate school, (6) completed graduate degree, or (7) completed terminal 307 degree. 308 six respondents chose “prefer not to answer” for income and four others were missing another data 309 point and were not included in the regression analysis. we tested the assumptions of regression and 310 there were no issues across the three regressions. we found that collinearity between the independent 311 variables was not an issue, as variance inflation factors (vif) ranged from 1.097 to 1.366. 312 313 4. results 314 315 the respondents did not have a strong interest in ingredient and nutritional label information in 316 general. less than half of the sample said that they read label information often or very often, 317 wep – wine economics and policy just accepted manuscript 12 whether it was ingredients (often: 31.4%; very often: 17.9%) or nutritional information (often: 318 31.1%; very often: 18.6%). when it comes to using nutritional information to decide which alcoholic 319 beverage to consume, or whether to consume one, barely a quarter (25.3%) said that it was important 320 or very important. the lack of a strong interest in general ingredient and nutritional information 321 carries over to wine even though, overall, the respondents think that wine is associated with good 322 health. when asked which alcoholic beverages, if any, are associated with a healthy lifestyle or diet, 323 almost 75% selected wine. when asked if they would agree that moderate wine consumption is good 324 for health, the mean response was 3.958 on a 5-point scale. 325 326 4.1 ingredient information when choosing a wine 327 328 overall, respondents think that knowing the ingredients when deciding which wine to purchase is 329 somewhat important, with a mean response of 3.037. table 4 presents the regression results for the 330 question “for each of the wine purchase occasions listed, indicate how important it would be to you 331 to know what the ingredients are in deciding which wine to buy” (ing-choice). 332 the model was a significant predictor of ing-choice (f (8, 293) = 10.652, p < 0.001), accounting for 333 20.4% of the variance in the model. price, age, physical activity, diet, education, and wine 334 consumption were all significant predictors of wanting to know ingredients when deciding which 335 wine to purchase. 336 the higher the price category the respondent reported purchasing at least monthly, the more the 337 importance of knowing the ingredients increased (p < 0.001). those who were more active (p = 0.019) 338 or had a healthy diet (p = 0.014) were more likely to want to know the ingredients in deciding which 339 wine to purchase, and core wine consumers wanted to know the ingredients more than marginal wine 340 consumers (p = 0.077). on the other hand, wanting to know the ingredients decreased with age (p = 341 0.004) and education (p = 0.058). 342 343 table 4. regression results for dependent variable ing-choice 344 b se t sig. wine consumption 0.223 0.126 1.772 * price 0.264 0.069 3.840 *** physical activity 0.308 0.131 2.356 ** diet 0.314 0.127 2.483 ** wine knowledge 0.167 0.185 0.898 wep – wine economics and policy just accepted manuscript 13 age -0.010 0.003 -2.933 *** income 0.052 0.039 1.328 education -0.070 0.037 -1.905 * constant 2.830 0.284 9.974 *** f (8, 293) 10.652 *** note: *, **, and *** indicate significance levels (two tailed) of 0.10, 0.05, and 0.01. n = 302. adjusted r2 = 0.204. 345 4.2 ingredient information when determining willingness to pay 346 347 on average, respondents think that knowing the ingredients when deciding how much to pay for a 348 wine is slightly less important than when deciding which wine to purchase. the mean response for 349 this variable was 3.014. table 5 presents the regression results for the question “for each of the 350 following wine purchase occasions listed, indicate how important it would be to you to know what 351 ingredients are in a bottle of wine in deciding how much you are willing to pay for the wine” (ing-352 pay). 353 the model was a significant predictor of importance of knowing ingredients for willingness to pay 354 (f(8, 293) = 8.046, p < 0.001) and accounted for 15.8% of the variance in the model. similar to the 355 importance of knowing ingredients when deciding which wine to purchase, price (p = 0.001), diet (p 356 = 0.008), and age (p = 0.017), are significant predictors of wanting to know ingredients when 357 deciding how much to pay for a wine, with the importance of knowing the ingredients increasing with 358 the level for each variable except age. when deciding how much to pay, wine knowledge is also a 359 significant (p = 0.030) positive indicator of wanting to know the wine’s ingredients. 360 361 table 5. regression results for dependent variable ing-pay 362 b se t sig. wine consumption 0.117 0.136 0.864 price 0.248 0.074 3.351 *** physical activity 0.226 0.140 1.607 diet 0.362 0.136 2.654 *** wine knowledge 0.435 0.199 2.179 ** wep – wine economics and policy just accepted manuscript 14 age -0.009 0.004 -2.398 ** income 0.015 0.042 0.347 education -0.051 0.039 -1.289 constant 2.943 0.305 9.644 *** f (8, 293) 8.046 *** note: *, **, and *** indicate significance levels (two tailed) of 0.10, 0.05, and 0.01. n = 302. adjusted r2 = 0.158. 363 4.3 nutrition information when choosing a wine 364 365 collectively, respondents were less interested in knowing nutrition information than in knowing a 366 wine’s ingredients. the mean response for the nutrition variable was 2.481. the regression results 367 for the importance of nutrition information for wine are reported in table 6, which looks at the 368 questions related to “for each of the following nutritional items, indicate how important you think 369 that item is when considering which wine to purchase.” the model was a significant predictor of the 370 importance of nutrition information (f (8, 293) = 10.175, p < 0.001) accounting for 19.6% of the 371 variance in nutrition information. price (p = 0.001), physical activity (p = 0.088), diet (p = 0.008), 372 and wine knowledge (p = 0.072) were positive predictors while as age increases the desire for 373 nutrition information decreased (p < 0.001). 374 375 table 6. regression results for dependent variable nutrition 376 b se t sig. wine consumption 0.136 0.134 1.019 price 0.237 0.073 3.257 *** physical activity 0.236 0.138 1.712 * diet 0.359 0.134 2.682 *** wine knowledge 0.355 0.196 1.808 * age -0.016 0.004 -4.401 *** income -0.011 0.041 -0.261 education -0.050 0.039 -1.298 wep – wine economics and policy just accepted manuscript 15 (constant) 2.839 0.300 9.452 *** f (8, 293) 10.175 *** note: *, **, and *** indicate significance levels (two tailed) of 0.10, 0.05, and 0.01. n = 302. adjusted r2 = 0.196. 377 378 5. discussion and conclusions 379 380 5.1 overall summary of results and implications 381 382 price is the only variable that was highly significant (p ≤ 0.01) across all three regression models. 383 consumers who purchased a higher-priced wine at least once a month were more interested in having 384 wine ingredient and nutrition information. this result is consistent with the wmc communications 385 study [2] that indicated that high-end wine buyers tend to want more information about wine in 386 general and are more likely to agree that the information found on wine labels rarely helps them 387 choose a wine. this group represents a small portion of wine consumers. in our survey, less than 30% 388 of respondents said they purchase a bottle of wine at least monthly at a price of $15 or more per bottle, 389 and almost half of those did not purchase a bottle priced at $25 or more at least once a month. the 390 u.s. wine consumer segmentation study [17] also found that almost half of regular wine consumers 391 say the never buy a bottle of wine in the $25.00 $29.99 range and almost three-quarters never pay 392 more than $50.00 a bottle. 393 age was highly significant in two of the regression models (ing-choice and nutrition) and significant 394 (p ≤ 0.05) in the third (ing-pay). it is the most significant factor when considering nutrition 395 information. younger consumers had more interest in ingredient and nutrition information than older 396 consumers. younger consumers were also more likely to accept getting this information through 397 technology than the labels on a wine bottle. when presented with the statement in our survey, 398 “including the website (url) or a qr code that links to that information would be a good alternative 399 to listing the ingredient or nutrition information directly on the bottle,” almost 70% of respondents 400 age 40 or younger chose either agree or strongly agree, a significantly higher rate than respondents 401 between 41 and 64 (55%) and 65 and older (41%) [χ2(8) = 23.336, p = 0.003]. 402 diet is highly significant for ing-pay and nutrition and significant for ing-choice. respondents who 403 indicated having a healthy diet were more interested in ingredient and nutrition information than those 404 who do not. similarly, respondents who say that they were more physically active than their peers 405 wep – wine economics and policy just accepted manuscript 16 were more interested in ingredient and nutrition information, although that variable was only 406 significant for ing-choice and marginally significant (p ≤ 0.10) for nutrition. this result is consistent 407 with the finding of bazzani, et al., [5] that health consciousness was positively related to the use of 408 wine labels information and the finding of grunert, et al., [7] that interest in health is a predictor, but 409 not the strongest one, of information wants for nutrition and ingredients. 410 similar to annunziata, et al., [10] we found that better wine knowledge (as self-assessed by 411 respondents) is positively related to wanting more information. however, the variable was only 412 significant for ing-pay and marginally significant for nutrition. it is worth noting that the wmc 413 communications study [2] indicated that more knowledgeable wine consumers tend to want more 414 information of all kinds about wine and were less likely to use that information in making a wine-415 buying decision. 416 surprisingly, frequency of wine consumption was not an important factor. core wine drinkers were 417 more likely to want ingredient and nutrition information, but the variable only reached marginal 418 significance and only in the ing-choice model. in contrast, escandon-barbosa and rialp-criado [9] 419 found that expert wine consumers, defined by the amount and frequency of wine consumption, make 420 more use of nutrition information than non-experts. 421 the education level of respondents was negatively related to the interest in ingredient and nutrition 422 information but, like wine consumption, only reached marginal significance in the ing-choice model. 423 income was the only variable not to be at least marginally significant in at least one regression model. 424 425 5.2 policy implications of results 426 427 while some wine industry professionals and wine writers advocate for ingredient and nutrition 428 information disclosure (e.g., pellechia [1] and gray [3]), the primary push for government regulations 429 has come from the public health sector. in 2007, the ttb issued “labeling and advertising of wines, 430 distilled spirits and malt beverages; proposed rule” [18] that, if enacted, would have required 431 alcoholic beverages covered by the rule to disclose “on any label affixed to the container” the alcohol 432 by volume and a statement of calories, carbohydrates, fat, and protein. the proposed rule notice noted 433 that almost 4 ½ years earlier the ttb had received a petition calling for such disclosure, and more, 434 from the center for science in the public interest, the national consumer league, 67 other 435 organizations, and eight individuals (including four deans of schools of public health). 436 government regulations should weight the costs of the regulations against the expected benefits. our 437 study suggests the actual benefits of such regulation may be less than the intended benefits. overall, 438 the respondents think that wine is associated with good health. still, respondents had only a marginal 439 wep – wine economics and policy just accepted manuscript 17 interest in having ingredient and nutrition information for wine. our findings would suggest that the 440 benefit of requiring ingredient and nutrition information on wine bottle labels seems small, especially 441 given research that shows that people tend to use nutrition labels at lower rates than they claim and 442 that having such information often does not change consumers’ choices. for example, grunert, et al. 443 [19] demonstrated that self-reported use of nutritional labels may be overstated by 50% and that the 444 lack of use is mostly not attributable to not understanding the information on the label. in addition, 445 their results do not prove that the label information changed consumers’ choices, compared to a 446 situation where such information is not available or is not read by the consumer. furthermore, köster 447 [20] showed that many food and beverage purchase and consumption decisions are based on routine, 448 habit, or other subconscious factors. 449 the operational cost for wineries, on the other hand, would be significant given the additional testing 450 and chemical analysis that would be required and the cost of having to create new labels and seek 451 ttb (and in some cases state) label approval with each new vintage as nutritional properties change 452 from year to year. one might expect that ingredient and nutrition labeling could lead to negative news 453 stories based on ignorance and fear rather than science and fact, and these stories could result in costs 454 of lost opportunities, especially considering the findings of pabst, et al. [6], and current ttb 455 regulations related to advertising health claims could make it difficult for wineries to respond to such 456 stories. 457 as eu regulations come into effect, researchers will have opportunities to study the impact of the 458 regulations in the real-world settings that robinson, et al., [16] concluded would be necessary to 459 produce studies with high evidential value. in the meantime, our study adds to the body of research 460 that calls into question the efficacy of requiring wine ingredient and disclosure information to meet 461 public health goals and suggests that the ttb could benefit from the opportunity to learn from the 462 eu’s experience before issuing its own regulations. 463 464 5.3 limitations and research opportunities 465 466 this study was based on a survey that asked respondents about their interest in having ingredient and 467 nutritional information available. we did not attempt to measure the extent to which they truly would 468 use ingredient and nutritional information in making wine purchase or consumption decisions or how 469 having ingredient and nutritional information would change such decisions. 470 we approached our study from a public health perspective rather than a marketing perspective. we 471 did not investigate whether consumers would be willing to pay more for wine that discloses ingredient 472 or nutrition information. likewise, we did not study consumers’ preference for ingredient or nutrition 473 wep – wine economics and policy just accepted manuscript 18 information if having that information would require them to make a tradeoff between having access 474 to this information or some other information, such as food pairings or a description of the wine, that 475 they may use in making wine purchase and consumption decisions. these are all avenues for future 476 research on this subject. 477 478 479 references 480 481 [1] “ingredient labeling may soon show up on your favorite wine,” thomas pellechia, forbes, 482 may 22, 2020, https://www.forbes.com/sites/thomaspellechia/2020/05/22/ingredient-labeling-may-483 soon-show-up-on-your-favorite-wine/?sh=69f88aa3654c (accessed 10/22/2021). 484 [2] “2020 wine market council communications study,” wine market council, september 25, 485 2020, 486 https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&ved=2ahukewjr9pgayt487 7zahubctqihxqrbxyqfnoecakqaq&url=https%3a%2f%2fwinemarketcouncil.com%2fw488 p-489 content%2fuploads%2fdlm_uploads%2f2020%2f09%2fwmc_communications_study_final_9490 -25-2020.pdf&usg=aovvaw0yu88_zvju71lasmsw0uwe (accessed 10/22/2021). 491 [3] “time for us wine to follow the eu,” w. blake gray, wine-searcher.com, may 24, 2020, 492 https://www.wine-searcher.com/m/2020/05/time-for-us-wine-to-follow-the-eu (accessed 493 10/23/2021). 494 [4] “ingredient labeling: a winemaker strikes back,” adam lee, wine-searcher.com, may 28, 495 2020, https://www.wine-searcher.com/m/2020/05/ingredient-labeling-a-winemaker-strikes-back 496 (accessed 10/23/2021). 497 [5] bazzani c, capitello r, ricci ec, scarpa r, begalli d. nutritional knowledge and health 498 consciousness: do they affect consumer wine choices? evidence from a survey in italy. 499 nutrients. 2020; 12(1):84. https://doi.org/10.3390/nu12010084. 500 [6] pabst e, corsi a, vecchio r, annunziata a, loose s. consumers’ reactions to nutrition and 501 ingredient labelling for wine – a cross-country discrete choice experiment. appetite. 2021; 156, 502 104843. https://doi.org/10.1016/j.appet.2020.104843. 503 [7] grunert k, hieke s, juhl h. consumer wants and use of ingredient and nutrition information 504 for alcoholic drinks: a cross-cultural study in six eu countries. food quality and preference. 2018; 505 63:107. https://dx.doi.org/10.1016/j.foodqual.2017.08.005 506 wep – wine economics and policy just accepted manuscript 19 [8] annunziata a, pomarici e, vecchio r, mariani a. do consumers want more nutritional and 507 health information on wine labels? insights from the eu and usa. nutrients. 2016; 8(7):416. 508 https://doi.org/10.3390/nu8070416. 509 [9] escandon-barbosa d, rialp-criado j. (2019). the impact of the content of the label on the 510 buying intention of a wine consumer. frontiers in psychology. 2019; 9:2761. 511 https://doi.org/10.3389/fpsyg.2018.02761 512 [10] annunziata a, pomarici e, vecchio r, mariani a. nutritional information and health 513 warnings on wine labels: exploring consumer interest and preferences. appetite. 2016; 106: 58. 514 https://doi.org/10.1016/j.appet.2016.02.152. 515 [11] pabst e, szolnoki g, loose s. the effects of mandatory ingredient and nutrition labelling for 516 wine consumers – a qualitative study. wine economics and policy. 2019; 8(1):5. 517 https://doi.org/10.14601/web-8216. 518 [12] pabst e, szolnoki g, loose s. how will mandatory nutrition and ingredient labelling affect 519 the wine industry? a quantitative study of producers’ perspectives. wine economics and policy. 520 2019; 8 (2):103. https://doi.org/10.1016/j.wep.2019.05.002. 521 [13] hayward l, mcsweeney m. investigating caloric values and consumers’ perceptions of nova 522 scotia rosé wines. food research international. 2020; 127, 108761. 523 https://doi.org/10.1016/j.foodres.2019.108761 524 [14] hayward l, finlay e, lafortune m, strother h, tomchuk a, selviz v, mcsweeney m. 525 investigating the disclosure of ingredient lists impact on consumers' sensory perceptions of red wines 526 produced in nova scotia, canada. journal of sensory studies. 2020; 35(6), e12608. 527 https://doi.org/10.1111/joss.12608 528 [15] vecchio r, annunziata a, mariani a. is more better? insights on consumers’ preferences 529 for nutritional information on wine labelling. nutrients. 2018; 10(11):1667. 530 https://doi.org/10.3390/nu10111667. 531 [16] robinson e, humphreys g, jones a. alcohol, calories, and obesity: a rapid systematic review 532 and meta‐analysis of consumer knowledge, support, and behavioral effects of energy labeling on 533 alcoholic drinks. obesity reviews. 2021; 22(6), e13198. https://doi.org/10.1111/obr.13198 534 [17] “2019 wine market council u.s. wine consumer segmentation slide handbook,” wine 535 market council, september 5, 2019, https://winemarketcouncil.com/download/914/ (accessed 536 10/24/2021; membership required). 537 [18] “labeling and advertising of wines, distilled spirits and malt beverages; proposed rule.” 538 72 fed. reg. 41859 (july 31, 2007). https://www.govinfo.gov/content/pkg/fr-2007-07-31/pdf/e7-539 14774.pdf 540 wep – wine economics and policy just accepted manuscript 20 [19] grunert k, wills j, fernández-celemín l. nutrition knowledge, and use and understanding 541 of nutrition information on food labels among consumers in the uk. appetite. 2010; 55(2): 177. 542 https://doi.org/10.1016/j.appet.2010.05.045. 543 [20] köster e. diversity in the determinants of food choice: a psychological perspective. food 544 quality and preference. 2009; 20(2): 70. https://doi.org/10.1016/j.foodqual.2007.11.002. 545 wep – wine economics and policy just accepted manuscript 1 just accepted 1 2 3 4 is a new eu wine policy coming? the unexpected role of regulatory measures 5 6 eugenio pomarici1, roberta sardone2 7 8 9 10 11 1 università degli studi di padova, dipartimento territorio e sistemi agro-forestali (tesaf) via 12 dell'università 16 35020 legnaro (pd), italy, e-mail: eugenio.pomarici@unipd.it 13 2 crea centro politiche e bioeconomia, via barberini, 36 00187 roma, italy, e-mail: 14 roberta.sardone@crea.gov.it 15 16 17 18 19 correspondence concerning this article should be addressed to eugenio pomarici, università degli 20 studi di padova, dipartimento territorio e sistemi agro-forestali (tesaf), via dell'università 16 21 35020 legnaro (pd), italy, e-mail: eugenio.pomarici@unipd.it 22 23 24 25 this article has been accepted for publication and undergone full peer review but has not been through 26 the copyediting, typesetting, pagination and proofreading process, which may lead to differences 27 between this version and the version of record. 28 29 please cite this article as: 30 31 pomarici e., sardone r. (2022), is a new eu wine policy coming? the unexpected role of regulatory 32 measures, wine economics and policy, just accepted. 33 doi: 10.36253/wep-13189 34 35 36 37 mailto:eugenio.pomarici@unipd.it mailto:roberta.sardone@crea.gov.it mailto:eugenio.pomarici@unipd.it wep – wine economics and policy just accepted manuscript 2 abstract 38 39 on january 1, 2023, a “reformed” common agricultural policy (cap) will come into force, which 40 is innovative by nature in structural terms, and focused on environmental and social sustainability 41 issues, aimed at a comprehensive digitization-based modernization of the agri-food sector. the new 42 cap keeps the current structure based on expenditure and regulatory measures, but includes a new 43 planning tool, the national cap strategic plan, a new cap management model, and the new delivery 44 model (ndm). concerning eu wine policy, the new regulations foresee a number of specific 45 amendments to existing rules, including changes that will apply to financial support for the wine 46 sector with a reduced budget and to the regulatory measures. among the latter, the most globally 47 impacting are labelling rules, which require more information to consumers and allow the use of an 48 e-label, the use of hybrid grape varieties for the production of appellation wines, and the inclusion 49 among cap regulated products of partially or totally de-alcoholised wines. 50 51 key words: common agricultural policy, de-alcoholised wine, hybrid grape varieties, labelling 52 53 introduction 54 on january 1, 2023, a new system of regulations will come into force that defines the next eu 55 common agricultural policy (cap), ending a long process that started in june 2018, when the 56 european commission, led by jean-claude juncker, presented a proposal that profoundly reshaped 57 the cap with the aim of defining a new governance model for post-2020 european agriculture. 58 however, the approval process was slowed down by the issues of brexit dependant budget cuts, the 59 reshaping of rules for the management of the eu multiannual financial framework (mff), the 60 settlement of a new eu commission led by ursula von del leyen, which launched the european 61 green deal strategy and the consequent from farm to fork agricultural strategy, and finally, by the 62 covid-19 pandemic. therefore, the reform proposal adapted to the new context completed the 63 process of approval in december 2022, with the official publication of the new cap regulations. 64 the “reformed” cap has an innovative nature in structural terms, being much more focused on 65 environmental and social sustainability issues, as clearly expressed by the 3 general objectives1, each 66 of them detailed in three specific objectives, and aimed at a comprehensive digitization-based 67 modernization of the agri-food sector (1). 68 1 reg. 2117/2021, art. 5: (a) to foster a smart, competitive, resilient and diversified agricultural sector ensuring long-term food security; (b) to support and strengthen environmental protection, including biodiversity, and climate action and to contribute to achieving the environmental and climate-related objectives of the union, including its commitments under the paris agreement; (c) to strengthen the socioeconomic fabric of rural areas. wep – wine economics and policy just accepted manuscript 3 as the wine sector in the eu is highly supported and regulated by cap (2, 3, 4), and the eu is a key 69 actor in the global wine market, a new cap may have a quite significant relevant effect on such 70 markets in terms of competitive scenarios, product innovation and institutional settings. therefore, it 71 is of some interest to look at the key aspects of cap reform in general and in relation to wine, whose 72 policy to date has been characterized by many peculiarities, which will be mitigated in the next 73 programming period, thanks to the new delivery model. despite this, european wine policy remains 74 structured on two main blocks of interventions: expenditure measures on the one hand, and regulatory 75 measures on the other. for this reason, it is worth to reflect on what news and what effects can be 76 expected following its entry into force, starting from january 2023. 77 78 1 the main changes 79 in terms of general architecture, the new cap maintains the current structure, which combines two 80 components of equivalent importance, expenditure and regulatory measures2. on the one hand, the 81 expenditure measures consist of direct payments to farmers to ensure income stability and to 82 remunerate them for public goods not normally paid for by the market, sectoral interventions to 83 stabilise and/or improve the functioning of the concerned markets, and rural development policy, 84 which provides for the structural strengthening of the agricultural sector and rural areas. on the other 85 hand, the regulatory measures, defined by a very large number of different provisions, include 86 provisions concerning many different areas of interest for agriculture and agri-food products. 87 however, beyond this element of continuity, the main novelty of the cap 2023-2027 is a new tool, 88 the strategic plan, that each member states can draw upon for the joint programming of all 89 expenditure measures to achieve the cap objectives, also setting quantitative targets and milestones 90 consistent with the achievement of the “more ambitious” environmental and social targets (5). this 91 novelty, which actually empowers eu member states in the shaping of the cap intervention, is part 92 of the intended innovation of the cap management, defined as a new delivery model (ndm) aimed 93 “to shift the policy focus from compliance to performance, and rebalance responsibilities between 94 the eu and the ms level with more subsidiarity [….] improving policy coherence across the future 95 cap and with other eu objectives”3. 96 the rules concerning the cap strategic plan and therefore the management of all expenditure 97 measures are laid down by the new regulation 2115/2021 (cap strategic plan regulation). the 98 regulatory measures in force with the reformed cap are those included in regulation 1308/2013, 99 2 these measures define a complex framework which represents a characterising part of cap; but nevertheless, the eu agricultural policy is frequently identified only with its expenditure measures. 3 explanatory memorandum to reform proposals (6, p. 2). wep – wine economics and policy just accepted manuscript 4 modified by the new regulation 2117/2021 (amendment regulation). below, a brief but complete 100 description is presented of the numerous and diverse changes that have been approved for the wine 101 sector as a result of this long and complex reform process in the final stages, with the approval of the 102 national strategic plans scheduled for the end of 2022. 103 104 2 towards a new wine policy 105 the cap reform introduces changes in the wine sectoral intervention and regulatory measures, but 106 does not turn upside-down the “eu wine policy” structure, consistently with the commission view 107 on the effectiveness of the current asset of such policy: “while the successive 2008 and 2013 reforms 108 of the wine policy have overall reached their objectives, resulting in economically vibrant wine sector, 109 new economic, environmental and climatic challenges have appeared. therefore, the regulation 110 foresees a number of specific amendments to existing rules to cope with these challenges”4. as a 111 matter of fact, the analysis of the performance of the eu wine sector in the recent past has shown that 112 there is no evidence of satisfactory progress towards high levels of environmental sustainability and 113 a satisfactory exploitation of the potential of vitivinicultural activities in the development of marginal 114 areas (1). 115 116 2.1 the new financial support 117 the set of spending measures destined to the wine sectors will rely on a reduced budget with respect 118 to the “old” cap (approximately 1 billion €/year, 3.9%), but with an enlargement of the range of 119 the intervention types, or measures, that member states may make available for wine actors5. 120 in the new policy framework, wine growers and wine producers and marketers will be potential 121 beneficiaries of seven types of “structural” measures that aim to strengthen the competitiveness of 122 the wine sector in mss, allowing the financial support of improvements at different levels of the 123 supply chain. one measure sustains wine growers for “restructuring and conversion of vineyards” 124 with the objective of improving sustainability by changing the vineyard management techniques, 125 replanting the vineyard in better sites or using varieties more suited to the eco-physiological condition 126 of the farm. four different measures sustain material (physical assets) and immaterial (software, 127 design costs, licenses, patents) investment and promote innovation activities and best practices to 128 achieve better wine quality from the perspective of sensory properties and environmental and social 129 sustainability. a new measure is included in this group, specifically designed to finance investment 130 4 explanatory memorandum to reform proposals (6, p. 14). such arguments are consistent with the last evaluation of cap measures applicable to the wine sector (7). 5 the complete description of the new cap sectoral interventions for wine is included in article 58 of regulation 2021/2115 (cap strategic plan regulation). wep – wine economics and policy just accepted manuscript 5 targeted to achieve specific improvements in terms of the carbon or water footprint. two measures 131 are designed to improve the position in the market of eu wines, including within third countries, 132 which involves financing wine producer’s true promotion activities, public relations, advertising, 133 wine exhibitions, while inside the eu are admitted only actions limited to information campaigns 134 about pdo and pgi, to comply with the opposition of the directorate general for health and 135 consumer protection of the european commission (dg sanco) policies that could result in an 136 increase in alcohol consumption in the eu. 137 three measures offer a set of tools to assist enterprises in facing different economic risks: harvest 138 insurance, mutual funds and green harvesting. these were conceived as preventive instruments able 139 to encourage a responsible approach to crisis situations after the dismantling of the traditional market 140 protection measures (price support, distillations, and private storage, with most aid in force until 141 2008) and are confirmed in the new cap. 142 two new measures finance actions undertaken by interbranch organisations recognised by member 143 states6 in the wine sector aimed at i) enhancing the reputation of union vineyards by promoting wine 144 tourism in production regions, and ii) improving market knowledge. 145 finally, a new measure finances the access of companies in the wine sector to advisory services, 146 particularly concerning the conditions of employment, employer obligations and occupational health 147 and safety, explicitly introducing the social dimension within sectoral wine interventions. 148 it is up to each member state to decide which measures to make available for its own actors in the 149 wine production chain7 and how to distribute the wine national budget, with only an obligation to 150 allocate at least 5% of the budget for actions with a positive impact on the environment, climate 151 change or sectoral sustainability. interestingly, a first analysis of the projects8 of the cap strategic 152 plan delivered by member states to the european commission shows that the resources assigned are 153 almost totally directed to the “old” structural measures, almost replicating the previous allocation 154 patterns (1, 8). the exclusion of the new measures is probably partially related to the fact that these 155 were introduced only in the last version of the regulation, when the draft of the cap strategic plans 156 was already in an advanced phase, and the stakeholders did not have enough time to evaluate their 157 real interest. to this must be added the fact that the measures directed to interbranch organisation are 158 not applicable in all eu wine producers’ countries, as those existing are not always recognised under 159 the eu rules. the new measures could eventually be selected in the case of a future update of the 160 6 according to regulation (eu) 1308/2013. 7 it is worth to remember that the wine sectoral interventions are addressed to different beneficiaries along the wine production chain, including nonagricultural actors. 8 the projects of cap strategic plans are currently (october 2022) in a revision phase according to the comments that the commission sent to member states and will be fully operative before the end of the year. wep – wine economics and policy just accepted manuscript 6 cap strategic plans. finally, it should be underlined that some (old and new) sectoral measures are 161 addressed to objectives also pursued through the rural development policy. in these cases, the interest 162 in their implementation under the sectoral interventions could be greatly reduced, as confirmed, for 163 example, by the limited resources allocated by mss in favour of the risk management measures, 164 which are usually supported within the rural development policy framework. 165 if the wine sector, as a whole, is going to be less funded by sectoral intervention, more financial 166 resources should reach winegrowers9 through the renewed mechanisms for calculating the cap direct 167 payments. winegrowers are only receiving direct payments from 2013, and in some of the wine eu-168 producing countries, they received only a small amount of money10. now, the new cap should bring 169 good news for agricultural actors in the wine sector, as the reform has among its targets the 170 rebalancing of the distribution of such payments in all member states. in the future, all winegrowers 171 should receive a payment proportional to the farm area similar to that received in other sectors, under 172 the condition that they comply with some basic requirements related to the adoption of sustainable 173 practices. moreover, they could benefit, according to the national decision, from additional payments 174 in the case of the adoption of the new voluntary environmentally friendly practices laid down in each 175 cap strategic plan (the so-called eco-schemes11). regardless, the actual increase in the resources 176 coming from the direct payment budget will likely be different in each member state, as both the 177 increase in the basic payment assigned or the number of eco-schemes actually accessible for wine 178 growers will depend on the single member state decisions. 179 as already mentioned, in the “new” cap, as in the “old”, actors in the wine sector may also apply 180 for financial support from the rural development policy in competition with actors belonging to other 181 agricultural sectors, as no preassigned budget for grape or wine producers exists. regardless, in the 182 new policy framework, rural development measures open to vitivinicultural actors should be planned 183 consistently with those of sectoral intervention inside the cap strategic plan, with the aim of 184 facilitating the accomplishment of the cap objectives and of those specifically defined for the wine 185 sector12. 186 187 188 189 9 in the cap, the definition of “winegrowers” refers only to producers which are also involved in the agricultural phase of grape productions. 10 the current value of the payment per hectare of vineyards is, in some member states, different from other surfaces due to different rules in the member states used in the implementation of the decoupling processes started with agenda 2000 (9). 11 reg. (eu) 2117/2021, art. 31 12 reg. (eu) 2117/2021, art. 57. wep – wine economics and policy just accepted manuscript 7 2.2 new rules 190 most of the amendments to the eu wine policy announced by the explanatory memorandum to deal 191 with the new economic, environmental and climatic challenges concern the rules for the marketing 192 of agricultural products and the functioning of the agricultural sector, which are laid down by the 193 amendment regulation13 and includes relevant novelties. 194 the amendment regulation allows the inclusion of varieties coming from a cross between vitis 195 vinifera and other species of the genus vitis in the production of wines with a protected designation 196 of origin (pdo). this rule change is rather radical, as genetic purity has been, over time, a distinctive 197 aspect of the regulation of european terroir-linked wines (2). in introducing this change, the eu 198 recognises that these new varieties may represent a gamechanger for the future of sustainable 199 winemaking [10]. indeed, genetic research and nursery activities are delivering new interspecific 200 hybrids obtained by multiple ‘backcrosses’ between some of the widely planted vitis vinifera grape 201 varieties (e.g., merlot and chardonnay) with non-vinifera grape varieties, obtaining new varieties 202 with a high percentage of the vitis vinifera genome, thus aiming to preserve most of the sensorial 203 properties of the “noble parent” [11]. 204 such novel genotypes have an innate resistance against cryptogamic diseases, allowing a reduction 205 in the use of synthetic pesticides by more than 80% [12] far greater than the 50% objective set by 206 the european green deal, allowing for approximately 60% savings/ha in the cost of treatments and 207 15% savings/ha in vineyard operating costs (13]. the first studies show a positive attitude of 208 consumers towards these new varieties, also known as piwi14 (14), which therefore promotes all 209 three dimensions of sustainability. their diffusion could be fostered by the subsidies for restructuring 210 and the conversion of vineyards under the sectoral intervention of the cap described above. 211 concerning new production options, the amendment regulation lays down the inclusion of the 212 products obtained by wine de-alcoholisation with an alcoholic degree lower than the minimum 213 indicated by the definition of wine15 among the products covered by the wine sector. such products 214 can currently be produced and marketed only as beverages, but from january 2023, such products 215 will be labelled wine if they comply with the eu approved wine oenological practices16. the de-216 alcoholisation can be total and partial, but only partial de-alcoholisation will be authorised for wines 217 with a protected geographical indication or protected designation of origin. for such wine, the 218 13 regulation (eu) 2021/2117, art. 1, concerning changes to regulation 1308/2013. 14 from german: pilzwiderstandsfahige (disease resistant). 15 regulation (eu) 1308/2013, appendix i: at least 8.5% in the northern part of eu (wine-growing zones a and b); at least 9% in the south (wine-growing zone c). 16 in the eu, products covered under the wine sector can be produced only by means of the oenological practices and using the substances listed in the eu regulations: reg (eu) 1308/2013, reg. 934/2019, reg 203/2012.. wep – wine economics and policy just accepted manuscript 8 possibility of de-alcoholising must be included in the product specification, which should contain a 219 description of the partially de-alcoholised wine and, where applicable, the specific oenological 220 practices to be used to make the partially de-alcoholised wine or wines, as well as the relevant 221 restrictions on making them. 222 the amendment regulation recognises that further research and experimentation is necessary to 223 improve the quality of the de-alcoholised wines, but the inclusion of such products in the wine sector 224 allows producers to obtain subsidies for investments and r&d activities using sectoral intervention 225 or rural development measures, again showing the high level of interconnection among different 226 instruments (expenditures and regulatory measures) within the cap for the wine sector. regardless, 227 it will likely be necessary to define new specific rules for the production of such products as the 228 subtraction of alcohol, especially if the final result is zero or very low alcohol, requires specific 229 technological interventions to rebuild the sensory equilibrium, which are currently not included in 230 the list of eu oenological practices. 231 interestingly enough, inclusion in the list of eu vitivinicultural products of de-alcoholised and 232 partially de-alcoholised wines was not considered in the first draft of the amendment regulation, as 233 a result of the co-decision process after the renovation of the eu commission and parliament in 2019. 234 such novelty also represents a break from the traditional european wine regulation, as the alcohol 235 content was considered an essential part of the identity of wine in the european tradition. not by 236 chance, within the oiv for years eu countries, although with different nuances, have been against 237 the inclusion of such product in the wine categories of the oiv international code of oenological 238 practices, pressing for their inclusion in the category of “products derived from grapes, grape must 239 or wine”. likely, most european wine stakeholders are now confident that the market opportunities 240 of such products are more important of the tradition17. the products of wine de-alcoholisation are not 241 new in the market, but only recently have experienced a relevant growth. in particular, they have 242 grown from us $7.8 billion in 2018 to $10 billion in 2022 in ten different key markets. moreover, 243 iwsr forecasts that noand low-alcohol product volumes will grow by +8% yearly between 2021 244 and 2025. 245 further amendments of the eu wine regulatory framework concern rules about labelling, new 246 planting of vineyards and interbranch organisations related to pdo wines. 247 17 the preliminary statements of the amendment regulation (whereas 40) explain the choice concerning de-alcoholised wines only referring to market opportunities. but it can be assumed that such choice was supported also by the awareness that these products comply with the recommendations recently expressed by who in the framework of the global action plan on harmful consumption of alcohol (https://apps.who.int/gb/ebwha/pdf_files/eb150/b150_7add1-en.pdf). https://apps.who.int/gb/ebwha/pdf_files/eb150/b150_7add1-en.pdf wep – wine economics and policy just accepted manuscript 9 to provide a higher level of information to consumers, complying with the eu general regulation of 248 labelling of food products, the wine label will include a nutrition declaration and a list of ingredients. 249 producers will have the option of limiting the contents of the nutrition declaration on the package or 250 on a label to only the energy value, making the full nutrition declaration and the list of ingredients 251 available on electronic support18. the commission is delegated to lay down rules for the indication 252 and designation of ingredients, with new rules coming into force after december 2023. the task of 253 the commission is not trivial, as the listing of what is an ingredient, beyond grape and must, is not 254 straightforward. in principle, all the oenological substances listed in regulation 934/2019 as additives 255 should be labelled19, but professional organisations are lobbying to limit the obligation of labelling 256 to those that are not already present in the grape. 257 moving on to the scheme of authorisations for vine plantings, in force since 1 january 2016, it is 258 extended from 2030 to 2045, with two mid-term reviews in 2028 and 2040 to evaluate the operation 259 of the scheme and, if appropriate, apply changes. it is therefore significantly extended, with minor 260 revisions, the current regime that allows member states to make available each year authorisations 261 for new plantings corresponding to 1% of the total area actually planted with vines in their territory20. 262 this choice also confirms the impossibility of reallocating the area corresponding to the grubbed-up 263 vineyards in farms that give up viticulture to other farms. the outcome of the cap reform results in 264 a substantial confirmation of the recently reformed scheme, which is effective in preventing structural 265 surpluses of supply, but that in progress could determine a depletion of the production potential and 266 hinder the structural strengthening of active and competitive farms in well developed areas, as well 267 the improvement of the socioeconomic fabric of marginal areas developing vitivinicultural activity, 268 which represents one of the few productive options for farmers. 269 the cap reform introduces new rules that can empower interbranch organisation related to pdo and 270 pgi wines21 in managing the position of the wines of interest in the market and deal with the 271 distribution of added value along the supply chain. according to the new rules, interbranch 272 organisation of producers of pdo and pgi wines will be allowed to request of member states to lay 273 down, for a limited period of time, binding rules for the regulation of the supply of their wines of 274 interest. moreover, such interbranch organisations may provide non-mandatory price guidance 275 18 anticipating the coming in force of the amendment regulation, some actors of the european wine industry developed the already operating u label platform (https://www.u-label.com/) which can support wineries in implementing the e-labelling for wine products. 19 the substances listed in the regulation 934/2019 are classified in additives and processing aids; the processing aids, which are the most numerous oenological substances and that could be present in the wine only as residues, must not be labelled. 20 as measured on 31 july of the previous year. 21 recognised by member states according to regulation (eu) 1308/2013. https://www.u-label.com/ wep – wine economics and policy just accepted manuscript 10 indicators concerning the sale of grapes for the production of wines of interest, provided that such 276 guidance does not eliminate competition with respect to a substantial proportion of the products in 277 question. in any case, the intention of the eu to empower interbranch organisations is also revealed 278 by the new measures introduced in the sectoral intervention reserved to these bodies. however, the 279 extension of the powers of interbranch organisations may raise questions about conformity with the 280 principles of competition law but up to now no concern has been expressed by stakeholders. 281 282 3. potential impacts 283 in summary, the cap reform is leading to interesting changes in the wine policy, which has potential 284 impacts in the wine market at the european and global levels. 285 the amount of financial resources to be transferred to wine actors is not expected to change much, 286 but complex rule changes should determine other substantial evolutions, such as the improvement of 287 the sustainability level that could make eu wine supply more consistent with the market demand and 288 comparable to non-eu competitors. therefore, the balance of power on the market should not be 289 affected by the new cap. moreover, the scheme of authorisations for vine plantings represents a 290 remarkable contribution of the eu to the global market equilibrium, which, however, could hamper 291 the reaction of eu wine producers in the case of a wine demand rise. 292 more significative impacts of the cap reforms will be on the labelling practices and innovation 293 options. 294 concerning labelling, the new eu rules are going to define a new global standard for trading. third 295 country producers will be required to comply with such rules, and consumers of eu wines in third 296 countries will become accustomed to the new labelling rules. these could also be a driver for a new 297 oiv wine labelling standard22. however, beyond the aspects related to the technicalities of labelling, 298 the new regulation could have interesting indirect effects in terms of changes in oenological practices. 299 such changes could result in a demand for new equipment or new services. in fact, most additives 300 (i.e., the substances subject to labelling), which do not correspond to substances already present in 301 the grape, can be substituted with physical treatments23. therefore, wineries could be induced to 302 change their processes to limit, as much as possible, the list of labelled items. as such, physical 303 treatments require specific equipment that could be hard to pay back in small or medium wineries, 304 22 the eu decision to allow the electronic labelling of mandatory information is likely something without precedents; this is very relevant because the question of electronic labelling is being debated in codex alimentarius at the present time. 23 as suggested by prof. moio in his contribution “vers une logique de l’etiquetage du vin” presented at the conference at the bordeaux university, june 21, 2018. wep – wine economics and policy just accepted manuscript 11 and a new demand for external services could emerge, which will proceed in parallel to the demand 305 for the supply of services for managing the e-label that will be linked with the physical label. 306 moreover, the disclosure of a limited category of oenological substances could bring the attention of 307 media and of consumers to the whole of complex oenological substances and practices that are 308 allowed in the eu and are of common use elsewhere. the awareness of most consumers about how 309 the wine is produced is currently quite scarce, so the additional compulsory information could result 310 in an increasing demand for full disclosure on how wines are made, going beyond what is requested 311 by the new rules, resulting in pressure for the exclusion of practices and processing aids that could be 312 badly perceived by consumers. the final results could be positive, including a general orientation 313 towards a “light” or “precision” oenology, which rely on high-quality grapes and minimal 314 intervention in the winery. on the other hand, the higher transparency of the complex oenological 315 practices and substances commonly used in wine making should be accompanied by an appropriate 316 communication effort to prevent dangerous and unjustified trust issues. 317 concerning the new rules about the partially or totally de-alcoholised wine and the use of hybrids in 318 the production of pdo wines, these will have practical impacts that are currently difficult to foresee. 319 the eu is opening to de-alcoholised products presented as “wine”, along with the contemporary 320 positive forecast of market analysis agencies, are now arousing the interest of many eu companies. 321 the resources of the sectoral intervention could ease access to indispensable investments, at least for 322 the larger of them. the actual market growth will depend, first on how much the interested companies 323 will be successful in delivering quality consistent wines, and second, on successfully managing 324 production costs that are rather high (15, 16). moreover, the possible societal concern for the adverse 325 social (overcompensation alcohol assumption 17) and environmental (energy use -18) implications 326 of these products may also play a role. in the case of wide consumer acceptance, it is possible to 327 foresee that new service providers will emerge, organised to manage in specialised plants, compliant 328 with the strict fiscal regulation of alcohol production and conservation, the dealcoholisation process 329 and complementary operations. 330 concerning the new hybrid resistant varieties, the actual speed and dimension of their diffusion will 331 depend on the solution to many issues. permission to include such varieties is increasing the interest 332 of producers and policy-makers, but new fungus-resistant grapevine varieties still represent an 333 immature technology whose adoption requires investments with a long payback (19). in fact, the 334 stability of resistance/tolerance to the targeted pathogens is unknown, and a strong research effort is 335 even now devoted to obtaining new fungus-resistant grapevine varieties with multiple genes for 336 resistance (11). moreover, the implications of the use of such new varieties regarding other pathogens 337 are not clear. last but not least, the choice of available new varieties is still restricted with respect to 338 wep – wine economics and policy just accepted manuscript 12 the huge differences in wine styles, soil and climate conditions of viticulture, and a large uncertainty 339 persists concerning the optimal viticulture and oenological practices to adopt. 340 the eu wine sector is moving in the coming years towards a normative framework with many 341 differences with respect to the past. with regard to the new cap organisation, only when the cap 342 strategic plans, in particular, and the new delivery model, in general, will be in force will it be 343 possible to understand if this new organisation will be more effective in sustaining the wine sector, 344 also reducing the red tape burden frequently criticised by practitioners and scholars (2, 3). with regard 345 to the wine policy, eu wine producers will likely be better supported in achieving more ambitious 346 environmental targets and will be inspired to evaluate new options in terms of product and processes 347 and to deal with public opinion pressures that could result from the new labelling rules. the labelling 348 rules, at least in the short run, could result in an additional non-tariff barrier to trade (20, 21). 349 regardless, a relevant consequence of the cap reform is a significant change of some identity 350 elements of the “european wine charter”: the minimum alcohol degree is no longer a constitutive 351 element of the definition of wine, the wine is no longer the result of a magic (black) box fed only 352 with grape, and the (high) quality of the eu wine is no longer exclusively linked to the vitis vinifera. 353 dramatic changes, indeed, that could have unforeseen consequences on the global wine market. 354 355 references 356 357 1 pomarici, e., sardone, r. 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(2019) barriers to wine trade, the palgrave handbook of wine industry 417 economics, pp. 291–315 418 https://doi.org/10.1093/erae/jbv008 wine economics and policy 11(1): 141-144, 2022 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/wep-13208 wine economics and policy citation: peter hayes, nicola marinelli (2022) a family business in the global market between tradition and innovation: an interview with mireia torres macsazzek. wine economics and policy 11(1): 141-144. doi: 10.36253/wep-13208 copyright: © 2022 peter hayes, nicola marinelli. this is an open access, peerreviewed article published by firenze university press (http://www.fupress. com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information fi les. competing interests: the author(s) declare(s) no confl ict of interest. a family business in the global market between tradition and innovation: an interview with mireia torres macsazzek peter hayes1, nicola marinelli2,* 1 honorary president of oiv; e-mail grapwine@senet-com.au 2 dagri university of florence, p.le delle cascine 18, 50144 firenze, italy. e-mail: nicola.marinelli@unifi .it *corresponding author. abstract. mireia torres macsazzek is head of the familia torres innovation and knowledge department and has been involved in her family’s business since 1999 aft er an education in chemical engineering, viticulture and oenology. she is also president of plataforma tecnologica del vino (ptv), a body that serves as a meeting point for rdi executives in the spanish wine sector. in this interview she shares her perspectives on business driving forces and critical aspects, especially related to the funding and implementation of innovation programmes and the keys to drive the business into the future. keywords: wine business, family, tradition, innovation, rdi, interview. phnm: mireia, we very much welcome the opportunity to undertake this interview and appreciate the time and commitment you have assigned to this, within your very diverse roles and responsibilities within the family business, familia torres winery, and across into industry leadership, notably via ptv, asociación plataforma tecnológica del vino. likewise, we recognise the very serious impacts that the covid pandemic has imposed on individuals, families, businesses, and nations, so we express our best wishes and added thanks for your contribution in such challenging times. one might have anticipated that your family background would lead you naturally to a career within the wine business, but we understand that this was not necessarily so. perhaps you might outline a picture of your formative infl uences from family and schooling that established your early interests and underpinned your educational and career paths? mt: my family has been involved in the wine sector for fi ve generations. in fact, two years ago, we celebrated our 150th anniversary. my father, miguel a. torres, had a huge infl uence on me when i fi nished my chemical engineering training in barcelona. he convinced me to study viticulture and oenology in montpellier. once there, i liked it so much that i decided to dedicate my professional career to wine. 142 peter hayes, nicola marinelli phnm: we note that your early, technically directed training, initially in chemical engineering complemented by specialist studies in viticulture and oenology, was then further reinforced with a pdd (programa de desarrollo directivo) in iese and a master in innovation and entrepreneurship, while holding your present position of innovation & knowledge director at familia torres; you have also held roles in r&d, as winemaker, and as both technical and production director. given that familia torres, is a long-established family company, within a traditional industry sector, to what people and driving factors do you attribute the very effective – but not so usual – embrace of the ‘new’ and complementarity of tradition and innovation? mt: i think that the family philosophy of hard work, non-conformism, and resilience has marked the direction of the business over the years. my father has been an important source of inspiration for the fifth generation. his work capacity, negotiation skills, and determination, as well as his vision of the future, have had a huge impact on us all. the family understands the need to innovate. even my grandfather, in his time, was a visionary and one of the pioneers behind wine export and brand registration, both aspects were extremely appealing to tourists to spain. my father was also a major driving force behind the changes in the expansion of the company and the creation of fine, premium wines, such as mas la plana, made from international varieties. innovation also plays an important role today in studying environmental changes, as well as social trends and demands. understanding change enables you to understand and predict how it will affect consumption patterns and wine quality. the problem with innovation is getting shareholders to understand that not every experiment or pilot test are going to give positive results and that you need to be patient because some projects involving vines can easily entail a decade of research. phnm: might you also amplify just how familia torres utilises the conjunctive forces of tradition and innovation within its pr and marketing, and where messages or trends from the market inform fresh r&d, and product or process innovation? how tightly are the factors within this cycle linked, and what is the key to effective, enduring innovation across technical, production, marketing and the broad issues of resource use and sustainability? mt: fundamentally, familia torres’s message is closely linked to tradition, the land, sustainability, regenerative viticulture, and a return to ancestral wisdom. we carry out numerous projects from the area of innovation that help to improve quality, costs, process efficiency, sustainability, digitalization, consumer knowledge, etc. yet very few directly address the product. since i began in innovation, there have only been two projects directly linked to the end-product; one focusing on recovering ancestral varieties with the objective of making exceptionally unique wines and the other on dealcoholized wines. at the moment, the innovation process works in the following way. first, innovation priorities are decided by the ceo, and then projects and resources are discussed. the scope of the area of innovation is wide-ranging. every area of the company has resources to carry out projects, which are the responsibility of the area director. the innovation & knowledge department provides support to promote projects in all areas in the form of assistance and funding. it also looks for synergies and writes business plans when needed. every project is assessed by a steering committee. phnm: allowing that your prime experience is within a privately held, family business, you have nevertheless extensive contact and engagement with many others in the sector, including within your role as president of ptv and noting you are also vice president of innovi, the catalan wine cluster. what do you identify as the essential differences between family and public corporate business regarding objectives, successional matters, longevity of investment cycle etc. and are any such differences of significance in advancing or constraining innovation, adaptation, and competitiveness of individual businesses, and more significantly the wine sector itself? mt: i think, in general, that a family-run business transmits certain values and, from my point of view, is more committed to society and its surroundings than a public corporate business. what’s more, the business vision is usually long term and there is strong commitment from family members. however, a family-run business can also be complex as it combines personal or family and professional aspects. moreover, as new generations get more involved and the number of stakeholders increases, the difficultly in understanding and accepting certain business management policies can lead to disagreement. according to the figures, 70% of family-run businesses do not get past the second generation and 20% of those that do make it, disappear within the third generation. phnm: this leads us then to addressing questions around the structure, function and effectiveness of research funding and the delivery of r&d + innovation for the benefit of the spanish wine sector. could you please outline the key challenges facing the broad spanish wine sector and what key strategic themes or programmes are being promoted and facilitat143a family business in the global market between tradition and innovation: an interview with mireia torres macsazzek ed through ptv – in other words, what are the priority themes and why are they best executed by ptv? mt: in spain, according to the latest cotec report, 1.4% of gdp is targeted at rdi while in other countries such as south korea and israel that figure is 4.5%, 3.4% in taiwan, 3.1% in germany, 2.8% in the us, 2.4% in china… europe wanted it to be at 3% by 2020 but the objective has not been reached. however, what is even more worrying is that spain is at the bottom of the oecd and eu ladder when it comes to rdi investment. even countries like greece, hungary, portugal, poland, and the czech republic are ahead of us. we have to bear in mind that while the wine sector in spain invoices 6.5 bn euros per year and that the whole sector represents 1% of gdp, since 2018, it has also been investing a minimum of 130-150 million euros per year in rdi. that represents around 23-26% of investment in r&d in the agrifood sector and 0.941.08% of domestic investment in r&d. it is important to highlight that the figure is higher than the domestic average for the agrifood sector (0.64%) and higher than the average of the eu-28 (0.69%) as regards gva. so, basically, the wine sector represents approximately over 5% of r&d investment in the food and drink sector, and 1% of rdi investment in spain. moreover, it also needs to be highlighted that it is exceedingly difficult to promote innovation in the wine sector because it is highly fragmented. the ptv wine technology platform gives priority to boosting projects and the transfer of knowledge to the sector through webinars and training sessions. it is also in conversation with the pertinent public authorities to communicate the needs of the sector every four years through the strategic agenda. the main priorities, at the moment, relate to digitalization, sustainability, circular economy, and adapting to climate change. the ptv has the financial support of the spanish wine interprofessional organization (oive) and the support of the spanish wine federation (fev), as well as national public financial entities (cdti, aei, micin, mapa, ine, etc.) and regional innovation agencies. phnm: from these ptv initiatives, what lessons has industry learnt regarding the translation of rdi into business innovation and competitive advantage---commercial, social, reputational---and which comes first from an esg or csg perspective? just who can and does initiate such developments? is it primarily individual operations or perhaps regional groups or clusters such as innovi? mt: in general, spain lacks policies that promote innovation, and there is also a lack of investment from the majority of businesses. there is a need to enhance the transfer of knowledge from research centres to businesses. associations such as ptv at a domestic level and clusters such as innovi help to revitalize and change the vision of innovation in companies within the sector. phnm: recognising that this journal has a focus upon wine economics and policy do you have a view on the role and potential of research and innovation in economics, policy, marketing, and new product development to meet changing global conditions, social demands and new consumers? how do we best deploy public, pre-competitive research in these areas and translate these into both private and public benefit? mt: from my perspective, we should take advantage of the momentum created by digitalization to capture data from social networks about what consumers/clients want and use it to identify new trends. when a company creates a new business model or product, if it works, others will follow. i believe that a good way to study the viability of technology is by improving innovation policies and encouraging collaboration between businesses and research centres (partly funded by the authorities). the aim should be to increase revenue and create a new, interesting business model. phnm: it is impossible to ignore the local and global impact of the covid pandemic. we wonder if you have any brief comments on the potential longer-term impact on the way the sector prepares for crises, anticipates future market and social trends, and prepares itself to be both resilient and agile in the future; you may (or likely have) addressed this, at least in part, in our previous question… mt: in spanish, we also have the saying “every cloud has a silver lining” and this has been the case with covid. this exceptionally complicated situation created many challenges for people and businesses alike. however, i believe that it has changed us all. it has made us more resilient. it has also speeded up digitalization, which has prompted changes in our habits, our way of working, of relating to each other, our demands, consumer demands… many of the recent innovation projects are linked to new technologies brought about by digitalization such as drones, satellite imaging, iot sensors, predictive algorithms, robotics, digital twin and blockchain. of all the family wineries, the pandemic had the most impact on the one i manage personally, jean leon, a modest winery in penedès that used to sell over 70% of its products on the domestic market – in the hospitality sector alone. then our sales fell by 50%! at the beginning, we were really concerned, but then we quickly responded to the situation. the whole team got together 144 peter hayes, nicola marinelli with distributors in workshops to create a 5-year business plan. once approved, the whole group has been following it like clockwork. i love to see the team happy with the changes we are making and motivated by the project. it is one of the things that gives me most satisfaction. phnm: we must look to close this interview, but would like to ask how you manage to balance your intense professional activities on behalf of the family company and the industry, with your personal interests. you have evidently strong multicultural engagement, socially and linguistically, and are involved in wider foundation activity such as fundación familia torres with its focus on protection of children and the wellbeing of people, promoting education and social integration. perhaps you might note some of the achievements of the fundación, but also ask, can you and do you find avenues to integrate, yet balance your public and personal life while finding time and energy for personal diversions and relaxation? mt: the fundación familia torres was founded by my grandparents in 1986 and has funded projects, in spain and around the world, mostly associated with children, although in recent years it has also funded projects focused on empowering women, which fills me with satisfaction. since 1986, we have collaborated on over 400 projects with ngos in 12 countries. the link to the website is https://fundacionfamiliatorres.org/. i have a 23-year-old daughter and a 22-year-old son, and both are engineers. my principal hobby is tennis, but i also enjoy cooking. i love cooking for family and friends. phnm: mireia, our thanks for your contribution to the journal. your heavy involvement and high responsibilities in both the private and public side of the business make your perspective invaluable for our readers and for the further development of the debate about the role of tradition and innovation and their interaction in the wine sector. wep – wine economics and policy just accepted manuscript 1 just accepted 1 2 3 4 old and new challenges in the wine business: what lies ahead for wine 5 economics and policy 6 7 nicola marinelli1 8 9 10 11 1 dipartimento di scienze e tecnologie agrarie, alimentari, ambientali e forestali, university of 12 florence, p.le delle cascine, 18, 50144 firenze, italy, email: nicola.marinelli@unifi.it 13 14 15 16 17 18 19 20 correspondence concerning this article should be addressed to nicola marinelli, dipartimento di 21 scienze e tecnologie agrarie, alimentari, ambientali e forestali, university of florence, p.le delle 22 cascine, 18, 50144 firenze, italy, email: nicola.marinelli@unifi.it 23 24 25 this article has been accepted for publication and undergone full peer review but has not been through 26 the copyediting, typesetting, pagination and proofreading process, which may lead to differences 27 between this version and the version of record. 28 29 please cite this article as: 30 31 marinelli n. (2022), old and new challenges in the wine business: what lies ahead for wine 32 economics and policy, wine economics and policy, just accepted. 33 doi: 10.36253/wep-13987 34 35 36 37 wep – wine economics and policy just accepted manuscript 2 abstract: 38 the wine sector, as all the other businesses, is facing the effects of the recent global pandemic and of 39 the energy price crisis, but at the same time the research has not finished dealing with old/new 40 challenges in the field of sustainability and innovation. and probably never will, as these issues 41 represent an underlying constant in the debate. 42 as the wine world continues to change, our journal changes: eleven years after the publication of the 43 first issue, it is time to take stock of the situation and discuss what lies ahead. 44 45 key words: wine, business, research, innovation, sustainability 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 wep – wine economics and policy just accepted manuscript 3 dear readers, 72 when this journal came to life with the publication of its first issue in 2012, it is no secret that there 73 was some sort of scepticism about it. some said that there was no need for another wine journal and 74 that the topic was so specialised that a market for it would be very narrow. now, after eleven years 75 and twenty-two issues, that scepticism seems to be vanished. wine economics and policy (wep) 76 proved to be successful, in spite of the hardships that any new publication needs to face at first, and 77 the reasons for this success are very simple: 78 a solid backbone: wep is an emanation of the university of florence, that has a long and 79 layered history of wine research and education. unicesv, the university centre for the 80 development of the wine sector, pools the best resources internally and connects them with 81 the rest of the wine academia and the business; 82 a prestigious and active editorial board: in particular, the idea to have editors for specific 83 geographical areas eased the appeal of the journal worldwide and facilitated the submissions 84 from very different and very specific realities of the wine world; 85 a fruitful cooperation with the publishers: elsevier at first and now firenze university press 86 (fup) gave the journal all the means necessary for establishing a visible presence in the 87 competitive world of academic journals; 88 the idea behind it: from the start, wep was never intended to be “just another journal about 89 wine”. the topics we tried to cover ranged from the traditional ones like consumer behaviour 90 and business analysis to newer ones, with a particular attention on interdisciplinary aspects. 91 moreover, the journal was never intended to be addressed only to academia and has always 92 maintained a space for policy analysis and discussion and for the direct voice of the business 93 sector. 94 95 when i was asked to take over the role of editor in chief from prof. silvio menghini, i admit i had 96 some doubts, and these doubts came from the fact that i thought it would be impossible to continue 97 to achieve all that was achieved under prof. menghini’s guidance. silvio started the journal and led 98 it where it is now with the help of the rest of the editorial board and the referees who contributed 99 with their availability and expertise: i will not mention the numbers related to the journal’s 100 performance, because they are visible on our cover and our website, but we can affirm that wep is 101 recognised as a prestigious publication for its reach and for the standards that researchers require 102 when deciding where to direct their work. 103 104 wep – wine economics and policy just accepted manuscript 4 so, first of all, i would like to thank prof. silvio menghini and promise that i will do my best to keep 105 up the excellent work. it is a challenge, though, because we move through a world that is constantly 106 changing and compels us to rethink, reassess and redirect our work all the time. 107 108 where to now, then? we just came out (maybe) of a pandemic that hit hard, not only in terms of 109 health and social welfare, but also in economic and behavioural terms. the wine world has been 110 affected by it as all the other sectors and many studies have already been published addressing the 111 effects of the pandemic for the business. new behavioural and purchasing patterns emerge and need 112 to be further analysed to assess their relevance and their persistence in the wine market and to supply 113 producers with clearer indications. these new patterns stem from the reshaping of our social life 114 during lockdowns but also from the economic impact this period had on society, and this leads us to 115 face the other issues that affect the post-pandemic world economy, i.e. the energy crisis we are going 116 through now in many parts of the world. 117 118 but the challenges for the future do not stop here. there are some “old” challenges that still need to 119 be addressed completely or, better, we need to continue addressing: the climate crisis calls for a 120 renewed look at sustainable production and consumption with a particular attention to circular 121 economy models that many governments seem to be aiming at with the support of new, changing 122 policies. 123 124 another “old” challenge regards the wide spectrum of digitalisation. the term is so broad that it does 125 not implicitly determine its object, so it can be applied to pretty much everything: from online new 126 media for the communication and distribution of wineries to the use of blockchain, the creation of 127 new accounting software and more. a lot of work was done on many aspects of it but we are certainly 128 not done with it, considering that, generally, technology is progressing at a faster pace than economic 129 and market research. 130 131 one last thing, that is directly linked to the mission of the journal: we should never forget about the 132 dynamic between academia and business. the research world is often biased towards a self-133 referencing approach that sometimes springs up in research… for the sake of research. this is 134 something that i, as new editor in chief of this journal, will try to avoid at all costs. i am well aware 135 of the needs and demands of academic research, but there is no need for it unless it has a concrete 136 impact in the real world. 137 138 wep – wine economics and policy just accepted manuscript 5 here’s to another eleven years (and beyond) of wine economics and policy. 139 140 141 wine economics and policy 10(2): 41-44, 2021 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/wep-10391 wine economics and policy citation: omer gokcekus (2021) does belonging to an appellation make a difference? new evidence from ontario viticultural areas. wine economics and policy 10(2): 41-44. doi: 10.36253/wep10391 copyright: © 2021 omer gokcekus. this is an open access, peer-reviewed article published by firenze university press (http://www.fupress.com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information files. competing interests: the author(s) declare(s) no conflict of interest. does belonging to an appellation make a difference? new evidence from ontario viticultural areas omer gokcekus seton hall university, 400 south orange ave,south orange, nj 07079, usa, email: omer.gokcekus@shu.edu abstract. assuming that wine markets are efficient, ultimately a bottle of wine’s cost and therefore its price should reflect its vintage, grape variety as well as how it is vinified. yet, being an experiential good, a wine’s price is also closely related to its place of origin. if the designated viticultural area of wine is coming from is not considered, even in a relatively new wine country, wine makers may end up over-estimating the premium attached to vintage, variety as well as how it is vinified. regression results indicate that, for ontario wines, the over-estimations vary between 1% points and 18% points. keywords: appellation, ava, price. introduction until recently, canadian wine was almost an oxymoron. other than its infamous ice wine, even well-informed wine drinkers were not aware of canadian wines. the reason being that canada resides out of conventional wine growing zone between 30 and 50 degrees latitude north and south of the equator; canada was dismissed as a wine country. yet, canadians have been making wine for centuries. (phillips, 2017). moreover, recently their wine industry is growing at an accelerating rate. for instance, from 2011 to 2018, canadian wine sales in canada went up by 41%, from 1.67 to 2.35 billion can$; while the imported wine sales were up by 34% during the same time period. (source: statistics canada via statista.) in particular, wineries in the ontario region are building a good reputation and market share in canada. with 6,663 hectares of wine grape area, ontario region has 60% of the canadian bearing vineyard area. (vqa ontario wine appellation authority, 2019.) since 1999, canadian wine industry has been heavily regulated. (carew and florkowski, 2012.) for instance, vintners quality alliance, or vqa ontario wine appellation authority is a regulatory agency responsible for “maintaining the integrity of local wine appellations and enforcing win42 omer gokcekus emaking and labelling standards in ontario.”1 as is shown in figure 1, vqa ontario divides ontario into three primary viticultural areas or appellations of origin: niagara peninsula, lake erie north shore, and prince edward county. within the niagara peninsula appellation, ten sub-appellations are identified; four of them on the plains close to lake ontario (four mile creek, niagara lake shore, niagara river, and st. david’s bench) and three on the bench lands of the niagara escarpment (beamsville bench, short hills bench, twenty mile bench). the other three sub-appellations are creek shores, lincoln lake shore, and vinemount ridge. thus, there are effectively four layers of appellations within the ontario wine region. cross, plantingab and stavins (2011) shows the economic importance of the concept of terroir but not the reality of terroir – as proxied for by locational attributes on the sale prices of vineyards. similarly, as is argued in gokcekus and finnegan (2017, p. 345-346), “… it is well established that terroir can have a demonstrable effect on wine’s worth, but there is no consensus on whether terroir matters as a fundamental reality or solely economically due to the perceived reputation of a particular area. nevertheless, the prices at which winemakers can sell their wines vary depending on the wines’ geographic origins.” (matthews, 2016; landon and smith, 1997, lecocq and visser, 2006; patterson and buechsenstein, 2018). 1 for details, see vqa ontario wine appellation authority’s web page: https://www.vqaontario.ca/home. in this study, we ask the following questions: does it make a price difference whether a wine is coming from a particular ontario appellation? in particular, is there a regional reputation premium attached to a particular appellation or sub-appellation? moreover, does the premium for vintage, variety, and vinification change whether the regional differences are taken into account or not? data for 4,213 table wines from ontario wine region, between 2015-2018, we have information regarding their retail price, vintage, size, grape variety(ies), appellation, as well as vinification—whether they are from a name vineyard or estate bottled. table 1 provides summary statistics for these wines. calculations and findings to set a benchmark, first, as an ad-hoc regression model, the real price of each bottle of ontario wine is set as a function of vintage, variety, and vinification2 without taking appellations differences into account. 2 the wine must be made from at least 85% of the grape variety named to be considered a single variety. estate bottled are variations such as “estate grown” or “grown, produced and bottled by” are permitted if the wine qualifies for the estate bottled designation, close variations are not permitted for non-vqa wines. vineyard (any named vineyard indicating origin is not permitted for non-qualifying vqa wines or nonvqa wines, two or more vineyards may not be named but general references to vineyards or multiple but unnamed vineyards are permitted). ontario niagara peninsula niagara escarpment beamsville bench short hills bench twenty mile bench niagara-onthe-lake four mile creek niagara lake shore niagara river st. david's bench creek shores lincoln lake shore vinemount ridge lake erie north shore prince edwards county figure 1. ontario appellations. table 1. summary statistics for 4,213 ontario wines. variable average price $ 23.12 price (2002)* $ 17.81 single variety 86% named vineyard 11% estate bottled 7% white wine 53% chardonnay 16% riesling 14% pinot noir 10% cabernet franc 10% *real, 2002 prices (canadian consumer price index is used in deriving real prices.) 43does belonging to an appellation make a difference? new evidence from ontario viticultural areas ln(pricei) = β0 + β1 vintagei + β2j ∑7j=1 varietyj,i + β3k ∑4k=1 vinificationj,i +εi where, ln is natural logarithm operator; vintage is the age of the wine; varietyj is a dummy variable, where j = chardonnay, pinot noir, cabernet sauvignon, cabernet franc, riesling, sauvignon blanc, merlot, or pinot grigio; vinification is a dummy variable, where k = single variety, estate bottled, named vineyard, or named vineyard and estate bottled; finally εi is a well behaving error term. according to the robust regression results, as is summarized in column (2) of table 2, there is a statistically significant relationship between real price and vintage, variety, and vinification: (1) vintage matters; (2) there is a premium for red wines—pinot noir, cabernet sauvignon, cabernet franc, and merlot as well as a white wine, chardonnay; (3) making wines by using a single variety and estate or/and named vineyard bottling increases the price. second, the real price of each bottle of ontario wine is set as a function of vintage, variety, vinification as well as fifteen appellation/sub-appellations: ln(pricei) = β0 + β1 vintagei + β2j ∑7j=1 varietyj,i + β3k ∑4k=1 vinificationj,i + β4l ∑15l=1 appellationk,i + εi column (3) of table 2 presents the robust regression results for this specification. these findings indicate that for ontario wine prices ‘terroir’ matter. for example, compared to an ontario wine with no particular appellation designation, a wine from four mile creek acquires an additional 35% premium of which 19% is due to having its own sub-appellation, 7% for being under niagara-on-the-lake, and 9% for a niagara peninsula appellation. the size of the premium differences from one appellation to another is striking: it varies between 5% (lake erie north shore) and 39% (st. david’s bench). these differences highlight the importance of appellation designations even in a relatively new and also small wine region of ontario. another finding is about the size of the over-estimation regarding the premium attached to vintage, variety, and vinification, if we ignore appellation/sub-appellation differences. according to the regression results in table 2 – the difference between column (2) and column (3) – the estimated coefficients for vintage, variety and vinification variables were over-estimated by between 1% points and 18% points. for instance, premium attached to grape varieties pinot noir, chardonnay, and cabernet franc are 7.2%, 4.2%, and 4.1% points respectively were over-estimated unless appellation designations were taking into account. similarly, regarding vinification, overestimations are 17.6%, 8.7%, 7.4%, and 6.8% points for name vineyard and estate, named vineyard, estate bottled, and single variety, respectively. these differences are not only statistically significant; indeed, they are economically significant too. table 2. ln (wine price2002) = f (wine characteristics); robust regression results. (1) (2) (3) characteristics coefficient t-stat coefficient t-stat vintage wine age 4.56% 11.94*** 3.88% 10.66*** variety chardonnay 9.34% 5.39*** 5.16% 3.07*** pinot noir 25.40% 12.59*** 18.23% 9.25*** cabernet sauvignon 25.47% 11.12*** 23.02% 10.4*** cabernet franc 16.81% 8.47*** 12.67% 6.61*** riesling -0.99% -0.55 -4.16% -2.36** sauvignon blanc -1.42% -0.55 -3.28% -1.33 merlot 22.69% 10.02*** 20.09% 9.2*** pino grigio -1.01% -0.40 -3.45% -1.43 vinification single variety 22.04% 13.83*** 15.27% 9.88*** estate bottled 14.97% 7.29*** 7.61% 3.69*** named vineyard 30.48% 17.46*** 21.80% 8.59*** named vineyard and estate 34.87% 13.81*** 17.25% 9.31*** appellation/sub-appellation beamsville bench 4.69% 1.26 creek shores 8.34% 1.79* four mile creek 18.69% 6.1*** lincoln lake shore 22.99% 7.78*** niagara lake shore -8.81% -2.33** niagara river 10.09% 2.62*** short hills bench -2.37% -0.37 st. david’s bench 22.27% 5.8*** twenty mile bench 2.47% 0.62 vinemount ridge 20.04% 5.53*** niagara escarpment 17.70% 5.6*** niagara-on-the lake 7.15% 3.41*** niagara peninsula 9.28% 6.14*** lake erie – north shore 5.14% 1.8* prince edwards county 32.50% 13.28*** constant 2.315 124.27*** 2.289 125.57*** obs. no. 4,213 4,213 adjustedr2 0.27 0.34 f(13, 4199) 119.99*** f(28, 4184) 78.48*** note: significance levels (two-tailed) 1% (***), 5% (**), and 10% (*) 44 omer gokcekus discussion to summarize, these findings 1) highlight the economically significant effect of terroir or a regional reputation even in a relatively new wine region; 2) indicate that ignoring the importance of terroir clearly could result in an overestimation of the premiums attached to different vintages, varieties, and vinification; and, moreover, 3) show that these premiums are not uniformly overestimated; there are variations among vintage, varieties as well vinification. consequently, a wine maker should be paying attention to things that they can choose or control, but meanwhile they should keep in mind the location of their winery in order to set realistic expectations for the return on their investments and efforts. references carew, r. and florkowski, w. j. regulatory and institutional developments in the ontario wine and grape industry. international journal of wine research 4 (2012): 33-44. cross, r., plantingab, a. j. and stavins, r. n. “the value of terroir: hedonic estimation of vineyard sale prices.” journal of wine economics 6, no. 1 (2011):1-14. gokcekus, o. and finnegan, c. “price effects of establishing a new sub-ava within oregon’s willamette valley ava.” journal of wine economics 12, no. 4 (2017): 345-353. landon, s., and smith, c. e. “the use of quality and reputation indicators by consumers: the case of bordeaux wines.” journal of consumer policy 20, no. 3 (1997): 289–323. lecocq, s., and visser, m. “what determines wine prices? objective vs. sensory characteristics.” journal of wine economics 1, no. 1 (2006): 42-56. matthews, m. a. terroir and other myths of winegrowing. oakland: university of california press, 2016. phillips, rod. the wines of canada. oxford: infinite ideas ltd, 2017. patterson, t. and buechsenstein, j. wine and place: a terroir reader. oakland: university of california press, 2018. vqa ontario wine appellation authority (2019). 2019 annual report. wine economics and policy volume 10, issue 2 2021 firenze university press productive efficiency of wine grape producers in the north of portugal micael santos1,*, xosé antón rodríguez2, ana marta-costa3 organic and conventional grape growing in italy: a technical efficiency comparison using a parametric approach federica cisilino1, fabio a. madau2,*, roberto furesi2, pietro pulina2, brunella arru2 competitiveness framework to support regional-level decision-making in the wine industry: a systematic literature review jorge mota*, rui costa, antónio moreira, silvana serrão, carlos costa does belonging to an appellation make a difference? new evidence from ontario viticultural areas omer gokcekus how do sparkling wine producers adopt a sub-appellation? evidence from an exploratory study on heroic prosecco superiore rive luigino barisan*, luigi galletto motivation factors for organic wines. an analysis from the perspective of german producers and retailers katharina hauck*, gergely szolnoki, evelyn pabst consumer preferences for certified wines in france: a comparison of sustainable labels adeline alonso ugaglia1,*, britta niklas2, wolfram rinke3, dan moscovici4, jeff gow5, lionel valenzuela6, radu mihailescu7 wine ratings and advertising strategies: is there a link? ricardo sellers-rubio adaptive market hypothesis: an empirical analysis of the wine market anoop s kumar wine economics and policy 12(1): 19-22, 2023 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/wep-14724 wine economics and policy citation: riccardo vecchio (2023). does anyone read my papers? the gap between academic consumer research and the real (wine) world. wine economics and policy 12(1): 19-22. doi: 10.36253/wep-14724 copyright: © 2023 riccardo vecchio. this is an open access, peer-reviewed article published by firenze university press (http://www.fupress.com/ wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information fi les. competing interests: the author(s) declare(s) no confl ict of interest. does anyone read my papers? � e gap between academic consumer research and the real (wine) world riccardo vecchio department of agricultural sciences, university of naples federico ii (italy),via università 100, 80055 portici –naples, italy e-mail: riccardo.vecchio@unina.it abstract. th e goal of this discussion paper is to foster the debate among scholars on some of the key issues that are currently challenging the impact of academic wine consumer studies and encourage younger researchers towards alternative paths. based on my personal experience, i will focus on some scholars’ practices that (in my view) could be revised to increase the reconnection of researchers to the practical world, namely: topic relevance vs. trendiness, methodological approaches and data utility, sample issues and the replication crisis. keywords: relevance, practicioners, scholars. 1. introduction as a wine consumer scholar from the beginning of my academic career i was clearly aware that i would never uncover the role of oncogene activation in human thyroid carcinomas or discover a real-time strategy to control prosthetic hands. nevertheless, i always thought that my research outputs could be of (some) interest for practitioners and policy makers. th e sad reality is (in my case) that the outcome papers are only read by academic colleagues. th e most frustrating consideration stems from the fact that nowadays research funds are deeply bounded by practical objectives and deliverables. nonetheless, my wine consumer studies (i can state with a great degree of confi dence) have rarely whispered in the ears of princes [1] – informed policy makers – and never advised wineries’ managers in their strategic planning. as a partial consolation, i quote lockshin and corsi [2] (p.493, 2020) which stated: “th is behaviour has oft en led to the accusation, particularly from industry, that our research does not provide answers to the questions that really matter”. th e researcher-practitioner divide is indeed an enduring issue among many disciplines and especially in applied academic fi elds (see, among others, [3]). notwithstanding the merits of knowledge diffusion among the academic community, i do believe that as applied scholars we should profoundly aim to reach a wider audience of possible ben20 riccardo vecchio eficiaries of our research. similarly, we must encourage young scholars to develop studies that have an impact also (or foremost) on the real-world. however, this pattern is not without potential pitfalls, recalling the caveats of too closely following practitioners’ agendas [4]. in my personal view, academic studies have strongly been pressured towards novelty of findings and the application of innovative methodological approaches, which are surely important features of research but do not represent (necessarily) a quality mark. additionally, the increasing competitiveness and complexity of the scientific publication process has encouraged scholars to engage in research that have greater publication appeal (the so-called indicator game). moreover, academic research timing (from hypothesis formulation to data gathering and article publication) is clearly divergent from practitioners’ need to collect and analyse market information. nevertheless, a sharp shift towards relevant research that addresses substantive problems could be necessary, urged by the increasing amount of external funding which is progressively more outcome based. the goal of this discussion paper is to foster the debate among scholars on some of the key issues that are currently challenging the impact of academic wine consumer studies and encourage younger researchers towards alternative paths. in my view not everything is directly attributable to the scholars’ community, as some pushbacks are also due to the industry and to policy makers. hereafter, due to my personal experience, i will focus only on some scholars’ practices that (in my view) could be revised to increase the reconnection of researchers to the practical world: topic relevance vs. trendiness, methodological approaches and data utility, sample issues and the replication crisis. but first some words of warning. whilst i am aware of the importance of the relevance versus rigour debate [5] and the differences existing among universities and business schools’ research, for sake of conciseness i will not dwell into these issues. additionally, i do not question the basic principles of academic freedom [6], which is in my opinion one of the most remarkable benefits of our profession. finally, i transparently admit that in many papers i have deviated from several recommendations provided in this discussion and (as later highlighted) i am aware of the incentives of digressing. 2. relevance vs. trendiness (and the indicator game) scientists consider an article to be relevant if it addresses an issue that has an impact on collective and/ or individual well-being in the short or long term. while undoubtedly it is hard to perform wine consumer research that actively benefits the broader collective, we should encourage studies that provide useful insights for multiple stakeholders. however, an unwritten, but quite wellknown, fast-track to publication is to perform research on a “hot topic”; in other words, investigate an issue that is popular in the international or national media due to some (recent) trend or phenomenon. nevertheless, most often when a topic is popular among the general press, the wine industry has already exploited its market opportunities. similarly, articles dealing with such hot topics have higher probabilities to be cited by colleagues and thus contribute to the indicator game [7]. 3. methodological approaches and data utility the general rule in science is that empirical research is rigorous if the methods and techniques warrant the conclusions drawn. whilst scholars generally acknowledge that all methodologies investigating consumer and other stakeholders’ attitudes and behaviours (from field experiments to stated preferences techniques) hold specific limitations and strengths (see, among others, [8]), there seems to be a periodic popularity upsurge of one, specific method of data gathering. guiding to over-criticism towards other methodologies and to a proliferation of studies more concerned of showcasing the complexity and grandeur of the underlining design rather than focusing on the potential utility of outcomes. relatedly, a worrying issue is also the use of validated scales in our research, which is certainly due to seek high methodological rigour, nonetheless it can lead scholars to diverge from real-world measurements. whilst information on psychological processes in the consumer journey and possible moderating or mediating influences are key for wine industry stakeholder, often the outcome of these scales depict individual psychometric characteristics that do not offer practical insights to wineries or policy makers interested in identifying market segments or interventions’ effectiveness. studies should be designed building on the unique make-up of that market [2] and carefully considering their final, empirical contribution [9]. 4. under-powered samples and the replication crisis causal inferences to be informative relies on externally valid samples [10]. however, empirical evidence suggests that non-representative convenience samples 21does anyone read my papers? the gap between academic consumer research and the real (wine) world can provide insights that closely resemble those found using representative samples [11]. indeed, many wine consumer studies rely on limited samples, most often non representative of any specific target population [12, 13]. while acknowledging the difficulties in achieving successful academic collaborations, an alternative to perform studies with narrow, convenience samples could be to crowdfund larger datasets collecting quota-based sub-samples from different affiliations. the immediate advantages of such practice would be to reduce individual scholars’ efforts of data collection (as each participant could provide a limited number of respondents) and more closely reach a larger population, (probably) located in different geographical areas. strictly related to the issue of low external validity of many wine consumer studies is the huge issue of the publication bias attached to replication studies. most scholars are convinced (and i fear appropriately) that journals will never publish research that loyally replicates an investigation performed by other authors [14]. whilst the advancements provided by this work for the academic community could indeed be limited, the outcomes would be of great benefit for the practitioners. as findings could offer an important update on stakeholders’ attitudes or/and behaviours and, even more importantly present, a validation of previous insights. 5. concluding remarks i hope that this discussion paper, examining a nonexhaustive list of core topics that limit academic studies’ usefulness to solve practitioners and policy makers problems, will provide some impetus to wine consumer researchers to further debate (and potentially increase) our contribution to the real-world. among the possible options, we should try to engage practitioners in the design of our studies and further exploit the opportunities offered by traditional and social media to share outcomes through popular science outputs (as indeed many younger scholars are increasingly doing). overall, i sincerely believe that enhancing the impact of our wine consumer research is a win-win solution. references [1] roth, a. e. (1995). bargaining experiments” chapter 5 in john h. kagel and alvin e. roth, editors, the handbook of experimental economics. [2] lockshin, l., & corsi, a. m. (2020). key research topics likely to generate australian and other wine producer countries’ support during the period 2020-2030. international journal of wine business research, 32(4), 493-502. doi.org/10.1108/ijwbr-01-2020-0004 [3] brennan, r. (2004). should we worry about an “academic‐practitioner divide” in marketing? marketing intelligence & planning, 22 (5), 492-500. doi.org/10.1108/02634500410551879 [4] tapp, a. (2004). a call to arms for applied marketing academics. marketing intelligence & planning, 22 (5), 579-590. doi.org/10.1108/02634500410551950 [5] brewer, j. d. (2013). the public value of the social sciences. london, uk: bloomsbury. [6] fish, s. (2021). versions of academic freedom. university of chicago press. [7] werner, r. (2015). the focus on bibliometrics makes papers less useful. nature, 517(7534), 245245. doi.org/10.1038/517245a [8] huffman, w. e., & mccluskey, j. j. (2017). using stated preference techniques and experimental auction methods: a review of advantages and disadvantages for each method in examining consumer preferences for new technology. international review of environmental and resource economics, 10(3-4), 269-297. doi.org/10.1561/101.00000088 [9] ozretic-dosen, d., fuduric, m., & horvat, s. (2022). challenging the status quo in marketing research. journal of business research, 143, 294297. doi.org/10.1016/j.jbusres.2022.01.077 [10] banerjee, a. v., & duflo, e. (2009). the experimental approach to development economics. annual review of economics, 1(1), 151–178. doi. org/10.1146/annurev.economics.050708.143235 [11] frigau, l., medda, t., & pelligra, v. (2019). from the field to the lab. an experiment on the representativeness of standard laboratory subjects. journal of behavioral and experimental economics, 78, 160-169. doi.org/10.1016/j.socec.2018.06.003 [12] deroover, k., siegrist, m., brain, k., mcintyre, j., & bucher, t. (2021). a scoping review on consumer behaviour related to wine and health. trends in food science & technology, 112, 559-580. doi. org/10.1016/j.tifs.2021.03.057 [13] schäufele, i., & hamm, u. (2017). consumers’ perceptions, preferences and willingness-to-pay for wine with sustainability characteristics: a review. journal of cleaner production, 147, 379-394. doi. org/10.1016/j.jclepro.2017.01.118 [14] ferraro, p. j., & shukla, p. (2022). credibility crisis in agricultural economics. applied economic perspectives and policy. doi.org/10.1002/aepp.13323 [15] foltean, f. s. (2019). bridging marketing theorypractice gap to enhance firm performance: intro22 riccardo vecchio duction to the special issue. journal of business research, 104, 520-528. doi.org/10.1016/j.jbusres.2019.06.008 [16] kumar, n. (2008). the ceo’s marketing manifesto. marketing management, 17(6), 24–29. [17] fraser, k., deng, x., bruno, f., & rashid, t. a. (2020). should academic research be relevant and useful to practitioners? the contrasting difference between three applied disciplines. studies in higher education, 45(1), 129-144. doi.org/10.1080/0307 5079.2018.1539958 [18] rowley, j. (2012). evidence-based marketing: a perspective on the ‘practice-theory divide’. international journal of market research, 54(4), 521-541. doi. org/10.2501/ijmr-54-4-521-541 wine economics and policy volume 12, issue 1 – 2023 firenze university press state of the international wine market in 2022: new market trends for wines require new strategies rafael del rey1, simone loose2,* does anyone read my papers? the gap between academic consumer research and the real (wine) world riccardo vecchio a certification for natural wine? a comparative analysis of consumer drivers in italy and spain eva parga dans1,*, riccardo vecchio2, azzurra annunziata3, pablo alonso gonzález4, raimundo otero enríquez5 structure and development of the czech wine market and foreign wine trade kamila vesela, david křížek*, lucie severova the impact of alternative packaging on the life cycle of wine on tap stefano massaglia1, tibor verduna1, vincenzo varchetta2, filippo brun1, simone blanc1,* the new cap and the challenge of sustainability: a synthetic indicator for the italian wine sector roberta sardone1,*, simonetta de leo1, davide longhitano2, roberto henke1 analysis of the 2007-2008 hérault premiumized grubbing-up campaign: a tool to better understand fischer-boel’s 2008-2011 grubbing-up campaigns and the desire in 2022 to reintroduce locally premiumized grub-ups étienne montaigne1, samson zadmehran2,*, alfredo coelho3, yacine messaoudène4 the impact of fees on customer purchasing behavior and beliefs in winery tasting rooms: a scoping review john c. spence wine economics and policy 9(2): 127-135, 2020 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/wep-10084 wine economics and policy citation: peter hayes (2020) the role, scope and management of r&d and innovation in the wine sector: an interview with antonio graca. wine economics and policy 9(2): 127-135. doi: 10.36253/wep-10084 copyright: © 2020 peter hayes. this is an open access, peer-reviewed article published by firenze university press (http://www.fupress.com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information files. competing interests: the author(s) declare(s) no conflict of interest. the role, scope and management of r&d and innovation in the wine sector: an interview with antonio graca peter hayes am honorary president of oiv e-mail: grapwine@senet.com.au abstract. antonio graca is director of research and development at sogrape vinhos and an eminent figure in the wine business. with this extensive interview, he shares his thoughts and views on many key aspects of the business, starting with the role of r&d and innovation and the connection between academic research and the operators of the wine sector. the experience and knowledge that emerges from this indepth conversation can represent a precious source of inspiration for researchers, managers and all the stakeholders in the sector, as it sheds a light on many key issues in the way to success in the wine business. keywords: wine business, r&d, innovation, management, leadership, interview. ph: antonio, you are very well known and respected across the wine sector for your commitment to, and considerable influence on, r&d and innovation not only within your company, but across portugal and the broader international community. your activities are diverse, embracing a market focus in defining r&d programme development and extending across a wide field of interests from genetic diversity, climate change mitigation and adaptation to sustainability, amongst many others. might i therefore open this discussion/interview by asking what first motivated your interest in grapes, wine, and the business of wine; was it your early upbringing, exposure during schooling or university or some other avenue? ag: i was born into a family that always had professional connections with wine, port wine, that is. my father and uncle both worked for competing port companies while my grandfather, a printing entrepreneur (before digital times) supplied all type of barrel marks, wood case engravings, white seals to most port companies. further back in my lineage there were other people working in the wine business. you also must understand that, in portugal, wine is a staple, an element inseparable from food, always present at every table, a part of our collective history, culture and lifestyle. wine was there, since ever. having close relatives in the business, made it a recurring topic at family gatherings. i remember, since a very early age, being fasci128 peter hayes am nated by tales of growers and vineyards, harvest, of coopers and sailors, of winemakers, tasters and blenders, the cosmopolitan feel with so many non-portuguese names working the business and the praise those wines received in international markets. my father, especially, has always been a fantastic storyteller, listening to him is always a wondrous experience. my mother, on the other hand is an innate naturalist, with a special understanding of plants. we spent my childhood and early teen years living in a very rural area of south portugal and in that period, she awoke in me the love of nature and the curiosity for its discovery making me realize the knowledge trove therein and the recurring cycles providing never-ending opportunities to experience again what you missed last time. i was not explicitly groomed to get into the business in any way but looking back i guess it would be hard not to. ph: in your present (and perhaps recent) roles, you facilitate and mentor personal and professional development as you engage with many organisations and individuals; may i ask how you transitioned from pursuing your individual, scientific and professional development to that where you more broadly foster the careers of others, the development of the your employer company sogrape vinhos, and for that matter, industry? ag: it was evolution, adaptation. at one point i just realized that if i aligned my personal goals with those of larger organizations my sphere of influence would expand, opening opportunities that would be much harder to get on my own, maybe even downright impossible. the hardest to do was to understand and clearly define what i thought could be my best contribution. it took years. however, once i did, it became quite easy to identify those organizations that would open channels, leverage my efforts, provide fast-tracks and materialize ideas. it is not that i have been harnessing critical mass to fight uphill battles, quite the opposite. i dream goals, as unrealistic as they may seem but presenting a clear case to advance from the current state, the baseline. next, i establish steppingstones to get there and wait for opportunities, for «stones» to emerge. when i spot one, i put all my effort to get my feet onto it and move closer to the goal. of course, when you are in a network that shares your goals (an organization), you exponentiate eyes and brains looking for or creating steppingstones. if you combine organizations into more complex levels (companies, associations, federations, intergovernmental bodies, etc.), like the layers in an onion, you become able to align their goals together which, if supported by scientific knowledge, becomes a powerful «stone» maker. for that, the opportunities provided by sogrape’s entrepreneurial stance and its own evolution as a family-owned company with a clear view of its purpose and how to achieve it, were always a strong lever. today, a lot of my work consists of a constant evaluation of which goals from different organizations are in line or may be merged. the critical factor is always the human factor. the basic units of human organizations are human beings so i give the greatest importance to making sure people in organizations understand how goals can be shared and aligned and how each one’s contributions will advance the organization’s and their own personal goals. the key to tap into the immense potential of human beings is communication: clear, concise, and courteous communication. hence my increasing dedication to facilitating and mentoring roles. ph: have you any thoughts on what might constitute the ideal combination of qualifications, experience (within and outside the vitivinicultural sector) and other attributes (soft skills etc.) which would best fit an individual for research development & innovation (rdi) leadership and management in the current era? ag: besides a ph.d. in life or earth sciences, i believe restless curiosity, an open but inquisitive mind, out-of-the-box creativity, courage to manage calculated risks and diplomatic skills to be of utmost importance for someone who wishes to make a difference in wine rdi. wine science is a confluence of many scientific disciplines; therefore, they should be able to manage radically different areas of knowledge and understand more than just the basics for each and all of them. it’s a job where you are constantly being humbled by what you don’t know, leading to a life of permanent, intensive learning, mostly from others. critical thinking is of the essence and they should quickly sniff out unsound science, unfortunately so commonplace today, from a distance. someone playing such a role should think of themselves as bridge-builders, establishing connections where they don’t exist, understanding the differences and the common denominators to bring the relevant people together, strengthening bonds, weeding out disruptive factors while anticipating future needs. someone who is relentless in the pursuit of scientific rigour yet seasoned with a mild spray of non-conformism and an overt loathing of dogma. someone who can successfully match history with a vision of the future, tradition with innovation. finally, someone who excels in the art of communication, not just scientific but more than anything else, layman communication. this is a role that permanently requires the summarizing of knowledge, 129the role, scope and management of r&d and innovation in the wine sector: an interview with antonio graca concepts, ideas and outcomes, so concision is key. but so is translation in all its forms, between people of different backgrounds and scientific disciplines, researchers, entrepreneurs, policymakers, teachers, journalists, technical staff, and common citizens. this is an era of fast change and someone who wants to lead that change needs to be prepared to change faster. ph: understanding your strong focus on quality research to inform company and industry development, i then have several questions for you relating to development of industry capacity along with investment and management of r&d and its role in supporting your company’s strategic objectives: q: do you see r&d largely as a means of resolving production, supply chain or market problems, or does it also offer a means to generate opportunities, then test and calibrate the company’s potential to address current imperatives and future priorities? ag: actually, i think r&d is meant to perform both roles and there is even a third one: it offers a means to dream the future, to break the boundaries created by the current reality and the past originating it, allowing us to imagine ideal worlds and tools and approaches that do not exist yet. then, identify the course of action, pick up the right tools and start opening the path that would take us there. it is probably the most powerful aspect of r&d and companies who devote a sensible share of their effort to it are the ones that usually lead development and innovation (and growth) in their sectors. ph: so you see the most powerful potential of r&d is the generation of dreams and visualisation of opportunity, providing the foundations and mechanisms from which to successfully adapt and innovate; there’s clearly potential for many who are prepared to act on this advice! q: within your experience, what are the key elements underpinning the most successful models of company or industry-wide adaptation and innovation? (topdown, bottom-up, strategy driven, team-based----); perhaps some examples? ag: in 2004, just one year after i started sogrape’s r&d department, over a glass of shiraz in a melbourne restaurant, i made that very same question to a researcher i respect a lot who had worked for a us company, arguably the one having the largest private wine r&d department ever. she told me that success lies in the intersection between top-down and bottom-up, because that is when you maximize all possibilities. it was advice i never forgot and going back home started to apply that concept to our strategy, generating an inventory of knowledge gaps at the operational points where they were identified and establishing links with the overall company strategy for development and innovation. to materialize it, i insisted on having two meetings every year with the company’s senior management and shareholders where identified gaps were compared to research avenues that could be pursued to solve them. in these meetings, finished, ongoing and pipelined projects were presented as a function of where they fit in the overall company’s strategy and by doing so, a few years later we were getting our r&d effort more and more in tune with the company’s purpose, vision and mission. at the end of the day, this was building a bridge between practical needs, strategic options, and the scientific offer. our first project to be funded by a national program for business r&d was named icone – integrating coherently and optimizing nodes of excellence, a fancy name for a bridge between the company, high-tech smes, national and international universities. the project aimed at gaining collinearity between market needs, oenological production, and viticulture and so it did. among many other important outcomes, we were able to bridge the old gap between grape growing and winemaking by adopting precision farming technologies. today, the science of sustainability is strengthening another bridge across the also traditional gap between production and marketing. bridges, convergence points and intersections are for me the essential elements of successful r&d wherever you do it because they enlarge your spheres of possibilities while allowing you to retain focus on your priorities. q: is research in the wine business mostly a competitive advantage tool that companies should pursue independently and in competition with each other or is it a cooperative endeavour for joint progress? ag: i have always been very careful by not mixing either of those two approaches. i believe there cannot be cooperation “per se” between competing companies as that is against their nature as organizations. companies are out there to maximize profits and returns on equity and investments and that means that any gain your competitor has is a gain you lose. however, there is an interesting concept that was proposed under game theory by von neumann and morgenstern and later developed by john nash (of ‘a beautiful mind’ fame) and others. that concept is coopetition, that is, cooperating for the basic conditions that allow your business to build on shared resources while competing for market and consumers. so, from an early stage i started to rank research projects in terms of cooperative or competitive, developing the former as shared, networked projects that would produce capacities, skills and knowl130 peter hayes am edge while self-funding competitive projects that would translate into competitive market advantages and innovations. the distinction is not always an easy one, and it takes luck and a fair amount of good judgement to avoid mistakes. hardest of all is having public research institutions understanding the fine line separating them (that is, the cooperative or the competitive approaches), most especially at a time where it is self-evident that research materializes results and progress much quicker when done under some level of collaboration with private companies. q: what types of scientific journals, abstracting services and industry publications do you regularly read or scan, and how do they inform your thinking, strategic plans, and project execution? have you any suggestions how these might better support industry innovation and progress? what is the role and the performance of wine specialized press in raising awareness for wine research – in r&d teams – in the business? what other entities or fora inform and influence your perspectives? do you (or your team) have any scheduled methodology or specific tools for doing that? ag: my best source of knowledge is the global network of scientific contacts we have been building in the last 15 years. a careful choice of who to follow in research gate or google scholar does wonders to keep you in tune with the latest research coming out of labs across the world. it is important not to stick just to grape and wine researchers. more and more of early awareness of breakthroughs come from paying attention to other disciplines and evaluating the possibilities of their application to the business of wine. we still subscribe to grape and wine scientific journals and specialized press both under electronic and paper formats but most of the knowledge we gain there had already been published elsewhere, so if we want to anticipate trends and position ourselves at the start of the development of a new breakthrough for grape and wine, we have to have wider scanning, from architecture to quantum physics, from archaeology to neurology. when it comes to research that is funded by public sources, i am a firm believer their results should be published in open formats, accessible to anyone, free of charge. i have seen the move of the european union in that direction as very positive and inspiring. it would be great to see more of that happening elsewhere. plos is another great example and so is oenoone a specialist open publication for the wine sector. i am hoping that these formats will develop more and become the format of choice for top researchers around the world to share their research. the recent boost towards open publishing stirred by the covid19 pandemic was reassuring. wine specialized press (the non-scientific type) is devoting more and more importance to science and research because their audiences are becoming more and more permeated by gen-y’s and millennials and these readers were born in a world where they can gain access to any knowledge and want to see beyond the label and marketing gimmicks. twenty years ago, no one could care less whether touriga nacional was a native portuguese variety or if burgundy was produced organically or not. today, these trivia became the matter of talk among a growing number of wine consumers, so publications follow the lead to explain wine matters. it still is quite incipient, from a scientific point of view, but the level of scientific terms, references and features you see today in the wine spectator, just-drinks or la vigne is a far cry from just two decades ago. so, we keep an open eye for all these sources and organize and index each relevant piece of knowledge in an internal technical database that is accessible to all technical staff in the company, searchable by author, keyword, theme, year of publication and other criteria. and yes, we have regular knowledge survey routines that target scientific publications, extension journals, books, specialized press, event proceedings and the odd feature that may pop-up in an innocent publication, filing them in the database under the same searchable structure. q: you will have observed significant changes in the type and style of project teams, internally or in the public sector, and in their project funding, structures, reporting and measures of success (kpis etc) over recent years; have you any comments on how projects and their structure might evolve over the next decade? ag: the major change was a higher concern with having companies involved in research projects and fostering contacts and collaboration between academia and companies. this, in europe, resulted from the european commission orientations towards funding programs such as horizon 2020, a major boost for european r&d with a budget of 80 b€ to spend over 7 years. grant proposal evaluation was much more focused on results’ impacts and ensuing innovation. yet, for the grape and wine sector, which in europe still counts a very small number of companies with a clear focus on r&d and a lesser number of companies that have in-house r&d structures, this translated as many being lured into participating for the funding they would get and not as much for the knowledge and innovation they could obtain. in any case, r&d became understood as an activity that brings tools and possibly solutions for problems but that understanding is still a far cry from being 131the role, scope and management of r&d and innovation in the wine sector: an interview with antonio graca materialized in practical terms. an evaluation done this year (2020) by the comité des entreprises européennes de vins – ceev, an industry representative in brussels, found that while this sector represents a bit more than 8% of total european agri-food exports, its capture of horizon 2020 funding was less than 0,6%, revealing a large loss of r&d funding for other, more r&d-happy, food sectors. the same lack of understanding and of common ground i identified more than 10 years ago still exists and is a looming threat for the european sector’s competitiveness, one that is currently exploited by other wine origins with better integration between research and entrepreneurship. in europe, with a few honourable exceptions, researchers only take companies onboard projects because funding initiatives force them to and because companies have data that otherwise they could not access, their main focus being to publish highly-cited scientific papers, solving companies problems being, at best, a secondary objective. companies, on the other side, often lack the needed qualified staff and adequate organization to extract benefits from scientific knowledge and research, therefore joining research projects more for the funding they will get and less because they are confident they will have their problems addressed and solved. also, often companies reject r&d because they are not ready to accept the investment risk it entails as an activity, even though that risk for most european countries is usually well offset by funding incentives. q: do you see and understand that wine consumers are aware of and appreciate research efforts in the sector, and by extension, might research be better deployed as a marketing tool for companies? ag: i don’t think consumers equate spontaneously wine with research. a vast majority of consumers still eye the wine sector romantically not acknowledging the huge technical evolution that has occurred in the last 70 years. for them, research is stereotyped as a lab activity performed by public institutions or large-cap corporations bent on ruling the world! the association between wine and research won’t come easily to their minds. yet, the most recent generations, because of being quite wary of lack of authenticity, misleading ads and wrong choices socialand / or environmental-wise, are a lot more open to delve deeper into how wine is made, where it comes from and how their choice of wine impacts environmental and social issues irrespective of where their purchased product comes from. this opens an interesting window of opportunity for the grape and wine sector in terms of marketing messages, as there is curiosity regarding what wine producers are doing to produce a wine that is authentic, responsible, and sustainable. conversely, this also means that gone are the days of marketing by managing the consumers’ ignorance. marketing claims and overall branding including brand communication need to have clearly accessible, credible support information and producers must walk the talk if they don’t want to risk being put off-market. these are the days where marketing needs to manage consumers’ education. q: regarding development of capacity within the sector, what do you see as the 3 main skills required of a researcher to be successful in the industry, and do you see a role for researchers in defining and supporting the training and education needs of aspiring wine professionals? ag: knowledge management, systems thinking, transformational communication. i think we live in a world where professionals are at a permanent risk to be overtaken by their clients or consumers in knowledge about their own product. in order to avoid that, professionals need to keep a good level of awareness of what is happening and, most especially, how do they and their organizations stand on critical fracture issues. for that, they need indeed support from researchers that will update them on the evolution of technology, new knowledge insights and breakthroughs from scientific research, their implications, expected impacts and potential threats. a professional that works supported by science is a professional that will be regarded as nononsense, up-to-date, dependable, and trustworthy. to achieve this, professionals need periodic contact with researchers that can translate even the most difficult and complex science in a message accessible by them, their clients, and consumers. not all researchers are able to provide this; a careful cherry-picking is thus in order. continuous training programs for wine professionals should therefore be setup with the participation of researchers but also important is to create always-on science helpdesks that allow professionals to react in a timely manner to questions and challenges they receive from the marketplace. ph: returning to some of the key issues around industry sustainability (tbl) and social licence, all of which have complex interactions and many competing interests, where and how might research best be directed to guide policy development and review, resolve tensions in resource allocation and ensure a long-term future for the wine sector? ag: many of the issues regarding sustainability collide headfirst with lack of qualification by wine profes132 peter hayes am sionals, the designation, ‘ sustainability’, itself being a prime example as it is often mistaken as environmental protection and not triple-bottom-line. here, again, transformational communication is of essence, researchers needing to first understand who their counterparts are, how they think and what is the common ground that can be used for a clear, successful communication. communicating on sustainability and social license is such a minefield that the united nations had to compile a guide to support their staff at the environment program. science-based observations, initiatives and targets are, in my view, the only way to progress on those issues constructively, consequently and…yes, sustainably. exactly because sustainability and social licence are complex, they require clear systems thinking, a skill not often found in researchers as they (still) are mostly trained to focus and dissect their specialty from everything else. however, these issues require an understanding of what is going to change in the whole system if you tweak something here or there. approaches such as lifecycle assessments need to be deployed to understand which is the net gain or loss from a specific change in the system. this is especially critical when dealing with policies which, by nature, affect a great number of actors in the system. q: have you any suggestions on how governmental, intergovernmental and professional associations, nationally and internationally might be better informed and engaged regarding the potential of r&d initiatives to inform policy, prioritise funding and ensure industry and societal impact? ag: knowledge management takes first-row here. peter høj of the australian wine research institute (awri) at that time, wrote, already in 2003, that the vast majority of knowledge is produced outside any single organization and that successful r&d lies in tapping into that knowledge pool. it appals me at how little this critical activity is taken seriously by the majority of governmental, intergovernmental or professional organizations in the grape and wine sector be they national or international almost 20 years later. i don’t know one such organization in the wine sector in europe that has a staff position with the continuous responsibility to manage access and awareness to publicly available knowledge. the few ones i know to perform some knowledge managing activity, at best, do it under a need-to-have basis, not like the routine activity made necessary by the current level of instantaneous knowledge production and dissemination. as a result, more often than not, policies are ill-informed, funding is prioritized as a function of political, not scientific criteria and the impact is dimmed and a long way from what it could and should be. the simple creation of a knowledge manager position in those organizations would improve their r&d impact almost overnight. q: in a similar vein, but now directed to the industry itself, is research’s role adequately portrayed and understood among wine entrepreneurs and managers? ag: i would say mostly not, even though a few companies, regardless of size or market relevance, did take r&d role seriously and by doing so, have risen among their peers. what baffles me is why others do not see and follow these clear examples. after some careful observation and even situations where i asked bluntly to shareholders and managers why they downplayed or ignored r&d as a business activity, i came to the impression that it has a lot to do with the experience and vision of each company’s senior management. companies that have a ph.d. among shareholders or senior management tend to have a better perception of the role r&d can play in raising their profitability. the same observation goes for companies having in the senior management, people who had previous experience in sectors that rely heavily in r&d, such as the pharmaceutical, software or chemical industries. in the grape and wine industry of today, research is still mostly seen as something to be done in university labs and not in companies. q: what are the greatest hindrances or blockers of adoption of research results in wine businesses? ag: i am probably sounding repetitive, but in my experience, the greatest hindrance to research results adoption in the grape and wine industry is poor communication. conversely, research projects where the final user (the person or persons, not the organization as a whole) participates since day one, offering opinions in hypothesis formulation, experiments design and results interpretation are the ones i have seen with fastest and most complete results adoption. cocreation and coproduction are powerful and efficient concepts in r&d. q: shall we see a rebalancing between discovery, design to objectives, innovation in product, processes, operating and supply systems etc? ag: the irony lies in that in the grape and wine sector, by its own nature, research does happen often and innovation almost every day. more than a rebalancing, i believe that we will witness a progressive realization than many activities that are executed to sort out a specific client’s request, to solve a new problem or to address an identified opportunity, are in fact innovation 133the role, scope and management of r&d and innovation in the wine sector: an interview with antonio graca and research activities. they are now, just not identified as such and not part of a specific, systemic insertion in businesses’ organizations. it is my persuasion that it is this systemization that will drive research’s integration in business activities and materialize its potential benefits. q: might there be more reliance on science and technology, scientists and technologists being embedded in the business and in multi or cross-disciplinary teams? ag: yes, i believe firmly that we are already seeing a growth in this reliance because of a growth in the average qualification of the grape and wine professional. q: what do you see as the 3 most pressing issues and 3 greatest opportunities amenable to being successfully addressed by well-designed, directed, and funded r&d? have you some current examples to illustrate progress down that pathway towards clear objectives ag: the three most pressing issues are: • pressure from health agencies to curb alcohol consumption. • climate change. • balancing resilience with efficiency from grape to glass. the three greatest opportunities are: • the global earth observation system of systems (geoss). projects like med-gold and the recently published australia’s wine future: a climate atlas are the very first hints of what may come after, from the integration of myriad sensors, spaceand earthbound that observe our planet in near-real time. the destination earth (destine) digital twin of our planet currently under development will make this potential accessible to everyone opening a whole new way of understanding farming, agribusiness and consumption through real-time data integration. • biodiversity. policies such the european green deal and the farm to fork initiative open a much-needed window of opportunity to reverse biodiversity loss and secure this fundamental resource for all businesses and industries. the recent call to action from the business for nature initiative has joined 600 companies across the world (just 3 wine companies, one of which sogrape), totalling over 4.1 tusd in revenues in a stern warning to the un that more measures are needed from national governments to conserve nature and secure the estimated 44 tusd of global gdp at risk from nature loss. • wine in moderation. this project itself is a great opportunity that can be made into huge market potential if carefully and well-designed r&d is applied to scientifically unravel the nexus between the role of wine in balanced diet and lifestyles and its direct effects in the health of moderate wine drinkers. this initiative, that has known so far limited success, demonstrated that the wine sector is willing to self-regulate and promote sustainable and responsible consumption. it was, however, not as successful in deterring health agencies across the world from using unsupported claims and even bad science to implement ill-advised policies curbing wine consumption. a global coordinated research effort to find scientific answers to the right questions, has the power to get policies back into a science-based framework that may have an audible voice even in the who. q: the covid-19 pandemic has affected our society in an unprecedented way. what do you think were the most important consequences in the wine business? and what lessons can we learn from it to move into the future? ag: i believe the pandemic boosted the sector’s resilience by showing that such a disruptive event could be handled without major disruptions to production while reducing exposure of the people involved in this production system. challenges are more in the drop of economic value being traded rather than in volumes. i believe we need to rethink our business models and adapt to the situation, namely in increasing the diversity of options for distribution and sale. as an example, takeaway restaurants are not new, but how many wine companies have targeted this specific way of buying wine offering solutions that can be beneficial for both takeaway owners and clients? the pandemic had the virtue of showing these types of uncared-for niches that can then become mainstream solutions overnight as a result of a catastrophic event. identifying them, designing specific solutions to increase the value being traded through them will not only provide for a more resilient sector but also provide increased revenues under so-called normal situations. ph: finally, recalling that you have a rich life outside the wine sector, what other cultural, social and recreational pursuits have you that allow you to escape from an intense engagement across our sector, but also refresh and energise you to continue your contribution? perhaps they may even translate directly in some cases! ag: my «rich life outside the wine sector» is a life where wine still plays an important role. in portugal, wine is an everyday presence at every table and our rich 134 peter hayes am cuisine is a great match for the vast diversity of wines we produce. i enjoy every aspect of wine: the emotions it elicits from our senses, the interplay it has historically played in the development of the human race as a civilized and civilizing species, the art it expresses through the craft of farmers, winemakers or sommeliers, the tamed natural world it lays within our grasp when in a vineyard or when tasting the climate bound in every sip. wine is for celebration and for introspection. it offers countless hours of storytelling to thrill my friends and it is a warm friend when i need to sit alone considering my place in the grand scheme of things. i try never to cellar more bottles than those i can consume, alone or in good company, in the space of one year and i am always on the lookout for wines i never tasted before and the unsuspected sensations they keep for my enjoyment. despite and through my passion for wine many other interests fill my life. i am an undecided person when it comes to wave some interest away in favour of another. being an innate universalist, my greatest frustration arose when i discovered as a teenager that i would not live enough to experience or learn about everything my curiosity lands on. so, i devoted my entire life to reducing the number of things i will never have the chance to discover and thus, became interested by science and research. the most interesting subject i have ever found is people. the endless learning opportunities to discover the amazing offers every other person has in store for me led to the creation of my life motto: searching undaunted for the novelty in every human being. it is something i cherish within the realms of loved ones, friends or the stranger who sits near me in the train or airplane. i enjoy and appreciate most art forms, but only one elicits in me the same inner and primal response as wine does: music. the same way wine allows me to travel through time and space, music allows me to transcend reality and consciousness. both touch what i call my soul, delivering my emotions from the strict and rigorous grip of the scientific method and allowing my imagination to run wild and free. i keep an incredibly eclectic and dynamic selection of music genres in my car music disk, ranging from portuguese fado and balkan techno to seattle grunge metal and australian white reggae, my first criteria when choosing a new car being the quality of its high-level sound system. i devote a great deal of time to learning history as a tool to understand the present and prepare the future, avoiding mistakes already made. i have a profound respect and proud admiration for the improbable outcomes my portuguese forefathers achieved when they decided to brave the ocean and went off the last rocky tip of the eurasian western end of the world. today, because of them, this obscure, hard to master, language made from mixing roman, celtic and arabic is the 3rd most spoken european language in the world. because of them, i can go to west africa, south america, india, sri lanka, singapore, malaysia, macao or indonesia and find native people who can, not just communicate in portuguese, but also show me the local buildings and monuments that carry the unmistakable lines of portuguese architecture and say, bursting with pride, that they too are portuguese, even though it has been centuries since they lived under portuguese rule. how a small kingdom in the periphery of medieval europe with less than one million people achieved such an outcome never ceases to amaze me and everybody else, who foreign to this country, takes the time to discover its unique history. my final word goes to that entity whose omnipresence shaped my life, being at the same time, a playground, a soothing vision, a place for imagination and a support for meditation. i mean that entity after which, in all fairness this planet should have been named after: the ocean. no one can claim being a portuguese without having a special relationship with the ocean. as a portuguese, it defines my citizenship, my culture, my social universe and my spirit, in brief, my place in the universe. the portuguese ocean, that is, the oceanic area under portuguese sovereignty is 19 times the size of its land surface, equivalent to half of india. nowhere is that notion more felt than in any of the 9 azorean islands, tips of underwater mountains of the atlantic ridge, places of volcanic fire encased by the sky and the ocean. not living in those islands, the mainland’s oceanic coastline has been for me the place for redemption from the pressures of everyday life or professional stresses. every weekend i spend time strolling along it, my gaze lost in the immensity. if the human spirit is constrained by the limits of the reach of the eye, the ocean is that place where the spirit breaks all boundaries and becomes one with the infinite universe. looking at the ocean, no impossibility lingers, no worry remains, freedom becomes the framework where all thoughts and the wildest ideas gain life and material possibility. without the ocean there would be no portugal and i would be a very different person indeed, who knows… ph: antonio, my sincere thanks for your most generous and expansive responses in this interview, addressing not simply the pragmatic, elements of r&d as influencing the international wine industry, but also disclosing equally important aspects of your systemsview on society, ecology, economics and the market. above all, 135the role, scope and management of r&d and innovation in the wine sector: an interview with antonio graca your preparedness to engage, facilitate, mentor and to apply philosophical principles to your professional and personal life shall, i hope, offer considerable inspiration and future guidance for many readers. in particular, i trust that interviews and influencers such as illustrated here, shall assist in generating innovation in the wine industry r&d and innovation nexus, to the enduring benefit of all stakeholders. wine economics and policy volume 9, issue 2 2020 firenze university press the influence of alcohol warning labels on consumers’ choices of wine and beer azzurra annunziata1,*, lara agnoli2, riccardo vecchio3, steve charters4, angela mariani5 a bad year? climate variability and the wine industry in chile eduardo haddad1,*, patricio aroca2, pilar jano3, ademir rocha4, bruno pimenta5 sparkling wine international market structure and competitiveness karim marini thome*, vitoria a. leal paiva the role of context definition in choice experiments: a methodological proposal based on customized scenarios fabio boncinelli*, caterina contini, francesca gerini, caterina romano, gabriele scozzafava, leonardo casini the impact of country of origin on brand equity: an analysis of the wine sector nádia passagem1, cátia fernandes crespo2,*, nuno almeida3 competitive strategies for wine cooperatives in the german wine industry barbara richter1,*, jon hanf2 valuation of viticultural adaptation to climate change in vineyards: a discrete choice experiment to prioritize trade-offs perceived by citizens verónica farreras1,2, laura abraham3,* does the institutional quality affect labor productivity in italian vineyard farms? maria raimondo1,*, concetta nazzaro4, annamaria nifo3, giuseppe marotta2 the role, scope and management of r&d and innovation in the wine sector: an interview with antonio graca peter hayes am wine economics and policy 12(1): 51-62, 2023 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/wep-13016 wine economics and policy citation: stefano massaglia, tibor verduna, vincenzo varchetta, filippo brun, simone blanc (2023). the impact of alternative packaging on the life cycle of wine on tap. wine economics and policy 12(1): 51-62. doi: 10.36253/wep13016 copyright: © 2023 stefano massaglia, tibor verduna, vincenzo varchetta, filippo brun, simone blanc. this is an open access, peer-reviewed article published by firenze university press (http://www.fupress.com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information fi les. competing interests: the author(s) declare(s) no confl ict of interest. th e impact of alternative packaging on the life cycle of wine on tap stefano massaglia1, tibor verduna1, vincenzo varchetta2, filippo brun1, simone blanc1,* 1 department of agricultural, forest and food sciences, university of turin, largo paolo braccini 2, 10095 grugliasco, italy 2 quality assurance department, vinicola agrifl egrea, via nelson mandela 95, 80126, napoli, italy e-mail: stefano.massaglia@unito.it; tibor.verduna@unito.it; vincevarchetta@gmail.com; fi lippo.brun@unito.it; simone.blanc@unito.it *corresponding author. abstract. sustainability is a key objective of development policies within international organizations, and it is also progressively gaining importance in the wine industry as a whole and, more specifi cally, in the draught wine market. th e competitive conditions of the wine sector and the evolution of consumption styles have led to an increasing need for more accurate management strategies and analysis activities to determine the performance of wineries. th is study aims to analyse both the environmental and the economic concerns of a commercial development strategy implemented by an italian winery that uses three packaging formats (glass bottle, one-way pet keg, and reusable steel keg) in the sale of falanghina pgi wine on three diff erent markets (domestic, italy; regional, germany; and international, usa). by assessing the environmental and economic impact of the diff erent formats on the three scenarios through lca and lcc analysis, it is revealed that the economic and environmental sustainability of packaging types can vary signifi cantly depending on the market destinations. in any case, the results show that pet, and especially reusable materials such as steel, can lead to a marked reduction in impacts on the market for tapped wine. keywords: life cycle assessment (lca), life cycle costing (lcc), wine, packaging. 1. introduction sustainability is undoubtedly a key objective of development policies within international organizations. the european union (eu), through its europe 2020 strategy, aims to promote smart, sustainable, and inclusive growth. sustainability has also gained importance in the wine sector and has led to companies and consumers being more aware of this issue within the wine supply chain [1,2]. consumer awareness in particular plays a central role in encouraging wine producers to pay close attention not only to economic aspects but also to the environmental impact of wine at diff erent stages of its life cycle [3]. 52 stefano massaglia et al. about 258 million hl of wine were produced during the 2019 campaign, according to the international organisation of vine and wine (http://www.oiv.int). moreover, competitive landscapes in the wine sector and high fragmentation of consumer behaviour have led to the need for management planning and tighter monitoring of costs. the precise estimation of the production cost of a litre of wine is an essential basis for setting up the different processing steps and for developing appropriate marketing strategies [4–6]. the consumption of wine at entertainment venues such as restaurants and bars highlights the need to find a compromise between environmental and economic costs, in order to ensure the consumer has a pleasant, reasonably-priced and sustainably-valued consumption experience. to this end, the choice of wine packaging can impact significantly on limiting environmental impacts and reducing costs. in recent years, several alternative packaging options have been adopted in the beverage sector. in addition to traditional glass bottles, wine is marketed to on-premise markets in large bag-inbox containers, pet (polyethylene terephthalate) kegs, and steel kegs [7]. two distinct and contrasting aspects arise in the choice of packaging: on the one hand, retailers prefer large-volume packaging due to its convenience; on the other, consumers prefer glass-bottled wine due to environmental concerns about plastic pollution [8]. another important aspect, as indicated by several authors [9,10] is that consumers’ purchasing decisions are influenced by the end-of-life of the product rather than the environmental impacts in the production and transport phases. with regard to on-premises markets, pet and steel kegs appear to be the most promising competitors to glass. both contain more volume for the same weight, and steel can be used multiple times, theoretically with endless use. in addition, the distribution phase is more critical for glass, due to the fragility of the material, which also has a major impact on secondary and tertiary packaging and on the type of materials used (pallets, films, and carton boxes) [11]. in recent years, the use of steel kegs for serving wine on tap has increased dramatically, especially in the united states, australia, and new zealand [12]. in europe, the use of bottles is widespread, but innovative alternative packaging seems to be appreciated both by retailers, who want to reduce the costs generated by waste by enhancing the efficiency of resource management and distribution, and by consumers who are more and more interested in sustainable wine consumption [13]. two methodologies deemed by academics as most suitable for assessing the environmental impacts and the economic aspects of agri-food products during their life cycle are the life cycle assessment (lca) and the life cycle costing (lcc). recent studies have investigated the environmental impacts of wine grape production [14], grape cultivation and wine making [15,16]. other works have considered the life cycle of a wine bottle [17] and the environmental impacts of consumption [18]. cultivation [19–21] and the wine-making process [22,23] have also been studied from an economic point of view. in recent literature, studies can be found that relate pet and steel kegs for beer consumption [24,25], but only one paper assesses the environmental impact of pet keg adoption in the wine industry [26]. in light of the above, the research question is related to the environmental and economic competitiveness of different materials commonly used for packaging wine sold on local and international markets. the objective of this study is to evaluate the environmental impacts and life cycle cost of three packaging systems (glass vs. pet vs. steel) of campania’s falanghina pgi wine on tap, in three market scenarios, i.e. local, italy vs. regional, germany vs. international, usa. alternative scenarios are defined considering the variation of the three packaging systems and the distance of distribution on the market in order to identify the aspects that most influence the environmental and economic performances of wine on tap. the case study is an italian winery (located in the campania region), which processes 7,300 hl of wine, mostly marketed in 20 l stainless steel keg containers, in 0.75 l glass bottles and in 20 l disposable pet keg recipients. the wine portfolio consists of 22 references, two of which are light sparkling wines that account for more than 30% of all wines in terms of volume. among still wines, campania falanghina pgi (obtained by an autochthonous/local cultivar) represents the largest in terms of volume share and annual growth rate. the hypothesis is that large packaging that can be reused several times is less impactful from an environmental and economic viewpoint than packaging used only once. 2. methodology 2.1. functional unit and system boundaries the volume of the beverage is typically chosen as the functional unit (fu) for lca and lcc analyses and, in particular, other studies that have focused on wine have defined their fu as 0.75 l or 1 l of wine [27,28]. when analysing the consumption of wine on the premises, we 53the impact of alternative packaging on the life cycle of wine on tap chose a 125 ml glass as fu, because that allowed us to compare falanghina pgi wine marketed in different volume packages. we considered the on-trade markets to carry out a cradle-to-grave environmental analysis, while the economic analysis was conducted from cradle to wholesale. cultivation of grapevine, winemaking, packaging, transport, refrigeration and waste management were considered and the allocation method by mass was used, considering that the wine yield of a unit mass of grapes is about 70%. the decision to adopt two systems lies in the fact that there are limitations when estimating both the transport costs from the wholesaler to the retailer and the product handling phase at the point of sale: the wine storage and service phase by the retailer could not be calculated because of the high variability due to the intrinsic characteristics of the shops, which results in very different costs (figure 1). 2.2. lca methodology 2.2.1. inventory analysis and impact assessment the software tool simapro 8.5 (pre consultants, amersfoort, the netherlands) was used to perform the lca. for vine growing, winemaking, packaging and transport, we obtained primary data from the winery; for refrigeration and disposal, we used background data from the ecoinvent v.3.7 database. the environmental impacts of the three packaging techniques and the three markets were calculated by adopting the impact 2002+ method. 2.2.2. grape cultivation grape cultivation was analysed from cradle to farm gate. we assumed that falanghina pgi grapes are grown with a conventional farming model. all input was provided by the farmers, and we processed it considering the production cycle in the following phases: fertilisation, fungicide treatments, pesticide treatments, pruning, inter-row management, irrigation, and harvesting. it was assumed that the vineyard is in full production, and vineyard establishment and end-of-life were excluded from the assessment as these stages represent minor impacts due to the long (and uncertain) lifespan of the vineyard. table 1 shows data for agricultural operations. 2.2.3. winemaking the vinification phase considers two steps: step 1 − winemaking with all related operations (table 2) step 2 − filtration and finishing with addition of prepackaging products (table 3) figure 1. system boundaries. table 1. inventory data for vineyard (amount per 125 ml of wine). unit amount input from nature water m3 1.49e-02 input from the technosphere diesel kg 4.06e-03 lubricating oil kg 8.78e-05 urea, as n kg 5.00e-04 ammonia kg 3.33e-04 phosphate fertiliser kg 4.17e-04 potassium fertiliser kg 4.17e-04 sulphur trioxide kg 6.25e-04 dithiocarbamate-compound kg 9.52e-05 copper oxide kg 1.49e-04 sulphur kg 2.34e-04 poles, softwood, pcp treated m3 1.98e-04 aluminium around bimetallic steel wire m 8.93e-03 54 stefano massaglia et al. 2.2.4. packaging three different wine packaging systems were considered: 0.75 l glass bottle, 20 l pet keg and 20 l steel keg. both the glass bottle and the pet keg are one way, while the steel keg is recyclable; therefore, the amount of steel per fu depends on the reference market scenario (italy, germany, or usa) and on the lifetime of the kegs. the winery declared that the life cycle of steel kegs lasts about 10 years and the number of roundtrips depends on the destination: 9 roundtrips/year for the italian scenario, 5 roundtrips/year for the german scenario, and 2 roundtrips/year for the us scenario. considering the weight of the 20 l steel keg (6.4 kg, or 40 g fu-1), its lifespan and the number of roundtrips, the right amount of steel fu-1 for each scenario is the following: 0.4 g steel fu-1 in the italian scenario 0.8 g steel fu-1 in the german scenario 2.0 g steel fu-1 in the us scenario. tables 4, 5 and 6 show the input used for each type of packaging. to calculate the amount of packaging film used to wrap pallets, the european standard pallet size (0.8 m x 1.2 m) with an average height of 1.8 m [29] were assumed. 2.2.5. transport the wine wholesalers are located in verona (for the italian scenario), frankfurt (for the german scenario) table 2. amount of all input in the first wine-making step (per 125 ml of wine). input unit destemming and crushing fermentation racking clarification cleaning cooling energy kwh 3.50e-04 2.50e-05 1.33e-02 yeasts g 2.50e-02 potassium metabisulphite g 6.25e-03 fermentation activator g 5.00e-02 enzymes g 1.25e-03 bentonite g 6.25e-02 detergents g 7.00e-02 table 3. amount of all input in the second wine-making step (per 125 ml of wine). inputs unit amount water g l-1 2.70e-03 electricity kwh l-1 3.75e-04 potassium metabisulphite g l-1 6.25e-03 colloids g l-1 1.88e-02 tanning g l-1 1.25e-03 lightener kwh l-1 1.75e-03 table 4. input in glass bottle packaging (per 125 ml of wine). input unit amount glass bottle g 75 cork closure g 6.88e-01 capsules g 1.33e-01 label g 1.40e-01 electricity kwh 4.00e-03 water g 2.00e-02 nitrogen g 1.00e-01 cardboard g 6.34 table 5. input in pet keg packaging (per 125 ml of wine). inputs unit amount pet g 6.25e-01 capsules g 7.25e-02 electricity kwh 3.88e-04 fuel g 2.38e-03 table 6. input in steel keg packaging (per 125 ml of wine). inputs unit amount ita ger usa stainless steel g 4.45e-01 8.00e-01 2.00 capsules g 7.25e-02 7.25e-02 7.25e-02 electricity kwh 3.13e-03 3.13e-03 3.13e-03 water g 1.25e-01 1.25e-01 1.25e-01 nitrogen g 1.25 1.25 1.25 55the impact of alternative packaging on the life cycle of wine on tap and new york (for the us scenario) respectively, thus causing a different environmental impact due to both the distance and the vehicles used during transport. the estimation of vehicle emissions was carried out considering the average values of emissions from the use of euro 4, euro 5 and euro 6 lorries [29], light commercial vehicles and, for the us scenario only, transoceanic ships. italian and german scenarios: the distance between the winery and the wholesaler is 700 km for the italian scenario and 1,450 km for the german scenario; a lorry (32 tonnes) was considered for the transport. the average distance from the wholesaler to the retailers was assumed at 150 km for both scenarios, considering a light commercial vehicle. us scenario: for overland transport from the winery’s headquarters to the port of livorno (italy), 550 km were assumed with a 32-tonne truck. for transport from italy to the wholesaler located in the port of new york, a transoceanic ship with cooling was considered. from the wholesaler to the retailer, a light commercial vehicle was considered, for an average distance from wholesaler to retailer of 50 km. 2.2.6. retailer refrigeration during the refrigeration phase, the electricity consumption for the glass bottle scenario was assumed to be 1.025e-03 kwh fu-1 in 12 hours of refrigeration (average time assumed before wine tapping). for the pet keg and steel keg scenarios, the use of electricity is limited to the tapping phase (table 7) and the refrigeration is managed using inert gases, leading to a refrigerant loss, which was also considered. the leakage of r404a and its three components for fu are shown in table 7; as also reported by amienyo and azapagic [24], the global warming power of r404a was estimated in 3.860 kg co2 eq. kg-1. 2.2.7. packaging end of life (waste management) the end-of-life phase of packaging systems was modelled by considering disposal scenarios consisting of incineration, landfilling, and recycling processes. pet keg and glass bottle are one way, while the steel keg is used for 10 years, then replaced at the end of the life cycle. regarding the percentages of these processes, official data from each scenario was assumed: ispra for italy [30]; the federal ministry for the environment, nature conservation and nuclear safety for germany [31], and united states environmental protection agency for the usa [32]. 2.2.8. scenario modelling a key option for reducing the environmental impact of wine consumption is closely related to the weight of packaging. in defining the alternative scenario, the potential reduction in life cycle environmental impact was analysed by considering alternative packaging containers with a weight reduction of 33% per glass bottle, pet keg and steel keg. 2.3 lcc methodology life cycle costs were evaluated according to [24,33] the methodological approach given in hunkeler [34] table 7. leakage of refrigerant r404a and its component (amount per 125 ml of wine). refrigeration leakage gwp r404a losses 1,1,1 – trifluoroethane pentafluoroethane 1,1,1,2 – tetrafluoroethane pet keg 2.90 7.50e-04 3.90e-04 3.30e-04 3.00e-05 steel keg 2.90 7.50e-04 3.90e-04 3.30e-04 3.00e-05 table 8. waste management scenarios. disposal scenario glass pet steel italy germany usa italy germany usa italy germany usa recycling 74% 85% 31% 44% 93% 14% 78% 91% 74% landfilling 26% 9% 55% 13% 69% 22% 9% 21% incineration   6% 13% 43% 7% 17%     5% 56 stefano massaglia et al. and swarr [35] concerning the conventional lcc calculation. the following equation (eq. 1) includes the phases and material useful to calculate the lcc of 125 ml of wine from field to wholesaler. lccw = cc + cp + cwpb + ct (1) where: lccw wine life cycle costs of 125 ml of wine cc costs of vine cultivation cp costs of packaging (glass bottle or pet keg or steel keg) cwpb costs of wine production and bottling ct costs of transport to wholesaler (italy, germany or united states) all cost items are given per functional unit and reported in the unit of measure € 125ml-1. all costs for cultivation, packaging, wine production and bottling were collected directly from the case study company. the lcc was conducted following an activitybased costing approach. in addition, different cost separation criteria and cost centres were taken into account in order to elaborate the balance sheet data set. in analytical cost accounting, the most commonly used categories are direct and indirect costs [36]. therefore, the primary criterion for separating costs is based on the distinction between: direct costs, which are allocated directly to cost objects, based on an objective measurement of the input consumed by the cost object; indirect costs, which are allocated or charged indirectly to the cost object because the amount of the input consumed by the cost object in question has not been objectively measured. the above categories have been broadly divided (as shown in table 9) into direct and indirect costs. category a includes direct costs for raw materials; category b (b1, b2, …, bn) includes direct costs of different types; while category c is the direct cost for packaging. category d indicates indirect costs and considers labour costs for packaging (d1) and depreciable assets (d2); finally, category e includes general indirect cost centres (e1, … em). the transport phase for the three scenarios is external to the company and was calculated through the analysis of contracts with transport companies. 3. results and discussion as shown in figure 2 and 3, the resource (expressed in mj of primary energy) and climate change (kg co2 eq.) indicators in the three scenarios were compared to assess the environmental impact of glass bottle, pet keg and steel keg packaging for the selected fu. for both indicators, the total environmental impact of each type of packaging is given by the sum of the following phases: cultivation winemaking packaging transport to the wholesaler transport to the retailer refrigeration waste management as the cultivation and winemaking techniques are the same regardless of the type of packaging, their environmental impact is equal for each scenario. in terms of resources used, the sum of their values is the highest of all the phases considered (2.3 mj primary energy fu-1), while in terms of gwp they barely reach 0.06 kg co2 eq. fu-1. in terms of resource consumption, the vineyard cultivation and winemaking phases remain among the most table 9. categories of direct and indirect costs. category type of cost description a 1 direct raw materials (wine) b 1 direct oenological products b 2 direct water b 3 direct detergents b 4 direct plant electricity consumption b 5 direct cooling system electricity consumption b 6 direct inert gas b 7 direct eno-registers consulting fee b 8 direct estimates for losses of product b 9 direct depreciation b 10 direct lab analysis b 11 direct microfiltration membranes b 12 direct rectified grape must concentrate c 1 direct packaging materials d 1 indirect production labour d 2 indirect production equipment depreciation e 1 indirect leased assets e 2 indirect consumables e 3 indirect logistical e 4 indirect general e 5 indirect bank charges e 6 indirect personnel e 7 indirect depreciation 57the impact of alternative packaging on the life cycle of wine on tap impactful; however, in the case of scenarios involving the use of glass bottle packaging, the latter becomes relevant in defining the overall impact. the production steps that lead to a greater difference between the three scenarios considered are packaging and transport for two reasons: 1) the amount and type of raw material used in packaging and 2) the distance between cellar and retailer. the glass bottle is the most impactful packaging, followed by the pet keg and the steel keg; the higher quantity of raw material used for the glass bottles and the total weight of each batch led to a greater environmental impact. regarding the impact of transport, it is obviously linked to distance: the greater the distance, the higher the environmental impact. therefore, the “us scenario” has the highest values, followed by the “german scenario” and the “italian scenario”. also considering waste management, glass bottles can become competitive again in italy and germany, thanks to the high level of recycling of this material and the low percentage of landfill disposal. table 10 shows the results of the scenario analysis, highlighting the different impact of packaging weight reduction in the market scenarios investigated. a significant change emerges with the use of the glass bottle as the primary packaging container. in this case, the climate change indicator shows a reduction in impact of as much as 1/3 for the commercial scenario on a domestic scale, clearly evidencing the impact of this type of container on the product life cycle. less sharp results were obtained on a regional and international scale, but again there is evidence that a significant share of the overall impact is attributable to the container. for the pet keg container, the reduction results, although appreciable, are more limited, also considering the large volume transported per single unit. the use of the steel keg shows no significant difference, considering the re-use of the container for several trips. these results also express the relationship between packaging weight and distance travelled to market, highlighting the strong environmental impact of packaging for short-marketed products. the cost analysis shows the high competitiveness of the steel keg format compared to the pet keg and the glass bottle, due to the possibility to reuse the packaging and thus spread the purchase costs over many trips. the least competitive scenario is where the glass bottle is used, mainly because of the cost of buying glass. considering the costs incurred by the winery to deliver the wine in the three scenarios (table 11), it can be seen that, on the domestic market, the most competitive format is the steel keg; for the european destination, the choice of one of the two keg formats analysed does not influence the total cost. for the us scenario, the most competitive format is the steel keg (-3.4% compared to pet). looking at individual cost items, raw material (wine), category a is the item that alone accounts for most of the costs in the pet and steel keg scenarios, while for the glass bottle, category b represents the highest costs. the packaging (category c) in steel keg accounts for 0.3% of production costs; this value rises to 3.5% for pet keg and 4.1% for the glass bottle. going into greater detail, the wine production and bottling phase (categories b and d) differ in the use of the three types of packaging, due to manual labour in the bottling phase and in all the phases prior to bottling, such as the cleaning of each container, the management of the bottling line, and the subsequent activities of warehouse logistics. in particular, category b is -2,00 -1,00 0,00 1,00 2,00 3,00 4,00 5,00 bottle pet keg steel keg bottle pet keg steel keg bottle pet keg steel keg italy germany usa m j p ri m ar y en er gy cultivation winemaking packaging transport to the wholesaler transport to the retailer refrigeration waste management figure 2. resources: environmental impact of glass bottle, pet keg and steel keg in the three scenarios considered (italy, germany and usa). -0,10 -0,05 0,00 0,05 0,10 0,15 0,20 bottle pet keg steel keg bottle pet keg steel keg bottle pet keg steel keg italy germany usa k g c o 2 eq . cultivation winemaking packaging transport to the wholesaler transport to the retailer refrigeration waste management figure 3. climate change: environmental impact of glass bottle, pet keg and steel keg in the three scenarios considered (italy, germany and usa). 58 stefano massaglia et al. higher for the glass bottle because of the higher energy consumption of the various machines that constitute the line, compared to the keg plant and the high incidence of the fixed costs of the plant. conversely, category d is higher for kegs because the incidence of the cost of personnel employed in the various operations is higher than for other production lines. turning to transport costs, carriers define unit costs that depend on the kilometres travelled and the type of material. pet packaging is the cheapest on all routes because it is the lightest in terms of volume transported. glass remains competitive on the domestic market, but not on the european and us markets. for steel packaging, the return of the empty container is also considered in the costs shown. packaging in the food industry has to consider various environmental and economic requirements in addition to marketing, logistics, and production. as another study [37] points out, there are two central elements to focus on when choosing the right packaging: the packaging material and the packaging end-of-life. the packaging sector evolved initially because of the need to produce new materials for technological reasons related to wine transport and preservation. currently, the need to find effective ways to reduce costs and environmental impact have led to new design paradigms [38]. this study shows that wine steel and pet have comparable and significantly better economic performance than glass packaging, with steel achieving the best environmental results. similar considerations were expressed by brock and williams [39] who found that glass and the recycled glass bottle are still the most impactful packaging. another study confirms the findings of this work for beer [40], with glass containers appearing to be the most expensive compared to steel. reusable packaging systems therefore appear to be more competitive in the supply chain than single-use packaging, as also demonstrated by mahmoudi and parviziomran [41]. in these terms, it is difficult to find alternative solutions considering on the one hand the tradition of using the glass bottle container and, on the other hand, the perception of the consumer. not all studies agree on the importance of wine packaging, but it seems that bottle design may play an important role in some old-world markets that are more tied to tradition [42], but also in relation to more innovative products, as for fruit wines that highlight the fundamental role of packaging in defining the attractiveness of the product [43]. a recent study [44], indicates that portuguese consumers associate the heavier glass bottle with better quality and a higher price, while at the same time expressing concerns about the presence of plastic in the packaging that may reduce recyclability and reuse. this condition is less evident for tap wine, but the cultural link with tradition can potentially influence the choice. nevertheless, the role of the consumer has been changing in recent years, and more and more attention is being paid to environmental claims and to the communication of the role of limiting impacts by wineries [45], which now consider their carbon neutrality and containment process as development objectives in the medium and long term. moreover, in the last few years, experiments are being conducted to evaluate alternative packaging such as biotable 10. scenario modelling results (33% of weight reduction for packaging). glass pet steel italy germany usa italy germany usa italy germany usa resources -13% -12% -10% -7% -7% -6% -2% -1% -1% climate change -30% -26% -15% -8% -7% -6% 0% 0% 0% table 11. cost analysis results (€ fu-1). format production cost categories transport scenario total costs scenario cultivation wine production and bottling it ge us it ge us a b c d e glass bottle 0.1150 0.1221 0.0116 0.0100 0.0263 0.0163 0.0350 0.0383 0.3013 0.3200 0.3233 pet 0.1150 0.0394 0.0069 0.0113 0.0263 0.0113 0.0250 0.0276 0.2100 0.2238 0.2264 steel keg 0.1150 0.0132 0.0005 0.0163 0.0263 0.0225 0.0525 0.0475 0.1938 0.2238 0.2188 59the impact of alternative packaging on the life cycle of wine on tap plastic bottles, which would guarantee a reduced environmental footprint but would be more expensive [46,47]. compared to our case study, the use of pet kegs seems to be interesting from an economic point of view; however, from a circular economy perspective and considering the increasing awareness of consumers on the use of recyclable and reusable products compared to the classical disposable ones, it seems inevitable for companies operating in the beverage sector to adopt green strategies [48]. in addition, when considering wine packaging, one must actually refer to three levels of packaging: primary packaging, which includes the container intended for the end consumer and with the function of protecting and advertising the product; secondary packaging, used to group bottles, for example in cardboard boxes; tertiary packaging, such as containers used to combine groups of packages into larger loads for transport [49]. the discourse, therefore, becomes broader and refers to many materials, paper, cardboard, plastic, and wood in primis. these materials are also chosen by the industry according to the form of distribution. the transport of wine has emerged as one of the main causes of environmental impact both because of direct emissions, mainly due to fuel consumption during logistics and product handling, but also indirectly because it determines the choice of packaging materials, especially secondary and tertiary packaging, and therefore requires more effective solutions. other studies also confirm the results of this research and emphasise the need to analyse the role of packaging in the agrofood system from a holistic point of view considering its interaction with the logistics phase [50]. finally, focusing on the end-of-life results obtained by the different packaging systems, the glass bottle generated the greatest environmental benefits, due to its efficient waste management system, mainly based on recycling. however, its impact is greater than the other two systems, as reuse, in the case of steel keg, seems to be a strong point for sustainability, as confirmed by other authors [51]. in order to limit environmental impacts and costs, new packaging, such as bag-in-box and tetra pak with integrated use of cardboard or paperboard layers, has entered the wine market in recent years, with the dual aim of maximising the volume transported and containing costs, while at the same time reducing environmental impact at the end of life. however, even these products are only partially recyclable [52]. 3. conclusions this study lays the basis to support wineries, merchants, and retailers in their choice of wine packaging, taking into account the different target markets. this is the first study in the wine sector to consider the entire product life cycle, by assessing both the dynamics and environmental impacts and costs with reference to all phases of the life cycle (production, transformation, distribution, consumption, and end of life). in this way, it has been possible to respond to a need of the industrial and logistics worlds that until now were not in a position to highlight the cost and environmental impact hot spots of the various phases that characterise wine consumption. we have been able to confirm that the glass bottle is still the most popular and appreciated packaging among consumers, probably for sentimental reasons and links with tradition. however, this container has obvious limits from the point of view of the circular economy, considering the limited volume transported for the same weight of the container, compared to other alternatives available on the market today. considering the above, companies are studying the possibility of using alternative packaging on the on-premise market, given that the use of glass bottles requires skilled employees, high cost technology, large space for storage and bottling equipment such as additional pack accessories: cork, screwcap, or cardboard. in addition, as the scenario analysis also showed, the traditional packaging consisting of the glass bottle makes a strong environmental contribution to the entire life cycle of the wine. in this respect, pet kegs prove to be particularly competitive, especially because of their limited weight and considering that each keg carries the equivalent of more than 26 glass bottles; moreover, wineries do not have to consider backhaul and handling charges and there is no need to store empty containers. in addition to the obvious advantages for logistics and limited costs, the one-way use of this container, coupled with not always guaranteed recyclability, introduces doubts about its use from an environmental point of view. the steel keg has interesting technological features, theoretically no end-of-life (unlimited use), and cleaning, filling, and packaging technologies that are much easier to handle than the bottle crate, and which are much less expensive. furthermore, this container has a high material performance in terms of wine shelf life and is also suitable for sparkling wines. on the other hand, this packaging has return transport costs, administration (book-keeping) and handling costs for the management of a keg, initial investment costs for the keg, and repair costs (higher for long routes or constant circulation rate). therefore, companies need a surplus of containers throughout the year to manage seasonal fluctuations. moving empty kegs over long 60 stefano massaglia et al. routes increases the environmental impact and transport costs, and the process of washing and sanitising kegs before each use wastes water, energy, and chemicals. reusable packaging systems appear to be a viable alternative to replace single-use packaging in supply chain systems. the decision-making processes of companies should therefore include an analysis of the feasibility of using reusable packaging systems considering environmental and economic factors. the future of research could lie in new forms of packaging eco-design, using materials with low environmental impact throughout the life cycle, aimed at improving container management in the logistics system. therefore, with a view to optimising the whole chain, both environmental and economic factors should be considered organically through optimisation models applicable at cellar level. furthermore, for future studies, it will be useful to consider case studies related to larger volume production, as the case examined refers to a production example of a medium-high range, low-volume wine. likewise, the research should also investigate other 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[52] thompson-witrick, k.a.; pitts, e.r.; nemenyi, j.l.; budner, d. the impact packaging type has on the flavor of wine. beverages 2021, 7. wine economics and policy volume 12, issue 1 – 2023 firenze university press state of the international wine market in 2022: new market trends for wines require new strategies rafael del rey1, simone loose2,* does anyone read my papers? the gap between academic consumer research and the real (wine) world riccardo vecchio a certification for natural wine? a comparative analysis of consumer drivers in italy and spain eva parga dans1,*, riccardo vecchio2, azzurra annunziata3, pablo alonso gonzález4, raimundo otero enríquez5 structure and development of the czech wine market and foreign wine trade kamila vesela, david křížek*, lucie severova the impact of alternative packaging on the life cycle of wine on tap stefano massaglia1, tibor verduna1, vincenzo varchetta2, filippo brun1, simone blanc1,* the new cap and the challenge of sustainability: a synthetic indicator for the italian wine sector roberta sardone1,*, simonetta de leo1, davide longhitano2, roberto henke1 analysis of the 2007-2008 hérault premiumized grubbing-up campaign: a tool to better understand fischer-boel’s 2008-2011 grubbing-up campaigns and the desire in 2022 to reintroduce locally premiumized grub-ups étienne montaigne1, samson zadmehran2,*, alfredo coelho3, yacine messaoudène4 the impact of fees on customer purchasing behavior and beliefs in winery tasting rooms: a scoping review john c. spence wine economics and policy 10(2): 29-40, 2021 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/wep-10131 wine economics and policy citation: jorge mota, rui costa, antónio moreira, silvana serrão, carlos costa (2021) competitiveness framework to support regional-level decisionmaking in the wine industry: a systematic literature review. wine economics and policy 10(2): 29-40. doi: 10.36253/ wep-10131 copyright: © 2021 jorge mota, rui costa, antónio moreira, silvana serrão, carlos costa. this is an open access, peer-reviewed article published by firenze university press (http://www. fupress.com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information files. competing interests: the author(s) declare(s) no conflict of interest. competitiveness framework to support regional-level decision-making in the wine industry: a systematic literature review jorge mota*, rui costa, antónio moreira, silvana serrão, carlos costa department of economics management industrial engineering and tourism, university of aveiro, aveiro, portugal and governance competitiveness and public policies research unit, university of aveiro, aveiro, portugal, email: jorgemota@ua.pt; ruicosta@ua.pt; amoreira@ua.pt; silvana.serrao@ua.pt; ccosta@ua.pt *corresponding author. abstract. this study aims to identify the main performance indicators and group them in dimensions within a regional competitiveness framework to support decisionmaking in the wine industry. for this research, a systematic literature review (slr) was conducted in the scopus database. there is a limited number of studies identifying indicators with impact on the performance of wine regions, and even fewer studies including indicators in an integrated approach to measure the different dimensions of wine regions’ performance. from a set of 85 papers, only 9 studies related to performance indicators with a specific focus on the regional level were considered. we document that under a convention framework, economic and territorial indicators cover 84.90% of all slr indicators analysed, and under a regional competitiveness framework, infrastructure and innovation and intellectual capital indicators fill 81.25% of all the indicators. as this group of indicators is limited to a set of sub-dimensions, we found that several groups of indicators are misrepresented, such as the ones related to human and socio-cultural capital areas, which play a crucial role in the regional competitiveness of the wine industry. this paper contributes to the literature identifying indicators according to convention and regional competitiveness frameworks in three dimensions – economic, environmental and territorial dimensions and five main areas – productive capital, human capital, socio-cultural capital, infrastructure and intellectual capital. these indicators are to be used at regional-level to support decision-making in the wine industry. for regional entities, it discloses the most pertinent indicators which need improvement to craft regional strategies. this framework is of added value for policymakers to customize their support programmes so that specific producers can enhance their competitive strategies. it could also be deployed in teaching programmes as a tool to address the importance of aligning different types of indicators to achieve better performance in the wine industry. keywords: regional competitiveness, performance indicator, wine industry, competitiveness framework, systematic literature review. 30 jorge mota et al. 1. introduction wine production constitutes one of the most ancient industries in the agri-food sector, providing important economic revenues for many countries and regions worldwide [1, 2]. the international trade of wine has mainly been dominated by three european countries – italy, spain, and france – which together export 57.1 million hectoliters (mhl) and represent 54% of the global market [3]. the growth of the wine industry highlights the importance of ensuring a competitive industry through the entire supply chain and in all its dimensions [4]. wine-producing firms in bordeaux, la rioja, tuscany, and douro, among others, leverage their reputation supported by their association with the region in which they operate [5]. today’s world requires that businesses in a specific region should focus not only on their internal development and success, but also on the development of the social, economic, and environmental conditions of the contexts in which they operate [6]. regional competitiveness, which has been attracting more attention due to its importance for economic growth and wealth creation, lies between the business and the national levels of competitiveness [e.g., 7, 8, 9]. competitiveness frameworks can be considered as a way for wine territories to systematize current practices or innovative entrepreneurial ways to improve wine management and promote innovation processes. wine regions have been creating their own frameworks, presented as national (or regional) programmes to be implemented in their contexts and deal with local issues. additionally, these frameworks support the positioning of the wine territory [10]. convention theory has been used as an explanatory framework in agri-food sectors and regions worldwide in order to understand the current trends in the agri-food system [11] and also analyse a wide range of cases [12] in various territories. thus, one perspective to frame competitiveness in the wine regions is based on convention theory. in regional competitiveness, the intervening factors, albeit resources that lie outside business processes, can be summarized as various types of capital, such as productive, human, social-cultural, infrastructure and intellectual. according to the world economic forum (wef) competitiveness global index (cgi) and the european commission (ec) regional competitiveness index (rci), regional competitiveness should include two additional dimensions: efficiency (higher education and training; market size; labour markets); and innovation (technological readiness; business sophistication; innovation). according to lengyel [13], the enhancement of regional competitiveness may follow a pyramid model. at the top sits the objective of regional competitiveness: quality of life and standard of living. on the bottom are the success determinants related to human/ intellectual capital (skills of the workforce, innovative activity), infrastructure (regional accessibility, environment), socio-cultural (regional identity, social structure, decision centres), economic structure. in the middle are the development factors (foreign direct investment, small and medium-sized enterprises, institutions and social capital, research, and technological development) which are related to the basic categories (labour productivity, employment rate, regional performance/gross regional product). despite there being several studies associated with performance in the wine business [14], there is a lack of emphasis on the development of studies that contain or summarize the major indicators applied in a regional context (in this research, 9 of the 85 selected studies). these are crucial for the identification of commonly used indicators for monitoring the wine industry [15]. nevertheless, we can observe a growing interest and development for regional studies in recent years [e.g., 16, 17, 18, 19] and the indicators cited in these studies refer mostly to protected designations of origin (7 of 9 studies apply to spanish protected designations of origin). regional indicators can contribute to improving knowledge about the decision-making processes of wine regions and consequently to the design of policy programmes to support the competitiveness of this industry. furthermore, they could help to attain a clear view of the potential impacts associated with their strategy and, consequently, to adjust them in the future [20]. in line with the concept of competitiveness, traditionally defined as the intersection of economic, environmental, and territorial dimensions, we believe it is crucial to adopt a global approach that combines the interactions of these dimensions. nevertheless, when studies adopt a global approach regarding performance, we note that the territorial dimension is not given its proper importance. despite its relevance in the wine industry, the territory plays a substantial role in economic, environmental, and infrastructural terms, among others, that are not properly addressed. as a result, we believe that all information must be integrated to obtain a better understanding of the main wine territorial/ regional competitiveness factors. this gap in the literature could be filled as a starting point to study performance in the wine industry at the regional level, including economic, environmental, and territorial dimensions. 31competitiveness framework to support regional-level decision-making in the wine industry: a systematic literature review with the aim of identifying the main performance indicators used at a regional level to support decisionmaking in the wine industry, a systematic literature review (slr) was carried out on papers published in the scopus database from 2009 to 2019. this paper contributes to the literature by: (i) identifying indicators that can be easily adopted by wine regions, to make comparisons and support decisionmaking processes; (ii) grouping the indicators into three dimensions, based on an inductive thematic analysis and interpretative synthesis – territorial, economic and environmental – and five main areas – productive capital, human capital, social-cultural capital, infrastructure and intellectual capital; and (iii) structuring a regional competitiveness framework of analysis for the performance of wine-producing regions. this present paper is organized as follows: after this introduction, section 2 describes the research methodology and section 3 discusses the research results. conclusions, practical implications, and future research recommendations of the study are presented in section 4. 2. research methodology wine as a research topic continues to address a plethora of diverse contexts (bonn et al., 2017). in order to analyse topics, patterns and/or development of a specific area in the wine industry, an slr seems an appropriate technique for the purpose of this study. slrs consist of the identification, selection, analysis, and synthesis of existing research on a specific topic and its presentation to display what is known and not known about the topic [21]. the main advantages of slrs are transparency in data collection and synthesis, which results in a higher level of objectivity and reproducibility [22]. slrs have also other advantages: they provide an overview of areas in which the research is disparate and interdisciplinary; they provide an overview of a certain issue or research problem; they identify gaps in research; they provide the basis for building a new conceptual model or theory; and they can be valuable when aiming to map the development of a particular research over time [23]. an effective and well-conducted review as a research method can provide new directions and challenges for future research studies [24]. in this research, the papers analysed in the slr cover several performance indicators to support decisionmaking in wine regions. in order to identify the main indicators and frameworks used in the analyses of the wine industry, an slr was carried out following the protocol proposed by tranfield et al. [22], which comprises three main stages: a) planning; b) conducting; and c) reporting and disseminating the results. for a credible outcome, the use of scholarly, top peerreviewed, published journal articles is highly important [25, 26]. based on the quality, plurality and relevance of its scholarly reputed journals, the scopus database was adopted. one of the particularities of the scopus database is that is allows researchers to analyse and easily compare literature review outputs through a comprehensive and easy search customization procedure that allows the inclusion/exclusion of search word criteria. in order to properly plan the slr, it is mandatory to define the objective of the slr, which in this paper is to identify the main performance indicators used at regional level to support decision-making in the wine industry. to conduct the review, it is necessary to properly use explicit inclusion search criteria to identify relevant literature. this needs to be assessed following exclusion criteria, so that only the relevant studies are incorporated and then fine graining the quality of the studies reviewed to strengthen the quality of the findings. the final stage involves reporting and getting the evidence into practice. the planning of the review involved the definition of the following search words searched by title, keywords and abstract: ‘ indicator’, ‘performance indicator’, ‘wine’, ‘wine sector’, ‘wine industry’ and ‘winer*’. the information of the inclusion criteria is as follows: i. publication date: 2009-2019 ii. language: documents written in english, french, portuguese, and spanish. iii. type of document: articles, reviews, articles in press, conference papers and conference reviews. as no exclusion criteria were defined, 464 documents that contained one or more search terms were considered in the analysis. table 1 summarizes the research method applied in the scopus database. publication citation data – author(s), title, date, keywords and abstract – were downloaded for each document published in scopus since 2009. the data were then imported into microsoft excel for further cleaning and processing to ensure all information elements had successfully been downloaded. a cross-sectional reading of the 464 results was carried out to select publications whose title, abstract, keywords would suggest the presence of indicators related to the wine industry. to increase the reliability of the selection, the documents were evaluated by three researchers and doubts and disagreements were discussed until consensus was achieved. the documents were included if all reviewers agreed. 32 jorge mota et al. after selecting the most relevant studies for the purpose of this research (85 publications), we examined and selected only the documents that contain indicators from a regional perspective (9 results). figure 1 synthesizes the methodological process adopted during the identification and selection of documents. the following section aims to answer the main purpose of this study. the following three specific steps were thus defined: i) to present the main descriptive results of the selected studies (date of publication; publication source and geographical location); ii) to examine which indicators are proposed in frameworks; and iii) establish how the literature classifies them. as such, it was possible to map the state of the art of the main indicators analysed. following braun and clarke [27] and silva and moreira [26], we sought to organize the literature in patterns of topics involving inductive thematic analysis – indicators, e.g., average size of the winery per region, number of wineries per region, number of brands per region, surface of the vineyard, surface area planted with high yielding grape varieties, and percentage of young wines. based on jones et al. [28] and ribau et al. [29], following an interpretative synthesis, we managed to cluster the papers in related topics or indicators and aggregated them in higher order classes that we call categories – economic, environmental, and territorial – and five main areas – productive capital, human capital, socio-cultural capital, infrastructure, and intellectual capital. 3. results despite the growing number of studies carried out in the wine industry and given the multiplicity of themes present in the literature, only a total of nine theoretical and empirical papers present regional level table 1. research method in the scopus database. 3. scope of research scopus database keywords indicators; performance indicators; wine; wine sector; wine industry; winery; wineries queries (title-abs-key) title-abs-key ((“indicator*” or “performance indicator*”) and (“wine” or “wine sector” or “wine industry” or “winer*”)) inclusion criteria documents in english, french, portuguese, and spanish between 2009-2019; type of document: articles, reviews, articles in press, conference papers and conference reviews. quality criteria the research was carried out on two different dates, confirming the same results. the steps in the two searches were: (i) access to the database; (ii) consultation; (iii) application of the inclusion criteria and (iv) export the results to excel. results the research achieved 1053 results before the application of the criteria stated above. records identified by searching the database (n = 1053 results) records identified after exclusion criteria: date 20092019 (n = 613 results) records identified after exclusion criteria: documents in english, french, portuguese and spanish (n = 576 results) records identified after exclusion criteria: type of document (articles, reviews, articles in press, conference papers and conference reviews) (n = 464 results) selection of documents according to title, abstract and keywords (n = 85 results) selection of documents which contain indicators from a regional perspective (n = 9 results) figure 1. methodological process. 33competitiveness framework to support regional-level decision-making in the wine industry: a systematic literature review performance indicators according to the aim of this research. date of publication the survey reveals a growing interest and development of studies in recent years as most of the studies identified were published between 2015-2019 (66.7%), reinforcing the relevance of the thematic studied. table 2 summarizes the number of publications per year. publication source the papers were published in eight different journals, as shown in table 3, which is a clear indication of how scattered the publication outlets were in the last decade. however, most sources of publication are related to geography or agro-environmental issues. regarding publications per number of authors, as demonstrated in figure 2, most were carried out by two authors (4 of 9 studies). geographical location the papers feature limited geographic dispersion, demonstrating that the subject matter is studied predominantly in european countries. this research also confirms that the nine publications were applied in one specific country, more precisely in spain (n = 7), argentina (n = 1) and hungary (n = 1). relating to wine regions, we observe growing interest and development for regional studies [e.g., 16, 17, 18, 19, 30]. in addition to the nature of the studies, these indicators refer mostly to wine with protected designation of origin. in this sense, table 4 summarizes the selected studies according to geographical coverage and sample. comparative studies were observed in this review. on examining table 4, we identified studies applied in different regions or protected designations of origin (pdo). for instance, sánchez-hernández et al. [18] include 16 protected designations of origin in their research, whereas climent-lópez and sánchez hernández [11] and esteban-rodriguez and climent-lópez [30] analyse a sample of all the spanish wine pdos. the same pattern is followed by esteban-rodríguez [19] and esteban-rodríguez and climent-lópez [16] as they considered all wine pdos present in spanish territory. on the other hand, esteban-rodriguez and climent-lópez [17] analyse 88 of 90 pdos. finally, de villanueva [31] characterizes the wine industry located in the province of mendoza, argentina, and szenteleki et al. [32] include three hungarian wine regions: etyek-budai; kunsági and mátrai (including 17 sub-regions). indicators and frameworks: a regional perspective the use of frameworks and indicators is a way to read and interpret the situation, simultaneously allowing a comparison of contexts over time [10]. a correct use of indicators may be applied to determine the critical areas of intervention to ensure competitive viticulture and may represent a decision-making tool to support wine regional entities, winemakers, and other related professionals [33]. one challenge is the selection of the most representative performance indicators to be included in a framework for wine regions. as a result of the slr carried out in this paper, a list with 112 regional indicators was generated, which were based exclusively on table 2. number of publications per year. year publications (n) percentage 2009 1 11.1% 2011 1 11.1% 2014 1 11.1% 2015 1 11.1% 2017 3 33.3% 2018 2 22.2% total 9 100.00% table 3. main sources of publication. sources of publication n cuadernos geográficos 2 géographie economie société 1 geoforum 1 mundo agrario 1 annales de geographie 1 boletín de la asociación de geógrafos españoles 1 economía agraria y recursos naturales 1 applied ecology and environmental research 1 0 2 4 6 1 author 2 authors 5 authors 6 authors 7 authors number of publications figure 2. publications per number of authors. 34 jorge mota et al. the articles under analysis and related exclusively to the presence of regional indicators in them. to document which indicators are included in the frameworks, as well as how the research classified them, it is crucial to specify the criteria applied in this research. bearing in mind the articles selected through the slr, ‘indicator classification’ was considered to be when: i) the authors had explicit categories/dimensions; and ii) even though not explicitly mentioned, it was possible to ascertain an indicator category/classification inductively generated according to the researchers’ perspective. the identification of the dimensions/categories was explicit in the cases of climent-lópez and sánchezhernández [11] and climent-lópez et al. [12], in which the indicators followed quality conventions: industrial, commercial, domestic, civic, public and ecological. despite addressing the same study field, esteban-rodríguez and climent-lópez [30], esteban-rodríguez [19] and esteban-rodríguez and climent-lópez [16] characterize the indicators based on different dimensions: market, technology and competition type. conversely, sánchez-hernández et al. [18] classify the indicators into products or resources and, finally, szenteleki et al. [32] categorize them as climate-based indicators. the second case occurs, for example in esteban-rodríguez and climent-lópez [17] in which, although the presented indicators are not explicitly classified, the combination of them makes it possible to set suitable indicators to identify different production models of pdos in spain. convention theory has been used as an explanatory framework in agri-food sector studies, including the wine industry, and provides comparative studies through several wine-producing areas with pdo label. despite the limited number of papers that address regional performance indicators, it is clearly possible to conclude that they use six different types of classification [12, 11, 19, 16, 17, 30]. these are synthetized in table 5, as well as the number of indicators and frameworks. according to table 5, climent-lópez et al. [12] classify the indicators into five quality conventions – industrial, commercial, domestic, civic and public. despite using the same classification of indicators, climentlópez and sánchez-hernández [11] introduces a sixth quality convention – ecological. despite that, while the previous authors characterize the indicators according to six quality conventions, which are an aggregation of indicators, esteban-rodríguez and climent-lópez [16, 30] and esteban-rodríguez [19] categorize the indicators simultaneously according to the following dimensions – market, technology, and competition type –as part of the framework. on the same logic, sánchez-hernandez et al. [18] aggregate 21 indicators according to product and resources and szenteleki et al. [32] analyse 11 indicators from the perspective of climatic conditions, which are both integrated into a framework. finally, there are cases such as de villanueva [31] where no classification or framework is observed at all, and the indicators are scattered. table 4. studies by their geographical coverage and sample. references countries where survey was conducted geographical coverage climent-lópez and sánchez hernández [11] spain 12 pdo wine districts: arlanza, arribes, bierzo, calatayud, campo de borja, cariñena, cigales, ribera del duero, rueda, somontano, tierra de león and toro. climent-lópez et al. [12] spain 16 pdo: arlanza, arribes, bierzo, calatayud, campo de borja, cariñena, cigales, mondéjar, ribera del duero, rueda, somontano, tierra de león, tierra del vino de zamora, toro, uclés, vinos de madrid. de villanueva [31] argentina province of mendoza esteban-rodriguez and climent-lópez [17] spain 88 protected designations of origin esteban-rodriguez and climent-lópez [30] spain all spanish wine pdos: rioja, ribera del duerao, montilla-morilles, vinos de madrid, terra alta, penedés, costers del segre, bierzo, tierra del vino de zamora, pago guijoso, pago dominio de valdepusa and cigales. esteban-rodríguez [19] spain 90 protected designation of origin esteban-rodriguez and climent-lópez [16] spain 90 protected designation of origin sánchez-hernández et al. [18] spain 3 regions in 16 spanish wine districts: aragón (catalayud; campo de borja; cariñena; somontano); castilla y león (arlanza; arribes; bierzo; cigales;ribera del duero; rueda; tierras de león; tierra del vino de zamora; toro); castilla-la mancha (mondéjar; uclés) and comunidad de madrid (vinos de madrid). szenteleki et al. [32] hungary etyek-budai; kunsági and mátrai wine regions (includes 17 sub-regions) 35competitiveness framework to support regional-level decision-making in the wine industry: a systematic literature review in sum, most of the indicators are integrated into frameworks (8 of 9 publications), corresponding to 104 of 112 regional level indicators. considering the papers mentioned in table 5, where indicators are classified and simultaneously integrated into frameworks, four viewpoints can be highlighted: i) indicators related to products and resources of a specific territory; ii) indicators associated with climate conditions of a given region; iii) indicators classified according to known quality conventions (industrial, commercial, domestic, civic, public, and ecological); and iv) indicators grouped into technology and market types. given the similarity of the indicators among the four perspectives and bearing in mind the purpose of the present study, the indicators were reclassified according to the territorial, economic, and environmental dimensions. under the territorial dimension, the exhibited indicators may be grouped into following areas – territorial resources and marketing. regarding the economic dimension, the indicators were grouped in two main dimensions – productivity and competitiveness. lastly, the environmental dimension features indicators related to sustainability issues. considering their geographical scope, tables 6 to 8 summarize the most mentioned regional level indicators found in the slr. as the wine production is an activity that depends on the availability of ‘territorial resources’, the importance given by the wine regions to the measurement and impact on their businesses is crucial. under this dimension, indicators such as ‘average size of the farm per region’, ‘average size of the winery per region’, ‘number of wineries per region’, ‘number of brands per region’ and the ‘surface of the vineyard’ are essential to characterize the wine industry on a regional scale. regarding ‘marketing’, indicators such as the ‘use of brands’ is related to an intention to associate the image of wine with a specific territory and to obtain recognition as a product of origin. the ‘average of stars obtained in wine guides’ and the ‘average awards/medals won in contests’ measure the reputation based on expert assessments. following a similar perspective, the number of ‘references in specialized journals’ measures the reputation in magazines which specialize in the wine industry and the ‘number of results in internet search engines’ analyses the popularity in a broader context. additionally, the ‘number of awards obtained by volume sold’ is also a relevant indicator that reflects the importance of product quality. in summary, these previous indicators may provide crucial insights to wine regions related to their performance in terms of image and awareness. table 6 presents the most cited indicators in the literature according to the territorial dimension. other indicators reported as having an important impact on the measurement of wine regions performance are those related to ‘productivity’. according to the literature, the ‘surface area planted with high-yielding grape varieties’ indicates a search for high yields per area and per wine region. in the same way, the ‘average production of wine per type/region’ quantifies the average size of the wine businesses and the ‘percentage of young wines’ show the extent to which wine businesses are looking for wines that require less time for production. further, high values for these indicators show the pursuit of economies of scale and subsequently reveal higher productivity. concerning ‘competitiveness’, a high percentage of vineyard area cultivated by global varieties reflects the adjustment of the suppliers to the demands of the international market. the ‘percentage of vineyards controlled by cooperatives’ focuses on the economic benefits of the industry and whether they are widely distributed among the local population. this indicator is an important measure of the level of collective involvement and economic cooperation within a region. ‘wine productable 5. number of indicators with their classification and framework. authors indicators framework classification climent-lópez and sánchez-hernández [11] 28 yes industrial, commercial, domestic, civic, public and ecological conventions (market and technology) climent-lópez et al. [12] 19 yes industrial, commercial, domestic, civic and public conventions de villanueva [31] 8 no not classified esteban-rodríguez and climent-lópez [17] 6 yes production models esteban-rodríguez and climent-lópez [30] 9 yes technology and market type (quality conventions) esteban-rodríguez [19] 4 yes technology and market type (quality conventions) esteban-rodríguez and climent-lópez [16] 6 yes technology, market, and competition indicators (quality conventions) sánchez-hernández et al. [18] 21 yes products and resources szenteleki et al. [32] 11 yes climatic indicators 36 jorge mota et al. tion’ and ‘average price per bottle’ are also key indicators which when well managed can influence the business strategies of wine regions and even their national and international markets performance. additionally, the ‘number of wineries within a region that organized guided tours’ may reveal a competitive advantage and a strong marketing strategy. table 7 exhibits the indicators related to economic dimension. several indicators are related to ‘sustainability’. for example, the ‘percentage of organic certified wineries by a regulatory board’ is based on the existence of labels that certify products made by processes that respect the environment and show an awareness of wine business organizations towards sustainable production processes. furthermore, the ‘percentage of planted vineyard area with rare grape varieties’ provides an additional criterion: the designation of ‘rare’ alludes to certain native grape varieties that have unique characteristics, and in some cases, have practically disappeared because they have been replaced by others, whether autochthonous or foreign, so vineyards can become more productive or more competitive. thus, the recovery of these rare varieties shows a positive attitude towards sustainability. finally, higher values of ‘vineyards planted with native varieties’ reveal the intent to produce wine from local/ endogenous resources, which clearly contributes to the local development and their preservation. table 8 synthesizes the most cited indicators from an environmental perspective. additionally, we reclassified the indicators according to a regional competitiveness framework into the following five basic competitiveness dimensions: protable 6. territorial indicators. indicators n authors number of brands per region 3 climent-lópez and sánchez-hernández [11]; esteban-rodríguez and climentlópez [16, 30] average size of the farm per region 2 esteban-rodríguez and climent-lópez [16, 17] average size of the winery per region 2 esteban-rodríguez and climent-lópez [16, 17] surface extension of vineyard (ha) 2 de villanueva [31]; esteban-rodríguez and climent-lópez [30] number of wineries per region 2 de villanueva [31]; esteban-rodríguez and climent-lópez [30] average size of brands 2 esteban-rodríguez [19]; esteban-rodríguez and climent-lópez [30] brands of local products 2 climent-lópez and sánchez-hernández [11]; climent-lópez et al. [12] average stars obtained by wineries in wine guides within a region 2 climent-lópez et al. [12]; climent-lópez and sánchez-hernández [11] awards/medals won by wineries in contests 2 climent-lópez et al. [12]; sánchez-hernández et al. [18]; climent-lópez and sánchez-hernández [11] average reference in specialized journals 2 climent-lópez and sánchez-hernández [11]; climent-lópez et al. [12] average results obtained in internet search engines 2 climent-lópez and sánchez-hernández [11]; climent-lópez et al. [12] number of awards obtained by volume sold 2 esteban-rodríguez and climent-lópez [30]; esteban-rodríguez [19] table 7. economic indicators. indicators n authors wine per region (hl) 3 climent-lópez et al. [12]; climent-lópez and sánchez-hernández [11]; de villanueva [31] percentage of vineyard controlled by cooperatives 3 climent-lópez and sánchez-hernández [11]; climent-lópez et al. [12]; sánchezhernández et al. [18] average price of the bottle per region 2 sánchez-hernández et al. [18]; climent-lópez and sánchez-hernández [11] average production of wine per region 2 climent-lópez et al. [12]; climent-lópez and sánchez-hernández [11] vineyard surface area planted with global grape varieties 2 sánchez-hernández et al. [18]; climent-lópez et al. [12] vineyard surface area planted with high-yielding grape varieties 2 sánchez-hernández et al. [18]; climent-lópez et al. [12] percentage of young wine 2 climent-lópez et al. [12]; sánchez-hernández et al. [18] wineries that organized guided tours within a region 2 sánchez-hernández et al. [18]; climent-lópez and sánchez-hernández [11] 37competitiveness framework to support regional-level decision-making in the wine industry: a systematic literature review ductive capital, human capital, social-cultural capital, infrastructure, and intellectual capital [following, for example, 7, and 13]. under the infrastructure dimension, indicators such as ‘vineyard cultivated with rare grape varieties (%)’, ‘percentage of vineyard surface area planted with native grape varieties’, ‘average size of the farm per region’, and ‘surface extension of vineyard (ha)’ demonstrate the importance of existing infrastructure for regional competitiveness (see table 9). the productive capital dimension covers aspects such as economic development, stability, or market size. in our study this dimension includes indicators such as ‘average production of wine per region’, ‘wine per region (hl)’, ‘percentage of young wine’ and ‘average price of the bottle per region’ (see table 10). for the social and institutional capital that should include variables relating to the efficiency of public administration or the legal framework, in our study an indicator ‘percentage of vineyard controlled by cooperatives’ could be identified [11, 12, 18]. finally, indicators as, e.g., ‘number of brands per region’, ‘wineries that organized guided tours within a region’, ‘average stars obtained by wineries in wine guides within a region’, and ‘wine certified as organic by the regulatory council’, were classified under the innovation and intellectual dimension (see table 11). 5. conclusions, implications, limitations, and future research given the increasing importance of the wine industry, and especially of well-managed wine regions, conducting a study to identify indicators and competitiveness frameworks with impact on performance at the regional level seemed an interesting and challenging research task. based on an slr, we sought to identify the main performance indicators used at regional level to support decision-making in the wine industry. the results document that there is a limited number of research works identifying indicators with impact on the performance of wine regions, and even fewer studies including indicators in an integrated approach to measure the different dimensions of wine regions performance. thus, our research contributes to the literature by identifying indicators according to a regional competitiveness framework grouped into five main dimensions: productive capital, human capital, social-cultural capital, infrastructure and intellectual capital. according to this slr, the indicators grouped and ranked under this framework are the most referred to and are used to address the overall performance of the wine industry. moreover, most of them are used in highly competitive pdo regions. as such, they could be clustered as the table 8. environmental indicators. indicators n authors vineyard cultivated with rare grape varieties (%) 3 sánchez-hernández et al. [18]; climent-lópez and sánchez-hernández [11]; climent-lópez et al. [12] percentage of vineyard surface area planted with native grape varieties 3 climent-lópez and sánchez-hernández [11]; climent-lópez et al. [12]; sánchezhernández et al. [18] wine certified as organic by the regulatory council 2 sánchez-hernández et al. [18]; climent-lópez and sánchez-hernández [11] table 9. infrastructure indicators. indicators n authors vineyard cultivated with rare grape varieties (%) 3 sánchez-hernández et al. [18]; climent-lópez and sánchez-hernández [11]; climent-lópez et al. [12] percentage of vineyard surface area planted with native grape varieties 3 climent-lópez and sánchez-hernández [11]; climent-lópez et al. [12]; sánchezhernández et al. [18] average size of the farm per region 2 esteban-rodríguez and climent-lópez [16, 17] average size of the winery per region 2 esteban-rodríguez and climent-lópez [16, 17] surface extension of vineyard (ha) 2 de villanueva [31]; esteban-rodríguez and climent-lópez [30] number of wineries per region 2 de villanueva [31]; esteban-rodríguez and climent-lópez [30] vineyard surface area planted with global grape varieties 2 sánchez-hernández et al. [18]; climent-lópez et al. [12] vineyard surface area planted with high yielding grape varieties 2 sánchez-hernández et al. [18]; climent-lópez et al. [12] 38 jorge mota et al. main dimensions and indicators to be used at regional level to support decision-making in the wine industry. under the regional competitiveness framework, the only basic competitiveness dimension for which we have not identified any indicators was that of human capital. this dimension should incorporate indicators related to the efficiency of the labour market, basic and higher education, and ongoing training. to achieve the target of regional competitiveness and to increase the well-being of the population in a certain region, it is essential to fulfil the basic dimensions of regional competitiveness. our results document that infrastructures, intellectual capital and productivity are dimensions that are given importance in terms of regional competitiveness in the wine industry. however, the same importance is not given to the dimensions of human and socio-cultural capital. to improve the quality of life of a region, e.g., represented by means of the gross regional product, it is essential to increase labour productivity and the employment rate, which is difficult to accomplish without including the human capital dimension. industry-wise, this paper contributes to the development of a meaningful and useful framework to assess collective wine business organizations/wine regions by means of performance indicators. nevertheless, regional specificities and their different business units must be considered when designing and proposing performance indicators in a framework. as referred to in the document, certain regions based their competitiveness on pdos, which might aggregate several of those indicators. from an academic viewpoint, this paper highlights the main research areas that require more attention in the future and might help researchers to update knowledge on this field. based on these regional indicators, future research could focus on developing studies/indicators related to national board commissions in the wine industry. references [1] b. rugani, i. vázquez-rowe, g. benedetto, e. benetto, a comprehensive review of carbon footprint analysis as an extended environmental indicator in the wine sector, j. cleaner prod. 54(1) (2013) 61-77. 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[33] r. merli, m. preziosi, a. acampora, sustainability experiences in the wine sector: toward the development of an international indicators system, j. cleaner prod. 172 (2018) 3791-3805. wine economics and policy volume 10, issue 2 2021 firenze university press productive efficiency of wine grape producers in the north of portugal micael santos1,*, xosé antón rodríguez2, ana marta-costa3 organic and conventional grape growing in italy: a technical efficiency comparison using a parametric approach federica cisilino1, fabio a. madau2,*, roberto furesi2, pietro pulina2, brunella arru2 competitiveness framework to support regional-level decision-making in the wine industry: a systematic literature review jorge mota*, rui costa, antónio moreira, silvana serrão, carlos costa does belonging to an appellation make a difference? new evidence from ontario viticultural areas omer gokcekus how do sparkling wine producers adopt a sub-appellation? evidence from an exploratory study on heroic prosecco superiore rive luigino barisan*, luigi galletto motivation factors for organic wines. an analysis from the perspective of german producers and retailers katharina hauck*, gergely szolnoki, evelyn pabst consumer preferences for certified wines in france: a comparison of sustainable labels adeline alonso ugaglia1,*, britta niklas2, wolfram rinke3, dan moscovici4, jeff gow5, lionel valenzuela6, radu mihailescu7 wine ratings and advertising strategies: is there a link? ricardo sellers-rubio adaptive market hypothesis: an empirical analysis of the wine market anoop s kumar wine economics and policy 10(2): 87-97, 2021 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/wep-10639 wine economics and policy citation: ricardo sellers-rubio (2021) wine ratings and advertising strategies: is there a link?. wine economics and policy 10(2): 87-97. doi: 10.36253/ wep-10639 copyright: © 2021 ricardo sellers-rubio. this is an open access, peer-reviewed article published by firenze university press (http://www.fupress.com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information files. competing interests: the author(s) declare(s) no conflict of interest. wine ratings and advertising strategies: is there a link? ricardo sellers-rubio university of alicante, department of marketing, crta. san vicente s/n. 03690, alicante, spain. email: ricardo.sellers@ua.es abstract. advertising is one of the most widely used marketing resources in the beverage industry, yet the wine industry has not made an intense use of this resource over time. the small average size of wineries together with rising concerns about the effectiveness of advertising has led many wineries to use alternative strategies to market their products: collective brands, the display of prizes and medals on their labels, or positive ratings in expert guides. in this sense, the objective of the present study was to analyse the behaviour of wineries regarding their use of advertising as a marketing resource. specifically, we analysed the advertising strategy of wineries with respect to the existence of publicly available wine ratings. the method was based on the estimation of a heckit model that simultaneously identifies the variables underlying the decision to invest in advertising and the determinants of the amount of money invested. the results revealed a nonlinear relationship between wine ratings and advertising investment. keywords: advertising, heckit model, wine ratings, winery. 1. introduction food and beverage companies resort to different strategies to promote their products. among them, advertising is often used to convince consumers to select a specific product over that of competitors, communicating positive and persuasive information about the company and its products to the target market. in fact, advertising can enhance brand awareness [1], brand equity [2] and create a reputation premium, enabling the price of an advertised brand to be higher than that of competing products with the same characteristics [3]. furthermore, advertising can discourage potential competitors to enter the market [4]. when a firm has a strong market position, an effective use of advertising can be helpful to charge higher prices and increase profits [5]. despite its potential benefits, there is some uncertainty in the academic literature as to the effectiveness of advertising [6–8]. some researchers have raised doubts about the relationship between advertising investment and performance [3,9–11]. several researchers have even found an absence of a link between advertising investment and sales performance [11–16]. consequently, 88 ricardo sellers-rubio advertising effectiveness is under continuous scrutiny by researchers and practitioners. in the wine industry, the link between advertising investment and performance is underresearched, and the scarce number of studies that do exist on this topic do not offer conclusive results. on the one hand, [17] provide evidence that advertising might positively impact sales. their results for the us market show that the advertising of imported wines significantly increases imports for most countries. on the other hand, [18] show that advertising investments are not significantly related to wine sales in the us market at an aggregate level. however, they suggest that in mature markets competition is intense, and firms attempt to increase their revenue and market share through their marketing efforts. the authors can hardly conclude, however, that advertising is the only driver of sales. indeed, other factors such as brand appeal or discounts may have an impact on sales and revenues. in spain, wineries have introduced several marketing and advertising campaigns in the media since the 1980s in order to overcome decreasing domestic demand and growing international competition [19]. the absence of a clear effect, however, of advertising investments on firm performance has led many small wineries to employ alternative marketing strategies, including some which are specific to the wine industry (e.g. fostering high ratings in wine guides). this situation has led to the existence of two different groups of wineries: a first group of wineries that relies on advertising as a powerful marketing strategy (with varying degrees of advertising intensity), and a second group of wineries that do not make these types of investments and rely on alternative strategies. in this paper, we seek to contribute to the literature by exploring the reasons underlying wineries’ behaviours. we focus in particular on the effect that wine ratings have on the advertising strategy of spanish wineries. wine ratings are frequently used in the wine industry to signal product quality because they represent a useful tool to compensate for information asymmetries between consumers and wineries. although some authors (e.g. [20–22]) have raised concerns about quality assessment inconsistencies between judges or incoherence by a same judge over time, they still constitute important informative clues for consumers. indeed, [23] provide evidence that consumers attribute a high credibility to independent expert recommendations. these ratings may, to some extent, affect wineries’ advertising strategies. in this sense, the objective of the present study was twofold. first, we sought to find out the variables that might explain the decision to invest in advertising or not. we propose a model to explain the differences between wineries that do invest in advertising and firms that do not. furthermore, we tried to explain the amount of money invested in advertising. we focused on the effect that publicly available ratings may have on these strategic advertising decisions. second, we compared several performance and profitability ratios among these two groups of wineries to assess the effectiveness of advertising investments in the spanish wine industry. 2. literature review 2.1 advertising effectiveness and the wine industry in a mature competitive market, firms have different strategies at their disposal to promote their products [24], such as price discounts, vouchers, increasing the amount of sales staff and points of sale, or advertising, which is a major means of appealing to consumers [25]. through advertising, firms send a message that allows consumers to obtain information about the firm/ brand and compare it with that of various competitors to make their purchase decisions. in this sense, firms advertise across several media vehicles, striving to build a cohesive message to increase the individual and joint effect of their investment [26]. advertising can be used to convince consumers to buy a certain brand instead of that of competitors, to increase consumers’ loyalty, and to reduce their sensitivity to price which can ultimately raise a firm’s market share [27, 28]. given their potential benefits, some scholars have focused on estimating the positive effects expected of advertising investments on different performance and profitability ratios. most of these studies find a positive effect of advertising investments on performance [27, 29–33]. for example, [30] provide evidence of a longterm relationship between advertising spending and market capitalisation. their results show that advertising has an effect on firms’ market capitalisation through its effect on sales and profits. in the same line, [29] state that a productive firm should be able to expand its market share through advertising. however, some studies have failed to find a clear relationship between advertising and performance [3, 10, 30] or have even found no link at all between these variables [12, 14–16, 34]. several explanations have been given to these contradictory results. for example, [34] suggest that advertising effectiveness may differ between expansion and contraction economic periods. they show that advertising investment during recessions may lead to more financial outcomes (e.g. sales) than advertising investment dur89wine ratings and advertising strategies: is there a link? ing periods of growth. according to other authors, it is reasonable to expect that not all companies will reap the same benefits from advertising. thus, [35] claim that the relationship between advertising and performance is not straightforward and other factors, such as advertising intensity or firm size might moderate this relationship. indeed, certain authors [35–38] have found that bigger firms make a more intense use of advertising and obtain higher returns than smaller firms. in the same line, [33] point out that advertising has a moderate influence on sales in the short and long term. advertising should thus be considered an adaptive learning process that may take some time to be noticed. [39] provide evidence of robust positive effects of advertising but stress the need to consider the originality and creativity of advertising, as the effects are stronger for high-involvement products compared to low-involvement products. in the beverage industry, most of the previous literature has focused on analysing the effect of advertising on alcohol consumption at an aggregate level. contrary to what could be expected a priori, most of the studies found no effect of advertising on total alcohol consumption [40]. however, a recent study [41] suggests a tiny yet consistent positive correlation between alcohol advertising exposure (wine, beer and spirits) and drinking behaviour. in the specific case of the wine industry, few studies have estimated the effect of advertising on wine consumption, and the scarce number of studies in this area that do exist do not offer conclusive results. on the one hand, [17] illustrate how advertising might have a positive effect on sales in the us market. they show that advertising of imported wines significantly increases the quantity of imports for most countries. on the other hand, [18] show that advertising investments are not significantly related to wine sales in the us market at an aggregate level. however, they do suggest that in mature markets competition among firms is intense. although firms strive to increase their revenue and market share through marketing efforts, it would be highly unrealistic to suggest that advertising is the only sales driver. indeed, other promotional activities (e.g. price discounts) may also have an impact on sales, so it would be difficult to precisely determine the effect of advertising on sales without considering these issues. [42] examine advertising effectiveness from the perspective of advertising productivity, showing that it is greater in the case of wineries associated with a collective brand than for non-associated wineries. their results also indicate that advertising productivity is higher in the case of brands with a better firm reputation, and this result is moderated by the degree of competition. in the greek market, [43] show that firms’ promotions offering information about the origin and other specific wine attributes, free samples, leaflets or new market channels through “wine routes” are more effective than advertising. furthermore, according to their results, promotional expenses along with market share affect profitability. based on a different perspective, [44] focused on advertising creativity and examined the potential effectiveness of advertising targeted towards millennials. they showed that current wine advertising is not appealing to this market segment, who would prefer wine advertisements based on fun, social, and relaxed settings. similarly, [45] found that wine brands should focus their advertising on the social aspects of wine when trying to reach millennials. in the same line, [46] examine the contents of wine advertising (types of photographs) and their effect on the adoption of technological solutions in this field. eventually, [47] have estimated the relationship between advertising investment and reputation in the framework of companies that belong to a collective brand in the spanish wine industry and invest in advertising. their results evidence a curvilinear relationship between advertising investment and reputation. besides, results also show that the market share of the winery negatively moderates this relationship. to some extent, our paper expands this previous article as our sample includes wineries that invest in advertising but also wineries that do not invest in advertising. 2.2 wine quality and advertising investment: the role of wine ratings the link between quality and advertising investment is a major marketing issue [48] as advertising investment can be informative about product quality. but the complexity of this theoretical relation shows that a clear relationship between quality and advertising investment has in fact not been demonstrated in past research [49]. on the one hand, the signalling theory [50] indicates a positive relationship between quality and advertising investment in the case of experience goods [48] because firms that produce high-quality products might use advertising to signal to consumers their commitment to quality [51, 52]. for example, [53] found that advertising can be a useful signal to improve consumers’ evaluations of advertised products. on the other hand, firms with low-quality products may also use advertising to compensate for the loss of quality as advertising differentiates products and reduces demand cross-elasticities. following this reasoning, product quality and 90 ricardo sellers-rubio advertising investment would present a negative association [27, 54]. indeed, the seminal study by [55] suggests a negative relationship, since a high degree of advertising intensity may be used to increase consumer preferences for low quality products [27]. [56] provides a review that shows how different studies offer conflicting evidence in support of these contradictory viewpoints. in the case of experience products, quality is very difficult to assess before consumption and alternative theoretical approaches consider the link between quality and advertising investment, focusing on reputation. when consumers are not able to assess quality before their purchase, some extrinsic cues may in fact act as a proxy of quality [57, 58]. for example, in the wine industry, price has played a traditional role as a proxy of wine quality [59]. at the same time, the brand (commercial brand and collective brand like a denomination of origin [60]) may have a role in this sense. in this paper we focus on the potential effect of firm and product reputations. however, prior evidence has also revealed conflicting results. some studies find a positive association when quality ratings are published and widely disseminated (e.g., [51]). in the same line, [53] illustrate how more highly rated experience products are found to be advertised more. this evidence is consistent with the company reputation model of [52] that assumes that reputation has a positive effect on advertising because firms with high quality products use advertising to inform consumers of their commitment to quality [51]. conversely, [49] show that available online ratings have a negative effect on advertising investment as firms with higher ratings invest less in advertising, suggesting that reputation through ratings might act as a substitute for advertising investment. based on the reasoning above, we adopted in this study the integrated view of [48] according to which a non-linear link exists between quality and advertising investment. in this sense, we propose the following hypothesis: h1a. publicly available wine ratings affect the likelihood of investing in advertising. h1b. wine ratings have a nonlinear effect on the amount of money invested in advertising. 3. method and data 3.1 method a heckit model estimation was conducted to explain the advertising strategy of wineries. this model was originally developed by [61, 62], and its main advantage is to avoid sample selection bias, which involves the incidental truncation that arises when the dependent variable is observed only if other variables take on particular values [63]. under the heckit model the dependent variable is only observable for a portion of the data, and this model permits the error terms to co-vary. thus, in our context, the model decomposes a winery’s advertising strategy into two stages: the decision to invest in advertising (or not) and the amount of money invested. the model has been previously used in the wine industry to test the willingness to pay for sustainable wines [64]. the resulting two-equation model was as follows: di* = ∑rr=1 γr w1ir+ ui (1) invi = ∑ss=1 βs w2is+ εi observed only if di* > 0 (2) where w1ir is a vector of r variables related to winery i that determine the decision to invest in advertising di, and gr are the associated parameters. the di variable is binary, with a unitary value when the latent variable is above zero (di*>0), and zero otherwise. w2is is a vector of s variables related to winery i associated with the decision regarding the amount of money invested (invi), and bs reflects the effect of these variables on this decision. it is worth noting that the log-transformation is applied to the dependent variable invi, thus semi-elasticities are obtained directly from the parameters. the error terms ui and ei follow a bivariate standard normal distribution, and standard deviations su and se, and covariance seu. full information maximum likelihood is used to obtain the parameter estimates. to test the effect of wine ratings on advertising spending, two different models were estimated, including linear (model 1) and quadratic (model 2) effects separately. to implement this methodology, we use the sampleselection library of the statistical package r [65]. 3.2 sample and variables the hypotheses were tested within the framework of the spanish wine industry. for the sample selection we use the population of wineries included in the 1102 section of cnae-2009, which is the equivalent of code 2084 of the us sic classification (wines, brandy and brandy spirits), and is found in the bureau van dijk database. from the initial sample we discarded companies with missing values in any of the relevant variables. besides, to ensure the homogeneity of the sample, we excluded wineries that mainly produce brandy and other distilled high alcohol products. following this procedure, the final sample comprised a total of 835 winer91wine ratings and advertising strategies: is there a link? ies, operating between 2004 and 2014, and represented more than 70% of spain’s total wineries’ sales revenue over the whole period. the data was collected and matched based on the sources described next. data on advertising spending were obtained from the information for advertising expenditures (infoadex) database (https://www.infoadex. es), which provides information on advertising expenditure in spanish media in the form of print, broadcast, outdoor, and internet advertising. financial, accounting and another specific firm information was obtained from the bureau van dijk database (https://www.bvdinfo.com). information on designations of origin (do) was gathered from the publicly available listings of the different dos and their respective websites. wine ratings were obtained from the renowned spanish guide the best wines in spain (repsol guide), which offers expert blind tasting quality scores on a 100-point scale. all monetary values are deflated by the gdp deflator index. the model’s dependent variable is the winery’s advertising strategy, which is broken down into two decisions: the decision to invest in advertising (measured through a dummy variable that takes the value of 1 if the winery invests in advertising in period t, and 0 elsewhere); and the decision of how much money the winery i invests during period t, which is measured in euros (invit). the variables listed below are considered to explain the winery’s advertising decisions: i) number of wine references with ratings (numrefsj): this variable reflects the number of wine references marketed by the winery that appear in the guide. advertising investment can be inf luenced by this variable because a wider product assortment is more likely to be associated with greater levels of advertising [54]. ii) wine ratings (wrj): this variable is measured through the average quality ratings of the wines marketed by the winery. it is a proxy of the winery’s reputation. wine guides ratings based on sensory assessments are used in the wine industry to measure quality and reputation [66]. iii) designation of origin (doj): this variable reflects whether the winery belongs to a designation of origin that acts as a collective trademark, signaling the origin, nature or quality of the wines. it is measured through a dummy variable that takes the value of 1 if the winery belongs to a designation of origin and 0, otherwise. iv) type of designation of origin (dotypej): this variable is based on the different requirements established to achieve a do status and is a proxy of the collective trademark reputation [67]. if a winery uses a collective trademark to market its wines, this information will be indicated on the wine’s label, which is publicly available to consumers. the spanish system establishes four different categories of do wines. thus, this variable takes a value of 4 for estate wines, 3 for qualified designations of origin, 2 for designations of origin and 1 for quality wines. for wineries that belong to several indications we have considered the highest level of do type achieved, as we don’t know the percentage that every do represents for the winery. v) winery experience (experiencej): this variable is measured as the number of years since the winery’s establishment. the age of the company is usually associated with its advertising investment. indeed, the reputation of a firm spreads through positive (or negative) word of mouth once it has been established for the first time [68]. hence, consumers will have more information about earlier entrants in the market and will depend less on advertising, so later entrants will probably need to invest more in advertising [54]. vi) winery size (sizej): this variable is measured based on the winery’s volume of assets [69]. this variable is included because firm size can affect advertising investment as larger firms dispose of more financial resources to invest in promotion [70]. the descriptive statistics are shown in table 1. of the sample’s 835 wineries, 189 invest in advertising and 646 do not. the average monetary amount invested is 51,240 euros per year. a total of 696 wineries belong to a do, while 139 do not. of the total, 273 wineries appear in the guide each year, 347 never appear in the guide, and 215 wineries appear only some years. most of the correlations among the variables are relatively low. however, and as it might be expected, advertising spending and size of the winery are positively correlated (0.553). besides, the correlation between the variables do and dotype is closed to 1. 4. results first, a heckit model estimation was conducted to explain the wineries’ advertising strategy and to test the proposed hypotheses. the procedure allowed us to identify the drivers of the advertising strategy, which was broken down into the decision to invest (or not) and the decision on the amount of money invested. to test the effect of wine ratings on advertising spending, two different models were estimated, including linear (model 1) and quadratic (model 2) effects separately (see table 2). the variables do and experience served as instruments and were included only in the selection equation (eq.1). we implemented the two-step heckman procedure that includes the inverse mills ratio in the second step as 92 ricardo sellers-rubio a regressor. results show that the coefficient of this variable (λ) is significant in both models. besides, the results showed significant correlations (ρ), which proves that the correlation between the disturbances of the decision to invest in advertising and the amount of money invested is significantly different from zero. the latter shows the advantages offered by the heckit model for this analysis as it permits the error terms to co-vary. moreover, it confirms the two-step managerial decision process: first, the decision to invest (or not) in advertising and, second, the amount of money invested. regarding the determining factors of the decision to invest in advertising (eq. 1), all the variables included were significant. according to the results, the numtable 1. descriptive statistics and correlations among variables. variable mean (sd) (1) (2) (3) (4) (5) (6) (7) (1) advspending 51240 (4783 e02) 1.000 0.125 -0.009 0.043 0.062 0.198 0.553 (2) numrefs 1.174 (1.713) 1.000 0.145 0.278 0.245 0.203 0.266 (3) wine ratings 90.486 (1.791) 1.000 -0.012 0.030 -0.029 0.067 (4) do 0.833 (0.372) 1.000 0.933 0.012 0.087 (5) dotype 2.5579 (1.344) 1.000 0.014 0.127 (6) experience 19.141 (15.658) 1.000 0.274 (7) size 9856.6 (31645) 1.000 table 2. determinant factors of wineries’ advertising strategy. model 1 model 2 coeff sd p-value coeff sd p-value eq.1 intercept −5.084 0.151 <0.001 −5.085 0.151 <0.001 numrefs 0.289 0.011 <0.001 0.289 0.011 <0.001 do 0.512 0.078 <0.001 0.512 0.078 <0.001 experience 0.007 0.001 <0.001 0.007 0.001 <0.001 size 0.390 0.016 <0.001 0.390 0.016 <0.001 eq. 2 intercept 6.973 2.736 0.011 211.426 82.005 0.009 numrefs 0.043 0.034 0.209 0.045 0.034 0.186 wine ratings −0.015 0.029 0.610 −4.551 1.818 0.012 wine ratings (^2) 0.025 0.010 0.012 dotype 0.049 0.063 0.431 0.041 0.063 0.512 size 0.455 0.067 <0.001 0.431 0.067 <0.001 lambda −0.361 0.176 0.040 −0.378 0.181 0.037 log-l −6357.247 −6354.139 sigma 1.816 1.815 rho (ρ) −0.199 −0.208 obs. 8351 8351 93wine ratings and advertising strategies: is there a link? ber of wine references in the portfolio included in the guide was significant, showing that a wider assortment of products with available quality ratings is associated with a greater probability of investment in advertising [54]. this result supports hypothesis 1a, implying that wine ratings are not substitutes for advertising. it seems that wineries that produce quality wines wish to inform consumers of their commitment. in addition, the results also provide evidence that wineries that belong to a do are more likely to invest in advertising. despite the fact that the collective trademark reputation might help to market the wines, the results showed that it is more likely that wineries with a do decide to invest in advertising, probably to reinforce their market position. ultimately, the control variables that reflect a winery’s experience and size were also significant in the selection equation (eq.1). the latter finding shows that market pioneer entrants are more likely to invest in advertising than later entrants. furthermore, firm size was positively and significantly associated with advertising investment, which suggests that larger wineries are more likely to invest in advertising. an explanation could be that big companies have more resources to invest in promotion than smaller ones [70]. these results were robust in models 1 and 2. in relation to the determinants of the amount of money invested in advertising (eq.2), the estimations generated interesting insights. model 1 proposes a linear relationship between wine ratings and advertising investment, while model 2 proposes a nonlinear relationship. first, the number of wine references with publicly available ratings was also non-significant, so this variable did not have any influence on the amount of money invested. however, the results showed that the average rating of the wines included in the guide was not significant in model 1, where a linear relationship was assumed. for its part, model 2 illustrates a u-shaped relationship between wine ratings and the amount of money invested (the parameter of the variable wr is negative and significant and the parameter of the variable wr (̂ 2) is positive and significant). these results show that wineries with low-level average ratings and wineries with high-level average ratings invest more money in advertising than wineries with mediumlevel average ratings. these results confirm hypothesis 1b as publicly available wine ratings (which act as a proxy of the winery’s reputation) have a nonlinear effect on the amount of money invested in advertising. it seems that the number of references appearing in the guide presents less significance than the average valuation of these wines, which can act as a sign of reputation [66] and better reflect the winery’s commitment to quality. in both models, the do type variable is non-significant, implying that the collective reputation of the different do types does not influence the amount of money invested in advertising. finally, as expected, the winery’s size also exerts a positive effect on the amount of money invested in advertising. in the second stage, traditional profitability indexes were estimated to test the differences between wineries that invest in advertising and wineries that do not. we also tested the difference between wineries with (and without) publicly available wine ratings. specifically, the traditional returns on assets (roa), returns on equity (roe) and returns on investments (roi) ratios were computed. results are shown in table 3. the average profitability ratios were 0.6 per cent for roa, 4.2 per cent for roe and 6.9 per cent for roi. to test the differences between investing and non-investing in advertising wineries a two-tailed t-test was performed. this test accounts for the possibility of the relationship in both directions. in this sense, the roa was higher for investing wineries while the roe was higher for non-investing wineries, and these differences were statistically significant. furthermore, the roa was higher for wineries with publicly available ratings while the roe was higher for wineries without publicly available ratings, and these differences were also statistically significant. however, no significant differences appeared when considering roi as a performance measure. nevertheless, much caution should be exercised, because performance ratios do not give the whole picture of winery performance. this descriptive approach shows that table 3. roi, roe and roa estimates. roa roe roi advertising yes mean 0,018 0,021 0,048 (sd) (0,074) (0,268) (0,344) no mean 0,002 0,048 0,075 (sd) (0,071) (0,576) (1,424) test difference t=-9,084 (p=0,000) t=2,062 (p=0,039) t=0,877 (p=0,380) public wine ratings yes mean 0,012 0,030 0,054 (sd) (0,075) (0,428) (0,819) no mean 0,001 0,052 0,083 (sd) (0,069) (0,592) (1,547) test difference t=-7,623 (p=0,000) t=1,981 (p=0,048) t=1,102 (p=0,270) total mean 0,006 0,042 0,069 (sd) (0,072) (0,522) (1,262) 94 ricardo sellers-rubio no one-size-fits-all strategy exists, since no robust and consistent differences can be obtained regarding the performance of wineries that invest (or not) in advertising and the wineries that appear (or not) in publicly available quality ratings. these results are consistent with the findings of other studies that have failed to find a clear association between advertising investment and performance (e.g. [11]). in this paper we have focused on the potential effect of wine ratings (a signal of reputation) on the advertising strategy of a winery. although prior evidence has revealed conflicting results, our results evidence a positive association between the existence of publicly available quality ratings and advertising investment, what is in line with [51]. besides, our results are aligned with [53], who evidence that more highly rated experience products are advertised more. in this sense, this evidence is consistent with the company reputation model [52]. when it comes to the association between advertising and performance, our results are aligned with [11], as the relationship between advertising and performance is not clearly supported. 5. conclusions in the wine industry, some firms make the decision to invest while others foster alternative marketing strategies to promote their wines. despite the potential benefits of advertising, the lack of a clear link between advertising investments and performance and the small average size of wineries might explain why the intensity of this resource is very low in this industry compared to other beverage industries. thus, alternative marketing strategies —such as promoting positive worth of mouth, the presence of medals and awards on wine labels or fostering ratings in the best-known wine guides— are frequently used by wineries [71]. wine ratings are particularly popular in the wine industry because they offer consumers a signal of wine quality which they can rely on to make informed purchase decisions. in this paper, we focused on the effect of these publicly available wine ratings on wineries’ advertising strategy. the results of the present study showed that the number of wine references with publicly available wine ratings in wine guides has a positive influence on the winery’s likelihood to invest in advertising. moreover, the results provide evidence of a u-shaped relationship between wine ratings and advertising investment: wineries with low and high average wine ratings invest greater amounts of money than firms with medium wine ratings. according to [72] the most effective means of communication in the wine industry is word of mouth, since most consumers often follow other people’s recommendation when buying wines. to spread a positive word of mouth, wineries can employ different strategies, from direct visits to wineries to advertising, which is considered the last item in the communication mix. in fact, long-term advertising is an effective tool to communicate the winery’s positioning in the market [72]. from a managerial viewpoint, two important decisions regarding the advertising strategy are made. first, managers decide whether to invest in advertising or not, and in a second stage, they decide which amount of money should be invested. bearing in mind that the wineries aim to choose the best available strategy to promote their wines, no one-size-fits-all strategy seems to exist. while some wineries invest in advertising, others rely on collective brands (do) to promote their wines. our results showed that the wineries that belong to a do are more likely to invest in advertising. in addition, the number of wines with publicly available wine ratings also has a positive influence on the probability of investing in advertising: it seems that wineries seek to inform consumers of their commitment to quality. once the winery has decided to invest in advertising, it must determine the amount of money to be invested. our results demonstrate that this strategy is employed by lowand high-quality producers. indeed, wineries with low ratings would use advertising to convince consumers to buy their wines, while wineries with high ratios also strive to reinforce their market position to attract consumers. both types of wineries attempt to spend their advertising budgets effectively while meeting customer needs. the present work presented several limitations that should be addressed in future studies. first, only two dimensions of wineries’ advertising strategy were explored: the decision to invest or not and the amount of money invested. however, other decisions, such as the media employed or advertisements’ content and creativity, were not considered. they are, however, also part of wineries’ advertising strategy. second, this paper only considered one spanish wine guide 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[72] t. spawton, marketing planning for wine, int. j. wine mark. 2 (1990) 2–49. wine economics and policy volume 10, issue 2 2021 firenze university press productive efficiency of wine grape producers in the north of portugal micael santos1,*, xosé antón rodríguez2, ana marta-costa3 organic and conventional grape growing in italy: a technical efficiency comparison using a parametric approach federica cisilino1, fabio a. madau2,*, roberto furesi2, pietro pulina2, brunella arru2 competitiveness framework to support regional-level decision-making in the wine industry: a systematic literature review jorge mota*, rui costa, antónio moreira, silvana serrão, carlos costa does belonging to an appellation make a difference? new evidence from ontario viticultural areas omer gokcekus how do sparkling wine producers adopt a sub-appellation? evidence from an exploratory study on heroic prosecco superiore rive luigino barisan*, luigi galletto motivation factors for organic wines. an analysis from the perspective of german producers and retailers katharina hauck*, gergely szolnoki, evelyn pabst consumer preferences for certified wines in france: a comparison of sustainable labels adeline alonso ugaglia1,*, britta niklas2, wolfram rinke3, dan moscovici4, jeff gow5, lionel valenzuela6, radu mihailescu7 wine ratings and advertising strategies: is there a link? ricardo sellers-rubio adaptive market hypothesis: an empirical analysis of the wine market anoop s kumar wine economics and policy 11(1): 3-13, 2022 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/wep-11454 wine economics and policy citation: vasco santos, alvaro dias, paulo ramos, arlindo madeira, bruno sousa (2022) the infl uence of wine storytelling on the global wine tourism experience. wine economics and policy 11(1): 3-13. doi: 10.36253/wep-11454 copyright: © 2022 vasco santos, alvaro dias, paulo ramos, arlindo madeira, bruno sousa. this is an open access, peer-reviewed article published by firenze university press (http://www. fupress.com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information fi les. competing interests: the author(s) declare(s) no confl ict of interest. th e infl uence of wine storytelling on the global wine tourism experience vasco santos1, alvaro dias2,*, paulo ramos3, arlindo madeira4, bruno sousa5 ¹ isla santarém, santarém, portugal and citur, leiria, portugal. email: vasco.ribeiro@islasantarem.pt ² universidade lusófona/trie and iscte-iul. email: alvaro.dias1@gmail.com ³ cbqf, porto, portugal and fernando pessoa university, porto, email: pramos@ufp.edu.pt ⁴ tourism and hospitality management school, universidade europeia, portugal and escad-school of science and administration, lisbon, portugal. email: arlindo.madeira@universidadeeuropeia.pt 5 ipca polytechnic institute of cávado and ave, barcelos, portugal and citur, coimbra, portugal. email: bsousa@ipca.pt *corresponding author. abstract. th e aim of this paper is to evaluate the role of wine storytelling as an antecedent in the wine tourism experience, namely on other constructs such as winescape attributes, sensorial attraction, wine excitement and cultural experience. th is study analyses the combined use of fi ve wine tourism experience dimensions as well the infl uence of storytelling as a key antecedent of the wine experience. th is study extends existing knowledge by identifying new key drivers which focus on wine tourist behavioural responses within visits to the wine cellars. data were collected within two wine tourism settings in madeira and porto wine cellars, from two convenience samples of 647 international wine tourists. using partial least square structural equation modelling, the results reveal a direct impact of wine storytelling on the several dimensions of the wine tourism experiences. furthermore, storytelling was found to directly infl uence wine excitement, and indirectly both outcome variables (wine excitement and cultural experience), trough the mediating eff ect of winescape attributes and sensorial attraction. keywords: wine tourism, wine storytelling, cultural experience, winescape attributes, wine excitement, sensorial attraction. 1. introduction wine tourism has long ceased to be just a visit to wine producing regions and wineries, just to taste or buy wine. in fact, wine tourism has become more complex as a tourist product, due to the requirement of visitors to obtain a diff erentiated experience, composed of multiple elements [1]. it is unquestionable that wine is an important cultural and heritage element, especially for the wine-producing regions of the ‘old world’ (europe) [2]. 4 vasco santos, alvaro dias, paulo ramos, arlindo madeira, bruno sousa the tourist’s involvement with the region visited results in a state of “wine excitement”, which starts with decision-making about the trip and extends throughout the visit [3]. this wine excitement makes the visitor more receptive to absorbing the stories that make the wines, the producer and the region stand out in their minds and make it a memorable experience. it is widely accepted that the wine tourism experiences should involve not only the wines and local gastronomy, but also the surrounding environment and its culture and traditions [4]. one of the factors that wine tourists value is the interaction with the staff involved in the wine tourism process, not only due to their know-how about the wines and the region, but mainly through the narratives around the wine, its production, and its surrounding environment. these narratives are composed of stories that involve the producers and their wines, as well as local myths and legends, its culture, and its traditions [5]. thus, it is essential that all staff involved in complementary services to the wine experience consider the importance of storytelling as an enhancing factor in the holistic experience that constitutes a wine visit and tasting in a wine-producing region [4]. in fact, wine tourists, and in particular the wine lovers, value not only wine as a draw for the visit, but also all moments of interaction with the owner, managers, winemaker, and line staff [6]. visitors want to know more, want to know exclusive stories that they have not yet read anywhere, the secrets of the winemaker in the design of a particular wine or the history of the estate, and to meet the producer’s family and discover the surrounding region. wine tourism storytelling happens in parallel with the sensorial immersion of the visitor in the culture of the region, the winescape that surrounds him and the experiences in the wine producer facilities [7]. this interaction between the stories, the local myths and legends and the sensory immersion of visitors is a factor that need to be further explored by researchers. the visitor, when immersed in the region through his senses, is not only more likely to accept the narrative that involves the visit but will also enjoy the experience more [8]. therefore, the use of the narrative that involves the wine tourism experience can be used to position the region, its wines, and its producers in the minds of visitors and consumers. this study aims to evaluate the role of wine storytelling as an antecedent in the wine tourism experience. more specifically, intends to explore the influence of wine experience elements (winescape attributes, sensorial attraction, wine excitement and cultural experience) on wine excitement and cultural experience. furthermore, this study also aims the indirect effects in the relation between storytelling and the same outcome variables (on wine excitement and cultural experience). a literature review relating construct domain, scale items and hypothesis development is followed by the methodology approach applied and then the results obtained. finally, the conclusions, implications, and future research directions are presented. data was collected in madeira and porto wine cellars, obtained from two convenience samples of 647 international wine tourists, and structural equation modelling (sem-pls) was applied. 2. literature review 2.1. key concepts 2.1.1. wine storytelling regarding wine tourism, the use of storytelling values rather than relying only on the region’s image is of paramount importance. therefore, attention should be focused on the particularities of each winery and its producer, through the opinions of visitors, writers and critics who visit the region, expressed in magazines, blogs and online comments and word of mouth (wom) [9]. producers use narrative to tell the story of the property, the brand, and its wines, which allows an emotional connection to be established with visitors, who are also consumers [5]. this emotional connection that allows visitors to absorb the cultural heritage, from social and landscape elements of the region and its producers, often starts with wine tasting [2]. by establishing an emotional connection with visitors, producers can position themselves in their minds as “brands of love”. this positioning allows them to differentiate themselves from their competitors, whether they are regions or direct competitors [7]. for the story to capture the attention of visitors, the narrative must contain elements of authenticity and emotion that coincide with the intention of the visit [5]. the fact that each region and producer use different grapes and vinification methods, allied to the specific conditions of the wine terroir and the winescape, allows personalized narratives to be built [2]. 2.1.2. sensorial attraction the experience of wine tourism is coated with hedonism, as wine is a product that aims to offer sensations that give us pleasure through the senses [4]. the sensory experience when tasting wines is transversal to any visitor, regardless of their level of knowledge about oenology and the ability to distinguish the characteristics of the wines or the most professional method of 5the influence of wine storytelling on the global wine tourism experience tasting them [10]. the sensory analyses of wines tasted at the winery is influenced by the involvement with winescape and affect perception, memory, and emotions, regarding wines, the producer and the wine region [11]. this multisensory emersion in an aesthetically appealing environment, which includes vineyards, the wine cellar, and the landscape, optimizes the wine tasting [12]. hence, senses are the means of how visitors will perceive the various dimensions that make up the wine experience. therefore, the greater the involvement of the senses, the greater the probability of the experience becoming memorable [13]. in addition, wine tourism provides an experience of pleasure through the involvement of the various senses with the region where the wine is produced in all its dimensions: aesthetics, culture, entertainment, and escapism [14]. 2.1.3. winescape attributes the attractiveness and authenticity of each region’s winescape is, together with the quality of the wines produced, a determining factor in deciding whether to visit a wine region [14]. the concept of winescape incorporates physical attributes such as the specificity of the region’s vineyards (the way they are planted and integrated into the landscape), the use of indigenous grapes, oenological practices and techniques, the wineries (including their architecture), restaurants (within the property or in the winescape context), and wine-related museums and shops where visitors can buy wines they tasted [15]. the concept of winescape has been extended to the socio-cultural components of the wine region to incorporate the culture and heritage of each region, which reinforces its capacity to attract visitors, promoting dialogue between humans and the environment [16]. the use of the sociocultural elements of the wine landscape can trigger and inspire the spiritual involvement of wine tourists and thus maximize wine experiences [17]. this broader concept of winescape, which incorporates the physical attributes, but also the sociocultural elements of each region, is essential for the promotion and renown of the image of the region, of each producer and of the wines produced there, through the myths and stories that compose the regional culture [8]. 2.1.4. cultural experience tasting wines in the region where they are produced is a cultural and educational experience for visitors [3]. the sensory experience of wine tasting is thus reinforced by its cultural and educational character, which allows visitors to increase their knowledge about the wines, in the specific terroir where they are produced [18]. in this context, the winery staff, especially the winemaker, has a decisive role because they can share details and techniques used in making the wines, which delight the wine lovers [6]. this cultural perspective of the wine experience plays a fundamental role in creating memories in the minds of the visitors and spreads through the sharing of their experiences with potential visitors [1]. the cultural experience of wine tasting in its region of origin is interpreted differently by each visitor, considering cultural factors and the level of knowledge and emotional involvement with the wines and the wine region [19]. cultural heritage is increasingly important in the design of the wine tourism product, not only for the educational component, through the authenticity and novel elements that each destination presents, but also for the sense of nostalgia that allows the visitor to connect with the past of the region and each producer [20]. 2.1.5. wine excitement the enthusiasm and excitement of consumers towards wine is related to their degree of involvement with the product [21]. consumers with a high level of enthusiasm and excitement have more knowledge about the world of wine and react differently to wine attributes, compared to less knowledgeable consumers [22]. for the connoisseur or expert, the visit to a wine region is the culmination of a long period of time dedicated to a passion for wine and everything that surrounds it. connoisseurs look for unique sensations through wine tasting in the region they choose to visit and its setting [23]. however, visitors who do not usually consume wine, termed novices, should also be considered for analysis, because although they are not as enthusiastic about wine, they have other motivations that make them visit the producing regions [6]. the excitement resulting from the consumption and wine tasting within the region therefore provides different sensations from visitor to visitor, due to their personalities, motivations, and level of involvement with wine [24]. 2.2. hypothesis development 2.2.1. the key role of storytelling on wine experience storytelling around wines and their producers is invariably linked to the region to which they belong, and to their terroir (climate, soils, and grapes). hence, the narrative of a wine cannot be separated from the winescape 6 vasco santos, alvaro dias, paulo ramos, arlindo madeira, bruno sousa where it is produced [25]. according to [26], storytelling about places is recognized as a tool to enhance the reputation of regions as they compete for tourism and economic development spending in the digital age. through digital media, people can be encouraged to tell their tourism stories and share their experiences [27]. storytelling around wine is essential to stimulate the imagination of visitors, through a powerful narrative that serves as a script for the wine tourism experience to develop [28]. the ability to tell stories and use them to create a context conducive to action is probably a skill as old as wine itself. these stories should include elements that attract the attention of visitors, causing excitement around the region and its wines [29]. wine as a cultural product act as a catalyst between culture, history, and landscape, through storytelling [28]. each sip of wine not only fills the mouth with sensations, but simultaneously fills the mind with images and the soul with feelings [25]. as such, we hypothesize: h1a: storytelling positively relates to winescape attributes h1b: storytelling positively relates to sensorial attraction h1c: storytelling positively relates to wine excitement h1d: storytelling positively relates to cultural experience 2.2.2. winescape attributes and wine experience wine landscape, in a comprehensive view, is a set which includes landscape, heritage and cultural attributes and which, when well are aligned, makes the visitor feel emotionally involved with the wine region [22,23]. this emotional alignment through the attributes of the wine region is reflected in a visitor’s predisposition towards the context where the wine experience occurs [30]. the winery staff and other players, including the owners, who work in the wine tourism system, use storytelling, through a well elaborated narrative, which helps to frame the experience and connect visitors with the cultural wine setting where it occurs [2]. in turn, if the narrative does not make sense with winescape and local culture, it will be ignored and will not have the expected emotional effect [5]. for instance, and according to kruger and viljoen [31], place, and subsequently the sense of a place, has become a major research theme within tourism. the wines produced in a region establish a relationship with the traditions and its inhabitants and with the local history and heritage, because they are the main motivation that gives rise to the visit [14]. the essence of wine tourism is, therefore, based on the exploration of the various senses through the experiences provided by the elements that constitute the winescape [13]. hence, the hypotheses are as follows: h2a: winescape attributes are positively related to wine excitement h2b: winescape attributes are positively related to cultural experience h2c: winescape attributes mediate the relation between storytelling and wine excitement h2d: winescape attributes mediate the relation between storytelling and cultural experience 2.2.3. sensorial attraction and wine experience in wine tourism, the sensory experience of tasting wine is reinforced by the sensations that the attributes of winescape provide to visitors [32]. place, destinations, cities, and regions offer distinctive characteristics beyond the physical geographic and topographic elements, especially concerning produce from a particular area, region, country or territory [31]. this multisensory experience is based on the search for new hedonic sensations, arising from visitors’ emotional connection to wine, the region and its culture and heritage [13]. a considerable number of studies have focused on the effects of wine tourists’ motivations on behavioural intentions [33]. the search for sensations through the wine tourism experience varies according to the level of involvement and excitement of the visitor with the wines, the region, and its attributes [23]. the sensory stimulus caused by the atmosphere surrounding the wine visit, coupled with a compelling narrative, optimizes the experience, and contributes to a sense of excitement [3], and plays a key role in the wine experience [34]. furthermore, the improvement of the wine experience, was also found to enhance the destination image [35]. it is through storytelling that the region as a whole and each producer individually can involve visitors and transport them to another emotional level, which allows them later to consider the experience not only as positive [33], but memorable [5]. the use of storytelling in wine tourism allows the visitor to absorb the history of the producer and the wine brand, the region heritage, its myths, traditions, and rituals, based on three narrative styles: descriptive, immersive, and technical [7]. drawing on these premises, the hypothesis is as follows: h3a: sensorial attraction is positively related to wine excitement h3b: sensorial attraction is positively related to cultural experience h3c: sensorial attraction mediates the relation between storytelling and wine excitement h3d: sensorial attraction mediates the relation between storytelling and cultural experience figure 1 depicts the hypothesized relationships. 7the influence of wine storytelling on the global wine tourism experience 3. methodology approach 3.1. data collection and sample design the data was gathered from the sample of international wine tourists visiting madeira and porto wine cellars between july and september 2019, because it directly coincides with the period of the greatest flow of wine tourists to this kind of wine tourism product and destination. the questionnaire was multilingual, in english, spanish, french and portuguese. in total, 647 complete self-administered questionnaires were obtained (321 in madeira and 326 in porto) and were collected in two weeks in madeira and two weeks in porto, to obtain a sample that was large enough to overcome the limitations of its convenience sampling method [36,37]. these questionnaires were attained in a post-visit setting (immediately after the visit). the questionnaire was pretested and the definition of some of its dimensions came from the results of previous research [11,38]. the questionnaire was divided in an initial section focused on demographic data about the respondent, and a second section composed by the variables measures. this section incorporated a total of twenty-seven items derived from pre-existing measures (in appendix): wine storytelling, sensorial attraction, winescape attributes, cultural experience, and wine excitement. the constructs were measured using a fivepoint likert scale, where 1 = ‘totally disagree’, and 5 = ‘totally agree’. 3.2. data analysis procedures the conceptual model was tested using survey data analysed through structural equation modelling (sem) by means of variance-based partial least squares (pls) with the smartpls 3 software [39]. the first step consisted of assessing the quality of the measurement model through reliability, convergent validity, internal consistency reliability and discriminant validity [40]. the reliability of each construct was tested by analysing that the standardized factor loadings of the items were superior to 0.7 (between 0.720 and 0.922, all significant at p < 0.001) [40]. to provide further test of the reliability, we also calculated the cronbach’s alpha and composite reliability (cr) values of each construct. to test the convergent validity, we followed a threestep approach. first, we confirmed that all constructs’ items loaded positively and significantly in each construct. second, it was verified that all the cr values for all the constructs were above the cut-off value of 0.70. third, we also confirmed that the average variance extracted (ave) for all constructs was higher than 0.50 [41]. to evaluate the discriminant validity, we used the fornell and larcker criterion and the heterotraitmonotrait ratio (htmt) criterion [38,40]. after analysing the quality of the measures, we then verified the quality of the structural model using the magnitude of the coefficient of the determination r2 value for each endogenous variable. the model quality estimation was also complemented using stone-geisser’s q2 [40]. the constructs’ collinearity was also evaluated as suggested by [38]. to test the hypotheses, bootstrapping with 5,000 subsamples was used to evaluate the significance of the parameter estimates. to test the mediation hypotheses, we followed the recommendations of [40] (p. 232). thus, we used a bootstrapping procedure to test the significance of the indirect effects via the mediator [45]. 4. results regarding sample profile, the sample is quite balanced in terms of gender, most coming from united kingdom, france, portugal, and germany, with the majority being adults between 25 and 54 years of age. 49.7% of the respondents were male and declared having higher education. table 1 provides additional detail about the sample. the results of cronbach’s alpha and cr were superior to 0.7 as indicated in table 2, providing additional evidence for the individual indicator reliability. cultural experience storytelling wine excitement winescape attributes sensorial attraction h1a h1b h1c h1d h2a h2b h2d h2c h3a h3b h3c h3d figure 1. conceptual model. note: the dashed lines represent the indirect relationships. 8 vasco santos, alvaro dias, paulo ramos, arlindo madeira, bruno sousa regarding the fornell and larcker criterion, the ave square root (diagonal bold values in table 2) was larger than its biggest correlation with any construct [41]. the htmt ratios are lower than 0.85 [38,40], thus providing evidence of discriminant validity. the r2 of the endogenous variables (winescape attributes; sensorial attraction; wine excitement; cultural experience) were 60.7%, 55.7%, 67.6%, and 67.5%, respectively. since these values are higher than 10% [42], the model’s predictive accuracy was assured. the q2 values for all endogenous variables (0.31, 0.27, 0.53, and 0.41 respectively) were positive, providing additional evidence of the model’s predictive relevance. the vif values were estimated (ranging from 1.00 to 3.04) and they were lower than the threshold value of 5 [38], revealing no collinearity problems. the results in table 3 and figure 2 indicate that the winescape attributes have a significantly positive relation with wine excitement and cultural experience (b = 0.235; p < 0.05; 0.424, p < 0.001), which supports h1a and h1b, respectively. sensorial attraction has a significantly positive effect on wine excitement and cultural experience (b = 0.391; p < 0.001; 0.323; p < 0.001), providing support for h2a and h2b. the results also reveal that storytelling has a significantly positive effect on winescape attributes, sensorial attraction, wine excitement, and cultural experience (b = 0.693; p < 0.001; b = 0.642; p < 0.001; b = 0.288; p < 0.001; b = 0.140; p < 0.05, respectively). these results provide support for h3a, h3b, h3c, and h3d. table 4 presents the results of the mediation effects. table 1. sociodemographic set profile of the sample. age education level country of origin 18-24 years old (7.1%) less than high school graduate (3.7%) portugal (8.3%) 25-44 years old (42.3%) high school graduate (18.5%) spain (5.6%) 45-64 years old (43.8%) degree (43.8%) france (24.7%) more than 65 years old (6.8%) phd (6.8%) germany (7.7%) united kingdom (25.9%) other (27.8%) table 2. composite reliability, average variance extracted, correlations, and discriminant validity checks. latent variables α cr ave 1 2 3 4 5 (1) winescape attributes 0.894 0.919 0.654 0.809 0.841 0.798 0.849 0.749 (2) sensorial attraction 0.847 0.897 0.687 0.782 0.829 0.832 0.841 0.710 (3) wine excitement 0.941 0.955 0.809 0.740 0.759 0.899 0.848 0.743 (4) cultural experience 0.886 0.914 0.640 0.772 0.743 0.784 0.800 0.695 (5) storytelling 0.945 0.958 0.819 0.693 0.642 0.702 0.640 0.905 note: α – cronbach’s alpha; cr – composite reliability; ave – average variance extracted. numbers in bold are the square roots of ave. below the diagonal elements are the correlations between the constructs. above the diagonal elements are the htmt ratios. table 3. structural model assessment. path path coefficient standard errors t statistics p values winescape attributes ® wine excitement 0.235 0.092 2.565 0.011 winescape attributes ® cultural experience 0.424 0.092 4.598 0.000 sensorial attraction ® wine excitement 0.391 0.091 4.320 0.000 sensorial attraction ® cultural experience 0.323 0.087 3.695 0.000 storytelling ® winescape attributes 0.693 0.037 18.599 0.000 storytelling ® sensorial attraction 0.642 0.039 16.263 0.000 storytelling ® wine excitement 0.288 0.082 3.509 0.000 storytelling ® cultural experience 0.140 0.067 2.072 0.039 9the influence of wine storytelling on the global wine tourism experience the indirect effects of storytelling on wine excitement and cultural experience via the mediator of winescape attributes are significant with (b = 0.163; p < 0.05) and (b = 0.293; p < 0.001), respectively. these results provide support for the mediation hypotheses h1c and h1d, respectively. furthermore, the indirect effects of storytelling on wine excitement and cultural experience via the mediator of sensorial attraction are significant with (b = 0.251; p < 0.001) and (b = 0.207; p < 0.01), respectively. thus, h2c and h2d are supported. 5. discussion and conclusions this research established that wine storytelling is a critical factor for the success of a wine visit and tasting. storytelling has the strongest relationships with both the mediator constructs: winescape attributes and sensorial attraction. this second layer of constructs will, therefore, help to enhance the global outcome of the wine experience expressed in the higher levels of wine excitement and of cultural experience. this suggests a global and synergetic effect between these constructs that shape the overall wine tasting experience. noticeably, there is also a strong relationship between the winescape attributes and the ws1 sa ws2 ws3 ws4 ws5 0.557 0.675 0.607 0.676 0.926 0.909 0.900 0.894 0.894 sa1 sa3 sa4 sa5 0.720 0.831 0.893 0.862 ce ws ce1 cei2 ce3 ce4 ce5 ce6 0.810 0.732 0.728 0.789 0.854 0.874 we1 we2 we3 we4 we5 0.863 0.903 0.921 0.922 0.887 we wa wa1 wa2 wa3 wa4 wa5 wa6 0.806 0.837 0.776 0.752 0.850 0.828 0.642 0.140 0.288 0.693 0.323 0.391 0.235 0.424 figure 2. path model. table 4. bootstrap results for indirect effects. indirect effect estimate standard errors t statistics p values storytelling ® winescape attributes ® wine excitement 0.163 0.064 2.557 0.011 storytelling ® winescape attributes ® cultural experience 0.293 0.067 4.366 0.000 storytelling ® sensorial attraction ® wine excitement 0.251 0.060 4.175 0.000 storytelling ® sensorial attraction ® cultural experience 0.207 0.060 3.479 0.001 10 vasco santos, alvaro dias, paulo ramos, arlindo madeira, bruno sousa cultural experience corroborating the stated relationship between the environmental factors, such has landscape and heritage, and the cultural enrichment felt by the visitor. however, although significant, a stronger relationship between storytelling and cultural experience was expected. this lower level of correlations between these two constructs is probably because the storytelling in these two particular experiences was not completely satisfactory from a cultural enrichment perspective due to the fact that visits still tend to be somewhat standardized. 5.1. theoretical contributions wine tourism is a phenomenon that moves millions of people around the world, acting as a major driver of the global economy [2,6]. due to the frequent changes in the tourism environment, every year competition is fostered between and within tourist destinations [46-49]. it is a multifaceted and geographically complex activity [50]. in this context, and according to [30], wine tourism has undoubtedly been a trend which has become cemented by quality and diversity of offer. this manuscript intended to understand and evaluate the role of wine storytelling positively related to winescape attributes, sensorial attraction, wine excitement and cultural experience, during a wine visit experience within two worldwide renowned wine tourism settings. specifically, storytelling around wine is essential to stimulate the imagination of visitors, through a powerful narrative that serves as a script for the wine tourism experience to develop. the emotional alignment through the attributes of the wine destination regions is reflected in a visitor’s predisposition towards the context where the wine experience occurs. the sensory stimuli caused by the environment surrounding the wine experience, coupled with a compelling narrative, optimize the experience, and contribute to a sense of excitement. on the other hand, a cultural experience of wine tasting in its region of origin is interpreted differently by each visitor, considering cultural factors and the level of knowledge and emotional engagement with the wines and the destination [51]. therefore, the resultant 12 hypotheses were validated, which determines the direct impact of the wine storytelling on wine tourism experiences of wine tourists, through winescape attributes, sensorial attraction, wine excitement and cultural experience. 5.2. practical and managerial implications wine marketers must ensure the improvement of this relational characteristic, since the relationships that are established between wine brands and consumers can have a positive outcome, such as strong brand loyalty, cost advantages and positive wom. the new vogue of wine tourism forces us to challenge and revisit the power relationships that exist within contemporary tourism and the host–guest relationship. however, this capacity of providing a good storytelling is not innate for many people. this needs to be deeply incorporated in the business culture of each winery or tasting site. this critical factor may help to differentiate a truly unique experience from just another standardized visit. we recommend extensive programmes of training in storytelling to help provide those on the front line contacting with the tourists with the right skills. 5.3. limitations and future research this manuscript has already identif ied that the global movement of tourism is seemingly towards an increased focus on the niche (wine) product or service. in this case, the question seems to be whether the further growth in demand for wine management and wine tourism products – as a niche tourism example – will continue until they become a form of mass tourism. a future study should include other emotional factors (e.g., brand love, commitment, trust, perceived disconfirmation) (c.f. 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(2004). the relationship between risk-taking, sensation-seeking, and the tourist behavior of young adults: a cross-cultural study. journal of travel research, 42, 251-260. appendix measurement items. construct references scale items adjusted to wine visit experience wine storytelling [53,54] 1. stories that the wine tour guide/wine storyteller/wine producer told me about wine (wine bottle/brand/ family/wine estate/wine-making) positively influenced the value i attribute to the wine 2. stories that the wine tour guide/wine storyteller/wine producer told me about wine (wine bottle/brand/ family/wine estate/wine-making) positively influenced the value i attribute to the wine tasting 3. stories that the wine tour guide/wine storyteller/wine producer told me about wine (wine bottle/brand/ family/wine estate/wine-making) positively influenced the value i attribute to this visit 4. stories that the wine tour guide/wine storyteller/wine producer told me about wine (wine bottle/brand/ family/wine estate/wine-making) enabled me to have an enjoyable time 5. stories that the wine tour guide/wine storyteller/wine producer told me about wine (wine bottle/brand/ family/wine estate/wine-making) enabled me to learn ancient facts about wine that i did not know sensorial attraction [55] 1. it is important to me that this wine i drink smells nice 2. it is important to me that this wine i drink tastes good 3. it is important to me that this wine i drink looks nice 4. it is important to me to touch the bottle of the wine that i drink 5. tasting this wine results in the activation of my sensory stimuli winescape attributes [56] 1. this wine scenery is attractive 2. this winery landscape has a rural appeal 3. these buildings have historic appeal 4. there is an old-world wine charm in these wine cellars 5. these wine cellars offer spectacular views 6. this architecture gives the winery character cultural experience [57] 1. experiencing this wine gives me an opportunity to increase my knowledge about different cultures 2. it is important to me to taste this wine in its original region 3. experiencing this wine enables me to learn what it tastes like 4. experiencing this wine allows me discover something new 5. experiencing this wine makes me see the things that i don’t normally see 6. experiencing this wine helps me see how other people live wine excitement [58] 1. experiencing this wine in its original wine cellars makes me excited 2. tasting this wine on holiday helps me to relax 3. tasting this wine makes me feel exhilarated 4. when tasting this wine i have an expectation that it is exciting 5. tasting this wine on holiday makes me not worry about routine wine economics and policy 12(1): 101-113, 2023 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/wep-12973 wine economics and policy citation: john c. spence (2023). the impact of fees on customer purchasing behavior and beliefs in winery tasting rooms: a scoping review. wine economics and policy 12(1): 101-113. doi: 10.36253/wep-12973 copyright: © 2023 john c. spence. this is an open access, peer-reviewed article published by firenze university press (http://www.fupress.com/ wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information fi les. competing interests: the author(s) declare(s) no confl ict of interest. th e impact of fees on customer purchasing behavior and beliefs in winery tasting rooms: a scoping review john c. spence faculty of kinesiology, sport, & recreation, 1-153 van vliet complex, university of alberta, edmonton, ab, canada e-mail: jc.spence@ualberta.ca abstract. purpose: th is scoping review presents a summary of studies that examined the impact or infl uence of tasting fees in wineries on the purchasing behaviour, beliefs, obligation to buy wine, and willingness to pay for such fees. methods: a search was conducted in august 2021 and updated in march 2022 of databases (i.e., academic search complete, scopus) and hand searching using terms such as wine, tasting fees, and charges. documents were included if they were databased studies, published in english, and related to the research question. th ey were then coded for characteristics of the document, design, sample, winery, purchasing behaviour and beliefs, and fi ndings. th e coding and analysis were conducted between august 2021 and march 2022. findings: of 195 possible documents, 16 remained aft er a title and abstract scan, and 12 were included aft er a full-article scan. th e reviewed studies were conducted primarily in australasia (60%) and north america (28%) and a majority of fi ndings were derived from surveys or interviews. a majority of the fi ndings suggested that customers and industry professionals did not support the adoption of tasting fees at the cellar door (64%). th ough, mixed impact was noted for purchasing behaviour (i.e., volume, money spent), slightly stronger negative associations were seen for intention to visit the winery or purchase wine in the future, willingness to pay for fees, and obligation to buy wine. originality: th is is the fi rst systematic review to examine the impact or infl uence of tasting fees on purchasing behaviour and beliefs in wineries. keywords: wine tourism, tasting fees, charging, obligation, cellar door, willingness to pay. 1. introduction th e tasting room experience at wineries is critically important for customer satisfaction [1], [2], [3], [4], [5], [6], [7] and sales [8] [7]. in fact, servicerelated factors are oft en more important to purchase and re-purchase decisions than wine quality [9]. for wineries, the cellar door helps them distribute wine at a relatively low cost, develop brand loyalty, and increase sales [10] [5]. for the customer, visits to wineries allow the opportunity for education (about the region, production, and the product), tastings, comparison shopping, and further exploration of the winescape [11]. 102 john c. spence an increasingly important aspect of the cellar door experience is the requirement of a tasting fee to sample the wines. these fees can serve several purposes. first, they may discourage those individuals seeking to consume free alcohol with little intention of actually purchasing any wine. for instance, the owner of nicholson river winery in the victoria region of australia estimated that the introduction of a tasting fee resulted in a 20 percent reduction in visitors to the cellar door (see travers [12]). second, fees may cover the cost of having more staff, and more educated/qualified staff, to offer a more thorough educational experience for the customer. the time lost serving people at the cellar door, especially those who do not purchase wine, is a significant cost factor for wineries [12]. third, because the wine consumed due to tastings reduces inventory and shrinks profits, especially for smaller wineries [13] [14], fees can help recoup or balance these expenditures. fourth, fees foster an expectation on the part of the customer that the product has some worth or value. finally, tasting fees are a potential revenue source for wineries. however, tasting fees are not without controversy. the first study to examine the impact of the introduction of such fees, concluded they could reduce visits by 30 percent among australians who had previously purchased wine [15]. basically, visitors to wineries expect to taste all of the wines offered absent of a tasting fee [5] [14]. the assumption being that part of the cost of doing business is to offer free tastings so that the customer can make an informed decision as to whether they want to purchase a particular wine. in north america, tasting fees are more the norm than not. according to a survey of 233 wineries based in california, washington, oregon, michigan, virginia, and canada, 59 percent of wineries reported charging a fee for tastings in 2007 [16]. this apparently was an increase of 8 percent from the previous year. though smaller or less developed wine regions in the united states (us), such as idaho [17], were less likely to require tasting fees, the vast majority of wineries in the larger more established regions such as napa and sonoma charge fees [18]. furthermore, those fees are much higher for the sonoma ($30 usd) and napa ($58 usd) regions than the average for us wineries overall ($25 usd) or those outside of california and oregon ($15 usd) [18]. similarly, a cursory review of web pages of wineries in the okanagan and niagara regions of canada, reveals that the majority of wineries charge tasting fees in 2022. in other parts of the world, the implementation of cellar door tasting fees has varied. though fees were first charged for tastings at wineries in the yarra velley in 1997, a majority of wineries in that region had fees in place by 1999 [12]. in contrast, a majority of wineries in south australia continued to “shun the concept’ of tasting fees in 1999 [12]. more recently, the proportion of australian wineries charging tasting fees has increased from 29 percent in 2018 [19] to 73 percent in 2021 [20]. furthermore, the amount charged for a standard tasting increased by 31 percent in 2021 and approximately 30 percent of wineries charged a non-refundable fee for a standard tasting [20]. in new zealand, the proportion of wineries charging tasting fees appears to have declined between 1997 and 2010 [21] [22]. for instance, according to the new zealand national wineries’ surveys, 51 percent of wineries reported charging tasting fees in 1997 while 25 percent did so in 2010 [21]. during that period, beverland [23] reported that all wineries in west auckland offered free tastings. more recently, a survey of 51 wineries from australia, new zealand, and south africa reported that 52 percent charged for tastings [24]. more often than not, these charges were for premium tastings and were refundable with purchases. finally, based on interviews with industry experts, bitsch et al. [25] states that wine touring activities such as tastings are generally free of charge in germany. apart from brief summaries provided by travers [12] and hanf and giering [26], no reviews have been published on the impact of tasting fees on customer satisfaction or purchasing behaviour. thus, understanding of how and if tasting fees influence purchasing behaviour and the factors that may moderate these relationships is limited. given that many wineries in regions in australasia, north america, and south africa have introduced tasting fees, yet preliminary studies suggested doing otherwise (e.g., [23] [15], the purpose of this scoping review was to identify all studies examining the impact of tasting fees on purchasing behaviour and beliefs about tasting fees. furthermore, sense of obligation [8] [27] and willingness to pay [25] [26] appear to be relevant theoretic constructs that may mediate the role of tasting fees on purchase decisions and attitudes. therefore, along with obtaining an understanding of the type and breadth of research that has been conducted on the topic, this review explored the impact or influence of tasting fees on: (1) purchasing behaviour (volume, money spent) of cellar door visitors; (2) beliefs about/toward the winery; (3) intention to visit the winery or purchase wine in the future from the winery; (4) willingness to pay for tastings; and (5) obligation to buy wine. 103the impact of fees on customer purchasing behavior and beliefs in winery tasting rooms: a scoping review 2. methods 2.1 protocol and registration because of the small body of research available on the impact of tasting fees, the scoping review method was chosen because it is an appropriate format to summarize the extent of existing literature on broad topics and identify research gaps in the evidence [28]. the steps for the review were based on a recommended framework for scoping reviews [28] [29] and the preferred reporting items for systematic reviews and meta-analyses extension for scoping reviews (prisma-scr) [30]. however, the protocol of this review (i.e., a description of the rationale, hypothesis, and planned methods of a review), was not formally registered because scoping reviews are not currently accepted for registration with the international prospective register of systematic reviews (prospero). 2.2 eligibility criteria studies were included if they met the following inclusion criteria: (1) examined wine tasting fees; (2) measured wine purchasing behavior and/or beliefs about the winery, intent to purchase wine in the future, willingness to pay for fees, or obligation to buy wine; (3) was a data-based study (quantitative or qualitative); (4) either published or grey literature; and (5) published in english. data from both individual customers or consumers and industry professionals (e.g., wine makers, winery owners) were eligible for inclusion. 2.3 information sources and search searches were conducted in academic search complete (1994 to 2022) and scopus (1983 to 2022) up until march 13, 2022. the search strategies were derived from the research questions and keywords noted in relevant papers (e.g., kolyesnikova and dodd, 2009 [27]; mcnamara and cassidy, 2015 [31]). the specific search terms included the following: wine, tasting, fee* or charge*. to identify additional relevant documents, manual searches were conducted on the table of contents of nine journals (international journal of wine business research; international journal of wine research; journal of consumer research; journal of hospitality & tourism research; journal of travel research; journal of travel & tourism marketing; journal of wine economics; journal of wine research; wine economics and policy) for the years 2017 to 2021. finally, hand-searching, tracking new documents (e.g., google scholar), and checking the reference lists of included documents were performed throughout the process. 2.4 selection of sources of evidence once the initial search was completed, a screening was conducted of the titles and abstracts of the documents. during this process, the reviewer determined whether a document should be included, and if excluded, the reason for exclusion was recorded. a full-text screening was then performed on the remaining documents. 2.5 data charting process and data items data extraction was conducted by the author from august 2021 to march 2022. given the small number of included documents, and that one coder was involved, all documents were double coded. the following information was extracted using a codebook: characteristics of the studies (i.e., author, year, publication status/type); characteristics of samples (i.e., population, sample size, age, sex, level of wine experience, study design); characteristics of wineries (i.e., location – continent, location – country, location – wine region, provenance – country, provenance – region); characteristics of wine purchasing behaviour and beliefs (i.e., research questions); and purpose and findings. because a document could have information on more than one of the research questions (e.g., wine purchasing behavior, intent to purchase wine in the future, willingness to pay for fees), more findings than documents were noted. 2.6 synthesis of results frequency analyses for categorical variables and content analyses for the main findings were conducted [29]. the meanings of the main finding were categorized using the themes developed from the analytic framework of this review: wine purchasing behaviour or beliefs, willingness to pay tasting fees, and obligation to buy wine. the direction of impact of tasting fees on purchasing behaviour, beliefs about the winery, and intent to purchase or visit the winery in the future (i.e., negative, positive, neutral), along with feelings of obligation to purchase (not obligated, obligated, neutral) and willingness to pay tasting fees (unwilling, willing, neutral) were coded and the corresponding frequency was calculated. a list of all documents included in this review is presented in the appendices (see also table a1). 104 john c. spence 3. results figure 1 provides a flow chart of the search and study selection process. a total of 195 potential includes were identified through the initial search of databases (n = 176) and additional sources (n = 19). after the removal of duplicates, 194 documents were screened for the title and abstract review. at this stage, 178 documents were excluded primarily because they did not examine the impact of tasting fees in relation to any of the stated objectives or provide empirical data (e.g., commentaries). the remaining 16 documents underwent full-text review. a further 4 documents were then excluded for not meeting the inclusion criteria; which yielded 12 documents and 25 findings being included in the final synthesis. sc re en in g el ig ib ili ty full-text documents assessed for eligibility (n = 16) studies included in synthesis (n = 12) records identified through database searching (n = 176) records excluded (n = 178) titles/abstracts screened (n = 194) additional records identified through other sources (n =19) full-text documents excluded, with reasons (n = 4): no specific assessment of tasting fees (n = 3) not data-based (n = 1) records after duplicates removed (n = 194) id en tif ic at io n in cl ud ed figure 1. prisma chart. 105the impact of fees on customer purchasing behavior and beliefs in winery tasting rooms: a scoping review the vast majority of included documents were published (92%) with most being journal articles (75%). the disciplines of the document sources were in tourism & travel (50%), wine (33%), and food & beverages (17%). of note, the first document was published in 1997 [15] and the most recent in 2022 [2]. a majority of findings were derived from samples that were of mixed age (83%), mixed sex (96%), tended to be visitors to wineries (44%) or wine tourists (36%), and had medium (64%) or high (20%) experience with wine (see table i). as for the wineries and wine regions, a majority of findings came from australasia (60%) or north america (28%), from countries such as australia (48%) and the united states (28%), and from regions that were considered established (58%) or new or developing (29%). the provenance of the countries involved was considered to be established (100%). finally, a majority of findings, were from surveys (60%) or interviews (24%). as reflected in table 2 (and table a2 in the appendices), most of the findings related to willingness to pay tasting fees (nfindings = 9; 36%) or impact of fees on purchasing behaviour (nfindings = 6; 24%). overall, a majority of the findings had a negative valance in regard to the impact of tasting fees on wine purchasing behaviour, beliefs, intentions, obligation to buy and willingness to pay (nfindings = 16; 64%). specifically, the few findings for purchasing behaviour (volume, $) were split between negative (nfindings = 4; 67%) and positive (nfindings = 2; 33%) impacts of fees. for instance, “visitors who had free wine tasting spent more money at the wineries than visitors who paid a tasting fee” (kolyesnikova and dodd [27], p. 816), whereas “…it is clear that visitors spent more at wineries that charged a fee…” [32]. the findings for beliefs were either negative (nfindings = 2; 67%) or neutral (nfindings = 1; 33%). one finding implied that customers held more positive views toward wineries that did not charge tasting fees, “…visitors who tasted wine at no charge felt significantly more appreciative of the personnel who provided services than did visitors who paid a tasting fee” (kolyesnikova and dodd [27], p. 816), while another observed no impact of fees on customers’ “…attitude towards the winery” (thomas and galbreath [33], p. 8). for intention to visit or purchase from the winery in the future, a majority of findings suggested that tasting fees had a negative effect (nfindings = 3; 75%). for example, “…for a winery wishing to attract the youth market, charging a tasting fee would not appear appropriate…” (hall and treloar [22], p. 123), and “an entrance fee would generate revenue but reduction in visitation may be a poor trade-off for these wineries” (taylor et al. [17], p. 73). in the first published study on the topic, king and morris [15] concluded that “…wineries could lose 36% of visitors” (p. 383) with the introduction of tasting fees at the cellar door. on the question of willingness to pay tasting fees, more than half of the findings suggested a lack of willingness (nfindings = 5; 56%), while several supported a willingness to pay (nfindings = 3; 33%). for instance, “… the majority of respondents would not stay at the winery and taste the wine if there was a charge” (mcnamara table 1. characteristics of the sample and the wineries (nfindings = 25). variable nfindings % characteristics of sample age group young adults 3 13 middle-age 1 4 mixed 19 83 sex male 1 4 mixed 23 96 population visitors to wineries 11 44 wine tourists 9 36 industry professionals 2 8 university students 3 12 experience with wine low 2 8 medium 16 64 high 5 20 mixed 2 8 characteristics of the winery location: continent north america 7 28 europe 2 8 australasia 15 60 mixed 1 4 location: country united states 7 28 australia 12 48 new zealand 2 8 germany 2 8 other 1 4 mixed 1 4 provenance: country established 25 100 provenance: region new or developing 7 29 established 14 58 mixed 3 13 106 john c. spence and cassidy [31], p. 15) and “the idea of charging fees for tasting proved to be a controversial issue and it was suggested by the majority of wineries that tasting fees would never be charged (with the exception of groups)” (beverland [23], p. 126). in contrast, bitsch et al. [25] explored willingness to pay tasting fees among germany university students and concluded that “…consumers are willing to pay positive prices for wine touristic activities” (p. 2492). in terms of obligation to buy wine in the presence of tasting fees, the findings implied a lack of obligation (nfindings = 2; 67%) or neutral (1; 33%). for instance, “… visitors who paid a tasting fee felt less obligated to end their visit to the winery with a purchase (kolyesnikova and dodd [27], p. 816) and “…nearly half (48 percent) of respondents indicated that they would not necessarily buy wine if they paid for a tasting” (mcnamara and cassidy [31], p. 13). whereas, king and morris [15] found that “the attitude of these tourists was varied…” (p. 383) when it came to obligations to buy. 4. discussion this review presents a summary of studies that examined the impact or influence of tasting fees in wineries on the purchasing behaviour, beliefs, and willingness to pay for such fees. a limited number of studies and findings were available to review and few have been produced on the topic since 2015. the included studies were conducted primarily in australasia and north america and a majority of findings were derived from surveys or interviews. though a majority of the findings suggested that customers and industry professionals did not support the adoption of tasting fees at the cellar door, some variation was observed across the research questions examined in this review. mixed impact was noted for purchasing behaviour (i.e., volume, money spent), whereas slightly stronger negative associations were seen for intention to visit the winery or purchase wine in the future, willingness to pay for fees, and obligation to buy wine. one of the more salient findings was that tasting fees are associated with perceived service failure of wineries among 90,000 tripadvisor reviews [2]. factors that appeared to moderate these relationships were the provenance of the wine region [17], the size of the winery or wineries [17], and the perceived quality of the winery or wines served [32] [31]. for instance, small wineries in developing regions are much less likely to have tasting fees and their customers are more likely to expect free tastings. as recounted by an owner of a small winery in a developing region in california, “[w]e know from informal surveys that, when asked, visitors state they object to paying for wine tasting…” (zucca [14], p. 8). however, the most important factor was whether purchases of wine were reimbursed [23] [31] or gifts or snacks were offered with the tasting [31] [34]. the offering of free samples to stimulate interest in products and to encourage purchases has long been an effective marketing strategy [35] [36]. for instance, instore offerings of free beer and wine samples can increase sales by as much as 70% to 300% for those products [39]. according to reciprocity theory [35] [36], consumers who feel more gratitude and obligated toward a winery will likely spend more on wine [26]. however, the presence of a tasting fee reduces the sense of gratitude and obligation [37], [15], [27]. for instance, kolyesnikova and dodd [27] observed that visitors to wineries with complimentary tastings spent significantly more money and experienced a greater sense of obligation to make purchases than those visitors who paid for tastings. thus, unless the customer is receiving something for their fee beyond the wine sample itself, they may not feel obligated to purtable 2. impact of tasting fees on purchasing behaviour, beliefs, intentions, willingness to pay fees, and obligation to buy wine (nfindings = 25). research question nfindings % within group impact of tasting fees on purchasing behaviour (volume) 4 negative 3 75 positive 1 25 impact of tasting fees on purchasing behaviour ($) 2 negative 1 50 positive 1 50 impact on beliefs toward/ about winery 3 negative 2 67 positive 1 33 impact on intention to visit or purchase from the winery 4 negative 3 75 positive 1 25 willingness to pay a tasting fee 9 unwilling 5 56 willing 3 33 neutral 1 11 obligation to buy wine 3 not obligated 2 67 neutral 1 33 107the impact of fees on customer purchasing behavior and beliefs in winery tasting rooms: a scoping review chase wine as part of their visit. offering reimbursements on wine purchases or gifts or food with the tastings may foster some sense of reciprocity on the part of the customer [31] [34]. for example, food offerings with tastings in wineries are associated with customer satisfaction [4]. in addition to reimbursement or gifts/food offerings, one option is to employ a pay-what-you want scheme in which the customer determines the price they are willing to pay for the tasting [25] [26]. of course, this all depends on whether wineries are seeing the tasting fee as a mechanism for weeding out freeloaders and recouping costs or a source of revenue. if tasting fees are supposed to dissuade the casual customer and allow wineries to provide a higher level of service to the potentially loyal customer [38], then we would expect that satisfaction is higher for wineries that charge fees or in regions that have adopted fees in comparison to those that have not done so. however, along with the findings of this review, other research challenges this notion. according to tripadvisor reviews of five major international wine regions (hunter valley, napa valley, mendoza, stellenbosch, tuscany), the napa valley ranks fourth in popularity, third in perceived quality, and first in perceived service failure [2]. yet, napa has the most extensive and expensive tasting fees in the world. the average cost of tastings in napa are $58 usd and premium wines are tasted for $90 usd [18]. in 2021, per-person spending at the cellar door in napa was up less than 1 percent from 2019, while it was down 10 percent in sonoma county [18]. aside from covid-related explanations, it is possible that customers in those regions are feeling the pinch of the tasting fees and are reacting with their wallets and their reviews of service. thus, assessments of service quality (e.g., [7]) and the broader winescape [11] should consider the impact of tasting fees on customer satisfaction and purchase decisions. 4.1 implications for practice several potential implications for wineries can be garnered from this review. first, if the intent of a tasting room is to generate interest in a winery and to stimulate sales, then requiring a tasting fee without any reimbursement after a purchase is not an effective strategy. while it may generate revenue in the short term, the findings of this review suggest such practices will not inspire customers to revisit or to purchase wines from the winery in the future. thus, wineries should consider waiving tasting fees with the purchase of wine. second, the perceived quality of the tasting room experience is critical to customer tolerance of fees. visitors are willing to pay for tastings if they feel they learned something about the winery, wines, and/or region while receiving value for money in terms of the quality of the wines tasted. therefore, if the argument for having such fees in place is to partly cover the costs of capable and knowledgeable staff in the tasting room, that fact should be apparent to the customer. finally, the cost of tastings has increased dramatically in the past few years and this may impact visitations and sales in the tasting room. for instance, a standard tasting fee in the united states increased by an average of 50 percent from 2019 ($21 usd) to 2021 ($31) [18]. this was due primarily to wineries attempting to recoup lost revenue resulting from the covid-19 pandemic. along with the fact that many wineries are retaining a by-appointment model for visits [18], the question becomes whether wineries can attract new and younger customers to their venues [39]. as mentioned previously, given that this review identified negative perceptions about tasting fees, it will be important for wineries to demonstrate value for money and emphasize a high quality tasting experience. 4.2 limitations this review has several limitations that should be acknowledged. first, though assessment of quality is not a requirement of a good scoping review [28], a majority of the findings in this review were from cross-sectional designs (e.g., surveys) and interviews. thus, internal validity is low and any causal claims should be made with caution. second, most of the studies were conducted in australia and the united states. since variation exists in the extent to which tasting fees are employed in various countries and regions, more research should be conducted in developing regions (e.g., china, united kingdom) and in more established ones such as canada, chile, france, and south africa. finally, it was surprising to find so few studies examining the impact of tasting fees. given the controversial nature of these fees [12], and that calls have been made for more research on the topic (e.g., [14]), it is unclear why so few studies have been conducted. regardless, the findings of this review should be treated with caution. 5. conclusion this paper presents the first systematic review to examine the impact or influence of tasting fees at the cellar door on purchasing behaviour, beliefs, and obligation to buy wine. a majority of findings suggested mixed impact of tasting fees on purchasing behaviour but negative impact or influence on beliefs toward the winery, 108 john c. spence willingness to pay for fees, and obligation to buy wine. furthermore, if tasting fees are to be employed, both customers and industry professionals suggested wineries should consider reimbursing purchases of wine (e.g., [23] [31]). however, more research is required on the topic, especially in countries and regions that are less established. finally, these findings have relevance for theory (e.g., reciprocity theory, willingness to pay) and suggest that frameworks 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[39] r. mcmillan, “state of the us wine industry 2023,” silicon valley bank, california, 2023. [40] c. heilman, k. lakishyk and s. radas, “an empirical investigation of in‐store sampling promotions,” british food journal, vol. 113, no. 10, pp. 12521266, 2011. [41] h. b. lammers, “the effect of free samples on immediate consumer purchase,” journal of consumer marketing, vol. 8, no. 2, pp. 31-37, 1991. [42] j. pinsker, “the psychology behind costco’s free samples,” the atlantic, vol. october, 1 october 2014. 110 john c. spence appendix studies included in the review 1. barbierato, e.,bernetti, i. and capecchi, i. (2022), “what went right and what went wrong in my cellar door visit? a worldwide analysis of tripadvisor’s reviews of wineries & vineyards”, wine economics and policy, 11(1), 47–72. https://doi.org/10.36253/ wep-10871 2. beverland, m. (1999), “wine tourists: a missed opportunity or a misplaced priority”, pacific tourism review, vol. 3, pp. 119-131. 3. bitsch, l., hanf, j. h. and rüdiger, j. (2020), “an innovative price-setting approach: a pay-what-youwant experiment”, british food journal, vol. 122 no. 8, pp. 2481-2496. https://doi.org/10.1108/bfj-072019-0504 4. charters, s., fountain, j. and fish, n. (2009), “’you felt like lingering…’: experiencing the ‘real’ service at the winery tasting room”, journal of travel research, vol. 48 no. 1, pp. 122-134. https://doi. org/10.1177/0047287508326508 5. hall, c. m. and treloar, p. (2008), “tasting fees and the youth market” revista brasileira de pesquisa em turismo, vol. 2 no. 2, pp. 113-127. https://doi. org/10.7784/rbtur.v2i2.105 6. holecek, d. and mccole, d. (2014), “2012 michigan wine tasting room research – a series (issue #4), the impact of tasting room fees on wine purchases”, northern grapes news, vol. 3 no. 2. http:// northerngrapesproject.org/wp-content/uploads/201 4/06/2014junengpnewsletter.pdf 7. kolyesnikova, n. and dodd, t. h. (2009), “there is no such thing as a free wine tasting: the effect of a tasting fee on obligation to buy” journal of travel and tourism marketing, vol. 6 no. 8, pp. 806-819. https://doi.org/10.1080/10548400903356228 8. king, c. and morris, r. (1997), “to taste or not to taste…to charge or not to charge”, australian & new zealand wine industry journal, vol. 12 no. 4, pp. 381-385. 9. mcnamara, n. and cassidy, f. (2015), “wine tasting: to charge or not to charge?”, international journal of hospitality management, vol. 49, pp. 8-16. https://doi.org/10.1016/j.ijhm.2015.05.004 10. roberts, l. and sparks, b. (2006), “enhancing the wine tourism experience: the customers’ viewpoint”, carlsen j. and charters s. (eds.), global wine tourism: research, management and marketing, cab ebooks, pp. 47-58. https://doi. org/10.1079/9781845931704.0047 11. taylor, r. g., woodall, s., wandschneider, p. r. and foltz, j. c. (2004), “the demand for wine tourism in canyon county, idaho”, international food and agribusiness management review, vol. 7 no. 4, pp. 58-75. https://doi.org/10.22004/ag.econ.8125 12. thomas, b. and galbreath, j. (2021), “beyond the traditional cellar door: do tiered cellar door service offerings maximise value for different wine tourist segments?”, final report for incubator project, wine australia, available at: https://www.wineaustralia. com/research/projects/incubator-initiative-beyondthe-traditional-wine-cellar-door-do-tiered-cellardoor-service-offeri 111the impact of fees on customer purchasing behavior and beliefs in winery tasting rooms: a scoping review table a1. descriptive information for each study included in the review author country region participants design purpose barbierato (2022) arg aus italy sa us mendoza, hunter valley, tuscany, stellenbosch, napa valley visitors survey the purpose of this work is to study the issues of service quality and service failure during visits to cellar doors in the five regions where wine tourism is most developed: hunter valley (au), mendoza (ar), napa valley (the usa), stellenbosch (za), and tuscany (it) (p. 1). beverland (1999) nz west auckland wine tourists & industry professionals survey interview “this research seeks to place wine tourism within the general market context in new zealand” (p. 119). bitsch (2020) germany rheingau university students experiment “the following experiment analysed if consumers have a willingness to pay for wine tastings.” charters (2009) aus nz swan valley, western australia, yarra valley, victoria, & waipara valley visitors interview “the overall aim of this research have been to investigate visitor perceptions of service in winery tasting rooms” (p. 124). hall (2008) aus nz university students survey “the aim is to identify the impact of tasting fees at the cellar door on the wine consumer behaviour of the generation y market” (p. 117). holecek (2014) us michigan visitors survey “to obtain the information relating to wine purchase and consumption behavior.” king (1997) aus western australia/margaret river visitors & industry professionals survey interview “this article examines the opinions and attitudes of… wine tourists towards cellar doors charging tasting fees” (p. 382). kolyesnikova (2009) us texas visitors survey “…examining possible differences between wine tourists who paid for tasting and those who did not pay a tasting fee” (p. 811). mcnamara (2015) aus queensland visitors survey to assess “the consumer’s perceptions and reactions to charging for wine tastings and under what circumstances” (p. 11). roberts (2006) aus victoria, south australia, & queensland wine tourists interview “…to develop a greater understanding of the factors that are important or enhance the experience of tourists visiting wine regions” (p. 47). taylor (2004) us canyon county, idaho visitors survey “…to discover which variables influence tourists to spend an afternoon touring canyon county wineries” (p. 60). thomas (2021) aus western australia visitors survey “…developing a better understanding of the different consumer segments that visit wineries and what service offering mix (e.g. wine tasting, restaurant, gift shop, gallery/museum, etc…) represents an appropriate value proposition for them.” (p. 1) arg = argentina; aus = australia; nz = new zealand; sa = south africa; us = united states. 112 john c. spence table a2. study-specific findings for the research questions. author research question findingpurchase behaviour beliefs obligation intention willingness vol. $ barbierato (2022) co-occurrence of service failure subreviews for all five wine regions: “the tasting theme is present only in the global graph, but highlights a rather debated problem [60], [61]: whether or not to charge a ‘tasting’ –‘fee’ at your cellar door” (p. 20). beverland (1999) “charging tasting fees that were not redeemable against a purchase would have a significant impact on visitors” (p. 127) “the idea of charging fees for tasting proved to be a controversial issue and it was suggested by the majority of wineries that tasting fees would never be charged (with the exception of groups)” (p. 126). bitsch (2020) -, “in short, our main findings are that consumers are willing to pay positive prices for wine touristic activities” (p. 2492). charters (2009) + “while many participants said that some sort of exchange felt necessary at the tasting room, particularly where the service experience has been excellent, it is unclear whether charging a tasting fee is an appropriate response” (131). hall (2008) “overall, the results have shown that for a winery wishing to attract the youth market, charging a tasting fee would not appear appropriate…” (p. 123) holecek (2014) + + + “although it is clear that visitors spent more at wineries that charged a fee, it is possible that the difference is spending was the result of other factors.” “almost 71 percent of respondents said they don’t avoid tasting rooms that charge a fee while 29 percent said they do.” king (1997) 0 0 “the attitude of these tourists was varied with some people stating that although they often did buy at the wineries when there was a tasting fee they did not feel compelled to buy the wine…” (p. 383). “due to the impact of the results, wineries could lose 36% of visitors” (p. 383) “the proposition that all wineries introduce tasting fees was not generally accepted by association members…” (p. 382). kolyesnikova (2009) “visitors who had free wine tasting spent more money at the wineries than visitors who paid a tasting fee” (p. 816). “…visitors who tasted wine at no charge felt significantly more appreciative of the personnel who provided services than did visitors who paid a tasting fee” (p. 816). “…visitors who paid a tasting fee felt less obligated to end their visit to the winery with a purchase” (p. 816). 113the impact of fees on customer purchasing behavior and beliefs in winery tasting rooms: a scoping review author research question findingpurchase behaviour beliefs obligation intention willingness vol. $ mcnamara (2015) “…nearly half (48 percent) of respondents indicated that they would not necessarily buy wine if they paid for a tasting” (p. 13). “…the majority of respondents would not stay at the winery and taste the wine if there was a charge” (p. 15). roberts (2006) “for many visitors there was still the expectation that there would be complimentary wine tasting, as this had become accepted as ‘part of the ethos’ of visiting a winery” (p. 51). taylor (2004) “an entrance fee would generate revenue but reduction in visitation may be a poor trade-off for these wineries” (p. 73). thomas (2021) 0 “raw data suggests that introducing a tasting fee has no impact on improving wines sales (atv, avv, ips and sc%)” (pp. 7-8). sc%, avv, & ips decreased after introduction of the fee. “…whilst most visitors had a negative attitude towards being charged a tasting fee, this had no impact on their attitude towards the winery or willingness to recommend the winery to others (p. 8). + = positive impact/influence of tasting fees; – = negative impact/influence of tasting fees; 0 = neutral impact/influence of tasting fees. wine economics and policy volume 12, issue 1 – 2023 firenze university press state of the international wine market in 2022: new market trends for wines require new strategies rafael del rey1, simone loose2,* does anyone read my papers? the gap between academic consumer research and the real (wine) world riccardo vecchio a certification for natural wine? a comparative analysis of consumer drivers in italy and spain eva parga dans1,*, riccardo vecchio2, azzurra annunziata3, pablo alonso gonzález4, raimundo otero enríquez5 structure and development of the czech wine market and foreign wine trade kamila vesela, david křížek*, lucie severova the impact of alternative packaging on the life cycle of wine on tap stefano massaglia1, tibor verduna1, vincenzo varchetta2, filippo brun1, simone blanc1,* the new cap and the challenge of sustainability: a synthetic indicator for the italian wine sector roberta sardone1,*, simonetta de leo1, davide longhitano2, roberto henke1 analysis of the 2007-2008 hérault premiumized grubbing-up campaign: a tool to better understand fischer-boel’s 2008-2011 grubbing-up campaigns and the desire in 2022 to reintroduce locally premiumized grub-ups étienne montaigne1, samson zadmehran2,*, alfredo coelho3, yacine messaoudène4 the impact of fees on customer purchasing behavior and beliefs in winery tasting rooms: a scoping review john c. spence wine economics and policy 12(1): 37-49, 2023 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/wep-11522 wine economics and policy citation: kamila vesela, david křížek, lucie severova (2023). structure and development of the czech wine market and foreign wine trade. wine economics and policy 12(1): 37-49. doi: 10.36253/wep-11522 copyright: © 2023 kamila vesela, david křížek, lucie severova. this is an open access, peer-reviewed article published by firenze university press (http://www.fupress.com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information fi les. competing interests: the author(s) declare(s) no confl ict of interest. structure and development of the czech wine market and foreign wine trade kamila vesela, david křížek*, lucie severova czech university of life sciences prague, faculty of economics and management, kamýcká 129, 165 00 prague, czech republic e-mail: veselakamila@pef.czu.cz; krizekd@pef.czu.cz; severova@pef.czu.cz *corresponding author. abstract. th e aim of the presented text is to evaluate the structure and development of the czech wine market, foreign wine trade and to analyse the factors shaping domestic demand for wine. th e text presents the results of the analysis of primary and secondary data. time series on the development and direction of the foreign wine trade are analysed and the results are then compared with the fi ndings of a questionnaire survey of 946 respondents which provides information about the current consumer preferences of the czech population in drinking wine. wine consumption has shown stable growth over the last 20 years, as demonstrated by primary research. th e research has proven that wine consumption in the czech republic shows a faster growth rate than domestic production, which is also refl ected in import demand. from the point of view of factors infl uencing domestic demand for wine, it is mainly the age, education, income and size of the consumer’s residence. th e research provides an up-to-date view of the structure of wine demand in the czech republic and identifi es the factors infl uencing wine demand. th e research also makes it possible to predict the future direction of the czech wine trade. keywords: export, import, production, consumption, wine. 1. introduction th e czech republic is a country with long-term wine production, but also consumption. from 1995 to 2016, wine production increased from 459 (in 1000 hl) to 631 (1000 hl). th is production grew at an average annual rate of 4.57% per year. in contrast, wine consumption in the czech republic increased from 1995, when its value was 63.7 (1000 hl) to 192 (1000 hl). it is an increase of more than 300%. th e average consumption per person in 1995 was 7.6 l of wine, in 2016 it was already 21.3 l/person. th e average growth rate of wine consumption was 6.57% per year. for a clear overview, see fi gure 1. a similar trend can be observed in asia, where the share of consumer spending in total household spending is also growing. th e largest consumption of wine is currently in france, followed by italy and austria. bentzen and smith [1] dealt with the situation and problems of wine production in 38 kamila vesela, david křížek, lucie severova countries with low wine production, especially in denmark, whereas marquart and hanf [2] focused on armenia. wine production in the czech republic is more focused on white wine. the share of white grape varieties in young vineyards in the czech republic in 2015– 2018 was 92% of the total area of vineyards. veltlínské zelené, pálava and ryzlink rýnský [3] have the largest share in the czech republic. the unequivocal market leader is the bohemia sekt group [4]. chládková [5] adds sufficient investment in the development and expansion of market share as a key element for maintaining the company’s competitive position in the wine market. it should also be noted that the czech republic’s accession to the european union significantly affected the wine market in the czech republic, which was reflected, among other things, in a slight decline in the market shares of most companies [6]. for example, butkus et al. [7] dealt with the issue of the impact of the czech republic’s accession to the european union on the czech republic’s foreign trade. they used an econometric model to try to determine the direct effect of the czech republic’s accession to the eu on the size of foreign trade. however, the analyses carried out provided mixed results regarding eu membership and export growth. with the accession of the czech republic to the european union, there have been a number of changes in czech viticulture, the market for czech consumers now offers a number of foreign wines in various price categories and quality levels. the integration of domestic and foreign wine markets can be expected, which will be reflected in the gradual convergence of wine prices at the global level. most czech producers are convinced that their wines will continue to be sufficiently competitive [8]. the development of the wine industry contributes to the overall competitiveness of individual regions of the czech republic, as well as the competitiveness of the czech republic on global markets [9]. specific problems of this sector including the development of wine consumption per capita were analysed, for example, by chládková [10]. verner [11] analysed the relationship between economic growth, production growth in the sector and quality of life. to understand the functioning of a particular market, in addition to knowledge of secondary data on overall market variables (such as production, consumption, profitability, or foreign trade), it is important to know the factors influencing the behaviour of individual market players. the importance of studies of agricultural commodities in the czech republic was emphasized e.g. by svatoš and smutka [12]. wine is one of the commodities with a long history of production and consumption in the czech republic. the aim of this text is to evaluate the structure and development of the czech wine market, foreign trade in wine and to analyse the factors shaping domestic demand for wine. the research provides an up-to-date view of the structure of wine demand in the czech republic and identifies the factors inf luencing wine demand. the research also allows predicting the future direction of the czech wine trade. this is important for regional development planning, as wine production is significantly more widespread in certain regions than in others (due to climatic conditions). the aim of the presented text is a comprehensive evaluation of the czech wine market in terms of wine production, consumption and foreign trade. the following sub-objectives have been set, the fulfilment of which will lead to the fulfilment of the main objective: 1) to evaluate the development and predict production, consumption and foreign trade (exports and imports) in wine in the czech republic; 2) to analyse the factors of wine demand among the population of the czech republic. 2. material and methods the key source of data for this research are 1) secondary data coming from the official website of the czech statistical office (hereinafter referred to as the csu) and the ministry of agriculture of the czech republic (hereinafter referred to as the mzcr); 2) primary data obtained by a questionnaire survey. the data base of secondary data consists mainly of annual data on the development of wine production and consumption in litres, as well as wine exports and imports in litres and average wine consumption per person (in litres/ year). in the research of secondary data, both absolute and relative indicators are analysed. secondary data for analysis are available in a comprehensive version for the 0 500 1000 1500 2000 2500 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 10 00 h l wine production wine consumption figure 1. the development of wine production and consumption in the czech republic over the period 1995-2016 (source: own processing based on mzcr data). 39structure and development of the czech wine market and foreign wine trade period 1995–2016 (unfortunately, newer data are not yet available). for the basic evaluation of time series, basic statistical descriptive characteristics were used, which were utilized to describe the year-on-year rates and the absolute deviation and their development between wine production and consumption and wine exports and imports. methods of trend analysis and regression statistics were used for analysis and prediction. the selection of a suitable trend function was made by using and evaluating interpolation criteria. the function chosen is that which has the smallest possible value of the mse criterion, meets the conditions of the f-test and has a sufficiently high value of reliability r. the value of mse is determined using function (1): (1) where t is the number of observations, yt are measured values and are expected values. linear and quadratic curves were used as basic with respect to the development of time series. the following null hypotheses were established: h01: the wine production/consumption in the czech republic has no trend (is stationary); h02: the development of the wine export/import ratio in the czech republic has no trend. (is stationary). the results of the analysis of time series are further confronted with the results of the questionnaire survey, which was conducted in 2020 and was focused on the evaluation of consumer preferences of the population of the czech republic regarding wine consumption. in order to obtain up-to-date consumer information, primary research was carried out to determine the extent, size and structure of the demand for wine. the aim was in particular to identify the factors influencing the size and formation of demand for wine. quantitative research using a questionnaire technique of data collection was used to obtain primary data. the research was carried out in 2020 in september and october. a total of 946 respondents took part in the questionnaire survey, which represented an 84% return after the elimination of empty or incomplete questionnaires. the gender composition of the respondents was 420 (44.4%) men and 526 (55.6%) women. the age structure of the respondents was divided into groups of 0–20 years, 21–25 years, 26–30 years, 31–40 years, 41–50 years, 51–60 years and 61 and more years. the dominant groups are 0–20 years and 21–25 years, which together make up 86% of all respondents. the structure of respondents’ demand was further examined according to the highest level of education attained and the amount of income. of the total number of respondents, 81.1% of respondents indicated that they would indulge in wine at least occasionally. absolute and relative frequencies were used in the descriptive statistics and contingency tables and the χ2 test was used to analyse the obtained data. the contingency table contains the observed frequencies from the questionnaire survey of individual combinations of characters. from the differences (residues) of the observed frequencies and the frequencies obtained from the assumption of the null hypothesis, the total normalized residue is calculated. if its value is less than the critical value of the distribution χ2 at the significance level of 0.95 for the appropriate degree of freedom, the null hypothesis cannot be rejected at the 95% significance level. significant variables (according to chi-square test) were further tested using multinomial and ordinal logistic regression, depending on the type of dependent variable. logistic regression models were constructed and their quality was evaluated based on nagelkerke‘s r squared value. furthermore, the significance of the regressors was tested using omnibus likelihood ratio tests. the questionnaire survey focused on the following questions: how often do you drink wine? what wine do you prefer? where do you most often buy wine? in what price range do you most often buy wine? the answers to these questions were then analysed according to gender, age, education attained, income and size of residence of the respondents. for these purposes, null hypotheses were established and tested. 3. results the first phase of the research is focused on evaluating the state of the czech wine market and the possibilities of predicting further market direction. for these purposes, time series on the production and consumption of wine in the czech republic and the values of exports and imports of wine from or to the czech republic are analysed. in the next phase, the results of this research are compared with the results of the analysis of primary data from the questionnaire survey. the following graph (figure 2) maps the development of wine production and consumption in the czech republic for the period 1995–2016. wine production shows grow th in the period observed, but it also shows relatively high variations. this phenomenon must be attributed to the fact that wine production is conditioned by a number of factors. first of all, it is the area of vineyards, then especially 40 kamila vesela, david křížek, lucie severova the quality and extent of the harvest in individual years, which is conditioned by the quality of climatic conditions, the number of pests and other factors. in the whole period observed, wine production exceeds consumption, however, the absolute difference between production and consumption decreases over time. this is due to the faster growth rate of wine consumption over production. this effect is clearly evident from the indicator of wine production/consumption where, as the graph above shows, this indicator has been declining for a long time. it is this indicator of the ratio of the amount of production and consumption of wine that expresses the direction of the czech wine market and was the subject of analysis and prediction. for these purposes, a null hypothesis was established: h01: the ratio of the amount of production and consumption of wine in the czech republic has no trend. the relationship between wine production and consumption was expressed using a ratio indicator found as the ratio of total wine production in the czech republic/ total wine consumption in the czech republic. as the graph above shows, this indicator has a declining trend, indicating a faster increase in wine consumption compared to production. subsequently, a regression analysis was performed in order to reveal and describe the function characterizing the development of the share of wine production and consumption. using the quadratic trend function, it was possible to explain 74.34% of the variability of the dependent variable; the value of the f test, or the p value shows a value of 0.000002, i.e. it satisfies the condition of a result with less than 5% level of significance. the individual parameters of the function are described in the following table (table 1). the functional relationship is described by equation (2): yt = 9,1473-0,5587t + 0,0131t2 (2) where yt is the ratio of wine production and consumption in the czech republic in individual years. using this function, the values for the expected development of production and consumption for the next 4 periods are then simulated. these are shown in the following graph (figure 3). the research has shown a relationship between wine production and consumption, which can be described by this function. the development showed a faster growing rate of wine consumption than production, which reduces the difference between production and consumption, and thus also decreases the analysed ratio indicator of wine production/consumption. this is followed by research into whether and how this growing consumption is reflected in the foreign trade of the czech republic. for these purposes, time series on the export and import of wines from and to the czech republic are analysed. data in this case are available until 2019. the development of the foreign wine trade is analysed in summary and according to the division into vermouth, sparkling wine and grape wine (still). for these purposes, a null hypothesis was established: h02: the development of the wine export/import ratio in the czech republic has no trend. the relationship between wine exports and imports was expressed using a ratio indicator found as the ratio of wine exports from the czech republic/wine imports to the czech republic. the following graph (figure 4) describes the development of the foreign wine trade. 0 1 2 3 4 5 6 7 8 9 10 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 1… 1… 1… 1… 1… 2… 2… 2… 2… 2… 2… 2… 2… 2… 2… 2… 2… 2… 2… 2… 2… 2… co ns um pt io n/ pr od uc tio n 10 00 h l figure 2. the development of wine production and consumption in the czech republic over the period 1995-2016. blue columns indicate wine production. orange shows wine consumption. the grey column is wine production minus consumption. the yellow curve shows the ratio of production to consumption (source: own processing based on mzcr data). table 1. parameters of the function of the ratio of production and consumption of wine in the czech republic. reliability value r ss residues mse f test (“p”) parameter a parameter b parameter c 0.74343514 21.93117 0.996871 0.000002 9.147321 -0.55866 0.013096 source: own processing. 41structure and development of the czech wine market and foreign wine trade figure 4 shows the growth of wine imports, which corresponds to the growing demand, or wine consumption. the import of wine in 2019 increased almost threefold compared to 1999, i.e. approximately the same as the consumption of wine in the czech republic. tomšík [13, 14] adds that the largest volumes of wine are imported from italy and hungary. the export of wine then goes mainly to slovakia and poland. in the case of slovakia, the export of wine from the slovak republic is directed, among other destinations, to the czech republic [15]. subsequently, a regression analysis was performed in order to reveal and describe the function characterizing the development of the share of wine exports and imports. in the case of total exports and imports, it is not possible to describe the development of the share of exports and imports of wine using a suitable function and it must be stated that there is no statistically significant relationship describing the development of exports and imports of wine. a more detailed analysis according to the type of wine has already been able to describe a statistically significant relationship, broken down into foreign trade in vermouth, sparkling wine and grape wine (still). the development of foreign trade in vermouth is shown in the following graph (figure 5). during the period observed, imports of vermouth increased by 2.7 times the value of 1999, while exports fell to about one third. using the quadratic trend function, it was possible to explain 55.90% of the variability of the dependent variable of the ratio of exports and imports, yet the model shows statistical significance; the value of the f test, or the p value shows a value of 0.0006, thus satisfying the condition of a result with less than a 5% level of significance. the individual parameters of the function are described in the following table (table 2). the functional relationship is described by equation (3): yt = 1,0097 – 0,1294t + 0,0045t2 (3) where yt is the ratio of vermouth export and import over time. using this function, the values for the expected development of foreign trade in vermouth for the following period are then simulated. these are shown in the following graph (figure 6). 0 2 4 6 8 10 12 14 16 18 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 20 20 pr od /c on s. figure 3. prediction of the development of wine production/consumption in the czech republic. the orange curve shows an estimate. the blue curve represents production and consumption (source: own processing). 0,00000000 0,05000000 0,10000000 0,15000000 0,20000000 0,25000000 -200.000.000 -150.000.000 -100.000.000 -50.000.000 0 50.000.000 100.000.000 150.000.000 200.000.000 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 ex po rt /i m po rt n et to k g figure 4. the czech republic’s foreign wine trade. the blue column indicates import. orange indicates export. gray shows net exports. the yellow curve represents the export/import (source: own processing based on csu data). 0 0,2 0,4 0,6 0,8 1 1,2 1,4 -8.000.000 -6.000.000 -4.000.000 -2.000.000 0 2.000.000 4.000.000 6.000.000 8.000.000 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 ex po rt /i m po rt n et to k g figure 5. the czech republic’s foreign trade in vermouth. the blue column indicates import. orange indicates export. gray shows net exports the yellow curve shows exports/imports (source: own processing based on csu data). table 2. parameters of the function of the ratio of export and import with vermouth. reliability value r ss residues mse f test (“p”) parameter a parameter b parameter c 0.559041 0.943614 0.044934 0.00063 1.009714 -0.12944609 0.00446645 source: own processing. 42 kamila vesela, david křížek, lucie severova in the case of sparkling wine, there was an even greater increase in imports. compared to 1999, the import of sparkling wine increased more than 6-fold by 2019, while exports, similarly to vermouth, decreased in the period observed (figure 7). using the quadratic trend function, it was possible to explain 73.88% of the variability of the dependent variable of the ratio of exports and imports, yet the model shows statistical significance; the value of the f test, or the p value shows a value of 0.00001, thus satisfying the condition of a result with less than a 5% level of significance. the individual parameters of the function are described in the following table (table 3). the functional relationship is described by equation (4): yt = 0,6465 – 0,0584t + 0,0014t2 (4) where yt is the ratio of export to import of sparkling wine over time. using this function, the values for the expected development of foreign trade in sparkling wine for the following period are simulated. these are shown in the following graph (figure 8). unlike vermouth and sparkling wine, still grape wine showed significant growth on the export side during the period observed. compared to 1999, wine exports in 2019 reached more than 8 times the value in 1999. at the same time, imports in this case increased “only” 2.7 times over the period observed (figure 9). the development of the foreign trade relationship, or the mutual ratio of exports and imports is more complicated in this case. the quadratic trend function was able to explain 42.33% of the variability of the dependent variable, yet the model shows statistical significance. the individual parameters of the function are described in the following table (table 4). 0 0,2 0,4 0,6 0,8 1 1,2 1,4 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 20 20 20 21 20 22 ex po rt /i m po rt figure 6. predicting the development of foreign trade in vermouth. the blue curve indicates export/import and the orange estimate (source: own processing). 0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 -10.000.000 -8.000.000 -6.000.000 -4.000.000 -2.000.000 0 2.000.000 4.000.000 6.000.000 8.000.000 10.000.000 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 ex po rt /i m po rt n et to k g figure 7. the czech republic’s foreign trade in sparkling wine. the blue column indicates import. orange indicates export. gray shows net exports. the yellow curve represents the export/import (source: own processing based on csu data). table 3. parameters of the function of the ratio of export and import with vermouth. reliability value r ss residues mse f test (“p”) parameter a parameter b parameter c 0.738835 0.213037 0.010145 0.00001 0.646529 -0.05843594 0.00143415 source: own processing. 0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 20 20 20 21 20 22 ex po rt /i m po rt figure 8. predicting the development of foreign trade in sparkling wine. the orange curve shows an estimate. the blue curve represents production and consumption (source: own processing). 0 0,05 0,1 0,15 0,2 0,25 -200.000.000 -150.000.000 -100.000.000 -50.000.000 0 50.000.000 100.000.000 150.000.000 200.000.000 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 ex po rt /i m po rt n et to k g figure 9. the czech republic’s foreign trade in grape wine – still. the blue column indicates import. orange indicates export. gray shows net exports. the yellow curve represents the export/import (source: own processing based on csu data). 43structure and development of the czech wine market and foreign wine trade the functional relationship is described by equation (5): yt = -0,0462 + 0,0229t – 0,0008*t2 (5) where yt is the ratio of export to import of still wine over time. using this function, the values for the expected development of foreign trade in still wine for the following period are simulated. these are shown in the following graph (figure 10). the conclusions from the first phase of the research are as follows: although the volume of wine production in the czech republic outweighs its consumption, in the long run and in the whole period observed there is a faster growth rate of wine consumption than production. thus, the ratio indicator of production/consumption decreases; this phenomenon proved to be statistically significant. the growing consumption of wine was also evidenced by the growing demand for wine imports, which also showed a total of about 3-fold growth between 1999 and 2019 (i.e., approximately the same growth as the growth of total wine consumption in the czech republic in the given period). imports of sparkling wine are growing the fastest (6 times the imports between 1999 and 2019), vermouth and still wine from grapes show an increase of 2.7 times over the period observed from 1999. in terms of volume, however, the largest item is the import of still wine. in the case of still wine from grapes, it was the only item mentioned for which exports increased, particularly by 8 times compared to 1999. the trends observed in exports and imports for individual wines proved to be statistically significant in all cases. the second part of the research is based on the evaluation of primary data obtained from a questionnaire survey. the aim of this research was mainly to test the results of previous research resulting from the analysis of secondary data. given the findings of growing wine consumption, respondents were first asked if they drank wine and how often. respondents chose from the answers: daily, every other day, once a week, once a month and exceptionally. the highest frequency was recorded in the answer “exceptionally” (383 answers) and “once a week” (263 answers), the lowest frequency, on the other hand, was recorded in the answer “daily” (10 answers). furthermore, factors that may affect the intensity of wine drinking were analysed, namely gender, age, education, income and size of residence of the respondents. in this context, the following null hypothesis was established: h03: the gender, age, education, income and size of residence do not significantly predict the frequency of wine drinking. multinomial and ordinal logistic regression were used to evaluate the statistical hypothesis. first, initial preparation for the use of logistic regressions was performed. a separate table of results is created for each dependent variable to determine the relationship between the dependent and independent variables. the dependencies were examined using chi-square test. the significant variables were then entered into an ordinal logistic regression model. the results of the first hypothesis testing by the chisquare test are shown in the following table 5. table 4. parameters of the function of the ratio of export and import with still wine from grapes. reliability value r ss residues mse f test (“p”) parameter a parameter b parameter c 0.423322 0.041582 0.00198 0.007053 -0.04624 0.02292227 -0.0008445 source: own processing. -0,05 0 0,05 0,1 0,15 0,2 0,25 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 20 20 20 21 20 22 ex po rt /i m po rt figure 10. predicting the development of foreign trade in still wine. the orange curve shows an estimate. the blue curve represents production and consumption (source: own processing). table 5. the results of chi-square test of the question “how often do you drink wine?”. criterion χ2 critical value result gender 32.6112 9.487729 rejected age 16.38039 15.50731 rejected education 25.39251 9.487729 rejected income 19.84832 21.02607 not rejected size of residence 23.76653 26.29623 not rejected source: own processing. 44 kamila vesela, david křížek, lucie severova the research has shown that there is a relationship between gender and the frequency of wine drinking. based on the results of the chi-square test, an ordinal logistic regression model was created. the reference category was the last and most numerous category “exceptionally”. only variables that were statistically significant according to the chi-square test were included in the model. the results of the ordinal logistic regression are shown in the following table 6. based on the result of the likelihood ratio test, we accept the alternative hypothesis, i.e. at least one predictor is statistically significant at the 5 % significance level. nagelkerk’s pseudo r2 of 0.02 indicates a very small effect of the predictors on the explanatory variable. table 7 summarizes the impact of each predictor. it is clear from the table that at the standard 5 % significance level, the variables education and gender are influential in the model. the answers are in line with the findings of chládková et al. [16], who showed in her research based on direct questioning of 1,000 respondents from all over the czech republic that 11.3% of respondents drink wine several times a week, 29.8% of respondents drink wine at least once a week and 23.32% of respondents drink wine several times a month. she also noted that only 2.7% of respondents do not drink wine at all. kelley et al. [17] also concluded that wine is drunk more by women, but argues that the frequency of consumption is higher in men than in women. an interesting feature of his research is also the research on the importance of the relationship between information about the pairing of food and wine on the labels of bottles and demand, or consumption of wine. as a result, consumers who buy wine at least once a week were positively affected by this information, and this effect decreased with the frequency of purchase. the second research question was: “what wine do you prefer? white, rosé or red?” white wine had the highest frequency of responses (664 responses), rosé had the lowest frequency of responses (187). subsequently, null hypothesis was established: h04: the gender, age, education, income and size of residence do not significantly predict the wine type preference (white, rosé or red). the results of the chi-square test are shown in the following table 8. the research has shown that there is a relationship between wine type selection and gender, age, education and income. the relationship between the size of residence and wine type selection was not confirmed. based on the chi-square test results, a multinomial logistic regression model was created. the reference category was the most numerous category – white wine and only variables that have a significant effect on the dependent variable according to the chi-square test were included in the model. the results of the multinomial logistic regression are shown in the following table table 9. based on the result of the likelihood ratio test, we accept the alternative hypothesis, i.e. at least one predictor is statistically significant at the 5 % significance level. table 6. the results of the ordinal logistic regression of the question “how often do you drink wine?”. model r²n χ² df p 1 0.02 47.33 8 < .0001 source: own processing. table 7. omnibus likelihood ratio tests of the question “how often do you drink wine?”. predictor χ² df p gender 15.05 1 0.0001 age 8.72 6 0.1897 education 11.09 1 0.0009 source: own processing. table 8. the results of the chi-square test of the question “which wine do you prefer?”. criterion χ2 critical value result gender 15.35246 5.991465 rejected age 29.48014 18.30704 rejected education 6.094705 5.991465 rejected income 20.56061 15.50731 rejected size of residence 14.64243 15.50731 not rejected source: own processing. table 9. the results of the multinomial logistic regression of the question “which wine do you prefer?”. model r²n χ² df p 2 0.05 62.57 24 < .0001 source: own processing. 45structure and development of the czech wine market and foreign wine trade nagelkerk’s pseudo r2 of 0.05 indicates a small effect on the explanatory variable. table 10 summarizes the effect of each predictor on different categories of the dependent variable. it is clear from the table that at the standard 5 % significance level, only the variables age and gender have a significant effect in the model. for the other variables we see statistically inconclusive effects. in connection with wine type selection, respondents were also asked about the preference for dry, sweet or semi-sweet wine. most respondents indicated a preference for semi-sweet wine (452 responses), the least respondents indicated dry wine (293 responses). tested null hypothesis: h05: the gender, age, education, income and size of residence do not significantly predict the wine type preference (dry, semi-sweet and sweet). the results of the chi-square test are shown in the following table (table 11). the research showed the existence of a relationship between the preference of the wine type and the education and income of the respondents. based on the results of the chi-square test, a multinomial logistic regression model was again created. the reference category was the most numerous category – semi-sweet wine and only the variables education and income, which are statistically significant according to the chi-square test, were included in the model. the results of the multinomial logistic regression are shown in the following table 12. based on the result of the likelihood ratio test, we accept the alternative hypothesis, i.e. at least one predictor is statistically significant at the 5 % significance level. nagelkerk’s pseudo r2 of 0.04 indicates a very small effect of the predictors on the explanatory variable. table 13 summarizes the impact of each predictor on different categories of the dependent variable. the table shows that at the standard 5 % significance level, both variables have a significant effect in the model. the next research question tested was where people buy wine most often. in this question, respondents chose a supermarket, a wine shop, directly from a wine-maker or from fair-trade stores. as expected, the most frequent answer was a supermarket, followed by a wine shop. the lowest frequency of responses was for fair-trade stores. subsequently, null hypothesis was established: h06: the gender, age, education, income and size of residence do not significantly predict the place of purchase of wine. the results of the chi-square test are shown in the following table (table 14). the research has shown a relationship between the place of purchase of wine and age and the size of residence. in her research, chládková et al. [16] also showed the highest proportion of supermarkets as places of sale of wine (45.2% of respondents buy wine in supermarkets and 23.8% in wine shops). based on the results of the chi-square test, a multinomial logistic regression model was again created. the table 10. omnibus likelihood ratio tests of the question “which wine do you prefer?” predictor χ² df p age 23.15 12 0.0265 education 2.55 2 0.2801 gender 11.76 2 0.0028 income 14.82 8 0.0628 source: own processing. table 11. the results of the chi-square test of the question “which wine do you prefer?”. criterion χ2 critical value result gender 0.808905 5.991465 not rejected age 6.010452 9.487729 not rejected education 20.22551 5.991465 rejected income 27.54793 15.50731 rejected size of residence 5.039119 15.50731 not rejected source: own processing. table 12. the results of the multinomial logistic regression of the question “which wine do you prefer?” model r²n χ² df p 3 0.03 41.67 10 < .0001 source: own processing. table 13. omnibus likelihood ratio tests of the question “which wine do you prefer?” predictor χ² df p education 12.57 2 0.0019 income 21.28 8 0.0064 source: own processing. 46 kamila vesela, david křížek, lucie severova reference category was the largest category – supermarket shopping and only the variables age and size of the municipality, which are statistically significant according to the chi-square test, were included in the model. the results of the multinomial logistic regression are presented in the following table 15. based on the result of the likelihood ratio test, we accept the alternative hypothesis, i.e. at least one predictor is statistically significant at the 5 % significance level. however, it should be noted that this significance level is very marginal. a nagelkerk pseudo r2 of 0.02 indicates a very small effect of the predictors on the explanatory variable. table 16 summarizes the impact of each predictor on different categories of the dependent variable. it is clear from the table that at the standard 5 % significance level, only municipality size has an effect on the dependent variable. the last question tested is the price range of purchased wines. respondents chose from the following price categories: up to czk 70, czk 70–100, czk 100– 150 and over czk 150. from the point of view of absolute frequencies, people buy wine the most in the price category czk 100–150, the least in the category up to czk 70. tested hypothesis: h07: the gender, age, education, income and size of residence do not significantly predict the choice of price category when buying wine. the results of the chi-square test are shown in the following table (table 17). the research has shown the existence of a relationship between the price range of wine and gender, age, income and size of residence. based on the chi-square test results, an ordinal logistic regression model was created. the reference category was the last category – over czk 150. all explanatory variables were included in the model except education, which is statistically insignificant according to the chi-square test. the results of the ordinal logistic regression are shown in the following table 18. table 14. the results of the chi-square test of the question “where do you buy wine most often?”. criterion χ2 critical value result gender 0.990744 5.991465 not rejected age 21.45865 18.30704 rejected education 0.612048 5.991465 not rejected income 7.424061 9.487729 not rejected size of residence 16.73919 15.50731 rejected source: own processing. table 15. the results of the multinomial logistic regression of the question “where do you buy wine most often?”. model r²n χ² df p 4 0.02 31.79 20 0.0456 source: own processing. table 16. omnibus likelihood ratio tests of the question “which wine do you prefer?” predictor χ² df p size of residence 17.66 8 0.0239 age 13.00 12 0.3689 source: own processing. table 17. the results of the chi-square test of the question “in what price range do you most often buy wine?”. criterion χ2 critical value result gender 17.41022 7.814728 rejected age 67.97642 12.59159 rejected education 3.231538 7.814728 not rejected income 36.23751 15.50731 rejected size of residence 137.8922 21.02607 rejected source: own processing. table 18. the results of the ordinal logistic regression of the question “in what price range do you most often buy wine?”. model r²n χ² df p 5 0.02 36.69 15 0.0014 source: own processing. table 19. omnibus likelihood ratio tests of the question “in what price range do you most often buy wine?”. predictor χ² df p age 9.9 6 0.1288 size of residence 3.63 4 0.4588 gender 0.2 1 0.6566 income 25.21 4 <.0001 source: own processing. 47structure and development of the czech wine market and foreign wine trade based on the result of the likelihood ratio test, we accept the alternative hypothesis, i.e. at least one predictor is statistically significant at the 5 % significance level. nagelkerk’s pseudo r2 of 0.02 indicates a very small effect of the predictors on the explanatory variable. table 19 summarises the impact of the individual predictors. the table shows that at the standard 5% significance level, only income has an effect on the dependent variable. 4. discussion wine is one of the most frequently consumed alcoholic beverages in the czech republic. there can be several motivations for wine consumption; anchor and lacinova [18] points out that one of the strong motives for wine consumption is social respect, which occurs especially in the young generation. however, it is possible to go even further, and oyinsey’s et al. [19] article, for example, is suggestive, as it takes into account a multidimensional experiential framework that seeks to uncover the dimensions that shape the experience of wine consumption. over the last 20 years, the czech republic has shown significant and sustained growth in consumption, which is faster than growth in wine production. however, domestic production still exceeds wine consumption. the growing consumption of wine is also reflected in the growing demand for wine imports. however, this is not just a matter for the czech republic, but as bonn [20] shows, as awareness grows, so too does demand, globally [21]. the growing consumption of wine is also reflected in the growing demand for wine imports. from the point of view of the structure of the foreign wine trade, imports of sparkling wine are growing the fastest, but the largest item of foreign trade is the import of still wine. straková [22] adds that with the growing frequency of wine drinking, the consumption of moravian and czech wines prevails over foreign ones. knowledge of the consumption and purchase motives of citizens of the czech republic, especially the young generation, is especially important for understanding the czech wine market, as these people are the current and future consumers of wine [23]. the research has shown the following conclusions: the frequency of wine drinking depends on gender, age and education. here it can be further noted that gender not only affects consumption, but also preferences and customer satisfaction, for example mitchell and walsh [24], atkin et al. [25]. the same is also true in the case of agein addition to consumption, it has an impact on both of the above, for example thach and olsen [26] or olsen et al. [27]. there is a relatively higher frequency of wine drinking among women than men, wine consumption increases with age and there is higher wine consumption among people with lower education. in the case of testing wine type preferences, dependence on gender, age, education and income was confirmed. consumption is clearly dominated by the consumption of white wine. white wine is clearly preferred more by women, it also dominates across all age categories. consumption of white wine also increases with increasing education and decreases with increasing age. on the fact that age can play an important role in preferences, for example, the article by hammond et al. [28] which states age is important in wine consumption, but also in wine preferences, on consumption behavior. consumption of semisweet wines clearly dominates in the decision-making on wine consumption in relation to the sugar content in wine. the dependence of the consumption of individual types of wine on education and income was proven. with increasing education, the consumption of sweet wines decreases and consumer preferences are shifting in favour of dry wines. consumption of dry wines also increases with income, whereas consumption of sweet wines decreases with increasing income. in terms of the place of purchase of wines, supermarkets clearly dominate. the research has shown a relationship between the choice of place to buy wines and age and the size of residence. with age, the amount of purchases from the wine-maker increases and the number of purchases in supermarkets decreases. němcová and stankova [29] confirms that the most common places of purchase for generation y are supermarkets and wine shops. from the point of view of the price category of wines, the consumption of wines in the price range of czk 100–150 dominates the most. the results confirm, among other things, the research of chládková et al. [3], who identified the most important factors influencing wine consumption in the form of consumer disposable income, product price and the existence of available substitutes (she considered beer in particular). here, however, is the limit of this article, as it does not distinguish between the price a consumer would prefer when buying wine for themselves and when buying wine as a gift. as cholette and castaldi [30] point out, the price when buying wine as a gift tends to be higher. as yu et al. [31] finds, this difference can be as much as ten times greater. if we compare the results of the presented research with the findings of the research carried out in italy, we observe certain differences. consumer preferences when buying wine in italy using the “best-worst” scaling method have shown that direct, especially sensory experiences of consumers are key when choosing wine 48 kamila vesela, david křížek, lucie severova in retail stores. the local statistical analysis showed that the age of consumers plays a role in the selection of wine in retail stores, the geographical location has not been proven [32]. gil and sánchez [33] analysed the factors shaping demand in spain, especially between two different regions, aragon and navarre, using a weighted least squares approach. the research focused on three attributes, namely the price, origin and vintage of the grapes. surprisingly, the presented results (at least in comparison with the results of research from the czech republic) showed that the most important attribute of wine purchase is its origin, followed by the vintage. 5. conclusions although the czech republic is described as a beer country, the popularity of wine and its consumption shows clear and long-term stable growth. we also observed a positive development in the production of vines, which has a long tradition in the czech republic. the question of the future direction of the czech wine market is promising and further development of the market in terms of production of domestic wine-makers as well as overall consumption and growth of competition can be expected. related to this is the need for wine producers to submit more to the wishes of demand (customer orientation) and thus the need to know the demand, its structure, preferences, expectations and factors that affect it becomes more important. acknowledgment this work was supported by the faculty of economics and management, czech university of life sciences in prague under grant “the impact of climate change on the economic performance of the viticulture and wine-making sector in the czech republic” number 2020b0002.” references [1] bentzen, j., smith, w. 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(1997), “consumer preferences for wine attributes: a conjoint approach”, british food journal 99(1), 3-11. https://doi. org/10.1108/00070709710158825 wine economics and policy volume 12, issue 1 – 2023 firenze university press state of the international wine market in 2022: new market trends for wines require new strategies rafael del rey1, simone loose2,* does anyone read my papers? the gap between academic consumer research and the real (wine) world riccardo vecchio a certification for natural wine? a comparative analysis of consumer drivers in italy and spain eva parga dans1,*, riccardo vecchio2, azzurra annunziata3, pablo alonso gonzález4, raimundo otero enríquez5 structure and development of the czech wine market and foreign wine trade kamila vesela, david křížek*, lucie severova the impact of alternative packaging on the life cycle of wine on tap stefano massaglia1, tibor verduna1, vincenzo varchetta2, filippo brun1, simone blanc1,* the new cap and the challenge of sustainability: a synthetic indicator for the italian wine sector roberta sardone1,*, simonetta de leo1, davide longhitano2, roberto henke1 analysis of the 2007-2008 hérault premiumized grubbing-up campaign: a tool to better understand fischer-boel’s 2008-2011 grubbing-up campaigns and the desire in 2022 to reintroduce locally premiumized grub-ups étienne montaigne1, samson zadmehran2,*, alfredo coelho3, yacine messaoudène4 the impact of fees on customer purchasing behavior and beliefs in winery tasting rooms: a scoping review john c. spence wine economics and policy 12(1): 23-35, 2023 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/wep-12890 wine economics and policy citation: eva parga dans, riccardo vecchio, azzurra annunziata, pablo alonso gonzález, raimundo otero enríquez (2023). a certifi cation for natural wine? a comparative analysis of consumer drivers in italy and spain. wine economics and policy 12(1): 23-35. doi: 10.36253/wep-12890 copyright: © 2023 eva parga dans, riccardo vecchio, azzurra annunziata, pablo alonso gonzález, raimundo otero enríquez. this is an open access, peer-reviewed article published by firenze university press (http://www.fupress.com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information fi les. competing interests: the author(s) declare(s) no confl ict of interest. a certifi cation for natural wine? a comparative analysis of consumer drivers in italy and spain eva parga dans1,*, riccardo vecchio2, azzurra annunziata3, pablo alonso gonzález4, raimundo otero enríquez5 1 instituto de productos naturales y agrobiología (ipna-csic), avda. astrofísico francisco sánchez, 3, 38206, la laguna, santa cruz de tenerife, spain 2 department of agricultural sciences, university of naples federico ii (italy), via università, 100, 80055 portici – naples, italy 3 department of economic and legal studies, university of naples “parthenope”, via parisi, 13, 80133 naples, italy 4 instituto de productos naturales y agrobiología (ipna-csic), avda. astrofísico francisco sánchez, 3, 38206, la laguna, santa cruz de tenerife, spain 5 departament of sociology and communication, university of a coruña, rúa da maestranza 9, 15001 a coruña, spain e-mail: eva.parga.dans@ipna.csic.es; riccardo.vecchio@unina.it; azzurra.annunziata@ uniparthenope.it; pablo.alonso.gonzalez@ipna.csic.es; raimundo.otero@udc.es *corresponding author. abstract. th e 2020 certifi cation of natural wine (nw) in france has unleashed a heated debate in europe. however, knowledge about nw consumer profi les and preferences in a comparative perspective remains scarce in the academic literature. th is study aims to defi ne the perceptions, preferences and profi les of wine consumers who support a nw label. for this purpose, we employed analysis of variance, aprioristic factor analysis and multiple regression analysis to examine data from a direct survey performed in italy and spain in 2020. findings reveal that nw consumers in both countries deem it necessary to establish a certifi cation for nw. however, we found signifi cant diff erences regarding consumers’ profi les, as well as purchasing preferences. in spain, demand for nw certifi cation is linked to eco-healthy and proximity-craft attributes of wine, and is considered more important by non-professional consumers and those with lower educational level. in italy, information on the label and the purchase experience are the most important factors to aid in recognizing nw, while women show a signifi cant interest in the nw certifi cation. th ese fi ndings may help policymakers to establish homogeneous parameters to diff erentiate and certify nw. keywords: natural wine, food labeling, consumer preferences, food certifi cation, ecolabels. 24 eva parga dans et al. 1. introduction 1.1 research context on march 25, 2020, natural wine (nw) obtained legal recognition for the first time in france under the designation vin méthode nature, opening the way for similar initiatives worldwide. this recognition results from a long struggle led by the syndicat de défense des vins naturels before the french government. the european commission (ec) decided not to allow the use of the term nw because there is no definition of the term “natural” in the eu regulations associated with wine. therefore, the combination of the two words can be misleading for the consumer, and damaging to the image of other wines [1]. debate on the approval of the certification vin méthode nature is ongoing at the european level. disagreements emerge among eu states about the possibility of allowing it at their national level. the french authorities thus decided to create a new appellation associated with the method of production of these wines, based on fulfilling a series of requirements that include certification of organic viticulture, use of indigenous yeasts, prohibition of stabilization or filtration, and absence of any additives except low sulfite doses (up to 30 mg/liter). this opens up both a new horizon for a whole sector that can now certify wine with the recently approved french label and a legislative path for other countries to follow suit. until now, nw was considered a social movement involving consumers, producers and other actors in the wine value chain, who advocated naturalness and minimal intervention in wine rather than a regulated or defined form of winemaking [2, 3]. this movement spread throughout the 20th century from france to the whole of europe as a reaction to modern viticulture and enological techniques. this includes intervention in the vineyard with synthetic chemicals and in the cellar with the more than 50 additives and processing aids that can be added to wine without a labeling requirement [4]. several associations have emerged in europe in defense of nw, such as l’association des vins naturels or sans aucun intrant ni sulfite in france, triple aaa, viniveri, vinnatur or van in italy, and the asociación de productores de vino natural in spain. this has added to the proliferation of different national standards [5, 6]. although there is no agreed definition for nw, these associations advocate a winemaking process under parameters of minimum intervention and the greatest respect for nature. wine is a canonical example of credence and experience goods because its quality is difficult to assess from its labeling [7]. unlike any other food product, wine carries no information about its nutritional values, ingredients or expiration date, despite the fact that it can contain dozens of additives, generating confusion for consumers [8]. the european commission intends to address this issue and revise the labeling requirements of alcoholic drinks. it has even published a roadmap to update the regulation on the provision of food information to consumers (eu 1169/2011 fic). since 2017, the ec has launched a series of reports and forced the wine industry to present a self-regulatory proposal in 2018. specifically, the proposal of the comité européen des enterprises vins (ceev), as the representative institution of wine industries in europe, is to offer some nutritional and ingredient information through a quick response (qr) code but not labeling the information on the bottle. however, through its beating cancer plan, the ec proposes a mandatory nutritional declaration and list of ingredients in alcohol labeling and is currently preparing an impact assessment that will culminate in a legislative proposal in 2022 [9]. controversy between countries is also on the rise, given the emergence of new alcohol regulations such as the irish public health act from 2018, requiring alcoholic beverages to provide health warning claims on their labels similar to the ones displayed on tobacco [10]. these initiatives can be interpreted as a reaction to the current situation of the wine sector. in the light of this debate, this manuscript sets out to answer two key research questions. first, is there a specific consumer profile that demands the differentiation of nw in the market? second, what are the preferences and perceptions of wine consumers who consider a certification to identify nw important? answering these questions is a prerequisite for the development of a eu-wide certification and to better address both producers and consumers’ needs and expectations, thus helping nw producers to create new marketing communication strategies or adapt their existing ones to new and emerging market niches. 1.2 information asymmetries in the wine market wine constitutes a seminal example of information asymmetries in the market [11]. in this context, producers know about the elaboration process whereas consumers cannot, or it is difficult and time-consuming for them to obtain such information. these asymmetries make wine a complex product, about which specific knowledge is needed to make rational purchasing choices [12]. consumers lack incentives to optimize their purchasing decisions and producers lack mechanisms to differentiate themselves in the market. this creates a poten25a certification for natural wine? a comparative analysis of consumer drivers in italy and spain tial adverse selection problem. since it is not possible to differentiate the quality of the product, there are no incentives to compete and produce above average quality, eventually threatening its survival in the market [13]. in the case of nw, consumers still do not have a clear notion of what it is, how it differs from other wines, and where to buy it [6, 14]. in fact, the lack of nw certifications and the uncertainty associated with its attributes have generated a very unstable market for this product in traditionally wine-producing countries such as spain, where consumer research about nw is scarce [15, 16]. recent research has shown growing consumer interest in products with environmental attributes, such as organic, healthy, sustainable, responsible and “proximity” wines [17, 18]. it is accompanied by a surge in new certifications that aim to convey trust and inform about wine’s intrinsic and extrinsic qualities [19]. previous research has shown that consumers are willing to pay a premium for organic wines in the belief that they are healthier, tastier, and of higher quality [3, 20]. however, the differences between organic, biodynamic, or sulfite-free wines remain confusing for many in the face of the proliferation of information associated with the naturalness of these wines [21-24]. fewer studies have been conducted about nw specifically, although the literature on the topic is rapidly growing. such coverage focuses on the different productive models in the natural wine field [15, 25, 26] and on the policy controversies arising from the recent french certification of natural wine “vin mèthode nature” [27]. studies focusing on consumer interest in nw show that a predisposition to pay more for nw by italian consumers was associated with drinking frequency and occasion, organic production, sulphite content, income, and attitudes towards healthy eating and the environment [28, 29]. other studies have explored consumer perception of nw in the italian wine industry [14], the construction of taste in the nw market [30], and marketing strategies in the nw sector [2, 25]. there is a research gap regarding comparative studies between countries, in that we must better understand consumer behavior and specific socioeconomic profiles, given the current dominant focus on italy in the literature. this study therefore enriches the growing literature on sustainable food consumption attitudes. a further research gap lies in the lack of studies on consumer interest in nw certification, a timely issue with normative implications because the certification developed by the french government has changed the field of play. owing to these present academic gaps in knowledge, this manuscript sets out to answer two key research questions. first, is there a specific consumer profile that demands the differentiation of nw in the market? second, what are the preferences and perceptions of wine consumers who deem a certification to identify nw important? answering these questions is a prerequisite for the development of a eu-wide certification and to better address both producers and consumers’ needs and expectations, and help nw producers to create new marketing communication strategies. owing to the present academic gap in knowledge to date, this paper deals with consumer profiles in relation to nw label interest and their preferences regarding a nw certification. for this purpose, data were collected through a direct survey delivered in italy and spain. both are traditional producing and consuming wine countries leading in terms of vineyard surface area, production volume and export value rankings worldwide, only after france [31]. ultimately, the paper offers an original contribution to a rather unexplored but emerging topic. 2. materials and methods 2.1 data collection data were collected using a questionnaire survey aimed at a convenience sample of spanish and italian wine consumers aged between 18 and 70 . the questionnaire was administered by online survey management software, with a filling time of approximately 11 minutes. the survey consisted of a total of 30 questions structured from multiple-choice answer possibilities based on previous research into nw consumption [5, 6, 14], divided into four interrelated sections: (1) wine consumption habits and occasions; (2) wine labeling information and eco-label perceptions; (3) nw consumption habits, perceptions and occasions; (4) socio-demographic factors. before beginning the survey, all participants provided informed consent. this included the purpose of the research, the voluntary nature of participation, number of questions, approximate response time, and the possibility of leaving the survey at any time. both survey procedure and questionnaire were favorably evaluated by the ethics committee of the spanish national research council (csic, approval number 136/2020). as mentioned, a convenience sampling procedure was applied in the absence of a regular wine consumer population census. eligibility was based on the definition of regular wine drinkers by wine intelligence [32], i.e., individuals consuming wine at least once a month. this description has been previously used in similar wine consumer studies [33-35], the questionnaire was launched through specialized sector agents in both spain and italy. producers’ associations, distributors, wine critics, sommeliers, wine observatories, etc., publi26 eva parga dans et al. cized the initiative through their websites. they requested the participation of their users, clients and followers, to improve the response rate among wine consumers in both countries. through this system, a total of 527 fully completed surveys by wine consumers were collected in spain and 501 in italy during the two months from midseptember to mid-november 2020. 2.2. data analysis data analysis consisted of two phases in order to understand the drivers inf luencing demand for nw labeling. consumer demand for a nw label was our dependent variable and was assessed by asking “to what extent do you consider labeling important to identify nw?”. respondents answered this question using a five-point scale (from 1 “not at all” to 5 “a lot”). the first phase of the analysis responds to our research question regarding profiles of consumers that expressed a need for nw certification. it consisted of a sample description and an analysis of variance (anova) aimed at distinguishing which socio-demographic and consumer profiles most accurately describe wine drinkers likely to support certification of nw in the two countries. based on the f value and the associated significance level (p<0.01), a relationship of statistical dependence or independence was established between the factors and the dv, in line with recent research related to nw consumer preferences [5, 36]. the assumption of normality is used especially when any of the factor categories has less than 50 cases. it was tested through kolmogorov-smirnov or shapirowilk statistics and was not fulfilled in several anovas. therefore, rejection of the hypothesis of equality of means was replicated by default through a kruskalwallis test. for the case of the independent dichotomous variables (gender and nw consumption), means were compared by evaluating the level of significance associated with the f value [37]. the purpose of the second phase was to answer our second research question, about the preferences and perceptions of wine consumers who consider labels important as a means to identify nw. first, it included r pearson correlations (p<0.01), in order to discriminate between independent and quantitative variables (iv) in wine labeling information, and on purchasing occasions that best correlated with the dv for each country [38]. it also established a ranking order and a comparison between the two. all the 85 iv in the questionnaire were used to prepare this ranking. the aim of this bivariate exploratory statistical analysis is to identify the best ivs that explain the dv in spain and italy. this also sheds light on the differences between the two countries. the exploratory bivariate analysis was followed by an aprioristic factor analysis to group the best ivs from each country under common latent dimensions. this strategy permits such exploratory factor analysis and makes it more efficient, thanks to avoiding the rubbish in, rubbish out phenomenon described by [38], which can result from factoring in an indiscriminate number of variables. the factor extraction method is based on principal component analysis using a varimax rotation. in all cases, bartlett’s test of sphericity rejected the null hypothesis that the observed correlation matrix is an identity matrix (p<0.01), which legitimizes aprioristic factorizations [38]. the eigenvalues obtained for each of the factors created are always greater than the unit. the scores obtained in differential format for each factor are calculated using the regression estimation method. finally, the factors are used as ivs in a multiple regression model aimed at explaining the largest percentage of variance in the dv and establishing an explanatory or predictive model for each context. use of the factors in the explanatory model was supported by a corresponding significant f value (p<0.01) [39]. in the multiple regression models, we checked the assumptions of normality and homoscedasticity of the residuals, as well as the linearity of the ivs with respect to the dv. it was also verified that the durbin-watson statistic was between 1.5 and 2.5 in the models, so the residuals were mutually independent. 3. results 3.1 socio-demographic profiles & nw certification this section responds to our question about whether there is a specific consumer profile correlated with demand for the differentiation of nw in the market. table 1 shows the sample description from both countries. the spanish sample was composed of 527 wine consumers, 69% men and 31% women, with a mean age of 45 years. more than 50% of the spanish respondents had a net monthly income of between 1,001 and 2,000 € and university or master studies (79.4%). in addition, 36.2% of the population surveyed considered themselves to be wine professionals. regarding wine consumption habits, 44.2% of respondents drank wine several times a week, 78.0% consumed nw (33.3% at least once a month), and considered that a certification for nw is necessary (3.95 out of 5). the italian sample was made up of 501 wine consumers, 55% of whom were men and 45% women, with an average age of 38. almost 50% of the italian respondents had a net monthly income between 1,001 and 2,000 € and university or master studies (55.5%). finally, 19.6% 27a certification for natural wine? a comparative analysis of consumer drivers in italy and spain of respondents defined themselves as wine professionals. regarding wine consumption habits, 36.7% drank wine several times a week, 68.7% consumed natural wine (32.3% at least once a month) and considered a nw certification necessary (3.90 on average out of 5). the significant sociodemographic profiles or iv associated with the desire for a nw label in each country are detailed in table 2. results show that in both countries nw consumers are more likely to ask for a certification, to be able to identify it in the market. however, anova shows significant differences between consumer profiles from spain and italy. in spain it was the non-professional consumers and those without university or higher education who most expressed a need for nw certification. in italy, on the other hand, (female) gender was the variable that discriminated the importance of such certification. all these variables showed significant differences (sig. f<0.05), but there were also descriptive differences to consider in both samples. for example, spanish consumers with lower purchasing power most valued the need to certify nw. this difference in means would be significant by the f test, not by kw. in italy, younger consumers thought it more important to certify nw, whereas in spain the over-50s showed the greatest interest in this, although not with statistical significance. 3.2 wine purchasing preferences, perceptions & nw certification this section responds to our question about the preferences and perceptions of wine consumers who deem a nw certification desirable. in order to understand the underlying data structure, table 3 shows the r pearson correlations (p<0.01) that best explain the dv for the cases of spain and italy, establishing a comparative ranking between them. in the spanish case, ranking results show that considering nw healthier than other wines was the main motivation for its consumption among those who would prefer it had a certification. secondly, the fact that nw wines are organic and sustainable is the next motivation table 1. socio-demographics and wine habits of the surveyed population. spain (n=527) italy (n=501) gender (%) female 30.9 45.3 male 69.1 54.6 age mean (s.d.) 44.90 (10.27) 37.50 (14.49) income (%) less than €1,000 9.1 25.4 €1,001 – €2,000 50.6 48.7 €2,001 – €3,000 25.8 15.4 more than €3,000 14.9 10.5 level of education (%) no studies 0.6 0.0 secondary 2.5 5.5 vocational training 17.6 38.9 university/master 79.4 55.5 nw consumption (%) yes 78.0 68.7 no 22.0 31.3 wine consumption frequency (%) at least once a month 6.1 15.2 several times a month 9.3 13.6 once a week 17.5 21.8 several times a week 44.2 36.7 everyday 23.0 12.8 nw consumption frequency (%) at least once a year 35.2 21.5 at least once a month 33.3 32.3 at least once a week 14.8 22.7 2-3 times a week 11.2 15.7 daily 5.6 7.8 i am a… (%) wine professional 36.2 19.6 wine consumer 63.8 80.4 nw label importance mean (s.d.) in a scale from 1 to 5 3.95 (1.33) 3.90 (1.10) 28 eva parga dans et al. table 2. anova – kruskal-wallis test / dv (“do you consider labeling important to identify nw?”) * iv. ivnw consumption (vi) no yes f sig.       spain n 116 412 8.144 .004 mean 3.65 4.04 italy n 157 344 8.272 .004 mean 3.69 4.00       ivi am a… wine professional wine consumer f sig.       spain n 191 337 5.884 .016 mean 3.77 4.06 italy n 98 403 .122 .727 mean 3.87 3.91       ivwine consumption frequency at least once a month several times a month once a week several times a week every day f sig. spain n 32 50 92 233 121 .528 .715 mean 4.16 4.12 3.99 3.90 3.92 italy n 76 68 109 184 64 1.581 .178 mean 3.93 4.13 3.72 3.88 3.98 ivnw consumption frequency at least once a year at least once a month at least once a week 2-3 times a week daily f sig. spain n 145 137 61 46 23 1.020 .397 mean 4.01 4.08 4.23 3.76 4.04 italy n 74 111 78 54 27 .471 .757 mean 3.96 4.02 3.91 4.15 3.96 ivincome less than €1000 €1001-2000 €2001-3000 more than €3000 f sig.   spain n 48 267 136 77 2.782 .040(**) mean 4.02 4.06 3.94 3.57 italy n 94 180 57 39 .525 .666 mean 3.98 3.83 3.77 3.92   iveducation level primary school secondary school university or master f sig.     spain n 13 93 419 7.672 .000 mean 4.54 4.38 3.84 italy n 27 191 272 2.237 .108 mean 3.48 3.91 3.95     ivage in large groups 18-34 35-49 +50 f sig. spain n 78 280 169 .444 .642 mean 3.97 3.90 4.02 italy n 270 108 122 2.516 .082 mean 4.00 3.79 3.78 ivgender woman man f sig.       spain n 162 362 .947 .331 mean 4.03 3.91 italy n 227 274 6.971 .009 mean 4.04 3.78       ** kruskal-wallis test (sig.>.05). 29a certification for natural wine? a comparative analysis of consumer drivers in italy and spain for their consumption. third, wineries are the preferred place for nw purchase. subsequently, the winery name or brand when choosing a bottle of wine appears fourth in the ranking. following this in fifth place, the fact that nw is handmade is a motivation for its consumption and demand for certification. finally, the region and country of origin is in sixth position, while wine shops as the preferred place of nw purchase follow this as seventh. this means that for spaniards who consider a nw certification necessary, it is important to characterize attributes such as healthy, sustainable, ecological and artisanal, which are the main motivations for its consumption. in comparison, these attributes rank 20th, 13th and 30th in italy). in the italian case, those wishing for a nw certification prioritize the place of purchase over the specific attributes of nw. in other words, in first place they prefer to go to tastings to identify and buy it. in second place, italians prefer to go to wine shops (seventh in spain) and, in third place, they rely on books, guides or specialized magazines to identify nw. biodynamic certification (e.g., demeter) is important for italians, appearing fourth in the ranking. it is noteworthy that for italians who would prefer nw certification, the internet and social networks are important spaces for identifying nw, with fifth position in the ranking. the information present on the label and the organic certification occupy positions number six and seven, respectively. thus, in addition to purchase (tastings, wine shops, book or guides), aspects related to labeling (biodynamic and organic certifications or brand) are also relevant factors among those requesting nw certification. these results are in stark contrast with the spanish case, where purchase places occupy the 43rd, 7th and 19th positions in ranking and labeling considerations appear in 46th, 17th and 9th positions. these variables were subsequent ly organized through an aprioristic factor analysis to identify clusters of explanatory variables of the dv. these factors have a higher pearson’s r than the iv variables that comprise them (see table 4), so their predictive capacity will be greater for the dv. in the spanish case, the first explanatory factor associated with demand for a nw certificate clusters the variables expressing nw attributes that characterize it as healthier, more sustainable and ecological than other wines. this factor was defined as eco-healthy (f1). a second explanatory factor emerges for the spanish context that combines the perception of nw as artisanal and the preference to buy directly from the winery. we named this factor proximity-craft (f2). a third factor combines the importance of the brand or product name with the region and country of origin when a person supporting nw certification chooses a wine. we called this factor origin-brand (f3). in the italian case, a factor identified as wine experience (f4) groups together tasting and wine shops as means to identify and buy nw. another factor defined as on-label-info (f5) groups the importance of organic and biodynamic certifications with brand information, in order to recognize nw. finally, we defined a sixth factor extra-label-info (f6) as the importance of information widely retrieved in the media to recognize table 3. comparison of pearson correlations (r) / dv (“to what extent do you consider labeling important to identify nw?”) * iv. highest r for spain highest r for italy spain italy ranking r ranking r healthy (motivation nw consumption) 1 .377** tasting (nw identification) 1 .344** sustainable and organic (motivation nw consumption) 2 .357** wine shop (place nw purchase) 2 .311** winery (place nw purchase) 3 .323** books, guides and/or specialized magazines (nw identification) 3 .297** brand (importance label information) 4 .318** biodynamic certification (importance label information) 4 .288** artisanal (motivation nw consumption) 5 .309** internet and/or social networks (nw identification) 5 .277** region and/or country (importance label information) 6 .290** brand (importance label information) 6 .274** wine shop (place nw purchase) 7 .289** organic certification (importance label information) 7 .270** ** sig.<.01. 30 eva parga dans et al. nw, including books, social networks, specialized magazines and similar outlets. finally, these factors were used as iv in a multiple regression analysis in order to establish an explanatory or predictor model for each country. table 5 shows the factors that explain a higher percentage of variance for both cases in a combined rather than independent form. this provides robustness to these combinations when explaining the dv (see table 5 and estimated coefficients in table a1). in the case of spain, the combination of f1 and f2 in the same model explains a significant percentage (18.9%) of the variance (sig. f change<0.01), that is, the perception that nw is both eco-healthy and proximitycraft. in contrast, the factor associated with origin-brand (f3) was left out of the model as it does not contribute a significant percentage of variance to explanation of the dv (sig. f change<0.05). this defines a model for the demand for a nw certificate in spain that could be taken into account when developing legislation and labeling policies. in the case of italy, both factors (f4 and f5) entered into the explanatory regression model of the dv, i.e. the combination of experience (f4) and on-label-info (f5) explains the need for a nw certificate. the factor associated with extra-label-info (f6) was left out of the final model because it does not contribute a significant percentage of variance to the explanation of the dv (sig. f change>0.05). 4. discussion our results in spain and italy show that nw consumers are more likely to demand a certification that identifies nw in the market. however, there are differences between the socio-demographic profiles of consumers and the drivers of nw consumption between countries. in spain, the socio-demographic profile of consumers who support nw certification includes nonprofessional consumers and people with no university or higher education, whereas in italy, as a group women do. these results converge with recent research by [40], which found that women pay more attention to wine labeling and are more likely to pay for nw in the italian market. in the spanish case, there is no previous research on consumer profiles and nw, so further work is required in this area. table 4. pearson correlations (r) / dv (“to what extent do you consider labeling important to identify nw?)” * factors. spain r f1_eco-healthy (ivhealthy + ivsustainable and organic) .406** f2_proximity craft (ivwinery + ivartisanal) .374** f3_origin-brand (ivbrand + ivregion and/or country) .337** italy r f4_wine experience (ivtasting + iv-winery) .405** f5_ on-label-info (ivbiodynamic certification + iv brand + ivorganic certification) .351** f6 _extra-label-info (ivbooks, guides and/or specialized magazines + ivinternet and/or social networks .312** **sig.<.01. table 5. regression model summaries. model r r2 adjusted r2 std. error of estimate change statistics durbinwatsonr2 change f change df1 df2 sig. f change spain 1 .409a .167 .166 1.208 .167 104.202 1 518 .000 1.933 2 .438b .192 .189 1.191 .025 15.782 1 517 .000 a. predictors: (constant). f1_eco-healthy b. predictors: (constant). f1_eco-healthy. f2_proximity craft c. dv“to what extent do you consider labeling important to identify nw?” italy 1 .405a .164 .162 .924 .164 73.170 1 373 .000 1.912 2 .441b .194 .190 .908 .030 13.916 1 372 .000 a. predictors: (constant). f4_wine experience b. predictors: (constant). f4_wine experience. f5_ on-label-info c. dv“to what extent do you consider labeling important to identify nw?” 31a certification for natural wine? a comparative analysis of consumer drivers in italy and spain several studies have noted the relationship of the symbolic prestige of wine consumption with the purchasing power and high education levels of certain social classes [41], even suggesting that wine is a food that establishes hierarchies [42]. already bourdieu’s studies [43] analyzed the taste for wine as an element of bourgeois social distinction, which allows classifying the social and educational origin of the individual. however, our results show that in spain the need felt to certify nw is associated with wine consumption among social strata with lower purchasing power and educational qualifications. these results are in line with other research showing that the lower classes can challenge the bourgeoisie regarding food and wine enjoyment, making a statement of sociability and generosity that contrasts with the formality and rigidity of the middle and upper classes [44]. traditionally, in many mostly southern parts of europe, wine was an everyday food staple [45]. however, with the globalization of wine and the proliferation of brands and quality labels, the choice to purchase wine has made the debate about which consumers choose which wine more complex. thus, our results for the italian sample differ profoundly from the spanish context, where women and young people are more likely to be interested in a nw label. in short, the socio-demographic characterization of wine consumers remains a complex scientific debate and therefore deserves special attention, especially in relation to emerging consumer trends such as nw. in fact, it remains unclear why certain sociodemographic factors are associated with greater interest in nw as a function of each specific society or culture. the factors resulting from this study are in line with recent research on nw. concerning the eco-healthy factor or f1, previous studies have shown that the perception of a wine’s naturalness through labeling information associated with health consciousness, sustainability and ecological winemaking are becoming determinant drivers of purchasing choices [22, 46]. they are positively associated with a higher willingness to pay [47]. moreover, these studies show that not only the perception but also the labeling of these attributes has become important, in line with f5, the on-label-info factor, for the italian consumer sample. for both the spanish and italian samples eco-healthy (f1) attributes are important. however, italian consumers prefer to obtain this information on-label (f5), through organic and biodynamic certifications. this shows the complexity of the current wine certification system, the multiple associated seals and the confusion it entails for the consumer, which ultimately emphasizes the absence of ingredient labeling of this product. in fact, organic certification has undergone a significant market breakthrough and has managed to build trust among consumers [48]. current confusion about the differences between organic, biodynamic and nw for consumers, who tend to think that they are all similar, has contributed to this loss of confidence in labels [3, 20, 21]. certainly, organic, biodynamic and nw are all based on organic agriculture, but they have different ways of working in the vineyard and winery [6]. seufert et al. [49] show that the perception of organic agriculture as chemical-free is the result of a limited and partial approach to organic certifications, engendering a huge confusion between environmental, sustainable or health-related principles. this would explain why in the italian sample the need to certify nw is associated with the importance of seeking extra-label information (f6) to identify it. thus, our results suggest that in the absence of more information, a certification system combining eco-healthy (f1) and on-label-info (f5) could satisfy different nw consumer profiles in various countries. what these results ultimately show is that the quality conventions associated with origin, brand or reputation of wine have changed radically, in turn transforming traditional systems of marketing and labeling [50]. our results regarding f3, the origin-brand factor, indeed suggest this, since its attributes are important for those desiring nw certification in spain, whereas in italy it is also relevant but in combination with organic and biodynamic certification (f5 on-label-info). it would appear that the certification based on protected designations of origin (pdo) played a very important role during the 1990s, when the globalized wine market developed [51]. in this scenario, traditional producer or old world countries competed with new world countries by relying on a system based on pdo, brand names and prizes from international competitions that generated positive attitudes among consumers [30, 52]. however, in the contemporary globalized market, varied certifications associated with eco-friendly, sustainable or health characteristics have emerged, generating alternatives to conventional wines [53, 54]. our results suggest that traditional aspects of the wine quality certification system are still important when certifying nw. therefore, a certification system for nw should respect traditional quality conventions in the wine labeling system and combine it with other emerging aspects valued by the contemporary consumer such as f1 (eco-healthy), f2 (proximity craft) or f5 (on-label-info). furthermore, aspects related to proximity-craft (f2) are important for spaniards supporting a nw certificate. previous research highlights the association con32 eva parga dans et al. sumers make between the perception of craft, traditional, small-scale or proximity winemaking with sustainable, organic and natural winemaking [5, 55, 56]; in other words, wines that deviate from standard and industrial production methods [57]. not surprisingly, the french certification body vin méthode nature is currently debating whether to charge wine companies producing over 25,000 bottles per year more, to prevent appropriation of the label by industry. therefore, aspects related to proximity-craft should also be taken into account when certifying nw. finally, there is the experiential factor (f4) among those wanting a nw certification in italy. in general terms, wine has been considered as a unique product and different from any other food whose singularity makes it an experiential product [58]. wine is ceasing to be a traditional food in rural societies and is becoming more and more a product associated with hedonic or luxury consumption, especially in non-wine producing regions [36]. the recent review on consumer behavior by deroover et al. [59] highlights that wine is perceived as an expression of traditions and culture. these attributes have greater influence on purchasing and consumption choices than for any other food or beverage [60]. our results show that the lived-experience of identifying and buying a nw in specialized wine shops and wine tastings is also part of this consumption pattern. therefore, a nw certificate should incorporate aspects that differentiate these wines with regard to the unique experience that can take place through nw consumption. 5. conclusion this study has furthered demographic and sociocultural knowledge of the consumer profiles and drivers of demand for a nw certification, distinguishing as an example between spanish and italian wine drinkers. to answer the initial research question as to whether there is a specific consumer profile that considers a nw label necessary, results show that those who already consume nw are the most likely to demand a certificate to differentiate nw in the market, both in italy and spain. however, there are significant differences between these profiles. in spain, non-professional consumers and those with lower educational levels support a nw certificate to a greater extent, while in italy it is women who show a greater interest. concerning our second research question about the preferences and perceptions of wine consumers who consider nw certification important, results show four main explanatory factors in the final multiple regression models, two for each country. the eco-healthy and proximity-craft factors explain the demand for a nw certificate in spain to a greater extent, while in italy it is the on-label-info and experiential factors. both samples converge in showing a predisposition among those who consume nw to prefer a distinctive label and that the explanatory factors for such a certificate are not mutually exclusive. therefore, these results suggest that the stakeholders could indeed set homogeneous standards to reduce uncertainty and information asymmetries concerning nw. this constitutes an important contribution to the debate on the need to establish a common regulatory framework leading to a consensual eu-wide creation of a distinctive nw label. this would help assuage the polemics among countries, as reflected in complaints by several members of the european parliament against the french certification initiative vin méthode nature. it could also satisfy nw producers who demand some sort of differentiation in the wine market given the lack of ingredient labeling in wine. in parallel, it could also respond to consumer interests in more transparent and sustainable food products, given that the new regulations for labeling alcoholic beverages are still being debated, with no clear outcome [9]. certainly, a rise in the minimum standard requirements for ingredient labeling in the wine sector would make nw producers less interested in having their own certification [61], but this scenario is still unclear. given that the promotion and growth of nw would be positive in terms of environmental sustainability and a cleaner food chain in europe and beyond, a nw certification is in line with new eu-wide strategies such as from farm to fork and the european green deal. a pro-labeling policy for nw would be therefore fundamental to reconcile sustainability aims with consumer and producer interests alike, thus reducing the currently prevailing information asymmetry in the wine market. we are aware that the lack of a probabilistic sample is a core shortcoming of this study, which limits the potential to extrapolate the results to the whole wine consumer population in spain and italy at large. furthermore, the explained variance in the regression models is low, which implies that there may be more drivers influencing demand for a nw certificate. future research should explore the perspectives of other actors in the wine sector on nw labeling, such as winemakers or traders, to further optimize nw communication and marketing. similarly, more cross-national and comparative studies are needed to better delve into the profile of the nw consumers and the perceptions associated with them, in order to more effectively deliver a europe-wide certification. 33a certification for natural wine? 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[61] streletskaya, n.a., j. liaukonyte, and h.m. kaiser, absence labels: how does information about production practices impact consumer demand? plos one, 2019. 14(6): p. e0217934. appendix table a1. coefficients. modela unstandardized coefficients standardized coefficients t sig. b std. error beta spain constant 3.955 .052 _ 75.719 .000 f1_eco-healthy .372 .067 .283 5.581 .000 f2_proximity craft .266 .067 .201 3.973 .000 italy constant 3.974 .047 _ 84.256 .000 f4_wine experience .322 .052 .319 6.150 .000 f5_ on-label-info .196 .053 .194 3.730 .000 a. dv“do you consider labeling important to identify nw?” wine economics and policy volume 12, issue 1 – 2023 firenze university press state of the international wine market in 2022: new market trends for wines require new strategies rafael del rey1, simone loose2,* does anyone read my papers? the gap between academic consumer research and the real (wine) world riccardo vecchio a certification for natural wine? a comparative analysis of consumer drivers in italy and spain eva parga dans1,*, riccardo vecchio2, azzurra annunziata3, pablo alonso gonzález4, raimundo otero enríquez5 structure and development of the czech wine market and foreign wine trade kamila vesela, david křížek*, lucie severova the impact of alternative packaging on the life cycle of wine on tap stefano massaglia1, tibor verduna1, vincenzo varchetta2, filippo brun1, simone blanc1,* the new cap and the challenge of sustainability: a synthetic indicator for the italian wine sector roberta sardone1,*, simonetta de leo1, davide longhitano2, roberto henke1 analysis of the 2007-2008 hérault premiumized grubbing-up campaign: a tool to better understand fischer-boel’s 2008-2011 grubbing-up campaigns and the desire in 2022 to reintroduce locally premiumized grub-ups étienne montaigne1, samson zadmehran2,*, alfredo coelho3, yacine messaoudène4 the impact of fees on customer purchasing behavior and beliefs in winery tasting rooms: a scoping review john c. spence wine economics and policy 10(2): 75-86, 2021 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/wep-10382 wine economics and policy citation: adeline alonso ugaglia, britta niklas, wolfram rinke, dan moscovici, jeff gow, lionel valenzuela, radu mihailescu (2021) consumer preferences for certified wines in france: a comparison of sustainable labels. wine economics and policy 10(2): 75-86. doi: 10.36253/wep-10382 copyright: © 2021 adeline alonso ugaglia, britta niklas, wolfram rinke, dan moscovici, jeff gow, lionel valenzuela, radu mihailescu. this is an open access, peer-reviewed article published by firenze university press (http:// www.fupress.com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information files. competing interests: the author(s) declare(s) no conflict of interest. consumer preferences for certified wines in france: a comparison of sustainable labels adeline alonso ugaglia1,*, britta niklas2, wolfram rinke3, dan moscovici4, jeff gow5, lionel valenzuela6, radu mihailescu7 1bordeaux sciences agro, french national institute for agriculture, food and environment, umr save isvv, gradignan, france. email: adeline.ugaglia@agro-bordeaux.fr 2ruhr-universität bochum, institute of development research and development policy, bochum, germany. email: britta.niklas@ruhr-uni-bochum.de 3fachhochschule burgenland gmbh, eisenstadt, austria. email: wolfram.rinke@fh-burgenland.at 4school of natural sciences & mathematics, stockton university, usa. email: daniel. moscovici@stockton.edu 5university of southern queensland, toowoomba, australia and stellenbosch university, stellenbosch, south africa. email: jeffrey.gow@usq.edu.au 6universidad técnica federico, santa maria, chile. email: lionel.valenzuela@usm.cl 7stenden hotel management school, leeuwarden, the netherlands. email: radu. mihailescu@nhlstenden.com *corresponding author. abstract. the wine industry has faced various environmental and social challenges. on the demand side, consumer demand for sustainable wines has been increasing but, to date, it is unknown whether consumers perceive wine companies’ efforts to obtain sustainable development (sd) certifications and labels as being valuable or how they differentiate them. on the supply side, sustainable wine production is increasing but producers report a lack of information to engage and select their sd strategy. this article uses a logistic regression and an artificial neural network model to show how french consumers differentiate and value different sd labels (organic, biodynamic, sustainable, fairtrade, natural). results show that consumers’ willingness to buy and willingness to pay are influenced by the importance each consumer gives to the certification. for all other drivers, consumers differentiate between labels, highlighting the importance of comparison between and knowledge about each of them, thereby aiding producers in choosing an appropriate marketing strategy. keywords: consumer preferences, stated preferences, wine, certified wines. 1. introduction the french wine industry dates back to ancient times and holds an important place in the french economy, representing the 2nd largest net trade surplus and creating numerous jobs in rural regions (alonso ugaglia et al., 2019; cardebat, 2017; porter and takeuchi, 2013). french wines have an 76 adeline alonso ugaglia et al. excellent reputation, based mainly on appellation regulations (protected designation of origin [pdos] and protected geographical indications [pgis]), but since the 1970’s the production and consumption of wine have been experiencing a long-term decline in france. at the same time, the wine industry has been facing a number of environmental1 and social challenges (delmas et al., 2008) in the form of the growth of societal demands for more environmentally-friendly and ethical practices in the vineyards and the cellars. sustainable development (sd) certification has, thus, became a critical success factor (sampedro, 2010), turning the wine industry into a ‘green business’ (silverman et al., 2005). on the demand side, consumers are increasingly demanding to know what inputs are used in food production and processing, to know producers’ labor standards, and to understand the environmental impacts of production (paloviita, 2010; pullman et al., 2009; trienekens et al., 2012). additionally, the wine industry is under considerable pressure from regulators to evaluate, reduce, and report its environmental and social impacts (christ and burritt, 2013), and to incorporate sustainability into its management practices. the attributes of a wine, however, whether ethical, social or environmental, are not verifiable by consumers before purchase, or even after purchase and consumption in the case of sustainability attributes. producers, therefore, must adopt a symbol on the bottle to solve this asymmetric information attribute. this symbol, sd certification or label, attests the compliance of the wine with a certain norm or a standard (hoberika et al., 2013). it informs consumers and differentiates a wine from other wines (giraud-héraud and hoffman, 2010). until now, however, it has not been known whether consumers perceive wine companies’ efforts to obtain sd certifications and labels as being valuable (barber et al., 2010) or how they differentiate between the various sd labels. in practice, the diffusion of such labels is still limited (delmas and gergaud, 2021). the way the consumers perceive the labels is therefore still an issue of discussion (ashenfelter et al., 2018). on the supply side, the wine sector has seen the emergence of specific eco-certification schemes and labelling programs, including sd specifications, in response to this demand (sogari et al., 2016), leading to a proliferation of voluntary and institutional social and environmental certification systems (mcewan and bek, 2009). in this sense, we observe the development of multiple sd labels such as biodynamic, fairtrade, natural, 1 water quality and use of chemicals, air pollution, soil erosion, waste, and land use, among others (chris and burritt, 2013). and sustainable (moscovici and reed, 2018; moscovici et al., 2020), corresponding to different definitions of what a sustainable wine can be. sustainable wine production has also been increasing, not only for marketing purposes, but also because of wine producers’ personal convictions (alonso ugaglia et al., 2017). however, producers in many countries associate ‘sustainability’ mainly with the environmental dimension and sometimes confuse the different terms and sd labels (szolnoki, 2013). they complain about the lack of information about sd wine labels and the associated potential added value. one option for producers to choose the best certification for their wines considering the many choices could be to know more about consumers’ preferences for sd certified wines and how these drive preference-based purchasing decisions (poelmans and rousseau, 2017; tozer et al., 2015), as consumer perception is indeed an important issue to take into consideration when making business decisions (lockshin and corsi, 2012; mariani and vastola, 2015). this paper contributes to the growing literature on consumers’ valuation of sd certified wines. in comparison with studies that deal with the general interest of consumers for sd wines (casini et al., 2009; schimmenti et al., 2016; vecchio, 2013), sometimes without defining what they call ‘sustainable’ (lanfranchi et al., 2019), this paper analyses whether consumers differ in their preferences for various sd labels and certifications and why and how they value them. the paper is organized into six sections: section 2 provides a literature review; section 3 presents the survey and the data; section 4 explains the methodology; section 5 includes the descriptive results from the logistic regression and the artificial neural networks model; and section 6 discusses the results and draws conclusions. 2. literature review 2.1 sd labels and certifications eco-labels signal to the consumer that the wine is an eco-friendly product (delmas and grant, 2010), with organic wines being the most discussed sd wines at present. the production and sale of organic wines has experienced a boom in recent years due to the pressure of consumer demand for environmentally-friendly agricultural products, the expectations of producers (health considerations), conversion subsidies, and the attractiveness of the market (oiv, 2017). organic viticulture represented 12% of french vineyards in 2018, with prospects for further growth in 2019. france is ranked third 77consumer preferences for certified wines in france: a comparison of sustainable labels in worldwide production of organic wines and is set to become the world’s leading consumer of organic wine by 2021, overtaking germany and having doubled its consumption since 2013 (iwsr, 2019) while conventional wine is experiencing a downturn. but there are around 300 definitions of sustainability (manderson, 2006) and what is considered to be a ‘sustainable’ wine can be interpreted in different ways. this paper focuses on five main sd wine labels and on the associated certifications and specifications (figure 1). for ‘natural’ wine, there is no official bottle label, but production in france is growing, despite there being no official rules corresponding to this designation. 2.2 stated preference approach the literature on consumers’ perceived value of sd certified wines mainly addresses the issue through wine pricing and willingness to pay (wtp). wine is an experience good, meaning that the consumer cannot gain any utility from the product until it is consumed (nelson, 1970 in ashton, 2014). consumers generally have limited knowledge of wine production and it may, therefore, be difficult for them to decide upon a sustainable wine. signals can help them to make purchasing decisions based on their preferences, to form quality expectations, and influence whether they will purchase the product again (gabrielyan et al., 2014; tozer et al., 2015). representative signals are usually available on packaging, hence labels in the case of wine. consumers interested in buying certified wine actively seek appropriate options and are willing to pay a price premium for such preferences (poelmans and rousseau, 2017; sellers-rubio and nicolau-gonzalbez, 2016). from a theoretical standpoint, the estimation of the wtp is a stated preference approach, while ‘revealed preference’ approaches obtain data from obser ved behavior. both approaches link the derived utility to the observed (revealed) or stated choice (carson and louviere, 2011). the choices in stated preference approaches are made by choosing between different options offered in the context of hypothetical situations, mostly asked within the framework of surveys or interviews that also facilitates the offering of attributes that are not currently on offer or not on offer at a certain (desired) level. the stated preference methods are the contingent valuation method (cvm), the conjoint analysis method, conjoint behavior, and the stated choice method (freeman et al., 2014; louviere, 1988; 2001; louviere et al., 2000). the cvm is the most commonly used method, asking consumers whether or not they are willing to pay a specific price premium for certain attributes of a product, which enhance the utility of consuming the product (baker figure 1. sd wine labels (examples and specifications) (source: authors). 78 adeline alonso ugaglia et al. and ruting, 2014; mitchell and carson, 1989; mogas et al., 2002). the answer to the question is interpreted as the expression of each consumer’s value for the respective attribute (freeman et al., 2014). this is the chosen approach for exploring our research question in line with other papers for different products (amato et al., 2017; sellers-rubio and nicolau-gonzalbez, 2016; skuras and vakrou, 2002; vecchio, 2013; vecchio and annunziata, 2015). 2.3 sd wine consumption the extant literature focuses mostly on eco-labels dealing with environmental specifications (cholette et al., 2005; loureiro, 2003; mueller and remaud, 2013) and focuses especially on organic labels (burgarolas et al., 2005; schmit et al., 2013). remaud et al. (2008) suggest that there is a tendency to pay a price premium for organic wine. mihailescu (2015) corroborates these findings for tourists in south africa who show a wtp a premium for organic wine. additionally, corsi et al. (2013) mention that the premium alters the impact of other variables on the wine price. bazoche et al. (2008), analyzing consumers’ wtp for french wines with environmental specifications on the label (including organic wine), show that consumers are only willing to pay a (quite low) premium for organic wine. gow et al. (2020) show that australian consumers are willing to pay more for biodynamic wines, while in italy there is a wtp a price premium for natural wine (galati et al., 2019). vecchio (2013) shows that customers are willing to pay between 23% and 57% more than the average price for the attribute ‘sustainability’. in new zealand, forbes et al. (2009) find that consumers believe that the quality of sustainable wines is superior to that of conventional wines and are prepared to pay higher prices for them. for south african fairtrade wine sold in the us, niklas et al. (2017) find that the price premiums are negative. some studies underline that consumers have a higher wtp when social attributes are combined with environmental ones (mueller loose and remaud, 2013). some studies find no premiums for sd wines (barber et al., 2009; gabzdylova et al., 2009; vecchio, 2013) or even decreasing demand when sd wines are associated with lower quality (sogari et al., 2006). some studies also provide insights into characteristics of wine consumers who are willing to buy or even to pay more for sd labels. results are controversial and it is difficult to identify global trends. the main consensus is that women and younger consumers in general are willing to pay more for sustainable wines (gow et al., 2020; lanfranchi et al., 2019; moscovici et al., 2020; vecchio, 2013). mcdonal et al. (2013) and tach and olsen (2006) underline that young consumers are interested in both environmental and social concerns related to wine. having knowledge and information about sd labeling is also of importance to determine the wtp (barber et al., 2009; bazoche et al., 2008; galati et al., 2019; vecchio, 2013). some other determinants are marital status, with unmarried people willing to pay more, education level, income level, the likelihood of buying eco-certified goods, the price consumers usually pay for wine, the occasion related to the purchase, lifestyle, and the link to wine tourism (barber et al., 2009; bazoche et al., 2008; burgarolas et al., 2005; gow et al., 2020; lanfranchi et al., 2019; moscovici et al., 2020; vecchio, 2013). yet, the numerous sd wine labels have led to confusion for consumers and exacerbate the imperfect perception of products (oiv, 2017). marette (2004) shows that this is particularly true for eco-labels that complement brands in signaling green, lead-free, fair-trade, organic, no child labour, and/or low-cholesterol attributes. there are few articles that compare sd labels with conventional wines. moscovici et al. (2020) compare five sd certifications for the north eastern united states and find no specific differences between them. it remains unclear how consumers respond to the different eco-labels and how they value different sd certifications and labels. it is this gap in the literature that the current study aims to close. 3. data: wine consumer survey this research project gathered data through surveys established on the qualtrics survey platform, which has been used to access wine consumers in the united states, australia, chile, france, italy, the netherlands, and south africa (moscovici and reed, 2018; valenzuela et al., 2019). the research sample was obtained through convenience sampling. eligibility criteria for the selection of respondents were that they were adults (18 years of age or older) who were habitual consumers of wine. exclusion criteria included those who worked in the wine or hospitality industries. within these international data, this paper analyzes the french data sample based on 239 completed questionnaires. the survey was divided into four sections. in the first section, we asked consumers about their backgrounds and habits with respect to wine knowledge and consumption. questions included motivations for drinking, favorite varieties, purchasing behaviors, and self-evaluated wine knowledge. the second set of questions collected perspectives and opinions on the various 79consumer preferences for certified wines in france: a comparison of sustainable labels environmental wine certifications. questions included which certifications they have heard of, whether they had purchased any type of certified wine, future willingness to purchase certified wine, ranking of certifications, interest in further information about certifications, and labelling. in the third section, we asked consumers whether they would be willing to buy a certified wine. if the answer was ‘yes’, we asked the (maximum) price they would be willing to pay by offering a large number of predetermined price brackets from which to choose (‘take it or leave it’ approach) which finally results in the estimation of the value consumers connect to attributes of a product (in our case the respective wine certifications) (kealy and turner, 1993; mihailescu and hecht, 2015; sellers-rubio and nicolau-gonzalbez, 2016). finally, the fourth set of questions collected demographic information such as country of residence, gender, age, income, education, and marital status. the surveys were disseminated in each country through wine newsletters and social networks, especially linkedin and whatsapp. 4. methodology: logit models & machine learning first, we provide a generic description of the sample and then analyze the data. we explain our dependent variable, ‘willingness to buy a certified wine’ (wtb), for different types of labels (organic, biodynamic, nature, sustainable, fairtrade) from a set of quantitative and qualitative explanatory variables, and the probabilities for the two alternatives of the wtb question (yes, no – coded as 1/0) are estimated applying a binary logit model as suggested in the literature (hanemann, 1984; mogas et al., 2002). second, we explain the variable ‘willingness to pay’ (wtp). for the wtp question, there are no binary responses, but respondents could decide between six wtp categories. models with categorical dependent variables in the economic literature are predominantly estimated by applying multinominal logit models (mogas et al., 2002), which belong to the parametric models. disciplines such as engineering or stock exchange trading have been applying machine learning, especially artificial neural networks (ann), as the core technology for these kind of models over the past two decades (shavlik and diettrich, 1990; stone et al., 2016). ann belong to the group of non-parametric models and are able to also capture non-linear relationships between independent variables and dependent variables. studies applying this approach suggest that ann outperform multinominal logit models in their predictive potential (hensher et al., 2000; lee et al., 2018; mohammadian and miller, 2002; tran et al., 2019) and possess higher capabilities to identify the (non-linear) relationships between dependent and independent variables. to explain wtp we are interested to find the dominating variables for each type of label and their average semi-elasticities2 related to wtp. farsi (2007) shows that a non-linear wtp estimation has a higher accuracy (higher r square) than a linear estimation model. therefore, we decided to apply a non-linear modelling technique for our wtp analysis and chose a machine learning model based on ann, which allows to make use of the above-mentioned nonlinear estimation advantages (rinke, 2015)3. for each sustainable wine label, we use a separate fully interconnected feed forward ann model, which consists of 18 nodes for the input layer representing all selected independent variables, five nodes for the hidden layer, and one node for the output layer which represents the dependent variable wtp. these ann models are used to calculate the dependency factors (rinke, 2015) and the average semi-elasticities for each label4. dependency factors are sometimes called ‘average linear importance factors’ and can be compared to significance levels of a normal ols regression (yeh and cheng, 2010). the average semi-elasticities show the percentage change of the dependent variable (wtp in this case) according to a unit change in the respective independent variable (owen, 2012). 5. results 5.1 descriptive results table 1 shows the descriptive statistics of the variables which are used in the models below. the survey was answered by 54% women (128) and 46% men (111) and the age of the respondents was grouped into 7 categories with an average age of 37.7 years for women and 43.2 years for men. the annual household income was grouped into 11 categories with the majority of respondents being in the income group 35,000 to <50,000  € annually and an average annual income of 44,906  €. the majority of respondents (42.26%) had a master’s or equivalent degree, followed by those with a bachelor’s 2 average semi-elasticities are derived from the sensitivity analysis of the ann model according to hashem (1992), yeh and cheng (2010) and owen (2012). 3 for a more detailed explanation of the approach, please refer to hornik (1990), rumelhart (1986) or witten (2017). 4 for a more detailed description of the approach, please see niklas and rinke (2020). 80 adeline alonso ugaglia et al. degree (16.32%) and those with a high school certificate (13.81%). on average, the respondents usually pay 8.99  € per bottle of wine, spend about 724  € per year on wine, and visit a winery 3.64 times per year. with regard to preferences, respondents articulate a high importance of the place of origin (5.78 on a 1-7 scale), an above average importance of sd certifications in general (3.99) and, interestingly, lower importance of expert ratings (2.87). 94% of the respondents had heard of and 82% had bought organic wine previously, while the numbers are lower for all other certifications: biodynamic (67%/49%), fairtrade (55%/12%), natural (58%/33%) and sustainable (34%/15%). the importance of the certification ranges from 3.27 for organic, 3.09 for sustainable, 2.99 for fairtrade, 2.95 for biodynamic, to 2.84 for natural. 78% of the respondents say that they are willing to buy an organic wine, 70% a fairtrade wine, 65% a biodynamic wine, and 63% a natural or sustainable wine. the wtp categories are quite similar for all certifications, representing an average wtp of 2.56 € for sustainable, 2.71 € for natural, 2.92 € for fairtrade, 3.03 € for organic and 3.07 € for biodynamic wine (see figtable 1. descriptive statistics for important model variables (source: authors). variable name mean sd variable coding age group 3.04 1.70 age ranging from 18-24 years =1 to >75 years = 7 gender 0.54 0.50 0 = male, female = 1 education group 4.65 1.89 education ranging from high school = 1 to doctorate = 7 yearly income group 3.24 2.00 yearly income ranging from <20,000 = 1 to >165,000 = 11 average price paid per bottle 8.99 4.96 average price in € annual expenditure on wine in € 725 2,060 annual expenditure in € how often do you buy certified food 3.84 1.13 1-6 (1 = never, 6 = always) knowledge of wine 2.85 1.57 1-6 (1 = very little knowledge, 6 = wine expert) days of winery visits per year 3.64 8.79 visits in days importance of eco-certification 3.99 1.60 1-7 (1 = no importance, 7 = very high importance) importance of expert rating 2.87 1.32 1-7 (1 = no importance, 7 = very high importance) importance of place of origin 5.78 1.28 1-7 (1 = no importance, 7 = very high importance) heard of biodynamic before 0.67 0.47 0 = no, 1 = yes heard of fairtrade before 0.55 0.50 0 = no, 1 = yes heard of natural before 0.58 0.50 0 = no, 1 = yes heard of organic before 0.94 0.24 0 = no, 1 = yes heard of sustainable before 0.34 0.47 0 = no, 1 = yes bought biodynamic before 0.49 0.50 0 = no, 1 = yes bought fairtrade before 0.12 0.33 0 = no, 1 = yes bought natural before 0.33 0.47 0 = no, 1 = yes bought organic before 0.82 0.39 0 = no, 1 = yes bought sustainable before 0.15 0.35 0 = no, 1 = yes importance of certification biodynamic 2.95 1.26 1-5 (1 = not at all important, 5 = extremely important) importance of certification fairtrade 2.99 1.12 1-5 (1 = not at all important, 5 = extremely important) importance of certification natural 2.84 1.24 1-5 (1 = not at all important, 5 = extremely important) importance of certification organic 3.27 1.24 1-5 (1 = not at all important, 5 = extremely important) importance of certification sustainable 3.09 1.17 1-5 (1 = not at all important, 5 = extremely important) wtb biodynamic 0.65 0.48 0 = no, 1 = yes wtb fairtrade 0.70 0.46 0 = no, 1 = yes wtb natural 0.63 0.48 0 = no, 1 = yes wtb organic 0.78 0.41 0 = no, 1 = yes wtb sustainable 0.63 0.48 0 = no, 1 = yes wtp biodynamic 2.80 0.97 categories ranging from no price premium = 1 to > 13 € = 6 wtp fairtrade 2.77 0.94 categories ranging from no price premium = 1 to > 13 € = 6 wtp natural 2.64 1.03 categories ranging from no price premium = 1 to > 13 € = 6 wtp organic 2.82 0.92 categories ranging from no price premium = 1 to > 13 € = 6 wtp sustainable 2.61 0.99 categories ranging from no price premium = 1 to > 13 € = 6 81consumer preferences for certified wines in france: a comparison of sustainable labels ure 2), but the differences in means are still significant according to the kruskall wallis h-test5, so that it is interesting to analyze the determinants of the wtb and wtp for the respective certifications. 5.2 logistic regression first, the correlation matrix of the most important independent variables was checked and with only two values being higher than 0.3 but still below 0.5, correlations and multicollinearity were not considered to be a problem. with the dependent variable being a binary 5 a kruskal-wallis h test was conducted to determine if the average price premium was different for the five certificates: biodynamic (n = 205), fairtrade (n = 211), organic (n = 229), natural (n=221) and sustainable (n=204). the kruskal-wallis h test showed that there was a statistically significant difference in the average price respondents are willing to pay, χ2(2) = 10.850, p = 0.0283. response variable, both probit and logistic models are optional approaches to analyze the impact of various independent variables on the wtb a certified wine6. to evaluate the goodness of fit of both probit and logistic models, the pseudo mc fadden’s r2 revealed that they have very similar degrees of efficiency in explaining the wtb, but we favor the logistic approach as it can be readily transformed to the odds ratio. the general model can be described as follows: wtbij = f (socio economic characteristics of consumers, wine knowledge, wine purchasing and consumption patterns, knowledge and importance of certifications, purchasing behavior with regard to certified wine and food)7 for each label j=1,…,5 and i respondents the answer to the wtb question is coded as 1 if the response indicates a ‘yes’ and 0 if it indicates a ‘no’. table 2 only shows significant variables of the logistic regression for wtb. these results suggest that the probability to buy a certified wine is significantly enhanced by the ‘importance’ the consumer attaches to a label and ranges from a higher probability of 2.31 for organic up to 3.24 times for sustainable wines which is in line with general household theory, as wine consumers seem to buy wine according to their respective preferences (varian, 2010). the variable ‘heard of certification’ is also significant for biodynamic and sustainable labels. the probability to buy organic, natural, and fairtrade wines is higher for consumers who often buy certified food in general. this result supports suggestions that households have a similar behavior with regard especially to organically certified food and wine (di vita et al., 2019). for fairtrade, the variable ‘bought this certification before’ changes the probability significantly. here, being an experience good is important for wine, because those who have experienced a fairtrade wine before seem to like it and purchase it again. 5.3 ann model the ‘wtp’ answers in the survey are coded from 1 to 6 into categories, from ‘no wtp’ to a very high wtp. for each label, dependency factors and semi-elasticities are calculated as described in the methodology section and, in table 3, those results with a high importance for 6 the approaches differ only with regard to the distribution of the errors. while the logistic model assumes a cumulative logistic distribution function, the probit model assumes a cumulative normal distribution function. both are estimated by maximum likelihood, the results hardly differ (horowitz and savin, 2001). 7 for a more detailed overview of the variables, please see table 1. attribute distribution mean std. dev. min. max. average price premium biodynamic 3.07 0.87 0 13.5 average price premium organic 3.03 0.87 0 13.5 average price premium fairtrade 2.92 0.91 0 13.5 average price premium natural 2.71 1.00 0 13.5 average price premium sustainable 2.56 1.04 0 13.5 figure 2. mean, standard deviation, minimum and maximum of bids per wine certification (source: authors). 82 adeline alonso ugaglia et al. the wtp and the respective semi-elasticities are highlighted in bold numbers. for biodynamic wine, the average expenditure per year on wine in general is the most important variable for the wtp, showing the more they spend on wine, the higher the wtp for biodynamic wine, and those who judge the certification as being important as well have a positive wtp. knowledge about the certification and the variable ‘bought certification before’ perform a negative influence which suggests some bad experiences and that the biodynamic wines did not meet consumer expectations. biodynamic is the only certification where the results do not show an important difference for age groups, nonetheless, the younger the respondents the higher the wtp. the wtp is hardly influenced by the average price that respondents usually pay for a wine bottle. for organic wine, again the average expenditure per year on wine in general and the importance of the certification (and additionally of eco-certifications in general) are important variables for the wtp. this is in line with the literature which shows that organic is the strongest label and the most visible one for consumers. another important variable with a positive impact on the wtp is the average price that the respondents usually pay for a wine bottle and, to a lesser degree, the ‘place of origin’. as for all other wines (except for biodynamic), the younger the respondents the higher the wtp. the only variable that has a negative influence is ‘days of winery table 2. results of the logistic regression (source: authors). wtb biodynamic wtb organic wtb fairtrade wtb sustainable wtb natural bought certification before 1.951981 0.98 1.142199 0.16 4.828255* 2.12 1.195554 0.23 2.139022 1.18 how often do you buy certified food 1.540636 1.5 2.115084** 2.88 1.754584** 2.61 1.306585 1.33 1.664622* 2.4 expenditure/year in € 0.999916 -0.44 0.9998272 -0.95 1.00008 0.43 0.9996783 -1 1.000337* 2.02 heard of certification before 7.778052** 3.24 1.607506 0.49 1.621343 1.23 2.379079* 2.06 2.154973 1.73 importance certification 2.854495*** 3.84 2.305237*** 4.67 2.359608 4.97 3.235772*** 7.01 2.940351*** 6.32 n 225 225 225 225 225 pr2 51.6 38.11 28.39 35.21 37.93 table 3. results of the ann (source: authors). wtp biodynamic wtp organic wtp fairtrade wtp sustainable wtp natural dependency avg. dy/dx dependency avg. dy/dx dependency avg. dy/dx dependency avg. dy/dx dependency avg. dy/dx average price per bottle in € 0,281 0,172 0,889 0,366 0,709 0,554 0,801 0,113 0,752 0,124 bought certification before 0,720 -0,127 0,410 -0,160 0,385 0,112 0,963 -0,469 0,554 -0,030 customer education 0,410 0,080 0,361 0,068 0,724 -0,211 0,510 -0,352 0,321 -0,225 customer age group 0,604 -0,179 0,805 -0,170 0,706 -0,325 0,831 -0,285 0,718 -0,198 days of winery visits 0,367 -0,013 0,841 -0,579 0,513 0,161 0,889 0,321 0,921 -0,043 expenditure/year in € 1,000 0,840 0,889 0,466 0,295 0,129 0,595 -0,065 1,000 -0,165 importance certification 0,799 0,316 1,000 0,253 1,000 0,637 1,000 0,674 0,843 0,405 importance eco-certification in general 0,636 0,187 0,771 0,059 0,404 0,090 0,511 0,382 0,655 0,223 importance expert opinion 0,245 0,049 0,696 0,029 0,736 0,151 0,688 0,319 0,596 0,000 importance poo 0,687 0,095 0,740 0,033 0,431 -0,121 0,732 0,467 0,384 0,108 knowledge about certification 0,772 -0,018 0,236 0,097 0,244 -0,105 0,472 -0,124 0,471 0,165 n 149 179 154 140 140 r2 0,894 0,920 0,922 0,956 0,865 83consumer preferences for certified wines in france: a comparison of sustainable labels visits’, which is a little surprising but is supported by the results for natural wine and, with lesser importance, biodynamic wine. if we assume that visiting wineries means to learn more (bazoche et al., 2008), this might be due to some negative experiences during the visit or – that by accident as we do not have a random sample – respondents visited more wineries offering ‘non-certified’ or sustainable or fairtrade wines. for fairtrade wine, the importance of the certification is again the most important variable for the wtp. as in the case of organic, there is a positive impact of the average price that the respondents usually pay for a bottle of wine on the wtp. fairtrade is the only certification where expert opinion is important for the wtp. as wine is an experience good, consumers tend to obtain information on quality and study expert opinions. again, the younger the respondents, the higher the wtp. this impact is stronger for fairtrade wines compared to all other labels. fairtrade is also the only label for which education performs an important and negative impact on the wtp. one explanation might be that those being higher educated know more about fair trade and are aware of the fact that it focuses more on social than environmental aspects, with the latter being more favored by this consumer group. for sustainable wine, the importance of the certification is again the most important variable for the wtp. as in the case of organic and fairtrade, there is a positive impact of the average price that the respondents usually pay for a bottle of wine on the wtp. this holds also for the variables ‘place of origin’ and ‘days of winery visits’. this means that they had good experiences when visiting and they link ‘sustainable’ to this experience. when consumers only ‘bought the certification before’, the wtp is lower, which means that if they just buy a bottle their wtp is lower and are disappointed when not linking the label with the experience of the winery visit. the younger the respondents the higher the wtp. for natural wine, the importance of the certification and the average price that the respondents usually pay for a bottle of wine have a positive impact on the wtp and the younger the respondents, the higher the wtp. those respondents with high annual expenditures on wine – even if they have a wtb – don’t want to pay higher premiums for natural wine. the same holds for those who have many annual winery visits. 6. discussion and conclusions the wine industry is facing major environmental challenges and a growing concern among consumers about environmental and sd issues can be observed (casini et al., 2009; schimmenti et al., 2016; vecchio, 2013). on the other hand, we know little about consumers’ preferences relating to a growing number of different sustainable certifications that serve as producers’ signals of sustainable attributes. extant studies focus either on organic wine, show contradictory results, or fail to compare different sustainable labels. our paper seeks to fill this gap by comparing five different labels and to show commonalities and differences between labels with regard to determinants for wtb and wtp. the wtb analysis shows that the respondents who judge the certification important have a higher probability of buying a wine possessing this certification, irrespective of the certification. further, this holds true for those who regularly buy certified food (for organic, fairtrade and natural wines) and have heard of the certification before (for biodynamic and sustainable wines). those who have bought fairtrade wine before will tend to buy it again. additionally, our wtp analysis shows which determinants impact respondents’ wtp for a certified wine. the results of the ann model suggest that the importance consumers attach to a label positively influences their wtp. the higher the importance they give to a label, the higher the wtp, irrespective of which label it is. the average price usually paid for a bottle of wine also positively influencing wtp (expect for biodynamic wine). in general, the younger the customers are, the higher their wtp. in addition, those with higher expenditures per year on wine have a higher wtp, but only for biodynamic and organic certified wines. these f indings highlight two main and robust results. first, the importance that consumers give to the certifications influences their wtb and wtp, irrespective of the sd label, showing the importance of their personal values and knowledge about the certifications. second, the drivers differ for each sd label, meaning that consumers behave differently with regard to their purchasing decisions for each label. this confirms the interest in having different sd labels or certifications representing different kinds of social and environmental practices, giving producers a reason to engage in sustainable practices and the need to signal these on the label. thus, we open a new direction for further investigations with regard to marketing and policy implications to better promote sd wines as, with more information, producers will be able to better choose an appropriate strategy (mariani and vastola, 2015). these results could also have further implications with the development of online purchasing (and online communication from the supply side) and 84 adeline alonso ugaglia et al. crowdfunding campaigns as a new form of early purchase (bargain et al., 2018). there are some methodological limitations to our study. there is still a chance that people taking part in such surveys seek to satisfy social norms more than their true preferences (fischer and katz, 2000). the method directly eliciting wtp for attributes without forcing respondents to make trade-offs between product attributes (e.g., product price vs. organic) can result in invalid and unrealistically high attribute importance (louviere and islam, 2007). further, we cannot prove to which reference price respondents 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(2010). first and second order sensitivity analysis of ml, neurocomputing, 73, 2225– 2233. wine economics and policy volume 10, issue 2 2021 firenze university press productive efficiency of wine grape producers in the north of portugal micael santos1,*, xosé antón rodríguez2, ana marta-costa3 organic and conventional grape growing in italy: a technical efficiency comparison using a parametric approach federica cisilino1, fabio a. madau2,*, roberto furesi2, pietro pulina2, brunella arru2 competitiveness framework to support regional-level decision-making in the wine industry: a systematic literature review jorge mota*, rui costa, antónio moreira, silvana serrão, carlos costa does belonging to an appellation make a difference? new evidence from ontario viticultural areas omer gokcekus how do sparkling wine producers adopt a sub-appellation? evidence from an exploratory study on heroic prosecco superiore rive luigino barisan*, luigi galletto motivation factors for organic wines. an analysis from the perspective of german producers and retailers katharina hauck*, gergely szolnoki, evelyn pabst consumer preferences for certified wines in france: a comparison of sustainable labels adeline alonso ugaglia1,*, britta niklas2, wolfram rinke3, dan moscovici4, jeff gow5, lionel valenzuela6, radu mihailescu7 wine ratings and advertising strategies: is there a link? ricardo sellers-rubio adaptive market hypothesis: an empirical analysis of the wine market anoop s kumar wine economics and policy 11(1): 73-87, 2022 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/wep-11305 wine economics and policy citation: filippo f. fagioli, giorgia gallesio, elena viganò (2022) wineries communication strategies. a text mining analysis. wine economics and policy 11(1): 73-87. doi: 10.36253/wep11305 copyright: © 2022 filippo f. fagioli, giorgia gallesio, elena viganò. this is an open access, peer-reviewed article published by firenze university press (http://www.fupress.com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information fi les. competing interests: the author(s) declare(s) no confl ict of interest. wineries communication strategies. a text mining analysis filippo f. fagioli*, giorgia gallesio, elena viganò department of economics, society, politics – university of urbino carlo bo, via saffi 42, 61029 urbino (pu), italy. e-mail: fi lippo.fagioli@uniurb.it; gi.gallesio@gmail.com; elena.vigano@uniurb.it *corresponding author. abstract. th e digital literacy that has developed in recent decades has resulted in internet playing an important role in the communication of wineries. business websites, initially used as an exhibitor of products, quickly became one of the most important tools to implement communication strategies used to successfully place the wine product in a competitive market. th e purpose of this study is to analyse major italian wineries websites through textual statistics and text mining methods to provide evidence on the storytelling device adopted by these companies to promote and brand themselves. th e information contained in the websites of the selected businesses in northern, central and southern italy, has been analysed in three steps. th e fi rst consisted in investigating categories with which the contents were organized, and the second step involved examining the contents’ word clouds which are useful for a qualitative analysis on similarities and diff erences found in the three diff erent areas. finally, diff erent strategies were formalized, by reconstructing the structure of concepts underlying the communication models of the wineries of the three areas examined. th e results demonstrate considerably diff erent approaches adopted by the areas. while the wineries in central italy focus on communication concerning the company, in the north and south, more attention is given to production methods and territory respectively. th anks to the analysis of word clouds it was also possible to expose the construct which is the basis of narratives used by wineries, followed by the typical communication strategy of the diff erent italian areas. keywords: winery, storytelling, promotion, website, text mining. 1. introduction th e advent of the internet and related socio-cultural changes have made consumers increasingly digitally addicted, with signifi cant repercussions on the supply of products, marketing, branding, on the communication which has moved online, on corporate websites and on social networks. internet has become the most aff ordable, most easily accessible, and widely available form of media communication also between wine producers and their stakeholders. for this reason, the quality of wine brand websites is now crucial and plays a strategic role in communication campaigns since it 74 filippo f. fagioli, giorgia gallesio, elena viganò represents a valid effort to build customer loyalty, develop a brand, increase presence in the tasting room, and to encourage direct purchasing [1–4]. the characteristics of the wine, make it particularly suitable to be linked to experiential components that involve consumers emotionally and cognitively, through the symbolic, hedonistic, and aesthetic nature of postmodern consumption [5,6]. this gives the wineries the opportunity to promote and commercialize its products using content that illustrates the history of the company, and its production techniques, linking the company brand name to the wine and the territory of origin through its website [7]. while stories are an effective way of communicating and involving people, the use of this kind of narration is therefore a valid means of differentiation in a very competitive market such as that of wine. this is particularly true in a country like italy, which has achieved significant results in both qualitative and quantitative terms. as a matter of fact, italy is the largest global producer with 17,83% of world total production, equal to over 49.1 million hectolitres, followed by france, with 16,92% and spain with 14,78% [8], while wineries, which are characterized by a strong orientation to regional tradition, produce wines which are often positioned in premium segments. the aim of this work consists in investigating communication strategies of the major italian wine producers through the analysis of their websites and highlighting the differences in their use of storytelling. the analysis focused on two different levels, namely the sections of the main page which indicate a storytelling content and the contents of these sections. using text mining methodologies, word clouds were formulated capable of summarizing the different topics that characterize the storytelling adopted by italian wineries and analysing differences in concepts and semiotic approaches among the three different country areas. this paper is structured as follows. section 2 presents a literature review on selected keywords. section 3 describes methods used for the analysis and materials. section 4 presents results followed by the discussion in section 5 and conclusion in section 6. 2. literature background in order to conduct a rigorous literature review with the aim of exploring text mining methodologies applied to business storytelling, five keywords have been defined taking into account the particularity of the wine sector and tools for business promotion. on the basis of these keywords, a search was carried out on the scopus database, to consult papers, books, abstracts, and articles from both academic and professional publishers. four subject areas have also been chosen: (i) economics, econometrics and finance; (ii) business, management and accounting; (iii) agricultural and biological sciences; (iv) environmental science. the final list of keyword combinations used and the number of articles found is shown in table 1. the literature review contains some important evidence. the theme of promoting wineries is strongly addressed to regional wine tourism. for example, alonso [9] investigated the reciprocal promotion of wineries involved in wine trails and tourism in us southern states. maumbe and brown [10] underlined the role of promotion strategies and their interaction with the place of origin and relations with the local community, as a key element in the development of small wineries. zamparini et al. [11] collected producers’ communication materials and applied audit methods to determine the effectiveness of wineries collective promotion, while festa et al. [12] identified the promotion of the region as one of the most important factors of cohesion for small wineries. woods et al. [13] studied appropriate marketing strategies which can help local wineries in the northern appalachian states (us) to create increased awareness, differentiation, and value in a crowded wine market and thach and cogan-marie [14] analysed winery websites to assess readiness for wine tourism. the digital literacy that has developed in recent decades has resulted in internet playing an important role in the communication of wineries which, through a website, have the opportunity to make themselves known in a highly competitive market such as that of wine. if at first these websites were found to be “electronic brochures” of products rather than “dynamic relationship marketing tools” [15], in recent years these websites have become one of the principal business communication channels, providing information in the form of text, photos, digital contents, symbolic elements and emotional stimuli linked to the territory, and capable of table 1. keywords interaction table. performed using scopus january 2021. keywords winery storytelling promotion website text mining winery storytelling 4 promotion 44 28 website 47 25 612 text mining 1 2 33 118 75wineries communication strategies. a text mining analysis establishing a direct relationship with wine lovers and consumers [7,16-19]. the study of websites and their integration with the communication activities of wine businesses, has been dealt with by kolb and thach [20] who analysed the adoption of web 2.0 and social media by german wineries to determine the impact of winery size on the use of social media, and by sellitto [21] who investigated e-marketing adopted by a small and successful australian winery. the quality and major features of wine company websites have been analysed in detail by galati et al. [22] who compared e-commerce and e-marketing approaches. in addition, treen et al. [23] researched emotions expressed by wine estate websites and whether the emotions conveyed are related to or can significantly predict the positive or negative sentiment expressed by these websites. it is interesting to notice that there is a clear lack of research on the themes of wineries and the analysis of their storytelling through the use of text mining methodologies or textual statistics. the concept of storytelling is very broad and has been extensively researched and adapted across many disciplines including psychology [24,25], sociology [26,27], environmental sciences [28,29], education sciences [30,31] and management [32,33]. however, the major applications in the economic fields refer to marketing [34-36], advertising [37,38] and branding of companies [39,40]. according to sole and wilson [41] storytelling could be defined as the sharing of knowledge and experiences through narrative and anecdotes in order to communicate lessons, complex ideas, concepts, and causal connections. the main objective of this narrative technique is therefore to involve the recipient, to make concrete what is abstract, and to be remembered over time. in addition, another feature is the spontaneity of writing, which suggests a high degree of diversity in the elements that compose a story [42]. however, bourion [43] argued that when comparing narratives which have the same aim, the words tend to focus on a short list of topics. in the wine business context, frost et al. [44] examined the role of storytelling in the cultural heritage related to wine tourism in australia, and parrish and downing [45] examined wineries in napa valley (us) and stellenbosch (za), finding a remarkable symmetry between the types of stories utilised and differences in terminology. italian wineries were investigated by kammerlander et al. [46] who analysed the impact of narratives on the family firm’s level of innovation. although the role of text mining methodologies is widely used in analyses related to the promotion of product and services [47–49], only two bibliographic results utilized this methodology to analyse a us winery website to identify how businesses communicate family brand identities [50], and to investigate the online narrative of the san giovese grape variety by examining the characteristics of non-winery-owned online information which may shape wine consumers’ behaviour [51]. 3. materials and methods 3.1 textual statistics methods textual statistics consists in the analysis of texts using statistical methods. such texts are intended as a set of distinct elements that have their own frequency and can be compared [52]. this method is largely used especially in linguistic research [53–55] and it has different approaches, ranging from a purely formal analysis, in which the texts are not subjected to any treatment before analysis, to cases in which linguistic information can be used to identify textual forms with specific meaning [56]. the first step of this study was to analyse the frequencies of the section titles extracted from a selected sample of winery websites to assess divergence in the narratives used in the different areas examined. as suggested by mora and livat [42], there is a limited number of topics used in wineries corporate communication. for this reason the titles of the pages have been categorized into six different argumentative dimensions, which represent the most commonly used themes in the websites of the wineries in the selected sample (table 2). the first collects all the pages relating to the productive aspects of wine, and pages which explain processes, innovation and production technologies, as well as winemaking and organic certifications. the second category concerns the product and the qualities connected to it. another important argumentative dimension has been identified in history in which all the titles of the pages concerning heritage, as well as some time references, have been inserted. the last two categories concern the territory and values. as regards the first, all the pages which refer to the land, the landscape, the roots, the resources have been inserted. the last dimension is the most consistent and includes all the pages that refer to values. 3.2 text mining methodologies the second step of the analysis through text mining methodologies, focused on the investigation of the 76 filippo f. fagioli, giorgia gallesio, elena viganò elements which characterize the storytelling present on the websites of the major italian wineries. the term text mining refers to the processes of exploring and analysing large amounts of data in form of texts in order to identify concepts, topics, models and other attributes. according to feldman and sanger [57], the use of text mining to probe extracted texts involved three distinct phases: (1) data collection, (2) pre-processing and cleaning, (3) analysis and evaluation of results. data collection is the processes aimed at identifying a corpus of texts relating to the topic, which in our case is represented by the contents of the pages that have been previously identified and which converged into the sets of each area. the pre-processing and cleaning phase is necessary because some information contained in a corpus may be irrelevant for the analysis and in these cases is removed from the corpus [58,59]. thanks to the use of specific software, atlas.ti, it was possible to remove all the insignificant words that commonly appear in the language, such as prepositions, conjunctions, pronouns, and punctuation. we decided to use the word clouds method to visualize the results. this type of representation is used in various contexts as a means of providing a clear overview of the words that appear most frequently in a given text. for example, moro et al. [60] use this methodology to establish the breadth of the literature and define the concept of ethnic marketing, characterized by high heterogeneity. other applications are in the biomedical field and especially in the emerging field of big data and computer science. the method is defined as a useful summary for knowing the number and type of topics present in a body of text [61–63] and is typically obtained by positively correlating the font size of the represented tags, with the text words frequency [64]. after that, it was necessary to carry out a codification of the main concepts which could comprehensively describe the storytelling of the wineries. according to bazeley [65], coding is a fundamental skill for qualitative analysis and a purposeful step to somewhere. in addition, it provides a means of access to evidence which can be useful to query data, for test assumptions and conclusions. at a descriptive level, naming a code provides a label that connects data to the idea, and from the idea to all the data pertaining to that idea [66]. in our case we decided to develop a codebook common to all three corpora and the choice fell on the text words contained in argumentative dimensions shown in table 2. 3.3 data collection the analysis was based on the major italian wineries selected using the aida database [67]. aida offers comprehensive information on the balance sheets of almost all the italian companies operating in the private sector, enabling a search for individual companies, companies with similar profiles and facilitating detailed analyses. more specifically, dataset contains economic variables such as revenues, value-added, net profits but also additional information such as the address of the company’s registered office, its website and a description of its main activity through ateco 2007 classification1. firstly, italian companies operating in the beverages sector were selected and, subsequently, those with ateco code 11.02.10 which identifies companies producing table wines and quality wines. in this way, it was possible to define three territorial contexts according to the legal headquarters of the companies (north, center, south and islands). a website availability criterion was subsequently added to the search eliminating those without website. the resulting companies were sorted in decreasing order of 2019 balance sheet revenues, considering successively the first 30 companies for each territorial context. 1 this classification is the italian version of the european nomenclature published in the official journal of 20 december 2006 (regulation (ec) no 1893/2006 of the european parliament and of the council of 20 december 2006). table 2. argumentative dimensions and related wineries website page titles. storytelling argumentative dimensions page titles (codes) production production, process, research, technology, vinification, winemaking, innovation, winegrowers, facility, work, certification, sustainability, green, vegan, bio wines wine, brand, product, awards, grapes, vine, vineyard, cellar, barrique, quality company about us, company, estate, group, market, marketing, profile, projects, services, shareholders, winery history history, today, tradition, heritage, story territory territory, terroir, surroundings, resources, roots, regional, native, land, landscape, locality, nature values values, mission, union, vision, world, thinking, solidarity, people, philosophy, experience, identity, knowledge, art, determination, excellence, communication, hospitality, family, ecosustainability, environment, biodiversity 77wineries communication strategies. a text mining analysis with increasing globalization, firms need to build a global marketing strategy to reach customers around the world, and the translation of website contents plays a crucial role in the effectiveness of communication strategies. the dominance of english as a lingua franca in international business exchanges is commonly accepted [68], and for this reason, the sample was built with the first thirty companies which had the english version of their website for each area. table 3 summarizes the main descriptive characteristics of the sample, from which it is possible to identify the differences among the selected companies in the various areas. data shows how in the north there is a clear predominance of more formalized public companies (plc) with the highest level of revenues compared to those in the central part of the country, where private companies (ltd) prevail, and in the south, where cooperatives are predominant. from a territorial point of view, the veneto region holds more than 50% of the companies in the north, followed by tuscany (14) and marche (10) in the central regions and in southern italy by puglia (8). in four regions, liguria, trentino alto adige, friuli veneziagiulia and molise, no companies matched the selected search criteria (figure 1). once the companies were selected, the websites of each of them was visited. a database was therefore created containing over 270 section titles which explained the narrative adopted by each individual company, and the related content. 4. results this investigation allows us to highlight how wine production has a completely different pattern in the three areas considered. northern italy is characterized by medium and large enterprises, compared to the center and the south, where less formalized enterprises prevail. this also reflects the reference market of the wineries examined. while those in the north are mostly internationalized with high levels of exports, in central italy and the south the reference market remains the national one [69]. the results demonstrate very different communication approaches among the areas. thanks to the first analysis it was possible to identify the major argumentative dimensions which characterize the storytelling of italian wineries (figure 2). while in the north more reference is made to history and production methods, in central italy the narrative focuses on the company and the quality of the wine. in the south however, the wineries mainly base table 3. descriptive statistics of the wineries selected by geographical area – aida database. type of company north center south and islands no. avg. no. of employees revenues (€/ mil) no. avg. no. of employees revenues (€/ mil) no. avg. no. of employees revenues (€/mil) min max min max min max public limited company (plc) 14 103 37,90 227,21 4 47 4,67 202,80 5 41 5,96 44,29 private limited company (ltd) 12 96 32,71 90,08 18 24 1,80 114,22 11 38 4,91 15,34 cooperative 4 103 45,48 237,18 8 16 1,71 25,92 14 39 4,83 18,78 total 30 100,66 32,71 237,18 30 29 1,71 114,22 30 39,33 4,83 44,29 figure 1. number of wineries selected by region – performed in microsoft excel. 78 filippo f. fagioli, giorgia gallesio, elena viganò their communication on the values and on the territory in which the wine is produced. the examination of elements which characterize page contents made it possible to formulate three different word clouds referring to the three geographical areas examined. a set of stopwords [70,71] was developed to eliminate all insignificant words for the purpose of the investigation, such as pronouns, verbs, prepositions, conjunctions, spaces, punctuation, which were excluded from the analysis (appendix a – tab. a1). in addition, to obtain meaningful word clouds, we decided to act on the width of the analysis by selecting minimum and a maximum threshold value. according to xu et al. [72] and bashri et al. [73] the determination of these values it is decided by the observer. in this case we decided to parameterize this value to the total number of words of each corpus. as regards the minimum value, 0.1% of the total number of words for each corpus has been chosen, while the maximum value was based on the maximum frequency reached by the first word not included in the stopword list. the result of this process is for the north a frequency between 37 and 18, for central italy between 34 and 228, and for south between 29 and 149. the word clouds are shown in figures 3, 4 and 5. (more detailed information see appendix a, tables a2-4) as suggested by sinclair and cardew-hall [74] and viegas et al. [75], word clouds generated were the starting point for a more in-depth analysis focused on strategies adopted by wineries in the different areas considered. the codification of the texts based on the words contained in the argumentative dimensions, allow us to extract all sentences which contained those words from the corpus. subsequently, the correspondences between the most commonly used words identified in the word clouds and the encoded sentences were analysed. this analysis was carried out in order to mine sample the most significant quotations in which all the codes that matched up to the 0 5 10 15 20 25 30 values production company territory wines history north center south figure 2. frequency of wineries pages’ title by argumentative dimensions. figure 3. northern italy wineries word cloud threshold values (min-max) 37-185 – performed with atlas.ti software. figure 4. center italy wineries word cloud threshold values (minmax) 34-228 – performed with atlas.ti software. figure 5. southern italy wineries word cloud threshold values (min-max) 29-149 – performed with atlas.ti software. 79wineries communication strategies. a text mining analysis most commonly used words for each area are present (table 4). these quotations were subsequently analysed to look for the correspondences with other codes. figures 6, 7 and 8 show the results of the analyses in the top down graphs, in which it is possible to examine the differences in the storytelling that characterizes the communication of the wineries of the three areas considered. 5. discussion the results of the analyses carried out demonstrate a very different approach in the communication strategies of the wineries of northern, central and southern italy. in general, communication strategies are based on different aspects, often neglecting the link existing between the quality of wines and the specific characteristics (natural, but also social and cultural) of their geographical area of origin, considered an essential element for the enhancement of wine productions [76–81]. through textual analysis of each company’s website, and in particular of titles pages, it emerged that, in all three areas, wineries “company” webpage is a predominant characteristic of websites. nevertheless the three areas differ from each other in terms of communication approaches (figure 2). northern italy companies tend to focus on the production processes webpages, while central italy wineries give more attention to the description of wines quality. in the south wineries tend to describe values related to their productions. the wordclouds allowed us to add an additional layer of analysis. if the terms wine, production, quality and grapes characterise the communication of wineries in the three areas, each of them has specific featable 4. most significant quotation mined from corpus by area. area code quotations north “wine” and “production” and “quality” nero d’avola organic wine 2017 is the first italian organic wine whose production processes, thanks to blockchain technology, have been fully tracked to guarantee quality, provenance and supply chain. the finest eastern veneto production bosco viticultori is the reference key to place on foreign markets high quality bulk wine, produced directly in the nine wine cellars of the group active participation, independence, spirit of cooperation and experience are the values and the intrinsic characteristics of our members, thus guaranteeing the quality of the fruit and of the finished products, productivity and constant care for the consumer, that allow the cooperative to grow” to promote a healthy cooperation in order to achieve the best possible results with the grapes contributed by its members, passing the values and know-how of the wine growing on to the new generation while preserving the natural and environmental surroundings in the production areas. center “wine” and “production” and “quality” customer satisfaction is at the heart of our philosophy, and this is achieved through: management and monitoring of the production chain in order to obtain high quality standards in all typologies of wine produced; preservation of the typicality of all productions and exaltation of the local terroir in order to maintain its specific characteristics; differentiation of characteristics of productions through constant research aimed at improving company processes. complementing this is its system of total quality and hygiene supervision over every phase and place of production, assuring uncompromised wine stability and purity. for the first time in 26 generations, the winery inaugurated a new winery designed to welcome wine enthusiasts inviting them to come into direct contact with their production philosophy based on passion, patience and the continual pursuit of high quality. for many years, the most respected wine guides of italy have been awarding the winery, praising the transparency and quality of its production. south “wine” and “production” and “grapes” the region boasts a great biodiversity from a viticultural point of view, producing both native and international grapes. always focused on the production of quality wine products, over the years we have organized our traceability system: all stages of production are followed by our trusted employees, our farmers suppliers are followed in all stages of production of the vine and invited promptly to keep in order all the documentation concerning the treatment of the grapes, the appropriate production report and the correct declaration in the case of igp dop grapes. with a capacity of 250,000 hectoliters in teel storage silos and reinforced concrete tanks, the company is one of the most important wineries in southern italy for the processing and wholesale of quality wine made from common grapes, pdo and igp as well as concentrated musts certified for the production of very high quality vinegars. 80 filippo f. fagioli, giorgia gallesio, elena viganò figure 6. north italy wineries communication strategy – performed with atlas software. figure 7. central italy wineries communication strategy performed with atlas software. figure 8. south italy wineries communication strategy performed with atlas software. 81wineries communication strategies. a text mining analysis tures. in the wineries of the north, the term company stands out, associated with group and family (fig. 3). this seems to be coherent with results shown in table 3, which indicate a substantial equivalence, in this area, of public limited companies (plc) and private limited companies (ltd). in central italy, the presence of the term family could be justified by the fact that here the wineries are mostly ltd and family managed. the value of made in italy emerges through the terms italian and/or italy in all areas considered, however with different modalities and levels of specification. if in the north there are no explicit references, in central italy there are more words linked to unequivocally italian types of wine as chianti, sangiovese, morellino, verdicchio (fig. 4), while in the south, also in this case, there is a constant reference to aspects linked to the territory (land, area, territory) and the landscape element is leveraged (fig. 5). the world of wine is inextricably linked to the concept of time, which is expressed in various forms: the life cycle of the vine; the vegetative sub-cycle that leads to the ripening of the grapes; the production and aging phase in the cellar; and, for some wines, aging (grainger and tattersall, 2007). not surprisingly, the term years is a constant in all areas (figures 3, 4, 5). the central and southern word clouds also reveal a marked contrast between the present and the past, therefore between terms such as today, and history, tradition. in the north, on the other hand, there is an orientation towards the future, with terms like new and innovation. this long-term vision is also accompanied by the communication of values related to sustainability (environment, sustainability) and internationalization (world, market, international). the use of argumentative dimensions, the mining of quotations and the identification of the most significant ones, allowed us to reconstruct a scheme of the communication strategies used in the three areas, systematising the differences characterising them. the strategies of northern italy (fig. 6) appear less complex than those of central and southern italy. in fact, in this area there are only 4 of the argumentative dimensions as identified in table 2, that is, values, territory, wine and production, while in the center (fig. 7) and in the south (fig. 8), the “company” dimension is added to these. however, the strategy of northern italy appears more detailed. with regard to value argumentative dimension, it can be noted how in the north, aspects such as the environment and experience are given greater importance, while in the center the values are declined in the philosophy and vision that characterise the production of wine. in the south, however, this aspect is declined only in the dimension of biodiversity. the wine dimension, on the other hand, is communicated by focusing on different aspects, depending on the area considered. more attention is given to the types of grapes and cellars in the north and south, whereas in central italy more importance is paid to national and international awards won by wines. from the point of view of production methods, in northern and southern italy the aspects connected to production processes and technologies are predominant, whereas in central italy there is also evidence of research activities connected to the production. territory is the least important aspect in all three areas and it is declined differently. while in the north there is a clear reference to territory, in the center the focus is on terroir. in the south, instead, the winery strategy heads towards the strong connection between wine and territory. 6. conclusion this work achieves the aim of adding the point of view of wineries in the broader context of wine communication. a detailed analysis of the major italian wineries’ communication strategies was carried out both from a formal and qualitative point of view, allowing us to have a clear picture of the elements which characterize the storytelling of wine companies. the application of text mining methodologies has allowed us to observe a substantial difference in strategies adopted by wineries in north, central and southern italy, and such differences could be a starting point for future research on varying aspects, particularly those regarding the assessments on the effect that these strategies can have on the wine added value or on consumers’ preferences [82]. in this regard, an aspect which needs to be examined further is undoubtedly the link with the different dimensions of sustainability, and in particular with the environment, which has been specifically mentioned only by the wineries of northern italy. for example, the use of organic farming techniques or the offer of products with low, or no, sulfite content are particularly relevant both for improving the quality of common goods (especially water and soil) at the level of specific territories, meeting the demand of consumers who are increasingly attentive to environmental and health protection [83–85], but who do not seem to be particularly present in the communication strategies of the sample of wineries considered. based on the result of this work, future studies could also analyse the evolution of these strategies in 82 filippo f. fagioli, giorgia gallesio, elena viganò specific local contexts [86,87], or integrate the analysis through the application of text mining methodologies on additional wineries communication tools to evaluate characteristic elements in relation to tourism [88] or wine quality perceptions [89]. references [1] n. velikova, j. b. wilcox, & t. h. dodd, designing effective winery websites: marketing-oriented versus wineoriented websites. 6th awbr international conference (2011). 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[89] s. shanmuganathan, p. sallis, & a. narayanan, unsupervised artificial neural nets for modelling the effects of climate change on new zealand grape wines. 18th world imacs congress and modsim 2009 international congress on modelling and simulation: interfacing modelling and simulation with mathematical and computational sciences, proceedings (2009), pp. 803–809. 86 filippo f. fagioli, giorgia gallesio, elena viganò appendix a table a1. stopword list (extract). a doing it’s that’s with about don’t itself the won’t above down i’ve their would actually during largely theirs wouldn’t after each let’s them you again effectively more themselves you’d against especially moreover then you’ll ahead essentially most there your all estate mustn’t therefore you’re almost extremely my there’s yours also few myself these yourself always finally no they yourselves am for nor they’d you’ve an from normally they’ll …punctuation and further not they’re …spaces any generally of they’ve …numbers anyway had off this are hadn’t on those aren’t has once through as hasn’t only to at have or too be haven’t other under because having ought until been he our up before he’d ours us being he’ll ourselves usually below her out very below here over was between here’s own wasn’t both hers primarily we briefly herself profile were but he’s regularly we’re by him same weren’t can himself service we’ve cannot his shan’t what can’t how shareholder what’s carefully however she when certainly how’s she’d when’s clearly i she’ll where completely i’d she’s where’s could if should which couldn’t i’ll shouldn’t while currently i’m so who did in some whom didn’t into specially who’s directly is successfully why do isn’t such why’s does it than widely doesn’t its that wines table a2. northern italy words frequencies. word frequency stop words > 185 wine 185 quality 144 production 138 company 92 vineyards 72 italian 60 new 58 family 55 grapes 53 world 53 environmental 51 area 50 sustainability 49 work 49 international 48 best 46 years 45 group 43 land 42 innovation 39 market 39 respect 38 stop words < 37 87wineries communication strategies. a text mining analysis table a3. center italy words frequencies. word frequency stop words > 228 wine 228 production 115 quality 111 chianti 98 family 89 area 80 grapes 75 years 68 land 58 scansano 54 vineyard 53 hectares 52 morellino 51 new 51 time 50 history 49 territory 48 today 47 since 46 world 41 antinori 40 cantina 40 classico 40 sangiovese 37 tradition 37 ruffino 36 located 35 work 35 year 35 italy 34 verdicchio 34 stop words < 34 table a4. south italy words frequencies. word frequency stop words > 149 wine 149 production 110 grapes 89 quality 68 winery 65 vineyards 61 company 56 area 55 land 54 territory 48 italy 44 grape 40 aglianico 39 sea 39 new 37 today 37 vine 36 tradition 35 world 35 years 35 varieties 33 vines 33 history 32 us 32 ancient 31 best 31 cantina 31 products 31 time 30 unique 29 stop words < 29 wine economics and policy 11(1): 15-29, 2022 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/wep-10342 wine economics and policy citation: mikael oliveira linder, katia laura sidali, christian fischer, valerie bossi fedrigotti, diego begalli, gesa busch (2022) assessing preferences for mountain wine and viticulture by using a best-worst scaling approach: do mountains really matter for italians? wine economics and policy 11(1): 15-29. doi: 10.36253/wep-10342 copyright: © 2022 mikael oliveira linder, katia laura sidali, christian fischer, valerie bossi fedrigotti, diego begalli, gesa busch. this is an open access, peer-reviewed article published by firenze university press (http://www. fupress.com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information fi les. competing interests: the author(s) declare(s) no confl ict of interest. assessing preferences for mountain wine and viticulture by using a best-worst scaling approach: do mountains really matter for italians? mikael oliveira linder¹,²,*, katia laura sidali³, christian fischer¹, valerie bossi fedrigotti¹, diego begalli³, gesa busch⁴ ¹ free university of bozen-bolzano, faculty of science e technology, piazza università, 5, i-39100, bozen-bolzano (bz), italy. e-mail: christian.fi scher@unibz.it, bossister@gmail. com ² cirad, umr innovation, 73 rue jean-françois breton, montpellier, 34898, france. e-mail: mikael.linder@cirad.fr ³ university of verona, department of business administration, via cantarane, 24, 37129 verona (vr), italy. e-mail: katialaura.sidali@univr.it, diego.begalli@univr.it ⁴ university of göttingen, faculty of agricultural sciences, department of agricultural economics and rural development, platz der göttinger sieben 5, 37073, göttingen, germany. e-mail: gesa.busch@agr.uni-goettingen.de *correponding author. abstract. european commission has recently published the rules on the use of the quality term “mountain product”. th e new regulation aims to promote the sustainable development of mountain areas and to facilitate the identifi cation of mountain products by consumers. despite the importance of viticulture for several european mountain communities and the growing interest of european consumers in quality certifi ed foods, the regulation did not encompass wines. th e literature addresses many issues regarding wines and consumer preferences, but so far mountain wines are not specifi cally researched. with this study, we seek to fi ll this gap by analysing italian consumers’ preferences for mountain wines as well as their opinion on the inclusion of this product in the mountain labelling scheme. to do so, this study applies a best-worst scaling model and subsequent latent class analysis. data was collected through an online questionnaire applied to a consumer panel. th e results indicate that most of respondents are in favour of applying the mountain label to wines. th e three most preferred attributes are related to human health, ecological sustainability and product typicity. most of participants gave less importance to the attributes that characterize mountain agriculture. only one consumer segment valued some of these. findings suggest that the inclusion of mountain wines in the labelling scheme may convey a better image of wine regarding its impact on human health, environmental sustainability and terroir-based typicity. keywords: mountain, wine, viticulture, italian preferences, best-worst scaling, latent class. 16 mikael oliveira linder et al. 1. introduction “mountains matter”. according to the international alliance mountain partnership there are countless reasons to agree with this slogan. all over the world, mountains cover around 22% of the earth’s land surface. mountains are hotspots of biodiversity, provide 60 to 80% of freshwater and shelter a rich cultural heritage [1, 2, 3, 4, 5]. in europe, mountain areas cover approximately 18.5% of the total land surface [6]. in italy, they comprise 43.7% of the municipalities and 58.2% of the national territory [7]. approximately, two-thirds of the economic activities in european mountain areas rely on the primary sector, including mountain farming [6]. agriculture in mountain areas is characterized mainly by family and small-scale agriculture [8, 9]. this type of farming plays an important role in supporting sustainability and promoting food security and economic development [10]. their importance from an ecological and socioeconomic point of view does not exempt mountain areas from facing challenges. the hard-living conditions and the economic dynamics can induce farming exit, contributing to the ageing of the farm population and agricultural abandonment [11, 12, 13, 14]. moreover, due to the isolation of mountain areas, the topography, the climate and short growing seasons, mountain farming faces higher production costs compared to lowlands [6, 15]. since the 1970s, the european commission has designed policies to address the challenges faced by mountain communities – as well as other communities located in the “areas facing natural or other specific constraints” [16, 17]. in the last three decades, the approaches adopted by some of such policies have favoured the valorisation of local resources to stimulate “conservation through consumption” [18, 19]. in this context and as a result of the efforts headed by the euromontana association, the european commission published rules to regulate the use of the term “mountain product” (regulation eu n. 1151/2012 and delegated act eu n. 665/2014). accordingly, the term – and the label created by each member state – can only be applied to food products intended for human consumption whose raw materials and animal feedstuffs come essentially from mountain areas. besides, the processing plants must be located within these areas. although representing a relevant step towards the institutionalisation of a market for mountain food products in europe, the european legislation does not contemplate the application of the term “mountain product” to wines produced in mountain areas. the inclusion of wine among the products suitable to use the term “mountain product” could benefit several mountain regions – in italy, romania, portugal, greece, slovenia, cyprus, spain and france – in which wines and grapes are relevant agricultural products [6]. for example, in 2018, in south tyrol, a mountain area located in the italian alps, the figure 1. wine labels from italy appealing to the mountainous origin. source: (a) [22], (b) [23]. 17assessing preferences for mountain wine and viticulture wine sector employed about 10,000 people, and around 5,000 farms were involved in viticulture operations cultivating on average one hectare each [20, 21]. besides benefiting producers in mountain areas, the possibility of applying the term “mountain product” to wines would be in line with a practice already adopted by winemakers across europe: using the mountain origin as an appeal for consumers. figure 1 displays some examples of this practice. some studies point out that consumers have a positive image of food produced in mountain areas. for them, mountain food products evoke purity, health, authenticity and simplicity [24, 25]. from the market side, the global consumer trends report [26] stated that there has been an increasing interest of some consumers in wines that are sustainably produced. in italy, the market for this type of wines increased by 34% from 2015 to 2016 [27]. furthermore, a review of 34 studies on consumers’ perceptions, preferences and willingness-to-pay for wine with sustainability characteristics confirmed these trends and showed that implementing sustainability-oriented marketing actions may be a promising strategy for quality differentiation of wines [28]. product differentiation through quality certification schemes may also contribute to preventing free-rider problems and information asymmetry in the market [29]. considering that consumers cannot easily identify mountain products in the market [9, 24], the application of the mountain labelling scheme to wines may facilitate the identification of the “authentic” mountain wine. in addition, it can contribute to avoiding the misuse of mountain imagery and wording by producers that are not producing in mountain areas [6]. previous studies have already shown how mountain cheese producers, within the same consortium, use the european label “mountain product” to avoid free-riding on product quality by producers from the lowlands [30]. due to the exclusion of wines from the mountain labelling scheme, this possibility is not given for wine producers from mountain areas. despite these pieces of evidence in favour of including wines in the mountain labelling scheme, little is known from the consumer side. the literature on consumers opinion, preferences and willingness to pay for wines and sustainable wines is extensive (e.g., 31, 32, 28, 33, 34, 35, 36, 37, 38, 39). concerning wines produced in mountain areas, little is known. the majority of the studies focused on the production side for instance, michael et al. [40], zottelle et al. [41], verdenal et al. [42], stanchi et al. [43], caffarra and eccel (2013), guimarães and magalhães [45]. a study with german consumers and producers indicated potential in obtaining a price premium for wine produced in steep slope [46]. being part of a broader research project, the current study builds upon the findings of a previous exploratory study [47]. the latter employed a qualitative design and confirmed the interest of italian consumers in wines produced in mountain areas. furthermore, the authors identified eight main attributes by which italian consumers associated wines and viticulture in mountain areas (see table 1). remarkably, only a few are directly connected to the mountain environment. however, the mentioned study does not analyse the importance of each attribute for consumers letting open the question on how mountain attributes scores in relation to all attributes tested. a better understanding of consumers preferences and opinions regarding wines produced in mountain areas is of utmost importance for the debate on the inclusion of wines in the mountain labelling scheme as well as to help farmers and managers in the design of marketing strategies. against this background, the objectives of this study are twofold: (1) to assess the preferences of italian wine consumers concerning the attributes associated with wine from and viticulture in mountain areas thus comparing the mountain attributes among the other attributes afore mentioned; (2) to segment the market based on their preferences to identify customer groups for mountain wines. to do so, an online survey with italian participants was undertaken using a (a) best-worst scaling method to rank preferences for the mountain wine attributes mentioned before, and a (b) latent class analysis to segment participants according to their preferences. segments are further described using consumption behaviour and sociodemographic data. 2. research design and method 2.1. best-worst scaling model the best-worst scaling model (bws) is a stated preference method and was designed by louviere and woodworth [48] based on the method of paired comparisons introduced by thurstone [49, 50] and the mcfadden’s studies on economic choice theory, use of psychometric data and conjoint experiments [51]. also called maximum difference scaling [52], some authors classify best-worst scaling as a variant of discrete choice experiments [53]. the best-worst scaling model is designed to measure individual’s relative preferences in relation to a set of items. individuals are asked to choose the best (or most important) and the worst (or least important) item among a set of items. the main idea is that the individ18 mikael oliveira linder et al. ual’s decision is the result of a comparison of differential utilities in a set of items. like in the theory of random utility [54], in bws an individual’s utility is a latent dimension composed of an observable component (v) and an unobservable or random component (ε) (1) [55]: uij = vij + εij (1) uij is the utility an individual i is assumed to obtain from alternative j in a specific set of items. vij is the observable component of utility, held by individual i for item j, while εij is the random component utility. in bws, each component v (2) and ε (3) is a result of the difference between the best and the worst items: vbw = vb – vw (2) εbw = εb – εw (3) the observable components (v) in this study are the wine attributes shown to the participants in a task (choose the most and least important attribute in a set of items). the bws model assumes that the probability of an individual selecting a pair of attributes (best and worst) is proportional to their distance on the latent dimension (in this case, the latent dimension is the utility) [55]. so, the utility (4) and the probability (5) equations can be written like the following: dbw = vbw – εbw (4) p(bw|c) = p(vbw – εbw > vij – εij) (ij) ≠ (bw) (5) in equation (4), dbw is the distance between the best and the worst items, which cannot be observed directly. in equation (5), p is the probability, and c is the subset of items (task). as observed by krucien [55], it is impossible to determine if the difference in the observable component is greater than the random component because the latter is not observable. louvière et al. [56], suggest a multinomial logit model to explain the probability that an individual n chooses item j as best and j’as worst among a set of items (j): 𝑃𝑃 = 𝑒𝑒𝑒𝑒𝑒𝑒&𝛽𝛽!𝑋𝑋′!" − 𝛽𝛽!𝑋𝑋′!"$ , 𝛴𝛴" %"$ ","!∈( 𝑒𝑒𝑒𝑒𝑒𝑒&𝛽𝛽!𝑋𝑋′!" − 𝛽𝛽!𝑋𝑋′!"$ , (6) in equation (6), the item selected as best is coded as 1. the item not selected by the individual is coded as 0. and the item marked as worst is coded as -1. x’nj is the observable explaining variable. the parameter βn is the individual-specific preference of an individual n. the results of the bws model provide an importance score which represents the utility of each item for each individual – thus revealing the most important mountain wine attributes according to consumers preferences. it allows to further analyse preference heterogeneity using latent class analysis. this method helps to detect consumer segments according to their preferences [57]. 2.2. best-worst experiment and questionnaire design the questionnaire was divided into four main parts: (part 1) individual food consumption behaviour; (part 2) eight attributes of mountain wine based on the afore mentioned study [47] (see table 1); (part 3) general attitudes towards labelling and mountain food; and (part 4) participants’ socio-demographics. the survey was set up using sawtooth lighthouse studio software. the individual food consumption behaviour encompasses questions on consumption habits and individual motivations. 23 questions from an adapted version of the food choice questionnaire developed by pieniak and colleagues [58] were used. answers could be given on 5-point likert scales. the bws experiment followed a balanced incomplete block design [59]. it consisted of the sequential presentation of eight sets of four attributes. the attributes tested in this research were taken from a previous qualitative study [47] whose objective was to identify the main characteristics associated by italian consumers to wines produced in mountain areas. table 1 shows the attributes extracted from the mentioned study and used in the bws experiment: the eight attributes were transformed into sentences to make the experiment easier for the respondents. at each task, participants were asked to select the most and the least important attribute. figure 1 below contains an example of a task. to assure attribute frequency balance (i.e., each pair of attributes appears within the same set across the experiment) and attribute positional balance (i.e., the attributes appear approximately an equal number of times in each position), the attributes were randomized by the software algorithm [60]. the section on general attitudes towards labelling and mountains included questions on the definition of mountain areas and whether the participants read labels when buying food. besides, participants were also asked to define to what extent they consider themselves to be mountain food consumers and how much they agree 19assessing preferences for mountain wine and viticulture with the inclusion of wines in the mountain labelling scheme. the demographics section encompassed questions regarding income, age, gender, household size, education, and city of residence – including whether respondents live in a mountain or non-mountain area, in an urban or rural area. the questionnaire was designed in english and it was translated into italian using back-translation [61]. the questionnaire was pre-tested with 81 participants from the autonomous province of bolzano, italy. considering that no participant reported problems in understanding and completing the questionnaire, no changes to the questionnaire were made after the pre-test. 2.3. data collection and pre-treatment data were collected through a self-administered online survey from an italian consumer panel. the questionnaire was designed using sawtooth lighthouse studio (version 9.8.1) and sent to the respondents across italy by the consumer panel provider. the data collection took place between january and may 2020. for a research topic that is still in its infancy an exploratory design is suggested. therefore, we opted for a quota sample which was representative of the italian population in consideration of age and gender. the author(s) established the quota, whereas the sample was delivered by a professional panel company. it is important to highlight that the sample includes only wine consumers. to improve data validity, speeders as well as those who did not fulfil the requirements such as participants under 18 years of age and/or people that do not consume wine were filtered out [62]. to define the final sample, the respondents who completed the questionnaire underwent a second control based on the root likelihood (rlh). the rlh is a probability expression of the goodness of fit of the data (in this case, the utility scores) in predicting which items respondents choose [60]. the highest value for the rhl is 1. the lowest is obtained by dividing the total number of items per task by the maximum value (1). in this study, the minimum rhl value is 0.25. we obtained it by dividing the maximum rhl possible (1) by the number of items per task (4) [60]. we then excluded 111 respondents whose rhl was below the minimum value. the final sample size is 973 respondents. table 1. attributes italian consumers relate to wines and viticulture in mountain areas. wines produced with grapes from small farms¹ wines with delicate aromas and flavours² vineyards located in high altitudes or terraces³ wine produced with less additive⁴ limited production volume⁵ less mechanization/more manual labour⁶ wines produced only with autochthonous grapes⁷ viticulture and wine production contribute to preserve the mountain environment⁸ source: author et al. [47]. for ease of reading, we use shorter formats of these attributes throughout the text as follows: ¹small farms, ²delicate aromas and flavours, ³high altitudes or terraces, ⁴less additive, ⁵limited production, ⁶manual labour intensive, ⁷autochthonous grapes, ⁸sustainable viticulture. figure 2. example of best-worst scaling task used in the study. source: own elaboration. 20 mikael oliveira linder et al. 2.4. best-worst scaling analysis the best-worst scaling model generates discrete data that can be analysed trough different methods [63]. hierarchical bayesian multinomial logit (hb mnl) was used for analysing data in this study because it provides a more accurate estimate compared to the standard count analysis and mnl. according to orme [63], hb mnl offers a better solution, as it can generate estimates combining information at the individual level and data from other respondents in the sample. the analyses generate a utility score which can be reported in three different ways: (a) raw utility scores that are the average utility value of each attribute; (b) probability scales, also known as rescaled importance scores (0 to 100 scaling), are ratio-scaling, meaning that a score of 10 is twice important as a score of 5; and (c) zero-anchored interval scales that represent the normalized raw utility score in which the scores have a mean of zero and a range of 100 [60]. to facilitate data interpretation, we report the results using the probability scale. 2.5. latent class analysis and characterization of the classes the latent class analysis is performed using sawtooth lighthouse studio software (version 9.8.1). the latent class analysis identifies clusters (or segments) with differing preferences and estimates part worths (utilities) for each segment [64]. each class is composed by respondents with similar preferences regarding the attributes of the best-worst scaling model. in other words, instead of calculating the utilities for each participant, latent class looks for respondents with similar preferences and then calculates the average utilities within the clusters [64]. we use the probability scale/ rescaled score (0 to 100) for the formation of the clusters. in this regard, it is important to highlight that there is no respondent who fully belongs to a single cluster. each respondent is assigned a probability of belonging to different groups according to their preferences. to characterize the segments and test for differences among them, one-way analysis of variance (anova) with post-hoc tests (tukey and tamhane) and cross tabulation with chi-square and standardized residuals were carried out. the analyses were performed using ibm spss statistics 25. 3. results 3.1. descriptive demographic statistics table 2 shows the description of the sample concerning the socio-demographic characteristics. the sample is representative concerning the italian population in terms of gender and age, and includes only wine consumers. the higher level of education of the sample can be explained by the skewed characteristics of the panel participants – because internet users do not necessarily represent the population [67]. moreover, in italy, internet access is greater among people with higher education [68]. the household size at the sample level is slightly smaller compared to the italian population. comparatable 2. sample description. gender sample n = 973 (%) italian population (%) male 50.70 48.43 female 49.30 51.57 age 18-29 15.00 14.61 30-44 22.60 23.22 45-59 27.70 27.78 60+ 34.60 34.37 education primary school 6.00 19.51 middle school 10.80 30.03 high school 56.00 30.71 c university degree or higher 32.60 10.78 residence location rural area a 28.0 24.00 urban area b 72.00 76.00 mountain 10.00 23.54 d non-mountain 90.00 76.46 household members 1 10.30 12.97 2 33.40 22.55 3 26.10 24.82 4 or more 30.20 39.67 a municipalities with low degree of urbanization according to eurostat [65] (istat, 2019). b municipalities with medium or high degree of urbanization according to eurostat [65]. c includes non-university tertiary diplomas of the old system and a.f.a.m. d based on the data from 2015 [66]. source: own elaboration based on istat [65] and fondazione montagna italia [66]. 21assessing preferences for mountain wine and viticulture tively, while at the sample level there is a greater number of respondents living with one person more, at the population level households with four or more people are more numerous. table 2 shows that only one-ninth of the interviewees live in a mountain area in contrast with almost a quarter at the population level. 3.2. general ranking of attributes the aggregate average importance scores are displayed in table 3 (importance score, 0 to 100 scaling): the results indicate a prevalence of three attributes that are associated with health (“less additive”), sustainability (“sustainable viticulture”) and typicity/terroir (“autochthonous grape”). together they add up to more than 60% of the total importance score. some characteristics related to mountain viticulture and mountain areas such as the mountain landscape (“high altitudes and terraces”), the intensive need of manual labor, limited production and production in smalls farms are less relevant at the sample level. 3.3. results of the latent class analysis in the latent class analysis, a three-class solution was chosen by observing the most used information criteria (percent certainty, aic, bic, log-likelihood and relative chi-square) (table 4). the most important attributes for each segment coincide with the three most important attributes at the sample level. segments 1 and 2 have at least one attribute with a very high score whereas segment 3 displays preferences more evenly distributed among all attributes 3.4. description of clusters by looking at the importance scores (table 4) and the segment describing variables (tables 5 and 6), in the next section the three segments are described. for ease of readiness, only statistically significant findings from the food choice questionnaire are displayed. segment 1 (naturalists): this group constitutes the most numerous segment containing approximately 37% of the respondents. it is also the group with the highest percentage of older people – closely followed by segment 2. its members place a high value on healthy eating and natural foods [69], that is, foods without additives and artificial ingredients, and with natural ingredients (table 5). this importance given to natural foods seems to be extended to wines as well. respondents falling into this segment show a high preference for mountain wines with fewer additives. although to a lesser extent, their members are also concerned with sustainability of viticulture that is in second place in their preferences. this group gives the greatest relative importance (among all groups) to the item delicate flavours and aromas. this difference is particularly marked in relation to group 2. table 3. ranking of attributes at sample level. item (attribute) rank importance score (0 to 100 scaling) less additive 1 24.45 sustainable viticulture 2 21.69 autochthonous grape 3 20.96 delicate flavours and aromas 4 8.17 small farms 5 7.30 manual labour intensive 6 6.70 high altitudes and terraces 7 5.62 limited production 8 5.11 source: own elaboration. table 4. characterization of the segments based on the clustering variables 0 to 100 rescaled importance score. variables segment 1 n = 359 (36.9%) segment 2 n = 329 (33.8%) segment 3 n = 285 (29.3%) total n = 973 less additive 31.91 24.92 12.72 24.45 sustainable viticulture 20.91 26.10 14.52 21.69 autochthonous grape 19.20 23.53 17.03 20.96 delicate flavours and aromas 13.18 2.05 12.53 8.17 high altitudes and terraces 4.05 4.23 10.17 5.62 small farms 3.91 7.62 12.79 7.30 manual labour intensive 3.71 6.16 11.00 6.70 limited production 3.08 5.36 9.21 5.11 fit criteria of the 3-class solution: log-likelihood = -17334.5, percent certainty = 19.7, aic = 34715.0, bic = 34891.1 chi-square= 8494.6. source: own calculations. 22 mikael oliveira linder et al. although the segment 1 members do not see themselves as consumers of mountain food products, they are the ones most leaned to support the inclusion of wines in the mountain labelling scheme. segment 2 (sustainability-driven): members of this segment represent about one-third of the sample. it is the group with the highest proportion of female respondents. like segment 1, this group also has a high proportion of elderly people and value food naturalness. nevertheless, they seem to give less importance to the relation between food and health than segment 1 members. regarding the preferences of group 2, viticulture that plays an active role in the preservation of the mountain environment is of importance for its members as they placed sustainable viticulture first. the other attributes valued by members of this segment are wines produced with ‘less additive’ and the use of ‘autochthonous grapes’ by mountain winemakers. sensory characteristics and the mountain setting seem to be relatively less important recalling the traditional aspects of mountain agriculture (e.g., higher altitudes, terraces, limited production). however, they tend to support the protection of wines by the regulation on mountain food products. segment 3 (terroir-driven): the smallest of the segments, with 29.3% of the sample, is also the group with the highest percentage of younger respondents (1844 years old) and highest proportion of males. natural food tends to be valued by the members of this segment, but to a lower degree if compared to the other two segments. in their daily meals, they tend to repeat their food choices (“is what i usually eat”) and eat food that is familiar to them. about the consumption of mountain products and the current definition of mountain areas, respondents from this group scored higher than the othtable 5. food consumption behaviour, attitudes towards labelling, mountain area definition, and mountain food mean responses by segment and total sample. variables segment 1 n=359 (36.9%) segment 2 n=329 (33.8%) segment 3 n=285 (29.3%) total n=973 food consumption behaviour it’s important to me that the food i eat on a normal weekday:1 is good valuer for money* 4 4.23 c 4.19 4.07 a 4.17 is easy to plan, buy and prepare* 4 4.04 b 3.88 a, c 4.01 a 3.98 contains natural ingredients*** 4 4.29 c 4.27 c 4.11 a, b 4.23 contains no artificial ingredients** 3 4.21 c 4.18 c 4.01 a, c 4.14 contains no additives*** 4 4.27 c 4.18 4.04 a 4.18 keeps me healthy* 4 4.38 b 4.26 a 4.27 4.31 tastes well* 4 4.57 c 4.51 4.45 a 4.52 is familiar*** 3 3.66 b, c 3.51 a, c 3.90 a, b 3.68 is what i usually eat*** 3 3.32 c 3.20 c 3.64 a, b 3.37 attitudes towards labelling, mountain area definition, and mountain food (segment means) in favour of the inclusion of mountain labels for wine***2, 4 4.21 c 4.19 c 3.96 a, b 4.13 consumption of mountain food products*** 1, 3, 5 3.10 b, c 3.25 a 3.36 a 3.23 agreement with the current mountain definition*1, 3 3.65 c 3.66 3.81 a 3.70 1 = 5-point likert scale from (1) strongly disagree to (5) strongly agree. 2 item: in your opinion, should the european commission include wine in the list of agri-food products authorized to use the term “mountain product” and the “mountain label”, if they have been produced in a mountain area? = 5-point likert-type scale from (5) definitely yes to (1) absolutely not. 3 = tukey post-hoc test was used because of no differences in variances in segments. 4 = tamhane post-hoc test was used because of differences in variances in segments. 5 item: considering a scale from 1 (not at all) to 5 (very much), to what extent do you consider yourself a consumer of mountain food products? a,b,c = letters indicate significant differences (p<0.05) between segments according to post-hoc tests. for instance. a indicates that this segment differs from segment 1 in this variable with p<0.05. ***=p<0.001, **=p<0.01, *=p<0.05 k= p<0.1 x² = chi-square. n.s. = non-significant note: the f values are in the appendix. source: own calculations. 23assessing preferences for mountain wine and viticulture er groups, especially in relation to segment 1. however, the members of segment 3 are the least leaned to accept the inclusion of wines in the mountain labelling scheme. the most preferred item concerning mountain wines and viticulture in mountain areas is the use of autochthonous grapes. it is followed by sustainable viticulture, production of grapes on small farms and wines produced with less additive. like in group 1, the attribute “delicate flavours and aromas” is also positioned with some relevance for the members of segment 3. except for “small farms”, the characteristics related to the mountain viticulture (higher altitudes, terraces, limited production) are slightly less relevant for the members of segment 3. nevertheless, they value these characteristics more than the other two groups. the difference between the most important and least important attributes is relatively small, especially when compared to the other two segments. in other words, there is not a single and very strong preference, but rather a subset of attributes with a certain degree of importance for the members of group 3. in this vein, taking the first five attributes, it is possible to link the preferences of segment 3 with the concept of “terroir” [70, 71, 72, 73]. 4. discussion do the mountains matter to consumers? when it comes to wine and viticulture, the results indicate that italians attach less importance to characteristics related to mountain farming. aspects such as landscape (“high altitude and terraces”), small-scale agriculture (“small farms”, “limited production”) and intensive manual labour received less attention in the survey. on the other hand, participants showed a higher preference for naturalness, sustainability, and tradition/typicity. these results confirm previous study findings [28, 69, 74]. looking at the segment level, some more heterogeneity can be observed. segments 1 and 2 (“naturalists” and “sustainability-driven”) showed a greater preference for more naturally-produced wines and sustainable viticulture. in the case of the “naturalists”, the high importance of health and natural food (table 5, food consumption behaviour variables) may be linked to their preferences for more attributes associated with “natural wines”. a similar relationship was found in the study of galati et al. [75], whose results indicated that a higher willingness to pay for natural wines depended on consumer attitudes towards healthy products withtable 6. socio-demographics profile of the respondents by segment and total. variables segment 1 n=359 (36.9%) segment 2 n=329 (33.8%) segment 3 n=285 (29.3%) total n=973 socio-demographic variables gender**(%) female 50.8 56.9 43.4 50.7 male 49.2 43.1 56.6 49.3 x2 = 10.964. p<0.05 residence location (n.s.) (%) rural area 27.9 28.0 27.0 28.00 urban area 72.1 72.0 73.0 72.00 mountain area 9.1 11.4 9.3 10.00 non-mountain area 90.9 88.6 90.7 90.00 age classes (n.s.) (%) 18-29 13.2 14.1 18.5 15.0 30-44 20.3 22.0 26.3 22.6 45-59 29.0 28.7 24.9 27.7 60 & over 37.5 35.2 30.2 34.6 income (net per year) (n.s.) (%) ≤ 24.000€ 35.1 30.9 31.3 32.6 24.000€ 60.000€ 46.8 50.8 49.8 49.0 ≥ 60.000€ 5.2 3.7 5.3 4.7 preferred not to answer 12.9 14.7 13.5 13.7 **=p<0.01. x² = chi-square. n.s. = non-significant. source: own calculations. 24 mikael oliveira linder et al. out additives or additional ingredients. as for segment 2, a higher interest in sustainable wines may be (at least partially) explained by the higher proportion of female respondents, confirming the findings in the review study of schäufele and hamm [28]. concerning the segment “terroir-driven”, the balanced distribution of preferences points to a probable valorisation of a subset of attributes – even though they tend to have tradition/typicity (“autochthonous grapes”) as the main consumption driver. the use of indigenous grapes, the sustainable viticulture, the small-scale production (“small farms”), the organoleptic qualities (“delicate flavours and aromas”), and the purity (“less additive”) are parts of the same whole that is attached to a territory and drives their consumption. similar conclusions arose in a cross-country study on european consumers perception concerning traditional food products [76] – which can also be called “terroir products”, “typical food”, “regional food”, “local food” [77]. in this study, italians consumers associated traditional/typical food products with many quality dimensions to a rather similar extent. in other words, italians perceive traditional food products as a very comprehensive definition, without strongly emphasizing one specific element. the preference for attributes associated with the notion of “terroir” may also be explained by the higher importance attached to familiarity, which is a common trait in consumers who are more likely to opt for traditional food products [58]. going back to the initial question (“do mountains matter?”), the results reveal that the importance of the mountain setting is not homogeneous among the segments. “naturalists” and “sustainability-driven” showed low interest in the attributes related to mountain viticulture (“small farms”, “limited production”, “high altitude and terraces”, manual labour intensive”). for the “terroir-driven”, except for “small farms”, the attributes related to mountain viticulture and mountain areas are also among the least preferred. nevertheless, the importance scores of such attributes are higher for segment 3 when compared with the results of the other two groups. in short, mountains are of some importance only for the “terroir-driven”. concerning the mountain food label, there are at least four reasons to believe that a considerable number of wine consumers would be attracted by certified wines produced in mountain areas. firstly, most participants of this study are in favour of the inclusion of wines in the mountain labelling scheme. secondly, the most important attributes in the case of wines and viticulture in mountain areas may evoke characteristics consumers associate with mountain food products, such as simplicity, purity, healthiness and authenticity [24, 25]. in this way, from one hand, wines produced with “less additive” and “sustainable viticulture” may relate to simplicity, purity and health. on the other hand, autochthonous grapes may represent authenticity. and finally, the markets for sustainable wines and qualified food products are increasing [28, 78]. given the reputation of mountain wines and viticulture, certifying their quality and origin with the mountain labelling scheme could provide mountain winemakers with an excellent opportunity in these growing markets. from these perspectives, it is plausible to think that the application of the mountain food label to wines may increase consumer purchase interest. based on our findings, both marketing and production strategies should be tailored according to three types of wine consumers: the naturalists, the consumers of sustainable wines, and the “terroir” wine consumers (consumers of traditional and typical products). for the first group, mountain winemakers should focus on the production and marketing of wines with less additive (e.g., less or no added sulphites) as well as other types of winemaking process based on the principles of natural winemaking [75]. for the “sustainability-driven”, the graphical and textual information should highlight mountain viticulture practices that contributes to the restoration and/ or conservation of the mountain environment. for instance, the use of local grape varieties and its effects in terms of agrobiodiversity enrichment, the reduction of pesticide and fungicide usage and the positive effects for the water resources. using other certification schemes, such as organic and biodynamic may also contribute to market mountain wines for this segment. for the “terroir-driven” segment, mountain wines must be accompanied by graphic and textual information showing the direct connection between the product and the mountain territory. in this respect, it would be advisable to highlight the sensory characteristics and uniqueness of production that derive from the peculiar environment conditions, the use of local grape varieties and small-scale production. 5. conclusions prior work on wine has focused on sustainability aspects of wine but neglecting consumers preferences for wine produced in mountain areas. in this work, the authors have conducted a quantitative study using the best-worst scaling model and latent class analysis. further, they have derived a ranking of eight attributes which the relative importance of attributes associated 25assessing preferences for mountain wine and viticulture to ecological sustainability (“sustainable viticulture”), natural wine processing (“less additive”) and typicity/ terroir (“autochthonous grape”). their findings also provide a basis for marketing strategies that emphasize the origins of products and can help policy makers to develop national wine policies. results of this study contribute to enrich the knowledge of the research community on consumer preferences for wines produced in mountain areas. in addition, findings can be useful for policy-makers who may want designing sustainable development strategies in mountain areas in line with consumer expectations on mountain farming and viticulture. all in all, a mountain certification scheme appears to be useful to capture the positive reputation of mountains. if it is not feasible to extend the mountain labelling-scheme to wines, mountain wine producers should market their wines in combination with those food products that are allowed to use the eu label “mountain product” in their packaging. the challenge to wine producers from mountain areas is threefold: · lobbying actions to include wines in the mountain labelling scheme; · catching consumers’ attention without generating information overload; and · improving viticulture and wine production by adopting more sustainable practices. as an avenue for further research, it would be interesting to employ a quantitative approach to measure revealed preferences regarding wines produced in mountain areas. for instance, calculating the wtp for wines produced in mountain areas by using hypothetical or non-hypothetical designs such as experimental auction. this study has some limitations. although the eight attributes of the bws experiment were retrieved from a previous qualitative study, some more attributes could have been tested such as taste, price, alcohol level, use of wild yeasts, organic viticulture, territorial brands etc. moreover, during the development of this study, the italian government approved a new labelling scheme for wines produced in harsh environments (small islands, mountains and steep slopes). testing the attributes established by this new regulation would be useful to the development of a european mountain labelling scheme for wines. given that the participants of this research are exclusively from italy, it is advisable to be cautious in 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(2020). economic value of eu quality schemes, geographical indications and traditional specialities guaranteed. report. luxembourg: european union, 144p. 29assessing preferences for mountain wine and viticulture appendix f values – variables from table 5. f = “is good value for money” =3.97, f = “is easy to plan, buy and prepare” =4.57, f = f = “contain natural ingredients” =7.02, f = “contain no artificial ingredients” =5.35, f = “contain no additives” =7.00, f = “keep me healthy” =3.36, f = “tastes well”=3.20, f = “is familiar” =18.13, f = “is what i usually eat”=20.72, f =” in favour of the inclusion of mountain labels for wine”= 9.71, f = “consumption of mountain food products” = 2.86, f = “agreement with the current mountain definition” = 3.14 source: own calculations. wine economics and policy 10(2): 15-28, 2021 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/wep-10384 wine economics and policy citation: federica cisilino, fabio a. madau, roberto furesi, pietro pulina, brunella arru (2021) organic and conventional grape growing in italy: a technical efficiency comparison using a parametric approach. wine economics and policy 10(2): 15-28. doi: 10.36253/wep10384 copyright: © 2021 federica cisilino, fabio a. madau, roberto furesi, pietro pulina, brunella arru. this is an open access, peer-reviewed article published by firenze university press (http:// www.fupress.com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information files. competing interests: the author(s) declare(s) no conflict of interest. organic and conventional grape growing in italy: a technical efficiency comparison using a parametric approach federica cisilino1, fabio a. madau2,*, roberto furesi2, pietro pulina2, brunella arru2 1crea – council for agricultural research and economics research centre for agricultural policies and bio-economy c/o university of udine, via delle scienze 206, 33100, udine (italy). email: federica.cisilino@crea.gov.it 2department of agricultural sciences university of sassari, viale italia 39/a, 07100 – sassari (italy), email: famadau@uniss.it; rfuresi@uniss.it; ppulina@uniss.it; brarru@ uniss.it *corresponding author. absract. several studies have focused attention on the differences between organic and conventional farms in terms of efficiency, and controversial findings have resulted from these applications. one source of controversy concerns the assumption about the frontier(s) adopted for the comparison: a common frontier or two separate frontiers for organic and conventional methods? this paper aims to estimate technical efficiency in italian grape farming. a stochastic frontier analysis (sfa) was applied to a sample of 531 farms (440 conventional and 91 organic farms) collected from the farm accountancy network database. among others, a test for evaluating whether a unique or separate frontier was performed. the findings suggest that organic and conventional farms would lie on a common frontier and that organic farms have greater capacity than conventional farms in using their technical inputs (efficiency amounts to 83.6% and 77.8%, respectively). several implications derive from these findings. keywords: stochastic frontier analysis, technological homogeneity, inefficiency sources. 1. introduction organic farming is a well-established reality in europe, where it has been regulated since 1991. one of the most debated topics in this field consists of measuring organic and conventional agriculture’s technical and economic performance [1] to highlight similarities and differences. comparison between organic and conventional farming is a very interesting field of research where different approaches have been adopted to find out differences between the two systems mainly to compensate for organic farming additional costs and income foregone. the assumption is that the organic method discounts a gap on the production level compared to conventional agriculture [2,3]. 16 federica cisilino et al. this paper tries to give evidence of the effective differences in terms of technical efficiency in using inputs by farms as controversial findings have been found on this topic. the analysis is focused on the european grape-growing sector since the relevance of the organic wine sector and because the european union (eu) accounts for 49% of the world grape-growing area [4]. italy is the country that devotes the larger land in the world to organic grape-growing [5]. specifically, italian organic vineyards covered about 110k hectares (23% in conversion), corresponding to 15.5% of the total world organic vineyards area [4]. estimating differences in grape-growing productivity is a crucial issue for better addressing policies and strategies in the sector. at the same time, assessing the role of efficiency in affecting production would provide useful information for understanding if the gap that organic grape-growing pays is only attributable to different productivity – therefore to the adoption of a less performing technology than the conventional one – or, vice versa, to another ability in using the inputs bundle. this paper aims to provide a comparative analysis between italian organic and conventional farms by estimating productivity and efficiency to confirm if a real difference in productivity exists and to evaluate the role of efficiency in affecting observed production level. this paper also tackles the debate on the typology of frontiers that must be used to compare organic and conventional farms. the question turns on the consideration of organic and conventional orientation as two different techniques within a single technological horizon or, conversely, as two different technologies that, in turns, refer to two different types of agriculture that are not directly comparable. in this context, some conceptual and methodological problems arise and should be addressed: a) firstly, the risk is to consider systems that are not homogeneous from a technological or organisational point of view because organic farming is developed on well-defined production processes and use of technical inputs; b) secondly, conventional agriculture can be considered as a jumble of a plethora of agronomic techniques, some of them very close to the organic method, and it is difficult to trace back to a well-defined technical-production paradigm. regarding the latter aspect, conventional agriculture can be understood as the most widespread practice in each territory or, conversely, all alternative techniques to the organic method can be included in this category [6]. the answer to this question has pivotal implications. in the first case, due to the use of the same frontier for the two orientations and thus the possibility of directly comparing them, any different productivity levels are mainly determined by inefficiencies rather than by actual technological gaps. conversely, the two measures are not comparable in the second case because of the difference in productivity derived from both inefficiencies and the different technology adopted by the two production orientations. this implies that the efficiency measure must be related to specific production frontiers, one for the organic method and one for the conventional one. the remainder of this paper is organised as follows. section 2 provides a review of the literature on efficiency estimation between organic and conventional agriculture and some information on the organic wine market. the research methodology and sample description are illustrated in section 3. section 4 shows the research results and discussion, and section 5 concludes our paper, outlines the implications for practitioners, academics, and policymakers, and makes recommendations for future research. 2. background using an efficiency analysis, the manuscript aims to fill the gap in the current literature. in fact, although numerous studies have appeared on wine grape farms in other geographical contexts, these efficiency analyses have been applied without distinguishing between organic and conventional farming [7–12]. concerning this sort of comparison research between organic and conventional wine grape farms, some controversial pieces of evidence have been provided by bayramoglu and gundogmus [13] on the turkish sector, tzouvelekas et al. [14] on grecian farms, and guesmi et al. [15] regarding spain. furthermore, aldanondo-ochoa et al. [16] analysed environmental and economic efficiency in the spanish sector. previous studies on organic farming have focused on the relationship between environment and competitiveness and the different use of resources between organic and conventional farms that green approaches could produce in terms of efficiency [17,18]. other scholars have put attention on the comparisons related to production practices, yields and economic performance [2,3,19,20] or again on profitability [21]. other recent studies have used meta-analysis to compare different countries’ situations by implementing various methods and approaches, which gave evidence of the environmental and economic comparisons [22–25]. still, some studies have assessed the agri-environmental schemes and organic measure impact of rural development policies [26–29]. particular attention has been paid to estimating the technical and economic efficiency [30–34], and out of which conflicting results have 17organic and conventional grape growing in italy: a technical efficiency comparison using a parametric approach emerged. on the one hand, studies focused on farm technical efficiency analysis – applying parametric or non-parametric techniques – have analysed both desirable and non-desirable outputs (ex. pollution) in different crop productions. these studies showed that it is not so evident that organic farms are less profitable and/or less efficient than conventional ones. lansink et al. [35] compared crop and livestock farms in finland, finding that organic crop is more efficient than conventional farming considering capital, land, labour, energy as inputs and the revenue as output. a study on the coffee sector in nepal [36] found that organic farms are more efficient than conventional ones in terms of production, inter/ shade crops, considering farm size, capital, labour cost, fertiliser and plant protection as inputs. tzouvelakas et al. [37], analysing the olive sector in greece applying a stochastic frontier analysis (sfa), found that organic crop is more efficient than conventional farming. on the other hand, the data envelopment analysis (dea) technique applied on the studies of damara et al. [38], alkahtani and elhendy [39], beltránesteve and reig-martínez [40], confirms the greater efficiency of conventional farms respectively as production, total revenue and sales are concerned. in the same vein, madau [34] and serra and goodwin [41], using the sfa to analyse the cereal sector in italy and spain, respectively, concluded that conventional farms are more efficient in terms of income and production terms. kramol et al. [42] analysed the efficiency of vegetable farms in thailand, considering the revenue as the output variable, finding that conventional farms are more efficient than organic ones. tiedemann and latacz-lohmann [43] concluded the same for a group of arable farms in germany. a two-stage dea approach was performed to compare organic and conventional rain-fed cereals in spain [44]. the results show that organic farms are more efficient in term of input consumption and ghg emissions. a local maximum likelihood (lml) approach was proposed by guesmi et al. [15] to compare the efficiency levels of organic and conventional farms in egypt. they found that results are slightly better for organic farms. organic farms in switzerland, austria and southern germany were analysed by lakner et al. [45] starting from the perspective of diversification and multifunctionality. they found that the benefits and drawbacks of diversification by applying a stochastic frontier combined with a metafrontier analysis estimating the effects on both productivity and efficiency. concerning the analysed sector, the wine market has traditionally represented an important and strategic segment of the eu agri-food system and, since the beginning of the eu common agricultural policy (cap), the wine sector policy has undoubtedly enjoyed a particular treatment [46–49]. italy is the eu leader in terms of wine market (47,5 mhl) – followed by france (42,1 mhl) and spain (33,5 mhl) – and varieties included in the vineyard register (504), and production is well oriented to bulk wines and premium certified types, specifically pdo wines. in this context, a remarkable role is played by organic production, which is constantly increasing in terms of the market and investments – this market is worth approximately 90 billion dollars worldwide [50] – and has highlighted growth that affects both demand and supply. consumers look for healthy, environmentally friendly and safe wines, while producers aim at valid and marketable alternatives to conventional production to satisfy consumer demand [51–57]. consumers with hedonistic and environmental protection values and beliefs would have a higher propensity to purchase organic wines [58,59]. moreover, previous studies showed that the environmental benefits of organic wine production push consumers willing to pay more for it [54,57,60]. fanasch and frick [61] found that “organic practices are a credible signal for consumers, inducing them to pay a price premium” [61] (p. 20). concerning the organic certification, abraben et al. [62] found that it exerts a positive effect on the price of low-quality rating wines, and this effect diminishes with increasing wine quality, till becoming penalising for higher quality wine. according to ruggeri et al. [63], consumer attention and the wtp for certifications vanish when there are indications of the high quality of wine as the perception of high wine quality may generate less willingness to pay for more eco-certifications. moreover, organic certification appears less important in the high-price segment than self-declaration [61]. lim and reed [64] research revealed a greater wtp for ecolabels of wines from less-prestigious regions rather than wines from higher-prestige regions, besides a greater wtp for organic wine than sustainable wines. preferences for organic wine are affected by sociodemographic and attitudinal variables [63]. previous literature identifies the most frequent demographic characteristics of organic consumers: persons with higher incomes [e.g. 65–67], living in urban areas [e.g. 56,68], millennials and young adults [69,70] and women [e.g. 55,56,67]. but also the frequency of consumption [66], wine education [63] and knowledge degree of the labels [63,71]. therefore, as eco-labelled products, organic wines allow wine producers to sell products with higher added value than conventional wines and will enable them to stay competitive in an increasingly globalised market. 18 federica cisilino et al. 3. materials and methods technical efficiency (te) is defined as the measure of the ability of a firm to obtain the best production from a given set of inputs (output-increasing oriented) or, vice versa, as the measure of the ability to use the minimum feasible amount of inputs given a level of output (input-saving oriented) [72,73]. in these terms, technical inefficiency is defined as the degree to which firms fail to reach optimal production. different methods have been proposed in the literature to estimate te and its related measures. in this study, a stochastic frontier analysis (sfa) approach was adopted. a parametric approach was preferred to the non-parametric approach because of three inherent abilities: first, the possibility of including in a unique model the production frontier and the inefficiency models; second, the ability to estimate the input elasticities directly; and third, the possibility of testing the more appropriate function that describes the production process. in the sfa model, the production frontier is specified, defining output as a stochastic function of a given bundle of inputs. this approach means that the error term e may be separated into two terms: a random error and a random variable explanatory of inefficiency effects as follows. yi = f (xi, ß) • exp (ε) and ε = (vi ui) i = 1,2,…n (1) where yi denotes the level of output for the i-th observation; xi is the row vector of inputs; ß is the vector of parameters to be estimated; f (.) is a suitable functional form for the frontier; vi is a symmetric random error assumed to account for measurement errors and other factors not under the control of the firm; and ui is an asymmetric nonnegative error term assumed to account for technical inefficiency in production. the mle (maximum likelihood estimation) of (1) allows us to estimate the vector ß and the variance parameters σ2 = σ2u + σ2v and γ = σu / σv; where g varies between 0 and 1. consequently, tei = exp(-ui), and the frontier production is calculated as its observed production divided by its tei value. some authors have proposed a one-stage method that permits contextual estimation of the inefficiency effects caused by factors that affect efficiency, assuming that inefficiency effects (ui) are expressed as a function of a vector of observable explanatory variables . specifically, battese and coelli (1995) adapted these models and proposed an approach where the inefficiency term ui has a truncated (at zero) normal distribution with mean mi: ui = mi + wi and mi = z (zi, δ) i = 1,2,…n (2) where wi is a random error term that is assumed to be independently distributed, with a truncated (at –mi) normal distribution with mean zero and variance σ2; z is the vector (mx1) of the zi firm-specific variables of inefficiency; and d is the (1xm) vector of unknown coefficients associated with zi. in this way, we can estimate inefficiency effects arising from the zi explanatory variables. the model adopted by battese and coelli [77] was used in this study. data description the information used was collected from cross-sectional data of italian specialised grape-growing farms. specifically, we analysed 531 farms that participated in the official farm accountancy data network (fadn) during 2017. the dataset consists of 440 conventional and 91 organic farms. all the selected organic farms were in the maintenance phase. however, we excluded farms with less than 40k euros of gross farm revenue (gfr) from the sample to limit the risk of considering too small and not very market-oriented activities. a summary description of the sample is reported in table 1. it must be emphasised that farms were included with different inputs and capital endowments. the choice depends on the need for estimating the possible difference in productivity in the sample and, more precisely, whether switching from conventional to organic in italian grape growing affects productivity. in other words, we estimated if conventional and organic farms lie on the same technologic horizon, or vice versa, they separately describe two production functions, each one characterised by a given level of productivity. for this reason and contrary to other studies [e.g. 34], we did not select two homogeneous subsamples of farms. for the same reason, we included both farms that produce grapes for processing pdo and gpi wine and farms that produce other wines. indeed, analytically, we estimated whether quality orientation affects productivity or, more generally, if all farms lie or not on the same technological horizon. table 1 shows that, on average, organic farms appear more productive than conventional farms. however, an empirical test would suggest whether this represents a discriminating factor for considering conventional and organic as two different agricultural methods in italian grape growing. 19organic and conventional grape growing in italy: a technical efficiency comparison using a parametric approach the functional model a translog functional form was assumed as the frontier technology specification for the farms. using the battese and coelli [77] procedure, the translog function is specified as follows. lnyi + ß0 + ∑4j=1 lnxji + 1/2 ∑4j≤∑4k=1ßjklnxki*lnxki + sm + sq + rn + rc + rs +am + ah + ap + (vi ui) (3) where the subscript i =1,2…n denotes the observation for the i-th firm and j,k = 1,2…j stand for the technical inputs used. the dependent variable (y) represents the value (in euros) of production and corresponds to the gfr. the bundle of inputs is composed by x1 is the total land area (expressed in uaa hectares) devoted to grapes by each farm; x2 is the total amount of labour (expressed in working units); x3 is the cost (euros) of capital in terms of annual depreciation; x4 represents the other variable costs (euros) supported by each farm. furthermore, we included other dummy variables that can affect grape-growing productivity and, as a consequence, determine the technological differences among farms. first, the model involves a dummy variable (sm) that considers the agronomic method practised (organic cultivation = 1; conventional cultivation = 0). the inclusion of a given variable permits us to estimate whether technological homogeneity exists between organic and conventional grape growing. in this sense, a unique technological frontier for both organic and conventional farms was assumed. the variable’s eventual estimated significant effect would suggest refereeing the analysis on separate frontiers (nontechnological homogeneity). in one case (unique frontier), possible differences in estimated efficiency by the two groups would be solely related to different abilities in using technical factors available to the farmer; in the other case (separate frontiers), efficiencies cannot directly be compared because a difference in productivity also exists. second, a variable (sq) that takes into account farm orientation towards the production of pdo and gpi wines was included (farms that grow grapes for pdo table 1. summary statistics of the collected sample. variable conventional organic total mean s.d mean s.d mean s.d value of production (euros) 196,634 420,374 240,784 378,282 204,200 413,461 land area (hectares) 18.8 26.0 32.8 39.4 21.2 29.1 labour (working units) 2.5 3.2 3.3 3.2 2.6 3.2 annual capital depreciation (euros) 13,552 20,549 22,505 45,769 15,086 26,775 variable costs (euros) 62,166 184,542 79,642 147,163 65,161 178,688 pdo and gpi (% of farms) oriented 82.4 85.0 84.6 no oriented 17.6 15.0 15.4 management (% of farms) only or mostly family workers 86.2 60.3 82.2 only or mostly wage workers 13.8 39.7 17.8 gender of farmer (% of farms) male 81.8 74.7 80.6 female 18.2 25.3 19.4 age of farmer (% of under 40) 11.4 9.9 11.1 region (% of farms) northern italy 60.7 28.6 55.2 central italy 28.4 35.1 29.6 southern italy 10.9 36.3 15.2 source: authors’ data processing on fadn data. 20 federica cisilino et al. and gpi wines = 1; any orientation = 0). according to this distinction, we would understand if orientation to this well-defined quality standard plays a role in conditioning productivity and efficiency, living aside the cultivation method (conventional or organic). finally, three dummies (0 = no; yes = 1) reflecting the geographical location of the farms (northern rn, central rc, and south rs italy) and three other variables corresponding to altimetry (mountain am, hilly ah, and plane ap) were introduced in the model. concerning the inefficiency effects, the model has the following form: uit = δ0 + δ1 zi1 + δ2 zi2 + δ3 zi3 + δ4 sm + δ5 sq + δ6 rn + δ7 rc + δ8 rs + δ9 am + δ10 ah + δ11 ap + wi (4) where z1 represents the type of farm management (only or mostly family workers = 0; only or mostly wage workers = 1); z2 represents the gender of the farmer (male = 1; female = 2); and z3 represents the age of the farmer. the other variables are identified with the same dummies that appeared in the function model, whereas wi is the error term. 4. results and discussion the production function and inefficiency parameters were estimated simultaneously using the computer program frontier© 4.1, created by coelli [78]. the preferable efficiency model a set of tests was applied to evaluate the suitability and significance of the adopted model concerning the data. all tests were carried out by the generalised likelihood-ratio test procedure, which permits evaluating a restricted model with respect to the adopted model [79]. the statistic associated with this test is defined as follows: l = -2lnλ = -2 = -2lnl(h0) lnl(h1)] (5) where l(h1) and l(h0) are the log-likelihood values of the adopted model and the restricted model, respectively. the statistical test λ has approximately a chi-square or a mixed-square distribution with several degrees of freedom equal to the number of parameters (restrictions) assumed to be zero in the l(h0) null hypothesis. if the value of λ is lower than the corresponding critical value (for α = 0.05 significance level), the null hypothesis cannot be rejected, and therefore, the preferred model would avoid these variables. the first test concerned the functional form of the function. the starting (null) hypothesis (cobb-douglas; βij = 0) was compared with the adopted hypothesis (translog). the null hypothesis was not rejected, implying that cobb-douglas can be a good representation of the data. the second test concerned the hypothesis of technological homogeneity between organic and conventional grape growing. the starting hypothesis implies that the two methods are homogenous bundles of a defined technology (sm = 0), and it was compared with the adopted hypothesis of nontechnological homogeneity between the two methods (sm ¹ 0). the null hypothesis was not rejected. therefore, the variable can be avoided in the preferred model, and as a consequence, organic and conventional grape-growing farms lie on a unique production frontier. the third test concerned the comparison between the null hypothesis of invariance with respect to quality orientation (sq = 0) and the hypothesis of variance (sq ¹ 0) a priori adopted. we found that the null hypothesis could not be rejected; hence, the preferred model is invariant to quality orientation. the fourth and fifth tests were applied to the hypotheses about the role of geographical location (r variables) and altimetry (a variable) in conditioning productivity, respectively. additionally, in these cases, the results from the two tests suggest that geographical location and altimetry would not be significant factors in describing the technology, and a common frontier can be adopted in the preferred model (without these variables). all the estimated results of the tests on the production frontier are reported in table 2. the model was re-estimated considering these findings, and the following tests of the inefficiency model were applied to the re-estimated cobb-douglas model: – if inefficiency effects (γ; δ0; δ1...δ3) are present in the model; – the stochastic nature of the inefficiency effects (presence of γ and δ0); – the presence of the intercept (δ0); – if the firm-specific factors (δ1...δ3) are present; – if the sm and sq variables significantly affect inefficiency; – if the geographical location significantly affects inefficiency; – if altimetry significantly affects inefficiency; – if each firm-specific factor is present. the results suggest that all the null hypotheses could 21organic and conventional grape growing in italy: a technical efficiency comparison using a parametric approach be rejected except for the geographical location and altimetry variables that hence can be excluded by the final model. the estimated parameters of the preferred model are reported in table 3. the production function each parameter related to the function model satisfies the monotonicity and diminishing marginal productivity properties at the point of approximation (positive signs), and it can be taken as an elasticity indicator. this finding means that capital would contribute the most to grape production in the italian sector (0.585). labour was estimated as the second most influential factor (0.371), whereas variable costs (0.121) and land area (0.085) appear to affect productivity weakly. specifically, to the latter input, the low elasticity might depend on the fact that grapes are typically grown in an intensive or semi-intensive way in the case of scarce land availability. in this sense, the land is a factor that affects production, but as estimated, it plays no relevant role in conditioning productivity. for this reason, the low amount of land contrasts with what was found in other wine grape-growing realities, where this factor was estimated to be among the factors most affecting efficiency [7,12] or in other efficiency studies carried out on (more extensive) small farms [81]. returns to scale – calculated summarising the single input elasticities – are generally increasing (1.162), implying that margins exist (approximately 16%) for improving the scale inefficiency of the grape-growing farms to increase the returns to scale. similar findings have been found in other studies on the wine grape-growing sector. regarding the south african sector, for example, townsend et  al. [82] and conradie et  al. [7] estimated that farms are too small and prevalently operate on returns to scale conditions. on the other hand, liu and lv [83], in a study on chinese wine grape farms, found that medium farms reveal a higher efficiency than smaller and larger farms. table 2. tests of hypotheses for the frontier function and inefficiency model parameters. restrictions model l(h0). λ d.f. χ20.95 decision production function none translog -97.08 h0 : bij = 0 cobb-douglas -104.71 15.26 10 18.31 not rejected h0 : sm = 0 conventional vs. organic -97.98 1.80 1 3.84 not rejected h0 : sq = 0 pdo vs. no pdo -98.33 2.50 1 3.84 not rejected h0 : rn, rc, rs = 0 geographical location -99.05 3.94 3 7.82 not rejected h0 : am, ac, ap = 0 altimetry -99.41 4.66 3 7.82 not rejected inefficiency model none cobb-douglas -105.44 h0 : g = d0; d1…d3 = 0 no inefficiency effects -112.55 14.22 4 8,76* rejected h0 : g = d0 = 0 no stochastic effects -109.01 7.14 2 5.14* rejected h0 : d0= 0 no intercept -107.88 4.88 1 3.84 rejected h0 : d1…d3 = 0 no firm-specific factors -110.41 9.94 3 7.82 rejected h0 : sm = 0 no conv vs. org. -108.82 6.76 1 3.84 rejected h0 : sq = 0 no quality -110.11 9.34 1 3.84 rejected h0 : rn, rc, rs = 0 no geograph. location -108.73 6.58 3 7.82 not rejected h0 : am, ac, ap = 0 no altimetry -108.90 6.92 3 7.82 not rejected h0 : z1= 0 no management -108.05 5.22 1 3.84 rejected h0 : z2= 0 no age -107.99 5.10 1 3.84 rejected h0 : z3= 0 no gender -108.90 6.92 1 3.84 * the statistic l for these variables is distributed as a mixed c2 because the tests involve equality and inequality restrictions. the relative upper bounds are shown in table 1 in kodde and palm [80]. source: authors’ analysis of fadn data. 22 federica cisilino et al. research findings from carvalho [8], moreira [9], and coelli and sanders [10] on the portuguese, chilean, and australian sectors, respectively, reveal that returns to scale are close to unity. the inefficiency model table 3 also reports the estimated parameters related to the inefficiency model. the findings suggest that efficiency tends to increase in the case of farms managed by young farmers (the positive sign associated with the variable age indicates that it positively affects inefficiency) and by males (vice versa, the negative sign of the variable gender means that efficiency would increase with the increase in the variable). we also found that capitalistic farms tend to be less efficient than (solely or prevalently) family-run businesses. this last finding is only apparently surprising because it is probably related to the general intensive or semiintensive grape cultivation in italy, living aside from the management. furthermore, family-run farms are likely to be more cautious in using their inputs to compensate for the productivity gap, which could be a reason that may help explain this finding. furthermore, organic and quality-oriented farms tend to be more efficient than conventional and nonoriented farms, respectively. specifically, the parameter associated with the organic/conventional dichotomy shows the highest magnitude, implying that it is the variable that mostly affects efficiency among the selected dichotomies. the technical efficiency the estimated technical efficiency of the sample amounts, on average, to 0.788 (table 4). this means that room for improvement of approximately 21% exists for increasing the ability of italian grape-growing farmers to use their technical inputs more efficiently. the value is very close to the mean technical efficiency estimated by carvalho [8] on portuguese wine grape farms in 2000 (0.793), even if this value tends to decrease over time. additionally, moreira et al. [9] and coelli and sanders [10] estimated similar scores on wine grape farms (0.778 and 0.790, respectively). however, as expected in light of the estimated inefficiency parameters, the organic farms reveal a greater technical efficiency than the conventional farms. since these scores refer to a unique frontier and the difference appears significant (for α = 0.01), it is possible to argue that organic farms have greater capacity than conventional units in using technical inputs (in the availability of the farmer). since technical efficiency scores are calculated as an output-oriented measure in this study, the results imply that both farming methods might increase production using the same input bundle. organic and conventional grape-growing farmers would be able to increase output by 16.5% and 22.2%, respectively, with the present state of technology and using their disposable resources more efficiently. these findings confirm previous studies. in a study on greek organic and conventional wine grape farms, tzouvelekas et al. [84] found that organic farms show table 3. ml estimates for sfp parameters for the organic and conventional data – preferred model. variable parameter coeff. s.e. frontier model constant b0 0.818 0.105 land area b1 0.085 0.222 labour b2 0.371 0.219 capital b3 0.585 0.280 other expenditures (variable costs) b4 0.121 0.050 inefficiency model constant z0 -0.003 0.018 management z1 0.142 0.186 gender z2 -0.051 0.100 age z3 0.059 0.136 organic sm -0.185 0.115 quality sq -0.126 0.156 variance parameters σ2 0.277 0.133 g 0.042 0.026 g* 0.467   log-likelihood function -106.386 source: authors’ data processing on fadn data. table 4. estimated technical efficiency scores.   mean s.d. total sample (n. 531) 0.788 0.108 organic (n. 91) 0.835 0.102 conventional (n. 440) 0.778 0.107 * p-values for t-tests on the mean difference between the two subsamples: te = 1.33 x 10-4. 23organic and conventional grape growing in italy: a technical efficiency comparison using a parametric approach higher efficiency than conventional farms (0.680 and 0.612, respectively). in the spanish sector, guesmi et al. [15] estimated a greater difference between the two categories (0.796 and 0.642, respectively). aldanondo-ochoa et al. [16], comparing the total farm revenues of wine grape producers using inputs, such as land, labour and other costs, and assessing the environmental impact, found a higher efficiency for organic farms. conversely, the results from bayramoglu and gundogmus [13] on turkish farms suggest that conventional grape farms are more efficient than organic farms. however, these scores refer to two separate frontiers; therefore, our findings are not comparable to those of this previous study. considering the observed gfr, it means that the achievement of full efficiency would lead to income increases of 47.6 m € and 55.3 m € for organic and conventional farms, respectively. therefore, conventional farms could partially fill the revenue gap concerning organic farms in the case of full efficiency. an important point is to assess the weight of inefficiency in affecting production to evaluate whether a possible improvement in efficiency could significantly affect productivity in grape-growing farms. analysis of the ratio parameter g provides information on the te relevance for the production process. the estimated g is significant at the 1% level, which indicates that te is relevant in explaining output variability. on the other hand, the parameter value could not be taken as a measure of the relative contribution of the inefficiency term to the total output variance. however, this measure can be obtained by estimating parameter γ*, calculated as described in table 3. the estimation suggests that 46.7% of the general differential between observed and best-practice output is due to farmers’ existing difference in efficiency. this study highlights some pieces of evidence in the management of organic and conventional grape farming in italy. the results suggest that organic and conventional farming systems would lie on a common frontier and that those organic farms seem more careful in using factors of production factors (technical inputs). this factor would be partly due to their awareness of the existing gap in terms of yields compared to conventional farms, which would also represent a general behaviour of organic producers who are constantly looking for greater performance. pricing and output value as far as the output is concerned, it has to be considered that the production data estimation has been carried out in terms of farms’ production value. since the output is higher for organic farms (compared to conventional farms), our findings show that in the wine grape-growing sector, organic farms are more technically efficient than conventional farms. this point requires some further comment. first, it is worth noting that the higher selling prices that organic farms can manage to command for their products play a role in the organic and conventional farming match. it must be said in fairness that the value of the grapes is substantially different, depending on their quality and typology [85]. moreover, it is also true that the price of grapes varies according to many characteristics, such as the land on which the vineyards are grown, the costs of cultivation, the environmental conditions and any legislative decisions [86,87]. the main distinction is to be made between dop wine grapes (more expensive) and table grapes. we find different varietals with different prices within the two types, depending on the yields and the wine qualities they could express. in italy, common criteria and specific associations are generally used to establish the prices of wine grapes, sometimes private and sometimes governmental. the latter annually provides the grape prices in agreement with the chambers of commerce. then, there are private agreements between high-quality companies and winegrowers. differences are both dependent on whether the wine producer is also a grape grower or not and the owner or not of the vineyards. when the wine market is rising sharply, the large brand wine producers could find it difficult to meet their needs with their vineyards (sometimes they cannot cover all the production in terms of grape quantities), and therefore they must go to the grape market. these companies consistently turn to the same trusted growers, entering into multi-year contracts. any dop wine producer uses this strategy and pays different prices, depending on the area of origin. when producing high-quality wine, it is essential to establish a lasting relationship of trust and collaboration to obtain the best results. prices can vary by a wide range, mainly depending on the quality, type (red or white), grape varietal and other factors, ranging from 20 euros to more than 200 euros per quintal for some special wines [88]. we should also not forget that sustainable and environmentally friendly practices, as known, require higher costs and higher prices for the final products (to compensate). suffice it to say that among other rules, the eu normative, for example, states that to obtain authorisation for organic wine, producers must include a maximum sulphite content (set at 100 mg per litre for red wine and 150 mg/l for white/rosé). the premium price 24 federica cisilino et al. should compensate for the higher costs for organic wine production. today, the price of organic grapes in italy is, on average, approximately 2,20 €/kg [89]. second, comparing prices, another point to be considered is producers’ ability to promote and communicate the product’s characteristics. in the recent past, in many italian regions, organic grapes were sold as highquality grapes, but the added value of being organic was not valued [90]. in recent years, the scenario has changed since increasing attention has been given to sustainability and climate change issues [91]. in this evolving context, grape producers have become more aware of the importance of communicating the agricultural methods adopted to respect both the territory and human health. in effect, “consumers seem more interested in environmental aspects associated with organic production, that have more direct benefits on health than other environmental issues [and their] perception of sustainable wines seems generally associated with the terms such as organic and local” [92]. in this scenario, since a higher quality is traditionally attributed to sustainable wine, its communication to consumers through recognisable signs appears to be a very important marketing and competitive factor for wine producers [92,93]. in this respect, the regulation of the european commission [49], which defines and regulates organic wine production, allows farmers that respect these rules to boast the eu certification of “organic”. finally, it must be underlined that a time lag would exist between when grapes are paid to produce wines and when wines are sold because wine generally takes several years to become market-ready. it means that the premium price applied by organic wine producers to grape-growers would reflect future wine price expectations, and it can be a source of distortion along with the price transmission from buyers to farmers. 5. conclusions with a specific application to grape growth, this study contributes to the debate on the efficiency and productivity of organic and conventional farming, which has produced controversial evidence throughout the world; however, it requires many more studies on the wine grape-growing sector. as far as the farm’s efficiency is concerned, it turns out that being organic and quality-oriented are characteristics that lead to a more efficient system. because grape-growing managed by young male farmers shows a higher efficiency level, the policymaker should encourage new farms’ opening by young entrepreneurs and the generational shift even more. moreover, the lower efficiency of companies run by women implies that there is an increasing need to provide more training and tools to support female entrepreneurs. a significant point concerns the variable of business-conducting typology. the higher level of efficiency of grapegrowing conducting family-run businesses must push policymakers increasingly to support these activities. using their production inputs more carefully to respond to the need for an ever-decreasing use of resources, family farms appear to be crucial agents in achieving sustainable development goals. concerning the two production orientations, the findings show that capital and labour are the two key issues that contribute the most to grape production in italy, confirming previous studies in the spanish sector [94]. moreover, this study disavows previous studies that see land as one of the most important factors affecting the efficiency of wine grape growth [7,12]. another noteworthy item is the positioning of the two production orientations along the same technological horizon due to the lack of a significant difference in productivity between organic and conventional wine grape farms. this aspect is relevant for those companies that, looking at the trend of organic wine and sparkling wine (+ 15.5% variation between 2020/2019) compared to non-organic products (+ 4%) [5] but also in light of the “farm to fork” strategy [95] aim to accelerate our transition to a sustainable food system also through the increase of up to 25% by 2030 of the area cultivated organically, intending to convert their production. this finding is also relevant for academics, who, despite the increasing number of studies that compare the performance of organic and conventional agriculture in terms of yield, environmental, and economic impacts, still quote methodological difficulties of comparing conventional and organic systems [1]. this paper has some limitations. the focus is on only one country (italy). further multi‐country research could be useful to confirm our findings in other fields, and more research needs to be done, also concerning our case (i.e., estimation of scale efficiency and the role of price in affecting productivity), to obtain more evidence on this 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[95] eu com/2020/381 final, 2020. communication from the commission to the european parliament, the council, the european economic and social committee and the committee of the regions. wine economics and policy volume 10, issue 2 2021 firenze university press productive efficiency of wine grape producers in the north of portugal micael santos1,*, xosé antón rodríguez2, ana marta-costa3 organic and conventional grape growing in italy: a technical efficiency comparison using a parametric approach federica cisilino1, fabio a. madau2,*, roberto furesi2, pietro pulina2, brunella arru2 competitiveness framework to support regional-level decision-making in the wine industry: a systematic literature review jorge mota*, rui costa, antónio moreira, silvana serrão, carlos costa does belonging to an appellation make a difference? new evidence from ontario viticultural areas omer gokcekus how do sparkling wine producers adopt a sub-appellation? evidence from an exploratory study on heroic prosecco superiore rive luigino barisan*, luigi galletto motivation factors for organic wines. an analysis from the perspective of german producers and retailers katharina hauck*, gergely szolnoki, evelyn pabst consumer preferences for certified wines in france: a comparison of sustainable labels adeline alonso ugaglia1,*, britta niklas2, wolfram rinke3, dan moscovici4, jeff gow5, lionel valenzuela6, radu mihailescu7 wine ratings and advertising strategies: is there a link? ricardo sellers-rubio adaptive market hypothesis: an empirical analysis of the wine market anoop s kumar sciencedirect journals & books ! there was a problem providing the content you requested please contact us via our support center for more information and provide the details below. reference number: 780cede91a48209d ip address: 129.74.145.123 timestamp: access denied you do not have access to www.sciencedirect.com. the site owner may have set restrictions that prevent you from accessing the site. ray id: 780cede91a48209d timestamp: 2022-12-28 20:08:41 utc your ip address: 129.74.145.123 requested url: www.sciencedirect.com/science/article/pii/s2212977418300553 error reference number: 1020 server id: fl_154f18 user-agent: python-requests/2.28.1 about sciencedirect shopping cart contact and supportterms and conditionsprivacy policy we use cookies to help provide and enhance our service and tailor content and ads. by continuing you agree to the use of cookies. copyright © 2020 elsevier b.v. or its licensors or contributors. sciencedirect ® is a registered trademark of elsevier b.v. wine economics and policy 11(1): 127-140, 2022 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/wep-10897 wine economics and policy citation: luis felipe garcía-rodea, humberto thomé-ortiz, angélica espinoza-ortega, pedro de alcântara bittencourt-césar (2022) viniculture and tourism in the new world of wine: a literature review from the american continent. wine economics and policy 11(1): 127-140. doi: 10.36253/wep-10897 copyright: © 2022 luis felipe garcíarodea, humberto thomé-ortiz, angélica espinoza-ortega, pedro de alcântara bittencourt-césar. this is an open access, peer-reviewed article published by firenze university press (http:// www.fupress.com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information fi les. competing interests: the author(s) declare(s) no confl ict of interest. viniculture and tourism in the new world of wine: a literature review from the american continent luis felipe garcía-rodea1, humberto thomé-ortiz1,*, angélica espinoza-ortega1, pedro de alcântara bittencourt-césar2 ¹ universidad autónoma del estado de méxico, toluca, mexico. e-mail: felipe_grodea@ hotmail.com; humbertothome@hotmail.com; angelica.cihuatl@gmail.com 2 universidade de caxias do sul: caxias do sul, rio grande do sul, brasil. e-mail: pabcesar@ucs.br *corresponding author. abstract. in the so-called new world of wine, the wine industry, particularly in the american continent, has increased its presence in various socioeconomic areas through strategies adapted to market conditions. th is literature review aims to identify research on viticulture and wine tourism in the new world of wine and categorize them to indicate new lines of research and knowledge gaps. given that the consumption and production of wine in the american continent were generated in european migrations and through the cultural mobility of food consumer goods, wine production systems have been consolidated in some emerging territories. however, the scientifi c production in this regard shows essential areas of opportunity. keywords: emerging territories, food and wine tourism, vitiviniculture. 1. introduction wine production areas have opted for tourist activity to increase their development opportunities so that wine and gastronomy have played an essential role since the late 1980s [1,2]. th is aspect is an opportunity for job creation, income generation in rural areas, as an engine for tourism development in inland destinations and promoting domestic wine consumption [3,4], coupled with the preservation of the territory’s agri-food heritage [5] and the consolidation of networks for collective action [6]. wine tourism is defi ned as the use of wineries as tourist attractions focused on wine [7], integrating tourism products, services, and events [8], and associated with a territory through its identity elements and know-how [9]. its importance refl ects a complex relationship between wineries, winegrowing regions, and consumers [10,11] to experience local culture [12]. due to the increase in wine tourists [13], they strive to have competitive advantages against diff erent market niches, creating brand loyalty and 128 luis felipe garcía-rodea et al. improving consumer awareness. numerous wineries depend on visitors [14], and this synergy can generate positive impacts throughout the region [15], promoting visits to museums and wineries, as well as tastings [16]. wine production is frequently associated with the “old world of wine,” referring to european regions, mainly france, italy, spain, portugal, and germany. these countries have a historical depth in wine production [17,18,19], integrating for centuries territorial methods and resources for the improvement of viticulture, distinguishing itself by its commercial protectionism and conservatism [20]. given the socioeconomic mobility towards the american continent, from the 16th century on, the so-called “new world of wine” was emerging, which includes countries that were initially european colonies [21], particularly in latin america, australia, south africa, new zealand and the united states [18,22,23]. the wine producers of the new world of wine are expanding towards the consolidated markets of wine consumption, through comparative advantages based on experimentation, development, and innovation, with a significant increase in the cultivation areas and the number of wineries [20]. likewise, a frank development of the scientific literature on viticulture and wine tourism can be observed. however, it is scattered and does not provide a comprehensive analysis of tourism production and consumption of wine in emerging territories, which is why the development of this literature review is considered necessary. 2. methodological approach this literature review was exploratory, focused on the american continent’s new world of wine countries: argentina, brazil, chile, the united states, and mexico (figure 1). the purpose was to identify the research areas that wine studies have focused on; the process included searching and analyzing scientific articles published from 2010 to 2020 in the chosen countries. a systematic analysis was done on the google scholar, scielo, web of science, and scopus databases. the search was guided by the keywords: wine tourism, new world of wine, wine and tourism, viticulture, viniculture. considering that the american countries have an essential linguistic variation, studies in english, spanish and portuguese were considered. two eligibility criteria were applied to identify the articles with the highest scientific quality (figure 2). the first criterion excluded gray literature (thesis, conference presentations, conference communications, and research notes). the second criterion excluded those publications whose results were limited in terms of constituting merely descriptive papers. it was intended that all the selected references allow us to discuss the scientific advance on the new world of wine from a global perspective. based on selecting titles, abstracts, and keywords, 72 scientific documents were reviewed, including documents written in english, spanish and portuguese, scientifically recognized internationally. from the selected corpus of literature, a content analysis was carried out through the definition of thematic axes. following the above, they were classified under the following categories: i) public policies; ii) wine tourism; iii) marketing; iv) heritage and culture; v) sustainability and; vi) consumption and consumers. a subsequent analysis was made in the five countries with oenological activities based on the categories mentioned above. 3. results and discussions the development of viticulture in emerging territories has led to greater integration of supply and demand in the consolidation of the enogastronomic experience [16,24,5]. the historical depth of the wine-growing countries of the new world of wine is a fundamental aspect of territorial anchoring and construction of cultural identity. this aspect has played an essential role in consolidating the supply and demand of wines from emerging regions on national and international scales. from this, it is relevant to identify the evolution of the wine industries in each chosen country. 3.1 the emergence of viticulture in the american continent the evolution in the historical and productive trajectories in emerging wine-producing countries has been crucial in developing an offer throughout the wine production chain. this fact has been framed in each chosen country based on the socioeconomic transformations over time, evidencing a consolidation in the wine industry. 3.1.1 mexico mexican viticulture has its origins in colonial times, in the new hispanic communities, when religious orders introduced and planted various varieties of vines in the country [25,26], positioning itself as the oldest producing country in america, whose cultivation dates back to 1528 [27]. viticulture in mexico had repercussions due to the prohibition of wine production in the 129viniculture and tourism in the new world of wine: a literature review from the american continent colony era [26], which influenced the late development of the industry. by the 1980s, mexico moved towards a neoliberal economic model that opened imports [26]. as an alternative for diversifying income, wine regions began to explore the possibility of incorporating wine tourism as of the 1990s, according to novo et al. [28]. the wine-producing states and promoters of wine tourism in the country are sonora, zacatecas, and aguascalientes. however, there are three that generate the highest production in the country: baja california (valle de guadalupe, valle ojos negros, valle santo tomás and valle san vicente), coahuila (valle de parras), and querétaro (tequisquiapan, bernal, and cadereyta), which already they have established tourist routes with a social and economic value at the national level [29,30,31]. figure 1. geographical band of wine and countries of the new world of wine in the american continent. source: prepared by the authors. 130 luis felipe garcía-rodea et al. 3.1.2 united states there are indications of the production of native grapes, such as isabella (a hybrid of vitis labrusca and vitis vinifera), that were not initially used in the production of wines [32]. formally, the production of wine in the united states is associated with the processes of catholic evangelization by the franciscan friar garcía de zúñiga who began to prepare sacramental wines [33]. the first wine reported in the country dates from 1769 [34]. new york was the first wine-producing state, starting this industry in 1677, later california in 1960, followed by oregon and washington in 1970 [35]. wine production in this country is distributed in 50 states [36,37]. the most iconic regions are the napa valley and sonoma, in california [38] due to the production of quality wines and being one of the central wine-producing regions in the world [34]. california has established itself as the second most attractive destination for food and wine in the united states [39]. this wine-growing region has a leading role in the market, depending on the number of wineries and wine production [36]. 3.1.3 argentina viticulture began in the 16th century with the arrival of the first grapes from spain and the jesuits who produced wine for religious purposes, finding the andes region ideal [40] late 19th and early 20th centuries. argentine viticulture developed in a limited number of large estates, whose owners controlled the production and sale of wine, selling almost everything to regional and national markets [41,42]. in the 1990s, the impact of globalization on the argentine wine industry began with reforms that transformed the production system to supply the national and international market [43,44]. 3.1.4 chile the history of the origin of wine in chile dates back to the 16th century [45]. furthermore, it has undergone significant technological transformations since the 1980s, with a strengthening of exports in 1990, since it was only exported 7% of production [46,47]. this aspect benefited the wine market since the country had experienced a drop in domestic consumption due to economic and social situations [45]. it is currently one of the largest wine producers in latin america [48] with 13 wine regions, the most characteristic being colchagua, casablanca, and maule [49]; the last two with production mainly of chilean premium wines [47]. the wine tourism activity has been promoted since 1996 as an economical alternative, positioning it as the eighth wine-producing country in the world and the first among the countries of the new world of wine [50]. 3.1.5 brazil wine production in brazil is linked to european immigration [51], mainly from italians who arrived in 1875 and established vineyards to produce table wine [52]. this situation makes wine a substantial social burden and culturally linked to history; therefore, brazil is currently occupying the sixth position among the new world of wine [53]. there are regions certified in wine production, such as: pinto bandeira, monte belo do sul, flores da cunha, urussanga and vale dos vinhedos (serra gaúcha) [54,55,56], the latter standing out for having 80% of the national wine production [57,58,59]. the brazilian wine industry has a competitive advantage because many of its products have geographical indication (gi) [54]. although monticelli et al. [60] mention that it is an emerging country in the initial internationalization phase, the wine production is exported to chile, argentina, portugal, and italy [55]. 3.2 scientific production of wine in the american continent parallel to its historical evolution, the new world of wine has gained scientific publications [61]. in this regard, gómez et al. [23] indicate that the number of articles on these topics has increased since the mid1990s in areas such as agriculture, geography, economics, and sociology. according to bonn et al. [62], the global growth of wine production and consumption has consequences. even though publications on wine are figure 2: research process and exclusion criteria. source: prepared by the authors. 131viniculture and tourism in the new world of wine: a literature review from the american continent incipient in some emerging countries [28], scientific production has been consolidated in international indexed journals in recent years (figure 3). the scientific production analyzed (2010 to 2020) shows great differences concerning the generation of knowledge about wine among the american countries of the new world of wine. the united states stands out (n = 26), followed by brazil (n = 16); later mexico (n = 13); chile (n = 11) and finally argentina (n = 6). these data are displayed because most of the publications from latin american countries are in spanish and portuguese. another fact that affects these figures is that monographic and descriptive works were not considered in countries with low scientific productivity, which lacked a strong analytical component and scientific rigor. from this analysis, it is evident that the new world of wine represents, at a global level, a sui generis object of study, which occupies a specific place within viticulture research. therefore, the systematic analysis of the information allowed us to identify the diversity of topics in the emerging viticulture processes and their theoretical approaches (table 1). the above summary of publications shows that wineproducing countries have adapted to the supply and demand of the environment, whether national or international. they have developed dynamics of appropriation of the territory from alternative forms of production and marketing of wine. in this sense, it is observed that the wine-growing regions have opted for the consolidation of new markets. this situation results in the appropriation of viticulture in these territories that cause a socioeconomic transformation in the global sphere. in this sense, the new world of wine has undergone exogenous and endogenous transformations reflected in scientific production. the topics that have had the highest incidence are highlighted (figure 4). of the studies included in the literature review, most are qualitative (n = 44), followed by those with a quantitative approach (n = 23) and a minority with a mixed analysis (n = 5). regarding the heritage and culture category, the studies are still incipient. european migrations in the american continent marked a reference in wine production and its territorial appropriation, although it has not been addressed in depth. in chile and brazil, these investigations have contributed to the knowledge of the wine regions’ socioeconomic history and the development of the wine industry [9,87]. in the usa, it is emphasized that cultural service activities are related to wine production and benefit the development of wineries [88]. in an exploratory way, these studies can contribute to the progress of the viticultural regions of the new world of wine to identify their territorial anchorage and the tradition around wine. on the other hand, the sustainability category provides guidelines for the strengthening of viticulture. this fact is based on considering climate change at a global level [90]. some authors [36] refer that a differentiation must be generated in the sustainable practices of the wineries. identifying the adaptability of the viticultural practice from the study of pests, diseases, and stress of the vines [93]. the use of wastewater in grape cultivation has been imperative due to the constant water crisis [92] and the constant changes in land use for crops [42]. these aspects have been considered in brazil and chile to focus on sustainable management practices, increase competitiveness, and promote product certifications [89,91]. the increasing environmental degradation worldwide should be a point of analysis in wine production, not compromising natural resources. public policies in the new world of wine should constitute a guiding axis due to the changes generated by globalization. this aspect implies that emerging wine markets strengthen programs in coordination with academic and government institutions under triple helix schemes [35,43]. this relationship between institutions should promote national and international cooperation in emerging countries [60]. to this end, the development of public policies that contribute to technical knowledge and the development of new winemaking practices [52], as well as the increase in wineries [64], should be stimulated. espejel et al. [63] mention that public policies fail in some emerging countries such as mexico due to a lack of statutes, ambiguous laws, and a complex relationship between buyers, producers, and the government. with this consideration, viticulture in the american countries would be strengthened, with which and action mechanisms for the consolidation, development, and interna0 2 4 6 8 10 12 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 numbers of articles per year figure 3. numbers of articles per year (2010-2020). source: prepared by authors. 132 luis felipe garcía-rodea et al. table 1. summary of wine and tourism studies in the new world of wine. source: prepared by authors. topic/subtopic author(s) country i. public policies institutional structures lara [43] argentina institutions and wine promotion monticelli et al. [60] brazil development of the wine region fachinelli et al. [52] brazil public policies and viticulture espejel et al. [63] mexico relationship with institutions hira and gabreldar [35] usa wineries expansion policies yelvington et al. [64] usa ii. wine tourism wine routes hojman and hunter-jones [65]; schlüter and norrild [40]; rainer [44]; zárate and barragán [66]; ramos et al. [67] argentina, brazil, chile, and mexico wine tourism challenges and opportunities figueroa and rotarou [50] chile wine tourism adoption torres et al. [68] chile wine tourism analysis kunc [69] chile tourism appropriation mechanisms de jesús-contreras and thomé-ortiz [70] mexico tourism and territorial transformation de jesús-contreras et al. [26] mexico wine tourism and territory de jesús-contreras et al. [71] mexico wine tourism potential robles and robles [72] mexico wine tourism as an emerging activity novo et al. [28] mexico influence of emotions on wine tourism pelegrín-borondo et al. [21] mexico wine festivals hubbard et al. [33]; sohn and yuan [73]; bruwer and kelley [74] usa wine tourist behavior quintal et al. [75] usa wine tourism profile garibaldi et al. [39] usa critical factors of wine tourism singh and hsiung [76] usa signposting and wine tourism byrd et al. [37] usa iii. marketing wine restructuring due to globalization rainer [41] argentina shared brands aparecida et al. [55]; aparecida and de moura [54] brazil wine internationalization carneiro et al. [57]; dalmoro [51]; felzensztein [47] brazil and chile differentiation strategies pinto et al. [59] brazil social capital and competitiveness macke et al. [58]; faccin et al. [77]; sarturi et al. [78] brazil circular economy model sehnem et al. [56] brazil market orientation rojas-méndez and rod [79] chile differentiated global markets overton et al. [46] chile production of wines for export overton and murray [45] chile marketing strategies duarte [80]; felzenzstein and deans [49]; torres and kunc [48] usa and chile wine marketing lópez and sotelo [81] mexico the perceived image of a wine destination bruwer et al. [82] usa the added value of wineries duarte [38] usa wine cellars and the hospitality industry duarte [83] usa wine business and philanthropy gilinsky et al. [84] usa wine strategies and performance gilinsky et al. [85] usa protection and hedonism of organic wines olsen et al. [86] usa viticultural success factors hira and swarts [34] usa 133viniculture and tourism in the new world of wine: a literature review from the american continent tionalization of the wine industry of the new world of wine would be established. another opportunity to investigate is wine tourism because it is an activity developed as a product diversification strategy. few studies in countries such as argentina, chile, and brazil in the academic field, although producing regions with routes are identified of wine whose potential for use is high [40,44,65,66,67]. in this sense, mexico is the country that leads the publications on this subject. although this may not reflect t he countries’ actua l demand, ca lifornia (united states) maintains a leadership role [36]. incorporating wine tourism into wine-producing regions represents a challenge, although it can contribute to the diversification of the economy [50]. in countries like chile, support has been provided to establish wine routes [69], although some companies do not have action plans to invest in this initiative [68]. other studies on wine tourism have been analyzed from the dynamics of territorial appropriation and transformation of the wine regions for their configuration as tourist scenarios [26,70,71,72]. these aspects are related to the emotions of the tourists and the perceived quality in the wineries visit [21,33,74]. due to the increase of tourist activities in producing regions, studies have examined the enotourist profile and their behavior [39,73,75] and the loyalty towards visits to various wineries [33,76]. the consolidation of wine tourism represents excellent potential for its growth, although, in some wine-growing regions, the connectivity, infrastructure, and signaling are not adequate [28,37]. the synergy created between wine production and tourism has been the key to increasing production benefits [68]. based on these findings, it is suspected that the producing regions have been able to consolidate a tourism demand by the new market demands, and therefore, it is advisable to strengthen studies on wine tourism in topic/subtopic author(s) country iv. heritage and culture using traditional methods lacoste et al. [87] argentina cultural identity lavandosky et al. [8] brazil cultural ecosystems winkler and nicholas [88] usa v. sustainability land-use changes hafner and rainer [42] argentina sustainable management in winemaking silva et al. [89] brazil geoviticultural systems bardin-camparotto et al. [90] brazil certificates of sustainability of wines marola et al. [91] chile use of wastewater in viticulture mendoza-espinoza et al. [92] mexico sustainability strategies gilinsky et al. [36] usa winemaking practices nicholas and durham [93] usa vi. consumption and consumers consumption motivations de oliveira et al. [53] brazil xenocentrism and consumption mueller et al. [94] brazil consumption preferences meraz-ruiz [95]; yue and govindasamy [96] mexico and usa influence of emotions when buying wine meraz-ruiz et al. [97] mexico consumption of eco-certified wines moscovici et al. [98] usa choice and consumption of wines duarte and o’neill [99] usa consumption and consumers of muscadine grape duarte and o’neill [100] usa generation z consumers thach et al. [101] usa membership in a wine club bauman and taylor [102] usa figure 4. summary of publications. source: prepared by authors. 0 5 10 15 20 25 30 marketing wine tourism consumpti on and consum ers susta inability public pol icies herita ge a nd culture summary of studies 134 luis felipe garcía-rodea et al. emerging countries. this aspect represents a development opportunity for the producing regions. studies of wine consumption and consumers represent an opportunity in countries like the united states, brazil, and mexico. argentina and chile would have to consider more studies because the consumption scenario is not in sight. these studies are vital due to the need to study consumers to identify their habits and characteristics of the market. the findings in this category focus on establishing a cognitive structure of consumers based on values such as hedonism, stimulation, and care [53]. on the other hand, they focus on analyzing how wine consumers can pursue a social status from acquiring foreign products or brands as a symbol of cosmopolitanism [94]. for this reason, it is essential to strengthening studies on wine consumer profiles [102]. due to the growing interest in consuming wine in recent decades [53], wine consumption studies have strengthened wineries’ offers. therefore, wine consumption preferences have consolidated the competitive strategies of wineries that have been approached from econometric perspectives and generational groups [95,96,101]. the increase in the direct sale of wine in wineries has established new forms of consumption, which have been approached from an economic perspective, although it is considered that the role of emotions also influences the purchase decision processes, and is an aspect that has not been studied in depth [97]. another aspect that should be studied is the response to consumer attitudes focused on the consumption of wines with eco-certification [98]. in addition, it is necessary to expand knowledge to provide more information for wine consumption based on vine strains little known to the consumer [100]. as the new world of wine is an emerging sector in viticulture, it is explained that studies focused on marketing are a potential topic for american countries. in the united states, brazil and chile, this topic represents the highest percentage of publications. it can be inferred that actions taken by the wine companies have been adapted to the demands of the market. in addition to this, these countries have opted for internationalization in promoting and marketing their products. on the other hand, there is a lack of publications on this item in argentina and mexico. studies carried out from marketing allow for an indepth analysis of the influence generated by the wine sector on wine consumers and the strategies implemented towards international competitors [59]. these aspects have been approached from ethnographic methods to identify new market niches in the context of globalization and insertion in new markets [41,46,79]. an effort has also been made to identify the construction processes of the sectorial brands from the stakeholders’ perspectives [54,55]. another relevant finding is that the consolidation of wine clusters has made it possible to promote the production of wines from the territory [56,58,77]. similarly, networks of winemakers have been consolidated to strengthen the internationalization processes of the wine industry [51]. other studies have focused on understanding the consumer preferences of the new generations (millennials and generation z) [47]. based on market studies, it has been possible to adopt various production strategies with low-cost scales, product homogenization, production of products for export, and organic wines [45,86]. as well as marketing strategies based on the recognition of market opportunities [48]. in this regard, felzenstein and deans [49] indicate that some companies have already initiated cooperative processes in marketing activities to attract new customers and strengthen marketing aspects [49,85]. the perceived image of wine destinations has become a relevant research area for marketing since it strengthens activities such as wine tourism and wine consumption [82]. leadership, terroir, entrepreneurial spirit, and how the wine regions’ actions are communicated become a competitive advantage [34]. another relevant finding in some studies [38,80] indicates that demand for products must be satisfied, considering those strains of vines that are not so well known and establishing mechanisms to promote them. to consolidate the commercialization of wines, it has been proposed to have greater participation in fairs, wine events, and pairings [81] and look for alternatives in hotel companies to publicize new products [83]. in some countries, such as the usa, marketing actions have been focused on strengthening the motivations for visiting wineries based on charitable events and activities [84]. it is essential to consider that there is no government support for these actions in some emerging countries. in general, the countries that make up the new world of wine have consolidated their wine offering to compete globally. this fact has set a guideline in establishing quality standards, new territorial appropriations, penetration of new markets, and diversification in the production of vines and wine. in the american context, the theoretical and methodological perspectives around the wine industry have been adapted to the terroir, to the various scales of production (local, national, international), and new market trends. based on the literature review, it is realized that both the production of wine, its consumption, and its academic approach have advanced over the years. these 135viniculture and tourism in the new world of wine: a literature review from the american continent facts show that the importance of wine has been present from ancient civilizations to new generations. therefore, there are challenges and opportunities in wine studies. regarding sustainability, action mechanisms must be established to face climatic risks and design production strategies that are not aggressive with the environment. public policies will have to consider collaborative participation between various entities to regulate and strengthen the wine industry. on the other hand, heritage and culture studies can set precedents on the development and consolidation of wine regions in the countries of the american continent. this is for the european influence that it has from the processes of colonization and immigration. regarding wine tourism studies, the challenge is to promote a more informed movement from a sustainable perspective and consider the different tourists who visit wine regions. marketing studies have led to better planning of the wine industry and will continue to strengthen due to the constant social changes that lead to perceptions and purchasing influences. finally, consumers and consumer studies have to be addressed in greater depth since wine intake is increasing, and consumer preferences are dynamic and changing. the various areas of knowledge selected show a growing interest in the emerging countries of the american continent. this fact is not isolated, since the selected countries are an essential reference in the new world of wine, due to the growth of the wine industry, the expansion of the wine culture, the diversification of productive and leisure activities, as well as the consolidation of emerging markets with an international scope. 4. conclusion and implications even though wine production is relatively recent in the american continent countries, compared with the countries of the old world of wine, the actions that have been undertaken regarding innovation and organization have generated great competitiveness that has been marginally studied. the countries with the highest scientific production in the scopus and jcr indices are the united states and brazil; both focused on wine markets in the american continent. these research areas mark a guideline in the influence of theoretical and empirical study that serves to reference countries such as mexico, chile, and argentina. in general, the american countries of the new world of wine are betting on studies of wine markets, wine tourism, and consumption and consumers. this fact indicates that the need for global positioning implies consolidating work networks that allow a flow of information and products. on the other hand, the strengthening of the wine-growing activity implies a change in the consumption and appropriation of wine production in some traditional societies that do not include it in their tastes and preferences. studies on wine and wine tourism should, in the future, contemplate economic, commercial, and marketing aspects and strengthen cultural and sustainability aspects in the forms of production. based on differences in the countries’ publications, it is observed that each country’s social, economic, and educational characteristics derive from the publications’ productivity. in this way, the main contribution of this review is to delineate future lines of research on wine and wine tourism from a thematic and geographical perspective. however, it is essential to emphasize that the analysis did not consider the economic and political asymmetries that determine the research capacity of the different countries studied. one limitation in this literature review is that, due to its limited scope and descriptive nature, many of the works published in spanish and portuguese were not considered. a good amount of the scientific production of chile, mexico, argentina, and brazil are case studies with a limited analytical scope. to better understand the production and consumption of wine in emerging countries of the new world of wine, research must be consolidated and strengthened with the highest standards of quality and scientific rigor. 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[102] m. bauman, c. taylor, an exploratory study on texas wine club members’ intention to remain, international journal of wine business research. 32(1) (2019) 41-58. https://doi.org/10.1108/ijwbr-08-2018-0043. sciencedirect journals & books ! there was a problem providing the content you requested please contact us via our support center for more information and provide the details below. reference number: 780cedf67d122037 ip address: 129.74.145.123 timestamp: access denied you do not have access to www.sciencedirect.com. the site owner may have set restrictions that prevent you from accessing the site. ray id: 780cedf67d122037 timestamp: 2022-12-28 20:08:43 utc your ip address: 129.74.145.123 requested url: www.sciencedirect.com/science/article/pii/s221297741830067x error reference number: 1020 server id: fl_154f14 user-agent: python-requests/2.28.1 about sciencedirect shopping cart contact and supportterms and conditionsprivacy policy we use cookies to help provide and enhance our 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service and tailor content and ads. by continuing you agree to the use of cookies. copyright © 2020 elsevier b.v. or its licensors or contributors. sciencedirect ® is a registered trademark of elsevier b.v. wine economics and policy 11(1): 31-45, 2022 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/wep-10657 wine economics and policy citation: linda bitsch, barbara richter, jon h. hanf (2022) the competitive landscape in transitioning countries: the example of the armenian wine industry. wine economics and policy 11(1): 31-45. doi: 10.36253/wep-10657 copyright: © 2022 linda bitsch, barbara richter, jon h. hanf. this is an open access, peer-reviewed article published by firenze university press (http:// www.fupress.com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information fi les. competing interests: the author(s) declare(s) no confl ict of interest. th e competitive landscape in transitioning countries: the example of the armenian wine industry linda bitsch*, barbara richter, jon h. hanf department of wine & beverage business, hochschule geisenheim university, von-ladestraße 1, d-65366 geisenheim, germany. e-mail: linda.bitsch@hs-gm.de; barbara.richter@hs-gm.de; jon.hanf@hs-gm.de *corresponding author. abstract. scholars showed that in transition and developing countries originating from the soviet period, the degree of market competition is rather low, as large corporates that had been operating were still prevailing. one can assume that the markets had been highly attractive and many newcomers must have been interested in entering the market, due to fewer market participants, i.e. processors and retailers, but numerous farmers are engaged in the commodity production. th is had provoked relatively high profi tability for downstream fi rms acting on the local market and likely increased the market competition. however, evidence exists that market structures and hence competition is still hampered. th erefore, this study aims to show how competition in markets of transition countries has developed and provide a detailed description of the market structure to derive the degree of competition. as the subject of research, the armenian wine industry has been exemplarily chosen as its wine industry is emerging and represents a key sector in the armenian agri-food industry. similar cases exist in other transitioning and developing countries. empirical results from the qualitative research that allows a comprehensive overview of the whole sector reveal that the competition intensity is relatively low, and wine producers act in an oligopolistic market surrounding. based on this, implications for producers and policy makers are derived, which include competitive and rural policy implications. keywords: competition intensity, industry structure, policy implications, rural development, armenia, wine. 1 introduction at the beginning of the new millennium, researchers showed a heightened interest in competition in transition and developing countries [1]. especially in transitional economies, the dramatic changes initiated aft er the collapse of communism have contributed to the growing interest in competition [1]. aft er leaving the previous centralized planned economies, a process of restructuring and development towards market economies took place [1,2]. in most cases, transition economies “developed weakly operating competi32 linda bitsch, barbara richter, jon h. hanf tive markets and regulatory frameworks” [1]. scholars had shown that in different sectors of several transition and developing countries the degree of market competition1 is rather low [1,4,5]. especially in the agri-food industries of transition countries, large corporates that had been operating in the former soviet union were still prevailing. this was also true for the armenian wine industry as part of the agri-food industry which serves as an example market for other transitioning countries [6]. compared to the situation of perfect competition there had been fewer market participants, i.e. processors and retailers, but numerous farmers are engaged in the commodity production. this had provoked relatively high profitability for downstream firms acting on the local market. they had often received extraordinarily high margins but were not competitive in international competition. in conclusion, the markets had been highly attractive and many newcomers must have been interested in entering the market. however, the opposite was the case. friesenbichler et al. [2] showed that there had been a switch in research. while earlier research mainly focused on competition and productivity, later articles rather examined the effects of market competition on technology and innovation2. similarly, the wine research focused on wine clusters and their impact on innovation in developed and transitioning countries (e.g. 7–9). dressler [10] analysed how innovation management can help to deal with market competition, conducting research with german wineries. recently, only little research has been published regarding the analysis of structure and competition in markets of transition countries. however, evidence exists that market structures and hence competition is still hampered [2]. we argue that market structures and hampered competition are directly related to rural development. knowledge of market structures and competition is necessary for a targeted development of rural policy implications. in this context, the questions arise why market structures are not further analysed and how competition can be initiated. therefore, this study aims to show how competition in markets of transition countries has devel1 the degree of competition is defined as follows: a high degree of competition refers to the situation of perfect competition (many firms, identical products). in imperfect markets, the degree of competition decreases from monopolistic competition (many firms, slightly different products) to oligopolistic market structures (few firms acting as suppliers) and monopolies (only one supplier). in fully competitive markets the firm is the price taker, whereas in a monopoly it is considered to be the price maker. in terms of welfare considerations, the effect of the different degrees of competition differ in their impact on total welfare: the higher the degree of competition, the higher is the total welfare. see [3]. 2 for a literature review on market competition in transition economies see [2]. oped and provides a detailed description of the market structure to derive the degree of competition. based on the results, implications for competitive policies as well as for rural development will be given. as a subject of research, the armenian wine industry has been chosen as itis emerging and represents still a key sector of the agri-food industry in the transition economy of armenia. the wine industry is becoming increasingly important for the armenian economy and with its strong bonds with rural areas it is important for rural development. similar cases exist in other transitioning and developing countries. the armenian government released a 2014-2025 development policy to develop several sectors that will contribute to economic growth and poverty reduction, prioritizing high-value-added processing industries, such as wine production (ra 2014-2025 sustainable development strategic program [11]). by coming increasingly important for the armenian economy, the wine industry can be supported by rural policies that help to further develop the industry and to increase the competitiveness of the industry participants (or: of the sector as a whole). this would also create the opportunity for armenian wine producers to export their wines, for instance, to european markets. for targeted rural policy implications, a profound knowledge of the sector and market structures is necessary. however, so far there is hardly any literature available regarding the domestic market. with 35 companies, the armenian wine industry is small in size; thus, a qualitative approach was chosen as a quantitative survey could not be carried out. in total, we conducted 41 individual in-depth interviews so that a comprehensive overview of the whole sector could be presented. we interviewed almost 50% of all wine producers, including all large and leading companies. in addition, we have covered the majority of all experts from the armenian wine industry. accordingly, interviews were also conducted with suppliers, buyers, and other experts of institutions related to the wine industry. this comprehensive study covering the sector almost completely – allows drawing implications for wine producers and policy makers. the armenian wine industry can be seen as an example for countries such as georgia and azerbaijan, which have a similar historical development of their wine industries shaped by the soviet history. today, these countries and their wine industries face similar challenges [12–15]. the paper is structured as follows: section ‘framework of competition intensity in the armenian wine industry’ outlines the development of the armenian wine industry and sets out predictions for the analysis of 33the competitive landscape in transitioning countries: the example of the armenian wine industry competition intensity. section ‘empirical study’ details the approach of data collection and evaluation used in this study, and presents the results and key findings of the study. section ‘discussion and implications’ provides recommendations for wine producers as well as competitive and rural development policy implications. in the last section, ‘summary’, summarizing comments are given. 2 framework of competition intensity in the armenian wine industry 2.1 development of the armenian wine industry as many caucasian countries, armenia has a longlasting history in winemaking which was heavily influenced by the country’s membership within the soviet union until 1991 [14,16,17]. before becoming part of the soviet union, armenia produced mainly wine and table grapes. within the soviet union, armenia had to focus on brandy production (80–90 % of grape production was used for brandy), whereas other soviet countries, such as georgia and moldova for instance, were obliged to focus on wine production [18]. this led to a big change in the armenian wine culture [14]. in 1991, after the collapse of the soviet union, armenia declared its independence [19]. after the end of the soviet era, armenia was moving from a centralized planned economy to a free-market economy and democracy [20]. the country had many problems facing that change. the first years after the independence were very tough for the armenian population, as the transition process caused an economic breakdown and the processing industry radically deteriorated in armenia as well as in other soviet countries (ibid.). remarkable changes took place regarding land rights, privatization, new evolving markets due to the free market regulations and others. after the independence in 1991, many of the armenian farmers got small plot sizes and due to the small production scale, they could not manage to finance their winemaking facilities and get access to the market in order to sell the high-valued final product [17]. this is why some farmers stopped producing grapes entirely or shifted towards new industries, whereas others continued to grow grapes and were heavily dependent on their grape sales to production plants such as wine producers or brandy factories [17]. the grape production area has gone through a tremendous decline after its 1980 peak of 36,200 ha. during the soviet-times, armenia processed more than 200,000 tons of grapes annually mostly for brandy, as well as some wine and sparkling wine. the major part of the production was consumed in russia and the soviet union [21]. nowadays, the vineyard area stretches over 17,000 ha [22], from which around 2,500 ha are used for winemaking, while the majority (14,500 ha) is still used for brandy and table grape production [23]. the share used for table wine production is stable, but a steady increase in productivity is noticeable [22]. overall, there are 35 wineries producing and selling table wine. this number has more than doubled within the last 10 years, as in particular more small-scale wineries were established [17]. most of the wineries rely on own vineyards (vertical integration), but almost all of them also engage in vertical coordination and buy in grapes, must or wine. some of the wine producers engage in producing and selling fruit wines and/or brandy. fruit wines include mostly pomegranate, apricot and cherry fruits. for the production of brandy and fruit wines some technical equipment is needed, e.g. a press, barrels/tanks, for brandy a distillery etc. only a small share of grape growers has access to the needed equipment. as stated above the farmers’ plot sizes after the privatization were small and they relied mostly on grape sales. in 2017 the situations is mostly unchanged. in total 66,544 farmers cultivate grapes on an average plot size of 0.23 ha [23]. the farmers are still heavily dependent on selling their grapes to the few operating wineries [24]. most of the sales are organized through oral agreements or contracts based on quantity and trust [17,25]. however, there is a current t rend among wineries towards in-house grape production to control grape quality and yields, as well as variety [17,26]. nowadays, the wine industry is again an emerging key industry for armenia and is developing positively [27]. until now, though, most armenian wine-producing companies strongly focus on wine exports, as export developments were overall positive. russia is by far the most important export market, accounting for 90% of all exports followed by the usa, ukraine, france, lithuania and others. since armenian wine exports are so undiversified, economic shocks occurring in the russian market directly affect armenia’s wine export dynamics. the strong devaluation of the russian rouble in 2014 resulted in a large decrease of armenian wine exports (up to -40% in one year). however, the wine exports recovered, market share was regained and wine exports are increasing again. [28] as the gross domestic product per capita is growing, the overall interest of the armenian population in wine seems to be rising [29]. the local demand for wine is steadily increasing [30,31]. the increasing number of wine bars and restaurants in armenia’s capital yerevan underlines this evolution of growing interest and 34 linda bitsch, barbara richter, jon h. hanf demand for wine. nowadays, especially the young population, which was part of the velvet revolution in armenia in spring 2018, seems to be interested in wine and is willing to spend money on wine [29,31]. the peak of imported wines in 2011 with 717 thousand litres of wine declined heavily nearly two times in the following years, but at the same time the number of wine specialised bars and retailers is raising. local demand on wine is steadily increasing [17,27,31]. this development in combination with a slowly increasing number of wine consumption per capita indicates an ongoing development in the interest and importance of the domestic wine production [17,32]. the consumption of wine is with 1.63 litres per capita [33] still very low, but the interest and growing importance of wine are steadily increasing and growing. a further indicator of the increasing importance of the wine sector is the establishment of the vine and wine foundation of armenia (vwfa) in 2016. the foundation is a governmental organization that represents the sector. additionally, the organization is the responsible body for the development of the wine industry in armenia as it takes a leading role3. most of the research is focused on developing towards the production of stable quantities and higher quality, accompanied by increased exports and domestic consumption in armenia as well as wine tourism [6,16,17,24–26,31,34,35]. however, scholars have not paid much attention to the market structures as a whole. 2.2 framework of competition intensity the structure of the armenian wine industry and the degree of competition were analysed using a framework based on the industry structure analysis. it provides the possibility to analyse the competition intensity within an industry as it investigates the industry conditions based on external factors. the intensity of competition implies for companies whether the industry is attractive or not. according to porter [36], the following forces affect the intensity of competition: (1) intensity of 3 the organization represents the interests of all participants in the wine industry towards the legislator, other industry participants, and the government. the vwfa is in exchange with the government as well as the wine producers and is involved in different stages of the wine chain: firstly, it considers the problems in viticulture that grape producers have to face e.g., grapevine breeding, determination of grape varieties, grapevine diseases etc., and supports the industry in finding solutions. secondly, the organization is connected to wine producers and processing companies and it supports domestic and export activities (e.g., participation of wine producers at international wine trade fairs). furthermore, the organization is engaged in developing an umbrella brand for the wine sector. finally, yet importantly, the wine culture is promoted among consumers within the country. rivalry among existing competitors, (2) bargaining power of buyers, (3) bargaining power of suppliers, (4) pressure from substitute products, and (5) threat of new entrants. to be able to derive strategic implications for the group of wine-producing companies and policy makers, the framework is applied from the perspective of the group of wine producers. this focus was set deliberately. even though the wine producers differ in size (some are larger than others, but also very small ‘boutique’ wine producers exist), compared to other wine producers in the old and new world countries, all wine producers are relatively small. they are located in rural areas and play an important role in the employment of the rural population in armenia. in 2012, almost 1.500 people were permanently employed in 27 wine-producing companies. taking into account the strong collaboration between wine producers and grape growers, the wine producers are a major sector for employment [32]. this enables grape producers to achieve higher grape prices in the medium and long term. in conclusion, the present structures contribute to rural development. therefore, each force is applied to the armenian wine industry from the point of view of all wine producers. the concluding predictions will be analysed in the empirical part of this study. intensity of rivalry among existing competitors the armenian wine industry has around 35 wineproducing companies, of which only six large-scale wine producers dominate the industry [32]. as the number of wine producers is quite small and the market is very transparent, the action one firm takes, except in the case of small-scale producers (households), can be seen by others. due to the small quantities, which households produce and mainly consume privately, they have a minor influence on the market.4 industry rivalry is low because the industry is small and a few large wine producers are leading the market. the positive market development [27] contributes to the low industry rivalry and gives firms the possibility to expand and grow in size. highly specialized assets (vineyards, oenological equipment, technology) cannot be liquidized easily and bear high sunk costs for wine producers. thus, in the armenian wine industry, exit barriers occur. even in the case of excess capacities, which makes it unprofitable to work in the industry, wine producers tend to stay in the market. prediction 1: in the armenian wine industry, an oligopolistic market structure is present as only a few wine pro4 thus, these small-scale producers are excluded from the analysis in this study. 35the competitive landscape in transitioning countries: the example of the armenian wine industry ducers dominate the market. as the market is growing, existing wine producers can expand easily. therefore, industry rivalry is low. bargaining power of buyers in armenia, there are only five big players in the category of supermarkets: carrefour, yerevan city, sas, parma and nor zovq [17]. other retailers are mostly small but numerous and increasing. since 2011, several wine bars and specialized retailers have started the business [17]. the first wine bar in vino was opened in 2010 [31]. as the retailers are more concentrated than the wine producers (with 35 companies according to 6 [6]), the bargaining power of retailers is expected to be high. due to the historical evolution and focus on brandy production during the soviet era, the armenian population also experienced a change in the wine culture. since the country’s independence, wine became emerging again. data from 2012 to 2017 show an increasing trend in the total wine consumption in armenia [31]. while 15 years ago, a large quantity of eastern european and georgian wines was still being imported and these represented the middle price segment in the food retail trade, today these imports are marginalised and armenian wines dominate the middle price and premium price segment [31]. wine consumption is driven by female consumers, local wines are more and more favoured, especially by younger consumers (18-34 years) [37]. the majority of wines are consumed at home, followed by events and restaurants [37]. in conclusion, retailers and final consumers can switch easily between wine producers and different products. the study by corsi and remaud [38] show that wine falls under the fmcg category. thus, producers should establish branded products to stand out in the market, bind customers, and sustain in these markets. the study results of hugger [37] show, that so far branded wines are rarely found in the armenian wine industry. prediction 2: the bargaining power of retailers and final consumers is high. bargaining power of suppliers the wine industry has different suppliers, such as producers of glass bottles, barrels, tanks, corks, screwcaps, labels, cardboards, fining and additives, technology and machinery. in a worldwide comparison, the armenian wine industry is relatively small with only 2,500 ha of vines used for winemaking. a greater vineyard area is used for brandy production. compared to european wine countries, the quantity of wine produced in armenia is small. as the total demand is too small, suppliers for wine industries do not set up a sales force in armenia. for that reason, almost all the equipment has to be imported to armenia [17]. as shown before the number of grape suppliers is rather high (in total 66,544 farmers). compared to this, the concentration among wine producers is much higher. therefore, buyers face low switching costs, especially because grape suppliers are often not protected by contracts [26]. the grape growers are dependent on the grape sale as it is for many the main rural income source. overall, grape growers can choose to sell the grape to wine or brandy producers. in general, wine producers pay more, as they demand differentiated quality criteria e.g. such as lower yields to have the right ripeness, healthiness or acidity. as an alternative, grape growers can sell to brandy producers, but brandy producers do not pay a price premium even if the grapes have a higher quality. the quality standards for brandy are lower. in contrast to table wine production, the prices for grapes for brandy are determined by a minimum sugar level and quantity only. a grape grower focusing to sell table grape quality fears the risk of not selling his grapes to a wine producer. then he has to sell it for brandy production, but due to the lower quantity to reach the table grape quality, he will end up with less money, as brandy grape prices are mainly set due to quantity. for a few grape growers (the minority) cultivating and selling international or rare varieties is an advantage. on the one hand, they can offer small capacities of highly demanded inputs. on the other hand, the special varieties can be seen as a kind of asset specificity. these varieties are only useful in wine-making. if these grape growers have no fixed relationships with buyers, they fear a huge risk of not selling their grapes. prediction 3: suppliers of inputs other than grapes have high bargaining power, whereas grape growers have a low bargaining power towards the wine producers. pressure from substitute products in armenia, beer can be a substitute for wine5. other substitutes of alcoholic beverages are spirits (including brandy), which is decreasing in consumption [17]. the market share of imported wine, which is a substitute for domestically produced wine, declined [22]. the switch5 in 2016, the per capita consumption of spirits exceeded the consumption of wine and beer in armenia [39]. 36 linda bitsch, barbara richter, jon h. hanf ing costs for consumers are very low, as the substitutes are available in all distribution channels at similar prices [17]. new product developments of substitute products in alcoholic beverages are very likely. according to 40 [40], globalization leads to a fast spread of innovations and product developments in the alcoholic sector. prediction 4: the threat of substitutes is medium. new developments and low switching costs create attractive alternatives for consumers. threat of new entrants after the collapse of the soviet union and the previous centrally planned economy, several wine producers entered the industry [6,32]. this indicates that entry barriers are low. compared to european and other wine countries, the quantity of wine produced in armenia is small and hence economies of scale and the earned profits are relatively small. armenia has a very large diaspora with about 7 million people [31]. some of them invest in the armenian wine business [26]. for many, the main motivation for investment is not the profitability of the business venture but the feeling of connectedness and belonging to their nation. this might be one of the reasons why only a few wine producers have entered the industry, even though entry barriers are low. prediction 5: the entry barriers for new entrants in the armenian wine industry are low. the armenian wine market is increasing in size; this makes the market attractive, creating a high threat of new entrants. 3 empirical study 3.1 sample and interview description a qualitative approach was chosen for two reasons: firstly, due to the size of the wine industry and the number of wine-producing companies as well as the number of experts in armenia, a quantitative survey could not be carried out. secondly, the data available on the structure and competition intensity of the domestic wine market is very limited, which also supports a qualitative approach. thus, 41 face-to-face in-depth interviews were conducted throughout field research in armenia in september and figure 1. summary of the expected influence of each force. (own illustration). 37the competitive landscape in transitioning countries: the example of the armenian wine industry october 2016. for the interviews a semi-structured interview guide was developed, based on the framework in chapter 2.3. on average, one interview lasted about 32 minutes. almost every interview was recorded with the oral approval of the interviewees. the recording gadget was a sony icd-bx140. recording was not allowed in two interviews, but notes were taken afterwards. depending on the interview partners, the interviews were carried out in armenian, and then translated into english and german, as well as in english and german directly. in this study, the software for qualitative and quantitative research methods maxqda was used. the recording files were uploaded and with the transcription tool transcribed and then analysed. in order to ensure a wide range of opinions and perspectives interviewees were chosen from different branches of the wine industry. in order to cover the sector, we have systematically and purposefully selected the interview partners, who are all actively working within the wine industry, considering different business models and including all parts of the supply chain. we interviewed almost 50% of all wine producers, including all large and leading companies. in addition, we have covered the majority of all relevant players from the armenian wine industry. accordingly, interviews were also conducted with suppliers, buyers, and other experts of institutions related to the wine industry. four sections of interviewees can be divided: · wine producers: 15 wine producers of different size (including all large and leading companies), located in the countryside, were interviewed. not every single wine-growing area has been covered. · suppliers: two suppliers of machinery and agents were interviewed. · distributors: 17 distributors were interviewed; out of these eight restaurants/hotels, two supermarkets and seven wine bars/shops. · experts: seven experts were interviewed. they work in key positions of closely related fields or are actively involved in the industry, e.g., politics, education, or foreign help organizations6. table 1 gives an overview of the different subgroups and the number of participants. having conducted 41 individual in-depth interviews with all relevant players of the armenian wine industry, we nearly achieved a representative sample, although we used a qualitative approach. the applied research methodology is used to analyse the developed framework and to gain a deeper insight into the armenian wine industry. due to the explorative research character, the analysis of the interviews followed the approach of [41]. this method of analysing qualitative data is based on mayring (2002). the advantage of the analysis following gläser and laudel [41] over the approach of mayring [42] is that the category system is open, which means that new categories can be added throughout the research process when necessary. the applied research methodology is used to analyse the first level of the developed framework as basis for further implications. secondary data that was collected to build assumptions about the peculiarity of each force is considered for the deductions within the developed framework to work out the competitiveness of the industry. 6 e.g., deutsche gesellschaft für internationale zusammenarbeit (giz), centre for agribusiness and rural development (card), centre for the promotion of imports from developing countries (cbi) etc. at that time, all of the organizations were involved in projects in the armenian wine industry. table 1. overview of the different subgroups and number of participants. groups of the supply chain subgroups number of active companies numbers of attended companies percentage (%) wine producers 35 15 46 suppliers grape growers many 0 0 barrel producers 3 0 0 bottle producers 2 0 0 machinery/agents 4 2 50 buyers restaurants / hotels not obtainable 8 not obtainable supermarket chains 5 2 40 wine bars / shops 13 7 69 other experts education / 4 / politics / 1 / foreign/related companies / 2 / based on own research. 38 linda bitsch, barbara richter, jon h. hanf 3.2 empirical results the qualitative study revealed important results with regard to the prevailing market structure in the armenian wine industry. regarding the intensity of rivalry among existing competitors, the interviewees verified the situation of having about 35 wine producers of different sizes, with few large-scale wine producers dominating the industry. the intensity of rivalry also depends on storage costs that can occur. armenian wine producers had to face high storage costs during the crisis in the russian market (armenia’s biggest export market) initiated by the russian rouble depreciation, which resulted in a decrease in sales for the armenian wine producers. this example shows that external factors (e.g., crisis) can induce high storage costs and lead to price-cuttings. the russian rouble depreciation showed that rivalry is high in such situations, in which wine producers want to sell their stocks, and there is excess capacity in the market. differentiation of wine producers is possible by branding and the quality level, as wine quality still differentiates strongly between producers. the market is developing positively and total consumption is growing. however, the interviews displayed that there is still potential for further growth in consumption. caused by high sunk costs for vineyards and cellar equipment, the interviews revealed that exit barriers for established wine producers are high. the high percentage of wine producers who invested in their own vineyards (67 %) and their own cellars (80 %) emphasizes this result. altogether, the intensity of rivalry among existing competitors can be described as low to medium. the prediction was confirmed. concerning the bargaining power of buyers, the interviews revealed that retailers have a large availability of different products. they can decide between imported and domestically produced wines. as there are 35 domestic wine producers, they already have a large choice. adding imported wines, their options even increase. most of the interviewed retailers work with contracts, only one works with loose agreements. for retailers, the contracting and delivery costs stay the same, no matter with which wine producer they decide to cooperate. thus, retailers can switch easily between wine producers and different products. the bargaining power for all types of retailers is high. for consumers, the bargaining power is also high, because they can switch at low costs to other products or wine producers. the results confirm the prediction about the high bargaining power of buyers. the bargaining power of suppliers of inputs other than grapes was evaluated separately, as the situation is very different for grape suppliers and suppliers of other inputs. the interviews showed that most equipment has to be imported to armenia. some bigger wine producers import on their own. apart from that, only three registered companies organize import. the interviews revealed that one reason for the low number of suppliers is that the wine industry in armenia is not attractive enough as it is too small. therefore, only few companies decide to set up a sales force in armenia. substitutes are not available. within the country, a single bottle producer, some smaller barrel producers and printing companies exist with limited product portfolio compared to other established wine countries. these firms are too small to threaten with a forward integration. due to the oligopolistic structures among suppliers of inputs other than grapes, these suppliers have the option for high margins; thus, they can charge prices, which are higher than the price in a competitive market. in addition, the suppliers offer different brands in their portfolio, e.g. bucher, europress and della toffola. as the press systems are (mostly) not compatible with each, wine producers cannot switch between the suppliers and compare prices. thus, for some products the suppliers operate with monopolistic margins. the threat of wine producers to integrate backward is credible, as they can manage the import themselves. the findings suggest that a threat of backward integration is trustworthy and already 80 % of wine producers do self-import of supplies. this means that the bargaining power of suppliers is lower than expected. for grape growers, the situation looks different. as the number of grape growers is high but only a few buyers exist, it is difficult for them to switch, whereas wine producers can easily switch to other grape suppliers. therefore, wine producers face low switching costs, especially because grape suppliers are often not protected by contracts. agreements are usually made orally for one year only [25]. additionally, high transaction costs arise, as a continuous business relationship is missing. this indicates a low bargaining power for grape suppliers. in armenia, wine producers set the prices, so these are not subject to negotiation. grape growers are dependent on sale as this is the main source of income. most smallscale farmers sell small quantities to wine producers. as wine producers supply grapes from many growers, they are not dependent on a specific farmer and have greater bargaining power. the lack of collaboration among grape growers contributes to the low negotiation power of the farmers. grape farmers often lack the financial resources to threaten with a forward integration. some grape growers who are cultivating special and highly demanded varieties have higher bargaining power, but 39the competitive landscape in transitioning countries: the example of the armenian wine industry these growers represent a very small percentage. other grape growers slightly increase bargain power if they can threaten wine producers with not accepting the instructions. this causes higher agency costs for wine producers, as they need to control or pay higher prices. following the results of the interviews, grape suppliers generally have low bargaining power. in summary, suppliers of inputs other than grapes have medium bargaining power, while grape growers have low bargaining power. the prediction was not confirmed. regarding the substitutes, the results of the interviews show that vodka and spirits do not serve the same function, as wine and brandy are drunk on different occasions. therefore, it can be stated that the pressure of these substitutes is low. beer and fruit wines can compete to a certain extent, but for fruit wine, the market share is rather small and beer is a seasonal competitor. imported wine is the strongest competitor, although it only possesses a market share of around 7 % of all consumed wines in 2017 [43]. for every alcoholic beverage, the switching costs for consumers are low, since it is available everywhere and within comparable price ranges and thus creating a high threat of substitutes. it is similar to new product developments. the same likelihood applies to all alcoholic beverages, again increasing the threat of substitutes. in summary, the threat of substitutes is medium. the prediction was confirmed. in terms of the threat of new entrants, it was shown that in armenia, there are no legal administrative entry barriers for the industry as there is no official wine law until now. some basic health and safety regulations do exist but are simple to be followed. the import of grafted international varieties, for instance, is restricted due to the threat of phylloxera7 that could affect all non-grafted vines in armenia [22,26]. for entering the armenian wine industry, capital is necessary to buy or set up new vineyards, machinery, equipment, etc. however, the capital requirements are not too high. wine producers also have the opportunity to rent facilities and equipment of existing producers or to use services such as contract bottling, which lowers the sunk costs. switching to other grape suppliers is easy, as the number of grape growers is high. switching to suppliers of inputs other than grapes such as producers of glass bottles, fining and 7 phylloxera is a louse or aphid that severely affects vineyards covered with vines that are not grafted. affected vineyards have almost no chance to be recovered. figure 2. summary of the peculiarity of each force.(based on own research). 40 linda bitsch, barbara richter, jon h. hanf additive agents, barrels, machinery, cork suppliers, etc. is more difficult since only a small number of suppliers operate on the market and each of them with their own brands (products with different characteristics, prices and maintenance services). a change to production of wine-related products (such as fruit wine and brandy) is not as difficult as expected in advance and the costs of a switch vary between different products. as many wine producers also produce fruit wine and brandy, it is feasible with low investment costs. the switching costs to other productions such as table grapes are high as selling machinery previously used for wine production can be difficult. furthermore, different varieties need to be planted, which can cause high costs. overall, this leads to medium exit barriers for possible new entrants. however, since the entry barriers are low and the exit barriers are medium, this implies a high threat of new entrants. the prediction was confirmed. 4 discussion and implications 4.1 implications for wine producers the results showed that wine producers have a low bargaining power towards suppliers of inputs other than grapes as well as in negotiations with retailers. there is a need to act to support wine producers in enhancing their bargaining power towards upstream and downstream stages. possible recommendations include (1) the collaboration among producers, (2) the establishment of a communication network among producers, (3) the strengthening of the competitive position of producers, and (4) investing in the establishment of brands. the establishment of collaboration among wine producers creates an opportunity to increase bargaining power towards suppliers of inputs other than grapes and towards retailers. such collaboration can be organized, for instance, by establishing a wine producers’ association. the producers’ association could include a producers’ communication network to interconnect with other wine producers. another example, could be collaboration among producers vertically or horizontally. 44 [44] analysed a small group of producers from portugal, called the douro boys and showed that the “informal network ”/collaboration fostered innovation and improved their market situation by fighting competition together. the group worked together in the international wine market through collective presentation of its wines in tastings, fairs and other events, but remained independent in all other areas. an additional possibility is to build a producers’ communication network to interconnect with other wine producers with the help of the vwfa. by being part of such a network, producers can exchange knowledge and discuss the development of the sector with the aim to strive for a common goal. together with the vwfa, wine producers can take joint measures to increase the visibility of the umbrella brand in export markets. wine producers have several options to strengthen their individual competitive position. they can try to produce at lower costs by improving the production cost structures and applying economies of scale (e.g., by expanding vineyard area and the total production volume or by mergers and acquisition). in general, through merger and acquisitions the overall competition intensity decreases for the industry. however, out of the perspective of a single, individual firm, it can improve its competitive situation and help to improve the bargaining situation with grape suppliers or buyers such as retailers due to bigger quantities. another possibility is to invest in product differentiation, which can be achieved with product development and branding. as earlier shown wine is a fmcg product, for which branding is especially important [38]. this is also related to the fourth recommendation for wine producers, which entails investments in the establishment of brands. this addresses the consumers and builds consumer loyalty establishing a long-term relationship. wine touristic activities can serve as a measure to establish brands. in wine tourism strong emotional bonds between consumers and the brand can be created through experience. thus, wine tourism can help wine producers to improve their competitive situation. 4.2 competitive policy implications the results show that there is still a low level of competition among wine producers in the armenian wine industry. there are about 35 wine producers. the industry is still growing, which is proving the profitability of the industry. oligopolistic structures are detected not only in the case of wine producers but also in other stages of the value chain. for instance, there are only a few suppliers of inputs other than grapes, especially those suppliers offering the import of supply necessary for viticulture and winemaking. also, in downstream stages, oligopolistic structures occur. five big players dominate the supermarkets in armenia. those three groups are able to charge higher prices due to the oligopolistic market structures. the implementation of measures, which help to increase the competition intensity among suppliers, wine producers and retailers, would cause a lower average market price. that, in turn, increases total welfare, especially by increasing consumer welfare. in the 41the competitive landscape in transitioning countries: the example of the armenian wine industry case of greater competition among suppliers, wine producers would benefit, as average prices for the supplies fall. to increase the competitiveness in the wine industry in armenia, possible implications for policy makers are (1) encouraging investments to increase competition, (2) increasing institutional infrastructure, (3) increasing the availability of data to make sophisticated decisions, and (4) fostering a regional and/or country brand. encouraging investments to increase competition although the findings presented earlier indicate a high degree of concentration of different participants along the value chain, including input suppliers, wine producers and retailers, there is no instant suggestion that the concentration has led to significant exercising of market power of any of the set firms. still, increased competition is beneficial to consumer welfare. the promotion and support of start-ups and investments into capital, skills (e.g. for further education and training) and labour (e.g. for vocational education) could help to improve the competitive landscape. in addition, the promotion of addition markets (e.g. neighbouring countries), would also help to improve the competition situation. the policy makers can promote the wine industry as a possible pillar for investors, no matter if they are local entrepreneurs or foreign investors. encouraging foreign investors to do business in armenia can contribute to the development and modernization of the local industry. this especially concerns technology and machinery needed in the wine production process, such as laboratories or anti-hail technologies, but also knowledge for marketing tools and strategies. 25 [25] showed for the armenian wine industry that most of the inflow of foreign direct investments (fdi) originates from the armenian diaspora or from other investors, which have a personal connection with the country. “the overall effect of fdi is considered positive, within society and for overall developments. constraints still exist, but examples show that the interest of investors exists and difficulties can be overcome.” [25]. increasing institutional infrastructure the results have shown that up to now the legal setting for the wine industry in armenia is not defined in detail. the interview results also show that wine producers require wine laws and regulations, and the enforcement of these. there is a law on alcoholic beverages on the basis of grape raw materials, but no detailed law exclusively covering the product grape wine. a first step was taken in 2014 when armenia joined the oiv as a member state, but the legal requirements must be implemented in the national law. the analysis showed that until now, clear legal definitions of product categories (wine, fruit wine, brandy, etc.) are missing. when purchasing wine, consumers demand a certain level of wine quality. to reach a higher quality of wines produced in armenia, it is necessary to implement wine laws and regulations based on international standards. standard specifications have to be set up that are valid for all grape and wine producers, which produce grapes or sell their wines commercially. this makes wines more competitive in the domestic and international market and facilitates wine exports in various countries. the wine that is sold abroad helps building trust between local consumers (also including tourists) and wine producers. like this, local consumers see that wines are produced according to international standards, which can contribute to a higher willingness to pay for local wines. hence, wine laws and regulations that increase the overall quality level will increase the competitiveness of the wine sector. it gives security to producers and consumers. on the one side, it enhances the chance for wine producers to sell their products, and, on the other side, it gives orientation to consumers, as they know what wine quality to expect. wine laws and regulations have to include specifications and minimum requirements in terms of grape cultivation, oenological practices, and regarding sales and marketing (e.g., labelling requirements, quality assessment in certified laboratories etc.). part of this step is also to create a standardized quality assessment system and opportunities for monitoring and control. to ensure a certain quality level, a legal analysis of the products has to take place before the products can be sold. therefore, independent and certified laboratories are necessary8. if the products do not match the regulations, sales have to be prevented. as many small-scale home producers exist, the regulations can only be applied to wine producers who sell through indirect sales channels. increasing the availability of data to make sophisticated decisions the results indicate that there is a lack of governmental decisions regarding threats for grape growers and wine producers such as the phylloxera. grape grow8 certified laboratories should carry out tests on malolactic fermentation, tests on stability and protein sediments, sensory tests, and microbiological assessments. this has been recommended by märz and bitarishvili [45] in the report on the qvevri wine identity practice of the qvevri wine cluster members. 42 linda bitsch, barbara richter, jon h. hanf ers are the first in the value chain to be affected by the pest, and wine producers the next when they cannot secure their supply. in order to know where the rootstocks are, which, and how many are affected, which grape and wine producers are affected, and to predict the actual scope of the crisis, a cadastre is necessary. furthermore, the government needs such a database to plan subsidies for grape and wine producers. thus, to be able to make governmental decisions safeguarded and purposeful, a statistical database for the wine sector has to be set up. such a database is beneficial for public regulators, policy makers, corporate managers and researchers, who can use this information to make sophisticated decisions about innovation, profits, competition, and social welfare. until now, the national statistical service (nss) provides a minor database. a database for the industry needs to integrate information about production areas, production quantities and qualities, planted varieties and rootstocks, land ownership, the corresponding grape growers, as well as wine and brandy producers, commercialization permits, distribution channels, trade, and consumption. it is essential to steadily collect, store and evaluate data. with these numbers, the importance of the wine industry in the context of the agricultural sector is clarified. fostering a regional and/or country brand a continued investment in the vfwa can help foster the generic brand of armenian wines. in turn a stronger regional or country brand can help to strengthen the individual brands of the wine producers [46]. 47 [47] show in their research that gi, collective brands and sector brands subsumed under shared brands facilitate the establishment of a relationship of trust between the producer and consumer, being a source of competitive advantage. 4.3 rural development policy implications the interview results show that there is great potential to increase wine consumption in armenia. besides establishing brands to increase consumer loyalty, as mentioned in the recommendations for wine producers, the government can engage to create greater awareness for the product wine. the vwfa, as governmental organization, already promotes wine culture within armenia. additional measures, such as the promotion and development of wine tourism in the country, lead to industry growth. wine tourism in armenia can contribute to rural development [34]. so far, wine tourism in armenia only exists on a small scale. in 2018, the project of the socalled wine cube started, which has built the base for further development of wine touristic activities within the country [48]. to increase wine touristic offers, policy makers should introduce potential benefits for wine producers to managers, the wine sector as a whole and the public. additionally, the government can encourage wine producers to engage in these activities, collaborate with established tourism providers to increase the offers. this includes (i) enhancing the quality of existing wine tours, (ii) developing new wine tour offers and wine tourism routes, (iii) providing information on the tours and attractions offered, and (iv) training guides with needed skills and knowledge. wine tourism offers locals and foreigners to incite interest in such activities and in the wine sector itself. this will foster economic development in the country as it creates employment for locals in rural areas. furthermore, it promotes cultural awareness and helps to preserve local culture and traditions. the earned money can be reinvested in infrastructure as well as the protection of the countryside. additionally, the promotion of wine tourism does not only foster the wine industry it also has cross border effects due to collaboration. this means, that wine tourism is only successful when a regional network including several actors, such as various overnight offers (hotels, b&bs etc.), gastronomy and others (museums, art galleries, regional tourism organizations etc.) work together offering a holistic touristic experience. in this case, besides the wine producers all other collaboration partners bloom as well, thus (wine) culture is promoted on a broad base [49]. the results of the industry analysis showed that the bargaining power of grape suppliers is quite low. farmers often possess small plot sizes. there is a high number of smallholders and they depend on the grape sales, as this is often the only source of income. hence, the government and vwfa should not only try to engage collaboration among producers but also among grape growers. an overall more professional type of relationship between grape suppliers and wine producers can be established by fostering the usage of midto long-term contracts, including the compliance of contract terms and contract monitoring. this would help to protect smallholders as well as wine producers and allow them to reduce uncertainty in the business relationship. besides, the government can promote collaboration among smallholders by either establishing a grape grower association or cooperatives. these kinds of partnerships between smallholders increase their bargaining power towards 43the competitive landscape in transitioning countries: the example of the armenian wine industry buyers and give them the opportunity to exchange knowledge, which can lead to the production of higher quality grapes and a higher income. 50 [50] showed that collective action by local and international governmental and non-governmental institutions and organizations may enhance farmer’s market performance. in their study, 50 [50] found that training and learning support is the main trigger to enhance farmer performances. in the case of governmental support, however, the government should only serve as a facilitator, providing capacity development in terms of management, contract negotiation, market research, supply chain analysis and bookkeeping for the farmer organizations to develop independent and sustainable structures [51]. governmental support already exists to a limited extent (e.g., regional development centres where agronomists share their knowledge with the farmers) but measures should be more target-oriented, reaching more farmers with the same effort. the government can establish a centre in the capital yerevan for all grape growers, where experts in viticulture offer consulting services without charging the individual farmers. another possibility of governmental support is to offer subsidies for loans to emancipate farmers to take business decisions e.g., to change to other crops, to change to other varieties, to increase the size of the cultivated vineyard area etc. in this way, the government can provide security to farmers in dangerous income situations. in terms of production, farmers need adjusted plant material of high quality and nurseries for the reproduction of plants for a stable production of high-quality grapes. for special agricultural problems that can occur in the industry, as for example phylloxera in viticulture, the government should provide state support concerning plant material and nurseries. in addition, the vwfa must give recommendations and advice to grape growers and wine producers on how to deal with specific agricultural problems. as no centralized organizations can assure an equal information distribution among farmers, some farmers have a lack of information and are not aware of the risk the phylloxera poses to their vineyards and income situation. a possibility for a recommendation given by the vwfa would be grafting of local varieties on resistant rootstocks. furthermore, it should negotiate with the armenian government in order to achieve the subsidization of grafting. 5. conclusion with this study, the industry structure of the armenian wine industry and its competition intensity is shown. armenia was chosen as an example for other transition countries in the caucasus. the results of the interviews, which have been conducted, permit to derive implications for wine producers and policy makers. recommendations, which address the increase of the bargaining power of wine producers towards suppliers and retailers, include (1) the collaboration among producers, (2) the establishment of a communication network among producers, (3) the strengthening of the competitive position of producers, and (4) investing in the establishment of brands. the competitive policy implications aim at three main areas: (1) encouraging investments to increase competition, (2) increase institutional infrastructure, and (3) increase the availability of data to make sophisticated decisions. the attractiveness of the industry should be promoted among local entrepreneurs and foreign investors. to build a sufficient institutional infrastructure and to reduce the uncertainty of market participants, policy makers should aim to establish laws and regulations for the armenian wine industry, as well as to develop a quality assessment system. the establishment of a widely accessible statistical database about production, distribution and consumption gives policy makers and managers the opportunity to make informed decisions. rural policy implications enclose the promotion and growth of wine touristic activities, the protection of smallholders by building more professional relationships along the value chain, the collaboration among smallholders, the establishment of cooperatives and state support for special agricultural problems (e.g. phylloxera). these implications may contribute to an increase in the overall competition and the development of the wine industry in armenia. with such a development, the country could overcome the struggles of building a strong sector with vital competition and foster 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[50] l. orsi, i. de noni, s. corsi, l.v. marchisio, the role of collective action in leveraging farmers’ performances: lessons from sesame seed farmers’ collaboration in eastern chad, journal of rural studies 51 (2017) 93–104. https://doi.org/10.1016/j. jrurstud.2017.02.011. [51] a. gramzow, p.j. batt, v. afari-sefa, m. petrick, r. roothaert, linking smallholder vegetable producers to markets a comparison of a vegetable producer group and a contract-farming arrangement in the lushoto district of tanzania. journal of rural studies, 63, 168-179, journal of rural studies 63 (2018) 168–179. https://doi.org/10.1016/j. jrurstud.2018.07.011. wine economics and policy 9(1): 51-61, 2020 firenze university press www.fupress.com/wepwine economics and policy issn 2212-9774 (online) | doi: 10.36253/web-7689 citation: c. obi, d. vergamini, f. bartolini, g. brunori (2020) the impact of changes in regulatory and market environment on sustainability of wine producers: a structural equation model. wine economics and policy 9(1): 51-61. doi: 10.36253/web-7689 copyright: © 2020 c. obi, d. vergamini, f. bartolini, g. brunori. this is an open access, peer-reviewed article published by firenze university press (http://www.fupress.com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information files. competing interests: the author(s) declare(s) no conflict of interest. original research article the impact of changes in regulatory and market environment on sustainability of wine producers: a structural equation model chinedu obi1,2,*, daniele vergamini1, fabio bartolini1, gianluca brunori1 1 university of pisa, department of agriculture food and environment, via del borghetto 80 – 56124, pisa, italy. *corresponding author 2 ghent university, department of agriculture economics, coupure links 653, ghent belgium e-mail: chinedutemple.obi@ugent.be, daniele.vergamini@agr.unipi.it, fabio.bartolini@ unipi.it, gianluca.brunori@unipi.it abstract.we explore the farmers’ perception of how different external drivers of changes in farming activities could lead to sustainability practices among wine producers. the general assumption is that regulatory and market forces can change the production strategies of wine producers, which could eventually lead to the adoption of sustainability practices. we presented the percentage sustainability practice (psp) as a novel way of measuring sustainability. we developed a structural equation model (sem) with 13 hypotheses to test our assumption for the wine supply chain in tuscany (italy). among the market forces, we found that wine growers perceived access to credit to have a significant positive association with sustainability practices. we also found that the perception of change in regulatory instruments such as environmental regulation and common agriculture policy can lead to sustainable practice if they improve access to credit. our research provides evidence for medium-large scale wine producers, emphasising their role as carriers of innovation in the movement towards sustainable wine production.  keywords: sustainability, wine, structural equation model. 1. introduction wine sustainability seeks to balance economic viability, social equity and environmental soundness on the whole production and processing of wine, from grapes to wine and spirits (oiv, 2016). a review of the literature on wine sustainability show a growing interest in the drivers of sustainability in the wine industry that has mainly focused on the internal drivers (dodds et al., 2013; flores, 2018; gabzdylova et al., 2009; gilinsky et al., 2016; merli et al., 2018; pullman et al., 2010; santini et al., 2013; szolnoki, 2013). indeed, the key drivers of sustainability in wine industries can be sufficiently divided into internal and external drivers. the internal drivers are the farm-level fac52 c. obi, d. vergamini, f. bartolini, g. brunori tors, including the managerial attitude and human capital required for the change to sustainable production. the production cost and yield impact of switching to more sustainable practices. the strategic advantages that come with sustainability labels such as improving new market penetration, competitive advantages, corporate images and reputations are farm-level internal drivers of sustainability. the external drivers that may influence the decision of whether to adopt wine sustainability are pressures from outside. these include market pressure such as consumer demand, climatic pressures such as changes in weather, and regulatory pressures and incentives such as environmental policies and credit incentives from the government. despite the existence of multiple relationships among the internal and external drivers and their relevance to wine sustainability, the research with evidence on how farmers perceived these drivers is still poor. our research explores how different perception of external drivers of changes in farming activities could lead to sustainability practices among wine producers. we used a structural equation model (sem) to visualise the type of relationships existing among the drivers and their significances from the winegrowers perspective. we concentrate on external drivers because only a few researchers have quantified the drivers of wine sustainability beyond the internal factors (santini et al., 2013). this strategy also allows a more concise evaluation of multiple variables. our study contributes to the current literature on wine sustainability on three fronts. first, it constitutes an innovative attempt to employ an sem in explaining the relationships of the external drivers of the sustainability practices of wine producers. second, our study provides a unique way of measuring sustainability using the percent sustainability practice (psp). third, we provide robust evidence, testing the model reliability and the main research hypotheses through an empirical case study of wine producers in tuscany (italy). 2. the structural equation model: conceptual framework and hypotheses sem is used to describe the conceptual framework for the relationship between the perceived external drivers of changes in farming practices and the level of sustainability practised by wine producers. the sem measures unobserved latent construct by using several observed or subjective variables and imputes the relationships among them. the main advantage of the sem is that it allows multiple and simultaneous testing of the magnitude and significance of the complex relationships between a set of variables. in figure 1, the sem is made up of circles which are connected by arrows. the singleheaded arrows define a causal relationship caused by the variable at the tail of the arrow, while open headed arrows indicate correlations, without a causal interpretation (hox & bechger, 1999). we categorised the external drivers of sustainability into two levels: the market forces and the regulatory factors. we make a general assumption that these two groups of external forces are capable of causing a change in the production strategies adopted by wine producers, which could eventually lead to the adoption of sustainability practices (rocchi & gabbai, 2013). the market forces are the changing institutional arrangements that offer advantages to wine producers when they adopt sustainability practices. for example, the provision of a credit facility, changing consumer behaviour for sustainable wines, and the changing market prices of wine (bianchi, 2015; santiago & sykuta, 2016). according to santini et al., (2013), these three variables are considered to have a much closer influence on farmers’ decision to engage in sustainability practices in the wine industry. hence, we developed the first set of our hypotheses. hypothesis 1: access to credit to influence sustainability practices positively. hypothesis 2: the increase in the market price of sustainable wines will influence sustainability positively. hypothesis 3: the change in consumer behaviour towards sustainable wine will influence sustainability practices positively. the regulatory factors are perceived to inf luence sustainability practices indirectly through their effects on the variables of wine market forces. they include climate change, changes in environmental regulations, and changes in international policy. kertész & madarász (2014) observed that environmental policies and climate change would probably be the major driving forces defining the direction of sustainability practices. climate change may compel policymakers to change regional policy and local environmental regulations. for instance, in the european union, the need to meet climate goals was the antecedent for introducing greening in the 2013 common agricultural policy (cap) reform (merino, 2012). the cap could influence farmers’ adoption of sustainable practices in several ways: a) by promoting investments aiming at speeding the modernisation process of the wine producers (first pillar payments). b) by ensuring a minimum environmental standard (greening and conditionality) or transition towards more sustainable farming systems (integrated or 53the impact of changes in regulatory and market environment on sustainability of wine producers: a structural equation model organic productions). c) diversifying the farming strategies with the inclusive engagement of local knowledge and territorial capital (wine cmo reform)1. emerging studies have shown that cap policies have led to farmers’ adoption of climate-friendly behaviour by curtailing chemical use and increasing crop diversity (cortignani & dono, 2015). climate change may also be perceived to cause changes in wine regulations in the eu. according to gaeta & corsinovi (2013), the eu has changed its wine legislation in response to climate change. some regulations help to check farmers oenological practices and treatments to ensure quality wines (vergamini et al., 2019). climate changes also may influence farmers to access credit facilities. for instance, fraga et al., (2012) observed that the increasing evidence for erratic changes in the climate called for adaptation and mitigation measures which often require additional financial resources on the wine producers. in recognition of this, the eu through the greening policy has committed up to 30% of the 2014–2020 budget providing non-repayable financial incentives for actions that improve climate change mitigation and adaptation measures at the farm level (rossi et al., 2017). climate change may also influence the market prices of wine. relevant studies have shown that this could occur through its effect on the quantity and quality of the wine (ashenfelter & storchmann, 2016). finally, some literature connects changes in wine regulations with changes in consumers’ behaviour towards sustainable wine (malorgio & grazia, 2007; pomarici & vecchio, 2014; sogari et al., 2016). these studies tend to suggest that regulations on sustainability labelling may offer quality signals to wine consumers, increasing their knowledge about sustainability and improving their willingness to pay for wine with sustainable labels (e.g. the recent spread of organic wines). more so, the price of wine is an essential driver of consumers’ willingness to pay for sustainable wine (pomarici et al., 2016; schmit et al., 2013). hence, we propose the next set of hypotheses which look at the interaction between the farmer perception of the regulatory forces and market forces. hypothesis 4: changes in cap policy could correlate with changes in environmental regulation. hypothesis 5: changes in cap influence wine farmers to access credit. hypothesis 6: changes in cap influence the market prices of wine. 1 see the proposal for wine cmo reform http://www.krir.pl/files/analiza_reformy_rynku_wina.pdf hypothesis 7: climate changes could influence adjustments in cap policies. hypothesis 8: climate changes influence changes in environmental regulation. hypothesis 9: climate change influences access to credit. hypothesis 10: climate change influences the market prices of wine. hypothesis 11: changes in environmental regulation influence farmers’ access to credit. hypothesis 12: changes in environmental regulation influence consumer behaviours. hypothesis 13: changes in market price will influence consumers’ behaviour. 3. method 3.1 data we tested the hypothesised model with a sample of tuscan wine producers who completed the producer’s survey of sustainable finance for sustainable agriculture and fisheries – sufisa2 – a project which investigates the wine sector in tuscany (italy). the sufisa survey collected quantitative data at the farm level for tuscan wine producers3 . the survey drew respondents from a producer list collected by the tuscany region during the 8th edition of an international business-tobusiness (b2b) meeting event in florence in 2017 (buy2 the purpose of sufisa was to identify sustainable practices and policies in the agricultural, fish and food sectors that support the sustainability of primary producers in a context of multidimensional policy requirements, market uncertainties and globalisation. the project has received funds from the eu’s horizon 2020 research and innovation programme under grant agreement no 635577. 3 for a more detailed picture of the case study analysis (italian national report, deliverable d2.2) here https://www.sufisa.eu/publications/ figure 1. hypothesized model. 54 c. obi, d. vergamini, f. bartolini, g. brunori wine meeting). most of the participants are mediumlarge wineries from the chianti area, siena and montalcino. the questionnaire was triangulated during a stakeholders meeting and tested through six pilot phone call interviews to improve data quality. we called a sample of 110 respondents: 80 of them responded to the questions on sustainability. after eliminating one case with excessive missing data, 79 cases remaining was used in the model. 3.2 the respondents’ characteristics all the respondents are wine producers, representing vertically integrated wine farmers who participate in grape growing, wine production and marketing. the descriptive statistics of the respondents are shown in table 1. it shows that different farm enterprises were represented in the analysis. these include individual farms (34.2%), family farms (35.4%), and private company farms (29.1%). the majority of the farm owners are male (69%), above 40 years (63.9%), and attended at least higher secondary education (97.1%). considering that data was collected from wine producers who took part in a b2b meeting in tuscany, we assume that our respondents are interested in exporting wines to other countries. the survey shows that the respondents produce at a relatively medium to large scale. for instance, about 58% of the respondents have either a mediumsize grape land of 10 to 25 ha or large grape land size of more than 25ha. in terms of wine yield, about 73% of the respondents either produce at a medium scale (200 to 500 hl per annum) or a large scale (above 500 hl per annum). these findings, therefore, represent market/ export-oriented wine producers in the chianti area and siena and montalcino in tuscany who wishes to sell their wine in larger quantities. following the sufisa definition of the small primary producer, it is, however, worthwhile to note that most tuscan wine producers are small and medium-scaled. 3.3 regulatory and market issues that are influencing farming strategies. we identified the critical variables of regulatory and market issues perceived to influence the management decision and farming strategies of wine producers. the six main variables selected during the stakeholders’ interviews include changes in market price, changes in consumer behaviour, and access to credit for farm inputs for the market forces; and adverse climatic conditions and pests; changes in environmental regulations, such as pesticide regulation; and changes in the cap policy for the regulatory forces. these variables had been identified in the literature to be among the external drivers of sustainability practices. the producer’s survey asked to what extent these issues have influenced the farming strategies adopted by the wine producers. we used a 5-point likert scale in the measurement. the likert scale ranges from not at all (1) to strongly (5). for convenience and ease of explanation, the analysis was done by rescaling the 5-point scales to binary. the first three likert scales: not at all, partly and somewhat was recorded as no (0), and the last two, considerable and strongly were recorded as yes (1). hence, a likert score of 4 or 5 shows that the underlying variable is a determinant of the choice of sustainable farming practices of the wine producer. 3.4. calculating percentage sustainability practices of wine producers the complexity associated with the sustainability framework, with its three symbiotic components (environmental, social, and economic) present difficulties in its assessment. according to hayati (2017), there are two ways of assessing sustainability. the first is by evaluation at the component level that enables comparisons of the table 1. respondents’ characteristics (n = 79). item definitions percentage (%) farm legal status individual farm 34.2 family farm 35.4 private company 29.1 public company 1.30 age of producer (years) up to 40 36.1 41 – 50 31.9 51 – 65 26.4 above 65 5.60 gender male 69.0 female 31.0 education lower secondary 2.90 higher secondary 44.1 university 52.9 type of wine conventional 65.8 organic 34.2 total yield (hl) small (less than 200hl) 26.5 medium (from 200 to 500hl) 25.3 large (more than 500hl) 48.1 grapeland (ha) small (1 – 9) 42.3 medium (10 – 25) 30.8 large (above 25) 26.9 55the impact of changes in regulatory and market environment on sustainability of wine producers: a structural equation model three components of sustainability, and the second is a systematic approach which was expressed as a function or aggregate of the different sustainability components. in our case, we analysed the aggregate sustainability of our respondent using the percentage sustainability practice (psp). the psp represents the wine producers’ opinions and perception of the extent to which their choice of production practices helped them maintain sustainability. unlike zahm et al., (2008), who used count number index, our percentage scale approach is to increase the variability of the sustainability score. it also helped to satisfy the underlying assumption of sem, requiring that the endogenous variable must be continuous (streiner, 2005). instead of providing a dichotomous score for the sustainable and non-sustainable farm as done by casas-cazares et al., (2009), we assume that sustainability is a systemic process that should be measured in percentage level. the selected indicators for measuring sustainability are in line with the literature (zahm et al., 2008). it includes 11 disentangled variables covering the three pillars of sustainability–i.e. environmental (n=3), social (n=4) and economic (n=4) (table 2). for instance, the producers were asked whether the production choice (farming strategy) they adopted help them to maintain biodiversity. a likert scale approach was adopted to retrieve responses ranging from 1 (strongly disagree) to 5 (strongly agree). following bianchi, (2015), a reliability test was conducted to check the internal consistency of the indicators on the three components, and confirmatory factor analysis (cfa) was conducted for measurement validity. furthermore, the percent sustainability practice (psp) is given as: 𝑃𝑃𝑃𝑃𝑃𝑃 = % !! "#! &% $ %#! 𝑋𝑋% 𝑛𝑛& ,% ' (#! 𝑌𝑌( 𝑛𝑛) ,% ' *#! 𝑍𝑍* 𝑛𝑛+ , 100 𝑇𝑇 where psp = percent sustainability practice n = number of indicators x_i = value of the ith indicator in the likert scale of environment component y_j = value of the jth indicator in the likert scale of social component z_k = value of the kth indicator in the likert scale of economic component t = maximum absolute value in the likert scale 3.5 the structural equation model: assumption and modelling the variables of marketing and regulatory forces and the variable of psp were combined for the final sem modelling. the assumption of the sem includes that there should be no missing value, the variables are to follow a normal distribution, they must be well correlated and have satisfactory goodness of fit (streiner, 2005). we conducted exploratory statistics to ensure that the first three assumptions were satisfied, while the goodness of fit was assessed through the sem analysis. the sem was performed using stata 13.1gui. the maximum likelihood estimation method was adopted. the goodness of fit of the model was evaluated using the significant level of the chi-square (chi2), the value of the root mean square error of approximation (rmsea), standardized root mean square residual (srmr), the comparative fit index (cfi), and the tucker-lewis index (tli) as suggested by schreiber et al., (2006) and streiner, (2005). hence, a model with good-fit should have non-significant chi2 test, the rmsea and srmr should be very close to 0, while the cfi and tli values should be very close to 1. 4. results and discussions 4.1 the marketing and regulatory drivers of farming strategies the summary of the market and regulatory drivers perceived to be influencing the farming strategies of wine producers is presented in figure 2. here, we considered the underlying factor as recognised essential driver of change in farming strategy if the respondent selected a score of 4 or 5 in the 5-point likert scale. a summation result showed that the majority (62%) of the participants considered adverse climate conditions as a significant factor influencing their farming practice. this is followed by changes in consumer behaviours (57.7%). others in rank order include a severe drop in market price (30.1%), changes in environmental regulation (21.8%), and access to credit (20.5%). on the other hand, changes in cap policy seem to play the least role in the choice of farming practices adopted by the participants (12.8%). as expected, all six factors are important drivers of change in wineries behaviour. however, the level at which the factors influence the producers varied, with changes in the climate perceived to be the most critical driver of change in the winery industry in the study area. as previously mentioned, changes in climate conditions often trigger several series of changes both in the other regulatory and market environment that influence a decision towards the adoption of sustainability practices. another vital factor is changes in consumer behaviour, which could motivate farmers to improve their farming practices to 56 c. obi, d. vergamini, f. bartolini, g. brunori maximise profit and remain competitive in the wine industry. 4.2. the percentage of sustainability practiced by the wine producers using the psp formula, sustainability was analysed as a function of the environmental, social and economic components. the description of the indicators of the components, their mean, reliability test, and coefficient of the cfa is found in table 2. the standardised cronbach’s alpha ranged from 78% to 92%, indicating a relatively high internal consistency (reliability). the results from the cfa showed that all the standardised regression on the factor loading was significant (chi2= 283.07, ρ > 0.000). this finding confirms that the indicators selected for measuring sustainability are consistent with the measurement model, providing robust support for the validity of the indicators. generally, the mean psp is 70.62%, implying that on average, 71% of the farming strategies of the wine producers in the study area was perceived to help maintain sustainability. 4.3 sem: linking drivers of farming strategy with sustainability practices. in this section, we examined the relationship between the drivers of the farming strategy and the adoption of sustainability practices. table 3 shows a significant correlation between changes in consumer behaviour and access to credit on psp. changes in consumer behaviour have a negative correlation; access to credit has a positive correlation. although none of the regulatory factors has a significant association with psp, our analysis showed a significant correlation between some market factors and regulatory factors. this result provides the first base to support our claim that there exist interconnectivity among the external drivers of sustainability. moreover, almost all the constructs have skewness and kurtosis value between -2 and +2, being a sign of univariate normality of the variables, providing a basis for testing the significance of this relationship using an sem. the goodness-of-fit estimation of the sem showed a good overall fitting. the result of the sem standardised 62 30,1 57,7 20,5 21,8 12,8 0 10 20 30 40 50 60 70 adver se cl imatic condition and pest severe drop in ma rket price changes in consumer behaviour access to credit for farms consumable inputs changes of r egulations e.g pesticide r egulation changes in the cap policy issues influencing wi negrowers farming str ateg ies (%) figure 2. drivers of wine producers farming strategies. table 2. percentage sustainability practiced (psp) by the participants. the production choice you made help you to: mean s. dev β (cfa) reliability component mean psp (total) environment maintain biodiversity 3.86 1.21 0.94*** 0.92 3.72 70.62 maintain water quality 3.44 1.31 0.77*** maintain soil organic matter 3.89 1.14 0.99*** social create a good connection with buyers and input providers 3.94 0.97 0.82*** 0.78 3.37 connect with other farmers 2.67 1.29 0.61*** achieve societal recognition of your farming activities 3.10 1.50 0.70*** secure a successor 3.77 0.74 0.55*** economic maintain profitability 3.52 0.95 0.56*** 0.81 3.58 invest in the farm business 4.03 0.77 0.75*** sell the products in periods of greater difficulty where prices were low 3.41 0.84 0.65*** cope with changing market conditions 3.38 0.76 0.91*** note: mean is based on likert scale response: strongly disagree =1, agree = 2, neutral = 3, agree = 4, strongly agree = 5. *** is significant at the 0.01 level; **significant at the 0.05 level, *significant at the 0.1 level. chi2 value = 283.07, p >0.000. 57the impact of changes in regulatory and market environment on sustainability of wine producers: a structural equation model coefficient and their level of significance is presented in table 4 and figure. 3. table 4 showed that the p-value of the chi2 is 0.627; the rmsea is 0.00, srmr 0.039, cfi 1.00, and tli 1.062. the final column of table 4 shows the hypotheses that were supported by the model, while this was represented with bold lines in figure 3. out of the 13 hypotheses, the path coefficients of 9 were found to be correctly predicted. 4.4 market drivers of sustainability we consider the hypothesis of a positive relationship between the perception of market drivers of change in farming practices and sustainability adoption (hypothesis 1-3). the results supported the hypothesis 1 by showing that having access to credit has a positive and significant association with sustainability practices (β = 0.312, ρ = 0.003). the model did not support hypothesis 2, as there was no significant relationship between changes in the market price and sustainability practices (β = -0.011, ρ = 0.916). the model also shows that changes in consumer behaviour have a significant negative relationship with farmers sustainability practice (β = -0.295, ρ = 0.004). to discuss why access to credit has a significant positive impact on the adoption of sustainability practices, we consider the higher cost of shifting towards sustainability practice. hence the wine producers that have adequate liquidity through credit access are more likely to a change in behaviour towards sustainability adoption (goodhue et al., 2004; santiago & sykuta, 2016). market prices are an economic feature that determines farmers supply, and it seems not to be a significant factor considered by farmers in the adoption of sustainable wine production in our study. the reason for this is that wine is an experience good mostly influenced by reputation, customer loyalty, and recommendation, minimally affected by price (ashton, 2014). without a good reputation, premium wine even if it is sustainable may not attract high demand. surprisingly, the result shows an inverse relationship between the producers’ choice for sustainability and the attitude of consumers towards sustainability. this is probably because of the disparity in what the society or consumers attribute to be sustainability and the farmers’ perception or vision of sustainability (vergamini et al., 2019). regional producers in tuscany associate sustainability with a value intrinsically linked to the territory expressed by the umbrella brand “tuscany”, which consequently reflects its dynamics. if treated as an external factor, out of their control as consumer behaviour this is perceived as inversely related to their choice. regardless of how the market and therefore the demand will align with this value, the producers perceive that their choices currently in the direction of greater sustainability could be upset by such a change. consequently, hypothesis 3 partially confirms the importance of demand but also the vision of producers as actors capable of stimulating demand and therefore, a change towards greater sustainability of wine consumption. 4.5. regulatory drivers of sustainability on the regulatory side (hypothesis 4 – 12), our hypothesis specifies that the changes in climate, changes in environmental regulation, and changes in cap policy would have an indirect impact on sustainability through a change in the market environment. the result of the sem showed that changes in cap policy significantly correlated with changes in environmental regulation (β = 0.398, ρ = 0.000), supporting hypothesis 4. while changes in cap policy were found to positively influence the market price for wine (β = 0.205, ρ = 0.05), it did not have a significant relationship with farmers credit access (β = 0.175, ρ = 0.103). therefore, table 3. correlation statistics between drivers of changes and sustainability. psp i ii iii iv v vi skewness kurtosis psp 1 -0.05 0.04 -0.22** 0.24** 0.11 0.12 0.10 -1.15 i -0.05 1 0.38*** 0.11 0.39*** 0.28** 0.30*** -0.51 -1.79 ii 0.04 0.38*** 1 0.17 0.32*** 0.22** 0.30*** 0.74 -1.49 iii -0.22** 0.11 0.17 1 0.25** 0.33*** 0.18 -0.29 -1.97 iv 0.24** 0.39*** 0.32*** 0.25** 1 0.43*** 0.38*** 1.51 0.28 v 0.11 0.28** 0.22** 0.31*** 0.43*** 1 0.45*** 1.41 -0.004 vi 0.12 0.30*** 0.30*** 0.18 0.38*** 0.45*** 1 2.29 3.32 i = adverse climatic conditions or pests, ii = severe drop in market prices, iii = changes in consumers behaviours, iv = access to credit for farms consumable inputs, v = change of the regulations, e.g. pesticides regulation, vi= changes in the cap. ***. correlation is significant at the 0.01 level (2-tailed); **. at the 0.05 level; *at the 0.10 level. 58 c. obi, d. vergamini, f. bartolini, g. brunori hypothesis 6 was supported, but hypothesis 5 was not. changes in climate conditions were found to significantly influence all the paths connected to it within the model. it has a significant direct relationship with changes in cap policy (β = 0.298, ρ = 0.003), with environmental regulation (β = 0.283, ρ = 0.005), with access to credit (β = 0.265, ρ = 0.006), and with changes in market price for wine (β = 0.320, ρ = 0.001). hence our model correctly predicted hypothesis 7, 8, 9 and 10. in addition, changes in environmental regulation significantly influence wine producers’ access to credit (β = 0.271, ρ = 0.010), and changes in consumers behaviour (β = 0.308, ρ = 0.003), hence supporting hypothesis 11 and 12. finally, a change in the market price of wine was not found to influence consumers behaviours, significantly rejecting hypothesis 13. generally, the results show that the regulatory drivers could impact on sustainability adoption if they lead to an improvement in access to credit. in line with the literature, our model predicts that changes in climate could be a factor influencing the introduction of instruments that promote sustainable practices in both cap and environmental regulations. studies have shown that introducing the greening component in the cap policy and other environmental laws is a direct reflection of the need to manage climate change (gaeta & corsinovi, 2013). climate change also has a significant positive association with access to credit. this may indirectly lead to farmers’ adoption of sustainability practices. for instance, during erratic climate change, maintain adequate agricultural practices requires the provision of financial support for wine producers. in many cases, they might rely on financial aid for adopting more restrictive and sustainable practices than mandatory ones (cortignani & dono, 2015). our model also showed that changes in environmental regulations have an indirect influence on sustainability by improving farmers to access credit and consumer behaviour. while environmental regulation may encourage governments to provide credits to farmers, it could also enhance environmental awareness and concerns of consumers, which may result in a shift in consumer behaviour favouring a higher demand for sustainable wine (joshi & rahman, 2015). finally, changes in the cap policy is explicitly perceived to cause changes in market prices, but these changes do not influence farmers’ adoption of sustainable practices. surprisingly, our results also show that changes in the cap policy have no significant direct impact on farmers’ access to credit. it, therefore, seems table 4. path analysis result from the sem for testing the hypothesis. item statement β ρ hypothesis supported? hypothesis 1 credit access ⟶ sustainability 0.312 0.003*** yes hypothesis 2 market price ⟶ sustainability -0.011 0.916 no hypothesis 3 consumer behaviour ⟶ sustainability -0.295 0.004*** no hypothesis 4 cap ⟷ environment regulation 0.398 0.000*** yes hypothesis 5 cap ⟶ credit access 0.175 0.103 no hypothesis 6 cap ⟶ market price 0.205 0.05* yes hypothesis 7 climate ⟶ cap 0.298 0.003*** yes hypothesis 8 climate ⟶ environment regulation 0.283 0.005*** yes hypothesis 9 climate ⟶ credit access 0.265 0.006*** yes hypothesis 10 climate ⟶ market prices 0.320 0.001*** yes hypothesis 11 environmental regulation ⟶ credit access 0.272 0.010** yes hypothesis 12 environmental regulation ⟶ consumer behaviour 0.308 0.003*** yes hypothesis 13 market price ⟶ consumers behaviour 0.105 0.331 no *** is significant at the 0.01 level; **significant at the 0.05 level, *significant at the 0.1 level. figure 3. result of the path analysis of the hypothesized model. 59the impact of changes in regulatory and market environment on sustainability of wine producers: a structural equation model that the cap policy does not improve sustainability practices, yet considering that there is a significant correlation between changes in cap policy and changes in environmental regulation, it becomes plausible to assert that the cap policy could only influence farmers’ adoption of sustainability if the policy is related to environmental issues, e.g. the greening policy. this explanation carefully means that non-greening direct payment policies may cause poor sustainability practices among wine producers. 5. conclusion and policy recommendation this study explored a visual path representation of the relationship of perception about the external drivers of changes in farming strategies, and how they could lead to sustainability practices for wine producers. the sem model used in the study linked perception with stated behaviour, which is quite an innovative way of understanding the enabling factors of transition towards sustainability. a growing literature recognises perception about external drivers and signals as a critical element to explain transition towards the adoption of sustainable practices (see, for example, dessart et al., 2019). the main findings showed that among the market factors that were hypothesised to drive sustainability, access to credit is perceived by farmers to drive wine sustainability significantly. the changes in market price and consumer behaviours do not. our result also shows that farmers perceived that environmental regulations could significantly drive the adoption of sustainability practices if they lead to the improvement in access to credit. however, some limitations of the study should be stressed. first, the study draws information from tuscany medium-large scale, export-oriented wine producers. we, therefore, cannot claim that the result is representative of the tuscan region nor could generalise the results to other areas or countries. moreover, we adopted broad questions in our analysis, limiting our assessment to selected external drivers of sustainability. furthermore, the model itself has a limited ability to explain or legitimise the nature of the relationship that we evidence through the analysis. however, the tool can be usefully integrated with more qualitative analysis in order to generalise some of the evidence we provided with their relevant policy implication. we refer to vergamini et al. (2019) and the sufisa deliverables concerning the tuscan case study for a more in-depth qualitative and quantitative analysis of the sector. nonetheless, some policy implications can be drawn from the study. to influence the adoption of sustainability practices, it is essential to strengthening environmental regulations with credit incentives which could offset the additional cost associated with sustainability practices. the research results apply to medium and large wine producers, who may have adopted sustainable production to be competitive at the international level. they are crucial for innovation dissemination in the industry and may help trickle down the sustainable practices to smaller wine producers. therefore, establishing a channel of communication between the export-oriented and small scale local producers is critical towards the achievement of sustainable wine production. we recommend that b2b meetings for wine producers should be all-inclusive and open to small farmers. acknowledgement we gratefully acknowledge funding from the european union’s horizon 2020 research and innovation programme within the project sufisa – sustainable finance for sustainable agriculture and fisheries (grant agreement no 635577). we also gratefully acknowledge tuscany region and promofirenze for collaboration in place on the buy wine research. references ashenfelter, o., & storchmann, k. 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(2008). assessing farm sustainability with the idea method from the concept of agriculture sustainability to case studies on farms. sustainable development, 16(4), 271–281. https://doi.org/10.1002/sd.380 wine economics and policy volume 9, issue 1 2020 firenze university press creating opportunity from crisis, progress from research: redefining the wine sector peter hayes am1 us wine industry preparedness for unforeseen crises and disasters: an empirical test armand gilinsky, jr.1, astha sen2, judith ford3, sergio canavati de la torre4, sandra k. newton5,* a cross-cultural comparison of wine consumption and purchasing behaviour in germany and hungary gergely szolnoki1,*, gedeon totth2 assessing the effects of the environment on consumers’ evaluations for wine gioacchino pappalardo, gaetano chinnici*, roberta selvaggi, biagio pecorino the speed of the internationalisation process and the institutional networks of family smes in the doc rioja wine industry marta fernández-olmos1,*, giulio malorgio2 the impact of changes in regulatory and market environment on sustainability of wine producers: a structural equation model chinedu obi1,2,*, daniele vergamini1, fabio bartolini1, gianluca brunori1 emerging consumer preference for wine attributes in a european transition country – the case of kosovo edvin zhllima1, drini imami1,*, njazi bytyqi2, maurizio canavari3, elvina merkaj4, catherine chan5 price determinants of sparkling wine in poland: does reputation really matter? authors: samuele trestini1,*, alice stiletto1, stefanella stranieri2 sciencedirect journals & books ! there was a problem providing the content you requested please contact us via our support center for more information and provide the details below. reference number: 780cede7985f1fef ip address: 129.74.145.123 timestamp: access denied you do not have access to www.sciencedirect.com. the site owner may have set restrictions that prevent you from accessing the site. ray id: 780cede7985f1fef timestamp: 2022-12-28 20:08:40 utc your ip address: 129.74.145.123 requested url: www.sciencedirect.com/science/article/pii/s2212977418300656 error reference number: 1020 server id: fl_154f11 user-agent: python-requests/2.28.1 about sciencedirect shopping cart contact and supportterms and conditionsprivacy policy we use cookies to help provide and enhance our service and tailor content and ads. by continuing you agree to the use of cookies. copyright © 2020 elsevier b.v. or its licensors or contributors. sciencedirect ® is a registered trademark of elsevier b.v. wine economics and policy 11(1): 89-106, 2022 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/wep-11550 wine economics and policy citation: giulia gastaldello, florine livat, luca rossetto (2022) does covid scare wine travelers? evidence from france and italy. wine economics and policy 11(1): 89-106. doi: 10.36253/wep11550 copyright: © 2022 giulia gastaldello, florine livat, luca rossetto. this is an open access, peer-reviewed article published by firenze university press (http://www.fupress.com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information fi les. competing interests: the author(s) declare(s) no confl ict of interest. does covid scare wine travelers? evidence from france and italy giulia gastaldello1,*, florine livat2, luca rossetto1 1 department of land, environment, agriculture, and forestry (tesaf ), university of padova, viale dell’università, 35020 legnaro pd, italy. e-mail: giulia.gastaldello.1@phd. unipd.it; luca.rossetto@unipd.it 2 kedge business school, center of excellence food, wine and hospitality, 680 cours de la libération, 33405 talence, france, e-mail: fl orine.livat@kedgebs.com abstract. tourism is sensitive to shocks, and the covid pandemic has profoundly changed sector dynamics. although wine tourism is primarily a form of proximity tourism, the pandemic may have aff ected wine travellers behaviour and intention to go on a wine holiday. th is exploratory study proposes a comprehensive analysis of the impact of covid-related fear and anxiety on wine tourism intentions aft er the fi rst lockdown while jointly considering the eff ects of solidarity, situational and personal involvement with wine. an online survey was delivered to a sample of 553 wine tourists from italy and france, two major wine tourism destinations. results highlight changes in wine travel patterns aft er the pandemic, which boosted post-lockdown wine tourism intentions. indeed, the latter are poorly impacted by fear of contagion while it is enhanced by dedicating time to wine in lockdown (i.e., situational involvement) and by willingness to support local wine producers. implications for sectors stakeholders are suggested. keywords: covid-19, wine tourism, travel intentions, covid phobia, involvement with wine, structural equation modelling, solidarity. 1. introduction as past studies highlighted, tourism is vulnerable to shocks. natural disasters like tsunamis [1], earthquakes [2] and fl oods [3] have an inevitable impact on tourism fl ow. in addition, the industry is aff ected by terrorism like 9/11 in the u.s. [4], [5] or the increased frequency of terrorist attacks in france from 2010 to 2017 [6], [7] and by war [8]. a global economic crisis as the covid-19 pandemic can also impact on tourism [9]. th e latter has indeed highlighted the susceptibility of tourism to measures implemented to counteract the circulation of the virus, mainly restricted mobility and social distancing [10]. being wine tourism a tourism branch, the present article aims at off ering a fi rst comprehensive analysis how the pandemic infl uences wine tourism intentions in a post-crisis context. according to the united nations world tourism organization (unwto), international arrivals in europe dropped by 68% between janu90 giulia gastaldello, florine livat, luca rossetto ary and august 2020 compared to 2019, leading to the worst negative peak since the 1950s. in the past, research has shown that international tourism has been damaged by other health emergencies such as the avian flu, with more significant damage on local (i.e. asian) tourism [11]. kuo et al. [12] show that the local number of cases has affected international tourists’ arrival in sars -affected countries but not in avian flu-affected countries. a similar result was obtained by mcaleer et al. [13]. tourism in developing economies is subject to the epidemic crisis because of induced effects due to their geographical or physical proximity to the outbreak ’s source (e.g., 14 in the case of ebola). nevertheless, different tourist populations can react differently to epidemics. for instance, pregnant women or travellers of reproductive age travelled significantly less to zika-affected regions after the zika-birth defects association became well known [15]. lastly, eradicating infectious disease risk associated with malaria, dengue, yellow fever, and ebola could increase international tourism demand and increase tourism expenditure [16]. due to its strong vulnerability, the tourism industry has become more flexible and increasingly resilient to crises. some shocks are transitory, even if returning to pre-disaster levels can take years. the speed of recovery depends on the extent of the damage caused by the disaster, on the ability of tourism stakeholders to rebuild facilities and infrastructures, and on effective communication stating clearly that the destination is safe [17]. this is the case of malaysia (a developing country and second destination in asia), subjected to the asian financial crisis, the outbreak of avian flu and sars, asian tsunami, and threat of terrorism [18]. in taiwan, visitors’ arrivals had not fully recovered 11 months after an earthquake [19]. cultural differences play a role in the recovery of disaster-hit destinations [20]. in the path toward recovery, the destination’s attribute can also change and attract some dark tourism [21]. shocks can lead tourists to substitute destinations [22]. however, with the covid-19 crisis, the tourism industry faces a pandemic, i.e., a global crisis in which substituting destinations is not feasible because of mobility restrictions. lastly, tourism can respond to shocks and become an engine for economic recovery [23, 24]. in such contexts, wine tourism can be seen as local tourism substituting non-local (i.e., international) tourism, and it can be favoured in a context of restricted mobility and fear of contagion due to uncertainty and fear of travelling abroad. moreover, with an economic downturn, tourists might privilege short breaks instead of more extended stays. proximity has been identified as a critical factor for the success of wine tourism [25]. wine tourism has also been acknowledged as a substitute for urban tourism, as it is perceived as safer in the case of a terrorist threat [6]. moreover, as tourism stakeholders make a claim for more sustainable practices and for the need to question the volume growth of the international tourism industry in a climate change context [10], wine tourism could be a possible answer. following the pandemic, clusters of wineries relying mostly on foreign tourism like those identified in conegliano valdobbiadene area [26] can strongly benefit of these behaviours. in this respect, it is worth understanding postlockdown domestic wine tourism intentions. to the best of our knowledge, though, the impact of the covid-19 pandemic on wine tourism has not yet been analysed. therefore, the present work aims at exploring how the covid-19 pandemic impacted wine tourism intentions both after the lockdown (alwtint) and in the long-run (lrwtint), starting from the main antecedents identified by the sector’s literature such as involvement with wine (wi) while considering new negative and positive contingency factors, such as the effect of fear and anxiety towards the virus – further referred to as covid phobia (cph) –, solidarity towards national winemakers (suplocw) and acquired interest in wine during the lockdown (aqwint), reflecting situational involvement. changes in wine tourism travel patterns following the pandemic are also explored. notably, we focus on two major wine tourism players, italy and france, hosting the highest number of wine tourists in europe (14 [27] and 10 million a year, respectively). figure 1 shows the number of overnight stays in hotels per month in both countries, which has dramatically fallen in 2020 and 2021 compared with 2019, despite a temporary recovery during summer. indeed, although the 2020-2021 overnight stays trend is positive (+19% and +7% in 9 months for italy and france, respectively), 2021 records are still remarkably lower than in 2019 (-44% in the first 9 months of 2021 for both italy and france). the relevance of this exploratory analysis lies in its contribution to shed light on how the covid-shock impacted on wine tourists’ travel intentions, which is key to predicting future demand developments and drafting appropriate recovery strategies. the present study is indeed among the first to assess the impact of covid and of the lockdown on wine tourism while modelling positive and negative drivers together. in light of the uncertainty around the evolution of the current pandemic as well as of its severe consequences on tourism sector, this information is strategic to tourism operators and especially to wineries for understanding how the virus impacted wine tourists’ behaviour and effectively 91does covid scare wine travelers? evidence from france and italy plan a recovery strategy. certainly, wine tourism is an important tool for building and strengthening brand reputation [28], boosting both awareness and demand of a product [29]. findings also provide useful information for planning communication and marketing activities in the pandemic context. the following section (section 2) provides an overview on the main acknowledged antecedents of wine tourism intentions, as well as on context-related factors that can impact on the latter. section 3 describes materials and methods, including a description of the sample, while section 4 presents the results obtained. finally, section 5 discusses the key findings and related implications for the wine tourism sector. 2. literature review to date, an extensive literature has developed on the antecedents of wine tourism intentions [30, 31, 32]. a key element characterising wine tourism research is involvement with wine (wi), which is identified as a vital driver of the intention to partake in wine tourism [30, 33] affecting wine tourists experiential priorities [30]. the advent of an extraordinary event like the covid-19 pandemic, though, has caused radical changes in people’s known normality on multiple levels, consequently impacting on their behaviour. particularly, tourism has been among the hardest-hit sectors due both to the strict limitations to mobility imposed by governments and to the high risk of infection connected to travelling as a social activity. in his respect, people may have developed fear and anxiety toward the virus that may negatively impact travel intentions. on the other hand, the several prolonged lockdowns imposed in most countries forced people to slow down and have potentially more free time to explore their interests [34]. the following sections will provide an overview of the main antecedents of wine tourists behavioural intentions identified by the sector’s literature and fear and anxiety towards the novel coronavirus. 2.1 fear of covid-19 and corona-phobia due to its disrupting effects on worldwide economies, to its ease of transmission and the life threatening nature of the sars-cov-2 illness, the covid-19 outbreak prompted the diffusion of fear and anxiety in human society [35, 36, 37]. the literature defines fear as an emotion caused by danger, pain or harm [35], [38], representing the awareness of danger [35]. anxiety, instead, is a psychological response to fear [39]. differently from psychological discomforts deriving from other extreme events such as natural disasters [40], [41], or accidents [42], those induced by human-to-human transmissible diseases like covid-19 are extensive and long-standing [43]. therefore, a prolonged and amplified state of fear and anxiety towards a major catastrophic situation such as the current pandemic may trigger anxiety disorders defined as phobias [44]. in this respect, arpaci et al. [44] developed a psychometric, self-report tool – the covid phobia scale (c19p-s) – to diagnose what they classify as corona phobia. particularly, high values recorded by the scale detect the presence of a state of great fear and anxiety towards the virus. the c19p-s is originally composed of 4 dimensions – economic, psychological, psychosomatic and social – representing the four main domains affected by the pandemic. the social dimension is particularly relevant when dealing with (wine) tourism activities since covid-19 is an airborne disease, spread through small liquid particles, called droplets, emitted when talking, coughing or sneezing [45]. in this regard, travelling is potentially connected with a great risk of infection implying uncontrolled contact with thousands of individuals. although the global scale of this health crisis may have levelled out the perceived risk of infection when traveling to other destinations [35], fear and anxiety towards the virus can lead to identifying travelling as a dangerous activity and to avoid it. consequently, subjects manifesting greater levels of covid phobia may show weaker post-lockdown wine tourism intentions (alwtint). 0,00 5.000.000,00 10.000.000,00 15.000.000,00 20.000.000,00 25.000.000,00 30.000.000,00 m on th jan ua ry fe bru ary m arc h ap ril m ay ju ne ju ly au gu st se pte mb er oc tob er no ve mb er france (source: insee) 2019 2020 2021 0,00 5.000.000,00 10.000.000,00 15.000.000,00 20.000.000,00 25.000.000,00 30.000.000,00 35.000.000,00 40.000.000,00 45.000.000,00 50.000.000,00 jan ua ry fe bru ary m arc h ap ril m ay ju ne ju ly au gu st se pte mb er oc tob er no ve mb er de ce mb er italy (source: istat) 2019 2020 2021 figure 1. monthly overnight stays in hotels. 92 giulia gastaldello, florine livat, luca rossetto hence, we postulate the following hypotheses: h1. covid phobia (cph) impacts negatively on postlockdown wine tourism intentions (alwtint). h2. covid phobia (cph) mediates the effect of longrun wine tourism intentions (lrwtint) on post-lockdown wine tourism intentions (alwtint). 2.2 involvement with wine the key role of involvement in marketing is widely recognized among scholars [46] as it is acknowledged to affect consumer decision-making processes and behaviour [47, 48]. the literature distinguishes among three types of involvement: enduring or personal, connected to the presence of a long-term personal relevance [50], [51], physical, arising from specific product characteristics, and situational, which is short-term and results from temporary changes in a consumer’s environment [49]. personal product involvement is the most commonly adopted and it is defined as a subject’s perceived relevance of an object based on his/her inherent needs, values, and interests [49, p.342] considering the hedonic nature of wine and wine tourism consumption, it is not surprising to find extensive sector research embodying the concept of involvement [52, 53, 54]. hedonic products, indeed, tend to create higher involvement [55]. particularly, findings reveal that product involvement can significantly affect wine consumers when choosing which wine to purchase [53], impacts on wine tourists’ behavioural intentions [30], motivations [32] and travel patterns [33]. however, the extent of its effect may change based on socio-demographics such as age [54], [56]. since wine tourism falls into the category of leisure travel activities, the most appropriate type of involvement to be considered according to the literature is personal involvement, also referred to as ego-involvement. recently, bruwer and huang [56, p.463] defined the concept of personal involvement in the field of wine research as “a motivational state of mind of a person with wine or wine-related activity…which reflects the extent of personal relevance of the wine-related decision to the individual in terms of one’s basic values, goals, and self-concept.” in this respect, brown, havitz & getz [33] conceptualized a tool to capture ego-involvement with wine in the wine tourism context – the wine involvement scale (wis) – by extending laurent & kapferer’s [57] widely applied consumer involvement profile (cip) scale. indeed, the cip scale has been adopted by several tourism studies in different cultural contexts which contributed to proving its consistency [58]. notably, the wis developed by the authors includes three dimensions: expertise, enjoyment, and symbolic centrality. by segmenting a sample of fine wine consumers based on the wine involvement construct, the authors found that different involvement segments show significantly different intention to visit a wine region in the near future, highlighting the central role of involvement in predicting wine tourism. sparks [30] further underlined the critical role that ego-involvement (i.e., personal involvement) can play as a motivator in wine tourism. the following hypotheses are accordingly proposed: h3. (personal) involvement with wine (wi) positively affects post-lockdown wine tourism intentions (alwtint) h4. (personal) involvement with wine (wi) positively affects long-run wine tourism intentions (lrwtint) 2.3 acquired interest in wine and solidarity during the first lockdown as mentioned above, the high infection rate of covid-19 [35] forced entire countries into lockdowns during which only first necessity industries (e.g., food and pharmaceutical industries) were allowed to operate. obliged to slow down, people found more free time on their hands which could be dedicated to exploring their interests and to leisure activities [34]. interest is defined as the degree of enjoyment a subject gets from engaging in specific activities [59]. based on the literature, it can be affirmed that wine tourism is driven by an underlying interest, at various levels, in wine [33], [60]. therefore, wine tourists have plausibly employed part of their free time engaging in wine-related activities, as some people did with cooking [60], thus reinforcing their interest in wine. interest in wine, in its turn, is connected to the degree of involvement with the topic – i.e., to its subjective relevance for the individual – [49]. consequently, the new normality of the lockdown may have fostered a situational involvement with wine, boosting the effect of enduring involvement with the product as an antecedent of leisure tourism intentions [62]. as involvement is an antecedent of the decision to partake in wine tourism, it is reasonable to hypothesize that also situational involvement (i.e., an increased interest in wine following the lockdown) reinforces both long-term and shortterm wine tourism intentions. indeed, interests can drive intentions [59]. moreover, it can amplify the predictive power of personal involvement with wine on the intention to visit a wine region. h5. acquired interest in wine (aqwint) mediates the effect of involvement with wine (wi) on post-lockdown wine tourism intentions (alwtint). 93does covid scare wine travelers? evidence from france and italy h6. acquired interest in wine (aqwint) mediates the effect of involvement with wine (wi) on future wine tourism intentions (lrwtint). h7. acquired interest in wine (aqwint) positively affects post-lockdown wine tourism intentions (alwtint). h8. acquired interest in wine (aqwint) positively affects long-run wine tourism intentions (alwtint). as pointed out by other academics [63], a crisis of the proportions of covid-19 encouraged the population to prioritize society’s problems over personal needs, pushing them to support national winemakers in their struggle to survive by purchasing their products. this sentiment is even more plausible considering that, already before the covid-19 outbreak, the literature was stressing the relevance of wine tourism as a tool for sustainable rural development [64, 65], and the strong association between direct sales of local producers and the desire to support to local communities [66]. accordingly, direct sales are one of the pillars around which the wine tourism industry is built [67, 25, 28]. as a result, solidarity with national wineries is expected to be a positive antecedent of wine tourism intentions and to increase the willingness to go on a wine holiday after the lockdown. h9. wi l l i ng ness to suppor t loc a l w i ner ies (suplocw) positively affects post-lockdown wine tourism intentions (alwtint). h10. wi l lingness to suppor t loca l w ineries (suplocw) positively affects long-run wine tourism intentions (lrwtint). 3. materials and methods 3.1 data collection and survey the population of interest for the study is italian and french wine consumers having an interest in wine and wine tourism. given the pandemic circumstances, an online survey was launched and diffused via e-mail and facebook groups dealing with travel and oenogastronomy. specifically, over 40 facebook groups and wine stakeholders were involved, and shared the survey with their online communities. data collection lasted two months, june and july 2020. alike villacé-molinero, fernández-muñoz et al. [68], snowball sampling is deemed an appropriate sampling technique to explore travel intentions considering the urge to collect data on a rapidly evolving phenomenon under unprecedented circumstances. this technique has been previously adopted in tourism and social science research [e.g., 69, 70], allowing to shrink time and monetary costs of data collection and to recruit hard to reach communities [71] while accounting for multiple eligibility requirements [72]. the main disadvantages of snowball sampling are self-selection bias and over-representation of subgroups having similar characteristics [72]. these limitations were addressed by collecting a large sample and by trying to diversify it socio-demographically. the questionnaire included 7 main sections investigating the following dimensions: socio-demographics, ego-involvement with wine (wi), covid phobia (cph), acquired interest in wine during the pandemic (aqwint), previous wine tourism experience, wine tourism intentions (lrwtint, alwtint), and financial difficulties caused by the pandemic. specifically, the socio-demographic section captured age, gender, education, country of residence, household composition, marital status, household income before the pandemic. household income is captured through 4 descriptive statements adapted from istat annual survey on life conditions. for example, a sufficient economic situation is described as follows: “my monthly household income was usually just sufficient to cover expenses and i/we could hardly save part of it.” potential economic constraints to travel are captured through one statement measuring family income variations following the pandemic, ranging from 1=much worse, to 5=much improved (table 1). wine tourists are identified through one statement assessing if the respondent visited a wine producing region and/or participated in a wine festival in the last 3 years [33]. involvement with wine (wi) is captured through brown et al.’s [33] wine involvement scale (wis), which is deemed the most appropriate for the present study due to its solid theoretical foundation and its specific application to wine tourism studies. the original wis includes 15 items measured on a 7-point likert scale, where 1 = totally disagree and 7= totally agree. fear and anxiety towards covid (cph) are captured by adapting arpaci et al. [44] covid-19 phobia scale (c19p-s). in the present study, the c19p-s is preferred to similar scales [e.g., 37] due to its capability to embody the effects of both covid-related fear and anxiety. considering the aim of the study, which is not diagnostic but rather to highlight potential negative effects of covid-19 on wine tourism intentions, the adapted c19p-s scale (further referred to as cph scale in the text) includes the psychological and social dimension measured through 7 items selected based on loading scores. like the wine involvement construct (wi), items are measured on a 7-point likert scale, where 1 = totally 94 giulia gastaldello, florine livat, luca rossetto disagree and 7= totally agree. five items measured on a 7-point likert scale (1 = totally disagree to 7= totally agree) are introduced specifically for the present study to capture the effect of the lockdown, and particularly of having more free time because of it, on interest in wine (aqwint). long-run wine tourism intentions (lrwtint) are captured through a single item adapted from sparks [30] and measuring the willingness to take a wine trip in a future holiday on a 7-point likert scale (1 = totally disagree and 7= totally agree). an additional item captures the short-term intention to go on a wine trip after lifting covid-related mobility restrictions (alwtint) – i.e., at the end of the first lockdown – measured on a 7-point likert scale. finally, one item captures willingness to support local wineries by purchasing locally produced wines (suplocw) on a 7-point likert scale (1 = totally disagree, 7= totally agree). the item is formulated as follows: “after the covid-19 pandemic, i think it is important to support italian winemakers by purchasing wines produced locally”. a detailed description of the items adopted for each scale and construct is provided in table 2. 3.2 sample description a total of 751 questionnaires was collected. incomplete surveys were excluded, and the final sample was reduced to 713 valid questionnaires. for the sake of the analysis, only people having previous wine tourism experience were considered (n=553), 412 of whom from italy and 141 from france. table 1 summarizes the socio-demographic profile of the sample by country of residence of the respondents. the socio-demographic characteristics of the sample are in line with the profile of wine tourists reported by the literature, which identifies them as highly educated tourists aged from 30 to 50, with typically woman travelling with their partner, with a high income [61, 73, 74, 75]. notably, both samples present similar shares of males and females while highlighting a slight prevalence of females (53.2% in italy; 53.9% in france). compared to france, italy records a higher share of singles (50.5%) and a lower average education level (17.5% of post-graduates against the 56.0% observed for france). in both samples, most respondents enjoy either a sufficient or good economic situation before covid-19 that did not change following the pandemic (65.0% in italy, 66.7% in france). nevertheless, a remarkable share of interviewees from both countries declares that his/her family income has worsened after covid-19 (31.8% italy; 27.0% france). 3.3. data analysis a preliminary descriptive analysis is conducted through spss software to explore wine tourism travel patterns before the pandemic, as well as wine tourism intentions after mobility bans are lifted (alwtint), and long-term tourism intentions (lrwtint), among italian and french wine tourists. amos software is used to further perform structural equation modelling (sem). sem is widely applied in many fields of study dealing with human-based data, particularly in consumer behaviour studies, tourism included [32, 76, 77). indeed, this methodology allows path modelling and the simultaneous estimation of measurements through multiple equations. differently from similar techniques such as partial least square (pls), sem estimation accounts for error variance. this represents a considerable advantage for behavioural studies, where complex theoretical concepts (such as the fear of the novel coronavirus) cannot be measured directly through a single item. still, instead, they are captured by multi-item latent constructs [78]. by accounting for the measurement error associated with the use of latent constructs and correcting for it, sem can provide higher robustness for elaborations made on data collected from human individuals, which are often not normally distributed [78]. sem consists of two main steps: step 1 is the evaluation of the measurement model (mm), and step 2 is the analysis of the causal relationships between constructs, i.e., the structural model (sm) analysis. to proceed with step 1, exploratory factor analysis (efa) and confirmatory factor analysis (cfa) are run on the 3 constructs included in the mm – i.e., covid phobia (cph), involvement with wine (wi) and acquired interest in wine during the lockdown (aqwint). first, the factor analysis (efa) with principal component as the extraction method and oblique rotation is run. like in other studies [30], oblique rotation is chosen as a correlation among the items expected. the efa confirms the 3 constructs load on different factors, 4 of the 6 items referring to symbolic centrality of wi scale load on a different factor showed no consistency with the rest of the scale. this is in line with past research highlighting potential inconsistencies of the symbolic centrality dimension of involvement as the context changes [58]. therefore, the symbolic centrality dimension is dropped, contributing to maintain an adequate sample-size/ parameters ratio for sem analysis [78]. based on cronbach’s alpha, other items are trimmed from both cph and wi scales. the final wi scale includes 7 items, while cph comprise 5 items. no items are removed from aqwint scale (5 items). 95does covid scare wine travelers? evidence from france and italy secondly, we proceed with the confirmatory factor analysis (cfa) of the measurement model (mm), the results of which are presented in table 2. to evaluate mm’s goodness-of-fit (gof), root mean square error of approximation (rmsea) and standardized root mean residual (srmr) are considered as indices of absolute fit. at the same time, tucker lewis index (tli) and comparative fit index (cfi) are reported for incremental fit. thresholds for the gof indices are considered based on sample size (n) and on the number of observed variables in the model (m) according to hair et al.’s guidelines [78]. overall gof of the measurement model (mm) on the whole sample is satisfactory (χ2 (553) = 441.13; df = 112; p < .001; χ2/df = 3.94; rmsea = .07; cfi = .96; tli = .95; srmr = .04). although some researchers argue that χ2 should not be significant [e.g.., 30], this statistic tends to penalize larger samples and models with a higher number of observed variables [78]. according to sample size (n = 553) and number of observed variables (m = 17) of the mm applied, significant p-values for χ2 are expected [78]. construct reliability (cr) and average variance extracted (ave) are above the recommended thresholds for all latent constructs (cr > .7; ave > .5) [78], and all standardized factor loadings are significant and above the ideal threshold (.7) providing evidence of convergent validity for all scales [78]. discriminant validity is also supported by ave exceeding inter-construct correlations [78]. for step 2, i.e., the analysis of the causal relationships between constructs, the same gof indices used for the mm are considered. mediation effects (h2; h5; h6) are explored in addition to direct effects and are estimated through bootstrapping (500 bootstrapping intervals) with bias-corrected confidence intervals (c.i. = 95%). this technique is reported to be a reliable tool to test for indirect effects, providing intervals for estimates without relying on distribution [79]. lastly, cross-cultural differences between france and italy are further explored through a multigroup analysis (mga). before path differences between the two table 1. socio-demographic profile of respondents by country. italy (n=412) france (n=141) frequency % frequency % gender male 193 46.8 65 46.1 females 219 53.2 76 53.9 age 18-29 76 18.4 24 17.0 30-40 121 29.4 36 25.5 41-50 103 25.0 38 27.0 51-60 82 19.9 26 18.4 60+ 30 7.3 17 12.1 education high school or lower 13 3.1 0 0.0 college 129 31.3 13 9.2 university 198 48.1 49 34.8 post-graduate 72 17.5 79 56.0 marital status couple 204 49.5 106 75.2 single 208 50.5 35 24.8 has children no 329 79.9 99 70.2 yes 83 20.1 42 29.8 income before covid insufficient 3 0.7 4 2.8 just sufficient 35 8.5 17 12.1 sufficient 194 47.1 71 50.3 good 180 43.7 49 34.8 income variation much worse 12 2.9 6 4.2 after covid worse 119 28.9 32 22.7 unchanged 268 65.0 94 66.7 improved 12 2.9 9 6.4 much improved 1 0.2 0 0.0 n=355 source: own elaboration. 96 giulia gastaldello, florine livat, luca rossetto countries are tested, a preliminary multigroup confirmatory factor analysis (mcfa) is required to test for the measurement model to be consistent between the two groups. to do so, the fitting of the mm is first tested on the french and italian samples separately to assess configural invariance. the latter condition is confirmed by the mm showing acceptable fitting for both groups (italy χ2 (412) = 361.77; df=112; p < .001; χ2/df = 3.23; rmsea = .07; cfi = .96; tli = .95; srmr = .04; france χ2 (141) = 242.99; df=112; p < .001; χ2/df = 2.17; rmsea = .09; cfi = .94; tli = .93; srmr = .05). moreover, the totally free multiple group model (tf) reveals acceptable fit (χ2 (553) = 605.10; df=224; χ2/df = 2.70; p < .001; rmsea = .05; cfi = .96; tli = .95; srmr = .04). all standardized factor loadings are significant at p < .001 with values of .7 or above in both groups [78], supporting configural invariance. subsequently, we test the model for metric invariance by comparing the fit of the constrained model (m1), where all factor loadings are imposed to be equal between the groups, and of the unconstrained model (m0), through a likelihood ratio test (lr). lr test compares the model with and without constraints by estimating them as nested models. the output produces a chi-square χ2 statistic estimated according to equation 1 [79]: 𝜒𝜒! = −2𝑙𝑙𝑙𝑙𝑙𝑙) 𝐿𝐿 (𝑀𝑀#) 𝐿𝐿 (𝑀𝑀$) . = {−2𝑙𝑙𝑙𝑙𝑙𝑙[𝐿𝐿 (𝑀𝑀#)]} − {−2log[𝐿𝐿 (𝑀𝑀$)]} (1) 𝜒𝜒! = −2𝑙𝑙𝑙𝑙𝑙𝑙) 𝐿𝐿 (𝑀𝑀#) 𝐿𝐿 (𝑀𝑀$) . = {−2𝑙𝑙𝑙𝑙𝑙𝑙[𝐿𝐿 (𝑀𝑀#)]} − {−2log[𝐿𝐿 (𝑀𝑀$)]} table 2. factor loadings and reliability of the measurement model. item description factor loadinga average variance extracted (%)b construct reliabilityc ave cr covid phobia (cph) cph1 the fear of coming down with coronavirus makes me very anxious. 0.91 67.9 .91 cph2 i am extremely afraid that by traveling me/ my family might become infected by the coronavirus. 0.81 cph3 news about coronavirus-related deaths causes me great anxiety. 0.88 cph4 after the coronavirus pandemic, i feel extremely anxious when i see people coughing. 0.76 cph5 the idea of traveling with big groups of peolpe (e.g., by train or plane) makes me anxious 0.78 involvement with wine (wi) wi1 my interest in wine makes me want to visit wine regions 0.80 73.9 .95 wi2 my interest in wine has been very rewarding 0.86 wi3 wine represents a central life interest for me 0.84 wi4 wine represents a central life interest for me 0.92 wi5 i have invested a great deal in my interest in wine 0.92 wi6 much of my leisure time is devoted to wine-related activities 0.90 wi7 people come to me for advice about wine 0.78 acquired wine interest in lockdown (aqwint) aqwi1 during the lockdown, i learnt more about wine and winemaking 0.82 69.6 .92 aqwi2 during the lockdown, i became more passionate about wine 0.81 aqwi3 during the lockdown, i watched and/or read on-line content (e.g., youtube videos, blogs) and/ or documentaries about wine 0.87 aqwi4 since the beginning of the lockdown, i started following profiles of wineries/wine experts on social media 0.87 aqwi5 since the beginning of the lockdown, i started looking for more information about the wines i want to purchase 0.80 n=553. a. based on standardized regression weights from amos. b. ave was computed based on the formula from hair et al. [78] as an indicator of convergent validity. c. cr was computed based on hair et al. [78]. 97does covid scare wine travelers? evidence from france and italy this step brings statistical evidence that the measurement model (mm) measures the same constructs in both the groups considered: if the χ2 statistic between the two models is significant, it means model estimates differ between the groups. i our study, model’s metric invariance is supported (χ2 test p= .625), confirming the equivalence of psychometric properties of the mm across groups [78]. therefore, it is appropriate to proceed with multi-group comparisons. single paths are further tested to identify which effects are significantly different between groups. in light of the size difference between the two groups, estimations have been weighted over groups numerosity. 4. results 4.1 wine tourism travel paths before covid and post-lockdown travel intentions. descriptive statistics of the samples are presented in table 3. before the pandemic, most italian and french wine tourists travelled to wine regions close to their area of residence and/or located in different regions, and a remarkable share visited wine regions in other eu countries (34.2% in italy; 34.8% in france). the average length of stay is slightly higher for french wine tourists, who tend to travel with their partner (59.6%), with friends (41.1%) or their family (29.8%), prefer private lodgings (41.1%) or hotels (34.4%) as accommodation, and declare a higher average budget compared to italian tourists. however, this budget difference is not significant (f (1, 508) = 2.26, p = .13). instead, italian wine tourists tend to prefer shorter trips (the 43.4 visits to a wine region no longer than 1 day), and usually stay at bed & breakfasts (38.4%) or hotels (29.3%). similarly to french wine tourists, most italians usually travel with their partner (55.8%) or friends (54.4%), but a considerably higher share travels with other wine lovers (28.9% in italy; 17.0% in france). with respect to wine holidays after mobility restrictions, the great majority of both french and italian wine tourists plans wine travel in a different region and to stay table 3. wine tourism travel patterns before and after covid-19. before covid after covid* italy france italy france freq. % freq. % freq. % freq. % visited wine regions in: the same region where i live yes 306 74.3 88 62.4 133 41.0 29 33.3 a different region in my country yes 292 70.9 106 75.2 241 74.4 54 62.1 another e.u. country yes 141 34.2 49 34.8 95 29.3 32 36.8 an extra e.u. country yes 34 8.3 24 17.0 20 6.2 6 6.9 length of stay 1 day or less 178 43.4 43 30.9 75 23.1 16 18.4 2-3 days 156 38.0 57 41.0 145 44.8 29 33.3 4-7 days 65 15.9 24 17.3 62 19.1 28 32.2 ≥ 7 days 11 2.7 15 10.8 25 7.7 14 16.1 preferred accommodation hotel 68 29.3 33 34.7 43 18.5 22 31.0 bed & breakfast 89 38.4 13 13.7 89 38.4 6 8.5 private lodging 39 16.8 39 41.1 39 16.8 37 52.1 camping/village 9 3.9 5 5.3 8 3.4 3 4.2 agritourism 27 11.6 5 5.3 53 22.8 3 4.2 traveling with partner yes 230 55.8 84 59.6 193 59.6 50 57.5 traveling with friends yes 224 54.4 58 41.1 157 48.5 30 34.5 traveling with family yes 75 18.2 42 29.8 51 15.7 24 27.6 traveling with wine lovers yes 118 28.6 24 17.0 57 17.6 10 11.5 traveling alone yes 33 8.0 13 9.2 24 7.4 8 9.2 budget (€) 431.0 513.0 539.9 622.3 n=553: italy n=412; france n=141. *after covid wine travel statistics refer solely to wine tourists who are most likely to have a wine holiday after the end of mobility restrictions (alwtint ≥ 4; france n = 87; italy n = 324). 98 giulia gastaldello, florine livat, luca rossetto longer than one day (44.8% 2-3 days in italy; 65.5% % 2-7 days in france). among italian respondents, the interest in hotels dropped by 58% in favour of an agriturismo (+97 %; table 3), which are typically family run farms with a limited number of rooms. th is variation does not seem to be related to fear and anxiety towards covid as no signifi cant diff erence in cph emerged for wine tourists preferring an agriturismo (f (1, 322) = 1.5, p = .22) or a hotel (f (1, 322) = 1.7, p = .20) for a post-lockdown wine holiday. most french tourists still prefer private lodgings (+27%) and are interested in hotels (31.0%). generally, the italian sample shows a signifi cantly higher intention to go on a wine holiday both on the long-term and aft er the lift ing of mobility bans (table 4). 4.2 structural model results th e structural model (sm) is fi rst tested on the whole sample (figure 2). goodness-of-f it statistics reveal a satisfactory fi t to the data (χ2 (553) = 605.81; df = 175; p < .001; χ2/df = 3.46; rmsea = .07; cfi = .95; tli = .95; srmr = .04). th e model shows a remarkable predictive power, explaining 41% and 42% of lrwtint and alwtint variance respectively. involvement with wine is a signifi cant antecedent of long-term wine tourism intentions (wi -> lrwtint; β = .57; p < .001), which is the main predictor, followed by willingness to support national wineries (suplocw -> lrwtint; β = .15; p < .001). as regards the willingtable 4. long-term and short-term wine tourism intentions. 1 2 3 4 5 6 7 mean st.dev. anova f p would like to visit a wine region in a future holiday (lrwtint) italy 0.7 1.7 1.9 6.8 9.0 16.0 63.8 6.3 1.25 85.98a 0.00 france 7.1 7.8 11.3 14.9 23.4 12.1 23.4 4.7 1.85 plans to visit a wine region aft er mobility bans are lift ed (alwtint) italy 5.8 7.3 8.3 6.6 14.1 15.8 42.2 5.3 1.93 29.23 0.00 france 12.8 11.3 14.2 12.1 17.0 11.3 21,3 4.3 2.02 n=553. 1=strongly disagree; 7=strongly agree. a th e assumption of homogeneity of variance is violated, welch anova is used. figure 2. path diagram with standardized regression coeffi cients: sem results on the whole sample. note: n = 553; ***p < .01; **p < .05; *. signifi cant paths are represented with a continuous line and the related structural weights are reported in bold. 99does covid scare wine travelers? evidence from france and italy ness to go on a wine holiday after the lifting of mobility restrictions (alwtint), it is significantly predicted by both lrwtint (β = .52; p < .001), and by aqwint (β = .11; p = .04). a worse family income following the pandemic (worseinc) positively affects alwtint as well, although to a lesser extent (β = .09; p = .01). interestingly, neither wi nor suplocw are predictors of alwtint. covid-related fear and anxiety (cph) have a limited negative impact on post-lockdown wine tourism intentions (cph -> alwtint β = .07; p = .05) but no significant effect on lrwtint. finally, as expected, wi is a significant antecedent of aqwint in lockdown (β = .75; p < .001). while the relationship between wi and lrwtint is not significantly mediated by aqwint, the effect of wi on alwtint is fully mediated by the construct (direct effect β = .07; p = .28; indirect effect β = .09; p = .04). regarding mediation of cph among lrwtint and alwtint, a significant indirect effect was found (β = .01; p = .04), although having a limited size. table 5 summarizes the results obtained from the sem analysis for all the hypotheses postulated while correlations, mean, and standard deviation of the variables included in the path diagram are proposed in table 6. multigroup comparisons between french and italian wine tourists are conducted to check for cross-cultural differences in single paths of the model. table 7 summarizes the key descriptive statistics of the two sub-samples compared through the multigroup analysis (i.e., france and italy). the effect of aqwint on alwtint is found to differ significantly between france and italy (χ2 (351, 553) = 8.01, p < .001). in particular, the effect for italian respondents is positive and significant (β = .20; p < .001), while it is negative and non-significant for the french sub-sample (β = .18; p = .13). slightly significant differences are found also for the effect of cph and of worseinc on alwtint (χ2 cph (351, 553) = -.22, p = .07; χ2 worseinc (351, 553) = 2.65, p = .09). similarly to the former effect, the two paths are not significant in the table 5. summary of hypotheses tested and related outcomes. hypothesis outcome h1. covid phobia impacts negatively on post-lockdown wine tourism intentions. partially supported h2. covid phobia mediates the effect of future wine tourism intentions on post-lockdown wine tourism intentions. not supported h3. involvement with wine positively affects post-lockdown wine tourism intentions. not supported h4. involvement with wine positively affects future wine tourism intentions. supported h5. acquired interest in wine mediates the effect of involvement with wine on post-lockdown wine tourism intentions. supported h6. acquired interest in wine mediates the effect of involvement with wine on future wine tourism intentions. not supported h7. acquired interest in wine positively affects post-lockdown wine tourism intentions. supported h8. acquired interest in wine positively affects long-run wine tourism intentions. not supported h9. willingness to support local wineries positively affects post-lockdown wine tourism intentions. not supported h10. willingness to support local wineries positively affects long-run wine tourism intentions. supported note: n=553. table 6. correlations and descriptive statistics. aqwint cph wi alwtint lrwtint worseinc suplocw acquired interest in wine during the lockdown (aqwint) 3.5 (1.77) covid-related fear and anxiety (cph) 0.058 3.5 (1.63) involvement with wine (wi) 0.662*** 0.058 5.2 (1.35) wine tourism intentions after lockdown (alwtint) 0.404*** 0.004 0.494*** 5.1 (2.02) future wine tourism intentions (lrwtint) 0.466*** 0.102*** 0.640*** 0.624*** 5.9 (1.58) worse income after covid (worseinc) 0.109*** 0.106*** 0.149*** 0.171*** 0.131*** 0.3 (0.46) willingness to support local wineries (suplocw) 0.129*** 0.041 0.123*** 0.139*** 0.194*** 0.050 6.0 (1.35) note: mean (std. dev.) on the diagonal. *** p < .01 ** p < .05. 100 giulia gastaldello, florine livat, luca rossetto french sub-sample (cph -> alwtint france β = .04; p = .48; worseinc -> alwtint france β = .05; p= .86) but they are for the italian one. particularly, cph has a signifi cant negative impact on alwtint (cph -> alwtint italy β = .11; p < .001) while a worse income (worseinc) positively predicts short-term wine tourism intentions (worseinc -> alwtint italy β = .51; p < .001). results of multigroup comparisons are summarized in figure 3. country-moderated mediation effects have been further explored. no signifi cant diff erences emerged for cph mediation between the two groups (χ2 (352, 553) = 3.42, p = .18). similarly, the mediation of aqwint on the eff ect of wi on lrwtint is not signifi cantly diff erent between france and italy (χ2 (352, 553) = 3.80, p = .15). a signifi cant diff erence exists for the mediation of aqwtint on wi and alwtint (χ2 (352, 553) = 11.39, p = .003). particularly, the indirect eff ect of wi on alwtint is positive for italian respondents while it is negative for french wine tourists, despite poorly signifi cant (italy β = .15; p < .004; france β = -.15; p =.092). table 7. mean and standard deviation of the variables included in the sem by group. france (n=141) italy (n=412) mean st.dev mean st.dev involvement with wine (wi) 4.9 1.36 5.4 1.32 acquired interest in wine during the lockdown (aqwint) 3.0 1.79 3.6 1.73 covid-related fear and anxiety (cph) 3.4 1.46 3.7 1.54 wine tourism intentions aft er lockdown (alwtint) 4.3 2.06 5.3 1.93 future wine tourism intentions (lrwtint) 4.7 1.85 6.3 1.25 willingness to support local wineries (suplocw) 6.1 1.24 5.9 1.39 note: n=553; italy n=412; france n=141. figure 3. multigroup comparisons between italy and france. note: n = 553; ***p < 0.01; **p < 0.05; *p < 0.1. th e fi rst result refers to italy, the second to france. signifi cant results are reported in bold. 101does covid scare wine travelers? evidence from france and italy 5. discussion and conclusion the present study is among the first to provide a comprehensive overview on how an unprecedented event like the pandemic affected wine tourists’ behavioural intentions considering both positive and negative factors. to do so, we focus on two major wine tourism actors which have been severely hit by covid-19: italy and france. generally, this analysis suggests the pandemic boosted wine tourism intentions rather than limiting them. particularly, a greater share of wine tourists from both countries is willing to travel outside their region of residence after the lockdown, either to a different region or to another european country. diversely, the share of tourists willing to travel to a neighbouring wine region is significantly smaller. both the average length of stay in the wine region and the planned budget for a wine holiday record an increase compared to pre-covid, despite a considerable share of respondents declaring a worse economic situation following the pandemic. this observation is consistent with the overnight stays peak recorded between july and august 2020 in both countries, when most covid limitations were lifted. for the future wine tourism research agenda, it would be interesting to evaluate whether the pandemic encouraged wine holidays instead of other trips among (wine) tourists. a switch from hotels to agriturismo emerged in the italian sample, which does not appear to be connected to fear of contagion. national tourism statistics support this tendency since, compared to 2019, overnight stays in accommodations other than hotels (e.g., agriturismo, camping) recorded a lower decrease (-45%) than hotel ones (-56%) in 2020. moreover, they grew more than hotel stays in 2021 (+27%, compared to +19% for hotels), and are therefore recovering faster from the 2020/2019 drop: while the 2021/2019 variation for hotels is still above -40%, other accommodations raised to -28%. further research is needed to verify the extent of such behavioural changes and to explore their drivers. in our study, covid-induced fear and anxiety (cph) only shows a minor and poorly significant negative effect on wine tourism intentions after the lockdown (alwtint). this is despite the data collection timeframe, i.e. after the first wave of infection, when information on the virus and potential treatments was still scarce. moreover, cph does not mediate the relationship between future wine tourism intentions (lrwtint) and intention to go on a post-lockdown wine holiday. the mild negative impact of cph may be explained by the fact that wine tourists tend to be older than regular tourists, and the covid-mortality rate is greater for the elderly [81]. nevertheless, in line with existing studies [e.g., 35], cph does not constitute a substantial deterrent to wine holidays. although more research is required, we can reasonably connect this outcome to a higher perceived safety of rural destinations (like wine regions) compared to city ones [6]. this hypothesis is reinforced by recent findings showing how the threat of covid intensifies consumers’ tendency to avoid crowding [82], which is easier in rural area. it should be noted that the impact of cph is remarkably higher for the italian sample, where its direct effect on wine tourism intentions after the lockdown is negative and significant (β .11, p < .01). at the same time, it is non-significant for french respondents. trust in official communications may have played a role in determining this country difference since, as villacé-molinero et al. [68] highlighted, they impact on the likelihood to stick to travel plans. therefore, this is an essential factor to be considered by future research on the topic. the fact that aqwint in lockdown signif icantly affects post-lockdown wine tourism intentions (alwtint) suggests that the proper communication strategy can help attracting wine tourists ahead of time. the prolonged duration of the covid pandemic enhances the relevance of this finding, drawing attention on the strategic role played by virtual wine content and socialmedia marketing in reaching a wider audience and retain existing consumers during infection peaks. by fostering an increase of online content use, covid has also boosted their long-term marketing potential in reducing the time and financial investment for wine tourists approaching unknown wineries and wine regions. the effect of such activities, though, may vary from country to country. indeed, the influence of situational wine involvement (aqwint) on post-lockdown wine tourism intentions (alwtint) shows a significant direct effect only for the italian subsample (β .20; p < .001). the same variable is a also a mediator of personal involvement with wine (wi) on alwtint for both french and italians, while playing a greater and positive role for the latter. summing up, while in italy situational involvement is an antecedent of short-term wine tourism intentions independently from involvement with wine, its effect is exclusively connected to the latter variable in france. nevertheless, ss past studies suggest [33, 62], the significant mediation of aqwint on the path from wi to wine tourism intentions supports the relevance of situational involvement in enhancing the predictive power of wi. academically, this finding paves the way to further research exploring the role of situational involvement in predicting wine tourism intentions and behaviour. 102 giulia gastaldello, florine livat, luca rossetto wi further confirmed to be a key antecedent of long-term wine tourism intentions, [52, 53, 54]. the remarkable standard deviation observed for wi highlights the present sample includes wine tourists possessing different degrees of interest and involvement with wine: a characteristic that may impact their future behavioural intentions. future studies should address this issue and analyse group differences in wine tourism behaviour after the covid outbreak based on respondents’ profiles as wine consumers, which is beyond the scope of this study. solidarity, intended as the willingness to support local wineries by purchasing their products (suplocw), emerged as a noteworthy driver of long-term wine tourism intentions. this finding is in line with proximity being a key driver of wine tourism [25], which is also supported by the remarkable share of day-trippers in the sample. moreover, it highlights the strong connection between the wine tourism phenomenon and support to rural communities through direct sales [66] and, on a greater scale, the vital role wine tourism can have as a form of sustainable tourism, answering rising concerns of tourism growth in the context of climate change [10]. winery owners and tourism stakeholders should build on the willingness to support local businesses to attract travellers outside major city destinations, designing sustainable itineraries and experiences in rural areas. post-lockdown wine tourism intentions (alwtint) seem to benefit of proximity as well, being positively impacted by negative repercussions of covid-19 on household income. so, in a sense, trips to close wine areas may represent an attractive and affordable getaway for families suffering the negative financial repercussions of covid-19. this is true especially for the italian subsample, where the effect is significant and not negligible (β 0.12; p < .01). despite some researchers argue that the pandemic brought people attention on society problems [63], in our model solidarity with local winemakers after the covid-19 crisis does not impact intentions to go on a wine holiday after the lockdown significantly. this outcome may be the result of risks connected to travelling representing a too high price to pay to prioritize collective wellbeing, since the potential losses associated with covid infection include health issues. whilst offering a comprehensive overview on a still unexplored topic, the present study comes with some limitations, which are mostly connected to operational difficulties in collecting data. notably, a relevant size difference between the two subpopulations exists. in this respect, data analysis relied on weighted estimates based on the french and the italian group sizes. some heterogeneity in terms of wine tourism intentions is also present between the two countries. the nature of such country-based behavioural differences calls for further research, while the present study results represent an exploratory step forward to their comprehension. to conclude, the pandemic has deeply impacted tourism dynamics, inducing changes in travellers’ behaviour that call for fast, innovation-based responses [68]. moreover, the emergence and re-emergence of lethal viruses have become increasingly frequent and worrying in the last decade, notably for the ease of transmission fostered by international travel [83]. covid itself is still undefeated, and new viral variants are emerging. the findings of this study, therefore, provide wine tourism stakeholders with relevant information on how such unprecedented circumstances impact wine tourists’ behaviour and to effectively plan a recovery strategy accordingly. academically, this research represents important progress to wine tourism research as, differently from many past studies, it provides a comprehensive view of behavioural intentions by simultaneously modelling positive and negative drivers of intentions: an improvement which is very much needed to avoid undesired myopias connected to the important role played by constraints in behavioural research [84]. references [1] e. calgaro, k. lloyd, sun, sea, sand and tsunami: examining disaster vulnerability in the tourism community of khao lak, thailand, singap. j. trop. geogr. 29(3) (2008) 288–306. 10.1111/j.14679493.2008.00335.x. 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[84] m. cho, m. a. bonn, r. a. brymer. a constraintbased approach to wine tourism market segmentation. j. hosp. tour. res. 41(4) (2017) 415-444. doi https://doi.org/10.1177/1096348014538049 sciencedirect journals & books ! there was a problem providing the content you requested please contact us via our support center for more information and provide the details below. reference number: 780cede8288620cd ip address: 129.74.145.123 timestamp: access denied you do not have access to www.sciencedirect.com. the site owner may have set restrictions that prevent you from accessing the site. ray id: 780cede8288620cd timestamp: 2022-12-28 20:08:40 utc your ip address: 129.74.145.123 requested url: www.sciencedirect.com/science/article/pii/s2212977419300444 error reference number: 1020 server id: fl_154f20 user-agent: python-requests/2.28.1 about sciencedirect shopping cart contact and supportterms and conditionsprivacy policy we use cookies to help provide and enhance our service and tailor 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content and ads. by continuing you agree to the use of cookies. copyright © 2020 elsevier b.v. or its licensors or contributors. sciencedirect ® is a registered trademark of elsevier b.v. sciencedirect journals & books ! there was a problem providing the content you requested please contact us via our support center for more information and provide the details below. reference number: 780cede8288520cd ip address: 129.74.145.123 timestamp: access denied you do not have access to www.sciencedirect.com. the site owner may have set restrictions that prevent you from accessing the site. ray id: 780cede8288520cd timestamp: 2022-12-28 20:08:40 utc your ip address: 129.74.145.123 requested url: www.sciencedirect.com/science/article/pii/s2212977418300516 error reference number: 1020 server id: fl_154f20 user-agent: python-requests/2.28.1 about sciencedirect shopping cart contact and supportterms and conditionsprivacy policy we use cookies to help provide and enhance our service and tailor content and ads. by continuing you agree to the use of cookies. copyright © 2020 elsevier b.v. or its licensors or contributors. sciencedirect ® is a registered trademark of elsevier b.v. wine economics and policy 12(1): 3-18, 2023 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/wep-14758 wine economics and policy citation: rafael del rey, simone loose (2023). state of the international wine market in 2022: new market trends for wines require new strategies. wine economics and policy 12(1): 3-18. doi: 10.36253/wep-14758 copyright: © 2023 rafael del rey, simone loose. this is an open access, peer-reviewed article published by firenze university press (http://www.fupress.com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information fi les. competing interests: the author(s) declare(s) no confl ict of interest. state of the international wine market in 2022: new market trends for wines require new strategies rafael del rey1, simone loose2,* 1 spanish observatory of wine markets (oemv), atenas 2 – 1º f, 28224 pozuelo de alarcón, madrid, spain 2 geisenheim university, von-lade-str. 1, 65366 geisenheim, germany e-mail: direccion@oemv.es; simone.loose@hs-gm.de *corresponding author. abstract. th e objective of this discussion paper is to provide an overview of the state of the global wine sector in 2022 and discuss the eff ects of recent events on the wine trade’s development. first, long-term trends in the global consumption and production of wine and the development of the international wine trade are discussed. th e growth trend of global wine consumption ceased in 2008, but the last decade in the global wine trade has been characterised by stagnant volumes but increasing values driven by premiumisation. several recent events have aff ected the volume or composition of the global wine trade: the recovery of the wine trade aft er covid-19, global cost increases and infl ation, the shift of chinese wine consumption and the eff ect of the russian invasion of ukraine on russian wine imports. th e paper closes with an outlook on how underlying long-term trends might aff ect the strategies that successful wine business can employ in the future and suggests future areas of research in the wine business and economics. keywords: global wine trade, wine consumption trends, infl ation, industry strategies. 1. scope and objective of the discussion paper th is discussion paper combines insights from two data sources unique to the wine sector. th e spanish observatory of wine markets (oemv) collects a singular record of long-term data of the global wine trade. most of the data series from oemv presented here was updated only for this paper and has not been published before. on behalf of prowein, the university of geisenheim regularly surveys international experts along the wine supply chain about their perceptions and insights and publishes the annual prowein business survey. current insights from comprehensive trade data and survey opinions are combined to explore the state of the global wine sector at the end of 2022. th e paper is limited to descriptive analysis to provide a basis for later hypothesis testing. longand short-term developments are described and the eff ects of current events on the wine trade are discussed. by combining past 4 rafael del rey, simone loose developments with current events, the authors draw conclusions about the potential future development of the wine sector and propose recommendations for successful industry strategies. the nature of a discussion paper makes those conclusions rather speculative and not based on hypothesis testing. the paper is organised as follows. section two presents the long-term development of wine consumption, wine production and the volume and value of the global wine trade. it also briefly outlines the current status of key markets and main producer countries. the third section examines how the current events of the pandemic and inflation have affected the wine sector and how wine imports to china and russia have changed. the paper closes with suggestions of potential future trends. 2. long-term development of production, consumption and trade of wine the international wine trade and international wine consumption have not been growing much since 2011 in terms of volume. this steady state was not fundamentally altered by the pandemic, nor the effect of inflation and cost increases, nor the russian war in ukraine. thus far, the international wine trade does not seem to be directly affected by the increasing deglobalisation of the world economy. the relative stability of global wine consumption, around 240 million hectolitres, has been maintained since 2009, which represents a trend lasting for more than 13 years. 2.1 development of production and consumption owing to varying meteorological conditions during the different stages of the production cycle, but also inf luenced by economic incentives, there are strong annual variations in wine production (figure 1). climate change and the end of european union (eu) subsidies for wine distillation in 2011 seem to have increased the amplitude of variations in recent years with a record low of 246 million litres in 2017 and a record high of 295 million litres in 2018. on the contrary, global wine consumption is much more stable. after a long and steady increase up to 2007, global wine consumption remained fairly stable until 2017, when it started to decline slightly in line with the reduction of wine imports to china (see section 3.4) and was temporarily affected by reduced wine consumption during the pandemic. considering that a certain amount of wine production goes into industrial products, such as vermouth or vinegar, and that some gets lost in the elaboration process of wine production, an average amount of approximately 30 million litres per year is produced in excess of world consumption. low harvests lead to scarcity and an increase in bulk wine prices, whereas a series of high harvests reduce prices. the declining trend in wine consumption tends to increase the pressure on wine prices in price sensitive market segments and certain product specifications (see section 4). generally, production must follow consumption patterns. otherwise, an increasing oversupply and wine stock will further increase the pressure on wine prices. managing the economic sector in these conditions is therefore challenging. 2.2 wine trade by volume has become steady the first decade of the century was characterised by growth in global wine consumption (figure 2) and a shift to non-wine-producing countries. after a halt to these two trends, global wine trade is now almost flat in volume terms. since 2011, the global wine trade has moved between 100 million and 110 million hectolitres annually and grown at a very limited compound annual rate of 0.4%. this is a very low rate compared to 4.3% annual growth in the first 11 years of the century. in absolute numbers, between 2011 and 2022, world trade increased by 400 million hectolitres, while during the previous 11 years, between 2000 and 2011, it had grown by 3.3 billion hectolitres. future trade volumes will depend on future global wine consumption trends (section 4). 2.3 wine trade by value and average price increases – premiumisation while the wine trade in volume terms is constant, it is sharply growing in value terms. figure 2 shows the 51,5 41,3 34,0 53,6 51,3 35,5 24,9 24,5 58,2 39,1 38,3 18,0 19,0 27,0 21,0 24,0 16,0 48,0 29,0 33,7 25,0 2,3 53,0 19,0 29,0 24,0 100 120 140 160 180 200 220 240 260 280 300 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 20 20 20 21 e world wine production & consumption source: data from gta / oemv difference world wine production world wine consumption figure 1. world wine trade by volume in million hectolitres (oemv, 2023 [1], based on data from gth /ihs). 5state of the international wine market in 2022: new market trends for wines require new strategies consistent increase in world trade in euros since 2000 with the two exceptions of the financial crisis in 2009 and the covid-19 crisis in 2020. both crisis years also saw a decline in average prices. in 22 years, the wine trade has grown from €14 billion to more than €37 billion. between 2000 and 2010, the growth in value was mainly driven by an increase in volume (figure 2), while average prices largely remained constant. the average annual price change over that period was −0.2%. when volume growth stopped, rising average prices drove value growth. average prices increased from €2.32/litre in 2011 to €3.59/litre in 2022 at an annual growth rate of 4.1%. this increase in the value of traded bottles or litres of wine was due to premiumisation. the long-term growth of trade value was almost even with an average annual rate of 4.3% during the first volume-driven decade of the century and 4.4% since 2011. in absolute terms, world exports increased by €7 billion between 2000 and 2010 and doubled (€14.3 billion) between 2011 and 2022. the global wine trade reduced sharply during the two crisis years 2009 and 2020. nevertheless, the recovery after the covid-19 crisis in 2020 more than compensated for this loss, as was also the case after the 2009 financial crisis. even in 2022, despite uncertainties caused by the russian invasion of ukraine, increasing deglobalisation and generalised inflation, the overall value of world trade increased by 9.3% while the volume decreased by −4.5%. as we will see in sections 2.5 and 4, import values did not increase equally across all countries and regions. the 14.4% increase in average prices in 2022 is exceptionally high and at least partially related to inflation as some producers managed to carry over their higher costs for energy and glass by increasing the wine prices (see section 3.3). the linear trend line across global average wine prices from 2010 to 2022 shows a very good fit to the data (figure 3). compared to the trend line, covid-19 resulted in negative price deviations for 2020 and 2021, while a positive deviation of €0.18/litre in 2022 is likely linked to inflation. figure 2. world wine trade by volume, value, and average price (oemv 2023 [2], based on data from gth/ihs) figure 3. deviation of average price from linear price trend (2010– 2022), based on data in figure 2. 6 rafael del rey, simone loose 2.4 world trade by type of wine the overall tendency of steady volume and increasing value does not equally apply to all product categories (figure 4). sparkling wines have led the growth in the world wine trade, while bottled non-sparkling wine reflects the general trend of increasing value without growth in volume. sparkling wine has been increasing at a compound annual growth rate of 7.5% for value (5.6% volume) for the last 12 years. the largest category of bottled wine, on average, increased annually by 3.8% in value (0% in volume) and bulk wine slightly declined in volume (−0.2%) and increased in value annually by 3%. these diverging trends also apply to the development during 2022 (see figure 9). the rise of sparkling wines, led by italian prosecco but also followed by champagne and cava, goes hand in hand with the increase in sales of white wines relative to red wines and relates to a positive trend in consumer preferences for fresher wines; see section 4.1 for a detailed discussion. 2.5 development of key producing countries wine exports are strongly concentrated in a few countries, traditionally positioned along the 40th latitude of both hemispheres. france alone represents one third of the total export value (figure 5). together with italy and spain, they represent 61.6% of value and 54.5% of volume for 2022. the top 11 global exporters of wine account for 86.3% of total value and 87% of volume. for decades, france, italy and spain have remained the three largest world wine exporters. however, their evolution has been quite different. overall, massive international trade in wine is a very recent phenomenon. up to the 1970s, less than 15% of total wine consumption was traded among different countries. with few exceptions (e.g. england), wine was a product to be consumed domestically and close to the place of production. it was only in the 1970s that italy and then france started to export increasing amounts of wine. spain came much later because of its late entry to the eu in 1986. more recently, since 2000 and particularly up to 2012, spain grew faster by volume than france and italy and took the lead in global wine trade volume from 2014 to 2021. spain’s exports fluctuate strongly around 21 million hectolitres depending on the size of its crops. italy also grew strongly between 2003 and 2011, but since then, it has shown less strong fluctuations than spain. over the last 20 years, france’s exports have been relatively steady at a volume of around 14 million hectolitres with a slightly decreasing tendency. consistent with the overall trend, the value of exports has grown strongly for the top three exporting countries, though they have differed in slopes and impacts of the financial crisis in 2009 and the covid-19 pandemic in 2020. france’s export value seems to be most sensitive to economic conditions, showing strong depressions during both crises and steep recoveries thereafter. it grew from less than €6 billion to almost €10 billion in the 10-year period since 2009. fuelled by inflation, recovery after covid-19 has been even steeper, increasing from €8.7 billion to more than €12 billion in two years. italy shows a more stable value increase with weaker sensitivity to economic crises. spain shows the lowest slope and values have almost remained constant over the last five years. therefore, france and italy especially managed to benefit from premiumisation. an interesting research question is what strategies the french and italian wine businesses used to achieve this success. figure 6 shows the absolute export volumes and percentage change for 2022. italy overtook spain and took the number one position by a small margin. as expected figure 4. volume and value of exports by type of product (graphic based on data from oemv, obtained from gta/ihs), bib = bag in box. figure 5. top three exporting countries by volume and value (graphic based on data from oemv, obtained from gta/ihs). 7state of the international wine market in 2022: new market trends for wines require new strategies from the overall trend, most countries lost volume. out of 11 countries, only two were able to increase export volumes: new zealand and australia. after a small harvest in 2021, new zealand took advantage of the sufficient supply and premiumisation trend. as a relatively small wine producer, exporting slightly less than three million hectolitres, particularly of fresh sauvignon blanc, new zealand exports at a high average price of €4.56 per litre – third after france and the united states (usa). australia recovered slowly after the harmful trade restrictions imposed by china by diversifying exports to other markets. on the opposite side, the usa, argentina and spain lost more than 10% export volume compared to 2021. the usa was particularly affected by lower imports by the united kingdom (uk). wine sales from argentina fell mostly in the uk, canada, china and paraguay and were affected by the market contraction in germany. spain suffered from two consecutive small harvests, which were partially related to extreme heat, lower demand for bulk wine and high price sensitivity of the bulk wine market. south africa reduced shipments particularly to germany and the usa. such changes among the top wine producers and exporters can also be analysed in terms of who has been better able to adapt to recent trends in world wine consumption. france, particularly with its premium wines and champagne, italy, with the strong growth of prosecco and some non-sparkling (often white) protected geographical indication (pgi) premium wines, and new zealand, with its crisp high-quality white wine, may be considered the three countries leading the market in recent years. as will be discussed in section 4, exporters well placed in both ends of the market – the top high-quality, expensive and famous wines on the higher end and the fresh, competitive and very well distributed wines on the lower end – seem to be performing better than other producers. there is a need for researchers to substantiate this suggestion. 2.6 recent trends in key import markets wine imports are much more diversified than exports. the top three exporters sell their wines to about 190 markets, which also have developed very differently. by value, the uk was traditionally the largest world importer until the usa took the lead in 2012 with an import value of €3.9 billion (figure 7). subsequently, the usa climbed to €7 billion, at an annual average growth rate of 5.9%, while the uk only reached €4.8 billion in 2022, growing at a lower rate of 2.1% per year. covid-19 had a strong negative impact on the usa’s import values but the years before and after show strong growth. germany remained quite stable during the recent 22-year period, reaching €2.7 billion in 2022. canada grew faster to become the fourth largest wine importer, spending €2.2 billion last year. japan, the netherlands, china, belgium, switzerland and russia complete the top 10 ranking of the world’s largest wine importers, which account for two thirds of the total import volume. on a very different scale, figure 8 shows six other large wine importers with import values in 2022 above €1 billion. china had impressive development until 2018, but then this started to decrease, long before covid-19 affected wine consumption (see section 3.4). the netherlands shows steady growth in wine imports, which, similar to germany, may also have been partially re-exported to other neighbouring markets. belgium, switzerland and france have grown particularly well after the pandemic. exports to russia increased to €1.3 billion in 2022 and will be analysed in more detail in section 3.5. figure 6. top wine exporters’ change in volume, 2021–2022 (graphic based on data from oemv 2023 [1], obtained from gta/ihs). figure 7. top 5 world import wine markets by import value in billion euros (graphic based on data from oemv, obtained from gta/ ihs). 8 rafael del rey, simone loose for 2022, the majority of world import markets show a similar dichotomy between (a) an increase in import values due to higher average prices and (b) a decrease in import volumes (figure 9). out of the largest 20 wine import markets, 13 decreased their import volumes. except for hong kong, all markets increased import values. average prices increased in all countries with the exception of russia and hong kong. italy stands out with erratic wine imports of cheap bulk wine, mostly from spain, when their domestic harvest falls short. 3. current challenges for the international wine trade this section presents industry expert opinions about current challenges the wine industry is facing. it examines four recent events affecting wine consumption and trade. during covid-19, the value and volume of the global wine trade decreased suddenly and recovered quickly in 2021. cost increases and inflation affected both the supply and demand sides, leading to disparate reactions of price and volume for the different price segments of wine. the dynamics of the change in wine imports into china continue to affect the global wine trade. preliminary data are presented to depict how the volumes and routes of wine trade with russia changed after the russian invasion of the ukraine. 3.1 producer and trade perceptions since 2017, an international survey has been conducted on behalf of prowein to explore the perceptions of experts along the complete supply chain for wine. the respondents include producers and exporters, importers, trade and horeca businesses (loose, 2023[3]). the resulting prowein business report provides an indicator of the development of producer sentiment about the economic situation and perceptions of the threats and challenges to the industry (figure 10). the global economic upturn after covid-19 already led to a greater demand for energy and rising energy prices in 2021. with the war in ukraine and sudden collapse in energy supplies in 2022, prices in many parts of europe therefore often more than doubled compared to figure 8. other major world wine importers by value in billion euros (graphic based on data from oemv, obtained from gta/his) figure 9. changes in value, volume and average prices for top 20 wine importers in 2022 (graphic based on data from oemv, obtained from gta/ihs). figure 10. threats and challenges to wine businesses. share of respondents who see strong or very strong effects (4 and 5 on a 5-point scale) based on loose (2022[4], 2023[3]) with n = 2,880 and n = 2,455 respondents, respectively, sorted in descending order by 2022 results. 9state of the international wine market in 2022: new market trends for wines require new strategies 2020. for 2021 and 2022, rising costs and disruptions to supply chains ranked at the top of the list. however, the degree to which the industry was affected clearly increased in 2022. according to 85% of those polled, the rising costs of energy, glass and paper pose a great or very great threat to their companies. in 2022, almost all producers were affected by transportation issues and supply chain disruptions, which seem to have eased over the first months of 2023. for 2023, international economic experts at the oecd and world bank anticipate a further downturn in the global economy, which might cause a reluctance amongst consumers to buy wine. general inflation and particularly high price increases for energy and food have reduced consumers’ real incomes. experts in the wine sector viewed the impact of an economic slowdown as the third largest challenge for the wine industry. compared to the previous year, the proportion of respondents sharing this view was up from 35% to 55%. the effects of inflation on wine supply and demand are detailed in section 3.3. the consequences of international trade wars, particularly the intervention on exports to russia, were perceived as a clear threat to wine producers (39%), particularly in the highly export-oriented countries portugal (59%) and spain (57%). from the industry’s perspective, the impact of covid-19 has subsided. covid-19 is still relevant to the hotel (44%) and food service/hospitality industries (42%). section 3.2 details the strong recovery after covid-19. climate change has been pushed even further into the background by the economic crisis. compared to 2021 [5], its importance dropped in 2022 from 45% to 40%, with regional variations. the industry entered 2022 with positive expectations. producers and traders hoped for a recovery from the negative impact of covid-19. these hopes were not or were only partially fulfilled. in general, therefore, the industry is looking to the future with caution. 3.2 covid-19 in the long-term perspective illustrated in figure 2, covid-19 was only a small “dent”. zooming in with a higher resolution, the effects of covid-19 have been more accentuated. global wine exports had already fallen by six million hectolitres in 2019 and then fell by a further two million hectolitres in 2020, the first year of the pandemic. more importantly than the relatively small drop in volume, covid-19 resulted in a sharp decline in the value of the global wine trade in early 2020. over the complete year 2020, wine trade lost a total of €1.9 billion or 5.8% of its value and faced strong uncertainty about its future development, like most other industries did during the pandemic. in 2021, both the volume and value of the global wine trade showed a steep recovery, and by mid2021, reached pre-covid values that were soon strongly exceeded. from today’s perspective, the decline in figure 11. world wine exports, volume (graphic based on data from oemv, obtained from gta/ihs). 10 rafael del rey, simone loose the wine trade during the pandemic can partially be explained by reduced orders and stocks keeping the intermediaries as well as horeca businesses in a period of high uncertainty. once vaccinations became available in 2021, trade picked up again, and part of the strong recovery relates to the refilling of declined inventories. the volume of the global wine trade started to decline in early 2022 because of the effects of inflation (section 3.3), while the value continued to increase, although at a declining rate. for the first time since the outbreak of covid-19, in december 2022, the value started to drop, and the future development for 2023 and beyond is of high interest to the wine sector. it cannot be ruled that over the long term, generalised inflation might also negatively impact the value of the wine trade. 3.3 cost increases, inflation and economic slowdown fuelled by the synchronous economic recovery, costs started to rise in 2021 with increasing freight rates and higher costs for energy and dry goods, such as glass, closures and cartons. russia’s invasion of ukraine led to a severe energy crisis, and the costs of gas and electricity more than doubled in many european countries. this led to a further increase in prices for energy-intensive products, such as glass and aluminium. wine producers reported cost increases of approximately 30%. in economic terms, the cost shock led to an upwards shift in the supply curve (figure 13). for consumers, the increase in energy prices led to a steep increase in inflation. compared to 2021, inflation tripled in europe up to 9.2% in 2022, leading to a significant decline in consumers’ real incomes [6]. the global inflation rate of 8.8% was similarly high [7]. lower income households were particularly affected by roughly 20% increases in food prices and gas and electricity prices increasing by 50–100% in many countries [8]. this led to a downward shift of the demand curve for wine. consequently, the flat price-sensitive section was more strongly affected than the steep slope section of inelastic demand for premium wine by affluent households (figure 13). the combined effect of the supply and demand shocks led to a new market equilibrium with a reduction in quantity and an increase in price. the degree of those changes significantly differs for elastic and inelastic demand. for elastic demand, consumers strongly reduce their wine purchases and trade down to lower prices. this effect was particularly visible in germany, where according to nielsen home scan data [9], retail wine sales declined by -6.5%, particularly affecting german wine (−8.1%), while imports to germany for low-priced spanish wine and european blends increased. for the inelastic demand for premium wine, the price effect considerably outweighs the loss in quantity as the value of wine sales increases. this is particularly the case in the figure 12. world wine exports, value (graphic based on data from oemv, obtained from gta/ihs). 11state of the international wine market in 2022: new market trends for wines require new strategies usa (section 2.5). in addition, for direct-to-consumer sales in germany for 2022, we could observe higher revenues and only slightly reduced quantity [10]. the overall income and price sensitivities for wine vary by region and state, and so far, there is limited research available on this. the global effect on wine consumption and trade is an aggregate of those regional effects. in this context, wine consumption behaviours at the country level are quite heterogeneous across geographical regions (section 2.6). by the end of 2022, the global wine trade was dominated by imports from countries with low price insensitivity and good economic conditions, most importantly the usa. this agrees with expert opinions in the prowein business export [3], where 63% expected minor drops in sales in the premium and luxury segment. increasingly, therefore, producers and traders are focusing on the high-price segment; this is also because the absolute margin in this segment is significantly higher than in the entry-level wine segment. of course, the increasing value of wine sales does not mean increasing profitability, since margins would depend on what grows faster: costs or selling prices. future developments in costs, economic conditions and price sensitivity will determine how many wine producers can carry over their cost increases to consumers. this will have crucial implications for the economic sustainability of wine producers [11]. 3.4 china the globalisation of wine consumption has for many years compensated the decline in wine consumption in the most important three wine producer countries, france, italy and spain. in particular, china began promoting wine consumption as a healthy alternative to spirits, and wine imports grew strongly until their peak in 2018 (figure 14). after a change to the rules for gift giving and public spending, chinese imports started to decrease by about one million hectolitres per year. this negative trend left clearly visible marks in the data on global wine consumption. covid-19 then accelerated the falling trend slightly, with the steepest decline between january and july 2020. in 2022, wine imports further decreased (−20.6%), while the decline in the value of imports slowed down to −4.3%. it is hard to predict the future development of wine consumption and imports to china. current accounts from iwsr (2023 [12]) indicate increased sales of imported spirits with the reopening of on-premise consumption. as wine consumption in china has been closely tied to a positive attitude towards a western lifestyle, it is uncertain what effects the shift in geopolitics, deglobalisation, the development of domestic production and aging of the chinese population will have on future wine imports to china. 3.5 russia after russia invaded ukraine in february 2022, many countries imposed trade restrictions with russia. according to oiv (2023 [13]), with 5% of global wine consumption, russia is the sixth most important country by consumption. for the last decade russia as figure 13. effects of cost increases and inflation on wine supply and demand for elastic and inelastic market segments. 12 rafael del rey, simone loose seen as one of the top emerging wine markets [14]. it is therefore of interest to see what effects the war has had on wine imports to russia. generally, two sources of data are available. imports are recorded by russia and exports to russia are reported by the exporting countries. historically, those two data sources largely run parallel with a small gap (figure 15 and figure 16). russia stopped official reports of wine imports in february 2022. therefore, current data completely rely on export data. what happened after the start of the war? the dashed lines in and figure 15 and figure 16 show that import volume and value, respectively, sharply dropped and rapidly rose again thereafter. preliminary data thus suggest that the war did not significantly reduce wine consumption in russia. on the contrary, according to exporters’ data, wine sales to russia strongly increased in 2022. the means of importing and origins of wine imports did change, however, to some extend becoming more indirect through re-exporting countries. the majority of wine exports to russia are organised as indirect exports through two baltic states, latvia and lithuania (figure 17 and figure 18). customs data analysed by oemv [1] suggest that 82% (69%) of imports into latvia (lithuania) are re-directed to russia. moreover, wine exports from poland can be considered re-exports of wine from other origins, although on a much smaller volume basis. conversely, georgia has its own strong production and very limited wine imports. in 2022, particularly exports of georgian wine to russia increased strongly (50% in volume and 40% in value). wine through latvia increased in value (38%) but less so in volume (16%). re-exports through lithuania were hardly affected by the war, and re-exports through poland declined strongly. the data also show that direct exports from producing countries increased figure 14. value and volume of wine imports in china (graphic based on data from oemv, obtained from gta/ihs). figure 15. imports and exports to russia, volume (graphic based on data from oemv 2023, obtained from gta/ihs). 13state of the international wine market in 2022: new market trends for wines require new strategies strongly by volume (germany 79%, of which some can be re-exports, spain +49%, france +43%) and by value (spain 79%, germany 53%). exports from new zealand, south africa and argentina declined strongly. average prices decreased overall (figure 9). it will be of interest to see how the composition by origin, volume and value of the wine trade with russia will be affected in the future, particularly after financial restrictions for bank payments may become stricter. 4. potential long-term trends we close the paper by discussing three major current market trends and contemplate how they might affect future strategies that companies can apply to stay in business successfully. we outline questions for researchers of the wine business and economics to address in the future. 4.1 shift towards lighter and fresher wines for a long time, “real wine” had to be red. to be highly rated, for instance, by robert parker’s wine advocate, only a few years ago, red wine had to be heavy, strong, bold and jammy. now, we see a major shift globally towards lighter and refreshing wines. in particular, there is rising consumer demand globally for sparkling wines (section 2.4 and figure 19). this trend is reflected in many strong market signals. red wine, particularly red wine targeted to lower segments of the market, is in a surplus globally. regarding bordeaux, the classical example of red wine, there was an announcement that vines would be pulled on 10,000 hectares because of structural oversupply. ciatti bulk wine reports have been indicating falling prices for red wine for the last two years, while white wine has been experiencing strong demand and increasing prices. the formerly successful fruity and strong australian red grape varieties seem to have been hit the hardest by falling demand for red wines with prices dropping as low as usd 0.33 to 0.47 per litre [15]. the trade success of sparkling and white wines agrees with the expectations for the global wine trade’s future well-performing wine styles for 2023 (figure 20). some industry experts see climate change and hotter summers as a driver of consumers preferring lighter and fresher wines [16]. at the same time, climate change makes it harder for wine growers to produce light and fresh wines, which require a change in viticultural procedures and/or grape varieties. figure 16. imports and exports to russia, value (graphic based on data from oemv, obtained from gta/ihs). figure 17. wine exports to russia 2022, volume (graphic based on data from oemv, obtained from gta/ihs). figure 18. wine exports to russia 2022, value (graphic based on data from oemv 2023, obtained from gta/ihs). 14 rafael del rey, simone loose the trade perceptions in figure 20 indicate the trend for no/lowalcohol wines. while the oiv has released a definition of dealcoholized wines (the permitted oenological practices are still in discussion [18]). low-alcohol wines are not as clearly legally defined yet and cannot be legally called “wines” in many regions. often, their classification depends on the national rules for wine taxes, if they depend on the level of alcohol, such as in the uk or scandinavia. many traditional wine-producing countries face a trend of particularly younger consumers cutting down on alcohol. no-low products are seen as one way to provide an alternative [17]. one of the big questions will be whether a grape-based alcohol-free beverage has to be produced through dealcoholisation. successful products, such as the kylie no alcohol sparkling rosé, provide examples of the potential of technological innovations in the sector that do not necessarily require the two steps of fermentation and subsequent dealcoholisation. for wine producers, the changes in consumer demand pose challenges. ideally, those changes can be anticipated to include adapting vine plantations that are normally used for 30 to 40 years. currently, there is a research gap concerning how long-term cycles in wine demand develop and shift over time. understanding the underlying drivers of consumer preferences and the consumption context would be helpful for the industry to anticipate changes ahead. 4.2 shift to new wine consumption regions consumption in wine-producing countries has been decreasing for decades, but such decreases have been more than compensated with parallel growth in wine consumption in non-producing countries. wine was becoming fashionable in societies that had previously shown a preference for beer or other international beverages while it was losing popularity in traditional wine-producing regions. such differences in wine consumption explained the increase in trade: wine had to be shipped from producing to non-producing countries. actually, the ratio of total world wine consumption and traded wine has been consistently growing in recent decades, up to around 46% in 2022 [1]. that is, almost every second bottle of wine is consumed in a country other than the one in which it was produced. however, it seems that these changes in wine consumption in different areas of the world no longer imply increasing trade volumes in more recent years. positive trends in increasingly consuming countries do not offset negative ones in traditional producers as clearly as they used to. nevertheless, in areas where wine is not a traditional beverage, like most countries in latin america or africa, the value of wine imports continues to grow faster than in more traditional wine regions, such as europe (figure 21). latin america and africa jointly still represent less than 5% of the value of global wine imports but have the potential to evolve. this dynamic shift in the regional development of wine consumption and trade is likely to continue into the future. this might affect what type of wine is demanded (see section 4.1) and how it is packaged [19]. if wine is increasingly marketed to consumers in non-producing countries, it may very well be that new consumers will approach wine in a different way and may prefer easy-to-drink wines – that is, fresher, probably sweeter and with some bubbles – rather than trafigure 19. world trade by type of wine change of volume, value and average prices 2021–2022 (graphic based on data from oemv, obtained from gta/ihs). figure 20. global wine trade perceptions of well-performing wines for 2023 [17]. 15state of the international wine market in 2022: new market trends for wines require new strategies ditional reds. the same trend seems to apply to new consumers entering the alcoholic beverage category in traditional markets. indeed, such a hypothesis does not contradict the remaining and even increasing consumption of traditional and high-quality wines, preferably aged reds, mostly by older, experienced consumers with higher incomes. the relative composition of both preference groups varies by country and will likely change over time, when older age cohorts leave the market and younger consumers enter it. following from these two opposing trends, it can be hypothesised that we will enter a period of increasing polarisation between (a) premium and super-premium wines for connoisseurs and more traditional drinkers and (b) easy drinkers increasingly looking at wine as a sort of elegant refreshment. important implications would follow for wine policy and company strategies if the hypothesised trend is confirmed. 4.3 diverging segments require different strategies the different price segments of wine have been impacted quite differently by cost increases and inflation (section 3.3). as suggested in the previous section, a stronger polarisation might be expected in the future. different evolutions of different price segments require different strategies from companies. the small niche of premium and super-premium wines represents a limited wine volume (of possibly 10–15%) but of high value. the small producing estates and companies focusing on high quality, reputation and storytelling have so far been minimally affected by the crisis. they were able to increase their prices because of a price-inelastic demand by their consumers. for some wines, even a positive price elasticity was observed. potentially owing to the exclusivity of the products, sales volume increased when prices went up. yet there is a large segment of highly price-sensitive consumers who favour more popular and easy-to-drink wines (lighter, fresher, sweeter, white, rosé, sparkling, etc.) at very competitive prices. some of these consumers have reduced their wine consumption and traded down to lower price points, increasing the price competition for producers in this large segment. in the future, these two different segments will require different strategies. the strategy for the highquality segment is based on objective and subjective wine quality. it is based on ownership or close relations with high-quality vineyards and regions. the necessary product characteristics must be matched by subjective reputation indicators, such as awards, storytelling and figure 21. wine imports by region: value of 2022 and change 2021–2022 (oemv [2]); border strength indicates growth rate. 16 rafael del rey, simone loose good distribution in the upper segment of the market. prices will likely increase further in this segment. it is highly uncertain whether the volume of this high-quality segment will increase significantly in the near future or even decline, making it harder for new entrants. cost and price competition are the main drivers of the second segment. efficiency is the key to production at a low cost. this includes serving food retail with cost-efficient, own-label products. this will increase the pressure on grape producers, and declining volumes will push those stuck in the middle – those with costs too high for price competition but a profile too low for premium – out of the market. large companies with a portfolio of well-known brands that are very well distributed will be successful in this segment. for most consumers in this segment, taste is more important than objective quality indicators, such as eu protected designations of origin (pdos) regulations. this might explain why eu pgis (protected geographical indications, former table wines with geographical indication) products and wines that are based on grape varieties, which can more flexibly react to changes in taste preferences, are less affected by the current crisis than traditional and strongly regulated pdos, such as bordeaux or rioja. the dichotomy between premium and value wine segments would explain why premium and super-premium wines from some segments of the supply of famous traditional and strongly regulated european pdos, such as bordeaux or rioja, evolved very well in recent times, even increasing sales after a two-digit increase in prices. at the same time, traditional wines from the same pdos but targeting a more popular segment of consumption suffer from strong oversupply and are requesting crisis distillation from the european and national authorities. they can hardly compete with wines produced in cheaper producing regions, particularly in a segment of the market for which the region of origin may not be so important and may no longer justify a higher price. for companies as well as regions, being caught in the middle may be a problem. imposing and selling high-cost wines in the lower price segments no longer seems to work, particularly not if it also requires different tastes. this argument also provides the basis for many companies to enlarge their portfolios, including forming different categories to better fit different and changing segments of the market. this also has important implications for wine politics and the strategies for pdos and igps. if the segment of high-quality pdo wines is limited and not growing further, it might not be a desirable goal for each wine region to establish pdos. instead, cost efficiency, economic sustainability and flexibility in the adaptation of product specifications to consumer preferences are key elements of sustainable wine politics. to date, considerable research has focused on quality. more research is required on the cost efficiency of wine production and different taste preferences. 5. conclusion and direction for future research we see five main areas of future business and economics research related to the wine trade that are of high importance for the future of the wine sector. 5.1 what strategies permit premiumisation? over the last 20 years, the global wine trade has undergone substantial shifts. it changed from volumedriven growth to growth of value due to premiumisation, of which not all wine-producing origins could benefit to the same extent. for the wine sector, it would be important to understand the success strategies of producers, such as france, italy and new zealand, which strongly increased sales and the average prices of their products, while others did not succeed to the same degree. 5.2 understand the drivers of preference shifts and anticipate future shifts besides premiumisation, successful growth seems to be driven by a substantial shift in some consumers’ preferences. sales of lighter and fresher wines, including sparkling wine, have increased, while an oversupply of commercial red wines has kept prices low and required supply management. it is important for the future of the wine sector to understand the underlying drivers of this preference shift and, ideally, to be able to anticipate how preferences will change in the future for the industry to react. 5.3 understand growing wine markets and their product preferences the us market appears to be the main growth motor for the global wine trade, while prior hopes for a further increase in wine consumption in china have not materialised. considering the shift in wine consumption of younger generations in the usa, it is uncertain to what degree the value of wine exports to the usa can be sustained into the future. how other growing mar17state of the international wine market in 2022: new market trends for wines require new strategies kets, such as canada, south korea, australia and russia, will evolve in the future is of interest. in addition, regions that are new to wine are growing strongly in wine imports, although from a small absolute base. new markets and new consumers might require new product styles and packaging, to which existing producers will have to adapt to be successful in the future. it is important for the wine sector to understand regional and generational differences in wine preferences and how they might evolve in the future. will young consumers and consumers in new markets evolve and change their preferences towards premium wines or will the current trend of light and fresh wines increase and persist? or will both evolve in parallel, increasing the current polarisation of the market? new consumers and/ or new markets may very well mean new consumption trends. in fact, new trends in the world wine trade may be responsible for the consistent leading role of sparkling and white wines. 5.4 corporate strategies for a polarised wine demand in the current major wine markets, we see contrary developments of the small but valuable premium wine segment, where prices increase strongly, and the large but cost-aggressive popular wine segment, where volume declines and prices only increase marginally. in a situation of oversupply and changing wine preferences, this puts wine producers under stronger competitive pressure. companies must adapt to this suggested polarisation of wine demand that requires either high-quality products or cost-efficient commercial products. while specialisation can be one adaptation approach, particularly for small and medium-sized family businesses, having a portfolio of products targeted to different segments may be an alternative strategy for large international companies. 5.5 optimal regulation and cost efficiency the suggested polarisation has major implications for wine politics and the framework this sets for quality versus cost efficiency as well as the flexibility with which producers can react to changes in consumer preferences and climate change. future research is required on how producers can remain economically sustainable while producing at competitive costs. this includes long-term strategies for regulating oversupply and quality differentiation adapted to consumer preferences. the mediumand longer-term effects of inflation and a potential longer-term cooling or recovery of the global economy are difficult to foresee currently. what the analysis of recent data clearly shows is that the world of wine is changing. new consumers in new countries and new trends are forcing companies to adapt their structures and follow new strategies to be economically sustainable in the long run. closely following up on such trends and consumers’ preferences will be a key element to succeed. references [1] oemv, “evolution of world wine trade. any lesson? ,” presented at the oiv ecomar working group, dijon, 2023. [2] oemv, “el vino español en el mundo: mercados y retos de las bodegas españolas,” presented at the fenavin, ciudad real, 2023, https://www.oemv. es/. [3] s. loose, “prowein business report 2022 “out of the crisis -the current situation of the international wine sector”,” 2023, doi 10.13140/ rg.2.2.24133.01769. [4] s. loose, “prowein business report 2021 “sustainability”,” 2022, doi: 10.13140/rg.2.2.19255.39840. [5] s. loose and s. nelgen, “2020 prowein business report – the effects of covid-19,” 2021, doi: 10.13140/rg.2.2.13770.59842. [6] eurostat. (2023, annual inflation more than tripled in the eu in 2022. available: https://ec.europa. eu/eurostat/web/products-eurostat-news/w/ddn20230309-2 [7] imf, “international monetary fund – world economic outlook update “ january 2023 2023. [8] eurostat. (2023, 26.04.2023). electricity & gas hit record prices in 2022. available: https://ec.europa. eu/eurostat/web/products-eurostat-news/w/ddn20230426-2 [9] dwi, “german wine institute – wine purchases of german housholds based on nielsen homescan data,” april 2023. [10] s. loose, a. wetzler, a. bennett, and d. emmert. (2023, 16.05.2023). sales revenue and volume analysis based on the geisenheim digital sales analysis of german wine producers. available: https://www. geisenheim-portal.de/wp-content/uploads/2023/05/ geisenheimer_absatzanalyse_stand_2023-05-16. html#1 [11] s. loose, l. strub, and a. kurth, “economic sustainability of wine estates: first insights and a roadmap for future research,” in 12th international conference of the academy of wine business research, dijon, 2022. 18 rafael del rey, simone loose [12] iwsr. (2023, 29.05.2023). how has chinese consumer sentiment shifted since the end of lockdown restrictions in 2022? available: https://www.theiwsr. com/how-has-chinese-consumer-sentiment-shifted-since-the-end-of-lockdown-restrictions/ [13] oiv, “state of the world vine and wine sector,” dijon, 2023. [14] l. lockshin and a. m. corsi, “consumer behaviour for wine 2.0: a review since 2003 and future directions,” wine economics and policy, vol. 1, pp. 2-23, 2012, doi: 10.1016/j.wep.2012.11.003. [15] ciatti, “global market report,” may 2023. [16] s. loose and e. pabst, “state of the german and international wine markets,” german journal of agricultural economics, vol. 69, pp. 130-141, 2020, doi: 10.30430/69.2020.5.130-141. [17] s. loose, “market opportunities for no-low and sparkling wines – special report on prowein business survey 2022,” 2023, doi: 10.13140/rg.2.2.10606.38723. [18] e. pomarici and r. sardone, “a new eu wine policy is coming? the unexpected role of the regulatory measures,” wine economics and policy, 2022. [19] s. loose, “opportunities for alternative packaging – special report on prowein business report 2022,” 01.06.2023. doi: 10.13140/rg.2.2.21659.85280. wine economics and policy volume 12, issue 1 – 2023 firenze university press state of the international wine market in 2022: new market trends for wines require new strategies rafael del rey1, simone loose2,* does anyone read my papers? the gap between academic consumer research and the real (wine) world riccardo vecchio a certification for natural wine? a comparative analysis of consumer drivers in italy and spain eva parga dans1,*, riccardo vecchio2, azzurra annunziata3, pablo alonso gonzález4, raimundo otero enríquez5 structure and development of the czech wine market and foreign wine trade kamila vesela, david křížek*, lucie severova the impact of alternative packaging on the life cycle of wine on tap stefano massaglia1, tibor verduna1, vincenzo varchetta2, filippo brun1, simone blanc1,* the new cap and the challenge of sustainability: a synthetic indicator for the italian wine sector roberta sardone1,*, simonetta de leo1, davide longhitano2, roberto henke1 analysis of the 2007-2008 hérault premiumized grubbing-up campaign: a tool to better understand fischer-boel’s 2008-2011 grubbing-up campaigns and the desire in 2022 to reintroduce locally premiumized grub-ups étienne montaigne1, samson zadmehran2,*, alfredo coelho3, yacine messaoudène4 the impact of fees on customer purchasing behavior and beliefs in winery tasting rooms: a scoping review john c. spence sciencedirect journals & books ! there was a problem providing the content you requested please contact us via our support center for more information and provide the details below. reference number: 780cee00aea61fef ip address: 129.74.145.123 timestamp: access denied you do not have access to www.sciencedirect.com. the site owner may have set restrictions that prevent you from accessing the site. ray id: 780cee00aea61fef timestamp: 2022-12-28 20:08:44 utc your ip address: 129.74.145.123 requested url: www.sciencedirect.com/science/article/pii/s2212977418300139 error reference number: 1020 server id: fl_154f11 user-agent: python-requests/2.28.1 about sciencedirect shopping cart contact and supportterms and conditionsprivacy policy we use cookies to help provide and enhance our service and tailor content and ads. by continuing you agree to the use of cookies. copyright © 2020 elsevier b.v. or its licensors or contributors. sciencedirect ® is a registered trademark of elsevier b.v. sciencedirect journals & books ! there was a problem providing the content you requested please contact us via our support center for more information and provide the details below. reference number: 780cee0adb8e209d ip address: 129.74.145.123 timestamp: access denied you do not have access to www.sciencedirect.com. the site owner may have set restrictions that prevent you from accessing the site. ray id: 780cee0adb8e209d timestamp: 2022-12-28 20:08:46 utc your ip address: 129.74.145.123 requested url: www.sciencedirect.com/science/article/pii/s221297741830022x error reference number: 1020 server id: fl_154f18 user-agent: python-requests/2.28.1 about sciencedirect shopping cart contact and supportterms and conditionsprivacy policy we use cookies to help provide and enhance our service and tailor content and ads. by continuing you agree to the use of cookies. copyright © 2020 elsevier b.v. or its licensors or contributors. sciencedirect ® is a registered trademark of elsevier b.v. sciencedirect journals & books ! there was a problem providing the content you requested please contact us via our support center for more information and provide the details below. reference number: 780cee0a59f320e5 ip address: 129.74.145.123 timestamp: access denied you do not have access to www.sciencedirect.com. the site owner may have set restrictions that prevent you from accessing the site. ray id: 780cee0a59f320e5 timestamp: 2022-12-28 20:08:46 utc your ip address: 129.74.145.123 requested url: www.sciencedirect.com/science/article/pii/s2212977418300632 error reference number: 1020 server id: fl_154f21 user-agent: python-requests/2.28.1 about sciencedirect shopping cart contact and supportterms and conditionsprivacy policy we use cookies to help provide and enhance our service and tailor content and ads. by continuing you agree to the use of cookies. copyright © 2020 elsevier b.v. or its licensors or contributors. sciencedirect ® is a registered trademark of elsevier b.v. sciencedirect journals & books ! there was a problem providing the content you requested please contact us via our support center for more information and provide the details below. reference number: 780cee014fe220e5 ip address: 129.74.145.123 timestamp: access denied you do not have access to www.sciencedirect.com. the site owner may have set restrictions that prevent you from accessing the site. ray id: 780cee014fe220e5 timestamp: 2022-12-28 20:08:45 utc your ip address: 129.74.145.123 requested url: www.sciencedirect.com/science/article/pii/s2212977418300267 error reference number: 1020 server id: fl_154f21 user-agent: python-requests/2.28.1 about sciencedirect shopping cart contact and supportterms and conditionsprivacy policy we use cookies to help provide and enhance our service and tailor content and ads. by continuing you agree to the use of cookies. copyright © 2020 elsevier b.v. or its licensors or contributors. sciencedirect ® is a registered trademark of elsevier b.v. sciencedirect journals & books ! there was a problem providing the content you requested please contact us via our support center for more information and provide the details below. reference number: 780cee022f0720cd ip address: 129.74.145.123 timestamp: access denied you do not have access to www.sciencedirect.com. the site owner may have set restrictions that prevent you from accessing the site. ray id: 780cee022f0720cd timestamp: 2022-12-28 20:08:45 utc your ip address: 129.74.145.123 requested url: www.sciencedirect.com/science/article/pii/s2212977418300474 error reference number: 1020 server id: fl_154f20 user-agent: python-requests/2.28.1 about sciencedirect shopping cart contact and supportterms and conditionsprivacy policy we use cookies to help provide and enhance our service and tailor content and ads. by continuing you agree to the use of cookies. copyright © 2020 elsevier b.v. or its licensors or contributors. sciencedirect ® is a registered trademark of elsevier b.v. wine economics and policy 9(1): 31-42, 2020 firenze university press www.fupress.com/wepwine economics and policy issn 2212-9774 (online) | doi: 10.36253/web-7851 citation: g. pappalardo, g. chinnici, r. selvaggi, b. pecorino (2020) assessing the effects of the environment on consumers’ evaluations for wine. wine economics and policy 9(1): 31-42. doi: 10.36253/web-7851 copyright: © 2020 g. pappalardo, g. chinnici, r. selvaggi, b. pecorino. this is an open access, peer-reviewed article published by firenze university press (http://www.fupress.com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information files. competing interests: the author(s) declare(s) no conflict of interest. original research article assessing the effects of the environment on consumers’ evaluations for wine gioacchino pappalardo, gaetano chinnici*, roberta selvaggi, biagio pecorino department of agriculture, food and environment (di3a), university of catania, via santa sofia 98-100, 95123 catania, italy. *corresponding author e-mail: gioacchino.pappalardo@unict.it, chinnici@unict.it, roberta.selvaggi@unict.it, pecorino@unict.it abstract. in the wine sector, experiential marketing is becoming increasingly important since the success of a wine hinges on “experiential” attributes that include hedonic and symbolic values associated with emotions. an aspect not yet fully explored in the scientific literature concerns the extent to which emotions aroused by the environment where wine is consumed are able to influence consumers’ evaluation of wine. to this end, we conducted an economic experiment in italy in the territory of mt etna, sicily and through a non-hypothetical experimental auction we assessed the effects of 10 emotions related to the environment of mt etna on consumers’ willingness to pay (wtp) for etna wine. the results of this study show that the values of consumers’ wtp for wine are affected by emotions aroused by the experiential environment of mt etna. keywords: wine, experiential consumption, experimental auction. 1. introduction and purpose of the study recently, companies operating in the agro-food industry have adopted business models related to environmental, economic and social sustainability (schimmenti et al., 2016; galati et al., 2019a). the wine industry has implemented initiatives aimed at both sustainability and changes in consumer behaviour, as purchasing decisions are increasingly influenced by environmental and social aspects, and at identifying web-marketing behavioural models (galati et al., 2017; iaia et al., 2017; capitello et al., 2019). consumers’ willingness to pay for wine has increased for products that offer greater sustainability guarantees (di vita et al., 2019; galati et al., 2019a). until recently, scientific literature has focused its attention on the main factors influencing the behaviour of wine consumers. reference literature is quite extensive and has focused on the consumer’s willingness to pay more for wines with particular characteristics of healthiness and environmental sustainability. consumer interest in both the quality and healthiness of the wines as well as the social and environmental impact of their consumption, has given rise to increased attention to the information displayed on the label 32 g. pappalardo, g. chinnici, r. selvaggi, b. pecorino as a tool to reduce the risk associated with wine purchasing (galati et al., 2019b). in this context, marketing strategies used in the wine sector by businesses are diversified by selling experiences, feelings and values that involve consumers on a personal level (goode et al, 2010; santini et al, 2013). from the perspective of ‘experiential marketing’ (pine and gilmore, 1999; schmitt, 2010), these new strategies aim to satisfy a new demand from wine consumers towards intangible services related to tradition and the environment where the wine is produced and consumed (pomarici et al, 2017). in the wine sector, experiential marketing is becoming increasingly important since the success of a wine hinges on ‘experiential’ features that include the hedonistic and symbolic values associated with emotions (santini et al, 2011; alebaki et al., 2015). emotions play an important role in many aspects of food consumption and have been widely analysed in scientific literature (kotler, 1973; mehrabian and russell, 1974). emotions, broadly defined as a complex state of feelings that translate into physical and psychological changes that can influence thinking and behavior (spinelli, 2017), are important for marketing organizations as they help them understand consumer behaviour and have some control over post-purchase behaviour. in the wine sector, an interesting aspect regards the effects of emotions related to the environment wine is consumed in as evaluated by consumers. these ‘environmental’ emotions are important factors when experiential marketing is put into practice and can be expected to influence consumers’ decision-making (platania et al., 2016a). stimuli from the place of consumption can influence the sensory and psychological markers associated with wine consumption (orth and bourrain, 2005). the characteristics of wine destinations also affect consumers’ intentions to revisit wine regions (bonn et al., 2016). motivations as a basis for segmenting tourism markets have provided information on why consumers desire to visit wine destinations and regions (bruwer et al., 2018). one aspect that has not been fully explored yet in scientific literature concerns the extent to which the emotions aroused by the environment where wine is consumed are able to influence consumers’ evaluation of it. to our knowledge, no study has examined whether the emotional state aroused by the environment consumers evaluate food in persists after the consumer has experienced visiting a place capable of arousing such emotions. this is an important topic for both companies and marketers since marketing practices related to the environment can lead to an increase in consumer demand for wine. for this purpose, in this study we assess whether the emotions related to the environment wine is consumed in affects consumers’ wtp for wine. in the wine sector, previous studies have shown that the environment wine consumed in can stimulate behavioural responses among consumers that can lead to wine purchases (platania et al., 2016a, sturiale and scuderi, 2017). environmental attributes that influence the consumption of wine can be related to the place of consumption (orth and bourrain, 2005; platania et al., 2016b), region of origin (lange et al., 2002; alant and bruwer, 2004; yuan et al., 2005; vecchio, 2013) and cultural attractions of the production site which are capable of developing emotions in highly motivated consumers who come from places far from the production area (getz and brown, 2006). understanding how the environment affects wine evaluation and consumption remains an unresolved issue. specifically, one interesting issue that has not been fully explored yet which we analysed in our study relates to the emotions aroused by attractive environments (voss et al., 2008; candi et al., 2013; creusen et al., 2018) which can enhance the hedonic and symbolic value of a product (chitturi et al., 2008; teng et al., 2007; reimann et al., 2010; candi et al., 2017). with the purpose of observing whether the emotions related to attractive environments affect consumers’ wine evaluation, we conducted a non-hypothetical experimental auction in italy to estimate the experiential effects of the emotions on consumers’ wtp for wine. the experiment involved recruiting people to blindly evaluate three types of wine in conditions of emotions aroused by the environment of mt. etna in sicily, the largest volcano in europe and one of the most wellknown wine areas in italy. 2. background to mt etna the environment of the volcano can arouse a wide range of emotions in visitors mostly because the semilunar like landscape creates attraction mixed with fear. numerous studies have proven the existence of emotions aroused by potentially hostile yet at the same time attractive environments such as volcanoes (zube et al, 1975; kaplan, 1987; purcell et al, 2001; böhm, 2003; bird et al. 2011; ruiz and hernández, 2014). etna is europe’s largest volcano attracting millions of visitors from all over the world every year. furthermore, in june 2013, etna was inscribed in unesco’s world heritage list. over the course of centuries, a rich agriculture has developed around the volcano mostly made up of fruit, 33assessing the effects of the environment on consumers’ evaluations for wine olive and vine production. most of these crops can boast of eu recognition as ‘protected designation of origin’ (pdo). man’s presence has left a profound imprint on etna’s agricultural landscape through the building of terracettes, barns, mill, wineries and other architectural structures. as a consequence, mount etna is a force of nature potentially capable of augmenting the experiential component of the environment and context consumers evaluate food products in and in particular wine. 3. methodology 3.1 experimental design to evaluate the effects of the emotions on consumers’ evaluation of wine, we conducted an economic experiment in the mt. etna area (italy). a sample of 140 students participated in a non-hypothetical experimental auction which is a well-established method of assessing the wtp for food products (lusk and shogren, 2007; pappalardo and lusk, 2016; wongprawmas et al. 2016; pappalardo et al. 2017; pappalardo et al., 2018; selvaggi et al., 2018a and 20181b). this type of experiment offers the advantage of providing an incentive for participants to truly reveal their preferences. indeed, an experimental auction simulates a real market where consumers can make the decision to buy or not to buy a product through a real money transaction providing researchers with an accurate estimate of product values (lusk and shogren, 2007). moreover, each participant will be provided with a gadget at the end of the auction protocol. few studies have used non-hypothetical methods to estimate the effects of intangible factors in consumers’ wtp for wine (bradley et al., 2015). in this study, we used the random nth price auction method (shogren et al., 2001; list, 2003) since this method is incentive-compatible and widely used in many empirical evaluation studies (huffman et al., 2003; capra et al., 2010; chern et al., 2013). participants do not know the winning position until all the bids have been submitted, thus removing the competitive biases that might exist in other experimental auction mechanisms, such as the secondprice auction (shogren et al., 2001). the novelty of this paper is combining a non-hypothetical evaluation method with an evaluation of emotions to identify a consumer’s wtp for wine. in the first step of the study, we recruited people for the experimental auction, and at the same time, people were asked questions on the emotions aroused by mt etna. we conducted our experiment in sicily, italy, in may 2017. a total of 140 people were recruited from a pool of students attending the 3rd year of the degree in food science and technology at the university of catania (italy). students were recruited by using a recruitment questionnaire in which they declared to be wine consumers and to have the minimum age (18 years old) required by the italian legislation authorizing the consumption of alcohol (law 30 march 2001 no. 125 “framework law on alcohol and related problems”). in the second step of the study, wtp for wine was elicited through a non-hypothetical nth price auction method. participants were randomly assigned to two groups: ‘control’ and ‘treated’ (table 1). each participant in the control group took part in three treatments called treatment control 1 (tc1), treatment control 2 (tc2), and treatment control 3 (tc3). similarly, each participant in the treated group took part in three treatments called treatment treated 1 (tt1), treatment treated 2 (tt2), and treatment treated 3 (tt3). the three treatments within each group (six treatments in total) were carried out at intervals of one week during may 20171. 1 unfortunately, it was not possible at the end of the experiment to have equal numbers in the control and treated groups. of the 140 participants initially recruited and who participated in the first treatment (70 in the treatment tc1 and 70 in the treatment tt1), only 118 (66 in the control group and 52 in the treated group) participated in all three treatments. the study only considered data concerning the participants in all three treatments. table 1. experimental treatments. design groups treatment denomination experiential consumption location of treatment wine tasting rounds in the auction pre-test control group tc1 no sensory lab blind 5 treated group tt1 no sensory lab blind 5 post-test control group tc2 no sensory lab blind 5 treated group tt2 yes winery blind 5 follow-up test control group tc3 no sensory lab blind 5 treated group tt3 no sensory lab blind 5 34 g. pappalardo, g. chinnici, r. selvaggi, b. pecorino the three treatments for the participants in the control group (tc1, tc2, and tc3) were carried out in a sensory lab, while participants in the treated group received the first treatment (tt1) in the sensory lab, the second treatment (tt2) in a winery on mt. etna, and the third treatment (tt3) in the same sensory lab. finally, we implemented a mixed design divided into three phases: ‘pre-test’, ‘post-test’ and ‘follow-up test’ where the repeated criterion within the two groups was the wtp for one 0.75litre bottle of wine. in our experiment, the experiential environment was represented by a winery located on mt. etna. participants were informed in advance that they would take part in three treatments as part of an economic experiment using experimental auctions. participants in the control group were informed that they would undergo all three treatments in a sensory lab. those participants in the treated group were informed that they would undergo the first and third treatments in the sensory lab, while the second treatment would be held at a winery located on mt. etna. more specifically, participants in the treated group carried out the second treatment (tt2) in a winery on etna which produces etna pdo (protected designation of origin) wine. as soon as the participants arrived at the winery and before the auction started, they were invited to take a guided tour of the winery. the guided tour not only allowed participants to observe the premises of the winery but also to appreciate the architectural, and emotional journey catalysed by the majesty and elegance of the winery as well as by the links between it and mt. etna. after the 90-minute tour, participants were taken to the elegant premises of the barrel cellar where the experimental auction took place. participants were also informed that before the experimental auctions both in the sensory lab and in the winery, they would taste three types of red etna wine. the wines used in our survey were 1) etna rosso “femina” pdo, 2) etna rosso “sensi” pdo, and 3) etna rosso “vulcano” pdo, and they were produced by the winery that students toured. the wines were similar in terms of organoleptic characteristics and production year but were only distinguishable nominally as ‘a’, ‘b’ and ‘c’. we used blind tastings to ensure impartiality and to avoid product-related experiential effects, that is, potential bias effects in participants’ judgments due to product-related attributes. three types of etna wine were used to test the consistency of the results across different types of wine in the region. participants were not informed that the wines they tasted originated from mt. etna. 3.2 list of emotions the survey investigated whether the emotional factors related to mt etna affected consumers’ willingness to pay (wtp) for wine. by reviewing past literature (böhm, 2003; bird et al. 2011; ruiz and hernández, 2014), 10 emotions related to volcano environments were identified (table 2) and for each emotion the participants in our survey were asked to classify them on a scale of 1 to 5, where 1 is equivalent to ‘no important’ and 5 ‘very important’. participants were asked to evaluate their emotional reactions immediately after each treatment to assess wtp. 3.3 auction procedure in all the treatments, the participants took part in a random nth price auction with five rounds of bidding in each treatment according to the procedure described below. step 1: upon arrival at the venue, after signing the consent form, each bidder received an id and was invited to sit in a specific seat. we then proceeded to blind tasting a 30 ml sample of each of the three wines. step 2: at the end of the tasting, the coordinator clearly explained in detail the random nth price auction mechanism to participants. step 3: to ensure participants understood how the auction mechanism worked, we conducted a practice table 2. list of emotions aroused when visiting or thinking about mt etna. emotions meaning tranquil the state of being calm and peaceful without noise, violence, worry, etc. ecstatic a state of being extremely happy and feeling or showing ecstasy. inner peace a state of being mentally and spiritually at peace. being ‘at peace’ is to be healthy and the opposite of being stressed or anxious. nostalgia the feeling of pleasure and also slight sadness when you think about things that happened in the past. excited the state of being or feeling very happy and enthusiastic. frightened the feeling or condition of being afraid. fascinated a state of being extremely interested by something. enchanted being affected by magic or seeming to be affected by magic. amazed a state of being extremely surprised by something. surprised the state of being or showing surprise because something has happened that you did not expect. 35assessing the effects of the environment on consumers’ evaluations for wine session with three different 1 kg generic pasta packages. this auction was only a trial session to familiarize the participants with the auction mechanism, and at the end of this, nothing was bought. since the real auction was for three wines in five bidding rounds, we conducted the trial auction with three different types of pasta and with five bidding rounds. step 4: after completing the trial auctions, the real wine auction began, and each participant simultaneously submitted bids for each of the three wines. the bids were for a 0.75l bottle of wine ‘a’, ‘b’ or ‘c’. to avoid any issues of bias or affiliation, participants did not receive any kind of feedback between rounds, such as who was the winner or if the winning bid represented the market price (corrigan et al., 2012). step 5: at the end of each round, bids were collected and arranged from highest to lowest. step 6: at the end of the fifth bidding round, one of the three wines was randomly drawn and chosen as the bidding wine. step 7: the bidding round was randomly drawn, which the price for the bidding wine would be chosen from. step 8: the random nth price (market price), whose value was between 2 and n, where n was the number of bidders in the auction’s session (ranging in our survey from 7 to 8), was randomly drawn. step 9: the random nth price was announced; the bidders who submitted a bid higher than the nth price won the auction. winning bidders paid the nth price to buy the randomly chosen bottle in the randomly chosen round. step 10: all bidders who had bid a price equal to or lower than the market price did not get anything. step 11: all participants filled out a follow-up questionnaire containing a series of questions related to emotions aroused by mt. etna and its demographics. each participant was given €20.00 at the end of all three treatments for their participation. 4. results 4.1 descriptive analysis summary statistics of the participants are shown in table 3. the average age of the subjects was 21.71 years in the control group and 22.27 years in the treated group. most of the subjects were female. the yearly average household income ranged from €20,000 to €29,999. most of the participants (91%) indicated that they had already been to mt. etna. as shown in the t-test p-value column, no significant differences were found between the control and treated groups regarding the variables used in our analysis except for age. table 4 reports the average bids for the three wines across the treatments. consumers’ wtp for each wine in the treated group was higher than the wtp in the control group both in the postand follow-up tests. on average, for wine a, subjects in tt2 were willing to pay €2.98 for this bottle of wine in the experiential environment (winery) while those in tc2 were willing to pay €1.90 in the non-experiential environment (sensory lab). these results signify the effect mt. etna has on consumtable 3. participants’ socioeconomic characteristics. variables categories control group (66 units) treated group (52 units) p-value age years mean % mean % 21.71 22.27 0.0868 * gender - male 19.7% 24.5% 0.2592 female 80.3% 75.5% income less than €20,000 37.9% 32.7% 0.2855 from €20,000 to €29,999 31.8% 26.5% from €30,000 to €39,999 18.2% 16.3% from €40,000 to 49,999 4.5% 8.2% from €50,000 to 59,999 3.0% 8.2% more than €60,000 4.5% 8.2% visits to mt etna yes 90.9% 91.8% 0.7887 no   9.1%   8.2% 36 g. pappalardo, g. chinnici, r. selvaggi, b. pecorino ers’ evaluation of wine. interestingly, wtp in tt3 was higher than wtp in tt1 for all three wines, reflecting the effect of having previously visited the winery. referring to the emotions aroused by mt. etna, the mean values for each emotion at the end of each treatment are shown in table 5 where all the emotions were valued more highly than the mean values on the scale except for ‘frightened’ and ‘nostalgia’. 4.2 effects of the emotions on consumers’ wtp for wine to estimate the effects of the emotions aroused by mt. etna on consumers’ wtp for wine, we developed a regression model in which we pooled the data from all six treatments carried out by participants in the control and treated groups. a random effects regression model was then estimated with the time dimension being the total number of rounds performed by each participant in the three treatments, i.e., 15. the regression model is specified as bidij = α0 + β1 tdum + β2 a2 × tdum + β3 a3 × tdum + β4tranquil + β5ecstatic + β6 inner peace + β7 nostalgia + β8 excited + β9 frightened + β10 fascinated + β11 enchanted + β12 amazed + β13 surprised + β14 xj + uj + εij where bidij is individual i’s wtp for each wine (a, b, or c) in round j in both the control and treated groups; a2 is a binary variable = 1 in treatments tc2 and tt2 and 0 otherwise; similarly, a3 is a binary variable = 1 in treatments tc3 and tt3 and 0 otherwise; tdum is a binary variable = 1 if participants belong to the treated group and 0 otherwise. consequently, a2 × tdum is an interaction term between a2 and tdum, while a3 × tdum is an interaction term between a3 and tdum. tranquil, ecstatic, inner peace, nostalgia, excited, frightened, fascinated, enchanted, amazed, surprised are the emotions aroused by mt etna as described in table 2. xi denotes a vector of control variables that include general sociodemographic factors, xi is random effects which controls for hidden individual characteristics; and εij is the i.i.d. component. overall, the results of the random effects model (table 6) show that participants wtp for wine is influenced by the interactive effect between treatment and membership of the treated group (a2 × tdum and a3 × tdum), by certain emotions which change depending on the wine and by certain socio-demographics of the participants. in particular, the results show that during the second treatment (tc2 and tt2), the treated group participants showed a higher wtp compared to those in the control group. table 4. mean bids of all five rounds across the treatments. treatments wine a wine b wine c mean st. dev. mean st. dev. mean st. dev. tc1 (pre-test) 2.02 2.06 2.09 1.48 2.73 2.90 tt1 (pre-test) 1.85 1.54 2.11 2.02 2.00 1.69 tc2 (post-test) 1.90 1.74 1.71 1.54 1.97 1.97 tt2 (post-test) 2.98 1.78 2.70 2.11 2.92 1.76 tc3 (follow-up) 1.80 1.55 1.69 1.09 1.95 1.62 tt3 (follow-up) 2.38 1.50 2.53 1.71 2.85 1.81 sample size = control group: 66 units; treated group: 52 units. note: tc1: treatment control 1; tc2: treatment control 2; tc3: treatment control 3; tt1: treatment treated 1; tt2: treatment treated 2; tt3: treatment treated 3. table 5. summary statistics of emotions. emotions control group treated group 1st auction mean 2nd auction mean 3rd auction mean 1st auction mean 2nd auction mean 3rd auction mean tranquil 3.77 3.77 3.70 3.69 3.96 3.81 ecstatic 3.03 3.27 3.24 3.31 3.54 3.69 inner peace 4.00 3.89 3.89 3.98 4.02 4.19 nostalgia 2.14 2.14 2.38 2.23 2.52 2.48 excited 3.58 3.65 3.68 3.79 3.83 3.88 frightened 1.83 2.00 1.92 1.87 2.02 1.88 fascinated 4.14 4.09 3.80 4.33 4.23 4.10 enchanted 3.94 3.91 3.88 4.10 4.19 4.15 amazed 3.58 3.73 3.59 3.58 3.71 3.79 surprised 3.05 3.32 3.32 3.25 3.50 3.65 37assessing the effects of the environment on consumers’ evaluations for wine the same result was observed during the third treatment (tc3 and tt3). these results would seem to indicate that the experiential effect of visiting the winery during treatment tt2 lasts over time and effects the subsequent treatment. table 6 also shows the parameters estimated for the emotions which influence wtp the most significant of which vary between wines and the relative coefficients showing both positive and negative signs. the positive parameters indicate there is a positive correlation between emotion and wtp. for example, with wine a, if the value of ‘excited’ increases by one point then wtp increases marginally by €0.22. or with wine c, if the value of ‘surprised’ increases by one point then wtp increases by €0.24. instead, some statistically significant emotions have negative coefficients. for example, wine a’s ‘nostalgia’ is negative representing a negative correlation with wtp. in marginal terms, this means that if ‘nostalgia’ increases by one point then wtp for wine a drops by €0.11. negative or positive correlations between emotions and wtp may be linked to the emotions aroused by the experiential environment used in our experiment (winery) which might have positively or negatively influenced wtp values. however, it would be better to confirm such conclusions with further research. 5. discussion our results confirm those obtained by previous research (kotler, 1973; orth and bourrain, 2005; alant and bruwer, 2004; yuan et al 2005; getz and brown, 2006; galloway et al., 2008; jang and namkung, 2009; muruganantham and bhakat, 2013; menini 2017) which are that experiential marketing strategies influence the willingness to pay for wine guaranteeing an increase in profits for wineries. nevertheless, all the previous research analysed how to identify and measure emotions in the consumption process (richins, 1997; king and meiselman, 2010; kergoat et al, 2010; prescott, 2017; spinelli, 2017), whereas the methodological approach in this study measured the effects of emotions directly aroused by the environment of the consumption on the willingness to pay for wine. in particular, this study observed that the emotions aroused by mt. etna and referred to by experiential techniques can influence consumers’ wtp. specifically, these results reflect the relevant role played by environmental features not directly pertaining to the wine products. it seems remarkable that in contrast to previous studies (creusen et al., 2018), our results suggest that the emotions aroused by the environment wine is consumed in, such as a winery recalling a high-value environment like mt. etna, significantly affects consumers’ wtp even in table 6. random effects regression results. variables wine a wine b wine c coefficient p-value coefficient p-value coefficient p-value treated (tdum) -0.355 0.152 -0.048 0.851 -0.891 0.003 *** interaction (a2 x tdum) 1.316 0.000 *** 1.056 0.000 *** 1.780 0.000 *** interaction (a3 x tdum) 0.763 0.000 *** 0.902 0.000 *** 1.625 0.000 *** tranquil -0.052 0.335 -0.021 0.663 0.128 0.046 ** ecstatic 0.047 0.320 -0.018 0.681 0.020 0.725 inner peace 0.054 0.423 -0.112 0.074 * 0.055 0.490 nostalgia -0.111 0.048 ** -0.118 0.024 ** -0.334 0.000 *** excited 0.222 0.001 *** 0.157 0.011 *** 0.249 0.002 *** frightened -0.001 0.984 0.027 0.623 0.005 0.938 fascinated -0.061 0.322 0.099 0.076 ** 0.061 0.393 enchanted -0.167 0.026 ** -0.189 0.006 *** -0.263 0.003 *** amazed -0.158 0.016 ** -0.217 0.000 *** -0.170 0.028 ** surprised 0.159 0.009 *** 0.160 0.005 *** 0.244 0.001 *** gender -0.958 0.000 *** -0.812 0.004 -0.944 0.003 *** age 0.090 0.133 0.016 0.800 0.067 0.364 visits to mt etna -0.213 0.673 -0.636 0.234 -0.205 0.739 income -.0520 0.400 -0.014 0.824 -0.062 0.409 cons 1.531 0.292 3.603 0.018 ** 2.196 0.214 *, ** and *** denote significance at 10%, 5% and 1% levels, respectively. 38 g. pappalardo, g. chinnici, r. selvaggi, b. pecorino the absence of product-related attributes such as brand or product packaging. on this latter issue, this study highlighted a twofold aspect yet to be explored in current scientific literature. above all, the emotions explicitly correlated to an environment with strong cultural and naturalistic ties are able to influence consumers’ wtp for wine. secondly, the emotions aroused by experiential marketing strategies which refer to places with strong cultural and naturalistic ties last over time as shown by the wtp values obtained in the follow-up test. in particular, this study has highlighted that certain emotions aroused by mt. etna significantly influence consumer wtp to buy wine produced on the volcano. those experiential marketing strategies, which refer to the mt. etna environment, produce an increase in wtp for the wine compared to the wtp of the same wine obtained in a non-experiential context (sensory laboratory). this is potentially important for those in the wine sector. the experiential marketing strategies, which refer directly to the emotions aroused by places with strong cultural and naturalistic ties, could provide a level of competitivity for wine sector players which others, not having such high levels of cultural and environmental factors, cannot compete with. moreover, the competitive advantage could be amplified by effects deriving from experiential consumption which lasts over time. 6. conclusion this research focused on assessing the effect of emotions directly related with a high-value environment where consumers evaluate and consume wine. in our study, results suggest that emotions aroused by visiting a winery recalling the environment of mt. etna was positively related with wine evaluation. the results have shown that the values of consumers’ wtp for wine seem to be coherent with the goal of this study regarding the effect of emotions aroused by the experiential environment of mt etna on consumers’ wtp for wine. in fact, the wtp in the treated group was higher than that in the control group for all the wines. moreover, the results of the random effects model showed that participants’ wtp for wine is affected by different emotions aroused by mt. etna. the significant emotions varied between wines and the relative coefficients showed both positive and negative signs. the positive coefficients indicate that some emotions aroused by mt etna such as ‘excited’ positively affect participants’ wtp for wine, and conversely some emotions such as ‘nostalgia’ or ‘enchanted’ negatively correlate with wtp. our findings suggest that to implement effective experiential marketing practices related to the environment, an important role is played by those ‘emotions’ that influence consumer buying behaviour. this aspect is potentially significant for the players involved in the wine sector such as cellar managers or wine producers since the emotions directly aroused by the environment where wine is consumed can affect consumers’ wtp for wine. ultimately, from the perspective of ‘experiential marketing’, the results generally suggest that emotions related to the environment could be a tool that wine producers and marketers could use to differentiate their products and increase consumer demand for their products. results of our survey could have relevant implications for the stakeholders involved in the wine sector. for cellar managers, experiential marketing practices explicitly related to the emotions aroused by high-value environments wine is consumed in could increase consumers’ evaluation of the wine products. for wine producers, environment and related emotions can lead to an increase in wine demand that could enhance winery income. generally, the results suggest that the environment could be a tool that wine producers and marketers could use to differentiate their products and increase consumers’ demand for their products. this study recommends that experiential marketing practices be pursued as a product differentiation tool, especially for wineries and vineyards which are located in areas with high environmental relevance. this strategy can achieve a greater acceptance from consumers and thus a competitive advantage, especially among consumers who are more aware of environmental issues. experiential marketing strategies related to the emotions aroused by the environment wine is consumed in should not be overlooked. therefore, the industry could exploit more effectively environmental values such as quality labels of the wine produced, compared to what has been done so far in order to enhance the organoleptic qualities and designations of the origin of the wine. nevertheless, it is important to remember the limitations to this study. above all, since this study was only limited to the case of mt. etna, it would be necessary for future research to verify such results in other geographical contexts with strong environmental ties. another limitation was the place of origin of the participants in the sample which was formed only by sicilian students who are already likely to be familiar with mt etna and its geographical characteristics. moreover, the study should be performed on a much wider sample of participants not just undergraduates. 39assessing the effects of the environment on consumers’ evaluations for wine nomenclature symbol description eu european union id identification pdo protected designation of origin random nth-price auction type of experimental auction tc treatment control tt treatment treated unesco united nations educational, scientific and cultural organization wtp willingness to pay acknowledgements a special thank goes to prof. rodolfo m. nayga jr. for his support in the design of the experiment treatments and for the suggestions and support in the data analysis. this research was conducted within the framework of the research projects “agronomic innovations and economic 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(eds.), landscape assessment: values, perceptions and resources, stroudsburg, pa, dowden, hutchinson and ross, pp. 151–167. wine economics and policy volume 9, issue 1 2020 firenze university press creating opportunity from crisis, progress from research: redefining the wine sector peter hayes am1 us wine industry preparedness for unforeseen crises and disasters: an empirical test armand gilinsky, jr.1, astha sen2, judith ford3, sergio canavati de la torre4, sandra k. newton5,* a cross-cultural comparison of wine consumption and purchasing behaviour in germany and hungary gergely szolnoki1,*, gedeon totth2 assessing the effects of the environment on consumers’ evaluations for wine gioacchino pappalardo, gaetano chinnici*, roberta selvaggi, biagio pecorino the speed of the internationalisation process and the institutional networks of family smes in the doc rioja wine industry marta fernández-olmos1,*, giulio malorgio2 the impact of changes in regulatory and market environment on sustainability of wine producers: a structural equation model chinedu obi1,2,*, daniele vergamini1, fabio bartolini1, gianluca brunori1 emerging consumer preference for wine attributes in a european transition country – the case of kosovo edvin zhllima1, drini imami1,*, njazi bytyqi2, maurizio canavari3, elvina merkaj4, catherine chan5 price determinants of sparkling wine in poland: does reputation really matter? authors: samuele trestini1,*, alice stiletto1, stefanella stranieri2 wine economics and policy 9(2): 23-35, 2020 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/web-7665 wine economics and policy citation: eduardo haddad, patricio aroca, pilar jano, ademir rocha, bruno pimenta (2020) a bad year? climate variability and the wine industry in chile. wine economics and policy 9(2): 23-35. doi: 10.36253/web-7665 copyright: © 2020 eduardo haddad, patricio aroca, pilar jano, ademir rocha, bruno pimenta. this is an open access, peer-reviewed article published by firenze university press (http:// www.fupress.com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information files. competing interests: the author(s) declare(s) no conflict of interest. a bad year? climate variability and the wine industry in chile eduardo haddad1,*, patricio aroca2, pilar jano3, ademir rocha4, bruno pimenta5 1 department of economics, university of são paulo (usp), são paulo, brazil. email: ehaddad@usp.br 2 business school, adolfo ibáñez university (uai), viña del mar, chile. email: patricio. aroca@uai.cl 3 business school, adolfo ibáñez university (uai), viña del mar, chile. email: pilar. jano@uai.cl 4 department of economics, university of são paulo (usp), são paulo, brazil. email: ademir.rocha@usp.br 5 department of economics, university of são paulo (usp), são paulo, brazil. email: brunoproencapp@usp.br *corresponding author abstract. short-term climate conditions may affect crop yields and vintage quality and, as a consequence, wine prices and vineyards’ earnings. in this paper, we use a computable general equilibrium (cge) model for chile, which incorporates very detailed information about the value chain of the wine sector in the country. using information for the 2015-2016 harvest, we calibrate climate variability shocks associated with a “bad year” for the wine industry in chile, when premature rains occurred in important wine regions, reducing the area harvested and leading to wines with less concentrated flavors, particularly for reds. we model the climate shocks as a productivity change in the grape-producing sector (quantity effect). moreover, we model quality effects as a shift in the foreign demand curve for chilean wine. given the specific economic environment in the model and the proposed simulation, it is possible to note the reduction of chilean real gdp by about 0.067%. by decomposing this result, we verify that the quality effect has a slightly greater weight compared to the quantity effect. jel c68, q13, q54. keywords: climate variability, viticulture, wine, computable general equilibrium, chile. 1. introduction viticulture is particularly sensitive to climatic conditions. climate is a factor that influences both the suitability of a region to ripen a specific variety of grapes and the resulting wine style (jones, 2006). short-term climate conditions may affect crop yields and vintage quality. as a consequence, 24 eduardo haddad, patricio aroca, pilar jano, ademir rocha, bruno pimenta the latter conditions affect wine prices (oczkowski, 2016) and vineyards’ earnings (ashenfelter and storchmann, 2010), also compromising the reputation of a wine region. climatic conditions and their effects on the quantity (yields) and quality of grapes produced will likely have important economic implications to the wine industry (jones et al., 2005; webb et al., 2008; hannah et al., 2013; mozell and thach, 2014; van leeuwen and darriet, 2016; ashenfelter and storchmann, 2016). while average climate conditions determine wine styles and varieties planted across the globe, different studies have shown that weather (short-term climatic conditions) define the characteristics of the vintages in the wine regions, with implications for wine prices and vineyard profitability (jones and storchmann, 2001; schamel and anderson, 2003; haeger and storchmann, 2006; ramirez, 2008; webb et al., 2008; ashenfelter, 2010; ashenfelter and storchmann, 2010; nunes and loureiro, 2016; oczkowski, 2016). climate variability is one of the main environmental causes of losses to the agricultural sector, with lower crop yields or failure due mainly to drought, frost, hail, severe storms, and floods. some of such driving climatic factors on the yield of wine grapes include temperature, solar radiation, and co2 concentration (bindi et al., 1996). weather conditions that directly affect the cultivated and harvested area of wine grapes also affect the quality of the associated wine vintages (nemani et al., 2001; jones, 2004; ramirez, 2008; ashenfelter, 2010; oczkowski, 2016). from a wider perspective, climate is part of the notion of “terroir”, with which viticulture and the production of fine wines have a very close association (jones et al., 2005). this concept involves matching wine grape varieties to particular combinations of climate, landscape and soils, within specific cultural contexts, to produce unique wines of particular styles (seguin, 1986). on the one hand, climate change will alter these terroirs and potentially affect the quality of wine grapes produced (de cortazar and seguin, 2004) and, on the other hand, wine production and quality are chiefly influenced by site-specific factors, husbandry decisions, and shortterm climate variability (jones and hellman, 2003). the aforementioned empirical literature on the impact of climate on yield variability and quality of wine grape relies mainly on partial equilibrium reduced-form econometric estimations. there is a plethora of studies that successfully isolate the effects of climate events on a variety of outcomes related to the wine sector in different parts of the world. however, there are not many studies exploring the systemic economic impacts of climate shocks on the grape and the wine sectors. this wider view is essential in a context of an integrated approach of the production value chain of the wine sector. backward and forward linkages affect, to different extents, local and external demand by the various economic agents. it is not different for the wine industry, in which sectoral linkages play an important role (gillespie and clarke, 2015). in this paper, we will examine the wider impacts of the unfavorable weather conditions that prevailed in the 2015-2016 season in chile, reducing the volume and the quality of the wine grapes. in what follows, we discuss in section 2 the climatic conditions in chile associated with higher quality vintages. as shown in ashenfelter (2010) for bordeaux wines, weather conditions are a good predictor of a “good year”, explaining quality and prices of mature wines of a vintage. we then highlight in section 3 some of the structural features of the chilean wine-industry value chain embedded in our database. section 4 describes our empirical strategy, and section 5 discusses the main results. concluding remarks follow. 2. what makes a “good year” in chile? geographically, chile is composed of fifteen regions. eighty nine percent of wine grape production is concentrated in the central zone of the country, from the v region of valparaíso to the vii region of maule (sag, 2017). this area has a mediterranean climate with welldefined seasons. this climate is characterized by a longdry season with an average annual temperature of 14-15 degrees celsius and an average accumulated rainfall of 400mm per year, ranging from 260 to 700mm. temperatures and rainfall vary from the coast to the andes mountains (west to east) and from north to south. temperature decreases from north to south while rainfall increases (ine, 2016; asociación nacional de ingenieros agrónomos enólogos de chile, 2016). a “good vintage year” in chile, assuming it implies high productivity combined with high quality wine grapes, is similar to a good vintage year in places of comparable latitude. wine grapes require hot, dry, rainless summers and cool winters. berry development and ripening require a dry atmosphere, moderate temperatures (15-40 degrees celsius) and plenty of sunshine (patil et al., 1995). among climate variables, air temperature is the most important factor affecting physiological behavior of the grape and chemical changes that occur during formation and maturity (jackson 2000, and carbonneau et al. 2007 cited by montes et al. 2012). the timing for the occurrence of high temperatures is also key as it can cause completely different effects in terms of grape quality and development. according to 25a bad year? climate variability and the wine industry in chile jones et al. (2005), the temperature during the growing season can affect grape quality and viability in several ways. for example, a number of days with temperatures above 10°c can initiate vegetative growth starting the growing season (mullins et al., 1992). also, during flowering and grape development, too high temperatures can cause: premature veraison (color change and beginning of sugar accumulation), high grape mortality, enzyme inactivation, and problems with flavor ripening (mullins et al., 1992). however, during ripening, a high diurnal temperature range leads to synthesis of grape tannins, sugars, and flavors (gladstones, 1992). for the case of chile, there is not much scientific information published as to what good and bad vintage years mean. the closest study is the one by montes et al. (2012), who classify the viticultural potential for high-quality wine production considering the spatial differences across central chile, an area representing around 85% of all viticultural area in the country. this area is characterized by a mediterranean climate with maximum temperatures ranging between 25 and 35 degrees celsius during the growing season (september to march), and a total annual precipitation varying from 300 to 900 mm, concentrated in the cold season (june to august). vineyards are typically irrigated and trained in vertical shoot-positioning system. montes et al. (2012) elaborate different climatic indices, which help describe the main features of chilean climate based on monthly mean data of temperature, rainfall, and pan evaporation over 1990-2005 for 54 climatic stations. they estimate heat accumulation during the growing season, thermal regime during ripening, and the potential water balance at the end of the growth cycle. they find that the spatial differences in climatic potential in chile are best described by heat accumulation and march thermal amplitude (the difference between maximum and minimum temperatures of march). while they determine a wide range of viticultural climatic groups in chile, most of the weather stations (59%) were classified as having temperate warm and warm climates according to a heat accumulation index. these climates are thermally suitable for ripening of the main cultivated varieties in chile, such as cabernet sauvignon or merlot. however, they are detrimental for earliest cultivars, such as sauvignon blanc and chardonnay in zones with high heat accumulation, possibly affecting their aromatic potential. this is consistent with the findings of mills-novoa et al. (2016) who suggest that viticultural suitability in the maipo valley (located in central chile) may be limited in the future for producing high-quality grapes from cooler climate varieties. montes et al. (2012) also find that grape ripening is associated with low minimum night-time temperatures mostly around 8.5 and 10 degrees celsius (consistent feature across all areas studied1); that proximity to the ocean has a strong influence; and that north to south orientation of climatic groups seems more relevant than east to west orientation. finally, they find a negative hydric balance during the warm season. this means there were almost no rainfall events during the growing season and fruit-ripening period, which, on the one hand, can reduce the development of some diseases but, on the other hand, can make the growing season highly dependent on irrigation in central chile. in chile, the harvest period goes from february to may depending on variety and location. rainfall late in these months is detrimental for productivity as it promotes the rise of fungus. in general, cloudy weather, high humidity, low temperatures and rainfall during flowering and berry development are prone to spread diseases (patil et al., 1995). for anecdotal information of good and bad vintage years matching climate characteristics with wine tasting score ratings, wine spectator regional vintage charts provide yearly information that allows vintage comparison (wine spectator, 2020). these charts provide aggregate (average) characteristics of each vintage year and, in general, do not consider specific regions or varieties. 2.1. the 2015-2016 season in chile the national association of oenologists 2016 vintage report classified the 2015-2016 season in chile as complex due to climatic factors that affected wine grape health, ripening delay, and a productivity decrease of 30% on average. el niño phenomenon greatly influenced climatic conditions presenting abnormally low rainfall during the 2015 winter and spring, and very intense rainfall starting on mid-april of 2016, around the middle of the vintage period. this rainfall episode and subsequent rainfall later in april exceeded a normal year and had a detrimental effect over grape health and productivity in chile’s central zone. furthermore, a colder 2015 spring delayed budding, contributing to a ripening delay. these lower temperatures affected grape sugar content making it difficult to reach the 24 degrees brix needed to produce a wine with 13 percent of alcohol by volume (asociación nacional de ingenieros agrónomos enólogos de chile, 2016). the most affected varie1 this spatial consistency is uncommon in other wine-grape producing areas in the world. 26 eduardo haddad, patricio aroca, pilar jano, ademir rocha, bruno pimenta ties were carménère, petit syrah, malbec, cabernet sauvignon, cabernet franc, and merlot. however, for grapes harvested before mid-april (mainly white grapes and some red grapes), acidity and freshness were high, resulting in high quality grapes for varieties that benefit from these characteristics (wines of chile, 2016). consequently, due to the particular climatic conditions on the 2015-2016 season, many localities resulted with lower quality wine grapes affected by diseases and lower productivity, especially those areas with grapes harvested after mid-april (asociación nacional de ingenieros agrónomos enólogos de chile, 2016). 3. grape and wine sectors in chile we use the 2014 input-output system published by the chilean central bank as the basis to calibrate a computable general equilibrium (cge) model. the model is very detailed in its sectoral disaggregation, identifying 111 different sectors and 179 goods and services. this database represents the structure of the chilean economy in 2014, just before the climate variability shock we want to analyze. the grape and the wine sectors are fully integrated in the model. in 2014, the grape-growing sector was responsible for 0.33% of national gdp and 1.04% of total exports. table grape was its primary output (71.0% of total sectoral output), but the sector also produced wine grape (28.6%), and other products (0.4%). most of the table grape’s output was exported to other countries (85.5%), while the remaining part went to household consumption (11.8%), and a smaller share to other users (2.7%). wine grapes were destined either to the wine production (90.7%) or to piscos and liquors production (9.3%). from a cost perspective, intermediate inputs were responsible for 45.0% of total costs of grape production, with the remaining 55.0% allocated to payments to primary factors and production taxes. the sector paid 81.1% of total intermediate inputs costs to domestic suppliers, with the main items being support activities for agriculture (26.6% of total materials cost – only produced domestically); diesel (16.5% of total – 27.2% from domestic sources); and fertilizers and pesticides (15.6% of total – 75.3% domestic). value added generated by the grape sector was relatively labor-intensive, with 53.7% of payments to primary factors accruing to labor, and 46.3% to capital.2 the wine sector contributed with 0.30% of chilean gdp in 2014, and was responsible for 2.30% of national 2 as a reference, overall labor share in the chilean economy was 42.9% in the benchmark year. exports. in addition to the production of wine (98.5% of total output), there was a secondary production of piscos and liquors (1.5%). the wine production was mainly exported (73.7% of total output), with the remaining part almost fully destined to household consumption (23.9%) and to supply hotels and restaurants (2.4%); piscos and liquors were directed to domestic consumption by households (80.8%) with smaller shares sold to hotels and restaurants (6.8%) and abroad (6.6%), and the remaining share to the pisco sector. the cost structure of the wine industry was divided into payments to intermediate inputs (69.0%) and to primary factors and production taxes (31.0%). the main input, wine grapes (21.2% of total intermediate input costs), was fully supplied by the domestic grape sector. other relevant input costs included glass (11.8% of total – 98.2% from domestic sources); paperboard (10.6% of total – only produced domestically); and different professional services: other business services (8.9%), marketing services (5.6%) and personnel supply, cleaning, security and other support services (4.7%). storage and deposit costs were also relevant (4.2%), as well as the use of other wood products (3.3% of total intermediate input costs – 80.5% from domestic sources) and imported other metal products (0.6%). value added in the wine sector was capital-intensive, with 59.9% of payments to primary factors accruing to capital, and 40.1% to labor. 4. the model we use a cge model, calibrated for the chilean economy, in order to evaluate the wider economic impacts of climate variability on the wine industry in the country. our model’s structure represents a variant of the well-documented orani-g model.3 the chilean version of the model identifies 111 sectors and 179 goods and services, one service used as margin (trade services), indirect, value added and production taxes, and five user groups (producers, investors, household, foreign sector and government). the cge model allows capturing economy-wide effects through an intricate plot of input-output relations. we calibrate the climate shocks defining two main channels to translate physical variables into economic inputs to the cge models. because we do not estimate econometrically the direct links between the climate scenario and the economic variables, we build narratives based on the expert literature to quantify the stylized exogenous scenarios to feed the cge model. 3 dixon et al. (1982), and horridge (2000). 27a bad year? climate variability and the wine industry in chile the first channel – quantity channel – is derived from a decrease in productivity of the grape sector. we use information for the 2015-2016 grape harvest, which is usually associated with a bad year for the wine industry in chile, since premature rains occurred in important wine regions, reducing the area harvested, and leading to wines with less concentrated flavors, particularly for reds, as perceived by consumers (wine spectator). according to data from the usda foreign agricultural service, grape production reduced by -10.59% in the period. the varieties cabernet sauvignon, carménère and petit verdot in the metropolitan region of santiago, o’higgins and part of the maule region were the most affected (see figure 1). weather conditions, characterized by heavy rains followed by high temperatures, was favorable for the development of botrytis fungus that causes fruit rot. in addition, many fruits were still in the vines when heavy rains began, making the losses even more substantial (usda, 2016). we model this channel of climate shocks as an exogenous productivity change (all input augmenting technical change) in the grapeproducing sector (quantity effect), decreasing overall sectoral productivity by -10.59% so that, coeteris paribus, the model imposes an initial reduction in grape production similar to that observed.4 according to the model’s analytical structure, the quantity channel can be decomposed into two different channels. first, a price change channel: as productivity declines, this represents, on one hand, increases in the prices of grapes (both table grapes and wine grapes), increasing production costs to the wine sector and raising the costs for domestic and foreign consumers, which lower both domestic and external demand. this creates room for decreasing firms’ output – destined for both domestic and international markets – which requires less inputs and primary factors. decreasing demand puts pressure on the factor markets for price decreases, with a concomitant expectation that the prices of domestic goods would decrease. second, the reduction in overall productivity is also associated with an increase in the inputs and primary factors requirements per unit of output in the grape sector (technical change channel). this creates an upward pressure on input prices, wages and capital rentals, which are passed on in the form of higher prices. the second channel – quality channel – is associated with an expert perception of a lower quality vintage 4 the “all input augmenting technical change” variables are sectoral-specific technological change variables, normally exogenous (values fixed outside the model). suppose output were fixed, a shock of -10% to the component of such variable of the wine sector would mean that 10% more of all inputs were needed to produce the benchmark wine output. for technical details, please refer to dixon et al. (1982), and horridge (2000). of chilean wines in 2016. the climatic adversity in 20152016 also brought about implications for the quality of the wines produced in chile in 2016. climate conditions in this “bad year” generated wines with slightly different characteristics from those more commonly found in chilean wines (usda, 2016). table 1, drawn from the wine spectator magazine, shows the average vintage ratings for chilean red wines for the period 2012 to 2016. it is possible to see that the rating for 2016 dropped five points in one year, passing from a score of 92, in 2015, to 87, in 2016. lower scores in vintage ratings may be associated with lower prices (premium). in a study by schamel and figure 1. regions most affected by climate variability. table 1. vintage ratings – chile: reds (all regions). vintage score description 2016 87 untimely rains in key regions such as colchagua, maipo and casablanca cut yields and led to less concentrated flavors, particularly for reds 2015 92 a warm growing season and good harvest weather delivered powerful cabernet sauvignons and crisp, fruity pinot noirs; average quality for whites 2014 89 spring frost cut crop; good quality fruit harvested; crisp reds, savory whites 2013 90 cool vintage, delivering fresh, well-structured wines with good balance in terms of concentration and flavor 2012 91 warm summer weather resulted in an early harvest, with clean, disease-free fruit and yields 15 percent above average; late-ripening carmenère performed well source: wine spectator 28 eduardo haddad, patricio aroca, pilar jano, ademir rocha, bruno pimenta anderson (2003), the authors estimated hedonic price functions for premium wine from australia and new zealand, differentiating implicit prices for sensory quality ratings over the vintages: the parameters for vintage rating were all significant and stable over time. the price premium was 3.1% on average and varied between 2.3% and 4.1% for one-point increase in the vintage rating for the 1992-2000 vintages. thus, given these two pieces of information, and considering the strong exposure of chilean wines to international markets (almost ¾ of the output are exported), we model the quality channel as a downward parallel shift in the downward-sloping constant-elasticity export demand curve for chilean wine in the model. in the specification of the model, foreign demands (exports) for domestic good i depend on the percentage changes in a price, and two shift variables which allow for vertical and horizontal movements in the demand curves. the price variable, which influences export demands, is the purchaser’s price in foreign countries, which includes the relevant taxes and margins. the parameter controls the sensitivity of export demand to price changes. formally: (exporti-fqi(export))=ηi(pi(export)-phi-fpi(export)), i∈g where g={1,…,g}, g is the number of goods in the economy; exporti is foreign demand for domestic good i, pi(export) is the purchasers’ price in domestic currency of exported good i; phi is the nominal exchange rate; fpi(export) and fqi(export) are, respectively, quantity and price shift variables in foreign demand curves for national exports. we parameterize the size of the shock on fpi(export) by applying schamel and anderson’s estimates to a fivepoint decrease in the vintage rating in 2016. given the average price premium of 3.1% per point increase in the vintage-rating, we computed the compounded effect of a five-point difference, leading to an approximate -14.16% price reduction associated with the same benchmark level of foreign demand for chilean wine.5 given the structure of the model, lower international demand for chilean wines puts less pressure on prices through the decrease in export activity.6 figure 2 summarizes the transmission mechanisms associated with first-order and second-order effects in the adjustment process underlying the model’s aggregate results in the context of the major channels through which the shocks operate. second-order prices changes 5 formula: (100*((1/(1.031^5))-1)) 6 the relative strength of this channel is directly related to the magnitude of the short-run export demand elasticity (for chilean wines), . loop price change channel technical change channel quality channel prices increase pressure on inputs intermediate and primary prices to increase (grape output needs more inputs) prices decrease prices decrease prices increase (decline) lower demand for primary factors in the wine sector higher (lower) demand for primary factors pressure on primary factor prices to decrease pressure on primary factor prices to decrease pressure on primary factor prices to increase (decrease) increase prices of goods and primary factors lower external demand higher (lower) domestic demand higher (lower) external demand lower wine output higher (lower) output by firms excees demand of both intermediate inputs and primary factors lower demand for primary factors lower domestic demand lower external demand lower output by firms decrease real income: firms, investors, households downward shift in foreign demand for wine increase (decrease) real income: firms, investors, households firms: less competitive investors: potential lower returns households: "poorer" firms: more (less) competitive investors: potential higher (lower) returns households: "richer" ("poorer") climate shock decrease in productivity of grape sector effects on wine exports increase the price of composite goods chilean wine less attractive effects on use of inputs by grape sector increase in inputs requirements per unit of grape produced demand for intermediate and primary inputs increases figure 2. causal relations underlying the simulation results. 29a bad year? climate variability and the wine industry in chile go in both directions – decrease and increase. the net effect is determined by the relative strength of the countervailing forces. 5. results to measure the wider impacts of the prevailing climatic conditions that affected grape and wine production in chile in 2016, we run the model under a shortrun macro-adjustment closure.7 on the supply-side, we make the capital stock, technology, and the real wage exogenous. with the real wage given, the model can determine aggregate employment. with employment, technology and capital determined, the model can determine aggregate output (gdp). on the demand side, aggregate investment, and other demands (and inventories) are fixed. we allow (i) government consumption to move with tax revenue, and (ii) household consumption to move with factor income. with gdp determined from the supply side and domestic absorption (household consumption, investment, government consumption and inventories) defined as previously indicated, the trade balance must act as an endogenous ‘swing’ variable to satisfy the gdp identity. that is, if as a result of our shock gdp increases/decreases relative to domestic absorption, the trade balance must move toward surplus/ deficit. table 2 presents the simulation results for gdp and its components. it breaks down changes in real gdp into the contributions of the main expenditureside components, also decomposing the total impacts associated with the quantity and the quality channels. this enables us to verify how much of the change in real expenditure-side gdp is due, say, to a change in exports, associated with each channel. table 2 also breaks down changes in real gdp from the income side, presenting the contributions to gdp due to primary factor usage, indirect taxes, and technical change. the combined effects of lower grape output and lower quality wine would lead to a reduction of chilean real gdp by -0.067%, with similar contributions associated with the quantity channel (-0.031%) and the quality channel (-0.036%). overall, a decrease in exports (negative impact on gdp of -0.052%), followed by a reduction in household consumption (-0.028%) made the main contributions to the aggregate gdp result. in the case of exports, lower productivity in the grape-producing sector (quantity channel) increases the price of both exported table grapes and domestically consumed wine grapes, 7 the closure is adapted from the standard short run closure described in horridge (2000). in the latter case indirectly affecting prices of wine exports. as for the quality channel, the shift in export demand for chilean wines directly impacts export volumes. thus, exports results go in the same direction in both channels. in the case of real household consumption, nonetheless, the results for its contributions to gdp, associated with the quantity and the quality channels, go in different directions. according to our model, with fixed capital stocks, the supply elasticity can be approximated by the expression that reflects its close connection with the elasticity of substitution between capital and labor, the shares of labor and capital in primary factor costs, and the share of primary factors in total costs. in other words, for given values of the substitution elasticity, supply is more elastic as either the labor/capital ratio is higher, or the share of materials in total cost is higher (dixon et al., 1982). as seen in section 3, the grape sector is characterized as a labor-intensive sector. within the quality channel, the technical change channel dominates primary factors market outcomes, generating higher labor absorption (positive impact on incomeside gdp of 0.021%), and an increase in household consumption (positive impact on expenditure-side gdp of 0.027%). this creates an upward pressure on input prices, wages and capital rentals, which are passed on in the form of higher prices, as can be seen at the bottom estimates of table 3.8 while the net effect of the quantity channel leads to real factor income increase, the outcome associated with the quality channel goes in the opposite direction, resulting in a decrease in household consumption. the initial decrease in economic activity associated with the foreign demand shift is accompanied by an overall reduction in employment and lower capital rentals, in a context of fixed capital stocks. given that we set real 8 table 3 also presents results for factor payments (including prices and use), gdp components and price indices. quantity quality real gdp from expenditure side -0.067 -0.031 -0.036 aggregate real investment expendiutre 0.000 0.000 0.000 real houselhold consumption -0.028 0.027 -0.055 export volume -0.052 -0.035 -0.017 aggregate real government demands -0.001 0.001 -0.001 import volume 0.014 -0.024 0.037 real gdp from income side -0.067 -0.031 -0.036 use of capital 0.000 0.000 0.000 use of labor -0.006 0.021 -0.028 indirect taxes -0.004 0.004 -0.009 technical change -0.057 -0.057 0.000 total subtotal table 2. decomposition of the impacts on chilean gdp (% contribution). 30 eduardo haddad, patricio aroca, pilar jano, ademir rocha, bruno pimenta wages exogenously, imperfect substitutability between labor and capital helps explaining the stronger effect on capital costs. one last comment on the macroeconomic results presented in tables 2 and 3 relates to balance of trade effects. real devaluation, defined as the ratio between the cif import price index in local currency and the gdp def lator, shows how foreign prices move compared to local prices. in this formulation, the overall impact on this variable, 0.071%, combines two different opposing forces. while the reduction in the productivity of the grape sector leads to overall higher domestic prices (-0.261%), promoting import penetration, the lower demand for chilean wine changes relative prices in favor of less expensive domestic goods (0.322%), which, together with an overall lower activity level, help decreasing import demand. accordingly, for exports, the vintage effect on real devaluation makes chilean products more attractive to foreigners, partially offsetting the effect of the decrease in wine exports. table 4 highlights the importance of the impacts on the main products of the grape sector (wine and table grapes) and the wine sector (piscos and liquors, and wine) for the simulation results, revisiting some of the macroeconomic effects previously described. it captures the relevance of forward linkages in the wine industry value chain, revealing features of each product’s sales structures, as described in section 3. we focus on two main final users, namely households and exports. the reduction in the consumption of table grapes by households (-4.932%) and foreigners (-6.308%), its two main markets, is mainly associated with the rise in prices due to productivity changes. as a result, total output drops by -5.789%, a decrease mostly due to the quantity channel. wine grapes, which supply exclusively to the wine sector, perceive an output decrease of -3.194%; roughly ¼ of this change due to the productivity effect in the grape sector and ¾ due to backward linkages associated with the vintage effect that affects wine exports. the wine output, on its turn, decrease by -3.951%, with most of this outcome associated with the quality effect (-3.130%). interestingly, despite a sharp reduction in sales to foreign markets (-4.788%), domestic sales to households increase 0.129%. the higher domestic consumption (1.145%), led by lower relative prices due to the shrinkage of sales to foreigners, offsets the negative local sales to final consumers when climate shocks harm yields of grape crops (-1.017%), raising local wine prices as domestic wine grapes, the main input of the wine industry, become more expensive. piscos and liquor output decreases to a lesser extent (-0.793%). however, we see a shift of production of the wine sector from wine to piscos and liquors, as the former becomes less “attractive”. this might be a path to follow as a potential adaptation measure given that there is an increase in exports due to quality (which in annulated by the quantity effect), which might be pursued to face a bad climate in a year.9 therefore, the vineyard can substitute wine production by spirits production in order to face the fall in the wine demand by household and international consumer. at the microlevel, this might be a strategy for those producers of grape that can be used in pisco and liquor production, which are at the north part of the grape zone cultivation. finally, we have also calculated the impacts on sectoral output of the climate variability scenario that affected grape harvests in chile. figure 3 highlights those sectors that achieved the top and bottom performance. sectors are ranked by the total effects. backward and forward linkages play an important role in the picture that emerges. 9 the specification of the sectoral composition of production is derived from the firm’s maximization of revenue from all commodity outputs, subject to a constant elasticity of transformation (cet) production function. the model allows for secondary production, i.e. each sector can produce a mixture of all commodities. given the cet specification, the output mix of each sector varies with the relative prices. table 3. impacts on selected macroeconomic variables (in percentage change). table 4. impacts on household consumption, exports and output of selected products (in percentage change). quantity quality aggregate primary factor payments -0.143 0.233 -0.376 aggregate payments to capital -0.164 0.224 -0.388 aggregate payments to labor -0.115 0.246 -0.361 index of factor cost (excludes tech change) -0.136 0.209 -0.345 average capital rental -0.164 0.224 -0.388 average nominal wage -0.099 0.190 -0.288 aggregate primary factor use (excludes tech change) -0.007 0.024 -0.031 aggregate capital stock, rental weights 0.000 0.000 0.000 aggregate employment, wage bill weights -0.017 0.056 -0.073 real gdp from expenditure side -0.067 -0.031 -0.036 aggregate real investment expendiutre 0.000 0.000 0.000 real houselhold consumption -0.044 0.043 -0.088 export volume index -0.159 -0.107 -0.052 aggregate real government demands -0.006 0.005 -0.011 import volume index, cif weights -0.043 0.075 -0.119 average real wage 0.000 0.000 0.000 real devaluation 0.071 -0.261 0.332 consumer price index -0.099 0.190 -0.288 exports price index, local currency 0.045 0.269 -0.223 government price index -0.099 0.179 -0.277 subtotal total total quantity quality total quantity quality total quantity quality wine grapes 0.000 0.000 0.000 0.000 0.000 0.000 -3.194 -0.751 -2.443 table grapes -4.932 -4.717 -0.215 -6.308 -6.289 -0.019 -5.789 -5.749 -0.040 piscos and liquors -0.450 -0.414 -0.036 -0.329 -0.514 0.186 -0.793 -0.951 0.157 wine 0.129 -1.017 1.145 -4.788 -0.644 -4.143 -3.951 -0.822 -3.130 total in chile -0.044 0.043 -0.088 -0.159 -0.107 -0.052 -0.048 -0.012 -0.035 outputhousehold consumption exports 31a bad year? climate variability and the wine industry in chile according to figure 3, in addition to the two sectors directly affected by the quantity and quality channels (grape vineyards and wineries), the sectors (indirectly) most affected by climate anomalies that hit grape yields are those related to the wine industry value chain. to better understand the sectoral results of the model, a brief analysis of the structure of the economy can be done (haddad, 2009). a close inspection on the benchmark data is necessary, conducted primarily on the relationships in the input-output database. understanding of disaggregated results may be achieved through econometric regressions on key structural coefficients. how important is the existing economic structure in explaining the sectoral results associated with climate anomalies in chile? do backward and forward linkages matter? to answer these questions, following dixon et al. (2007), we regress the model results (sectoral activity level) against selected structural coefficients of the model, suggested by the previous discussion. the ols regressions are shown in table 5 and aim only at revealing some of the influence of the benchmark structure on the results, considering a regression for the overall results, and two regressions for the subtotals (quantity and quality decompositions). the selected structural indicators explain more than 90 percent of the variation across sectors in the cge model results. given the nature of our experiment, we included sectoral dummies for the grape and wine sectors, in attempt to isolate the sector-specific shocks in each analysis. sectors that present higher decreases in their output tend to have an overall higher share of their sales to the wine sector, suffering from the effects in the production value chain. also, sectors that face stronger negative effects tend to concentrate their sales to chilean households. thus, the extent to which climate anomalies faced by the grape-producing sector affect sectoral economic activity is conditioned by the structural characteristics of the productive system and macroeconomic outcomes. 5.1. sensitivity analysis in cge modeling, one possible way to overcome the scarcity of estimates of key parameters is to simulate results based on different qualitative sets of values for the behavioral parameters and structural coefficients (haddad, 2009). through the judgment of the modeler, a range of alternative combinations reflecting differential structural hypotheses for the regional economies can be used to achieve a range of results for a policy simulation. this method, called qualitative or structural sensitivity analysis, provides a “confidence interval” to policy makers, and incorporates an extra component to the model’s results, which contributes to increased robustness through the use of possible structural scenarios. as data def iciency has always been a big concern in cge modeling, one that will not be overcome in the near future, this method tries to adjust the model for possible parameter misspecification. if the modeler knows enough about the func-6.00 -5.00 -4.00 -3.00 -2.00 -1.00 0.00 1.00 grape vineyards wineries glass and glass product manufacturing piscos and liquors manufacturing paperboard container manufacturing warehousing and storage other editing, production and dissemination activities all other support activities for transportation annual crops and other forage crops administrative and support activities nonferrous metal production and processing all other mineral mining and support activities for mining basic chemical manufacturing pharmaceutical manufacturing apparel manufacturing transportation equipment manufacturing iron and steel mills and ferroalloy manufacturing oil and gas extraction forestry and logging support activities for agriculture and forestry % change quality quantity total figure 3. impacts on sectoral activity (in percentage change). table 5. structural analysis of sectoral activity results.* dependent variable: act_sect quantity quality wine_sh -4.205*** -1.006** -3.199*** (0.301) (0.432) (0.132) hh_sh -0.089*** -0.048*** (0.032) (0.018) d_grape -4.143*** -4.064*** (0.118) (0.174) d_wine -3.945*** -3.145*** (0.098) (0.054) exp_sh -0.121** 0.051** (0.058) (0.022) mat_sh -0.121 (0.076) constant 0.023* 0.073 0.012 (0.013) (0.045) (0.008) observations 111 111 111 r-squared 0.977 0.899 0.975 subtotal totalvariables standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1 note: *act_sect = percentage change in sectoral activity level; wine_sh = share of total sales to the wine sector; hh_sh = share of total sales to households; d_grape = dummy for the grape sector; d_wine = dummy for the wine sector; exp_sh = share of total sales to exports; mat_sh = share of materials in total costs.\ 32 eduardo haddad, patricio aroca, pilar jano, ademir rocha, bruno pimenta tioning of the particular economy, the model achieves a greater degree of accuracy when such procedure is adopted. qualitative sensitivity analysis is carried out in this sub-section in order to grasp a better understanding on the role played by the export demand elasticity for wine. such parameter determines the strength of the responsiveness of the chilean wine industry to price changes. given the lack of specific estimates for chilean wine10, it was calibrated with the short-run value 0.33, based on estimates for agro-industrial products. given the uncertainty about its value, we run sensitivity analysis for this parameter, choosing alternative values up to twice and five times higher. table 6 summarizes the sensitivity of results for macroeconomic aggregates and selected products. overall, they point to a stronger dominance of the quality effect, as the value of the parameter goes up. they also point to the magnification of the main results, reinforcing their direction. 10 muhammad et al. (2013) report a price demand elasticity for chinese wine imports from chile equal to -1.104. 6. concluding remarks in this paper we have computed estimates of the economy-wide impacts of the special weather conditions that prevailed in chile and affected grape harvests in the country, also affecting the quality of the wine produced. we have used a national cge model calibrated for the chilean economy. we evaluated two main transmission channels of the climate variability shocks to the economy, namely a quantity channel originated in the grape vineyards, and a quality channel accruing to the wineries. the general equilibrium approach adopted in this work allowed a broader understanding of potential responses of the wine industry in chile to a specific climate scenario taking into account its whole value chain. it helped telling a story that takes into account the grape and wine sectors embedded in a national economic system. the results revealed the relevance of backward and forward linkages to understand the systemic effects. revisiting the main results of the paper, a quick backof-the-envelope calculation using the estimates of the impacts on sectoral economic activity and structural coefficients computing sectoral shares in gdp shows that for each 1.00 chilean peso (clp) of reduction in the combined sectoral gdp of the grape and wine sectors, table 6. sensitivity analysis results: export demand elasticity for wine. total quantity quality total quantity quality total quantity quality household consumption wine grapes 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 table grapes -4.932 -4.717 -0.215 -5.099 -4.736 -0.363 -5.398 -4.770 -0.628 piscos and liquors -0.450 -0.414 -0.036 -0.472 -0.415 -0.057 -0.503 -0.416 -0.088 wine 0.129 -1.017 1.145 1.060 -0.901 1.961 2.784 -0.687 3.471 exports wine grapes 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 table grapes -6.308 -6.289 -0.019 -6.330 -6.294 -0.035 -6.374 -6.304 -0.070 piscos and liquors -0.329 -0.514 0.186 -0.175 -0.491 0.316 0.104 -0.448 0.551 wine -4.788 -0.644 -4.143 -8.182 -1.102 -7.080 -14.429 -1.946 -12.483 output wine grapes -3.194 -0.751 -2.443 -5.197 -1.023 -4.174 -8.881 -1.524 -7.357 table grapes -5.789 -5.749 -0.040 -5.826 -5.755 -0.071 -5.897 -5.768 -0.129 piscos and liquors -0.793 -0.951 0.157 -0.656 -0.927 0.271 -0.397 -0.883 0.486 wine -3.951 -0.822 -3.130 -6.517 -1.171 -5.346 -11.236 -1.813 -9.423 macroeconomic aggregates real gdp from expenditure side -0.067 -0.031 -0.036 -0.096 -0.035 -0.061 -0.147 -0.042 -0.104 aggregate real investment expendiutre 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 real houselhold consumption -0.044 0.043 -0.088 -0.114 0.033 -0.147 -0.236 0.016 -0.251 export volume index -0.159 -0.107 -0.052 -0.201 -0.112 -0.089 -0.277 -0.122 -0.155 aggregate real government demands -0.006 0.005 -0.011 -0.015 0.003 -0.018 -0.029 0.001 -0.030 import volume index, cif weights -0.043 0.075 -0.119 -0.138 0.062 -0.200 -0.305 0.038 -0.343 aggregate employment, wage bill weights -0.017 0.056 -0.073 -0.075 0.047 -0.122 -0.176 0.032 -0.209 benchmark 2x 5x 33a bad year? climate variability and the wine industry in chile there is an additional 1.39 clp reduction in other sectors’ gdp.11 the results are not without limitations. in our simulation-based approach, results depend heavily on the analytical, functional and numerical structures of the model. the usual issue of model pre-selection (blaug, 1992), with its advantages and disadvantages for the purpose of this exercise, applies here. moreover, in spite of taking a general equilibrium approach to understand the economic effects in the chilean economy, the narratives we built to quantify the exogenous scenarios to feed the cge model preclude how weather conditions may have affected other crops. thus, in our attempt to isolate the main mechanisms that link physical (climate) shocks to economic shocks, we have focused our attention on those directly associated with the key players of the wine industry. as usual, additional research is needed to help providing further evidence to evaluate these issues more completely. as a final comment, we recognize there is an ongoing discussion about the definition of terroir and, even more, there is a discussion about the existence of the concept of terroir (pszczólkowski, 2014, vaudour, 2002). broadly, there are two definitions of terroir: one that does not incorporate human intervention (management and perception), and another definition that besides soil, climate, and variety combination, considers vineyard management and perception (tasting). besides the discussion about the definition of terroir, bramley and hamilton (2007) show that terroir is spatially variable at the within-vineyard scale using precision viticulture techniques. considering this last fact and the definition by seguin (1986) presented in the introduction section of this article, in order to include terroir in the model we would need detailed information of variety-soil-climate combinations together with vineyard management at the local level. to the best of our knowledge, this information is very limited in chile (and very far from what is known in the old world about their terroirs). nonetheless, from a methodological perspective, it would be feasible to specify the model for specific wine regions – as information becomes available. for example, according to the discussion in section 2, we can conclude that valleys that produce reds such as maipo and colchagua were affected negatively by the 2015-2016 season climatic conditions, however, valleys like casablanca, specialized in white wines may have benefited. in spite of data con11 we have compared the gdp effects (-0.067%) to the combined contributions of the grape and the wine sectors to this outcome, by multiplying their respective shares in gdp (0.33% and 0.30%) to the simulated impact on their activity levels (-5.062% and -3.800%, respectively). straints, future research efforts in modeling the chilean economy in an integrated manner should move towards multirregional modeling frameworks. acknowledgements. fi na nc ia l suppor t f rom con ic y t-fa pe sp 2018/08337-8 “agricultural and agro-industrial sustainability in chile: modeling the impacts of climate change and natural disasters in an integrated framework ” is acknowledged. this work was also supported by the brazilian research network on global climate change finep/rede clima [grant 01.13.0353-00] and the inct for climate change ii (inct-mc) [grant 2014/50848-9]. eduardo a. haddad acknowledges financial support from cnpq (grant 302861/2018-1). references ashenfelter, o. 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(2008). climate change and winegrape quality in australia. climate research, 36(2), pp. 99–111. wines of chile (2016). vintage 2016 report. summary available at: http://www.winesofchile.org/es/news/092016/vendimia-2016-revisa-el-informe-elaboradopor-vinos-de-chile. wine spectator (2020). vintage charts, chile: reds. available at: https://www.winespectator.com/ vintagecharts/search/id/4 wine economics and policy volume 9, issue 2 2020 firenze university press the influence of alcohol warning labels on consumers’ choices of wine and beer azzurra annunziata1,*, lara agnoli2, riccardo vecchio3, steve charters4, angela mariani5 a bad year? climate variability and the wine industry in chile eduardo haddad1,*, patricio aroca2, pilar jano3, ademir rocha4, bruno pimenta5 sparkling wine international market structure and competitiveness karim marini thome*, vitoria a. leal paiva the role of context definition in choice experiments: a methodological proposal based on customized scenarios fabio boncinelli*, caterina contini, francesca gerini, caterina romano, gabriele scozzafava, leonardo casini the impact of country of origin on brand equity: an analysis of the wine sector nádia passagem1, cátia fernandes crespo2,*, nuno almeida3 competitive strategies for wine cooperatives in the german wine industry barbara richter1,*, jon hanf2 valuation of viticultural adaptation to climate change in vineyards: a discrete choice experiment to prioritize trade-offs perceived by citizens verónica farreras1,2, laura abraham3,* does the institutional quality affect labor productivity in italian vineyard farms? maria raimondo1,*, concetta nazzaro4, annamaria nifo3, giuseppe marotta2 the role, scope and management of r&d and innovation in the wine sector: an interview with antonio graca peter hayes am wine economics and policy 9(1): 3-4, 2020 firenze university press www.fupress.com/wepwine economics and policy citation: p. hayes (2020) creating opportunity from crisis, progress from research: redefining the wine sector. wine economics and policy 9(1): 3-4. doi: 10.36253/web-8333 copyright: © 2020 p. hayes. this is an open access, peer-reviewed article published by firenze university press (http://www.fupress.com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information files. competing interests: the author(s) declare(s) no conflict of interest. issn 2212-9774 (online) | doi: 10.36253/web-8333 discussion creating opportunity from crisis, progress from research: redefining the wine sector peter hayes am1 honorary president of oiv e-mail: grapwine@senet.com.au change, for some, is reluctantly accepted, yet, for others, it’s welcomed and embraced. this decade shall likely entail even more changes in our world and the wine sector than has ever been experienced, requiring a significant reliance on the knowledge, experience, resilience and innovative capacity of colleagues, academic and professional in securing a sustainable and prosperous future. perhaps, in its own way, the transfer of this journal from hosting by elsevier to the florence university press signifies a preparedness for timely adaptation to the pressures facing, in this case, the publication of peerreviewed research. a decade on from the founding of this journal, and having been invited to contribute this editorial comment, i reviewed the editorial we prepared for the first issue; editorial / wine economics and policy 1 (2012) 87–88. it is evident that many of the issues noted at that time remain relevant, albeit now accompanied by additional emerging and important themes. back in 2012 the issues we identified spanned the gamut of economics, finance, business management and policy and identified several key issues which might now, a decade on, be considered even more relevant and topical. these issues include the drivers and facilitators of adaptation and innovation within the sector; adequacy and timeliness of data collection, analysis and interpretation, now much more broadly developed with “big data” and artificial intelligence; and the restructured and alternative distribution pathways, now reinforced by innovation in it, e-commerce and social media. without ignoring the relatively recent and substantial development of china, the wine industry is a mature industry in much of the producing and 1 peter hayes is wep business editor, honorary (former) president of the oiv and has other current roles; president, lien de la vigne/vine link; presiding member, wine australia board selection committee; member, wine australia geographic indications committee; independent chairman, almond board of australia. he has been an active promoter of r&d, and professional development activity contributing to adaptation and innovation within the sector and now operates as an independent wine industry strategist and advisor with activity in australia, the uk, china, and india. 4 peter hayes consuming world. growth opportunity in such markets appears limited as do the prospects of new markets, notwithstanding the frequently expressed potential for such candidates as china and india. addressing the future of the wine world, what then might be some of the key themes warranting r&d, adaptation and innovation to assist in securing a viable and prosperous sector? first, the consumer: we observe and see commentary on the dramatic changes in consumer demographics, consumer preferences and behaviours, the influence of novel and evolving models of communication, and the role of competing products, services and experiences. attention to the publication and promotion of insights, models and adaptive strategies to recruit and retain a rejuvenated and enduring consumer base and to frame the appropriate development of innovative wine and wine-based products should be highly valued. second, the supply or (preferably), the value chain: although likely to be contested by some, the current supply or value-chain arrangements encourages excess supply in the interests of access to “cheap” supplies, fails to deliver reliable, predictable supply, poorly allocates risk and reward and imposes considerable stress on natural resources and social licence. global economic and public health crises or conflicts, as arise from time to time, impose further uncertainty in securing inputs to the production process, visitation by tourists and in delivering products and services. this situation offers considerable challenges to both the wine sector and to others concerned with food security and resource use accountability. to retain and enhance legitimacy of trade in wine (and other foodstuffs), the industry shall require improved models of supply-demand balance, value allocation, food security and risk mitigation, along with development of transparent, credible resource -use accounting (perhaps a “resource -return quotient”) and reporting systems, their validation and promotion, accompanied by policy development to facilitate their adoption. third, just what is “the wine industry”? is it a supplier of commodity or product, cultural or lifestyle experience, hospitality or tourism destination or some combination thereof ? a range of market and commercial factors in combination with economic policy, social and resource pressures shall likely see further diversification and specialisation in strands of wine-business and related activity. considerable potential and value lie in describing, devising and validating alternative models to meet the pressures for commercial adoption and adaptation across the future decade. in closing, there remains enormous potential for the academic research & development community to engage with the professional sector for the benefit of each of the parties, the broader community and the environment. assessment and reporting on effective models for such engagement, the related investment funding and evaluation of system and process improvements would be much welcomed. this should provide a solid foundation for adapting this journal, and assisting the industry itself, to meet forthcoming challenges and opportunities. since 4th march 2020, when i first drafted this discussion for the journal, much has changed with whole societies severely disrupted, the wellbeing of individuals and families under considerable stress and national and international economies and trading in turmoil. the future of the many business enterprises and employment of many individuals within the sector is clearly threatened, as is the financial security and confidence of its consumers, and broader society; this prompts the question of what could and should be the nature, form and scale of the wine sector of the future? my view is reinforced that r&d, and its publication and promulgation, must actively adapt to better envisage, project, and analyse prospective scenarios, to inform future policy, planning and strategy at all levels. this shall demand better interaction and integration with, and recognition by, other elements of the sector and society, and is especially crucial given that under the anticipated economic conditions, financial support for r&d is likely to be further constrained. for all players to plan and secure their future relevance, legitimacy, efficiency, and effectiveness from which a prosperous future may be attained, demands a serious reorientation of focus. a successful reorientation would create opportunity from crisis, greater progress from research, and would substantially contribute to redefining the wine sector, globally. wine economics and policy volume 9, issue 1 2020 firenze university press creating opportunity from crisis, progress from research: redefining the wine sector peter hayes am1 us wine industry preparedness for unforeseen crises and disasters: an empirical test armand gilinsky, jr.1, astha sen2, judith ford3, sergio canavati de la torre4, sandra k. newton5,* a cross-cultural comparison of wine consumption and purchasing behaviour in germany and hungary gergely szolnoki1,*, gedeon totth2 assessing the effects of the environment on consumers’ evaluations for wine gioacchino pappalardo, gaetano chinnici*, roberta selvaggi, biagio pecorino the speed of the internationalisation process and the institutional networks of family smes in the doc rioja wine industry marta fernández-olmos1,*, giulio malorgio2 the impact of changes in regulatory and market environment on sustainability of wine producers: a structural equation model chinedu obi1,2,*, daniele vergamini1, fabio bartolini1, gianluca brunori1 emerging consumer preference for wine attributes in a european transition country – the case of kosovo edvin zhllima1, drini imami1,*, njazi bytyqi2, maurizio canavari3, elvina merkaj4, catherine chan5 price determinants of sparkling wine in poland: does reputation really matter? authors: samuele trestini1,*, alice stiletto1, stefanella stranieri2 wine economics and policy 9(2): 113-126, 2020 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/wep-7833 wine economics and policy citation: maria raimondo, concetta nazzaro, annamaria nifo, giuseppe marotta (2020) does the institutional quality affect labor productivity in italian vineyard farms?. wine economics and policy 9(2): 113-126. doi: 10.36253/ wep-7833 copyright: © 2020 maria raimondo, concetta nazzaro, annamaria nifo, giuseppe marotta. this is an open access, peer-reviewed article published by firenze university press (http:// www.fupress.com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information files. competing interests: the author(s) declare(s) no conflict of interest. does the institutional quality affect labor productivity in italian vineyard farms? maria raimondo1,*, concetta nazzaro4, annamaria nifo3, giuseppe marotta2 1 università degli studi del sannio, department of law, economics, management and quantitative methods, benevento, italy, email: raimondo@unisannio.it 2 università degli studi del sannio, department of law, economics, management and quantitative methods, benevento, italy, email: marotta@unisannio.it 3 università degli studi del sannio, department of law, economics, management and quantitative methods, benevento, italy, email: nifo@unisannio.it 4 università degli studi del sannio, department of law, economics, management and quantitative methods, benevento, italy, email: cnazzaro@unisannio.it *corresponding author abstract. the paper aims at analyzing the effect of institutional quality on labor productivity in the agricultural sector. to meet this aim, a gaussian log-linear model was applied to 773 vineyard farms, located in 71 italian provinces. the applied methodology enabled to quantify the overall impact of the institutional quality on labor productivity by discriminating with respect to the italian regions and macro-areas (i.e. north, south or central italy). the findings of the investigation show a positive effect of the institutional quality on labor productivity, with an overall impact of 39%. moreover, huge differences among italian regions and macro-areas were detected. the study findings provide recommendations for academics and policy-makers to improve both theoretical and practical aspects. keywords: iqi, labor productivity, vineyard farm. 1. introduction in the last decades, institutional factors have attracted great interest as one of the main determinants of economic performance of countries and regions [1, 2, 3, 4]. a large literature has emphasized the role of institutions in influencing both inputs (physical and human capital) and productivity, thus focusing on the existence of an additional effect of institutions on the per capita gross domestic products (through productivity changes). previous studies have also emphasized the role of institutions into influencing the ability of firms to combine inputs more efficiently [5, 6, 7]. often, a positive and important of context factor is also recognized in the good institutional quality of the geographical area where the firm is located. such a quality may be defined as a fruitful combination of formal institutions, good rules and 114 maria raimondo, concetta nazzaro, annamaria nifo, giuseppe marotta practices, cooperation among firms, researchers and policy makers [8, 9, 7, 10]. in this vein, institutions shape the key incentives of individuals and firms, influencing investments in physical capital, human capital, technology and the ability to organize production, determining not only the potential for aggregate economic growth, but also the distribution of resources [11, 12, 13]. as for the agricultural sector, some authors have theoretically analyzed the effect of institutional context on economic performances of farms [14]. however, few researches have empirically investigated the effect of institutional quality on farm’s economic performances [15, 13, 16]. accordingly, the general goal of this study is to empirically investigate the effect of institutional quality on economic performances of italian farms. in particular, since better institutions create a legal structure which increases: i) the adoption of technological innovation [17], ii) the likelihood that a firm conducts and transfer r&d activities [18] and iii) the human development [19], the research hypothesis is that the institutional quality positively affects labor productivity in italian vineyard farms. precisely, by taking italian farms specialized in viticulture (wine of excellence) as a case study, the specific goals of the present study are to: i) investigate the effect of the institutional quality on labor productivity, ii) quantify the effect of institutional quality on labor productivity, and finally, iii) assess the effect of institutional quality on labor productivity among italian regions and macro-areas (north, center and south). italian vineyard farms have been chosen for the following reasons: i) italy is one of the main wine producing and wine-exporting country in the world [20, 21, 22]. in fact, in 2016, italy has produced more than 50 million hl of wine, the highest in the world. [23] currently it counts more than 600.000 hectares of vineyards and around 350 autochthonous grape varieties, 470 protected designation of origin (pdo) wines and 120 protected geographical indication (pgi) wines [24]; ii) viticulture is widely spread in all italian regions; iii) during the last decade, the labor productivity in italian viticulture is gaining attention by strengthening the mechanization along the production process [25, 22]. for the purposes of the present paper, we refer to the farm accountancy data network (fadn), a dataset which records information about statistically representative aspects of farms and farmers, referred to 2012. as for the institutional quality, we have accounted for the institutional quality index (iqi) developed by nifo and vecchione [9]), which regards institutional quality in italian provinces as a composite indicator derived by 24 elementary indexes grouped into five institutional dimensions (namely corruption, government effectiveness, regulatory quality, rule of law, voice and accountability). the investigation is conducted on a sample of 773 italian vineyard farms, located in 71 of the overall 107 italian provinces. given the nature of the data, a gaussian log-linear model is performed. the paper is organized as follows: paragraph 2 outlines the theoretical framework; paragraph 3 illustrates the statistical model once described the materials of the study. then, the study findings are exploited in paragraph 4, and discussed in paragraph 5. conclusions and implications are drawn in paragraph 6. 2. theoretical background the decisive impact that institutions may have on economic growth, on the environment, on service levelof-quality, and on overall efficiency of an area has been examined by a broad strand of the economics literature that, in recent years, has paid growing attention to the role of political and administrative contexts as well as social, historical and cultural factors in conditioning and steering development processes. starting from the work of douglass north [1, p. 3], according to whom “institutions are the rules of the game in a society”, institutions contribute to forming the set of incentives underlying behavior and individual choices. as a consequence, several studies have been concerned with measuring the quality of political and administrative institutions (in terms, for example, of well-defined property rights, respect for regulations, degree of corruption, and barriers to entry on markets) both for cross-country [26, 27, 28, 29, 30, 31, 32, 33] and inter-regional comparisons [34, 35, 36, 37]. several researches [6, 38, 39, 40] have specifically focused on the importance of institutional quality as the basic determinant of economic growth and total productivity of factors in the long term. the institutional differences as a key factor of growth and stagnation as well as disparities in productivity and accumulation of physical and human capital is also investigated [11]. some authors have focused on the role of sub-national institutions, particularly the regional ones, in fostering economic growth. porter [41, 42] has argued that economic development is pursued by favoring not isolated companies but industrial clusters, which include firms, suppliers and also local institutions and research centers. additional contributions have extended the notion of institutional quality to social capital endowment [43, 44, 45] and institutional thickness [46]. empirical evidence has pointed out that social cohesion [47] as well as the spread of collaborative 115does the institutional quality affect labor productivity in italian vineyard farms? and associative practices [43, 48, 49] are drivers of economic development. notwithstanding the institutional quality has been investigated from decades to come, the role of institutional context on value creation in agricultural sector has gained attention only in the last few years [16, 50, 13, 51, 14]. through disparate analytical perspectives, several theoretical and empirical studies have shown different relations between institutional quality and economic performance in agricultural sector ([6, 14, 51]. lin et al. [16], by using structural gravity models to measure how institutions affect the trade performance of some coconut producing countries, have shown that government effectiveness increases trade flows of high value coconut products. conversely, nadarajah and flaaten, [13] by investigating the relationship between annual growth in aquaculture production and the quality of institutions, emphasized the insignificant correlation between aquaculture growth and the quality of institutions in analyzed countries. the institutional context has been also analyzed as determinant of voluntary traceability standards in the italian wine sector (50). a previous study, from marotta and nazzaro [14], theoretically analyzed the role of institutional context in new business models for value creation in agriculture sector. more deeply, according to the “value portfolio” (vp) model, macroeconomic factors such as territorial assets, the quality of institutions and policies play a strategic role on value creation in agricultural sector. in other words, the vp of a farm is composed by organizational schemes in which internal resources of a farm (i.e. entrepreneurship and human resources; physical and financial resources; technological resources and networking) are combined with the external ones, such as social capital, fixed social capital and institutional context [52, 53, 14]. based on what has been discussed so far, it is crucial to investigate also empirically the effect of institutional quality on labor productivity in agricultural sector. 3. materials and method 3.1 data in order to achieve the specific aims of the study a cross-section dataset from the fadn have been used. the dataset records information about statistically representative farms and farmers aspects. the fadn is composed by an annual survey carried out by the member states of the european union. it is the unique source of microeconomic data based on the same principles in all european countries that aims to provide representative data along three dimensions: the economic size, type of farming and the region. more deeply, the aim of the network is to collect accounting data from farms in order to know incomes and to conduct business analyses of agricultural holdings with the aim of evaluating, ex-ante and ex-post, the impacts of the common agricultural policy (cap). our analysis includes data on overall 773 italian farms specialized in viticulture producing grapevines for quality wine (with certification of origin pdo/pgi or variety indication as regulated by eu reg. 1308/2013 and reg. 607/2011) and located in 71 italian provinces of all italian regions (appendix a). a summary statistics of the variables included in the model is given in section 3.2. in order to know information about the quality of institutions in italian provinces, we referred to the institutional quality index. major attention should be devoted to the iqi description. this is achieved in the following subsection. 3.1.1 the iqi index the aim of this subsection is to describe the iqi that is getting momentum in recent scientific studies [7, 54, 55, 10]. it is a composite indicator that measures the quality of italian institutions at province level through the analytic hierarchy process [56] for the period 2004-2012. the following five dimensions: “voice and accountability”, “government effectiveness”, “regulatory quality”, “rule of law” and “control and corruption” are the main components of the iqi. the first one concerns the degree of freedom of press and association, the second one is related to the quality of public services as well as the definition and the implementation of policies by the local government. the third refers to the ability of government to promote and formulate effective regulatory interventions, while the fourth accounts for the perception of the law application in terms of contract fulfilment, property rights, police forces, activities of the magistracy as well as crime levels. lastly, the fifth dimension takes into account the degree of corruption of public employees. the iqi index is prompted by the world governance indicator (wgi) proposed by kraay et al. [57] in the context of the knowledge for change programme promoted by the world bank. however, it considers only five of the six dimensions of the wgi. indeed, the so-called “political stability and absence of violence and terrorism” dimension is omitted in the iqi since it is related to the frequency of terrorist attacks and to the presence of military in politics, that are not relevant in italy [9]. each dimension is composed, in turn, by the aggregation of elementary indexes (see figure 1) evaluated by data from institutional sources, 116 maria raimondo, concetta nazzaro, annamaria nifo, giuseppe marotta research institutes and professional registers. appendix b reports the list of all elementary indexes employed and sources. as for the methodological approach, three steps have been implemented to obtain the iqi index from elementary indices, such as: normalization, attribution of weights to each index and aggregation. first of all, the elementary indices were normalized, then measured in the interval [0, 1], determining the distance of each of them from the maximum value found at the province level. thus, through the analytical hierarchy process (ahp) [56], a weight was assigned to each normalized elementary index. finally, once normalized and weighed, the elementary indices were aggregated to obtain the institution’s quality index for 107 provinces – from 2004 to 2012 – which, by construction, takes values in the interval [0,1] [9]. appendix b reports values of iqi of each italian province and region included in the study. 3.2 method description the effect of institutional quality on labor productivity in italian vineyard farms is assessed by designing the following gaussian log-linear model: ln_lpi=α+β youngi+γ farmi+δ iqii+ εi i=1,2…773. (1) where ln_lp is the logarithmic of the labor productivity for each i-farm. more specifically, the lp is the dependent variable of the model obtained by the ratio between the gross marketable output (gmo) and the work units employed in each farm (euro/worker). some control variables were chosen, including farmers and farms aspects, based on what the scientific literature considers as crucial elements for labor productivity in agricultural sector [58, 59, 60, 61, 62, 63, 64, 65, 66]. young is a dummy variable, meaning the youth of the farmer that assumes value 1 if the farmer is 40 years old and 0 otherwise. in our model we called farm the vector of farms’ variables. the vector includes five control variables, i.e. machines capital, land-labor ratio, circulating agricultural capital, irrigation and second pillar founding. the variable machines capital is the ratio between the economic value of machines and the used agricultural area (uaa), attached to the level of farm’s investments in mechanization. the land-labor ratio variable, obtained by dividing the uaa per worker, giving information on the number of hectares per worker is a measure of the labor intensity. the circulating agricultural capital, defined as the ratio between the circulating agricultural capital and the (uaa), is an indicator that suggest the availability of euros per hectare. the irrigation variable is a dummy variable that assumes value 1 if the farm has irrigated land and 0 if the farm has not irrigated land. as for the second pillar founding variable, it is a dummy variable that means whether or not the farm received subsidies from the second pillar founding of the cap. in other words, the variable assumes value 1 if the farm has received some payments for measures of axis 2 from the rural development plan and 0 otherwise. the iqi is an explanatory variable of our model that measures, in the interval from 0 to 1, the institutional quality of the province in which the farm is located. finally, ε is the error term. a descriptive statistics of the variables included in the model is given in table 1. the average lp is around 50 thousand euros. as for the age of farmers, only 13% is younger than 40 years. the average value of the machines capital is roughly 3 thousand euros per hectare, about 1 thousand euros lower than the average circulating agricultural capital per hectare (3985.73 euros/ha). as for the land-labor ratio, each worker has, on average, less than 10 hectares (9.22). the 38% is the percentage of the irrigated land, while the 47% is the percentage of farms that have received founding from the second pillar founding. last, the average value of the iqi is 0.69, with the lowest equal to 0.04 and the highest value equal to 1 (meaning the maximum of the iqi). figure 1. dimensions and elementary indexes of iqi. source: structure of the institutional quality index (iqi) from lasagni et al, [7]. 117does the institutional quality affect labor productivity in italian vineyard farms? 4. results 4.1 the gaussian log-linear model estimates results from the designed statistical model are summarized in table 2. at a first glance, the coefficient of iqi has a significant and positive effect on lp, meaning that the institutional quality positively affects the labor productivity thus corroborating our research hypothesis. as for the impact of the institutional quality on the dependent variable, we followed benoit [67] for interpreting coefficients with logarithmic transformation. in the log-linear model, the interpretation of estimated coefficient β (see the second column of the table 2) is that a one-unit increase in x will produce an expected increase in log y of β units. in terms of y, this means that the expected value of y is multiplied by eβ. briefly, in terms of effects of changes in x on y (unlogged), each 1-unit increases in x multiplies the expected value of y by eβ. accordingly, the impact of the iqi on lp is quantified in 39% (the third column of the table 2). this means that going from the lowest level of the iqi (equal to 0) to the maximum one (equal to 1), the labor productivity will increase by 39% in italian vineyard farms. except for young, all control variables are statistically significant. more deeply, all of them have a positive effect on lp. 4.2 the sensitivity analysis of the iqi index the sensitivity analysis allows to determine and to quantify the impact of small input perturbations on the model output [68]. thus, we have carried out several perturbations to the iqi index. more deeply, we have assigned several different values to the institutional table 1. descriptive statistics of the variables included in the statistical model. variable name variable description mean std. dev. min max dependent variable lp labor productivity (euro/worker). the ratio between the gmo and the units of labor 48262.17 43514.6 1148.39 360860.8 independent variables young 1 = under 40 years old; 0 = otherwise .13 n.a. 0 1 machines capital ratio between machines capital and uaa (euro/ha) 2949.81 7482.68 0 105383.8 land-labor ratio available uaa per worker (ha/worker) 9.22 9.54 .64 107.25 circulating agricultural capital ratio between circulating agricultural capital and used agricultural area (euro/ha) 3985.73 17223.03 0 333915.2 irrigation 1=yes; 0=no .38 n.a. 0 1 second pillar founding 1=yes; 0=no .47 n.a. 0 1 iqi institutional quality index .69 .14 .04 1 n.a.: not applicable*. table 2. effect of iqi (institutional quality index) on value creation in vineyard farms. gaussian log-linear model estimates. parameters β coef. (eβ) std. err. t p-value iqi 0.330 1.39 0.17 1.88 0.060 * young 0.104 1.11 0.07 1.43 0.155 machines_capital 0.006 1.01 0.00 1.65 0.099* circulating agricultural capital 0.013 1.01 0.00 9.29 0.000*** irrigation 0.202 1.22 0.05 3.95 0.000*** second pillar founding 0.115 1.12 0.05 2.33 0.020 ** land-labor ratio 0.035 1.03 0.00 13.44 0.000*** cons 9.719 16.63 0.13 72.80 0.000*** note: n=773; * p-value < 0.1; ** p-value < 0.05; ***p-value < 0.01. r2 =0.26. 118 maria raimondo, concetta nazzaro, annamaria nifo, giuseppe marotta quality index in the range from 0 to 1 (0, 0.1, 0.2, 0.3, 0.4, 0.5, 0.6, 0.7, 0.8, 0.9 and 1) where 0 corresponds to the minimum level of the institution quality while 1 is the maximum value. afterwards, we have quantified the average labor productivity, at each level of iqi (table 3). in the figure 2 we have plotted the lp (y–axis) versus the perturbations of the iqi(x–axis). the graph reveals the linear effect of institutional quality index on the lp. specifically, the sensitivity analysis indicated that the institutional context has a positive and constant impact on labor productivity in vineyard farms. the slope of the line in figure 2 is the sensitivity of the lp with respect to the iqi (by taking fixed the other variables).in particular, as shown by the statistical model, if the iqi index is equal to 1 the average lp is 39% higher than that obtained under the iqi index equal to 0. in table 4, the difference between the average lp at region level by considering the current iqi and that obtained by giving to all provinces the maximum iqi value (i.e. equal to 1) suggests the economic loss, in terms of labor productivity, due to low institutional quality. the developed analysis shows that the lp in the italian regions and macro-areas (northern, southern and central) is not homogeneous. more specifically, it is possible to state that in calabria the average economic loss caused by the low quality of institutions is more than 37%. conversely, in trentino alto adige the average economic loss is roughly 5%. moreover, the economic loss increases by passing from the north to the southern regions, as shown in the last column of the table 4. accordingly, investments for improving the institutional quality in the southern regions would enhance the labor productivity in vineyard farms, thus improving the agricultural sector in underdeveloped areas. 5. discussions the present paper had three specific goals. first, it developed, for the first time, an empirical study to analyze the relation between the institutional quality of the italian provinces and labor productivity in italian vineyard farms. second, once answered to the first aim, the table 3. assumptions tested in the sensitivity analysis. assumptions average labor productivity (euro/worker) the iqi index is equal to 0 42901.02 the iqi index is equal to 0.1 44340.35 the iqi index is equal to 0.2 45827.97 the iqi index is equal to 0.3 47365.49 the iqi index is equal to 0.4 48954.60 the iqi index is equal to 0.5 50597.03 the iqi index is equal to 0.6 52294.56 the iqi index is equal to 0.7 54049.04 the iqi index is equal to 0.8 55862.39 the iqi index is equal to 0.9 57736.57 the iqi index is equal to 1 59673.63 40000 45000 50000 55000 60000 65000 0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1 a ve ra ge l ab or p ro d u ct iv it y (l p ) (e u ro /w or k er s) iqi index figure 2. the sensitivity analysis changing iqi index. table 4. the average labor productivity (lp) in italian regions at current iqi and at maximum value of iqi (equal to 1) in all italian provinces.   average lp (teur/w) at current iqi average lp (teur/w) at iqi equal to 1 in italian provinces economic loss (%) due to low institutional quality trentino alto adige 139633 146329 4.80 tuscany 44225 47043 6.37 abruzzo 37970 40589 6.90 emilia romagna 110657 119892 8.35 valle d’aosta 57200 62182 8.71 veneto 46239 50291 8.76 umbria 72550 79120 9.05 friuli venezia giulia 49611 54512 9.88 piedmont 46027 50775 10.32 lombardy 45512 50218 10.34 marche 43628 48158 10.38 lazio 46242 52960 14.53 liguria 45628 53438 17.12 campania 35125 41444 17.99 puglia 44793 54109 20.80 sardinia 76916 93006 20.92 basilicata 45715 55770 21.99 molise 48154 62701 30.21 sicily 60323 78563 30.24 calabria 31245 42894 37.28 119does the institutional quality affect labor productivity in italian vineyard farms? study quantified the effect size of the institutional quality on the economic value created per worker and finally, it measured the impact of the institutional quality on labor productivity in vineyard farms located in all italian regions and macro-areas (north, south and central italy). to this end, we developed a gaussian log-linear model, which considers the ratio between the gross marketable output and the number of workers employed in each farm as the dependent variable of the statistical model. further, the iqi is one of the independent variables together with the farms and farmers’ aspects. the model output highlighted a significant and positive effect of the institutional quality on labor productivity in italian vineyard farms. although there are no previous empirical studies about the effect of institutional quality of italian provinces on labor productivity in agricultural sector, our findings are consistent with previous theoretical and empirical studies developed in non-agricultural sector [5, 14, 51, 69, 9, 7, 70]. based on the study findings, one can state that vineyard farms operating in a good institutional context consistently increase the labor productivity. several reasons may explain this result. first, getting the “right” price from the market and reducing the transaction costs is helpful in increasing the gross marketable output. several authors, from decades to come, have indeed highlighted the role of both formal and informal institutions in improving the level and quality of entrepreneurship [71] as well as in removing the market imperfections and the transaction costs [1, 32]. furthermore, a favorable institutional context (in terms of bureaucracy efficiency and economic facilities) encourages farms to invest in technology and mechanization [18, 7], thus increasing the economic value created through the intensification of output produced per worker. the availability of economic facilities is also helpful for improving crop productivity and technical efficiency by the increase of financial services [72]. further, associations and social cooperatives are helpful tools for labor productivity by overcoming market imperfections and constraints [73, 74, 75, 76]. indeed, according to fischer and qaim [77] social cooperatives increase farm income and profit. moreover, being part of social cooperatives and associations may improve labor productivity by sharing knowledge and information among workers. as for the measure of the effect of the institutional quality on the average labor productivity in vineyard farms located in the north, south and in the central italy, the finding showed the lowest lp in farms located in the southern regions. this is in agreement with the work of lasagni and co-authors [7]) who showed that the total factor productivity in manufacturing firms is lower in industries located in the southern italian regions than those located in the northern and in the central ones. differences in lp among italian vineyard farms may be attributed to differences in transport and infrastructures [78] as well as to institutional factors [79]. more deeply, as for the transport field, according to carlucci et al. [78] the southern italy suffers from an infrastructure and logistic gap compared to northern italian regions and, in the same regions, bureaucracy is less efficient in terms of costs and time required [80]. moreover, widespread differences among italian macroareas are also shown in terms of corruption. indeed, 6 of the 7 southern regions have the number of reported crimes higher than the national average, meaning a high index of corruption that is a relevant issue in transport infrastructure financing and service provision [81, 82, 78]. to summarize, the main result of this study not only confirms the well known differences in endowments of institutional quality among italian provinces, but it pointed out, for the first time, that these differences also affect economic performances, specifically the lp in the italian vineyard farms. the impacts of control variables assessed in this research, except for the “young” one, are also significant and they are in line with scientific evidences. first, the higher capital endowment, both in terms of machines and financial capital, increases the lp. these results are consistent with previous studies in which the mechanization at farm level is a very critical tool for enhancing economic productivity [58, 66]. mechanization improves value created per workers in two ways: i) reducing the hard labor (and, consequently, drudgery) and ii) improving gross marketable output through the timeless of agricultural operations [59, 63]. conversely, the un-mechanized agriculture reveals much more negative economic performances [60, 64]. on the other hand, the availability of financial capital is helpful in purchase inputs of production, such as fertilizers and pesticides. indeed, a good amount of economic capital allows a huge consistency of fertilizers and pesticides increasing crop yield and, once again, the gross marketable output per workers [62]. likewise, the endowment of irrigated hectares may enhance value created reducing the risk of yield loss in vineyard farms located in the mediterranean area, where a deficit of irrigation reduces the yield of grape [61]. as for the second pillar founding, the model output has shown a positive impact on lp. it is a natural result since several measures of the second pillar of the cap providing physical investments1 could enhance the 1 http://www.europarl.europa.eu/factsheets/en/sheet/110/second-pillarof-the-cap-rural-development-policy 120 maria raimondo, concetta nazzaro, annamaria nifo, giuseppe marotta output per workers. a positive role on value creation is also played by the land-labor ratio variable, in agreement with urgessa [62] and fuglie [65]. the latter highlighted that the growth of population in rural areas-through the decline of the ratio between land and labor can reduce the average output per workers [65]. 6. conclusions and policy implications the present study analyses, for the first time, the effect of macroeconomic aspects, e.g. the quality of institution, on labor productivity in italian farms. to this end, we built a cross-section dataset of overall 773 italian farms specialized in viticulture and located in 71 italian provinces, where both micro and macroeconomic aspects are considered. then, data were analyzed by means of a gaussian log-linear model in order to grasp the effect of the institutional quality on lp. despite some limitations, among the others the specificity of the farms (vineyard farms) considered for the research and the type of the dataset used (cross-section), results assign a critical role to the business environment and institutional quality into determining labor productivity differentials in italian vineyard farms, in accordance with previous conceptualizations and empirical studies. this means that the economic performance of vineyard farms does not depend on internal resources of farms solely, but it is also affected by the quality of institutions in which farms operate. however, the variables (which we have shown to have a significant and positive impact on lp) that were used in the present study to describe the institutional quality, are not managed by farmers neither by the cap instruments. as a consequence, the findings of the present study have theoretical and political implications. as for the former, a wide discussion can be found in pervious publications where the role of institutional context on economic performances of farms is discussed [83, 84, 69, 51]. as for the political implications, it should be emphasized that critical aspects for the agricultural development, such as infrastructure facilities, bureaucracy efficiency and business environment, are not influenced by the cap. however, in the last decades, the policy makers have considered the second pillar of the cap the only available tool to enhance the rural development, without considering the general eu development strategies. these latter, meaning the european regional development found (erdf) and the european social found (esf), were indeed never integrated within the european agricultural fund for rural development (eafrd), since they are almost exclusively implemented in urban areas. given the findings of the present study, one can state that the integration among different eu strategies is crucial to develop the agricultural sector, especially in italian underdeveloped (typically southern) regions. as a consequence, since the institutional quality plays an important role in increasing the economic performances of farms, balancing all the eu strategies should be the main aim of the policy maker for the next programming period (2021-2027). an effective integration among eu strategies is needed to improve the agricultural sector to which citizens require many challenges, such as a better quality of food and environment as well as social sustainability. references [1] north, d. c.,. institutions. j. econ. perspect., 5(1), 97-112 (1991). doi: 10.1257/jep.5.1.97 [2] oecd, territorial 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firenze 22 palermo 1 salerno 1 alessandria 55 foggia 1 pavia 4 sassari 4 ancona 17 forlì-cesena 1 perugia 26 siena 3 aosta 51 genova 3 pesaro e urbino 4 sondrio 6 arezzo 5 gorizia 20 pescara 10 taranto 7 ascoli piceno 20 grosseto 15 piacenza 1 teramo 9 asti 57 imperia 4 pisa 1 terni 17 avellino 1 isernia 9 pistoia 1 torino 1 benevento 15 la spezia 6 pordenone 42 trapani 3 bergamo 5 latina 1 potenza 2 trento 21 bologna 3 lecce 3 prato 1 treviso 15 bolzano/bozen 18 lucca 1 ragusa 2 trieste 1 brescia 12 macerata 1 ravenna 5 udine 41 brindisi 38 mantova 7 reggio di calabria 2 venezia 9 cagliari 8 modena 4 reggio nell’emilia 3 verona 19 caserta 3 novara 1 rieti 1 vicenza 7 chieti 36 nuoro 1 rimini 1 viterbo 5 cuneo 41 padova 6 roma 3     source: fadn dataset. appendix b table 2a. structure of elementary iqi indexes index value source (details in notes) year voice and accountability social cooperatives absolute value1 istat 2001 associations absolute value1 istat 2004 election participation turnout %2 interior ministry 2001 books published absolute value3 istat 2007 purchased in bookshops index4 sole24ore 2004 government effectiveness endowment of social facilities index5 tagliacarne 2001 endowment of econ. facilities index6 tagliacarne 2001 regional health deficit absolute value7 mef and mh 1997-2004 separate waste collection separate/total8 tagliacarne 2007 urban environment index index9 legambiente 2004 regulatory quality economy openness index10 tagliacarne 2001 local government employees absolute value11 istat 2003 business density index12 tagliacarne 2008 business start-ups/mortality registration/cessation13 tagliacarne 2003-2004 business environment index14 confartigianato 2009 125does the institutional quality affect labor productivity in italian vineyard farms? rule of law crimes against property absolute value15 istat 2003 crimes reported absolute value16 istat 2003 trial times trial lengths i, ii, iii17 crenos 1999 magistrate productivity magistratetrials18 ministry of justice 2004-2008 submerged economy tax evasion index19 index20 istat revenue agency 2003 1998-2002 corruption crimes against pa index21 interior ministry & istat 2004 golden-picci index index22 golden and picci (2005) 1997 special commissioners municipalities overruled23 interior ministry 1991-2005 notes:1social cooperatives per 100,000 residents, provincial level. istat: “le cooperative sociali in italia” (2006) and “le organizzazioni di volontariato in italia” (2005); 22001 general election, provincial level. interior ministry: “archivio storico delle elezioni” http://elezionistorico.interno.it/ ; 3books published, in absolute value, provincial level. istat: “la produzione libraia” (2007); 4purchased books over resident population, provincial level. il sole24ore “dossier sulla qualità della vita” (2004); 5includes education, healthcare and leisure facilities, provincial level.tagliacarne institute “atlante di competitività delle province italiane” (2001); 6includes the following networks: roads, railroads, ports, airports, energy, ict, banking, provincial level. tagliacarne institute “atlante di competitività delle provincie italiane” (2001); 7regional health deficit per capita 1997-2004, regional level. elaboration on ministry of economy and finance and ministry of health data from “relazione generale sulla situazione economica del paese” (1997-2004); 8share of separate waste collection on total waste collection, provincial level. tagliacarne institute “atlante di competitività delle province italiane” (2001); 9includes 25 indexes relative to: air quality, water quality, purification plants, waste management, public transportation, energy consumption, public parks, eco management, provincial level. legambiente “ecosistema urbano 2004” (2004); 10import + export on the gross domestic product, provincial level. tagliacarne institute “atlante di competitività delle provincie italiane” (2001); 11public servants over resident population, regional level. istat: “indicatori statistici sulle amministrazioni centrali e locali” (2003) http://dati.statistiche-pa.it/ ; 12number of firms for 100 residents, provincial level. tagliacarne institute “atlante di competitività delle province italiane” (2008); 13firms registration/mortality, provincial level. tagliacarne institute “atlante di competitività delle province italiane” (2003-2004); 14includes 39 indexes relative to: entrepreneurship, job market, tax system, market competition, banking, bureaucracy; public services to firms, firms’ cooperation, provincial level. confartigianato: “l’indice confartigianato – qualità della vita dell’impresa” (2009); 15number of crimes against property over resident population, provincial level. istat: “indicatori territoriali per le politiche di sviluppo” (2003); 16number of crimes reported over resident population, provincial level. istat: “indicatori territoriali per le politiche di sviluppo” (2003); 17average length of judicial process, regional level.crenos “data-base on crime and deterrence in the italian regions (1970-1999)”; 18number of completed civil and criminal trials for magistrate, regional courts level. ministry of justice, statistics: “graduatoria rispetto agli esauriti per magistrato presente” (2004-2008); 19istat estimation, provincial level.istat: “le misure dell’economia sommersa secondo le statistiche ufficiali” (2003); 20based on the difference between the estimated added value by national accounts and tax system (irap and individual income tax returns), provincial level. agenzia delle entrate: “analisi dell’evasione fondata su dati irap, anni 1998-2002” (2006); 21number of crimes against the public administration over number of public servants, regional level. istat: “indicatori territoriali per le politiche di sviluppo” (2004); 22difference between the amounts of physically existing public infrastructure and the amounts of money cumulatively allocated by government to create these public works, provincial level. golden and picci (2005); 23absolute value of the overruled municipalities on total municipalities, regional level. interior ministry: “relazione sull’attività svolta dalla gestione straordinaria dei comuni commissariati” (1991-2005). table 3a. the institutional quality index of considered provinces in 2012. province iqi province iqi province iqi province iqi agrigento 0.2135 firenze 1 palermo 0.1998 salerno 0.5378 alessandria 0.6651 foggia 0.3511 pavia 0.6229 sassari 0.4713 ancona 0.7505 forlì-cesena 0.7719 perugia 0.7572 siena 0.877 aosta 0.7469 genova 0.5228 pesaro e urbino 0.7524 sondrio 0.6969 arezzo 0.8635 gorizia 0.775 pescara 0.6235 taranto 0.3795 ascoli piceno 0.6794 grosseto 0.7928 piacenza 0.7435 teramo 0.7788 asti 0.6614 imperia 0.4221 pisa 0.8757 terni 0.7312 avellino 0.4538 isernia 0.2001 pistoia 0.7705 torino 0.6823 benevento 0.5197 la spezia 0.6083 pordenone 0.703 trapani 0.147 bergamo 0.7405 latina 0.5209 potenza 0.3976 trento 0.873 bologna 0.695 lecce 0.4937 prato 0.8179 treviso 0.7935 bolzano/bozen 0.8553 lucca 0.8504 ragusa 0.2887 trieste 0.7984 126 maria raimondo, concetta nazzaro, annamaria nifo, giuseppe marotta brescia 0.7029 macerata 0.7209 ravenna 0.8135 udine 0.698 brindisi 0.4459 mantova 0.729 reggio di calabria 0.0398 venezia 0.7247 cagliari 0.3927 modena 0.7035 reggio nell’emilia 0.7126 verona 0.7312 caserta 0.411 novara 0.7585 rieti 0.5958 vicenza 0.7186 chieti 0.8574 nuoro 0.4515 rimini 0.7645 viterbo 0.5397 cuneo 0.8075 padova 0.7308 roma 0.7297     source: 9. table 4a. the average iqi at region level in 2012. italian regions italian macroarea average iqi trentino alto adige northern 0.8642 tuscany central 0.8109 abruzzo southern 0.8020 valle d’aosta northern 0.7469 veneto northern 0.7452 emilia romagna northern 0.7436 umbria central 0.7396 friuli venzia giulia northern 0.7158 lombardy northern 0.7033 piedmont northern 0.7021 marche central 0.6955 lazio central 0.5831 liguria northern 0.5313 campania southern 0.5010 apulia southern 0.4374 sardinia southern 0.4214 basilicata southern 0.3976 sicily southern 0.2065 molise southern 0.2001 calabria southern 0.0398 total 0.6898 source: our elaborations on data by nifo and vecchione (2014). wine economics and policy volume 9, issue 2 2020 firenze university press the influence of alcohol warning labels on consumers’ choices of wine and beer azzurra annunziata1,*, lara agnoli2, riccardo vecchio3, steve charters4, angela mariani5 a bad year? climate variability and the wine industry in chile eduardo haddad1,*, patricio aroca2, pilar jano3, ademir rocha4, bruno pimenta5 sparkling wine international market structure and competitiveness karim marini thome*, vitoria a. leal paiva the role of context definition in choice experiments: a methodological proposal based on customized scenarios fabio boncinelli*, caterina contini, francesca gerini, caterina romano, gabriele scozzafava, leonardo casini the impact of country of origin on brand equity: an analysis of the wine sector nádia passagem1, cátia fernandes crespo2,*, nuno almeida3 competitive strategies for wine cooperatives in the german wine industry barbara richter1,*, jon hanf2 valuation of viticultural adaptation to climate change in vineyards: a discrete choice experiment to prioritize trade-offs perceived by citizens verónica farreras1,2, laura abraham3,* does the institutional quality affect labor productivity in italian vineyard farms? maria raimondo1,*, concetta nazzaro4, annamaria nifo3, giuseppe marotta2 the role, scope and management of r&d and innovation in the wine sector: an interview with antonio graca peter hayes am wine economics and policy 12(1): 81-99, 2023 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/wep-12781 wine economics and policy citation: étienne montaigne, samson zadmehran, alfredo coelho, yacine messaoudène (2023). analysis of the 2007-2008 hérault premiumized grubbing-up campaign: a tool to better understand fischer-boel’s 2008-2011 grubbing-up campaigns and the desire in 2022 to reintroduce locally premiumized grub-ups. wine economics and policy 12(1): 81-99. doi: 10.36253/wep12781 copyright: © 2023 étienne montaigne, samson zadmehran, alfredo coelho, yacine messaoudène. this is an open access, peer-reviewed article published by firenze university press (http://www.fupress.com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information fi les. competing interests: the author(s) declare(s) no confl ict of interest. analysis of the 2007-2008 hérault premiumized grubbing-up campaign: a tool to better understand fischer-boel’s 2008-2011 grubbingup campaigns and the desire in 2022 to reintroduce locally premiumized grub-ups étienne montaigne1, samson zadmehran2,*, alfredo coelho3, yacine messaoudène4 1 l’institut agro, supagro montpellier, 34060 montpellier, france 2 moisa, univ montpellier, cirad, ciheam-iamm, inrae, institut agro montpellier, france 3 department enterprises and territories, bordeaux sciences agro, 33170 gradignan, france 4 ciheam-iamm, umr moisa, f-34093, montpellier, france e-mail: etienne.montaigne@supagro.fr; zadmehran@gmail.com; alfredo.coelho@agrobordeaux.fr *corresponding author. abstract. in 2022, in bordeaux due to a structural oversupply, grape growers’ syndicates have asked to reimplement premiumized grub-ups in order to bring the market back to equilibrium. however, in today’s cmo no legal basis exists to conduct such a policy. in this article, we go over the policy of planting rights (transformed in 2016 into planting authorization) and of premiumized grub-ups. in undertaking this historical review of europe’s grubbing-up policy, we analyze in detail pierre bartoli’s 1982 thesis and studies of the observatoire de l’hérault (dyopta) that take into account experts’ opinions and statistical viewpoints. th is review enables us to present the main indicators in order to “objectively” analyze data that we received from a 2007/2008 grubbing-up campaign in hérault. our originality is the analysis of a subset consisting of 341 vinifl hor applications for grubbing-up premiums, which represents 20% of all benefi ciaries receiving premiums. th e applications were later sent with the applicants’ consent to a development agency that transmitted them to us. within this subset, we selected 51 grape growers with whom we conducted a qualitative and quantitative survey. our goal was to identify their real motivations for grubbing up their vines. we then put forward synthesized results explaining the qualitative interviews and run the data through an econometric model. th e main results are that many grape growers grubbed up only a small fraction of their vineyards mainly to cash in on the premiums in times of dire wine crisis. grubbing ups of young “improving varietals” reinforces this analysis. furthermore, the 2007/2008 grubbing-up campaign comes a year just before the 2008/2011 fischer-boel grubbing-up campaigns that wanted to reduce europe’s vineyard of 175,000 ha of vines by eliminating the least effi cient grape growers. we thought it would be interesting to shed light on this 2008 wine cmo policy by using the results of the 2007/2008 grubbing-up campaign. keywords: sustainability, wine sector, cap reform, fadn. 82 étienne montaigne et al. 1. introduction unlike the new world’s viticulture, the potential of the european grape production is controlled through planting rights introduced by the 1976 wine cmo and planting authorizations since 2016 and the 2013 cmo1. planting rights gave the eu the possibility to control the area planted in vines and therefore participated to the long-term regulation of the wine market. historically, the ue wine market was also controlled by other short-term methods such as distillation, but it is another method that has attracted our attention: grub-ups and specifically premiumized ones. interestingly, it seems that one could imagine grub-ups as the flip side of planting rights: the eu commission enlarges the area planted in vines by issuing additional rights and diminishes it by introducing permanent grub-ups. currently under the 2013 cmo, premiumized grub-ups are no longer available as a policy tool to control the production potential of european vineyards. however, today in 2022, bordeaux’s grape growers’ syndicates are seeking to reintroduce a legal framework to be able to use them. in this paper we had access to data from the 2007/2008 hérault grubbing-up campaign that consists of 341 application files that the hérault chamber of agriculture received and transmitted to us. the particularities and importance of our data are linked to its rarity (individual grubbing-up data is difficult to access) and to the fact that it sits at the end of the 1999 wine cmo and right before the beginning of the 2008 wine cmo. the 2007/2008 hérault grubbing-up campaign is part of a set of campaigns that followed the 2004 worldwide overproduction crisis and its intent was clearly to regulate supply by diminishing it. our 2007/2008 campaign immediately precedes the three 2008/2011 grubbing-up campaigns (2008 wine cmo) that were introduced by the european commission and commissioner mrs. mariann fischer-boel in order to improve the competitiveness of european grape growers by grubbing-up 170,000 ha. this improvement was deemed necessary before the liberalization of the market through the disappearance of planting rights in 2016. in our work, on a given population and in a limited area, we aim to do an in-depth analysis of the grubbingup policy at the dawn of the new eu policy promoted by mrs. fischer boel. our article’s first ambition is to analyze the 2007/2008 hérault grubbing-up campaign by looking in detail at what was grubbed up. our second ambition is to study the motivations that directed the 1 for a historic and long-term vision of french viticulture, interventions and regulations, see chevet et al. (2018) [1] and meloni and swinnen (2013) [2]. grape growers’ decision. to do so we conducted 51 qualitative interviews with grape growers contained within our initial sample (341 application files). furthermore, we use these analyses as an exploratory tool in the event of a future reflection on the evaluation of the 2008/2011 eu grubbing-up policy. by doing so, it appears that the reasons put forward in european texts’ recitals were focused on eliminating “old and inefficient” small grape growers and did not take into account, at least in hérault, all of the grape grower’s microeconomic and technical motivations. 2. history of european wine cmos for the production potential management it has now been more than eighty years since france and spain implemented rules commonly known as planting rights to control the planting of vines [1,2]. following king’s law’s logic [3], their aim is to prevent anarchic plantings of vines that would come to weigh on the wine supply within the next three years2 and perhaps cause the collapse of prices on the wine market. starting on january 1, 2016, planting rights became planting authorization3 and still remain a pillar of the wine cmo as they manage the capacity of wine production [4]. however, this was not always the case in the european union (ue): originally in 1970 the ue recuperated the french market organization except for planting rights meaning that from the 1970 to 1976 planting rights did not exist in the eu except in france. in 1976, the ue decided to activate planting rights in order to face a table wine overproduction crisis induced by “wine wars” between france and italy that caused riots [5]. as winemakers rioted in 1976 in montredon-corbrières (languedoc-roussillon, france), they faced the crs4: during the clashes both a crs captain and a winemaker died [6]. planting rights/ authorizations have gone on to become the hallmark of the ue wine policy. 2 in general, it takes three years for planted vines to mature and produce grapes that will come to the market. 3 with the 2013 cmo, planting rights have been transformed into planting authorizations but have retained the same impact on controlling production. also, the new rules forbid to transfer the title to other producers. this constraint highly affects the evolution and the capacity to control the evolution of vineyards. 4 compagnies républicaines de sécurité: an elite french police force specialized in facing riots. 83analysis of the 2007-2008 hérault premiumized grubbing-up campaign 2.1 1976 wine cmo: adoption of “(re)planting5 rights and grubbing premiums in 1976, facing social tension, the european commission decided to manage the capacity of wine production by prohibiting the planting of any new vines and by doing so recreated de facto “(re)planting rights.” in other words, a grape grower could only plant an area of vines if he had previously grubbed up an equivalent area. simultaneously, the european commission created premiums for grape growers grubbing up their vines to compensate the suspension of their rights to plant for six years (council regulation (eec) no. 1163/76) [7]. later, premiums for permanent grub-ups, resulting in the permanent disappearance of planting rights, appeared and were maintained through the following wine cmos [8]. economically, this policy had an impact on the wine market: until the middle of the ’90s grubbed-up areas brought the european wine market to a general quantitative equilibrium [9]. other measures concerning restructuring, favoring the transition to pgi and pdo have participated in a better adaptation to the market. from the 1988/1989 campaign to the 2004/2005 one, premiumized grub-ups resulted in the permanent disappearance of roughly 500,000 ha of vines in all of the eu [10]. figure 1 gives the share of the grubbing-up budget in the wine cmo budget from 1993 to 2005 (light green). in regard to the dimensions of the eu vineyards, on a period going from 1990 to 2007, the french ones grew on average from 4 ha to 9 ha, 5 in 1999, this first category of planting rights will be renamed replanting right in order to differentiate it from the two newly created categories. hence the parentheses. the spanish ones from 3.5 ha to 5.5 ha, the german ones from 2 to 3.5 ha and the italian ones from 1 ha to 1.5 ha. however, there is still a large number of small vineyards left and some were even created during the 2007/2012 grubbing campaigns as a result of splitting the vineyards in order to be able to receive the premiums. from 2010 to 2020 changes appear as restructuring financed by the cap becomes the principal policy tool affecting languedoc vineyards instead of cmo ones such as planting rights and grubbing-up campaign [11]. 2.2 1999 wine cmo: creation of the reserve for rights, reserve rights and “new” planting rights the introduction of the 1999 wine cmo6 refined the management of planting vines in the eu7. this reform arrived in the midst of fears of an insufficient wine supply, at least in certain markets, due to: (1) the systematization of premiumized grub-ups from 1976 to 1997, (2) three consecutive small harvests (1995/1996; 1996/1997; 1997/1998) [13] and (3) flawed diagnostics made during the 1993/1994 amendment of the previous wine cmo [14,15]. in refining its management, the 1999 wine cmo created a reserve system to save forsaken or unused planting rights and clearly distinguished three categories of planting rights: (1) replanting rights (previous grub6 council regulation (ec) no. 1493/1999 of may 17, 1999. 7 “this suppleness is comforted by the level of the community’s production of wine. the 1996, 1997 and 1998 harvests were situated at levels clearly below the previous years. this was the background for the discussions that took place and that resulted in the new 1999 basic rules, which decided to create the new planting right quotas for the member states.” [13] figure 1. evolution of the wine cmo’s budget allocated to grubbing up. source: challenges and opportunities for european wines – 16.02.2006 – slide 42 [12]. 84 étienne montaigne et al. up required), (2) new planting rights (a new right created ex-nihilo) and (3) planting rights from the reserve. as we’ve seen replanting rights already existed in the former wine cmos: planting an area of vines was only possible if an equivalent area of vines was grubbed up elsewhere. in 2000/2001, replanting rights remaining in grape growers’ portfolios represented an area of 193,016 ha. by 2005/2006 this area had increased to 216,0048 ha [16]. table 1 illustrates the evolution of the area of replanting rights held by grape growers from 2000/2001 to 2005/2006 in major eu wine-producing countries. the 1999 wine cmo created ex-nihilo an overall 51,000 ha quota (art. 6(1) of r. 1493/1999)9 of new planting rights (art. 3(2) of r. 1493/1999) which was distributed to 8 countries as table 2 indicates. this table also shows that only 68% of the quota equaling to 34,783 ha of rights to plant new vines were allocated and the rest were directed towards the newly created rights’ reserve [16]. 8 this number rises to 231,809 ha if we include the 10 wine producing member states that joined the european union on may 1st, 2004 after the athens treaty: cyprus, czech republic, estonia, hungary, latvia, lithuania, malta, poland, slovakia, slovenia. 9 this handing out did not have major impact on determining the production capacity. the decrease in wine consumption has led to premiumless grub ups and reconversions in many wine-producing countries. the 1999 wine cmo created national and regional “reserves” to recuperate unused new planting rights and replanting rights that were set to expire. on three campaigns from 2000/2001 to 2003/2004, the reserves held 68,000 ha [16]. members states or their regions could access these reserve rights if an inventory of their wine production showed that their wine supply was below table 1. replanting rights held by the grape growers (ha, eu-15, 2000/2006). in ha 2000/2001 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006 czech republic nr nr nr 0 154 192 germany 3900 4235 4184 4366 4436 4285 greece 2376 2376 560 1682 1206 987 spain 74,189 83,315 80,949 82,814 88,475 88,412 france 45,094 47,611 51,942 44,823 43,749 43,702 italy 42,056 44,448 41,103 47,748 46,502 52,465 cyprus nr nr nr 467 596 596 luxembourg 0 0 0 12 0 0 hungary nr nr nr 12,509 13,525 14,266 malta nr nr nr 0 0 0 austria 12,592 12,695 5313 5501 8897 9030 portugal 12,809 10,737 12,045 13,541 17,124 17,124 slovenia nr nr nr 0 276 251 slovakia nr nr nr 0 500 500 subtotal eu 15 193,016 205,417 196,097 200,488 210,390 216,004 subtotal eu 10 nr nr nr 12,976 15,051 15,805 total 193,016 205,417 196,097 213,463 225,441 231,809 source: communications of the member states according to table 7.2 and, where applicable, table 7.1 of the annex to regulation (ec) n. 1227/2000, cited by commission of the european communities. commission report to the european parliament and the council on management of planting rights pursuant to chapter i of title ii of council regulation (ec) n. 1493/1999. brussels: commission of the european communities; 2007. table 2. use of the newly created planting rights for planting vineyards to produce quality wines and table wines with geographical indication. quota distributed (ha) new planting rights used (ha) percentage of use (%) germany 1534 471 31 greece 1098 1098 100 spain 17,355 17,107 99 france 13,565 9377 69 italy 12,933 3688 29 luxembourg 18 0 0 austria 737 0 0 portugal 3760 3041 81 total 51,000 34,783 68 source: communications of the member states according to table 2.2 of the annex to the regulation (ec) n. 1227/2000 and article 6 of regulation (ec) n. 1493/1999. 85analysis of the 2007-2008 hérault premiumized grubbing-up campaign their demand. when applying, young and recently settled grape growers were given priority. all in all, the three categories of planting rights represented 275,797 ha or 8.3% of the european vineyards consisting of 3,326,542 ha [16]. from the 2000/2001 campaign to the 2007/2008 one, grubbing-up was carried out with the help of limitless community (european) funding. each member state specified the regions where the intervention would be applied. in france, small regions and small surfaces were first concerned for the initial four campaigns and the average grubbing rate was 1,200 ha/year. then, due to the 2004 global overproduction crisis, this measure became more widely solicited and over the next three campaigns, from 2005 to 2008, the average national grubbing rate rose to 14,000 ha/year. 70% of all grub-ups happened in languedoc-roussillon with 9,740 ha/year. these three grubbing-up campaigns were far superior to the following three from the 2008/2011 “fischer boel” operation. 2.3 2008 wine cmo: a thirst for competitiveness in 2006, a procedure that would profoundly modify the 1999 wine cmo appeared. it was initiated by discussions between the different european bodies—the european commission, the copa-cogeca and the european parliament—and based on two documents provided by the european commission [17,18] and three by the commission of the european communities [12,19,20] and completed by studies ordered by the european commission and the european parliament [14,21–23]. the european commission’s proposal took into account the hardships of the european wine sector, which were linked to a never before witnessed worldwide overproduction of 50 to 60  million extra hectoliters10 [24,25]. this crisis impacted to a certain degree all wine actors, including australia and other countries from the new world and the southern hemisphere. the economic situation worsened in the eu due to an internal decrease of wine consumption in the traditional wine producing countries and a significant increase in imports of new world wine entering northern european markets, especially the united kingdom. the european commission concluded that this situation existed due to a lack of competitiveness from the european producers because their farm sizes were too small [26]. in its communication “towards a sustainable european wine sector,”  the european commission retained the scenario “profound reform of the cmo—variant b—two-step” and justified its choice by stating: “the first 10 each year the oiv publishes data in regards to wine production. phase is restoring market balance and the second phase is building improved competitiveness, including the abolition of planting rights. the principal feature of variant b would be a structural adjustment, i.e., temporarily reactivating the grubbing-up scheme. the system of restrictions on planting rights would be extended until 2013, when it would expire. the least competitive wine producers would have a strong incentive to sell their planting rights or to grub up with subsidies. rapidly, competitive producers can be expected to focus more on the competitiveness of their enterprise, as the cost of planting rights will no longer hamper expansion. in the medium to long term this would represent a reduction in their fixed production costs” [19]. this scenario would span 5 years, aim to grub up 400,000  ha and allocate 2.4  billion euros towards premiums. incentives were also given to grape growers to act quickly as the value of the premiums received would decrease in the second and third years of the policy. promoting competitiveness and fighting oversupply were truly at the heart of this policy project. however, this scenario was not validated and a second proposal was negotiated in 2007. after many debates and a parliamentary text putting forward more than 500 amendments [27], the council of ministers approved the 2008 wine cmo11 reform (council regulation (ec) no. 479/2008 of april 29, 2008), which included a new grubbing policy. in it, the original target of 400,000 ha was first reduced to 200,000 ha spanning 5 years and then, furthermore, to 175,000 ha on a 3-year period—2008/2009, 2009/2010 and 2010/2011—with premiums also decreasing in the second and third years. this three-year grubbing policy is defined in the 2008 wine cmo under title v, production potential, chapter  iii grubbing-up scheme. arguments for such a scheme are stated in recitals  3, 58 and 68: “moreover, some of the existing regulatory measures12 have unduly constrained the activities of competitive producers.”—recital  3; “while the transitional prohibition on new plantings has had some effect on the balance between supply and demand in the wine market, it has at the same time created an obstacle for competitive producers who wish to respond flexibly to increased demand.”—recital 58 and finally “where producers consider that the conditions in certain areas are not conducive to viable production, they should be given the option of cutting their costs and permanently withdrawing these areas from wine production and should be enabled either to pursue alternative 11 the new wine cmo dealt with the organization of the wine common market. it modified rules (ec) no. 1493/1999, (ec)  no.  1782/2003, (ec) no.  1290/2005 and (ec) no. 3/2008, and repealed rules (cee) no. 2392/86 and (ec) no. 1493/1999. 12 commonly understood as planting rights, as confirmed by recital 58. 86 étienne montaigne et al. activities on the relevant area or to retire from agricultural production altogether.”—recital 68. through these recitals the grubbing-up policy appears to intervene simultaneously on supply and efficiency with objectives to respectively eliminate planting rights13 and foster economies of scale in grape farms. it is also put forward as a way to eliminate the least productive producers, by enticing then with a premium. article  102 “procedure and budget” defines how to target the least productive grape grower through a set of rules prioritizing the access to the premium. priority is given to those (1) grubbing up the entirety of their vineyard or completely ceasing their wine-related activity and (2) to applicants aged 55 or higher. furthermore, premiums increase with the yield and decrease in the second and third years as shown in table 3 this gradualness is part of the european commission’s tradition, as it believes that it should compensate the loss in revenue in proportion to the yield14. this grubbing-up policy was successful as eu countries used a 100% of the available budget and seamlessly reached the 175,000 ha target and 160,550 once the application files were treated15. 13 planned next was the liberalization of vine planting by making disappear all planting bans (i.e. planting rights). the start of this plan ranged from 2015 to 2018 and many reasons in the text supported and motivated their definitive disappearance. but as the deadline approached, many european professionals and many locally elected representatives questioned the soundness of this deregulation as they feared disastrous consequences. 14 delord and al. (2016) have questioned the relationship between yield, size and profitability in viticulture [18]. 15 upon further notice franceagrimer determined that 160,550 ha resulted in premiumized grub-ups [28]. dacian ciolos confirmed the 160,000 ha of grubbed up vines in the april 19, 2012 speech [29]. simultaneously to the implementation of three grubbing-up campaigns, the 2008 wine ocm (ce n° 479-2008) reorganized the management of viticulture by means of the nsps, “the national support programs”. these programs provided a fixed budget for each country and gave each member state (ms) the possibility to choose its objectives “à la carte within a menu”, and with the possibility of doing so at the regional level. by doing so, europe was thus giving itself other means of continuing to improve its viticultural performance, in particular by three preferred means in france: restructuring and reconversion (37.8%), investment (32.3%) and promotion (14.3%) ((ce) n° 479-2008, art. 10-11-15 confirmed by (ce) n° 32013r1308 art 43-52) [30]. 2.4 2013 cmo: abolition of planting rights and the end of premiumized of grubbing-up campaigns the 2008 wine cmo introduced the abolition of planting rights by 2015, a decision that led to debates and controversies within the wine industry. responding to the uproar, the 2013 cmo transformed planting rights into planting authorizations and introduced a yearly growth limitation corresponding to 1% of the area planted in vines. authorizations are free, they cannot be sold on a market like planting rights could. economically argued limits were also introduced at the pgi and pdo level. grape growers can plant as many vines as they want as long as national and local limits are not attained. in the south of france [11], with the exception of charentes exposed to strong growth in demand for cognac, local limits have not been very much used. hérault area planted in vines has stabilized around 80,500 ha since 2011, after having lost 40,931 ha from 1988 to 2010 with the permanent abandonment premium [31]. grape growers use today cap tools, such as restructuring instruments, that let them get financial help in order to plant improving varietals, change the distance between rows, changing the canopy management, introduce irrigation, improve environmental aspect such as planting hedges. but it appears that the cap’s tools are not sufficient to replace the effects of a grubbing-up campaign in regard to bringing the market back to equilibrium, particularly in on a regional market. recently, in 2022, bordeaux has been pleading for a grubbing-up campaign, but under the 2013 cmo there is no legal basis to fund it [32,33]. table 3. level of the premium provided for in article 98 of regulation (ec) n. 479/2008 annex xv. historical yield per hectare (hl) premium (eur/ha) requests approved in 2008/2009 requests approved in 2009/2010 requests approved in 2010/2011 (1) (2) (3) (4) ≤20 1740 1595 1450 >20 and ≤30 4080 3740 3400 >30 and ≤40 5040 4620 4200 >40 and ≤50 5520 5060 4600 >50 and ≤90 7560 6930 6300 >90 and ≤130 10,320 9460 8600 >130 and 160 13,320 12,210 11,100 >160 14,760 13,530 12,300 source: commission regulation (ec) n. 555/2008 of 27 june 2008. 87analysis of the 2007-2008 hérault premiumized grubbing-up campaign 3. hérault 2007/2008 campaign: a case study to shed light on the 2008/2011 eu grubbing policy and the question of the reintroduction of localized premiumized grub-ups in 2022 3.1 the importance of hérault and past studies in languedoc-roussillon historically16 the languedoc-roussillon region, where hérault is situated, has been very prone to grubbing up: from 1977 to 2010, this policy resulted in the disappearance of 40% of the vineyard (166,000  ha) [35]. according to the cour des comptes, the grub-up of highyield vines and vineyards being qualitatively restructured led languedoc-roussillon’s mean yield to drop from 80  hl/ha in 1980 to a bit more than 50  hl/ha in 2009 [35]. this court adds: “the focus of the grubbingup subsidy policy on a region traditionally prone to overproduction, added to the restructuration policy has profoundly modified this region’s landscape and the wine supply. it has favored the going out of business of many small polyvalent producers and has led to an upgrade of the product range” [35, p.  24–25]. in france, the 2008 wine cmo grubbing campaign resulted in more than 58,000  ha of vines removed and not surprisingly most came from languedoc-roussillon and hérault [35]. from 2005 to 2010, 69% of all grubbed-up areas in france and receiving premiums happened in languedoc-roussillon [35]. past research has already been conducted in hérault on grub-up motivation, particularly the study done by pierre bartoli and marc meunier in 1982 [36]. in “la politique de reconversion viticole  : résultats de la prime d’arrachage en languedoc-roussillon  1976-79”17 [37] the goal was to examine the consequences of the distribution of sizes on production systems. they wanted to understand the farmers’ governing motivations, their adequacy with the wine policy and analyze the socio-economic situation. this study showed the importance of the gap between the objectives set forth for reconversion premiums and the actual results. this gap appeared not only at the level of zones and farm structures, but also at the one dealing with the types of grubbing-up implemented and their reasons. the observatoire viticole de l’hérault’s (2005) [38] study “étude d’ impact des arrachages définitifs dans 16 for a general view of french viticulture see alonso et al. (2019) in the palgrave handbook of wine industry economics [34]. 17 the wine conversion policy: results of the grubbing-up premium in languedoc-roussillon 1976-79. l’hérault”18 updated the 1997 works of aigrain et al. [39] by undertaking a very precise statistical analysis, taking into account quantities and geographical areas, on a period ranging from 1988 to 2003. it showed that grubups were mostly located in the coastal plain, in urban and peri-urban areas. it also took note of the regression of the number of small size farms, the grub-ups within areas of appellation, the acceleration in the loss of the traditional varietals and the grub-ups of improving varietals. the study also showed “that from 1988 to 1991, the reasons for grubbing up gathered from the analysis are diffuse. their results show that premium value arrived in first place (83% of grub-ups received a premium). a need for diversification is also very present (80%) and it is hard to dissociate decision-making elements, such as retirement (30%), family reasons (24%) from a need for cash (10%)” [38]. however, they did not precisely state their survey’s sources and methodology. nevertheless, this study cites through “experts’ statements” the possible motivations for primed grubups: “(1) some grape growers that are dealing with hardships, take advantage of this chance to improve finances (grubbing  up small surfaces), (2) small farms (<5  ha), farmers that will retire soon and have nobody to takeover, will be the first concerned, (3) for certain farms the whole area may be grubbed up” [38, p.  16]. we find the same reasoning that had been expressed by the european commission as the study cites their arguments and explicitly leans on them. our analysis also aims to complete and further advance these previous works by pinpointing the real motivations (economic and social) that push grape growers to permanently grub up, partially or totally, their vines. this leads to a finer analysis of the adequacy between the actual grub-ups and the future objectives set forth by the policy within the 2008 wine cmo. 3.2 our analysis of the 2007/2008 grubbing-up campaign any economic policy decision taken at a level as aggregated as viticulture in europe cannot take into account all the situations of grape growers and all their motivations for grubbing up their vines. few data have been published on either the age of grape growers or on their economic performance to justify the a priori choices made. being considered as common knowledge was enough to make these facts relevant. furthermore, the success of this policy according to selected criteria has substantiated the merits of the common knowledge. to us, it seemed interesting to deepen the thought process 18 impact study of final grubbing up in the hérault. 88 étienne montaigne et al. on the eu 2008/2011 grubbing-up policy by analyzing the technical and microeconomic data originating from a genuine database capturing the grape growers’ motivations and behaviors adopted during the last subsidized grubbing-up campaign (2007/2008) using the previous 1999 wine cmo rules. it should be noted that this is france’s second largest grubbing-up campaign during the entire 1999/2011 period with 6,278 ha grubbed up and of which 4,040 ha happened in languedoc-roussillon. also, the 2007/2008 campaign gave the possibility to introduce specific rules locally. this was authorized by the 1999 wine cmo, adopted at the french national level and defined regionally by the “interprofessions” (inter-professionnal organisations) as they had the possibility to exclude any appellation or any varietals within an appellation from being grubbed up19. there are several reasons for doing so (1) because precise data on the 2008 wine cmo grubbing-up scheme is extremely hard to encounter due to privacy rules and (2) according to experts (inao and franceagrimer) this data may not be representative as rumor is that some grape growers split-up their grape farms and made their elderly grandparents owners of the areas to be grubbed up in order to maximize their chances of receiving their premium. therefore, the 2008/2009 data may be skewed and therefore the previous 2007/2008 campaign may be more representative of grape growers’ natural motivation as it does not incite them to change their behavior. our analysis acknowledges the 2004 world oversupply crisis that impacted all wine-producing countries in the world. falling prices created financial hardships for farms and cooperative cellars [41, 4220, 4321, 4422]. our 19 “geographical areas that can benefit from the premium for definitive abandonment of area of vineyard under the 2007/2008 campaign for the languedoc-roussillon region: […] for the department of hérault, all areas under vines, excluding areas planted with clairette (white) grape variety in the pdo ‘clairette du languedoc’ and areas planted with cinsault grape variety (red) in vin de pays des ‘côtes de thongue’” [40]. 20 “the study clearly illustrates the crisis. the majority of winemaking farms from languedoc roussillon cannot survive with the actual wine prices. we add to this the deficiency of the yields. sacrifices have been made to ‘hold on’ (few private withdrawals) but we note strong restrictions on investments (on average €10,000 per farm in 2007, €6,000 in 2008)” [42]. 21 “the languedoc-roussillon economy: 90% of the grape-growing farms appears to be in financial hardship. the cer (center of rural economy) of languedoc-roussillon presented this week an alarming report on the financial situation of the region’s grape growing farms. according to this study conducted within the scope of the regional wine production observatory, the financial situation of the wine-growing farms has strongly deteriorated within the last three years” [43]. 22 “in reality it’s mostly languedoc-roussillon that is going to grub up its vineyards. the crisis is here, worst and more profound than anywhere else and the winemakers’ cash reserves are totally depleted” [44]. complementary hypothesis is that numerous grub-ups were motivated by the consequences of the economic crisis due to falling prices and that grubbing-up premiums were also a means of survival for many grape growers, as they could use these premiums to reimburse bank loans contracted to purchase land or to plant vines in order to meet the ’90s new qualitative orientation. the 2004 supply crisis was followed by a strong demand crisis in 2008 due to the subprime mortgage crisis, which extended hardships for grape growers and increased their resort to grubbing up. 3.3 hypotheses using a typology of grape growers, we state the following hypotheses on their use of premiums resulting from permanently grubbing up their vines: freshly installed young grape growers facing a budget and indebtedness crisis: for them, premiums will be of great help in facing current farm expenses and to pay back loans and debt. grape growers near retirement: grub-up premiums guarantee them a decent retirement. grape growers that can no longer face the crisis: their belief is that grape-growing has no future in the region and has become a rewardless enterprise. therefore, they decide to grub up their vines and with the help of the premiums, they invest in other crops (wheat, fruits, vegetables, etc.). they may reorient themselves towards other sectors they deem more rewarding. grape growers owning land near urban centers: their vineyards are grubbed to transform their land lots into building plots. 4. materials and method 4.1 the sources of information: 341 viniflohr application files vinif lhor23 manages premiumized grub-ups in france and grape-growers must submit to them an application file. in addition to its administrative task, viniflhor analyzes the information in the files to compile grubbing-up statistics at the levels of the city, the department, the region and the country that are published on the site of the observatoire viticole (dyopta)24. spatialized data is highly interesting especially at a 23 now franceagrimer. 24 today this privately owned company is defunct. 89analysis of the 2007-2008 hérault premiumized grubbing-up campaign fine scale, but it only allows us to randomly approach and survey grape growers that have decided to grub as viniflhor’s management of grubbing-up premiums anonymizes all application files to ensure confidentiality meaning that individual grape growers are theoretically inaccessible. an exception was made for the 2007/2008 grubbing-up campaign as professional wine organizations demanded viniflhor to insert in the application files an optional consent form for grape growers allowing their application files to be forwarded to a development agency. france directly funded 2007/2008 campaign and it was the last one before the implementation of the new eu grubbing-up policy (2008/2011). the idea was to allow an ongoing thought process to improve future targeted interventions in order to better follow up on grape growers and their grubbed-up lots. the main points were economic monitoring and managing landscapes. in the case of our study, consenting grape growers accepted that their contact information and the content of their accomplished grub-ups be transmitted to the hérault chamber of agriculture (local extension service). 341 files representing about 20% of all hérault applications for the 2007/2008 premiums were transmitted. however, on certain files, certain information was missing as some questions remained unanswered. as the application files were handed over to us by the hérault chamber of agriculture, we did not construct the survey sample. furthermore, in regard to the french laws concerning privacy (cnil), we do not have any information on the entirety of the population that grubbed up their vines. therefore, we are unable to see if our 20% sample represents or not and if it is biased or not in regard to the hérault population grubbing up their vines during the 2007/2008 campaign. it could therefore appear, a priori, as a sample created by convenience since it is true that, within the grubbing-up application files, the choice “is favorable to the transmission of the file to a development organization” is not subject to any known statistical references. however, a posteriori, once we look closer, this is not the case of our survey sample. in fact, we can do the hypothesis that the population grubbing up their vines is representative of the total population of grape growers in hérault. to do so, we use the criterion “size of the vineyard”. when characterized by this criterion, our sample survey comes very close to one created by quota sampling using data contained in a survey conducted in 2007 by the hérault department on the size of grape farms in hérault. [45]. our sample’s variable concerning the size of grape farms when regressed against the one contained in the 2007 hérault survey results in a coefficient of determination equal to 0.78 (r2 using pearson’s method). the transmitted information was limited and contained: identification of the farmer and his farm, direct or indirect farming, owner-farmer or tenant-farmer leasing land, farm’s total area in vines and grubbed-up areas, winemaking location, list of lots being grubbed up including age of vines, their classification and if appellation wine was being produced, and the area grubbed up. quite surprisingly, the farmer’s age and yield were missing. these elements are essential in calculating the premium amount and should have normally been included. we assume their absence was due to the fact that viniflhor directly gathered this data on site during the field evaluation prior to the grub-ups and immediately evaluated premiums, according to table 4, as it completed the processing of the files. table 4. premium for the permanent abandonment (2007/2008 grb-up campaign, amount in euros by yield and by hectares. total area to be grubbed up vineyard area within the farm yield (hl/ha) premium amount (€/ha) less than 10 ares any area any value of yield 0 from 10 ares to 25 ares lower or equal to 25 ares any value of yield 4,300 higher than 25 ares more than 25 ares higher than 25 ares yield lower or equal to 20 1,450 yield higher from 20 to 30 3,400 yield higher from 30 to 40 4,200 yield higher from 40 to 50 4,600 yield higher from 50 to 90 6,300 yield higher from 90 to 130 8,600 yield higher from 130 to 160 11,100 yield higher than 160 12,300 source: viniflhor [40] 90 étienne montaigne et al. 4.2 sources of information: a survey of 51 grape growers after waiting 9 months, from september 2009 to march 2010, we completed our study by individually surveying 51 grape growers. indeed, as the 341 files were not anonymized we constituted a sub-sample containing 51 grape growers selected by size strata [46] and using telephone interviews, we were able to complete the information contained in the application files. our survey included detailed questions on farm structure and grub-up motivations. questions included the sex and age of the grape growers, the legal entity of their farm, how they acquired it, the size of their farm, the planted area of each varietal, the area of the varietals being grubbed up, the motivations for grubbing up, questions on the financial situation of the grape grower, questions of past grub ups, the presence of other crops on the farm, questions on grants received, questions on the possibility of an heir taking over. included was also a non-directive qualitative commentary from grape growers on their economic situation. the goal was to have access to a sample that best represented the concerned population. many questions were not fully answered, but a certain number of them enabled us to confirm certain qualitative results. 5. results 5.1 the grubbing-up rates the grubbing-up rate is an excellent indicator to measure the application of the grubbing-up policy. as shown in figure 2, we can define four groups of application files. the first group includes the smaller sized grape growers that grubbed up all or almost all their vines. the total area of their vineyard is 10  ha or less. the second group is similar to the first in vineyard size. its specificity is that the grubbing-up rate is lower, between 50 and 80%. they often conserve a small land lot to grow vines to keep a link with the cooperative cellar. this guarantees grapes for family consumption and a family revenue. they are trimming down on their size. the european commission specifically targeted these models. the third model englobes small and medium-sized farms that only grubbed up a smaller part of their vineyard: 1 to 30%. these grub-ups are limited. many farmers justify their decision of “selling a lot with vines” because of the opportunity to sell in a land market depressed by the crisis [47] and to find cash to reimburse loans. the fourth group gathers all the large farms. the areas grubbed up are high in absolute values, but much lower in relative values. grubbing-ups represent a sort of “option value” on the future, as it enables to balance the accounting books while they await the market’s evolution and the impact of the european grubbing-up campaign on the prices. the decision to quit, maintain oneself or again, increase in size will depend on the future sectorial situation. figure 3 gives another illustration of this data. 5.2 the varietals we analyzed the grub-ups of 27325 grape growing farms based in hérault and their corresponding 25 varietal data was missing from 68 wine estates. figure 2. grubbing-up rates according to total areas of vines (341 farms) 2007/2008 hérault. source: 341 viniflhor application files submitted with authorization to development agencies [4]. 1 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0 10 20 30 40 50 60 70 80 grubbing rate (%) farm area (ha) 91analysis of the 2007-2008 hérault premiumized grubbing-up campaign 1,029 land lots, for the year  2007 – representing 484 ha of grubbed-up vines. th e grubbed-up varietals can be categorized into two principal categories: traditional varietals and improving varietals as shown in figure 4. among the latter, some are considered as southern qualitative varietals such as syrah or grenache, and are found in the pdo specifi cations (cahier des charges). others, such as cabernet sauvignon and merlot, are excluded from the languedoc pdo specifi cations. th ese were principally developed for the pays  d’oc wine category [48,49]. th e traditional varietals (carignan, aramon, alicante, cinsault, terret-bouret, white ugni) are considered as either too abundant or too productive when planted in the plain. th e ministry of agriculture’s policy and subsidies for restructuration have favored the reduction in share of these varietals in the hérault vineyards. th e eight most grubbed-up varietals represent three quarters of all the grub-ups (361 ha/484  ha). among those 83% are traditional varietals and 17% improving varietals. more than a third of grubbed-up vines are carignan: 184 ha (38%). other major traditional varietals from the languedoc vineyard are cinsault (53.3 ha or 11%), grenache (47.6 ha or 10%), aramon (21.6  ha or 4%) and alicante (46.6 ha or 10%). added to these traditional varietals are improving varietals such as syrah (38 ha or 8%), cabernet sauvignon (25  ha or 5%) or merlot (19  ha or 4%). th e remaining grubbed-up hectares are either made up of traditional varietals from languedoc (mourvèdre) or other improving varietals (viognier). we even found some table grapes (danlas or dabovki), but their proportions remain minimal and stay below the 1% mark. to refi ne our analysis, we looked at the age of the grubbed-up vines (figure 5) and in doing so we retained 4 age categories with a 25-year interval (0 to 24 years, 25 to 49 years, 50 to 74 years and 75 to 100 years). th e major fact observed is that most of the improving varietals are grubbed up before they reach 25 years. 92% of grubbed-up cabernet sauvignon (22.9 ha/24.9  ha) and merlot (12.4  ha/13.5  ha) were less than 25 years old. in regard to syrah,  85% of grubbed-up vines were under the age of 25. oppositely, the age at which traditional varietals are grubbed up was much older: almost 2/3 of carignan vines (108.5 ha/165.9  ha) were grubbed up between ages  25 and 49. about a 1/4 of grubbed-up 70 – 99 % 50 – 70 % 20 – 50 % 020 % 0 1 2 3 4 5 6 7 <= 5 ha 5 – 10 ha 10-20ha 20-50 ha > 50 farm area (ha) grubbing rate (%) farm count figure 3. headcount of surveyed farms according to their area and grubbing-up rate (341 farms) 2007/2008 hérault. source: 341 vinifl hor application fi les submitted with authorization to development agencies [4]. 92 étienne montaigne et al. carignan vines were between ages  50 and 100 (46.7  ha). we find similar age ranges for other traditional varietals as the age of 93% of grubbed-up alicante is between 25 and 49 years. 42.5% of grubbed-up aramon is located within the same range and 53% within the range of 50 to 100 years. only in the varietals grenache and syrah did we see vines under the age of 25 having been grubbed up: 46% and 28% respectively. however, when we look at the varietals between the ages  25 and 49, the grub-ups represent respectively 46.5% and 64%. when looking at the grubbed-up varietals and their ages as illustrated in figure 5, we can state that the main goal of eliminating the oldest vines and the least adapted to the market demand constituted the main part of the intervention. however, an important part of “improving varietals,” about a sixth were removed. this sends us to other explanations that are of a microeconomic nature that we will now study. 5.3 the motivations the reasons why each grape grower grubs up his vines are unique, that is, if we take into account the history of his farm, the specificities of his vineyard, his outlook on the future, his financial situation, if his farming business is full time or part-time, the existence of side revenues, etc. we conducted a survey in order to pursue our idea of testing the relevance of the “reaction” induced by the european commission’s economic policy. our goal is (1) to shed light on the impact of the premiums on the behavior of grape growers during the 2007/2008 campaign (the grubbing-up policy preceding the three-year campaign of the 2008 cmo), (2) but also use these finding to reflect on the new grubbing policy born from 2008 cmo and see which of our findings appear, or not, in fischer boel’s decision to grub-up 175,000 ha. we sur veyed grape growers that grubbed up their vines. we recorded word for word their reasons, expressed directly from the grape growers, for their grub-ups. twenty reasons were noted (table 5). we have been very thorough in recording these motivations. oftentimes we recorded two or three, near or complementary reasons coming from the same grape grower (on average two and a half). these motivations can be placed in five large categories: economic reasons are dominant: a lack of profitability and a need for cash. almost half of the answers dealt with economic reasons. our hypothesis of the impact of the economic crisis on the situation of farms has been confirmed. the goal can be to leave the business or simply to have access to more dis0 20 40 60 80 100 120 140 160 180 200 ca ri gn an ci ns au lt g re na ch e a lic an te sy ra h ca be rn et -s au vi gn on a ra m on m er lo t g re na ch e bl an c te rr et te m pr an ill o sa uv ig no n bl an c ch ar do nn ay ca ri gn an b la nc m ou vè rd re te rr et b la nc bo ur bo ul en c u gn i b la nc g re na ch e gr is m au za c bl an c pe tit v er do t m ar sa nn e ch en an so n te rr et g ri s bo rb et d an la s cl ai re tt e d ab ov ki m ac ab eu ch as se la s vi og ni er figure 4. grubbed-up areas (ha) according to varietals (2007/2008 hérault). source: viniflhor application files submitted with authorization to development agencies (273 estates as some data was missing in the files) [4]. 93analysis of the 2007-2008 hérault premiumized grubbing-up campaign posable cash. th e additional cash may be used to change businesses—linked to farming or not—or reduce debt. th e premium enables to transform land capital into fi nancial capital in a period when the market for vineyard land is limited [47]. th e land prices adjust themselves to the value of the premium added to the value of bare land. th en come the reasons associated to the farmer’s “life cycle.” th ese reasons are almost cited as much as the economic reasons. th ey are similar to the wine cmo whereas: th e premiums allow grape growers to retire with additional capital. it is a type of retirement annuity26. old age oft en goes hand in hand with retirement and the absence of a buyer or a successor. th is happens with the departure of land leasing farmers and sharecroppers. th e owner due to his old age cannot himself take over the work needed for the vines. lack of time and a second activity are motivations that are slightly diff erent. low profi tability is the reason that leads to reevaluate the opportunity cost linked to the time committed to grape growing. death and health problems speak for themselves. 26 in french this is called: “indemnité viagère de départ”. farm reorganization is less frequently cited. reducing the size can be linked to a reduction of payroll taxes, particularly by laying off a farm worker. it can free up additional time for a family member that can then take on another business. grubbing up vines from land lot situated far away from the farm’s center will reduce the distances within the farm. th is can be analyzed as a cost reduction (distance) or as a waiting strategy to purchase, at a later date, better situated land or vines. th e goal is to increase the rationality of farming. here, we are also looking at a deal that in a time of crisis is impossible to go forward with because of a lack of buyers. th e nature of the investment made with the premiums is not clearly stated. but it is also linked to a strategy of future farm enlargement or reorientation of the estate. th e possibility of transforming a freed-up land lot into a building lot is only cited once. th e intent here to perform a double dividend: turn the estate into cash and cash in on the real estate profi ts. bartoli and meunier’s [36] study had shown that this double dividend was meaningful in the suburbs of the languedoc plains and in many villages. for our survey, this dimension seems statistically too limited. 0-25 25-50 50-75 75 et + 0 20 40 60 80 100 120 ca rig na n ali ca nt e gr en ac he cin sa ult sy ra h ca be rn et -sa uv . m er lot area (ha) age (years) varietals figure 5. grubbed-up areas according to varietals and age of the lots (2007/2008 hérault). source: vinifl hor application fi les submitted with authorization to development agencies (273 estates as some data was missing in the fi les) [4] 94 étienne montaigne et al. the age of the vines or their poor state is a technical reason that is very rational. the remaining question would be to know if it was appropriate to subsidize these grub-ups. sooner or later these lots would have been eliminated and their contribution to the excessive supply was low. the premiums, however, were the right answer to brussels targets. lots that are in bad state have a low profitability and therefore coincide with the elimination of the least productive grape growers. however, we must state that this motivation is rather rare in our sample. a new orientation for farm activities also constitutes an answer to the objectives of the commission, but in a more indirect way. developing a more profitable business, changing business models, developing another crop, selling directly to customers, and organizing oenotourism, all these goals meet the target of improving competitiveness and support the need for extra cash. 5.4 econometric model: ordinary least square regression in order to further explain the reasons for grubbing up within the data gathered from our 51 grape growers, we have used an ordinary least square (ols) regression where xi are the k explanatory variables and y is the dependent variable. the model is linear and for each sample n the value yn is: the coefficient ß are found by minimizing the error of prediction. in our model y is the grubbing rate and the k xi explanatory variables are: grape grower’s sex and age, his need for cash and profitability, his agricultural activity, belonging to a cave coop, having an heir to take over the vineyard, if the grape grower had already previously been in a grubbing-up campaign. other variables included are the age of the vines being grubbed up and several important varietals: carignan, syrah, aramon, grenache, merlot, cinsault and sauvignon. our ols model has led to interesting results that are shown in table 6. it seems that there is an average correlation between having a tendency to grub up less and the fact of being a man (-0.172*) or of planning an agricultural activity after the grub-ups (-0.199*). this tendency to grub up less seems to be strongly correlated to being optimistic (-0.291**) and having an heir wishing to take over the family vineyard (-0.374**). these correlations are rational. the fact that a correlation exists between grubbing up and being a man is linked to the fact the low number of women (12 women, 23.5%). the other strong correlations in our ols regression are linked to varietals. it appears to that a strong correlation exists between a high percentage of grubbed-up vines and the grubbing-up of varietals aramon (0.316**) and merlot (0.369**). conversely, it seems that the more grape growers own cinsault (-0.259**), the less they tend to grub it up. this data on varietals should be put into perspective with the historical evolution of languedoc grape varietals. the grubbing-up of aramon is logical as it is one of the old languedoc varietals planted in the plains and linked to mass production of table wine. today the area planted in aramon is still deemed excessive meaning that more should be grubbed up. the explanation of grubbing up merlot is more counterintuitive as merlot is one of the first improving grape varietals introduced into the languedoc vineyards. several interpretations table 5. reasons for grub-ups. economic 57 45% absence of profitability 38 30% need for cash 19 15% life cycle 44 35% retirement 4 3% old age 3 2% lack of workforce to hire 4 3% lack of time due to second activity 11 9% death 1 1% departure or absence of the land leasing farmer or sharecropper 7 6% no buyer/successor to take over business 7 6% health problems 7 6% farm reorganization 7 6% size reduction 1 1% recentering the farm 3 2% investment 1 1% land purchase 1 1% building plots 1 1% technical 10 8% old vines or in bad state 10 8% activity reorientation 9 7% direct sales 1 1% oenotourism 2 2% development of another crop 5 4% change of business 1 1% total 127 100% 127 100% source: data from the 51 grape growers surveyed [4]. 95analysis of the 2007-2008 hérault premiumized grubbing-up campaign may be put forward explaining why they have a higher tendency to be grubbed up. firstly, these may be the first generation of languedoc merlots introduced in the 80’s probably planted in poor ecological condition (soil, microclimate, canopy management). in such a case, their grubbing-up and potential replacement are justified. another interpretation is that the grape growers’ situation is too dire to take into account the quality of this varietal. yet another possibility is that the grubbing-up is linked to the impossibility of selling the plot planted in merlot. finally, it must be noted that all three interpretations may be combined. cinsault is a dual-purpose varietal (it is also a used to produce table grapes) traditionally found in languedoc. recently it has been revisited by many languedoc pdos, particularly in corbières, pic saint-loup and saint-chinian and currently benefits by the high demand for rosé wines. furthermore, special rules in hérault banned its grubbing-up in certain appellations [40]. it is interesting to note that our model does not show any strong correlation between the grubbing-up rate and the age of the grape grower, the financial situation of the grape grower, a participation in a cooperative, the age of the vines, the existence of the previous grubups. furthermore, in regard to the varietals there appear no strong correlation between the grubbing-up rate and carignan, syrah, grenache and sauvignon. 6. conclusion can the grubbing campaigns that followed the period we studied, i.e. after 2007/2008, be clarified or, conversely, can it enlighten the micro-economic analysis of our survey on the permanent grubbing-up awarded in hérault? the three campaigns that followed, 2008/2009, 2009/2010 and 2010/2011, were the implementation of commissioner mariann fischer boel’s project of massive grubbing-up schemes oriented first on the equilibrium of the market, then on the improvement of the productivity of european viticulture. this orientation was formalized in the criteria required for allocating aid: the grubbingup of an entire vineyard or the grape grower’s age needed to be higher than 55 years. as such, this grubbing-up policy allowed elderly people without heirs or any economic prospects to exit their business and at the same benefit from the cashing out of their capital. simple criteria were needed to implement fischer boel’s policy, however, these criteria could not take into account qualitative aspect such as the choice of grape varietals to be grubbed up (see improving grape varietals of the 2007/2008 survey), nor the financial needs of grape growers under pressure from banks due to debt stemming from the crisis of overproduction in 2004 (cf. motivations). in fact, it is also known that the selected criteria have caused families to divide their vineyards to meet the threshold and benefit from this funding (see the partial uprooting observed in 2007/2008). the realization of this operation was a success as it reduced the eu’s vineyard production potential and allowed the early retirement of many operators. in the table 6. econometric analysis using the ols. (1) (2) (3) male -0.187* -0.158 -0.172* [-1.95] [-1.62] [-1.81] grape_grower_age 0.00803** 0.00891* 0.00621 [2.08] [1.93] [1.31] need_for_finance 0.0230 0.130 [0.22] [1.25] other_agri_activity -0.105 -0.199* [-0.92] [-1.89] coop -0.0678 -0.118 [-0.53] [-0.87] heir -0.400** -0.374** [-2.62] [-2.49] optimistic -0.264** -0.291** [-2.06] [-2.31] previous_grub_up -0.0891 -0.128 [-0.71] [-1.07] age_of_vines -0.00322 -0.00298 [-1.12] [-1.09] carignan 0.103 [1.00] syrah 0.0858 [0.68] aramon 0.316** [2,39] grenache 0.0349 [0,33] merlot 0.369** [2.73] cinsault -0.259** [-2.07] sauvignon -0.198 [-1,23] _cons 0.0835 0.330 0.391 [0.37] [0.88] [0.94] n 49 49 49 r2 0.152 0.348 0.573 source: zadmehran (2016) [50]. 96 étienne montaigne et al. years that followed, the question of premiumized permanent grub-ups was settled. in fact, at first our work only serves to improve our understanding of the impact of a “dated” agricultural policy measure. subsidized grubbing-up policies have been implemented since a long time in many grape-producing countries. the european commission has finally adopted this tool to achieve an identical goal: regulate the supply through the control of the production potential. even though the question of how to improve productivity has been set at the forefront as a justification for the intervention, the target is truly, in a first step, the impact of the reduction of supply potential on the market. from this point of view, the policy was highly efficient since 160,550 ha were grubbed up. in our analysis, limits we faced stemmed from the sampling method as the selection of grape growers was volunteer-based and thereby affects the representativeness of our quantitative evaluation. also, by using indirect productivity variables, age and total area grubbed up, the 2008 wine cmo rules for the 2008/2009 grubbing-up campaign gave priority to older grape growers and those grubbing up all their vines. however, it seems quite certain that these tools/variables take into account all aspects of the decision-making process to grub up and the data collected renders it difficult to analyze multifactorial motivations. furthermore, the quality policy appears to be put on the back burner since there are no criteria taking into account the nature of the grape varieties. as for perspectives to improve our analysis, there is work to be completed by improving the data processing, renewing the survey after 2011 (last campaign) and continuing to monitor data on the number of grape farms and their sizes, by particularly taking into account private estates and cooperatives. our analysis of the grubbing-up rates of the 2007/2008 campaign show that some of the least efficient farmers were eliminated through the deletion of their farms and when varietals of the grubbed-up grape are taken into account, the results merge towards those expected by the new 2008 wine cmo as most of the grubbed-up grapes are old or not sought-after varietals. however, one sixth of the eliminated lots are young improving varietals. the analysis of the motivations encompasses a large diversity of motivation and is mainly split between economic reasons linked to the crisis and the life cycle of the grape grower. the economic crisis and the premiums led a certain number of grape growers that had established vineyards in the ’90s to use the subsidies to reduce their debt. the 2008 wine cmo enabled a certain proportion of windfall for grape growers offsetting the impacts of the 2004 global supply crises (overproduction) and the 2008 demand crisis (subprime): premiums just as much help grape growers “get by” as improve productivity. in their 2016 article, kim anderson and hans jensen [51] criticized how the oecd interpreted the subsidies paid by the european union to the grape-growing sector. when trying to attempt to rectify the retained values, they added in the grubbing-up premiums. would the grubbing-up premium be a social subsidy helping the aged and non-efficient grape growers to retire? or would it be a larger subsidy helping the “wine industry”? our study on the 2007/2008 grub-up campaign, the ultimate one before the introduction of the 2008 wine cmo, gives us the following results: half of the grub-ups are done by grape growers for reasons that will be targeted by the 2008/2011 grub-up campaigns (the rejuvenation of the vines and grape growers) and the other half of the grub-ups are related to a windfall effect enabling grape growers to survive the crisis and wait for better days, even by grubbing up improving varietals. we can only wonder if this windfall effect will also appear in the 2008/2011 campaigns. 7. discussion premiumized grub-up campaigns should therefore theoretically be a policy of the past. however, news emanating from the wine market brings us back to reality. indeed, as overproduction reappeared in bordeaux, the question to grubbing up 8,000 to 10,000  ha of vines is again being brought up [32]. on may 23, 2022, during the general assembly of the bordeaux wine interprofessional council (civb), the civb president stated that “european texts do not currently allow to finance through public money permanent grub-ups. reminding this does not mean that we are against grubbing up, it means that these texts must be changed to remedy it” [32]. in its subtitle, the newspaper prints: “faced with the abandonment of vines and the depression of winegrowers, the interprofession wants to convince other french and european regions to release community funds to grub up surplus plots”. the question to grub up a significant area of vine is again on the rise, but the mechanism for a collective financial incentive through premiums no longer exists. the possibility of reintroducing this scheme through the french nsp raises many questions such as what specific criteria to introduce (exclusion of area or grape varieties, minimum surfaces, age of the winegrower or the vines, etc.). more questions arise, notably economic and 97analysis of the 2007-2008 hérault premiumized grubbing-up campaign political ones (on what budget to take the means of this campaign, at what level to ask for the individual bonus, what contribution to ask from the interprofession or the region, how to involve and obtain the agreement of the european commission and its funding?) at the microeconomic level, our work very modestly highlights a set of economic policy questions: how to take into account the economic situation of winegrowers, how not to destroy part of the quality grape varieties, and which criteria should be selected for a grubbing-up campaign and premiums should be directed towards which producers. the new policy of planting authorizations has had consequences on the price of land: how will this effect be taken into account in a new grubbing-up intervention? 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[thèse master 2 commerce des vins]. université de montpellier et supagro montpellier; 2016. available from: https://web.supagro.inra.fr/pmb/opac_css/doc_num. php?explnum_id=3532 [51] anderson k, jensen hg. how much government assistance do european wine producers receive? journal of wine economics. 2016;11(2):289–305. doi: 10.1017/jwe.2016.16 wine economics and policy volume 12, issue 1 – 2023 firenze university press state of the international wine market in 2022: new market trends for wines require new strategies rafael del rey1, simone loose2,* does anyone read my papers? the gap between academic consumer research and the real (wine) world riccardo vecchio a certification for natural wine? a comparative analysis of consumer drivers in italy and spain eva parga dans1,*, riccardo vecchio2, azzurra annunziata3, pablo alonso gonzález4, raimundo otero enríquez5 structure and development of the czech wine market and foreign wine trade kamila vesela, david křížek*, lucie severova the impact of alternative packaging on the life cycle of wine on tap stefano massaglia1, tibor verduna1, vincenzo varchetta2, filippo brun1, simone blanc1,* the new cap and the challenge of sustainability: a synthetic indicator for the italian wine sector roberta sardone1,*, simonetta de leo1, davide longhitano2, roberto henke1 analysis of the 2007-2008 hérault premiumized grubbing-up campaign: a tool to better understand fischer-boel’s 2008-2011 grubbing-up campaigns and the desire in 2022 to reintroduce locally premiumized grub-ups étienne montaigne1, samson zadmehran2,*, alfredo coelho3, yacine messaoudène4 the impact of fees on customer purchasing behavior and beliefs in winery tasting rooms: a scoping review john c. spence wine economics and policy 9(2): 49-62, 2020 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/web-7978 wine economics and policy citation: fabio boncinelli, caterina contini, francesca gerini, caterina romano, gabriele scozzafava, leonardo casini (2020) the role of context definition in choice experiments: a methodological proposal based on customized scenarios. wine economics and policy 9(2): 49-62. doi: 10.36253/web-7978 copyright: © 2020 fabio boncinelli, caterina contini, francesca gerini, caterina romano, gabriele scozzafava, leonardo casini. this is an open access, peer-reviewed article published by firenze university press (http:// www.fupress.com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information files. competing interests: the author(s) declare(s) no conflict of interest. the role of context definition in choice experiments: a methodological proposal based on customized scenarios fabio boncinelli*, caterina contini, francesca gerini, caterina romano, gabriele scozzafava, leonardo casini university of florence, department of agriculture, food, environment and forestry dagri, p.le delle cascine 18, 50144 florence, italy *corresponding author. e-mail: fabio.boncinelli@unifi.it abstract. one of the most critical points for the validity of discrete choice experiments lies in their capability to render the experiment as close to actual market conditions as possible. in particular, when dealing with products characterized by a large number of attributes, the construction of the experiment poses the issue of how to express the choice question providing sufficient information. our study verifies the role of scenario definition in choice experiments and proposes a methodology to build customized scenarios by eliciting responses from interviewees on the main choice criteria, which makes it possible to render the conditions of the experiment more realistic. this methodology is applied to the case study of wine and is introduced by a systematic review of the discrete choice experiments conducted on wine. the findings show that customized scenarios result in different preference estimates compared to the conventional approach. in particular, we found a significant decline in the importance of the price attribute, which could be attributed to a better definition of the product being evaluated. moreover, the methodology is capable of gathering information on the decision-making process that would otherwise remain unobserved and that can be used for a better segmentation analysis. jel: d12, q13. keywords: choice-based conjoint, choice modeling, experimental design. 1. introduction the market potentials of new product attributes were assessed by means of various methodological approaches including discrete choice experiments (dces), which are the most widely used stated preference method in the literature of applied economics and marketing (hensher, 2010; lancsar and louviere, 2008; louviere et al., 2000). this methodology consists of an attribute-based measure of benefit and is built on the hypothesis that any product can be described by its attributes and be assessed via the levels of the attributes themselves (ryan, 2004). 50 fabio boncinelli, caterina contini, francesca gerini, caterina romano, gabriele scozzafava, leonardo casini the dces are conducted by means of interviews that seek to reproduce a choice situation as close as possible to that of a real purchasing decision (ben-akiva et al., 2019). the interviewee is presented with several product alternatives that differ by the different levels of the attributes considered. the choice of these attributes and levels is a crucial point in carrying out the dce. this issue becomes particularly important when dealing with complex products (such as wine, beer, motor vehicles, and property), the valuation of which is subject to a large number of stimuli. in fact, while considering many elements of value to describe the products can, on one hand, render the experiment more realistic, on the other hand, a large number of attributes and levels makes the experimental design difficult to manage (hoyos, 2010), increases the variance of the error term, and entails a cognitive effort for the respondent that can become an error of evaluation (arentze et al., 2003; caussade et al., 2005). moreover, it is also fundamental to not omit the attributes that are important for the majority of consumers, so as to avoid overestimating the importance of the attributes included in the choice task (boncinelli et al., 2017; casini et al., 2009; corduas et al., 2013), and to avoid respondents making inferences about omitted attributes without the researcher being able to have information about them (lancsar and louviere, 2008). in this regard, ben-akiva et al. (2019) point out that the presentation of incomplete product profiles in the dces is a widespread issue among scholars. the same authors claim that the resulting fill-in problem puts the interviewees in the condition of making unrealistic and heterogeneous assumptions about missing attributes. many studies have tackled this issue defining in greater detail the context of reference where the actual choice is made. in this manner, the attributes considered important, but that are not included in the experiment, are described in context by the researcher, and therefore represent a scenario shared by all choices and all respondents. this solution presents some difficulties, however. in fact, when dealing with complex products, an excessively detailed description of the scenario can lead to high rates of no-choice, as excessively specific products are proposed that may not prove interesting to many consumers. furthermore, scenarios with too many details would lead to creating an experiment that would be valid only for specific cases, and therefore, incapable of assuming a general value. in order to make the experiment as realistic as possible, ben-akiva et al. (2019) recommend building it so as to maintain the same complexity of the real market in defining the products, possibly also incorporating the filtering heuristics in the choice of the product. indeed, as pointed out by swait and adamowicz (2001), in a real market where goods comprise many attributes, consumers often adopt filtering heuristics that consists of screening out products that fail to pass thresholds on selected attributes. in view of making a contribution to these issues, our study proposes a methodology to build the choice experiment in which defining the scenario is based on what each interviewee states about the attributes and levels considered for the choice of the product being analyzed, according to a procedure analogous to that of filtering heuristics. it is thereby possible to obtain a choice scenario tailored to respondents’ behavior. in literature, the studies that have attempted to adapt the experiment to the respondents have modified the attributes of the choice sets, applying the adaptive choice experiments or menu choice methodologies (contini et al., 2019; liechty et al., 2001; toubia et al., 2004; yu et al., 2011). in the ambit of environmental economics, the personalization of the experiment concerned the statusquo option (see, as example, ahtiainen et al., 2015). to our knowledge, however, there are no studies that have worked on personalizing the choice scenario, which makes our proposal the first contribution in this sense. the article illustrates this proposal of methodology applied to the case study of wine. the choice of wine derives from the consideration that it is a complex product whose preferences depend on an abundance of extrinsic and intrinsic attributes (charters and pettigrew, 2007; contini et al., 2015; oczkowski and doucouliagos 2015; schmit et al., 2013). the literature review presented in the following section illustrates the way these attributes were used in building the choice experiments on wine. in our dce, besides the attributes used in the choice sets, the scenario was described leaving the interviewees free to choose the attributes they felt were most important from among the principal attributes of literature. using a mixed logit model, the results of this approach are compared with those obtained by applying the conventional methodology in which the researcher chooses a priori the elements to define the scenario. moreover, the information collected on the choice criteria of the interviewees can be utilized for further analyses on consumer behavior. in our case, for example, this information was used to obtain a more meaningful segmentation by a latent class analysis. in the discussions section, a critical analysis is performed on the methodology and several suggestions are made for a further development of studies. 51the role of context definition in choice experiments: a methodological proposal based on customized scenarios 2. literature review we conducted a systematic review of the articles published on the study of wine preferences from 1998 to 2019 by applying dces. relevant articles were identified and gathered from two scientific article databases (scopus, web of science) and a web search engine (google scholar) by means of using the following keywords: “choice experiment” and “wine”, “choice modeling” and “wine”, “discrete choice” and “wine”. we selected only articles published in journals indexed in wos and scopus, excluding conference proceedings. we found a total of 35 studies. the various attributes that appeared in the selected articles were reclassified in the following 15 categories: “alcohol content”; “awards” includes awards and mentions in guidebooks; “brand” includes the indication of the producer, bottler, and brand notoriety; “format” includes characteristics like bottle capacity and shape; “functional properties” concerns the presence of information on health benefits; “price”; “production methods” conveys information on the production process, including various certifications of an environmental nature, such as organic; “promotion” states whether a discount is offered; “protected geographical indication” includes the geographic indications of different countries and regions like, for example, the docgs in italy or the aocs in france; “region of production”; “sulfites” i.e. the absence of added sulfites; “taste”, such as, for example, fruity, sweet, tannic, and full-flavored; “typology” includes the typologies red/ white, still/sparkling, the grape variety, and the name that identifies the wines, such as, for example, chianti or champagne; “winery distinctiveness” includes information about the producer, such as company history, label graphics, and company web site; “consumption advice” includes advice to enhance the consumption experience by means of pairings with particular dishes, and indications on the best modalities for enjoying the wine, such as, for example, the serving temperature. in addition to these elements, we also examined the “occasion”, which is to say the special or usual situation of consumption, at home or with friends, insomuch as the preference for the attributes evaluated in the dces also depends on the situational variables connected with the social and physical environment in which the wine is consumed (boncinelli et al., 2019). the experiments reviewed utilized the aforesaid categories either to describe the choice context, which is to say the scenario defined by the researcher and shared by all of the choice sets, or as attributes that characterize the alternatives in the choice set. the different use in the choice experiment is synthetically illustrated in table 1, where “c” means that the element is used in describing the context, and “a” indicates that the attribute describes the choice option. in addition to price, the review shows that the category most utilized in the literature is wine “typology”, which is found in experiments both as a choice attribute (17 articles) and as a context (13 articles). to be more exact, the information on color and style (still or sparkling) is used in defining the context, while the information on grape variety or wine name are among the choice set attributes. next in line for frequency of use is the “region of production” (21 articles), which was always used in the dces as a choice attribute. conversely, the “format” was almost always considered as a context variable (18 times out of 19). “brand”, “designation of origin”, “production methods”, “alcohol content”, “taste”, “winery distinctiveness”, “acknowledgements”, and “consumption advice” are less studied in the literature and are mostly treated as choice attributes. in particular, to date, no studies have used awards and the evaluation in specialized guidebooks as a context, which is to say that none have formulated a dce in which the preference for awardwinning wines is evaluated. finally, only a limited number of studies have used choice attributes like absence of added sulfites (2 articles), nutraceutical characteristics (2 articles), and offer of discounts (2 articles). defining the “occasion” is used as a context variable and is found in 22 articles out of 35. this description shows that almost all of the 15 categories of attributes considered are found in a consistent number of studies, thus confirming that the choice process of wine takes numerous attributes into account. the difficulty of implementing dces with all of the important attributes, however, has led researchers to select only a few attributes in making the experiments, inevitably reducing the realistic nature of the choice. in particular, in building the choice sets, an average of 4 categories are employed (each of which almost always represented by a single attribute), while the definition of the scenario involves, on the average, 1-2 categories more. our study proposes to surpass these limits by defining a methodology to create the dce that makes it possible to take account of most of the attributes of the complex product that are considered important, guaranteeing sufficient effectiveness in developing the experiment. 3. methodology this section opens with a presentation of the procedure applied in our experiment; it then presents the 52 fabio boncinelli, caterina contini, francesca gerini, caterina romano, gabriele scozzafava, leonardo casini ta bl e 1. f ac to rs u se d in th e ch oi ce e xp er im en ts o n w in e cl as si fie d as c on te xt e le m en ts ( c ) or a s ch oi ce a tt ri bu te s (a ). a ut ho r( s) / d at e o cc as io n w in e a tt ri bu te s a lc oh ol co nt en t a w ar ds br an d c on su m pt io n ad vi ce fo rm at fu nc tio na l pr op er tie s pr ic e pr od uc tio n m et ho ds pr om otio n pr ot ec te d ge ogr ap hi ca l in di ca tio n r eg io n of pr od uc tio n su lfi te s ta st e ty po lo gy a w in er y di st in ctiv en es s b on ci ne lli e t a l. (2 01 9) c a c a a a c   es co ba r et a l. (2 01 8) c a c a a a pa lm a et a l. (2 01 8) a a c a a c a a sc oz za fa va e t a l. (2 01 8) c c a a d el m as a nd l es se m ( 20 17 ) c a a a a c g hv an id ze e t a l. (2 01 7) c a a a a c h ua ng e t a l. (2 01 7) c a a c w ill ia m so n et a l. (2 01 7) a a a c a pa lm a et a l. (2 01 6) c a a a sc oz za fa va e t a l. (2 01 6) c c a a tr oi an o et a l. (2 01 6) c a a a a a w ill ia m so n et a l. (2 01 6) c c a c c a a a a g as sl er ( 20 15 ) c   a         a a a   a   a c a c os ta ni gr o et a l. (2 01 4) a a a a c lo nt si e t a l. (2 01 4) a a a st as i e t a l. (2 01 4) a c a a a x u an d z en g (2 01 4) c a a   a a c c ic ia e t a l. (2 01 3) a a c m ue lle r an d r em au d (2 01 3) c a a a a a a a a a k al la s et a l. (2 01 3) c a a a a sá en zn av aj as e t a l. (2 01 3) a a a c a a a a a th ie ne e t a l. (2 01 3) a c a a a c or si e t a l. (2 01 2) c a a c a a a a k al la s et a l. (2 01 2) c a a a a z hl lim a et a l. (2 01 2) c a a a a ja rv is e t a l. (2 01 0) c a a c a a c m ue lle r et a l. (2 01 0a ) c a a a a c a m ue lle r et a l. (2 01 0b ) c c c a c a a c a a a m ue lle r et a l. (2 01 0c ) c a a a c a a a a c b ar re ir oh ur lé e t a l. (2 00 8) a c a a a a c h er tz be rg a nd m al or gi o (2 00 8) c a c a a a a lim ov a et a l. (2 00 7) a a a a lo ck sh in e t a l. (2 00 6) c a c a a a c m tim et a nd a lb is u (2 00 6) c a c a a a pe rr ou ty e t a l. (2 00 6) a a a a n ot es : a t yp ol og y in cl ud es th e ty pe o f w in e (r ed /w hi te , s til l/s pa rk lin g) , t he g ra pe v ar ie ty , a nd th e na m es o f t he w in es u se d (e .g . c hi an ti, b ru ne llo d i m on ta lc in o) . 53the role of context definition in choice experiments: a methodological proposal based on customized scenarios econometric model employed, and ends with a description of the sample. 3.1. experimental procedure our experiment was conducted in january 2018 by administering an on-line questionnaire to a sample of 600 italian wine consumers. a company specialized in market research (toluna inc.) handled recruiting participants and collecting data. in particular, the experiment consisted of a dce divided into two treatments. following a betweensubject approach, each respondent was randomly assigned to only one of the treatments. in this manner, two subsamples of 300 respondents each were formed. we called the first treatment “limited information”. it is tantamount to a conventional unlabeled dce in which the description of the scenario conveys the information that the experiment concerned a 0.75-liter bottle of red wine for an occasion of everyday home consumption. in the second treatment, which we called “full information”, every single respondent received the same information as the first treatment, plus a description of the scenario that was more detailed and consistent with his purchasing habits. the description of the scenario was based on questions asked prior to the choice experiment. the procedure of the second treatment can be divided into 3 steps. in the first step, respondents were asked to select, from a list we drew up based on the literature review, the criteria that they normally use in choosing wine. the criteria they could select from were: the wine’s region of origin, the grape variety, the brand, alcohol content, and mention in guidebooks. in the second step, for each criterion selected, the participant was asked to select their preferred option from a dropdown menu containing the principal possible alternatives (table 2). for example, if the interviewee indicated grape variety as a choice criterion, then he was asked to select the one he habitually preferred from a list of 20 grape varieties. in the third step, the respondents participated in a dce where the choice scenario was defined on the basis of the information collected in phases 1 and 2. in other words, the respondents received a choice scenario “personalized” to their purchasing habits. in this manner, we were able to work around the problem that each respondent could make inferences about the attributes important for them but not included in the choice experiment and that the researcher could therefore not survey. by way of example, the respondent who selected tuscan wines produced from the sangiovese grape variety and with an alcohol content of 13° performed the choice experiment reported in fig. 1. the attributes included in the choice tasks, identical for the two treatments, number 4 (table 3). the first attribute concerns the organic production method with two levels: conventional (the product does not have an organic certification) and organic (the product carries the european logo concerning organic certification). the second attribute concerns sulfites with two levels: contains sulfites, no sulfites added. the third attribute considered concerns the geographical indications (gi). the levels of gi are those regulated by the italian classification system of gi wine (italian law 238/2016). the levels utilized for the gis are: docg (designation of table 2. information to form the choice scenario. criteria available options origin abruzzo, basilicata, calabria, campania, emilia romagna, friuli-venezia giulia, lazio, liguria, lombardy, marche, piedmont, apulia, sardinia, sicily, tuscany, trentino alto adige, umbria, valle d’aosta, veneto, international wine. grape variety aglianico, barbera, bardolino, bonarda, cabernet, cabernet sauvignon, cannonau, corvina, dolcetto, gutturnio, lambrusco, merlot, montepulciano, morellino, negroamaro, nero d’avola, primitivo, sangiovese, syrah, teroldego, other brand well-known, unknown alcohol content less than 12%, 12%, 13%, 14%, 15%, more than 15% mention in guidebooks mentioned, not mentioned figure 1. example of a choice experiment. imagine you need to purchase a 0.75-litre bottle of red wine from tuscany, made from the sangiovese grape variety and with an alcohol content of 13% for everyday consumption (which is to say not tied to special occasions). in each choice set, from among the alternatives proposed, choose the one you would purchase. in the event that none of the alternatives is to your liking, you can select the no-choice option 54 fabio boncinelli, caterina contini, francesca gerini, caterina romano, gabriele scozzafava, leonardo casini controlled and guaranteed origin), doc (designation of controlled origin), and igt (typical geographical indication). the docg wines are subjected to stricter regulations than the doc wines. the doc wines instead respect stricter regulations than the igt wines. finally, the fourth attribute is price with 4 levels: € 2, € 6, € 10, € 14. each respondent was required to answer 8 choice questions, indicating in each choice task their preferred wine between two product alternatives that differed by attribute levels. each choice task also included a no-buy option. the experimental design was done by means of the ngene software version 1.1.2, applying an orthogonal fractional design. 3.2. econometric model dces have their theoretical foundations in lancaster’s consumer theory (1966), which postulates that the utility deriving from the consumption of a certain good is a function of the same good’s characteristics. we can therefore model the product’s utility in function of the attributes included in the choice tasks and handle the information collected with the dce by means of a mixed logit model (train, 2009) that takes account of the unobserved heterogeneity across the sample. the utility function of the individual i obtained from the choice alternative j in the choice task t is as follows: uijt = asc + αpriceijt + β’ ixijt + εijt (1) where asc is an alternative-specific constant that represents the no-buy option; α is the marginal utility of the price; price represents the price levels offered to the respondent to purchase a bottle of wine; βi is the vector of utility parameters for participant i; xijt is the vector of the wine’s attributes and their levels with respect to alternative j, individual i and choice task t. finally, εijt is an unobserved random term. in the specification of our model, price and asc have been estimated as fixed coefficients, while the coefficients of the other attributes (organic certification, sulfites, and gi) have been assumed as independently distributed following a normal distribution. therefore, in addition to the median effect, for each attribute, a standard deviation was estimated for each of the random components. the model has been estimated by stata 15.1. we used the mixed logit model to compare the results of our approach with those obtained by applying the conventional methodology in which the researcher chooses a priori the elements to define the scenario. we then created a latent class model (lcm) in order to provide an example of how the information obtained with our proposed procedure can be used to obtain a more meaningful segmentation. the lcm represents the semi-parametric version of a mixed model inasmuch as heterogeneity has a discrete distribution with c mass points, where c represents the number of classes with which the model is estimated (greene and hensher, 2003; hynes and greene, 2016). the lcm considers that every single individual belongs to a specific latent class c, where c = 1, ..., c; where all of the individuals belonging to that class have homogeneous preferences but are heterogeneous with respect to the individuals belonging to other classes. we can therefore write that following greene and hensher (2003), the probability that individual i in the choice task t chooses the alternative j among the j alternatives is: (2) where βc is the vector of utility parameters of class c. the model estimates the parameters of the attributes for each class, as well as the probability of each individual πic to belong to a specific class c. this process too, can be modeled as a multinomial logit (greene and hensher, 2003; ouma et al., 2007; wu et al., 2019): (3) where zi is the vector of the respondent’s observed individual characteristics and γc is the parameter vector for consumers in class c. in our case, zi represents the criteria that respondents stated they normally use in choosing wine, which is to say the information collected in the first step of the experimental procedure with the full information group. table 3. attributes and levels in the choice experiment. attributes levels organic claim organic, none no sulfites added no sulfites added, contains sulfites geographical indications docg, doc, igt, none price €2, €6, €10, €14 55the role of context definition in choice experiments: a methodological proposal based on customized scenarios 3.3. the sample six hundred italian respondents filled in the questionnaire, 300 for each treatment. all participants were screened to ensure they were over 18 years of age and had consumed wine in the previous months. the overall sample consists of approximately 48% men and 52% women. the different age categories are well represented and most of the respondents have a secondary education. however, the consumers with a university degree are slightly over-represented. the two sub-samples have the same socio-demographic make-up as shown by the chi-squared test (table 4). 4. results this section presents the choice criteria selected in the first step of the experiment, the results of the mixed logit models and the latent class analysis. 4.1. choice criteria table 5 reports the frequencies with which respondents chose criteria in the course of the first step of the experiment. the information most used is origin, indicated by 77% of the respondents, followed by brand, selected by approximately 69% of the interviewees. guidebooks are utilized by just over one-fifth of the sample and represent the criterion used less frequently. as interviewees were given the possibility to choose one or more criteria, an overall 30 combinations were chosen, the first 10 of which represent 73% of all of the respondents (fig. 2). the combination of origin and brand is the most numerous, and is utilized by almost 14% of respondents. the successive combinations add to these two criteria, alcohol content and grape variety. the group of respondents that utilizes all 5 criteria (8.7%) is quite consistent, while the groups that use a single criterion are few. among these, the most conspicuous is in fact the group that only considers origin, which represents only 4% of respondents. the results of this first explorative analysis confirm that the choice of wine is very complex, that there are large differences between consumers, and that defining the product in creating the choice experiment can therefore be critical. 4.2. likelihood ratio tests for pooled models to test whether the coefficients between the two models are equal, we used the likelihood ratio (lr) test. the lr test is calculated as: table 4. sample composition (%). limited information scenario full information scenario prob.>chi2 gender male 48.67 49.00 female 51.33 51.00 0.93 age 18–34 years 24.00 23.00 35–54 years 35.67 36.33 55–80 years 40.33 40.67 0.95 education primary education 7.67 7.67 secondary education 49.67 55.00 tertiary education 42.67 37.33 0.06 geographical area northern italy 46.67 47.00 0.99 central italy 18.33 18.00 southern italy and islands 35.00 35.00 table 5. frequencies with which the respondents chose criteria in the course of the first step of the experiment. attributes relative frequency (%) origin 77.00 brand 69.33 alcohol content 50.00 grape variety 49.67 mention in guidebooks 21.67 figure 2. frequencies concerning the first 10 combinations of the habitual choice criteria. 56 fabio boncinelli, caterina contini, francesca gerini, caterina romano, gabriele scozzafava, leonardo casini lr = -2(llpooled (lllim_info + llfullinfo)) (4) where lllim_ info is the log-likelihood of the model applied to the sub-sample with limited information, llfullinfo is that of the model for the group that received the treatment with full information, while llpooled is the log-likelihood pertaining to the pooled model. the lr test has a chi squared distribution with a number of degrees of freedom equal to the difference of the number of parameters. table 6 reports the results of the lr test calculated both with a model specified in the utility space and with a model specified in the wtp space. the latter model serves to make sure that the results are the same in both of the specifications and to take into account the scale heterogeneity between the two subsamples. for both of the models, the lr statistics do not significantly exceed the critical values. based on this outcome, we can affirm that the results between the two sub-samples are different. 4.3. parameter estimates table 7 reports the results of the mixed logit models for the limited information scenario, the full information scenario, and the pooled model. in both scenarios, the parameters of the attributes are 99% significant and bear the expected signs. with the exception of that of the igt with limited information, the coefficients associated with the standard deviations are also all significant, which indicates a substantial heterogeneity in consumer preferences with respect to the attributes considered in the model. specifically, the coefficient of the no-buy option is negative in both models, which indicates that the consumers receive a greater utility from choosing at least one of the options presented compared to the no-choice option. as expected, the coefficient of price is negative for both of the scenarios, indicating that the increase in price corresponds to a decrease in consumer utility. for this parameter, the magnitude is substantially different in the two scenarios, -0.10 for the limited information scenario compared to -0.05 for the full information scenario, indicating the lesser role of the price attribute in the utility function in the latter case. the parameters of the other attributes’ levels all prove to be positive in both of the scenarios, thus indicating that the consumers prefer wines without added sulfites, with geographical indication, and organic. in particular, the absence of added sulfites is the parameter with the greatest magnitude and thus constitutes the characteristic that on a par with other conditions confers greater utility to wine. from the analysis of the confidence intervals, we can also note that the two models substantially differ only by the parameter of price. indeed, as we have already pointed out, the coefficient of price for the full information scenario is about half that of the limited information scenario, and the confidence intervals in the two models do not overlap. to further verify the determinants of the differences between the two sub-samples, a new model was performed on the pooled sample, inserting variables of table 6. results of the log-likelihood ratio tests. preference space model wtp space model log likelihood limited information scenario -2011.78 -1969.72 log likelihood full information scenario -2040.38 -1969.69 log likelihood pooled model -4065.40 -3951.07 lr test statistics 26.49 23.31 degrees of freedom 12 13 p-value 0.009 0.039 table 7. results of the mixed logit models. attributes limited information scenario full information scenario coef. 95% c.i. coef. 95% c.i. random parameters in utility functions organic 0.41 *** (0.11; 0.71) 0.37 *** (0.09; 0.65) no sulfites added 1.79 *** (2.02; 1.55) 1.73 *** (1.98; 1.48) igt 0.77 *** (0.47; 1.06) 0.92 *** (0.62; 1.22) doc 0.94 *** (0.6; 1.27) 0.93 *** (0.61; 1.25) docg 0.68 *** (0.43; 0.93) 0.73 *** (0.49; 0.98) non-random parameters in utility functions price -0.10 *** (-0.13; -0.08) -0.05 *** (-0.08; -0.03) no-buy -1.36 *** (-1.71; -1.01) -0.96 *** (-1.29; -0.62) standard deviation organic 0.94 *** (0.74; 1.13) 0.46 *** (0.19; 0.74) no sulfites added 1.20 *** (0.96; 1.43) 1.42 *** (1.17; 1.67) igt -0.12 (-1.04; 0.79) 0.66 *** (0.29; 1.03) doc 0.94 *** (0.64; 1.24) 0.53 *** (0.15; 0.91) docg -0.85 *** (0.53; 1.17) 0.91 *** (0.61; 1.21) observations 7,200 7,200 bic 4130.14 4187.35 aic 4047.55 4104.77 notes: asterisks indicate the following significance levels: *= 10%; **= 5%; ***= 1%.; coef. = coefficient; c.i. = confidence interval. 57the role of context definition in choice experiments: a methodological proposal based on customized scenarios interaction between the treatment (full information) and the attributes specified in equation 1. the results of this different specification indicate that all of the interaction variables are not statistically significant except for the interaction variable between treatment and price (table 8). this confirms that the full information treatment affects the parameter of price, determining a significant reduction of its importance. notably, the interaction between the no-buy option and treatment is also not significant, which indicates that the treatment has not affected the no-choice rate during the choice experiment. providing the respondent with a more definite scenario by means of the proposed methodology therefore does not modify the no-choice rate. in order to test whether the treatment also had an effect on the willingness to pay, we applied a poe (2005) test. the results reported in table 9 show that the willingness to pay of the two sub-samples differ by the attributes no sulfites added, igt and docg. the difference for the willingness to pay for the doc attribute is significant only for 10%, while the willingness to pay for the organic certification does not differ in the two treatments. 4.4. latent class results the segmentation analysis was conducted by means of a lcm with a specification of the model with respect to the same utility function as that of equation 1 and utilizing the choice criteria of each respondent as class membership variables. we have chosen the 5-class model based on the bayesian information criterion (bic), which shows an inversion between the models with 5 and 6 classes (table 10). the results of the lcm (table 11) show a marked heterogeneity in consumer preferences indicated by the strong differences between classes as per significance, magnitude, and sign of the utility function parameters. for example, the price coefficient is negative and significant for classes 1 and 3, positive and significant for classes 4 and 5, and not significantly different from zero for class 2. organic certification is instead significant only for class 5, where it represents one of the attributes with the greatest positive impact on consumer utility. the absence of added sulfites is perhaps the most homogeneous parameter among the classes; it is indeed always significant with a positive sign even when it presents a table 8. results of the mixed logit model with treatment interactions. attributes coefficient z-value random parameters in utility functions organic 0.39 *** 2.65 no sulfites added 1.80 *** 15.62 igt 0.80 *** 5.37 doc 0.92 *** 5.51 docg 0.67 *** 5.25 non-random parameters in utility functions price -0.10 *** -9.35 no-buy -1.33 *** -7.50 treatment*price 0.04 *** 3.00 treatment*no-buy 0.33 1.37 treatment*organic 0.01 0.06 treatment* no sulfites added 0.07 0.48 treatment*igt 0.07 0.36 treatment*doc 0.05 0.20 treatment*docg 0.07 0.41 standard deviation organic 0.75 *** 9.47 no sulfites added 1.32 *** 15.19 igt -0.42 ** -2.00 doc 0.77 *** 6.72 docg 0.89 *** 7.98 notes: asterisks indicate the following significance levels: *= 10%; **= 5%; ***= 1%. table 9. wtp values (€ per bottle) across treatments and hypotheses tests. limited information scenario full information scenario p-values organic 4.09 7.25 0.199 no sulfites added -17.37 -33.18 0.001 igt 7.42 17.78 0.010 doc 9.22 18.22 0.054 docg 6.66 14.01 0.021 we estimated p-values using the poe (2005) test with 1,000 krinsky and robb (1986) bootstrapped wtp estimates. table 10. fit measures for latent class models with different numbers of classes. model ll bic aic npar 2-class model -1857.609 3829.226 3755.217 20 3-class model -1781.949 3752.013 3629.898 33 4-class model -1717.814 3697.849 3527.629 46 5-class model -1668.261 3672.849 3454.522 59 6-class model -1640.347 3691.126 3424.694 72 7-class model -1619.769 3724.075 3409.537 85 notes: ll = log-likelihood; bic = bayesian information criterion; aic = akaike information criterion; npar = number of parameters. 58 fabio boncinelli, caterina contini, francesca gerini, caterina romano, gabriele scozzafava, leonardo casini conspicuous variability of magnitude, passing from 0.33 for class 1 to 4.74 for class 5. the gi parameters always have a positive sign, but are not always significant. for example, they are all significant for classes 3 and 5, while for class 2, no indication of origin is significant. class 1, which has the most consistent class size, has a significant preference only for docg wines, the top-tier certification. the coefficients of class membership indicate the role of the different criteria in determining the probability of belonging to each class with respect to class 1. the wald test of joint difference of parameters between classes indicates that the main predictors among the classes are origin (wald = 9.77; p-value = 0.044) and mention in guidebooks (wald = 16.75; p-value = 0.0022). in particular, the probability of belonging to class 2 and 4 (40% of respondents) depends significantly on the choice of origin. while respondents belonging to class 3 are consumers who, more than those of other classes, are more likely to disregard the judgement of guidebooks as a choice criteria of wine. the coefficients concerning alcohol content, grape variety, and brand are instead not statistically significant. 5. conclusions dces are a widely utilized methodology to evaluate the market potentials of new attributes of products. one of the main challenges in applying them is represented by the capability to reproduce the decision-making context in the most realistic manner possible (ben-akiva et al., 2019). this issue is particularly important when dealing with complex products. their evaluation necessitates considering a great number of stimuli, and also involves a filtering heuristic, progressively screening out products that fail to pass thresholds on a selected attribute. in the literature, creating dces for complex products has frequently implied the use of a large number of attributes and levels in the experimental design without, however, always succeeding in adequately reproducing the actual choice situation. moreover, the use of a large number of attributes and levels entails important criticalities in terms of experimental design complexity and the difficulty of interviewees to reply. an enhancement of the realistic nature of the experiment can also be obtained by means of a better definition of the context in which the choice is made, but in this case, excessive detail can determine the undesired effect of a high no-reply rate, considering the fact that the product described in this manner might not prove interesting to a sufficient number of consumers. the solution proposed here confronts this problem by means of a methodology of building the choice experiment that takes into account the actual behavior of the consumer in choosing wine. for this product, as for others with similar characteristics of complexity, the final choice derives from a filtering heuristic of the many alternative products available on the market (swait and adamowitcz, 2001). for example, first we choose the table 11. latent class model results. attributes class 1 class 2 class 3 class 4 class 5 utility function coefficients price -0.11 *** -0.04 -0.45 *** 0.19 *** 0.18 *** no-buy -3.85 *** -3.06* -1.96 *** 0.23 4.04 *** organic 1.14 0.96 -0.58 -0.25 2.91 *** no sulfites added 0.33 ** 4.65 ** 1.46 *** 0.50 *** 4.74 *** igt 0.76 1.74 1.67 *** 0.96 ** 2.28 *** doc 1.88 2.24 1.44 *** 0.79 * 3.03 *** docg 1.15 *** 4.45 1.19 ** 0.38 0.98 ** class membership coefficients constant -1.34 ** 0.44 -1.71 ** -0.29 origin 1.34 ** 0.32 1.22 ** 0.15 grape variety 0.07 -0.30 -0.56 -0.06 brand 0.34 -0.24 0.31 0.02 alcohol content -0.40 -0.66 0.31 -0.66 mention in guidebooks 0.56 -1.43 ** 0.92 -0.76 class size 25% 23% 22% 17% 13% notes: asterisks indicate the following significance levels: *= 10%; **= 5%; ***= 1%. 59the role of context definition in choice experiments: a methodological proposal based on customized scenarios color, then the grape variety, then we consider the price, and so on until we complete the range of attributes that each consumer considers important. in attempting to make the choice experiment as realistic as possible, we therefore developed a procedure to define the scenario of reference which includes all the attributes that each interviewee considers important in their decision-making process. in greater detail, in the first phase, the respondents were asked what attributes were important for them in choosing wine. then for each attribute selected, the main alternatives were proposed, and they were asked to select the one they preferred. the mix of options indicated in this manner was then used to define the choice scenario of each interviewee. it was thereby possible to obtain a more realistic choice situation, maintain the design within acceptable limits of complexity, and also observe the specific characteristics of the product that each interviewee referred to in his choice. the capability to identify the specific preferences that the decision-making process of wine develops along constitutes an important improvement compared to traditional procedures. furthermore, we found significant differences in the choice criteria for wine, as far as the nature and number of attributes to consider are concerned. applying the procedure of tailoring the scenario of reference to the individual respondent has shown that defining the choice scenario is not neutral with respect to the choices elicited in the experiment. in fact, our approach has shown preference estimates that are significantly different from those of the conventional approach, as pointed out by the lr test. these differences proved substantial for the parameter of price, indicating that a better description of wine in the scenario of reference gave rise to a reduction in the importance of the price attribute, which can plausibly be explained by the fact that the consumer is less uncertain about the definition of the two alternatives of wine to evaluate. our outcomes are coherent with general economic theory and with earlier consumer studies which indicate that price sensitivity is a function of available information. in this regard, alba et al. (1997) find that having more information on quality attributes reduces price sensitivity, while nagle and müller (2017) suggest that consumers show lower price sensitivity when they perceive specific quality features of the product. these results call for further research on the role that the specification of the choice scenario has on preference estimates. in fact, in various case studies, an issue might arise on how detailed the product definition should be, and the adopted solution might not be neutral with respect to the results, especially in terms of wtp. furthermore, our results point out that the use of the “region of origin” and “mention in guidebooks” criteria, in particular, contribute to defining specific segments of consumers. it is worth mentioning that the information acquired through the methodology proposed is greater than the information used in this paper. the numerousness of the choice options utilized by respondents, however, was such that given the size of the sample, it did not permit more in-depth segmentation analyses. the type of approach utilized does not allow us to identify econometric indicators that define whether the procedure we propose has greater statistical properties than the traditional procedure. from the practical point of view, however, the possibility to avail ourselves of individual information on the choice criteria and on the preferred options for each choice criterion represents an important element for a better understanding of the decision-making process, and can also be used for further segmentation analyses, as proposed in the article. in conclusion, this article represents a first contribution to achieving a more realistic decisionmaking context by improving the choice scenario definition in dces. overall, the proposed solution offers various advantages over the traditional approaches, even though its application in different contexts and on different products could certainly make for further improvements in the 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economics and policy volume 9, issue 2 2020 firenze university press the influence of alcohol warning labels on consumers’ choices of wine and beer azzurra annunziata1,*, lara agnoli2, riccardo vecchio3, steve charters4, angela mariani5 a bad year? climate variability and the wine industry in chile eduardo haddad1,*, patricio aroca2, pilar jano3, ademir rocha4, bruno pimenta5 sparkling wine international market structure and competitiveness karim marini thome*, vitoria a. leal paiva the role of context definition in choice experiments: a methodological proposal based on customized scenarios fabio boncinelli*, caterina contini, francesca gerini, caterina romano, gabriele scozzafava, leonardo casini the impact of country of origin on brand equity: an analysis of the wine sector nádia passagem1, cátia fernandes crespo2,*, nuno almeida3 competitive strategies for wine cooperatives in the german wine industry barbara richter1,*, jon hanf2 valuation of viticultural adaptation to climate change in vineyards: a discrete choice experiment to prioritize trade-offs perceived by citizens verónica farreras1,2, laura abraham3,* does the institutional quality affect labor productivity in italian vineyard farms? maria raimondo1,*, concetta nazzaro4, annamaria nifo3, giuseppe marotta2 the role, scope and management of r&d and innovation in the wine sector: an interview with antonio graca peter hayes am wine economics and policy 12(1): 63-80, 2023 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/wep-13468 wine economics and policy citation: roberta sardone, simonetta de leo, davide longhitano, roberto henke (2023). the new cap and the challenge of sustainability: a synthetic indicator for the italian wine sector. wine economics and policy 12(1): 63-80. doi: 10.36253/wep-13468 copyright: © 2023 roberta sardone, simonetta de leo, davide longhitano, roberto henke. this is an open access, peer-reviewed article published by firenze university press (http://www.fupress.com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information fi les. competing interests: the author(s) declare(s) no confl ict of interest. th e new cap and the challenge of sustainability: a synthetic indicator for the italian wine sector roberta sardone1,*, simonetta de leo1, davide longhitano2, roberto henke1 1 crea centre for policies and bioeconomy, via barberini 36, 00186 rome, italy 2 crea centre for policies and bioeconomy, viale dell’università 14, 35020 legnaro (pd), italy e-mail: roberta.sardone@crea.gov.it; simonetta.deleo@crea.gov.it; davide.longhitano@ crea.gov.it; roberto.henke@crea.gov.it *corresponding author. abstract. among the keys enabling the actors of the food chain to become more sustainable, the strategy assigns an important role to knowledge and information. for this reason, the farm to fork strategy aims to make the farm accountancy data network (fadn) the main data source of sustainable indicators, turning it into a farm sustainability data network (fsdn). wine not only represents one of the most important products of the italian agri-food system (value of turnover and exports), but it is also characterised by a widespread use of traditional certifi cation systems (pdo/ pgi, organic), to which in recent years specifi c certifi cations of sustainability have been added, evaluated through its threefold dimension: economic, environmental, and social. indeed, wine is much ahead of other sectors in the process of sustainability certifi cation both for the process and the product itself. th e paper is an eff ort to test the current set of information included in the fadn and some related computable indicators as a feasible tool for the assessment of sustainability in the wine sector. th e goal of this paper is twofold. firstly, we assess the actual level of sustainability of the wine sector in italy through an indicator that synthetizes the three dimensions (economic, environmental, and social) of sustainability at the regional level. secondly, more in general, we test the current capacity of the fadn information to provide a reliable measure of sustainability given the intention of the eu legislator to switch the european data network from fadn to fsdn. keywords: sustainability, wine sector, cap reform, fadn. 1. introduction th e last few years have seen the prevalence of the paradigm of sustainability in all fi elds of production and development. aft er the launch of agenda 2030 in 2015 and the 17 sustainable development goals by the united nation organisation, all subsequent public policies were aligned to these main policy goals, including eu policies. 64 roberta sardone et al. with regards to agriculture, the food and agriculture organization of the united nations (fao) had already adopted in 1989 a concept of “sustainable agriculture and rural development” based on environmental conservation (soil, water, and animal and vegetal genetic resources), economic viability, and social acceptance [1], aligned with the sustainable development concept from the brundtland report and the three dimensions of sustainable development: environmental, social, and economic [2]. whitin the common agricultural policy (cap), elements of sustainability were introduced by agenda 2000 and since then the concept has gained increasing visibility and relevance. recently, the farm to fork strategy (2020) has set the goal of making the eu food system a standard for sustainability at the global level [3,4,5]. among the key factors that enable actors in the food chain to become more sustainable, the strategy assigns an important role to knowledge and information. for this reason, the strategy aims to turn the farm accountancy data network (fadn), already widely used in the economic evaluation of agricultural policies, into the farm sustainability data network (fsdn), the goal of which will be to collect data for new and more accurate sustainability indicators. the transformation of the fadn will be one of the main future challenges, due the fact that its original purpose was limited to the evaluation of the economic performance of farms. the italian fadn, however, represents an exception, as it has long since broadened the scope of its dataset and, consequently, the type of variables collected. thus, the capacity of the italian fadn to measure sustainability more comprehensively is worthy to be tested1. wine not only represents one of the most important products of the italian agri-food system (value of turnover and exports), but it is also characterised by a widespread use of traditional certification systems (pdo and pgi) and a significant share of organic production. in recent years specific sustainability certifications have been added, which are evaluated in their economic, environmental, and social dimensions. moreover, wine is often associated with high profile tourism experiences, which add to the perception of wine consumption as a “full experience”, connecting good food, convivial lifestyle, and the enhancement of local territories [6]. the increasing attention to the issue of sustainable production processes has also been reinforced by the international organisation of vine and wine (oiv), which has supported the definition of a common ground of general principles of sustainable wine and vine pro1 for more information on the italian fadn, please visit https://rica. crea.gov.it/ duction, and the adoption of a global vision, taking into account environmental, social, economic, and cultural aspects [7]. for all these reasons, and thanks to the many different sustainability programs launched in italy – the most popular of which are v.i.v.a. and equalitas2 – the italian wine sector is far ahead of others in the certification of sustainability both for the process and the product itself [8,9]. this work aims to test the extent to which the current set of information included in the italian fadn is suitable for building a feasible tool for assessing the sustainability of the wine sector at the regional level in italy. the relevance of sustainability in the italian wine sector and the advanced stage of the italian fadn in tracing and measuring sustainability make this study particularly innovative and can support the transition from theory to the practical implementation of the three dimensions of sustainability. in fact, after a test phase in the next few years, in 2026 the implementation roadmap of the new fsdn has scheduled the introduction in the database of additional variables necessary to measure the environmental and social performance of farms at the european level. to our knowledge, other recent studies assessing the sustainability of the wine sector have successfully focused on various aspects of production through questionnaires to wine producers [10,11,12]. other research has investigated the sustainability of the chain as a whole, focusing mainly on organic production [13] or on models of sustainable business in the wine sector [14]. no recent studies have sought to build a specific contextrelated synthetic set of sustainability indicators, as it is proposed here. the present study also constitutes the first ever attempt to include social elements of sustainability in the synthetic measure, according to the “triple bottom line principle” [15]. the objective of this paper is therefore twofold. first, we assess the actual level of sustainability of the italian wine sector with an indicator that synthetizes the three dimensions of sustainability (economic, environmental, and social), developed through a multi-criteria approach (sustainability wine index – suwi). this indicator can be used to assess the level of sustainability of italian regions over time. to render measurements comparable across regions, the variables used to build the indicator take the local context into consideration as much as possible. the second and more general objective is to test the current capacity of the current fadn dataset to pro2 there are other interesting sustainability schemes at the national and regional level, such as sostain in sicily. however, the present analysis is limited to the two most relevant national programs, which the ministry of agricultural, food and forestry policies is working to harmonize. 65the new cap and the challenge of sustainability: a synthetic indicator for the italian wine sector vide a reliable measure of sustainability, in anticipation of the eu legislator’s intention to switch from fadn to fsdn3. based on the fadn dataset, the performance of the wine sector is assessed for italian regions according to the three dimensions of sustainability, defining a set of indicators for each of them. we then propose a synthetic sustainability indicator based on the results for each region in each of the sustainability dimensions, which facilitates more general reflections on the use of the current italian fadn as a sustainability data network. 2. sustainability in the wine sector 2.1 background and literature review the wine sector has been particularly affected by the theory and practice of sustainability, for many different reasons: the sector is associated with high profile, responsible consumption; it affects the state of health of local territories; it characterizes local development in a specific way; and it involves both primary production (vines) and the processing industry (wine factories). an important boost in the recognition of a sustainability certification has come from the many oiv resolutions, which define the general principles of sustainable wine and vine production, including environmental, social, economic, and cultural aspects [16]. in addition, other initiatives focus on specific issues, such as traceability [17] or greenhouse emissions and carbon footprint in the wine industry [18]. it is interesting to observe that both scholars and policy-makers agree on considering sustainability applied to viticulture and wine-making as something different from organic (or biodynamic) production, given the broader and more holistic value placed on the former [9]. in fact, it is now agreed to interpret sustainability not only as an environmental concern but also as a social and economic one: rather than limiting the approach merely to an environmental dimension [19] a proper consideration of the ecological, economic, and social dimensions of sustainability can lead to a change in the unsustainable modes of production and consumption, thus contributing to protecting and managing natural resources and enhancing a bio-economic and circular approach to development [8,20,21]. it is often argued that sustainable viticulture frameworks are the response by the wine territories to the latent demand from customers and markets for more 3 with specific annual surveys it will be also possible to use fsdn to measure the evolution of sustainability in wine production, facilitating periodic comparisons both at the farm and the territorial level. transparency in terms of processes and environmental impacts; they are also viewed as a way to highlight and systematize current practices or to improve and promote innovation processes [9]. for this reason, many studies have focused on the effects of including sustainability issues in strategies of vine-growing and wine production, as well as on consumer perception of the main differences between conventional and sustainable wine, including organic production, certification of origin, bio-dynamic wines, and “free wines”. given the complexity of a product such as wine, its identification with its origin, and the steady growth of “sustainable” lines of production, reviews on these matters are always very careful in analysing segments of products as well as segments of consumers, which differ widely according to country, region, habits, and attitudes towards environment and sustainability. previous studies have attempted to classify and compare different tools and legislation across different producer countries, both from the “old wine world” and “new actors” [22,9,23,24]. in the recent literature, many works rely on the conceptualisation of sustainability that originated among wine makers, particularly in the united states and spain. pullmann et al. [10] compare wineries and food processors in the us in terms of sustainability, highlighting differences in practices and in performance impacts. their main findings concern the environmental dimension and show how wine producers in the us are far ahead of food processors in addressing sustainability. pomarici et al. [11] analyse the perception among californian wine producers of the costs and benefits (both in economic and environmental terms) of joining a sustainability scheme implemented by the state of california. while most farmers interviewed recognised some form of benefit from sustainable practices, some costs we are also acknowledged. however, all agreed on the positive effect of sustainability on quality and vineyard health. garcia-cortijo et al. [12] focus on four drivers of sustainability in spanish wineries: marketing, financial resources, technologies, and innovation. their main finding is that consumers perceive communication and innovation as more important than financial and technological resources. this kind of analysis is key to draft policies that support the switch to a sustainable approach and to enhance specific sustainability certifications. finally, ferrer et al. [14] propose a model of sustainable business in the spanish wine sector, associating spanish wineries to archetypic models, identified as either “high sustainability” or “low sustainability”. these differ in terms of the type of marketed product, the integration in the supply chain, and the policies required, 66 roberta sardone et al. and sustainability is perceived as an increasing element of competitiveness on the internal and external market. with regard to studies that look more specifically at the italian market, broccardo and zicari [25] explore the role of sustainability in the business model of small and medium farms operating in the wine sector in italy. they focus on the profitability of familyowned businesses and on sustainability as a vehicle to innovation in the long run. their paper illustrates how italian farms operating in the wine sector integrate sustainability in their business models. the wine sector in italy is composed mainly of small and medium size family-owned farms, as well as in spain and france, the main european producers. in italy, the wine sector has reached high levels of performance, both in terms of production and exports, becoming one of the standards of excellence of the national agri-food sector. through interviews with wine producers, relevant academic works [26,27,28] have shown that a significant number of farms has become involved in some sort of “sustainability projects” in order to meet specific needs of their customers, both end consumers and intermediaries (ho.re.ca.). the focus of these projects included organic farming, energy saving, and the reduction of chemical inputs. according to broccardo and zicari [25], for most of the interviewed farms, sustainability was understood not only from an environmental point of view, but also from a social one, such as work conditions and quality products. moreover, for younger producers, sustainability was also perceived as a way to increase territorial stewardship and defence. while a broad interest in sustainability is declared by both family and non-family businesses, its practical implications vary substantially. sustainability is mostly associated with environmental issues, while the combination of environmental with either social or economic issues is less frequent, especially among non-family farms. firms that are sensitive to sustainability do not always seek to reduce costs; rather, their main goal is to improve customer fidelity through sustainability goals. the following studies focus on consumers’ choices, and specifically on their perception of sustainable production. capitello and sirieix [24] analysed italian and french consumers’ perceptions of sustainable versus conventional wine. the study shows how consumers associate different characteristics and beneficial aspects with different categories of sustainable wines, also depending on their level of knowledge of the sector and their personal involvement with wine consumption. a cross-national study conducted in seven wineproducing countries by szolnoki [22] revealed different understandings of sustainability in the wine industry even between wine producers located in the same region or country. recent studies have highlighted that different sustainability certifications have appeared in the past decade in many wine-producing regions [9,29,30]. however, the management of sustainability remains underdeveloped in many of the certification frameworks. in a cross-country analysis of several sustainability-assessment frameworks, flores [9] noted that sustainability frameworks focus on operational issues, while strategic thinking remains underdeveloped. in addition, according to moscovici and reed [30], there is a need for more research into the consumer perspective of sustainability certifications. capitello and sirieix [24] demonstrate that there is a lot of room to improve the perception of sustainability in wine certifications and that sustainable wine marketers should place a greater emphasis on the level of consumer involvement with wine and the specific associations made by consumers with the sustainable wine category they want to promote. several recent studies have shown that consumers are interested in wines produced in an environmentally friendly or socially responsible manner [31,32,33,34]. however, compared with other industries, consumers hold the perception that the wine industry is already relatively ‘green’, and this creates one of the biggest barriers to the success of the sustainable wine sector [35,36]. wine is generally perceived as a ‘natural’ product; thus, unlike for other ‘natural’ food products, claims of wine being organic have failed to create an important element of differentiation [8,33,36,37]. the sustainable wine market is evolving into a market segment with a vast growth potential and further product differentiation. so, consumer involvement with the quality of sustainable products and efforts in sustainable production practices remain a challenge for the wine industry. for the italian sample, the results confirm previous studies on the sustainable wine market [38]. among the product-attribute associations, italian respondents attach importance to the environment and ethics, while price of products does not appear to be relevant. sogari et al. [39] also confirm a direct relationship between positive attitudes towards sustainable wine, stronger belief in environmental protection, and willingness to pay more. this study also brings new insights in relation to consumers’ involvement with wine and emcb (ethically minded consumer behaviour). emcb does not appear to be sufficient to explain differences in consumers’ perceptions of different sustainable wines. consumers who best differentiate among wines are interested in sustainability to a limited extent, their choices being driven more by the intrinsic quality of the product than by the sustainability of the process. 67the new cap and the challenge of sustainability: a synthetic indicator for the italian wine sector another stream of literature focuses on the shift from traditional to sustainable production, such as in the case of the work by chaminade and randelli [40]. the authors focus especially on the territorial dynamics of the innovation process and, more specifically, on the role of territorially embedded innovation ecosystems (teie) in accelerated sustainability transformations, with a particular focus on the establishment of the biodistrict of chianti classico. another relevant issue, investigated by merli et al. [41], is that of building solid indicators for measuring sustainability. this topic is particularly relevant when sustainability becomes key in the allocation of public support to the wine sector and to agriculture in general [42]. it also directly involves the fadn in the debate, since it has often been indicated as the relevant dataset for measuring and assessing the level of sustainability of the main agricultural processes and products. the work by merli et al. [41] stresses once again the need to investigate sustainability not only through environmental indicators but also by including economic and social ones. however, using life cycle assessment (lca) as the main methodology, it is very difficult to create a common ground for measuring sustainability, because “life cycle” is interpreted in different ways: from farm to product consumption, from farm to gate, and so on. in general, there is a problem with the definition and dimension of sustainability, and with the definition of the life cycle of the product, and this is particularly true for wine. for this reason, there has been a proliferation of methods and standards for sustainability assessment, in the old as in the new wine production world, and each of them, as reviewed by merli et al. [41], has its own pros and cons. sustainability indicators should measure the impact of business activities through a scientific, objective, and shared method. this process should be conducted with the support of stakeholders representing different viewpoints. this would improve both consistency of measurements and scientific solidity. the goals set should focus on a common ground leading to strategies for sustainability, acknowledging, at the same time, differences characterizing individual territories, in terms of production and consumption. the identification of shared and comparable tools is essential in building business networks aimed at achieving sustainability in vineyards and wineries. the variety of instruments, indicators and certifications that have been proposed worldwide may lead to confusion for both farms and consumers, who are unlikely to understand the real benefits of sustainable wine production. the authors conclude that it is crucial to develop a common indicator set for sustainable wine production in order to define clear metrics to monitor the industry’s environmental, economic, and social impacts. 2.2 the italian programs for wine sustainability outside the academic world, the interest in sustainability of the wine sector in italy is proven by the wide range of sustainability programs launched in recent years by private producers and consortia. the large number of different strategies, guidelines, and practices is a positive sign of the concern regarding the issue of sustainability in viticulture. however, farmers and producers might not have a clear understanding of the opportunities and benefits deriving from the implementation of a certain sustainability program [8]. as a matter of fact, sustainability has become a key issue for the italian wine industry. currently, v.i.v.a. and equalitas are the two main voluntary wine sustainability certification schemes operating in italy. both are based on the three pillars of sustainability (economic, social, and environmental) and apply to the entire life cycle: from the vineyard to the bottle of wine. moreover, they are both based on a principle of continuous updating of the goals and improvement of the results. despite some common aspects, the two programs present several important differences. v.i.v.a. is a public certification established in 2011 by the ministry of environment, in cooperation with two research centres, opera of the university “cattolica del sacro cuore” and agroinnova of the university of torino. in joining this scheme, winegrowers and winemakers accept to follow certain guidelines and to measure their performance using a well-defined set of international standards, referring to four different significant indicators: 1) air, measured through the carbon footprint applied to the life cycle of a wine bottle; 2) water, measured through the direct water scarcity footprint and the non-comprehensive direct water degradation footprint; 3) vineyard, measured mainly via quantitative and qualitative analysis of the impacts produced on water resources, soil, and biodiversity; 4) territory, taking into account the issue of the landscape (abandonment of vineyards, eco-sustainable materials and native species) and also socio-economic aspects. the social aspects refer mainly to the relationships established with the local community, the staff (training and salary) and the relationship with the consumers, whereas economic aspects refer to the investments made, the adoption of methods of a green or circular economy, and the acknowledgment of a fair remuneration for the different actors in the value chain. participation in the scheme is communicated with a label and 68 roberta sardone et al. a qr code that allow consumers to identify the score for the single wine bottle and for the whole organization. recognition of this labelling in foreign markets is still in progress. to date, about 40 wineries (number steadily increasing) and more than 60 different wines have joined this certification program. equalitas is a private certification, established in 2015 thanks to the initiative of unione italiana vini, federdoc, with the participation of gambero rosso, csqa and valoritalia. the scheme is addressed to the needs of the entire supply chain: from small producers, to cellars and bottlers, up to cooperatives. within equalitas, sustainability refers not only to the three traditional dimensions – environmental, social, and economic – it also includes two additional pillars: socio-environmental and communication. participation in the program involves the adoption of virtuous behaviors, compliant with specific requirements periodically updated and tiered as major, minor and recommendations, combined with the use of verifiable and measurable indicators, certified by a third-party entity. equalitas is characterized by a gradual approach to sustainability goals, and the results achieved are monitored by an annual sustainability report. the certification can be obtained by a single producer or by a territory and refers to three different dimensions: the organization standard, the product standard, and the territory, when it involves at least 60% of a specific pdo/ pgi. to date, more than 60 wineries (including 2 in spain, thanks to an agreement with the federación española del vino) and about 40 different wines are certified. the differences in the sustainability initiatives in the wine sector are an opportunity for the sector as a whole; however, overlapping methodologies and results which can lead to confusion should be avoided. according to corbo et al. (2014), a common notion of sustainability should be shared and promoted in the italian wine sector with the cooperation of academic scholars, institutions, and stake holders. this would provide consumers with greater awareness and a clearer knowledge of the benefits and costs of sustainability. moreover, a common language and framework is needed, in order to better understand and solve shared problems in vine-growing and the wine industry. finally, a single and shared sustainability framework and brand could enhance the competitiveness of italian wine on foreign markets, particularly on those promoting sustainable products, which are where italian wine is mostly positioned. in this spirit, the italian ministry of agricultural policies, food and forestry (mipaaf) introduced in 2020 a legal framework (law 77/2020) to reach a common sustainability standard that would harmonize the two protocols v.i.v.a. and equalitas, using as starting point the “sistema di qualità nazionale di produzione integrata” – sqnpi (national integrated production quality system), which is a voluntary certification programme for agricultural and agri-food products generated using integrated production techniques. for the wine sector, the sqnpi was supposed to be supplemented with additional sustainability requirements, taken from the two aforementioned certifications, which remain autonomous and operational. in this way, italy will be the first eu member state to have a national system, shared by the wine chain, to acknowledge and assess the performance of sustainability, that the law itself requires to relate to the new fadn. the two italian voluntary sustainability certification programmes are comprehensive and of high methodological value. at the same time, due to the importance of the fadn for the european farm to fork strategy and the italian law, its ability to assess the sustainability of the wine sector is worth to be tested. however, due to the type of variables and indicators available within the fadn, it is currently impossible to compare farms included in it and those participating in the v.i.v.a. and equalitas programmes, as the latter are based mainly on international standardised indicators which cannot be calculated via the fadn. nevertheless, the fadn is able to assess the sustainability of the wine sector in line with the following definition, adopted by the oiv “global strategy on the scale of the grape production and processing systems, incorporating at the same time the economic sustainability of structures and territories, producing quality products, considering requirements of precision in sustainable viticulture, risks to the environment, products safety and consumer health and valuing of heritage, historical, cultural, ecological and landscape aspects.” [7]. 3. data and research methodology the data for the present analysis of sustainability in the italian wine sector are based on an fadn sample. more precisely, the sample consists of 3,995 units of which 2,983 are farms specialized in vine-growing and 1,012 are farms specialized in wine-making4. the two groups have been analysed separately – keeping a distinction between farms that only produce grapes for wine and farms that also directly produce wine own – in order to take into account the considerable differences in the structural equipment and in the consequent eco4 more precisely, within the fadn, a farm is considered specialised when the majority (about three quarters) of the production value is due to vine-growing or wine-making. 69th e new cap and the challenge of sustainability: a synthetic indicator for the italian wine sector nomic profi les of farms in the two groups [43]5. th e following fi gures show the regional distribution of farms in the fadn sample that either only produce grapes for wine (figure 1) or are also engaged in wine processing (figure 2)6. 5 it is worth noting that, for an even more accurate sustainability analysis, the fadn sample should have been separated into four sub-groups, in order to take into account the quality of the grapes and wines produced. however, the small size of the sample did not lend itself to such detailed segmentation. 6 th e two groups in the fadn sample, jointly considered, have been compared with other offi cial statistical sources (national institute of stastistics istat). th e distribution of the farms in the fadn is generally in line with the overall distribution of the italian farms with grapea selection of variables from the fadn, referring to the sample organised in the two subgroups indicated, was used as the basis for the calculation of the wine sector sustainability indicator. th e methodology used to calculate the suwi follows the methodology of the sustainable farm index– sufi [45], which was developed as a variant of the agri-environmental footprint index approach methodology [46]. th e calculation of the index is based on a multicriteria approach specifi ed from an assessment criteria matrix (acm) based on the three dimensions of sustainability – environmental, economic, and social – linked to the farm management of the sample selected. more precisely, the acm is formed by column vectors that indicate the three dimensions of sustainability, while the row vectors indicate the set of indicators used within the farm management to calculate the suwi. th e indicators were extracted from variables available in the fadn on the grapevine sector for the accounting years 2017-20182019 and have been observed at the regional level. in table 1, the selected indicators are listed and described, and the reason they were chosen (contextualization) in relation to the three dimensions of sustainability is explained. it should be noted that the indicators have been selected according to the specifi c characteristics of the wine-producing and vine-growing sectors, rather than basing them on the territorial context of each region. however, this level of approximation is compatible with the objectives of the present research, the main goal of which is to test the current and the potential functionality of the fadn to conduct large-scale sustainability analyses. future research could incorporate the territorial dimension in a more structured way. once identifi ed, indicators were normalized to make them comparable and to proceed with the calculation of the farms’ sustainability indices by adding the weighted scores for each of the levels within the evaluation matrix. to this end, indicators were converted into scores according to the relationships between indicator values and level of sustainability. th e relationships observed can be linear, or non-linear, and scaling can be categorical or binary (mortimer et al., 2009). for non-dichotomous indicators, the score was predominantly assigned by dividing the observations into quartiles; on the contrary, for dichotomous indicators the score assigned was equal to 10 and 5 (respectively, presence or absence)7; fi nally, for other indivines, with small diff erences due the sample characteristics (minimum economic dimension) [44] and the presence of farms with grapes not for wine in some southern regions. 7 for example, this is the case for organic farming. all farms certifi ed as organic were considered equally committed to environmental profigure 1. italian fadn: distribution of vine-growing farms by regions (%). source: our elaborations on fadn data 2017-2019. figure 2. italian fadn: distribution of wine-making farms by regions (%). source: our elaborations on fadn data 2017-2019. 70 roberta sardone et al. cators, scores were assigned on the basis of specific evaluations (e.g. farmer’s age and farmer’s education). tection, obtaining a score of 10. the score was assigned regardless of whether farms receive cap support. indeed, the resources for organic farming in italy are not sufficient for all applications, so the presence/ absence of support cannot be considered a discriminating factor. in addition, the identification of the organic method does not consider possible technical issues, but only looks at the participation or not in a certification system defined by the most recent eu strategic documents, and this merely indicates that it is sustainable in comparison with conventional methods. according to this methodology, both the selected indicators and the scores assigned to each of them were carefully tested through a specific questionnaire submitted to a qualified group of stakeholders: experts in wine sector, the fadn, and sectoral policy from academic and technical-scientific world. the result of the score scaling process is shown in table 2. prior to aggregating the normalised indicators, a weight was assigned to the indicators selected within each dimension (the sum of the weights at the dimension level is = 1). within each dimension, the indicatable 1. indicators used in the development of the sustainability index and their contextualization. indicator description contextualization economic dimension net added value per hectare of utilized agricultural area represents the productivity of the land net of current costs, depreciation, provisions, taxes and duties and gross of subsidies. well assessed profitability indicator net added value per labour unit represents labour productivity net of current costs, depreciation, provisions, taxes and duties and before subsidies. well assessed profitability indicator new investments represents the new investments that are made by the farm over the course of a year economic viability of the farms in the long term current costs on revenues ratio of costs incurred for current management to revenue well assessed profitability indicator income from other gainful activities revenues from complementary activities to agricultural ones such as agritourism, active contracting, active rentals, other complementary revenues farm diversification is an indicator of additional income environmental dimension nitrogen content per hectare of utilized agricultural area represents the quantity (quintals) of nitrogen present in fertilizers used per hectare of agricultural area. indirect indicator of the level of intensity linked to fertilization incidence of toxic pesticide expenditure on the total pesticide expenditure represents the incidence of farm expenditure for toxic and very toxic pesticides on the total pesticide expenditure impact indicator on natural and antagonistic entomofauna agro-climatic-environmental payments indicates whether the farm has received agro-climaticenvironmental payments reports farms eligible for rdp agroenvironment payments organic farming indicates the presence of organic farming practices reports farms that follow organic production therefore with a high degree of environmental sustainability altitude represents the location of the farm (plain, hill, mountain) enhances the ecosystem services related to high altitude viticulture (e.g. hydrogeological stability, carbon storage, etc.) social dimension farmer’s age represents the age of the farm’ handler innovation propensity and maintenance of agricultural activity family labour unit per hectare of utilized agricultural area represents the ratio of family labour units per hectare of agricultural area family employment potential labour unit per hectare of utilized agricultural area represents the ratio of labour units per hectare of agricultural area. local employment potential certifications (pdo/pgi) represents the presence of farm certifications social capital indicator, due to the beneficial effects for the local community farmer’s education represents the level of education of the farmer higher level of knowledge allows for better farm management farmer’s gender represents farmer’s gender gender equality provides social value 71the new cap and the challenge of sustainability: a synthetic indicator for the italian wine sector tors were assessed as being of equal importance8. the final aggregation procedure then led to the calculation of the sustainability index where the suwi obtained is expressed on a scale of values between 0 (low level of sustainability) and 10 (high level of sustainability). summarising, for each farm in our fadn sample the multidimensional sustainability index is given by the weighted average of the scores assigned to the same 8 the weights assigned to the indicators belonging to the economic dimension is equal to 1/5 (as we have identified five indicators in the economic dimension); the weights assigned to the indicators belonging to the environmental dimension is equal to 1/5 (as we have identified five indicators in the environmental dimension); the weights assigned to the indicators belonging to the social dimension is equal to 1/6 (there are six indicators). farm linked to the indicators belonging to each of the three dimensions considered. therefore, the suwi of each farm represents the weighted average of the three sustainability index categories: economic, environmental, and social. finally, single data referred to all farms in the two groups are reaggregated to obtain a value of the suwi at the regional level. table 3 and the following show the results of these calculations. the last step in this assessment is a sensitivity analysis, which allows comparisons of farms in each region by considering different scenarios9. more precisely, we 9 the word “scenario” is used here to represent alternative definitions of sustainability, each giving more importance (weight) to one specific dimension. table 2. scaled scores of selected indicators. indicator unit scaling score net added value per hectare of utilized agricultural area €/ha < 0 0 i quartile 2 ii quartile 4 iii quartile 7 iv quartile 10 net added value per labor unit €/lu < 0 0 i quartile 2 ii quartile 4 iii quartile 7 iv quartile 10 new investments no 5 yes 10 current costs on revenues € i quartile 10 ii quartile 7 iii quartile 4 iv quartile 2 income from other gainful activities no 5 yes 10 nitrogen content per hectare of utilized agricultural area q./ha i quartile 10 ii quartile 7 iii quartile 4 iv quartile 2 incidence of toxic pesticide expenditure on the total pesticide expenditure % not valued 5 0 10 >0 and <25% 3 >25% and <50% 2 >50% and <75% 0 >75% 0 agro-climatic-environmental payments no 5 yes 10 organic farming no 5 yes 10 indicator unit scaling score altitude plain 5 hill 8 mountain 10 farmer’s age year <70 2 60 a 70 4 50 60 6 40 50 8 <40 10 family labour unit per hectare of utilized agricultural area lu/ha i quartile 2 ii quartile 4 iii quartile 7 iv quartile 10 labour unit per hectare of utilized agricultural area lu/ ha i quartile 2 ii quartile 4 iii quartile 7 iv quartile 10 certifications n. 0 2 1 6 >1 10 farmer’s education no degree / elementary school license 2 middle school license 4 professional diploma / high school diploma 8 short degree / degree / specialization 10 farmer’s gender female 10 male 5 source: our elaborations on fadn data 2017-2019 72 roberta sardone et al. first created what we called a “balanced” scenario, in which each dimension of sustainability assumes the same relevance in the creation of the synthetic indicator (each weighing 33.3%); then, we built three additional different scenarios, each of them characterized by different levels of importance assigned to each dimension: what we called the economic, environmental, and social scenarios. in these scenarios, the dominant dimension accounts for 50% of the total weight, while the other two 25% each. to assign a higher weight to each of the three dimensions allows us to rank the performance of each of the two different groups of farms from a specific point of view (or scenario), and subsequently to identify the most performing regions according to each analysed dimension. therefore, the suwi has also been calculated under the three additional scenarios. 4. discussion of results 4.1 the suwi in the balanced scenario the analysis moves from the “balanced” scenario, in which the three dimensions of sustainability are weighted equally. overall average scores roughly ranged from just over 5 to nearly 8 in both vine-growing farms and wine-making farms, although the index itself could vary between 0 and 10. the average value of suwi is equal to 5.97 for the first group and to 6.30 for the second, confirming the good level of diffusion of sustainability practices within the national wine sector (table 3)10. this result is not surprising given the high attention devoted in the wine sector to the sustainable practices and quality labels previously described. however, although the variability in the scores is not large, the differences in the mean values are statistically significant both within the groups and between the different regions (f2980 = 39.331 for vine-growing farms and f1010 = 18.670 for wine-making farms; p-value <1%). analysing the results at the regional level it emerges that in the case of vine-growing farms the best results are achieved by valle d’aosta and trentino-alto adige, while the lowest performances are found in the case of sardegna, emilia-romagna and marche, although the values do not differ much from the national average. in the case of the wine-making farms similar features are 10 a preliminary comparative analysis was also carried out referring to other specializations. in particular, a comparison with permanent crops confirms the relatively higher performance of the wine sector. this justifies and supports the choice made for this explorative exercise through the fadn and, at the same time, reflects the advanced level of sustainability achieved by the wine sector, thanks to the well-structured certification currently in place. displayed, with trentino-alto adige and valle d’aosta among the best performing regions, while sardegna, puglia and molise are the regions with the lowest scores. to better understand these results, it is helpful to look at the partial scores obtained for each sustainability dimension. indeed, it must be recalled that suwi is a synthetic and complex index composed of weighted indicators within each dimension (table 4 and table 5). in the case of trentino-alto adige and valle d’aosta, the fact that farms are located in mountain areas grant them a sort of environmental advantage, according to the construction of the evaluation matrix. this result can in part be justified by the importance that viticulture could have in these contexts in terms of providing ecosystem services related, for example, to hydrogeological stability, landscapes with tourism value, the conservation of biodiversity, and above all the maintenance of agricultural activity in disadvantaged territories. by contrast, this aspect could penalize other regions in achieving a good environmental index if farms are mainly located in lowland areas, where viticulture is more likely to be focused on quantity rather than quality, which also has repercussions in terms of crop intensification. in this regard, it should be noted that the region with the best environmental performance is calabria, table 3. balanced scenario: suwi by type of farm and by italian region. regions s uwi regions s uwi valle d'aosta 7.22 alto adige 7.87 alto adige 7.14 valle d'aosta 7.35 trentino 6.47 trentino 6.98 lombardia 6.32 veneto 6.73 umbria 6.23 liguria 6.47 veneto 6.19 friuli venezia giulia 6.36 liguria 6.15 italia 6.30 calabria 6.12 camp ania 6.29 lazio 6.05 umbria 6.25 friuli venezia giulia 6.03 toscana 6.23 abruzzo 5.98 lazio 6.22 italia 5.97 sicilia 6.14 piemonte 5.95 lombardia 6.11 camp ania 5.95 calabria 6.01 toscana 5.93 piemonte 6.00 m olise 5.87 abruzzo 5.91 puglia 5.69 basilicata 5.90 basilicata 5.68 m arche 5.84 sicilia 5.66 emilia romagna 5.79 m arche 5.63 m olise 5.43 emilia romagna 5.58 puglia 5.31 sardegna 5.57 sardegna 5.23 f (2980) 39.33 f ( 1010) 18.67 p-value < 1% p-value < 1% wine making farmsvine growing farms source: our elaborations on fadn data 2017-2019. -73the new cap and the challenge of sustainability: a synthetic indicator for the italian wine sector thanks to its high incidence of organic farms within the regional fadn sample and the consequent absence of the use of toxic pesticides. trentino-alto adige and valle d’aosta show high scores also for other dimensions, especially for the social dimensions in both groups of farms. this may be partially linked to the fact that the farms belonging to these regions are generally highly specialised in quality wines, having achieved many different certifications, which would imply a greater number of social relationships, as well as the important share of female entrepreneurship in the sample. on the other hand, for the economic dimension a polarization in performance emerges, with the north-east regions prevailing over the southern ones. this result is in line with expectations, considering the strategic importance of the wine sector in the agricultural economy of these regions [47]. it is worth noting that some important regions with a high vine-growing vocation and tradition nevertheless show lower economic sustainability indices than the national average (sicilia and puglia only for wine-making farms). this may be due to the composition of production in terms of prevailing quality types (wines with or without certifications), which is still quite diverse among italian geographical areas11. in addition, the results achieved by the indicator in the economic dimension are only in a few cases aligned with those obtained in the other two dimensions. this is the case of sicilia, which, while obtaining a good positioning of the environmental index in both groups (the organic farms in sicilia are widespread with a low consumption of nitrogen and toxic pesticides), is on the contrary penalized by the results in the economic 11 other studies based on the italian fadn sample have showed a generally higher performance for the farms specialised in the production of quality wines [43,44]. table 4. vine-growing farms: economic, environmental, social indices in the balanced scenario. regions economic index regions environmental index regions s ocial index trentino 6.68 calabria 7.83 alto adige 7.63 friuli venezia giulia 6.68 valle d’aosta 7.55 valle d’aosta 7.63 valle d’aosta 6.48 umbria 7.52 liguria 6.72 alto adige 6.38 alto adige 7.42 trentino 6.70 veneto 6.36 lazio 7.09 abruzzo 6.45 emilia romagna 6.03 lombardia 7.04 veneto 6.15 puglia 5.96 sicilia 6.91 camp ania 6.13 lombardia 5.95 camp ania 6.74 piemonte 6.08 umbria 5.90 m arche 6.67 lombardia 6.07 italia 5.83 toscana 6.58 italia 5.78 liguria 5.82 m olise 6.32 friuli venezia giulia 5.74 m olise 5.81 italia 6.31 lazio 5.73 piemonte 5.79 basilicata 6.14 calabria 5.55 toscana 5.69 veneto 6.06 toscana 5.52 abruzzo 5.44 piemonte 6.05 basilicata 5.49 basilicata 5.41 abruzzo 6.04 m olise 5.47 m arche 5.32 puglia 6.04 sardegna 5.39 lazio 5.32 trentino 6.03 umbria 5.25 sardegna 5.31 sardegna 6.00 sicilia 5.12 camp ania 4.98 emilia romagna 5.96 puglia 5.06 calabria 4.97 liguria 5.92 m arche 4.90 sicilia 4.96 friuli venezia giulia 5.66 emilia romagna 4.75 source: our elaborations on fadn data 2017-2019. 74 roberta sardone et al. and social dimensions. similarly, emilia-romagna and puglia, despite good economic performance in the vine grape sector (less so in the wine sector), are penalized in the social and environmental dimension, which in part can be attributed to the high intensity of the farms. campania, toscana and piemonte are in line with the national average, being regions traditionally suited to viticulture, while, in the case of wine-making farms, toscana and piemonte are placed below the national average. in the case of toscana, the economic and social dimensions reduce the global result of the suwi, probably due to the high average age of the farmers, the low recourse to waged workforce as well as the persistence of economic difficulties. the most relevant scores for piemonte are the quantity of pesticides used, which is an indicator of a high degree of intensity of the farming activity, together with a low level of education of farmers (compared to the national average) and a reduced number of new investments. in sum, these results confirm that the current structure of the fadn is still mainly oriented to capturing economic aspects and less suited to explaining the interactions between the different dimensions of sustainability in a comprehensive and contextual manner. additional improvements and integrations need to be put in place, especially in terms of social and environmental statistics, in order to fruitfully turn the accounting network (fadn) into a reliable data bank for sustainability (fsdn). 4.2 the suwi in the alternative scenarios as mentioned above, a further analysis was carried out on three different scenarios, each emphasising one of the three dimensions of sustainability. this simulation aims to test the robustness of the multidimensional sustainability index for the vine-growing and wine-making farms in identifying the effects of various policies that may enhance one or the other of the dimensions of the table 5. wine-making farms: economic, environmental, social indices in the balanced scenario. wine making farms economic index wine making farms environmental index wine making farms s ocial index alto adige 7.92 calabria 8.23 alto adige 7.92 veneto 7.28 trentino 8.20 valle d’aosta 7.41 valle d’aosta 6.87 valle d’aosta 7.96 trentino 7.33 friuli venezia giulia 6.64 alto adige 7.76 liguria 6.98 toscana 6.15 umbria 7.58 lazio 6.48 italia 6.15 camp ania 7.47 veneto 6.30 emilia romagna 6.07 sicilia 7.30 lombardia 6.27 piemonte 5.99 basilicata 6.82 abruzzo 6.21 liguria 5.90 lazio 6.75 camp ania 6.15 sicilia 5.54 sardegna 6.67 toscana 6.13 umbria 5.54 italia 6.65 italia 6.13 lombardia 5.54 veneto 6.61 friuli venezia giulia 6.10 m arche 5.49 liguria 6.52 m arche 5.78 abruzzo 5.48 lombardia 6.51 basilicata 5.75 lazio 5.43 toscana 6.40 calabria 5.71 trentino 5.40 m olise 6.34 piemonte 5.67 puglia 5.25 piemonte 6.33 umbria 5.64 camp ania 5.25 friuli venezia giulia 6.33 sicilia 5.58 m olise 5.22 emilia romagna 6.30 puglia 5.14 basilicata 5.14 m arche 6.26 emilia romagna 4.98 sardegna 4.37 abruzzo 6.05 m olise 4.71 calabria 4.11 puglia 5.55 sardegna 4.65 source: our elaborations on fadn data 2017-2019. regions regions regions 75the new cap and the challenge of sustainability: a synthetic indicator for the italian wine sector index. for example, one could wonder what the effects of “deep green” measures imposed by a european or a national policy could be on the vine-growing and the wine-making farms. the three simulated scenarios confirm, to a certain extent, the results of the “balanced” scenario, with the only exceptions of calabria in the south and friuli venezia giulia, in the north, for both groups of farms (table 6 and table 7), while campania differs only for the vine-growing farms. calabria’s environmental performance is very good, but its economic and social performance is definitely poorer. on the contrary, friuli venezia giulia features a satisfactory economic performance but the environmental one is much poorer, which implies a rather high level of intensiveness in the farm management and the technical performance. comparing the different scenarios, in the case of vine-growing farms in the economic scenario, the number of regions above the national average value (5.94) is lower (8) than in the other two scenarios (respectively 11 for environmental and 13 for social). moreover, the top group of regions for the economic index includes only regions from the north-east plus umbria, whereas the other two groups over the average are much more heterogeneous. it should be noted that the north-eastern regions and, to a lesser extent umbria, are quite specialised in vine-growing and wine-making, with a high share of the sectoral value added. table 6. vine-growing farms’ sustainability performance in the alternative scenarios. economic scenario s uwi enviromental scenario s uwi s ocial scenario s uwi valle d’aosta 7.03 valle d’aosta 7.30 valle d’aosta 7.32 alto adige 6.95 alto adige 7.21 alto adige 7.27 trentino 6.52 umbria 6.55 trentino 6.53 veneto 6.23 calabria 6.54 liguria 6.29 lombardia 6.22 lombardia 6.48 lombardia 6.26 friuli venezia giulia 6.19 trentino 6.36 veneto 6.18 umbria 6.14 lazio 6.31 abruzzo 6.10 liguria 6.07 veneto 6.16 camp ania 5.99 italia 5.94 camp ania 6.15 piemonte 5.98 piemonte 5.90 liguria 6.09 umbria 5.98 toscana 5.87 toscana 6.09 calabria 5.97 lazio 5.87 italia 6.06 lazio 5.97 m olise 5.85 abruzzo 6.00 friuli venezia giulia 5.95 abruzzo 5.85 m olise 5.98 italia 5.93 calabria 5.83 sicilia 5.97 toscana 5.83 puglia 5.76 piemonte 5.97 m olise 5.77 camp ania 5.71 friuli venezia giulia 5.94 basilicata 5.63 emilia romagna 5.69 m arche 5.89 puglia 5.53 basilicata 5.61 basilicata 5.79 sicilia 5.53 m arche 5.55 puglia 5.78 sardegna 5.52 sardegna 5.50 emilia romagna 5.68 m arche 5.45 sicilia 5.49 sardegna 5.68 emilia romagna 5.37 source: our elaborations on fadn data 2017-2019. 76 roberta sardone et al. moving to wine-making farms, there seems to be a little less variability in the values achieved by each region in the three dimensions. only 6 regions show a higher-than-average value (6.26) in the economic scenario, while this figure rises to 9 for the environmental scenario (average score 6.39) and 7 for the social one (average equals 6.26). once again, it is especially north-eastern regions (trentino, alto adige, veneto) and mountainous regions (valle d’aosta and liguria) that place high in the ranking in all the scenarios considered. all in all, in the case of wine-making farms, there seems to be a higher homogeneity and contiguity in the three scenarios presented. this is definitely a topic worth investigating in the future with proper instruments. these analyses confirm the power of the fadn as a tool for evaluating and monitoring farms’ overall performance. however, as regards sustainability, the necessity to further develop the fadn has been confirmed. the main goal, as indicated by the commission itself, will be collecting additional information with an adequate level of detail, both at the farm and the territorial level. clearly, this must be a long-term adjustment process that will take some time and effort throughout the european fadn network, with the crucial support of the commission and research offices, which will need to be involved in impact assessments and territorial analyses. another key point is that of the representativeness of the fadn sample and its robustness. particularly relevant for the analysis of sustainability in the wine sector is the exclusion – due to the eu regulations 79/56 and 1217/2009 – from the sample of micro farms (edu < 8,000 euro) which constitute a significant portion of all farms in europe and particularly in italy, especially in marginal territories and in specific production sectors, table 7. wine-making farms’ sustainability performance in the alternative scenarios. economic scenario s uwi enviromental scenario s uwi s ocial scenario s uwi alto adige 7.88 alto adige 7.84 alto adige 7.88 valle d’aosta 7.21 valle d’aosta 7.47 valle d’aosta 7.36 veneto 6.87 trentino 7.28 trentino 7.07 trentino 6.58 veneto 6.70 veneto 6.62 friuli venezia giulia 6.43 camp ania 6.59 liguria 6.60 liguria 6.33 umbria 6.58 friuli venezia giulia 6.29 italia 6.26 calabria 6.57 lazio 6.29 toscana 6.21 liguria 6.48 italia 6.26 umbria 6.07 sicilia 6.43 camp ania 6.26 camp ania 6.03 italia 6.39 toscana 6.21 lazio 6.02 lazio 6.36 lombardia 6.15 piemonte 6.00 friuli venezia giulia 6.35 umbria 6.10 sicilia 5.99 toscana 6.27 sicilia 6.00 lombardia 5.96 lombardia 6.21 abruzzo 5.99 emilia romagna 5.86 basilicata 6.13 calabria 5.94 abruzzo 5.81 piemonte 6.08 piemonte 5.92 m arche 5.76 m arche 5.95 basilicata 5.87 basilicata 5.71 abruzzo 5.95 m arche 5.83 calabria 5.54 emilia romagna 5.91 emilia romagna 5.58 m olise 5.38 m olise 5.66 puglia 5.27 puglia 5.30 sardegna 5.59 m olise 5.25 sardegna 5.02 puglia 5.37 sardegna 5.09 source: our elaborations on fadn data 2017-2019. 77the new cap and the challenge of sustainability: a synthetic indicator for the italian wine sector including the cultivation of wine grapes. such a feature of the italian fadn sample might, for example, affect the overall assessment of social and environmental sustainability. in the move from the fadn to the fsdn, some statistical rethinking and adjustment of the construction of the sample would be appropriate and advisable. on the whole, our suwi shows encouraging results when applied to the wine sector. however, it is necessary to select proper homogeneous groups of farms (vinegrowing and wine-making) to make the analysis fit better to the sectoral characteristics. moreover, it reveals some critical issues in the use of the fadn database for a global sustainability analysis – in its threefold dimension – due to its current structure. 5. conclusions in the framework of the new cap 2023-2027, in which support to farmers is increasingly coupled to specific desirable behaviours, the creation of a synthetic indicator including all three dimensions of sustainability, and applicable to specific sectors, is becoming one of the main challenges [48,49]. to this end, contributions for the construction of synthetic indicators of sustainability are appropriate and even necessary. many recent works have tested a wide range of synthetic measures of sustainability, but there are no previous studies that have used the fadn for this purpose. nevertheless, in a few years the fadn should become, according to the eu commission itself, the main source of data on and measurements of desirable farming behaviours aimed at enhancing sustainability. the exercise through the fadn has highlighted some relevant challenges. the most important of these are the representativeness of the samples, the replicability of the measures, the generalisation of the indicators, the statistical robustness, and the effectiveness in identifying specific connections between an observed action and the level of sustainability achieved. our exercise focused on the wine sector, one of the most advanced production systems in terms of certification of sustainability in italy, so it is interesting to see how it actually performs with regards to sustainability in its three dimensions, based on a series of simple but rather effective indicators originating from the fadn and aggregated in a single indicator like the suwi. the wine sector is interesting as a case study because it is ahead of other sectors in italy and other european and non-european countries in the matter of sustainability labels and quality acknowledgment by consumers. a high number of recent papers, as mentioned above, have reported on the awareness of the consumers, the efforts of the producers to become more sustainable, and the advancements in the policy design to combine, alongside the recent strategies of the eu, production goals with environmental and social concerns. this is the first attempt to apply this methodology to the wine sector and, while it has been quite effective in reflecting the full complexity of the concept itself and in comparing performances in space and possibly in time too, it does not allow one to describe in absolute terms how sustainable a farm, or a group of farms, or a specialised territory is. more work is needed in this respect. with regard to the composition of the index proposed here, it implies necessarily a sort of compromise amongst the three dimensions considered: the economic, environmental and social dimensions of sustainability. this “average” value of performance could help overcome the idea of possible trade-offs amongst the three dimensions, so that the environmental (natural resources) and social (labour) dimensions of sustainability would no longer be considered constraints, but rather as opportunities to maximise economic values (profits and revenues) [11,50]. future developments in the method of calculating the suwi, using appropriate methodologies, could also take into consideration the evaluation of the reciprocal effect (adjunctive or diminutive) among indicators within the different dimensions and between the three pillars of sustainability. however, both innovative policies and new micro and user-friendly technology (digital technology and precision farming) have contributed to reducing the traditional trade-offs among sustainability goals, so that economic goals can be boosted within a more general framework of social and environmental sustainability. with regards to the performance of the italian regions as measured by the suwi, the regional ranking shows significant differences in the position of the italian regions according to the two groups of farms. among the wine-making farms, the suwi shows a greater variability of scores; furthermore, a smaller number of regions achieved a result that was above the italian average, suggesting that the most sustainable wine-making farms are concentrated in a few regions. this study also explains the current potential of the italian fadn for use in sustainability analyses. from this preliminary assessment of the wine sector, some interesting recommendations emerge, aimed at increasing the capability of the fadn for the analysis of sustainability, and more in general in the agricultural sector, as indicated in the farm to fork strategy and confirmed in the roadmap for the construction of the new fsdn. 78 roberta sardone et al. with regards to data, the main shortcoming identified is the lack of or weakness of some information, which has been overcome here with the use of proxies, which, however, make the link between the variables chosen and the specific dimension of sustainability rather unstable and weaker than they should be. however, it 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vecchio2, azzurra annunziata3, pablo alonso gonzález4, raimundo otero enríquez5 structure and development of the czech wine market and foreign wine trade kamila vesela, david křížek*, lucie severova the impact of alternative packaging on the life cycle of wine on tap stefano massaglia1, tibor verduna1, vincenzo varchetta2, filippo brun1, simone blanc1,* the new cap and the challenge of sustainability: a synthetic indicator for the italian wine sector roberta sardone1,*, simonetta de leo1, davide longhitano2, roberto henke1 analysis of the 2007-2008 hérault premiumized grubbing-up campaign: a tool to better understand fischer-boel’s 2008-2011 grubbing-up campaigns and the desire in 2022 to reintroduce locally premiumized grub-ups étienne montaigne1, samson zadmehran2,*, alfredo coelho3, yacine messaoudène4 the impact of fees on customer purchasing behavior and beliefs in winery tasting rooms: a scoping review john c. spence wine economics and policy 9(1): 19-29, 2020 firenze university press www.fupress.com/wepwine economics and policy issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.14601/web-8053 citation: g. szolnoki, g. totth (2020) a cross-cultural comparison of wine consumption and purchasing behaviour in germany and hungary. wine economics and policy 9(1): 19-29. doi: 10.14601/web-8053 copyright: © 2020 g. szolnoki, g. totth. this is an open access, peerreviewed article published by firenze university press (http://www.fupress. com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information files. competing interests: the author(s) declare(s) no conflict of interest. original research article a cross-cultural comparison of wine consumption and purchasing behaviour in germany and hungary gergely szolnoki1,*, gedeon totth2 1 geisenheim university, von-lade-str. 1, 65366 geisenheim, germany. *corresponding author 2 budapesti gazdasagi egyetem, buzogány u. 10-12, 1149, budapest, hungary e-mail: gergely.szolnoki@hs-gm.de, totth.gedeon@uni-bge.hu abstract. both the german and the hungarian wine markets belong to the “old world” european winemaking heritage and each have long winemaking traditions; however, since the 1950s, they have gone through completely different changes as political and economic circumstances greatly influenced the development of these wine markets. this paper, based on a representative survey of 2,000 participants in germany and 1,500 participants in hungary, investigates the differences in consumer behaviour and sales channel structures in both countries. the results indicate that, despite some similarities, there are large differences between german and hungarian wine consumers in not only wine preferences but also in the use of sales channels. the two countries differ especially in the number of heavy drinkers and in the socio-demographic background of wine drinkers. these results shall provide important information and insights for producers and marketers about the wine markets of these two european countries. keywords: wine, wine market, consumer behaviour, hungary, germany, cross-cultural comparison, sales channels. 1. introduction while most wine growing countries in europe are considered part of the “old world” winemaking heritage, the differences between those countries can be substantial. with singular political and economic circumstances as well as unique cultural backgrounds that influenced the development of their wine markets, germany and hungary are excellent examples of how the wine markets in two “old world” heritage countries differ significantly. these two countries, both with a long wine tradition and similar per capita consumption, will be compared within the framework of this study in terms of consumers’ preferences and sales channel usage. germany’s winemaking tradition has a 1,000-year history [1]. more recently, germany has become one of the most important marketplaces of the european wine business; it is the world ś largest wine import market by volume, with annual per capita consumption of 24.2 litres of still and sparkling 20 g. szolnoki, g. totth wines [2, 3]. trade structures that include very effective discount stores have encouraged this volume growth as they promote additional sales and thus contribute to what has been a rapid change in demand volume [4]. hungary also has a more than 1,000-year wine tradition. unlike germany, however, wines by domestic hungarian producers dominate the market and this pattern is expected to continue [5]. the average annual wine consumption has been decreasing since 2010 and is currently around 24.0 litres per capita [6]. the sales channel structure also differs from the german model; in hungary, superand hypermarkets are the leaders in selling wine [7]. two representative surveys have been conducted in order to describe the current situation of consumer preferences, to analyse the differences between these two markets, and to model the total wine market in germany and hungary. the paper begins with a general description of the german and hungarian wine markets, followed by the materials and methods of the representative survey. then, in the “results” chapter, data analyses using various statistical methods show the differences between german and hungarian wine consumers. at the end of the paper, the “discussion” chapter summarises the results, gives some managerial implications, and provides some information on the limitations of the research. 1.1 the german wine market german viticulture land area has remained constant during the last ten years [3]. germany currently has 102,000 hectares of vineyards, which makes it the 14th largest wine growing country globally. the total wine production from the 13 official registered wine regions averages approximately 9.0 million hectolitres annually. germany imports another 15 million hectolitres each year, making it the largest importer of wine by volume globally and one of the most important sales markets in the world [8]. this has gradually led germany to become the primary wine marketplace of europe. while this market is not considered very attractive due to the high degree of competition and saturation [9], the german wine market has one significant advantage and opportunity in its consumers’ willingness to purchase foreign wines. the overall still wine market consists of 60 per cent imported wine and 40 per cent domestic wine [3]; further, this market composition is expected to remain stable on a long-term basis. this enthusiasm for foreign wines represents an critical aspect of the german market. also, the lack of impairing trade barriers makes the market easily accessible for wine exporters all over the world. the limited production capacity of the domestic german wine business results in a high level of imports, consisting mainly of bulk wine, primarily from mediterranean countries [10]. due to extremely low costs, germany is an important bottling hub in the international wine trade; 2.6 million hectolitres are imported annually as bulk, repackaged into 341 million 0.75 litre bottles, and then exported as low-priced wine, mainly to neighbouring european countries such as the netherlands, belgium, and scandinavia [12]. net exports of german wine remained at a low level of about 1 million hectolitres [3]. this business has been particularly lucrative for large food retail groups, which dominate the domestic market. discounters have been especially successful, overtaking the sales of large food retail chains due to their strong emphasis on private labels. their success has also contributed to the high price sensitivity in the german retail market [13]. the on-trade sector accounts for approximately 18 per cent of all wine sales in the country and is often guided by the nationality of the businesses in germany [9, 11]. this sales channel shows the highest average sales price per bottle as 25 eur [13]. a general trend of premium wines, priced above 5 eur, is gaining popularity in germany [9, 14]. the market demand for german quality wine is relatively constant at about 7.5 million hectolitres [3]. quality wine represents a high share in the german wine market; only about 3 per cent of german wine production is marketed and bottled as table wine [12]. the german market is liberal in terms of sales channel structure for wine, and this liberality is related to both the huge import component of the market and to the peculiar structure of german retail stores. german consumers have several possibilities when deciding where to buy a bottle of wine [15] as the structure and diversity of the distribution channels offers a broad range of points of purchase. globally, germany is one of the few countries with such enormous diversity in wine distribution options. direct selling and specialised wine stores reach a higher average price, though their share is significantly lower than that of discount stores or superand hypermarkets. online sales have been increasing annually, although their market share is still below 5 per cent [16]. 1.2 the hungarian wine market the hungarian wine sector has undergone several serious political and economic changes over the past 150 years – from the dual monarchy of austria-hungary to communism after the second world war to a democratic state with a free economy after the iron curtain fell. 21a cross-cultural comparison of wine consumption and purchasing behaviour in germany and hungary after the political change in 1989 to a democratic state, the hungarian wine industry changed significantly – vineyards of co-operatives and state wineries were privatised, thousands of new wineries were founded, and quality winemaking dominated instead of mass production [17, 18]. at the same time, however, by 2017, vineyards shrank from 130,000 to 65,000 hectares [19], and production has decreased to approximately 2.5 – 2.9 million hectolitres as of last year [5]. export volume has remained stable the past five years, reaching a volume of 0.7 – 0.8 million hectolitres, with a substantial share as bulk wines (60 per cent) [19]. the order and importance of export countries has changed for the hungarian market; former communist countries of the warsaw pact, especially slovakia and the czech republic, have increased their wine import from hungary in the last two years and become the two most important export destinations for hungarian wines. germany, which had been the primary market for exported hungarian wines for many years, fell to third [20]. domestic consumption of hungarian wines is high. therefore, wine imports do not play an essential role in the hungarian wine market. although there were some peaks above 0.6 million hectolitres before 2011, during the past three years wine imports have stabilised at a volume of 0.2 million hectolitres, primarily from italy and germany [21]. the market for sparkling wines was estimated for 2017 at 6.5 per cent of the total volume, while on-trade has a share of approximately 20.0 per cent [5]. regarding sales channels, discount stores do not have the same hegemony as in germany. instead, the market is dominated by superand hypermarkets such as auchan hypermarche sas, tesco plc, and spar. also, small grocery shops are the main distribution centres for food products in villages [21], increasing sales venue diversity in hungary. table 1 summarizes the main differences and similarities of germany and hungary in terms of wine production, trade and consumption. 1.3 objectives and research questions both the german and the hungarian wine markets have been previously studied, though in limited amounts. previous scientific papers about germany range widely on their topics, including: cooperatives [22], consumer segmentation [16], wine price analysis [23, 24], winery structure [25], wine tourism [26], social media usage in the wine business [27], and on the german wine production sector [28]. in addition, the popular german scientific magazines weinwirtschaft and meiningeŕ s wine business international also publish articles on the german wine market [9, 10, 14]. there has also been some research into hungary’s consumer segmentation [29], consumption and purchasing behaviour [30, 31], innovation processes [32, 33], general overview of the wine sector [34], wine tourism [35], and a comparison of french and hungarian wine producers [36]. these two countries represent two different worlds. germany symbolises the wealthy western europe, while hungary, as one of the formal communistic countries in middle-eastern europe, is at the border between europa and the balkan. due to the completely different development, both on political and on economic level, of these two countries, there is a certain scientific interest to investigate wine consumers with various cultural backgrounds. we suppose that differences in culture, economic and politic have their influence also on wine consumption behaviour. there has not, however, been a comparative study on the german and hungarian wine markets nor on consumer behaviour in these two countries. therefore, for the purposes of this study, representative surveys were conducted in germany and hungary. based on the assumption that german and hungarian wine consumers and markets differ significantly, this article examines the following questions: rq1: what are the main differences between german and hungarian wine consumers in their basic characteristics and preferences? rq2: how do the wine market sales channels differ in germany and hungary? 2. materials and methods 2.1 consumer sample representative consumer surveys were conducted in may 2017 in germany and hungary. the random sampling of 2,000 and 1,500 participants respectively is representative of the basic socio-demographic structure of the german population from age 16 and of the table 1. wine related statistics in germany and hungary 2018.   germany hungary vineyard areas (ha) 102,000 65,000 annual wine production (million hl) 9.0 2.5 wine import (million hl) 15.0 0.2 wine export (million hl) 1.0 0.7 sparkling wine (share in %) 16.0 6.5 on-trade (share in %) 18.0 20.0 source: [3, 5, 8, 9, 11, 19, 21]. 22 g. szolnoki, g. totth hungarian population from age 18 (the legal drinking ages in each nation). therefore, the provided information was generalised for the total population of each country. in order to increase the validity and reliability of the results, the survey was carried out in the form of a personal interview (face-to-face survey) in the households of the interviewees by using quota sampling [37]. the interviews were conducted by a professional market research company, gf k (nürnberg, budapest). for quotas, we used official statistics from federal office of statistics on national level. in germany, it was on the basis of data from statistisches bundesamt, wiesbaden [55] and in hungary from köszponti statisztikai hivatal, budapest [56]. the quote for gender, age and social class are reported in table 3. regarding the selected quota criteria, the german sample corresponds to the german total population and the hungarian one to the hungarian total population. for the determination of the respondents, the external employees of gf k received the characteristics gender and age of the respondents as well as occupation of the head of household and household size directly; the characteristics town/city size and federal state were indirectly specified. the questioning of the respondents was based on a structured questionnaire. the external employees of gf k had to follow the question formulation and the order of the questions. a total of 400 interviewers in germany and 200 interviewers in hungary were involved in this investigation. for the interviewer an automated software was used. 2.2 methodical approach the questionnaire, based on the study by szolnoki and hoffmann [16], included identical questions in both countries regarding wine consumer behaviour as well as socio-demographic profile information. consumption of still wine, sparkling wine and beer was measured by using six frequency categories such as “many times a week ”, “once a week ”, 2-3 times a month”, “once a month”, “less than once a month” and “never”. for wine type preference (white, rosé and red wine), sweetness preference (dry, semi-dry, semi-sweet and sweet wine), preference of origin (german and imported wine) and sales channel usage (discount shop, supermarket, hypermarket, wine shop, cellar door and online sale) constant sum scaling was used [38]. considering the results of friedmann and amoo’s study on rating scales [39], the questionnaire utilised a seven-point interval scale for gauging involvement. this was measured by asking consumers for their interest for and knowledge about wine. for the socio-demographical variables gender and age, we applied the same response categories in both countries, while social class was calculated from education level, net-income and current profession. the questionnaire was designed in german and back-translated (german-hungarian) so that the native language of each country was used during data collection. data from the survey were analysed with spss 23.0 (spss ibm) using mean, frequency, cross tables and anova. like mueller et al. [40], we used the χ2 test as an ordinal penetration measure to test the differences between the segments in terms of socio-demographic and behavioural profiles combined with crameŕ s v for cases with more than four cells [41]. for metric responses, factorial analysis of variance was used, and post-hoc effects (tukey-b test) were estimated, allowing analysis of the significant differences between the segments. 3. results 3.1. consumption frequency of alcoholic beverages first, the consumption frequency of three alcoholic beverage types (still wine, sparkling wine and beer) was determined in order to provide preliminary insight into differences between german and hungarian consumer behaviour. table 2 shows that there were significant consumption differences in all three beverage types. the consumption pattern reflects that hungarian frequent wine drinkers (at least once per week) is significantly higher than in germany (22 per cent vs 12 per cent). according to this, the share of occasional drinkers and non-wine drinkers in germany is higher than the hungarians’. germany’s annual per-capita sparkling wine consumption is number one in the world with a value of 3.4l [3]. this is reflected in the table 1 results, especially when comparing the first frequency categories. in hungary, sparkling wine is also popular; however, the drinking frequency is lower than in germany. beer consumption in germany exceeds that of hungary [3, 42]; comparing frequent beer drinkers, 45 per cent of the german population consumes beer at least once a week, while in hungary, this share is only 24 per cent. 3.2. socio-demographic profile of wine drinkers to evaluate the socio-demographic makeup of wine drinkers, we employed cross-tabulation to determine any significant differences between the two countries (table 2). for this analysis, we only involved wine drinkers 23a cross-cultural comparison of wine consumption and purchasing behaviour in germany and hungary from both countries, therefore the investigated number of cases reduced on 1,237 in germany and 988 in hungary. comparing first the gender of wine drinkers, it becomes clear that in hungary, there is an even distribution of male and female wine drinkers at 50 per cent each, while in germany, wine preference is slightly higher among women than men. age seems to be a more significant indicator of drinking frequency. table 3 shows that while the consumer drinking behaviours are similar in both countries between the ages of 40-65 years, younger generations in hungary are more likely to consume wine than their german peers. however, these statistics reverse for the oldest generation, with more german consumers over age 65 drinking wine than their hungarian counterparts. the largest socio-demographic difference between german and hungarian wine drinkers is related to social class. in germany, wine drinking seems to be strongly correlated with higher social status; more than one-third of wine drinkers in germany are wealthy and well-educated consumers, while the lower social class makes up only 17 per cent of the wine drinking population. the exact opposite is observed in hungary, where wine drinking is popular among the middle and lower social classes but has significantly fewer upper-class participants. 3.3. wine consumption behaviour factorial anova was applied to analyse significant differences in the metric responses of wine consumption behaviour (table 4); origin, wine type, level of sweetness, and place of consumption were measured with a constant sum scale. involvement was evaluated by looking at self-reported interest in and knowledge about wine on a scale from -3 to +3. a main distinction between the german and hungarian wine markets is the preference of origin of wine: domestic or foreign. germany is considered the largest import market internationally [3], while the hungarian market is dominated by domestic wines; german consumers stated a 59 per cent preference for their domestic wines, but 94 per cent of hungarians favoured a native vintage. wine type preferences show some differences; however, they are not substantial. both countries produce more white wines than red [3, 19], which also reflects table 2. consumption frequency of selected alcoholic beverages in germany and hungary. sparkling wine sparkling wine beer germany n=2,000 hungary n=1,500 germany n=2,000 hungary n=1,500 germany n=2,000 hungary n=1,500 several times per week 6% 11% 1% 0% 28% 13% once a week 8% 11% 3% 1% 17% 11% two or three times per month 13% 14% 9% 3% 11% 15% once a month 10% 12% 12% 6% 6% 8% less than once per month 24% 19% 49% 54% 13% 19% never 39% 34% 27% 37% 25% 35% χ2 68.421* 144.739* 177.311* cramer-v 0.198 0.284 0.302 * significant differences between germany and hungary, χ2 = p < 0.05. table 3. socio-demographic profile of wine drinkers in germany and hungary.   germany n=1,237 hungary n=988 χ2 cramer-v gender male 44% 50% 15.587* 0.105 female 56% 50% age 16/18-29 yearsa 15% 17% 31.209* 0.165 30-39 years 13% 20% 40-49 years 20% 18% 50-65 years 28% 26% older than 65 years 24% 18% social class b upper 37% 17% 210.455* 0.325 middle 45% 40% lower 17% 43% a legal drinking age in germany is 16 years, while in hungary 18 years; b social class is based on education level and net monthly salary; * significant differences between germany and hungary, χ2 = p < 0.05. 24 g. szolnoki, g. totth the consumer preference structure. yet, the above-mentioned imported wine share contributes to higher red wine consumption in germany. in hungary, the preference level for white wines is above 50 per cent. one of the greatest differences in this study was sweetness preference. the majority of german respondents prefers dry wines, which comprise 43 per cent of their total consumption, while sweet wines account for just 23 per cent. hungarian wine drinkers demonstrated nearly inverse choices, with strong preferences for wines with a higher level of residual sugar and only 23 per cent consumption of dry wines. one explanation for hungary’s inclination for sweet wine may be that one of the most popular wine growing regions in hungary is tokaj [21], where the focus is on sweet wine production. as for consumption location, two categories have meaningful differences: drinking wine at home and at exterior dining establishments. in germany, restaurants are a more popular choice for drinking, at 18 per cent compared to 13 per cent in hungary, while at-home consumption in hungary is significantly higher at 53 per cent. with respect to involvement, hungarian consumers indicated a lower value; however, the differences on a seven-point scale, even though they are significant, are marginal. 3.4. usage of sales channels for purchasing wine germany and hungary have entirely different landscapes regarding wine sales channels. therefore, in the questionnaire, the inquiry about sales channels differed according to the retail structure of each country. in germany, the categories “supermarket” and “hypermarket” were not separated and “purchasing wine abroad” was an added option. in hungary, the category “small grocery” was included as small groceries are still of enormous importance in terms of selling wine, especially in the countryside, where there is not significant superand hypermarket coverage. table 5 summarises the results of sales channel usage in germany and hungary. discount shops such as aldi einkauf gmbh & co. and lidl stiftung & co. have huge popularity in germany when it comes to purchasing food and beverages. accordingly, the share of the discount shop channel is 37 per cent followed by supermarkets and hy permarkets at 36 per cent. discount shops are not unk nown in hungar y, but they are not as widespread as in germany. therefore, based on the survey data, we estimate their share at 12 per cent. the greatest piece of the total wine market in hungary is controlled by hy permarkets, such as tesco plc or auchan hypermarche sas, with a 33 per cent market share. supermarkets follow at 20 per cent, and then small groceries, with a significant 18 per cent share. specialty wine stores also having large differences in market share; in germany, wine stores perform far better than those in hungary (11 per cent versus 5 per cent market shares respectively). winerydirect sales have a similar share in both countries at 12 per cent. online wine shops sales, however, differ significantly between germany (2 per cent) and hungary (0.1 per cent). table 4. wine consumption behaviour of german and hungarian wine drinkers.   germany n=1,237 hungary n=988 f-value sign. origin domestic wines 59% 94% 1124.27* 0.000 imported wines 41% 6% 1124.27* 0.000 wine type white wine 44% 53% 44.09* 0.000 rosé wine 12% 12% 0.00 0.989 red wine 44% 34% 43.15* 0.000 level of sweetness dry 43% 23% 150.18* 0.000 semi-dry 34% 18% 152.99* 0.000 semi-sweet/sweet 23% 58% 477.95* 0.000 place of consumption home 46% 53% 25.87* 0.000 dining establishment 18% 13% 27.66* 0.000 visiting friends or relatives 25% 25% 0.02 0.963 events 11% 9% 14.55* 0.000 involvement interest -0.31 -0.65 18.68* 0.012 knowledge -0.83 -1.22 22.42* 0.002 * significant differences at p < 0.05, anova-test. table 5. usage of sales channels of german and hungarian wine drinkers. sales channels germany n=1,237 hungary n=988 f-value sign. discount shop 37% 12% 314.276* 0.000 small grocery n.a. 18% n.a. n.a. supermarket 36% 20% n.a. n.a. hypermarket 33% n.a. n.a. wine store 11% 5% 51.983* 0.000 at the winery 12% 12% 3.709 0.054 online wine shops 2% 0.1% 29.732* 0.000 abroad 2% n.a. n.a. n.a. *significant differences at p < 0.05, anova-test. 25a cross-cultural comparison of wine consumption and purchasing behaviour in germany and hungary when analysing the usage of sales channels by comparing different sub-segments, we have found significant differences. in germany, there are proportionally more females than males, who buy their wines in discount shops. in hungary, due to the fact that discount shops play a less important role, superand hypermarkets have a higher proportion of female consumers. this phenomenon can be tracked back to the fact that in both countries mainly females do the everyday grocery shopping, which, obviously, is combined with purchasing wine. in terms of age, older consumers in germany buy more frequently in wine stores, while in hungary younger generations have a significant higher share of purchasing wine in hypermarkets. one of the main influencing factor among socio-demographic and –economic characters is social status – regardless of the country. german wine consumers with higher income and social status purchase very little wine in discount shops and spend more money on wines form wine stores or directly at the winery. in hungary, we a similar situation can been seen regarding purchasing wine in wine stores and cellar door. there is a higher proportion of hungarian wine drinkers from lower social class, who buy wine in small groceries [1]. additional questions about consumers’ activity and attitudes towards online wine sales were asked to analyse the potential and to forecast the development of this market in the future. as already stated, german online wine sales cover two per cent of total purchases and have an active consumer group of seven per cent (see table 6). in hungary, only one per cent of all wine drinkers purchased wine online in the last year. wine drinkers in both countries that have not already purchased wine online are to the same extent (13-14 per cent) interested in ordering wine online in the future. however, the share of those who do not want to consider online wine purchases is still substantial at 79 and 86 per cent, respectively. 3.5. market structure of wine there are official statistics of wine sales in terms of total volume by the federal statistic offices in both countries. according to these, in 2016, germany had sales of approximately 20 million hectolitres and 2.2 million hectolitres were sold in hungary. even the total proportion of sparkling wine consumed can be defined precisely – 16 per cent in germany and 6.5 per cent in hungary [3, 43, 44]. when deducing the volume of the total wine market by the share of sparkling wines, 16.8 million hectolitres remain in germany, while in hungary the volume changes to 2.06 million hectolitres. however, there are limitations when trying to quantify the value of the total wine market due to the very raw estimates appearing in different media. according to euromonitor [5, 44], the total value of the german wine market was estimated at 13 billion euros, and the hungarian one at 315 billion forint. other sources, however, show a significantly lower value of 9 billion euros in germany [45]. attempting to determine the value share of the on-trade wine market in each country is even more complicated. for that reason, this study only calculated the volume, but not the value, of the retail market. the study considered the on-trade share to be 18 per cent in germany and 20 per cent in hungary, which then converts to approximately 14 million hectolitres in the german off-trade wine market and 1.64 million hectolitres in hungary [5, 44]. tables 7 and 8 indicate the importance of different retail sales channels in germany and hungary. as already discussed above, the structure of the channels in germany and hungary differs substantially, especially when comparing the share of discount shops as well as superand hypermarkets. weighing the shares by volume, winery-direct sales in both countries gain in importance while discounts and superand hypermarkets become less significant. this can be traced back to the fact that consumers in discount stores and super and hypermarkets have below-average consumption rates while those who buy their wine directly from the winery tend to have a higher average consumption.table 6. active and potential online wine buyers in germany and hungary.   germany n=1,237 hungary n=988 have purchased wine online 7% 1% have not purchased wine online but willing to do so in the future 14% 13% have not purchased wine online and unwilling to do so in the future 79% 86% chi-square 53.447* cramer-v 0.189 table 7. retail market structure of still wine in germany.   discount food retails wine store cellar door online abroad average price (€/l) 2.92 3.20 10.00 6.72 10.00 8.00 unweighted share 37% 36% 11% 12% 2% 2% volume share 33% 34% 12% 16% 2% 3% value share 20% 23% 26% 22% 3% 5% 26 g. szolnoki, g. totth for the value share, this study used official statistics [3] and, in some cases especially in hungary, where no statistics were available conducted short qualitative interviews with wine market experts. based on the official statistics and the results of the expert interviews, the average price for each sales channel was defined. although the german and hungarian average prices were calculated separately, there are definite similarities in terms of price in certain sales channels. due to the lower average price and lower volume share, discount shops in germany have a 20 per cent value share, while the share of wine stores and wineries rises strongly above 20 per cent. in hungary, too, wine stores and wineries increased their value share massively compared to discounts, small groceries, and superand hypermarkets. 4. discussion this study sought to identify differences between german and hungarian wine drinkers, to provide insights into their wine purchasing and consumption behaviours, as well as investigate the structure and importance of sales channels in these countries. the results indicate that major differences appear in wine purchasing and consumption behaviours in germany and hungary. social class is the strongest differentiating factor for wine consumers in these two countries. wine in germany is trendy among consumers from the higher and middle social classes, but it still attracts quite a few consumers in the lower class. in hungary, however, the main wine drinker population comes from the lower and middle social classes. the positive correlation between wine consumption and higher social status in germany verifies previous research by mortensen et al. [46], lockshin et al. [47], and thach and olsen [48]. there were also significant differences in terms of age of the consumer. in hungary, wine drinkers are evenly distributed across all ages examined; however, in germany, wine consumers are generally older (above 40 years). in other studies, age was also recognized as a robust variable influencing wine consumer behaviour [40, 49, 50, 51, 52, 53]. preference of origin is also a substantial behaviour difference; hungarian wine consumers greatly favour domestic wines [21], while imported wines are of great importance in germany. sales channels in the two countries are also entirely different. in germany, more than two-thirds of the total wine volume is sold in discount shops and other food retailers [37], while in hungary, hypermarkets, supermarkets, and small groceries are the leading wine distributors. the above-mentioned significant differences between germany and hungary underline the hypothesis that countries with different cultural, political and economic background have a different consumption pattern of alcoholic beverages. in hungary, wine consumption is distributed more homogeneously within the different segments. as stated above, the differences in wine consumption between younger and older consumers as well as wine drinkers from lower, middle and higher social classes are much lower than in germany. due to this fact, wine in hungary can be seen as an alcoholic beverage, which goes beyond social and age borders, while in germany, socio-demographic and –economic characters influence consumption of wine more significantly. 4.1 practical and managerial implications from a managerial perspective, these results contribute to more profound insights and better understanding of german and hungarian wine markets and consumers. germany, with its 15 million hectolitres of imported wine, is one of the most important and popular wine markets worldwide [3]. in addition to the approximately 8,000 german self-marketing wine estates, large wine bottler operations and cooperatives, international wine table 8. retail market structure of still wine in hungary.   discount small grocery super market hyper market wine store cellar door online average price (ft/l) 800 870 1,000 1,000 3,300 2,000 3,300 average price (€/l)* 2.51 2.73 3.14 3.14 10.34 6.27 10.34 unweighted share 12% 18% 20% 33% 5% 12% 0.1% volume share 11% 20% 19% 30% 5% 16% 0.1% value share 8% 15% 17% 27% 14% 20% 0.2% * average price in € was calculated based on the official exchange rate on 15. february 2019. 27a cross-cultural comparison of wine consumption and purchasing behaviour in germany and hungary companies compete for german buyers. in hungary, the pressure of imported wines is not as great as in germany, however, the diminishing geographic area of vineyards as well as the decreasing per-capita-consumption in the country [43] challenges producers and wine market experts. for the reasons mentioned above, detailed information and data about consumers in these countries is crucial in order to understand their behaviours, needs, recent market trends, and the importance of various sales channels. with the help of this study’s results, sales channel target groups can be identified which may lead to better positioning for wine suppliers and offer the opportunity for promotional campaigns. in addition, wine producers and specialty wines stores, as well as discount shops and other retail channels, will be able to quantify the market share of their respective channels and also better position themselves in the german and hungarian wine markets. the market structure presented in 3.5 summarizes the importance of different sales channels. the german retail landscape differs significantly form the hungarian one, especially in volume and value of discount shops and wine stores. this overview shall support wholesalers, exporters as well as importers of wines from hungary to germany and vice versa, to identify the target market and its sales channels and to position their products in the right channel. this study also analysed trends for future developments in the wine sales landscape. although online sales currently only make up 2 per cent of total wine sales in germany and 0.1 per cent in hungary, per study results, e-commerce will become an increasingly important and substantial portion of the future sales markets. this fact is essential for retailers to prepare their business for the future. 4.2 limitations and further research academically, this study enhances existing research into wine consumerś behaviour in two wine growing countries. as the framework of this study included two representative surveys (one in germany and one in hungary), the results can be generalised for the total populations. while this article shares new results, there are also limitations of the research that should be considered. the current study outlines a snapshot of the german and hungarian wine market in 2017. although other representative studies from germany [16] and hungary [54] can confirm the results about consumer behaviour and structure of the sales channels, only a long-term investigation would give a complete picture on the development of both markets. the authors of this paper, therefore, recommend continuing data gathering and comparing germany and hungary again in the future. furthermore, we also encourage other researchers to adopt this way of investigation to compare other wine markets and their consumers. acknowledgements we would like to thank the geisenheim university and the hungarian national council for the wine communities (hegyközségekn nemzeti tanácsa) for supporting our idea, the data collection and the analyses of this study. we would also like to thank nicole siegenheim and dávid brazsil for their helpful comments. references [1] g. szolnoki, d. hoffmann, 2013. consumer segmentation based on usage of sales channels in the german wine market. international journal of wine business research, 26 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[56] központi statisztikai hivatal, magyarország lakossága, budapest, hungary, 2019. wine economics and policy volume 9, issue 1 2020 firenze university press creating opportunity from crisis, progress from research: redefining the wine sector peter hayes am1 us wine industry preparedness for unforeseen crises and disasters: an empirical test armand gilinsky, jr.1, astha sen2, judith ford3, sergio canavati de la torre4, sandra k. newton5,* a cross-cultural comparison of wine consumption and purchasing behaviour in germany and hungary gergely szolnoki1,*, gedeon totth2 assessing the effects of the environment on consumers’ evaluations for wine gioacchino pappalardo, gaetano chinnici*, roberta selvaggi, biagio pecorino the speed of the internationalisation process and the institutional networks of family smes in the doc rioja wine industry marta fernández-olmos1,*, giulio malorgio2 the impact of changes in regulatory and market environment on sustainability of wine producers: a structural equation model chinedu obi1,2,*, daniele vergamini1, fabio bartolini1, gianluca brunori1 emerging consumer preference for wine attributes in a european transition country – the case of kosovo edvin zhllima1, drini imami1,*, njazi bytyqi2, maurizio canavari3, elvina merkaj4, catherine chan5 price determinants of sparkling wine in poland: does reputation really matter? authors: samuele trestini1,*, alice stiletto1, stefanella stranieri2 wine economics and policy 10(1): 23-32, 2021 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/wep-8194 wine economics and policy citation: giuseppe cantafio, luana parisi (2021) micro-wineries as drivers for local economic development and innovation in lagging areas. wine economics and policy 10(1): 23-32. doi: 10.36253/wep-8194 copyright: © 2021 giuseppe cantafi o, luana parisi. this is an open access, peer-reviewed article published by firenze university press (http://www. fupress.com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information fi les. competing interests: the author(s) declare(s) no confl ict of interest. micro-wineries as drivers for local economic development and innovation in lagging areas giuseppe cantafio1,*, luana parisi2 1 university of sunderland in london, 197 marsh wall, london, e14 9sg, great britain. e-mail:giuseppe.cantafi o@sunderland.ac.uk 2 school of architecture, computing and engineering (ace), university of east london 4-6 university way, london e162rd, great britain. e-mail: l.parisi2@uel.ac.uk *corresponding author abstract. for a long time mainstream economics has neglected the non-economic side related to economic growth. yet, today there is increasing awareness of the role that social capital can play in spurring local economic development especially in underdeveloped, remote, or lagging contexts. microwineries represent a good example of smes, being small realities serving the local markets and spaces that strengthen local communities. th e european mediterranean regions have commonly been connected with these sectors. th is study aims at pushing the body of knowledge in the development of microwineries in the lagging-behind contexts of southern europe, particularly in southern italy. to support the discussion, the present study will adopt a deductive approach, by analysing the san diego wine cluster taken as a case study, since its wine market recently boomed. findings will highlight the microwineries symbiosis with the territory itself. useful lessons will be drawn for encouraging policymakers in undertaking actions towards strengthening the potential of microwineries and building networks among them. keywords: microwineries, smes, innovation, economic growth, business. introduction microwineries can be defi ned referring to the offi cial classifi cation provided by the european commission [12]. th is framework can be used to defi ne small and medium enterprises (smes), identifying micro, small and medium-sized enterprises with two main indicators, namely the number of employees and total assets. microwineries are those fi rms that count less than 9 employees and produce less than 2 million euros in total assets. th ey are considered as a new specialized organizational form that is proliferating recently in the wine market and is smaller in size than the farm winery, in that they tend to produce about 2,000 cases per year compared to the 40,000 cases of farm wineries [52]. being categorized as small and medium enterprises (smes), microwineries are of a crucial importance as they are responsible for a country’s wealth, and they furnish employment, as emphasized in various reports and academic papers [15]. 24 giuseppe cantafio, luana parisi several studies have analysed the multifaceted thematic related to wine in various areas: some have deepened the topic of resilience between micro and small wineries, investigating approaches for helping businesses to be more resilient [24,29,10]. under a different perspective, other studies have analysed the innovative marketing behaviour of small and medium wine enterprises in italy [8] and the influence of size on winery performances [47]. some scholars have provided a study of the internationalisation procedures related to the wine industry in southern italy [43,38]; other studies highlight the “tourism and marketing characteristics of family-owned wineries” [21]. similarly to microwineries, microbreweries, considered as small businesses specialised on the production of distinctive styles of beer through their own process [2], are growing in numbers in recent years. some studies have focused on the role that craft breweries play for the innovation processes [11]. a few studies have had the objective of analysing and perceiving microwineries as pockets of specialisation and innovation, places in which creating and sharing knowledge accumulated through a millennial-long process of improvement of the product and resilience of the whole wine-related business. in particular, scholars explored the innovation pattern of micro and small operators in the wine industry, by means of the theory of innovation [10]. this study is grounded on the following hypothesis: h1: microwineries have a strong linkage with the territory and the society itself, and thanks to them innovation can be spurred to the agricultural sector. this study aims at pushing the body of knowledge in the development of microwineries in southern italy and, more in general, in southern europe and mediterranean countries, with the goal to regenerate the existent wineries and transform them in actual places of knowledge sharing, where innovation can be applied to the agricultural sector. microwineries can be seen also as places where tourists have the possibility to live a real experience, in contact with the real local culture of the place they visit. the present study can also be seen as a source of ideas and information that could be useful to familyowned businesses, micro and small-size wine-related firms, that compose about the 99 per cent of all firms in the european union [13].  innovation for a long time, mainstream economics has neglected the non-economic side related to economic growth. yet, today, there is increasing awareness of the role that social capital can play in spurring the local economic development especially in underdeveloped, remote, or lagging contexts. the social capital encompasses different aspects, such as the network of relationships, allowing knowledge exchange and spurring innovation. while before innovation was considered as a process of creative destruction [46], or a function or activity among entrepreneurs [53], more recently, innovation has been understood as the driving force of long-term competitiveness, growth, and employment [9]. it has been found a positive relation between employment and innovation in relation to small manufacturing firms [38]. therefore, it is a process that takes to a result that is by definition new, in the sense that it is a thing or a way of making a thing that was not there [22]. thus, today the main goal and input of most of the organizations and companies is to build interactions, strengthening the social capital as both an input and an output of the development process [47] and as a key component of social innovation [22]. microwineries, being small realities serving especially the local market, represent a good way for studying craft-based economic activities of small and medium-size. it is thanks to them that the social capital thrives, since crafts and smes are entrusted with the long-term development of the local economy and are embedded into local societies. this is in line with the fact that the majority of italian wineries are familyowned and family-operated businesses [20]. microwineries can help to foster the networks of relationships and the sharing of knowledge between people, consequently thriving social capital and boosting innovation, which can act as engines of the local economic development. under this point of view, the concept of microwineries can be associated to the one of rural innovation centres, whereas “rural innovation is defined as the introduction of something new (a novel change) to economic or social life in rural areas, which adds new economic or social value to rural life” [33]. thus, this perspective can let us consider microwineries as co-working spaces as well, defined as membership-based workplaces where freelancers, remote workers, and other autonomous professionals work together in a shared, common setting [50]. around the world several co-working spaces that are also craft breweries are sprouting [51]. cobrew, a local community for people with a common vision about sharing, collaborating and creating, in australia, is depicted as a local co-working spacecraft where people from all innovative disciplines have at their disposal the 25micro-wineries as drivers for local economic development and innovation in lagging areas tools and the facility to cultivate and brew project and ideas about their own craft. galvanize, in fort collins, colorado is a place where entrepreneurs from fort collins collaborate in the heart of this historic city. this city was classified in 2013 as the second most entrepreneurial city in america by catherine clifford [7]. the workbar, in cambridge, ma, is another example of working space that provides free tastings, events, and recommendations for beer aficionados. apart from this aspect, there is also the fact that this is a place where people go to work on shared projects in an attractive working environment, which in turn increases the workers’ productivity. overall, it emerges that microwineries can constitute the pockets of entrepreneurship and sustainability where to innervate innovation in rural areas. this can be carried out through different funding projects in europe: the policy framework of the smart specialisation strategies [18] can help creating new competitive advantages for enhancing the economic growth. another example of policies for rural innovation and growth of firms is “innogrow”, a funding project that is constituted by 9 partners from 8 different countries, bringing together managing bodies and regional entities shaping local and national policies, to share knowledge and best practices, and how to better implement policies that promote the adoption of innovation and spurring the growth of small businesses linked to the rural economy [28]. ruralgrowth is another project with the aim of improving the policies related to small rural enterprises linked to the industry of hospitality. to carry out this, the project supports the adoption of sustainable and technologically advanced solutions as a way of fostering smes competitiveness and can serve as a push for the sustainable development in the rural regions [29].  scope of work the present study aims at pushing the body of knowledge in the development of microwineries in southern italy and, more in general, in southern europe and mediterranean countries, which rank among the first global places in terms of production of wine. at the same time, recent economic indicators have shown that mediterranean regions, including the southern italian and greek areas, cyprus, malta, southern spain, portugal, represent the poorest european areas and have lower gdp levels, if compared with the other european regions. in europe, urban regions can be classified as economic hubs that provide relatively high levels of wealth creation, while several social and economic problems are enduring in rural areas [16]. if we have a look at italy, there is a unique situation, like a dramatic economic division between northern regions and southern ones, the so-called “mezzogiorno”, that has economic and social characteristics very similar to the ones of other mediterranean countries [4]. looking at the economic indicators of centrenorthern italian regions, they have a gdp per capita of €31,124, comparable with germany, where the gdp per capita is €31,703. vice versa, the “mezzogiorno” richness levels are closer to poorer countries like greece. as an example, southern italy has a gdp per capita of €18,000, while greece showed a gdp per capita of €18,500 [6]. other particular striking facts are referring to the post economic crisis period 2009-2013, in which the “mezzogiorno” lost 39,500 firms; almost 10,000 of them were belonging to the manufacturing sector. a similar situation has been observed in other mediterranean areas, and still most of mediterranean areas have not fully recovered from the period of recession experienced after the economic crisis [6]. the southern part of italy has been one of the more affected by the economic crisis, which lasted about 7 years and has widened the gap between north and south. the south, in fact, has grown at a rate of 13% between 2000 and 2013, registering a more structured desertification process of the economic system. its stagnant economy contrasts with the ones of the other eu disadvantaged regions, with a gdp per capita downward of about a 80% compared to a decade ago [37]. another serious problem to be faced in different mediterranean areas is the demographic decline. this can be appreciated from the study done by the german institute bbsr where it has been observed a negative demographic trend in mediterranean areas like southern italy, greece, portugal, and part of spain. some of these areas showed an average annual population fall of 2 percent or more. from recent reports emerged that the area of southern italy apennines faced a demographic decline from 2001 to 2011 [1]. the phenomenon of population decline can be explained by several factors, including the economic crisis of the last years, which caused a reduction of job opportunities, especially for younger people. a factor that influences the demography is the crude birth rate that was 10 births per 1,000 inhabitants or lower across southern italy, with a similar trend with eastern europe (bulgaria, croatia, hungary, poland and romania), southern europe (greece, spain, malta and portugal). 26 giuseppe cantafio, luana parisi mediterranean regions like southern italy have one of the lowest fertility rates among european nuts 3 regions [14]. another problem linked to mediterranean cities is the lack of environmental awareness and environmental sustainability of mediterranean areas. this problem can be traced also in southern italian regions as it has been indicated in a report published by legambiente, which is an italian environmentalist association. this report is called “ecosistema urbano”, translation of urban ecosystem, and it depicts the situation of italian cities by studying the performances by means of indicators and numbers coming from analysis inside cities, like public transportation, mobility, air pollution, waste management, energy and others. in particular, most of the cities classified at the bottom of the ranking published in the report are southern cities. more in depth, in the whole italy there are 104 provinces, and fourteen southern italian provinces in 2017 ranked among the last twenty positions of this report [32]. opportunities in southern europe linked to microwineries mediterranean areas, which are the target of this study, have been widely connected with wine production. nevertheless, only lately, as regions come to tackle the effects of global rural reorganisation, wine and oenological tourism have been used for local development and economic regeneration strategies. the production of wine in mediterranean countries constitutes an important asset for the economy. italy is the first country in the world for production of wine and other mediterranean countries present significant levels of wine production as well. france and spain, for instance, are respectively the second and third producer of wine in the world [55]. in italy the sector is characterised by an important fragmentation and a strong dichotomy, with more than half of the firms growing less than 3ha of grapes and with only 4% owning over 30ha. therefore, on the one hand, the sector accounts a large number of small businesses, often being familyowned and managed and for self or local consumption, and, on the other hand, businesses of a medium and big size with significant levels of professionalism [47]. local and self-consumption against high levels of vertical integration in the production process. this leads to an improved connection between micro wine players, which could potentially increase their added value. as highlighted above in the section dedicated to innovation, in view of the positive link between employment and innovation when it comes to micro sized manufacturing firms, this could also have a triple down effect on the employment numbers of large amount of young people attracted by the triggered innovation of this appealing sector. demographically, it can be deducted that the above explained phenomenon of population decline in the southern regions of europe could be also narrowed. the sector includes wine making and growing of grapes, but also wine-related tourism. in this regard, several studies have deepened the concept of wine tourism and its development in the last years. the concept of themed touring routes (ttrs) refers to paths and road segments that connect proximate tourism attractions intended as nodal points of a network, under a principal topic or product. many studies have characterised the concept of ttr [56] and analysed the role of wineries and vineyards collaborating to magnetise tourists and sponsor their products [52]. microwineries can, indeed, become places where tourists can live a real experience, being in contact with the real local culture of the place they visit. this same concept could be applied to the calabrian context, where wineries could contribute to the ecotourism and serve as a trigger for the economic development of calabria [5]. as examined by several studies, ttrs, in turn, have positive effects on local economic development, particularly in rural areas [3]. methodology as stated in the introduction, microwineries can be considered as local clusters constituting pockets of specialisation where it is possible to innervate innovation. since innovation and specialisation are the two parameters of competitiveness, this process helps to develop new competitive advantages for the territory, helpful to enhance the economic growth. as stated by foray [19], regions need to “specialize themselves”, developing strategic visions, locating investments where regional strengths indicate opportunities to move up in the international value chains. the strategy takes the activities with more potential out of the territory, through a vertical logic transforming them into domains of specialization for a certain length of time and bringing them into the broader regional innovation strategy, that is more horizontal [47]. for supporting the discussion, the research design will be based on the case study [57]; this descriptive and exploratory approach has been implemented in order to adopt a grade of detailed analysis to define the relevance of themes treated in the present study. 27micro-wineries as drivers for local economic development and innovation in lagging areas rationale for research approach research approaches explain the factors on which the researchers can frame the steps of gathering data and examine different literatures from different school of thoughts. there are two main approaches of research in this sense, specifically the inductive approaches and deductive approaches. in the circumstance of inductive approach, the researcher relies on the process of data collection for setting up a new theory that can eventually lead them to construct the structure required to build up concepts and theories that may emerge from the research. on one side there is the deductive approach, which leads a researcher to adopt initiatives for studying different concepts and literatures in the beginning [31]. this aids in originating ideas and then attempts to defend them with the help of data collection. from another point of view this suggests that if the practise of data collection follows the procedure of literature review then it can be said that it has adopted a deductive approach. the present study has followed the deductive approach. the rationale adopted for the present study has been constructed by means of deductive approach then; this study has been able to classify the different theories that exist regarding the concept of innovation management in the microwineries sector. the wine cluster of san diego, california, become an important case study for understanding key characteristics and implications of a sector that is growing in parallel and complementarily with innovation spaces. according to the san diego county vintners association [45], there are currently about “142 active and planned wineries in san diego county. local wineries are located throughout the region, and satellite tasting rooms reach many of the urban and coastal communities that dot the san diego landscape.” these include an abundance of microwineries that are occupying the innovation spaces in the city centre. the next section will deepen meanings, implications and evidence of this phenomenon.  results the san diego wine cluster has been deepened as a case study, since its wine market recently boomed, challenging the historic worldwide producers and constituting an important slice of the local market. as a matter of fact, in the recent years, california has emerged as one of the major players in the global wine industry [40], so that about 90% of wine from the united states is produced in this state [55]. looking at the sectors composing its market, while the agricultural branch decreased by 9% between 2007 and 2012 and manufacturing jobs went down as well by 4% between 19982016, the wine market of the county of san diego is now among the leading sectors of the local economy [54], registering $30.4 million regional economic impact in 2016. moreover, from 2010 to 2017 the “total acres of wine grapes harvested” have grown by 111% [45] and, according to professor porter there has been a +53% in terms of job creation between 1998 and 2015, a growth of +68% in terms of establishments (1998-2015) and a +8% increase in wages (2001-2015) [54]. in 2017, 116 are the “artisan and family-owned wineries and vineyards” that have been registered throughout the county [45]. in 2018, wineries generated $41.59 million in gross sales, which is about 57% more compared to 2017 and about 72% increase from 2016 sales [45]. moreover, according to the scholar showley, about 45% of 2016 rented office space went to coworking spaces [49] that include microbreweries and microwineries. overall, this growing phenomenon gives the picture of an environment that is socially and economically growing thanks to the links of the microbreweries and microwineries with the local innovation ecosystem in general, and with the other spaces of innovation located in the area. microwineries can work as innovation spaces and are places where the two aspects of getting work done and experiencing a work/life balance merge together.  figure 2 shows the co-working spaces and other innovation spaces present in the san diego urban context as of 2018, it is possible to appreciate the high density of such spaces of innovation and knowledge sharing: the rural innovation centre (ric) is an example of an existing place of knowledge sharing located in an urban context, and it was funded by the university and the frank parkinson trust. this centre entails many activities such as teaching, mentoring and functions as a hub for events, with laboratory research workshop, a machinery workshop, a demonstration hall and has extensive external training capacity [44]. an existing example like the one of ric can suggest how a knowledge and innovation centre in an urban figure 1. san diego county vintners association [45]. 28 giuseppe cantafi o, luana parisi area with the support of anchor institutions (an academic institution and a charity) can have a key role in spurring individuals’ capabilities and pushing local communities towards an entrepreneurial spirit for attaining business development, personal success and the growth of an entire community. moreover, it has the potential to create a direct, indirect and induced eff ect on the creation of new jobs in the region, as evidenced in table 1: discussion the case studies provided emphasised an example that can give the guidelines for defi ning a new role of microwineries in southern italy and mediterranean areas. th e process hypothesised could be seen as a shift in the way the industry works: a modernisation of the microwineries industry framework could in turn generate diff erent spill-over eff ects that could change and improve the classical framework of the industry, as explained in previous studies. th is can be displayed in the following infographics in fi gures 3 and 4: traditional wine industry framework in the following the proposed new framework for microwineries conceived as knowledge and innovation spaces and links with other actors of the innovation ecosystem: the effects of microwineries as innovation centres and co-working spaces could be many. one of them could be in the transformation of the rural areas in more knowledge-based areas, based on the theory of knowledge-based rural development, known as kbud [58]. microwineries could serve as knowledge and innovation spaces, where holding events, sharing knowledge on the industry and entrepreneurship, and places where figure 2. map of san diego innovation centres (authors’ elaboration). table 1. economic dynamics of san diego wineries [45]. figure 3. th e framework of wine value chain [24]. figure 4. framework of knowledge transfer and eff ect on an area’s level of innovation (authors’ elaboration, adapted from olcay & bulu [36]). 29micro-wineries as drivers for local economic development and innovation in lagging areas transmitting to younger generation the passion and the secrets of crafting wines. we can appreciate the differences between the two frameworks compared in fig.3-4, where in the former we have a classical approach, aimed at the consumption of the wine to the final consumer; in the latter we have a completely revolutionised approach, where the final aim is not the mere consumption of the produce, but the knowledge sharing and the connected spill-over effects such as the creation of new firms and improved connections with anchor institutions such as the university, the enlargement of the entrepreneurial community of the area, and the major collaboration with public stakeholder as state offices and technological transfer offices (ttos). in the present study the development approach is applied to rural areas, therefore it assumes the terms of knowledge-based rural development (kbrd), with the aim of spurring the economy of small villages and urban areas of european rural peripheral regions, seeking prosperity, environmental sustainability, and more social cohesion, as some of the results of the action of microwineries as rural innovation centres. conclusions, limitations and future research findings from the research highlighted the microwineries symbiosis with the territory and the society itself, therefore meeting the hypothesis (h1) formulated by the researchers. microwineries are able to strengthen the urban-rural link, revitalizing rural realities that are commonly considered out of the touristic channels as well. indeed, they can offer to tourists’ unique experiences in contact with local cultures, proposing tours, courses and workshops. thus, positive relations between them and the broad regional innovation strategy emerge as well, showing the snowball effect on the levels of social capital and local economic development in lagging contexts. useful lessons are drawn for encouraging policy makers and planners in undertaking actions towards strengthening the potential of microwineries and building a network of relations among them. fi na l ly, compa rat ive, bench ma rk i ng st ud ies, addressing the lessons learned from the incorporation of new innovation centres inside microwineries also imply considerations regarding policy framing in the southern europe and in mediterranean areas. addressing the lessons learned would also be of significance in generating greater understanding of the issues in this area [42]. therefore, this paper advocates a significant change in the way that microwineries in lagging-behind contexts, like the ones of southern europe, are managed.  since microwineries can act as co-working spaces, strengthening local communities, it is necessary to consider them as spots of knowledge-sharing. thus, in essence, they can be considered as pockets of specialization where to innervate innovation by means of the smart specialization strategies, creating new competitive advantages for enhancing the economic growth in lagging behind contexts. the ideas drawn from the paper try to push towards a regeneration of the existing realities, creating spots of knowledge-sharing where also tourists can live experiences in contact with local cultures. this matter encompasses sustainable tourism development, innovation, and wider domains of social and economic policy, which are hypothesized in the present work. the approach is to recognize the importance of innovation, and advocating towards a cultural shift that would lead to the regeneration of existing structures and small businesses, but also to the evolution of social innovation within policy and planning. these issues can be considered only if a holistic approach will be embraced, which comprehends the inter-dependencies of urban planning with other political, social, economic and cultural issues. these, in turn, can be perceived as key drivers for the creation of economic stability and the spur of local innovation and knowledge sharing, making the notion of achieving an improved culture sharing and a realistic proposition for improved local economic development, innovation, and tourism reinforcement. the research does come with its limitations. first, conclusions generalise from the san diego case study and this should be done with caution. second, primary data referring to microwineries in southern italy, including interviews and surveys should have been conducted to support the results. future lines of research should address these limitations, 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(2016) urban knowledge and innovation spaces, journal of urban technology, 23:1,1-9, doi: 10.1080/10630732.2016.1164443 wine economics and policy 9(1): 73-84, 2020 firenze university press www.fupress.com/wepwine economics and policy issn 2212-9774 (online) | doi: 10.36253/web-8018 citation: s. trestini, a. stiletto, s. stranieri (2020) price determinants of sparkling wine in poland: does reputation really matter?. wine economics and policy 9(1): 73-84. doi: 10.36253/ web-8018 copyright: © 2020 s. trestini, a. stiletto, s. stranieri. this is an open access, peer-reviewed article published by firenze university press (http:// www.fupress.com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information files. competing interests: the author(s) declare(s) no conflict of interest. original research article price determinants of sparkling wine in poland: does reputation really matter? samuele trestini1,*, alice stiletto1, stefanella stranieri2 1 department of land, environment, agriculture and forestry, university of padova, padova, italy. *corresponding author 2 department of environmental science and policy, university of milan, milan, italy e-mail: samuele.trestini@unipd.it; alice.stiletto@unipd.it; stefanella.stranieri@unimi.it abstract. due to the important worldwide growth of the sparkling wine sector in the last years, this research aims to explore the polish sparkling wine retail market by applying a hedonic price model. poland is the most important market in eastern europe, with a noticeable increase in wine consumption in recent years. few researches have investigated the price premium of wine attributes in this area, while none of these concentrated their analysis on sparkling wines. the aim of this research is to apply a hedonic price model to estimate the effects of credence attributes and quality signals on sparkling wines sold in the polish capital. data were collected from 35 retail stores in warsaw. findings suggest that collective reputation linked to designation of origin is the variable that most affects the price, followed by brand reputation and characteristics of the point of sale. the type of retailer has a significant effect on price: discounts and supermarkets imply a price decrease with respect to hypermarkets, whereas specialised shops charge a premium. moreover, we explore the presence of wine with italian sounding names: this positively affects wine price, confirming the role of imitations stressed in the recent literature. keywords: hedonic price model, poland, sparkling wine, premium price. 1. introduction the european union is the world’s biggest wine producer, with around 60% of the total (european commission, 2015). although global wine production in 2018 reached its highest value since 2000 (292  million hectolitres, representing a 17% increase compared to 2017)1 it should be noted that 2018 marked a halt of the global growth in wine consumption precisely because of a stabilization in the main european producing countries, which are traditional consumer countries, as well as a slight decrease in china and the united kingdom [1]. considering the world wine trade, 2018 showed a modest growth in terms of volume (+ 0.4%) and value (+1.3%) compared with 2017 (table 1). the spar1 in 2017 very difficult weather conditions affected wine production in many countries. 74 s. trestini, a. stiletto, s. stranieri kling wine market, once again, saw the biggest growth in terms of both volume and value. indeed, in 2018 the world sparkling wine trade accounted for 9% of the volumes traded and continued to increase in both volume (+3.7%) and value (+6.3%) compared with 2017. from 2013 to 2017, the value of sparkling wines traded on the international market gained 1.4 billion € (+32%), more than double the rest of the wine sector (+14%). sparkling wines represent a significant share of exports, in terms of value, especially for italy and france among eu countries, reaching 20% and 13% respectively in 2018 [1]. 1.1 polish wine sector nowadays, statistics show that non-traditional wine producing countries are experiencing a relevant increasing wine demand. among eu countries, poland has witnessed a significant increase in consumption in the last decade, with a variation of 33.3% from 2013 to 2018 (table 2), due to a rising demand for wine and the growing culture of this beverage [2,3]. according to euromonitor [4], wine shares the alcoholic drinks market with two other product categories: beer (39.2 million hl in 2018) and spirits (2.9 million hl in 2018). compared to wine, these categories have shown slower growth, of respectively +5.4% for beer and +3.2% for spirits compared to 2013. in the same period, sparkling wine grew 43.3% with a sales increase of +11.8% in 2018, stronger than expected. this growth is related to the fact that consumers tend to choose it not only for special occasions but also throughout the year as a regular drink. the wine market in poland can therefore be described as a growth sector, with a forecasted growth to 2023 (cagr%) of +4.8% for still grape wine and +11.5% for sparkling wine. in addition, poland is the largest economy in eastern europe and the second biggest importer in the area, accounting for 22.3% of total wine imports [2,3]. considering the trade channels, it emerges that the polish retail sector has been very dynamic in the last decade, with a remarkable growth in the number of hypermarkets and supermarkets, even if the presence of small retail stores is still relevant. indeed, alcoholic drinks’ offtrade consumption in poland is 6.3 times higher than ontrade consumption in 2018 [4]. the discount sector has the predominant share of wine sales, with wine imported from portugal, italy and spain: these channels ensure sufficient quality products at a cheap price, thus encouraging their purchase by poles. from 2010 to 2015, offtrade channels grew their share in poland from 52.1% to 72.8%, while the on-trade channel had the smallest share of total volume sales of wine in poland. this is due to the lack of tradition in consuming wine in foodservice outlets, such as bars, restaurants and hotels [4]. seeking the reasons behind the growing interest of poles in the wine sector, it emerges that it is due to the consumers trend of moving away from spirits towards lighter alcoholic drinks; indeed, after a period of decline in consumption, the purchase of wine has started to grow [5]. in particular, it is worth noting that the sparkling wine market is the most dynamic in the sector (as in many other countries) and has grown by 29.5% in volume from 2012 to 2017, greater than other wines (+19.1%). in this scenario, it might be interesting to understand the contribution of product attributes in creating sparkling wine value on the polish market; poland not being a grape producer makes it an important case study to investigate. this could allow it to be understood how such a consolidated product category develops in a new market such as the polish one (it should be remembered that the fact that poland is not a grape producer leads to a not very strong wine tradition). this paper aims to explore the sparkling wine market in poland; in particular, this study applies a hedontable 1. world wine trade. typology 2018 var. 2017-18 volume value volume value bottled 53% 70% -8.0% -0.9% sparkling 9% 20% 3.7% +6.3% bib(a) 4% 2% 5.0% +15.7% bulk (>10l) 34% 8% -5.0% +3.8% total 107.6 mln hl 31.3 billion € +0.4% +1.3% notes: (a) bib, namely bag in box wines, identifies wines in containers holding more than 2 litres but not more than 10 litres. source: oiv, 2019. table 2. wine consumption. 2013 2014 2015 2016 2017 2018 var. 2013-18 total volume (millions of hl) poland 0.9 1.0 1.1 1.1 1.2 1.2 +33.3% europe (a) 119.2 117.8 119.5 120.1 121.5 121.3 +1.8% world (a) 242 241 243 244 246 246 +1.7% per capita (l) poland 2.9 3.1 3.2 3.4 3.5* 3.8* notes: (a) countries with a wine consumption of more than 1 million hectolitres are included. source: oiv, 2018; oiv, 2019; * per-capita consumption data for 2017 and 2018 are estimated based on oiv, 2018; oiv, 2019. 75price determinants of sparkling wine in poland: does reputation really matter? ic price model to investigate the effects of quality signals on the wine price. due to the relative novelty of sparkling wine in poland, taken as a mass product, we expect that credence characteristics, including reputational cues, will largely explain retailers’ price variability. various studies adopt this method in the wine sector, estimating the price effect both on the label information and sensorial evaluations [5, 6, 7, 8, 9, 10]. however, from the literature analysis it emerges that there are limited applications of a hedonic model on sparkling wine [11]. this research, to the best of our knowledge, is the first application of a hedonic price model for sparkling wine in eastern european countries. these countries can be defined as a “new buyers” and can be considered among the “new world” countries because they have little tradition of wine consumption and no tradition of its production [12]. 1.2 hedonic research in the wine market walking through an ordinary supermarket, a consumer may be surprised and, at the same time, confused by the huge number of different wines on the shelves. wine, in fact, can be considered as a set of different characteristics, both sensory and objective and it is widely known that, for consumers, the purchase of this product is more complex than the choice for many other food goods, due to the large amount of different cues that can influence the purchase decision [12, 13]. however, consumers use the attributes mentioned on the label, such as colour, vintage, appellation etc., (sensory and objective attributes) in addition to wine reputation when they wish to buy a product [14, 15]. thus, considering the wide variability in both types of wine and their prices, it could be interesting to understand how prices and wine characteristics are related: what are the specific effects of the different features mentioned on the bottle label, such as brand, vintage or different type of technology utilized for the production, on the prices? all these attributes have been used as the main variables in different studies on hedonic price models, pioneered in the early 1990s by golan and shalit [17] and by oczkowski [18], precisely for answering to this question. consumers can consider diverse sets of attributes at the time of purchase or they can assign different weights to product characteristics [19]. orrego et al. [20] classified these attributes as intrinsic and extrinsic. the former can be considered as the essence of the product, such as vintage, grape variety, colour etc., while the latter are those characteristics that influence consumers’ appreciation of the product but do not belong to the good itself (such as jury grade and cellaring potential, etc). generally speaking, consumers more familiar with a specific product tend to use more intrinsic characteristics, such as wine style, aroma, flavour and taste, whereas less familiar individuals mainly use extrinsic characteristics to evaluate the quality, such as price, packaging, labelling and brand name [21]. consumer experience and the different type of information provided may influence the consumer’s willingness to pay (wtp) a premium price for the quality signal; poland being a young market, credence attributes [22] are going to be relevant in explaining wine prices. since obtaining information on quality is expensive for consumers [20] and the quality of a product cannot be known a priori (i.e., before purchase), customers can use other ways to infer it and, especially for wine, they can use reputation as a guarantee of quality [22, 23]. reputation is an essential tool especially on the “old world” market; indeed, it is common in the literature to divide the world into “old world” countries, i.e. the traditional producers such as france, italy, spain etc., and “new world” countries, i.e. new producers, such as the united states, australia, new zealand etc. [12]. orrego et al. [20] found that most hedonic research on the wine market was conducted for “new world” wines sold in “new world” countries; it emerged that, for these wines, rating (jury grade), vintage and place of origin have a strong and positive price premium (see for instance manesme et al. 2019). instead, on the “old world” market the most important attributes that influence price are place of origin and reputation index. many authors have studied the impact of reputation on wine price and linked them with consumers’ choice. among others, schamel and anderson [25], schamel [26] and costangiro and mccluskey [27] pointed out how producer’s reputation plays a decisive role in determining the price of wines, by applying a hedonic price model on premium wines sold in australia/new zealand and the us, and on red wines in california. caracciolo et al. [28] investigated, through a hedonic price model, the effect of private and collective reputation on wine price, analysing the wine purchases made by a panel of representative italian families. estimates based on quantile regression reveal that the effects of the two reputation strategies (private and collective) have different weights depending on the price range of the wines. while private reputation plays an important role in both low-priced and highpriced wines, collective reputation in terms of geographical denominations appears to be particularly important for high-priced wines. this is confirmed by rossetto and gastaldello [29] who found that wines in the higherprice range benefit from strong consumer loyalty. verdonk et al. [30] highlighted that brand image and rep76 s. trestini, a. stiletto, s. stranieri utation play an important role in purchasing decisions, as well as advice, recommendations and expert reviews, and consumption occasion. to this extent oczkowsky et al. [31] found that experts rating has an important effect in explaining prices. trestini et al. [11], instead, examined the impact of different product characteristics on sparkling wine price on the german market. they found that an italian sounding name positively affects consumers’ wtp just because of brand reputation. within this context, the influence of the reputation of the iconic “champagne” was bound to be studied. lee and sumner [32] investigated the effect of the term “champagne” on sparkling wine in the us market. their study evidenced that when the term “champagne” is reported on the label of french wines (sold in the us) the price is much higher than other wines in the category, ceteris paribus. and when “champagne” is reported on the label of american wines, without reflecting the region in france, the price is much lower than other comparable wines. from the literature analysis on hedonic price, it emerges that, as previously reported, sensory and objective characteristics also play a role as explanatory variables of the model in order to evaluate the effects of quality attributes on wine prices. with regard to the former ones, which derive from the chemical components of wines such as aroma or acidity and bitterness levels etc. – i.e. strongly influenced by the production methods [32; 33] –, it should be noted that the first studies on this topic were conducted twenty years ago (see for instance nerlove [10]). combris et al. [8] highlighted that consumers are more likely to use objective features as quality signals, by applying a hedonic price model to different bordeaux wines, while the quality of a particular wine can be explained by wine jury members on the basis of its sensory characteristics. jones and storchmann [35], schamel and anderson [25] and benfratello et al. [36], among others, supported the central role of sensory variables on the price, thanks to the evidence derived from their hedonic price studies on different types of wines. within this framework, certainly noteworthy is the article of lecocq and visser [37] that aimed to explore the effect of sensory and objective features on three different data sets (two on bordeaux wines, and one on burgundy wines). they found that the objective characteristics, directly revealed to the consumers on the labels, explain the major part of the price differences, while the subjective ones seem not to play an important role. furthermore, wine prices are hardly affected by the jury grade assigned by professional wine tasters, which are closely linked to the sensory characteristics, as previously reported. 2. material and methods 2.1 data collection data were collected by recording prices and wine attributes that a free-service customer could observe directly from the bottle on the shelves. the dataset contains observations on white sparkling wines and champagne with and without geographical indication. prices are identified in the currency that is used in poland (pln). it should be noted that the average monthly exchange with the euro was around 4.43 pln in december, 4.36 pln in january and 4.38 pln in february. the current exchange with the euro (september 2019) is 4.26 pln. since numerous studies reported that distribution channels have a significant effect on wine price (see for instance rebelo et al. [14]), we selected different kinds of distribution channels (supermarkets, hypermarkets, discounts, specialised shops), both local and foreign, in order to understand wine premium price according to location, type and size of retailer. it was expected that the price in specialised shops would be higher than the others, while other aspects, such as the premium price in different areas of the city was unknown. it was otherwise supposed that the central area of the city (środmieście) would have the highest prices in comparison to other locations. data were collected from december 2016 to february 2017. we interrupted the survey in the christmas period (from december 15th to january 10th) to avoid a biased effect on product selection and price promotions. the shops had been randomly chosen among the 18 districts of the city of warsaw (figure 1). a sample of 35 retailers were selected for the survey: 10 supermarkets, 10 hypermarkets, 12 discount stores and 3 specialised shops. this distribution takes into account the market share of different types of retailers2, with the aim of ensuring at least one observation per district. the list of shop types and their distribution among districts are reported in table 3. the survey collected information on 1,095 references to sparkling wine. 2.2 model specification the hedonic price model is based on the hypothesis that each good is characterized by the entire set of attributes that define it in a unique way. given that wine 2 according to euromonitor data, discounts have 33% of wine market share in store-based retailing, hypermarkets have 16%, supermarkets 40% and specialist shops 7.1%. 77price determinants of sparkling wine in poland: does reputation really matter? is, by nature, a widely differentiated product it follows that it is a suitable candidate for this particular type of empirical study, but it is difficult to identify the specific characteristics that affect prices [36]. according to lancaster [38], consumers’ purchase choice is guided by the set of extrinsic and intrinsic characteristics that maximizes their utility. the hedonic price model hypothesis asserts that goods can be valued through their utility attributes or characteristics. according to rosen [39], the hedonic price function can formally be written as pi= f (zi), where p is the given price of the ith product and z is the vector of attributes of the ith product. hence, hedonic prices are described as implicit prices of attributes and their analysis involves the regression of price with respect to the product characteristics. the partial derivative of the price function represents the marginal price of that attribute. furthermore, the hypotheses of rosen [39], which guarantee that observed price is the result of market equilibrium are: i) each level of z attribute is used interchangeably to designate commodities of a given quality or specification; ii) there is a sufficiently large number of differentiated products available so that choice among various combinations of z is continuous. we thus assume that this hypothesis is satisfied for wine by looking at price and attributes in the retail market. although there is no theoretical basis for the functional form that should be applied, it should be remembered that the most used are the linear [39, 40], semilogarithmic [41, 10] and box cox linear [43]. as reported by león [43] in his comprehensive literature analysis of hedonic price, the box cox transformation [44] can be useful not only as a flexible functional form, but also as a tool to choose the best functional form among those applicable. following this method, also applied by ferro and benito amaro [45] and rossetto and galletto [46], the transformation of the dependent variable, y>0, is: 𝑌𝑌(λ) = & ("!#$) & 𝑖𝑖𝑖𝑖 (𝜆𝜆 ≠ 0) ln(𝑌𝑌) 𝑖𝑖𝑖𝑖 (𝜆𝜆 = 0) (1) λ being the transformed parameter of the dependent variable (y). as specified by box and cox [44] it should be noted that since an analysis of variance is unchanged by a linear transformation (1) is equivalent to: 𝑙𝑙𝑙𝑙𝑙𝑙 (𝜆𝜆 = 0)𝑙𝑙(𝜆𝜆) = ' 𝑙𝑙! (𝜆𝜆 ≠ 0) (2) by applying an ols regression the log-linear functional form was shown to be preferable, in line with many table 3. number of retailers by category distributed among districts. districts retailers category supermarkets hypermarkets discounts specialized shops total żoliborz 1 1 2 bemowo 2 2 białołęka 1 1 2 bielany 1 1 mókotów 1 1 2 praga połnoc 2 1 3 praga południe 1 1 2 rembertów 1 1 środmieście 4 1 5 turgówec 1 1 2 ursus 1 1 ursynów 3 2 1 6 włochy 1 1 wawer 1 2 3 wilanów 1 1 wola 1 1 total 10 10 12 3 35 source: analysis on own sources. figure 1. the 18 districts of the city of warsaw. 78 s. trestini, a. stiletto, s. stranieri other applications [46, 5, 47]. the ols regression has to satisfy the hypothesis of homoscedasticity and no multicollinearity. multicollinearity was checked through the vif (variance inflation factor): no variable in the model showed vif greater than 5 [49]. the presence of heteroscedasticity was verified applying the breusch-pagan [50] and white tests [51]. we found a violation of the hypothesis of homoscedasticity with ols regression. in order to solve the heteroscedasticity issue, we re-estimated the model with robust standard errors applying a generalized linear model with the mle estimator performed through ibm-spss 26.0. we then looked for the best functional form regression by evaluating mcfadden’s pseudo r2 after repeating the box-cox transformation. after application of the mle estimator with robust standard error, the loglinear function form was confirmed to be the best one (mcfadden’s pseudo r2 = 0.744): ln(p)= β0 + ∑βi zi + ε (3) where ln(p) is the log of the price, zi is the i attribute of the wine, βi are the estimated coefficients of the zi variables and ε the random error. this form allows the percentage variation of the product price to be explained that is independently attributable to a specific characteristic. the variables included in the model refer to objective and reputational characteristics of sparkling wine together with attributes linked to the retailer type and location. in order to understand the reputation effect on wine it was necessary to include in the model the variables of the main wine brands3 (martini, henkell and moët chandon are the principal brands on the shelves. in fact we took into account only the brands that have been observed at least 30 times during the data collection) and the collective brand of designation of origin (do), namely the appellations, (asti, champagne, cremant, cava, prosecco doc4, prosecco docg are the most frequent in the dataset). our hypothesis is that the price is higher in central warsaw: we considered center as a variable that describes how important the location of the store is. as previously reported, the type of retailer can also influence the price, hence supermarket, spec_shop, hypermarket, discount variables have been attached. 3 we chose to use the term “wine brand” to refer both to winery and company brands. indeed, some companies may have different product lines and show either the company or winery name on the labels. the aim is to report the brand used by consumers to make their choice. 4 prosecco is classified as a white wine produced from glera grapes that are grown in a specific area of two italian regions (i.e. veneto and friuli venezia giulia). for the description of doc and docg prosecco see trestini et al. [11]. because of the recent expansion of foreign hypermarkets in poland, we inserted the variable nat_r, to express the nationality of the shop. from our survey, all the specialised shops are polish, as are 80% of supermarket brands, 20% of discount and no hypermarkets. cembalo et al. [52] describe the so-called “italian sounding” as a false evocation of the italian origin of the products and, according to trestini et al. [11], this phenomenon may have a positive effect on the wine price due to a misleading reputation perceived by consumers. thus, italian sounding variable was included in the model, considering also that this item is always measured when wine names include terms associated with italian culture (e.g. michelangelo, raffaello, veneziano). other quality attributes, such as vintage (i.e. when 85% of grapes used to make the wine were harvested in the same year) and traditional method (i.e. when the second fermentation took place in the bottle) are considered as dummy variables. we expect that these variables raise the price of wine. indeed, from the study conducted by vecchio et al. [34] it emerged that detailed information on the champenoise, which is just another name for the traditional method, is perceived as positive and increases wtp especially by young consumers. brut, dry and sweet taste variables are also included to describe attributes. furthermore, promotion variable (i.e. when wine is sold at a discount price) had to be added, as well as alcohol content. finally, the variable volume considers the effect of different bottle sizes. table 4 reports descriptive statistics. 2. results and discussion the dependent variable of the model is represented by the log-price of a bottle (0.75l in volume) of a sparkling wine with an alcohol content equal to 11%. reference baseline is assumed to be a wine without designation of origin or vintage specification, produced without second fermentation in bottle. this wine is sold in warsaw, in a foreign-owned hypermarket (non-polish) outside the central district. in addition, it is sold without any price discount. the wine format is 0.75l, at an average price of 32.77 pln (around € 7.70). estimates are summarised in table 5. the estimated model well explains the observed price variability (pseudo-r2 = 0.744); all the variables are statistically significant, with a p-value lower than 0.05, except for henkell, asti, cava, traditional method and sweet. as supposed, due to their reputation, brands like martini and moët & chandon have a relevant and sta79price determinants of sparkling wine in poland: does reputation really matter? tistically significant premium price equal to 36.9% and 49.6% respectively, while henkell has no significant effect on wine price. this price premium is calculated in comparison with the other brands (different from martini, henkell and moët & chandon). it is widely reported in the literature [26, 52, 25, 10] that brand reputation has a table 4. sample descriptive statistics. variable description type n. obs % bottler nationality italy d 310 28.3 france d 260 23.7 poland d 22.6 22.6 spain d 150 13.7 germany d 54 4.9 other_or other origin d 73 6.7 wine brand company or winery brand, depending on the reported brand in the label. martini d 73 6.7 henekell d 47 4.3 moet moet&chandon d 37 3.4 point of sale special specialised shops d 55 5.0 super supermarkets d 310 28.3 disc discounts d 88 8.0 nat_r polish retailer d 232 21.2 center store located in central district d 160 14.6 appelations asti asti d 47 4.3 champagne champagne d 175 16.0 cremant cremant d 22 2.0 cava cava d 118 10.8 prosecco_docg prosecco conegliano, valdobbiadene, docg d 25 2.3 prosecco_doc prosecco doc d 170 15.5 other_ita trento, franciacorta, oltrepò pavese d 4 0.4 other_fr clariette die, saumur d 7 0.6 method traditional method d 134 12.2 type vintage wine with grapes coming from the same harvest year d 20 1.8 dry dry, demi sec, demi sweet, extra dry d 305 27.9 brut brut, brut nature, brut alb, extra brut d 323 29.5 sweet d 239 21.8 sounding italian sounding bottle with wine name sounding as italian d 200 18.3 promotion promotion d 82 7.5 mean std. dev. volume volume c 0.76 0.19 alcohol alcohol alcohol content c 10.76 1.45 notes: d= dummy variable; c= continuous variable. 80 s. trestini, a. stiletto, s. stranieri positive and significant effect on wine purchase decision. especially for those consumers who have scarce information about the quality of wine, the brand plays a positive and decisive role and consumers are willing to pay a higher price, because they trust brands, due to their reputation as a guarantee of high quality. when it comes to the shop location, we find that a central position (center) has a premium price (+10.4%) if compared to those that are located in the periphery. these results seem to be mainly linked to the retailers’ costs, which are higher in the central district and small specialised shops. findings demonstrate that the type of shop can affect the product price: the specialised shops have higher prices (54.7%), whereas supermarkets (-5.1%) and discounts (-35.0%) offer a discount when compared to hypermarkets, according to what was found by trestini et al. [11]. our results are consistent with those of di vita et al. [54]: they found that wine shops have a direct impact on price fixing, highlighting the presence of a premium price for high quality wines. indeed, cerjak et al. [55], who investigated sparkling wine purchasing and consumption behaviour among croatian consumers, found that there are differences between consumer groups. older consumers with good economic status are the staunchest sparkling wine consumers and often choose specialised shops and direct sale for their purchase, even if the price is higher. the higher price is largely explained by the different type of information provided. boatto et al. [6] have shown that consumers are willing to pay for “tailor-made” information supplied by the retailer during the purchasing process in the specialised shops. they found that this premium is nearly 200% for wines without relevant quality signals and lower for quality wines. polish specialised shops guarantee a premium price lower than that estimated in traditional wine consumer countries (i.e. italy), perhaps suggesting a lower quality of service and product selection. the nationality of the retailer has a significant and positive effect when it is polish (nat_r), with a premium price of 16.5% compared to the non-polish ones. poland variable is referred to the polish nationality of the bottler of some wines, not produced with polish grapes but made in poland. findings show that these products have a price discount of 61.6% when compared to other wines. muller [56] assessed the effect of local brands on the premium price in germany, rarely finding positive effects. in the case of polish consumers, they cannot recognise polish wine, and the discount price can be mainly related to low production costs. in fact, many of these products (77% of the wines investigated) apply italian sounding wine names (poland*italian sounding), which guarantees these wines a price premium equal to 49.5%. as reported by trestini et al. [11], even though the wine has no declared origin, attaching an italian sounding name to the bottle label makes the consumer think about the reputation of italian quality. as stressed in the literature, italian sounding can affect consumers’ purchasing decision: they may interpret price as a quality signal, due to the asymmetric information [57]. nowadays, in fact, the presence of italian sounding names seems to be a confirmed tendency on the international food and beverage market; free riders have the opportunity to profit from the quality associated with this origin, due to the diversified supply of italian sparkling wines. indeed, the italian origin of products does not bring to the mind of consumers an univocal and specific product, as happens in the case of french ones (for which there is a clear reference to champagne), leaving room for imitations. european institutions do not limit the use of this kind of wine naming, which is regulated under the rules of trademarks. however, this result should be interpreted as an effect of misleading information given to an inexpert consumer, who places value on a name that emulates the positive reputation of the italian food and beverage tradition. moreover, we find that, except for cava and asti, all the designations of origin have significant and positive effects on price: as expected, the highest premium is attached to champagne (+ 395.9%), followed by prosecco docg (+49.1%), cremant (+31.7%) and prosecco doc (+13.3%). in addition, the other french appellations (other_ fr) (e.g. clairette de die, saumur) show a statistical significance in creating value in the estimated model (+18.7%), as well as the other italian designations of origin do (+75.9%). do, as often reported [5, 6, 53] is a source of collective reputation closely related to consumers’ perception of the quality of wine. this is particularly true when the place of production is far from the consumption area [58] and consumers have limited connections to wine producers. in this framework, champagne has the greatest impact on price, but prosecco docg, prosecco doc and the other italian geographical indications, such as trento, franciacorta and oltrepò pavese, are also considered valued products, considerably increasing the price. as reported by onofri et al. [59], the different sensitivity to price variations is confirmed by the fact that consumers of prosecco docg express a preference for the product characteristics (brand and taste). this can be explained by a greater “loyalty to the product” of the prosecco docg consumers than the prosecco doc purchasers. traditional method attribute does not significantly affect the price with respect to the charmat method of production: this feature being generally linked to specific 81price determinants of sparkling wine in poland: does reputation really matter? do, we can argue that on the polish market it does not affect retail price. euromonitor [4] reported that the tastes of polish consumers have changed significantly in the last period: in line with the growing wine culture, consumers are moving from sweet and herbal wines to dryer ones. the results are thus in line with expectations. brut type increases the price by 18.0%, if compared to the dry categories (dry, demi sec, demi sweet, extra dry). this is in line with what was found by rossetto and galletto [46] and justified by a general trend in modern consumption. vintage wines have an important premium price (+22.0%), as also found by menesme et al. 2019. as expected, wines with promotion have a statistically significant discount, equal to -9.6%. regarding the alcohol content, we found that it is negatively correlated with the price: a 1% increase in alcohol content (e.g. passing from 11 to 12%) brings a 3.6% price decrease. this result is contrary to and with a lower estimated effect to what was found by rossetto & galletto [46] for rosé wines on the italian market. our opposite results may be justified by the young wine consumers in poland who, ceteris paribus, may prefer wines with slightly lower alcohol content. 3. conclusions this paper aims to estimate the hedonic price model by comparing the impact of different characteristics on sparkling wines’ prices in poland, also including the point of sale, with specific attention to reputational attributes. the results confirm that the retail wine market in poland assigns a price premium to quality attributes coherently with the estimated model in a traditional wine consumers market. the point of sale plays an important role in affecting the price, confirming the expected signs: central areas of warsaw have a small but relevant and positive influence on price; discounts and supermarkets imply a decrease of price with respect to hypermarkets. specialised shops have a price premium that is lower than that observed in traditional consumer markets (e.g. italy) where service at the point of sale can add a price premium that is four time higher than in poland. despite the fact that polish consumers still choose low-priced wines [4], reputational variables – wine brand (brand reputation) and do (collective reputation) – have a big impact on price. well-known wine brands guarantee a relevant price premium at retail level, because of huge investments made by private companies. at the same time, polish consumers are starting to pay more attention to collective brands, above all sparkling wines with do from italy, france and spain. a new wine martable 5. hedonic model estimates. variable β std. err. sign. % price premium(a) constant 0.325 0.165 0.050 wine brand martini 0.315 0.038 0.000 +36.9% henkell 0.019 0.045 0.677 n.s. moet 0.404 0.059 0.000 +49.6% point of sale special 0.439 0.070 0.000 +54.7% super -0.052 0.020 0.008 -5.1% disc -0.429 0.043 0.000 -35.0% center 0.099 0.041 0.014 +10.4% nat_r 0.153 0.042 0.000 +16.5% bottler nationality poland -0.954 0.065 0.000 -61.6% sounding poland*italian sounding 0.424 0.064 0.000 +52.5% appelations asti 0.077 0.061 0.208 n.s. champagne 1.602 0.051 0.000 +395.9% cremant 0.277 0.062 0.000 +31.7% cava -0.026 0.066 0.697 n.s. prosecco_docg 0.401 0.058 0.000 +49.1% prosecco_doc 0.125 0.032 0.000 +13.3% other_it 0.601 0.269 0.026 +75.9% other_fr 0.173 0.067 0.009 +18.7% method traditional method 0.085 0.070 0.227 n.s. type sweet -0.055 0.041 0.183 n.s. brut 0.166 0.029 0.000 +18.0% vintage vintage 0.204 0.099 0.040 +22.0% promotion promotion -0.100 0.033 0.002 -9.6% volume volume -0.219 0.082 0.008 -15.1% alcohol alcohol -0.037 0.015 0.013 -3.6% adjusted r2 0.744 n. obs 1,095 notes:(a) adjustments made according to kennedy [60]. 82 s. trestini, a. stiletto, s. stranieri ket, like poland, is characterised by a relevant presence of quality wines, with a growing importance of new world wines and a high number of medium range prices. international sparkling wine in a new wine market is currently dominated by old world producers, but the access to these new markets is introducing new forces that justify the fact that the market for sparkling wine is gradually changing, both in poland and europe. sparkling wine is increasingly competitive in the overall wine sector, and exports of italian, spanish and french wines prove this trend. almost all the do obtain a relevant price premium that justifies the efforts towards the achievement of a specific quality and identity that allows the /building of a collective reputation with a recognised value on the market. in this context, the attempt to profit from other collective reputations, like using italian sounding names, finds room for growth when consumers have limited knowledge about how to select quality wines. information asymmetry is relevant in evaluating this market situation, as well as confirming that the majority of consumers are non-experts and risk-averse and tend to look for reputational signals to make their choice. the estimated hedonic model can be useful for determining the opportunities for sparkling wines in this new wine market, especially for producers and all operators in the supply chain. these results, in fact, may support producers and retailers in defining the price at which sparkling wines can be placed on the polish market. moreover, they may be useful for understanding the dynamics within this market category, thus allowing producers to pay more attention to the features most appreciated by consumers; generally speaking, in the polish wine market most sales are off-the-shelf, while sales in wine shops are marginal, despite representing the most prestigious sales share. this implies a lack of consultation during the purchasing process – because there is no one who explains the particular characteristics of the product to you –, so brand reputation becomes very important in this context [61]. producers should therefore focus their attention on the reputational attributes such as do and brand. these characteristics should be stressed on the label to guarantee a direct connection with the consumer, because they are considered higher price features. since brand reputation is the critical success factor in this market, both the single and collective brands must enhance their prestige in order to increase sales volume. as also reported by ferro and benito amaro [45] it is necessary to apply some collective action and public policies to improve terroirs’ reputation. in conclusion, despite the effectiveness of the hedonic model in explaining price diversification among products, few insights can be inferred about consumers’ preferences. further efforts should be made to outline the profile of possible buyers of sparkling wines in the polish market. a limitation of the results could be the restricted area of investigation, just the off-trade channel, being the main channel for wine in poland. in fact, the dataset doesn’t take into account wines sold through the horeca channel that could further moderate the value of reputational attributes [6] and gain additional insight on the premium price in this iconic wine sector. further research should be conducted in order to better understand consumer behaviour in the on-trade channel. acknowledgements we thank the anonymous reviewers for their careful reading of our manuscript and their many insightful comments and suggestions. references [1] oiv (2019a), state of the vitiviniculture world market: state of the sector in 2018, available at: http:// www.oiv.int/public/medias/6679/en-oiv-state-of-thevitiviniculture-world-market-2019.pdf. 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[61] l. cembalo, f. caracciolo, e. pomarici, drinking cheaply: the demand for basic wine in italy, aust. j. agric. resour. econ. 58 (2014) 374–391. https://doi. org/10.1111/1467-8489.12059. wine economics and policy volume 9, issue 1 2020 firenze university press creating opportunity from crisis, progress from research: redefining the wine sector peter hayes am1 us wine industry preparedness for unforeseen crises and disasters: an empirical test armand gilinsky, jr.1, astha sen2, judith ford3, sergio canavati de la torre4, sandra k. newton5,* a cross-cultural comparison of wine consumption and purchasing behaviour in germany and hungary gergely szolnoki1,*, gedeon totth2 assessing the effects of the environment on consumers’ evaluations for wine gioacchino pappalardo, gaetano chinnici*, roberta selvaggi, biagio pecorino the speed of the internationalisation process and the institutional networks of family smes in the doc rioja wine industry marta fernández-olmos1,*, giulio malorgio2 the impact of changes in regulatory and market environment on sustainability of wine producers: a structural equation model chinedu obi1,2,*, daniele vergamini1, fabio bartolini1, gianluca brunori1 emerging consumer preference for wine attributes in a european transition country – the case of kosovo edvin zhllima1, drini imami1,*, njazi bytyqi2, maurizio canavari3, elvina merkaj4, catherine chan5 price determinants of sparkling wine in poland: does reputation really matter? authors: samuele trestini1,*, alice stiletto1, stefanella stranieri2 wine economics and policy 9(1): 43-50, 2020 firenze university press www.fupress.com/wepwine economics and policy issn 2212-9774 (online) | doi: 10. 36253/web-8371 citation: m. fernández-olmos, g. malorgio (2020) the speed of the internationalisation process and the institutional networks of family smes in the doc rioja wine industry. wine economics and policy 9(1): 43-50. doi: 10. 36253/web-8371 copyright: © 2020 m.f. olmos, g. malorgio. this is an open access, peer-reviewed article published by firenze university press (http://www. fupress.com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information files. competing interests: the author(s) declare(s) no conflict of interest. original research article the speed of the internationalisation process and the institutional networks of family smes in the doc rioja wine industry marta fernández-olmos1,*, giulio malorgio2 1 university of zaragoza, spain. *corresponding author 2 university of bologna, italy e-mail: maferno@unizar.es, giulio.malorgio@unibo.it abstract. institutional networking is a key element in businesses’ internationalisation processes and is an important strategy for promoting the long-term growth and survivability of family smes in the doc rioja wine industry. we hold that the proportion of family members in the tmt plays an important role in strategic decision-making and helps to explain the speed of their internationalisation process. this paper contributes to the scant research on the influence of family involvement in the tmt by analysing the moderating effects of two diversities on the relationship between institutional networking and the speed of internationalisation: the family tmt ratio and generational involvement. using a broad sample of 77 family wineries in doc rioja, the results obtained indicate that institutional networking plays a significant role in explaining the speed of internationalisation in family firms and that this relationship is weaker when a larger proportion of family members serve as top managers. the empirical results also have interesting implications for the managers of family firms as it may help them to identify the effective composition of tmts to be considered when deciding on the process of internationalisation. keywords: institutional networking, speed of internationalisation, doc rioja wine. 1. introduction institutional networking of the firm, the firm’s network relationships with institutional actors (e.g., research institutions, advisory and support offices, independent export assistant organisations, export promotion councils, etc.), is a key element in businesses’ internationalisation processes (séror, 1998; bateman, 2000). in the specific case of rioja certified designation of origin (doc rioja) wineries, institutional networking has been identified as a key success factor in their bid to expand their business to international markets. to overcome the barriers that family sme wineries encounter when accessing international markets, many have been able to count on and benefit from collaborations with institutions. one example is the family winery association of rioja provir, which represents spanish family wineries in the european 44 marta fernández-olmos, g. malorgio confederation of independent winegrowers, with 8,000 independent european winegrowers. previous and recent literature has acknowledged that the presence of family members chairing the board and their experience are important determinants in the internationalisation of family smes (pukall & calabro, 2014). however, most research on family business internationalisation has largely ignored the possible effect of individual managerial levels of knowledge and experience on the speed of internationalisation for smes. according to zahra (2003), when family members are in top management team (tmt) positions, which is very common in family smes (speckbacher & wentges, 2012), they may approach internationalisation with caution. this involvement of family members in management prompts unique strategic behaviours, influences the decisions that manage resources, and may influence internationalisation strategies and practices (abdellatif et al., 2010). the influence of family involvement in smes offers a unique environment in which to analyse whether and to what extent a firm’s family character affects the speed of the internationalisation process. to address this gap, we examine the moderating role of family involvement in the institutional networkinginternationalisation relationship. according to previous literature (arzubiaga, maseda, & iturralde, 2019), the identity of the tmt (the diversity between family and non-family managers) and the involvement of multiple generations (the diversity among two or more generations of family members that work together in the tmt) are the two main forms of tmt diversity created by the family’s involvement. we consider that there could be a relation between tmt diversity and the firm’s speed of internationalisation and that a more fine-grained examination of family influence, using these two family involvement measures, is needed to gain a clear and precise understanding of how they affect the process. to the best of our knowledge, this is the first study concerned with how institutional networking’s effect on the speed of the internationalisation process may be moderated due to family-related factors. the context of the doc rioja wine industry is particularly noteworthy because doc rioja wine producers, as members of the european wine sector, are making efforts to increase export volumes due to declining consumption in the domestic market (köhr, malorgio, & aragrande, 2017; köhr, camanzi and malorgio, 2018). our study also aims to contribute with new knowledge regarding how strategic behaviour and the speed of internationalisation process may differ, not only between family and nonfamily firms but also between family firms with different attributes, showing that family firms are heterogeneous (sharma, melin, & nordqvist, 2014). one important differentiating attribute is the varying level of family involvement in the tmts, which can be a more important driver of variation, in terms of success, when turning institutional networking into internationalisation among family smes than was suggested by previous literature. moreover, the study contributes to understanding the heterogeneity of the family firm internationalisation processes, highlighting the importance of effects of the family business governance dimensions (baronchelli et al., 2016). 2. theoretical background and development of the hypotheses although family firms have mainly tended to focus on domestic markets, they increasingly focus on foreign markets as a survival strategy due to global competition and slow growth domestically (pukall & calabrò, 2014). it is well known that family firms suffer from inherent constraints to international growth (fernández & nieto, 2005; abdellatif et al., 2010). to overcome the limitation of internal resources for internationalisation, family firms can develop network associations with institutional partners such as governments, agencies for international development, research institutions, and so on. these institutional networks can help family smes gain knowledge of international markets and the current rules and regulations (kontinen and ojala, 2011a,b). in particular, they provide a variety of support services aimed at reducing risks and providing access to required resources and capabilities when these firms enter international markets (séror, 1998). a key objective of this type of network association is to help family firms to build international contacts and allow them to assess their abilities to identify and exploit international opportunities (szyliowicz & galvin, 2010; bateman, 2000). in the specific case of the rioja wine industry, an example of recent institutional collaboration by the board of the rioja designation of origin was its participation in the background work for establishing and implementing an internationalisation strategy for la rioja (annual report of doc rioja, 2018) using these institutional networks not only creates opportunities for family firms to internationalise but also provides them with links to accelerate their internationalisation process. recent literature recognises the diversity in family firms in several areas, such as family involvement in ownership and management (beck, janssens, debruyne, & lommelen, 2011; nordqvist, sharma, & chirico, 2014). according to pukall & calabrò (2014), family firm het45the speed of the internationalisation process and the institutional networks of family smes in the doc rioja wine industry erogeneity could help to understand behaviours in their internationalisation. this study focuses on the level of family involvement in the firms’ tmts; which seems to be an important determinant of the speed of the internationalisation process and whose relevance has been underestimated (alayo et al., 2019). following alayo et al. (2019), we focus on two sources of tmt diversity: generational involvement, i.e., whether there are multiple family generations simultaneously involved in the firms’ tmts (sciascia, mazzola, & chirico, 2013), and the proportion of family members inside the tmts, which may be important in explaining variations in performance. generational involvement can be conceived as a proxy of knowledge diversity in multigenerational family tmts (sciascia et al., 2013). within the family business literature, there exist some theoretical discussions arguing in favour and others against the degree of presence of family members in the tmt (minichilli, corbetta, & macmillan, 2010). internationally experienced management teams have a greater ability to process information and face intense competition, and thus have a greater propensity to develop higher levels of internationalisation. however, family firms do not have the capacity to succeed and endure in the global competitive market due to a lack of the knowledge and management skills needed to run them (banalieva & eddleston, 2011; gómez-mejía, makri, & kintana, 2010). this can be important when developing international markets, because non-family managers tend to expand from domestic to international markets through existing relationships (liang, wang, & cui, 2014). specifically, non-family managers in tmts have a greater diversity of specialised skills and knowledge than family members that often have the same background and lack international experience. taking into account that more diverse management teams tend to be more creative and innovative, including non-family managers may strengthen the positive relationship between social capital and a family firm’s speed of internationalisation. thus, tmss with family managers, whose composition reflects a weak diversity of backgrounds, knowledge, experience and abilities, are expected to reduce the positive relationship between institutional networking and a firm’s speed of internationalisation. building on this line of reasoning, we propose the following: h1. a greater proportion of family members in the tmt will negatively influence the effect of institutional networking on family smes’ speed of internationalisation. according to chirico, sirmon, sciascia, & mazzola (2011), experiences and knowledge tend to differ more across generations than within a single generation (chirico et al., 2011), because family members from different generations achieve different levels of formal education and experience outside the business before joining the firm (talke et al., 2011) and have different social relationships (arregle, hitt, sirmon, & very, 2007). while later generations are characterised by more formal education, older generations have more tacit knowledge and experience in the business. thus, the involvement of several generations in tmts provides a synergistic combination of capabilities that are useful for intensifying social capital’s effect on family firms’ speed of internationalisation. some studies do argue, however, that maintaining family management of the business across generations can increase complexity (sciascia et al., 2013), because it is easier to share interests and understand the intentions and actions of actors within a generation rather than across several generations. this may lead to control and coordination problems as each family member is trying to protect his or her own personal interests in the firm (ling & kellermanns, 2010; sciascia et al., 2013). therefore, managing the transgenerational orientation of tmts in family firms makes conflict particularly pervasive, which makes it difficult to achieve consensus around strategic decisions (michie, dooley, & fryxell, 2006). therefore, some of the elements that intergenerational involvement brings to the management of family firms are positive and some are negative. when there are several generations in the tmt, family firms benefit from it in terms of expertise diversity, but relationships can be more complex and communication more difficult (sciascia et al., 2013). from the above, we might conclude that the impact of institutional networking follows a different pattern for family firms with several generations than for those with a single generation in management. therefore, we posit the following: h2. multigenerational family in the tmt will positively moderate the effect of institutional networking on family smes’ speed of internationalisation. figure 1. the proposed model. 46 marta fernández-olmos, g. malorgio 3. methodology the main data sources used to obtain the list of wineries in the target population were the directories drawn up by the regulatory council of the rioja designation of origin (the number of wineries in this directory numbered 580). the data for this study were collected using a structural survey. the data collection period ended in september 2017. the population from which the sample is drawn consists of wineries that fulfil the following requirements: (1) they belong to the rioja designation of origin, (2) they manage the full winemaking process from grape to bottle, and (3) they are obliged to present accounting information to the authorities. in total, 123 valid questionnaires were obtained. for the purpose of this research, we focused on exporting firms and family firms. although a consensus around what is exactly meant by family businesses is still missing in the literature, academics recognise that family involvement in ownership and management play a decisive role. therefore, firms in this study are considered family-firms if they meet three requirements: (1) majority ownership is controlled by a single family; (2) the family actively participates in firm management; and (3) they were self-classified as family businesses by answering the questions related to generational transfer. seventyseven firms that fulfilled all the conditions were identified in the sample. all of them were considered as smes because they have fewer than 250 employees. we examined previous literature to measure all variables. the dependent variable, internationalisation speed, is measured by analysing international market expansion strategies in terms of the timing and scope of the foreign markets entered (lee and yang, 1990; ruzo et al., 2011). in keeping with the approach used by lee and yang (1990), we first divided the sample into firms with less or more experience in international activities with five years selling abroad as the cut-off point. those firms placed in the group with less international experience and operating in up to five countries were categorised as the low speed group. firms with more international experience, and operating in up to 12 countries, were also placed in the low speed group. the rest of the firms were classified as the high-speed group. in total, 48 wineries were classified in the low speed group and 29 wineries in the high-speed group. institutional networking includes the network of relationships with formal institutions. in the context of this study, an important institution is provir (asociación bodegas familiares de rioja). belonging to this association allows family wineries to be affiliated with a global brand “independent family wineries”. this allows them to become familiar with the global business environment (e.g., by launching marketing campaigns abroad), including knowledge about their competitors and an awareness of international standards, requirements and quality. other important formal institutions in this context are araex (asociación de exportadores de rioja alavesa), arbor (agrupación de artesanos bodegueros de rioja), abc (asociación de bodegas por la calidad), fecoar (federación de cooperativas agrarias de la rioja), abra (asociación de bodegas de rioja alavesa), aevzr (asociación de empresas vinícolas de la zona rioja), instituto de ciencias de la vid y del vino, estación enológica de haro, grupo de empresas vinícolas de rioja, proyecto europeo wine tech, el grupo rioja, university of la rioja, university of basque country-campus álava, university of navarra, etc. the questionnaire provides a list of institutions and we count the institutions chosen. the study analyses two moderating variables. to compute the family tmt ratio, respondents were asked to indicate the number of family members holding managerial positions and the total number of tmt members. this percentage is measured as a continuous variable. to measure multigenerational involvement, respondents were asked to indicate which family generation, at present, is in charge of ownership and management. we created a dummy variable, which takes value 1 when there are two or more family generations involved and 0 otherwise. in addition to the above measures, two control variables were included: human capital and size. we used the proportion of employees with a university degree as a proxy for human capital (fernández-olmos, 2011). company size was operationalised using the natural logarithm of the number of employees (e.g., hessels and terjesen, 2010). we also control for family firm age in the analysis. following prior empirical studies (e.g., majocchi et al., 2005), we measure experience as the number of years that a family firm has in the winemaking activity. 4. empirical testing since the dependent variable (the speed of internationalisation) is a binary variable, a binomial logit model is applied as the means of estimation (greene, 2003). in table 1 we present marginal effects from this model. the choice of the binomial logit model for the estimation of our model is appropriate, since the model presents satisfactory indicators of overall significance. the effect of institutional networks on the speed of internationalisation is positive and statistically signifi47the speed of the internationalisation process and the institutional networks of family smes in the doc rioja wine industry cant at the 0.10 level; the results suggest that family wineries in doc rioja can greatly improve their internationalisation speed by effectively generating network ties. the moderating effect produced by the family tmt ratio is negative and significant and hypothesis 1 is thus not rejected. it is suggested that the effect of institutional networks on the speed of internationalisation is lower in family wineries with a higher proportion of family members in the managerial team. however, the moderating effect produced by multigenerational involvement is positive but not significant, thereby rejecting our second hypothesis. other control variables remain statistically significant. in particular, variable human capital is positive and significant, suggesting that firms that hire talented employees are more likely to have a greater speed of internationalisation. the coefficient indicating size was also marginally significant, indicating that size is a significant feature for a rapid process of internationalisation. finally, there is evidence that age only influences very slightly the speed of internationalisation. 5. discussion the purpose of this paper was to analyse the extent to which family tmt involvement influences the relationship between institutional networking and the speed of internationalisation of family smes. it advances our understanding of how family involvement in firms (in particular, the family tmt ratio and multigenerational family) affects the role of tmt. interestingly, the literature review of the upper echelons theory revealed the idea that firms will be a reflection of the composition of their top management team, in particular their heterogeneity (hambrick, 2007). the relative heterogeneity or diversity of the characteristics (e.g., training, abilities, aptitudes, etc.) of team members may influence the speed of internationalisation. our empirical analysis improves our understanding of family firms’ institutional networking and the speed of internationalisation in three ways. first, it extends the literature on upper echelons theory, showing empirical evidence of the impact of tmt heterogeneity on family smes’ speed of internationalisation. our results support our first hypothesis that the family tmt ratio has a negative effect on the relationship between institutional networking and the speed of internationalisation, as the relationship is weaker when a larger proportion of family members serve as top managers. this is due to the low availability of diverse perspectives and knowledge in decision-making processes when family involvement is excessive. in this respect, dyer (2006) suggests that family firms are constrained by their limited pool of human capital and their tmts often lack qualified employees. for this reason, hiring non-family members for the tmt may transform the family firm into a more professional business (dyer, 1989), bringing specific skills, formal training and idiosyncratic knowledge, and thus, help them overcome the inherent limitations of family management (segaro et al., 2014). thus, our results suggest that family firms that wish to quickly penetrate international markets must hire and maintain experienced and skilled non-family members for their tmts to improve the institutional networking effect on the speed of internationalisation. the present study contends that a multigenerational family presence in the tmt positively influences the effect of institutional networking on family firms’ speed of internationalisation. the underlying idea is that generational involvement is conceived as a proxy of knowledge diversity in multigenerational family tmts (sciascia, 2013). however, our results do not support this second hypothesis. rather, they show that involving a larger number of generations generates a positive but not significant moderating effect. this lack of evidence of the effect of generational involvement allows us to propose the following interpretation. multigenerational family businesses involve hierarchical and asymmetric relationships among members of different generations (wadebenzoni, 2002), where communication problems, different priorities and anachronistic mentalities are factors which create a negative climate. this would reduce the benefits of having a more heterogeneous tmt with the presence of multiple generations. table 1. binomial logit model (average marginal effects). independent variables marginal effects (dy/dx) p> i z i institutional networking 0.536 0.054 institutional networking*family tmt ratio -0.006 0.048 institutional networking* multigenerational involvement 0.118 0.423 human capital 0.006 0.008 size 0.120 0.073 age -0.164 0.093 n 77 mcfadden’s r2 0.202 likelihood ratio test 20.57 chi-square statistic 0.002 48 marta fernández-olmos, g. malorgio 6. conclusions this paper aims to make several contributions to the under-researched and poorly understood phenomenon of the internationalisation process in family firms (arregle et al., 2019). first, our findings contribute to recent research on family firm heterogeneity, which has been insufficiently examined when studying the internationalisation of family firms (arregle et al., 2019). ignoring this could lead to an inaccurate understanding of the process (melin and nordqvist, 2007). family firms are heterogeneous as they differ in terms of the extent and mode of family involvement in the tmt. dimensions of family firm governance are discussed, and our study focuses on how governance influences the speed of internationalisation, moderating the effect of institutional networking. second, our study contributes to the scant research on the influence of family involvement in the tmt and the internationalisation process in family firms (arregle et al., 2019) by showing how family tmt heterogeneity, as a distinctive characteristic of family firms, does influence the relationship between institutional networking and the speed of internationalisation. this knowledge contributes to the upper echelons theory on family firms by increasing our understanding of the impact of two diversities that are found specifically in family firm tmts: the family tmt ratio (i.e., the proportion of family members in the tmt) and generational involvement (i.e., presence of multiple generations in the tmt). we choose these two family firm-specific diversities, which are found only in family firms, because they have been previously analysed in research on entrepreneurial orientation (alayo et al., 2019) or innovation (kraiczy et al., 2015; arzubiaga et al., 2019) in family firms, but not in the relationship between institutional networking and speed of internationalisation. based on the upper echelons theory, we show that the proportion of family members in the tmt plays an important role in strategic decision-making and moderates the existing positive relationship between institutional networking and the speed of internationalisation. our results also suggest that generational involvement in the tmt is a double-edged sword with advantages and disadvantages. on the one hand, with the presence of diverse younger generations may benefit from the experience and different knowledge backgrounds of older generations. on the other hand, older generations tend to be more risk-averse than previous generations when it comes to expanding to foreign markets. this can explain why the expected positive effect was not significant. therefore, future research efforts should validate our findings with regard to these two family firm-specific diversities by using larger and more heterogeneous samples. third, we contribute to the literature combining international business and family firms by providing a potential explanation for why family firms are able to internationalise quickly. little research exists on family firms’ institutional networking and the internationalisation of family firms, and in particular, on the dimension of the speed of internationalisation. to the best of our knowledge, this is the first study to analyse how the effect of institutional networking on the speed of internationalisation may vary because of family influence. specif ic family f irm characteristics (i.e., family involvement in tmt) can facilitate a set of strategic decisions related to internationalisation. thus, this paper argues that the relationship between a family firm and the speed of internationalisation is a highly complex issue that needs further research. fourth, our study aims to serve as a turning point in the investigation of the family wine sector. family firms are the most common type of business in the wine industry, but their gradual or accelerated process of internationalisation has not been investigated in depth although it has become significant. our results are based on a comprehensive new data set on institutional networking, family firm characteristics, and internationalisation, for a broad sample of 77 family wineries in doc rioja, a context where almost 90% of wineries are considered family firms according to aref (asociación riojana de empresa familiar, https://www.aref.es/). it would be interesting for future studies to analyse other dimensions of internationalisation of family firms and their variations due to the influence of family-related factors in other settings. the results obtained also have interesting implications for the managers of family firms, because it may help them to identify the effective composition of tmts to be considered when deciding on the process of internationalisation. our findings suggest that the presence of family managers in tmt positions can be an obstacle as regards increasing the speed of the internationalisation process. to overcome these barriers, it non-family members should participate in tmts because they accumulate, develop and transfer external market knowledge and experiences that can enhance the effect of institutional networking during the process of entering an international market. non-family managers can also mitigate problems among family members by infusing a broader, organisationally rational perspective into their practices (alayo et al. 2019). with regard to the presence of multiple generations in tmt positions, the effect is ambiguous. each gen49the speed of the internationalisation process and the institutional networks of family smes in the doc rioja wine industry eration of a family business tends to have different priorities related to management and future strategies. this can affect their internationalisation business interests if there is a lack of coordination and mutual understanding amongst family members. consequently, and in line with the work of alayo et al. (2019), family firms should try to align the interests of business for non-family and family members of different generations involved in the tmt to lead to a valuable collaboration regarding knowledge transfer and decision-making. however, our results must be viewed in the light of the study’s limitations. empirical data were obtained only from doc rioja wine family businesses. therefore, the findings may not be generalizable to other environments. however, we consider that this sample is valuable in explaining why some family firms exhibit divergent behaviour with regard to the speed of internationalisation for two reasons. first, the use of this homogenous, industry-specific sample permits us to concentrate on the more firm-specific variables, and second, the research on family businesses in the wine sector is practically non-existent (soler et al., 2017). moreover, we conduct a cross-sectional study due to a lack of longitudinal information, which presents the disadvantage of not capturing the dynamic nature of the hypotheses tested in this study. therefore, future research should take a dynamic approach into account to gain more insight into the relationship between institutional networking and the speed of internationalisation. in spite of these limitations, this paper sheds light on the process of decision-making with regard to the internationalisation process in family firms. it could help guide policy makers in designing stimulation programmes to motivate family firms, particularly wineries, to organize their tmts depending on their internationalisation needs. aknowledgement this research was supported by project grant eco2016-77-p (aei/feder, ue) , the compete (s52 _17r) research group (government of aragón -spainand feder 2014-2020 "construyendo europa desde aragón") and by project vinci soe3/p2/f0917. references abdellatif, m., amann, b., jaussaud, j. 2010. family versus nonfamily business: a comparison of international strategies. j. family bus. strat. 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crisis, progress from research: redefining the wine sector peter hayes am1 us wine industry preparedness for unforeseen crises and disasters: an empirical test armand gilinsky, jr.1, astha sen2, judith ford3, sergio canavati de la torre4, sandra k. newton5,* a cross-cultural comparison of wine consumption and purchasing behaviour in germany and hungary gergely szolnoki1,*, gedeon totth2 assessing the effects of the environment on consumers’ evaluations for wine gioacchino pappalardo, gaetano chinnici*, roberta selvaggi, biagio pecorino the speed of the internationalisation process and the institutional networks of family smes in the doc rioja wine industry marta fernández-olmos1,*, giulio malorgio2 the impact of changes in regulatory and market environment on sustainability of wine producers: a structural equation model chinedu obi1,2,*, daniele vergamini1, fabio bartolini1, gianluca brunori1 emerging consumer preference for wine attributes in a european transition country – the case of kosovo edvin zhllima1, drini imami1,*, njazi bytyqi2, maurizio canavari3, elvina merkaj4, catherine chan5 price determinants of sparkling wine in poland: does reputation really matter? authors: samuele trestini1,*, alice stiletto1, stefanella stranieri2 wine economics and policy 9(1): 63-72, 2020 firenze university press www.fupress.com/wepwine economics and policy issn 2212-9774 (online) | doi: 10.36253/web-8285 citation: e. zhllima, d. imami, n. bytyqi, m. canavari, e. merkaj, c. chan (2020) emerging consumer preference for wine attributes in a european transition country – the case of kosovo. wine economics and policy 9(1): 63-72. doi: 10.36253/web-8285 copyright: © 2020 e. zhllima, d. imami, n. bytyqi, m. canavari, e. merkaj, c. chan. this is an open access, peerreviewed article published by firenze university press (http://www.fupress. com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information files. competing interests: the author(s) declare(s) no conflict of interest. original research article emerging consumer preference for wine attributes in a european transition country – the case of kosovo edvin zhllima1, drini imami1,*, njazi bytyqi2, maurizio canavari3, elvina merkaj4, catherine chan5 1 agricultural university of tirana and cerge ei, albania. *corresponding author 2 university of pristina, kosovo 3 university of bologna, italy 4 università politecnica delle marche, italy 5 university of hawai`i at manoa, usa e-mail: ezhllima@ubt.edu.al, drinimami@yahoo.com, njazi.bytyqi@uni-pr.edu, maurizio.canavari@unibo.it, elvinamerkaj@yahoo.it, chanhalb@hawaii.edu abstract. this study analyzes consumer preferences for wine in prishtina, kosovo – a transition country in the balkans, which is making efforts to withstand to the competition pressure from the traditional neighboring wine producing countries. with the changes in life style and consumer behavior, and incomes rising rapidly since the last conflict, it is imperative to survey the changing demand for producers to compete in the domestic markets. conjoint choice experiments were used to evaluate wine consumer preferences based on wine type (white vs. red), origin (domestic vs. imported), taste (sweet vs. dry) and price. four distinct classes of consumers were identified. the top two important attributes in the choice of wine are the type and origin but preferences vary across groups – type of wine and origin appear far more important when compared to price, especially for the richest identified segment, whose consumers prefer more expensive wines. keywords: consumer preferences, wine, conjoint choice experiment, latent class choice model, kosovo. 1. introduction there is a vast literature on wine consumer preferences with focus on traditional wine consumption and production countries, especially eu. previous research about matured market countries such as spain, australia and chile identifies various wine attributes preferred by consumers. these are both of intrinsic and extrinsic nature, such as price, wine aging, and grape variety (barreiro-hurlé et al., 2008; lockshin et al., 2006; mtimet and albisu, 2006; mueller and szolnoki, 2010; palma et al., 2013; sánchez and gil, 1998), packaging and label (loureiro, 2003; mueller and szolnoki, 2010), taste (jarvis et al., 2007), certification of origin (mtimet and albisu, 2006; 64 e. zhllima, d. imami, n. bytyqi, m. canavari, e. merkaj, c. chan scarpa et al., 2009) and also environmental or organic label equipment (remaud et al., 2008;scarpa et al., 2009). there are fewer consumer studies on developing markets or transition economies, such as western balkans countries, compared to the first group. some of the studies are focused on basic attributes such as origin, type and aroma (zhllima et al., 2012), alcoholic level (palma et al., 2013), color (mehta and bhanja, 2018) and in few cases on region of origin (jantzi and mcsweeney, 2019). the socio-demographic factors such as age, gender and income have been explored vis a vis with the product attributes (gjonbalaj et al., 2009; zhllima et al., 2012) reflecting the benefit of collected evidences for helping wine producer to follow market segmentation based strategies. contribution to the existing literature is especially important for small neighboring countries of eu, which face strong competition from the single market. the objective of this study is to analyze consumer preferences for wine in kosovo, which is a small country aspiring to join eu. kosovo is a typical case of a country lacking competitive advantages for exporting large quantities of wine to eu (at least at medium term). however, export to niche markets, such as the albanian diaspora and gradual import substitution, is a potential considering the government efforts and the production trends in the post-conflict decade. overall, the local market is and will remain crucial for the local industry as increasing competition in the export market prevails. the study provides recommendations for the sector’s stakeholders, with focus on wine market operators relying on consumer segmentation. last but not least, since wine is an important agrifood sector in kosovo (as shown in the following section) the study offers empirical evidence for policy makers to orient their policies to national/local food and agricultural systems, designing a concept for consumer-driven agriculture that is innovative and responsive to consumer expectations. in order to contribute to the existing literature, the study estimates the willingness to pay for domestic over imported wine. this is of relevance for the local industry which is struggling to keep its presence in the export market, while grow its share in the small but growing local market too. the study is based on a structured survey that took place in kosovo’s capital city, prishtine, in year 2016. prishtine is the largest urban community in the country, with highest concentration of income and purchasing power, therefore a driving market for quality products such as wine. the outline of the paper is structured as follows: in the following sections of the paper is provided an overview of the vineyard and wine sector in kosovo. the third section describes the methodology followed by a separate section of results. the final section presents the conclusions of the study. 2. background – viticulture and wine making in kosovo kosovo is situated in the western balkans, with a population of 1.8 million, dominated by ethnic albanians, and it shares similarities with albania (ethnic, cultural, language, etc.). almost half of the population lives in rural areas. kosovo belonged to a centrally planned economy under yugoslavia until late 1980s, while it underwent a notorious conflict and emerged as an independent country in the following decade. the conflict resulted in human losses as well as devastated economy – the production capacities were damaged, including agriculture and specifically vineyards. despite economic growth since independence, kosovo remains one of the poorest european countries. because of the troubled past, kosovo has been facing many challenges such as weak institutional framework, which have affected also the agri-food markets and value chain organization (fao, 2016). agrifood sector is considered key for economic development in kosovo – most people live in rural areas and are engaged in the agriculture sector. agriculture importance in kosovo’s economy remains high– its contribution to the annual gva is 11.4% (volk et al., 2019). the sector still suffers of many structural, organizational and capacity problems. difficulties to recover capital and governance conditions during the post-conflict period have negatively influenced the sector, in particular the agro-processing node (including wine processing, which is the focus of this paper). wine production and vineyards growing is one of the most important agri-food sectors in kosovo in terms of production and international trade, since wine is one of the main exported agri-food products. suitable agroecological conditions combined with tradition of wine making have been key factors for the growth of wine production in the past. after achieving a production peak in the 1980s, namely 100 million liters of wine per year with strong export orientation, the sector faced a remarkable setback in the following decade. during the late 1990s conflict many vineyards were destroyed and production of grape and wine were reduced drastically. after the conflict, there was growing attention by private business, government and donors for the agriculture sector in general, and vineyard and wine specifically, which resulted in growth and renewed investments in the sec65emerging consumer preference for wine attributes in a european transition country – the case of kosovo tor. the government has been supporting the sector by using coupled support (volk et al., 2019). vine growing and wine making continues to provide a significant contribution to the kosovo economy (bytyqi, 2015). in kosovo there are cultivated more than 40 types of grapes. the total area of vineyards in 2017 was 3,199 ha, which compared with 2016 marked an increase of 3% (kas, 2015). out of the total area of vineyards in 2017, 25% of the surface was planted with table grapes, while 75% with wine grapes, of which 1,583 ha is destined for red wine, which is also the dominant wine produced in kosovo. from the cultivated area with red wine production varieties, leads the vranac variety with 477 ha cultivated, followed by the prokupe variety with 368 ha, game variety with 254 ha and black burgundy with157 ha. whereas grape varieties for white wine production constitute the cultivated area of 816 ha. the majority is cultivated with the smederevka variety with a surface area of 369 ha, followed by italian rizling with a surface area of 220 ha, and shardone variety with a surface area of 91 ha, while the rest of the area of 136 ha is planted with varieties such as: r. rhaine, zhuplanka, rrakacitel, semion, white burgundy, zhillavka, melnik and the white of kladova (mafrd, 2018). the production of wine consisted of 3.3 million litters red wine and 2 million liters white wine in 2017. the company “stone castle vineyards & winery” leads with the highest wine production in the amount of 16,061 hl. also this year after “stone castle”, the second company is the “sunny hills” with a total of 13,568 hl, followed by “haxhijaha” company with 8,767 hl (ibid). historically, kosovo’s wine industry has had a strong export orientation. its average wine consumption is about 1 liter per capita per year according to the official estimates, which is very low compared to neighboring balkan countries such as albania (ca. 6 liters per capita per year), serbia and macedonia (ca. 20 liters per capita per year), and much lower than the average southern and western european consumption (ca. 30 liters per capita per year) (fao, 2016). one reason behind the low consumption of wine and alcohol in general is religion – the largest religious community in kosovo is muslims. although many muslims are secular (and do also drink alcohol), on the other hand, many are practicing, implying alcohol abstaining. another reason for the low level of wine consumption is low income. raki (so far, the main alcoholic drink consumed in kosovo which is a brandy like grapa, which is mostly locally produced and can be found at relatively low prices) is widely used as a less expensive substitute, often produced by households for self-consumption. with the increase of income, consumption of wine is expected to increase. the domestic wine industry, which exports a large share of its production, is keen to increase its presence or share of the production in the domestic market (aiming at substituting imports, which are strongly present especially in the upper end market segments), as part of market diversification and risk reduction strategy (fao, 2016). however, that requires better understanding of kosovo consumer preferences for wine, which is also the focus of this paper. as a country in transition, a crucial problem is the lack of a proper link between the local vineyard production and processing practices and the needs and expectations of wine consumers in the domestic market. this is particularly important, given that income and lifestyles are changing fast in the context of economic growth– such changes may affect the demand for wine. therefore, it is important to explore the consumer preferences, especially among urban consumers which are the main purchasing segment for the domestic wine in kosovo. 3. methods and data 3.1. overview of the approach and selection of product attributes while in the introduction we discussed previous studies findings on consumer preferences for various wine attributes, in this sub-section we focus on methods used by previous studies. the methods for exploring consumer preferences are typically based on panel data or large datasets of sales (as on cortez et al., 2009) or by surveying the stated consumer preferences. the first approach provides powerful evidence of what consumers actually purchase but it is criticized for not allowing exploration of new attributes or combinations of attributes that can be realized through stated preferences (goodman et al., 2005). one of the most commonly used methods for stated preferences in exploring consumer preferences are choice experiments (barreiro-hurlé et al., 2008; jantzi and mcsweeney, 2019; mehta and bhanja, 2018; mtimet and albisu, 2006; rodríguez-donate et al., 2019; sánchez and gil, 1998; zhllima et al., 2012). other authors used means-end chain approach (barrena and sanchez, 2009) and scale method (joveret al., 2004; barreiro-hurlé et al., 2008; bernabéu et al., 2012). in this study, a choice based conjoint analysis (cbc) is used to estimate how levels of different attributes combined affect overall preference of consumers for wine in kosovo. cbc permits respondents to choose between full product combinations against each other instead of rating or ranking the product based on the attributes. 66 e. zhllima, d. imami, n. bytyqi, m. canavari, e. merkaj, c. chan the cbc derives from the theoretical basis established by lancaster (1966) according to which the utility of a product is based on the bundle of attributes it has (quoted at mtimet et al., 2008). it was earlier developed by louviere and woodworth (1983) and was originally used in the market research and transport literature (hensher, 1994). it has also been used widely as a method for conducting surveys on consumer preferences for environmental amenities. the utility of any good is derived from the characteristics of the good rather than the good itself (lancaster, 1966). the analysis is based on the idea that a good can be described by its attributes or characteristics and by the levels of those attributes. majority of the authors following these experiments used face to face interviews while some have used webbased experiments (see palma et al., 2013). experiments can also include sensory tests (see jarvis et al., 2007). in this study, choice experiments have been applied face to face (see bytyqi et al., 2015), similar to zhllima et al. (2012) in albania. in order to implement this approach, there are five stages for developing a cbc, namely selection of attributes, assignment of their level, design of choice sets, collecting data and conducting analysis (cattin and wittink, 1982; green and wind, 1975). the stages for this study are shown in table 1 below. attributes in a conjoint design are fundamental characteristics of the product that describe and differentiate it from others in the market. we chose attributes and their level based on literature review, market observations and expert consultations. to validate the attributes and the levels chosen in this early stage, a focus group was organized with different categories of wine consumers in kosovo. the attributes chosen for this study’s objective are price, type, origin and taste. attributes in this paper are chosen by considering the importance, relevance and parsimony criteria (simmons and esser, 2001). they are important in describing the wine market in kosovo, to differentiate various types of wine and take also into account the complexity of the conjoint design. to generate an optimal conjoint design, the levels of the attribute were chosen to be independent from one another, clearly defined along one dimension to avoid misinterpretation of the consumers, realistic as they represent the wine market in kosovo and balanced as the number of levels does not vary too much between attributes. the type and level of attributes selected to analyze wine preferences in kosovo are represented in table 2. price attribute is typically present in wine conjoint studies (joveret al., 2004; lockshin et al., 2006; mtimet and albisu, 2006; sánchez and gil, 1998; zhllima et al., 2012). some studies use equally distant price levels while others identify price segments which are more representative to certain product groups. in our study we have defined the price levels (from 2.2 euro to 7.5 euro) based on the focus group with consumers and observations in the market. another important attribute is type. the industry of wine has been prone to produce more red rather than white wine, due to technology constraints, while the focus group with consumers has identified type as a key factor in their choices. given the low diversity of wines in the kosovo market and based on the literature for developing country markets (see barreiro-hurlé et al., 2008; mehta and bhanja, 2018) two main categories for wine were chosen to be explored through the experiment, namely red and white. discussions in the focus group with consumers identified also taste as a very important variable. therefore, similar to joveret al. (2004), jarvis et al. (2007), and zhllima et al. (2012) it was decided to select two levels of taste, namely sweet and dry wines. participants in the table 1. stages of a conjoint choice experiment and analysis. stage description 1. selection of attributes attributes and attribute levels were selected based on a focus group with stakeholders and an extensive literature review 2. assignment of attribute levels 3. construction of choice sets the ssi web program using the random method that incorporated orthogonal array was used to create the profiles in the survey 4. data collection survey was conducted via face-toface interviews in different week days 5. data analysis data is analyzed with latent class approach source: chan-halbrendt et al. (2010). table 2. wine attributes and levels chosen for the cbc experiments in kosovo. attributes price (liter) type origin taste level of attributes 7.50 € white domestic sweet 5.50 € red imported not sweet (dry) 4.00 € 2.20 € source: authors. 67emerging consumer preference for wine attributes in a european transition country – the case of kosovo focus group expressed difficulties to express and explain other taste attributes. origin is another important attribute. some studies (barreiro-hurlé et al., 2008; lockshin et al., 2006; zhllima et al., 2012) are more interested to understand the consumer preferences toward domestic product while other studies, especially in recent years (jantzi and mcsweeney, 2019; mueller and szolnoki, 2010), are focusing more on the region of origin and other intrinsic signals linked with it. considering the fact that wine production in kosovo is focused on a homogenous and relatively narrow area, authors chose to follow the example of the earlier studies. moreover, study findings in this direction are more relevant for the local industry and the policymaking institutions, strongly focused on import substitution. 3.2. experimental design and construction of choice set sowtooth software ssi web was used to design the experiment, prepare and analyze the data. to ensure an efficient design of the survey seven versions of the questionnaire were generated. for each version, attributes and levels of the product were combined into 12 hypothetic market scenarios (choice task) each composed of four subsets of product alternatives (concept). each respondent was shown one version of the questionnaire and was asked to choose between four alternatives of the product with the specific attributes proposed in a hypothetic market scenario for all the 12 scenarios of the questionnaire. table 3 represents an example of hypothetic market scenarios. the complete enumeration method1 was used to combine the various attributes and levels to develop potential products choices for the respondents. this approach ensures orthogonal concepts within each version of the questionnaire and balances the two-way frequency of level combinations between attributes (green and srinivasan 1978). moreover this method generates combinations with the minimum overlap of attributes making the alternatives in a choice task as different as possible. the quick test2 was used to test the efficiency and integrity of the cbc design. it provides a good approximation of the relative efficiency of the cbc design with respect to each attribute level. 1 the sowtooth software was used for the analysis in this work 2 the quick test, for each attribute and level, makes an approximation of the relative standard error of each main effect under aggregate analysis and assuming that each version is seen just once across the total observations.  the quick test uses ordinary least squares efficiency. it provides a good approximation of the relative efficiency of the cbc design with respect to each attribute level. (https://www.sawtoothsoftware.com/help/ issues/ssiweb/online_help/hid_web_cbc_designs_6.htm) 3.3. data collection green and srinivasan (1978) suggest a minimum sample of 100 respondents for conjoint analysis types of studies – in our case there were 215 valid questionnaires. interviews were administered during 2014 by trained graduate students. the interviews were carried out at various sites (e.g. shopping malls, open markets, streets) in prishtina – people were approached randomly and after completing each face-to-face interview, interviewers would approach the next closest person who walked by. table 4 shows the gender and age structure of survey respondents compared to prishtina population statistics. while gender wise, the sample structure is similar to that of the population, elderly people are slightly under represented in the sample when compared to the population. 3.4. data analysis method: latent class analysis latent class method is used to analyze the data of our experiment. this approach is used extensively in table 3. example of a product task with four product concepts in the questionnaire. if these were your only options, which wine would you choose (to buy)? 7.50 € 5.50 € 4.00 € 2.20 € red red white white imported imported local imported not sweet(dry) sweet not sweet(dry) sweet ☐ ☐ ☐ ☐ source: authors. table 4. sociodemographic comparison of survey respondents with prishtina population. survey respondents (%) prishtina population (%) gender female 52.3 50.0 male 47.7 50.0 age* 18-35 40.7 43.5 36-50 43.1 30.6 51 and up 16.2 25.8 source: own calculations for the survey respondents and kosovo statistical agency for the prishtina population. * note: the survey targeted adult consumers (consumers below 18 years were not considered for interview). thus, to make the structure comparable between the sample and the population, only the structure of adult population is shown. 68 e. zhllima, d. imami, n. bytyqi, m. canavari, e. merkaj, c. chan recent years to group consumers based on their preferences. the model segments respondents into finite groups with homogenous preferences expressed in the experiment, even though the population is presumed to have heterogeneous preferences. this way the preferences are relatively homogenous within segments but differ from one segment to another. latent class model allows the estimation of part worth utility for each homogeneous group based on the choices of the respondent in the conjoint experiment. according to mcfadden (1974) the probability that individual n chooses profile i in the cbc experiment can be described as follows: )(exp )exp( 1 nh i h ni ni x x p h h ∑ = = (1) where pni is the probability of respondent n choosing profile i, η denotes a scale parameter, and xni is the deterministic component that is assumed to be a linear function of explanatory variables. lca approach assumes that the sample of individuals is drawn from a population that consists of a finite number of latent classes, say m, and that each element in the sample can be regarded as a draw from one of these m latent groups. equation 1 can be rewritten for lca to give the following equation: ( ) ( ) | 1 exp exp m m ni ni m i m m nk h z p z h b h b = = å (2) where pni |m means the probability of individual n who chooses profile i belongs to class m, ηm means the classspecific scale parameter and βm is the class-specific estimated utility parameter, zni are explanatory variables of xni. this approach assigns to any respondent a probability of membership in each segment that sum to unity, differently from a cluster analysis where respondents are assigned to each class in a discrete manner. the sum of the probabilities of membership across respondents for each group defines the total weight (class size) of that segment. in lca respondents are segmented based on their choices in the cce experiment. in our study we take into account only the product of wine as parameters to group the preferences of consumers. due to software limitation the respondents were segmented based only on their choices of the wine attributes. the estimation of the model was carried out using maximum likelihood method. estimated parameters vary for different classes. in maximum likelihood methodology the starting point is important since the model can estimate local maxima. to avoid local maxima we conducted 100 replications for each segment starting from different points. the results shown are the best fit for a 4 class segmentation considering the relative change of consistent akaike info criterion (table 5). 4. results results of the cbc experiments are shown in tables 6 and table 7. table 6 shows sample size and the importance of the attributes for each of the identified classes, whereas table 7 shows the estimated parameters and the level of significance. all attribute levels coefficients, except for taste in the case of class 1, are statistically significant. the wine consumers in kosovo are grouped in 4 (four) distinct classes that differ in their preferences for the attributes of wine. almost one fourth of the respondents are in class 1 (27%) who give over 50% of the importance to the type of wine (approximately 55%), followed by the origin of the wine (26%). these respondents prefer white wine from kosovo (ethno-white wine table 5. summary statistics of latent class analysis. groups cert caic chi sq rel chi sq 2 29.3 5155.8 2107.7 234.2 3 35.4 4768.2 2539.6 181.4 4 39.2 4537.9 2814.2 148.1 5 42.4 4352.9 3043.5 126.8 6 45.2 4196.4 3244.3 111.9 source: authors calculations based on field survey. table 6. class sizes and importance of attributes. description class 1 class 2 class 3 class 4 class size 26.60% 27.00% 36.10% 10.30% attribute importance of attributes (%) price 17.09% 11.52% 3.36% 6.46% type 54.64% 67.08% 45.34% 34.29% origin 25.66% 13.01% 26.41% 28.63% taste 2.61% 8.39% 24.89% 30.62% total 100% 100% 100% 100% source: authors calculations based on field survey. 69emerging consumer preference for wine attributes in a european transition country – the case of kosovo lovers). class 2 (27%) predominantly prefer red wine with 67% importance placed on this attribute. this group also prefers competitively priced imported wine (cheap foreign red wine lovers). class 3 (36%) placed the most important attribute on the type of wine (red) followed equally by the attributes of domestic and sweet tasting wine (ethno-red and sweet wine lovers). the last group with the smallest share of respondents (10%) placed almost equal importance to the type (white) and origin (imported) sweet wine (richwhite sweet foreign wine lovers). this class is the only segment of consumers that has a preference for high prices wine, implying that high price is perceived as a signal of quality guarantee. several tests were run to assess possible socio-demographic variable differences across groups not statistically significant differences were found for education, gender and age. the only variable which appears to differ significantly across groups is income – class 4 has a stronger presence of higher income households. indeed, class 4 consumers, as shown above, being also the wealthiest class, are first and foremost interested in quality, reflected by their preferences for higher price wines. regarding willingness to pay, class 1 has a strong preference for domestic wine they would consider imported wine only if it were 4.5 eur cheaper. on the contrary, class 2 consumers prefer imported wine they would switch to local wine, if it were 3.4 eur cheaper. class 4 has a positive price coefficient thereby calculation of wtp is meaningless. for class 3, which is also the largest class, price is the least important factor; thereby they would not switch from domestic to import or from red to white wine, even for significant price difference. table 7. latent class model parameter estimates. indicator class 1 class 2 class 3 class 4 attribute utility t-ratio utility t-ratio utility t-ratio utility t-ratio price -0.194 -4.803 -0.191 -4.458 -0.094 -2.094 0.199 2.363 type                 white 0.932 16.627 -1.669 -16.779 -1.904 -21.728 1.583 10.618 red -0.932 -16.627 1.669 16.779 1.904 21.728 -1.583 -10.618 origin                 domestic 0.438 9.489 -0.324 -6.554 1.109 16.295 -1.320 -9.309 import -0.438 -9.489 0.324 6.554 -1.109 -16.295 1.320 9.309 taste                 sweet -0.04 -1.03 -0.21 -4.63 1.05 16.14 1.41 9.86 not sweet 0.04 1.03 0.21 4.63 -1.05 -16.14 -1.41 -9.86 source: authors calculations based on field survey. table 8. income levels by identified consumer class. income range class class 1 class 2 class 3 class 4 total 0-300 € count 8 12 23 1 44 percentage 13.8% 20.7% 29.9% 4.5% 20.5% 301-600 € count 33 29 31 4 97 percentage 56.9% 50.0% 40.3% 18.2% 45.1% 601-900 € count 11 12 15 8* 46 percentage 19.0% 20.7% 19.5% 36.4%* 21.4% above 900 € count 6 5 8 9* 28 percentage 10.3% 8.6% 10.4% 40.9%* 13.0% total count 58 58 77 22 215 percentage 100% 100% 100% 100% 100% *chi square = 0.000. source: authors calculations based on field survey. 70 e. zhllima, d. imami, n. bytyqi, m. canavari, e. merkaj, c. chan 5. concluding remarks the paper explored consumer preferences for wine in prishtina, kosovo – a transition country in the balkans, which has been overcoming major transformations in the vineyard sector and remains under continuous market competition from traditional wine consumer countries in both western balkans and eu market. considering these conditions, it is imperative to observe the changing demand for producers to compete in the domestic markets. cce were used to evaluate wine consumer preferences. following a latent class choice model there are identified four distinct classes of consumers. more than ¼ of the market are classified as ethno-white wine lovers. together with class 3, the ethno-red and sweet wine lovers, they constitute more than half of the existing market. these two classes are the main current segment for which local producers should carefully drive a promotion using ethnic oriented promotion, using strong signals through label information, design and story-telling which recall the countries tradition for both local and diaspora consumers. local producers should keep considering various instruments for targeting the remaining classes, namely the cheap foreign red wine lovers as well as white sweet foreign wine lovers. these classes are very different, and cannot be targeted using the same price policy since the first is cost oriented while the second is the only segment of consumers that has a preference for high prices wine, implying that high price is perceived as a signal of quality guarantee, similar to jarvis et al. (2007) and zhllima et al. (2012). the producers in this case should create a divided production basket. on one hand they can create sub-brands for which they have to invest on better technologies and know-how for improving wine quality, and compensate increased costs with higher prices. this is an important step considering the majority of consumers (more than 60%) can accept price increase, since they are expressing positive willingness to pay for domestic wine or are not price sensitive. for instance, classes which are not price sensitive and oriented to domestic wine, such as the case of ethno-white wine and ethno-red and sweet wine lovers found respectively in class 1 and class 3. on the other hand, a separate share of the product portfolio should be focused on price sensitive consumers, such as the case of cheap foreign red wine lovers. they expressed a willingness to convert their preferences toward domestic wine in case of price reduction. this class, providing more than ¼ of the market, might be the short term goal of the wine processing industry in kosovo. the most important attribute in the choice of wine in kosovo is the type. two consumer classes, including the biggest one, prefer red wine. this is very similar to albania where majority of the consumers prefer red wine (see zhllima et al., 2012). the consumption of red wine is also related to food life style and previous experiences on local white wines. thus, when considering the vineyards investments, red wine grape cultivars should be considered in order to match the general preferences related to type. similar to jarvis et al. (2007) the taste of the wine is important too. this is an evidence for reaching the consumer interests by adding information on labels on regards to wine taste characteristics, especially for the sweet oriented consumers such as those found in class 3 and class 4. moreover, producers should make efforts for strictly controlling the postharvest and processing protocols in order to control the alcohol content, by emphasizing the flavor and sweetness of the wine. considering these results, wine processors can strategically opt for competitive lower price wines in larger urban markets. a diversification strategy may be created where a small portion of the production of high quality wine may compete for a space on upper shelves where also imported wines are shelved. this strategy would target class 4 consumers who prefer white, imported wines. particular attention should be given to ethnic oriented consumers by focusing efforts on certification, promotion of regional origin differences, labelling and packaging which are important in other studies. to produce quality white wine, additional investments are required to improve the production technology in addition to a better vertical coordination with raw material suppliers. consumer education and tourism can be explored to increase wine consumption and strengthen the image of the local producers. in this way, product should be part of culinary offers and be strengthened with description of natural amenities of the production areas. the study is based on urban consumer preferences and as such it has limitations in understanding wine production potentials future research should explore also rural consumer preferences. moreover, future research can rely on sensory testing method which would be an added value for understanding consumer preferences related to taste. other attributes are necessary to be explored in the future. for instance, recent decade studies (see lockshin et al., 2006; mueller and szolnoki, 2010; remaud et al., 2008) have explored the area of origin as an attribute to attract selected market segments. in addition, choice experiments have been developed in order to understand consumer wtp for missing attributes such as protected designation of origin (pdo) and protected geographical indication (pgi). 71emerging consumer preference for wine attributes in a european transition country – the case of kosovo studies in this sphere are crucial for casting light to new product strategies for local producers in relevance with local and native varieties. moreover, research is utilized to evaluate the feasibility of adoption of gi certification schemes for wine producers, which is a viable instrument for reducing the pressure of international wine market, especially in the case of an eu neighboring country. references barreiro-hurlé, j., colombo, s.&cantos-villar, e., 2008. is there a market for functional wines? 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(eds) conjoint measurement. springer, berlin, heidelberg volk, t., rednak, m. erjavec, e. rac, i. zhllima, e. gjeci, g. bajramović, s. vaško, ž. kerolli-mustafa, m. gjokaj, e. hoxha, b. dimitrievski, d. kotevska, a. janeska stamenkovska, i. konjevic, d. spahic, m. bogdanov & stevović m. (authors), ilic, b. pavloska gjorgjieska d., ciaian,p. (editors),2019. agricultural policy developments and eu approximation process in the western balkan countries, eur 29475 en, publications office of the european union, luxembourg, doi:10.2760/583399, jrc114163. zhllima, e., chan-halbrendt, c., zhang, q., imami, d., long, r., leonetti, l. & canavari, m., 2012.latent class analysis of consumer preferences for wine in tirana, albania. journal of international food & agribusiness marketing 24(4), 321-338. wine economics and policy volume 9, issue 1 2020 firenze university press creating opportunity from crisis, progress from research: redefining the wine sector peter hayes am1 us wine industry preparedness for unforeseen crises and disasters: an empirical test armand gilinsky, jr.1, astha sen2, judith ford3, sergio canavati de la torre4, sandra k. newton5,* a cross-cultural comparison of wine consumption and purchasing behaviour in germany and hungary gergely szolnoki1,*, gedeon totth2 assessing the effects of the environment on consumers’ evaluations for wine gioacchino pappalardo, gaetano chinnici*, roberta selvaggi, biagio pecorino the speed of the internationalisation process and the institutional networks of family smes in the doc rioja wine industry marta fernández-olmos1,*, giulio malorgio2 the impact of changes in regulatory and market environment on sustainability of wine producers: a structural equation model chinedu obi1,2,*, daniele vergamini1, fabio bartolini1, gianluca brunori1 emerging consumer preference for wine attributes in a european transition country – the case of kosovo edvin zhllima1, drini imami1,*, njazi bytyqi2, maurizio canavari3, elvina merkaj4, catherine chan5 price determinants of sparkling wine in poland: does reputation really matter? authors: samuele trestini1,*, alice stiletto1, stefanella stranieri2 wine economics and policy 9(1): 5-18, 2020 firenze university press www.fupress.com/wepwine economics and policy issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.14601/web-8054 citation: a. gilinsky, jr., a. sen, j. ford, s. canavati de la torre, s.k. newton (2020) us wine industry preparedness for unforeseen crises and disasters: an empirical test. wine economics and policy 9(1): 5-18. doi: 10.14601/web-8054 copyright: © 2020 a. gilinsky, jr., a. sen, j. ford, s. canavati de la torre, s.k. newton. this is an open access, peer-reviewed article published by firenze university press (http://www. fupress.com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information files. competing interests: the author(s) declare(s) no conflict of interest. original research article us wine industry preparedness for unforeseen crises and disasters: an empirical test armand gilinsky, jr.1, astha sen2, judith ford3, sergio canavati de la torre4, sandra k. newton5,* 1f j korbel bros. professor of wine business, sonoma state university 2 assistant professor of economics, sonoma state university 3 special consultant, the climate commitment project, sonoma state university 4 assistant professor of business, sonoma state university 5 professor of business, sonoma state university. *corresponding author e-mail: gilinsky@sonoma.edu, astha.sen@sonoma.edu, judith.ford@sonoma.edu, canavati@sonoma.edu, sandra.newton@sonoma.edu abstract. natural disasters and human-created crises have thrust the topic of strategic preparedness into management conversation around the world. following recent fire, flood and earthquake disasters, this paper assessed perceived organizational preparedness and resilience as related to four key characteristics: the size of the firm through annual case production and number of employees, the age of the firm, and the organizational hierarchy. data were gathered via an online survey, where 81 representatives of the western us wine industry responded. data are analyzed using descriptive statistics, factor analysis, and analysis of variance. results of this research indicate that wine firms with larger annual case production perceive greater resilience to disaster and crisis than firms with smaller annual case production perceive. wine firms with more employees perceive greater resilience to disaster and crisis than firms with fewer employees perceive. significant differences were found among managerial level perceptions of preparedness, in contrast to earlier studies. this study, which is based on exploratory empirical research and leads to a conceptual framework, can shed at least some light on what motivates wine firms to engage in strategic preparedness activities, as well as deepen our understanding of how communities would benefit from those actions. keywords: black swan events, organizational resilience, strategic preparedness. 1. introduction growing interest in the strategic preparedness of organizations (van der vegt et al., 2015) has led to extensive study of this subject among scholars. given its social and economic impacts, many scholars have investigated the drivers/antecedents of strategic preparedness (e.g. larson and fowler, 2009; haimes, 2012; rao and greve, 2018; wang and wu, 2018; williams et al., 2017). despite increasing research, strategic preparedness in the agricultural industry, the wine industry in particular, remains underexamined. areas of insufficient wine busi6 a. gilinsky, jr., a. sen, j. ford, s. canavati de la torre, s.k. newton ness research include how managerial and institutional factors influence strategic preparedness. the aim of this study is to examine the impact of managerial and institutional factors influence motivations to prepare for and bounce back from the unexpected crisis or disaster. previous studies have taken an isolated approach to the examination of managerial and institutional factors, treating them separately, and failing to address their combinative effects. how strategic preparedness for weather-related and other natural disasters, as well as human-created crises) fits into the equation has been thrust into the conversation. strategic preparedness not only can mitigate the impact of adverse weather and other natural disasters on organizations, but also enable them to sustain or at least quickly resume production or services in order to sustain the economic vitality of the communities in which these organizations operate. in the past decade alone, catastrophic events have become too numerous (and too frequent) to document. these include earthquakes in california, indonesia, japan, and new zealand; hail and frost losses in burgundy and piedmont; hurricanes and flooding in the southern us and puerto rico; devastating wildfires in the western us and the iberian peninsula; drought in the western cape of africa; data breaches at major corporations and government agencies around the globe; and numerous mass shootings at us and european public places such as tourist attractions, businesses, schools, churches, military installations, and entertainment events, to name just a few. strategic preparedness denotes proactive management processes to cope with crises (augustine, 1995; o’rourke, 1997; schroder, 1989). gruman, chhinzer, and smith (2011) found that the providers in the canadian hospitality industry perceived low levels of disaster preparedness overall. absent said processes, a firm or an entire industry sector may struggle to maintain its legitimacy (massey, 2001). when firms or industries cease to operate, even temporarily, organizations, along with the community in which they operate, may be in peril (kahneman, 2011; rao & greve, 2018). 1.1 recent threats to the global wine industry fire and earthquake disasters in california, new zealand, and northern spain resulted in damage greater than an estimated $5 billion to the global wine industry and their surrounding communities from 2014 to 2017. see table 1 for a partial list of recent natural disasters from 2014 to 2017, and their attendant economic impact on several wine regions. given the monumental impact of natural disasters have imposed on businesses (see table 1), this paper aims to empirically inquire the effect of certain attributes of wine businesses on their disaster preparedness and resilience strategy. we use a survey methodology to establish an empirical relationship between three primary attributes of a business and its preparedness policy from the perspective of a survey respondent. more specifically, we explore the impact of a firm’s size (defined by production and number of full-time employees), its age and the role of the survey respondent in a given wine firm across various perception-based preparedness and resilience measures. for the rest of the paper, we proceed in the following manner. the next section presents a brief review of previous literature on strategic preparedness in organizations. section three elaborates upon the exact research questions and our hy potheses based on previous research work. section four elaborates upon the survey instrument used, the data collection process, the survey response rate and the definition of constructed variables. section five discusses the empirical findings and the final section offers conclusions, guidance for practitioners, the limitations of this investigation, and suggestions for future research. 2. literature review prior researchers have investigated how managers perceive and prepare for mitigating the impact of exogenous shocks, e.g. on large and on small-to-medium sized firms alike. swaminathan (1995) examines whether or not wine businesses that were founded during shocks have longer lives than firms founded under more munificent conditions. rao and greve (2018) report the effect of an exogenous shock  — a flu epidemic — on small, entrepreneurial start-ups in norway, and opine that researchers also ought to look at table 1. economic impact of natural disasters on wine regions, 2014-2017. event region date economic impact earthquake napa valley 8/2014 >us$500 million earthquake kaikoura (south isl.), new zealand 11/2016 >nz$500 million fire napa valley & sonoma 10/2017 >us$9 billion fire portugal & northern spain 10/2017 >€1 billion sources: compiled by authors from bridges, s., 2017; kasler, d., 2018; and macau news agency. 2018. 7us wine industry preparedness for unforeseen crises and disasters: an empirical test whether such shocks impact the mortality rates of such organizations. duquesnois et al. (2010) compare the market responses of two long-established producers in the languedoc-rousillion region in response to declining market demand. abel and bressan (2015) categorize adaptation and resilience strategies from a sample of 273 microand small italian wine firms, all facing systemic crises such as globalization, increasing competition, and declining domestic demand. wang and wu (2018) explore motivations in crisis planning and implementation of hotel managers in china and australia. however, none of these studies deal directly with asymmetric, exogenous shocks. the literature review is divided into three primary sections: definitions, managerial perceptions, and organizational preparedness. table 2 provides a compilation of pertinent research in the strategic preparedness arena. 2.1 definitions of threats to an organization’s well-being strategic preparedness for unpredictable crises and disasters, which seem rare but appear predictable in hindsight, are known as “black swan” events. these events have become a crucial topic in our global society today, and there are numerous opportunities for empirical research in this domain (taleb, 2007). firms across numerous industries need to develop proactive enterprise-wide crisis plans in order to mitigate the prospective and possibly uninsurable damage from disasters (lankoski, 2016; marra, 1998; penrose, 2000; shrivastava, 1987). fear of negative events, such as an economic downturn or increasing network competition in a mature industry, however, also indices or paralyzes a firm to enhance its strategic preparedness for consequential changes in its task environment (abel & bressan, 2015; duquesnois et al., 2010; weber et al., 2015). 2.2 managerial perceptions penrose (2000) and marchall et al. (2010) opine that expectations for proactively addressing social concerns are rising from employees, trade associations, retail groups and customers. furthermore, according to marchall et al. (2010), the normative expectations formed by employees and trade associations appear to be felt most significantly by managers. fowler et al. (2007) suggest that managers’ perceptions of strategic preparedness are contingent upon organizational characteristics as well as an employee’s status within a firm. yet many ceos and senior-level management teams worry that, as their companies improve strategic preparedness for social sustainability, their competitiveness deteriorates (nidomolu et al. (2009). still, companies that are proactive in preparing for unanticipated events are more likely to rethink their business models, products, technologies and processes. in doing so, these companies may foster innovations that lead to renewed and sustainable competitive advantage (nidomolu et al., 2009). haimes (2012) defines strategic preparedness as “a proactive phase of risk management…for emergent forced changes, whether originating from natural or human sources” (pg. 1842). fowler et al. (2007) suggest that differences in perception of disaster and crisis preparedness may be contingent upon an individual’s level of standing within the firm, i.e., top-level managers and owners claim to have a higher level of perceived preparedness than their employees claim. people are the most important assets for businesses. a critical source of table 2. prior research into strategic preparedness. strategic preparedness topic author(s) definitions of threats to an organization’s well-being 1. low-probability, high consequence events that could threaten the sustainability of the firm 2. characteristically ambiguous events in terms of cause, effect, and resolution 3. “’black swan’ events: highly improbable but might nonetheless happen” 4. exogenous events that threaten an individual firm or cluster of firms’ competitiveness shrivastava (1987) pearson & clair (1998) taleb (2007) duquesnois et al. (2010); abel & bressan (2015) managerial perceptions 1. crisis planning: clear benefit or environmental value 2. mitigation of risk or confirmation of fear response behavior 3. effects of crisis response strategies on firm legitimacy 4. perceived likelihood of different crises: natural disasters were perceived most likely to occur while terrorist attacks were perceived as the least likely to occur penrose (2000); marchall et al. (2010) bourgeois & eisenhardt (1988); leonard-barton (1992) massey (2001) larson & fowler (2009) planning and preparation for responses 1. process models for crisis preparedness 2. crisis communication planning 3. how firm size, age, managerial level, and other variables impact preparedness planning greening & johnson (1997); o’rourke (1997) marra (1998); ullmer (2001) fowler, et al. (2007); lankoski (2016); haimes (2017) source: prepared by authors for use in this investigation. 8 a. gilinsky, jr., a. sen, j. ford, s. canavati de la torre, s.k. newton capacity for organizational resilience is contained in the characteristics of employees (lengnick-hall et al., 2011; luthans et al., 2007). 2.3 planning and preparation for responses firms that properly plan and prepare for environmental and social challenges are more resilient (ortizde-mandojana, 2012). evaluating prior research on the topic of resilience of businesses to crises and disasters, linnenluecke (2013) opines that: (1) research on organizational resilience is highly fragmented with sparse conceptual development; (2) resilience has been studied mostly through case examples in a wide variety of contexts and settings, yet findings are often not integrated; (3) existing attempts to detect resilience (or absence thereof ) have employed retrospective analyses after an adverse impact has occurred, but provide little insights into predictive factors leading to future resilience. despite numerous theoretical investigations into crisis management and disaster preparedness, there is scant prior research on proactive activities such as institutionalized processes, executives’ and employees’ perceptions of risk, and adoptions of firms’ crisis management preparations, considered as part and parcel of pre-event preparedness (pearson & clair, 1998). greening and johnson (1997) indicate that there are some basic criteria for ranking the relative merits of a firm’s options to respond to crises and disasters. these criteria may include: (1) cost: can the company afford to respond? (2) corporate public  relations: can the company make a prompt, full disclosure, assume responsibility, express concern and make efforts to correct mistakes in the long run; and (3) corporate  values: are they expressly oriented towards corporate social responsibility (csr), i.e. is there a track record of acknowledging responsibility and maintaining existing commitments to stakeholders’ well-being? (cf. greening & johnson, 1997). haimes (2012) identifies a model to explain the relationships among vulnerability, resilience, risk, the states of a system, and the specific emergent forced changes. in sum, resilience may be defined as the ability of a firm to anticipate trends and potential threats, to cope effectively with unexpected events and to learn from these events to foster dynamic capabilities to facilitate change (weick & sutcliffe, 2007; duchek, 2014). taken together, crisis management and resilience are manifestations of the pre-event preparedness for the challenge of adversity, in that resilience is viewed as an interaction between the organization and the environment and comprises pre-adversity capabilities, in-crisis organizing and adjusting, and post-crisis resilience responding (williams et al., 2017). further investigations are clearly needed to uncover institutionalized processes for coping with unexpected events (ullmer, 2001); managers’ perceptions of risk (bourgeois & eisenhardt 1988; leonard-barton, 1992); and adoptions of organizational crisis management preparations (pearson & mitroff, 1993; pearson & clair, 1998). 3. research questions and hypotheses a firm’s age and size are important variables that are said to lend themselves to liabilities of smallness and newness (stinchcombe, 1965). managerial perceptions and strategic preparedness of firms in different kinds of industries have also been shown to wield considerable influence over firm performance in prior studies. arend (2014) opines that, the firm characteristics of newness and smallness…also provide a solid basis for building upon in future work because they proxy for more sophisticated factors such as: scale economies, market power, bargaining power, resource slack, specialization, experience, and so on. (arend, 2014, p. 36, f 2) our research questions are organized around firm size, firm age, and level of managerial hierarchy or role. 3.1 firm size firm size can be advantageous for implementing planned change (ford, 2009). newer and smaller firms have lower survival rates in the absence of growth (freeman et al., 1983; steffens et al., 2009), while survival rates increase as firm size and age increases (gilbert et al., 2006). firm size also appears to explain the variance in strategic preparedness in response to environmental threats (smith et al., 1989). a larger firm will possess greater resources and potentially more market knowledge to identify and implement strategic responses that are not available to smaller firms to mitigate adverse environmental changes. smaller organizations may be limited in terms of available resources, including human and social capital (lumpkin, et al., 2010). large firms also show a higher propensity to innovate than smaller firms, while a firm’s innovation practices do not depend upon its age (duchek, 2014; moohamad et al., 2014). case production and number of employees are acceptable proxies for estimating the size of a wine business (delacroix & swaminathan, 1991). this leads to our first research question. rq1 – are larger wine businesses better prepared for “black swan” events than smaller wine businesses? to investigate this research question, fowler et al.’s (2007) propositions regarding organizational character9us wine industry preparedness for unforeseen crises and disasters: an empirical test istics related to disaster preparedness are modified and applied. see hypotheses 1 and 2 below. h1 – larger firms will exhibit a higher proactivity towards strategic preparedness than smaller firms (firm size determined by annual production). h2 – firms with more employees will exhibit a higher proactivity towards strategic preparedness than firms with fewer employees. 3.2 firm age firm age has been posited to be a significant determinant of an organization’s ability to conduct environmental scanning activities (mengistae, 1996; mohanneill, 1995; thomas & ramaswamy, 1996; yasuda, 2005). the age (in years since founding) of a firm can be associated to its strategy (grinyer & yasai-ardekani, 1981). newer entrants in the wine industry tend to pursue an “aggressive” strategy aimed at niche market definition and penetration via “entrepreneurial” behaviors (brown & butler, 1995). established, growing businesses in an industry, by contrast, tend to experience diminishing efficacy of entrepreneurial behavior and need to pay greater attention to building management systems and market share (jordan et al., 2007; mora, 2006). whereas long-established firms tend to be strategic in implementing planned change (ford, 2009), the size of an organization, measured by researchers using assets accumulated, production capacity, and/or employees as proxy variables, can explain the variance in strategy and performance (smith et al., 1989), or its movement toward or away from diversification (grinyer & yasai-ardekani, 1981). a newer, more entrepreneurial organization might also have a different view of its environment in terms of its views for success (lumpkin et al., 2010). an organization’s longevity can negatively impact knowledge acquisition and entrepreneurial growth (naldi & davidson, 2014). this leads to our second research question. rq2 – are established wine businesses better prepared for “black swan” events than newer wine businesses? how organizational age is related to disaster preparedness is conceptualized in hypothesis 3 below. h3 – older f irms will ex hibit a higher proactivity towards strategic preparedness than younger firms. 3.3 level of responsibility within the firm prior literature on organizational preparedness for an unexpected disaster or crisis has tended to focus solely on top management responses (mclean & power, 2014, trainor & velotti, 2013). identification of the performance effects of the manager-strategy orientation mirrors prior research into those managerial characteristics said to be associated with organizational success (child, 1974; norburn & birley, 1988; sambharya, 1989; thomas & ramaswamy, 1996). among these investigations, sambharya (1989) notes that firms led by ceos with longer tenures tend, on average, to outperform other firms. our third research question seeks to broaden understanding of preparedness at both level of responsibility and organization-wide. rq3 – are owners and top-level managers of wine businesses better prepared than lower-level staff for “black swan” events? again, fowler et al.’s (2007) proposition regarding managerial hierarchical impacts on perceptions of preparedness is adapted for hypothesis 4. h4 – upper-level managers and owners will perceive better strategic preparedness than lower-level employees. figure 1 represents the proposed variables that impact preparedness and resilience. the independent variables (iv) to be tested are organization size, organization age, and managerial hierarchy against perceptions of strategic preparedness and resilience, the dependent variables (dv). while the focus of fowler et al.’s (2007) study was to test crises preparedness, we have attempted to extend its framework and investigate both preparedness and resilience. 4. methodology 4.1 survey instrument we adapted fowler et al.’s (2007) questionnaire using the same end choice points (1 = strongly disagree, 2 = disagree, 3 = agree, 4 = strongly agree) for the questions; however, we added one question, “my organizafigure 1. proposed variables impacting preparedness and resilience. source: prepared by authors for use in this investigation. 10 a. gilinsky, jr., a. sen, j. ford, s. canavati de la torre, s.k. newton tion has provided every employee with access to a text message or other digital notification system in the event of an emergency,” in order to reflect changes in communications technology in the decade or so since fowler et al.’s earlier study. we found fowler et al.’s original 21-item scale to have a reliability (α = .815); whereas the 22-item scale with the added question to have a reliability (α = .819). from may – june 2018, a pilot survey via qualtrics survey software was sent to 400 northern california university wine business program alumni (undergraduate, mba, and emba), resulting in a response rate of 12.5 percent. the resulting sample was too small for meaningful analyses; therefore, excluded from the study. follow-up qualitative interviews to verify, refute, or amplify quantitative responses and clarify the understanding of questions were conducted with eight individuals representing four different wineries during augustseptember 2018. as there appeared to be little or no confusion about the 22 questions from the pilot study and interviews, the same survey via qualtrics survey software was sent to a larger sample of 3,775 winery executives in the wines & vines database during a one-month period from october-november 2018. the intent of obtaining a larger sample was to permit higher-level statistical analyses to provide a more balanced viewpoint not easily obtainable from the exploratory cross-sectional pilot survey data (patton, 2002). of the 3,775 email addresses in the database, 3,425 turned out to be valid. after three mailings as per dillman (1991), 108 responses were received, but only 81 responses were sufficiently complete for further analyses. probable causes of such high non-response include an over-surveyed industry, sensitivity over the 2017 sonoma/napa fires, concern over the concurrent november 2018 camp fires in northern california, or respondents’ general lack of interest in participating in surveys. as to a comparison of those who didn’t complete the survey to those who completed the survey, sufficient demographic information to analyze for non-response bias via chisquare tests found no significant differences. because of the sensitivity of the questions, the topical event, the criticality to time (lapse to the event), and memory details, we chose to move forward with the small sample in line with other small sample research (köhr, malorgio & aragrande, 2017; williamson et al., 2012). 4.2 demographics demographic information was obtained from selfreport. of the 81 respondents, forty-five percent (n=37) were winery executives (owner/ceo/president), while the respondents had been employed an average of 14.3 years. fifty-nine percent (n=48) of the wineries were considered established, having been in business 20 years or more. wineries, of which 60 percent were located in northern california, had been in business an average of 28½ years and had an average of 38 full-time employees. forty-eight percent (n=39) of the wineries were considered large where its annual production was greater than 20,000 cases of wine. 4.3 analyses the iv to be tested were organization size, organization age, and managerial hierarchy. organization size was defined two ways: annual production in cases and the number of full-time employees. dichotomous variables were created for annual production in cases, where small was ≤ 20,000, and large was > 20,000; and for number of full-time employees of the firm, where small was ≤ 20, and large was > 20. a dichotomous iv was created for organization age, where new or young had < 20 years in operation, while established organizations had ≥ 20 years in operation. the respondent’s level of responsibility defined the iv managerial hierarchy using three levels executive (owner/ceo/president), management, or staff. spss statistics, version 26 was used to analyze the data. content review of the literature and study questions resulted in our conducting an informal confirmatory factor analysis using the principal components’ extraction method and varimax rotation method, permitting evaluation of the correspondence between the measurement items in the survey while extracting two factors theorized from fowler et al.’s (2007) questionnaire: organizational preparedness and organizational resilience. the first factor (organizational resilience) had an eigenvalue of 4.95 and the second factor (organizational preparedness) had an eigenvalue of 2.22, where greater than 1 is considered significant; and both accounted for 34.13% of the total variance explained. while the total variance explained was low, the sample observations per variable to be analyzed minimum was met for conducting factor analysis, and thus it was deemed satisfactory to move forward (hair et al., 1998). results of the initial analysis with factor loadings with corresponding item questions are presented in the table 3. one question from fowler et al.’s original 21 questions (“it would be easy for a potentially threatening nonemployee to gain access to my workplace”) was reverse-coded and omitted after initial factor analysis and reliability analyses revealed insufficient loadings and unsatisfactory 11us wine industry preparedness for unforeseen crises and disasters: an empirical test reliability. the reliability, again using cronbach’s (1951) alpha of the factor r – organizational resilience items was 0.780 and the factor p – organizational preparedness items was 0.765. 5. results and discussion hypothesis testing was accomplished using analysis of variance (anova). following fowler et al.’s (2007) study, we calculated the sum from each respondent’s scores for each variable, thus the higher scores suggested the higher perception of organizational preparedness and organizational resilience. results of the hypothesis tests are shown in table 4. hy pothesis 1 proposed that firms with higher annual wine production would exhibit a higher proactivity towards organizational preparedness than firms with small annual case production. hypothesis 1 was not supported for the dv – preparedness, but was supported for dv – resilience, with the f score of 4.553 and significance level of .036 using an alpha cut-off of .05. although respondents from firms with larger annual case production reportedly did not feel more prepared for black swan events than those from smaller firms, the larger producers perceived themselves to be significantly more resilient in the face of change than smaller producers, which is consistent with earlier findings from maurel (2009). hy pothesis 2 proposed that f irms with more employees would exhibit a higher proactivity towards organizational preparedness than firms with fewer employees. similar to fowler et al.’s (2007) findings, hypothesis 2 was not supported for dv – preparedness, but was supported for dv – resilience, with the f score of 6.916 and significance level of .010 using alpha cut-off table 3. factor analysis loading with question items. question item factor r factor p i am very familiar with our workplace evacuation plan. .075 .692 if my organization suffered a serious crisis or disaster, i might be in danger of losing my job. [reverse-coded] -.075 .450 if my organization suffered a serious crisis or disaster, i would still be paid until we could reopen. .570 -.002 if my organization suffered a serious crisis or disaster, i would still have my job. .484 .160 if my organization suffered a serious crisis or disaster, i would still be covered by my organization’s employee benefits (e.g. health insurance. .490 .053 my organization has provided every employee with access to a text message or other digital notification system in the event of an emergency. .208 .412 my organization has provided every employee with a crisis or disaster preparedness kit (e.g. smoke mask, flashlight, etc.). .617 .053 the security at my workplace is adequate. .122 .514 in the event that my organization suffered a serious crisis or disaster, i am familiar with the plan for how family members can receive notification on the status and safety of their relatives. .262 .609 in the event that my organization suffered a serious crisis or disaster, i am familiar with my organization’s plan to continue its operations at another location. .629 .086 all organization members are required to rehearse potions of our emergency preparedness plan, e.g. evacuation. .575 .161 security at my workplace has significantly increased since the most recent crisis or disaster. .501 .118 i know where the nearest fire extinguisher is located near my desk or workstation. .044 .669 if a serious crisis or disaster were to occur at my organization, i am familiar with our plan on how to communicate with my fellow employees at scattered or remote locations (such as mobile phone numbers, websites, or e-mail lists. .336 .627 most of our organization’s employees are familiar with our crisis and disaster preparedness plan. .220 .681 as part of our emergency preparedness plan, customers and suppliers would know how and still be able to contact our organization for information. .423 .378 if a serious crisis or disaster were to occur at my organization, i would still have access to the data that i need to do my job (e.g. backed up at a remote site. .373 .279 my organization offers to pay volunteer employees to be trained in basic life support techniques (e.g. cpr, first aid. .570 -.019 my organization has a contingency plan in place so that our customers would be covered if we were to suffer a disaster. .651 .083 i know where the nearest emergency exits are to my desk/workstation. -.105 .542 my organization’s emergency preparedness plan has been coordinated with local agencies, such as the fire and police departments. .483 .100 12 a. gilinsky, jr., a. sen, j. ford, s. canavati de la torre, s.k. newton of .05. while respondents from firms with larger numbers of employees did not feel more prepared than smaller firms for black swan events, those same firms did feel significantly more resilient, that they could get back to business quickly, consistent with gil and mataveli (2017). hy pothesis 3 proposed that older firms would exhibit a higher proactivity towards organizational preparedness than younger firms would. this hypothesis was not supported for both dv – preparedness and resilience. respondents from the more established firms did not perceive preparedness for a black swan event, nor did they perceive greater resilience to overcome a black swan event over the smaller firms, confirming galbreath et al. (2016). while fowler et al. (2007) found top and middle level managers perceived a higher level of preparedness compared to employees, this study also found significant differences between the three employee levels (executive (owner/ceo/president), management, and staff ). hypothesis 4 was supported for dv – preparedness with the f score of 5.843 and significance level of .004 using alpha cut-off of .01, but was not supported for dv – resilience. significant differences in perceptions of preparedness were found between responding executives and management (sig. = .005; mean difference 2.539 at .05 level) in the scheffe ) post hoc tests, as well as staff employees and management (sig. = .085; mean difference 1.985 at .10 level) in fisher’s least significant difference (lsd) post hoc tests. those respondents who described themselves as executives and staff employees reported feeling much more prepared than responding managers. these findings reflect those of an earlier investigation into wine firms’ environmental preparedness (cordano et al., 2010). 6. conclusions environmental disasters and human-created crises have increased the complexity, disruption and interconnectedness of a broad range of threats and hazards to which firms are expected to respond (van der vegt et al., 2015). effective responses and recovery processes are crucial in addressing the aftermath and saving lives and livelihoods. proactive investment in prevention and mitigation have become necessities to reduce the shortand long-term negative social and economic impacts (van der vegt et al., 2015). a large percentage (86%) of respondents felt confident that if a disaster struck, employees at the company could carry out the disaster preparedness plan, which is in line with gruman (2018) at 75% of respondents. based on our exploratory findings, owners and managers of wine businesses must find the right balance between planning and remaining operational. no matter how well a plan has been thought out, unexpected events — “black swans” —will happen (taleb, 2007: 203-4). one of the hallmarks of a successful business is adaptability, regardless of what its business plan. for some wine businesses, the environment is too turbulent for extensive planning to be beneficial (conz et al., 2017). when a crisis occurs, managers may find that there is not enough information to allow them to follow a comprehensive plan. in this case, a manager’s ability to adapt may be more important than following a careful plan for the future. earlier investigations into preparedness in the wine industry have largely been concerned with adaptive responses by firms to climate change (bernetti et al., 2012; galbreath et al., 2016; merloni et al., 2018). prior researchers have likewise investigated the motivations of senior-level managers and owners that delibertable 4. analysis of variance results. h iv n variable means dv f sig h1 firm size-prod# sm-41 lg-39 sm-20.1 lg-19.8 preparedness 0.092 .762 sm-41 lg-39 sm-28.2 lg-30.8 resilience 4.553 .036* h2 firm size-empl# sm-45 lg-34 sm-20.1 lg-20.0 preparedness 0.014 .905 sm-45 lg-34 sm-28.2 lg-31.4 resilience 6.916 .010** h3 firm age yng-33 est-48 yng-20.0 est-19.9 preparedness 0.005 .944 yng-33 est-48 yng-29.3 est-29.6 resilience 0.077 .782 h4 employee level s-10 m-33 o-37 s-20.5 m-18.5 o-21.1 preparedness 5.843 .004** s-10 m-33 o-37 s-32.4 m-29.1 o-29.1 resilience 1.555 .218 significance at *p<.05, **p<.01. 13us wine industry preparedness for unforeseen crises and disasters: an empirical test ately ignored opportunities to grow their firms, motivations including concern for employee well-being, loss of the positive “small” business atmosphere, less involvement and job satisfaction, and fear of negative events, such as an economic downturn (wiklund et al., 2003). on the other hand, for incumbent firms in the wine industry, organizational characteristics such as size can drive profitable growth (sellers & alampi-sottini, 2016). while the organizational preparedness instrument proposed by fowler et al. (2007) has been adopted in the management literature for over a decade, no study has since attempted to unpack the different constructs included within this instrument. we have explored and proposed organizational preparedness and organizational resilience as two constructs within this instrument, which can further our understanding of organizational preparedness in the wine industry, and extended fowler et al.’s (2007) study through analyses of two factors: preparedness and resilience. organizational resilience may also possess interactive effects on perceived strategic preparedness. we will assess that interaction in a separate, forthcoming investigation (bhamra et al., 2011; kantur & iseri-say, 2012). preparedness and resilience are generally viewed as desirable characteristics of organizations that are able to contend with various types of unexpected, abrupt and/or ‘extreme’ changes in their environments. however, despite the growing utilization of the concept in the popular press and academic research, there have been few insights into the conceptualization, operationalization and empirical assessment of the resilience factor (linnenluecke, 2013). success or failure to innovate in the face of unexpected events has been attributed to the knowledge base of the firm (leonard-barton, 1992; tellis, 2006). to weather those events, wine business owners, executives, and their employees must foster serendipity and resilience to prepare for emergencies, i.e. by adopting new technologies, procedures, or employee-centered services (mccann et al., 2001). that is, not only is the contribution of a proactive, healthy organizational culture to good strategy implementation certainly positive, but also the main benefit of a healthy culture is organizational resilience in the face of setbacks. (kahneman, 2011: 263). to make processes work efficiently and effectively, however, managers must have the knowledge of disparate values, cultures, and attitudes when pursuing innovations in different nations or regions (wilkins & ouchi, 1983). in summation, this exploratory study has a number of contributions. first, this study contributes to strategic preparedness literature by suggesting combinative effects of managerial and institutional preparedness. second, this study contributes to an understanding of how the characteristics of the organization affect social entrepreneurship by highlighting the moderating roles of firm age and size. third, our findings corroborate the earlier studies of strategic preparedness initiatives undertaken by organizations, suggesting the need for policy-makers to be aware of these unique characteristics in their efforts to encourage both sectoral and community preparedness. fourth, our findings found significant differences among managerial level perceptions of preparedness, in contrast to earlier studies. 6.1 implications for practice communities in which wine business operate and to which those businesses provide economic benefits nevertheless face the future prospect of more extreme, frequent and damaging natural disasters and possible resilience failures (mcknight & linnenluecke, 2015). firms are crucial stakeholders in building the resilience of the communities in which they operate, and play a central role in supporting communities impacted by natural disasters, e.g. by delivering essential products and services during a natural disaster, and supplying inputs crucial for disaster recovery (ballesteros et al., 2017). nevertheless, a gap remains to be crossed between the public policy literature that focuses on community-level resilience (ballesteros et al., 2017; mcknight & linnenluecke, 2015; weick, 1977; weick & sutcliffe, 2007), and disaster-oriented management research, i.e. that focuses on firmcentric reactions to natural disasters (larson & fowler, 2009; lengnick-hall et al., 2011). businesses must not only operate in conformity with their legal and regulatory environments, but they also require a more tacit ‘license to operate’ from the local community in which they reside. surprisingly, few studies have investigated corporate social responsibility (csr) in the wine industry per se, and none has examined disaster preparedness and response as a focal topic. firms in the wine industry typically encounter both support and opposition in the communities where their operations are based, and as wine firms attempt to build out the event-based and tourism sides of their businesses, they may be viewed as generators of economic development (i.e., wealth creation, jobs, and tax revenues), yet concomitantly remain vulnerable to community opposition (mccuan & hertz, 2018). earlier investigations examined whether or not a firm’s environmental practices influence wine consumers’ attitudes towards wine firms (forbes et al., 2009; nowak et al. 2008) and whether or not philanthropy as a voluntary component of csr positively impacts external stakeholders, at least 14 a. gilinsky, jr., a. sen, j. ford, s. canavati de la torre, s.k. newton in the short term (forbes et al., 2018). managers of firms who engage in csr resource allocation can create value at times for their shareholders through the creation of insurance-like protection (godfrey et al., 2009). how would suppliers, customers, communities, regulatory agencies, even insurers, among other external stakeholders, respond to the withdrawal of a wine firm’s voluntary support from these capability-building activities? would external stakeholders allow wineries to continue production and distribution of products, conduct ‘cellar door’ sales, open their tasting rooms to the public, and host special events? marchall et al. (2010) note that expectations for proactively addressing social concerns are rising from employees, trade associations, retail groups and customers. furthermore, it is the normative expectations formed by employees and trade associations that appear to be felt most significantly by managers. in contrast to traditional risk management approaches taken by firms and their insurers, i.e. that focus on the identification of risks and alleviating the level of vulnerability to external disturbances, adopting a resilience approach to disturbances requires developing capabilities and capacities that create or retain resources and capabilities that are of necessity flexible, storable, convertible, and malleable to permit firms to contend with and learn from the unexpected (sutcliffe & vogus, 2003). viewed through the lens of the resource-based view of strategy, resources and capabilities for preparedness, particularly in the face of environmental turbulence, is considered to be a potential core competence for the firm (racherla & hu, 2009). ameliorating the preparedness and resilience of firms and creating value for internal stakeholders, including owners, can help mitigate organizational deficiencies, overcome organizational rigidity, and forestall lost opportunities (barney, 1991; wernerfelt, 1984). firms said to be able to develop proactive social and environmental practices (sep) may use those as a buffer against shocks and return more quickly to their pre-crisis status (ortiz-de-mandojana & bansal, 2016). over the longer term, firms that invest in sep may emerge even stronger: they can experience lower financial volatility, have higher rates of survival, and grow faster than rivals that are less responsive to social and environmental issues (ortiz-de-mandojana & bansal, 2016). in practice, good deeds and careful longterm planning appear to enable some firms to ‘pay it forward.’ one might well consider an opposing viewpoint, namely, that preparedness should be viewed as detrimental to the sustainability of a wine firm or any other business (hamel & valikangas, 2003). for example, preparedness for disruptions of a producer’s supply chain may be considered by some to be excess organizational slack, i.e. a sign of inefficiencies. in that view, voluntary actions to contend with crises and disasters, while potentially leading to innovations in supply chain management, could be neutral with respect to or even have adverse impacts on a firm’s financial and social performance (akgün & keskin, 2014). that there appears to be a trade-off between the costs and benefits in the short term relative to the long term is a central issue for achieving both business and societal sustainability (ortiz-de-mandojana & bansal, 2016). 6.2 limitations and future research first, any research such as ours that analyzes unverified cross-sectional data that are not verified by secondary or other sources of data can have questionable reliability. second, while fowler’s (2007) survey instrument has proven validity, we may have missed some important questions specific to the nature of the wine industry in an attempt to keep the survey short and minimize technical terminology in order to increase response rates. along these lines, due to the fact that the wine industry may be suffering from being over-surveyed, or due to the sensitive nature of some of the questions in our instrument, our sample size was limited. thus, results obtained may or may not be representative of all us wine businesses, wine regions, or attributes of these businesses. despite these limitations, future wine industry research studies should test whether these two constructs can explain greater variance in firmand employee-level predictors and outcomes across different groups of wine businesses and employee groups in different regions of the us as well as in other countries. furthermore, research studies in industries other than wine should test whether the validity of our construct factors holds in other industries, as well as the extent to which there are differences between the results of our study and those of studies based on firms in other industries. additional work is also needed to quantify the relationship between an employee’s sense of trust in the organization, perception of empowerment and cohesive organization culture and perceived preparedness and resilience and identify key indicators of this potentially mitigating force. although ours is an inconclusive cross-sectional investigation into preparedness behaviors that has been conducted in the aftermath of natural disaster events in northern california, strategic choices to engage in longterm strategic preparedness activities within the wine firm to cope with adversity are of great importance to 15us wine industry preparedness for unforeseen crises and disasters: an empirical test understanding firm behavior. future researchers might well consider conducting longitudinal studies of strategic 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(ii) relative position in the market (rpm); (iii) hirschman-herfindahl index (hhi); and (iv) net export index (nei). the paper analyses the growth of the sparkling wine trade worldwide. it demonstrated that france had the greatest relative position in the market, followed by italy and spain. this same sequence was found in the revealed comparative advantage, highlighting the increased italian export level. a high export market structure concentration was also shown. on the other hand, there was an unconcentrated import market structure, and, according to the nei, it was possible to identify three groups composed of actors who were stable in terms of: i) exports based on domestic production (france, italy and spain); ii) trade, reflecting re-export (singapore and the netherlands); iii) imports, with strong domestic consumption (germany, the united kingdom, the united states of america, australia, and belgium). keywords: wine competitiveness, market structure, sparkling wine, hhi, revealed comparative advantage. 1. introduction sparkling wine, which is known as a celebratory beverage, and also as a lifestyle symbol, has a strong symbolic function (velikova et al., 2016). the earliest mentions of sparkling wine production date back to 1531 at the sainthilaire monastery in the south of france (stevenson, 2003).  the most famous, prestigious, expensive, and highest ranked sparkling wines come from champagne (epstein, 2011; rokka, 2017). the products of that area carry the denomination of origin, and are named as champagne. sekt, cava, crémant, and prosecco are familiar terms used to describe the different sparkling wines from outside the champagne region, and these are becoming better known in the world. furthermore, their consumption has been trending upwards due to the strong influence of western culture, 38 karim marini thome, vitoria a. leal paiva reflecting luxury fads (epstein, 2011), the trend toward indulgence, and to differentiate the chosen wine in order to enhance the experience (hannin et al., 2010; mariani, pomarici and boatto, 2012). the wine industry is a multibillion-dollar business engaged in world trade. in 2018, sparkling wine export figures rose to more than us$ 7 billion worldwide (itc, 2020). france maintains its leadership in sparkling wine exports as a result of its specialisation in winemaking and attention to terroir (zhao, 2005; demossier, 2011). however, recent studies reveal changing dynamics in the sparkling wine market, whether due to new entrants (basso, 2019), new consumers and new consumer behaviour (castellini and samoggia, 2018; velikova et al., 2016; lerro et al., 2020), or strategies for maintaining established markets (rossetto and gastaldello, 2018), resulting in a complex situation described, for example, by pomarici (2016). in addition, since the beginning of the 21st century, the sparkling wine trade has been growing and its structure has been undergoing changes due the new competitive market scenario (mariani et al., 2012). however, just a few studies analyse the international wine market in a sectioned manner in countries (anderson, 2018; beluhova-uzunova and roychev, 2018; corsi, marinelli and sottini, 2013) or sets of countries (fleming, mounter, grant, griffith and villano, 2014; lombardi, dal bianco, freda, caracciolo and cembalo, 2016), and no study deals with international sparkling wines market. thus, this paper fills that lack of studies by analyse the sparkling wine market regarding its: (1) international competitiveness; and (2) international market structure. 2. theoretical background and method competitiveness can be examined in multiple ways. this paper follows latruffe’s (2010) idea, where competitiveness is defined by the capacity to face competition and be successful. comparison is inherent in this view, which can be between different units (such as different countries) in a specific factor or the same unit (the same country) with its respective factor in a different period of time.  competitiveness can be determined by three different levels: microeconomic (firm), mesoeconomic (sector) and macroeconomic (nation), as seen in drescher and maurer (1999) and bojnec and fertö (2009). this paper considers the mesoanalytical level involving sparkling wine.  according to horn (1985), the mesoanalytical level can be measured with different indicators. trade theory suggests that the nation’s competitiveness should be defined by comparative advantage. the comparative advantage theory reveals that trade flows are a result of the relative cost differences among trading partners, suggesting that countries are competitive in the sectors in which they have greater efficiency (horn, 1985; bojnec and fertö, 2009).  to determine the competitiveness of the international sparkling wine market we used the revealed comparative advantage (rca) initially developed by balassa (1965), and later modified by vollrath (1991) to avoid duplicate registers. this was applied in the wine sector by anderson (2018), maté balogh and jàmbor (2017), beluhova-uzunova and roycheva (2017), van rooyen et al. (2010) and crescimanno and galati (2014). the index is sustained by exports, revealing the relation between the nation’s exported product to its total export flow, and the world’s export performance for the same product, in the same period, as follows: rca= where: rca = revealed comparative advantage = exports of product i from the country in period t = exports from the country in period t = exports of product i across the world in period t = exports across the world in period t the higher the final value is, the higher the nation’s revealed comparative advantage, whereas the lower the final value, the higher the disadvantage (vollrath, 1991; bojnec and fertö, 2009; fleming et al., 2014).  in addition to the rca, the relative position in the market (rpm) is also used, which determines the nation’s position in the international trade of a specific product (thomé and soares, 2015). it is revealed by calculating the relationship between the nation’s trade balance for a specific product and the total global trade for the same product (thomé and soares, 2015; lafay et al., 1999), as follows: = relative position in the market = exports of product i from the country in period t = imports of product i into the country in period t = global trade (exports plus imports) of product i in period t the rpm follows the same pattern as the rca, which means that the higher the final value is, the greater its market position.  39sparkling wine international market structure and competitiveness beyond the rca and rpm indexes, the industrial organisation  is a useful framework to understand how market structure influences performance, as shown by iwasaki et al. (2008), mariani, et al. (2012) and thomé and soares (2015). the structure-conduct-performance (scp) paradigm advocates a direct link between market structure and the degree of competition (bain, 1951). according to the scp, greater market concentration allows those holding bigger market shares to exploit market power to obtain greater profits (bain, 1951; iwasaki et al., 2008).  as seen in scherer and rosss (1990), market concentration is the union of the largest market shares in a given sector, and, according to correia, gouveia and martins (2019), this same consideration is applicable to the international wine business. a high market concentration occurs when few competitors hold a significant share of it, while a large majority of players operate in the rest of the market. in contrast, low market concentration occurs when there is a large number of competitors in similar conditions (thomé and medeiros, 2016). market concentration is an important aspect of the market structure. where companies are located affects their performance by reflecting the country’s competitive position (thomé, medeiros and hearn, 2017), thus, market concentration can be seen as a relevant performance indicator (thomé and soares, 2015). as seen in iwasaki et al. (2008), concentration measures should be based on the international market share of each country. they can be expressed in different ways and need to consider the inequality of international market shares and the number of countries (competitors). according to the u. s. department of justice and federal trade commission, horizontal merger guidelines (2010), the value of hhi varies between zero, indicating a monopolistic position, to ten thousand, indicating pure monopoly. otherwise, an index value lower than 1,500 indicates that the industry or market is unconcentrated; for values between 1,500 and 2,500, the market is moderately concentrated; and for hhi with a value above 2,500, the market is highly concentrated. among the possible equations used to express market concentration, iwasaki et al. (2008) highlighted the hirschman-herfindahl index (hhi): hhi = where: hhi = herfindahl-hirschman index  = market share squared n = total countries in the sector furthermore, another helpful index that allows understanding of competitive conduct in international trade is the net export index (nei). the nei refers to the product’s import/export flow (banterle and carresi, 2007; pascucci, 2018). this index not only helps in the debate on sparkling wine re-exportation emphasised by pomarici (2016), but also shows the countries that use this strategy and at which level. according to mariani et al. (2012, p. 33), re-exportation is the act of “exporting from one country wine previously imported”, which takes into account the country’s trade balance for product i, due to the total trade for the same product. based on banterle and carresi (2007) and thomé and soares (2015), it is calculated as: where: = the net export index = exports of product i from the country in period t = imports of product i into the country in period t = the trade (exports plus imports) of product i of the country in period t the index fluctuates between -1 (when the country only imports the product) to 1 (when the country only exports the product). when its result reaches 0, the country both exports and imports.  the data for this paper were extracted from the international trade centre (itc) database, from 2004 to 2018 for product 220410: sparkling wine of fresh grapes. the itc is a subsidiary organisation of the world trade organisation (wto) and the united nations (un), with the purpose to provide trade reports and technical assistance for developing countries (itc 2020). 3. results and discussion this study identifies the major international players in the sparkling wine sector, verifying and describing their evolution in the annual growth transactions. the identification was measured in thousands of us dollars, as follows. 3.1 importers in the results of the ten main importers, according to the data presented in figure 1, it is possible to see that, although all the countries were affected by the 2009 financial crisis, the total amount of sparkling wine imports increased over the period analysed. 40 karim marini thome, vitoria a. leal paiva the usa is the world’s largest importer of sparkling wine, followed by the uk. prior to 2014, the uk had led, but the two countries changed position, and, ever since, the usa has remained in first place. its imports have grown continuously, and its annual average growth rate was 8.83% during the period under analysis, as presented in table 1. like the uk and the usa, albeit presenting smaller values, germany, japan, singapore and belgium have also changed their positions over the period. it is also noteworthy that singapore (13.36%) and japan (10.14%) were third and fourth respectively in terms of annual average growth rate. the russian federation, experienced its highest average annual growth (23.06%), mainly due to increasing imports of italian sparkling wine, as described by crescimanno and galati (2014). this was followed by australia, which had increased its imports due to a drop in domestic sales of national sparkling wine (see verdonk et al., 2017), thus presenting an average annual growth of 20.38%. 3.2 exporters the results show france as the greatest sparkling wine exporter, as seen in figure 2. its exports were outstanding when compared to other exporters. throughout the period analysed, france held the largest portion of this market. such stability can be explained by the fact that french wines attract and fascinate consumers in a way that wines from no other country do (phillips, 2016), and their management of quality and production, combined with their promotion and distribution techniques, have placed france in the foreign market as a producer of high quality wines (corsi et al., 2013). the second and third places were shared by italy and spain. for spain, the data showed stability, while figure 1. top 10 importers (us$) of sparkling wine, 2004-2018. source: our own calculations based on itc data. table 1. annual average growth (us$) of the top 10 sparkling wine importers.   2004  2018  difference  annual average growth (%)  usa  578,649  1,348,136  769,487  8.83  uk  691,460  916,638  225,178  2.17  japan  244,031  615,558  371,527  10.14  germany  364,751  493,531  128,780  2.35  singapore  120,879  363,299  242,420  13.36  belgium  205,837  308,859  103,022  3.33  australia  54,394  220,742  166,348  20.38  italy  163,920  213,777  49,857  2.02  switzerland  132,138  211,441  79,303  4.00  russian federation  43,907  195,843  151,936  23.06  source: our own calculations based on itc data. 41sparkling wine international market structure and competitiveness italian sparkling wine exports presented a constant increase that had begun in 2005, thus remaining as the second biggest exporter.  the 2009 financial crisis affected italy more mildly than france, causing italian exports to fall less than the french ones. in 2011, after just 3 years, it can be seen that italy managed to exceed its 2008 figure, and has since continued to grow steadily. france, despite remaining in first place throughout the entire analysis, only managed to surpass its 2008 exports nine years later, that is, in 2017. it is important to note that, after the crisis, consumers’ purchasing power became limited, making them opt for more affordable sparkling wines (lero et al., 2019), but they also maintained their ties of tradition and territory (corsi et al., 2013), which contributed to the growth of italian and spanish exports. as seen in table 2, among the largest exporters of sparkling wine, italy enjoyed the highest average annual growth (32%) during the timeline, which was explained by crescimanno and galati (2014), revealing that the country knew how to take advantage of the opportunities that had arisen with the change in the international wine market. thus, it expanded exports due to its capacity to meet a diversified demand that required high-quality wines. among the four largest exporters of sparkling wine, singapore showed growth in its exports in the first four years, but it was surpassed by belgium in 2008. in 2009, singapore recovered, reaching fourth place, and, since then, it has kept growing steadily, while belgian exports have remained constant, lower than singapore’s.  the netherlands, the usa, the uk and germany also presented high annual average growth. the netherlands was outstanding, with an annual average growth of 23.47%.  on the other hand, australia presented a decrease of almost 1% per year. 3.3 market share and concentration of imports as seen in table 3, imports of sparkling wines are unconcentrated. the usa, the uk and japan are the importers holding the three largest market shares. figure 2. top 10 exporters (us$) for sparkling wine, 2004–2018. source: our own calculations based on itc data. table 2. annual average growth (us$) for the top 10 sparkling wine exporters.   2004 2018  difference  annual average growth (%)  france  2,313,905  3,767,259  1,453,354  4.18  italy  306,052  1,786,570  1,480,518  32.00  spain  344,511  599,128  254,617  4.92  singapore  134,019  387,163  253,144  12.59  germany  43,356  146,955  103,599  15.92  netherlands  21,666  97,948  76,282  23.47  uk  17,632  54,561  36,929  13.96  usa  13,629  52,712  39,083  19.11  belgium  19,093  45,629  26,536  9.26  australia  47,948  43,155  -4,793  -0.66  source: our own calculations based on itc data. 42 karim marini thome, vitoria a. leal paiva besides these, singapore, australia and the russian federation showed considerable growth.  the usa and the uk switched their positions over the years. the uk initially held a market share of  21.8 points while the usa held 18.2. since 2015, the uk showed a reduction in market share, while the usa increased steadily.  japan and germany also showed f luctuations in their market shares. japanese market shares fluctuated until 2013, when a period of slow continuous growth began, resulting from consumption habit changes. the people began to view wine as a daily drink, and became increasingly curious about higher quality wines (corsi et al., 2013), which generated an increase in sparkling wine consumption, especially among women (rod and beal, 2014). germany, despite presenting a constant fall, starting with 11.5 points in 2004 and experiencing fluctuations between 2006 and 2011, continued to be a strong importer, due to having sparkling wine as an occasional celebratory beverage (dressler, 2018). according to szolnoki and hoffmann (2014), it was one of the few countries in the world that had very diversified structured distribution channels, offering a wide variety of purchase points for the german sparkling wine consumer. singapore, australia, and the russian federation have experienced remarkable growth. singapore’s market share started at 3.8 points in 2004 and closed at the end of the analysis with 5.1 points. australia started with 1.7 points and finished at 3.1. notably, the russian federation doubled its market share, which went from 1.4 points in 2004 to 2.8 in 2018. the results for hhi, throughout the timeline analysed, revealed that the market structure remained unconcentrated. in 2004, the index was 1,218, and, in 2018, it was 873, i.e., a total deconcentration of approximately 30%. 3.4 market share and concentration of exports unlike imports, sparkling wine exports were concentrated. analysing table 4, it can be seen that the three largest exporters were france, italy and spain, totalling about 83% of the sparkling wine exportation in 2018. it is also noted that singapore, germany, the netherlands, the usa and australia showed significant changes. france was the largest exporter of sparkling wine and remained stable in first place throughout the entire period. its market share was the only one that exceeded the average of 50 points, confirming its greater capacity to create added value in international markets, a fact also identified in lombardi et al. (2016). with an emphasis on the evolution of the italian sparkling wine market shares, it can be noted that they almost tripled, starting at 9.1 points and ending at 24.4 in 2018.  the results show that, although the italy figure grew, france underwent a significant decrease. thus, it means that italy increased its market share substantially based on france’s decrease. other countries, like spain, had a lower increase or decrease in exportation. the hhi for exports showed an equal decrease in imports, reducing by about 30%. in 2004, it was 4,930 and in 2018 it was 3,342, indicating that, despite the reduction in its concentration, the sparkling wine export market remained highly concentrated. 3.5 relative position in the market table 5 contains the rpm (lafay et al., 1999) calculations for the 10 largest world exporters of sparkling wine. analysing table 5, it is possible to identify two players that held significant market positions, above 10 points, as follows: table 3. market share and the hhi for the imports of sparkling wine.   2004  2005  2006  2007  2008  2009  2010  2011  2012  2013  2014  2015  2016  2017  2018  usa  18.2  17.6  17  14.3  11.9  12.6  14.1  14.9  14.8  14.8  14.7  17.9  19.5  19.5  19.1  uk  21.8  21.1  18.7  17.4  15.7  17.5  17  15.3  14.7  14.3  15.8  16.8  15.4  13.4  13  japan  7.7  6.7  8.2  7  7  6  7.2  6.8  8  7.1  7.4  7.8  8.4  8.5  8.7  germany  11.5  11.3  12.4  9.6  10.6  11.6  9.9  11  9.2  8.9  7.9  7.3  7.5  7.4  7.1  singapore 3.8  5.6  4.6  4.3  3.9  3.1  4  4.3  4.5  4.8  5.7  5.4  4.8  5.4  5.1  belgium 6.5  6.2  5.7  10.5  10.9  7.6  6.1  6  6.1  6.5  5.7  4.7  4.4  4.3  4.4  australia 1.7  1.9  2.1  2.3  2.5  2.5  3.1  2.9  3.4  3.3  3  3.3  3.1  3.3  3.1  italy  5.2  5.1  5.3  5.7  5.1  4.4  3.8  3.8  3  2.6  2.5  2.7  2.9  2.9  3  switzerland 4.2  3.7  3.5  3.3  3.3  4.1  3.8  3.7  3.6  3.5  3.3  3.3  3.2  3.1  3  russia 1.4  1.5  1.4  2.2  2.6  2.3  3.6  4  3.5  4.2  3.3  1.9  2  2.5  2.8  hhi  1,218  1,159  1,077  962  867  883  868  854  815  793  813  925  948  899  873  source: our own calculations based on itc data. 43sparkling wine international market structure and competitiveness france: from the analysis, it is possible to observe a fall of 9.45 points in french rpm. the highest mark was in the first year (2004) with 34.84 points, and, since then, the french figures have been decreasing continuously. italy: showed steady growth, starting the analysis with 2.17 points and ending with 10.92. it had the biggest observed growth among the 10 largest exporters. despite having experienced periods of instability, spain sometimes surpassed italy’s marks, and, because of its lower level of specialisation (see mariani et al., 2012), it did not follow the italian growth, remaining in the third-largest relative market position. 3.6 revealed comparative advantage table 6 presents the rca (vollrath 1991) for the 10 largest world exporters of sparkling wine.  france had the highest values for the revealed comparative advantage, starting at 15.11 points, and, despite fluctuations, it showed a slight growth over the years, ending at 17.43 points.  italy showed the largest increase in its revealed comparative advantage. at the beginning of the analysis, it presented 2.33 points and, over the years, it showed continuous growth, without f luctuations, ending at 8.64 points. thus, italy tripled its revealed comparative advantage from 2004 to 2018. spain started the analysis with marks higher than those of italy, but, throughout the years, however, italian values underwent continuous growth. spain did not have the same flow, thus, since 2013, italy remained contable 4. market participation and the hhi for the exports of sparkling wine.   2004  2005  2006  2007  2008  2009  2010  2011  2012  2013  2014  2015  2016  2017  2018  france  68.7  67.4  68.4  63.6  59.3  58.5  60.4  58.1  54.7  55.3  55.6  56.9  53.8  53.5  51.4  italy 9.1  9.1  9.3  10.2  11.4  13  12.6  13.7  14  16.6  17.9  18.9  22.3  23.1  24.4  spain  10.2  9.9  8.4  9.2  10.9  11.3  10.4  9.8  12.1  9.6  8.7  8.4  7.9  7.8  8.2  singapore  3.9  4  4.7  4.6  4  3.4  4.4  4.8  6  5.6  5.6  5.8  5.8  5.6  5.3  germany  1.3  1.7  1.9  1.9  2  3  2.8  2.8  2.6  2.5  2.3  1.9  2.1  2  2  netherlands 0.6  0.9  1  0.7  0.7  0.7  0.9  1.1  1.1  1  1  0.8  0.9  0.9  1.3  uk  0.5  0.6  0.7  0.6  0.6  0.8  0.6  1.4  0.7  0.7  0.6  0.7  0.6  0.6  0.7  usa  0.4  0.4  0.3  0.4  0.4  0.7  0.6  0.7  0.7  0.8  0.6  0.6  0.6  0.6  0.7  belgium 0.6  0.8  0.5  4  5  2.3  0.5  0.7  0.6  0.6  0.6  0.5  0.5  0.5  0.6  australia 1.4  1.6  1.7  1.4  1.2  1.4  1.5  1.4  1.3  1.1  0.9  0.8  0.8  0.7  0.6  hhi  4,930  4,753  4,869  4,282  3,813  3,754  3,947  3,695  3,385  3,468  3,531  3,708  3,499  3,500  3,342  source: our own calculations based on itc data. table 5. relative position in the market, 2004-2018.   2004  2005  2006  2007  2008  2009  2010  2011  2012  2013  2014  2015  2016  2017  2018  france  34.84  33.42  33.91  31.82  29.79  28.31  29.97  28.9  27.65  27.49  27.26  28.18  26.6  26.3  25.39  italy 2.17  2.04  2.06  2.34  3.35  4.33  4.49  5.07  5.73  7.11  7.61  8.22  9.86  10.31  10.92  spain  4.55  4.06  3.23  2.87  3.67  4.55  4.3  4.07  5.5  4.17  3.57  3.35  3.18  3.13  3.28  singapore  0.2  -0.73  0.08  0.21  0.16  0.13  0.21  0.29  0.92  0.44  -0.05  0.26  0.57  0.18  0.16  germany  -4.91  -4.74  -5.22  -3.77  -4.25  -4.3  -3.44  -4.07 -3.13  -3.1  -2.83  -2.65  -2.64 -2.62  -2.42  netherlands -0.56  -0.04 -0.66  -0.87  -0.85  -0.76  -0.56  -0.56 -0.45  -0.39  -0.5  -0.43  -0.35 -0.32  -0.22  uk  -10.3  -10.19 -8.92  -8.27  -7.35  -8.28  -8.1  -6.82 -6.8  -6.71  -7.66  -7.95  -7.33 -6.26  -5.99  usa  -8.64  -8.53  -8.29  -6.85  -5.59  -5.94  -6.68  -7.01 -6.81  -6.92  -7.08  -8.53  -9.3  -9.26  -9 belgium -2.85  -2.67  -2.57  -3.16  -2.79  -2.62  -2.75  -2.57 -2.64  -2.9  -2.56  -2.06  -1.87 -1.86  -1.82  australia -0.09  -0.11  -0.18  -0.42  -0.6  -0.53  -0.76  -0.73 -0.96  -1.08  -1.08  -1.22  -1.45 -1.3  -1.23  source: our own calculations based on itc data. 44 karim marini thome, vitoria a. leal paiva stant above the mark of 6 points, while spain dropped from 5.09 points in 2004 to 4.78 in 2018. singapore’s growth was relatively stable during the course of time. it is noticed, however, that, in 2005 and 2009, the country had its biggest falls, below the initial mark of 1.82 points. the highest mark was registered in 2017 at 2.74 points.  on the other hand, australia showed different behaviour from other significant countries. despite starting in a position similar to singapore, with 1.49 points, and showing growth in 2005 and 2006, it started, in 2007, to undergo a period of instability and decline, as it increased its sales volume to the detriment of quality (corsi et al., 2013), ending with 0.44 points in 2018. 3.7 net export index the net export index – nei allows a better understanding of the commercial characteristics of the nations under this sparkling wine analysis. the nei fluctuates between -1 (where the nation only imports the product) and 1 (where the nation only exports the product). when the index reaches 0, the nation both imports and exports the product (banterle and carraresi, 2007). table 7 contains the nei values for the main sparkling wine exporters. the results presented in table 7 reveal that some countries’ positions as producers or consumers were well established. however, the results also confirm mariani et al. (2012) and pomarici (2016), which shows that reexportation is a common action in the sparkling wine sector, specifically: france: strong tendency to export. features: fluctuates between its lowest mark, 0.92 points, and its highest mark, 0.97; the results indicated france as the world’s largest exporter of sparkling wines.  italy: shows growth in exporting, registering an overall increase of 0.48 points. the lowest registered marks were in 2005 and 2006, at 0.28 points. since table 6. revealed comparative advantage, 2004-2018.   2004  2005  2006  2007  2008  2009  2010  2011  2012  2013  2014  2015  2016  2017  2018  france  15.11 16.05 17.07 16.31 15.92 15.57 17.81 17.95 18.02 18.3 18.6 18.9 17.5 17.8 17.4 italy 2.33  2.52  2.67  2.8  3.37  3.95  4.27  4.74  5.13  6.06  6.38  6.79  7.12  8.05  8.64  spain  5.09  5.3  4.9  5.2  6.21  6.23  6.36  5.95  7.75  5.83  5.17  4.96  4.51  4.29  4.78  singapore  1.82  1.81  2.04  2.12  1.89  1.53  1.87  2.07  2.66  2.49  2.56  2.66  2.74  2.61  2.47  germany  0.12  1.81  0.19  0.19  0.2  0.03  0.03  0.03  0.34  0.32  0.12  0.23  0.25  0.24  0.25  netherlands 0.18  0.25  0.29  0.19  0.2  0.2  0.26  0.38  0.36  0.33  0.34  0.31  0.33  0.31  0.44  uk  0.13  0.15  0.18  0.17  0.19  0.27  0.21  0.49  0.26  0.24  0.2  0.23  0.21  0.24  0.29  usa  0.04  0.04  0.03  0.04  0.04  0.07  0.07  0.08  0.08  0.09  0.07  0.06  0.06  0.06  0.08  belgium 0.16  0.24  0.15  1.27  1.68  0.77  0.19  0.27  0.25  0.21  0.24  0.2  0.21  0.2  0.25  australia 1.49  1.57  1.69  1.34  1.02  1.14  1.07  0.95  0.9  0.81  0.65  0.71  0.65  0.5  0.44  source: our own calculations based on itc data. table 7. net export index for the main sparkling wine exporters.   2004  2005  2006  2007  2008  2009  2010  2011  2012  2013  2014  2015  2016  2017  2018  france  0.96  0.96  0.97  0.96  0.96  0.92  0.96  0.96  0.96  0.96  0.95  0.95  0.94  0.94  0.94  italy 0.3  0.28  0.28  0.29  0.4  0.49  0.54  0.57  0.66  0.73  0.74  0.75  0.77  0.78  0.78  spain  0.76  0.69  0.62  0.44  0.49  0.67  0.69  0.69  0.79  0.75  0.69  0.65  0.64  0.64  0.65  singapore 0.05  -0.15  0.01  0.04  0.04  0.04  0.05  0.06  0.17  0.08  -0.01  0.04  0.1  0.03  0.03  germany  -0.78  -0.73  -0.73  -0.66  -0.69  -0.59  -0.54  -0.59  -0.53  -0.55  -0.55  -0.58  -0.54  -0.56  -0.53  netherlands -0.45  -0.34  -0.4  -0.56  -0.54  -0.51  -0.39  -0.33  -0.28  -0.27  -0.32  -0.33  -0.27  -0.26  -0.14  uk  -0.95  -0.94  -0.92  -0.93  -0.92  -0.91  -0.93  -0.82  -0.9  -0.9  -0.93  -0.92  -0.92  -0.9  -0.88  usa  -0.95  -0.95  -0.96  -0.94  -0.93  -0.89  -0.91  -0.9  -0.89  -0.89  -0.91  -0.93  -0.93  -0.93  -0.92  belgium -0.83  -0.76  -0.83  -0.43  -0.35  -0.52  -0.83  -0.77  -0.8  -0.83  -0.8  -0.8  -0.77  -0.78  -0.74  australia -0.06  -0.06  -0.09  -0.23  -0.32  -0.27  -0.33  -0.33  -0.41  -0.49  -0.55  -0.59  -0.59  -0.65  -0.67  source: our own calculations based on itc data. 45sparkling wine international market structure and competitiveness 2007, italian marks show steady growth.  spain: its net export index presented a stable line in export score.  usa: stable and consistent importer, the lowest marks were registered in 2009, 2012 and 2013 at -0.89, and the highest mark registered was -0.96 in 2006. uk: like the usa, the uk is a stable consistent importer, fluctuating between -0.95 and -0.82. singapore: shows small f luctuation. the biggest imports mark was registered in 2005 at -0.15 points, and, in terms of exports, it was registered in 2012 at 0.17 points. due to the proximity to the mark of 0, it can be inferred that singapore was a re-exporter. as an important transportation hub, sparkling wines from the main producing countries passed through singapore before heading to southwest asia and japan (rod and beal, 2014). australia: the country’s figures showed that, in the first year of the analysis, it was classified as a reexporter. however, during the period, it is noted that the australian nei moved from 0 to -1. in 2018, the australian nei was -0.67, classifying australia as a sparkling wine importer. despite being a large importer, mainly of french champagne (culbert et al., 2016), australia presented a continuous contraction of its commercial specialisation (galati et al., 2017). domestic sales of australian sparkling wine fell due to increased international competition and unfavourable exchange rates. thus, it was concluded there was an increase in the volume of imported wine (fleming et al., 2014; verdonk et al., 2017). 4. conclusions this paper analysed the sparkling wine industry in terms of its competitiveness and international market structure. france was the largest exporter of sparkling wines in the world. the marks of its main competitors (italy and spain, respectively 23.1% and 7.8% of the market share in 2018) were far lower than those of france (51.4% of the market share in 2018). on the other hand, the usa (19.5% of the market share in 2018) and the uk (13.4% of the market share in 2018) were the principal importers. regarding the hhi, the all the results are lower than 1,500, revealing that the sparkling wine import market was unconcentrated. thus, when comparing the number of competitors that have the largest market shares, it can be said that the sparkling wine import market was more balanced than the export market. the hhi for exports showed that it remained a very concentrated market, despite the general drop of 1,588 points in its concentration. it could be inferred that the sparkling wine export market consisted of a highly concentrated market, and that the largest share of this concentration lay in a single main competitor. while for exports france had the largest share, for imports we could observe four main importers: the usa, the uk, japan, and singapore. the rca showed that the countries with the greatest comparative advantage in the international sparkling wine market were: france (17.4), italy (8.64) and spain (4.78), and the relative market position reveals that these were the most significant countries in the international sparkling market, which benoît et al. (2019) called the old world wine market. the nei revealed, among leading exporters, three groups of actors who are: i) stable in terms of exports based on domestic production (france, italy and spain) with general number above 0.5; ii) stable in trade, ref lecting re-export (singapore and the netherlands) with general numbers between -0.4 and 0.1; iii) stable in imports, with strong domestic consumption (germany, the uk, the usa, australia, and belgium) with general numbers below -0.5. trade based measures of competitiveness provide a realistic indicator of underlying competitiveness, but are a limitation for the period analysed, in this case 2004 to 2018. for future studies, two main goals are suggested regarding: i) the reasons why the comparative advantages in sparkling wine are changing in france and italy, ii) the relation between old and new countries in the sparkling wine markets. for instance, does the new world sustain the old world, and if so, why?. references anderson, k. 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consumers’ choices of wine and beer azzurra annunziata1,*, lara agnoli2, riccardo vecchio3, steve charters4, angela mariani5 a bad year? climate variability and the wine industry in chile eduardo haddad1,*, patricio aroca2, pilar jano3, ademir rocha4, bruno pimenta5 sparkling wine international market structure and competitiveness karim marini thome*, vitoria a. leal paiva the role of context definition in choice experiments: a methodological proposal based on customized scenarios fabio boncinelli*, caterina contini, francesca gerini, caterina romano, gabriele scozzafava, leonardo casini the impact of country of origin on brand equity: an analysis of the wine sector nádia passagem1, cátia fernandes crespo2,*, nuno almeida3 competitive strategies for wine cooperatives in the german wine industry barbara richter1,*, jon hanf2 valuation of viticultural adaptation to climate change in vineyards: a discrete choice experiment to prioritize trade-offs perceived by citizens verónica farreras1,2, laura abraham3,* does the institutional quality affect labor productivity in italian vineyard farms? maria raimondo1,*, concetta nazzaro4, annamaria nifo3, giuseppe marotta2 the role, scope and management of r&d and innovation in the wine sector: an interview with antonio graca peter hayes am wine economics and policy 10(2): 99-109, 2021 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/wep-9492 wine economics and policy citation: anoop s kumar (2021) adaptive market hypothesis: an empirical analysis of the wine market. wine economics and policy 10(2): 99-109. doi: 10.36253/wep-9492 copyright: © 2021 anoop s kumar. this is an open access, peer-reviewed article published by firenze university press (http://www.fupress.com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information files. competing interests: the author(s) declare(s) no conflict of interest. adaptive market hypothesis: an empirical analysis of the wine market anoop s kumar gulati institute of finance and taxation, chavadimukku, sreekariyam, thiruvananthapuram, kerala, india. email: askumar@gift.res.in abstract. we test the nature of weak form informational efficiency present in the wine market using daily return of liv-ex 50 index from 1/1/2010 to 12/6/2020. first, we employ a number of statistical tests including variance ratio tests, tests for linear and non-linear dependence and hurst coefficient. the tests are applied on the full dataset and on four non overlapping sub-samples of equal length. the variance ratio tests provide a mixed regarding informational efficiency. evidence of non-linear dependence in the return series was found. the hurst coefficient values confirm the presence of long run persistence in the wine market. based on the mixed evidence, we test the possibility of adaptive nature of the wine market. we employ the newly proposed adaptive index (ai) to quantify the degree of information inefficiency in the wine market at any instance. our results confirm that wine market is adaptive and periodically shifts between states of efficiency and inefficiency. the wine market is found to be relatively free from the covid-19 induced shock and the safe haven property of wine is thus confirmed. finally, impact of various macroeconomic and financial events on wine market efficiency is identified by using ai. keywords: liv-ex 50, emh, adaptive markets, vr tests. introduction ever since its inception, the efficient market hypothesis (emh henceforth), proposed by fama [1] has been at the center of many academic discussions. fama proposed a financial market that is informationally efficient. he postulated that asset prices contain all relevant information and they instantaneously absorb all the fresh information. emh talks about a market populated by rational investors, optimally using all the information available to them. if a market is informationally efficient, any deviation from the asset’s equilibrium value should be temporary, as market participants would instantaneously make use of any new information signal. in such a scenario, the possibility for arbitrage is absent. fama postulated that emh has three versions. the first version is called weak form emh. in weak form emh, current price of an asset contains all past price information. in semi-strong form emh, current price of an asset reflects past price information and all publicly available information. in strong form emh, current prices include past price information, public and 100 anoop s kumar private information. among these three forms, weak form emh is the easiest to verify. therefore, the current analysis is limited in that aspect. as mentioned earlier, emh in its weak form states that current price of an asset contains all information pertaining to its past prices. in such a scenario, price fluctuations are transient and hence, extreme price fluctuations can be ruled out. in that case, the asset’s return series should follow a geometrical brownian motion or random walk. if an asset is weak form efficient, we cannot employ past prices to predict future value. for an investor, it will not be possible to gain abnormal profits in the long run. if the market is informationally inefficient, there is scope for investors to make abnormal profits using appropriate strategies. empirical validation of weak form emh resulted in mixed results across different financial markets. the varying outcomes are often attributed to the differences in sample size, statistic used, and the regional factor [2]. moreover, most of the test statistics are binary in nature, i.e. the series is either weak form efficient or not. these issues encouraged researchers to investigate for alternate planations. lo [3] argued that informational efficiency is not a static concept. rather, it is time varying in nature. lo proposed adaptive market hypothesis (amh henceforth) to reconcile emh and assumptions from behavioral economics. he proposed that the market participants evolve. further, they adapt according to the market conditions and structural changes. a market switches between states of efficiency and inefficiency if it is adaptive. modeling dynamic nature of information efficiency in a financial market has its own practical uses. if one can identify the states of inefficiency, it is possible to apply relevant trading strategies and make a profit. amh have been verified in equity markets [3–6] forex markets [2,7], commodity markets [8,9] and cryptocurrency markets [10,11]. here, our purpose is to test the validity of amh in the fine wine market. of late, fine wine has emerged as an alternative investment option. the literature provides ample evidence of investment potential of fine wine. in the following paragraphs, we discuss select studies that analyzed this aspect. [12] employed the data from auctions at the chicago wine company for the period of 1996 to 2007 and studied the evolution of wine prices. they constructed wine indices and found them to be cointegrated. further, they found that wine returns and equity returns are not significantly correlated. using the repeat sales regression model, [13] estimated the return to the australian wine. he found that the wine returns are low compared to other financial assets. however, in spite of lower returns, wine is found to have diversifier property. [14] compared from results from repeated sales regression model, hedonic pricing model and a hybrid model using australian fine wine price data. the results suggested that hybrid model is way to incorporate australian wines in a diversified portfolio in comparison with repeated sales regression and hedonic approach. employing a threshold cointegration approach, [15] studied the interaction between wine and stock markets of australia, france, chile, china and the us. the results indicated cointegration between wine and stock markets. further, the speed of adjustment of the wine index for us and france was found to be slower compared to the stock market index, indicating that wine prices may be predictable in the short-run and informed traders can anticipate price movements and make profit. [16] used australian wine auction price data and showed that the estimation method has a significant impact on the wine return distribution and the type of diversification benefit test employed determines the extent of diversification potential of wine. they found that employing the efficient frontier method along with bootstrapped confidence intervals provide the best results regarding the diversification aspect of wine. using a historical database for five long-established bordeaux wines, [17] studied the impact of aging on wine prices and its potential as a long-term investment asset. they found that wine returns underperform compared to equites, but performs better compared to government bonds. employing cointegration methods and causality tests, [18] studied the short-term and long-term price linkages between fine wine and equity markets. instead of wine index data, they employed auction price data of world’s mostly traded vintage pairs. they found that the wine prices and global equity markets move together. further, the causality test results revealed that wine prices influence each other. [19] employed dynamic conditional correlation garch model and studied the relationship between fine wines and equity indexes returns for united states, united kingdom, germany, france, and japan. the study found evidence that fine wine exhibit hedge and weak safe haven properties against equity price fluctuations. [20] analyzed the time varying risk premium related to fine wine investments in the context of financial crisis by employing a conditional capm model and a multivariate garch model. they found boudreaux fine wine prices to be more volatile during financial crisis and less volatile during stable periods. further, they found nonfrench wines to exhibit an inverse volatility trend while compared to french wines. using dynamic conditional correlation model, [21] analyzed the properties of fine 101adaptive market hypothesis: an empirical analysis of the wine market wine as a hedge and safe haven instrument against uk stock price fluctuations. they found that wine can act as an effective hedge against stock price fluctuations. however, wine could not act as a safe haven against market turmoil. [22] analyzed the role of wine in investment portfolios for the french market. using liv-ex and winedex index data along with equity and bond prices, they employed mean-variance portfolio optimization approach and modified value-at-risk approach. they found that inclusion of wine in the investment portfolios increases the portfolio performance. further, they suggested that wine is an ideal investment asset for riskaverse investors. using engle-granger and johanson cointegration methods, [23] studied the nature of cointegration between fine wine, non-fine wine and equity markets. they used liv-ex 100 index for fine wine prices, mediobanca global wine industry share price for normal wine, and the msci world index to proxy the stock market. they found absence of co-integration between the series and confirmed the existence of diversification benefits of wine. [24] analysed the long-term co-movement between the fine wine market and world equity markets by applying a cointegration based approach for a period of 21 years. they found statistically significant cointegration between emerging markets and fine wine markets. they found causal relationship from emerging equity markets to wine markets, indicating that the slowdown of emerging countries can have an adverse effect on the fine wine market. further, china was identified as a main driver of fine wine prices. [25] studied the investment diversification potential of wine by employing portfolio diversification methods such as mean-variance optimization and stochastic dominance method. their findings suggested that wine is the best individual investment asset in comparison to equities, bonds, gold, and housing. further, they found that the investors prefer wine-included portfolios compared to without-wine portfolios in the absence of short selling. [26] employed auction hammer prices for the years 1996-2009 and constructed wine price indices. from the analysis, they found that fine wine yields higher return and exhibits low volatility compared to stocks. further, they found that wine prices are mainly influenced by macroeconomic events than market risk. from the literature, it is clear that wine is effectively used as an investment option. it can be used as a diversifier to reduce investment risk. fine wine is considered as an investment option because it acts as a store of value. as wine prices are often affected by non-economic factors such as the brand, year of vintage, grape composition and production process [27], it can be used as an effective hedge and safe haven against portfolio fluctuations [19,21].if wine is to be included in an investment portfolio, it is important to confirm whether wine prices are efficient or adaptive. if it is informationally efficient, the investor only needs to be concerned with the systemic risk, and the portfolio could be passively managed. if the markets are dynamically efficient, then there is nonsystemic risk and the portfolio will need to be actively managed. there is a serious dearth of studies discussing informational efficiency of the wine prices. so far, we have come across only the pioneering study by bouri et al. [29]. here, the author used a set of unit root tests and found that wine market is informationally inefficient if structural breaks are considered. however, there is mounting evidence against static nature of information efficiency/inefficiency across other financial markets as mentioned earlier. therefore, it is only logical for us to check the same for wine market. we aim the present study at that direction. we structure rest of the article as follows. section 2 discusses data and methodology used. in section 3, we discuss the results. we present our concluding remarks in section 4. 2. data and methods daily returns of liv-ex 50 index from 1/1/2010 to 12/6/2020 is used for the analytical purposes. we select live-ex 50 index as it includes price movement of most heavily traded commodities in the wine market. therefore, it can act as a suitable proxy for studying market dynamics. the methodology comprises two parts. first, we statistically test the possible presence of weak form market efficiency using six variance ratio tests and two tests for serial dependence. in the second part, we capture the dynamic nature of informational efficiency by employing a newly constructed index. brief description of the tests employed are provided in the forthcoming paragraphs. 2.1. variance ratio tests variance ratio (vr) tests occupy a prominent position among the methods to test for weak form informational efficiency in a time series. lo and mckinlay [30] proposed the first vr test. later, there were many extensions and modifications. here, six commonly used vr test results are employed. brief test descriptions are given in the following paragraphs. 102 anoop s kumar 2.1.1.lo and mckinlay vr test in lo and mckinlay [17] , rwh for a time series xt is shown as: xt = μ + xt-1 + εt (1) μ is the constant and follows an i.i.d normal distribution with zero mean and variance σ2o. here, the null hypothesis is stated as: h:εti i.i.d. n(0,σ2o) (2) then, variance at kth lag shall be k times variance at first lag, or: vr(k) = = 1 (3) two test statistics, z1(k) and z2(k) were developed by lo and mackinlay [30,31] (lo and mckinlay, 1988; lo and mckinlay, 1989) in order to account for homoscedastic and heteroscedastic error terms. 2.1.2 automatic vr test of choi selection of lag k is important while testing weak form emh using vr tests. often, the lags are selected in an arbitrary fashion. choi [32] (1999) used a quadratic spectral (qs) kernel based method to determine the optimal value of k. andrews [33] (1991) stated that qs kernel has the ability in calculating the spectral density at zero frequency. hence, it was employed vr estimator of choi is then defined as: vr(k) = 1 + 2 h(i ⁄k) (i) (4) here, (i) is the autocorrelation function, and h(x) is the qs window the normalized statistic is calculated as: vrf = (5) under h0, vrf follows asymptotic standard normal distribution. 2.1.3 wright’s non-parametric variance ratio tests due to the parametric nature of lo-mackinlay test, small sample results were found to be biased. wright [34] (2000) proposed a non-parametric vr test using signs and ranks to overcome this bias. as rank (r1 and r2) and sign (s1 and s2) tests have an exact sampling distribution, there is no need to approximate the asymptotic distribution. further, these tests outperform the conventional vr tests while tested against data containing autocorrelation and fractional integration. 2.1.4 vr test of richardson and smith if the vr test statistics are computed over long lags with overlapping observations, the conventional parametric tests could not be used to draw useful inference as the distribution of the vr test becomes non-normal. to address this shortcoming, richardson and smith [35] (1991) suggested a joint test based on the following wald statistic. the statistic is defined as: rs(k) = t(vr-1k)'ϕ-1(vr-1k) (6) vr is the (k × 1) vector of sample k vrs, is the (k × 1) unit vector and is the covariance matrix of vr. the joint rs(k) statistic follows a χ2 distribution with k degrees of freedom. 2.1.5 chow and denning multiple vr test chow and denning [36] (1993) observed that the individual vr tests lack the ability to see whether all the variance ratios at different lags are equal to 1 simultaneously. this is a requirement to reject the rwh. further, individual vr tests fail to control for the overall test size, resulting in the probability of a type 1 error. the chow and denning test controls the joint test size and facilitate a comparison of variance ratios at multiple lags by employing studentized maximum modulus (smm) critical values. chow and denning statistics are calculated as follows: z*1 (k) = |z1 (ki)| (7) z*2 (k) = |z2 (ki)| (8) z1(k) and z2(k) is calculated same as in lo and mackinlay [30,31] (1988, 1989). here, (qi) are the different lags for {qi | i = 1,2,…,m}. acceptance or rejection of the null hypothesis is based on the maximum absolute value of individual variance ratio test statistics. 2.1.6 chen and deo joint vr test chen and deo [37] (2006) variance ratio test is based on a power transformation of the vr statistic. the 103adaptive market hypothesis: an empirical analysis of the wine market transformation is used to achieve a better approximation to the normal distribution in finite samples with small lags k. further, the test statistic is found to be performing well against possible conditional heteroscedasticity present in the data. 2.1.7 escanciano and lobato test for autocorrelation escanciano and lobato [38] (2009) automatic portmanteau test is employed to test the dependence structure in a given financial time series. the test statistic is defined as: aq = t (9) is the estimated autocorrelation coefficients from lags i to p. the optimal lag length is determined using akaike or bayesian information criterion. 2.1.8 dominguez and lobato test for non-linear dependence dominguez and lobato [39] (2003) proposed test for nonlinear dependence in a time series. the test is based on cramer-von mises (cm) and kolmogorov-smirnov (ks)statistics. for a time series , the test statistics are defined as : cm = (10) ks = max(1≤i≤t) (11) where = (yt,yt-1……yt-p), 1() is an indicator function and p is the non-negative lag. they obtain the asymptotic p values for the statistics from a wild bootstrap method. 2.2 alternatives to efficient market hypothesis: the adaptive market hypothesis in amh, lo [40] (2004) stated that the market participants adapt according to the prevailing conditions, and the market switches between states of efficiency and inefficiency. he proposed an intuitive method to test this hypothesis by estimating rolling window first-order autocorrelation. if the market is efficient, the value of ac should be zero. the deviation of ac from its theoretical minimum can provide the degree of inefficiency at any given period. another common method to test amh is the estimation of rolling window hurst coefficient. hurst coefficient was proposed by hurst [41] in order to test longmemory or self-similarity in a time series. hurst introduced hurst coefficient to model the water flow in the river nile. existence of long memory in a financial time series provides the possibility of price forecasting its behavior. further, such information could be of use to investors to design investment strategies and risk diversification. hurst exponent is estimated through different methods. the basic formulation is explained as follows. let xt be a stationary time series and λτ be its autocovariance function at lag τ. then, the asymptotic property of the auto-covariance function is given as follows: λτ ≈ |τ|-α f(τ) as |τ| → ∞ where α (0, 1) and f(τ) is a slowly varying function at infinity. the degree of long memory is given by the exponent α; smaller the exponent, longer the persistence. the hurst exponent and α are related in the following way: h = h lies in the range 0 ≤ h ≤ 1. if h=0.5, then the series is said to be uncorrelated. h implies long memory or persistence in the return series. if the prices or returns are exhibiting an upward momentum in this period, it would persist in the next period and vise versa. hsuggests short memory or mean reversion in the series. with short memory, an upward trend in this period would be followed by a downward trend in the next period and vise versa. for a market that is weak form emh, the hurst coefficient should have a value of 0.5. using the aforementioned measures, kumar et.al. [42] (2020) proposed the adaptability index (ai). ai is formulated as follows: ai = (12) h is the hurst coefficient and acf is the first-order autocorrelation coefficient. acf is rescaled using its maximum (1) and minimum (-1) values for comparability. if a market is efficient, h=0.5 and acf=0, hence ei=0. the extent of deviation of ei from its theoretical minimum can explain the degree of inefficiency present in the market at any given time. h and acf are included in the index as both of them are bounded. while autocorrelation captures the nature of dependence, the hurst coefficient measure the ‘memory’ present in the series. we estimate the ei over a rolling window of 500 observations in order to dynamically test for amh in the wine market. 104 anoop s kumar 3. results and discussion before proceeding to the evaluation of test results, we estimate the summary statistics for the liv-ex 50 return series. we present the results in table 1. here, we estimate basic summary statistics like minimum, maximum, mean, standard deviation, skewness and kurtosis along with the jarque-bera test to see if the returns are normally distributed. further, we employ ljung-box test and box-pierce test to see if the returns exhibit autocorrelation. from the minimum and maximum values, we can find the range in which the returns are moving. from the skewness measure, we can see whether the return distribution is symmetric. from kurtosis, we can see if the return distribution is fat-tailed, i.e. whether there are extreme fluctuations in the return series. the returns are found to be oscillating within the range of -3.2% and 5.6%, as evidenced by the maximum and minimum value of the returns. from the skewness and kurtosis values, we can see that the returns are positively skewed and exhibit fat tails. the jarque-bera test checks the null of normal distribution. from the p-value, we can infer that the null hypothesis is rejected and the return series is not normally distributed. the null of no autocorrelation is rejected for both ljung-box and box-pierce test at a lag of 5, as evidenced from the p-value. thus, presence of autocorrelation in the liv-ex 50 return series is confirmed. from the diagnostic testing, we can infer certain things. first, the live-ex 50 returns are skewed, indicating possible asymmetry. we see evidence of fat-tails, pointing towards increased activity at the tails. these two findings are confirmed by the jarque-bera statistic result that the returns are non-normally distributed. the two autocorrelation test results point towards the presence of a dependence structure in the return series. next, we evaluate the statistical test results. we apply the tests on the whole sample and on four non-overlapping sub-samples of equal length. the sub-samples testing is employed to see if information efficiency is episodic in nature. we present the results in table 2. here, lo-mckinlay and choi are individual vr tests whereas chen-deo, chow-denning, richardson and smith and wright are joint vr tests. in the individual vr tests, the weak form emh is tested at separate holding periods. in the case of joint vr tests, the null of emh is jointly tested for all the holding periods. we decided the holding periods as 2,5,10 as suggested by [43]. first, we go through the test results for the entire sample. the lo-mac(m1) statistics reject the null of weak form efficiency for the lags 5 and 10. however, when we account for heteroscedasticity (the m2 statistics), the returns are found to be weak form efficiency. looking into the automatic vr test results (choi), we can see that the null of emh is not rejected for the whole sample. among the joint vr tests, wald test and wright’s joint rank and sign test results suggest that the wine market is informationally inefficient whereas chen-deo and chow-denning test results do not reject the null of weak form efficiency. looking into the test results for serial dependence, the escariano and lobato test result does not reject of linear dependence structure. however, the dominic-lobato test results reject the null non-linear independence. the hurst coefficient is 0.552 and statistically significant and thus confirms weak long memory. overall, the results are mixed. vr test results give some indication towards weak form inefficiency. the presence of non-linear dependence and long memory in the return series is confirmed. the mixed nature of result warrants more examination to see if weak form emh is an episodic phenomenon. towards this, we examine the test results estimated for the four non-overlapping sub-samples. in case of the first sub-sample, lo-mac m1 statistics reject the null of weak form emh at holding periods 2 and 5 whereas m2 does not reject the null hypothesis. choi test also cannot reject the null of emh. among the joint vr test results, wright’s test result shows that the sub-sample is weak form inefficient, whereas chodenning and chen-deo test result confirm that the subsample is weak form efficient. escariano and lobato test result do not reject of linear dependence structure while dominic-lobato test confirm non-linear dependence. the hurst coefficient value is 0.568 and statistically significant, showing weak persistence. table 1. summary statistics. statistic value minimum -0.032353 maximum 0.05631 mean 4.06e-05 stand. deviation 0.0028422 skewness 1.264 (0.000) excess kurtosis 53.506 (0.000) jarque-bera(jb) 532610 (0.000) ljung-box(5) 58.094 (0.000) box-pierce(5) 11.6040 (0.040) note: p values are provided in the parenthesis 105adaptive market hypothesis: an empirical analysis of the wine market in the second sub-sample, both lo-mac and choi test results do not reject the null of weak form emh. among joint vr tests; chen-deo, chow-denning and wald test results confirm weak form emh in the subsample whereas the wright test results showing that the sub-sample is weak form inefficient. escariano and lobato test result show absence of linear dependence structure where dominic-lobato test results confirm non-linear dependence in the sub-sample. hurst coefficient value is 0.696 and statistically significant, showing moderate persistence or long memory. in the third sub-sample, we can see that all the variance ratio tests (except lo-mac m1 and lo-mac m2 at lag 2) reject the null of weak form efficiency. looking into the escariano and lobato test result, we can confirm presence of linear dependence structure. however, dominic-lobato test results show the absence of nonlinear dependence in the sub-sample. the hurst coefficient value is 0.559 and statistically significant, pointing towards the existence of weak persistence. in the fourth sub-sample, it is seen that the null of weak form emh is rejected for lo-mac m1 and lo-mac m2 at lags 2, whereas it is not rejected at other lags. choi test result indicates that the sub-sample is weak form inefficient. choi-denning (cd1) statistic value shows that the series is weak form inefficient. however, when we consider heteroscedastic errors (cd2), the null of weak form emh is not rejected. both chen-deo and wald test results show that the sub-sample is weak form efficient. however, the wright test results show that the sub-sample is weak form efficient. escariano and lobato test result confirms linear dependence while dominictable 2. test results. statistics whole sample subsample1 subsample2 subsample3 subsample4 lo-mac m1 2 1.554 0.826 -1.323 0.864 -2.424** 5 4.507** 2.272** -0.156 4.892*** -1.408 10 4.315 ** 2.074 1.847 8.094*** -0.073 lo-mac m2 2 0.464 0.476 -1.148 0.775 -2.191** 5 1.424 1.385 -0.143 4.305*** -1.250 10 1.443 1.338 1.705 7.060*** -0.065 choi 1.787 (0.454) 0.466 (0.634) -0.738 (0.320) 2.927 (0.002) -1.856 (0.030) chow-denning (2,5,10) cd1 4.507*** 2.272 1.847 8.094*** 2.424** cd2 1.443 1.385 1.705 7.060*** 2.191 chendeo (2,5,10) 2.832 2.701 12.001** 33.839*** 8.576** rs wald (2,5,10) 26.798*** 6.672 16.105*** 86.564*** 9.292** jr1 (2,5,10) 15.359*** 15.205*** 1.941 6.732*** 1.655 jr2 (2,5,10) 18.023*** 15.118*** 1.621 6.998*** 2.101 js1 (2,5,10) 9.346*** 10.262*** 2.358** 4.638*** 1.256 dominguez and lobato cm 0.472 (0.000) 0.514 (0.030) 0.578 (0.010) 0.170 (0.280) 0.452 (0.050) ks 1.135 (0.000) 1.109 (0.060) 1.387 (0.030) 1.068 (0.120) 1.388 (0.050) escanciano and lobato(es) 0.215 (0.643) 0.226 (0.633) 1.242 (0.265) 87.960 (0.000) 4.776 (0.026) hurst coefficient (h) 0.552 (0.000) 0.568 (0.000) 0.696 (0.000) 0.559 (0.000) 0.731 (0.000) note: in table 2, lo-mac m1 and m2 stands for lo-mckinlay vr test statistics, with homoscedastic and heteroscedastic errors. choi stands for choi’s automatic vr test. similarly, chow denning cd1 and cd2 denotes the chow-denning joint vr test statistics with homoscedastic and heteroscedastic errors. chen-deo stands for chen and deo’s joint vr test. wald test statistic of richardson and smith is denoted by rs wald. wright’s joint rank and sign vr test statistics are denoted by jr1, jr2 and js1.the crammer-von and kolmogorov-smirnov statistic of dominiguez and lobato are represented by cm and ks. similarly, escanciano and lobato test statistic is represented by es. the measure for long memory, i.e. hurst coefficient is denoted by h. the p values are presented in the parenthesis. the symbols *** and ** indicates the rejection of the null hypothesis of weak form efficiency at 1% and 5% significance respectively 106 anoop s kumar lobato test results indicate non-linear dependence in the sub-sample. the hurst coefficient is statistically significant with a value is 0.731, showing strong persistence in the sub-sample. looking into the results, we see a mixed picture. vr test results show mixed evidence regarding weak form efficiency of the wine market. further, there is evidence of non-linear dependence in the return series. the presence of long memory across all the four sub-samples indicates persistence in the return series. in this context, it would be ideal to study the market efficiency in a time varying context. towards this, we estimate the ai over a rolling window of 500 length. we present the result in figure 1. from the plot, it is clear that the wine market oscillates between relative states of efficiency and inefficiency. however, it never touches the theoretical minimum zero, indicating that the wine market was never truly efficient. the market becomes more inefficient as the ai values move away from zero. during times of extreme market movements, any dependence structure present in the market will be lost because of the prevailing uncertainty and market volatility, resulting in ai values being close to zero. we identify the first dip in wine prices around end of 2012. this period coincides with the chinese-lead bordeaux bubble collapse. with the post 2008 economic boom in china, the demand for fine wine increased multifold. majority of the demand was aimed at fine wine produced in the bordeaux region of france. fine wine was mainly employed as a gift in china. this increased demand resulted in a steep rise of fine wine prices, resulting in the asset bubble. for example, a case of chateau margaux 2000 cost £10,500 during the peak of the bubble. the building of the asset bubble is characterized by the increased ai values, indicating the increasing returns in the market. this is in line with the earlier results that wine prices are influenced by economic growth[30] (jiao,2016). however, with the 2011 anti-corruption drive in china, demand for fine wine as a gift steeply declined, resulting in the bubble’s collapse. the same is characterized in the plot by the decreasing ai values. next, we see a drop in ai values between january-june 2013. the possible reason for the decrease in the ai values is the qe3 tapering by us fed in 2013. later, we see ai values exhibiting a decline, starting from 2014 january. this period coincides with the us fed’s tapering of the bond-buying back program starting in january 2014. the ai reaches its minimum value around june 2014, coinciding with then fed chairman bernanke’s announcement regarding qe tapering and the resultant stock market crash in june 2014. [30] had shown that macroeconomic factors indirectly influence wine prices through shocks from the financial markets figure 1. the adaptability index plot. 107adaptive market hypothesis: an empirical analysis of the wine market via the channels such as wealth effect, cash effect and volatility transmission. further, there is a direct but delayed impact. the ai values suggest that the qe 3 tapering and the resultant economic turbulence affected wine prices. later, we find a drop in ai values starting around the first quarter of 2016. this period coincides with the brexit announcement and the subsequent turmoil in the wine market. uk is one of the largest wine markets in the world. therefore, leaving the eu affects the wine market in two ways. first, the import tariffs will undergo a change. the earlier free trade agreements with the eu will no longer be applied. the increased tariffs will have a negative impact on wine consumption because of the price rise. second, the depreciation of pound since brexit makes wine imports costlier and driving its prices up and may cause a price bubble. we see a recovery around the beginning of 2017 with the ai values reaching its peak by mid-2017 and then drop. bordeaux index grew 43% in the first six months of 2017, compared to the same period in 2016. [31] found evidences of an asset bubble during this period because of the exchange rate fluctuations. the collapse of the 2017 bubble is characterized by decreasing ai values post june 2017. the period 2019-20 is characterized by low ai values (oscillating between 0.2 and 0.05), indicating that the market was relatively efficient during this period. if we analyze the wine market’s response to the covid-19 crisis, we can see no significant fluctuations in the ai, indicating that wine market was not significantly affected by the covid-19 induced economic crisis so far. however, a delayed impact cannot be ruled out. concluding remarks the purpose behind this study was to analyze nature of informational efficiency in the wine market. to achieve our objective, we used six variance ratio tests and two tests for serial dependence on the daily returns of liv-ex 50. we applied the tests on the whole sample and four equally sized non-overlapping sub-samples to see if weak form efficiency could be categorized as episodic. we estimated hurst coefficient to test for the presence of long memory in the data. the statistical tests exhibited mixed results regarding weak form efficiency, while the hurst coefficient values confirmed long memory. further, presence of non-linear dependence was detected. considering these factors, we tested the dynamic nature of information efficiency by estimating the adaptability index (ai) for the liv-ex 50 returns over a rolling window of length 500.the ai values showed that the wine market is periodically oscillating between states of relative efficiency and inefficiency. we use the word relative as ai never reached its theoretical minimum value of zero. periods of inefficient behavior often coincided with episodes of economic turmoil. our analysis revealed that the wine market was adversely affected by events such as the bordeaux wine price bubble, the quantitative easing 3 (qe3) tapering by us fed, brexit and covid-19. our results confirm the findings of [44] , that wine markets are influenced by macroeconomic fluctuations directly and indirectly. regarding market efficiency, our results confirm the findings of [29], indicating that wine market is informationally inefficient. however, our study reveals that the notion of informational efficiency in wine market is dynamic than static. that is, the market participants adapt according to the prevailing market conditions. therefore, our study extends the work carried out by [29]. from the ai values, we can see that the wine market switches between states of relative efficiency and inefficiency. an inefficient market implies that the wine returns do not follow a random walk and there can be predicted. hence, there is chance of excess profit to be made. further, when the market is the in period of inefficiency, the wine prices do not reflect all the available information, enabling the market participants to incorporate their own hidden information set while creating strategies and reap extra gains. however, this would not be desirable in the long run, as mispricing of assets invariably leads to asset bubbles and market crashes [45]. therefore, from a policy perspective, it would be better to make wine market related information to be more accessible to all stakeholders so that the information asymmetry in the market could be minimized. our results reveal that the wine market was largely unaffected by the covid-19 induced financial shock. from an investor perspective, this is a positive news, as wine could be employed as a safe haven instrument during times of crisis. our results reiterate the safe haven property of wine market, previously discussed by [19] and [21]. for practical purposes, the ai could be used as an indicator to measure relative market efficiency at any point. if ai values are away from zero, there is a dependence structure present in the market and it may persist for some time. an investor could employ appropriate models to identify the nature of persistence and design necessary trading strategies. to conclude, it is better to treat information efficiency as a dynamic concept rather than a static notion. our results conclusively proved the dynamic nature of information efficiency of the wine market and confirmed the safe haven property of wine. we suggest investors to consider these aspects while making investment decisions. 108 anoop s kumar references [1] e.f. fama, the behavior of stock-market prices, j. bus. 38 (1965) 34–105. 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[45] c.-w. su, l.i. xin, when will bubbles occur in the fine wine market?, econ. comput. econ. cybern. stud. res. 54 (2020). wine economics and policy volume 10, issue 2 2021 firenze university press productive efficiency of wine grape producers in the north of portugal micael santos1,*, xosé antón rodríguez2, ana marta-costa3 organic and conventional grape growing in italy: a technical efficiency comparison using a parametric approach federica cisilino1, fabio a. madau2,*, roberto furesi2, pietro pulina2, brunella arru2 competitiveness framework to support regional-level decision-making in the wine industry: a systematic literature review jorge mota*, rui costa, antónio moreira, silvana serrão, carlos costa does belonging to an appellation make a difference? new evidence from ontario viticultural areas omer gokcekus how do sparkling wine producers adopt a sub-appellation? evidence from an exploratory study on heroic prosecco superiore rive luigino barisan*, luigi galletto motivation factors for organic wines. an analysis from the perspective of german producers and retailers katharina hauck*, gergely szolnoki, evelyn pabst consumer preferences for certified wines in france: a comparison of sustainable labels adeline alonso ugaglia1,*, britta niklas2, wolfram rinke3, dan moscovici4, jeff gow5, lionel valenzuela6, radu mihailescu7 wine ratings and advertising strategies: is there a link? ricardo sellers-rubio adaptive market hypothesis: an empirical analysis of the wine market anoop s kumar wine economics and policy 10(1): 119-132, 2021 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/wep-8880 wine economics and policy citation: peter gal, attila jambor, sandor kovacs (2021) regional determinants of hungarian wine prices: the role of geographical indications, objective quality and individual reputation. wine economics and policy 10(1): 119-132. doi: 10.36253/wep-8880 copyright: © 2021 peter gal, attila jambor, sandor kovacs. this is an open access, peer-reviewed article published by firenze university press (http:// www.fupress.com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information fi les. competing interests: the author(s) declare(s) no confl ict of interest. regional determinants of hungarian wine prices: th e role of geographical indications, objective quality and individual reputation peter gal1, attila jambor1,*, sandor kovacs2 1 corvinus university of budapest, hungary 2 university of debrecen, hungary e-mail: peter.gal@stud.uni-corvinus.hu; attila.jambor@uni-corvinus.hu; kovacs.sandor@econ.unideb.hu *corresponding author. abstract. analysing the determinants of wine prices has always been a fi eld of interest in the wine economics literature. by estimating hedonic price functions, however, most papers generally remain at the country level with regions generally neglected or treated as simple dummy variables. th e aim of this paper is to analyse the determinants of wine prices at the regional level by using latent variable path modelling with partial least squares and principal component analysis on the example of hungarian wines. th is approach is able to capture the regional specialties of wine production and provides a better insight into price determination. results suggest that intrinsic values play a major but ambiguous role in determining regional wine prices, especially in the case of sugar content. it also becomes apparent that specifi c geographical indications (gis) play a crucial role in price determination, instead of gi use per se. moreover, individual brands also have an important role, as tier1 and tier2 wineries tend to sell their wines at higher prices and in smaller batch sizes. keywords: wine regions, price determination, hungary, quality, partial least squares. 1. introduction a large amount of scientifi c literature has been dealing with the determinants of wine prices recently [1,2,3,4]. by mainly applying hedonic pricing models, the vast majority of these studies quantify the relationship between wine prices and, inter alia, origin, subjective and objective quality and labelling elements like variety, vintage or brands. despite the large quantity of research into the topic, articles mainly focus on the country level and regions are oft en neglected or treated by simple dummy variables [5,6,7]. however, wine is a highly diff erentiated product and this diff erentiation starts at the regional level [5,8,9]. it largely depends on the regional characteristics of the kind of wine produced and such diversity is missed when wine prices are analysed at the country level. th is article aims to analyse 120 peter gal, attila jambor, sandor kovacs the determinants of wine prices at the regional level by using latent variable path modelling with partial least squares (lvpls) and principal component analysis (pca), using the example of hungarian wines. this approach is able to capture the regional specialties in wine production and provides a better insight into price determination. our motivation to prefer this approach over the classical methods was based on some previous studies [10,11,12] using pls and we followed the guidelines of hair et al. [13]. the article is structured as follows. first, a literature review is given on the most important studies on the determinants of wine prices written between 1998 and 2018, and this is followed by a description of the methods and data used here. the third section shows our results together with a discussion, while the last part concludes. 2. geographical origin as a determinant of wine prices origin has always been considered one of the most important determinants of wine prices. in this regard, a significant part of the literature analyses the role of geographical indications (gis) in the determination of wine prices. being indicators of special quality, gis may permit higher prices, which may prove to be essential when competing with more efficient new world wine-producing countries. the main idea behind gis is that differences in quality may be attributable to their origin. gis as collective brands embody a collective reputation, which is the sum of the individual reputations of the group members [14]. the majority of the theoretical literature in this regard analyses the relationship between consumers’ willingness to pay and regional reputation (gis). menapace and moschini [15], for instance, developed a reputation model to investigate the use of trademarks and certification for gi food products and found the two concepts to be complementary in signalling superior quality to consumers. anania and nistico [16] analysed whether public regulation can substitute trust in quality food markets and found that even imperfect regulation is better than having no regulation in place. moreover, moschini et al. [17] investigated the relationship between geographical indications and the competitive provision of quality in agricultural markets and found a strong positive relationship as well as clear welfare gains. zago and pick [18] combined the two theories and suggested that the introduction of a regulation and the emergence of two differentiated competitive markets provides consumers and high quality producers better-off (and lowquality producers worse-off ). it is also evident that gis play a crucial role in international trade debates, labelled as a “war on terroir” by josling [19]. as to the empirical literature, ali and nauges [20] analysed bordeaux en primeur wine pricing on a sample of 1153 wines of 132 producers and showed that the pricing behaviour of producers depends to a large extent on their collective reputation associated with their wine regions. angulo et al. [21] ended up in similar conclusions by analysing 200 spanish red wines they concluded that wine regions were one of the most important determinants of wine prices. blair et al. [22] also reached similar conclusions when analysing 393 bordeaux wines, while di vita et al. [23] also ended up in the same when analysing wine sales in sicily. the argument above was also underpinned by ling and lockshin [24] for australian wines, noev [8] for bulgarian wines and roma et al. [7] for sicilian wines. moreover, the role of geographical indications was especially strong in price determination in case of grand cru wines as suggested by carew and florkowski [25] as well as combris et al. [26]. lecocq and visser [27] by analysing three different samples of bordeaux and burgundy wines, also found that objective characteristics shown to the consumers on the label, including gis, explained the major part of price differences, while sensory characteristics are less important. van ittersum et al. [9] analysed consumers’ willingness to pay for protected regional products and found a significantly positive relationship between the two, based on the consumers’ image consisting of a quality warranty and an economic support dimension. similar conclusions were drawn by panzone and simoes [28], highlighting that labelling is not a factor attracting a price premium per se, but rather it is the interaction between the labels and the region of production that actually gives a premium. moreover, landon and smith [29] analysed the collective reputation of bordeaux red wines and found that reputation of seven out of eleven wine regions had a significant positive effect on price, which can even reach $14 per bottle. shane et al. [4] estimated this price difference to be £6-7 for uk consumers. similarly, thrane [30] was talking about a 30% difference for french and german wines, while troncoso and aguirre [6] calculated a 20% price difference for chilean wines sold in the usa. this, according to landon and smith [29] strengthens the snob-effect where consumers prefer a bottle of wine to another based on regional origin and reputation and not on quality difference. however, a number of articles found that the role of origin in price determination was rather country-spe121regional determinants of hungarian wine prices: the role of geographical indications, objective quality and individual reputation cific. defrancesco et al. [31], for instance, analysed the role of origin in the case of argentinean malbec, concluding that new and old world consumers differ in their willingness to pay for geographical names (gns) when buying premium argentinean wines in specialised shops. estrella orrego et al. [32] added that consumers appreciate “new world” wines for different attributes than “old world” ones, thereby valuing wine’s characteristics differently. schamel [33] analysed the value of producer brands versus gis on us price data for 24 wine regions in 11 countries and added that “new world” wines had to catch up in terms of regional reputation, though leading brands could take much of the price differential. besides origin, a large part of the literature analyses the determinants of wine prices from different aspects including expert ratings, objective characteristics (chemical composition, weather, age) and wine label information (varietal, vintage). although a full review of this literature would take us far away from the focus of this article, some relevant literature is discussed here to highlight the most important findings. as to expert ratings, the majority of the studies found a significant and positive relationship between wine prices and expert ratings (scores), however, opinions differ on the strength of the relationship (see e.g. [1,6,8]). regarding objective characteristics, most studies agree that chemical composition and weather affects the price of wines ambiguously, while age has a significantly positive effect on wine prices (see e.g. [7,24,30]). finally, wine label information also has a generally positive impact on prices, according to most of the studies (see e.g. [2,24]). it seems evident from the literature above that regions play a decisive role in determining wine prices. although most studies are focusing on a country or a specific region in searching for the determinants of wine prices, the novelty of this paper is to analyse all wine region of a country at the same time to provide a full picture – this approach is, to our understanding, new in the literature. the paper also aims to provide a full coverage by aiming to capture and analyse the most important factors determining wine prices as evident from the literature above. 3. methods and data used 2.1 theoretical background in order to analyse the determinants of wine prices at the regional level, two methods are used (path modelling and principal component analysis). first, partial least squares (pls) is a relatively new methodology for estimating latent variable path models (called lvpls). from a broader conceptual perspective, lvpls is a statistical data analysis methodology for studying a set of blocks of observed variables which can be summarized by latent variables (outer model) and the linear relationships between the latent variables (inner model). establishing the relationships requires some previous knowledge. lvpls is also employed to handle structural equation modelling problems (sem) which was founded by joreskog [34]. before pls become quite popular, sem was the conventional technique for estimating latent variable path models. the main principles of the pls technique for principal component analysis were described by wold [35], and the first pls analytical tool for blocks of variables was developed in 1975 [36]. the whole algorithm was published in the 80s [37,38]. further developments to the approach relating to the methodology’s application to sem problems and path models were described by chin [39] and tenenhaus et al. [40], respectively. however, these methodologies (pls and sem) differ a lot as concepts. there exists a wider range of applications that cannot be handled properly by a sem framework but are nevertheless within the spectrum of the flexible lvpls methodology. structural equation models are causality networks of several latent variables (lvs) measured by several observed manifest variables (mvs) [41,42]. the sem estimation procedure is based on classical covariances and a maximum likelihood (ml) estimation, but the pls approach is a component-based (variance-based) procedure involving fewer assumptions. for example, within the sem framework variables should obey the normal distribution assumption, and the number of the observations should be large enough (over 200). pls allows working with small sample sizes and makes less strict assumptions about the distribution of the data [43]. pls has the capacity to deal with very complex models involving a high number of lvs, mvs, and relationships [44,45]. in pls, the relationship between an lv and its mvs can be modelled in either a formative or a reflective way, which is an advantage when the approach is compared to the sem. in a formative way, a given lv is estimated by the linear regression of blocks of mvs that belong to the lv. this means that the lv is caused by the mvs. in the reflective way, the opposite is true so the mvs are caused by the lv. another important difference is that pls is rather an explanatory technique, but sem is mainly used for testing theoretical models. the major disadvantage of pls is that no global criterion is optimized which would allow us to evaluate the overall model. however, amato et al. [46] propose a global criterion of goodness-of-fit (gof). 122 peter gal, attila jambor, sandor kovacs in a formative model, mvs are modelled by multiple regressions, implying that multicollinearity might be a relevant problem in lvpls modelling [47,48], therefore we fit a reflective model and also estimated the variance inflation factor (vif). chin [39] suggests bootstrapping for model testing, an approach in which 500 samples are generated from the original data through the use of sampling. this means that beta coefficients are estimated in each sample and the mean and standard error (se) of the parameters are computed from the total number of samples. another problem concerns the assumption of equal initial weights at the beginning of the estimation procedure, something which makes the results very arbitrary. the advantages of the pls approach compared to the classical hedonic model should also be stressed out as this is the major point of the study. hedonic models aim to describe the price of a good by a set of prediction variables using an ordinary least square regression (ols) or weighted least squares (wls) ([11]). the general pitfalls are the large number of prediction variables that might cause a problem in case of small datasets when ols applied as well as in case of large datasets due to the problem of multicollinearity (correlated predictors). in order to solve this issue highly correlated variables could be omitted generating the loss of information and biases and important features of the model could be lost. król [11] stated that especially in case of large amount of binary predictors and multicollinearity as in our case partial least squares regression might be a better alternative to ols/wls methods of hedonic models estimation. on the other hand, pls approach makes it possible to use more dependent variables. the above mentioned reasons guided us to prefer pls latent variable path modelling. in order to estimate the causal relations between each wine region/sub-region and the wine composition, price and quantity a latent variable path analysis with partial least squares (lvpls) with a reflective method for index construction [49] was applied, using xlstat software. the sample contained 2309 valid observations, which is more than sufficient for this type of analysis. the composite reliability of the blocks was tested by the explained variance. for estimating the initial weights in the model, the centroid scheme was used. the pls algorithm stopped when the change in the outer weights between two consecutive iterations was smaller than 0.0001 or the number of iterations reached 100. in our case the algorithm converged on average after 18 iterations. bootstrap sampling was also applied for model testing and parameter estimation, in which 500 samples were generated from the original data as suggested by chin [39]. this means that the mean and se of the parameters were computed from the total number of samples and only those beta coefficients were considered statistically significant that were at least twice their respective se [50]. a normalized version of the goodness-of-fit (gof) as proposed by esposito vinzi et al. [51] was used to measure the overall model fit by obtaining bootstrap resampling. the gof of 0.10, 0.25, and 0.36 can be considered an adequate, moderate and good global fit, respectively [13,48,52]. in the course of inner model quality assessment, r2 measures were calculated. the r2 values of 0.02;0.15;0.35 are considered as small, medium or large effects according to hair et al. [48]. in order to assess the discriminant validity of the model, the fornell and larcker criterion [53] was applied. in the case of the outer model, we reported the pearson correlation coefficients, which were denoted by “r”. regarding the inner model, we reported the regression beta coefficients, denoting bootstrap-estimated se values by “b”. 2.2 operationalization of constructs our sample of wines is selected from the hungarian off-trade sector (main wine shops and supermarkets). considering the extreme levels of sugar content and high prices, all wines from the tokaj region were excluded as they would significantly distort the results. in case, when the same observations (wines with the same lot number) were sold at different prices, and only the cheapest was included in the model. our model design includes nine latent variables for five different dimensions of the study. regional origin is represented by five variables, one for each wine region, while other latent variables are individual brand, composition and market situation. the manifest variables of regional origins are geographical indications. each gi of a wine in the sample is represented by a dummy variable whose value is 1 if the batch in question bears the geographical indication concerned, but is otherwise 0. two additional dummy variables were generated: one for wines without a geographical indication, and another for wines with nonhungarian-protected geographical indications (pgis) that were imported in bulk by wineries operating in the duna region and then released to the market under their own brands (i.e. both the brand and the name of the wine is in hungarian). certain geographical indications are segmented into two or three quality levels using additional terms to the name itself (e.g. eger superior or villány prémium). to handle this phenomenon, these geographical indications were treated as separate names. the source of data is the geographical indication on the label of the wine observed. the legal use of the gis was 123regional determinants of hungarian wine prices: the role of geographical indications, objective quality and individual reputation double-checked in all cases in the public database of the wine authority. individual brand reputation is measured by three dummy variables. given the high number of producers, the grouping of individual brands according to their status served as an appropriate method. the wineries were classified in relation to two significant awards (‘wine producer of the year’ and ‘winemaker of the winemakers’). there are several reasons for this. on the one hand, both nominees and winners of these awards are selected by experts, so a high level of past performance can be assumed for these winemakers. on the other hand, both awards traditionally receive heavy media attention which focuses on the winemakers involved. hence, the individual brands concerned have a credible and positive reputation with the consumer. winners of one of these awards were categorised as tier1 wineries, while nominees were classified as tier2 wineries and the rest was ranked as tier3. information on this can be found on the websites of the relevant awards. intrinsic value of the wines is measured by five manifest variables. according to hungarian wine law, wine products produced in hungary may be marketed for public consumption or export only if they receive authorisation by the wine authority. this permission is issued following the assessment of 12 analytical parameters and, where appropriate, after sensory evaluation. the following analytical parameters were included as manifest variables: – sugar-free extract content (g/l), – residual sugar content (g/l), – ph value, – actual alcoholic strength (by volume), – age (years) 2.3 source of data the source of the data is the hungarian wine authority. the latent variable colour and varietal is measured by seven manifest variables, including the colour of wine and the varietal composition. the information on varieties is condensed into these variables by creating varietal groups as the wines included in the sample represent almost 150 different permutations of varietal composition. the following groups were created: – red wines made of bordeaux (cabernet franc, cabernet sauvignon and merlot) varietals, – red wines of other varietals, – rosés (of any variety), – white wines of two hungarian varieties (cserszegi fűszeres or irsai olivér), – white wines of other aromatic (muscat) variables, – white wines of international varieties (e.g. chardonnay), – white wines of other varieties. the hungarian wine authority also provided data on colour and varieties. the manifest variables of market situation are price and quantity. the price was observed in the hungarian off-trade sector (main wine shops and supermarkets). if a wine was observed on multiple sites, the lowest price was included in the dataset. the scope of the study extended only to wines, other grapevine products (such as sparkling wines or semi-sparkling wines) were excluded. all prices were re-calculated for a unit of 0.75 l bottle. quantity is the size of the batch expressed in litres and was provided by the wine authority. finally, when reporting our results, we are aware that a region per se cannot determine wine prices but that special characteristics of the regions do. we should keep this in mind when “regional effects” are analysed below. 4. results and discussion before presenting our model results, descriptive statistics and measurement units are shown in table 1. figure 1 provides a graphical representation of the parameter estimates in the model. path modelling groups subregions into blocks according to the wine region they belong to and then examines the paths and links between these wine regions and links between regions and wine composition, colour and varietal and individual brands in terms of regression coefficients. the model is exploratory in nature and the algorithm is iterative, hence it is able to identify irrelevant connections. ovals represent the lvs (blocks), and squares stand for the mvs. all the links (arrows) are significant at the 5% level, whereas the dotted lines represent non-significant links. based on the result of the bootstrap analysis, the regression coefficients between the lvs were proved valid. in order to verify that the se of the regression coefficients will always be provided. regarding the goodness of fit, the gof of the inner model was 0.770, the gof value of the outer model was 0.958 and the entire model has a gof of 0.738, which shows an excellent fit. the two main regressions of the model are wine composition (r2=0.561) regressed by the wine regions and colour and varietal as well as market situation (price, quantity) (r2=0.386) regressed by wine composition. the proportion of variance explained in the two regressions is appropriate. 124 peter gal, attila jambor, sandor kovacs all manifest variables of intrinsic value are in a strong significant relation with composition, and their effect is positive except for sugar content. that means that the more concentrated a bottle of wine is, the higher its price and the lower its quantity will be, while wines (outside of the tokaj wine region) with higher sugar content are cheaper and produced in larger batches. this argument supports the findings of the majority of the literature [7,24]. moreover, the analysis of colour and varietal composition shows that red wines significantly differ from white ones and rosés. the (positive) effects of the varietal composition is the highest for red wines of bordeaux varieties. that means that red wines (especially of bordeaux varieties) tend to be priced higher and sold in low quantities, while rosés are sold in large batches at significantly lower prices. this is very much in line with previous findings of the literature [1,2]. the effect of regional origins largely depends on the actual region. felső-mag yarország and pannon wine regions affect intrinsic value positively (b=0.175; se=0.014; t=12.6; p<0.001 and b=0.184; se=0.016; t=11.7; p<0.001, respectively), while the effect of balaton and duna regions is negative (b=-0.087; se=0.015; t=-5.8; p<0.001 and b=-0.225; se=0.014; t=-15.9; p<0.001, respectively). this means that wines from felsőmagyarország and pannon regions are sold at higher prices, in smaller batch sizes and have higher intrinsic value. on the contrary, wines from balaton and duna region wines have lower prices, higher quantity and lower intrinsic value (the composition contains less alcohol and more sugar). felső-pannon region is still significant but with a relatively smaller regression coefficient (b=0.044; se=0.015; t=3.0; p<0.01). the regression coefficient of wine composition was b=0.621 (se=0.016; t=38.1; p<0.001) with regards to price and quantity. this suggests that the more alcohol and sugar-free extract content increases the price of wines and the quantity is lower. these results confirm previous studies suggesting the gi-based results are highly region-specific [31,32]. collective or individual brands may alter the effects of regional origin, again echoing findings of previous literature on the topic [7,8]. higher tier individual brands (tier1 and tier2) always positively affect intrinsic value and compensate potential negative regional effects. the effect of using a tier1 brand is double to that of a tier2 brand. meanwhile, the role of gis is versatile; however, all of them were significant. in regions, where the regional origin is positively related to intrinsic value (felső-magyarország and pannon), only half of the gis strengthen this effect. the different classes of eger (eger classicus (r=0.124), eger superior (r=0.398), eger grand superior (r=0.326) and eger before 2010 (r=0.458)) have a positive effect. in the case of eger, however, the role of regulations must be highlighted – if certain practices are forbidden (e.g. sweetening, subtracting alcohol), and table 1. descriptive statistics. unit of measurement description price (huf/ 0.75 litre) quantity (litre) actual alcohol (%vol) sugar (g/litre) sugar-free extract (g/litre) ph age (years) min 195 250 7.14 0.00 15.60 2.88 1.00 max 23980 507284 16.45 162.70 46.80 4.01 13.00 mean 2072 20275 12.61 5.31 24.70 3.49 2.33 standard deviation 1937 35803 1.13 13.09 4.45 0.15 1.66 median 1540 7540 12.59 1.30 24.20 3.49 2.00 1st tier 3015 19703 12.99 2.08 25.37 3.51 2.67 2nd tier 2659 11049 12.96 3.41 25.03 3.50 2.57 3rd tier 1678 22982 12.42 6.63 24.44 3.48 2.18 white other 1831 14831 12.45 5.02 22.23 3.39 2.02 white international 1857 11232 12.70 5.40 22.07 3.39 1.83 rose 1299 26043 12.24 3.98 20.82 3.40 1.15 red other 2287 20956 12.68 3.88 27.40 3.57 2.85 red bordeaux 3108 16684 13.41 3.50 29.24 3.62 3.45 white cserszegi/irsai 1115 21352 11.61 3.43 21.33 3.45 1.24 white other muscat 1496 26577 11.73 19.05 21.31 3.43 1.65 source: own composition. 125regional determinants of hungarian wine prices: the role of geographical indications, objective quality and individual reputation thresholds on grape quality level are stricter, production technology has an impact as well. on t he ot her hand, mátra (r=0.627), bü k k (r=-0.181), debrői hárslevelű (r=-0.163) and felsőmagyarország (r=-0.279) have a negative effect. in pannon region, it is only szekszárd (r=0.421) and the two tiers of villány (v.classicus (r=0.168) and v.prémium (r= 0.783), while pannon (r=-0.097), pécs (r=-0.198) and tolna (r=-0.115) have a slightly negative effect. a higher negative effect can be found for dunántúl (r=0.266). both in the case of eger and villány, the effect of top tier categories (e.superior and e.grand superior, v.prémium) significantly exceeds the effect of low tier categories (e.classicus and v.classicus). these results also strengthen the case-specific nature of gi price effects suggested by the literature [31,32]. there are two regions, where regional origin yields a negative effect: balaton and duna. only 3 out of the 16 concerned gi has an impact that changes the negative coefficient of the regional origin into positive: balatonboglár (r=-0.035), balatonfüred-csopak (r=-0.131) and zala (r=-0.193). all other gis keep the negative effect of regional origin on intrinsic values. the highest impact is of duna-tisza közi (r=0.794), imported pgis (r=0.464), figure 1. path model and regression coefficient estimates from the bootstrapping. source: own composition. 126 peter gal, attila jambor, sandor kovacs balaton (r=0.587), balatonmelléki (r=0.382). also, dunántúl (a pgi including the area of three wine regions: felső-pannon, balaton and pannon) has an overall negative effect on intrinsic values, regardless of their regional origin. not using a gi affects only the pannon regional origin, moderating its positive impact (r=-0.097). regarding felső-pannon regional origin has a negative effect in case of mór (r=-0.371) and etyek-buda (r=-0.383) while neszmély (r=0.545) has a positive effect on intrinsic values. individual brands may compensate for the negative effects (r=0.125). the “without gi” variable did not have a significant correlation with any of the above wine regions but balaton (b=-0.044; se=0.021; t=-2.128; p=0.033). the explained deviation is presented in the main diagonal of the correlation matrix and shows how much a given lv explains from its mvs (table 2). the figures under the main diagonal are the pearson correlations between the lvs. the values above the main diagonal show the significance of the pearson correlation coefficients. it is obvious that each lv (especially the outcome price and quantity) explains a sufficient amount of deviation of its linked items and the model does not conflict the fornell and larcker criterion (correlations don’t exceed standard deviations). however, in case of wine composition colour and varietal is also strongly correlated but not better then its mvs. wine composition is the most correlated with colour and varietal, price and quantity and with pannon/duna regions. table 3 presents the contributions of the latent variables to composition. colour and varietal explained around 62.5% of the variance in composition, pannon and duna contributed to 14.8% and 11.3% of the variance. regarding the effect sizes it can be stated that colour and varietal had a large predictive ability, while felső-magyarország, duna and pannon had only a small effect on composition.going more into detail, the diftable 2. pearson correlations between latent variables and standard deviations. latent variable 1 2 3 4 5 6 7 8 9 ib (1) 0.762 <0.001 <0.001 <0.001 <0.001 <0.001 <0.001 <0.001 <0.001 cv (2) 0.081 0.414 <0.001 0.943 0.834 0.017 <0.001 <0.001 <0.001 duna (3) 0.158 -0.099 0.397 0.943 0.834 0.017 <0.001 <0.001 <0.001 fm (4) 0.116 0.141 -0.035 0.357 0.238 0.967 0.895 <0.001 <0.001 fp (5) 0.125 0.043 -0.052 0.019 0.408 <0.001 0.082 <0.001 0.001 balaton (6) -0.110 -0.143 0.132 -0.048 -0.286 0.284 <0.001 <0.001 <0.001 pannon (7) 0.192 0.375 -0.127 0.047 0.191 -0.277 0.368 <0.001 <0.001 wc (8) 0.204 0.661 -0.281 0.246 0.111 -0.188 0.452 0.662 <0.001 pc(9) 0.279 0.304 -0.272 0.213 0.074 -0.087 0.390 0.621 0.764 n.r = not relevant, cannot be calculated source: own composition. ib: individual brand; cv: colour and varietal; fm: felső-magyarország; fp: felső-pannon; wc: wine composition; pc: price and quantity. table 3. impact and contribution of the latent variables to composition. description colour & varietal pannon felső-pannon balaton felsőmagyarország duna correlation 0.661 0.452 0.111 -0.188 0.246 -0.281 beta coefficient 0.531 0.184 0.044 -0.087 0.175 -0.225 vif* 1.196 1.284 1.109 1.196 1.030 1.058 effect sizes (f2) 0.537 0.060 0.004 0.014 0.068 0.109 correlation x beta coefficient 0.351 0.083 0.005 0.016 0.043 0.063 contribution to r2 (%)** 62.5 14.8 0.9 2.9 7.7 11.3 cumulative % 62.5 77.3 78.1 81.0 88.7 100.0 (*): variance inflation factor, should be lower than 3 according to hair et al. [13]. (**): the sum of “correlation x beta coefficient” was 0.561 and contribution to r2 of a latent variable was calculated as a percentage of this value. 127regional determinants of hungarian wine prices: the role of geographical indications, objective quality and individual reputation ferent wine regions show various patterns with respect to intrinsic values, price and quantity and can be clustered into two groups (table 4). in the first cluster, larger batches can be observed in the case of duna and felsőmagyarország at lower prices. also, these wine regions have lower alcohol content and relatively higher sugar content. felső-pannon, balaton, pannon belong to the second cluster with lower batches and higher prices and relatively higher alcohol and lower sugar content. pannon region is standing out with its high sugar-free extract content. f-values show significant differences among these wine regions and also highlights the most influential factors and we could determine an order. the major differences among the regions are due to actual alcohol content (f=94.3) which varies between 11.6 to 13.1 percent. the second most influential factor is sugarfree extract content followed by quantity (f=37.3) and price (f=30.2). the least significant factors are sugar content, ph value and age but they also cause significant differences between the regions. studying the differences between the different gis also reveal new patterns (table 5). it is observable that wines without gis (fn) are dominating the sample with extremely high quantity and relatively lower prices. the same holds for duna-tisza közi and dunántúl. in the case of eger wines, we can observe the lower quantities with the highest prices. badacsony is standing out from the balaton gis, kunság and hajós-baja from duna gis, villány from the pannon gis and neszmény and etyekbuda from the felső-pannon gis regarding quantity and price. at gi level the most significant factors are also actual alcohol content, followed by quantity and price. the least influential factors are ph value and sugar content. anova analysis found significant differences between gis and region with respect to all parameters at 1% significant level. the major differences among the gis are due to actual alcohol content (f=25.6) (this is the same at the regional level) which varies between 10.9 to 14.2 percent. the second most influential factor is quantity (f=16.7) followed by price (f=13.8). the three least significant factors are sugar content, age and ph value but they also cause significant differences between the regions. in the second step, a pca was performed (figure 2). the purpose of the analysis was to graphically represent the patterns of the different wine gis with respect to the different determinants of wine prices in a twodimensional space (biplot graph) and study the connections between the rows (subregions) and columns (determinants) of the matrix. all the pcas were performed by using the varimax rotation so as to create more interpretable principal components. for all the calculations r 3.4.4 was used with psych package with principal and kmo function was used for calculating pca and kaiser-meyer-oldkin (kmo) tests of sampling adequacy. the total explained variance was 74% and kmo test provides 0.55 for measuring the sampling adequacy which is acceptable. as evident from figure 2, the first component separates explain 42% of the total variance and separates wine gis with respect to price and actual alcohol on the right side and quantity and sugar content on the left side of the axis. wines without gi or with gis dunatisza közi, balatonmelléki, balaton, felső-magyarország are lower priced and poor in alcohol but more sold in higher quantity and the sugar content is also higher. the opposite is true for eger superior, grand superior, eger ns2010 and szekszárd and villány. the second dimension separates gis with more relatively higher ph and sugar-free extract content like duna, szekszard, eger ns2010 and eger superior from gis (somlói, bükk, mór, neszmély, pannonhalma, pannon, mátra) with relatively less extract content and smaller ph. the second component explained 32% of the total variance. on the whole, we found that major differences among the gis in terms of prices are due to actual alcotable 4. regional determinants of wine prices by major wine regions. region alcohol content (%) sugar content (%) extract content (%) ph value price (huf) quantity (litre) age (years) duna 11.6 10.8 24.3 3.5 1037 39029 1.9 felső-magyarország 12.7 6.7 24.4 3.5 2007 21917 2.6 felső-pannon 12.7 2.7 22.6 3.4 2090 14451 2.0 balaton 12.6 6.4 23.7 3.5 2066 15414 2.2 pannon 13.1 2.1 26.4 3.5 2556 14297 2.6 anova f-values* 94.3 25.9 47.2 25.4 30.2 37.3 19.1 *: all the f-values are significant at 0.01 level. source: own composition. 128 peter gal, attila jambor, sandor kovacs hol content and quantity, while sugar content, age and ph value had less importance. these findings also hold important lessons for policy makers. it should be understood that a dual wine market exists in hungary, with producers for the two distinct segments having very different goals and ambitions. on the one hand, premium quality wines should have a higher alcohol content, have a recognisable gi behind them, and be produced in lower quantities. on the other hand, homogenous wines should be produced in large quantities and be sold at an average price. stakeholders in the sector should also bear in mind that it is not gi usage that matters on average but the specific gis as we have shown above. from a consumers’ point of view, economic theories also hold – high quality wines with low prices remain supermarket slogans. finally, we have to mention some limitations of this study. first of all, the results are highly case (i.e. gi)specific. regarding the pls approach, interpretation of the model could be harder with negative weights and table 5. regional determinants of wine prices by geographical indications. regions alcohol content (%) sugar content (%) extract content (%) ph price (huf) quantity (litre) age (years) without pdo/pgi 11.1 18.8 25.2 3.5 1045.7 80501.6 2.1 badacsony 12.5 8.2 23.5 3.4 2648.9 8056.6 2.8 balaton 12.0 9.4 23.2 3.5 1544.0 29610.3 1.9 balaton-felvidék 12.6 4.4 24.5 3.4 1670.6 4336.6 1.4 balatonboglar 12.8 6.2 24.5 3.5 2016.4 20172.4 2.3 balatonfüred-csopak 12.7 3.3 22.7 3.5 2105.3 7153.4 1.9 balatonmelléki 11.9 14.8 23.7 3.5 1019.6 42766.9 1.4 bükk 12.6 1.2 20.5 3.3 2004.8 2507.7 1.7 csongrád 11.7 6.9 24.5 3.6 1620.0 2832.2 1.8 duna 12.5 6.2 26.5 3.6 1624.8 6036.7 2.4 duna-tisza közi 10.9 14.6 23.6 3.5 479.9 65311.9 2.2 dunántúl 11.9 9.6 22.8 3.5 1306.9 50326.3 1.4 eger classicus 12.9 2.6 25.3 3.5 1745.6 32052.6 1.5 eger grand superior 14.1 10.6 25.2 3.4 7874.3 2877.9 2.7 eger superior 14.2 4.7 28.5 3.6 4806.2 8990.5 3.4 egerns2010 13.6 4.1 27.8 3.5 4622.4 5989.3 4.3 etyek-buda 12.5 2.2 21.6 3.4 1762.2 22490.8 7.6 felső-magyarország 12.4 9.8 24.3 3.5 1735.9 24143.3 1.9 hajos-baja 12.4 5.1 26.0 3.5 1316.0 13519.3 2.0 káli 13.1 22.3 24.9 3.4 3771.5 4785.3 2.3 kunság 12.1 6.4 23.8 3.5 1392.2 9661.3 2.5 mátra 12.2 8.0 22.3 3.4 1332.4 14725.1 2.1 mór 12.7 4.0 20.9 3.4 1524.6 5273.0 1.9 nagy-somló 12.4 2.4 24.2 3.4 2466.9 6507.9 1.6 neszmély 12.6 2.4 21.6 3.4 1749.4 23899.6 2.5 pannon 12.3 2.2 22.1 3.4 1308.5 20068.9 1.9 pannonhalma 13.0 2.4 21.4 3.4 2066.2 11159.1 1.1 pécs 12.7 7.2 23.9 3.4 1837.9 5612.9 1.3 somlói 13.6 2.2 19.7 3.2 1982.5 5349.0 2.1 sopron 12.7 3.3 24.8 3.5 2706.4 4924.6 3.0 szekszárd 13.1 1.8 26.9 3.6 2419.6 12084.9 2.3 tolna 12.6 3.0 24.8 3.5 1585.4 12031.6 2.7 villány 13.1 1.6 26.7 3.5 2894.9 17108.6 2.5 zala 13.2 2.0 23.6 3.4 1679.7 6102.7 2.7 anova f-values 25.6 8.3 13.3 9.7 13.8 16.7 13.9 *: all the f-values are significant at 0.01 level. source: own composition. 129regional determinants of hungarian wine prices: the role of geographical indications, objective quality and individual reputation formative measurements with negative weights could critical. there is not a global index for model validation and gof is not advisable to use for this purpose and its use is limited. some variables might violate the fornell and larcker criterion (like in our case color and varietal was strongly correlated with wine composition) and multicollinearity could be an issue especially in case of formative modelling. 5. conclusions this paper aimed to analyse the regional determinants of wine prices in hungary by using partial least squares method. the results show adverse effects on price and quantity as cheaper wines tend to be sold in larger quantities, and the opposite also holds true. first, it becomes apparent that intrinsic values play a major but ambiguous role in regional wine prices. the higher the concentration of a compound is, the higher the price will be – with the exception of sugar. this suggests that wines with a higher concentration of alcohol and sugar-free extract and with low sugar content are made in lower quantities and are sold at higher prices. the lower the batch size is, the easier it is to attain higher price levels. alternatively, from the reverse perspective, we can assume that only more expensive wines are worth producing in smaller quantities (as average costs are higher in these cases). at the other end of the market, larger batches are produced of wines with elevated sugar levels and sold at a lower price. given the exclusion of tokaj wines from the sample, higher sugar levels are typically a result of sweetening rather than the use of overripe grapes whose must does not ferment completely. in the case of these wines, sugar is not a sign of elevated quality level but rather a tool for creating a homogenous taste (and covering possible minor defects). thus, the negative relationship of sugar content and price is entirely in line with theory, suggesting that homogenous wines shall be produced in large quantities and sold at an average price. the regional dimension shows versatile effects as some regions strengthen the relationship of intrinsic values and market situation, while others weaken this effect. this is further complicated by different gis. the results are in line with the findings of previous literature on this subject as it is not gi usage that matters, but the specific gi. the most notable gis are villány (v.classicus and v.prémium), eger (mainly e.superior and e.grand superior or older vintages) and szekszárd. we must note that red wines are very common with these gis (however, whites in eger and rosés in villány and szekszárd also have a significant share). individual brands have an essential role. tier1 and tier2 wineries tend to sell their wines at higher prices and in smaller batch sizes. the relationship is twice as strong in the case of the tier1 group. on the whole, our figure 2. relationship between subregions and determinants (biplot). source: own composition. 130 peter gal, attila jambor, sandor kovacs results support empirical literature at the country level as evident from the literature review. our model also suggests that wines with a low concentration of alcohol and extracts and significant levels of sugar content (i.e. semi-sweet) are sold in the lower segment of the market, characterised by fierce competition. here, batches must be larger for the sake of efficiency and the concentration of chemical compounds are low for lower costs. meanwhile, the higher end of the market shows the signs of monopolistic competition with product differentiation, higher quality level, higher prices and smaller batches. results also suggest that wine market policies (such as horizontal rules on gi systems) shall make the differences in quality rules more transparent for consumers. a classification of gis by easy-to-understand quality standards (based on simple indicators of grape and wine quality) may serve as a useful tool. moreover, the control of wine products shall be adjusted to their market situation. on the one hand, wines sold at larger quantities (and lower prices) should be controlled on the spot instead of the strict and timeconsuming ex-ante control process before their release to the market. on the other hand, wines sold in low quantities and at higher prices (often using gis or individual terms benefitting of a good reputation) should be controlled rigorously before entering to the market (including strict organoleptic tests). our paper can serve as a basis for future studies either by comparing our results to different regions or introducing other regional determinants (variables) to a selected region in order to give a more comprehensive picture on the topic. acknowledgement this article was supported by the jános bolyai research scholarship of the hungarian academy of sciences and supported by the únkp-20-5-de-1 new national excellence program of the ministry for innovation and technology from the source of the national research, development and 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[52] m. wetzels, g. odekerken-schröder, c. van oppen, using pls path modeling for assessing hierarchical construct models: guidelines and empirical illustration. mis quarterly 33 (2009), 177–195. https://doi.org/10.2307/20650284 [53] c. fornell, david f. larcker, evaluating structural equation models with unobservable variables and measurement error, j marketing res. 18 (1981), 39–50. https://doi.org/10.2307/3151312 wine economics and policy 10(1): 89-100, 2021 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/wep-8873 wine economics and policy citation: marcos vinícius araujo, grégory lo monaco, kelly lissandra bruch (2021) social mobility and the social representation of sparkling wine in brazil and france. wine economics and policy 10(1): 89-100. doi: 10.36253/ wep-8873 copyright: © 2021 marcos vinícius araujo, grégory lo monaco, kelly lissandra bruch. this is an open access, peerreviewed article published by firenze university press (http://www.fupress. com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information fi les. competing interests: the author(s) declare(s) no confl ict of interest. social mobility and the social representation of sparkling wine in brazil and france marcos vinícius araujo1,2,*, grégory lo monaco3, kelly lissandra bruch1 1 universidade federal do rio grande do sul, centro de estudos e pesquisas em agronegócios, brasil 2 aix marseille université, laboratoire de psychologie sociale ur849, france 3 aix marseille université, laboratoire adef ur 4671, france e-mail: araujovmarcos@gmail.com; gregory.lo-monaco@univ-amu.fr; kelly.bruch@ ufrgs.br *corresponding author. abstract. wine is a social object, established in the old world and later migrated to the new world. champagne is an internationally important and famous french sparkling wine, signifi cantly present worldwide. brazil, a new-world wine producer, has a recent but expanding history of sparkling wine production and consumption. as to its social aspect, this product has diff erent representations and roles in both these countries. th erefore, this study aims to understand how culture and social status infl uence the organization of social representations associated with sparkling wines in brazil and france. th us, we used the social representation approach, a theory of knowledge and communication. for content collection, we carried out a verbal association task. two hundred and thirteen brazilians and one hundred ninety-eight french participants provided the fi rst four words which came to mind aft er hearing four inducted words. th e verbal associations were categorized using semantic contextualization. th en, we performed a correspondence factor analysis. th e results supported our hypothesis that culture, social status, and social origins all infl uence social representations associated with sparkling wine, revealing this kind of wine to be a product of social distinction and affl uence. keywords: social origins, social representation, wine culture, social norms, wine consumption. 1. introduction consumption is a symbolic act, as social behavior is infl uenced by symbolism around a given product, as well as its social role [1]. buying a product is not an isolated action. it is rooted in social and cultural values and ideologies. as a cultural product, wine [2, 3, 4, 5, 6] – with collective values and symbolism – projects diff erent representations [5] because of its ancestry. wine has more than 8,000 years of history [7], and was evidenced in mesopotamia, a region which developed a rich urban civilization [8], as far back 90 marcos vinícius araujo, grégory lo monaco, kelly lissandra bruch as 3000 bce. wine culture was established in the old world, represented by european countries, and was later migrated to the new world [9]. represented by colonized countries, such as brazil, new-world wine is undergoing an expansion in production [10] and consumption [11, 12], mainly in regard to sparkling wine, which has seen a significant increase in recent years [13, 12]. in brazil, the conventional sparkling wine market grew around 160% from 2005 to 2017, and moscatel sparkling wine grew around 400% [13]. france is still the main sparkling wine market in the world [14]. over the last years, consumption there has remained stagnant, however, with low variation to local products and an increase of around 60% in imported sparkling wines [15]. despite said stagnation, france is still the world’s most important sparkling wine producer. the history of sparkling wine predates 77 ce, but its era of prestige began and continues with champagne [16] in france. therefore, champagne has been followed and imitated all over the world. in the usa, for example, locally produced sparkling wines have used the name “champagne” to convey a better reputation for themselves [17]. in brazil, local sparkling wine was initially called “brazilian champagne” [18]. inspired by the champagne region, replacement products have also emerged in france, such as the crémants [19] and other sparkling wines. in brazil, the same representations associated to champagne are applied to these variants mentioned above. champagne shares the same representation with conventional and moscatel sparkling wine and cider, and, in france, crémants and other sparkling wines [20]. despite the physical differences, these products share a social meaning and convey different, historically constructed representations in society. 1.1 social mobility and sparkling wine consumption social mobility concerns status changes, upward or downward in social standing, on a population over time [21]. it is a general aspect of the industrialization process [22]. europe overwent an upward process during the 1980’s and 1990’s , but it is currently experiencing a downward process [23]. nowadays, developing countries are going through an upward process [24], among them brazil. such changes in social standing affect consumers’ habitus asymmetrically [25]. according to the author, downward mobility provides no incentive to change their habitus as a devalued position. contrarily, upward mobility works as an incentive to adjust the habitus, creating a blended habitus. in short, a blend of the position of origin and destination, facilitated by a slow and steady upward movement [25]. despite sharing the same economic access as others in their social class, consumers develop different perceptions, depending on their social origins [26]. social origins are tied to the one’s family’s social class and education. such perceptions are also expressed in behavior. in the high class, people tend to maintain their status throughout their lives, so they try to replicate their family’s behavior [27]. however, social origin is not the only influence. in alcohol consumption, one’s behavior and perceptions are influenced by their social class and age, particularly during their adolescence and early adulthood [28]. in other cases, such as with music, preferences are related to the origin of the individual’s capital and their environment [29]. we also have bandwagon effects. in this case, consumers replicate other people’s behavior as luxuries that all should have access to [30]. privileged classes want to maintain their status and habits, and individuals seek to replicate their position throughout their lives [27]. however, this replication of behavior, the traditional cultural reproduction, might be different because of the education received by one’s parents [31]. upon reaching a new class and amassing wealth, consumers are driven to demanding iconic european products, such as wines, which provide a physical characterization of their economic growth [9]. as a product, wine represents cultural and social distinction [2]. drinking wine improves social relations [32] and has an elitist dimension, such as the maintenance of one’s social status, as well as its differentiation and self-promotion [33]. for example, a woman in upward social mobility consumes more wine than women in her group of origin because wine is generally associated with affluence [34]. this is a possible effect of the social value of wine [35] and the different representations associated with it [36], as well as the cultural contexts which influence the way people think about wine [6]. the main context in wine culture is the difference between old and new-world wine and traditional and non-traditional wine countries. the old world retains a historical relation to wine, while the new world’s association to it is much more recent, and mostly in former european colonies . traditional wine nations, though they might belong to the new world, form a closer and more familiar bond with wine than non-traditional wine countries. for example, france bears much closer ties to argentina, a traditional wine producing country, than to switzerland, whose bond is nearer to brazil, a non-traditional wine country [38]. the old world, composed of european countries, is the traditional producer and consumer. the new world is made up of former european colonies, such as latin america, africa, oceania, and 91social mobility and the social representation of sparkling wine in brazil and france the usa [9], the new consuming and producing countries. represented mainly by emergent markets, such as china, india, and brazil, new-world wines have a social influence on wine consumption [37]. in those countries, consumers develop different relations with wine and its different types. usually, older consumers prefer still wine, while young adults prefer sparkling wine [39] because of their different representations. sparkling wine has different characteristics concerning types, countries, and segments [40, 41], besides the different consumption contexts [13]. in the new world, sparkling wine is more associated with enjoyment and self-image, while in the old world, it is more associated with tradition and the product itself [42]. champagne is the main product of this category. champagne is an icon, a luxury, and a festive beverage which has shaped modern consumption ideologies [43]. nevertheless, over the last years, the most important consumption growth has been tied to other sparkling wines. in france, the crémant had an increase in sales of around 50% from 2005 to 2013 [44]. brazilian consumers have increased the consumption of local sparkling wines, unlike the increase of consumption of imported wines, mainly from countries in the new world. 1.2 the theory of social representations social representation (sr) is a theory of common sense in knowledge and communication. it ref lects socially constructed knowledge, maintained and shared, aiming to build a reality [45] and beliefs shared by individuals in the same social and historically determined group [46]. srs may influence individual behavior in collectivity [47] because they aim to understand how people think, communicate, and behave [48]. from them, one can understand how individuals and groups build a stable and predictable world, from an unfamiliar object to a familiar one [49]. two processes allow this social construction: objectification and anchoring. the former reduces uncertainty, making an abstract object concrete. the latter incorporates the new object in a familiar category based on preexisting knowledge [50, 51, 52]. an sr’s activity and construction are the same for all individuals, but objects and their content may vary across cultures [6]. people think and interact according to their own culture, and depending on their group of origin and level of knowledge [53]. an sr might also explain and influence collective behavior [54, 55]. it is a lens we use to see the world and understand the dynamics of social interactions and practices [56]. it was made to persist and is not constantly changing [57]. according to abric [58, 59, 60], srs are structured around a central core and a peripheral system. the central core is rigid and may be activated differently to signify particular objects or practices according to the social context in which they occur [59]. elements composing the peripheral system are more dynamic, accessible, and adaptable to a concrete reality. they also affect behavior [61, 62, 63] and allow us to understand products and objects from a social and cultural perspective [64], because an sr — as a collectively shared representation — classifies individuals as belonging to a specific group [65]. 1.3 summary and hypothesis the present study aims to understand how culture, social origins, and social class influence the social representations of sparkling wine. some studies aim at understanding the social aspect of sparkling wine consumption [13; 20, 42], and others focus on sparkling wine preferences [66, 67, 39, 68, 42], its intrinsic and/ or extrinsic attributes [69, 70, 71, 41], and the sparkling wine market [72, 73, 74]. no studies have explored social representations of sparkling wine or made a comparison between the old world and traditional wine countries against the new world and non-traditional wine countries, such as france and brazil, or even that sparkling wine is a distinct category of wine, and an important product in the wine sector. as to social representations, some studies have been developed about wine. it has been observed that still wine and sparkling wine are traditional and cultural products in france, one of the most important wine producing countries in the world. contrarily, when compared to france, brazil’s history of wine production and consumption is recent, but has enjoyed significant growth in recent years. sparkling wine was the most important reason for this growth, mainly due to internal sales, as this product has become linked to partying, luxury, celebrations, and a symbol of social affluence. previous studies have already approached social representations of wine in general. those studies applied different approaches. consumer proximity to wine improves their knowledge about the product, and, thus, there is an influence on how the object is represented in the consumer’s mind [75]. similarly, social representations allow highlighting how social groups understand the ill-defined concepts of wine [53]. wine is seen as a traditionally french beverage [36], a cultural object of sociability and heritage [76] in which representations are influenced by culture and expertise level [6]. france is considered a traditional wine producing country, while 92 marcos vinícius araujo, grégory lo monaco, kelly lissandra bruch brazil a non-traditional wine producing country [38]. wine has an “ideal” context of consumption [32, 77] and may have an “ideal” label and bottle [78]; furthermore, it is an object of polemical representations and part of intergroup conflict, connected to social identity [5], represented as a product of social standing and affluence [20, 33]. social representations are a worldview used by individuals or groups to understand the dynamics of social interactions and to clarify determinants of social practices [56]. additionally, we have seen that social representations are constructed knowledge, socially and historically maintained, and they influence social behavior. similarly, social origins, such as the education received by one’s parents’, also affect behavior and cultural practices. due to these different social representations of wine, class, social origins, and cultural influence, our hypotheses were the following: h1 – social status and social origins will influence the way individuals represent sparkling wine, but they will be more important for brazilian consumers due to their social mobility and the recent rise of the sparkling wine culture. h2.a – because the french are closer to and have historical contact with sparkling wine culture – being from a traditional country – social representations shared by them will be more related to wine culture and wine knowledge. h2.b – brazilians have a recent history with sparkling wine culture – being from a non-traditional country – and will thus share more trivial representations, showing ignorance about the product. h3 – sparkling wine will have shared representations with still wine as well as representations distinguishing the two. h4 – consumers will confuse sparkling wine with more familiar sparkling beverages. 2. method 2.1 participants participants were recruited using the online snowball sampling method via online social networks. this method consists of participants inviting others to share the questionnaire link. the link was shared on facebook and whatsapp groups in brazil and france, and we invited participants to share the link in turn. two hundred and fifteen brazilians (151 females and 64 males) and one hundred ninety-eight french men and women (142 females and 56 males) of legal drinking age (see table 1) answered the questionnaire. wine and sparkling wine habits were assessed on a 5-point likert scale, where 0 = non-consumer (never), 1 = very occasional (exceptional parties and events), 2 = occasional (occasionally, other occasions besides parties), 3 = regular (regularly throughout the year), 4 = frequent (several times per month) [see 6]. most participants were regular wine consumers (brazil m = 3.31, sd = 1.01; france m = 3.37, sd = .92) and occasional to regular sparkling wine consumers (brazil: m = 2.74, sd = 1.00; france: m = 2.58, sd = .78). social origins were measured by their parents’ educational level [see 27, 31]. socio-demographic questions were also asked, such as age, gender, occupation, income range, and educational level. 2.2 procedure we collected the content using a word association task, followed by two steps referring to hierarchical evocation and semantic contextualization [see 65, 60, 79, 80, 81]. information such as social origins, consumption habits, and sociodemographic data were also requested. participants wrote (04) words or phrases that came to mind [82] when we asked them about the four different inducing words. the inducing words in brazil were: “vinho espumante” (sparkling wine), “espumante moscatel” (moscatel sparkling wine), “sidra” (cider), and champagne; in france: “vin mousseux,” “vin pétillant,” “vin crémant” – terms used to designate sparkling wine in french, and champagne. these words were taken in referenced blogs and official content from wine associations, explaining the difference between those products, as well as how the product was misunderstood by the consumer [see 20]. to verify the context and the real meaning of the expressions and words, participants wrote a sentence expressing the meaning of the word and expressions through semantic contextualization [80,81]. the questionnaire was pretested with some brazilian and french participants to verify their understanding of the terms and the organization in portuguese and french. table 1. participants age distribution across culture, socio-professional category, and social origin. age total brazil france spc+ spcso+ so18-20 4 1 3 0 4 1 3 20-29 166 94 72 80 86 80 86 30-39 99 68 31 56 43 36 63 40-49 54 20 34 31 23 12 42 50 and over 90 32 58 49 41 16 74 93social mobility and the social representation of sparkling wine in brazil and france 2.3 data analysis the words collected were categorized according to their meaning and similarity. this technique is based on intuitive-content analyses and aims to exhaust the meanings produced on a word association task [83]. the categorization was done by groups of meanings, based on semantic contextualization, that is, “champagne,” when related to the wine from champagne, and “non-champagne,” when the participants affirm the difference from champagne [see 81]. participants’ data was dichotomized by culture (brazil and france), socio-professional category (spc + and spc-), and social origins (so+ and so-). socioprofessional category and social origins were dichotomized using the average of participants. their social status was measured by socio-professional category [see 84, 85, 86]. social origins were measured by their parents’ education level, following traditional cultural emulation [31]. education levels were split by 2 years or less, and more than 2 years of a bachelor’s degree or equivalent (university education). finally, we performed the correspondence factor analysis (cfa) from a contingency table [see 87], and the results are illustrated with a cfa graph. 2.4 correspondence factor analysis (cfa) cfa is a technique for processing different types of data matrixes, in which we can analyze interdependence between dimensions [88]. in this study, we look for the interdependence between representations associated by participants in the verbal association task (categories) and country of origin, socio-professional category, and social origins as independent variables. this technique allows us to simultaneously analyze independent variables and the verbal production of participants [83, 6], and also highlights the correspondence between the variable modalities and their associated words [6]. through this method, cfa allows us to highlight social anchoring and helps us identify how the considered object is regarded, according to which positions it occupies in the social field [60]. it was developed to identify the most significant factorial axes [87]. this factorial analysis highlights the differences between association frequencies related to independent variables and their correspondence [80]. the graphical representation of results shows how social representations are organized [88, 83]. 3. results correspondence factor analysis (cfa) was used to study the correspondence between our observations and modalities (figure 1). we used deschamps’ approach [83], applied in recent studies, to define contributions by factors (cf) [see 87, 79, 6]. factor 1 receives contributions related to the variable “culture”: brazil = .44, france = .49, a contribution of 93% of inertia. factor 2 is related to social status and social origins. high social origins = .44, low social origins = .23, and low socio-professional category = .13, a contribution of 80% of inertia. the high socio-professional category was excluded because it did not contribute significantly to any factor = .12. figure 1 shows the organization of factors. the main opposition, related to culture, is observed in factor 1. for brazilians, the term “beverage” refers to many different sparkling beverages, such as cider, moscatel sparkling wine, and conventional sparkling wine, which have the same usage, such as toasting, cork popping, bubbles, special glasses, “a champagne flute,” the ideal temperature for consumption, and as a light drink. “apple” refers to cider, derisively presented by figure 1. graphical representation of the results from correspondence factor analysis (factors 1 and 2). note: it is important to read the figure following these instructions: abbreviations in capital letters which are inside frames represent the terms of independent variables. br – brazilians; fr: french; so-: low social origin; spc-: low socio-professional category; so+: high social origin; spc+: high socio-professional category. “term” means that the term of independent variables accounts for the construction of factor 1. “term” means that the term of independent variables accounts for the construction of factor 2. “item” means that the item accounts for the construction of factor 1. “item” means that the item accounts for the construction of factor 2. “item” means that the item accounts for the construction of factors 1 and 2. items not considered as important are not showed on the graph, except to spc+. 94 marcos vinícius araujo, grégory lo monaco, kelly lissandra bruch some participants as a “poor man’s champagne.” the terms: “brand”, “usage”, “aesthetic”, and “romantic” refer to visual and social status due to the prestige associated with product consumption. brazilian participants shared representations of a visual and refreshing beverage, such as with the terms “refreshing”, “beverage” and “temperature”. they are also associated with an easy to drink beverage, soft and sweet, with specific consumption practices. for the french, “type” and “origin” refer to different products from different regions, such as the different regions where crémant, in france, or other sparkling wines are produced, such as prosecco, in italy, and cava, in spain. “champagne” and “non-champagne” refer to the importance of a good differentiation between the champagne aop and substitute sparkling wine. the word “entertain” refers to amusing moments in which sparkling wine is consumed, such as parties and happy hours. factor 2 opposes high and low social status, socioprofessional category, and social origin. however, there is more consensus in france than in brazil, which can be explained by the fact that wine is a cultural product in france [6]. there, sparkling wine is seen as “champagne” and “non-champagne” substitute products [20]. low social status represents sparkling wine as more visual and general characteristics, “refreshing”, “good”, “soft”, “provenance”, “aroma”, and “health”. “provenance” refers to the raw material used to produce sparkling wine, such as must and grape, and methods in which low status participants affirm they know how sparkling wine is produced. they give more superficial and general information about the product and not details of organoleptic properties, as a traditional wine consumer would [see 38]. those from high social origins associate sparkling wine with the protection of social standing and distinction, showing their knowledge about the product, the difference between substitutes, or lack of knowledge about them. in france, “non-champagne”, “unfamiliar”, and “accompaniment” show that substitute products are not champagne. in brazil, substitutes are not conventional sparkling wine. “unfamiliar” refers to the lack of knowledge about substitute products. the brand is related to how consumers differentiate products and social standing, mainly in brazil. the results show evidence of sparkling wine as a product of social standing and distinction. the object has different social meanings depending on the country in question. in france, “champagne” and “non-champagne”, in brazil, the different sparkling beverages and sparkling wine. in france, the representation is more related to the different wine types than to the sparkling characteristic; in brazil, it is related to consumption, rules, and general beverages, not just wine. 4. discussion this study aimed to understand how culture and social status influence the organization of social representations associated with sparkling wine in brazil and france. according to our h1 hypothesis, results show that sparkling wine is seen as a product of social standing and distinction, but in different ways, depending on the country. one can observe that there is a convergence of associations from low social status, origins, and socioprofessional category. high social status, social origin, and socio-professional category, which do not contribute significantly to the factor, do in fact converge. among the french and brazilians, in line with our theoretical elements, we can see the influence of culture. indeed, results highlight a cultural difference between traditional and non-traditional wine countries [38]. moreover, the process and construction of social representations are universal, but the subject differs across cultures [6] and depends on its country of origin [53]. brazilians have a recent wine history [18, 89], but sparkling wine culture is on the rise. differently, wine is part of the french identity and culture [90, 5, 6, 38]. therefore, france is the origin of modern sparkling wine culture [91, 92, 8]. the results show social representation divergences in brazil and convergences in france, probably due to their tradition of sparkling wine production and consumption. the results support h2.a, and h2.b hypotheses, in which one’s culture and proximity to wine culture influence social representations associated with sparkling wine. results confirm prior research about the differences between traditional and non-traditional countries [38]. in brazil, sparkling wine is more often related to a general, soft, sweet, refreshing, easy-to-drink beverage, and with different brands. in france, it is related to champagne and substitute products – non-champagne — from different origins, regions, and countries, and different types: representations linked to knowledge and ignorance regarding the product. this aspect highlights social standing and dominance related to wine consumption [33] and the proximity to wine culture. there are also differences concerning social status, more divergent in brazil and convergent in france. that evidence likewise contributes to validating our h1 hypothesis. wine, in general, is a cultural and social product [2]. other authors have also showed the different rep95social mobility and the social representation of sparkling wine in brazil and france resentations associated with it [77, 75, 5, 6, 78, 53, 36, 93]. in our study, according to our h3 hypothesis, the most important difference between still wine and sparkling wine is the presence of bubbles, foam, aesthetics, and entertainment. however, in brazil, sparkling wine is represented as a general or common beverage with bubbles. in france, it is represented as wine with bubbles, consumed for entertainment, according to intrinsic and extrinsic quality characteristics [see 94], such as origin and type. in both countries, bubbles are an important element. they emphasize sparkling wine as a distinct category in the wine field, with bubbles, prestige, fun, and a product to be flaunted. in france, we can observe the association between champagne and non-champagne and, in brazil, sparkling wine as a general sparkling beverage, including cider. it is observed that there is a misunderstanding about the definition of sparkling wine. this result validates our h4 hypotheses about social anchoring, in which individuals familiarize novelty and reduce its strangeness [95]. both countries anchor in familiar products to understand “new” products. substitute products, crémant, cava, and prosecco, are compared to champagne; champagne, technically a sparkling wine, holds a better reputation [16] and is represented in a different category. in brazil, substitute beverages, such as cider, a fermented beverage made from apples, are compared to conventional sparkling wine, sharing representation of sparkling wine, in some cases called “a poor man’s champagne.” that is an anchoring process in which individuals give sense to a non-familiar object from preexisting knowledge [50, 51, 52]. the process is related to social representation origins and reinforces social position and sociability [33, 96]. brazilians in higher social positions have more knowledge about sparkling wine, and the french, about champagne. otherwise, results show the symbolic aspect of sparkling wine consumption related to social factors, such as social standing, position, and mobility. sparkling wine is a product of social affluence and with a strong visual appeal. however, social representations of sparkling wine, its consumption, and social distinction must be studied further. thus, our study shows the future directions of social standing and sparkling wine consumption. the rise of sparkling wine consumption in brazil and france could be explained by social distinction and mobility, mainly in brazil, where social representations differ depending social origins, suggesting the use of sparkling wine as a product of social standing. brazil has increased economic and social development in recent years, showing upward social mobility [97]. in upward mobility, individuals try to adapt to a new social class, in an attempt to become a part of it and to be accepted by it [24]. then, future research could study the correlation of the social representations of sparkling wine and social domination orientation (sdo), and conspicuous consumption, social representations of sparkling wine supporting a social hierarchy. sdo is the society that tends to have a social structure based on social hierarchies and dominance of hegemonic groups at the top [98]. conspicuous consumption is “a deliberate engagement in the symbolic and visible purchase, possession and usage of products and services imbued with scarce economic and cultural capital with the motivation to communicate a distinctive self‐image to others” [99, p. 217]. 5. conclusions considering consumption as a symbolic act which bears a social role [1], sparkling wine consumption must be seen as a social and cultural phenomenon. our research highlights the origins of sparkling wine representation and the anchoring process with champagne and french practices, as well as the context of its consumption. as proposed by rodrigues et al. [38], lessknown regions must improve wine education as a marketing strategy to increase wine awareness, as it could be an important alternative for the wine market. despite its organoleptic characteristics, sparkling wine is an object of representation, and its consumption is a social phenomenon with cultural meaning. the object is used to communicate social class and the need for social affiliation. we highlighted the differences between traditional and old-world wine, and non-traditional and new-world wine representations. these differences show the influence of old-world wines and opportunities for wine marketers to build product brands according to consumers’ beliefs and culture, and the openness to new sparkling wine types, mainly in emerging countries, where upward social mobility is occurring and where there is a non-tradition of sparkling wine consumption. 6. acknowledgements the authors thank the higher education improvement coordination – capes for the grant allocated to the first author (grant pdse-capes 47/2017 and finance code 001). 96 marcos vinícius araujo, grégory lo monaco, kelly lissandra bruch references [1] solomon, m. r. 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(2011). conspicuous consumption orientation: conceptualisation, scale development and validation. journal of consumer behaviour, 10(4), 216– 224. https://doi.org/10.1002/cb.364 wine economics and policy 10(2): 3-14, 2021 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/wep-8977 wine economics and policy citation: micael santos, xosé antón rodríguez, ana marta-costa (2021) productive efficiency of wine grape producers in the north of portugal. wine economics and policy 10(2): 3-14. doi: 10.36253/wep-8977 copyright: © 2021 micael santos, xosé antón rodríguez, ana marta-costa. this is an open access, peer-reviewed article published by firenze university press (http://www.fupress.com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information files. competing interests: the author(s) declare(s) no conflict of interest. productive efficiency of wine grape producers in the north of portugal micael santos1,*, xosé antón rodríguez2, ana marta-costa3 1centre for transdisciplinary development studies (cetrad); university of trás-osmontes e alto douro (utad), quinta de prados, pólo ii echs, 5000-801 vila real, portugal, e-mail: micaels@utad.pt 2department of quantitative economics, university of santiago de compostela (usc), avda xoán xxii, s/n, santiago de compostela, spain, email: xoseanton.rodriguez@usc.es 3centre for transdisciplinary development studies (cetrad); university of trás-osmontes e alto douro (utad), quinta de prados, pólo ii echs, 5000-801 vila real, portugal, email: amarta@utad.pt *correspond author. abstract. portugal is a country traditionally dedicated to viticulture and characterized by the production of wines of high quality. it has been among the top of 15 countries in the sector in terms of vineyard area extension and wine production, however in recent years portugal have lost market share in these fields. this situation can be related to the level of productive efficiency of vineyards. therefore, this study aims to analyse the productive efficiency of wine-growing farms and the determinants that make farms more efficient. the specific hypothesis to be tested is if structural factors of the wine grape farms are determinant of its productive efficiency. to achieve this purpose, we use a database collected by face-to-face surveys from a sample of 154 wine-growing farms with specific input-output information from 2017. these farms are locating in the three regions of the north of portugal (minho, douro and trás-osmontes), which represents more than 40% of the portuguese vineyard area. to analyse the productive efficiency of the farms, we use the stochastic frontier analysis (sfa). the results show that the efficiency level in the wine-growing farms from the north of portugal is around 68/67%, but with significant differences at regional level. many of these discrepancies may be due to structural factors, such as the type of wine grapes and the specific characteristics of the region. in conclusion, farms must adjust production management to the existing structural characteristics. keywords: technical efficiency, productivity, grape production, stochastic frontier analysis. 1. introduction the wine market is becoming increasingly competitive and is no longer an exclusive sector of the southern european countries (fleming et al., 2014; goncharuk and figurek, 2017). literature designates the traditionally wine-producing countries as “old world” and as “new world” the countries 4 micael santos, xosé antón rodríguez, ana marta-costa that were colonized by the former group, but the first continue to lead the 2018 market in the following order italy, france and spain (oiv, 2019). portugal, being the 9th with the largest vineyard area and the 11th largest wine producer on a worldwide level, needs to improve its competitiveness position to get a better podium place in the world market and this can upstream of the sector. viticulture is an expensive activity in the wine production (moreira et al., 2011) and therefore it could play an important role to improve the sector competitiveness through its grapes production efficiency. the north of the portugal has three wine regions – minho, douro and trás-os-montes – that integrates 42% of the total vine area of the country and corresponds to 35% of the national production of wine in 2019 (ivv, 2019). minho is located in the northwest of portugal and integrates vinho verde region (green wine, 23.999 ha, 12,5% and 759.757 hl, 12,5% of total national) cradle of the famous alvarinho variety; in the extreme northeast of the country to the north of the douro region, there is the wine production region of trás-os-montes (tom, 12.252 ha, 6,4% and 50.670 hl, 0,8% of total national); and the demarcated region of douro (drd, 43.863 ha, 22,8% and 1.259.683 hl, 20,8% of total national) is considered to be the first demarcated region of the world since 1756 (ivv, 2019). douro is a mountain vineyard region with high slopes, which increases production costs due to the difficulty of mechanization and to the labour intensive activity. nevertheless, it is a wine region characterized by the production of port wine, a generous wine known internationally, where the grapes are sold at higher price. despite the geographical proximity of the three regions, they have very distinct characteristics in terms of climate, soil and types of wines produced. these different structural factors present in these three regions cannot be changed. thus, the aim of this paper is to estimate the productive efficiency of the three regions of northern portugal and to verify if these structural factors are responsible for the different levels of efficiency. the analysis of farms efficiency is imperative to check how the resources are being used and if its reduction can lead to the same level of production. in the farmers’ vineyards context, this methodology allows to identify which ones are the most efficient and the characteristics of the system that are likely to get better performance. this work not only contributes to the relevant literatures, as it is an original study that analysis the efficiency of grape farms in the north of portugal, which integrates wine regions such as minho and trás-osmontes never tested, besides drd, but also overcomes the lack of data, applying face-to-face surveys at a farm level. furthermore, the hypothesis tested are innovative, revealing new insights into the determinants of efficiency on wine grape farms. 2. literature review 2.1 concepts and methodologies efficiency is linked to a very important economy premise, the scarcity of resources. since resources are limited, the productive efficiency analysis confirms if a decision making unit (dmu) is minimizing the use of productive factors to achieve a desired amount of production. this literature began with farrell (1957) work and since that the efficiency analysis is applied to several sectors. the efficiency analysis in agriculture sector is very common and is an ascendant topic over the years (bravo-ureta et al., 2007; mareth et al., 2016; thiam et al., 2001). to analyse the productive efficiency, two types of methodologies have been applied in the literature, the parametric and non-parametric ones. the stochastic frontier analysis (sfa) is the widely used method as a parametric and stochastic approach that was introduced by aigner, lovell and schmidt (1977) and meeusen and van den broeck (1977), while data envelopment analysis (dea), created by charnes, cooper and rhodes (1978), is the non-parametric and deterministic method most used. both present advantages/potentialities and disadvantages/deficiencies that have been pointed out by several authors (alvarez and orea, 2001; coelli, 1995; cullinane et al., 2006). the dea is an easier method to apply, because does not need to specify a functional form (lemba et al., 2012). however, to use sfa is necessary to choose a functional form that best describe the reality, because the production function is never known in practice (farrell, 1957). the functional forms most used in empirical studies are cobb-douglas and translog. in addition, the relationship of inputs and outputs is not made in dea, in opposite to sfa (thiam et al., 2001). the sfa allows for measurement errors (two distinct error components) besides efficiency estimation (cullinane, wang, song and ji, 2006). the random error captures noise that is beyond of control of the producer and can affect the production such as weather, disease and pest infestation (alem et al., 2018). although there is no consensus on the best methodology, lampe and hilgers (2015) through a bibliometric analysis verified that dea is most used (maybe because is an easier method), but the sfa had been preferred 5productive efficiency of wine grape producers in the north of portugal in agriculture and in economics themes and dea in operation research. moreover, oh and shin (2015) state that dea is chosen when it is not possible to express an algebraic form and to impose a distribution of inefficiency, whereas the sfa is preferable when it is possible to express a functional form and to assume distributions of efficiency and measurement errors. in addition, sfa includes random error that is very important in any agriculture activity, where there are factors beyond the farm’s control (alem et al., 2018; moreira et al., 2011). for these reasons, we have chosen to use the sfa in this work as some previous studies have done (coelli and sanders, 2013; moreira et al., 2011; tóth and gál, 2014). 2.2 literature from previous empirical studies some empirical studies have analysed efficiency in wine sector and they are synthetized in table 1. overall, there is a consensus in the choice of variables for output and input, with grape or wine production in quantity or value being used for output and land, labour and capital used for inputs (aparicio et al., 2013; brandano et al., 2019; coelli and sanders, 2013; conradie et al., 2006; freitas, 2014; henriques et al., 2009; marta-costa et al.; 2017; moreira et al., 2011; santos et al., 2018 and 2020; sellers-rubio et al., 2016; sellersrubio and más-ruiz, 2015; tóth and gál, 2014; urso et al., 2018). intermediate consumptions also has been tested by freitas (2014) and santos et al. (2018, 2020). the determinants of efficiency in wine sector seems to be an important analysis in previous studies and only the research papers from aparicio et al. (2013); coelli and sanders (2013); marta-costa et al. (2017) and sellers-rubio et al. (2016) have not verified their impact on productive efficiency. the variables to be tested are diverse and depend on the objective of the study and whether it is been analysed grape or wine production. as efficiency determinants intertwined to grape production we found in the literature the specialization of the farm in viticulture, training systems, irrigation, mechanization, number of plots, age of plantation, vineyard landscaping, farm slope index, climate, land ownership, farmers’ age, and transformation of grapes into wine (henriques et al., 2009; moreira et al., 2011; santos et al., 2020, 2018; urso et al., 2018). other variables are specifically connected with wine production, which is not the focus of this study. however, some variables could be implemented in the wine sector at any stage of production in the value chain such us farm or company experience, share of paid work or average of wages paid, education or quality of human capital, public aid, financing and investment, type of grape or wine, grapes or wine with a designation of origin and market price of grapes or wine (freitas, 2014; henriques et al., 2009; moreira et al., 2011; santos et al., 2020, 2018; sellers-rubio and más-ruiz, 2015; tóth and gál, 2014; urso et al., 2018). the factors that could influence the efficiency have been discussed by several authors among the years (mareth et al., 2017) and the effect of specific efficiency determinants is not consensual between the previous studies. the systematic literature review in efficiency analysis of mareth et al. (2017) offers a controversial results table on the efficiency dairy farm determinants. while some of the referenced studies show a significant impact of the location, farm size, education, farm age, among others on the farm efficiency, other studies found a non-significant relationship between them. in the wine sector, coelli and sanders (2013), moreira et al. (2011), santos et al. (2020) and urso et al. (2018) showed that efficiency performances between regions were significantly different in australia, chile, portugal and italy, respectively. moreover, sellers-rubio and másruiz (2015), vidal, pastor, borras and pastor (2013) and urso et al. (2018) verified significant differences in productive efficiency levels between designations of origin (do) and these do are associated with specific regions. these findings highlight the relevance of a more detailed study of production efficiency at regional level, since all previous revised studies in the wine sector show a significant impact of the location in efficiency farm performance. however, this relationship has not always been consensual in other agricultural sectors (mareth et al., 2017). mostly empirical studies have shown that location has a significant influence on production efficiency (e.g. bravo-ureta et al., 2007; mareth et al., 2016; and santos et al. 2021), with some exceptions (e.g. thiam et al., 2001; and álvarez and gonzález, 1999). size is a determinant of efficiency and productivity that has been studied for quite some time (baumol, 1967) and can influence economic performance and competitiveness. however, this relationship can be somewhat controversial (mareth et al., 2017; townsend et al., 1998). in the studies conducted in the wine sector the debate remains, since some have found a positive relationship with efficiency (brandano et al., 2019; henriques et al., 2009; sellers and alampi-sottini, 2016; sellers-rubio and más-ruiz, 2015), others a negative impact (santos et al., 2020; urso et al., 2018) and one a non-significative influence (santos et al., 2018). the positive relationship between size and productivity and efficiency can be explained by increasing returns to scale (diewert and fox, 2010; sheng et al., 2015), more mechanization linked to better performance 6 micael santos, xosé antón rodríguez, ana marta-costa table 1. summary of previous empirical studies on efficiency analysis in wine sector. study sample methodology outputs inputs determinants conradie (2006) 70 farms in western cape province of south africa, between 2003 and 2004 sfa grapes in volume land; labour; maquinery location average wage; electricity in irrigation; percentage of non-bearing vines; farmers age; education henriques et al. (2009) 22 farms of the alentejo region of portugal, between 2001 and 2004 dea grapes production in value agricultural area; labour; machinery and equipment costs; vegetal production costs; other costs area; experience; land ownership; irrigation; labour type; product specialization moreira et al. (2011) 38 chilean wine grape producers that belong to tecnovid and 263 observations, in 2005-2006 sfa grapes production per block in volume size of blocks; labour cost; machinery cost; other inputs (e.g. fertilizer, pesticides). age of plantation (>5); type of wine (red); grape quality (premium); training system (cordon); location brandano et al. (2019) unbalanced panel dataset of conventional wineries and cooperatives in the island of sardinia, italy, between 2004 and 2009 dea bootstrap sales and earnings of wine production in value labour cost; capital; land cooperative wineries; size of board of directors of each firm; included in a specialized tasting magazine; total number of hotel beds in the municipality; amount of public aid for investment received; average temperature; average rain aparicio et al. (2013) 24 wine spanish dos, in 2010 dea weight additive model domestic sales and foreign sales of wine in volume surface area; number of wine growers na coelli and sanders (2013) unbalanced panel dataset of 135 farms (214 observations) in the murray-darling basin region of australia, between 2006-07 and 2009-10 sfa wine grapes in volume land; water; capital; labour; other inputs costs (fertiliser, fuel and chemicals) na freitas (2014) 14 european union countries, between 1999 and 2009 dea wine production in value intermediate consumption costs; labour; capital percentage of paid labour; vineyard area; wine consumption per capita; proportion of wine destined for export; degree of specialisation. tóth and gál (2014) 16 major wine producing countries, 11 of old world and 5 of new world, over the period 1995-2007 sfa wine production in volume vineyard area; agricultural employment; net agricultural capital stock (proxy: agricultural machinery) openness to international trade; development of financial system; quality of human capital; wine consumption (tradition of wine); old wine world sellersrubio and más-ruiz (2015) 1257 spanish wineries, which 437 are not members of any do, and 820 are members of the 58 pdos dea sales volume and the profit volume of wineries number of employees; funds of the company; level of debt pdo; age of company; average wages paid by the company; size of company sellersrubio et al. (2016) 622 spanish and 609 italian wineries, between 2005 and 2013 dea sales revenue and profit volume of wineries number of employees; equity; level of debt na martacosta et al. (2017) 95 observations in 5 portuguese vineyard regions, between 1989 and 2007 dea and sfa wine and grape production in value vineyard area; labour (hours); capital; total specific costs na 7productive efficiency of wine grape producers in the north of portugal (gleyses, 2007) and higher investment capacity allowing better technological progress (hooper et al., 2002). on the other hand, santos et al. (2020) highlight a negative relationship between those variables due to the finer management developed and the better adaptation of the production system on a smaller area. another highpoint regarding the determinants of efficiency is the type of wine, which was observed by moreira et al. (2011) and santos et al. (2020). in both cases, grapes with superior quality have a negative and significant impact on productive efficiency. the study of santos et al. (2020) highlights a specific type of grapes of the region with higher quality, the grapes used for port wine, which in turn are sold at much higher prices. taking into account the empirical evidence of the analysed studies, in which structural (e.g. region and type of wine grapes) and non-structural (e.g. traction and farm size) determinants of efficiency are included, it becomes relevant to test for the wine grape producing systems of northern portugal whether structural factors determine their productive efficiency. 3. methodology and data 3.1 stochastic frontier analysis (sfa) following the above, we assume that sfa is the better methodology to use to our purpose, since it can establish the functional form for the grapes production, includes random errors (important when production is dependent on uncontrollable factors such as climate) and it can estimate efficiency levels and examines its determinants in the same stage. therefore, this work follows the sfa method, through the software frontier 4.1, based on battese and coelli (1995) and with two stages in the same step, to overcome the criticized assumption of independence of the inefficiency effects in the two-stages method (coelli, 1996). the stochastic frontier production function was estimated by equation 1: yi = exp(xiβ + vi ui) (1) where: yi denotes the production for i-th farm (i = 1, 2, … , n); xi is a (1 x k) vector of values of know functions of inputs of production; β is a (k x 1) vector of unknown parameters to be estimated; vi is assumed to be iid n(0,σ2v) random errors, independently distributed of the ui; ui is non-negative random variables, associated with technical inefficiency of production, which are assumed to be independently distributed, such that ui is obtained by truncation (at zero) of the normal distribution with mean, ziδ, and variance, σ2; zi is a (1 x m) vector of explanatory variables associated with technical inefficiency of production of firms over time; and δ is an (m x 1) vector of unknown coefficients. the technical efficiency effect, ui, in the stochastic frontier model could be specified by equation 2: ui = ziδ + wi (2) study sample methodology outputs inputs determinants urso et al. (2018) 623 italian farms in 2005 and 842 farms in 2010 dea gross marketable output in value land; labour costs; capital vineyard size; investments; irrigation; mechanization; pdo; localization; yield; market price santos et al. (2018) 20 portuguese farms in douro region, in 2016/17 season dea grape production in value land, labour, capital, intermediate consumption cost vineyard area, farmers’ age, grape as main source of income, training systems (cordon), vineyard landscaping (vertical) santos et al. (2020) 110 portuguese farms in douro region, in 2017 season dea grape production in volume land, labour, capital, intermediate consumption cost vineyard area, training systems, vineyard landscaping, farm slope index, number of farm plots, education of the farmer/manager, viticulture as only activity, sub-region, type of wine grapes, transform grapes into wine 8 micael santos, xosé antón rodríguez, ana marta-costa where random variable wi is defined by the truncation of the normal distribution with zero mean and variance, σ2. the method of maximum likelihood is proposed for simultaneous estimation of the parameters of the stochastic frontier and the model for the technical inefficiency effects. the likelihood function and its partial derivatives with respect to the parameters of the model are presented in battese and coelli (1993). the technical efficiency of production for the i-th farm at the t-th observation is defined by equation 3: tei = exp(-ui) = exp(-ziδ + wi) (3) following the previous literature, to specify the production frontier functions we use 2 alternative forms, the cobb-douglas (equation 4 such as moreira et al. 2011) and the translog (equation 5 such as coelli and sanders, 2013), which is a more flexible functional form (e.g. rae et al., 2006 and jin et al., 2010): lnqi = β0 + β1lnxli + β2lnxti + β3 lnxai + β4 lnxii + vi ui (4) lnqi = β0 + β1 lnxli + β2 lnxti + β3 lnxai + β4 lnxii + 0,5β5 (lnxli)2 + 0,5β6 (lnxti)2 + 0,5β7 (lnxai)2 + 0,5β8 (lnxii)2 + β9 lnxli lnxti + β10 lnxli lnxai + β11 lnxli lnxii + β12 lnxti lnxai + β13 lnxti lnxii + β14 lnxai lnxii + vi ui (5) these variables of regressions are described in table 2. 3.2 data the data used for this work was gathered from a sample of 154 grape producers of the north of portugal and he agricultural season of inquiry was 2017 (crosssectional data). the data were collected through face-to-face surveys of winegrowers and/or entrepreneurs that were generally contacted in advance by their farmers’ associations or cooperative wineries. the questionnaire was appreciated by the head of this structures and also by experts from the scientific areas involved and then it was pretested. the survey data included information about the respondent and the entrepreneur, farm, vineyard, its inputs and outputs, costs and yields and information on environmental and social issues. the gathered data was then validated by a formal meeting through the world café model realized at 2019, that was attended by around forty representatives of associations and viticulturists from the various geographical areas under study. the event was developed around two small-groups rounds of questions dedicated to (1) presentation and discussion of the results obtained; and (2) the future of viticulture. in the first panel the aim was to explore and justify the findings and, in the second panel, to identify the main variables of the system that the sector’s agents consider relevant for its analysis and evolution. the variables used for output, input and as explanatory variables of efficiency were chosen according with (1) the characteristics of the activity in the north of portugal, which were collected by the surveys and (2) the variables used in previous empirical studies (brandano et al., 2019; coelli and sanders, 2013; fuensantana et al., 2015; marta-costa et al., 2017; moreira et al., 2011; santos et al., 2018; sellers-rubio et al., 2016; sellers-rubio and más-ruiz, 2015; urso et al., 2018). both procedures conduct to the output and inputs variables that are described in table 2. the explanatory variables of efficiency translate not only the characteristics of region profiles from the north of portugal and the chosen variables in the previous studies, but also the availability of data. as output (grapes production) and input (land, labour, capital and intermediate consumption costs) variables we used the most consensual determinants found in the previous studies. as explanatory variables we included the size of the vineyard, which is a determinant of preference in the agriculture sector (freitas, 2014; henriques et al., 2009; santos et al., 2020, 2018; sellers-rubio and más-ruiz, 2015; urso et al., 2018); the number of plots that revealed a significant effect on grapes production efficiency of douro in the study of santos et al. (2020); and the mechanization, reflected by the number of hours of traction, was considered forasmuch as an unusual behaviour in this variable due to the different landscape physiography of the region. the geographical location and type of wine produced were also tested as determinants in the efficiency approach by virtue of the structural context of the region of study. in this matter, moreira et al. (2011) show that red and premium grapes affect efficiency negatively which makes more relevant the inclusion of port and alvarinho wines production as explanatory variables, due to the quality of this type of wine with the correspondingly highest remuneration on the market. in our sample, the port grapes are the most expensive (1,21€ versus 0,41€ in the regular grapes). all these variables and their descriptive statistics are shown in table 2. the analysis of table 2 shows a large discrepancy of the variables from the grape farms contacted, but supported in a large distinct sample of farms. 9productive efficiency of wine grape producers in the north of portugal 4. results and discussion table 3 contains the results of efficiency estimation using equation 3 for cobb-douglas and translog functional forms. in general, we could see that the average efficiency and efficiency scores trends in table 3 are almost identical in both specifications. the average efficiency for the farms that produce grapes are around 68 and 67% and its efficiency levels are very discrepant between the production units. relatively to the regions, minho appears to be the most efficient region (0.9859 and 0.9898), while the most inefficient is trás-os-montes region (0.4776 and 0.4877). the size class of the farms has also proved relevant in the achieved efficiency levels, but in a conversely way. the farms that have more than 20 ha have the lower average efficiency scores (0.5915 and 0.4470) and the smallest ones have highest average efficiency scores (around 0.72). the classes of plots, which coincide with its quartiles, show an increase of its efficiency scores with the number of plots, but it is in the class with the highest number of plots (above 6) the efficiency values decreased. the data collected by the surveys exposes that when the size of the farms increases, the number of plots also increases, however this variable appears to have distinct influences on efficiency scores (table 3). the situation can be explained in two ways. on the one hand, less plots may lead to a lower use of production factors (lower costs), such as traction, which will conduct to greater efficiency. on the other hand, a larger number of plots may allow a better adaptation of the system used in each plot to its conditions and consents to higher efficiency level. this situation was also reported in the recent study of santos et al. (2020). relatively to the traction, we observe a general positive relationship between this production factor and the average of efficiency of farms. table 4 reports the results of sfa gathered with equation 4 and 5, that uses a coob-douglas and a translog functional forms and regress the inputs and determinants of inefficiency in the same stage. observing the lr test-statistic (2) we cannot reject the null hypothesis of using cobb-douglas versus translog. as an alternative, we present the results of both, since the translog is considered a less restrictive form. moreover, the results presented by this second alternative are very similar, reinforcing robustness and adding information that may be of interest to the discussion. observing the lr test-statistic (1), the determinants of inefficiency present a clear overall significance in the both models. however, when translog is used, there are more factors that are significant (size, plots, douro and traction). all coefficients of productive factors are positive and they demonstrate a direct relationship with production. all inputs variables are significative, except capital in the cobb-douglas specification and labour in the translog functional form. according to the partial elasticity of production, the most influential variable are land in the two models (0.6553 and 0.597). all significative inputs variables are significative at 1%, with exception of labour in the cobb-douglas that are significative at 10%. the results of both specifications show that trás-osmontes region and port wine grapes influence negatively and significantly (at 5% and 1% respectively) the farms efficiency performance. in addition, the translog model, show that the number of plots influence the efficiency levels positively and significantly (at 1%), while the vineyard size, douro region and the traction affect it negatively and also significantly (at 10%, 5% and 5% respectively). firstly, the farms that produce more percentage of grapes intended for port wine are more inefficient. this is in agreement with santos et al. (2020). in addition, moreira et al. (2011) also verifies that some type of wine grapes (red and premium) influences the farms efficiency table 2. descriptive statistics of inputs and outputs used from the database collected. type of variables average standard-deviation min. max. output production (kg) q 81079.48 134245.31 3300.00 900000.00 input land (ha) xl 14.00 25.94 1.00 184.38 labour (days) xt 768.91 1725.27 42.33 12602.64 capital (amortization €) xa 6784.86 9627.89 0.00 72701.03 intermediate consumption (€) xi 21009.67 40716.13 634.38 449861.15 explanatory vineyard size (index) 100.00 185.28 7.14 1316.99 plots (number) 5.82 5.97 1.00 51.00 port wine (%) 30.59 26.87 0 1 alvarinho (%) 6.34 23.47 0 1 traction (hours/ha) 32.85 14.22 0 74.48 10 micael santos, xosé antón rodríguez, ana marta-costa scores. the lower yields of this grapes of higher quality and the severe and protective regulation, which imposes limits to the production of the port wine, can be the reason for its lower levels of efficiency. however, the situation is compensated by the higher prices pay per kg of grapes for this type of wine (1.21€) compared to the regular grapes (0.41€). secondly, trás-os-montes reveals to be the most inefficient region and this is aligned with the low relevance of this wine region of portugal, with less land productivity from the north (3698 and 6559 kg/ha, respectively, from our database) and yet with the fewer recognized wines. additionally, the translog functional form presents others results that could complement the analysis. this model detects a negative impact of farm size and the explanation of negative influence of the farm size is supported in the results of table 3, which present a decrease in average efficiency when the farm size increases. as a matter of fact, the farms with less than 10 hectares have higher yields with more than 6754 kg of grapes produced per hectare, while the biggest farms (≥ 20 ha) have the lowest productivity (5715 kg/ha). in addition, the small farms benefit from a larger share of family labour and the biggest farms of our database present the highest average real costs per hectare (3545 €/ha against 3371 of the total average). this inverse relationship between size and efficiency is supported in some previous studies (e.g. akamin, bidogeza, minkoua and afari-sefa, 2017; chen, huffman and rozelle, 2011; urso et al., 2018). recently in the viticulture sector, santos et al. (2020) also confirmed an opposite connection of the same variables, in the portuguese douro region. the findings with the number of plots in translog specification are also consistent with table 3 and corroborate the affirmation of the management of the production system can be more specific to the characteristics of land and the type of grapes when land are divided in plots. also the work of moreira et al. (2011) support this evidence which conduct to a more efficient production system. although the size of the farm and the plots have a direct and positive relationship between them, they have an opposite influence on efficiency as already predicted by the results of table 3. besides trás-os-montes, douro demonstrates to be less efficient than minho (in the translog specification) and several indicators can support this result. douro has lower productivity (5784 kg/ha against 9909 in minho) and it is more labour-intensive (53 days/ha against 48 in minho) due to the mountain viticulture that characterizes the region which exacerbates the difficulties of mechanisation and, in turn, increases the production costs. this is also confirmed in the hogg and rebelo (2018) study, which refer douro as very dependent on labour, a scarce production factor in the region and in the sector. the importance of the region in efficiency scores has been demonstrated in many previous studies such as bravo-ureta et al., (2007); coelli and sanders (2013); mareth et al., (2016); moreira et al. (2011); santos et al., (2020); sellers-rubio and más-ruiz (2015); thiam et al., (2001); urso et al. (2018) and vidal et al. (2013). yet, the grapes used for port wine are produced only in the douro region and they show a negative relationship with efficiency levels. however, the prices charged for these types of grapes can compensate its production and originate a positive impact on profitability, as mentioned before. relatively to the alvarinho type of wine, it was not proved any significant influence on farms productive efficiency. the traction per hectare, when used more intensively, leads to higher farm costs and a negative relationship with production efficiency. this result make sense and it is in accordance with urso et al. (2018), but the authors measured the use of the production factor in horsepower. however, the mechanization is important to make table 3. average efficiency scores. variables observations average efficiency – cobbdouglas average efficiency translog north 154 0.6814 0.6706 region douro 110 0.6058 0.5885 minho 34 0.9859 0.9898 tom 10 0.4776 0.4877 farm dimension (ha) [1;5[ 51 0.7129 0.7254 [5;10[ 47 0.7161 0.7221 [10;20[ 37 0.6400 0.6253 ≥20 19 0.5915 0.4843 plots (number) [0;3[ 35 0.6477 0.6484 [3;4[ 24 0.6909 0.6925 [4;7[ 54 0.7196 0.7204 ≥7 41 0.6542 0.6110 type of wine (%) port 108 0.5997 0.5817 alvarinho 12 0.9876 0.9915 others 34 0.8328 0.8397 traction (hours) [0;23,06[ 38 0.6320 0.6189 [23.06;29.92[ 39 0.6427 0.6092 [29,92;42,52[ 39 0.6991 0.6951 ≥42,52 38 0.7523 0.7600 note: plots and traction intervals are based on quartiles. 11productive efficiency of wine grape producers in the north of portugal the production process faster and can solve the labour shortage in the region and others studies proved their importance (abass et al., 2017; hormozi et al., 2012; park et al., 2018). in this sense, the hypothesis that structural factors are responsible for different efficiency levels should be accepted, since the intrinsic characteristics of the region and the type of wine specifically produced in a location affect farm efficiency. in addition, the farm size and number of plots can be difficult to change as it can be associated with structural characteristics of the region such as slope, topography of the land and social characteristics. furthermore, efficient mechanization can be difficult when it comes to a region like douro where mountain viticulture with steep slopes prevails. 5. conclusion productive efficiency analysis is crucial to verify whether the wine-growing farms are using the available resources efficiently to produce grapes and to identify which characteristics make the farms less efficient. to analyse efficiency in the wine grapes farms of the northern of portugal, sfa was used, because it allows to separate the efficiency from other factors through random errors, which is essential for agriculture that has many external factors affecting its production and efficiency. in addition, the use of two specifications (cobbdouglas and translog) allowed for more robustness of the results since both model findings are similar and complement each other. this study estimates an average efficiency score in north of portugal around 0.68/0.67, leading to the conclusion that farms can improve their efficiency by 32/33%. the most significant determinants in both models were trás-os-montes region and the production of port wine grapes, which were shown to have a negative influence on farm efficiency. in addition, the translog specification also shows that the number of plots and minho region positively affect farm efficiency, while the size of vineyards, douro region and traction have a negative impact. we can conclude that most variables that affect efficiency are structural and therefore cannot be changed (e.g. region and specific type of wine grapes produced), whilst other determinants are difficult to modify (e.g. farm size or number of plots). hence the producer cannot do much to improve farm efficiency in this perspective. we believe that these structural factors or intrinsic characteristics explain the main differences in efficiency between regions such as edapho-climatic conditions and the type of wine produced exclusively in one region (alvarinho and port wine). however, this study makes reference to some performance determinants that are likely to change, such as farm size, number of plots and traction hours. in this sense, the policies that support parcelling can be questioned, since the small farms (predominant in the region) and the ones with a larger number of plots are the most efficient. relatively to the use of traction, despite its inefficient use, this practice is important for those regions where labour is increasingly scarce, notwithstanding its difficulty in mountain viticulture region like douro. table 4. results of sfa. variables frontier production function cobb-douglas specification coefficient translog specification coefficient constant 0.4385*** (0,0697) 0.4091*** (0.0616) lnxl 0.6553*** (0,1244) 0.5971*** (0.1169) lnxt 0.1883* (0,1020) 0.1588 (0.0987) lnxa 0.0282 (0,0358) 0.1612*** (0.0543) lnxi 0.1826*** (0,0639) 0.1983*** (0.0747) 0,5(lnxl)2 -0.3580 (0.5061) 0,5(lnxt)2 -0.0852 (0.4319) 0,5(lnxa)2 0.0195 (0.0331) 0,5(lnxi)2 -0.0653 (0.1234) lnxl lnxt 0.1674 (0.4218) lnxl lnxa 0.1712 (0.1534) lnxl lnxa -0.0575 (0.2179) lnxt lnxa -0.0622 (0.1480) lnxt lnxi 0.1114 (0.1478) lnxa lnxi -0.0076 (0.0807) constant -0.7636 (0,6073) -0.5952*** (0.2050) size 0.0003 (0,0003) 0.0011* (0.0006) plots -0.0068 (0,0048) -0.0105*** (0.0039) douro 0.6647 (0,5105) 0.4690** (0.2314) trás-os-montes 1.4488** (0,5871) 1.2538*** (0.2726) port 1.3672*** (0,1907) 1.3836*** (0.2264) alvarinho -0.1551 (0,6162) -0.0989 (0.0988) traction 0.0021 (0,0020) 0.0017** (0.0008) sigma-squared 0.1351*** (0,0147) 0.1208*** (0.0121) gamma 0.0846*** (0,0171) 0.0518** (0.0265) lr test-statistic (1) 94.19*** 99.14*** lr test-statistic (2) 15.54 *, **, *** significance at 10%, 5% and 1%, respectively. standard error in parentheses. (1) this test-statistic allows us to test the hypothesis of the absence of inefficiency effects. (2) this test-statistic allows us to test the cobb-douglas versus translog specification. 12 micael santos, xosé antón rodríguez, ana marta-costa minho as undoubtedly the most efficient region (0.99) against trás-os-montes (0.48 and 0.49) and douro (0.61 and 0.59). therefore, despite its intrinsic characteristics, minho seems to use its production factors more efficiently and the region can be used as a model for the others geographical areas to adopt better production routines or new technologies. in conclusion, the farms will be more efficient if its management fits the specific structural factors (climate, soil type, slope of the land, type of grapes, economy, market, crop size, complexity of the production process that are mostly specific to the region, the farm, or even the plot). however, each farm is unique and has a set of inimitable resources that makes them more heterogeneous. thus, it is expected that farms operating in different contexts, with distinct technologies, resources and using diverse combinations of them will have dissimilar levels of efficiency. although this paper studies the efficiency of the viticulture sector, the profitability of the farm has been the most important management issue. small farms can be more efficient due to more precise practices, where their managers or farmers control and identifies its needs more easily. however, since big farms transform 83% of their grapes into wine (11% of the sample with an average of 65 ha), they can earn more at the end of the value chain. grapes production for port wine may be inefficient, but the price paid per kilogram of grapes (1.21€ against 0.41€ for still wine in douro) makes them more profitable. taking these conclusions into consideration, an analysis of the grape farms profitability and efficiency-related would be important for future research together with its contribution to the sustainability of production systems. acknowledgements this work was supported by the r&d project 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origin in the spanish wine sector. spanish j. agric. res. 11, 294– 304. https://doi.org/10.5424/sjar/2013112-3607 wine economics and policy volume 10, issue 2 2021 firenze university press productive efficiency of wine grape producers in the north of portugal micael santos1,*, xosé antón rodríguez2, ana marta-costa3 organic and conventional grape growing in italy: a technical efficiency comparison using a parametric approach federica cisilino1, fabio a. madau2,*, roberto furesi2, pietro pulina2, brunella arru2 competitiveness framework to support regional-level decision-making in the wine industry: a systematic literature review jorge mota*, rui costa, antónio moreira, silvana serrão, carlos costa does belonging to an appellation make a difference? new evidence from ontario viticultural areas omer gokcekus how do sparkling wine producers adopt a sub-appellation? evidence from an exploratory study on heroic prosecco superiore rive luigino barisan*, luigi galletto motivation factors for organic wines. an analysis from the perspective of german producers and retailers katharina hauck*, gergely szolnoki, evelyn pabst consumer preferences for certified wines in france: a comparison of sustainable labels adeline alonso ugaglia1,*, britta niklas2, wolfram rinke3, dan moscovici4, jeff gow5, lionel valenzuela6, radu mihailescu7 wine ratings and advertising strategies: is there a link? ricardo sellers-rubio adaptive market hypothesis: an empirical analysis of the wine market anoop s kumar wine economics and policy 10(1): 73-88, 2021 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/wep-9055 wine economics and policy citation: enrique orduña-malea, cristina i. font-julián, josé antonio ontalba-ruipérez, raúl compés-lópez (2021) masters of wine on twitter: presence, activity, impact and community structure. wine economics and policy 10(1): 73-88. doi: 10.36253/wep-9055 copyright: © 2021 enrique orduña-malea, cristina i. font-julián, josé antonio ontalba-ruipérez, raúl compéslópez. this is an open access, peerreviewed article published by firenze university press (http://www.fupress. com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information fi les. competing interests: the author(s) declare(s) no confl ict of interest. masters of wine on twitter: presence, activity, impact and community structure enrique orduña-malea1,*, cristina i. font-julián1, josé antonio ontalba-ruipérez1, raúl compés-lópez2 1 universitat politècnica de valència, department of audiovisual communication, documentation and history of art, spain 2 universitat politècnica de valència, department of economy and social sciences, spain e-mail: enorma@upv.es; crifonju@upv.es; joonrui@upv.es; rcompes@esp.upv.es *corresponding author. abstract. globalisation, the internet and social media have changed the kind of actors with infl uence in the wine industry and the way these actors create signals to communicate credible information about experience and trust attributes. among the most prestigious experts in the world of wine are the masters of wine (mw). although initially devoted to international trade, they have spread their activities and their opinion is more and more appreciated by producers and consumers. th e main objective of this article is to determine this community of experts’ behaviour on twitter. in order to do so, four factors (presence, activity, impact and community) have been considered. all twitter profi les belonging to users awarded with the mw qualifi cation were identifi ed and analysed. in addition, a set of 35,653 tweets published by the mws were retrieved and analysed through descriptive statistics. th e results show mws on twitter as high attractors (number of followers), moderate publishers (original contents published), moderate infl uencers (number of likes and retweets), and low interactors (number of friends and mentions to other users). th ese fi ndings reveal that the mw community is not using twitter to gain or reinforce their reputation as an accredited expert in the wine industry, giving more infl uential space on twitter to consumers and amateurs. keywords: wine, wine industry, wine experts, social media, twitter, informetrics. 1. introduction wine has experience and trust attributes that ask for signals to avoid market failures. th e role of critics, guides, prizes, awards and other thirdparty references has always been important to off er market actors credible information about the characteristics of wine [17, 32]. th e globalisation of wine markets has increased the supply of wine and, consequently, the need of this kind of information for consumers. th e emergence of the internet and the development of social networks changed the way people receive and interchange information [9], emerging thus new infl uence models where new actors can provide information and 74 enrique orduña-malea, cristina i. font-julián, josé antonio ontalba-ruipérez, raúl compés-lópez influence market trends, therefore increasing the options to search and transmit signals of quality [32]. in particular, the potentiality of twitter to generate influence has been widely proved [6]. previous findings suggest that twitter can create soft value for wine focused businesses [43]. however, more engagement from wine actors (marketers, brands, retailers, etc.) with those consumers talking about wine on twitter is needed to create hard value. among the emerging actors who can play a role within the online conversation are the masters of wine (mw). the mw certification is the most prestigious in the world of wine for trade purposes. there are currently 384 mws worldwide–out of the 452 that have obtained the certificate since its founding in 1953–from 30 different countries, although the most important group is that from anglo-saxon countries. all of them have a great reputation and hold important responsibilities in the different organisations that make up the global wine system. in general, most of them are opinion makers, although some of them have greater public presence, depending on their main activity. their sound knowledge and prestige make of them potential wine critics and influencers. the objective of this work is to identify and characterise the behaviour of the community of the masters of wine on twitter, as well as to determine the impact achieved by these reputable wine experts through this platform. this understanding will allow further research in the field of ‘wine and expert opinion’ to be developed, identified by storchmann [36] as one of the most important in wine economics. there is a considerable amount of literature regarding the world of wine and the impact of gurus, experts and critics, both through publications and specialised magazines [2, 4, 13, 27], as well as blogs and social networks [8, 26]. the influence of certain professionals, such as sommeliers, who have a direct relationship with the final consumer and clients, has also been investigated [20, 34]. however, there are no studies – neither online nor offline – that analyse the role played by prestigious qualifications or diplomas, such as the mw, which enhance the reputation or brand of those who obtain them. this is probably due to the difficulty of measuring the real influence – or capacity of influence – of such a large and heterogeneous group, where graduates carry out various professional activities (many make wine, others blend it, others buy it, others trade it, some teach it, and others write about it). this means that in some cases their influence is direct while in others it is indirect. in some cases, their influence is very intense, and in others it is practically non-existent. the approach of this article is therefore original, as it aims to estimate the behaviour of all the professionals with this qualification through participation as members of the social network twitter, which serves as an indicator of their influence. 2. literature review social media’s interactivity has empowered wine consumers to influence others [43], enhancing the role of crowdsourcing amateur opinions in areas traditionally relegated to experts [1]. users can comment, review and share information online on the one hand, and search for this information as part of the consumption experience on the other hand [11]. consequently, the online community has created a force within the industry [29], and has become one of the trust factors than can increase selling of products online [37], which is particularly effective among wine consumers, as word of mouth is such an important driver of wine sales [24]. the body of literature on wine and social media covers a wide variety of fields, mainly drinking alcohol (health), economics (sales and costs) and marketing (consumer behaviour and tourism) [25]. the latter concerns unveiling how wineries use social media for their business interests [32] and how marketers can use these tools to build a brand community [23]. thach [38] coined the term wine 2.0 and investigated to what extent wineries were adopting web 2.0 components (mainly blogs and social media) as part of their marketing strategy and as potential accepted sources of information that might influence a purchasing decision, as well as increasing sales and consumption [40]. facebook stands out as the most used social networking site regardless of the analysed country, followed by twitter [37]. however, instagram is increasing in some countries, such as greece [18, 19]. nonetheless, studies from the consumers’ perspective are scarce. literature confirms that consumers who claim to use social media more intensively when collecting information about wine show a greater propensity to buy wine online [25, 32, 35, 39]. the conversational and informational nature of twitter makes this tool of special interest to track user interest on specific products [3, 5, 12], especially for marketing purposes [10, 21] and expert finding [42]. wilson and quinton [43] analyse a collection of tweets in english on the subject of wine in order to identify how wine was being discussed. an international 75masters of wine on twitter: presence, activity, impact and community structure and diverse tweeting population with interest in the consumption of wine was discovered, where the interactive medium (twitter) had empowered the consumer to influence others, irrespective of any existing relationship. contrary to what happens with wine experts and critics in traditional specialised magazines, wine industry professionals do not control the ability of twitter users to have peer influence because of their independent twitter status. specifically, wilson and quinton [43] find wine bloggers as active and influential actors. according to wright [44], 84% of wine bloggers use twitter to promote their blogs. this community of bloggers can be divided into those who have no professional affiliation to the wine industry, entrepreneurial wine bloggers promoting their company, and other bloggers strongly connected to the wine industry and/or press, such as robert parker [16]. marlowe et al. [26] analyse a sample of wine bloggers on twitter in order to determine whether users with wine credentials attract more twitter followers, as a proxy of becoming an influential voice on twitter. to do this, the authors take into account the following nationally and globally-respected certifying bodies for wine credentialing: the court of master sommeliers, wine and spirit education trust (wset), society of wine educators, culinary institute of america, international sommelier guild, sommelier society of america, and the international wine guild. the analysis concluded that wine bloggers with a certification had on average 75% more followers than those without certifications, supporting prior research showing that credentials have a major influence on others’ behaviour [26]. masters of wine, irrespective of their specific connection with the wine industry, might establish a reputation and authority on twitter, as wine expert users having a wine credential. however, this community has not been studied to date. therefore, this contribution aims to fill this gap in the literature and provide a better understanding of this community, especially its online visibility and impact on twitter, with the aim of providing wine market research practitioners a basis on which to better develop their work. 3. method twitter is widely used as a data source for research since its inception [31, 45]. taking apart conceptual and technical aspects, research based on twitter data focuses on two elements: users and contents, shaped by a specific domain [41]. in this article, these elements are framed by the masters of wine (users), all those contents generated by this community on twitter (messages), and the wine market (domain). the behaviour in general – and influence degree in particular – of one user is delimited consequently by the contents generated and the impact of these contents on other users, considering the characteristics of the analysed domain. notwithstanding, there is no consensus on what specifically denotes influence on twitter. literature has led to the conclusion that each approach to determine ‘inf luence’ depends on the emphasis on different individual factors [3]. we can find factors related to connectivity (followers), contentoriented interactions (replies, mentions), click-oriented interactions (retweets, likes), and network-oriented measures (centrality metrics). moreover, these measures are diverse. some are based on simple metrics provided by the twitter api, while others are based on complex mathematical models [33]. in addition, some approaches are based on the combination of several metrics to generate a final score, while other approaches try to reflect influence through each of the metrics measured separately [30]. for this exploratory study, four behaviour and influence factors have been considered: 1. presence. this factor considers whether a mw has created a public twitter profile. for each profile created, this factor includes all demographic user-level information incorporated into the profile. 2. activity. this factor considers to what extent are mws creating content on twitter, and it includes productivity and types of content created. 3. impact. this factor considers to what extent are mws engaging with users, and it includes metrics related to connectivity and interactions, both content-oriented and click-oriented. 4. community. this factor considers to what extent do mws communicate with other mws on twitter, and it includes network-oriented interactions. the approach followed by this work does not emphasise any of the factors considered, nor does it intend to generate an influence on the final score, but describe the overall behaviour of mws on twitter just as a preliminary stage to characterise their influence. the first step consisted of gathering the population of professionals awarded with the mw distinction to date. to do this, the institute of masters of wine’s official website1 was directly accessed on 8 march 2019. a total of 384 people were gathered, along with basic descriptive data: country of residence, gender, pro1 https://www.mastersofwine.org/en/meet-the-masters/browse-byregion/browse-by-country-of-residence.cfm 76 enrique orduña-malea, cristina i. font-julián, josé antonio ontalba-ruipérez, raúl compés-lópez fession, personal website, and year in which she/he obtained the qualification. then, we proceeded to locate the mws’ personal profiles on twitter. in order to do this, several searches by name/surname were carried out in the twitter search box. in addition, the institute of masters of wine official twitter account2 was analysed to check followers/ following users and twitter mentions. finally, the mws’ personal websites were also consulted. at the end of the process, 186 twitter accounts were identified. the second step consisted of extracting data from each of the 186 twitter accounts. this process was separated into two levels: profile-level data and publicationlevel data. a) profile data: information related to the overall twitter account performance was gathered through the twitter api as of 12 may 2019. the following metrics were captured for each profile: name, screen name, user id, profile creation date, number of followers, followings and favourites, total number of tweets published, date of the first tweet, date of the last tweet, number of lists where the user is listed, language, bio text, location and personal url. in addition, the social authority of each profile was obtained from followerwonk3, a professional suite oriented to analyse twitter followers. this metric recursively measures the prestige of a twitter account based on the prestige of the followers who follow said account. social authority metric scores from 0 (no authority) to 100 (maximum authority). b) publication data: all tweets published by all 186 twitter accounts from october 2018 to april 2019 (seven months) were retrieved through the twitter api. a total of 35,653 tweets were obtained. for each tweet, the following information fields were identified: tweet id, tweet text, tweet author, publication date, number of favourites received, number of retweets received, language, type of tweet (original, reply, retweet) and embedded elements (media, urls, hashtags and user mentions). the third step consisted of quantifying the degree of interaction between mws on twitter through centrality measures. all mentions from each mw to any other mw were gathered, and a network was built with gephi4. finally, both node-level metrics (degree and centrality) and network-level metrics (density, diameter and average degree) were calculated to determine centrality measures [7]. table 1 includes each of the metrics captured as well as their scope. 2 https://twitter.com/mastersofwine 3 https://followerwonk.com/social-authority 4 https://gephi.org 4. results 4.1 presence 186 mws out of the total 384 people awarded with such distinction (48.4%) have a twitter profile, 106 women (57%) and 80 men (47%). of these, eight accounts (5 males and 3 females) exhibited no data. therefore, the final sample was composed by 178 twitter profiles. the percentage of mws with a twitter profile increases according to the decade in which the person was awarded the qualification. 73.4% of people awarded the qualification during the 2010’ decade have a twitter profile (table 2). most accounts were created between 2009 and 2014 (91%). eight users created the twitter profile the same year they finished the study programme, while 77 already had a twitter account when they obtained the qualification. 58.4% of users included the term ‘mw’ in their profile name whereas 25.8% included the term as part of their username (name of the account after the @ symbol), reflecting personal branding purposes. as regards the language used, a predominance of english (predefined for 169 accounts) was found, foltable 1. summary of network metrics used: level and scope. metric level scope indegree node the number of edges (mentions) directed into a node (user) in a directed graph. in this case, the number of mentions a mw receives from other mws outdegree node the number of edges (mentions) directed out of a node (user) in a directed graph. in this case, the number of mentions a mw provides to other mws degree node indegree + outdegree. in this case, this measure represents the total number of mentions where a mw is involved. eigenvector centrality node a high eigenvector score means that a node (user) is connected to many nodes (users) who themselves have high scores and vice versa. this metric is also referred to as prestige score. density network the number of connections the network has, divided by the total possible connections the network could have. diameter network the shortest distance between the two most distant nodes (users) in the network. it denotes the number of steps, on average, it takes to get from one member of the network to another. average degree network the average number of edges (mentions) per node (users) in the network. 77masters of wine on twitter: presence, activity, impact and community structure lowed by spanish (three accounts) and then norwegian, dutch, swedish, japanese, french and german (one account each). th is bias towards english is a consequence of the origins of the mws: 206 (53.6%) come from the united kingdom, 52 (13.5%) from the united states and 24% (6.25%) from australia (table 3). th e number of mws from new zealand, ireland, and canada (26; 6.8%) is also signifi cant. no location data was found for 46 users (38 had the location fi eld empty and six accounts included other information instead of a real/accurate location). moreover, a location mismatch (diff erent real origin and twitter location) was detected for ten accounts. th e geographies of mws thus changes under the lens of twitter (figure 1). users can include in their twitter profi les a hyperlink to promote their related websites. 115 (61.8%) users included a link, mainly to private companies (46) and personal websites (40). other less common websites were personal blogs (9), media (5), searchers (2), linkedin profi les (2), youtube profi les (1) and non-profi t organisations (1). also noteworthy is that nine links were broken, refl ecting carelessness on the part of these users. 4.2 activity and impact for the sake of clarity, activity (contents generated) and impact (content outcome) infl uence factors are included together in this section, which starts with metrics related to the users (profi le-level data) and follows with metrics related to the tweets (publication-level data). profi le-level data (users) no general patterns were found regarding the activity of the mws on twitter (table 4). data is widely dispersed and several outliers (both high and low performers) exist. however, on average, profi les attract a great number of followers (4,946 followers), although their productivity (3,114 tweets on average) and impact (2,159 favourites on average) is less intense. in addition, mws did not usually follow other users (912 followings on average) and are included in few users’ lists (119 lists on average). the distribution of followers per user is highly skewed (figure 2; top left ). 17 users attained less than 100 followers while 12 users attracted more than 10,000 followers each. jancis robinson is the mw with the most followers (257,031). th e number of followings is rather more homogeneous (figure 2; top right) and exhibits lower values (only table 2. number of masters of wine with a twitter profi le, broken down by decade of admission. decade mw twitter yes no 1950’ 7 0 100% 1960’ 12 0 100% 1970’ 25 8% 92% 1980’ 33 18.2% 82% 1990’ 110 36.4% 64% 2000’ 71 63.4% 37% 2010’ 124 73.4% 27% total 382 48.2% 51.8% source: twitter. note: data of completion date were unavailable for two masters of wine. table 3. ranking of countries according to the number of masters of wine. country all mw mw on twitter real location real location twitter location united kingdom 206 80 54 united states 52 34 29 australia 24 13 11 france 17 6 4 new zealand 13 9 5 germany 8 4 3 ireland 7 7 6 canada 6 2 2 spain 6 5 3 norway 5 2 1 switzerland 5 1 1 source: th e institute of masters of wine and twitter. figure 1. masters of wine according to the twitter location fi eld. source: twitter. 78 enrique orduña-malea, cristina i. font-julián, josé antonio ontalba-ruipérez, raúl compés-lópez 12 mws follow more than 2,500 users). it is noteworthy to mention that 30 mws have published less than 100 tweets (figure 2; bottom left), and 68 (36.6%) received less than 100 favourites (figure 2; bottom right). the number of followers achieved is not important in itself if we do not evaluate the quality of these followers. thousands of inactive followers do not provide impact while hundreds of active and influential followers table 4. general activity and impact patterns of masters of wine on twitter. statistic tweets tweets/ day followers followers/ day following favourites lists max 60,856 14.9 257,031 70.3 12,702 89,109 3,757 paul tudor paul tudor jancis robinson jancis robinson sarah abbott paul tudor jancis robinson 1st quartile 242.3 0.1 589.0 0.2 157.0 26.8 23.0 median 987.5 0.3 1,476.0 0.5 359.5 223.0 45.0 3rd quartile 3,019.8 1.0 3,658.3 1.3 990.3 1,377.8 108.5 mean 3,113.6 1.0 4,945.7 1.5 911.5 2,159.3 118.8 standard deviation 6,816.5 2.0 20,303.7 5.6 1,646.1 9,057.4 324.2 source: elaborated from twitter data. note 1: data includes all activity generated by each twitter account since its creation. note 2: lists refer to the number of times that a user has created a list in which the user is included. 1 2 figure 2. general behaviour of masters of wine on twitter: distribution of followers (top left), followings (top right), tweets (bottom left) and favourites (bottom right). source: twitter. 79masters of wine on twitter: presence, activity, impact and community structure may provide reputation. the social authority indicator precisely measures this facet. the average social authority for all mws is 31.1 (32.0 in the case of female users and 30.1 for male users). only five users surpassed the value of 60. tim atkin stands out as the mw with the highest social authority (67). on the contrary, 40 users did not exceed the value of 10 (figure 3). time elapsed since the creation of the twitter account may distort the analysis, insomuch as one user may have more time to publish more tweets and to obtain a better reputation. in order to check whether this parameter influences the remaining variables, a correlation test (spearman) was performed (table 5). age (the number of days since the creation of each twitter profile) does not correlate strongly with any of the variables. as we can observe, the social authority achieves a strong correlation either with the number of favourites (rs= 0.83; p-value < 0.0001) and tweets published (rs= 0.75; p-value < 0.0001), while the raw number of followers is slightly less important (rs= 0.65; p-value < 0.0001). the low influence of the time elapsed since the creation of the twitter account may be due to the greater or lesser activity of the user when the account was set up. for example, 71 mws waited more than a year to post their first tweet (figure 4; top) while only 70 published their first tweet during the first month. similarly, 32 mws did not publish a tweet over the last year as of when the time data was retrieved (figure 4; bottom). figure 3. social authority of masters of wine. source: followerwonk. table 5. correlation matrix for user-level twitter metrics. variables social authority age (days) tweets followers following favourites lists social authority 1 age (days) 0.04 1 tweets **0.75 **0.23 1 followers **0.65 **0.28 **0.82 1 following **0.55 **0.26 **0.70 **0.67 1 favourites **0.83 0.03 **0.70 **0.61 **0.61 1 lists **0.55 **0.39 **0.78 **0.93 **0.66 **0.50 1 ** values are different from 0 with a significance level α < 0.01 source: elaborated from twitter data. 1 2 figure 4. publication activity: (top) time elapsed since the creation of the twitter account and the publication of the first tweet; (bottom) time elapsed since the publication of the last tweet and the date of gathering data (12 may 2019). source: twitter. note 1: each category is cumulative. that is, users tweeting the first day also tweeted within the first week, month, and so on. likewise, users who tweeted last week also tweeted last month, year, and so on. note 2: the time since last week was not available for one user. 80 enrique orduña-malea, cristina i. font-julián, josé antonio ontalba-ruipérez, raúl compés-lópez publication-level data (tweets) from october 2018 to april 2019, mws published a total of 35,844 tweets, of which 14,517 (41%) were replies, 10,817 (30%) original tweets and 10,510 (29%) retweets. th e distribution of publications is skewed (figure 5) and distinguishes two diff erent pattern behaviours. a wide set of users who publish a moderate-to-low amount of tweets, especially original tweets on the one hand, and a small group of users (approximately 15) who publish a great number of original tweets, retweets and replies on the other hand. th e publication profi le of each user can be determined upon the percentage of each type of publications: original tweets (creator), replies (commentator) and retweets (disseminator). th is way, we can fi nd users that all their tweets are original (strictly creators), users that only retweet other tweets (strictly disseminators), or any other combination. following this reasoning, authors designed a scale from 0 (any tweet published falls under one specifi c tweet type) to 5 (all tweets published fall under one specifi c tweet type) for each of the three publication types to characterise the publication pattern of each user. th e threshold for each value of the scale is detailed below: value 0: no tweets published on the corresponding typology. value 1: from 1% to 25% of all tweets published fall under the corresponding typology. value 2: from 26% to 50% of all tweets published fall under the corresponding typology. value 3: from 51 to 75% of all tweets published fall under the corresponding typology. value 4: from 76% to 99% of all tweets published fall under the corresponding typology. value 5: all tweets published fall under the corresponding typology. a total of 36 different publication patterns were identifi ed, being those that did not publish any kind of content (strictly readers or ignorers) the category with the highest number of users (41 mws; 23%). 24 mws were extremophile users (those with a 5 value in one dimension), 16 only published original tweets (strictly creators), 5 only published retweets (strictly disseminator) and 3 only published replies (strictly commentator). other common profi le patterns are characterised by combining a great percentage of original tweets and a low percentage of replies or retweets (table 6). th e number of likes received by each tweet published in the period shows a skewed distribution (figure 6), with few tweets attracting a signifi cant number of likes and a long tail of tweets without any impact. th e figure 5. distribution of publications (original tweets, replies and retweets). source: elaborated from twitter data. table 6. publication profi les according to the type of tweet published. class type number of mw profi le original reply retweet 0 0 0 41 strictly reader or ignorer. 5 0 0 16 strictly creator 3 1 1 13 moderate creator; very light commentator and disseminator 4 1 1 11 heavy creator; very light commentator and disseminator 2 2 1 10 light creator and commentator; very light disseminator 3 1 2 10 moderate creator; very light disseminator; light commentator 1 3 1 6 very light commentator; moderate creator; very light disseminator 2 3 1 6 light commentator; moderate creator; very light disseminator 0 0 5 5 strictly disseminator 1 1 3 5 very light creator; very light commentator; moderate disseminator 2 1 1 5 light creator; very light commentator and disseminator. source: elaborated from twitter data. 81masters of wine on twitter: presence, activity, impact and community structure original tweet with the highest number of likes received is posted by jancin robinson (1,113 likes). however, 25,112 (99.1%) tweets (both original tweets and replies) receive less than 100 likes each, and only seven tweets receive more than 100 retweets each. if we take the whole corpus of tweets published by mws in the period (25,334 original tweets and replies), we can observe a great wealth of information in the embedded elements (table 7): 6,602 hyperlinks, 11,819 hashtags, 39,206 users mentioned and 4,434 media (either photos or videos). mentions to other users constitute the most frequently used element (59.0% of all tweets), followed by hyperlinks (25.4%), hashtags (19.8%) and media (17.5%). however, this activity is highly skewed. for example, 82 users did not mention any user. among the elements embedded in tweets, hashtags stand out as they can express interest in specifi c topics or terms. 4,169 diff erent hashtags were located out of the 11,819 total hashtags extracted from the tweets (table 8). th e term #wine is the most frequently used hashtag (634 times), by 46 different mws from 10 different locations, followed by #burgundy (used 138 times by 13 users). in addition, among the most used hashtags, some of them achieve higher impact (#winelife obtains an average of 14.3 likes per tweet), whilst others remain less popular ( #cellartalk only 2.0 likes per tweet, being use almost the same number of times than #winelife). th e impact of tweets shows a dependence on the type of embedded element. th e engagement rate (er) (number of likes and retweets divided by the number of tweets) informs about the relative impact of tweets per user. on average, the er of tweets including at least one media (10.9) is higher than the er of tweets including at least one hashtag (7.6), hyperlink (5.0) or user mention (4.0). finally, the dissemination activity carried out by mws on twitter through retweets is also noteworthy. a total of 10,510 retweets have been identifi ed in the period. 49.6% of retweets included at least one hyperlink, 42.0% included at least one user mention, 41.9% included media, and 34.0% included at least one hashtag. th e inclusion of embedded elements increases the engagement of tweets published by masters of wine. th e average number of likes for those tweets with at least one embedded element is 5.3 whereas this same value for tweets without embedded elements is 2.2. likewise, the average number of retweets received by tweets with at least one embedded element is 0.75 whereas this same value for tweets without embedded elements is 0.19. 4.3 community 14,953 tweets (59.0% of all original tweets and replies analysed) contained a total of 39,206 user mentions. of these, 2,990 (7.6%) are mentions from one mw to another mw (figure 7). otherwise, 67 mws did not mention any other mw, and 20 did not receive any mention from another mw in the period analysed. given the number of twitter profi les analysed (178), the generated network exhibits a low average degree (16.6) and a low density (0.093). th at is, the community of masters of wine is not intensively connected with each other through direct twitter mentions. consequently, the number of steps it takes on average to get from one user to another is high (network diameter is equal to 5). only few nodes (those located at the centre of the network) are highly connected to others, showing a higher centrality (prestige score). natasha hughes stands out as the mw who receives a greater number of mentions from other mws (52), while jancis robinson is the mw who mentions other mws the most (118 users). th ese two users also appear as the most infl uential mws in the username-to-username mention network built. in absolute terms, gorman mcadams (945 mentions) and tim atkin (1,932 mentions) are the mws who have receive and provide the greatest number of mentions, respectively (table 9). as regards the eigenvector centrality, natasha hughes stands out as the most infl uential user in the network. a lack of reciprocity in the ‘mentioning/mentioned’ network is also identified, ref lecting different profile usage and information interests. few mws are widely mentioned by others, but they rarely mention others. for example, john downes was mentioned by 42 users and eugene mlynczyk by 39 mws, but they did not mention any other mw. figure 6. scatterplot of the number of likes and retweets received by original tweets and replies. source: elaborated from twitter data. 82 enrique orduña-malea, cristina i. font-julián, josé antonio ontalba-ruipérez, raúl compés-lópez other mws can be distinguished by mentioning other colleagues, but they rarely receive mentions from other mws. for example, tim atkin mentioned 114 mws but he only received mentions from 21 mws. jancis robinson mentioned 118 mws but she only received mentions from 27. it is also noteworthy to comment that some mws (specifically 121) also mention other mws without a twitter account, through their real name. this way, 107 mws not present on twitter have been mentioned at least once, accumulating a total of 603 mentions. julia harding (49 mentions) is the most mentioned mw without a twitter profile by other mws (table 10). 5. discussion and conclusions since not all tweets published by mws have been analysed, results should be taken cautiously as seasonal effects or changes in publication patterns might happen. table 7. impact of tweets (original tweets and replies) according to the embedded elements: links, hashtags, user mentions and media. media embedded metric sum mean median sd max total tweets 25334 140.7 17.0 473.5 4845 links tweets 6446 25.4% 35.8 4.0 76.8 564 jancis robinson links 6602 36.7 4.0 79.6 618 jancis robinson likes 42287 234.9 10.5 1155.0 10836 tim atkin retweets 8051 44.7 1.0 245.7 2737 tim atkin engagement rate na 5.0 2.7 5.5 29.5 derek smedley hashtags tweets 5007 19.8% 27.8 3.0 63.5 549 christy canterbury hashtags 11819 71.2 5.0 207.4 1755 jeannie cho lee likes 40626 225.7 12.0 956.0 11591 tim atkin retweets 5952 33.1 1.0 117.4 1157 tim atkin engagement rate na 7.6 4.1 9.4 63.0 amy christine @ tweets 14953 59.0% 83.1 10.0 242.8 2401 tim atkin user mentions 39206 217.8 19.0 677.0 6700 tim atkin likes 57586 319.9 19.0 1119.8 12800 tim atkin retweets 8032 44.6 3.0 173.7 2042 tim atkin engagement rate na 4.0 3.0 3.2 16.0 david hesketh media tweets 4434 17.5% 24.6 1.0 53.5 311 greg sherwood likes 51263 284.8 3.0 1085.7 11632 tim atkin retweets 7622 42.3 0.0 155.4 1276 tim atkin engagement rate na 10.9 7.5 11.2 65.9 jancis robinson source: elaborated from twitter data. 83masters of wine on twitter: presence, activity, impact and community structure table 8. most frequently hashtags used by masters of wine. hashtag times used avg. likes avg. retweets number of users users (%) number of countries countries #wine 634 10.4 1.9 46 25.8 10 australia, canada, greece, hong kong, india, ireland, new zealand, sweden, uk, us #burgundy 138 12.6 2.1 13 7.3 5 hong kong, india, ireland, uk, us #masterofwine 120 12.2 2.5 12 6.7 6 australia, canada, hong kong, india, uk, us #cellartalk 120 2.0 0.4 2 1.1 2 australia, new zealand #winelife 119 14.3 2.9 4 2.2 4 hong kong, india, uk, us #winetasting 114 12.2 2.4 11 6.2 6 australia, hong kong, india, ireland, uk, us #malbecargentino 111 6.1 1.7 1 0.6 1 us #malbecworldday 107 6.6 2.0 1 0.6 1 us #mwtour 103 5.7 0.5 13 7.3 6 india, netherlands, new zealand, south africa, uk, us #mastersofwine 95 6.6 0.8 17 9.6 9 france, hong kong, india, ireland, netherlands, south africa, spain, uk, us source: elaborated from twitter data. note: no local language equivalents aggregated. figure 7. user mentions network for masters of wine. source: elaborated from twitter data and generated with gephi. 84 enrique orduña-malea, cristina i. font-julián, josé antonio ontalba-ruipérez, raúl compés-lópez notwithstanding, the set of 35,653 tweets published over seven months of activity is considered representative enough to estimate the recent activity of mws. another aspect to take into account is the level of twitter adoption. the current total number of active users amounts to 330 million [14], showing a decrease with respect to 2018 (336 million users). given the bias of mw origin towards the us and the uk, the penetration of twitter in these countries is critical. in 2019, the us had 48.5 million users (14.7% of the total population), being the country with the highest number of active twitter users in the world. the uk had 13.7 million users (20.2% of the total population), being the 4th country in the ranking [15]. the percentage of wine drinkers in these countries should also influence the results obtained. as a proxy – and considering the last data available from the international organisation of vine and wine (which corresponds to 2018) – the consumption of wine was 12.4 litres per capita (15 years of age or older) in united states (39th in the world), and 22.6 litres per capita (15 years of age or older) in the united kingdom (23rd in the world)5. 5 https://www.oiv.int/en/statistiques/recherche besides twitter demographics, wilson and quinton [43] detected an elevated occurrence of some specific wine type mentions (brands, red/white, places, champagne/sparling). our study corroborates the use of these terms through hashtags, specifically of locations (#hongkong, #napavalley, #london, #chile, #edinburgh, #argentina, #baden, #italy, #california, etc.), brands and varietals (#burbundy, #malbecargentino, #bordeaux, #champagne, #garnachagrenache, #pinotnoir, #cabernetsauvignon, #chardonnay, etc.), denominations of origin (#bordeaux, #rioja, etc.), and terms related with leisure time (#tasting, #travel, #delicious, #familytime, #holiday, etc.). the results evidence a low presence of mws on twitter (48.4% of all individuals awarded), although higher for recent awardees. they predominantly speak in english, include hyperlinks to promote their related websites and come from anglo-saxon countries (uk, us and australia). the fact that a significant number of mws includes the term ‘mw’ in their twitter username denotes a potential interest in using the profile for selfpromotion, giving the mw qualification an influential status. master of wine’s twitter profiles attract a significant number of followers on average. however, their social activity (following other users) is further limited (only 43 mws follow more than 1,000 users), which also indicates an interest primarily oriented towards promotion rather than conversation. the long average time elapsed since the creation of the accounts to the first published tweet might reveal on average there is a weak interest in the strategic use of twitter. the publication activity is varied in the period and no single activity pattern is detected, being the passive user the most frequent kind. otherwise, the most productive users are likely to publish more replies and retweets. given the number of followers that mws have on average, impact (measured according to the number of likes and retweets received) is low. even though the engagement rate of tweets increases by adding suptable 9. most influential masters of wine in the username-to-username mention network through node-level metrics (indegree, outdegree, eigenvector centrality). indegree outdegree eigenvector mw users mentions mw users mentions mw users n hughes 52 492 j robinson 118 1846 n hughes 1.0 p reedman 50 442 t atkin 114 1932 p reedman 0.94 sj evans 45 345 n hughes 88 659 k lazarakis 0.90 m gorman-mcadams 42 945 a krebiehl 86 585 m gorman-mcadams 0.83 j downes 42 109 e gabay 80 892 sj evans 0.82 table 10. masters of wine without a twitter profile most mentioned on twitter by other masters of wine. most mentioned mentions julia harding 49 caroline gilby 25 olivier humbrecht 24 michael broadbent 23 liz thach 23 patrick schmitt 21 jean-michel valette 19 mark andrew 14 steve smith 13 david gleave 12 85masters of wine on twitter: presence, activity, impact and community structure plementary embedded elements, including hyperlinks, hashtags and media is less common, while mentioning other users is more frequent. a social authority below 25 (out of 100) can be considered low. while values over 90 points are reserved for famous people (e.g., the singer justin bieber, entrepreneur elon musk, or us president donald trump6 have a social authority of 100), values from 50 to 75 points can be considered significant for specific market domains. for example, in the case of the wine market, the wellknown wine critic robert parker exhibits a social authority of 40 as of november 2020. this value was 54 in march 2018 [16], which shows the volatility of prestige, as followers can vary over time. 37% of the mws obtain a social authority score lower than 25. therefore, impact (measured according to the followers’ social authority) is on average low. despite the total number of followers attracted being elevated, the authority of these followers is limited, except for a few users. further research on followers’ linkage to the industry might reveal whether mws relate to influential people in the wine industry on twitter. despite mws frequently mentioning other users, they rarely mention other mws, as the low-density userto-user network demonstrates. moreover, a lack of reciprocity in user mentions is identified, where a few mws mention many awardees in their tweets, but the vast majority of these do not mention other mws. the general findings of this work show mws on twitter as high attractors (as regards the number of followers they attain), moderate publishers (as regards the quantity of original content published), moderate influencers (as regards the reactions to their published content), low connectors (as regards the users they follow) and low interactors (as regards the number of mentions to other mws). given the reputation and influence of mws in the wine industry, especially in english-speaking countries, these findings reveal that this actor (community of people awarded with the mw accreditation) is not using twitter to gain or reinforce this reputation or influence. this research also shows that this community is very heterogeneous on this social network and that some of their components are very active. in any case, and given the uneven geographical distribution of mws, these results would be especially significant in countries where the mw qualification is more integrated in the wine business culture (united kingdom, united states and australia). 6 donald trump’s twitter account was suspended in january 2021. https://blog.twitter.com/en_us/topics/company/2020/suspension.html if we consider the earlier findings by wilson and quinton [43], who detected a low engagement of wine marketers, brands and retailers on twitter, we can reinforce the hypothesis that the influence space provided by twitter to the wine sector is being occupied by consumers and amateurs, who can easily connect and engage with other consumers. this may cause a loss of representativeness on the part of professional wine experts involved in the communication of wine trust attributes signals. these results are of importance both for the industry and the markets, where expert opinion is very important, but their influence is due to a combination of expertise and communication strategy. in any case, future research analysing other wine-focused twitter groups is advisable for a better understanding of the results obtained. given the rising importance of online sales channels in the wine sector, increased by the covid-19 crisis [22], the effective use of social media in general and twitter in particular by the professional actors of this industry should be considered as a strategic issue of central importance. this research does not attempt to strictly identify influencers (as this term refers to the extent to which peers exert inf luence on the attitudes, thoughts and actions of an individual), which is one step beyond the description of publication patterns. similarly, the dynamics of the ‘sense of community’ force of mws on twitter is outside the scope of this study, as it needs four characteristics (belonging, influencing, supporting and sharing) to be completely established [28]. a deeper analysis on mw followers as well as a content analysis of published tweets is consequently advisable for future works focusing on the characterisation of the mw online community. finally, future research should also delve into the use of other social platforms (e.g., instagram and facebook) by all professional actors in the wine sector, as well as to ascertain the reasons for using (or not using) these 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[45] zimmer, m., proferes, n., 2014. a topology of twitter research: disciplines, methods, and ethics. aslib journal of information management, 66(3), 250–261. https://doi.org/10.1108/ajim-09-20130083 wine economics and policy 10(1): 57-71, 2021 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/wep-9418 wine economics and policy citation: carla ferreira, lina lourenço-gomes, lígia m.c. pinto (2021) region of origin and perceived quality of wine: an assimilation – contrast approach. wine economics and policy 10(1): 57-71. doi: 10.36253/wep-9418 copyright: © 2021 carla ferreira, lina lourenço-gomes, lígia m.c. pinto. this is an open access, peer-reviewed article published by firenze university press (http://www.fupress.com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information fi les. competing interests: the author(s) declare(s) no confl ict of interest. region of origin and perceived quality of wine: an assimilation-contrast approach carla ferreira1,*, lina lourenço-gomes2, lígia m.c. pinto3 1 university of minho, 4710-057 braga, portugal. e-mail: carlacrisfe@gmail.com 2 cetrad and desg, university of trás-os-montes and alto douro, 5000-801 vila real, portugal. e-mail: lsofi a@utad.pt 3 eeg and nipe, university of minho, 4710-057 braga, portugal. e-mail: pintol@eeg. uminho.pt *corresponding author. abstract. wine quality perception involves both intrinsic and extrinsic attributes and is related to consumer liking and acceptability of a product. th e main purpose of this paper is to evaluate the actual role of the region of origin cue on the experienced, expected, and perceived quality of wine, as well as on the discrepancies between them. using an experimental design set up, real tasting sessions were applied to elicit consumer quality perception in three diff erent information conditions: (1) blind tasting (2) labelled tasting (region informed evaluation); and (3) wine tasting under full information. in total, 136 wine consumers stated their preferences through liking score. th e results from the assimilation-contrast framework show that region of origin aff ects the experienced, expected, and perceived quality, as well as the agreement between them. th us, the region of origin may off er a good predictive value of the product, increasing the consumer expectations. th ese results have important implications for producers as they demonstrate that the region of origin may be used as a brand. keywords: assimilation-contrast approach, product quality, region of origin, wine. 1. introduction increased competition between food suppliers, especially in terms of price and product diff erentiation [1], [2] has enhanced the complexity of the consumers’ choice task. th e concepts of expected, experienced and perceived quality have been widely reported in the literature pertaining to food quality [3,4]. cohen and basu [5] defi ned expected quality as the expectation or belief regarding the anticipated performance of a product. it can then be compared with true evaluation of quality obtained through blind tasting, designated by experienced quality [6]. perceived quality can be defi ned as the subjective response to several explicit features of a product and should be seen in relation to the perceptions and expectations of consumers [7]. in sum, consumer liking and acceptability of the product can be infl uenced by the available information which in turn aff ects expectations. 58 carla ferreira, lina lourenço-gomes, lígia m.c. pinto it is widely agreed that wine is one of the most differentiated products on the food market, where consumers have to choose from an extended product line with varying objective and subjective characteristics [8,9]. wine perceived quality is influenced, simultaneously or successively, by non-sensory cues, and sensory cues when the product is tasted [3,4,10,11]. however, in a purchasing context, the intrinsic cues, such as sensory properties, are seldom available [12,13] and thus non-sensory cues tend to dominate the choice [15]. many extrinsic cues, i.e. price, medals, ratings, region of origin, packaging, can affect consumers’ choices by creating quality expectations. perrouty, et al. [16] showed how the region of origin is an extrinsic cue with added value to the consumers. in particular, existing literature supports that the expected quality of wine is strongly associated with the region of origin, which is the main extrinsic cue underlying choice (see for example [17-19]). furthermore, the region of origin can play a direct effect in determining consumer behaviour, through the effective linkage between trust and authenticity [20–22]. for madureira and nunes [23] and pettigrew and charters [24] the influence of information on the region of origin depends on consumer’s knowledge level, gender, and economic status. empirical studies have revealed that expected quality and experienced quality may not match, showing differences between blind evaluations and extrinsic cue evaluations [3,6,25]. also, the mismatch found between expected and perceived quality is generally understood as “disconfirmation of expectation” which meaning can depend on the sensory evaluation of wine, but also on its extrinsic cues. in this vein, the present research intends to measure the role of the region of origin cue on the experienced, expected, and perceived quality of wine, as well as on the discrepancies between them. applying the conceptual framework of expectancy disconfirmation [26,27] this study empirically investigates whether there is a dissonance between perceived, expected and experienced quality among three portuguese wine regions of origin (douro, dão and alentejo) with different levels of notoriety and image content [28]. furthermore, the influence of the consumer’s knowledge level of wine in both experienced and perceived quality is analyzed. the novelty of the approach developed derives from the elicitation of the perceived quality obtained through real tasting sessions applied in 5 portuguese geographical locations, using a specific experimental design based on hedonic evaluations under different information conditions. the next section presents the theoretical background and the research hypotheses. 2. theoretical background and research hypotheses experienced quality of food product depends on sensory characteristics, while perceived quality is also influenced by extrinsic cues, on the other hand expected quality depends crucially on extrinsic cues. when a product is consumed, expectation and sensory experiences are combined into a global product evaluation, designated as perceived quality [3,6]. anderson [26] seminal work, proposed four psychological theories to explain the effect of the difference between the expected quality and the overall perceived product quality: (1) cognitive dissonance (assimilation); (2) contrast; (3) generalized negativity; and (4) assimilation-contrast. dissonance or assimilation theory assumes that any discrepancy between expected quality and the perceived quality will be minimized or assimilated by a consumer adjustment of the evaluation of the product to be more consistent (less dissonant) with his expectations. this theory argues that an unconfirmed expectancy generates a state of dissonance or “psychological discomfort” given that the outcome contradicts the consumers’ original hypothesis. based on this proposition, the extrinsic attributes of a product should substantially lead to expected quality above perceived quality. in this case, the consumer receives two perceptions that are psychologically dissonant and attempts to reduce this mental discomfort by changing or distorting one or the two perceptions to make them more consonant [6,29]. several criticisms emerged, especially because this theory assumes that the consumer instead of learning from his purchasing mistakes, increases the probability of making them again as he tries to reduce post-purchase dissonance by justification and rationalization of his decisions [26,30]. contrast theory (2), argues that if the perceived quality of the product fails to meet the expected quality, the consumer will assess the product less favorably than if he had no prior expectations for it. in this sense, contrast theory assumes that the surprise effect or the contrast among expectations and evaluation will lead to exaggerate or magnify the disparity. thus, contrast and assimilation theories predict opposing effects [26,30]. the third theory argues that any discrepancy between expected and perceived quality leads to a generalized negative hedonic state, in which the product will receive a more unfavorable rating than if it had coincided with expectations. following this theory, even if perceived quality exceeds the experienced quality, the product will be perceived as less satisfying than its perceived quality would justify [26]. finally, the assimilation-contrast theory (4), as the name 59region of origin and perceived quality of wine: an assimilation-contrast approach implies, combines the theories of assimilation (1) and contrast (2). th is theory suggests that there are zones of acceptance, rejection, and neutrality in consumer perception. th erefore, if the disparity between expected quality and perceived quality is suffi ciently small to fall into the zone of acceptance, consumers tend to assimilate the diff erence, rating the product more in line with expected quality than with perceived quality (assimilation eff ect). on the other hand, if the discrepancy between expected quality and perceived quality is too large that it falls into the zone of rejection, the consumer will tend to increase the perceived disparity between expected and perceived quality (contrast eff ect). th us, an assimilation or contrast eff ect arises as a function of the relative disparity among expected and perceived quality [6,26, 29–31]. this conceptual framework is widely applied by marketing managers to study consumer satisfaction and the likelihood of purchase [6, 29]. most empirical studies have shown that matching between expected, experienced and perceived quality is not a rule, and that the size of the discrepancy among expected and perceived quality may determine consumers’ fi nal behavior. several authors call these discrepancies as “disconfi rmation of expectations” [31–33]. th e analysis of the competing theories requires the elicitation of consumers’ perception of quality and acceptance, for which diff erent approaches have been used: hedonic scores [25,34,35] incentive compatible mechanisms such as auctions [36– 38] and a combination of hedonic scores and auctions [11,18, 39–41]. th e application of the assimilation-contrast theory to analyze the eff ect of a region of origin on expected quality and therefore its strength [3,6,18], lead to the formulation the following research hypotheses: a. th e sensory perception of a wine is infl uenced by the knowledge of the region of origin; b. th e region of origin signifi cantly aff ects the experienced quality; c. th e region of origin signifi cantly aff ects the expected quality; d. th e region of origin signifi cantly aff ects the perceived quality; e. th e region of origin signifi cantly aff ects the diff erences between expected and experienced quality; f. th e region of origin signifi cantly aff ects diff erences between perceived and experienced quality; g. th e consumers’ wine knowledge type signifi cantly aff ects experienced and perceived quality. to test the research hypotheses, hedonic scores under diff erent information conditions were gathered: (1) blind tasting (evaluates the intrinsic features of wine and provides a measure of experienced quality); (2) the evaluation of region of origin information (a measure of expected quality based on a wine region); and (3) wine tasting under full information (a measure of perceived quality). moreover, specifi c indicators to test the assimilation-contrast theory were computed (see appendix for a detailed description). 3. materials and methods 3.1 experimental design and procedure following the approach adopted by d’hauteville et al. [3], kokthi and kruja [6], and stefani et al. [18], the hedonic scores were collected through real tasting applying an experimental design replicated over six sessions in fi ve portuguese regions (figure 1). th e tasting session asked participants to evaluate red wines from three portuguese wine regions (douro, dão and alentejo) under diff erent information conditions (blind evaluation; region informed or labelled evaluation; full information). in each session, two scenarios were carried (a and b). each participant took part in only one scenario. th e procedure started with a brief explanation of the research goals and tasks to be performed. in case of agreement, the participant signed an informed consent form and was endowed with a gift figure 1. summary of experimental protocol. 60 carla ferreira, lina lourenço-gomes, lígia m.c. pinto card as an incentive. to minimize session effects, the instructions were read aloud by the same experimenter in all sessions. each red wine sample (30 ml) was served in standard glasses and identified with a three-digit code randomly assigned. the presentation order of wines was randomized across sessions according to a williams’ latin square design, balanced for order and first carry-over effects [6]. the full set of six possible combinations was used. in scenario a – blind scenario, participants were asked to evaluate the wines on a hedonic scale using a 1-9 likert scale (1= dislike extremely to 9= like extremely) and to evaluate the intrinsic attributes for each wine sample(colour, aromatic intensity, sour flavour, and structure). in scenario binformed scenario, participants received information about the region of origin before the expectation test liking score was obtained. then, participants were invited to taste each wine and evaluate it using a 1-9 likert scale (1= dislike extremely to 9= like extremely). participants were also asked to assess intrinsic attributes as in scenario a (figure 1). finally, both scenarios included a questionnaire to collect information regarding: i) socio-demographics; ii) wine consumption and purchasing habits; ii) objective wine knowledge; iii) subjective wine knowledge, following previous studies on wine consumer behaviour [42]. to identify objective knowledge, forbes, cohen, & dean (2008) test was used (table 1 reports the specific questions posed and the alternative answers, identifying in italics the correct option). moreover, to assess subjective knowledge, flynn and goldsmith [43] eight-item measure was used. in addition, the two six-item measures proposed by flynn et al. [44] were applied to measure opinion leadership and opinion seeking. selection of region of origin and wine portugal is typically associated with wine production and consumption. in 2019, it was the 2nd largest wine consuming country among european countries [45]. historically, wine production in portugal is structured in 13 demarcated mainland wine regions, where wine can be sold as a certified product (see map of portugal’s wine region in silva et al. [46]). this certification represents a signal of perceived quality for the consumer, although there are differences as to how the wines connect to the winemaker and contribute to the local economy [47]. in 2018, 62% of still wine consumed in portugal was red wine [48]. comparing the market share (in volume and value) of still wines by the thirteen portuguese wine regions, in 2018 (figure 2), alentejo and douro regions were the most important contributors for total sales in value. however, the douro region contributed significantly less for total sales in volume. for each wine-producing region under evaluation (dão, douro, alentejo), the wine was selected according to the following criteria: to have an average price in the middle range of the portuguese off-trade channel (5€ 12€), the same vintage (2017), and to possess a similar alcohol content. furthermore, a specialist wine consultant firm was recruited to select a wine from each wine region that fulfilled these criteria. table 2 shows the main characteristics of the three wines selected to taste. participants one hundred and thirty-six red wine consumers living in different portuguese wine regions of origin participated in this study. a consulting firm recruited the participants, based on the following criteria: (1) portuguese native speakers; (2) to have a good general state of health (self-reported); (3) to have some experience in choosing wine; (4) regular still wine consumers; and (5) to have 35 or more years old (according to bruwer et al. [49], and wolf et al. [50], older consumers have more experience choosing and consuming red wine). table 1. objective wine knowledge test. question answer choice (correct choice in italics) which of the following is a grape of red wine? alvarinho chardonnay touriga nacional loureiro don’t know a peppery character is most associated with which wine? merlot shiraz/syrah semillion pinot noir don’t know which is not a famous french wine region? bordeaux champagne rheingau alsace don’t know which is the most appropriate designation for port wine? still wine fortified wine sparkling wine lat harvest wine do not know in 2017, which was the largest producer (in quantity) of wine at european level? spain portugal italy france do not know 61region of origin and perceived quality of wine: an assimilation-contrast approach 3.2 data analysis participants’ characterization participants’ characteristics were analysed using univariate descriptive statistics for socio-demographics, wine consumption and purchasing habits, self-reported knowledge, subjective knowledge, opinion leadership, and opinion-seeking behaviour. for objective knowledge, a single score of individuals was determined depending on whether participants answered correctly or not the fi ve multiple-choice items that make up the scale. to investigate the psychometric properties of these measures, a principal component factor analysis with a varimax rotation was performed [43,51]. to identify the wine knowledge types, median splits for objective and subjective knowledge measures were determined: participants with scores above the median on each measure were classifi ed as “high” while the other participants were classifi ed as “low” [51]. th e resulting four consumer wine knowledge types were identifi ed and labelled as show in figure 3. hedonic evaluation to explore the direct impact of the region of origin, we analyzed the diff erence between the evaluation of intrinsic cues (colour, aromatic intensity, acid taste, and structure) and the hedonic scores for each wine. to interpret how hedonic score was aff ected by region of origin information several indicators were calculated, according to table a2 in the appendix. furthermore, we investigate the impact of consumers’ knowledge level on experienced and perceived quality. for this, a kolmogorov-smirnov test was performed to test the statistical signifi cance of positive and negative diff erences between the blind test liking score (experienced quality) and the full information test liking score figure 2. market share (in volume and value) of still wines by thirteen portuguese wine regions, 2018, source: ivv [48]. table 2. main characteristics of the three wines selected to taste. region of origin douro dão alentejo grape variety touriga nacional, tinta roriz and touriga franca touriga nacional, tinta roriz, alfrocheiro and jaen trincadeira and aragonez alcohol content 13,5% 13% 14% year 2017 2017 2017 type of bottle bordeaux burgundy bordeaux colour of bottle black black black geographical indication pdo pdo pdo price (€/bottle) * 7 € 6 € 9 € *mean price off -trade; pdo: protected designation of origin. 62 carla ferreira, lina lourenço-gomes, lígia m.c. pinto (perceived quality). statistically signifi cant diff erences were signalled at the confi dence level of 95%. 4. results and discussion sample description participants’ profi le is reported in table 3. concerning the socio-demographic characteristics, participants’ mean age was 44,3 years (sd=8,63 years), 52% of participants were women, household average size (over 18 years old) was 2,27 individuals (sd=1,13), 87% stated to have a higher education level and 43% earn a monthly household income between 581€ and 1 500€. regarding the purchasing and consumption behaviour, 49% of participants drink wine several times per week, 77 % stated to buy mainly wine from the douro region, and 50% stated to spend 4,99€ per week on wine. th e majority (74%) prefer to buy wine in the supermarket. comparing participants’ profi les between scenario a and b, at a signifi cance level of 5%, there are no signifi cant statistical differences for all variables, except for monthly purchasing of wine. it is thus possible to compare scenario eff ects between the two groups [52]. to classify participants into the four types of wine knowledge proposed by ellis and coruana [51] we fi rst investigated the validity of the measures of the 20 items making up the three constructs in study (subjective knowledge, opinion leadership and opinion seeking) through a principal components factor analysis by applying a varimax rotation. table 4 shows as each item is loaded separately and distinctively onto four factors. two items for the opinion leadership measures and one item for the subjective knowledge were excluded to improve model robustness, increasing the explained variance to 68%. figure 3. wine knowledge types. source: adapted from ellis and caruana [51]. table 3. participants’ profi le description. relative frequency total p-valuescenario a (n= 71) scenario b (n=65) gender 0,128 women 57,7 44,6 51,5 men 42,3 55,4 48,5 education level 0,407 5-9 years 2,8 1,5 2,2 10-12 years 12,7 9,2 11 higher education 84,5 89,2 86,8 household monthly income 0,100* < 580 € 0 3,1 1,5 581 €1 500 € 42,3 44,6 43,4 1501 € 2 500 € 33,8 27,7 30,9 2501 € 3 500 € 18,3 16,9 17,6 3501 € 4 500 € 1,4 7,7 4,4 > 4 501 € 4,2 0 2,2 wine consumption frequency 0,075* never 4,2 4,6 4,4 once 28,2 38,5 33,1 several times 47,9 49,2 48,5 every day 19,7 7,7 14 wine region of origin that most buys 0,696 verdes 1,4 3,1 2,2 douro 78,9 75,4 77,2 dão 8,5 7,7 8,1 lisboa 2,8 1,5 2,2 alentejo 8,5 12,3 10,3 monthly purchasing of wine (bottle) 0,047** 1 or less 36,6 49,2 42,6 2 to 3 33,8 35,4 34,6 4 or more 29,6 15,4 22,8 weekly spending of wine 0,161 ≤ 4,99 € 45,1 55,4 50 5,00 € 9,99 € 39,4 33,8 36,8 10,00 € -14,99 € 5,6 6,2 5,9 15,00 € -49,99 € 8,5 4,6 6,6 ≥ 50,00 € 1,4 0 0,7 place of purchase 0,097* hypermarket 71,8 75,4 73,5 wine store 11,3 13,8 12,5 producer 16,9 10,8 14 notes: *** p<0,001; **p<0,05; *p<0,1. 63region of origin and perceived quality of wine: an assimilation-contrast approach the findings indicate a cross loading for item six of flynn and goldsmith [43] proposed measure. in other words, the item related to the opinion leadership is placed on the subjective knowledge measure. this result can be explained by the relationship between the two measures, as subjective knowledge involves opinion seekers. vigar-ellis et al. [42] also found cross loading among factors and items with poor loading. the results show a division of the opinion leadership measure into two constructs, with a leading opinion relationship, the negative opinion leader and the positive opinion leader. however, the computation of cronbach alpha supports the convergent and discriminant validity of the constructs (the cronbach alpha score for all measures exceed 0,7, providing support for internal consistency, as stated by nunnally [53]. regarding the measurement of objective wine knowledge, each question was evaluated as either correct (1 mark) or incorrect (0 mark). the scores for the objective knowledge ranged from 0 to 5, with an average value of 2,60 (sd=1,06). based on the marks, the sample was split into four segments using subjective and objective knowledge results of participants, according to figure 3. this resulted in 93 of the participants being classified as “neophytes” (low subjective-low objective), 25 as “modest” (low subjective-high objective), 14 as “snobs” (high subjectivelow objective), and only 4 as “experts” (high subjective-high objective). table 5 reports the results by consumers’ knowledge type, regarding the importance of information on consumers’ choice [11,36]. for all consumer segments, the most important wine cue is the region of origin. environmental certification appears as indifferent for all knowledge types. neophytes give more importance to front label design and medals/awards, while experts ascribe more importance to information as grape variety, winemaker, expected quality price ratio, recommendation, previous experience and brand. comparing the modest with the snobs, snobs give more attention to the quality-price ratio, alcohol content, wine history, brand, and front label design. moreover, the distribution of the importance of information across knowledge types is statistically different (p-value <0,05) for bottle shape, wine history, winemaker, brand, and medals/awards. in general, these results corroborate those in the literature for the four wine knowledge types [42,54]. impact of origin region on hedonic score to assess the impact of the region of origin on the scores ascribed by participants to the features colour, aromatic intensity, acid taste, structure, and overall hedonic scores in two information conditions (blind tasting and full information) a between means unpaired test (zwilcoxon test) was performed (table 6). results show that, in general, participants value more the wine attributes when they have previous knowledge about the region of origin (scenario b) than in the blind information condition (scenario a). for the four intrinsic attributes under evaluation, statistically significant differences were found for colour and acid taste (alentejo wine) as well as aromatic intensity (douro wine). thus, intrinsic attributes such as colour, acidity, and aromatic intensity were perceived diftable 4. results of principal components factor analysis followed by varimax rotation. components 1 2 3 4 (1) i feel quite knowledgeable about wine 0,848 (2) among my friends, i am one of the ‘experts’ on wine 0,790 (4) i know pretty much about wine 0,724 (5) i do not feel very knowledgeable about wine (r) 0,720 (7) when it comes to wine, i really do not know a lot (r) 0,714 cronbach’s α 0,99 (16) i do not need to talk to others before i buy a wine 0,820 (17) i rarely ask other people what wine to buy 0,809 (15) when i consider buying wine i ask other people for advice (r 0,753 (18) i like to get others’ opinions before i buy a wine (r 0,704 (20) when choosing wine, other people’s opinions are not important to me 0,659 cronbach’s α 0,89 (9) my opinion on wine seems not to count with other people 0,885 (10) when they choose a wine, people do not turn to me for advice 0,760 (11) other people rarely come to me for advice about choosing wine 0,667 (6) compared to most other people, i know less about wine 0,560 cronbach’s α 0,86 (13) i often persuade other people to buy the wine that i like 0,874 (14) i often influence other people’s opinions about wine 0,870 (12) people that i know pick wine based upon what i have told them 0,717 cronbach’s α 0,84 64 carla ferreira, lina lourenço-gomes, lígia m.c. pinto ferently, depending on the region of origin information (table 6). comparing the means of hedonic scores by scenario and by region of origin, there is a valorization of all regions of origin (table 6), i.e, the information on the region of origin increases the hedonic scores. in blind tasting (scenario a), consumers assign the highest mean hedonic score to douro wine. however, in the full information condition, the dão wine achieved the highest mean hedonic score. differences between information scenarios are statistically significant for alentejo and dão wine at p value < 0,05. these results can be explained by the general idea among wine portuguese consumers of an overvalued alentejo wine region, as well as dão wine region. according to ivv [48], in volume, the alentejo wines were the most consumed in portugal, representing 37,4 % of total sales, 73,1% through the retail channel. on the other hand, for douro wine, the differences were not statistically significant between both scenarios (at a significance level of 5%). consumers follow the same hedonic assessment with or without information about the region of origin. in 2018, douro wine represented 12,4 % of total sales, in volume, mainly (68%) in restaurants [48]. the hypothesis that sensory perception of the wine is influenced by the knowledge of the region of origin was supported by the results, reinforced by the need of tasting in hedonic evaluation to avoid individuals’ assumptions about the perceived quality of the products [55, 56]. stefani et al. [18]and d’hauteville et al. [3] found a similar behaviour when investigating the impact of region of origin on hedonic score. the hedonic score expressed in the full information scenario is higher than the hedonic score obtained under blind test condition. furthermore, masson et al. [12] and vecchio et al. [57] demonstrate the influence of extrinsic cues (i.e. low-alcohol wien and process impacts) on the sensory perception. in same line, these authors show that the sensory perception of a wine is influenced by the knowledge of the extrinsic cue. assimilation and contrast effects to test the assimilation and contrast effects six indicators were computed: expected quality – experienced quality; perceived quality – experienced quality; perceived quality – expected quality; assimilation effect (α); moderating effect of information (mi); and dissonance effect (di). according to the results reported in table 7, a statistically significant difference between expected quality and experienced quality was found for table 5. mean importance score of information seek by consumers’ knowledge type. mean score consumers knowledge type kruskal-wallis test p-values neophytes modest snobs experts region of origin 6 6 6 6 0,406 sensory profile 5 5 5 5 0,426 food pairing 5 5 5 5 0,446 environmental certification 4 4 4 4 0,051* grape variety 3 5 5 6 0,444 front label design 6 3 4 3 0,132 bottle form 5 4 4 3 0,024** wine history 4 4 5 5 0,000*** winemaker 3 5 5 6 0,000*** brand 4 5 6 6 0,005** medals/awards 6 5 5 4 0,038** expected quality-price ratio 5 5 6 6 0,703 recommendation 5 5 5 6 0,445 alcohol content 4 4 5 5 0,271 qr code 3 4 4 4 0,051* previous experience 5 5 5 6 0,659 importance level on a scale of one to seven with one equal to no at all important and seven equal to extremely important; *** p<0,001; **p<0,05; *p<0,1 65region of origin and perceived quality of wine: an assimilation-contrast approach the three regions of origin. in other words, the score of expected quality was slightly above the experienced quality in blind tasting, indicating the non-confirmation of expectations for each wine tested and the region of origin effect on consumers’ preferences. the mean of disagreement between the expected quality and experienced quality was higher for alentejo wine, with a dissonance (di) value of 24%. on the other hand, for douro wine the di value is only 7%, suggesting that the effect of region of origin is not homogeneous. these findings are in line with the results reported in stefani et al. [18], d’hauteville et al. [3] and masson et al. [12]. the effect of assimilation or contrast is significant and positive for the three wines under study (table 7). the region of origin information affects the overall wine evaluation increasing the mean of liking ratings. especially, for alentejo wine, the information about the region of origin leads to a 16% increase in experienced quality. thus, the findings suggest that there is an assimilation effect for the three regions of origin under analysis. the results reveal statistically significant differences between full information conditions and expectated evaluation (table 7). for the three wines, the liking scores decreased in full information conditions, showing that the product did not meet the expectations. this effect is greatest for alentejo wine, the least appreciated in sensorial terms. in other words, there is a positive partial assimilation or negative disconfirmation of expectations for the three regions of origin. these findings suggest that the wines are less tasty than the average participants’ expectancy, probably because participants expected better, given some recognized regions of origin, as explained by lange et al. [40]. regarding the assimilation coefficients (α), the three wines reported a coefficient higher than 0,5, indicating the predominant effect of region of origin on the overall evaluation of the wine. overall results confirm that perceived quality depends on the expectation of the region of origin, as reported by kokthi and kruja [6] and vecchio et al. [57]. furthermore, these results confirm the empirical evidence found in previous research that sensory cue by itself is not a discriminative of consumers’ evaluation [18]. assimilation-contrast theory helps to understand the differences that may exist in terms of the strength table 6. mean values of hedonic scores with blind tasting (scenario a) and with full information (scenario b) for the three wines. attributes region of origin douro alentejo dão colour a 3,68 3,18 3,65 colour b 3,57 3,54 3,74 colour b-colour a -0,11 0,36** 0,09 aromatic intensity a 3,21 3,18 3,35 aromatic intensity b 3,49 3,43 3,48 aromatic intensity baromatic intensity a 0,28** 0,25 0,13 acid taste a 3,18 3,54 3,28 acid taste b 3,40 3,25 3,3 acid taste b-acid teste a 0,22 -0,29* 0,02 structure a 3,27 3,18 3,38 structure b 3,35 3,28 3,31 structure b-structure a 0,08 0,1 -0,07 hedonic score a 6,55 5,96 6,18 hedonic score b 6,82 6,89 7 hedonic score bhedonic a 0,27* 0,93** 0,82** nº obs. scenario a 71 71 71 nº obs. . scenario b 65 65 65 attribute a = score attribute mean with blind tasting; attribute b= score attribute mean with full information. ***statistically significant at p-value<0,01; **statistically significant at p-value<0,05; *statistically significant at p-value<0,1 table 7. computed indicators by region of origin. indicators region of origin douro alentejo dão expected quality – experienced quality 0,45*** 1,44*** 1,22 *** perceived quality – experienced quality 0,27* 0,93** 0,82*** perceived quality – expected quality -0,18*** -0,51*** -0,40 ** assimilation coefficients (α) 0,60 >0,5 0,65>0,5 0,67 >0,5 moderating effect of information (%) 4 16 13 dissonance effect (%) 7 24 20 assimilation/contrast effect partial positive assimilation partial positive assimilation partial positive assimilation ***statistically significant at p-value<0,01; (z-wilcoxon test). 66 carla ferreira, lina lourenço-gomes, lígia m.c. pinto of the region of origin on the wine [57]. based on this theory, the results suggest that if the disparity between expected quality and perceived quality is sufficiently small to fall into the zone of acceptance, the consumers tend to partly assimilate the difference. therefore, the hypotheses that the region of origin significantly affects experienced, expected, and perceived quality are supported. also, these results confirm that the region of origin significantly affects differences between expected and experienced quality; and the differences between perceived quality and experienced quality. in sum, these results highlight the effect of region of origin information on wine consumers’ preferences. previously, several authors have shown that the wine evaluation is influenced by both intrinsic cues (as taste) and extrinsic cues (as region of origin or brand), which affect the perceived quality of the wine [34,58–60]. on the other hand, masson et al. [12] and vecchio et al. [57] applied the assimilation-contrast theory to study the effect of other extrinsic cues, such as low-alchol and process impact, respectively, on wine perceived quality. the results of this study are in line with previous research findings, however, few studies have applied the assimilation-contrast theory to investigate the effect of region of origin on wine’s perceived quality [3,18], as developed here. impact of wine consumers’ knowledge type on experienced and perceived quality to investigate the difference of experienced and perceived quality across consumers’ wine knowledge type, a kolmogorov-smirnov test was performed (results for experts are not reported as only one subject belongs to this category). table 8 shows that only neophytes present statistically significant differences between experienced and perceived quality. comparing the hedonic score distribution for the three wines, statistically significant differences were found only for the alentejo wine. the results indicate that this group ascribes higher hedonic scores for alentejo wine in blind tasting (experienced quality). following the distinctions discussed by ellis & caruana [51] for the different consumer knowledge types, neophytes recognize that they know very little about wine, but like to consume wine. a basic product with low prices and intensively distributed will likely be the most sought by this segment of consumers. thus, a feasible reason for the results obtained is the familiarity of the consumers to certain sensorial profile, responding more to brands than to the region of origin. in this context, the hypothesis that wine consumers’ knowledge type has significant effects on experienced and perceived quality was partially verified. this result is in line with those reported in previous literature [3,12,57]. a summary comparison table of our results and those from previous literature is presented in the appendix (table a3). 5. conclusion the region of origin cues influence the consumer evaluation of food products as far as it can act as a quality cue to other features of the good and/or it can affect the liking of food through its symbolic or affective meaning. this is especially important for wine as it is an information-intensive product offering multidimensional decision challenges for consumers. understanding the strength of region of origin on perceived quality of wine, and how it varies across market segments is essential for the design of successful marketing strategies. considering three portuguese wine regions of origin, the present study provides empirical evidence that table 8. distributions of hedonic scores by consumer knowledge type between two informational scenarios (blind tasting and complete information). consumer knowledge type1 region of origin hypotheses2 kolmogorovsmirnov z (p-values) neophytes douro hs(eq)<hs(pq) 0,976 hs(eq)>hs(pq) 0,644 alentejo hs(eq)<hs(pq) 0,008** hs(eq)>hs(pq) 1,000 dão hs(eq)<hs(pq) 0,990 hs(eq)>hs(pq) 1,00 modest douro hs(eq)<hs(pq) 0,826 hs(eq)>hs(pq) 0,877 alentejo hs(eq)<hs(pq) 0,476 hs(eq)>hs(pq) 1,000 dão hs(eq)<hs(pq) 0,168 hs(eq)>hs(pq) 1,000 snobs douro hs(eq)<hs(pq) 0,743 hs(eq)>hs(pq) 0,953 alentejo hs(eq)<hs(pq) 0,898 hs(eq)>hs(pq) 0,953 dão hs(eq)<hs(pq) 0,898 hs(eq)>hs(pq) 0,497 **statistically significant at p-value<0,05; *statistically significant at p-value<0,1. 1the expert knowledge consumer group is composed of only one individual, thus the group is absent from the table. 2eq=experienced quality; pq=perceived quality. 67region of origin and perceived quality of wine: an assimilation-contrast approach attest the impact of the region of origin on consumers’ preferences, namely that it affects the expected, the experienced and the perceived quality of the wine. it also shows that consumers’ knowledge provides a useful basis for segmenting the wine market, which reinforces the bet on the characterization of consumers by wine marketers. the neophytes segment shows hedonic sensitivity to positively evaluate a known sensory profile. however, further research is required to test the responses of the segments to other marketing mix variables. additionally, a predominant effect of region of origin on the overall evaluation of the three wines was found. this paper supports important findings with respect to the relationships between expected quality of region of origin and its market strength. in the full information condition, participants decreased hedonic rating of all regions of origin, especially for alentejo, which presented the highest percentage of dissonance. this suggests that the alentejo region has a brand in the market that leads to higher consumer expectations. on the other hand, for other regions, dão and douro, investments should go to brand construction. moreover, the paper sheds light on the role of the region of origin in moderating the impact of experienced quality on consumers’ preferences. in particular, it emerged that each region of origin is perceived differently according to its strength in the wine market. in light of this, intensive advertising and communication strategies can help to enhance the region of origin as a brand in the market thus improving the perceived quality of its wine. the results reported in this study need to be considered in light of its limitations. part of our results may depend on the choice of wines, although we controlled the selection criterion to obtain a representative sample. in this line, further research needs to be carried using authentic consumption situations, including other marketing mix variables and other wine regions. several practical implications derive from these findings. wine producers should carefully transmit the information and the specific product features, both in terms of sensory profile and in terms of market reputation. moreover, wineries could run information campaigns to communicate differences in sensory profile between regions of origin. in future research, it is crucial to investigate more deeply specific sensory attributes that influence wine consumer preferences, affect the perceived wine quality with a special focus on specific consumer segments. 6. references [1] c. altomonte, i. colantone, and e. pennings, “heterogeneous firms and asymmetric product differentiation,” j. ind. econ., vol. 64, no. 835–874, 2016. 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[61] m. fornerino and f. d’hauteville, “how good does it taste? is it the product or the brand?,” j. prod. brand manag., vol. 19, pp. 34–43, 2010. 70 carla ferreira, lina lourenço-gomes, lígia m.c. pinto appendix according to schifferstein [31] there are three ways to elicit sensory and non-sensory quality preferences depending on the information set available: blind test liking score (b – experienced quality: no information); expectation test liking score (eexpected quality: provision of non-sensory information) and full information test liking score (f-perceived quality: provision of non-sensory and sensory information). the difference between perceived quality and expected quality is designated as degree of disconfirmation; if expected quality is compared to experienced quality the degree of incongruence can be computed. finally, comparing the perceived quality with experienced quality, the degree of response shift is computed. schifferstein [31] proposes the analysis of ratio α, equal to the degree of response shift over the degree of incongruence, translating the assimilation effect. the assimilation-contrast theory can be interpreted as a mechanism by which the individuals try to adapt psychologically to their environment [61]. table a1 summarises the different assimilation and contrast effects. assimilation is absent (α equal to zero) when there is no discrepancy between expected quality and perceived quality. on the other hand, there is an assimilation effect (positive or negative) whenever that change of perceived quality is in the same direction of expected quality; while contrast effect (positive or negative) occurs when the change of perceived quality moves in the opposite direction of expected quality [6]. table a1. assimilation and contrast effects. perception (information conditions) assimilation contrast partial positive partial negative complete assimilation positive negative expected quality – experienced quality (e-b) >0 <0 >0 >0 <0 perceived quality – experienced quality (f-b) >0 <0 >0 <0 >0 perceived quality – experienced quality (f-e) <0 >0 0 >0 <0 notes: b -blind test liking score; e -expectation test liking score; f -full information test liking score. table a2. hedonic score differences tested. indicators application data analysis expected quality – experienced quality expectation test liking score (e) blind test liking score (b) – it is calculated to identify the effect of region of origin information on consumers preferences. – there are effects of region of origin on consumers preferences if e -b >0 perceived quality – experienced quality full information test liking score (f) blind test liking score (b) – it is calculated to identify if there is assimilation or contrast effect – it shows to what extent product information (region of origin + sensory test) affects hedonic scores. perceived quality – expected quality full information test liking score (f) expectation test liking score (e) – it is calculated to identify if assimilation is partial or full; – there is complete assimilation if f-e=0. assimilation coefficients (α) α = perceived quality – experienced quality (f-b), expected quality – experienced quality (e-b) 0≤ α≥1 – if α< 0,5, then sensory features are the most important in the product evaluation; – if α> 0,5 region of origin is preferable to sensory features. dissonance effect (di) di(%) = expected quality – experienced quality (e-b) * 100 experienced quality (b) – it measures the distance among expected quality and experienced quality as a percentage from the baseline outcome experienced quality moderating effect of information (mi) α = perceived quality – experienced quality (f-b) * 100 experienced quality (b) – it measures the average effect of information, as a percentage from the experienced quality on the perceived quality 71region of origin and perceived quality of wine: an assimilation-contrast approach table a3. assimilation-contrast theory findings: comparison by wine evaluation’ studies. present paper stefani et al. [18] d’hauteville et al. [3] masson et al. [12] vecchio et al. [57] characteristics of study extrinsic cues under evaluation region of origin region of origin region of origin low-alcohol wine process impacts main results the sensory perception of a wine is influenced by the knowledge of the extrinsic cue (i.e., region of origin) ✓ ✓ ✓ ✓ ✓ the extrinsic cue under evaluation (i.e., region of origin) significantly affects the experienced quality ✓ ✓ ✓ ✓ ✓ the extrinsic cue under evaluation (i.e., region of origin) significantly affects the expected quality ✓ ✓ ✓ ✓ ✓ the extrinsic cue (i.e., region of origin) significantly affects the perceived quality ✓ ✓ ✓ ✓ ✓ the extrinsic cue (i.e., region of origin) significantly affects the differences between expected quality and experienced quality ✓ ✓ ✓ ✓ ✓ the extrinsic cue (i.e., region of origin) significantly affects differences between perceived quality and experienced quality ✓ ✓ ✓ ✓ ✓ the consumers’ wine knowledge type significantly affects experienced and perceived quality ✓ n.a. ✓ ✓ ✓ n.a.: not application; ✓: supported. wine economics and policy 10(2): 61-74, 2021 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/wep-9893 wine economics and policy citation: katharina hauck, gergely szolnoki, evelyn pabst (2021) motivation factors for organic wines. an analysis from the perspective of german producers and retailers. wine economics and policy 10(2): 61-74. doi: 10.36253/ wep-9893 copyright: © 2021 katharina hauck, gergely szolnoki, evelyn pabst. this is an open access, peer-reviewed article published by firenze university press (http://www.fupress.com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information files. competing interests: the author(s) declare(s) no conflict of interest. motivation factors for organic wines. an analysis from the perspective of german producers and retailers katharina hauck*, gergely szolnoki, evelyn pabst hochschule geisenheim university. email: katharina.hauck@hs-gm.de; gergely.szolnoki @hs-gm.de; evelyn.pabst@hs-gm.de *corresponding author. abstract. this study investigates the motives for producers that inform decisions to convert or not convert to organic wine production as well as the motives for retailers to offer or not offer organic wine and promotion of organic wine from producers’ and retailers’ perspectives. in total, 100 semi-structured in-depth interviews with 25 different types of retailers, 50 organic wineries and 25 non-organic wineries were conducted and analysed using content analysis and grounded theory. additionally, the wine offers of 25 stores were analysed to develop an understanding of the distribution and promotion of organic wines. producers choose to switch or not to switch to organic farming for primarily altruistic reasons. because organic wine producers do not specifically focus on the organic nature of their wines in their communications, this attribute is typically disregarded by retailers and consumers during their wine-buying decisions, which undermines the growing demand for organic wine. there are significant differences between wine-growing regions in germany and their vine cultivation conditions due to weather, the steepness of slopes and the attitudes towards converting conventional wine production to organic wine production. missing knowledge and a low demand for organic wines are barriers for retailers to focus on organic wine. to our knowledge, this is the first study to investigate organic wines from numerous producers in every wine-growing region in germany and various retailers in germany. the focus on communication shows a lack in the knowledge transfer along the value chain of organic wine. therefore, this study fills a research gap and provides valuable practical insight into the organic market for the wine industry and the scientific community. keywords: organic wine, germany, producers, retailers, qualitative research 1. introduction in germany, the agricultural area devoted to organic farming has almost doubled in the last 5 years, with around 10 % of german farmland now certified for organic farming. the usa and europe are the largest organic markets around the world [1]. in 2016, germany was one of the most important organic markets worldwide [2]. nonetheless, although it has since lost its leading position and now occupies the sixth largest organic market in 62 katharina hauck, gergely szolnoki, evelyn pabst europe [1], it is still the world’s largest market for organic wine [3]. organic viticulture in germany covers around 9 % of german vineyards, or 9,300 hectares in total. the supply of organic wine is similar to the organic food market, suggesting that the demand for organic wine is comparable to the demand for organic food [1]. however, several studies have indicated that the growing supply for organic wine is not a direct indicator of high demand for the product. rather, according to findings by remaud et al., hoffmann and szolnoki and szolnoki and hauck [4,5,6], the active demand for organic wine is small. in addition, wine producers face many local and global challenges, such as climate change and a saturated wine market [7,8,9]. while the majority of organic wine (86 %) is produced in europe, the number of german organic vineyards is comparatively small [10]. moreover, traditional german food retailers and discounters with a high market share in the german wine market have increased their supply of organic food and wine [1,11]. the present study examines the motives that inform producers’ decisions to convert to organic farming and the resulting changes in costs and sales structures and the motives of retailers to offer organic wine. the paper also analyses producers’ and retailers’ perceptions and promotion of organic wine to determine the driving factors behind the discrepancy between the supply and demand of organic wine. finally, the study assesses consumer knowledge and the demand for organic wine to draw practical implications for the organic wine industry in germany. 2. literature review the motivators behind farmers’ decisions to shift from conventional to organic production were evaluated in several studies. while ethical and lifestyle factors appeared to significantly influence farmers’ decisions to convert to organic production in the past [12,13], today the decision making is more complex [14]. according to some authors, organic farming is more far-reaching than conventional production techniques and can involve social movements [15,16,17,18,19]. the conversion from conventional to organic production has been described as a major change [18] and transformation [20,21] that requires a strong need for change and an adjustment to mindset [22,18]. xu et al. [23] found that conventional farmers are typically unwilling to accept the challenges of producing organic goods when they are already satisfied with their businesses. a study by darnhofer et al. [24] examined different barriers and drivers on the organic markets in austria, italy and france. these are relations between organic agriculture and broader issues in the agrifood system such as structural change, environmental protection, gastronomic heritage, fairness in the food chain or export promotions. within the eu, the history of relations within the agrifood stakeholders and consequently market structure, market power and interaction between these stakeholders play a crucial role in the development of the organic sector and differ in each country. karipidis and karypidou [14] identified external factors as market factors, demand, price, distance to the market or point of sale, supply chain, certification schemes, technologies, institutional factors, social networks and knowledge transfer, relationships between market players and institutions, financial factors and the public policy. furthermore, they described also internal factors such as farm business characteristics, farmerś characteristics, demographic and other social characteristics and psychographic and behavioural characteristics. according to a study by castellini et al. [25], wineries most frequently convert from conventional to organic wine production for ethical reasons, followed by factors related to higher product quality and to differentiate themselves from other producers. in a qualitative research study, bouzdine-chameeva [26] interviewed organic wine producers in france and italy to investigate their motivations, production approaches and marketing strategies, determining that their motives varied considerably. risk, quality loss and the lack of recognisable international quality certification resulted in an ambivalent gap between the producers’ ecological and economic goals. although an eu organic label was introduced in 2010, zander et al. [27] found in an international study in six countries that only about 15 % of consumers are aware of the label and the knowledge about its meaning is low. the producers’ motivations for converting from conventional to organic farming also varied significantly. when siepmann and nicholas [28] interviewed wine producers in germany, they determined that soil protection is one of the primary motives for switching to organic farming. in addition, they found that some wine producers doubt the overall sustainability of organic wine production, especially regarding the use of copper. ideologies for or against organic production are the main drivers for switching or not switching to organic farming. although the concept of organic farming was first introduced almost a century ago, its benefits to humanity and nature remain under debate. reganold and wachter [29] examined studies on organic and conven63motivation factors for organic wines. an analysis from the perspective of german producers and retailers tional farming that had been published over the last 40 years, concluding that organic farming is generally more sustainable than conventional farming due to its lesser impact on ecosystems as a more balanced form of agriculture. they also determined that organic producers’ yields are 8 % to 25 % lower than those of conventional winegrowers. regarding organic viticulture, one german study surmised that due to slower wine growth and smaller yields, the productivity of organic vineyards is an average of 35.9 % lower than that of conventionally farmed vineyards [30]. these results were corroborated by an australian study that observed that organic wine producers’ yields are 21 % lower than those of conventional producers [31]. siepmann and nicholas [28] found that the lower yields of organic wine production are linked to efforts to increase wine quality and can be offset with higher prices. in terms of economic sustainability, reganold and wachter [29] posited that organic farming can result in higher profits when the products are charged at a premium. without these premium prices, the cost ratio decreases and is much lower than the cost ratio for conventional production. nonetheless, according to crowder and reganold [32] and macrae et al. [33], significantly higher labour costs in organic production can offset the lower costs for synthetic products and make the costs more comparable to conventional farming. crowder and reganold [32] also concluded that organic agriculture could only grow if it is financially profitable. although siepmann and nicholas’s [28] study noted that economic incentives are important drivers in decisions to convert to organic farming, it found that ideology was the primary factor that motivated these types of decisions. in a south african study that examined organic farmers’ production costs and revenues [34] and explored whether conventional or organic farming benefited wine producers, the authors concluded that the benefits of organic farming depend on the price premium of organic wines. regarding economic motivation, zilber et al. [35] observed that because labour intensity increases production costs, farmers’ decisions to produce organically should be informed by factors related to differentiation rather than expense. delmas and grant [36] observed that consumer demand, subsidies and challenges to selling conventional wines are less relevant to the producers’ decisions to convert to organic farming. this suggests that some wineries produce organic wines without seeking organic certification. nevertheless, while most organic wine producers are proud of their organically grown wines and want to share this information with their customers by obtaining organic certification and labelling their wines as organic, organic labels can only prove successful if consumers are familiar with them and aware of the differences between organically and conventionally farmed wines. fanasch [37] found that an eco-certification and individual reputation can have a significant, positively impact on the corporate performance. hauck and szolnoki [38] reported that only 44.7 % of german consumers are aware of the eu organic label and that their awareness of other german certifications, such as biokreis, bioland, ecovin, naturland and demeter, are even lower. in risius et al. ‘s [39] choice experiment with german consumers, they found that organic labels carried a positive part-worth coefficient that was rather marginal when compared to other attributes. a study by gassler et al. [40] examined the willingness to pay for organic wine and found that organic labelled wines were perceived as tastier and of higher quality and value than conventional wines. schäufele and hamm [41] reported an attitude-behaviour gap in household panel data of organic wines in germany. the results revealed that the expenditure share remained low for german organic wines. an analysis by pomarici and vecchio [42] assumed, that sustainability will gain in in the development of competitive advantage of single wineries and of country wine-supply chains. consumers buy organic foods for several reasons, such as health, taste and altruism [43]. these same categories apply to organic wine. sireix and remaud [44] determined that most wine consumers associate organic wine with health benefits. consumers with strong health awareness are also more willing to pay a premium for organic wines [45]. a study by fanasch and frick [46] analysed 55,500 wines in germany to find a significant price premium for organic and biodynamic wines, but the magnitude was far smaller than previous surveys and laboratory experiments expected. because wine is viewed as a luxury item, taste is a relevant factor during purchase decisions [47]. altruistic motives for buying organic food, such as environmental protection and animal welfare, are usually not associated with wine production [36]. consumers with a strong environmental orientation are often more willing to purchase organic wine [48] and pay a premium for environmentally friendly organic wines [49]. this sentiment was confirmed by schäufele and hamm [41], who examined six different segments of german wine consumers whose attitudes and purchasing behaviours towards organic wines differed significantly. as mentioned earlier, there are similarities in the motives between purchasing organic foods and organic wines. both products also encounter many purchasing barriers. to illustrate, customers are often hesitant to 64 katharina hauck, gergely szolnoki, evelyn pabst buy organic food due to its higher pricing, inferior taste or because they are unfamiliar with or lack knowledge about the product [43]. sirieix and remaud [44] discovered that consumers typically perceive organic wine as more expensive than conventional wine. consumers also have little knowledge about organic wine production [50,51] and often perceive wine as a natural product. as a result, there is not the same level of positive differentiation between conventional and organic wines as there is with conventional and organic foods [44]. therefore, consumers of organic food rarely consider buying organic wine and purchase the conventional alternative more often [4]. for consumers who have little knowledge of organic wine, tasting it can have a positive impact on their perceptions of its quality [36]. sohn et al. [52] demonstrated in their study that the organic wine purchase intensions can be influenced by social cues, which are increasing trust during the online purchase. zander and janssen [53] found that consumers who regularly buy wine are more willing to purchase organic wine. this was confirmed by szolnoki and hauck’s [6] study, which revealed that consumers consume more organic wine when they have a greater interest and more knowledge of wine. as the literature review has illustrated, few papers have investigated producers’ motives for converting to organic wine production [25,26,28] and consumers’ perception of organic wine [36,38,43,44]. to date, no study has examined the challenges that organic wine producers encounter or how producers and retailers influence the consumer demand for organic wine. in addition, there is no study investigating organic wineries including all german winegrowing regions and dealing also with conventional wineries to identify the barriers to convert. therefore, this study aims to analyse along the value chain the german producers’ and retailers’ perceptions of organic wine by addressing the following three research questions (rq): rq 1: what are the motives for converting or not converting from conventional to organic wine production? based on the findings in the study by castellini et al. [25], fairweather et al. [15]; darnhofer et al. [16]; rigby et al. [17]; sutherland et al. [18]; pavie et al. [19]. rq 2: how are production and sales structures affected by organic wine production? based on the findings in the study by darnhofer et al. [24] karipidis and karypidou [14] reganold and wachter [29]. rq 3: why and how do retailers offer organic wine? based on the fact that there are no publications dealt with the role of retailers and organic wines. 3. materials and methods data for this survey were collected using a qualitative research method. this involved interviews with the managing directors of selected organic and conventional wineries in all 13 german wine-growing regions and wine buyers of retail stores. the face-to-face or telephone interviews were conducted by using semi-structured interview guidelines [54,55]. all experts, both form the wineries and from the retail shops, are in decision-making positions. the interviews were conducted in 2018. the set of questions for the wineries covered the following topics: 1) the motives for converting to organic wine production; 2) changes in workload and cost after the conversion; 3) changes in sales structure; 4), the characteristics of organic wine consumers and 5), how organic wine is promoted. the retailers were asked about 1) the share of (german) organic wine in their range of wines; 2) the development of the demand for organic wine; 3) the reasons they listed organic wines in their wares; 4), the characteristics of organic wine consumers; and 5), the promotion of organic wine. all interviews were recorded and transcribed. based on the derived research questions, theoretical assumptions were made in order to use grounded theory. the contents of the transcription were analysed before open, axial and selective coding with maxqda. the interviewed wineries differed in location, size and according to the type of organic certification (or lack thereof ) in order to cover a broad variety in the sample. the number of interviews per region depended on the size of the region. the aim was to analyse a heterogeneous set of organic wine producers and conventional wine producers. in particular, conventional wine producers were needed to represent each wine-growing region in germany, as some regions have only a few or no organic wine producers. external validity was maximised due to the involvement of differently sized wineries. to increase internal validity, we selected wineries with various sales channels, instead of only direct sales, in order to cover the complete value chain of organic wine. wineries with eu organic, biokreis, bioland, ecovin, naturland or demeter labels were included in the research. the interviewed retailers sold organic wines either exclusively or together with conventional wines. the retailers were categorised as local retailers and retailers selling nationwide. we interviewed two owner-managed local supermarket, one supermarket, four organic supermarket and one discounter. additional 17 specialised wine store owners were interviewed. table 1 shows key data about the interviewed wineries and retailers. to 65motivation factors for organic wines. an analysis from the perspective of german producers and retailers maintain anonymity, the names of the interviewed producers and retailers are not listed. the interviews were summarised by performing a content analysis using an inductive scheme for coding the open-ended questions. content analysis reduced the material while preserving the essential content so that the material could be reflected. generalised and double answers were decreased, and the material was paraphrased based on a defined criterion and specific levels of abstraction. the results objectively reflected the material and were not influenced by our research questions. in a final step, the content was analysed and interpreted. content analysis had been defined as a systematic, replicable technique for compressing many words of text into fewer content categories based on explicit rules of coding [56]. we quantified and analysed the presence, the meanings and the relationships of the words and concepts in the interviews undertaken and then we made inferences about the messages within the texts [57,58]. grounded theory is an open method that comes from qua litative socia l studies. the idea behind grounded theory is to “generate new theory where little is already known” [59]. grounded theory is a fourstage process: steps 1 (coding data) and 2 (memo writing) helped keep track of the interview results as they arrived. steps 3 (theoretical sampling) and 4 (integrating analysis) facilitated sorting the topics of the interview memos and starting to create clear links between the emerging topics of the incoming interview transcripts. krippendorff ’s [56] special quality criteria were used to verify the validity and reliability of the study. wineries and retailers of various sizes were selected from different wine-growing regions with several certifications, locations and sales channels (external sample validity). the potential interview partners were selected and contacted according to their certifications and interests, which had been defined beforehand (internal sample validity). all interviews were conducted and analysed by the same interviewer to ensure the consistency of the investigation (reliability). in addition to the interviews, store tests were conducted to analyse the supply of organic wine at the point of sale. to this end, the following standardised criteria were considered: the number of wines in a store’s selection, the organic wine share, the german organic wine share, the share of foreign organic wines and the labelling of organic wines. these results provide a snapshot of the supply and promotion of organic wines during the tests and can be used to support the findings of the interview. in total, table 1. interviewed wineries and retailers. total number size/type (number) region (number) wineries 75 ≤ 5 hectares (12), 6–10 hectares (15), 11–20 hectares (31), 21–100 hectares (17); conventional (25); organic certified: biokreis (2), bioland (9), ecovin* (21), naturland (2), demeter (15) ahr (4), baden (9), franconia (5), hess. bergstraße (2), middle rhine (4), mosel (4), nahe (5), palatinate (10), rheingau (5), rhine hesse (11), saale-unstrut (4), saxony (4), wuerttemberg (8) retailers 25 specialised wine stores (17); organic supermarkets (4); supermarkets without focus on organic (3); discounter (1) local (17); national (8); baden-wuerttemberg (2), bavaria (2), berlin (2), hamburg (2), hesse (4), lower saxony (1), north rhine-westphalia (2), rhineland-palatinate (1), saxony (2), thuringia (2) *double certification possible. table 2. stores analysed in the store tests. stores/characteristics number of stores number of wines in the range number of organic wines distribution discounters 5 487 19 national supermarkets 5 3756 218 national specialised wine stores (brick-and-mortar) 5 915 49 local specialised wine stores (online) 5 3177 152 national organic stores 5 248 248 local sum 25 8583 623 66 katharina hauck, gergely szolnoki, evelyn pabst 25 stores were analysed in germany; these stores were located in baden-wuerttemberg (4), bavaria (3), berlin (3), hamburg (2), hesse (4), lower saxony (2), north rhine-westphalia (2), rhineland-palatinate (2), saxony (1) and thuringia (2). in table 2 the sum of offered wines across all stores are described. 4 results 4.1 motives for converting to organic wine production a variety of motives influenced the wine producers’ decisions to convert or not to convert to organic farming (table 3). personal conviction was the primary reason underpinning decisions to favour or oppose organic farming. wineries that switch to organic wine production are largely driven by altruistic motives, such as their responsibility towards nature and younger generations. an interviewee from a medium-sized winery summarised this outlook as follows: ‘how can we not care about the environment when we are working in it?’ other motives were linked to product quality, the winegrowers’ health, the birth of children or generational changes within the wineries. therefore, although the producers who switched to organic production considered the market situation for switching to organic wine to be difficult, their decision-making processes rarely included marketrelated factors. as one organic wine producer said, ‘at the time when we decided to switch to organic wine production, no one was asking for organic wine’. economic goals were also negligible. in addition, while consumer demand proved not to be a motive for switching to organic wine production, especially for small producers, larger producers took economic factors into consideration more frequently. conventional wineries tended to evaluate the market situation in a similar manner. to illustrate, a representative of one of these wineries claimed as follows: ‘we do not perceive a demand for organic wine or any restrictions in our sales because our wines are conventionally farmed’. economic and market-orientated factors prevent conventional wineries from switching to organic farming. while 5 out of 25 of the conventional wineries still used glyphosate, most of them attempted to follow organic principles by adhering to environmentally friendly practices without certification. to that end, most conventional wineries viewed certification as a useless and overly complex process. by comparison, the organic wineries perceived certification as a means of providing evidence and control to consumers. the conventional wineries believed that organic wine production was not necessarily more sustainable than environmentally friendly wine production, and they were particularly critical of the use of copper to protect plants in organic farming. in summary of the attitude that most conventional producers shared, one producer said, ‘for me, it is less sustainable to use cooper instead of other types of plant protection’. nonetheless, economic goals could sway a majority of conventional wineries to switch to organic wine production in the future. although personal conviction is typically the primary reason that conventional wine producers choose not to switch to organic farming, vine cultivation conditions in certain wine-growing regions are a more important factor. due to the geographic distribution of organic wineries, some german wine regions only have a few organic wine producers. according to the organic and conventional producers in our sample, this is due to local weather and the conditions of vine cultivation. certain wine regions, such as mosel, mittelrhein, sachsen and saale-unstrut, have a large share of steep slopes, terraces and a decreased ability to work mechanically, preventing wine growers from switching to organic production. because organic farming requires a higher degree of manual work and a greater commitment from personnel, the costs are considerably high. nonetheless, organic wine producers in these regions did not view the higher workload and costs as obstacles to producing organic wine due to their personal convictions. 4.2 influence of organic wine production on production and sales according to the interviewed producers, there is no economic incentive for converting to organic farming. table 3. reasons for and against switching to organic wine production. for against • more sustainable • responsibility towards nature and younger generations • producers’ health • certification includes control • less sustainable (due to copper) • lack of active demand for organic wines • higher labour costs • local production conditions (e.g. weather, steep slopes, terraces) 67motivation factors for organic wines. an analysis from the perspective of german producers and retailers all producers stated that the management of organic vineyards requires a significantly higher amount of work. they also noted that crop protection and pruning involve more procedures than conventional production. at the same time, protecting the crops against peronospora and oidium remains a challenge. according to the wine producers, organic wine production requires quicker reactions and shorter spray intervals. in addition, the approved crop protections are not as effective as they are for conventional products. the higher workload also requires more personnel and results in higher costs. all organic producers reported a general change in cost structure and higher production costs. while crop protection costs decreased, labour costs increased significantly. as one organic wine producer remarked, ‘we need more staff to react faster to weather conditions. at the same time, producers faced yields that were as much as 20 % lower when switching from conventional to organic production. even before converting to organic production, wineries that farmed according to yield regulations were less affected by harvesting fewer grapes. however, most of the interviewed wineries stated that they had to charge higher prices due to their reduced yields. according to most producers, higher prices for organic wines are rarely accepted or not accepted at all in the organic wine market. in total, 42 of 50 respondents did not raise their prices after initiating organic production (figure 1). the eight organic wineries that increased their prices after converting found it challenging to sell at these price levels, especially when compared to sales of conventional wines. according to a producer from a medium-sized winery, ‘we were always compared with conventional wines, and if the quality of our wine is not better, most of the customers or retailers will not pay a higher price just because the wine is produced organically’. in this producer’s opinion, customer acceptance depended on their individual attitudes towards organic products as a whole. without a positive attitude towards organic products, consumers are less willing to pay more for a bottle of organic wine. in sum, there is no economic benefit for producers to convert from conventional to organic farming. however, our results indicate that despite the lack of economic incentive, these factors do not influence producers’ beliefs in a more sustainable form of agriculture and their responsibility towards nature. none of the interviewed producers lost customers after converting to organic production. nevertheless, according to 40 of the 50 respondents, only a few clients asked specifically for organic wines. although most wine consumers and retailers appreciate organic wine, wine quality, a winery’s image and the price and relationship between a customer and winery play a more critical role in purchasing decisions. as one organic wine producer from palatinate noted, ‘organic is nice to have, but if the wine is too expensive or does not taste good, customers will not buy it or buy it just once’. most wineries sell their wines through various distribution channels, such as direct sales, retail and gastronomy. organic farming makes it possible to distribute wines to selected export markets, organic wholesalers or retailers. in traditional wholesalers and discounters, the active demand for organic wines is low. furthermore, only larger wineries can supply these sales channels due 50/50 higher costs same costs 42/50 8/50 same prices higher prices figure 1. impact of conversion on costs and prices. (n = 50 interviewed organic wineries). 68 katharina hauck, gergely szolnoki, evelyn pabst to the high quantity and low prices of the wines that they sell. some organic wineries also believe that while certain distributors, such as traditional food retailers or discounters, offer organic products to improve their image, they do not carry the same personal convictions as organic food stores or organic producers. apart from the legal requirements to use the eu organic label, most producers do not actively communicate the fact that they have organic wine certification to consumers or retailers. rather, they focus their communications on other factors, such as their history and/ or the quality of their wines. because the conversion to organic farming is mostly driven by personal convictions, organic wineries perceive certification as self-evident. this is one of the main reasons why several wineries do not market it as a unique selling point to promote their wines. the fact that wine consumers often lack knowledge about organic labels and wine production is another reason that wineries choose not to promote their organic certification. this discrepancy is illustrated in figure 2. 4.3 organic wine in retail according to retailers, the market share for organic wine has risen continuously over the last ten years due to the growing number of organic vineyards. however, organic wines only generate a small share of the total revenue from wines for many retailers. while traditional food retailers and specialist wine stores adjust their range of organic wines to meet their customers‘ demands, organic stores modify their range of goods according to their wholesalers‘ offers. regardless, the critical factors driving a retailer‘s decision to include organic wines in their portfolio primarily include the quality, taste and price of the products. as one retailer asserted, ‚the value-for-money ratio is the main decision criterion‘. the range of organic wines is dominated by foreign wines rather than organic wines from germany. most of these wines are cheap and from larger producers, as smaller producers are unable to deliver many bottles or offer their wines for a low price to stores like discounters. in terms of price, traditional food retailers perceive the price of organic wines in germany to be too high. as shoppers in traditional food stores can be quite sensitive to price, organic wines lose their attractiveness if they are priced above a certain threshold. retailers at specialist wine stores appear to carry the same impression. according to the owner of one of these stores, ‚some wineries start at 8 euros per bottle. that is way too high for a basic wine in retail‘. this indicates a discrepancy between the perceptions of organic wine producers and retailers. while organic wine producers in germany view the price of organic wine as too low, most retailers consider the price of german organic wine to be too high. in specialist wine stores, personal recommendations significantly influence consumers‘ willingness to purchase wine. this sentiment was confirmed by one of many interviewees: ‚the customers trust my choice‘. when compared to products offered at traditional food stores and discounters, the range of products at specialist wine stores includes wine from smaller wineries and/or premium wines. the promotion and visibility of organic wines varies depending on the personal convictions of store managers. while some managers promote organic products as an added value, few consumers demand organic wines and the demand for vegan wines is higher. the importance of organic labels within the distribution process is somewhat low, as most consumers do figure 2. discrepancy in communication of organic wines. 69motivation factors for organic wines. an analysis from the perspective of german producers and retailers not know enough about them and only some organic stores demand specific labels. furthermore, retailers admitted that organic wines are rarely communicated in stores. they agreed that consumers have too little contact with organic wine and so rarely demand it. in particular, retailers who do not exclusively sell organic products claimed that the variety of organic wine labels can confuse consumers. at the same time, the eu requires an organic certification for retailers to promote organic products, which includes wine retailers, to avoid fraud. since the range of organic products in discounters, traditional food stores and organic stores is typically higher than in specialist wine stores, larger stores are more frequently certified as organic and can promote organic products. for smaller specialist wine stores specifically, certification is not attractive due to the bureaucratic procedures involved and the lack of positive impact on sales. for these reasons, retailers have more or less the same incentive to buy organic or conventional wines. there is no widespread view on whether the inclusion of organic wines in store portfolios attracts new customers. as it stands today, only organic stores can gain new customers and increase awareness by offering organic wines. in addition to these results, the store tests revealed that 7% of wine ranges were organic. almost 80% of the stores offered organic wines originating from germany, and 20% did not offer german organic wines. the most frequently sold organic wines were from france, followed by italy and spain. the share of organic wines ranged from 1% to 100%. although organic stores or specialist wine stores with a focus on organic wines offered up to 100% organic wines, some traditional food retailers and discounters offered only a few organic wines or none whatsoever. moreover, the share of german organic wines that were offered by traditional food retailers and discounters was under 1%. in organic stores, there was usually only a small selection of wines and rarely organic wines from germany. the highest share of organic wines was found in specialist wine stores that focused on organic wines. on the other hand, some specialist wine stores offered only a few organic wines. therefore, the amount of organic wines that stores provide can vary considerably (table 4). apart from a few exceptions, german organic wines are generally underrepresented. the price can range from 1.59 euros to 79.99 euros for a 0.75-litre bottle. in the stores we tested, 80% of organic wines were priced between 4.00 and 7.99 euros; 62% of organic wines featured one organic label; and 38% of organic wines featured two organic labels. more specifically, 97% of organic wines featured the eu organic label and 15% featured the german organic label. some organic wines featured private organic labels, such as 13 % for demeter, 12.5% for ecovin and 7% for bioland. most organic wines (95%) were only labelled as organic on the back of the bottle. to boost visibility, the majority of traditional food stores mark wines as organic on the price tag. regardless of the types of sales channels, all interviewed producers and retailers confirmed that there are no typical consumers of organic wine. wine consumers vary widely depending on shopping location. because traditional food stores and discounters have a large product range, they reach a wide range of customers. specialist wine stores target an older, affluent and well-educated group. for some specialist wine stores and organic wine producers, women seek organic wines more often than men, even when the majority of their customers are male. other retailers described a lack of loyalty for organic wines, indicating that wine consumers who buy organic wines also buy conventional wines. at this stage, it is clear that certification plays a less significant role in purchasing decisions than other factors, such as price, taste, wine quality and personal recommendations. communications about organic wines within stores, which could attract attention and boost interest in organic products, are very rare. as one retailer described, ‘organic wines are just like conventional wines. for us, there is no difference. that is why we do not promote organic’. table 4. summary of store test. characteristics share of organic wine share of foreign organic wines share of german organic wines discounters < 2 % > 1.5 % < 0.5 % full-range stores < 2 % > 1.5 % < 1 % specialised wine stores (brick-and-mortar) 10–100 % 70–99 % 1–30 % specialised wine stores (online) 10–100 % 70–99 % 1–30 % organic stores 100 % 90–100 % 1–10 % total 70 katharina hauck, gergely szolnoki, evelyn pabst 5. discussion similar to the findings by castellini et al. [25] and siepmann and nicholas [28], our study confirms that personal conviction is the primary reason that winegrowers in germany choose to convert to organic farming in all winegrowing regions in germany. nevertheless, this is the same factor that prevents conventional wineries from converting to organic production. other reasons that discourage conventional wineries from producing organic wines include lack of demand and challenges related to production, such as steep slopes or unsuitable weather conditions. as such, some winegrowing areas in germany have a higher share of organic wine producers than others. regarding the production costs of organic wines, german wine producers complain about the lower yields and the increased costs of higher staff requirements. studies by reganold and wachter [29] and hough and nell [34] arrived at similar conclusions about the cost structure of organic wine production. surprisingly, only 15 % of organic wine producers who have been impacted by higher costs have raised their prices. nonetheless, organic wine producers consider organic wine production to be the only sustainable form of agriculture that is suitable to the production of grapes and wine. according to crowder and reganold [32], organic agriculture will only grow if it becomes more financially profitable than conventional agriculture. in addition, our results indicate that economic motives can influence most conventional wineries to convert to organic farming. our results are consistent with studies that have posited that consumers base their buying decisions on a variety of factors, such as wine quality, taste and their relationship with the producer [47]. a special interest in wine can increase the willingness to purchase organic wines at a premium [4,45,48,49]. studies by hoffmann and szolnoki [5] and remaud et al. (2008) [4] determined that at least one consumer group buys organic food but not organic wines. this segment of the population should be targeted by organic wine producers and retailers to increase their interest in organic wine and generate a more active demand for the product. because wine growers produce organic wines due to their personal convictions, there is a clear gap in the way they communicate their beliefs to consumers. in line with previous research, the present study found that a lack of knowledge about organic farming serves as a barrier to buying organic food [43,50,51]. furthermore, consumers’ unfamiliarity with organic wine is the primary contributor to the product’s low demand. for organic wine producers, communicating about organic wine is critical to better informing potential consumers. active communication can increase consumers’ knowledge and familiarity with organic wines and grow the active demand for the product as a result. in addition, because the current study confirmed findings by delmas and grant [36] and szolnoki and hauck [6] that consumers lack knowledge about different organic wine labels, the role that organic labels play in the sale of organic wines must be reconsidered. increasing their knowledge about these labels and what they represent will likely boost the active demand for organic wines. when selecting wines for their portfolios, most retailers and consumers base their decisions on similar attributes. retailers are important gatekeepers in the distribution process. for this reason, producers must consider the wine purchasing processes from both consumers’ and retailers’ points of view. only retailers who believe that a product’s organic designation is important to the purchasing decisions of their consumers will actively communicate organic certification or show willingness to educate their customers about the production of organic wines. therefore, organic wine producers should emphasise that their products are organic to both consumers and retailers during the purchasing process. according to the retailers in our study, the cost of organic wine is not necessarily higher than the cost of conventional wine. nonetheless, there is a clear price difference between german organic wines and organic wines from foreign countries. as such, the higher price of german organic wines can serve as a barrier to consumers (and retailers) that prevents them from purchasing organic wines from germany. according to the perceptions of organic wine producers and retailers, no typical organic wine consumer exists. organic wine producers agree with barber et al. [48], who found that consumers with a strong environmental orientation have a greater willingness to buy organic wine. however, in contrast to schäufele and hamm [41], who defined six different segments of german wine consumers based on their attitudes towards and purchasing behaviour of organic wine, szolnoki and hauck [6], who also defined organic wine consumers, wine producers and retailers, were unable to identify a typical organic wine consumer. our results can afford the following recommendations to producers and retailers: 1) use organic stores as distributions channels. organic stores can play a critical role in the distribution of organic wine since shoppers in these stores have a special interest in organic food and are therefore more predisposed to purchasing organic wine [53]. in addition, because organic stores sell organic wines only, there is no com71motivation factors for organic wines. an analysis from the perspective of german producers and retailers petition from conventional wines. 2) producers and retailers should practice active communication. for consumers to familiarise themselves with and gain knowledge about organic wine, producers and retailers must teach them about the product. they can achieve this by practising active communication. moreover, organic wine producers should actively communicate about their products with their retailers, as retailers are intermediaries at the interface between producers and consumers. 3) improve communications about organic wine labels. the low level of consumer knowledge about organic wine labels can result in a low active demand for organic wine, as consumers may not understand the relevance of the different labels. therefore, to garner the support of organic associations and make organic wines more accessible to consumers, communicating the purpose of these labels is vital. the present study can help organic wine producers reduce the communication barriers between producers, retailers and consumers that result from issues with supply and a lack of knowledge about organic wine. because this study adopts a qualitative research approach, it may be limited in that its results cannot be generalised on the total population. although the study aimed to interview and analyse the input from many experts, its data are not representative. nonetheless, we made an adequate sampling with a solid data collection and analysis. this study provides a general overview of wine producers’ and retailers’ perceptions towards organic wine and the organic wine market in a heterogeneous sample. therefore, because the study only covers data from producers and retailers, consumers’ attitudes towards organic wine may be investigated in subsequent research. while consumers purchase organic food, the reasons they hesitate to buy organic wine require further analysis. as consumer knowledge about organic wines and their motivations to purchase and consume these products remain unclear to producers and retailers, we recommend another qualitative study that examines these factors. based on these results, a quantitative study could also provide representative results, allowing strategies to be defined according to the knowledge, personal attitudes and shopping locations of consumers. acknowledgement this research was financed by the federal ministry for food and agriculture in the federal program for organic farming and other forms of sustainable farming (böln). list of abbreviations bölw – bund ökologische lebensmittelwirtschaft, organic food production alliance in germany fibl – forschungsinstitut für biologischen landbau, research institute of organic agriculture in swiss ifoam – organics international iwsr – international wines and spirits record in uk vdp – verband deutscher prädikatsweingüter, assoziation of german prädikat wine estates in germany references [1] bölw (2020): bund ökologische lebensmittelwirtschaft – branchenreport 2020: https://www. b o elw.de/f ileadmin/us er_upload/dokumente/ z ahlen_und_fakten/bros chüre_2020/b ölw_ branchenreport_2020_web.pdf ; 04.03.20. 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(2017). marketing research: an applied approach. 5th edition, pearson wine economics and policy volume 10, issue 2 2021 firenze university press productive efficiency of wine grape producers in the north of portugal micael santos1,*, xosé antón rodríguez2, ana marta-costa3 organic and conventional grape growing in italy: a technical efficiency comparison using a parametric approach federica cisilino1, fabio a. madau2,*, roberto furesi2, pietro pulina2, brunella arru2 competitiveness framework to support regional-level decision-making in the wine industry: a systematic literature review jorge mota*, rui costa, antónio moreira, silvana serrão, carlos costa does belonging to an appellation make a difference? new evidence from ontario viticultural areas omer gokcekus how do sparkling wine producers adopt a sub-appellation? evidence from an exploratory study on heroic prosecco superiore rive luigino barisan*, luigi galletto motivation factors for organic wines. an analysis from the perspective of german producers and retailers katharina hauck*, gergely szolnoki, evelyn pabst consumer preferences for certified wines in france: a comparison of sustainable labels adeline alonso ugaglia1,*, britta niklas2, wolfram rinke3, dan moscovici4, jeff gow5, lionel valenzuela6, radu mihailescu7 wine ratings and advertising strategies: is there a link? ricardo sellers-rubio adaptive market hypothesis: an empirical analysis of the wine market anoop s kumar wine economics and policy 9(2): 83-98, 2020 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/web-8872 wine economics and policy citation: barbara richter, jon hanf (2020) competitive strategies for wine cooperatives in the german wine industry. wine economics and policy 9(2): 83-98. doi: 10.36253/web-8872 copyright: © 2020 barbara richter, jon hanf. this is an open access, peerreviewed article published by firenze university press (http://www.fupress. com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information files. competing interests: the author(s) declare(s) no conflict of interest. competitive strategies for wine cooperatives in the german wine industry barbara richter1,*, jon hanf2 1 geisenheim university, von-lade-str. 1, 65366 geisenheim, germany, email: barbara. richter@hs-gm.de 2 geisenheim university, von-lade-str. 1, 65366 geisenheim, germany, email: jon.hanf@ hs-gm.de *corresponding author abstract. the wine industry is significantly affected by globalization and changes in consumption habits and shifts in lifestyle, which lead to changes in the market environment and intensity of competition in the wine markets. overall, wine cooperatives have a market share of more than 40 % in europe. in germany, they account for around one third of the total wine production. the decreasing number of wine cooperatives and their members leads to the assumption that wine cooperatives have difficulties adapting to the different market environment and though, need to select and implement competitive strategies. the aim of this paper is to identify and develop competitive strategies for wine cooperatives in the german wine industry. therefore, the external forces affecting competitive rivalry in the wine industry are being evaluated for wine cooperatives in germany. a qualitative approach has been applied including in-depth interviews with managing directors and chairmen of the board (n=15). data were transcribed verbatim and content analysed. results showed that the intensity of rivalry among existing competitors is high. bargaining power of wine cooperatives towards buyers and suppliers strongly depends on their size. however, generally the bargaining power of retailers is high, although this depends on the retail channel (discounters, food retail, specialized retail, specialized wholesale, gastronomy). five main strategy dimensions emerged: (1) the cost leadership and cost focus strategy, (2) the differentiation and differentiation focus strategy, (3) collaboration among producers, (4) offering additional services, and (5) options for improved membership relations and increased youth involvement. keywords: industry structure, competition, competitive strategies, cooperatives, wine, germany. 1 introduction the wine industry is significantly affected by globalization and changes in consumption habits and shifts in lifestyle, which lead to changes in the market environment. the total worldwide consumption amounts to around 244 million hectolitres, whereas production is much higher [1,2]. the intensity of competition in the global wine market is increasing [3]. the german 84 barbara richter, jon hanf wine industry reflects this tendency. in germany direct sales from wine producers to consumers are decreasing, and the proportion of wine sold via retail chains now adds up to 89 % of total wine sales [4]. one factor influencing this development is the fact that nowadays many consumers are used to one-stop-shopping in order to save time [5]. five retailers are dominating the food retail in germany [6]. besides the market power of those retailers, the high/constant availability of products of foreign and domestic producers impacts the competitive intensity in the german wine market. in the past, the process of retailer concentration in germany has induced a similar development in german agriculture and viticulture [7,8]. as food retailers generally demand large quantities for low prices, wine producers had to grow in size, too, to be able to respond (to these demands) and to be in a position to negotiate with retailers at eye level. however, in germany, grape production is still dominated by small-scale producers. cooperatives “continue to be indispensable for most vineyard owners with small holdings, because wine production and wine marketing (…) would not be possible without prior pooling of resources and cost-sharing arrangements.” [9] similar to other european countries such as france (619 wine coops), spain (551), italy (493), portugal (95) and austria (15) [10], wine co-operatives play an important role in the german wine industry. in europe, cooperatives are widespread in the agricultural sector. in the wine sector, cooperatives even have a market share of more than 40 % [11,12]. in germany, around 41,000 grape growers are members of wine cooperatives [13]. for wine cooperatives, the changing market environment is challenging. the number of wine cooperatives in germany has been decreasing from about 264 in 2000 to 159 cooperatives in 2016 [13]. correspondingly, the number of members has decreased in the respective years from 61,000 to 41,000, and the acreage of vine cultivated by cooperatives has been decreased slowly for many years [13]. this development emphasizes the need for cooperatives to work customer oriented focusing on the market developments. however, this remains a very challenging task for wine cooperatives. due to their business principles and characteristics as well as the strong heterogeneity within the groups of their members most cooperatives are still working member oriented, i.e. instead of market orientation they maintain a strong producer orientation [14,15]. thus, the challenge for cooperatives is to find a competitive position within the industry by working market oriented and to foster the relationship with their members to retain members and vineyard areas. focussing on just one of those areas will not be sufficient to work successfully in the long-run. the main performance criteria of a cooperative is the amount of grape pay-outs. high grape pay-outs and member satisfaction can only be accomplished if the cooperative is working successfully in the market in the long-run. so far, the analysis of the german wine market has addressed the wine market displaying the market structure [16–21]. however, an analysis of competition intensity has not been done from the perspective of wine cooperatives. this paper aims to examine the competitive intensity in order to derive strategies for wine cooperatives. therefore, semi-structured expert interviews had been conducted with management representatives of 15 cooperatives in different wine growing regions in germany. based on the results, competitive strategy implications for wine cooperatives in germany will be provided. these implications can (partly) be applied to wine cooperatives in other european countries as well. the paper is structured as follows. section ‘the german wine market and cooperatives’ outlines the overall situation of the german wine market and underlines the importance of wine cooperatives in germany. in the next section ‘framework of competition intensity’ predictions for the empirical analysis of competition intensity are being formulated. section ‘empirical study’ details the approach of data collection and evaluation used in this study and presents the results of the study. section ‘discussion and implications’ provides recommendations for competitive strategies for wine cooperatives. in the last section ‘summary’ summarizing comments are being provided. 2 the german wine market and cooperatives 2.1 the german wine market in 2018, the total of volume marketed in germany was roughly 20 million hl, from which german wine production accounted for approximately 10 million hl of wine. germany is leading worldwide in wine imports, with more than 14 million hl in 2018. at the same time germany is (re-) exporting a total of 3.7 million hl. the three main distribution channels are discount retail chains (50 % market share), retailers (28 % market share), and direct sales (11 % market share). seven percent of the total volume is marketed via specialized retail and four percent via online retail. [4,22] discounters have gained market share during the previous years, whereas retail sales by supermarkets have remained stable, and direct sales have decreased. 85competitive strategies for wine cooperatives in the german wine industry accordingly, average prices have been decreasing. consumers spent on average 3.39 €/l for a german wine, whereas the average price paid for any wine sold via retail in germany was 3.09 €/l in 2018. this means that imported wines have a lower average price in german retail than wines from germany. [4] regarding the wine quality, consumers have high expectations. even cheap wine has to be of acceptable quality. therefore, producers need to meet the demands of their customers, including consumers and retail customers. working with discounters and supermarkets, producers often have to meet requirements regarding the terms of delivery and minimum quantities [21]. due to these requirements only few large wineries, large cooperatives (including secondary cooperatives), and producer associations are able to supply such large retailers national-wide. however, recent developments show that there is an increasing number of independent retailers which are part of the retail cooperatives of edeka and rewe group [23,24]. because those independent retailers often offer a broad spectrum of wines from regional producers [23] and since the independent retailers source their goods directly from wine producers via direct deliveries, this represents an attractive sales channel for private wine estates, wineries, and smaller cooperatives. hence, also smaller industry players can benefit from the opportunity to distribute smaller quantities via retail compared to the nationwide distribution in the case of discount retail chains and supermarkets. in order to ensure the quantities and grape qualities required for this distribution channel, wine estates and wineries are now increasingly dependent on the cooperation with grape producers, thus competing with cooperatives in this realm. an example of this are the wines of the robert weil junior brand, which are marketed exclusively through the edeka group [25,26]. the structure on the demand side of the market strongly influence recent developments on the supply side as well. in former times viticulture was often one of many different plantations in the farms and the cultivated vineyard area per farm was very small. pursuant to the structural change in the agricultural sector, the average acreage and production per farm increased with the level of their specialization. viticulture is attractive for full-time as well as for part-time farmers as a high intensity of labour hours is needed and small growers often have simple equipment for viticulture. [21] in germany grape production is dominated by small-scale producers. there are more than 43,300 wine businesses in germany. out of this number about twothirds cultivate less than 1 ha. only 7 % (around 2,900 businesses) own more than 10 ha [27]. these figures show that viticulture in germany is typically organized on small-scale plots. corresponding to the structural change in the agricultural sector [28,29] the concentration process also continued in the wine sector. there is a tendency towards fewer estates with, on average, larger vineyard areas. smaller farms are increasingly being pushed out of the market and forced to close down. this concentration process is also reflected in the figures of the federal statistical office [30]. there is a tendency to have fewer holdings with larger average vineyard areas. according to these figures, the number of agricultural holdings maintaining vineyards fell from 20,290 to 16,898 in the years 2010 to 2016. in particular, the number of smaller farms with an area under vines of less than 10 ha has declined. since 2010 the average area per holding has risen from 4.8 to 5.9 hectares. [30] 2.2 wine cooperatives in germany the origin of wine cooperatives dates back to the 19th century, a century marked by far-reaching economic and political changes. with the beginning of the industrialization the proportion of cheap foreign wines and wine counterfeits increased. additionally, grape producers were confronted with cultivation difficulties due to vine diseases and pests such as phylloxera and fungal infections (powdery and downy mildew). in response to this, grape and wine producers joined forces to improve their economically weak position. in 1868 the first wine cooperative was founded in the ahr wine growing region, followed by the emergence of wine cooperatives in various wine growing regions in the subsequent years. [31] today, wine cooperatives are still of significant importance in terms of german wine production. in the financial year 2015/2016 wine cooperatives produced around 2.7 million hectolitres wine accounting for about 30 % the total german wine production. the number of wine cooperatives in germany has been decreasing from about 264 in 2000 to 159 cooperatives in 20161. by creating synergies and reducing costs an improvement of the economic situation should be attained. in 2016 the german cooperative sector could be classified into 157 primary and two secondary cooperatives. however, only 91 possessed their own vinification facilities. around 41,000 grape growers are members of wine cooperatives in germany. the acreage planted with vines by all members declined from about 37,000 hectares in 1990/1991 to 28,205 hectares in 2015/2016. still, this vineyard area represents about 28 % of the total winegrowing area in ger1 2016 is the last year for which comparable data are available. the most recent number is 150 raiffeisen cooperatives in 2020 [32]. 86 barbara richter, jon hanf many. most cooperatives are situated in the wine growing regions of baden, württemberg, and palatinate. [13] the size of wine cooperatives in germany varies strongly. especially minor cooperatives without own vinification facilities can be quite small, some only possess an acreage under cultivation of around 28 hectares, whereas other cooperatives (mostly with own vinification facilities) are larger and some even cultivate more than 1,400 hectares2. according to their bye-laws, wine cooperatives are self-help organisations for grape producers. the business principles of wine cooperatives can be defined as “by the identity of users and owners, the democratic principle of voting, and the lack of entry barriers” [7]. furthermore, the legally manifested business objective can be seen as a further characteristic [7]. the main aim is to improve the economic situation of their member businesses (geng §1) [33] by enhancing the profitability and sustainability of their members [34,35]. in other terms, this refers to supporting the member businesses with highest possible pay-outs. in cooperatives members and the management have a double function: they are both agents and principals at the same time (double principal-agent problem) [36–38]. based on information asymmetries that arise due to the internal structure certain problems arise in cooperatives. five general problem areas have been identified by cook [39]: free-rider problem, horizon problem, portfolio problem, control problem (quantity and quality instabilities due to adverse selection and opportunistic behaviour as well as high agency costs), and influence cost problem (arising from different demands, interests, strategies, and goals of individual member businesses). furthermore, ringle [40] identified transaction cost problems and the problem of identification with the cooperative. due to different interests and approaches to achieve cooperatives goals conflicts can occur [34]. hanf and schweickert [7] showed that member heterogeneity increases all challenges which were mentioned above. [35] the business principles of (wine) cooperatives as well as the internal structure and consequent problems often lead to a strong member orientation [14]. furthermore, cooperative members are of different size and some are full-time grape producers whereas others are only active part time in viticulture. there also often exists a strong heterogeneity among cooperative members, i.e. the business aim of the members can differ widely [15]. members also differ in regard to their planning horizons and risk preferences [9]. the organizational form and member heterogeneity contribute to a 2 based on own interview results within this study. slow decision-making process, as it can be challenging to aggregate the different members’ preferences [9]. however, the key objective of all grape producers is to sell their grapes [15]. consequently, members as well as cooperatives are often producer oriented [15]. in their article hanf and schweickert [15] aimed to disclose the area of conflict between member orientation and customer orientation for wine cooperatives. 3 framework of competition intensity the structure of the german wine industry and degree of competition were analysed by using a framework based on the industry structure analysis. it offers the opportunity to analyse the competitive intensity within one industry as it investigates the industry conditions based on external factors. according to porter [41], the following forces affect the competitiveness in an industry: (1) intensity of rivalry among existing competitors, (2) bargaining power of buyers, (3) bargaining power of suppliers, (4) threat of substitute products, and (5) threat of new entrants. to be able to derive strategic implications for the wine cooperatives each force is applied to the german wine industry from the perspective of wine cooperatives. the concluding predictions will be analysed in the empirical part of this study. intensity of rivalry among existing competitors the german wine market is a saturated market. for many years the total volume of wine (incl. sparkling wine) traded in germany varies between 19.5 and 20.2 million hl [22]. hence, the market size is quite stable and consumption in germany is not growing. after the large harvest in 2018 [42,43] it has been be observed that high fixed (storage) costs could lead to price-cuts. to a certain extent product differentiation and branding can be achieved [44–47]. there are not many strong brands of german producers in the wine industry, though. consumers and retailers have low switching costs as there exists a huge number of products of different producers in the market. domestic producers are also in competition with both foreign producers and imported wines as germany is leading the worldwide wine imports in respect to volume [1]. production costs are high [48,49]. exit barriers are high as well as high sunk costs occur when producers want to switch the production in favor of another product or exit the industry at all. especially for those producers who are engaged in viticulture and wine production as their main source of income switching is not easy. 87competitive strategies for wine cooperatives in the german wine industry prediction 1: the intra-industry competition is intense and rivalry among existing firms is high. bargaining power of buyers both retailers and consumers are considered as customers. most cooperatives with own vinification facilities produce large quantities and therefore need to distribute through supermarkets and/or discounters. often, cooperatives also engage into direct sales to consumers. in germany, five big store-based retail groups dominate the food retail market in germany [6]. this shows that the concentration of food retailers is high. compared to this the number of individual producers in germany is high. additionally, many foreign producers try to sell their products in the german market. this implies low switching costs for customers. during the past years the number of independent retailers that belong to the retail cooperatives edeka and rewe group has been increasing [15,23,24,50]. they can partly decide about the offered product range [23] which makes it possible to work closely with regional producers. for wine producers forward integration is only possible through direct marketing but not through vertically integrating into the realm of food retail. for retailers, backward integration is not very common. the only existing example in germany is edeka group which has its own winery called rheinberg kellerei. apart from this, retailers often have special contracts with wineries or other wine producers to secure the supply of certain products or to produce their own retail brands. consumers also face low switching costs as they can choose from a broad band of different products. prediction 2: due to the low switching costs for customers and the availability of a large number of different products of domestic and foreign producers the bargaining power of buyers is high. bargaining power of suppliers the group of suppliers is divided into intra-cooperative suppliers (grape growers) and external suppliers which supply inputs other than grapes. other suppliers include producers of glass bottles, barrels, tanks, corks, screwcaps, labels, cardboard, fining, additives, equipment, and machinery, etc. needed during the wine production process. due to the “one-member-one-vote”-principle, cooperative members have limited influence in the decisionmaking. that means that “irrespective of the amount of grapes or wine that members produce, all members have the same voting power in assemblies” [51]. they always have the possibility to leave the cooperative but have to face switching costs. the grape prices are not negotiated with the grape growers but within the board of members and supervisory board. as these boards are being formed by their members the members that were selected into the boards have influence over grape prices. information asymmetries can easily occur in the relationship of grape producers and the management of the cooperative [37] which can lead to opportunistic behaviour (e.g. free-riding on quality, partial delivery, …) [52,53]. up to now, only a few cooperatives in germany seem to sanction their members when they are in breach of the contract [54,55]. sanctions often remain low or have not been implemented [54,55] since cooperatives are threatened to lose members and vineyard area. suppliers of scarce or highly differentiated inputs have a high bargaining power. in the german wine industry this is especially true for suppliers of equipment and machinery. strong suppliers exist in these fields which offer very specialized services for their products to their customers. suppliers of other inputs such as glass, corks, screwcaps, labels, etc. are more frequent and are expected to have a lower bargaining power. all suppliers rely on a good reputation and customer satisfaction. there is neither a credible threat of forward integration from suppliers of other inputs nor a credible threat of backward integration from cooperatives. in the case of larger cooperatives, the bargaining power is expected to be higher than in the case of smaller cooperatives as large cooperatives supply large amounts of inputs. prediction 3: due to the specific structure of cooperatives and member-management relationship the bargaining power of grape suppliers is medium. for suppliers of other inputs than grapes bargaining power is expected to be medium as well. threat of substitute products many substitutes for wine of german wine cooperatives exist in the market. these include wines from other national and international producers as well as all other alcoholic beverages such as beer and to a certain extent spirits, wine-based drinks, and cocktails [56]. there is also a recent trend emerging toward cannabis-based drinks [57]. some big international beverage producers draw their attention to this market segment and launch products which contain thc-extracts [58]. as of today those products cannot be considered as a substitute yet but might be in future [57]. there is a high number of alcoholic beverages, but cooperatives often offer wines at a reasonable price-perfor88 barbara richter, jon hanf mance ratio. consumers can easily switch between products as there are many products to choose from. wine producers and cooperatives might lose some consumers as they experiment with the introduction of new products. prediction 4: the pressure from substitute products is medium. threat of new entrants all kind of new entrants which produce wine represent a threat to established wine cooperatives. these include newly founded cooperatives, wine producer associations, wine estates, and wineries. the most likely new entrants which represent a threat to established cooperatives are other wine producer associations and wine estates that purchase grapes. they both are dependent on grape producers like cooperatives, as they have a need for grapes as input for the production of large volumes and in order to gain market share. overall entry barriers to the german wine industry can be viewed as being medium. factors that could deter potential entrants from entering the market are high capital requirements (e.g. for vineyards, equipment, machinery, production facilities) and high production costs [48,49]. also, high exit barriers occur for wine producers in the german market. they are high for both new entrants and established firms. prediction 5: in the german wine industry barriers to entry are medium and barriers to exit are high. thus, the threat of entrants is medium. figure 1 shows a summary of the expected influence of each force. 4 empirical study 4.1 sample and interview description so far, no research has been done explicitly on the structure and competitive intensity in the german wine market from the perspective of german wine cooperatives. until now there has only been limited knowledge and an explorative study has been conducted. for this qualitative approach 15 in-depth interviews were conducted via telephone from july to september 20193. the 3 a total of 27 experts were initially contacted out of which 17 experts (including two pre-tests) agreed to be interviewed. despite repeated attempts, no reply was received from seven of the contacted experts figure 1. framework of expected influence of each force. 89competitive strategies for wine cooperatives in the german wine industry interviews were done in german language, transcribed verbatim, and content analysed [59]. then the main results were translated into english. in order to ensure a wide range of opinions and perspectives, interviewees from cooperatives were chosen which were located in different wine growing regions and different cooperatives of varying sizes. the cooperatives included in this study were all located in baden, württemberg, and palatinate as these regions contain the highest numbers of cooperatives within germany. because cooperatives are not subject to publication requirements it was not possible to assemble information on the financial performance of the 15 cooperatives and to relate that information to the answers provided by the interviewees. in the case of wine cooperatives, the payments (grape money) members receive is the decisive performance criterion. this data is not available. all interviewees of this study are actively working within the german wine industry. managing directors and chairmen of the board were selected as interview partners as it is vital that all interview partners are involved in the day-to-day business of the cooperative and have in-depth information on structures, strategies, processes, and procedures. except for one, all interview partners agreed to the recording of the interview. in the case of the single exception, written minutes were produced. the length of the interviews varied; the shortest lasted 25 minutes while the longest lasted 55 minutes. different techniques were used during the interviews to minimize the social desirability bias. in the beginning of each interview details about the study were given including the purpose of the study and details on how the data would be used, how confidentiality would be guaranteed, and information about anonymity procedures. the interviewer also used techniques such as posing indirect questions about the behaviour of others, providing examples, assuring that there are no right or wrong opinions. the applied research methodology is used to analyse the developed framework and to gain a deeper insight into the structure and competition in the german wine industry. 4.2 empirical results regarding the intensity of rivalry among existing firms, results will be shown including the following and another three persons were not willing to give an interview. two of which stated time constraints and the other one generally refuses to participate in interviews. aspects: competitors, market size and evolution, storage and price-cuts, customers’ switching costs, export activities, and approaches to face the situation of competition. the interview partners are mainly considered as competitors, local competitors such as other successfully operating cooperatives or wineries in the same region, as well as foreign producers, that are able to produce wine at lower costs. all interview partners described the german wine market as a mature and stagnant market, without industry growth. the oversupply was mentioned several times4. the interviews, which had been conducted shortly before the harvest of 2019 indicated a severe situation of the market as the stocks were still well filled because of the large harvest in 2018 and producers felt the need to empty their storage for the new harvest. the interview partners highlighted the low switching costs their customers have. both retailers and final consumers can choose between many different products. it was not confirmed that sunk costs are high as online platforms and newspaper advertisements exist to sell and buy second-hand equipment and machinery. in general, shelf space is limited and there is a fierce competition amongst wine producers. the majority of the cooperatives included in this study is not engaged in export. only one interviewee mentioned that the cooperative exports 35 % of total sales, another exports 5 %, and 13 interview partners mentioned small, irregular, or no export activities. reasons cited for small export activities were the production of certain grape varieties or wine types (e.g. red wine), which are not demanded in potential import countries. furthermore, the representatives stated the lack of financial resources for export. six interview partners expressed interest in increasing their export activities. to face the situation of competition, wine cooperatives follow different approaches depending on their size and managerial capabilities in pursuing a clear strategy. seven interview partners spoke about optimising and reducing costs. six of them were large cooperatives (> 500 ha under cultivation) and one was a medium-sized cooperative (100-499 ha). one manager stated as aim “to optimize costs and to keep costs permanently slim”. with regard to the investment planning, another said that it is absolutely necessary to keep an eye on process optimisation and potential cost reductions. several 4 a visible example of the struggle some german wine cooperatives face as a result of overproduction and a mature market is the cooperative remstalkellerei eg, which had stopped grape pay-outs to its members because of financial difficulties and the lack of wine sales. in the newspaper article it was mentioned that there are still some quantities of the vintages 2014, 2015 and 2016, which the cooperative had not sold yet and the time has passed to sell those wines to the secondary cooperative at acceptable prices. [60]. 90 barbara richter, jon hanf cooperatives included in this study have already been part of a merger with the aim of creating synergies in terms of cost reductions. for cost optimisation, the technical facilities have to be up-to-date and the capacity utilisation has to be high, one interview partner specified. the high capacity utilisation contributes to lower the costs per unit (application of economies of scale). another interview partner mentioned that the cooperative is filling all year in double-shift operations. the medium-sized cooperative also plans to build further collaboration to reduce costs. the manager wants the cooperative working together with other cooperatives or private businesses mainly from other wine growing regions to reduce costs. such kind of collaboration also enables logistical advantages to customers as different wines from different producers from various wine growing regions can be offered “to get it all from one source”. some interview partners mentioned being part of the weinallianz gmbh, which is a collaboration of 14 businesses from different wine-growing regions and of different type (cooperatives and wine estates) with the aim to reduce costs by sharing a joint sales force. besides optimising and reducing costs, cooperatives can use branding to differentiate from competitors. some of the managers have a clear understanding of the meaning of branding. as one interview partner said: “wine is a luxury good and hence there is a brand awareness and attachment to certain brands.” one manager spoke about strong competitors (mainly wineries) who produce wines of a certain brand where the brand concept behind is very similar to their own. another cooperative offers different brands within the distribution channel depending on the retail chain. for lidl, for example, they produce another brand than for aldi or netto. in order to be able to offer such cheap products in the discount, the cooperative even buys in cheap in order to be able to sell large quantities to the retailers. this business allows the cooperative to experiment with other things as there is a greater financial backup. furthermore, the respective manager said: “this is not correlated with an enormous risk, as these are single brands, we can decide immediately to stop that.” he said: “the aim is to strengthen the brand and increase the demand for our brand, as this will also increase our negotiation power and then we will be able to also increase prices and revenues.” however, another interview partner highlighted: “you can’t establish brands from one day to another. you need to let a brand grow, and therefore you need time.” instead of using brands for differentiation others mentioned to use certain attributes in the communication with customers that are relevant to them. one manager stated that the cooperative was even certified as sustainable producer and uses this attribute in marketing communications. besides this one, others also highlighted that cooperatives live values that recently have gained importance such as joint production, co-working, solidarity, partnership, local production, transparency, and sustainability. regarding investments in tangible and intangible assets, the interviews showed that it is much easier to realize investments in tangible assets such as machinery or equipment. investments in intangible assets are often more difficult to realize. one statement should be given exemplarily: “investments in tangible assets, e.g. cellar, cellar equipment..., are always easier and better understood by the members, than investments in intangible assets, such as the marketing agency and sales topics. there we have to put more effort into the conviction.” only one interview partner clearly disagreed and stated that there was no difference at all between such investments. the prediction of a high intensity of rivalry among existing firms within the german wine market was confirmed. on the subject of the bargaining power of buyers, the interviews showed that the market environment is as described before: the food retail (incl. discounters) in germany is concentrated and demands minimum quantities for a nationwide supply. however, the increasing number of independent retailers of the edeka and rewe group represent a new and attractive distribution channel for cooperatives, wineries, and wine estates. often, they own several markets within one region. hence, they demand smaller quantities compared to nationwide distributing food retailers, and are interested in working with regional producers. the interviews showed that the competition within such regional retailers is fierce as well. in most wine regions retailers can choose from numerous different producers. the interview partners mentioned that during negotiations with specialised wholesalers and gastronomy other factors vitally important, which influence the business relationship including long-term business relationships, mutual trust, and reliability. in negotiations with retailers, besides prices, conditions such as extra services or reimbursements depending on the sales performance are being negotiated. for german retailers it is not common to backward integrate. in respect to the consumer all interviewed cooperatives stated that they have established direct sales to consumers. the share distributed via direct sales ranges from 8-50% of total sales in volume between the interviewed cooperatives. direct marketing is attractive for wine producers as this entails the highest margins for 91competitive strategies for wine cooperatives in the german wine industry the cooperative without sharing margins with retailers. to increase direct sales, cooperatives conduct in-store wine tastings, offer wine touristic activities (e.g. guided walk through the vineyards with wine tastings; wine festivals; after-work get-togethers for young professionals). some cooperatives also maintain an own online-shop for direct sales to consumers. most interview partners desire to increase the percentage of direct sales to consumers. the prediction of a high bargaining power of buyers was not confirmed as it strongly depends on the distribution channel and size of the cooperative as to which party has a greater influence in negotiations. in terms of the bargaining power of suppliers the interviews revealed that in most cases the management of cooperatives is challenged regarding the relationship with grape suppliers, which are their members. due to their potential influence in decision making as board members and interest in the highest-possible pay-outs the management of cooperatives is challenged to keep their members satisfied. some cooperatives struggle with loosing members whereas other successfully operating cooperatives cannot or do not want to accept new members. some have installed e.g. social mechanisms regarding incentives and control which help to give guidance and support to the members and work market oriented. some cooperatives organize farmer reunions to inform members about ongoing projects. according to the interview partners, this also helps to raise the member’s identification with the cooperative. as expected, the bargaining power of grape suppliers is medium. in the relationship with their suppliers of inputs other than grapes, the cooperatives included in this study work in different ways. cooperatives which are attached to the secondary cooperative5 mostly order inputs of those suppliers with which the secondary cooperative works in order to obtain better conditions. thus, those do not negotiate on prices and conditions. the bargaining power strongly depends on the size of the cooperative and the type of supplier. large cooperatives that represent an important customer for the supplier, e.g. a regional supplier of etiquettes or closures, have the possibility to influence negotiations. smaller cooperatives do not have many possibilities to negotiate on prices, but mostly prefer to work with their regional supplier and have a long-term and stable relationship instead of changing the supplier frequently. in the case 5 according to the interview partners, cooperatives that are attached to the secondary cooperative are cooperatives without own vinification facilities as well as cooperatives that have a contract with the secondary cooperative for partial delivery. the latter have own vinification facilities but deliver a fixed amount of the harvest directly to the secondary cooperative for further vinification. of suppliers of technology, equipment, and machinery, room for negotiation is very limited. as these suppliers offer certain services and are very specialized, they are the one in control. overall, the representatives of the cooperatives mentioned that three factors are decisive for the business relationship with suppliers: the duration, reliability, and reasonable prices. the statements of the interview partners show a clear tendency: the smaller the cooperative, the less important is the price, and the more important is a stable relationship with regional suppliers; the larger the cooperative, the more important is the price, as this is more cost-driven. no information was provided regarding the potential threat of forward integration by suppliers. regarding the threat of backward integration of wine cooperatives, the interview partners did not show interest in producing their own inputs (except for grapes). the prediction about the medium bargaining power of suppliers (both grape suppliers and other suppliers) was confirmed. to estimate the pressure from substitute products interview partners were asked about the kind of products considered as substitutes they compete with as well as consumer preferences and developments in this field. for most cooperatives especially regional competitors with products at the same quality level, price range, and grape variety are rated excessively high in the assessment. these competitors are mainly private-owned wine estates or wineries close by but also other wine cooperatives in the same region. furthermore, some interview partners mentioned low-cost products from abroad as strong substitutes. especially for producers from the wine growing region württemberg that is mainly producing red wines, wines from producers from countries such as italy, france, and spain, are evaluated to be strong substitutes. however, other product categories of alcoholic beverages, such as beer, spirits, or wine-based drinks were not considered to be strong substitutes. new product developments such as cannabis-based drinks were not mentioned explicitly by any of the interview partners. one interview partner highlighted the importance of being attentive to market developments: “you try to analyse your market environment and decide, where you could sell more. it is also essential to analyse the wine types and grape varieties (such as pinot gris, blanc de noir, rosé) which are demanded at the moment. it is important to discuss about this frequently with the ones who are responsible, thinking about innovations and about which products to cut off.” five interview partners spoke about the importance of product innovations. one interview partner mentioned to have invented a new product that was not known on the german market so far. it is an aromatised wine-based 92 barbara richter, jon hanf drink, more specifically a red-wine aged in whiskey barrels. one also noticed: “product innovations also require investments: time and money, in order to push the product into the market.” the threat of substitutes is medium, hence, the prediction was confirmed. regarding the threat of new entrants the experts stated that economies of scale and scope apply in the wine industry which might retain new entrants from actually entering the industry. switching suppliers is not always easy, especially in the case of suppliers of equipment and machinery. working in viticulture and wine production requires high investments, which lowers the threat of new entrants. also, production costs for wine are high. product differentiation in terms of branding and product innovation is still possible in the german wine market which makes it more attractive for producers to enter the wine industry. it could not be confirmed that switching costs to produce other products (such as juices, spirits, or wine-based drinks) are high. several interview partners mentioned the new emerging competition in terms of private-owned wine estates that buy-in grapes from grape producers. in order to be able to guarantee the quantities and grape qualities required for the distribution channel of the independent retailers, wine estates are now increasingly dependent on cooperations/cooperating with grape producers. due to these developments grape producers have more alternatives for the sale of their grapes, which results in the migration of members. besides, nearly all interview partners mentioned to struggle with succession. according to the interview partners full-time grape producers often have a successor, as full-time viticulture offers the basis for making a living. one interview partner stated: “it is a challenge to motivate the young generation for the cooperative system. also finding young people who are willing to work voluntarily in the committees is difficult.” overall, the prediction about a medium threat of new entrants was confirmed. figure 2 shows the framework of actual competition in the german wine industry. 5 discussion and implications the following implications do not only apply to the german wine cooperatives but also partly to wine cooperatives in other european countries. in other european countries which traditionally produce wine differences in production and consumption is increasing and the markets are saturated as well [61]. furthermore, cooperatives play an important role in countries like spain, france or italy. in spain, for example, cooperatives account for 60 to 65 % of the total spanish wine production [62]. due to figure 2. framework of actual competition in the german wine industry. 93competitive strategies for wine cooperatives in the german wine industry the saturated market, cooperatives in germany and other european countries face the same challenge: to pursue a clear strategy in order to gain a competitive advantage. however, to a certain extent, the derived strategies can only be applied to german wine cooperatives as the market structure differs from some of its neighbouring countries due to the high wine imports from other countries. need for market orientation and competitive strategy the results showed that wine cooperatives in germany face the situation of intense competition. with the high number of imported products and a wide availability of products with a good price-quality ratio, german consumers have the choice. besides, the increasing share of wine distributed via discounters and food retail emphasizes the need for cooperatives to work market oriented. the narrow focus on the level of pay-outs and internal structure of cooperatives leads to a strong production and member orientation in many cooperatives, and prevents them from following a more market-oriented approach. this result is consistent with the findings of hanf and schweickert (2014) who state “customer orientation is the key to success” [15]. certainly, the pursuit of a clear strategy is necessary to tackle the intense competition. on one hand cooperatives have to find a competitive position within the industry and on the other hand they have to foster the relationship with their members to retain members and vineyard areas. the focus on just one of those aspects will not be sufficient to compete successfully in the long-run. high grape pay-outs and member satisfaction can only be achieved if the cooperative is working successfully in the market and generating a surplus. schamel [63] found that the success of wine cooperatives also depends on particular social factors (e.g. member commitment and trust) as well as on organizational control variables (e.g. training activities). in terms of means of achieving a competitive advantage and determine the respective strategy (and based on the scale of the enterprise and scope of the line), cooperatives can follow the strategy of cost leadership, cost focus, differentiation, or differentiation focus. cost leadership as a generic strategy to become the industry’s low cost producer can only be chosen by a few players in the german wine industry [64]. alternatively, producers can choose differentiation. cost leadership and cost focus strategy of the interviewed cooperatives, mainly large cooperatives implement the cost focus strategy for a nation-wide distribution. as shown in the results, managers pay attention to keeping the technological equipment and facilities up-to-date and having a high capacity utilisation. furthermore, collaboration among producers is seen as a possibility to lower costs in terms of joint sales activities. for the cost focus strategy, the application of economies of scale and scope are vital. the decreasing number of wine cooperatives in germany and recurring news about mergers of cooperatives show that this is one of the measures cooperatives take to lower the production costs. small and medium-sized cooperatives can aim for regional cost leadership. apart from the secondary cooperatives it is difficult for wine cooperatives to strive for an industry-wide cost leadership as wineries produce low-cost wines of german and international origin. differentiation and differentiation focus strategy results have shown that the bargaining power of retailers in the german wine industry is often high depending on the distribution channel. in some cooperatives, direct sales to consumers account for up to 50 % of their total sales volume. direct marketing is attractive for most cooperatives as avoiding retail channels provides them for a better margin. thus, most of the interview partners aim to increase the share of direct marketing. options for cooperatives in the wine sector to lower the bargaining power of retailers are: (1) establishment of strong brands, (2) development of new products, (3) market development, and (4) using attributes in the communication with customers that are relevant to them. these options are also applicable to wine cooperatives in other countries. (1) the establishment of strong brands will allow to differentiate from other wine producers. this will help to increase sales. brands give orientation to the consumer. e.g. consumers that have had a positive experience with the cooperative (e.g. during a wine touristic activity, wine fest, tasting) are more likely to choose the wine when to decide which wine to buy at the point of sale at the retailer. however, as shown in the interviews, the establishment of brands is costly and needs a long-term plan. besides, in most cases the investment in intangible assets is difficult for wine cooperatives due to their internal structure and the horizon problem (cf. results and [31]). krieger et al. (2014) [31] suggest that these problems can, however, be solved by an explicit definition of competences and greater budgetary authority for the brand managers of a cooperative. (2) another possibility is the development of new products. as shown in the results, five of the interview 94 barbara richter, jon hanf partners have already identified product innovations as important tool to increase or stabilise sales. innovations such as aromatised wine-based drinks diversify the product portfolio. this is in line with grashuis (2018) who found that some cooperatives respond to the ongoing segmentation of consumers with product and process innovation in order to diversify the product portfolios [65]. (3) the results showed that export activities of the interviewed cooperatives remain in most cases still at a low level. several interview partners demonstrated their interest in increasing exports. based on sound market research, the identification of new export markets and investment into export activities contribute to the development of new markets. (4) as shown in the results interview partners mentioned positive effects of using attributes in the communication with customers that are relevant to them. an example is the usage of the characteristic of being a sustainable producer which can be used as differentiation focus strategy. one interview partner mentioned the certification of the cooperative as sustainable producer which was assessed as competitive advantage by the manager. cooperatives which follow the approach of sustainable production should use this as an outstanding feature in communication with customers. furthermore, the usage of the “farmer-owned” attribute can provide a marketing advantage over non-cooperatives [14]. consumers might associate the cooperative with certain social values such as democracy, equality, or solidarity, which can also provide a marketing advantage [14,66]. cooperatives could use these values for differentiation [67]. collaboration among producers as mentioned in the interviews, another option to lower the bargaining power of retailers is the establishment of inter-firm collaboration. the results show that in germany so far apart from the collaboration of some interviewed cooperatives with the secondary cooperatives (joint production and distribution of wine) or joint marketing efforts of certain wine-growing regions (e.g. weinheimat württemberg) only few collaborate with other producers (e.g. being part of the weinallianz gmbh). especially small and medium-sized cooperatives should develop a collaboration with other producers, e.g. with other cooperatives or wine estates from different wine-growing regions in germany. this can be implemented as a collaboration between two or more german cooperatives with the objective to join forces and lower costs for joint participation in trade fairs or joint marketing and sales efforts. such type of collaboration among producers could also be applied in other countries where market structures, common goals and joint interests allow building strategic alliances. offering additional services for b2b and b2c customers another option to lower the bargaining power of retailers is to expand and improve additional services. as retailers can be considered to be gatekeepers to consumers, the requests of retailers have to be fulfilled. requests can include a professional supply chain management, including a prompt and timely delivery as well as minimum delivery volumes [15]. for products of retail brands, a high product quality is a prerequisite [15]. furthermore, medium and large cooperatives could offer consultancy for food retailers in terms of category management. this in turn emphasizes the need for market orientation and hence, customer orientation which is essential for building a professional relationship with the customer. cooperatives can also offer additional services for gastronomy and specialized wholesalers to create added value and by this to enhance their competitive position. another promising approach for cooperatives not yet in direct contact with the edeka and rewe group is to offer their wine range to independent retailers who are able to shape their product portfolio. in this study it was shown that independent retailers gain importance in the german market. bitsch et al. (2020) [23] have shown that this distribution channel offers a good possibility to market wines for those players who are not able to supply the nation-wide market. by offering concepts closely oriented to specialized retail, consumers also often have the chance to ask for advice of special sales staff and to taste wines at the point of sale, which influences their willingness to pay. besides the expansion and improvement of additional services for retailers cooperatives should also pay attention to the increase of services offered to consumers. this can include for instance the intensification of wine-touristic activities. especially small and mediumsized cooperatives should build on regionality, customer relations, and innovative events. options for improved membership relations and increased youth involvement this study showed that wine cooperatives in germany have to deal with member fluctuation and the question of succession. in order to counter this, coopera95competitive strategies for wine cooperatives in the german wine industry tives should improve membership relations by increasing the flexibility of membership and terms of delivery (e.g. permitting partial delivery). based on the principles laid down in the cooperatives bye-laws members of some cooperatives are allowed to deliver their grapes either to the cooperative or to sell them to wineries or wine estates at better conditions [37,54,55,68]. research has shown that the permission of partial delivery in wine cooperatives in germany can contribute to retain members and support member businesses6 [54,55,70]. a different activity to improve membership relations and increase youth involvement is the promotion of intergenerational exchange in line with peer-to-peer learning. cooperatives can implement a mentor-system where old and young grape producers can learn from each other not only on technical issues but of equal importance for the cooperatives topics on the rights, duties, opportunities, and long-term vision of being a cooperative member and board member. adapting this approach older members get in touch with younger members and potential successors who want to take over vineyard areas. this includes also the promotion of interaction among members and with the board and the management of the cooperative. another form of peer-to-peer learning a cooperative can offer is the support for young grape producers to acquire practical skills and know-how for working in viticulture by offering demonstration plots where young members can try new techniques and share experiences. the interviews show that some cooperatives already have such groups for young members. moreover, the cooperative can establish an internship programme for young talented persons with interest in viticulture. such a programme could include a mix of internships at the organising wine cooperative, partner cooperatives (in germany and abroad), wine estates, retailers, research institutes, the german wine institute (dwi), or the european and overseas information offices 6 to find out to what extent partial delivery is applied in practice and what significance it has in the german cooperative system the authors [55] conducted 20 expert interviews with managing directors, cooperative members and other experts of the german cooperative system. the authors showed that partial delivery is officially applied in practice on a small scale and unofficially on a larger scale. the official partial delivery applies if the cooperative allows the partial delivery. cooperative members are then obliged to sell their grapes to market participants other than wine cooperatives or producer associations [69]. unofficial partial delivery means that the full delivery obligation is circumvented by splitting the members business or by using lease and cultivation contracts. once the entire vineyard area has been divided, new sites are created and registered to family members. this means that only a part of the vineyard area remains in the cooperative. the area belonging to the newly established business can be freely marketed through other sales channels. of the dwi, high-end gastronomy, and (wine) trade fair organisers. by this, the whole sector would be covered, and first-hand experiences could be offered in viticulture, oenology, marketing, the cooperative system and applied research. however, there is not “one strategy for all” but the results of this study demonstrate that there are many options and approaches for wine cooperatives to develop an adequate strategy for their specific situation to meet intense competition and to compete successfully in the (german) wine market. 6 summary changes in consumption and market developments affect the opportunities for wine cooperatives to compete successfully in the wine market. in germany, today about 50 % of the total wine volume is sold through discounters, 28 % via retailers, and 11 % via direct sales. seven percent of the total volume is marketed via specialized retail, and four percent via online retail. the number of wine cooperatives in germany has decreased from about 264 in 2000 to 159 cooperatives in 2016. correspondingly, the number of members has declined. the concentration of wine cooperatives is ongoing and reflects the struggle cooperatives face with the recent situation on the german wine market. to be able to give recommendations for wine cooperatives on how to strengthen their position within the industry, the german wine industry was analysed by using the model of the five forces that affect the competitiveness in an industry. for this, and based on a wine market description, predictions for each force were formulated. in-depth interviews with 15 representatives of german wine cooperatives were conducted. the results show a high intensity of rivalry among existing competitors. bargaining power of buyers and suppliers is medium, constrained by the actual size of the cooperative. the threat of substitute products is medium, as well as the threat of new entrants. the results of the interviews which have been conducted permit to derive strategic implications for wine cooperatives in germany as well as in other european countries with saturated markets. recommendations which address the competitive position of cooperatives in the wine industry include (1) the cost leadership and cost focus strategy, (2) the differentiation and differentiation focus strategy, (3) collaboration among producers, (4) offering additional services, and (5) options for improved membership relations and increased youth involvement. in the end, it is a difficult task for coopera96 barbara richter, jon hanf tives to develop an adequate strategy to meet the intense competition but many possibilities to strengthen the position and work future-oriented exist. arguably the most important limitation of the empirical study is the exclusive consideration of wine cooperatives from germany. it is difficult, if not 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[70] l. bitsch, u. schilling, j.h. hanf, teils teils: teilablieferung hat früher häufig zu qualitätseinbußen geführt, sorgt heute aber oftmals für flexibilität bei den mitgliedsbetrieben (2019) 28–30. wine economics and policy volume 9, issue 2 2020 firenze university press the influence of alcohol warning labels on consumers’ choices of wine and beer azzurra annunziata1,*, lara agnoli2, riccardo vecchio3, steve charters4, angela mariani5 a bad year? climate variability and the wine industry in chile eduardo haddad1,*, patricio aroca2, pilar jano3, ademir rocha4, bruno pimenta5 sparkling wine international market structure and competitiveness karim marini thome*, vitoria a. leal paiva the role of context definition in choice experiments: a methodological proposal based on customized scenarios fabio boncinelli*, caterina contini, francesca gerini, caterina romano, gabriele scozzafava, leonardo casini the impact of country of origin on brand equity: an analysis of the wine sector nádia passagem1, cátia fernandes crespo2,*, nuno almeida3 competitive strategies for wine cooperatives in the german wine industry barbara richter1,*, jon hanf2 valuation of viticultural adaptation to climate change in vineyards: a discrete choice experiment to prioritize trade-offs perceived by citizens verónica farreras1,2, laura abraham3,* does the institutional quality affect labor productivity in italian vineyard farms? maria raimondo1,*, concetta nazzaro4, annamaria nifo3, giuseppe marotta2 the role, scope and management of r&d and innovation in the wine sector: an interview with antonio graca peter hayes am wine economics and policy 9(2): 99-112, 2020 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/web-9823 wine economics and policy citation: verónica farreras, laura abraham (2020) valuation of viticultural adaptation to climate change in vineyards: a discrete choice experiment to prioritize trade-offs perceived by citizens. wine economics and policy 9(2): 99-112. doi: 10.36253/web-9823 copyright: © 2020 verónica farreras, laura abraham. this is an open access, peer-reviewed article published by firenze university press (http:// www.fupress.com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information files. competing interests: the author(s) declare(s) no conflict of interest. valuation of viticultural adaptation to climate change in vineyards: a discrete choice experiment to prioritize trade-offs perceived by citizens verónica farreras1,2, laura abraham3,* 1 instituto argentino de nivología, glaciología y ciencias ambientales (cct-conicetmendoza). av. ruiz leal s/n parque general san martín.mendoza argentina. cp 5500. email: vfarreras@mendoza-conicet.gob.ar 2 universidad nacional de cuyo, facultad de ciencias económicas, m5502jma mendoza, argentina 3 universidad nacional de cuyo, facultad de ciencias agrarias, almirante brown 500, chacras de coria, luján de cuyo, cpa m5528ahb mendoza, argentina. email: labraham@fca.uncu.edu.ar *corresponding author abstract. on a climate change scenario, a discrete choice experiment was applied to elicit the trade-off values for three environmental impacts of current viticultural management practices in vineyards of mendoza, argentina. water availability for other uses was found to be the most concerning topic for the population, followed by use of chemical fertilizers and then by use and conservation of biodiversity. an increase of one percentage point in water availability was estimated to add each citizen on average 13.05 argentinean pesos – 0.74 us dollars – per year in terms of increased welfare, a figure equivalent to the welfare drop a citizen would experience after an increase of 1.45 percentage points in the use of chemical fertilizers annually per hectare, or a decrease of 2.69 percentage points in the use and conservation of biodiversity. these trade-off values may help policy makers, planners, regional managers, and ecologists to take social preferences into account in setting resource allocation priorities intended to support viticulture. this study approach provides a framework that could guide similar assessments in other regions. keywords: viticultural management practices, climate change, discrete choice experiment, human welfare effects of environmental-impact choices. 1. introduction viticulture is one of the most important agricultural activities in the central west region of argentina. at the foot of the central andes, the mendocinian vineyards cover a total crop area of 155,900 ha, the largest 100 verónica farreras, laura abraham in argentina (inv, 2018).1 in mendoza, viticulture has been developed, like in many other viticultural zones of the region, since the end of the xix century, initiated by european immigrants (lacoste, 2003). its green and vast vineyards are well known not only because of its productive economic value, but also because of its cultural and identifying values (montaña, 2007). the region is characterized by its arid and semiarid climate, with an annual average rainfall of 220 mm. due to the dry weather, water availability in mendoza is a determining factor, most of the mendocinian agricultural and urban areas are reduced to small portions of its territory (figure 1. a: oases and non-irrigated land). these oases were built upon an irrigation system of ditches and canals which strictly takes into account the topography of the place. this system makes the most of the water coming from the mountain rivers, whose 1 one hectare contains approximately 2.47 acres. streamflow is a result of the fusion between the snow and the andean glaciers (morábito et al., 2007). vineyards, on average, use 45% of the water available in the oases of the province. about 53% is available for industrial use, public use –green spaces and urban trees– and watering of crops other than vineyards. the percentage of water supply for the population, currently estimated at 2%, completes 100% of the water availability in the oases.2 the exploitation of irrigation water depends mainly on the irrigation system adopted. almost 90% of the mendocinian vineyards use the traditional surface irrigation system with an estimated irrigation efficiency of 39% for a furrow system with drain and 67% for a furrow system without drain. whilst in 2 however, to the effects of the empirical application developed below, the percentage of water supply for the population is not contemplated within the 53% of water available in the oases after using it for the vineyards, given that mendoza water law 1884, still applicable, prioritizes population´s supply against any other uses (dgi, 2016). figure 1. farm units with grape cultivation (a) in the oases of mendoza province and (b) in the mendocinian northern oasis (source: own elaboration based on data obtained from national sanitary registry  of agricultural products (renspa) and cartography of the territorial environmental information system (siat) and national geographic institute (ign)). the darkened areas are farm units with grape cultivation. 101valuation of viticultural adaptation to climate change in vineyards the rest of the vineyards, the estimated efficiency varies between 82% and 90% as a result of the implementation of water-saving technologies such as the drip irrigation system (morábito et al., 2007; schilardi et al., 2015). in the last seven years, there has been a substantial deficit in the water balance of the mountain rivers in mendoza (castex et al., 2015). this hydrological deficit is the result of a decrease in the snowfall and the retreat of the glaciers caused by an average global warming between 0.6 and 0.7°c (ipcc, 2013; boninsegna, 2014; poblete and minetti, 2017). in the upcoming decades, this phenomenon is expected to aggravate as a consequence of a predictable increase in the average temperatures of the central andes (cabré et al., 2016). this increase in temperature will drastically raise the regional evapotranspiration, it will alter the relations between rainfall and snowfall and it will modify the seasonal distribution of the runoff of the mountain rivers (villalba, 2009; lauro et al., 2019). global warming and the current and future hydrological deficit will, undoubtedly, have important consequences on the availability of this resource unless there is a more efficient use of the water coming from the mountain rivers (castex et al., 2015). a decrease in the availability of water will probably lead to an increased competition in the oases, compromising the current vineyard surface. that is, unless vineyards can make use of the water destined for other purposes (industrial use, public use – green spaces and urban trees – and the watering of crops other than vineyards; hereinafter, water availability for other uses). in line with global warming, weather simulations indicate that by the end of the present century there will be changes in the rainfall patterns on the plains located at the foot of the andes (boninsegna, 2014; deis et al., 2015). an important increase in the frequency of summer precipitations is expected, mostly associated with severe convective storms (castex et al., 2015; cabré et al., 2016). the effect of rainfall is complex since crops respond differently depending on the type of precipitation and the soil management practices. practices like applying manure and compost and the use of cover crops provide nutrients and organic matter, improving the structure and fertility of the soil (miglécz et al., 2015). experimental studies in the vineyards of mendoza have reported benefits in the conservation of the soil as a result of cover crops used as green manure (uliarte et al., 2013; martínez et al., 2018; among others). however, the vast majority of the vineyards in mendoza keeps their soils without vegetation cover throughout most of the year. more intense rainfall, as predicted for the upcoming years, can contribute to soil loss, reducing its nutrient content and organic matter. this reduction decreases the size and stability of the soil aggregates and, together with the lack of vegetation cover, reduces water infiltration and increases superficial runoff (powlson et al., 2011). all of this leads to soil erosion and an increase use of fertilizers in an attempt to keep the same crop yield (pérez vázquez and landeros sánchez, 2009). currently in mendoza, it is estimated that per year per hectare, an average of 80% of nutrients replenishment in the vineyards is achieved with the use of chemical fertilizers (van den bosch, 2017). in the upcoming years, an increase in the use of chemical fertilizers in order to avoid a decrease in crop yield is expected as a result of the current soil management practices and the predictable changes in the frequency and intensity of the precipitations on the plains. however, the overuse of fertilizers can cause groundwater contamination from infiltration of fertilizers or carry-over contamination of fertilizers to surface water course (meier et al., 2015). there have been reports of cases of water contamination caused by nitrates associated with excessive use of fertilizers in crops on the central oasis (morábito et al., 2011; salatino et al., 2017; among others). field studies show that global warming and global co2 concentration have an effect on the population dynamics of the organisms that attack the crops as well as on their natural enemies (hamada and ghini, 2011; karuppaiah and sujayanad, 2012; among others). vázquez (2011) has reported an alteration on the population dynamics of common pests as well as changes in their period of emergence, appearance of new pests and a reduction of natural enemies. this shows that global warming together with concentration of co2 can cause phytosanitary problems and reduce the efficiency of the chemical control methods. in mendoza, this phenomenon can be aggravated as a consequence of a raise in summer precipitations. traditional crops such as vineyards can be affected by a higher occurrence of cryptogamic diseases (villalba, 2009; deis et al., 2015). the use and conservation of biodiversity in crops not only make them less vulnerable to weather variations, but also can contribute to an effective control of pests and diseases through its natural or biological management (nicholls estrada, 2008). a diverse and complex crop system facilitates the necessary environmental conditions for the development of pests’ natural enemies, making the agroecosystem generate its own natural protection (rolando et al., 2017). it is estimated that, in mendoza, only 2% of vineyards cultivated area utilizes and conserves biodiversity with cover crops and patches of native vegetation, which are maintained to provide habitat for natural enemies and local fauna (senasa, 2017). this indicates that pesticides employed 102 verónica farreras, laura abraham for the control of pests and diseases are more widely used than biological management practices. it is foreseen that in the next few years there will not be any significant changes in the use and conservation of biodiversity on the vineyards cultivated area of mendoza, despite being widely well documented in the literature that the massive use of pesticides may reduce environmental quality (turgut, 2007; di lorenzo et al., 2018; among others) and decrease the species diversity in the agroecosystems, modifying their stability and resilience (see, among others, moonen and  bàrberi, 2008; kremen and miles, 2012). consequently, and in line with the above-mentioned literature, viticulture in the region faces new challenges due to global warming that must be considered in the design of its agricultural practices. lower water availability for other uses, increased use of chemical fertilizers, and a non-significant change in the use and conservation of biodiversity are three of the most pronounced and environmentally concerning consequences of nonadaptive management practices to climate change in the vineyards of mendoza. according to the aforementioned results conducted on the vineyards of mendoza (uliarte et al., 2013; castex et al., 2015; martinez et al., 2018) and the current knowledge on the efficiency of the irrigation methods (morábito et al., 2007; schilardi, 2015), on changes in the precipitation patterns (boninsegna, 2014; deis et al., 2015), and on population dynamics of pests, diseases and natural enemies (hamada and ghini, 2011; vázquez, 2011; deis et al., 2015), we hypothesised a possible temperature-change scenario by 2050, which we will refer to as the ‘‘do-nothing’’ or ‘‘business-as-usual’’ (bau) situation. considering the three mentioned variables – water availability for other uses, use of chemical fertilizers, and use and conservation of biodiversity – the changes from current average values to new values in 30 years’ time were estimated subject to: (i) an increase in annual mean temperature by 2°c, (ii) a rise in precipitations on the plains from 200mm to 250mm per year, and (iii) a 10% decrease in snow accumulation in the andes per year –figures in the medium range of the predicted change reported by multiple general circulation models for the region over the period of 20712100 (ipcc 2013; boninsegna, 2014; cabré et al., 2016; poblete and minetti, 2017). based on moderate interpretation of the above-mentioned literature and on expert opinions on viticulture and agricultural economics, the bau situation assumed the following changes: the percentage of water availability for other uses, currently averaging about 53% in the mendocinian oases, will drop to approximately 41%; chemical fertilizers, currently representing every year on average 80% of nutrients replenishment per hectare of vineyard, will raise to 95%; and finally the percentage of vineyards cultivated area that utilizes and conserves biodiversity, currently estimated on 2%, will not register any significant changes, only reaching 3%.3 nowadays, however, the human-welfare effects of these possible environmental changes are unknown. the information on the social significance of these possible changes can be useful for those involved in making decisions and may be considered in setting resource allocation priorities intended to support viticultural practices for climate change adaptation. in order to explore this, a discrete choice experiment valuation exercise was conducted to elicit the trade-offs perceived by mendocinian citizens for changes in water availability for other uses, use of chemical fertilizers, use and conservation of biodiversity, and the willingness to pay for the adaptation of viticultural management practices to climate change. with this method the importance of these environmental changes can be expressed in monetary units and the extent to which citizens are willing to consent one change for another can be elicited (hanley et al., 2002; hensher et al., 2005; among others). 2. discrete choice experiment the label “discrete choice experiment” concerns to a survey-based valuation method consistent with welfare economic theory (jones and pease, 1997; bennett and blamey, 2001). this method, which belongs to the family of stated preference methods, describes a hypothetical market with details of the good to be considered (carson and louviere, 2011). the good details encompass some of its characteristics, known as attributes. depending on the proposed action, the attributes can differ in their quantity or quality level. different level combinations of attributes, alongside with a suggested payment, set up an alternative. in a discrete choice experiment, respondents are presented with a series of alternatives –usually called choice set, comprising bau and two or more alternatives. then they are asked to choose their most preferred alter3 the decrease in the availability of water for other uses was estimated by considering that both current cultivated vineyard area and actual average percentage of irrigation efficiency will not register any significant changes during the next 30 years (morábito et al., 2007; schilardi et al., 2015; dgi, 2016). the increase in chemical fertilizers was estimated according to experts’ opinions based on grape production models generated by the national institute of agricultural technology (van den bosch, 2017). the change in the use and conservation of biodiversity was estimated using the local trend in organic viticulture certification in mendoza (senasa, 2017). 103valuation of viticultural adaptation to climate change in vineyards native (hanley et al., 2002). a respondent can confront several successive choice sets throughout interview. in order to interpret the results in welfare economics terms, the bau alternative must be included in each choice sets. the discrete choice experiment is based on random utility maximization (rum) models (mcfadden, 1973). a succinct methodological description is provided below, whilst a more comprehensive one can be found in farreras et al. (2017). under the rum framework, the utility function for each respondent has the form: uij=vij+εij (1) where uij is individual i’s utility from choosing alternative j, vij is the deterministic component of utility, and εij is a stochastic element that denotes unobservable motivates on individual choice (manski, 1977). usually, ε is assumed to be independent and identically distributed (iid) across alternatives and individuals. the condition for individual i choosing a given alternative j over any alternative option k belonging to the set of alternatives a, can be expressed in probability terms, p, as: pij=p{vij+εij>vik+εik; ∀k≠j∈a} (2) the choice probabilities can be predicted using different models. most often, choice probabilities are estimated using the mixed logit (ml) model. the most straightforward derivation, and most widely used in recent applications, is based on random coefficients (train, 2009). given that choice probabilities cannot be calculated accurately, they are approximated through simulation (hensher and greene, 2003). 3. empirical application 3.1 choice sets alternatives were defined by three non-monetary attributes – water availability for other uses, use of chemical fertilizers, and use and conservation of biodiversity –, and a monetary attribute in the form of an annuity to finance the adaptation of viticultural management practices to climate change. each attribute displayed four levels as shown on table 1. the levels of water availability for other uses were described as an average percentage of water available in the oases for industrial use, public use – green spaces and urban trees – and the watering of crops other than vineyards. likewise, the levels of use and conservation of biodiversity were also expressed in percentages and were defined as the average percentage of the vineyards cultivated area with native vegetation strips and cover crops that promote the biological control of pests and diseases. the levels of both attributes were distributed between the expected values in the bau situation and the values above the bau levels. the levels of use of chemical fertilizers were also expressed in percentages and were defined as the average percentage of nutrients table 1. attributes and levels used in the choice questionnaire. attribute description levels water availability for other uses the average percentage of water that is available in oases for industrial use, public use –green spaces and urban trees– and other irrigated crops other than vineyards in 30 years’ time. · 41% (business-as-usual) · 53% (current level) · 65% · 76% use of chemical fertilizers the average percentage of nutrients replaced with chemical fertilizers in the vineyards, per year per hectare in 30 years’ time. · 95% (business-as-usual) · 80% (current level) · 50% · 25% use and conservation of biodiversity the average percentage of vineyards cultivated area with native vegetation strips and cover crops that promote the biological control of pests and diseases in 30 years’ time. · 3% (business-as-usual) · 10% · 25% · 50% annual payment subject to adjustment for inflation† the annual payment required per household over the next 30 years to finance the adaptation of viticultural management practices to climate change. · 600 argentinean pesos · 400 argentinean pesos · 200 argentinean pesos · 0 argentinean pesos (businessas-usual and current level) †average exchange rate in spring 2017: 1 us dollar equals 17.54 argentinean pesos. 104 verónica farreras, laura abraham that are replenished in the vineyards, each year per hectare, with chemical fertilizers. the levels of use of chemical fertilizers for scenarios different to bau were defined below 95%. the levels of bau for the non-monetary attributes reflected the estimated situation in 30 years’ time as a result of the use of non-adaptive management practices to climate change in mendocinian vineyards, whilst the rest of the levels could be reached through the adaptation of viticultural practices to climate change. focus groups confirmed that the temporal horizon of 30 years was perceived as reasonable and did not show any credibility problems. the levels of payment were determined based on different focus groups in which the participants stated the maximum quantity of money they would be willing to pay for the different scenarios. the extra cost for “donothing” was zero. the monetary levels were expressed in argentinean pesos subject to adjustment for inflation, to be paid per household each year, during the next 30 years. there were 81 (34) possible combinations of attribute levels or different alternatives, excluding the bau levels, given that this situation does not vary. since this universe was large, a statistically efficient choice design combining the attribute levels into alternatives and choice sets was constructed using ngene (choicemetrics, 2014), (table 1). a d-optimal fractional factorial design consisting of 27 alternatives was identified. the alternatives were randomly grouped into 9 blocks of three alternatives plus bau. each block of four alternatives corresponds to a choice set. the efficiency for the final design expressed as the bayesian d-error was 0.00148. a pilot exercise, used to complete the design process, confirmed that random combinations of the attribute levels posed no problems to participants and ensured the choice task adequacy. the final version of the questionnaire included three different choice sets, which were randomly presented to each individual. respondents were asked to pick within the choice set the alternative they preferred the most. figure 2 reproduces a typical choice set.4 3.2 questionnaire the first part of the questionnaire focused on the presentation of the attributes. it described the current average level of each non-monetary attribute –water availability for other uses, use of chemical fertilizers, and use and conservation of biodiversity– in the mendocinian oases and the most reliable prediction of the average levels of each attribute in 30 years’ time (based on the working hypothesis that predicts a raise in temperature and annual precipitations of 2°c and 50mm, respectively and a 10% snowfall reduction) (table 1). hence, the questionnaire showed, in the first place, the expected change in the three non-monetary attributes under the “do-nothing” or bau situation. afterwards, respondents were explained that with the adaptation of viticultural practices to climate change, the bau situation could be modified. these practices included the sustainable agricultural management of water, soil and biodiversity such as the implementation of water-saving technologies, the substitution of chemical fertilizers for organic manure and cover crops used as green manure that additionally would allow, together with the conservation of native vegetation strips, the vineyards to generate its own protection against pests and diseases. three alternative levels to bau levels were presented for each non-monetary attribute indicating that the level each one of them would finally reach would depend on the quantity of money destined to finance the adaptation of the viticultural practices to climate change. in order to further familiarize individuals with possible levels of change, and check for satiation within the levels segment, participants were then asked to indicate the preferred attribute level, regardless of the cost. after the introduction of non-monetary attributes, the monetary compensation was described. it was stated that the local government was considering the possibility of financing the adaptation of viticulture to climate change. it was explained that the degree of adaptation would depend on the quantity of resources allocated to this end, which in turn would depend on the answers to the questionnaire. if, on average, the answers indi4 given the sample size, each alternative was seen by an average of 70 respondents in the whole survey. figure 2. example of a choice set presented to respondents. 105valuation of viticultural adaptation to climate change in vineyards cated that people were willing to pay some money for the adaptation of the viticultural practices to climate change, then the payments would be obligatory and would be charged annually to the citizens through a council tax. some possible alternatives on the payment vehicles were tested on different focus groups. it was confirmed that the obligatory payment gathered by the council city through its tax was reasonable, credible and easily accepted by the interviewees; whilst other alternatives on payment vehicles such as direct payment to an organization created to this end caused rejection for its lack of credibility. the central part of the questionnaire focused on the choice tasks and a set of debriefing questions. the third and last part of the questionnaire was designed to gather socioeconomic data, such as income, gender, age, and level of formal education, among others. the survey was carried out in spring 2017. a representative sample of the residents of the northern mendocinian oasis – which concentrates 58.20% of the total mendocinian farm units with grape cultivation and in which more than half the total population of the province lives – was interviewed face to face in the respondents’ households (figure 1. b). according to the national institute of statistics and censuses (indec, 2010), the northern oasis has a population close to one million people. the total number of interviewees between the age of 24 and 80 was 226. the sample included residents in cities of more than 10,000 people randomly drawn – after weighting cities according to their population size – and were interviewed in blocks of 6. the selection of individuals within a block was conducted through a random-route procedure to find a household and then, within the household, a particular individual to fulfil a specific quota for age and gender. around 90% of the people chosen accepted to be interviewed. all of them completed the choice tasks, which resulted in 678 valid observations –three sets of choice per person. from a social economic point of view, the sample and composition of the population were relatively similar (table 2). the questionnaire was handed out in paper format and read by the interviewer. each questionnaire came along with a set of coloured cards, which showed the attributes being valued. each interview took approximately 30 minutes and no signs of fatigue or other obvious problems were detected. 4. results an ml model was determined to detect the relation between the levels of the attributes and the probability of the interviewees choosing certain alternatives. the specification of the ml model requires certain characteristics such as the selection of the parameters –attributes– that are going to be considered random and the distribution supposed to them. in this way, it was considered, in the first place, that the preferences of the interviewees for the three non-monetary attributes were heterogeneous and followed a triangular distribution whilst the preferences for the monetary attribute were considered homogeneous.5 however, the standard deviations of the non-monetary attribute distributions were not statistically significant, which shows that the preferences for these variables were homogeneous among the individuals of the sample (table 3). the three non-monetary and monetary variables entered the regression expressed in the units of the respective attributes as they were described in table 1. the coefficient signs were as expected and most of the variables were statistically significant with a 95% lev5 due to the higher probability of occurrence that some of the levels showed in relation to others considered. for the attributes water availability for other uses and use and conservation of biodiversity, the higher levels were the most selected ones within the range considered. whilst for the attribute use of chemical fertilizers, the lower levels were the most chosen ones. table 2. sample and population composition in the northern oasis. gender and age groups northern oasis † (%) sample (%) women age 52.63% 54.21% 24–35 16.59% 16.82% 36–49 14.71% 13.55% 50–65 13.85% 14.49% 66–75 5.47% 6.54% 76–80 2.01% 2.80% men age 47.37% 45.79% 24–35 16.34% 18.22% 36–49 13.54% 10.75% 50–65 11.99% 12.15% 66–75 4.18% 2.34% 76–80 1.32% 2.34% income ‡ argentinean pesos (at 2017 prices) argentinean pesos (at 2017 prices) 27,019 § 24,030 † indec 2010 ‡ brackets were used in the survey, making the comparison less accurate between the average monthly income of the argentinean urban agglomerations and that of the sample. § average monthly household income in the fourth quarter of 2017, according to indec 2017. 106 verónica farreras, laura abraham el of confidence. the positive sign of the coefficients of water availability for other uses and of use and conservation of biodiversity shows that mendocinian citizens tend to prefer higher levels of these attributes to lower levels. this implies that the alternatives with higher percentages of water availability for other uses and of use and conservation of biodiversity are more likely to be chosen. on the contrary, the coefficient signs of use of chemical fertilizers and of payment were negative, which shows that higher levels of these attributes decrease the population welfare. since the socioeconomic variables of the respondent do not vary over alternatives, they can only enter the model if they are specified in ways that create differences in utility over alternatives (train, 2009). with 4 alternatives per choice set, one alternative-specific coefficient of income, gender and age variables entered the model, where three of the coefficients were normalized to zero (i.e., the three non-bau alternatives were left out). the income data were collected in the survey using nine categories: no direct income; <8,060 argentinean pesos; 8,060–12,000; 12,001–17,000; 17,001–22,000; 22,001– 30,000; 30,001–40,000; 40,001–50,000, and >50,001 argentinean pesos. thus, income entered the regression as a categorical variable reflecting the monthly earnings of the respondent’s household, with a being the alternative-specific. while, the gender entered the regression as a dummy variable, we coded females to be 0 and males to be 1; with a being the specific alternative. finally, the age entered the regression as a continuous variable reflecting the age in years of the individual, with a being the alternative-specific. the negative sign of the coefficient of the variable income indicates that the interviewees with higher incomes are less likely of choosing option bau, i.e., they are more likely to pay for the adaptation of the viticultural practices to climate change. on the other hand, the negative sign of the coefficient of the variable gender indicates that women are more prone to choose an alternative other than bau. conversely, the positive sign of the coefficient of the variable age denotes that the older the interviewees, the more likely they would choose option bau. this suggests that, on average, women, younger respondents, and respondents with higher income obtain greater utility from the adaptation of viticulture to climate change. once estimated the parameters, the marginal values for each attribute can be inferred from the following relation of regression coefficient, –βn/ βm, where βn is the coefficient of the attribute to be considered and βm represents the coefficient of the attribute in which units one wishes to express the value of the attribute of interest (hensher et al., 2005). these values show the mean of the marginal values of the population, in the units of the variable in which change wants to be expressed – percentage points or argentinian pesos at 2017 price subject to adjustment for inflation. the marginal values for each attribute are illustrated in figure 3. according to the respondents’ perception, for example, in order to obtain an increase of one percentage point in the water availability for other uses, a representative mendocinian citizen would, on average, be willing to consent (at most) an increase of 1.45 percentage points table 3. results of the mixed logit regression analysis.† variable coefficient (standard error) random parameters in utility functions water availability for other uses 0.02062496*** (0.00586975) use of chemical fertilizers –0.01422602*** (0.00289968) use and conservation of biodiversity 0.00767425* (0.00451211) non-random parameters in utility functions annual payment –0.00158077*** (0.00042721) income a –0.50662382** (0.23111555) gender a –0.48969585** (0.24946993) age a 0.02142159*** (0.00694294) derived standard deviations of parameter distributions water availability for other uses 0.06695391 (0.04430034) use of chemical fertilizers 0.620393d-04 (0.02512014) use and conservation of biodiversity 0.00016680 (0.03114923) log likelihood function –798.5422 pseudo-r2 .131664 observation 642 nb: 6% of respondents chose the bau situation (annual payment of 0 pesos) quoting reasons other than lack of value for the adaptation of viticulture to climate change, which could be considered as protests. after removing those observations, the quantitative analysis was performed on a subset of 214 respondents. † estimates were obtained using 1,000 random draws to simulate the sample likelihood. ***significant at 1% level. **significant at 5% level. *significant at 10% level. 107valuation of viticultural adaptation to climate change in vineyards in the use of chemical fertilizers, or a decrease of 2.69 percentage points in the use and conservation of biodiversity, or to pay per household (at most) 13.05 argentinean pesos – 0.74 us dollars – annually during the next 30 years. the confidence intervals for the marginal value of each attribute were calculated using the krinsky and robb procedure (1986) with 3,000 repetitions. likewise, these marginal values can also be useful to elicit the trade-offs, as perceived by mendocinian citizens, for expected changes if none or only some viticultural practices are adapted to climate change. assuming a unitary price elasticity of demand, for example, the increased welfare that a citizen would experience, on average, as a result of an increase from 3% to 25% in the use and conservation of biodiversity is equivalent to the welfare drop he or she would experience after an increase from 80% to 91.85% in the use of chemical fertilizers. these social-welfare changes are inferred from figure 3. figure 3. marginal values for each non-monetary attribute (equivalent to a one percentage point change). values in relative units of attributes with their respective confidence intervals for (a) an increase of one percentage point in the water availability for other uses, (b) a decrease of one percentage point in the use of chemical fertilizers, and (c) an increase of one percentage point in the use and conservation of biodiversity. non-monetary attributes are expressed as percentage points on the left-hand vertical axis, while the monetary attribute is expressed in argentinean pesos (at 2017 prices subject to adjustment for inflation) on the right-hand vertical axis. (a) an increase in the water availability for other uses of one percentage point– e.g., from 41% to 42% – offsets (1) an increase, on average, in the use of chemical fertilizers of 1.45 (0.55, 3.02 ) percentage points, the figures in parentheses denoting the limits of the 95% ci; (2) a decrease, on average, in the use and conservation of biodiversity of 2.69 (1.05, 10.05) percentage points, the figures in parentheses denoting the limits of the 90% ci; and (3) the equivalent, in terms of welfare, of an annual expenditure per household, on average, of 13.05 (6.24, 27.28) argentinean pesos [0.74 (0.35, 1.55) us dollars] over the next 30 years, the figures in parentheses denoting the limits of the 95% ci. (b) a decrease in the use of chemical fertilizers of one percentage point – e.g., from 95% to 94% – offsets (1) a decrease, on average, in the water availability for other uses of 0.68 (0.33, 1.80 ) percentage points, the figures in parentheses denoting the limits of the 95% ci; (2) a decrease, on average, in the use and conservation of biodiversity of 1.85 (0.55, 9.07) percentage points, the figures in parentheses denoting the limits of the 90% ci; and (3) the equivalent, in terms of welfare, of an annual expenditure per household, on average, of 9.00 (4.22, 22.09) argentinean pesos [0.51 (0.24, 1.26) us dollars] over the next 30 years, the figures in parentheses denoting the limits of the 95% ci. (c) an increase in the use and conservation of biodiversity of one percentage point – e.g., from 3% to 4% – offsets (1) a decrease, on average, in the water availability for other uses of 0.37 (0.03, 0.73) percentage points, the figures in parentheses denoting the limits of the 90% ci; (2) an increase, on average, in the use of chemical fertilizers of 0.54 (0.03, 1.30) percentage points, the figures in parentheses denoting the limits of the 90% ci; and (3) the equivalent, in terms of welfare, of an annual expenditure per household, on average, of 4.85 (0.39, 8.27) argentinean pesos [0.28 (0.02, 0.47) us dollars] over the next 30 years, figures in parentheses denoting the limits of the 90% ci. ** 95% confidence interval. * 90% confidence interval. 108 verónica farreras, laura abraham 5. discussion and conclusions this research intends to contribute to a deeper and further discussion on the way of managing the relation between agriculture and the conservation of the environment and natural resources. on a climate change scenario, the monetary value of sustainable agricultural management practices in mendocinian vineyards was estimated. the valuation exercise results show that mendocinian citizens are willing to pay for the adaptation of viticultural management practices to climate change. this result is in line with the findings of riera et al. (2007), a study that elicited the trade-off values for three climatesensitive attributes – plant cover, fire risk, and soil erosion – of mediterranean shrubland. they found that catalan citizens were willing to finance programs that might mitigate climate-change impacts on shrublands. arora et al. (2017) also reached similar findings for rice cultivation in india. using the discrete choice experiment, they found that farmers were willing to pay a significant premium for reducing the abiotic stresses, such as droughts and flood, induced by climate change. similar conclusions from climate change adaptation in cultivated areas were found by waldman and richardson (2018). they looked into the malian farmers’ valuation of hybrid-perennial sorghum technologies that might facilitate adaptation to climate change. although not specifically dealing with climate change adaptation, sellersrubio and nicolau gonzalbez (2016) and lanfranchi et al. (2019) found that individuals were willing to pay for implementation of sustainable wine production methods. using a contingent valuation method, sellers-rubio and nicolau gonzalbez (2016) looked at the non-market value of these production methods in spain, while lanfranchi et al. (2019) estimated the willingness to pay of sicilian consumers for a sustainable wine. our findings also suggest that, on average, women, younger respondents, and respondents with higher income are more prone to choose an alternative other than bau. that is, they are more likely to be willing to pay for the viticultural adaptation to climate change, a result consistent with welfare economic theory and expectations. these findings have also been reported in several other studies which show consumer’s general interest towards environmental-friendly wine production methods (see, among others, sellers-rubio and nicolau gonzalbez, 2016; pomarici et al., 2018; lanfranchi et al., 2019). as well, our research provides results not only in monetary units, but also in the units of the other attributes considered (figure 3). these trade-off values provide useful information for both private sector and policy makers. for instance, those involved in making decisions may wish to set resource allocation destined to finance viticultural practices prioritizing the balance among water availability for other uses, use of chemical fertilizers, and use and conservation of biodiversity, as expressed by citizens. moreover, these social values expressed in monetary units can be useful for planners and regional managements to evaluate whether the benefits of a given policy outweigh its costs. likewise, the results suggest that citizens are prepared to invest on sustainable agricultural management on private land, a result also found in yao and kaval (2010). thus, the estimated values of the environmental impact reduction of viticulture may be useful not only for future government policy decision making, but also to be incorporated in the market goods price. for instance, the estimated value of an additional percentage point in the water availability for other uses could indicate the price premium that a citizen would, on average, be willing to pay (at most) for each wine glass produced with watersaving technologies. in this context indeed, an analysis of young consumers’ preferences for wines labelled with a water saving claim was conducted by pomarici et al. (2018). this study revealed that on average consumers are willing to pay an extra of half a dollar or more for water saving labelled wines. others studies have also shown that consumers are willing to pay a premium price for wines with sustainable production characteristics (barreiro-hurlé et al., 2008; mueller and remaud, 2010; schäufele and hamm, 2017; among others). water availability for other uses was found to be the most concerning attribute for the population considering the expected changes under the “do-nothing” situation. this finding is consistent with the answers to an explicit question on the relative significance of the attributes. as show in table 4, water availability for other uses was the attribute that three quarters of all respondents had in mind when deciding on the contingent choices. this information denotes a certain consistency with the results followed from marginal rate of substitution (figure 3). even though there was not an explicit question that discloses the reason of this preference, the province of mendoza has been on hydrological emergency for the last seven years. hydrological emergency is an issue frequently mentioned on the news and the population is constantly being asked to make a rational and careful use of water. this result is also in line with the findings of farreras and lauro (2016), a study that dealt with the valuation of possible environmental waste landfills impacts in mendoza. they used a discrete choice experiment to value different attributes – water quality, air quality, and vector-borne diseases –. water quality was defined as the resource aptitude to be used in the fol109valuation of viticultural adaptation to climate change in vineyards lowing possible uses: (i) domestic, (ii) agricultural, (iii) industrial, and (iv) recreational. an attribute in common between their paper and ours is that related to water availability, which was found to be the most valuable attribute. concerning biodiversity valuation, there is some disconcert reflected in the relatively modest statistical significance of this attribute. this seems to reflect a lack of a priori well-formed preferences of some respondents. whereas some people were sure about the implications of changes in biodiversity to themselves, other respondents were not so sure. a similar conclusion has been reached by lienhoop and macmillan (2007), szabó (2011), among others, who have reported the prevalence of unformed or ill-formed preferences for non-marketed public goods, such as biodiversity which is often complex and unfamiliar. in short, this study displays that the welfare of mendocinian citizens is expected to drop in line with the environmental impacts predicted to occur as a result of the non-adaptive viticultural management practices to climate change. the most socially concerning topic is water availability for other uses, followed by use of chemical fertilizers and then by use and conservation of biodiversity. from a social point of view, this result implies that agricultural practices that are more focused on sustainable water management are the ones that increase welfare to citizens the most. this information can be useful for policy makers, planners, regional managers, and ecologists in order to take social preferences into account in setting resource allocation priorities intended to support viticulture. finally, this study approach provides a framework that could guide similar assessments in other regions. acknowledgments this work was supported by the secretaría de investigación, internacionales y posgrado, universidad nacional de cuyo (grant numbers 01/a039). we would like to thank the anonymous reviewers for their valuable comments, and emilce vaccarino for her help in drafting the map. references arora, a., bansal, s., ward, p.s., 2018. do farmers value rice varieties tolerant to droughts and floods? 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(print) | doi: 10.36253/wep-9878 wine economics and policy citation: elói jorge, ernesto lopezvaleiras, maria beatriz gonzalezsanchez (2021) millennial university students’ valuation of traditional wine: evidence from an experimental auction. wine economics and policy 10(1): 133-145. doi: 10.36253/wep-9878 copyright: © 2021 elói jorge, ernesto lopez-valeiras, maria beatriz gonzalez-sanchez. this is an open access, peer-reviewed article published by firenze university press (http://www. fupress.com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information fi les. competing interests: the author(s) declare(s) no confl ict of interest. millennial university students’ valuation of traditional wine: evidence from an experimental auction elói jorge1,*, ernesto lopez-valeiras2, maria beatriz gonzalezsanchez1 1 ecobas, universidade de vigo, rgeaf, facultade de cc económicas e empresariais, 36310 vigo, spain. e-mail: edias@uvigo.es; bgonzale@uvigo.es 2 ecobas, universidade de vigo, rgeaf, departamento de economía financeira e contabilidade, facultade de cc empresariais e turismo, 32004 ourense, spain. e-mail: elvaleiras@uvigo.es *corresponding author. abstract. th is paper analyzes whether the perception of traditional wine brings value to millennials. based on survey data and experimental auctions (165 participants), this study identifi es the main factors aff ecting this consumer groups’ willingness to pay for traditional wine through a tobit model methodology. th e results suggest that millennials are willing to pay a higher price depending on demographic factors such as monthly disposable income, on wine involvement variables such as consumption frequency, and on nourishing and health aspects and product availability at points of sale, both of which are wine purchase decision criteria. th e investigation has signifi cant marketing and policy implications. keywords: traditional wine, millennials, willingness to pay, purchase decision variables, experimental auction. 1. introduction traditional food products have been described as those produced with assured authentic receipt, raw material, and production processes and that have been commercially available for over 50 years [1]. traditional winemaking is oft en linked to a wine produced in limited quantities using autochthonous grape varieties with minimal chemical-physical and technological intervention methods and using techniques of processing and conservation consolidated by time, in opposition to more modern, standardized, commercially oriented and large-scale wine production [2,3].1 although oft en related 1 admittedly, to be consistent with prior literature, the labels “traditional”, “typical” [4], and “terroir” [5] may overlap in some dimensions. “typical” and “terroir”, in particular, are commonly employed in the wine literature when examining the sensory typicality of a wine [4,6]. all these traits point to the distinctive characteristics of a wine, linked to the combination of natural and 134 elói jorge, ernesto lopez-valeiras, maria beatriz gonzalez-sanchez to a remainder category and left out of the mainstream wine groups, the traditional wine concept is attracting increasing interest among consumers from the ‘old world’ and is found in many of the leading wine-producing countries (e.g., france, spain, italy, and portugal) with strong links to regional/local identity. in burgundy, france, this concept is closely related to practices developed by vignerons, including small french artisan producers [7]. in the autonomous region of galicia (spain), decree 174/2019 regulates the production and marketing of traditional wine. in the same line, traditional wine is officially regulated in the autonomous regions of trento and of bolzano (italy) (law n. 238/2016) and portugal (article 3 of the legislative order 38/2008). for consumers in general, the attribute ‘traditional’ is consistently associated with the concept of natural food products [9]. this claim is commonly linked to ‘old-style family-farm food’ production [10], which is capable of better preserving food naturalness [11] and authenticity [12]. however, recent studies focusing on the millennial generation have shown evidence that such consumers do not necessarily link traditional food products with natural food products [13]. this previous evidence raises questions about the importance these consumers place on the specific case of traditional wine and conditions for attracting wine interest. drawing on previous literature on millennials’ attitudes and wine purchasing behaviors (e.g., [14-16]), the aim of this paper is to analyze whether the concept of traditional wine brings value to millennial university students. consumers’ purchase decisions rely on several factors that can potentially influence their choices. specifically, this research examines the influence of individual factors (i.e., demographic characteristics, self-reported wine knowledge and consumption frequency, and wine purchase criteria) on the willingness to pay (wtp) for a wine. in line with this objective, this investigation combines a wine experimental auction along with the selfadministration of a questionnaire. the experimental auction was designed to compare the wtp for a traditional wine with the wtp for three other wines (non-organic wine protected with a designation of origin (hereafter pdo), organic wine with pdo (hereafter, pdo+organic), and organic wine without pdo (hereafter organic)). all four wines had the same basic characteristics, namely, color, region, vintage, and grape variety. the setting used was a convenience sample of 165 university students. the findings suggest that millennial university students are willing to pay a higher price for traditional human factors in a certain territory [4-6]. terroir and typical wines, in contrast to traditional wine, are frequently used to refer wines that also certificated with pdo or pgi [4,7,8]. wine only under certain circumstances. in particular, we found that consumers’ demographic characteristics, self-reported consumption frequency, and wine purchase criteria can act as driving factors influencing wtp for a traditional wine. this evidence highlights the importance of behavioral factors in wine choice behavior. therefore, our investigation has major implications for wine business practitioners when targeting specific marketing audiences. this paper is structured as follows. section two reviews the literature and introduces the theoretical framework. section three describes the research methods (experimental auction and self-administered questionnaire). the fourth and fifth sections introduce and discuss the empirical findings. finally, the last section presents the main conclusions, limitations, and lines of future research. 2. background 2.1 certifications, regulations and market trends in the wine industry the wine sector is regulated by multiple legislations and quality schemes frequently associated with certifications of specific production processes and geographical origin. certification bodies are organizations that ensure compliance and verif y that the standards disclosed through mandatory or voluntary norms are met. in the last decades, the main regulations and certifications have been pushed to respond to the dynamics of the international wine industry market. in this regard, a trade-off arises between the forces that lead to the standardization of productions and those in favor of maintaining the traditions and preserving the ties with the territory and the reflection of its unique characteristics on a specific wine [17]. on the one hand, most wine producers have tried to adapt their wines to the dynamics of the international market by producing more commercial and industrialbased products [18], and by adopting technology-driven winemaking techniques (e.g., micro-oxygenation and mechanical filtration [19], or commercial yeast [20]). “in a world characterized by a significant evolution in wine consumption, pdos have constituted a valid strategy of marketing and competitiveness for producers” ([21], pp. 140). together with pdos, organic certification is another main officially regulated production system that is playing a key role in the current scenario. organic production is a reactive movement looking for ecological alternatives to conventional producing systems, generated by modern consumption patterns [22]. to 135millennial university students’ valuation of traditional wine: evidence from an experimental auction certify their wines as organic, companies not just have to respect the ecological procedures of organic farming (e.g., avoid synthetic chemicals) but also regard the established rules on the use of certain products or practices during the oenological process [23]. the responses to attend to market demands and international dynamics moved the production of most wines away from the features of traditional wines [24]. on the other hand, relatively few wine producers, usually small-scale peasants from “old world” wine regions, struggled to maintain the uniqueness and traditional way of producing wine in their area. the concept of ‘traditional wines’ is something that goes beyond pdo or organic certifications. these wines are known since the old days and, although they are subjected to specific regulations in some regions (e.g., galicia-spain), they are rarely attached to an official certification. 2.2 traditional food products traditional food products were defined by guerrero et al. [12], as ‘a product frequently consumed or associated with specific celebrations and/or seasons, normally transmitted from one generation to another, made accurately in a specific way according to the gastronomic heritage, distinguished and known because of its sensory properties and associated with a certain local, region or country’ (pp. 348). traditional food products are normally associated with small-scale peasant production systems oriented towards artisanal and old-fashioned elaboration methods ref lecting the soil, the environment, and the culture of one region [18,25] as opposed to industrialized manufacturing [11]. in the specific case of wine, this follows the same principles of the abovementioned products in relation to its production process, i.e., small-scale, made exclusively in the rural properties of the peasant farmers, ancestral know-how linked to common cultural roots, the environmental and social characteristics of a certain territory [26,27]. in addition, it is also characterized by the employment of minimal mechanical operations and limited chemical intervention during the winemaking process [2,3]. as a result of its production process, one of the most valued aspects of traditional wines is its ability to better express the terroir [5,6], being its commercialization carried out mainly in a cellar door concept, directly with the final consumer, at the head of the rural property where it was produced [28]. in contrast to pdo and organic products, traditional wine is not associated with an official certification scheme. the previous literature on consumer behavior suggests that the acceptance of traditional food products could be more linked with middle-aged consumers than with younger generations [29]. nevertheless, millennials’ attitudes and purchasing behaviors in relation to traditional wine remains underexplored. 2.3 millennial wine consumption habits the concept ‘millennials’ applies to people who reached adulthood around the beginning of the 21st century. accurate delimitation varies from one source to another, but the prevailing threshold encompasses those born between 1982 and 2000 [30]. the use of information and technology in almost every aspect of their lives is a distinctive feature of this consumer segment [31]. their behavior might dictate present and future consumption tendencies [30]. therefore, the understanding of millennial behavior has become an important issue not only for academics but also for managers. the millennial generation shows specific features relevant for the analysis of food purchasing habits. these differences place this generation apart from others and establish the segment as one of the most attractive for food businesses across the globe [32]. millennials have higher acceptance of natural product claims [33] and show a high knowledge level regarding the value and quality of products [31]. moreover, they are highly aware of their eating habits [33] and their health implications [15], and have a stronger interest in sustainability aspects [34]. millennials are more likely to come across an innovative food product on the market [35]. they have more interest in a greater diversity of flavors and/or textures and usually show interest in non-traditional foods [29]. millennials tend to be early adopters of new food products [35]. this consumer group tends to use price as a quality indicator [36]. regarding habits related to wine, frequent wine consumers appear to be declining among millennials [34]. this can be associated with the evidence that suggests that millennials are willing to pay less for a bottle of wine than older generations [31]. by contrast, the number of occasional consumers is increasing [16]. millennials drink wine in more varied contexts than previous generations, with wine being one of the favorite drinks of millennials in social settings [14,31]. in addition to traditional places such as home and restaurants, consumption habits are shifting to other places such as bars and outdoor spaces [37,38]. wine is primarily consumed in groups and takes its roots in the millennial generation’s lifestyle [16]. consumer’s price behavior has been linked with price elasticity [36]. on the one hand, price is more inelastic for younger consumers than for older consumers, i.e., 136 elói jorge, ernesto lopez-valeiras, maria beatriz gonzalez-sanchez one may expect that millennials would be less responsive to price modifications than older consumers [39]. on the other hand, previous research suggests that the price elasticity of wine for the lower end of the market is higher than for the middle and upper ranges [40-42]. therefore, the wtp for wine varies slightly depending on the age of the consumer and the wine price point. surprisingly, limited evidence can be found in the literature about millennials’ wtp for wines in different price brackets. previous studies of millennials confirm that wine labels have a relevant influence when choosing a bottle of wine [43], as they facilitate risk reduction in decisionmaking [34]. furthermore, through the label, the sustainable attributes of the wine are communicated, which play a relevant role in the millennial wine purchase decision-making process [31,34]. furthermore, wine business research suggests that the importance attached to price by this consumer group is directly correlated, among others, to their country of origin [37], the wine production system [34] or wine type [44]. 3. methodology 3.1 sampling and data collection two different methods were conducted: a quantitative research survey and an experimental auction. the survey was distributed among millennial students from a public university in spain. the first part of the questionnaire was answered before the experiment, and the second was answered during the experiment [45]. we followed the methodology of similar experimental studies (e.g., [34]) that used convenience sampling of potential respondents. the chosen sample for the present study is supported by allen and spialeks’ [30] definition of millennials, comprising individuals born between 1982 and 2000. along with statistical demographic data, among other information, participants were asked to indicate the importance of a number of established product characteristics when buying a wine. additionally, an experimental auction was conducted to analyze the willingness to pay for wine (e.g., [46]). this procedure is developed in depth below in subsection 3.2. to address the issue of common method bias and following conway and lance’s [47] recommendations, some procedures were employed before collecting the data. two pretests with three academics with experience in the wine field ensured anonymity and confidentiality of the respondents and presented all information and data to facilitate the completion of the survey [48]. all the information-gathering work was performed between november 2017 and march 2018. the sample for this study consisted of 165 respondents. the age of the respondents at the time of the survey ranged between 18 and 35 years2 (see table 1 for demographics). the use of university students is common in recent experimental auctions involving wine (e.g., [16,46]). descriptive statistics (table 1) revealed that the majority of the individuals in the sample were aged between 18 and 21 years old (49.7%), mainly women (55.8%). the average monthly income ranged between 2 the age 18 is the legal age for drinking and purchasing alcohol in spain. table 1. descriptive statistics of the participants in the sample (n = 165). variable name variable coding frequency percentage gender male 73 44.2 female 92 55.8 age 18-21 82 49.7 22-25 62 37.6 26-35 21 12.7 monthly disposable income (€) =< 1000 31 18.8 1001-2000 60 36.4 2001-3000 38 23.0 3001-4000 20 12.1 >4000 10 6.1 not declared 6 3.6 wine consumption frequency never 7 4.2 several times a year 51 30.9 less than once per month 18 10.9 1–3 times per month 36 21.8 once a week 33 20.1 more than a once a week 18 10.9 daily 2 1.2 self-reported knowledge of wine products absolutely no knowledge 40 24.4 some knowledge 106 64.6 good knowledge 17 10.4 not declared 2 0.6 consumption by wine typea red 102 61.8 white 102 61.8 rosé 28 16.9 sweet 19 11.5 sparkling 29 17.5 a participants could choose more than one option. 137millennial university students’ valuation of traditional wine: evidence from an experimental auction 1,001.00 and 2,000.00 euros (36.4%). over 50% of the participants reported drinking wine more than 3 times a month. furthermore, 64.6% of the individuals considered themselves as having some knowledge about wine. it also should be noted that red and white wine were the most frequent types of wine consumed by the participants. 3.2 task and procedure drawing on previous literature, we identifi ed ten items infl uencing the wine purchase decision. participants were required to indicate the importance of each item (see table 2) when buying a wine. th eir choices were measured by using a likert scale, including intermediate points, where ‘1’ denoted ‘‘not important at all’’ and ‘5’ ‘‘extremely important’’, prompted by the question “indicate the importance for you of each of the following characteristics when buying a wine”. th ere is a common understanding that likert scales are the most widely used unidimensional scaling method for attitude and opinion measures [49].3 th e scale reliability was assessed using cronbach’s alpha. in an untabulated test, we obtained a score of 0.6, which according to previous studies [53,54], could be considered an acceptable value. in this regard, a lower cronbach’s alpha could be considered suffi cient to indicate consistency for scales with a reduced number of items [55] or in the case of a new scale [56]. 3 despite the number of possible items on a likert scale, fi ve and seven response categories are considered signifi cantly more accurate than other category options [50]. notwithstanding potential limitations, a 5-point likert scale was found suitable for the present study proposal. th is number of items has been used in recent similar wine studies [15,19,44]. it has been suggested that this number can reduce respondent’s frustration [51],and is also related to an increased response rate [52]. to assess participants’ wtp for traditional wine, an experimental auction was conducted. th e experimental auction included four wines (see fig. 1)4, two organic and two conventional: (1) wine 1 (pdo): with protected designation of origin and non-organic (i.e. conventional); (2) wine 2 (organic): produced according to european commission (ec) regulation no. 203/2012; (3) wine 3 (pdo+organic): with a protected designation of origin and produced according to european commission (ec) regulation no. 203/2012; and (4) wine 4 (traditional): not a certifi ed wine. participants were divided into two groups5, with participants submitting their set of bids according to the following scheme: – group 1 sees the label fi rst ® then bids ® then tastes the four wines® and then bids again. – group 2 tastes fi rst ® then bids ® then sees the label ® and then bids again. in both groups, wtp was measured through the overall average wtp of the participant for each of the four wines considered. th e experiment consisted of a pen and paper auction that included the following steps [46]. first, with participants allocated randomly and separated from each other, 4 wines were provided by three wineries. all the wines chosen were collected directly from the pallets stored in the wineries’ warehouses. 5 group 1 and group 2 comprised eighty-fi ve and eighty individuals, respectively. table 2. signifi cant factors infl uencing wine purchase (n = 165). variable description source references mean std. dev. brand wine brand or producer [57] 3.267 1.079 taste expected taste [57] 4.242 0.748 health nourishing and health aspects [58] 3.327 0.040 labelandbottle visual impact of the bottle / label [59] 2.848 1.004 price price of the product [60] 3.897 0.932 availability product availability at points of sale [61] 3.445 1.078 grape grape variety [38] 3.152 1.142 pdo protected designation of origin [21] 3.509 1.007 regionallocal local or regional product [7] 3.600 1.049 organic organic certifi cation [23] 3.109 1.117 figure 1. wine information used in the experimental auctions. 138 elói jorge, ernesto lopez-valeiras, maria beatriz gonzalez-sanchez they received an id number. then, participants were placed at a visually isolated table with four wine samples with numbered codes in a different random order specific to each subject. the sessions started by providing written and verbal instructions, as well as a thorough briefing about the production process (see table 3) of each wine in the auction. the participants were subsequently informed that the four wines had the same general characteristics: wine region,6 varietal grapes (mencía) and type (young red). following vecchio’s [16] experiment, no additional information on brand, sensory characteristics and, to avoid any influences on bid values, no reference price was given to respondents. in line with other studies with similar characteristics (e.g., [46]), the information on alcohol content was not provided to the participants. this is because once the auctioned wine samples have all the same alcohol content, this information has no influence on the results. attendants were instructed to eat a piece of cracker and rinse their mouth with water to clear their palate between tastings. the methodology employed is based on the sealed bid method (first-price). this methodology has been used in previous wine studies (e.g., [46]) and has been proven to be quite efficient for eliciting wtp, being one of the easiest for participants to understand; it can also increase equilibrium bids [64]. subjects were asked to submit the maximum amount they were willing to pay for a 750-ml bottle for each of the four wine samples presented to them. the bid range was from a minimum bid of € 0.00 to a maximum of €10.00. following schmit et al. [46] and vecchio [16], each participant received monetary compensation (€10.00) for completing the experiment. this monetary compensation covers the costs associated with their bids as well as the time 6 all the wines in the experiment were produced in ribeiro wine region, (province of ourense, galicia), where red wines assume a relevant presence [62]. ribeiro is one of the oldest denominations of origin (pdo) in spain (1932). it is also one of the most outstanding in terms of sales and knowledge awareness among spanish consumers [63]. individuals spent in the experimental auction [65]. participants were informed that only one of the wines auctioned would be binding to the end of the experiment. the highest bidder should buy the wine bottle, so it was in their best interest to bid their maximum wtp for each of the wines. the experiment involved a total of nine sessions. in group 1, the glasses were labeled with the information of each wine. participants submitted their bids for each of the four wine samples. later, they were allowed to assess the overall likeability and the attributes of bitterness, sweetness, and fruitiness (see appendix1). this assessment was followed by a second set of bids [46]. in group 2, participants were invited to perform a blind tasting of each of the four wines. this sensory assessment was followed by a first set of bids. afterwards, the conductors of the experiment uncovered the label for each wine. at that point, participants presented the second set of bids. 3.3 data analysis tobit models, also commonly designated censored regression models, are widely used in academic research. such models are also adapted to the study of consumers’ response to food labels (e.g., [16,46]). given the nature of the data, the tobit model is recognized as one of the most appropriate methods to model the factors affecting bidding behavior [66]. 7 in particular, the methods employed ensured that the data were left-censored at 0, since wtp cannot be negative. according to tobin [66], the tobit model, compared with other statistical techniques, ensures more consistent estimates. furthermore, it facilitates the inclusion of additional information. statistical analysis was performed using r 3.6.1 gui 1.70 statistical package rcmdr version 2.6-0. the censreg, 7 in this research the dependent variable is a continuous variable in a finite interval. table 3. the wine production process as explained to the participants. wine 1 wine 2 wine 3 wine 4 pdo organic pdo+organic traditional production system conventional organic organic conventional production process this wine has been produced following pdo regulations (e.g., being officially approved by the do) this wine has been produced following european union rules for organic production (e.g., the avoidance of any chemical interventions) this wine has been produced following pdo regulations and european union rules for organic production this wine has been produced in small-scale, manufactured at the rural property of peasant farmers employing traditional practices; it has no certifications 139millennial university students’ valuation of traditional wine: evidence from an experimental auction summarytools, and maxlik packages were used to compute censored regression analysis and other statistical analyses [67]. 4. results 4.1 average willingness to pay bids for each of the four wines the main aim of this study is to analyze whether the concept of traditional wine brings value to millennial university students. for that purpose, we examined whether information revelation affected participants’ wtp. using data from group 1, this assessment adopted a one-way analysis of variance (anova) along with the tukey test [68]. the preliminary assessment confirmed the influence of information cues. the wtp reached an average of €2.13 for the traditional wine (table 4). additionally, the average bid for this wine was lower than for other wines. table 5 shows the results for group 2. after the blind test, the average bid for traditional wine was €3.67. next, the information about the wines was presented to the participants. the following average bid for this wine decreased by €1.21. this represents a reduction of 32.97% compared to the average bid obtained in the blind tasting. by contrast, the average wtp bids for the remaining wines increased when information was disclosed after the sensory evaluation. many experimental auction studies conducted on agricultural and processed food products have highlighted the importance of introducing sensory cues when evaluating consumers’ wtp (e.g., [69]). therefore, in line with those works, a complementary analysis was performed. the new analysis was designed to assess the participants’ overall likeability towards intrinsic wine quality (5-point likert scale where 1 denoted ‘don’t like it at all’ and 5 denoted ‘like it a lot’). the findings presented in table 6 suggest that sensory responses to traditional wine are stronger when sensory evaluation precedes the disclosure of information. 4.2 variables influencing the purchase of traditional wine the participants’ demographics, self-reported wine knowledge, consumption frequency, and purchase decision criteria were analyzed as variables potentially influencing the purchase of traditional wine. this analysis was performed with data from group 1 because the steps followed by this group were closer to a real market scenario, although we acknowledge the limitation that it does not consider the influence of the ‘context’ and the ‘situation’ of purchase. table 7 provides a summary of the results. the relevant role of some sociodemographic variables is suggested here. a significant positive relationship was identified between monthly disposable income and the wtp for traditional wine, as expected (e.g., [70]). the frequency of wine consumption was also found to have a significant positive relationship, confirming previous findings associating frequency of consumption with a high acceptance of certain products (e.g., [57,71]). the findings also suggested a meaningful effect of the variables in the wine purchase decision. here, the t-value confirmed the statistical significance of the variable health. the results also suggest that the availability of the product has a negative relationship with wtp. to further explore the participants’ behavior toward the traditional wine, we applied ordinary least squares (ols) regression to understand the factors underlying table 4. average willingness to pay (€)* bids displaying information first (group 1). wine information first pdo 3.76 organic 3.93 pdo+organic 5.18 traditional 2.13 table 5. average willingness to pay (€)* bids displaying sensory evaluation first (group 2). wine blind taste (a) information after blind taste (b) difference (b-a) pdo 2.84 3.04 +0.20 organic 2.64 2.75 +0.11 pdo+organic 2.79 3.71 +0.92 traditional 3.67 2.46 -1.21 *significant at: p < 0.01 (one-way anova). table 6. average overall likeability. information first (group 1) sensorial first (group 2) difference (group 2 group 1) pdo 3.40 2.88 -0.52 organic 2.91 2.66 -0.25 pdo+organic 3.02 2.84 -0.18 traditional 3.14 3.48 +0.34 140 elói jorge, ernesto lopez-valeiras, maria beatriz gonzalez-sanchez the difference in prices assigned to these products. interestingly, as shown in table 8, income was statistically significant for traditional-pdo and traditional-organic but not for traditional-pdo+organic. the variable price only impacted traditional-euro leaf. in particular, the estimated coefficients for income show that participants with higher income tended to bid higher in the significant relationships. 5. discussion wine is one of the most differentiated products in the food market [72]. the aim of this paper is to analyze whether the perception of traditional wine adds value for millennial university students. new emerging consumer groups are increasingly concerned about differentiated food products [73]. based on the combination of dynamics in food and beverage markets [74], consumers’ preferences, and the need to differentiate themselves from their competition [70], managers have explored new production techniques and developed innovative products, and such changes have impacted traditional attributes and uniqueness [12,29]. despite market dynamics and innovation changes, it appears that a substantial untapped market exists for traditional wines. the tobit model indicated that variables affecting wtp for traditional wine vary depending on monthly disposable income, frequency of wine consumption, health-related issues, and availability at sales points. although ‘traditional’ is an attribute excluded from what millennial university students consider to be a ‘natural product’ [13], surprisingly, the results show that fulfilling certain conditions can contribute to increasing preferences towards such products with respect to wine. table 7. tobit regression results on bids for the traditional wine auctioned in group 1 (information disclosed first)a. variable pdo organic pdo+ organic traditional gender -0.044 0.100 0.899 0.517 (0.556) (0.515) (0.623) (0.472) income -0.187 -0.750 0.187 2.001** (0.216) (0.202) (0.244) (0.182) product knowledge -1.432 -1.302 -0.904 -1.325 (0.525) (0.487) (0.589) (0.445) consume frequency 0.985 0.997 0.759 1.826* (0.176) (0.164) (0.198) (0.148) brand 0.014 0.185 0.040 -0.146 (0.249) (0.230) (0.279) (0.210) taste -0.462 0.100 0.388 0.163 (0.312) (0.289) (0.349) (0.264) health 1.381 1.924* 1.792* 2.207** (0.269) (0.249) (0.302) (0.232) labelandbottle -0.170 -0.628 -0.692 -0.419 (0.240) (0.222) (0.269) (0.205) price -0.364 -2.249** -1.349 -0.248 (0.275) (0.255) (0.308) (0.233) availability -1.639 -0.663 -2.089** -1.950* (0.224) (0.208) (0.252) (0.192) grape 0.774 1.749* 0.835 0.647 (0.218) (0.202) (0.244) (0.186) pdo -0.156 -0.160 0.051 -0.083 (0.295) (0.274) (0.331) (0.248) regionallocal 0.060 -0.394 -0.445 -0.073 (0.262) (0.243) (0.294) (0.222) organic -0.321 -0.671 0.510 -0.738 (0.276) (0.256) (0.309) (0.234) constant 2.584 2.768 2.005 0.599 (2.436) (2.258) (2.731) (2.042) log-likelihood -163.254 -157.455 -172.260 -141.264 n 85 85 85 85 a standard error is reported in parentheses. significance codes: ‘*’, ‘**’, and ‘***’ denote significance at the 10%, 5%, and 1% levels, respectively. table 8. ols regression results for the price difference in bids for the traditional wine auctioned in group 1 (information disclosed first)a. variable pdo organic pdo+organic gender 0.577 0.389 -0.618 income 2.246** 2.797*** 1.531 product knowledge 0.472 0.187 -0.034 consume frequency 0.585 0.647 0.650 brand -0.316 -0.487 -0.309 taste 0.805 0.118 -0.255 health 0.159 -0.325 -0.531 labelandbottle -0.050 0.437 0.603 price 0.234 2.288** 1.426 availability 0.156 -1.064 0.882 grape -0.235 -1.255 -0.375 pdo 0.293 0.271 0.151 regionallocal -0.392 -0.126 0.254 organic -0.208 0.156 -1.132 constant -2.497 -2.410 -1.814 r2 0.138 0.196 0.192 n 85 85 85 a standard error is reported in parentheses. significance codes: ‘*’, ‘**’, and ‘***’ denote significance at the 10%, 5%, and 1% levels, respectively. 141millennial university students’ valuation of traditional wine: evidence from an experimental auction the driving factors of wine purchase create a unique level playing field for traditional wines and a distinctive market niche far from large-scale, streamlined industrial wine production. first, the health-enhancing aspects of wine – a niche closely associated with organic products – are a driver of product differentiation and new marketing channels. the previous literature has acknowledged that the expected enhanced health benefits derived from wine consumption are also related to the wtp (for example, those employing organic production methods [43] that do not contain certain specific additives, such as sulfites [75]). thus, these factors lead to the assumption that the health-enhancing aspects of traditional wines may be related to their less-processed nature and the avoidance of chemical interventions during the winemaking process [2,3], which lead consumers to be willing to pay more for such products.8 second, smaller availability at the point of sale may act as a promoter of family traditional small-scale production and as a driver of wine tourism development. recent empirical investigations suggest that limited availability of a product may be seen as a barrier affecting consumers’ purchase decisions [61]. in some cases, limited availability can also relate to a niche market [77]. despite the limited evidence in the previous literature of millennials’ wtp for wines in different price ranges, some conclusions can be mentioned in this regard from our findings. on the one hand, according to previous research, the price elasticity of traditional wine, often related to a remainder category, may have the equivalent behavior as basic priced wines, consistent with high price elasticity (e.g., [36,41,42]). however, on the other hand, a different scenario could be possible. the wtp for traditional wine is related to its smaller availability at the point of sale, which can lead to the assumption that traditional wine could follow the same assessment of premium wines, meaning that they are more inelastic. additionally, the more frequently the individual consumes wine, the higher the wtp for traditional wine. in this regard, previous studies (e.g., [78]) suggest that participants with a higher frequency of wine consumption are less price sensitive, in both onand offpremise wine sale outlets. furthermore, considering the common features shared with more differentiated products, significant substitution effects may not be expected for traditional wine. although the elasticity and substitutability of traditional wines in a millennial setting are very interesting discussion issues, caution must be applied to previous discussions as this is not our study focus. there is abundant room for further progress on 8 in this regard, conflicts of interest in research related to the health benefits of wine should be acknowledged (e.g., [58,76]). these issues. studies specifically oriented and drawing on specific theories (e.g., auction theory [79]) could extend our knowledge about elasticity and substitutability at different price ranges in a millennial context. finally, positive externalities can arise from the fact that traditional wine purchases are often related to a ‘cellar door’ experience, which is habitually linked to the oldest consumer segment [70] and per se represents an authentic experience of place. such an experience creates a close relationship with the seller, facilitating consumer loyalty and contributing to increased sales in the long term and preventing consumers’ perception of traditional wines as a low-quality wine class. this is confirmed by famularo et al.’s [80] assumptions that a greater understanding of a wine’s region results from consumers’ knowledge and involvement with wine products, which together contribute to their decision-making process. 6. conclusions in view of the above considerations, there seems to be an alternative path for small traditional wine producers. such wine producers are completely different from more technology-oriented producers. these two realities could, and should, coexist in the market landscape for mutual benefit. nevertheless, traditional products, when compared to other niche market products, suffer from a lack of decoded information and clear labeling. the presence on the label of a protected designation of origin reference [43,57] or organic certification [43] has proven to be a quality indicator. thus, our findings confirm previous studies (e.g., [8,59]) on the use of information cues as an important focus for assisting consumers in decision-making related to the quality of the product. such information is required given the impossibility of tasting the wine before purchase. therefore, wine producers should provide detailed and valuable cues to market traditional wine. furthermore, the sustainable aspects of traditional wine, namely, aspects related to the practices employed for its production, the promotion of the cultural and artisanal heritage of its region of origin, and economic profitability for many small producers, should be enhanced. the present study has limitations, which offer ample opportunities for future research. first, although the research model provided some novel insights into the evaluation of traditional wine in the millennial context, data collection involved only millennial students from a public university in spain. second, the geographical area in which the auctions were performed has a long winemaking tradition, and wine is present in daily life. 142 elói jorge, ernesto lopez-valeiras, maria beatriz gonzalez-sanchez the traditional attribute may perform differently in areas where traditional is associated with greater exclusivity and high standing. therefore, future research extending this analysis to more diverse samples and other geographical locations is recommended. studies in diverse cultural settings may confirm (or not) our findings. third, as the minimum bid of 0.00€, it could not be determined whether a person would have a negative bid (that is, actually pay to avoid drinking the wine). fourth, the limitation of using a single product in the analysis should also be considered. fifth, the research model does not consider the influence of the ‘context’ and the ‘situation’ of purchase. for that reason, generalization of the results to real market transactions should proceed with caution. finally, the analysis was carried out using entry-level wines; thus, extrapolation of the results related to price elasticity and substitutability for the lower end of the market to the middle and upper ranges may not be possible. future research could extend the analysis by integrating different price points (basic, premium, super premium, 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[80] famularo, b., bruwer, j., li, e., 2010. region of origin as choice factor: wine knowledge and wine tourism involvement influence. int. j. wine bus. res.. 22 (4), 362-385. https://doi.org/ 10.1108/17511061011092410. wine economics and policy 9(2): 3-21, 2020 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/web-8189 wine economics and policy citation: azzurra annunziata, lara agnoli, riccardo vecchio, steve charters, angela mariani (2020) the influence of alcohol warning labels on consumers’ choices of wine and beer. wine economics and policy 9(2): 3-21. doi: 10.36253/web-8189 copyright: © 2020 azzurra annunziata, lara agnoli, riccardo vecchio, steve charters, angela mariani. this is an open access, peer-reviewed article published by firenze university press (http://www.fupress.com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information files. competing interests: the author(s) declare(s) no conflict of interest. the influence of alcohol warning labels on consumers’ choices of wine and beer azzurra annunziata1,*, lara agnoli2, riccardo vecchio3, steve charters4, angela mariani5 1 university of naples parthenope, department of economics and legal studies, via amm. f. acton, 38 80133 napoli, italy, email: azzurra.annunziata@uniparthenope.it 2 burgundy school of business, université bourgogne franche-comté, dijon, france, email: lara.agnoli@bsb-education.com 3 university of naples federico ii, department of agricultural sciences, napoli, italy, email: riccardo.vecchio@unina.it 4 burgundy school of business université bourgogne franche-comté, dijon, france, email: steve.charters@bsb-education.com 5 university of naples parthenope, department of economics and legal studies, napoli, italy, email: mariani@uniparthenope.it *corresponding author abstract. this study aims to analyse the influence of alternative formats of health warnings on french and italian millennial consumers’ choices of beer and wine. two discrete choice experiments were built for wine and beer and two latent class choice models were applied in order to verify the existence of different consumer profiles. results show that young consumers’ choices for wine and beer are influenced by framing, design and visibility of warnings. in both countries, the acceptance of warnings is higher for beer than for wine and in both cases consumers show higher utility for a logo on the front label: on the neck with a neutral message in the case of beer; on the front, without a message for wine. latent class choice models highlight the existence of different consumers’ groups with different levels of warning influencing their choices. in order to apply policies conducting to health benefits, our results suggest the need to focus on young individuals to communicate the risks of alcohol abuse through targeted messages and, more generally, to make them aware of the potential negative effects of excessive consumption of both wine and beer. keywords: alcohol warning labels, wine, beer, discrete choice experiment, latent class. 1. introduction considering that the harmful use of alcohol is the third leading cause of mortality and morbidity of population globally (who, 2018), many public health and consumer associations are urging the implementation of mandatory health warning labels on alcoholic beverages. several studies have highlighted that a large share of drinkers worldwide have an inac4 azzurra annunziata, lara agnoli, riccardo vecchio, steve charters, angela mariani curate knowledge of the potential risks associated with alcohol consumption (stockwell et al., 2016). the world health organization suggests that the presence of warning labels on alcohol containers could be considered an important first step in raising awareness and it could have a longer-term utility in helping to establish a social understanding of the harmful use of alcohol (who europe, 2017; eurocare, 2016). indeed, labelling information is widely recognized as a means to constantly deliver a clear message to consumers at the point of purchase, or at the time of use, by promoting awareness, comprehension, and subsequent behavioural changes in line with the message content (jarvis and pettigrew, 2013). however, alcohol warning labels (awl) are currently used in 31 countries. they are often limited to the dangers of drinking when pregnant or drinking and driving, but the potential harm of excessive alcohol consumption could be extended to include other health conditions (who, 2010). although europe is the region with the highest per capita consumption of alcoholic beverages in the world, warning labels are still not required in the majority of member states, and there are significant differences in national legislation among the countries that have introduced mandatory warnings (who europe, 2017). much research has shown that support for health warnings on alcoholic beverages among consumers is high (annunziata et al., 2019; annunziata et al., 2016; blackwell et al., 2018; thomson et al., 2012; greenfield et al., 2007), while other scholars have questioned the efficacy of alcohol warning labels in influencing drinking behaviour and concluded that evidence of their influence on changing behaviour is limited (e.g. brennan et al., 2016; coomber et al., 2015; 2018). instead of analysing the effectiveness of awl in reducing abusive consumption behaviours, this paper aims to analyse the influence of alternative formats of awl on millennial consumers’ choices of alcoholic beverages (wine and beer) by extending the results of a previous research carried out in italy and france (annunziata et al., 2019). specifically, this paper aims to verify 1) the influence of alternative formats of awl on millennial consumers stated choices of wine and beer; 2) the existence of different segments of consumers with different level of influence of awl when choosing wine and beer. to this purpose a discrete choice experiment (dce) and latent class choice models (lcm) were realized in italy and france. the choice to analyse these two countries lies in their different regulations about awl. starting from 2007, mandatory warnings are imposed in france to inform consumers about the dangers associated with the consumption of alcoholic beverages during pregnancy, with a statement or a specific pictogram. in italy a voluntary and unregulated approach exists, with the market offering bottles of alcoholic beverages with and without warnings and with a heterogeneity of warnings. the decision to analyse millennial generation consumers stems from the awareness that they are recognised as a particularly risky population segment, especially considering that heavy episodic drinking is constantly increasing among these individuals worldwide (calafat et al., 2011). furthermore, this generation represent a segment of growing interest for marketing researchers both in the wine and beer markets (agnoli et al., 2011; de magistris et al. 2011; rivaroli et al. 2019). compared with previous research, the originality of the current paper lies in the application of the choice experiment to two alcoholic beverages and the comparison of the outcomes. wine and beer were chosen as the objects of investigation of this study as: i) they are the most consumed alcoholic beverages in france and italy (table 1); ii) they are the most frequently consumed alcoholic beverages by millennials in the two analysed countries (euromonitor international, 2020; agnoli et al., 2011); iii) wine is associated to tradition in both countries, while beer is more linked to northern european consumption patterns (agnoli et al., 2018), and this can give rise to differences in the acceptability of awls in these two alcoholic beverages, with relevant implications. the paper is organised as follows: a brief overview of existing literature is presented in the first section; subsequently, a detailed description of the methodology and stimuli applied in the dce is provided; then results from the dce and latent class analysis are presented and a discussion of the core implications is offered. 2. literature background the current study builds on the growing research prompted by insights of behavioural economics and table 1. consumption of alcoholic beverages in france and italy, million litres, 2010-2019.     france italy 2010 2019 2010 2019 wine 2,466 2,157 2,550 2,395 beer 1,909 2,151 1,634 1,706 spirits 395 367 158 138 source: euromonitor international (2020). 5the influence of alcohol warning labels on consumers’ choices of wine and beer the dual process theory (see, among others, camerer and loewenstein, 2004; evans, 2008; kahneman, 2011). indeed, disentangling the relationship between conscious and unconscious elements in behaviour and decision-making, scholars have proved that consumers’ choices are influenced by several contextual factors as social and environmental elements as well as cognitive shortcuts, emotions, and habits. therefore, researchers have proposed to modify the choice architecture to alter individuals’ behaviour for the good, i.e.: nudging people to do the right thing (thaler and sunstein, 2008). in particular, nudges are “any aspects of the choice architecture that alters people’s behaviour in a predictable way without forbidding any options or significantly changing their economic incentives” (thaler and sunstein, 2008, p. 6). based on this premises several policy makers have favourably embraced the use of gentle prompts and suggestions to increase healthier behaviours; also relying on high citizen support compared to other interventions as taxes (reisch et al., 2017). recent evidences provided by cigarettes warnings suggests that labels that present health-aligned information may nudge behaviour that are in line with individuals’ health goals, reducing consumption (e.g. noar et al., 2016). questions remains, however, around the possibility that similar label-based nudges can be effective also on alcoholic beverages. several studies suggest that awls may improve knowledge and attitudes regarding the harmful consequences of alcohol consumption among adults (annunziata et al., 2017; wigg and stafford, 2016; vallance et al., 2017), while little impact on changing drinking behaviour was found (glock et al., 2013; brown et al., 2016). according to al-hamdani (2015) and coomber et al. (2015), the limited impact of awls in changing behaviour is connected to the weak content of warnings and their poor visibility. in this regard, agostinelli and grube (2002) suggest that in order to improve the potential of warning labels in influencing behaviour, the key elements are label design and how well the information and messages on labels are targeted at their intended audience. indeed, several studies suggest that warning message framing, label design, format and visibility are crucial elements in determining health warning effectiveness and encouraging healthier behaviours (blackwell et al., 2018; al-hamdani and smith, 2017a; knai et al., 2015; krischler and glock, 2015; jarvis and pettigrew, 2013). many studies found that pictorial health warnings are more effective than text-based warnings and enhance warning recognition (hassan and shiu, 2018; kersbergen and field, 2017; wigg and stafford, 2016). al-hamdani and smith (2017a) suggest that combined text and image warnings have a stronger effect on alcohol consumers than the use of text only. considering warning visibility, kersbergen and field (2017) reveal that increasing the visual salience by using graphic warnings as well as front-of-pack labelling might be more effective in attracting and maintaining consumers’ attention. alhamdani and smith (2017b) found that plain packaging warning increases the likelihood for correct recognition. in relation to the message framing, specific rather than general health warnings were rated as more effective, and led to greater risk perceptions (miller et al., 2016; pettigrew et al., 2014; creyer et al., 2002). jarvis and pettigrew (2013) found that negatively framed messages had the highest utility whereas a positive message (about drinking and driving) could generate a boomerang effect. in addition, blackwell and colleagues (2018) reported that participants of their study are more motivated to drink less after viewing negatively framed messages. pettigrew et al. (2014) compared warnings with the wording ‘increases risk’ versus ‘can cause’ and found that the ‘increases risk ’ wording was more convincing and more believable than the ‘can cause’ wording. furthermore, pettigrew et al. (2014) have examined the use of quantitative information in alcohol warnings and showed that quantitative messages performed poorly in terms of believability. krischler and glock (2015) showed that warning statements formulated as questions are more effective, especially among young adults, while branco and kaskutas (2001) found that warning labels that employ scare tactics can be perceived as overstating the risks and are not believable. annunziata et al. (2019) found that the level of visibility of the warnings currently carried by wine bottles in italy and france is low and that consumers tend to prefer the “no warning option” attaching more utility to neutrally framed messages, even if some differences between italian and french consumers exist. other researches highlighted that the extent to which the warning is read and elaborated by individuals is linked to the personal relevance of the message and individual motivation to actively respond, suggesting that tailored and targeted warning labels may be better received compared to generic ones (hassan and shiu 2018; wogalter, 2006; argo and main, 2004). in this regards other evidences revealed that targeted messages should be particularly useful among populations where there is great heterogeneity. the use of customised messages seems to be more effective than generic ones, especially considering individual alcoholrelated beliefs, gender or age (robertson et al. 2017; 6 azzurra annunziata, lara agnoli, riccardo vecchio, steve charters, angela mariani miller et al. 2016; jarvis and pettigrew, 2013; creyer et al., 2002; wright et al., 2008). with reference to the latter, argo and main (2004) argue that age correlates negatively with warning perception, in particular young adults tend to perceive themselves as invulnerable to the negative consequences of risky behaviours. jarvis and pettigrew (2013) found that the messages with the greatest utility differed across gender. furthermore, concerning the drinking behaviour, cryer et al. (2002) reported that drinking frequencies (i.e. binge or non-binge drinking) strongly affect the perception of different warnings on alcoholic beverages among students. jarvis and pettigrew (2013) found that for those who report higher consumption of alcohol, negative health messages had the highest utility. further, miller and colleagues (2016) found that high-risk drinkers perceived the warning labels to be less effective in altering drinking behaviours than light-to-moderate drinkers. robertson and colleagues (2017) found that heavy drinkers are more sensitive to alcohol warnings related to concerns for self (e.g. liver damage) while lighter drinkers to warning related to potential risk for others (as violence). previous research has also found that the effectiveness of alcohol warning messages is influenced by different type of drink (e.g. wine, beer, vodka) (thomson et al., 2012). in particular, messages matched with the type of drink were more relevant and acceptable to consumers, suggesting the need to further assess the interaction between the type of drink and the warning message but also to be cautious in generalising their results to other types of alcoholic beverages (hassan and shiu, 2018;wright et al., 2008). 3. material and method 3.1 questionnaire and measurements a consumer survey was conducted in order to reach the research objectives. beyond the collecting data on socio-demographic characteristics, the questionnaire included information about alcohol consumption habits, selected from the alcohol usage questionnaire (auq) developed by mehrebian and russell (1978) (table 2). after assessing the level of attention paid to health warnings, the questionnaire asked about what effects health warnings have on respondents and their attitude towards alcohol, drawing from the readiness to change questionnaire developed by kersbergen and field (2017). respondents were then asked to express their level of concern for some short and long-term side effects from alcohol consumption (vecchio et al., 2017; coomber et al., 2017). 3.2 discrete choice experiments design respondents were also subject to two discrete choice experiments (dces) (louviere and woodworth, 1983), depicting the hypothetical choice of a bottle of wine and beer. in order to avoid to sensitise respondents to warning contents, the dces were introduced to respondents before the section asking for the effects of health warnings. the two dces include the same alternatives and attributes, selected considering the literature on health warnings and designed to test if consumer preference for wine and beer are influenced by the framing, design and visibility of different warnings (table 3). two non-mandatory warnings about a shortand a long-term effect of alcohol on health have been selected as alternatives of the designs, plus a no-warning alternative. the choice to select the risk of brain damage as the long-term effect and the risk from drinking and driving as the short-term effect was suggested by the literature (jarvis and pettigrew, 2013; kaskutas and greenfield, 1992; coomber et al., 2017). these warnings have been graphically depicted on the label, and they could assume big size or small size and be placed on the neck or on the front label for beer, and on the front or the back label for wine, as in previous research (al-hamdani, and smith, 2017b; al-hamdani, and smith, 2015; wigg and stafford, 2016). alcohol by volume is another attribute emerged as important in the literature (jarvis and pettigrew, 2013) and low, medium and high levels have been selected for beer according to general standards and for wine according to the specific grape variety involved in the hypothetical choice, cabernet sauvignon. the choice of this grape variety is given by the fact that it is the most widespread grape variety in europe (eurostat, 2017). a textual message for the two selected warnings has also been included as an attribute of the dces, neutrally or negatively framed as in previous studies on the subject (jarvis and pettigrew, 2013; krischler and glock, 2015; miller et al., 2016) or not included in the label (table 4). these alternatives, attributes and levels have been statistically combined in order to compose the experiment designs for this study. a full factorial design including each possible combination of the elements composing the design would have given rise to an enormous number of hypothetical choice situations. in order to show respondents with only a subset of possible choices, efficient fractional factorial designs were built with the software package ngene (rose and bliemer, 2009; choicemetrics, 2018). this class of designs aims to give rise to results generating parameter estimates with 7the influence of alcohol warning labels on consumers’ choices of wine and beer table 2. collected data and measurement. topic variable measure references socio-demographics gender 1 if male, 0 if female   age years of education continuous (from 18 to 40) total years of education alcohol consumption habits consumption frequency from 1 (never) to 5 (every day) alcohol usage questionnaire (auq) (mehrebian and russell, 1978) inebriation frequency in the last six months from 1 (never) to 5 (more than 5 times) alcoholic beverages consumption in % % of beer consumption % of still wine consumption % of sparkling wine consumption % of spirits consumption % of ready to drink consumption attention towards labels and aw front label back label health warning scale from 1 to 5 degree of attention towards information currently reported on front and back label (mueller et al., 2010; annunziata et al., 2016) discrete choice experiments for wine and beer effects of health warnings decreased consumption multiple choice question, single answer 1 if is the case, 0 otherwise   thought about decreasing consumption discussed with friends on risks thought about the risks no effect attitudes towards alcohol do not think to drink in excess likert scale from 1 to 5 readiness to change questionnaire (kersbergen and field 2017) like to drink and sometimes drink too much trying to drink less think that friends drink too much concerns about the consequences of alcohol abuse lack of coordination and slower reflexes likert scale from 1 to 5 concerns for long and short-term effects of alcohol intake (vecchio et al., 2017; coomber et al., 2017) reduced concentration motor vehicle, bicycle and pedestrian accidents injuries associated with falls, accidents, violence alcohol poisoning   harm to unborn babies obesity brain damage liver/stomach problems heart and blood disease 8 azzurra annunziata, lara agnoli, riccardo vecchio, steve charters, angela mariani as small as possible standard errors. in order to reach this goal, they need to be fuelled by prior information on these parameters. ‘priors’ to build two efficient designs were drawn from a pilot study involving 50 consumers from france and italy and analysing their hypothetical choices of wine and beer. the efficient designs adopted in this study drove the allocation of alternatives, attributes and levels in the hypothetical choice scenarios of respondents and they were selected because they minimised the expected d-errors1 (ferrini and scarpa, 2007; scarpa and rose, 2008; sándor and wedel, 2001). the final designs included 12 choice scenarios composed of three bottles each. in order to rationalise the response time to the questionnaire, three blocks of four choice scenarios were created adopting the blocking procedure. in this way, each respondent faced the choice of the preferred bottle of beer among four groups of three bottles and the choice of the preferred bottle of wine among four groups of three bottles each. the choice scenarios were graphically represented to facilitate choice, adopting fictitious brands to avoid the conflicting impacts of knowledge and perceptions over real brands (delmas and lessem, 2017). for the beer choice task we applied only images of the front label (fig. 1a), while for the wine choice task we used both 1 the d-error is an aggregate measure drawn from the asymptotic variance-covariance (avc) matrix of the variables in the design. it is estimated according to the following equation: d-error = [det(ω(β, xtj)]1/k]where ω is the avc matrix of the variables in the design (xtj), β is the vector of estimated coefficients, j is the alternative, t is the choice task and k is the number of estimated coefficients. table 3. alternatives, attributes and levels of the dces. design components  levels beer wine alternatives logo 1. long-term health warning (risk of brain damage) 2. short-term health warning (risk from drinking and driving)     3. no logo attributes i. logo position 1. neck 1. back label 2. bottle 2. front label ii. logo size 1. big 2. small iii. alcohol by volume 1. low (3%vol.) 1. low (11.5%vol.) 2. medium (5%vol.) 2. medium (12.5%vol.)   3. high (7%vol.) 3. high (13.5%vol.) iv. message 1. neutrally framed 2. negatively framed 3. no warning message table 4. frame of the text messages associated with the warnings. message risk of brain damage risk from drinking and driving neutrally framed keep your brain healthy. lower your alcohol intake to be safe, do not drink and drive negatively framed every drink of alcohol harms your brain drunk driving kills figure 1. an example of choice task for wine and beer. 9the influence of alcohol warning labels on consumers’ choices of wine and beer front and back labels (fig.1b). in line with the habits of millennials, the hypothesised consumption situation is a dinner with friends (mueller and charters, 2011). 3.3 modelling approach data collected through the discrete choice experiment where analysed applying multinomial logit (mnl) models (mcfadden, 1974) and latent class (lc) choice models (greene and hensher, 2003). mnl models assume that all respondents behave in the same way and present the same preferences, with a choice probability described as follows: (1) where n is the individual, who assesses for t times j alternatives and chooses alternative i. following the random utility theory (thurstore, 1927) vnit is the part of the utility observed by the researcher, as discrete choice models assume that utility is a stochastic function, composed of a deterministic part, the function of the attributes of the good, and a stochastic part. as reported in equation (1), the deterministic part of the utility can be written as: vnit=β'xnit (2) where β is a vector of estimated coefficients and xnit are the attributes of alternative i of the t choice which compose the utility of individual n (train, 2009). lc models create c latent classes grouping respondents with similar underlying preferences. respondents are therefore assigned to a class up to a probability and given membership of a given class c, the probability of respondent n’s sequence of choices yn over the t choice occasions, is: where yn=(in1;in2,…,intn) (3) mnl models are applied in this study to analyse the influence of alternative formats of awl on millennial consumers stated choices of wine and beer. lc models were applied to identify different segments of consumers with different level of influence of awl when choosing wine and beer. following the theory of lancaster (1966), according to which the utility of a good is given by the attributes composing the good itself, in our models for the choice of wine and beer the utility of consumer n belonging to the latent class c can be explained as follows: unjt|c=β1|clogonit+β2|csizenit+β3|cpositionnit+β4|c messagenit +β5|cabvnit (4) where logo is a nominal variable composed by three levels/logos (risk of brain damage, from drinking and driving and no logo); size is a binary variable assuming value 1 if the logo is big, 0 if it is small; position is a binary variable assuming value 1 if the logo is on the front label and 0 if it is on the back label/neck of the bottle; message is a binary variable assuming value 1 if the warning message is neutrally framed on the label, 0 if it is negatively framed and abv is a continuous variable representing the three levels of alcohol by volume (low, medium and high) of the experimental design. the emerged latent classes were characterised introducing socio-demographic and behavioural characteristics of respondents as covariates in the model. data analysis was conducted using the software latentgold (vermunt and magidson, 2013). 3.4 data collection in line with other studies analysing wine and beer consumption and involving young respondents, the questionnaire was submitted online to a convenience sample of millennials from france and italy in 2018 (vecchio, 2013; szolnoki and hoffmann, 2013). respondents were recruited through social networks, blogs, forum and the word of mouth. there is no common agreement among scholars defining the boundaries of millennial generation. some authors consider this generation as born between 1981 and 1999 (brosdahl and carpenter, 2011; bolton et al., 2013), others between 1980 and 2000 (macky et al., 2008) or between 1978 and 2000 (lancaster and stillman, 2002; thach and olsen, 2006). in the present study individuals were screened to be born between 1978 and 2000 and to be of the legal age limit to drink alcoholic beverages at the time of the survey administration. the final sample is composed of 659 individuals, 394 from italy and 265 from france (table 5). the sample is well balanced between male and female and is mostly composed of the younger segment of generation y. half of the italian part of the sample comes from the south, while half of the french sample comes from the centre of france. as the french and the italian education systems are different, a continuous variable was drawn explaining the years of education for each respondent 10 azzurra annunziata, lara agnoli, riccardo vecchio, steve charters, angela mariani and highlighting a similar education level for the two segments. 4. results 4.1 preferences for warning labels on wine and beer two mnl models were applied to understand different influences of awl in the choice of wine and beer by millennial respondents. figure 2 shows that the most important elements driving consumer’s choices for beer are a warning logo, alcohol by volume and warning message explaining the consequences of alcohol intake. concerning wine, the presence and typology of warning logo is still the most important element, with a higher degree of importance than beer, and it is followed by the position of the logo and by the warning message. these results are in line with the study by al-hamdani (2014), highlighting the strong inf luence of pictorial health warnings on consumers. for beer, positive utility is associated with the logo warning about the risks of drinking and driving, which is actually common on the bottles of beer both in italy and france, depicting a focus on the short-term side effect of alcohol intake. a lower but still positive utility is registered if no logo is depicted on the label. concerning wine, people associate positive utility to a bottle with no logo, and the logo about the consequences of alcohol on brain decreases consumer utility, as it does with beer (table 6). unlike other studies (pham et al., 2018; al-hamdani and smith, 2017b), a clear preference does not emerge in consideration of the logo size for both alcoholic beverages. concerning the position, consumers prefer a logo on the neck of the bottle for beer and on the front label for wine. when it comes to choosing a bottle of beer, people prefer to be informed about the possible negative consequences of consumption, but with a neutrally framed message. when it comes to choosing wine, they prefer no warning message. in both cases a negatively framed message decreases consumers’ utility, in line with studies by al-hamdani and smith (2017a, 2017b). the alcohol by volume indication results in a significant impact on consumers only for beer, and with a positive sign. two latent class choice models were run to analyse the hypothetical choices for both the alcoholic beverages and better explain these differences and understand consumers’ preferences. the identification of latent classes aims to highlight differences in preferences and influences of health warning labels among young consumers. despite being considered as a unique cohort, this generation is composed by a heterogeneous group of consumers, also in the light of the large age group that characterise it (bucic et al., 2012; agnoli et al., 2018). it becomes therefore important to identify these heterogeneities and characterise them according to their drinking behaviours and perceptions towards awls. 4.2 latent class choice model for beer the five-class solution was selected as the optimal to explain consumers’ choices of beer, in line with the data fit criteria (ferrini and scarpa, 2007) (table 7). after estimating the latent class model, socio-demographics and behavioural characteristics collected through the survey questionnaire have been included in the estimatable 5. socio-demographic characteristics of the sample.     sample (n=659) italy (n=394) france (n=265) n % n % n % gender male 286 43.4 168 42.6 118 44.5 female 369 56.0 226 57.4 143 54.0 age class 18-24 years old 397 60.2 195 49.5 202 76.2 25-31 years old 197 29.9 141 35.8 56 21.1 32-40 years old 65 9.9 58 14.7 7 2.6 area of residence north 208 31.6 154 39.1 54 20.4 centre 152 23.1 20 5.1 132 49.8 south 245 37.2 219 55.6 26 9.8 mean s.d. mean s.d. mean s.d. years of education 14.8 1.6 14.3 1.8 15.6 1.0 figure 2. attribute importance for beverages, full sample. 11the influence of alcohol warning labels on consumers’ choices of wine and beer tion as covariates (table 8). this allowed the study to characterise classes also in the light of their alcohol consumption habits, effects of health warnings, attitudes towards alcohol and concerns about the consequences of alcohol abuse. this last aspect was included in the model as a single variable composed by the sum of the different items depicting individual’s concerns about the consequences of alcohol abuse. latent class 1 (lc1) is composed of 28% of respondents and bases its choice on alcohol content, whose importance accounts for one third of the total utility. in particular, the utility of this lc increases with the increase of the alcohol by volume. the warning logo is the second most important attribute driving choice and consumers belonging to this class prefer a bottle of beer with no logo. anyway, a bottle with a logo informing about the negative consequences of drinking and driving is positively perceived, differently from a logo informing about the negative effects of alcohol on brain. when a logo is present, they prefer it small and on the neck of the bottle. they prefer a bottle of beer with no warning message and negatively framed messages impact negatively on utility. this class particularly includes french male respondents, who do not consume alcoholic beverages very frequently, who declare that warnings about the negative consequences of alcohol on health have no impact on table 6. multinomial logit estimation for choice of wine and beer, full sample.     beer wine coeff. s.e. wald p-value coeff. s.e. wald p-value logo                     brain damage -0.544 *** 0.036 246.598 0.000 -0.693 *** 0.039 339.748 0.000 no driving 0.318 *** 0.030 0.050 0.033 no logo 0.226 *** 0.037 0.644 *** 0.041 logo size big vs small -0.054 0.054 0.996 0.320 -0.094 0.061 2.339 0.130 message negatively framed -0.163 *** 0.045 15.728 0.000 -0.141 *** 0.046 10.376 0.006 neutrally framed 0.144 *** 0.043 0.031 0.048 no message 0.019 0.041 0.109 *** 0.046 logo position label vs neck -0.159 *** 0.054 8.622 0.003 front vs back label 0.383 *** 0.061 39.050 0.000 alcohol by volume 0.085 *** 0.013 45.827 0.000 -0.011 0.025 0.200 0.650 goodness of fit                     observations 2636 2636 cases 659 659 log likelihood -2,689.476 -2,611.704 r² 0.073         0.1019         * p<.10; **p<.05; ***p<.01. table 7. data fit criteria for alternative latent class models for beer choice.   log likelihood bic aic caic n. parameters r² multinomial logit -2689.4759 5424.387 5392.952 5431.387 7 0.073 2-class -2380.1775 4857.716 4790.355 4872.716 15 0.367 3-class -2311.849 4772.985 4669.698 4795.985 23 0.445 4-class -2266.5442 4734.301 4595.088 4765.301 31 0.517 5-class -2227.7592 4708.657 4533.518 4747.657 39 0.604 6-class -2206.0983 4717.261 4506.197 4764.261 47 0.642 12 azzurra annunziata, lara agnoli, riccardo vecchio, steve charters, angela mariani ta bl e 8. e st im at es o f l at en t c la ss c ho ic e m od el fo r be er a nd c la ss c ha ra ct er is at io n (n =6 59 ). la te nt c la ss lc 1 lc 2 lc 3 lc 4 lc 5 la te nt c la ss s iz e 28 % 24 % 22 % 19 % 7% r ² 38 % 7% 8% 14 % 68 %   a i c oe ff. se a i c oe ff. se a i c oe ff. se a i c oe ff. se a i c oe ff. se lo go 27 % 51 % 51 % 39 % 2% b ra in d am ag e -0 .9 19 ** * 0. 12 4 -1 .0 72 ** * 0. 32 3 0. 64 0 ** * 0. 13 8 -3 .9 80 ** * 1. 34 6 -0 .1 76 0. 25 7 n o dr iv in g 0. 26 8 ** * 0. 11 1 1. 54 4 ** * 0. 16 5 0. 49 5 ** * 0. 11 7 -1 .7 79 1. 19 7 0. 14 9 0. 22 8 n o lo go 0. 65 1 ** * 0. 11 9 -0 .4 71 ** 0. 24 0 -1 .1 35 ** * 0. 16 9 5. 75 9 ** * 2. 29 9 0. 02 7 0. 32 6 lo go s iz e 10 % 11 % 1% 9% 14 % b ig v s sm al l -0 .6 20 ** * 0. 18 7 0. 57 8 ** 0. 27 2 -0 .0 35 0. 11 6 2. 31 4 1. 67 7 2. 17 1 1. 65 2 lo go p os iti on 6% 10 % 15 % 12 % 13 % l ab el v s n ec k -0 .3 72 ** 0. 18 6 0. 50 2 ** 0. 29 6 -0 .5 28 ** * 0. 13 9 -3 .0 65 * 1. 71 9 -2 .0 72 1. 65 5 m es sa ge 24 % 19 % 20 % 24 % 9% n eg at iv el y fr am ed -0 .7 93 ** * 0. 16 9 0. 42 2 * 0. 25 4 -0 .0 47 0. 12 5 0. 67 8 1. 76 3 -0 .9 33 ** * 0. 35 5 n eu tr al ly fr am ed 0. 16 6 0. 12 4 0. 12 6 0. 16 6 0. 37 9 ** * 0. 12 2 -3 .3 23 3. 42 3 0. 43 1 0. 33 0 n o m es sa ge 0. 62 8 ** * 0. 13 5 -0 .5 47 0. 19 6 -0 .3 31 ** * 0. 11 1 2. 64 5 1. 84 5 0. 50 2 0. 34 3 a lc oh ol b y vo lu m e 33 % 0. 48 4 ** * 0. 05 6 9% 0. 11 8 ** 0. 05 7 12 % 0. 10 8 * 0. 05 6 15 % -0 .9 50   0. 74 6 62 % -2 .4 23 * 1. 44 2 so ci ode m og ra ph ic s i ta lia n -0 .8 16 ** * 0. 19 0 0. 27 1 0. 19 9 0. 83 6 ** * 0. 25 6 -0 .5 34 ** * 0. 18 6 0. 24 4 0. 29 5 m al e 0. 74 2 ** * 0. 17 9 -0 .1 22 0. 19 0 -0 .1 75 0. 21 5 0. 06 8 0. 18 3 -0 .5 14 * 0. 30 2 a ge -0 .0 31 0. 02 3 0. 01 2 0. 02 2 0. 05 0 ** * 0. 02 2 -0 .0 06 0. 02 2 -0 .0 26 0. 03 4 a lc oh ol c on su m pt io n ha bi ts c on su m pt io n fr eq ue nc y -0 .2 68 ** * 0. 12 9 0. 35 1 ** * 0. 13 3 0. 22 5 * 0. 11 7 -0 .1 64 0. 11 4 -0 .1 44 0. 19 6 d ru nk fr eq ue nc y in th e la st 6 m on th s -0 .1 28 0. 08 1 0. 55 5 ** * 0. 08 9 -0 .0 90 0. 07 8 0. 20 1 ** * 0. 07 3 -0 .5 38 ** * 0. 16 8 b ee r co ns um pt io n vs o th er a lc oh ol ic s -0 .0 04 0. 00 5 0. 01 4 ** * 0. 00 6 0. 00 4 0. 00 5 -0 .0 04 0. 00 4 -0 .0 10 0. 00 7 eff ec ts o f h ea lth w ar ni ng s d is cu ss ed w ith fr ie nd s on r is ks -0 .0 82 0. 42 9 0. 08 7 0. 38 7 -0 .2 10 0. 42 1 0. 82 7 ** 0. 39 8 -0 .6 22 0. 78 8 d ec re as ed c on su m pt io n -0 .6 90 * 0. 39 7 -0 .0 59 0. 34 1 0. 53 4 * 0. 29 2 -0 .5 82 0. 45 5 0. 79 7 * 0. 40 9 n o eff ec t 0. 92 1 ** * 0. 17 0 -0 .1 32 0. 20 2 0. 31 6 * 0. 18 0 -0 .7 33 ** * 0. 30 8 -0 .3 72 0. 33 4 th ou gh t a bo ut th e ri sk s -0 .2 34 0. 23 0 0. 32 0 * 0. 19 2 -0 .4 72 ** 0. 24 0 0. 32 5 0. 21 5 0. 06 1 0. 32 5 th ou gh t a bo ut d ec re as in g co ns um pt io n 0. 08 5 0. 31 8 -0 .2 16 0. 33 5 -0 .1 68 0. 33 3 0. 16 3 0. 35 3 0. 13 7 0. 46 9 a tt itu de s to w ar ds a lc oh ol d o no t t hi nk to d ri nk in e xc es s -0 .2 57 ** * 0. 08 2 -0 .1 48 0. 09 3 -0 .1 15 0. 08 4 -0 .0 08 0. 08 4 0. 52 7 ** * 0. 16 7 l ik e to d ri nk a nd s om et im es d ri nk to o m uc h 0. 37 3 ** * 0. 08 1 -0 .3 18 ** * 0. 09 7 -0 .0 57 0. 08 7 0. 13 8 * 0. 07 8 -0 .1 37 0. 12 9 t ry in g to d ri nk le ss -0 .0 70 0. 08 0 -0 .0 91 0. 08 8 -0 .0 70 0. 08 1 -0 .1 59 * 0. 08 2 0. 39 0 ** * 0. 10 2 th in k th at fr ie nd s dr in k to o m uc h -0 .0 87 0. 08 2 0. 00 5 0. 08 7 0. 01 4 0. 07 9 0. 05 2 0. 08 0 0. 01 6 0. 11 9 c on ce rn a bo ut th e co ns eq ue nc es o f a lc oh ol a bu se a   -0 .0 30 ** * 0. 01 1   0. 04 3 ** * 0. 01 3   0. 00 0   0. 01 0   -0 .0 14   0. 01 0   0. 00 1   0. 01 8 n ot e: l c =l at en t c la ss ; a i= a tt ri bu te i m po rt an ce ; s e= st an da rd e rr or ; * p <. 10 ; * *p <. 05 ; * ** p< .0 1; a th is v ar ia bl e is g iv en b y th e su m o f t he it em s co m po si ng th e to pi c. 13the influence of alcohol warning labels on consumers’ choices of wine and beer their behaviour as they are not concerned about the consequences. despite not consuming alcoholic beverages frequently, they admit to drinking too much sometimes. lc2’s utility is strongly driven by the warning logo. they prefer the warning logo related to risks of drinking and driving in big size on the front label of a bottle of beer. however, their utility is also positively driven by the alcohol content of a beer. no clear socio-demographic characterisation emerges for this class. they consume alcoholic beverages frequently, and beer is their favourite drink. in the last six months they have frequently felt drunk, but they do not think that they drink too much. they are concerned about the negative effects of alcohol abuse on health. lc3, comprising 22% of respondents, is also strongly driven by the warning logo when choosing a bottle of beer and its utility is higher when there is a warning logo on the label. respondents in this class prefer the warning about the negative effects of alcohol on brain and in a second instance on the negative consequences of drinking and driving. their utility is positively influenced by a logo on the neck label and a neutrally framed warning message. this class is more likely to be composed of italian respondents and respondents belonging to the higher age segment of the generation. this class particularly includes individuals that do not think about the risks when faced with a health warning. differently from lc2 and lc3, the utility of individuals associated to lc4 (19% of respondents) decreases when any kind of logo is included on the beer label, and when a logo is present, it is preferred on the neck label. this class more likely includes french people who state that they have had frequent episodes of drunkenness in the last six months. warning labels have an effect on the behaviour of this class, including discussing with friends the risks of alcohol intake. lc5 (7% of the sample) is strongly driven by the alcohol content and it prefers low-alcohol beers. the warning logo has little influence on its choice, and respondents from this class do not want to have a warning message negatively framed on the label. this class includes more women, people who do not tend to be involved in risky consumption behaviours and who tend to decrease consumption when they see a health warning label. 4.3 latent class choice model for wine a latent class analysis was applied also to analyse the wine choice of respondents and a four-class solution was selected as optimal according to the data fit criteria (table 9). lc.i (35% of the sample) is strongly driven by the logo when choosing wine and in particular any logo included on a wine label decreases their utility (table 10). the logo about brain damage depresses the utility of individuals from this class more than the ‘drinking and driving’ one. their utility is positively correlated with the alcohol content of a bottle of wine. french and male respondents are more likely to belong to this latent class. they do not consume alcoholic beverages frequently but when they drink, they tend to drink too much so that they feel drunk. this segment more probably includes respondents who declare to reduce consumption when they see the health warnings, but also some respondents for who these warnings have no effect or do not think about the risks. they are not concerned about the negative effects of alcohol on health. lc.ii (33% of the sample) is driven both by the logo and the warning message when choosing a bottle of wine. individuals from this class prefer to see no logo, but if a logo is present they prefer the ‘no driving’ one as the logo on brain damage depresses their utility. they prefer a small logo, posted on the front label of the bottle. they prefer to have no warning message accompanying the logo on the label and a negatively framed message depresses their utility. the alcohol by volume of a bottle positively drives their choice. this class is more likely composed of female from the younger segment of the generation, who frequently consume alcoholic beverages even if they do not think to drink too much, and who declare that alcohol warnings have no effect on their behaviour as they are not concerned about the risks of alcohol abuse. table 9. data fit criteria for alternative latent class models for wine choice.   log likelihood bic aic caic n. parameters r² multinomial logit -2611.704 5268.844 5237.409 5275.844 7 0.102 2-class -2230.962 4559.286 4491.925 4574.286 15 0.434 3-class -2150.245 4449.777 4346.490 4472.777 23 0.532 4-class -2109.622 4420.456 4281.243 4451.456 31 0.584 5-class -2088.329 4429.797 4254.658 4468.797 39 0.616 14 azzurra annunziata, lara agnoli, riccardo vecchio, steve charters, angela mariani ta bl e 10 . e st im at es o f l at en t c la ss c ho ic e m od el fo r w in e an d cl as s ch ar ac te ri sa tio n. la te nt c la ss lc .i lc .ii lc .ii i lc .iv la te nt c la ss s iz e 35 % 33 % 19 % 13 % r ² 88 % 17 % 64 % 32 %   a i c oe ff. se a i c oe ff. se a i c oe ff. se a i c oe ff. se lo go 50 % 35 % 49 % 40 % b ra in d am ag e -3 .0 58 ** * 0. 98 3 -0 .8 89 ** * 0. 14 8 -0 .2 48 0. 21 7 1. 05 9 ** * 0. 23 7 n o dr iv in g -1 .1 92 * 0. 61 2 0. 30 2 ** * 0. 09 4 2. 15 6 ** * 0. 42 6 -0 .5 80 ** * 0. 23 9 n o lo go 4. 24 9 ** * 1. 46 5 0. 58 7 ** * 0. 12 7 -1 .9 08 ** * 0. 55 1 -0 .4 79 ** 0. 24 1 lo go s iz e 9% 11 % 5% 7% b ig v s sm al l 1. 27 7 0. 83 4 -0 .4 65 ** * 0. 18 0 0. 44 8 0. 27 4 -0 .3 02 0. 23 3 lo go p os iti on 1% 20 % 3% 11 % l ab el v s n ec k -0 .0 82 0. 57 3 0. 86 7 ** * 0. 18 0 0. 20 9 0. 22 0 0. 44 7 * 0. 25 7 m es sa ge 35 % 25 % 18 % 19 % n eg at iv el y fr am ed 2. 36 9 1. 78 3 -0 .5 68 ** * 0. 13 5 0. 21 1 0. 22 7 0. 36 0 0. 23 0 n eu tr al ly fr am ed 0. 37 9 1. 74 8 0. 10 3 0. 10 0 0. 65 0 ** * 0. 25 7 -0 .4 28 0. 27 5 n o m es sa ge -2 .7 49 3. 40 8 0. 46 5 ** * 0. 12 3 -0 .8 61 ** * 0. 29 9 0. 06 9 0. 18 7 a lc oh ol b y vo lu m e 5% 0. 37 2 * 0. 22 0 8% 0. 16 1 ** 0. 00 8 25 % -1 .0 43 ** * 0. 35 8 23 % -0 .4 62 ** * 0. 16 1 so ci ode m og ra ph ic s i ta lia n -0 .5 78 ** * 0. 20 6 0. 06 1 0. 24 6 0. 23 8 0. 28 6 0. 27 9 0. 40 5 m al e 0. 34 7 ** 0. 17 2 -0 .3 62 * 0. 21 4 0. 01 8 0. 21 8 -0 .0 03 0. 28 3 a ge -0 .0 16 0. 01 9 -0 .0 44 * 0. 02 3 0. 00 5 ** * 0. 02 2 0. 05 5 ** 0. 02 7 a lc oh ol c on su m pt io n ha bi ts c on su m pt io n fr eq ue nc y -0 .2 41 ** 0. 11 5 0. 23 0 * 0. 13 8 0. 33 4 ** * 0. 14 0 -0 .3 22 0. 20 7 d ru nk fr eq ue nc y in th e la st 6 m on th s 0. 22 2 ** * 0. 08 1 0. 14 2 0. 10 1 -0 .1 27 0. 10 4 -0 .2 37 0. 16 2 b ee r co ns um pt io n vs o th er a lc oh ol ic s 0. 00 5 0. 00 4 0. 00 6 0. 00 4 -0 .0 03 0. 00 6 -0 .0 09 0. 00 7 eff ec ts o f h ea lth w ar ni ng s d is cu ss ed w ith fr ie nd s on r is ks -0 .3 73 0. 33 2 -0 .3 44 0. 43 3 0. 02 3 0. 38 4 0. 69 3 0. 46 9 d ec re as ed c on su m pt io n 0. 62 9 ** * 0. 28 2 -0 .2 25 0. 57 5 -0 .3 98 0. 44 3 -0 .0 06 0. 54 6 n o eff ec t 0. 43 5 ** * 0. 19 2 0. 69 0 ** * 0. 24 1 -0 .1 97 0. 26 4 -0 .9 28 ** 0. 44 5 th ou gh t a bo ut th e ri sk s -0 .4 50 ** * 0. 19 8 0. 05 0 0. 23 2 0. 20 0 0. 20 5 0. 20 0 0. 23 9 th ou gh t a bo ut d ec re as in g co ns um pt io n -0 .2 41 0. 28 9 -0 .1 72 0. 37 1 0. 37 2 0. 30 7 0. 04 1 0. 39 6 a tt itu de s to w ar ds a lc oh ol d o no t t hi nk to d ri nk in e xc es s 0. 10 4 0. 06 8 0. 14 2 * 0. 08 2 -0 .0 76 0. 08 1 -0 .1 70 * 0. 10 1 l ik e to d ri nk a nd s om et im es d ri nk to o m uc h 0. 00 7 0. 08 3 0. 01 4 0. 09 7 -0 .1 14 0. 11 5 0. 09 3 0. 16 1 t ry in g to d ri nk le ss 0. 08 5 0. 06 8 0. 03 2 0. 08 6 -0 .1 53 0. 09 9 0. 03 6 0. 09 8 th in k th at fr ie nd s dr in k to o m uc h -0 .0 25 0. 06 9 -0 .0 18 0. 08 3 0. 00 6 0. 09 1 0. 03 8 0. 10 9 c on ce rn a bo ut th e co ns eq ue nc es o f a lc oh ol a bu se   -0 .0 32 ** * 0. 01 0   -0 .0 34 ** * 0. 01 2   0. 00 5   0. 01 3   0. 06 0 ** * 0. 01 7 n ot e: l c =l at en t c la ss ; a i= a tt ri bu te i m po rt an ce ; s e= st an da rd e rr or ; * p <. 10 ; * *p <. 05 ; * ** p< .0 1 a th is v ar ia bl e is g iv en b y th e su m o f t he it em s co m po si ng th e to pi c. 15the influence of alcohol warning labels on consumers’ choices of wine and beer lc.iii (19% of the sample) is driven by the logo and the alcohol content when choosing a bottle of wine. differently from the previous two classes, individuals from this class prefer to see a warning logo on the wine label, and in particular the one connected to the risks of drinking and driving. their utility increases also when a warning message accompanies the logo, when the message is neutrally framed. they choose wine based on low alcohol content. these individuals are more likely to belong to the older age segment of millennials and be frequent consumers of alcoholic beverages. lc.iv (13% of the sample) includes respondents who want to be warned about the negative consequences of alcohol on the brain when choosing a bottle of wine. they want the logo on the front label and low alcohol content for wine. the older segment of millennials is more likely to belong to this latent class, who think about the risks when faced with a warning label and who are worried about the consequences of alcohol on health. 5. discussion the introduction of health warnings on the label of alcoholic beverages is a topic of renewed interest in the field of consumer studies, due to the current debate on its mandatory or voluntary nature. alcohol labelling issues are highly controversial due to the clash between different interests. on one side, there is the industry goal to increase sales volumes (and not costs) and on the other side, there is public interest in protecting consumers’ health and right to be informed. alcohol industry actors lobby for voluntary or self-regulatory initiatives and frame alcohol consumption issues as a part of their corporate social responsibility practices (mccambridge et al., 2018; mialon and mccambridge, 2018). in this regards, it is useful to recall the fierce debate occurred among eu policy makers and the wine industry for the introduction of mandatory labelling of potentially allergenic substances in wine, including sulphites2 . as well as the ongoing discussion related to the ingredients and nutritional labelling for alcoholic drinks for which the spirits and beer sectors signed in 2019 a memorandum of understanding3. 2 regulation (eu) no. 579/2012 required mandatory labelling of a variety of allergenic substances in wine. 3 following the submission of the industry self-regulatory proposal on the provision of nutrition and ingredients listing from the european alcoholic beverages sectors, during the 2019 a series of bilateral dialogues with the sectors’ representatives took place to encourage their commitment. as a consequence, representatives of the spirits and brewery industries signed the memorandum of understanding in which they with reference to health warnings, according to several research, current experience of voluntary alcohol warning in england (petticrew et al., 2016), australia (coomber et al., 2018; o’brien, 2019) and new zealand (tinawi et al., 2018) failed to inform individuals of health implications of alcohol consumption. if a selfregulatory approach prevails on mandatory standardised labelling, best practices for warning labels should be developed taking into account the results of the numerous studies that have analysed the impact of design and placement of health messages on alcohol labels; together with sector specific aspects. in this scenario, the present study contributes to the literature by deepening the analysis of the influence of alternative formats of health warnings on french and italian millennial consumers’ choices of beer and wine. overall, our results confirm that awl effects on consumer choices of wine and beer are influenced by the alcoholic beverages considered suggesting the need to consider the interaction between the type of drink and the warning message (thomson et al., 2012; wright et al., 2008). indeed, for beer a positive utility is associated with the option of logo warning on the risks of drinking and driving, while for wine consumers attach more utility to the ‘no-warning option’, confirming the results of previous study conducted in italy and france (annunziata et al., 2019). this difference could be due to the fact that wine is still considered as a traditional product in both countries and it is not considered as transgressive, or linked to harmful and risky behaviours (agnoli et al., 2018); on the contrary, wine is often touted for its potential health benefits (higgins and llanos, 2015). in this regard, several studies in mediterranean countries reveal that wine consumption among millennial consumers is decreasing for the shift in the preferences towards other products such as beer and spirits (marinelli et al., 2014; de magistris et al., 2011). in addition, specifically for wine, a range of studies has investigated the use of different information sources and indicated that in-store or inrestaurant sources are most valued (atkin, nowak, and garcia, 2007; atkin and thach, 2012). considering t he warning content, consumers attached a negative utility to the brain damage logo, for both beer and wine. this could be due to the fact that as shown by previous research young consumers are not very interested in potential long-term effects of alcohol (annunziata et al., 2017; annunziata et al., 2019; jones and parri, 2010; jones and parri, 2009). indeed, these commit over the coming years, to voluntary provide nutritional information and the list of ingredients for spirits and beer (even if in different manners). 16 azzurra annunziata, lara agnoli, riccardo vecchio, steve charters, angela mariani consumers perceive themselves as not personally vulnerable to the long-term consequences of alcohol consumption at this point in their lives, attaching more importance to the short-term consequences of their decisions (coomber et al., 2017). furthermore, the current study points out that the preference for the drinking and driving logo on beer could be linked to a strong public awareness of the problem of alcohol-related car accidents, but also to the fact that the beer industry is already involved in various public campaigns against drinking and driving4. the present results also confirm that framing, design and visibility of awl affects consumers’ choices of wine and beer and the impact varies in relation to alcoholic beverages considered. in particular, with reference to the warning visibility, consumers prefer to have a logo on the neck of the beer bottle; while for wine it should be on the front label. in relation to beer, our result is interesting considering that, according to recent research, most beer bottles already carry warning labels on the back (gfk, 2014). while, concerning wine, when warnings are available, they are usually located on the back label. considering that pabst et al. (2019) in a recent study reveal that the back label plays a minor role in the wine buying decision, according to our results, moving the logo on the front label could increases the warning visibility and effectiveness. the size of the logo, according to current results, does not seem to be an influential attribute, contrarily to findings of other researchers (pham et al., 2018; alhamdani and smith, 2017b). concerning the message framing, results show that in the case of beer, consumers tend to choose a bottle with a neutrally framed message, while for wine they prefer the option without a message. however, negatively framed messages reduce consumers’ utility for both alcoholic beverages, confirming that this type of message could have a stronger emotional impact on consumers choices (al-hamdani and smith, 2017a; al-hamdani and smith, 2017b). in this regard, sillerorejon et al. (2018) found for beer that very stringent health warnings were judged to be more effective, leading to a greater motivation to reduce alcohol consumption, as well as greater avoidance and reactance. results from the lc models confirm the existence of different groups of young consumers whose choices are differently influenced by different awl. according to previous research, our results show that these groups are characterised by different drinking behaviours and awareness of social and health risks related to alcohol consumption (annunziata et al., 2017; scholes-balog et al., 2012). 4 for a review of main educational campaign promoted by worldwide brewing alliance see http://ec.europa.eu/health/ph_determinants/life_ style/alcohol/forum/docs/alcohol_lib6_en.pdf overall, the results reveal once more that consumer preferences diverge among beer and wine. taking into account beer, two classes of consumers show a higher utility for the bottle with warning labels (lc2 and lc3, 46% of total sample), but at the same time these consumers hold significant differences in consumption patterns. while, lc2 included heavy beer drinkers, worried about the consequences of alcohol abuse and preferring the presence of warning on drinking and driving, lc3 included consumers with moderate consumption habits, who assign a positive utility to both warning logos but prefer the ‘brain damage’ warning. considering sociodemographic variables, a higher number of older millennials are included in this group. conversely, lc1 and lc4 (47% of sample) are characterised by a higher concentration of consumers that do not want any warning logo on beer. in particular, lc1 (the most numerous) consumers are not worried about the consequences of alcohol abuse and strongly believe that health warnings have no effect. men are the majority in this group. considering wine, a clear preference emerges towards a label without any warning. specifically, the biggest groups lc.i and lc.ii (which together represent 68% of sample) include consumers who are not worried of the consequences of alcohol abuse and consider health warnings ineffective. conversely, consumers in the other two classes (32% of respondents) that attach a positive utility to warnings on the label, are worried about the negative effects of alcohol, and consider health warnings as effective. both groups have a high presence of older millennials. in brief, our results extend previous findings, highlighting that the older segment of millennials with a moderate consumption behaviour tend to be influenced by the presence of awl in their choices of alcoholic beverages, while this influence is weaker among younger millennials (creyer et al., 2002; wright et al., 2008). overall, millennials are little concerned about the consequences of alcohol abuse and the only two groups that claim to be worried fall among those who prefer the bottle with the warning. therefore, in line with other research (comber et al., 2015), our results suggest that warnings can be a useful tool to spread more knowledge and awareness of the shortand long-term negative health and social effects of alcohol abuse. 5. conclusion this study analyses the influence of alternative formats of awl on millennials’ beer and wine choices, in order to provide further insights to the current debate 17the influence of alcohol warning labels on consumers’ choices of wine and beer on the introduction of health warnings on alcoholic beverages’ labels. despite it does not focus on the analysis of the effectiveness of health warnings policy in reducing abusive consumption behaviours, current results should be valuable for producers, providing practical indications on the influence of alternative formats of labels on young consumer choices. in brief, findings highlight that the inf luence of awl on the choice of wine and beer by millennial consumers are driven by the type of alcoholic beverage and are affected by framing, design and visibility of warnings. in the two mediterranean countries considered – italy and france the acceptance of warnings is higher for beer than for wine and in both cases consumers show an higher utility for a logo on the front label: on the neck with a neutral message in the case of beer; on the front, without a message for wine. from a consumer behaviour point of view, the results confirm the existence of different segments of individuals in relation to their choices of alcoholic beverages with awl, also characterised by different drinking behaviours and awareness of the social and health risks related to alcohol consumption. in particular, the older segment of millennials with moderate consumption behaviour, a group which is to some extent worried about the negative effects of alcohol, chooses the bottle of beer with warning labels. the same is true, but with a lesser extent, when they chose a bottle of wine. the awareness of alcohol related health risks and the preference for bottles carrying warning labels is weaker among younger millennials. thus, in order to apply policies fostering health benefits, our results suggest the need to focus on young millennials, effectively communicating the risks of alcohol abuse through targeted messages. in addition, and more generally, policies should increase young adults’ awareness of the potential negative effects of excessive consumption of both wine and beer. some segments of millennials declared that they are not affected at all by health warnings on the labels of wine and beer. this could be also a consequence of the excess of labelling information, in particular for wine, where labels are already very detailed, often including sensory descriptions and food pairings suggestions. in order to avoid overloading consumers with too many stimuli on the label, a valid alternative could be represented by providing detailed health related information online, using for example qr codes or specific links to websites that provide useful information about alcohol and drinking combining on-label and on-line information. furthermore, companies should be stimulated to insert the website link in their general advertisements. moreover, considering that current results underline that millennials, regardless of age, are not very concerned about the long–term consequences of alcohol abuse, more extensive education and information campaigns are needed aiming to inform young individuals about the potential negative consequences of alcohol intake, which go beyond the effects on driving and on pregnant women. this type of interventions can be more effective if combined with the use of warnings on the label, specifically rotating negative framed messages. finally, considering that the awareness of alcohol-related health risks is weaker among younger millennials and that they mainly drink alcoholic beverages during weekends in out-of-home contexts (bazzani et al., 2020), new tools should be developed to provide information in this contexts, as posters in bars and stores, and advertisements; together with tools designed to explain how responsible drinking messages translates into actual drinks (such as the pocket-sized unit calculator introduced by uk drink-aware campaign). the results of our analysis cannot be generalised as they are hardened by several limitations. first, the use of self-reported measurements is prone to generate social desirability bias; second the use of a convenience sample does not allow inferences on the populations of the two countries; third, the study analyses stated choices of respondents, which can be in line or not with actual choices when called to buy a bottle of wine (or beer) in everyday life. lastly, the choice of the two countries (i.e.: italy and france), where wine has an historical tradition of daily consumption, may limit the generalisation of results to other countries with different cultural backgrounds. based on these considerations, our analysis should be extended to other contexts with different drinking patterns and culture, like north european countries, and to other types of alcoholic beverages with a higher alcohol content, even more harmful and currently up surging among younger individuals. a laboratory experiment analysing actual choices of wine and beer with different awl stimuli and monetary incentives for participants could partially bridge the lack of realism of discrete choice analysis. references agnoli l., begalli d., capitello r., generation y’s perception of wine and consumption situations in a traditional wine-producing region. int. j. wine bus. res., 23(2) (2011), 176-192. doi: 10.1108/17511061111143025 18 azzurra annunziata, lara agnoli, riccardo vecchio, steve charters, angela mariani agnoli l., boeri m., scarpa r., capitello r., begalli d., behavioural patterns in mediterranean-style drinking: generation y preferences in alcoholic beverage consumption. j. behav. exp. econ., 75 (c) (2018) 117–125. doi:10.1016/j.socec.2018.06.001 agostinelli 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definition in choice experiments: a methodological proposal based on customized scenarios fabio boncinelli*, caterina contini, francesca gerini, caterina romano, gabriele scozzafava, leonardo casini the impact of country of origin on brand equity: an analysis of the wine sector nádia passagem1, cátia fernandes crespo2,*, nuno almeida3 competitive strategies for wine cooperatives in the german wine industry barbara richter1,*, jon hanf2 valuation of viticultural adaptation to climate change in vineyards: a discrete choice experiment to prioritize trade-offs perceived by citizens verónica farreras1,2, laura abraham3,* does the institutional quality affect labor productivity in italian vineyard farms? maria raimondo1,*, concetta nazzaro4, annamaria nifo3, giuseppe marotta2 the role, scope and management of r&d and innovation in the wine sector: an interview with antonio graca peter hayes am wine economics and policy 9(2): 63-81, 2020 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/web-8407 wine economics and policy citation: nádia passagem, cátia fernandes crespo, nuno almeida (2020) the impact of country of origin on brand equity: an analysis of the wine sector. wine economics and policy 9(2): 63-81. doi: 10.36253/web-8407 copyright: © 2020 nádia passagem, cátia fernandes crespo, nuno almeida. this is an open access, peerreviewed article published by firenze university press (http://www.fupress. com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information files. competing interests: the author(s) declare(s) no conflict of interest. the impact of country of origin on brand equity: an analysis of the wine sector nádia passagem1, cátia fernandes crespo2,*, nuno almeida3 1 school of technology and management, polytechnic of leiria, morro do lena – alto do vieiro, apartado 4163, 2411-901 leiria, portugal, e-mail: nadiapassagem@gmail.com 2 carme, centre of applied research in management and economics, school of technology and management, polytechnic of leiria, csg/advance, morro do lena – alto do vieiro, apartado 4163, 2411-901 leiria, portugal, e-mail: catia.crespo@ipleiria.pt 3 citur, estm, polytechnic of leiria, rua do conhecimento, nº 4, 2520–614 peniche, portugal, e-mail: nunoalmeida@ipleiria.pt *corresponding author abstract. the purpose of this study is to explore the country of origin´s effects on brand equity dimensions. this research selected wine as the product category and data were collected from portuguese and canadian consumers. our conceptual framework incorporates the influence of country of origin on brand equity dimensions, composed by brand loyalty, brand associations, brand awareness and perceived quality, as well as the brand equity subsequent effect on purchase intention. the hypotheses were tested using partial least squares structural equation modelling (pls-sem). the results of the portuguese sample indicate that the country of origin affects positively all the brand equity dimensions. the canadian sample results show that country of origin affects brand loyalty and perceived quality, but there is no significant effect on brand associations and brand awareness dimensions. keywords: country of origin, brand equity, wine sector, loyalty, awareness, brand associations, perceived quality. 1. introduction consumers’ concerns during the purchasing process comprise, not only product quality and price, but also other factors such as, the product’s country of origin. the home country effect is a persistent concern in international marketing (koschate-fischer et al., 2012). countries recognized as good producers in a product category generally leverage the acceptance of their products compared to countries less recognized in that product category (yasin et al., 2007). country of origin can act as an indicator of quality, exerting an important impact on consumer’s purchase intention (lin and chen, 2006) and consequently, on the consumer’s perception of brand equity (rezvani et al., 2012). this study intends to analyze the impact of country of origin on brand 64 nádia passagem, cátia crespo, nuno almeida equity, placing the focus of the analysis on the portuguese and canadian markets. different types of conceptual categorizations have been developed to classify wine producing countries, but the classification that separates the geography of the wine industry into two “worlds”, has been widely applied (rodrigues et al., 2020). according to this taxonomy, portugal is classified as an “old world” wine producing country, while canada is a “new world” wine producing country (johnson and robinson, 2013). remaud and couderc (2006) consider that “old world” wine producing countries have historically emphasized the origin of grapes and promoted their specified regions’ designations, while “new world” has mainly concentrated on supporting labeling through strong proprietary brands and grape variety. the wine producer country classification “old world” vs. “new world” can be combined with the categorization into “traditional producer” vs. “nontraditional producer” (thorpe, 2009). while the categories “old world” vs. “new world” consider the country’s history as a wine producer, the classification “traditional producer” vs. “non-traditional producer” refers to the country’s relevance in world wine exports. therefore, a non-traditional exporter indicates a country with a reduced presence as an exporter in the international wine market. according to these categorizations, the differences between the two countries under investigation are evident, since while portugal is classified as an old world traditional producing wine country, canada is considered as a new world non traditional producing wine country (rodrigues et al., 2020). portugal is the eleventh major wine producer in the world, with a total volume of wine production of approximately 6.1 million hectoliters (oiv, 2019). between 2014 and 2018, portuguese wine production increased 29% in volume. portugal is the fourth major per capita wine consumer in the world, with a per capita consumption of 51.3 liters in 2018, and the eleventh major wine consumption market in the world, reaching a total of 5.5 million hectoliters in that year (oiv, 2019). moreover, portugal is the ninth world top exporter of wine, exporting around three million hectoliters of wine in 2019 (statista, 2020). the export volumes of portuguese wines have been relatively stable from 2011 to 2019. additionally, prowein business report (prowein, 2018) considered portugal as one of the wine origins with stronger demand from international marketers. canada has a wine consumption per capita of 16.9 liters (statista, 2020). the per capita wine consumption in the canadian market increased 14.2% between 2010 and 2018. the wine consumption in the canadian market has been showing a growing trend over the past few years, with an increase of 32.7% between 2011 and 2019, in terms of sales. in 2019, canadian wine sales reached approximately 2.28 billion canadian dollars, while imported wine sales achieved a total of 5.18 billion canadian dollars. canada is the twelfth major wine consumption market in the world, reaching a total of 4.9 million hectoliters in 2018 (oiv, 2019). moreover, canada is the sixth world top importer of wine, with approximately a total of 4.2 million hectoliters (oiv, 2019). between 2014 and 2018, canadian wine imports demonstrated a growth of 10% in volume. in the prowein business report (prowein, 2018), canada was considered one of the wine markets more attractive and with lower risk for wine producers. based on a sample of portuguese and canadian consumers, the current study intends to investigate the influence of the wine’s country of origin on the different brand equity dimensions and purchase intention. the next section contains the literature review, followed by hypotheses development. next, the methodology and results sections are presented. this study is concluded with the discussion, managerial implications, and suggestions for future research. 2. literature review 2.1. country of origin country of origin can be defined as the country to which the consumer associates a product or brand as its source, regardless of where the product is produced (herz and diamantopolous, 2013). the country of origin’s effect is mentioned by several authors (e.g. sauer et al., 1991; suh et al., 2015) as the influence exerted on consumer evaluation of a product or service, depending on the stereotypes formed in relation to the country of origin. country of origin can be considered as a product attribute (cordell, 1992; hong et al., 1989). consumers often develop stereotypes about the products of a particular country and their respective attributes (yasin et al., 2007). the greater the contact and knowledge about a country or its products, the more objective can be the consumer’s perception regarding the country of origin effect (lee and lee, 2009). country of origin may function as an indicator of product quality or as an appeal to references that consumers may have developed regarding products of a particular origin (insch and floreck, 2009). consequently, a positive image of the country can be used to highlight the relationship between the product and its origin. furthermore, a corporate brand’s country of origin can influence the reputation signals’ effectiveness (cowan and guzman, 2020). 65the impact of country of origin on brand equity: an analysis of the wine sector the influence of country of origin on consumers’ product evaluations can occur on three levels, namely, cognitive, affective and normative (martinez-carrasco, brugarolas and martinez-poveda, 2005). regarding the cognitive perspective, country of origin can be used as a signal for quality attributes. the affective level is activated by emotional benefits related to national pride and social status. the normative perspective is associated with personal and social norms that consumers possess related to the country of origin. for instance, the purchase of national products can be perceived as the correct way of conduct to support the national economy. in the wine sector, communication of its origin is mandatory, both in canada (food and drugs act, 1985 and consumer packaging and labeling act, 1985) and in the european union (protected designation of origin, 2011), thus increasing the relevance of the country of origin’s effect in this product category (thøgersen et al., 2017). the positive impact of the country of origin occurs in many industries. however, previous research has defended that country of origin effects may differ between product categories (trinh, corsi, and lockshin, 2019). for instance, country of origin seems to exert weaker effects for low-involvement products, such as wheat, potatoes, or butter (magnusson, haas, and zhao, 2008). on the contrary, country of origin effects tend to be stronger for high-involvement products, such as wine, since consumers invest more effort into collecting information about those products (li, leung, wyer, 1993). country of origin is used as crucial element in promotion campaigns in the wine industry (trinh et al., 2019). previous studies have shown that the country of origin of wines can have important implications for both export and marketing activities of the wine industry. for instance, rodrigues et al. (2020) have shown that the country of origin of wines is extremely relevant to the wine traders’ mental representation. tzimitra-kalogianni et al. (1999) concluded that the wine origin is one of the most relevant wine attributes in the greek market, together with label, aroma, taste, and clarity. keown and casey (1995) evidenced that country of origin is the most relevant criterion for wine selection in northern ireland. steiner (2000) highlighted the importance of origin in the selection of french wines in the uk wine market. therefore, in the wine industry, country of origin can be considered a crucial element in the consumers’ wine choice. 2.2. ethnocentrism the concept of ethnocentrism has been mentioned in international business for about half a century (michailova et al., 2017). ethnocentrism can be defined as: “a view of things in which one’s own group is the center of everything. each group nourishes its own pride and vanity, boasts itself superior, exalts its own divinities, and looks with contempt on outsiders” (sumner, 1906: 13). ethnocentric consumer trends affect the emotional dimension related to the process of buying foreign products and creates the assumption that this choice somehow threatens domestic industry and national security (herche, 1992). thus, ethnocentric consumers believe that buying foreign-produced products is morally wrong and does not contribute to the local economy (el banna et al., 2018), therefore opting to buy domestic products and disregarding foreign products. with increasing globalization, the concept of ethnocentrism becomes relevant for understanding the moral concern resulting from the consumption of domestic versus foreign goods (siamagka et al., 2015). in the wine industry, consumer ethnocentrism has been considered as being capable to influence both the perceived quality and the purchase intentions of regional wines (garcía-gallego, chamorro-mera, and garcíagalán, 2015). these results confirm that communication campaigns that promote a wine region’s image are valuable, not only as an external promotion tool, but also as an encouragement for domestic consumption, particularly by consumers with stronger ethnocentrism levels. martinez-carrasco et al. (2005) found that consumer ethnocentrism creates strong preferences for local wines. therefore, consumer ethnocentrism can act as a crucial consumption motivation during the process of wine selection. ethnocentrism creates in the individual a sense of identity and stimulates the understanding that national symbols and values are objects of attachment and pride (le vine and campbell, 1972), motivating the purchase of domestic products and creating a negative attitude towards foreign products (verlegh and steenkamp, 1999). nowadays, consumers’ choices encounter a large range of domestic and foreign products. ethnocentric tendencies constitute one of the factors that influence the purchase decision between domestic and foreign products. in the wine industry, consumer ethnocentrism can exert a strong and positive influence on attitudes related to domestic wine purchase (tomić maksan, kovačić, and cerjak, 2019). 2.3. brand equity brand equity can be defined as a “set of brand assets and liabilities linked to a brand, its name and symbol, that add to or subtract from the value provided by a prod66 nádia passagem, cátia crespo, nuno almeida uct or service to a firm and/or to that firm’s customers” (aaker, 1991: 27). consequently, brand equity translates the value of a product, a service, or a corporate brand (kim, choe, and petrick, 2018). a brand is considered to benefit from a positive customer-based brand equity effect when consumers respond more favorably to an element of the brand marketing mix, compared to their responses to a similar marketing mix element from an unnamed or a fictitiously named version of the product or service (keller, 1993). brand equity is of critical importance since it conditions customer lifetime value and leverages financial market outcomes (heitmann, et al. 2020). the assets and liabilities that generate brand equity can be grouped into the following dimensions: brand loyalty, brand awareness, perceived quality, brand associations and other proprietary brand assets (aaker, 1991). these dimensions of brand equity have long been of crucial interest to business managers, marketing, and consumer behavior researchers (chen, su, and lin, 2011; kim et al., 2018). in the following sections, the main antecedents of customer-based brand equity (brand loyalty, brand awareness, perceived quality, brand associations) are explained in more detail. 2.4. brand loyalty brand loyalty is often the core of brand equity (aaker, 1991), as consumer loyalty reinforces the brand over competitors. this relationship is strengthened as brand loyalty acts as a barrier to entry for new competitors, since the cost of attracting new customers is higher than retaining existing consumers. brand loyalty is not a unanimous concept in the literature, but two key approaches to behavioral loyalty and attitudinal loyalty are highlighted (roustasekehravani et al., 2015). behavioral loyalty is based on consumer behavior. thus, the consumer who systematically buys the same brand is considered loyal. the subjectivity and complexity of explaining why the behavior occurs, is pointed out as the main disadvantage of this approach, since the company is objectively unaware of the factors that determine the consumer’s brand loyalty (odin et al., 2001). on the other hand, attitudinal loyalty delimits and identifies the determining factors of loyal consumer attitudes. therefore, research focuses on the consumer’s psychological commitment to purchase, without necessarily considering whether the purchase takes place. premium price can be perceived as a basic indicator of brand loyalty, as it indicates that consumers are willing to pay an extra percentage for that brand, although other brands with similar characteristics may be available at a lower price (aaker, 1991). 2.5. brand awareness brand awareness can be defined as the ability of consumers to recognize or recall that a brand belongs to a particular product category (romaniuk et al., 2017). brand awareness is strongly related to the strength of a brand’s presence in the minds of consumers, resulting in their ability to identify the brand under various market conditions (świtała et al., 2018). for aaker (1991), brand awareness is created by repeatedly and memorably exposing brand elements such as the name, slogan, logo, or packaging to consumers. this exposure contributes to establish brand roots in consumers’ memory and to strengthen brands’ links with the product category. the strengthening of brand awareness paves the way for a victorious brand, due to the distinction from other brands present in the market (ahmed et al., 2017). for example, constellation, one of the largest wine companies in the world, invests heavily in the acquisition of wine brands to create and increase brand awareness (atkin et al., 2017). this strategy recognizes the important role that brand awareness plays in the distinction between products and in the consequent purchase, therefore consumers can buy a bottle of wine by the brand name, even when they have little knowledge about that particular wine (foroudi, 2018). 2.6. brand associations brand associations relate a memory to a brand (aaker, 1991). associations are starting points for buying decisions, as consumers rely on them to retain information emanating from brand actions, to generate a buying reaction and to create positive behaviors, allowing openness for brand diversification into other types of products. thus, companies try to associate their brand with a certain attribute, recognized by the consumer, to make it difficult for new brands to enter the market (akkucuk et al., 2016). brand associations are important for both businesses and consumers, as brand associations influence brand differentiation, brand positioning, brand extension, consumer information processing, consumer behavior, purchase intention and consumer satisfaction (bawa and saha, 2016). 2.7. perceived quality perceived quality is the consumer’s subjective assessment of the excellence or generic superiority of a product (zeithaml, 1988). the degree of perceived quality increases with the long-term brand relationship experi67the impact of country of origin on brand equity: an analysis of the wine sector ence, as through this, consumers recognize brand differentiation and superiority. perceived quality is subjective since it depends on the perception and discernment of the consumer involved. saleem et al. (2015) characterize perceived quality as a psychological assessment of the product based on consumer perceptions. this assessment is based on product characteristics, whether intrinsic or extrinsic. the intrinsic attributes, which are related to the product itself, may be the aroma, the palate, or the color, in the case of wine. extrinsic characteristics are related to properties that are not physically part of the product, such as packaging or region of origin (sáenz-navajas et al., 2016). the intrinsic determinants of wine quality are the most important for brand value creation, however, they are also the most difficult to control. thus, the combined valuation of both characteristics is predominant (danner et al., 2016). perceived quality is a particularly important factor in the wine product category, as consumers perceptions are quite heterogeneous and strongly influenced by their level of specialization or knowledge (sáenz-navajas et al., 2016). therefore, perceived quality can be understood as a brand value proposition, which makes consumers endogenous to value creation (liu et al., 2017). 3. hypotheses the country of origin can affect the purchase behavior (dmitrovic, vida, and reardon, 2009). consumers form multiple stereotyped national images regarding a product’s country of origin (ahmed and d’astous, 2007; laroche et al., 2005), and these perceptions influence their purchase behavior (garcía-gallego, et al., 2015; papadopoulos, and heslop, 2002; pharr, 2005). a country of origin with a strong presence generally has a positive impact on purchase intention, as it acts as an indicator of product quality (aichner et al., 2017). therefore, when a wine is thought to be originating from a country with high standards, a long tradition and or with strong wines brands, it will be considered superior and more appealing compared to a similar wine from a country not recognized as a wine producer. certain brands adopt names that refer to nationalities recognized by the product category, in order to leverage their product based on the effect of the country of origin, such as the french brewer brasserie fischer that launched its tequila flavored beer by adopting a name, desperados, and a mexican image. based on the effect of portugal as a country of origin in the wine sector, the following hypotheses are proposed: h1a: the country of origin portugal relates positively with purchase intention for portuguese consumers. h1b: the country of origin portugal relates positively with purchase intention for canadian consumers. brand equity has a positive and important impact on the preference for a brand. hoeffler et al. (2003) suggest that strong brands get a greater preference from consumers because with a certain level of product knowledge, consumers buy the brands with the highest value (aaker, 1991). brand equity is reflected in the preference for the brand, and thus we can infer that the preference for the brand is reflected in purchase intention (bougenvile and ruswanti, 2017). thus, the following hypotheses are proposed: h2a: brand equity relates positively with purchase intention for portuguese consumers. h2b: brand equity relates positively with purchase intention for canadian consumers. consumers’ national identities have been showing a growing impact on their consumption behavior (dmitrovic et al, 2009; quellet, 2007). stronger competitive rivalries in domestic markets may stimulate nationalistic purposes in consumers’ purchasing motivations (shankarmahesh, 2006). since consumers judge products taking into account the country with which they are associated, consumers may reveal, in specific conditions, a preference for a domestical alternative (granzin and olsen, 1998). ethnocentric consumers tend to believe that it is unpatriotic to purchase foreign products and to consider national manufactured products as being superior (shimp and sharma, 1987). consequently, consumer ethnocentrism strongly influences the construction of consumer attitudes towards domestic and foreign products (kim and pysarchik, 2000). in the current study, the ethnocentrism of portuguese and canadian consumers and their relationship with “portugal” country of origin effect was analyzed, assuming that the greater the degree of portuguese consumers’ ethnocentrism, more favorable will be the associations that they will create in relation to their own country of origin. in turn, it is considered that the greater the degree of ethnocentrism of canadian consumers the less favorable their associations will be in relation to the country of origin portugal. therefore, the following hypotheses are proposed: h3a: portuguese consumers’ ethnocentrism relates positively with the country of origin portugal. h3b: canadian consumers’ ethnocentrism relates negatively with the country of origin portugal. the country of origin can provide to consumers important quality connotations, consequently affecting the perceived quality of a product (klein, ettenson, and morris, 1998; verlegh and steenkamp, 1999). the coun68 nádia passagem, cátia crespo, nuno almeida try image inf luences consumers’ product evaluations (lee, lee, and lee, 2013), regarding attributes such as the product quality and reliability (laroche et al., 2005). consequently, consumers make use of product-country images as a cue for inferring product quality (haubl and elrod 1999; verlegh, steenkamp, and meulenberg, 2005). consumers tend to have favorable perceptions regarding brand quality when the brand is known to come from a country strongly associated with a certain product category (elliot and cameron, 1994). thus, it is expected that associations to a country, well recognized in a product category, are transferred to the perceived quality of brands originated from that country. hence, the following hypotheses are proposed: h4a: the country of origin portugal relates positively with perceived quality for portuguese consumers. h4b: the country of origin portugal relates positively with perceived quality for canadian consumers. country of origin can generate and emphasize secondary associations to a given brand, through connections to places, people, and moments (pappu et al., 2006). since associations to a country of origin are considered as secondary associations to the brand (keller, 1993), it is assumed that the country of origin influences brand associations. thus: h5a: the country of origin portugal relates positively with brand associations for portuguese consumers. h5b: the country of origin portugal relates positively with brand associations for canadian consumers. consumers are known to associate the brand with its country of origin. previous studies confirm a strong relationship between country of origin and brand awareness (sanyal et al., 2011). in this sense, the awareness of a wine-producing country is transferred to wines from that country, thus influencing the consumer. therefore, brands from the same country share a common base of awareness related to the country of origin (pappu et al, 2007). hence, the following hypotheses are proposed: h6a: the country of origin portugal relates positively with brand awareness for portuguese consumers. h6b: the country of origin portugal relates positively with brand awareness for canadian consumers. country of origin can affect brand loyalty through its positive image and consumer familiarity with the country’s products (septyanti and hananto, 2017). in parallel, paswan et al. (2003) verified that consumers tend to be loyal to a country, just as they are loyal to brands. therefore, consumer satisfaction with products from a particular country can influence consumer loyalty to that country’s brands (pappu et al., 2007). thus: h7a: the country of origin portugal relates positively with brand loyalty for portuguese consumers. h7b: the country of origin portugal relates positively with brand loyalty for canadian consumers. perceived quality can increase brand preference and induce consumers to choose a brand over another (liu et al., 2017). aaker (1991) also identifies perceived quality as a distinctive factor that offers the consumer a reason to buy or not a certain product. in this way, a growth in perceived quality can translate into an increase in brand equity. therefore, the following hypotheses are proposed: h8a: perceived quality relates positively with brand equity for portuguese consumers. h8b: perceived quality relates positively with brand equity for canadian consumers. brand associations are fundamental to differentiate the brand from its competitors (aaker, 1991). krishnan (1996) concluded that brands with strong brand equity tend to possess more positive brand associations than others with weak brand equity. positive brand associations, influence consumers’ choice, benefit the brand’s image and enhance brand equity (faircloth, capella, and alford, 2001; pouromid and iranzadeh, 2012; sasmita and suki, 2015; yasin et al., 2007). in the context of the wine product category, associations with a brand may be represented by status or by a moment that makes that wine special, giving it an identity that translates into a positive association with that wine brand. consequently, brand associations can benefit brand equity. thus: h9a: brand associations relate positively with brand equity for portuguese consumers. h9b: brand associations relate positively with brand equity for canadian consumers. the greater the brand awareness the more likely the brand is to be considered in purchase situations (yasin et al., 2007). consumers usually prefer to buy brands that are familiar to them. as a result, increasing brand awareness can lead to an increase in brand equity (pouromid and iranzadeh, 2012; keller, 2008). this leads to following hypotheses: h10a: brand awareness relates positively with brand equity for portuguese consumers. h10b: brand awareness relates positively with brand equity for canadian consumers. consumers’ brand loyalty reflects a repetitive purchasing behavior of the brand, which is positively associated to brand equity (sasmita and suki, 2015; zhang, van doorn, and leeflang, 2014). consequently, brand loyalty is considered as an important source of consumer-based brand equity (aaker, 1991; kim, kim, and an, 2003). when consumers are loyal to a brand, even when brands with enhanced characteristics are available, it means that the brand has value for the consumer (agrawal and kamakura, 1999). therefore, stronger lev69the impact of country of origin on brand equity: an analysis of the wine sector els of brand loyalty translate into higher levels of brand equity. therefore: h11a: brand loyalty relates positively with brand equity for portuguese consumers. h11b: brand loyalty relates positively with brand equity for canadian consumers. given the hypotheses previously deducted, the conceptual model proposed is presented in figure 1. 4. materials and methods 4.1. survey development an online survey was launched based on the literature review. the country of origin measure (table 2 and table 3) was adapted from yasin et al. (2007) and is composed by eight items. ethnocentrism was measured with a five-item scale version of shimp and sharma’s (1987) cetscale, adapted from strizhakova and coulter (2015) and alden et al. (2013). the purchase intention measure was adapted from xie et al. (2015) and is composed of three items. brand associations, brand awareness and brand loyalty were measured with three-item scales, adapted from yasin et al. (2007) and yoo et al. (2000). perceived quality was measured with a six-item scale adapted from yoo et al. (2000). brand equity was measured with a seven-item scale adapted from yasin et al. (2007). all constructs were measured on a likert scale, with the response anchors from 1, indicating “strongly disagree, to 5 “indicating” strongly agree”. the survey was prepared in english and then translated into portuguese, following the back-translation process. prior to the questionnaire released, a pre-test was sent to canadian and portuguese correspondents to identify possible improvements in the scope of questions understanding and adaptation to the reality of each country. through the application of an exploratory factor analysis, common method bias (podsakoff and organ, 1986) was analyzed. the results of the exploratory factor analysis revealed that there is no single factor that explains most of the results variance. in order to test for non-response bias, the early and late respondents (comprising the first 75% and the last 25% to answer the questionnaire, respectively) were compared across all variables in the model (armstrong and overton, 1977). no significant differences were found between the initial respondents and the late respondents. 4.2. sample this study was developed in order to analyze the influence of the country of origin in the different dimensions of brand equity, in the wine sector, considering the perceptions of portuguese and canadian consumers. the portuguese domestic wine market currently demonstrates a high growth potential and canada was identified as a strategic market by viniportugal (2019) in the strategic plan for the internationalization of the wine sector in portugal. following a quantitative approach and a non-probability sampling procedure, an online survey was implemented in portugal and canada to collect the data. to reach a diversified and wide sample, the survey was implemented across universities, wine associations and wine importers. participants were invited to participate in the study by email. the survey was addressed to individuals over the age of eighteen with portuguese and canadian nationalities. a total of 208 valid responses were collected in portugal and 63 valid responses in canada, in the year 2018. in the portuguese sample, 50.5% of respondents are male and 49.5% are female, which indicates a balanced sample in terms of gender. in the canadian sample 57.1% are male and 42.9% are female. the most representative age group in both samples is 28 to 37 years old, with 45.2% and 42.9% of portuguese and canadian respondents, respectively. in the portuguese sample, 40.9% of respondents have a bachelor’s degree and in the canadian sample, this percentage is 49.2%. the portuguese sample consumes an average of 1 bottle of wine per month and presents portugal and france as preferred countries of origin. the canadian sample consumes an average of 2 bottles of wine per month and presents the usa and italy as preferred countries of origin for wine purchase. table 1 presents the demographic characteristics of the sample. figure 1. conceptual model: the impact of the country of origin on brand equity. 70 nádia passagem, cátia crespo, nuno almeida 5. results data were analyzed with partial least squares structural equation modelling (pls-sem) in smart pls 3.0. (ringle, wende, and becker, 2015), a technique widely used in behavioral sciences. we selected this method because pls-sem is particularly recommended to predict and explain the variance of key constructs through different explanatory constructs (hair et al., 2012). consequently, this technique should be selected when prediction is one of the main focus of the research (hair et al., 2020). moreover, pls-sem is recommended to test complex models with a large number of latent variables (hair et al., 2020). furthermore, pls-sem is strongly appropriate to test structural models with small sample sizes (barclay and smith, 1997). in the evaluation process of the partial least squares structural equation model, the steps identified by hulland (1999) were followed. the analysis was started with the assessment of the model reliability and validity, followed by the structural model evaluation. to analyze the measurement model the individual items’ evaluation was conducted. all constructs possess items with loadings superior to 0.6 (bagozzi and yi, 2012), ensuring convergent validity – tables 2 and 3. alpha cronbach values exceed the desirable value of 0.60, which demonstrates that the scales are reliable and the used measures have content validity (hair et al., 2009). the composite reliability for each construct is above the desirable value 0.7 (bagozzi and yi, 2012). the average variance extract (ave) in each construct is above the reference value of 0.5 (fornell and larcker, 1981) ensuring convergent validity of the constructs. the assessment of discriminant validity followed fornell and larcker’s (1981) recommendations. the fact that the shared variance among any two constructs (the square of their intercorrelation) is less than the average variance explained in the items by the construct (table 4 and table 5) supports the existence of discriminant validity. to evaluate the structural model, it is recommended an assessment through the use of r2, the level of explained variance of each endogenous variable, which should be superior to 10% (falk and miller, 1992). as table 2 and table 3 evidence, this condition is verified for each endogenous variable. regarding the portuguese sample, hypothesis 1a is supported by the results as shown by the following values: (β)=0.099; p<0.05, t-value=1.878 (table 6). therefore, the country of origin portugal is positively related with purchase intention for portuguese consumers. the results also demonstrate that brand equity relates positively with purchase intention for portuguese consumers, supporting hypothesis 2a (β =0.784; p<0.001, t-value =17.999). moreover, portuguese consumers’ ethnocentrism relates positively with the country of origin portugal, supporting hypothesis 3a (β = 0.525; p<0.001, t-value = 10.742). the study also demonstrates that the country of origin portugal relates positively with perceived quality for portuguese consumers, supporting hypothesis 4a (β = 0.714; p<0.001, t-value = 17.309). results support hypothesis 5a with the following values (β = 0.510; p<0.001; t-value = 6.578), therefore the country of origin portugal relates positively with brand associations for portuguese consumers. hypothesis 6a is supported (β = 0.472; p<0.001, t-value = 9.693), suggesting that country of origin portugal relates positively with brand awareness for portuguese consumers. regarding hypothesis 7a, the results demonstrate that the country of origin portugal relates positively with brand loyalty for portuguese consumers (β = 0.549; p<0.001; t-value = 9.174). hypothesis 8a is supported by the results (β = 0.481; p<0.001; t-value = 8.177) thus, perceived quality relates positively with brand equity for portuguese consumers. hypothesis 9a is not supported (β = -0.026; t-value = 0.376), therefore results doń t provide evidence for a significant effect of brand associations on brand equity. moreover, hypothesis 10a is not supported (β = 0.01; t-value = 0.209), thus results provide evidence for a non-significant effect of brand awareness on brand equity. the positive relationship between brand loyalty and brand equity predicted in hypothesis 11a is supported by the results (β = 0.459; p<0.001, t-value = 7.077). table 1. final sample characterization. portugal % canada % gender female 50.5 42.9 male 49.5 57.1 age 18-27 20.2 12.7 28-37 45.2 42.9 38-49 24.5 23.8 50-59 8.2 15.8 60-79 1.4 4.8 >80 0.5 0.0 qualification high school 40.8 27.0 bachelor degree 40.9 49.2 master degree 14.4 22.2 phd 3.9 1.6 71the impact of country of origin on brand equity: an analysis of the wine sector table 2. measurement items and validity assessment for the portuguese sample. constructs items factor loading cronbach alpha composite reliability ave r² country of origin portugal is an innovative country in manufacturing 0.787 0.901 0.9243 0.592 0.276 portugal is a country that has high level of technological advance 0.806 portugal is a country that is good in designing 0.744 portugal is a country that is creative in its workmanship 0.802 portugal is a country that has high quality in its workmanship 0.810 portugal is a country that is prestigious in wine production 0.745 portugal is a country that has an image of an advanced country 0.665 portugal is known for being easy to do business with 0.787 ethnocentrism i believe that i should buy national products first, last and foremost 0.735 0.899 0.8574 0.710 purchasing foreign-made products is unpatriotic 0.827 it is not right to purchase foreign-made products because it puts portugal out of work 0.888 a true portuguese must always buy products made in portugal 0.907 portugal should not purchase foreign products, as it puts portuguese out of jobs 0.846 purchase intention i will choose portuguese wines next time when i buy this product category 0.958 0.908 0.9558 0.915 0.722 i believe that portuguese wines are my first choice for wine shopping 0.956 i am willing to try new portuguese wines * brand associations i have no difficulty imagining myself drinking a glass of portuguese wine 0.692 0.747 0.8575 0.670 0.261 i have an opinion about portuguese wines 0.866 i know the quality of portuguese wines 0.884 brand awareness i can quickly recall the symbol or logo of wines of portugal 0.853 0.668 0.8574 0.751 0.222 i know how the symbol of wine regions looks like 0.879 i am aware of wines of portugal * perceived quality portuguese wines are of high quality 0.842 0.904 0.9247 0.639 0.510 the likely quality of portuguese wines is extremely high 0.872 the likelihood that portuguese wines are reliable is very high 0.884 portuguese wines must be of very good quality 0.811 the likelihood that portuguese wines would be tasty is very high 0.777 the reliability of portuguese wines is very high 0.684 brand loyalty i consider myself highly loyal to wines from portugal 0.838 0.711 0.835 0.629 0.302 i will think twice before buying wine from another country if it has almost the same characteristics as portuguese wines 0.740 compared to other origins of wines that have similar features, i am willing to pay a premium (higher) price for portuguese wines 0.796 brand equity if there is another wine as good as a portuguese wine, i prefer to buy a portuguese wine 0.803 0.927 0.9428 0.733 0.669 if another wine is no different from portuguese wines in any way, it seems smarter to purchase portuguese wine 0.868 it makes sense to buy portuguese wines instead of any other wines, even if they are the same 0.842 to impress my guests, i plan to buy portuguese wine even though there are other wines as good as portuguese wines 0.886 even if another wine has the same price as a portuguese wine, i would still buy portuguese wine 0.871 even if another wine has similar features as portuguese wines, i would prefer to buy portuguese wines 0.866 if i have to choose among brands of wine, portuguese wines are definitely my choice * *item was dropped due to scale purification. 72 nádia passagem, cátia crespo, nuno almeida table 3. measurement items and validity assessment for the canadian sample. constructs items factor loading cronbach alpha composite reliability ave r² country of origin portugal is an innovative country in manufacturing 0.848 0.875 0.9050 0.615 0.157 portugal is a country that has high level of technological advance 0.768 portugal is a country that is good in designing 0.780 portugal is a country that is creative in its workmanship 0.822 portugal is a country that has high quality in its workmanship 0.653 portugal is a country that is prestigious in wine production 0.820 portugal is a country that has an image of an advanced country* * portugal is known for being easy to do business with* * ethnocentrism i believe that i should buy national products first, last and foremost* * purchasing foreign-made products is unpatriotic 0.940 0.948 0.9621 0.864 it is not right to purchase foreign-made products because it puts canada out of work 0.918 a true canadian must always buy products made in canada 0.917 canada should not purchase foreign products, as it puts canadian out of jobs 0.943 purchase intention i will choose portuguese wines next time when i buy this product category 0.891 0.608 0.8283 0.708 0.536 i believe that portuguese wines are my first choice for wine shopping 0.789 i am willing to try new portuguese wines * brand associations i have no difficulty imagining myself drinking a glass of portuguese wine* * i have an opinion about portuguese wines 0.973 0.927 0.9645 0.931 0.003 i know the quality of portuguese wines 0.957 brand awareness i can quickly recall the symbol or logo of wines of portugal 0.943 0.771 0.8925 0.806 0.042 i know how the symbol of wine regions looks like 0.851 i am aware of wines of portugal * perceived quality portuguese wines are of high quality 0.807 0.894 0.9160 0.612 0.164 the likely quality of portuguese wines is extremely high 0.615 the likelihood that portuguese wines are reliable is very high 0.835 portuguese wines must be of very good quality 0.891 the likelihood that portuguese wines would be tasty is very high 0.826 the reliability of portuguese wines is very high 0.810 brand loyalty i consider myself highly loyal to wines from portugal 0.905 0.875 0.9232 0.800 0.190 i will think twice before buying wine from another country if it has almost the same characteristics as portuguese wines 0.926 compared to other origins of wines that have similar features, i am willing to pay a premium (higher) price for portuguese wines 0.851 brand equity if there is another wine as good as a portuguese wine, i prefer to buy a portuguese wine 0.739 0.939 0.9494 0.678 0.725 if another wine is no different from portuguese wines in any way, it seems smarter to purchase portuguese wine 0.824 it makes sense to buy portuguese wines instead of any other wines, even if they are the same 0.854 to impress my guests, i plan to buy portuguese wine even though there are other wines as good as portuguese wines 0.875 even if another wine has the same price as a portuguese wine, i would still buy portuguese wine 0.907 even if another wine has similar features as portuguese wines, i would prefer to buy portuguese wines 0.901 if i have to choose among brands of wine, portuguese wines are definitely my choice * *item was dropped due to scale purification. 73the impact of country of origin on brand equity: an analysis of the wine sector concerning the canadian sample, the positive relationship between country of origin and purchase intention predicted in hypothesis 1b is not supported by the results (β =0.131; t-value =0.801) – table 7. regarding hypothesis 2b, the results demonstrate that brand equity relates positively with purchase intention for canadian consumers, supporting hypothesis 2b (β =0.656; p<0.001, t-value =8.259). moreover, canadian consumers’ ethnocentrism relates negatively with the country of origin portugal, supporting hypothesis 3b (β = -0.397; p<0.001, t-value = 3.749). the study also demonstrates that the country of origin portugal relates positively with perceived quality for canadian consumers, supporting hypothesis 4b (β = 0.405; p<0.001, t-value = 4.001). hypothesis 5b is not supported (β = 0.058; t-value = 0.443), therefore results do not provide evidence for a significant effect of the country of origin portugal on brand associations for canadian consumers. moreover, hypothesis 6b is not supported (β = 0.205; t-value = 1.318), thus results provide evidence for a non-significant effect of the country of origin portugal on brand awareness for canadian consumers. regarding hypothesis 7b, the results demonstrate that the country of origin portugal relates positively with brand loyalty for canadian consumers (β = 0.405; p<0.001, t-value = 4.348). hypothesis 8b is not supported by the results (β = 0.132; t-value = 1.292) thus, the relationship between perceived quality and brand equity is non-significant for canadian consumers. the positive relationship between brand associations and brand equity predicted in hypothesis 9b is supported by the results (β = 0.196; p<0.05, t-value = 2.300). hypothesis 10b is not supported (β = -0.109; t-value = 0.975), thus results provide evidence for a nonsignificant effect of brand awareness on brand equity. the positive relationship between brand loyalty and brand equity predicted in hypothesis 11b is supported by the results (β = 0.697; p<0.001, t-value = 8.255). 6. discussion and managerial implications this study analyses the influence of country of origin on the different brand equity dimensions, in the wine sector, considering the perceptions of portuguese and canadian consumers. results demonstrate that country of origin partially inf luences purchase intention. regarding portuguese consumers, findings show that consumers are sensitable 4. discriminant validity for the portuguese sample. 1 2 3 4 5 6 7 8 1.brand associations 0.8185 2.ethnocentrism 0.3659 0.8429 3.purchase intention 0.5949 0.5249 0.9568 4.brand loyalty 0.5797 0.5242 0.6864 0.7928 5.brand awareness 0.4721 0.3753 0.3572 0.4908 0.8663 6.country of origin 0.5104 0.5249 0.5948 0.5492 0.4715 0.7694 7.perceived quality 0.6207 0.5084 0.6826 0.5622 0.3421 0.7142 0.7992 8.brand equity 0.5436 0.6072 0.8463 0.7195 0.3879 0.6328 0.7262 0.8563 note: the boldface scores on the diagonal are the square roots of ave. table 5. discriminant validity for the canadian sample. 1 2 3 4 5 6 7 8 1.brand associations 0.9651 2.brand awareness 0.4833 0.8980 3.brand equity 0.6156 0.4708 0.8233 4.brand loyalty 0.5381 0.6269 0.8147 0.8947 5.country of origin 0.0578 0.2052 0.4871 0.436 0.7843 6.ethnocentrism -0.2256 0.1605 -0.2733 -0.1219 -0.3963 0.9294 7.purchase intention 0.465 0.5726 0.7286 0.7299 0.4205 -0.0905 0.8413 8.perceived quality 0.7347 0.3754 0.6627 0.6132 0.4055 -0.2584 0.5246 0.7826 note: the boldface scores on the diagonal are the square roots of ave. 74 nádia passagem, cátia crespo, nuno almeida tive to wine origin during the buying process, preferring to buy national wines. this result is in accordance with previous studies that indicate country of origin as a crucial consumers’ decision factor (yunus and rashid, 2016). moreover, aichner et al. (2017) indicate that a country of origin with strong associations generally exerts a positive impact on purchase intention. however, concerning the canadian consumers, the positive influence of country of origin on purchase intention was not demonstrated. this result might be explained by the still incipient portuguese country-product image in the canadian market, as well as, by the weak presence of the table 6. hypotheses testing results for the portuguese sample. hypotheses t-value path coefficient (β) result h1a: the country of origin portugal relates positively with purchase intention for portuguese consumers. 1.878* 0.099 supported h2a: brand equity relates positively with purchase intention for portuguese consumers. 17.999*** 0.784 supported h3a: portuguese consumers’ ethnocentrism relates positively with the country of origin portugal. 10.742*** 0.525 supported h4a: the country of origin portugal relates positively with perceived quality for portuguese consumers. 17.309*** 0.714 supported h5a: the country of origin portugal relates positively with brand associations for portuguese consumers. 6.578*** 0.510 supported h6a: the country of origin portugal relates positively with brand awareness for portuguese consumers. 9.693*** 0.472 supported h7a: the country of origin portugal relates positively with brand loyalty for portuguese consumers. 9.174*** 0.549 supported h8a: perceived quality relates positively with brand equity for portuguese consumers. 8.177*** 0.481 supported h9a: brand associations relate positively with brand equity for portuguese consumers. 0.376 -0.026 not supported h10a: brand awareness relates positively with brand equity for portuguese consumers. 0.209 0.010 not supported h11a: brand loyalty relates positively with brand equity for portuguese consumers. 7.077*** 0.459 supported * p < .05; ** p < .01; *** p < .001 (one-tailed test). table 7. hypotheses testing results for the canadian sample. hypotheses t-value path coefficient (β) result h1b: the country of origin portugal relates positively with purchase intention for canadian consumers. 0.801 0.131 not supported h2b: brand equity relates positively with purchase intention for canadian consumers. 8.259*** 0.656 supported h3b: canadian consumers’ ethnocentrism relates negatively with the country of origin portugal. 3.749*** -0.397 supported h4b: the country of origin portugal relates positively with perceived quality for canadian consumers. 4.001*** 0.405 supported h5b: the country of origin portugal relates positively with brand associations for canadian consumers. 0.443 0.058 not supported h6b: the country of origin portugal relates positively with brand awareness for canadian consumers. 1.318 0.205 not supported h7b: the country of origin portugal relates positively with brand loyalty for canadian consumers. 4.348*** 0.405 supported h8b: perceived quality relates positively with brand equity for canadian consumers. 1.292 0.132 not supported h9b: brand associations relate positively with brand equity for canadian consumers. 2.300* 0.196 supported h10b: brand awareness relates positively with brand equity for canadian consumers. 0.975 -0.109 not supported h11b: brand loyalty relates positively with brand equity for canadian consumers. 8.255*** 0.697 supported * p < .05; ** p < .01; *** p < .001 (one-tailed test). 75the impact of country of origin on brand equity: an analysis of the wine sector country when compared to other wine producers such as french, italian, and north american. results demonstrate that brand equity positively influences purchase intention for both portuguese and canadian consumers, corroborating several previous studies (e.g. hoeffler and keller, 2003; aaker, 1991) who report that brands with stronger brand equity are commonly preferred by the consumer. considering the accentuation of protectionist policies, we have been witnessing in the world economy, and their consequences (andrews et al., 2018), the degree of ethnocentrism has been analyzed in order to understand the behavior of portuguese and canadian consumers regarding the country of origin effects. the results show that the effects of ethnocentrism on country of origin are emphasized in the portuguese market, since the degree of ethnocentrism positively enhances the country of origin effect, accentuating the preference of portuguese consumers for national wine. moreover, the degree of ethnocentrism of canadian consumers negatively influences the effect of portugal country of origin, restricting their preference for imported wines. the strong relationship between country of origin and perceived quality, defended by previous authors (e.g. elliott and cameron, 1994), was demonstrated in both portuguese and canadian samples. consumers of both nationalities are likely to transpose the favorable characteristics that portugal as a country conveys, to this product category. the inf luence of country of origin on consumers’ brand associations was partially demonstrated. the results of the portuguese sample demonstrate the positive effect, therefore, as advocated by pappu et al. (2006), favorable associations to the country of origin are transferred to the brand. however, the results of the canadian sample did not support this positive influence, which might be explained by the limited offer of portuguese wine in canada, compared to other sources, which may hinder the consumer’s ability to transfer possible qualities, memories and benefits to the brand. the fact that the product is not “massively” available in the canadian market might explain the unsupported relationship between country of origin and brand awareness in the canadian sample, contrarily to what is suggested in the literature (pappu et al., 2007). additionally, portugal may hasń t achieved yet a distinctive level of wine producer country, compared to other countries present in the canadian market, such as italy and france. however, in the portuguese sample, the positive influence of the country of origin on brand awareness is supported, which is in accordance with previous studies (e.g. pappu et al., 2007). therefore, the portuguese market relies heavily on national demarcated wine regions to underline the country of origin influence. the positive influence of country of origin on brand loyalty was supported in both samples. this indicates that a favorable country image can increase brand popularity and enhance brand loyalty (septyanti and hananto, 2017). therefore, loyalty to a country may be transferred to loyalty to the country’s brands, through the familiarity with a country’s products (paswan et al., 2003). regarding the positive influence of aaker’s (1991) four brand equity dimensions, namely perceived quality, brand associations, brand awareness and brand loyalty on brand equity, our results wereń t totally consistent with previous literature. the results partially supported the positive influence of perceived quality on brand equity. in accordance with previous literature (e.g. liu et al., 2017), the results of the portuguese sample demonstrate that perceived quality positively influences brand equity. however, the results of the canadian sample did not support this relationship. one possible explanation for this unsupported relationship, besides the fact that the sample may not be representative of the population, is that portugal ranks ninth in total wine imports of the canadian market (canadian vintners association, 2019), both in terms of value and quantity. as defended by zeithaml (1988), the degree of perceived quality increases with a long-term relationship with the brand, enabling the recognition of brand differentiation and superiority. thus, compared to other wines available in the canadian market, portuguese wines may still evidence some disadvantage in this brand equity dimension. moments, episodes, and facts constitute associations that consumers can produce regarding one brand, which will lead them to select one brand over another, thus contributing to the creation and enhancement of brand equity. although the relationship between brands associations and brand equity has been previously accepted in the literature (yasin et al., 2007), regarding the wine industry, this study only partially supported it (in the canadian sample). for portuguese consumers, the impact of brand associations on brand equity is not significant, which may be explained by the fact that consumers’ associations may be essentially connected to the product and not to the brand. moreover, it is important to emphasize that the survey was drawn up addressing the wines of portugal brand, instead of specific national brands. previous studies (e.g. keller, 2008) have demonstrated the importance of brand awareness for brand equity reinforcement. however, this relationship was not supported in this study. in both portuguese and canadian samples, the impact of brand awareness on brand equity does not reach the importance of other brand equity 76 nádia passagem, cátia crespo, nuno almeida dimensions, namely perceived quality, brand associations and brand loyalty. the relationship between brand loyalty and brand equity is generally accepted in the literature and has been pointed out as preponderant in the creation of brand equity (aaker, 1996). the results corroborate this relationship in both samples, therefore for wine consumers of both nationalities, brand loyalty positively influences brand equity. in the specific case of the portuguese market, the current country’s positive phase regarding tourism may be an important tool to promote the wine industry. the promotion of wine tourism can improve the reputation of wine regions and highlight their differentiating characteristics (frochot, 2003), allowing the consumer to transfer these positive associations to the brands coming from that region/country. the creation of favorable consumer experiences may be a tool to enhance the wine perceived quality and the creation of memories that enable increased brand loyalty and brand equity (madeira et al., 2019). this suggestion can be applied to both the portuguese and canadian markets. in addition to the above benefit, this action may also contribute to change the canadian consumer habits towards the product category under study, as according to 2018 data on alcoholic beverages (statistics canada, 2019), canadians prefer beer, with wine appearing as a second choice (only in two provinces british columbia and quebec is the situation reversed). the results of the canadian sample highlight the need to enhance portugal’s reputation as a distinguished and high-quality wine country producer. to this end, joint and coordinated actions should be considered between governmental and private entities. this joint effort will benefit not only wines of portugal, but also individual brands wishing to internationalize to this market or to strengthen their presence, leveraged by the country of origin effect. the results of this study highlight the work that needs to be done for wine producer countries to become reference countries in this product category and to raise brands to another level of recognition and distinction. 7. conclusion 7.1. limitations our results supported the perspective that country of origin is important for brand equity (koschatefischer et al., 2012), however, country of origin’s effects may diverge depending on several characteristics, such as nationality (johansson et al., 1985) and culture (balanis et al., 2002). therefore, the results presented may have been influenced by both the diversity and size of the sample. in the portuguese sample, most individuals were from leiria district and aged 28 to 37 years, and the canadian sample was composed mostly of individuals from the province of alberta and aged 28 to 37 years. at the same time, the size of the samples and the disparity between them may also affect the results. the study analyzed the wine industry, however, the generalization of the results needs to be conducted with caution, since specific wines have different behaviors, for instance the portuguese porto wine has a different behavior compared to the industry average. 7.2. future research future investigations may extend the analysis of country of origin’s effect on wine brands to other markets. future studies may also analyze how other factors may influence the country of origin’s effects on brand equity, such as the difference between inexperienced and experienced consumers. additionally, in this study four brand equity dimensions identified by aaker (1991) were used to measure brand equity. future studies may examine the influence of other brand equity dimensions within the wine industry. 7.3. final conclusion given the above results, the wine market is sensitive to the effects of the country of origin on brand equity, therefore players in the wine industry, such as brands, and producers’ associations, should emphasize their origin in their communication strategies. it should be noted that the results suggest that efforts should be made to create brand 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climate variability and the wine industry in chile eduardo haddad1,*, patricio aroca2, pilar jano3, ademir rocha4, bruno pimenta5 sparkling wine international market structure and competitiveness karim marini thome*, vitoria a. leal paiva the role of context definition in choice experiments: a methodological proposal based on customized scenarios fabio boncinelli*, caterina contini, francesca gerini, caterina romano, gabriele scozzafava, leonardo casini the impact of country of origin on brand equity: an analysis of the wine sector nádia passagem1, cátia fernandes crespo2,*, nuno almeida3 competitive strategies for wine cooperatives in the german wine industry barbara richter1,*, jon hanf2 valuation of viticultural adaptation to climate change in vineyards: a discrete choice experiment to prioritize trade-offs perceived by citizens verónica farreras1,2, laura abraham3,* does the institutional quality affect labor productivity in italian vineyard farms? maria raimondo1,*, concetta nazzaro4, annamaria nifo3, giuseppe marotta2 the role, scope and management of r&d and innovation in the wine sector: an interview with antonio graca peter hayes am wine economics and policy 10(2): 45-59, 2021 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/wep-9900 wine economics and policy citation: luigino barisan, luigi galletto (2021) how do sparkling wine producers adopt a sub-appellation? evidence from an exploratory study on heroic prosecco superiore rive. wine economics and policy 10(2): 45-59. doi: 10.36253/wep-9900 copyright: © 2021 luigino barisan, luigi galletto. this is an open access, peerreviewed article published by firenze university press (http://www.fupress. com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information files. competing interests: the author(s) declare(s) no conflict of interest. how do sparkling wine producers adopt a subappellation? evidence from an exploratory study on heroic prosecco superiore rive luigino barisan*, luigi galletto university of padua, department of land, environment, agriculture and forestry, via dell’università 16 35020 legnaro (pd), italy, email: luigino.barisan@unipd.it; luigi.galletto@unipd.it *corresponding author. abstract. this exploratory paper investigates why sparkling wine houses producing conegliano valdobbiadene prosecco protected designation of origin (cvpp) wines decided to adopt the sub-appellation “rive” to increase the value of their wines. we estimated both logistic and generalized linear models to explain rive sub-appellation (sa) firms’ choice and market share, respectively. by using data gathered from cvpp producers, we divided wineries into two groups, namely, those that adopted the rive sa and those that did not. by means of a stepwise procedure, we categorized factors that were likely to explain the rive sa choice within a set of structural, marketing and wine tourism-related variables. the results showed that structural drivers such as the human capital of younger producers, firm size, resource endowments, wine production, and involvement in ad hoc promotional activities (i.e., primavera del prosecco) have the greatest effects on the choice of rive sa. on the other hand, the effects of small sizes, cellar door sales, and key cvpp wine tourism events have emerged as vital factors in the growth of rive sa in terms of market share. the adoption of the rive sa may play an important role in supporting and valuing the work of a vine-growers community who have been able to transform the difficulties and the passion of vine cultivation on steep slopes parcels into distinguishing features and may help the cvpp tutelary consortium appropriately undertake promotional policies to differentiate wines and improve competitiveness. this could have positive effects on wine tourism, hospitality, and winery visits considering the recent recognition of the cvpp as the 55th italian unesco world heritage site. keywords: sub-geographical indication, prosecco sparkling wine firms, intraregional wine differentiation, steep-slope viticulture, market differentiation, wine tourism strategies. 1. introduction over the last few decades, the international wine market has dramatically changed by, inter alia, increasing the number of appellations and subappellations. under the pressure of several market and socioeconomic forces, 46 luigino barisan, luigi galletto the italian wine supply has followed these developments towards a reference model of higher quality wines [1]. as evidenced by scozzafava et al. [2], italian wine legislation has designed a model that differs from the french model based on the hierarchical territorial classification, where vineyards or groups of vineyards are typically recognized for quality. therefore, a new appellation (or subappellation) faces difficulties in attempting to become successful mainly for institutional, wine labelling, and market differentiation reasons [3-5]. however, some of these new designations may build a reputation of excellence as an acclaimed and successful collective brand [6]. in this context, conegliano valdobbiadene prosecco protected designation of origin (cvpp) appellations are encompassed within the most prominent case studies deserving of attention, with a supply of over 91 million bottles in 2018 [7-9]. the cvpp is made up of 15 districts (municipal areas), and it takes its name from the two main towns of the zone. it represents the top protected designation of origin (pdo) for prosecco, as it is rooted in a specific tradition, rural heritage, terroir, and landscape. prosecco wine is made from the glera grape variety and is obtained using the martinotti method after secondary fermentation in pressure tanks. the prosecco reform (2009) provided by the italian ministry of agriculture, upgraded the former cvpp’s from doc (controlled designation of origin) to docg (controlled and guaranteed designation of origin), and instituted the new prosecco doc, which covers nine provinces belonging to veneto and friuli-venezia giulia regions [10]. it is the largest italian wine pdo for the number of bottles (500 million bottles in 2020), most of which are exported worldwide [11]. the cvpp hierarchical quality model is in turn classified into three geographical levels. these levels are superiore di cartizze sub-appellation (sa), which is locally considered in the same manner as the firstgrowth or grand cru and represents 1.7% of the cvpp supply; rive sa, a second-growth wine or small sa, which accounts for a proportion of 2.9%; and the basic prosecco superiore (ps), (i.e., the classical cvpp sparkling wine), which is the most widespread (95,4%) [12]. the first sub-appellation (1.5 million bottles sold) indicates absolute top-quality wines within the cvpp appellation. it comes from a subzone that covers just 107 hectares of vineyards in the borough of valdobbiadene, where the maximum yield allowed by the disciplinary system is 12 tons of grapes per hectare. it has not changed its territorial boundaries since the cvpp was set up in 1969. its supply has stabilized since the 1980s. hence, the alternative decision to produce superiore di cartizze has substantially no chance of being developed by the cvpp’s sparkling wine houses. therefore, it can be excluded from the choice set due to the current cvpp’s disciplinary rules. in contrast, a major choice in adding value to cvpp supply chains is through rive sa’s adoption strategy by replacing ps production. in july 2009, the prosecco reform introduced the prosecco superiore and rive sas, both stemming from the cvpp’s spumante (sparkling wine) doc [10]. production for the former is approximately 83.8 million bottles, and the maximum yield allowed is 13.5 tons of grapes per hectare. rive sa production and yield lie between those already described for superiore di cartizze and prosecco superiore. in 2018, the rive sa covered an area of approximately 249 hectares with a supply equal to 2.7 million bottles sold. interestingly, over the 2010-2018 period, the number of bottles claimed under the rive sa increased at a double-digit annual growth rate (15%), which is almost three times higher than that of the ps. the term “rive” indicates, in the patois of the local inhabitants, small parcels of steeply sloped vineyards that are characteristic of the area and where the bestquality grapes are produced (sensu stricto). this category of wine highlights the different expressions of the cvpp. rive wines are often obtained from grapes grown in the steepest, highest-quality vineyards in a single borough or hamlet, thus emphasizing the characteristics that a terroir gives to the wine. the concept of the rive sa as a brand arose as an answer to the awareness of the need to link the image of a wine to its terroir to highlight the synergies between soil, weather, grape and winegrower [13]. within the cvpp appellation, 43 rive wines are now allowed, of which 12 get their name from their borough and 31 from their borough’s hamlet. each terroir expresses a different and specific combination of soil, exposure, microclimate, and human factors. in the rive, yields are limited to 13 tons of grapes per hectare, the grapes are picked exclusively by hand, and the vintage must be shown on the label. the rive sa represents a viticultural potential of 83.7% of the cvpp area, of which 48.4% falls within the unesco “core zone,” and the rest falls within the so-called “buffer zone” (figure 1). the marketing literature on geographical indications is rather vast and has mostly focused on the consumer side [2, 14, 15]. however, less attention on the supply side has been paid to sub-appellations or small appellations within larger ones. the soundness of sas proposed for the niagara region of canada has been investigated from both a consumer viewpoint [5, 16] and a terroir perspective [17]. in europe, gergaud and ginsburgh [18] tested the terroir impact on the quality of bordeaux wines. on the supply side, cross et al. [19] show a strong impact of new sas on vineyard sale prices with47evidence from an exploratory study on heroic prosecco superiore rive in the willamette american viticulture area (ava), while gokcekus and finnegan [20] demonstrate that sa wine reputation premiums have increased significantly with their creation. the cvpp appellation is somewhat similar to the willamette ava, given that new sas are superimposed within an existing, wide appellation. according to the extant literature concerning the wine sector, the adoption of an sa is expected to bring benefits to firms, such as increased competitiveness through increased supply or greater market differentiation [21]. given that some firms in the cvpp area use rive sa, while others do not, this study aims to ascertain what factors make a difference in deciding to adopt rive sa. this leads to the following research questions: 1) what are the drivers (i.e., structural, market and wine tourism-related variables) of the adoption of rive sa? what is their relative importance? 2) additionally, what structural, market and wine tourism-related factors have effects on the rive sa share of the total cvpp sparkling wine sales? this study focuses on two traditional cvpp sparkling wines (ps and rive sa), where rive sa can be considered a potential driver of innovation [22]. to consider the expected impacts of structural, marketing and wine tourism-related variables, a set of factors capable of explaining a firm’s likelihood of adopting rive sa was evaluated [23-26]. the cvpp’s sparkling wine houses face an important decision regarding whether to adopt the rive sa over ps or reject that innovation while maintaining the ps. thus, weighing the pros and cons of adoption represents a challenging and temporary choice (i.e., made at the time of harvest selection). – rive sa’s advantages over ps. rive sa represents the sparkling wine of the “core zone”. it has an image linked to heroic viticulture and colline del prosecco di conegliano e valdobbiadene, which is recognized as a unesco heritage site. this implies a role of the product in promoting wine tourism with higher cvpp quality. in their attempts to be more competitive and differentiate themselves, cvpp firms have a growing interest in adopting rive sa over ps [26]. according to the cvpp’s research centre for market studies and the cvpp’s production specifications, on the one hand, the ps allows a maximum production of 12,600 bottles per hectare with an average price of 5.44 euros per bottle at the production phase; on the other hand, the yield of the rive sa is 12,133 bottles per hectare with an average unit value of 6.23 euros per bottle. consequently, other production costs being equal, the opportunity cost for giving up or postponing rive sa adoption would consist of approximately 10% of the revenue. – rive sa’s disadvantages over ps. the price differential between rive sa and ps in the grape and base wine markets should be greater to properly sustain both higher labour intensity and its expanding effect among producers. yet, compared to ps, the spread of rive sa is more linked to the domestic market than to exports; given its recent creation, the promotion of rive sa has not been established. ultimately, consumers’ knowledge of ps in a broader sense is stronger than that of rive sa [27]. the paper is organized as follows. section two presents the theoretical approach. section three relates to the methodology and the data employed. section four addresses the results, and section five discusses those results. final considerations conclude the work. 2. theoretical approach and hypotheses as argued by rogers [28], the adoption of rive sa can be contextualized as the process of deciding on the introduction of an innovation. the entrepreneur, to (a) (b) figure 1. rive sa: 43 sub-appellations within the cvpp area; (b) inside and outside of unesco’s world heritage site (bordered by the red line). 48 luigino barisan, luigi galletto start with, goes through a phase of acquiring knowledge about the rules of the product specification and then the assessments of conditions for its claims and of market demand, which leads to the formation of a positive or negative attitude towards the rive sa when ultimately deciding whether to adopt the new sa. the review of the literature has widely investigated the relevance of factors affecting the introduction of new geographical indications for wines. for instance, the process can be influenced by a wide variety of patterns [2932], including cultural and psychological factors (e.g., belonging to a community of heroic winegrowers, personality, empathy); structural factors (e.g., land under cultivation, human capital, production size); marketing factors (firms’ entries into new channels and markets, price positioning, branding); factors related to the development of wine tourism (e.g., visitor reception, wine events); and political factors (e.g., differentiation strategies implied by the tutelary consortium at the territorial level). thus, a broader framework can be applied to study the model for the adoption of sa by firms in the cvpp territory [33, 34]. the framework can identify group variables derived from the structure–conduct–performance model [35] that can inf luence the process by which firms adopt the rive sa as a relevant innovation, i.e., the structural, marketing, and wine tourism contexts. this design is in line with similar research and strategies implemented in the wine industry [19, 20, 36, 37]. this study considers that the development of the conceptual adoption model assumes that the differentials in the vineyard yield per hectare, average selling prices and production costs between the ps and rive sa in current and future years are known with certainty to winegrowers. therefore, one can assume that the decision has low risk and uncertainty to properly portray the rive sa adoption decision process; this process is aligned with the cvpp consortium’s aim to support the added value of the heroic viticulture wines of the designation as a unesco world heritage site. 2.1 rive sa adoption structural variables. according to the existing literature and empirical evidence, structural resources have been consistently identified as important factors for the adoption of a sa [13, 26, 38]. winery size is supposed to affect the choice of introducing the rive sa. however, the decision is challenging. on the one hand, large wineries have more possibilities to diversify their portfolios than small ones do. on the other hand, small wineries are more focused on local consumers who may be more interested in terroir features. given this ambiguity about the size effect, we include various size indicators in the model: the number of bottles, pdo surface, pressure tank capacity and three categories of employees. considering the human factor, a younger entrepreneur is thought to be more likely to push for the adoption of new sas. the amount of cvp bottled by third parties should imply a lower incentive to use sas, as more third-party bottling indicates a weaker tie to the winegrowing area. a similar consideration may apply to the quantity of purchased grapes to be crushed in the winery, given that this can be an obstacle to a strong supply identity based on a winery’s own grapes. therefore, it is reasonable to hypothesize the following: h1: firms with higher levels of human factors, owned structural endowments, and commercial size are more likely to adopt rive sa than firms with lower levels. market variables. the company’s decision to adopt rive sa may also be influenced by market or distribution channel conditions [22, 39, 40]. a possible impact on rive sa adoption may derive from a higher tendency to favour selling to the domestic market in comparison with the export market, as rive sa is arguably more acknowledged and appreciated by italian consumers. the degree of use of some marketing channels may also favour the rive sa; e.g., a large share of prosecco sold by winery shops or in the horeca channels, where quality and reputation affect the outcome more than in other outlets, would imply higher interest for the rive sa, while the opposite would happen for a large share sold to the mass market, i.e. large scale retail (lsr). hence, we can hypothesize the following: h2: firms with higher italian market shares and higher penetration rates in the wine shops or in the horeca channels are more likely to adopt the rive sa than firms with lower shares and rates. tourism variables. since “rive” sparkling prosecco is linked more strongly to terroir, viticulture tradition and landscape than superior prosecco is, we can expect that a strong involvement of wineries in wine tourism may increase the probability of including this sub-brand in their portfolio [41]. to verify and clarify this aspect, we test the number of visitors and propose the hypothesis that the greater the involvement in certain events, the greater the likelihood of adopting the rive sa [42, 43]. therefore, we hypothesize the following: h3: firms with higher levels of involvement in wine tourism and particularly in events organized on-site are more likely to adopt rive sa than firms with lower levels. 49evidence from an exploratory study on heroic prosecco superiore rive although this paper’s main issue concerns rive sa adoption by cvpp wineries, a secondary field of investigation is the intensity of this adoption, i.e., its share of total cvpp sparkling wine sales. in particular, we are interested in verifying the effect of two variables on it: the share of direct sales on total sales and winery size. given previous considerations, the former is expected to affect rive sa market share, while the latter should reduce it. the lack of investigation on sa choice makes our analysis explorative. therefore, in achieving the two goals of our research, we have not estimated models based on specific sets of variables; rather, we have attempted to select sets of variables among those suggested by the previous theoretical considerations. 3. material and methods 3.1 quasi-census study and data collection the study is based on 2017 data, and the sample is made up of 158 wineries that produce sparkling cvpp, 38 of which have chosen the rive sa. the data were collected through an ad hoc survey using the listed cvpp’s sparkling wine house members. the survey showed a very high response rate (over 89%), which was yielded by face-to-face interviews with the business owner and/ or the firm’s management representatives while ensuring that gathered data were treated anonymously with confidence and sensitivity. although some firms were initially less inclined to participate in the survey, they were persuaded to take part after some telephone reminders. the population distribution was analysed using data coming from the certification bodies in charge of prosecco production control [11] by using strata based on bottled production. the variable distribution from this database was compared with our dataset by considering the size of the bottled production sold annually (standard = 0.75 litres) and avoiding omitting the largest companies. hence, our data represent a quasi-census study having specific representativeness of the surveyed population. the remaining share of sparkling wine houses (11%) did not respond to the research because they were either too busy to participate or not available to provide the requested information. 3.2 variables the following is the list of dependent and explanatory variables that were used in the analysis for this paper. the dependent variable is a discrete binary variable that is assigned a ‘1’ if the firm has already adopted the rive sa; otherwise, the firm has adopted the ps (prosecco superior sa firm) and is thus assigned a ‘0’. the explanatory variables were grouped into three components. the explanatory variables were grouped into three components (table 1). the first group concerns structural variables, the second group of variables relies on the conduct of firms in the industry by markets and sales channels, and the third group considers the performance of wineand tourism-related events [44]. regarding structural assets, marketing skills (i.e., young commercial employees, young ceo, oenologist, young owner), physical and technological resources (i.e., glera docg surface, purchased grapes, own wine production, storage capacity of pressure tanks, undercontract bottling,) and firm size (i.e., small-, medium-, largeand very large-) have been analysed and implemented following a criterion that focuses on the importance of human capital and firm resources as crucial dimensions in rive sa’s innovation processes. all the variables are numerical, except for both owner and size, which were transformed into factors with two and four levels, respectively. in the framework of market conduct, the model used tries to capture, in terms of the competitive strategy, the effects of rive sa on market share of cvpp firms in italy and abroad and on the domestic market through distribution channels (i.e., wine shops, horeca, largescale retail, wholesalers, e-commerce and others) and major export markets (i.e., germany, the united kingdom, switzerland and the united states). wine tourism events were assessed considering: a) actions aimed at promoting cvpp wines and b) their performance in pursuing wine tourism policies. drivers have been defined to capture the effects of how important the economic return of major wine events was (likert scale from 1 to 5 points) and the number of visits per winery [45]. the major wine events, ranging from domestic to international, with a significant impact on cvpp firms, were as follows. conegliano valdobbiadene’s wine festival is the most important event devoted to cvpp and takes place in may at the castle of san salvatore. conegliano valdobbiadene’s prosecco wine route was created in 1966 (the first wine route in italy) as an oenological circuit covering the entire hilly area. additionally, the major sporting events in the cvpp area (e.g., prosecco cycling classic, prosecchissima and tour of italy) were grouped. vinitaly is among the most important international wine festivals and takes place in verona. the cantine aperte (“open cellars”) is one of italy’s major wine tourism events. 50 luigino barisan, luigi galletto 3.3 the model specification to find the determinants of rive sa choice, we estimated a logistic regression, which is a model broadly employed to examine the factors that affect a binary outcome such as undertaking an action [49, 50]. the logistic regression model allows us to identify the variables that have the most impact on the choice to use the rive sa for branding. we modelled the probabilities of the outcome based on producer characteristics and marketing behaviours. more specifically, this technique determines the significant drivers for classifying a winery as belonging to the rive group or to the other group. therefore, it offers a “prognosis” (or propensity) relative to adopting the rive sa. logistic regression represents a way to evaluate factors affecting the decision to produce a sparkling wine under the rive collective brand. briefly, for each winery in our sample (i=1…n), the dependent variable yi indicates the following values: 1 if the winery chooses the table 1. overview of the explanatory variables used in the models. variable description how the variable was measured references structure: vineyard employees winery employees: oenologists younga commercial and sales young ceo young owner glera docgb vineyard surface purchased grapes crushed own wine production storage capacity of pressure tanks under-contract bottling firm sizec numeric numeric numeric numeric numeric 1 if any, 0 if not present hectares thousand tons hectolitres (in thousand) hectolitres bottles produced (in thousand) bottles sold (in thousand) 1=small-sized (less than 150,000 bottles sold), 0=otherwise 1=medium-sized (150,001-500.000 bottles sold), 0=otherwise 1=large-sized (500.001-1.000.000 bottles sold), 0=otherwise 1=very large-sized (more than 1,000,000 bottles sold), 0=otherwise [33] [33] self-developed self-developed self-developed self-developed [33] self-developed self-developed self-developed self-developed [7, 46] [7, 47] conduct: market share in domestic and foreign markets italy direct sales (%) hotellerie-restaurant-café and wine bar (%) large-scale retail (%) wholesalers (%) e-commerce (%) other channels (%) major export markets: germany switzerland united kingdom united states percentage of bottles sold (%) percentage of bottles sold (%) percentage of bottles sold (%) percentage of bottles sold (%) percentage of bottles sold (%) percentage of bottles sold (%) percentage of bottles sold (%) percentage of bottles sold (%) percentage of bottles sold (%) percentage of bottles sold (%) percentage of bottles sold (%) percentage of bottles sold (%) percentage of bottles sold (%) [15, 48] performance: visitors per winery major wine tourism events: conegliano valdobbiadene’s wine festival vinitaly prosecco wine route cantine aperte (“open cellars”) sports events numeric 1= not at all important; 2=low importance; 3=important; 4=very important; 5=extremely important [19 45, 46] a less than 40 years old. b appellation of controlled and guaranteed origin. c categorial variables were developed according to cvpp’s research centre for market studies. 51evidence from an exploratory study on heroic prosecco superiore rive rive sa and 0 if the winery does not choose the rive sa but instead remains with the superiore sa. the probability of choosing the rive sa is as follows: pr(yi = 1|x1,x2,…,xk) = where βk is the estimate of the kth parameter and xki is the k-th characteristic of the ith winery. although, as we discussed earlier, economic theory may suggest some reasons in favour of the rive sa choice, we have not made any a priori assumptions about which variables should be included in the model. furthermore, a generalized linear model approach was used to determine the main drivers for rive sa market share by employing the same candidate variables as those of the logistic regression [51, 52]. therefore, the estimations of both models rely on an exploratory stepwise procedure. 3.4 the data analysis in our initial table of descriptive statistics, we present t-tests of differences in variables according to rive sa or non-rive sa. in the stepwise logistic regression model-building procedures, backward selection, rather than forward selection, has been used to avoid the so-called suppressor effect [50, 53]. as suggested by snipes & taylor [54], to discover the best logistic regression model, akaike’s criterion was used to support the model choice. as argued by bendel & afifi [55], to ensure less risk of failure when trying to find a relationship between explanatory and dependent variables when one exists, the usual p < 0.05 statistical significance criterion has been relaxed to 0.10. in the tables of results, we have reported not only the estimated coefficients and associated odds ratios but also the marginal effects of each variable. the marginal effects are the change in the probability that a winery chooses to produce rive sa sparkling wine due to a unit change of a specific independent variable. to estimate the marginal effects, we have followed the approach where marginal effects on the binary dependent variable are computed by using the command ‘margins’ in stata, as suggested by cameron and trivedi [56]. a generalized linear model (glm) was fit using the maximum pseudolikelihood algorithm to estimate rive sa’s market share, which is its proportion on total wines sold in the firms’ portfolio of prosecco wines. this variable was rescaled into a range between 0 and 1. we used a binomial family glm, link to logit, following the method proposed by papke and wooldridge [57], which was subsequently and particularly enhanced in stata by baum to handle with fractional response data [58]. to model the data, we jointly considered the akaike information criterion (aic) and the bayesian information criterion (bic) [54] [59]. 4. results the results that examine the hypotheses of the study are presented considering a) the direction and significance of the differences between the average value of the variables for adopting and not adopting rive sa and b) the contribution of the various independent variables to explain the adoption of rive sa using logistic regression. findings about the main drivers of rive sa market share conclude the paragraph. 4.1 differences between rive sa adopters and non-adopters the results of the t-test for the homogeneity of the means are shown in table 2. first, the differences between the average value of the group of rive sa adopters and that of nonadopters are positive for some crucial structural variables, while they are negative for a firm’s own-grapes crushed and small-size firms. among the former, the differences between the variables’ average values are statistically significant for pdo area under cultivation, higher firm commercial size (i.e., large, and very large firms), number of winery employees and young commercial and sales staff, young owner, share of production under contract, own grapes crushed, and winery pressure tank sizes. second, when detailing the analysis of the leading foreign markets, only the us shows a significant difference that is higher for rive sa. only the difference in large-scale retail market share is negative and almost significant. third, the level of involvement in communication activities such as vinitaly and primavera del prosecco (i.e., prosecco spring) show significant differences between the groups of firms. therefore, these first outcomes appear to confirm hypotheses 1 and 3 previously formulated (see paragraph 2) but seem to be inconclusive for hypothesis 2. the following estimates from multivariate logistic regression contribute to providing further insight into the relationship between the set of independent variables and the dependent binary variable. 4.2 factors influencing rive sub-appellation adoption the results of logistic regression are presented in table 3. according to pregibon [60] and mehmetoglu 52 luigino barisan, luigi galletto and jakobsen [61], the assumptions that the model is good and correctly specified were tested by link test, p = .000 for linear predicted value and p = 0.793 for squared predicted value variables. a likelihood ratio (lr) chisquare test showed that the model with the constant and the set of explanatory variables is able to explain rive sa adoption significantly better than the model with the intercept only, χ2 = 59.05 (with 10 degrees of freedom), p < .001. however, the hosmer–lemeshow (h-l) test, which was computed from the chi-square distribution with eight degrees of freedom, did not indicate lack of fit (p = 0.100). this empirical evidence indicates that this group of variables contributes significantly to explaining the choice of cvpp firms to adopt or not to adopt rive sa. the estimated value of mcfadden’s r2 is 0.339, which suggests that it is quite good for cross-sectional data. in cvpp firms, this model can screen for likely rive sa adopters with a sensitivity of 55% and a specificity of 94%. the direction of the estimated effects is generally in line with expectations. regarding the group of structural variables, marketed bottles1, prosecco base wine production, and young owners are positively and significantly associated with the adoption of the rive sa, while the percentage of purchased grapes has a negative effect on the propensity to adopt the rive sa. among these explanatory variables, winery size is the most significant. the analysis of the marginal effects indicates that the probability of adopting the rive sa increases by 25 percentage points for medium-sized wineries and by 48 points for very large wineries in comparison with small wineries. the larger the prosecco base wine production is, the more likely the rive sa choice is; i.e., one hundred thousand hectolitres increase the probability of adopting the rive sa by approximately 7 percentage points. the presence of a young owner was a less significant variable (p = 0.060). wineries with the last feature have a propensity to adopt the rive sa that is 2.7 times greater than for those who do not. marginal effects show that, ceteris paribus, the probability of the rive sa, when a young owner is present, increases by 11 percentage points. among the independent variables relating to market share, only the use of lsr appears to affect the propensity to adopt rive sa by undermining it, although less relevantly than the other factors. more specifically, the analysis of the marginal effects for different values of lsr share shows that when this variable is above 10%, the probability of the rive choice becomes almost zero. it may be argued that the role of distribution channels 1 splitting the number of marketed bottles into three binary variables has performed better than dealing with it as a single numerical variable. table 2. sample winery description: t-test results comparing rive and prosecco superiore firms. variables mean (rive=1) mean (rive=0) p-value structure: vineyard employees (no.) 2,16 1.49 0.148 winery employees (no.) 8,13 4.93 0.069 oenologist (no.) 1,71 1.44 0.178 young commercial and sales (no.) 2.32 0.64 0.006 young ceo (no.) 0.18 0.11 0,248 young owner (dichotomous) 0.42 0,25 0,043 glera docg vineyard surface (hectares) 13.51 7.00 0.001 own-grapes crushed (tons) 20.60 90.55 0.002 purchased-grapes crushed (% of total grapes) 13.42 24.59 0.092 own wine production (thousand hectolitres) 4.72 2.22 0.158 production bottled under contract (% of total bottles) 2.50 14.90 0.002 pressure tank capacity (thousand hectolitres) 7.05 2.87 0.048 firm size (thousand bottles): 1,665.00 928.59 0.231 small-sized (dichotomous) 0.29 0.63 0.000 medium-sized (dichotomous) 0.29 0.19 0.203 large-sized (dichotomous) 0.16 0.05 0.029 very large-sized (dichotomous) 0.26 0.13 0.061 conduct: italian market share by channels (%): 70.87 74.81 0.391 direct sales (%) 25.31 32.03 0.266 hotellerie-restaurant-café and wine bar (%) 46.19 39.22 0.205 large-scale retail (%) 0.50 5.48 0.078 wholesalers (%) 19.66 17.70 0.685 e-commerce (%) 0.32 0.35 0.918 other channels (%) 5.40 5.23 0.950 export shares by major markets (%): 29.13 25.19 0.391 germany (%) 18.02 15.31 0.538 switzerland (%) 8.72 15.75 0.090 united kingdom (%) 8.25 9.96 0.638 united states (%) 14.42 6.16 0.008 performance: wine tourism: visitors per winery (no.) 2,796.16 1,668.96 0.250 wine event involvement (1-5 points likert scale): conegliano valdobbiadene’s wine festival 2.45 2.08 0.203 vinitaly 3.13 2.43 0.027 primavera del prosecco 3.32 2.68 0.026 prosecco wine route 2.74 2.90 0.549 cantine aperte 2.42 2.42 0.988 sports events 2.55 2.14 0.098 53evidence from an exploratory study on heroic prosecco superiore rive is overshadowed by the firm size, given a sort of channel specificity according to the size. however, we found no large variance inflation factors (all lower than 3), suggesting that collinearity was not a substantial problem between firm size and distribution variables2. primavera del prosecco, which is a proxy for wine tourism events, is positively and significantly related to rive sa adoption. for wineries rating primavera del prosecco from important (3 points) to extremely important (5 points), the propensity to use the rive sa increased by a minimum of 6 to a maximum of 9 times in comparison to wineries poorly scoring this event3. 2 the variance inflation factors for reported distribution channels (2.48 for direct sales; 1.80 for hotellerie-restaurant-café and wine bar; 1.90 for large retail scale) when firms’ size was included in the model (1.76 for medium-sized; 1.52 for large-sized; 2.92 for very large-sized) were quite small. 3 using the primavera del prosecco score as multiple binary variables has performed better than dealing with it as a single categorical variable. the marginal effects show that the probability of adopting the rive sa increases by 21-25% if the winery is involved in the primavera del prosecco and gives this event an importance score equal to or higher than 3 points. 4.3 drivers of the rive sa market share the goodness of the link test has provided evidence that the model was correctly specified concerning linear predictors (p = 0.000), regardless of whether the regression equation specification error test indicates that the model has no omitted variables. other statistic indicators appear satisfactory as well; among them, results did not show a large value of the condition index (17.1), implying that multicollinearity is not a problem [64]. table 4 presents the glm regression results for rive sa market share determinants. table 3. logistic regression model. variable b st. err. odds ratio (β) p values marginal effects human capital and productive structure: young owner (dichotomous) 0.983 0.523 2.672 0.060 0.113 medium-sized (dichotomous) 2.125 0.600 8.370 0.000 0.245 large-sized (dichotomous) 3.114 1.008 22.520 0.002 0.358 very large-sized (dichotomous) 4.211 0.953 67.435 0.000 0.485 purchased grapes crushed (% of total grapes) -0.034 0.010 0.967 0.001 -0.004 own wine production (thousand hectolitres) 0.057 0.022 1.058 0.012 0.007 market conduct: large-scale retail (%) -0.238 0.117 0.788 0.041 -0.027 wine tourism events: primavera del prosecco (score=3) 1.813 0.787 6.127 0.021 0.209 primavera del prosecco (score=4) 1,794 0.738 6.015 0.015 0.207 primavera del prosecco (score=5) 2.180 0.985 8.842 0.027 0.251 constant -3.684 0.781 0.020 0.000 goodness-of-link test: linear predicted value 0.000 squared predicted value 0.793 goodness-of-fit test χ2 0.568 lr χ2 (11)*** 59.05 h-l’s test 0.100 mcfadden-r2 0.339 aic 137.27 bic 170.96 notes: number of observations = 158. goodness-of-link test calculated according to tukey [62] and pregibon [60]. the goodness-of-fit test was tested following hosmer et al. [63]. akaike’s information criterion (aic) and bayesian information criterion (bic). sensitivity = 21 firms out of 38 (55.3%), specificity = 113 firms out of 120 (94.2%), positive predictive value = 21 firms out of 28 (75.0%), negative predictive value = 113 firms out of 130 (86.9%), predictive accuracy = 134 firms out of 158 (84.8%). 54 luigino barisan, luigi galletto first, the coefficient related to small-sized firms exhibits a positive sign and significant relationship with market share (p = 0.006), which supports the statement that smaller sizes create greater value in wine portfolios through the growth of rive sa. second, the results show positive and significant effects of direct sales (p = 0.006), while for the role of italian market, a negative impact is shown, which indirectly confirms that product growth is currently not linked to other domestic channels, which do not have closer relationships between producers and customers as much as direct sales [65]; finally, the positive coefficients of the organized wine tourism events suggest that the prosecco road and the primavera del prosecco are positive and significant tools (p = 0.061 and p = 0.036, respectively) to promote growth and achieve the strategic objectives of rive sa firms. 5. discussion the three hypotheses stated at the beginning of the work find partial confirmation from the t-test analysis. the logistic regression model reinforces the validity of h1 and h3 by deepening the effect of the most explicative variables. given that rive sa is a type of marketing innovation, younger entrepreneurs are more inclined to adopt it in comparison with those who are older. moreover, it seems the only human factor that matters in the rive sa choice. among structural factors, both basic wine production and marketed bottles play the most important role. we observe that as winery size increases, it is more likely that the winery will include the rive sa within its wine portfolio. when the number of end markets, channels or consumer segments grows, the need to rely on a wide diversified assortment of prosecco by not simply using the traditional residual sugar content (brut, extra dry, dry) drives a winery to explore other products, such as those that can be produced in the rive sa. both the marketed bottles and basic wine enlighten a specific contribution to the model. in fact, to understand how they can coexist in the logistic model, we have to consider that the latter can only partly be transformed into bottles of sparkling cvpp to be sold by the winery: part can be sold as bulk wine to plain bottlers [5], part can be reclassified and sold under other appellations. as expected, the purchase of grapes from other estates does not favour a propensity for rive sa adoption. the analysis of marginal probabilities for different percentages of purchased grapes shows that, for medium-high percentages, the likelihood the winery uses the rive sa is reduced to nearly zero. therefore, it seems quite clear that rive sa is viewed as being strongly rooted in the terroir of the firm’s vineyards and is closely linked to the concept of “estate-bottled” sparkling prosecco. if the t-test results show that wineries choosing the rive sa are significantly more involved than others in the first italian wine event (vinitaly), where both wine differentiation and portfolio diversification play a crucial role in achieving successful public relations, the logistic model underlines that they are even more involved in the wine tourism business. in fact, the propensity to adopt rive sa increases when wineries give a rating of 3 or more for the main wine tourism event, i.e., the “primavera del prosecco”. with reference to market features, hypothesis 2 seems to be rejected because neither the effect of the domestic market share, nor the penetration rate in the wine shop nor in the horeca channels can be assumed to be significant factors driving the rive sa choice. only table 4 – generalized linear model: drivers for rive sa market share. variables β st. err. z value p value structure: small-sized (dichotomous) 1.630 0.485 3.36 0.001 conduct: italy (%) -0.042 0.009 -4.51 0.000 direct sales (%) 0.033 0.012 2.75 0.006 performance: primavera del prosecco (score=4) 1.142 0.421 2.09 0.036 prosecco wine route (top scores=4 and 5) 0.748 0.399 1.88 0.023 constant -1.271 0.503 -2.52 0.012 goodness-of-link test: linear predicted value 0.037 squared predicted value 0.344 condition number 17.1 log pseudolikelihood -9.970 deviance 4.347 aic 31.399 bic 41.225 note: number of observations = 38. glm fitted using newtonraphson (maximum likelihood) optimization; distribution family (binomial); link function (logit) [59]. the goodness-of-link test was calculated according to tukey (1949) and pregibon [60]. multicollinearity diagnostics followed procedures found in belsley, kuh, and welsch [64]. akaike’s information criterion (aic) and bayesian information criterion (bic). 55evidence from an exploratory study on heroic prosecco superiore rive the share of bottles marked through lsr is somewhat important for this choice. hence, because the share of bottles sold by other channels does not seem to significantly affect the choice of sa use, we can conclude that the distribution policy can be an obstacle to it only when the winery has a nonnegligible interest in the mass market. a similar consideration may be applied for sales in specific foreign markets. their shares do not significantly influence the choice, a fact that could partially depend on the relatively new definition of the rive brand and knowledge of it based mainly on local consumers. regarding the main factors affecting rive sa market share, we observe that the two hypotheses previously formulated are well confirmed. once a winery has chosen the rive sa option, its weight in the total prosecco wine supply increases with its cellar door share, which depends both on local customers and wine tourists, while it decreases with the firm’s size. therefore, considering previous results, we can conclude that while winery size positively influences the adoption of sa, once it has happened, it plays a negative role in the weight of the rive sa in the winery sparkling wine assortment, where the rive sa has to compete with an increased number of cvpp labels as the firm size grows. moreover, being too focused on other domestic channels other than direct sales, where the interest in a sa subdivision is likely to be lower, may divert attention from improving the sa proportion in the cvpp portfolio. involvement in wine tourism is confirmed to be important in also determining the sa share. in fact, in addition to the variables included in the logistic model, the high scores attributed to both the prosecco wine route and “primavera del prosecco” show a significant impact on the dependent variable. hence, we can argue that, as the french wine classification system shows [66], a process of intense subdivision within a geographic region is much more effective when it is accompanied by sound wine tourism perspectives, which rely mainly on a considerable number of people willing to obtain a remarkable experience in the wine world. 6. conclusions this survey highlights the relevance of structural, market-related and wine tourism-related features in explaining sa adoption choice by measuring how these features can contribute to supporting and valuing a sparkling wine produced with considerable efforts by heroical vine-growers (rive sa) within the cvpp. among them, we want to stress the increased likelihood of using rive sa as business size (however measured) grows. if the linkage with wine tourism involvement was rather expected, this was not straightforward given that it could also be supposed that small wineries focused on niche markets would have better appreciated the new sa as a tool to better differentiate their small sparkling prosecco products from that of other producers [67]. we can hypothesize that a core business based on a consolidated simple portfolio and a reduced level of flexibility in comparison with larger producers may contribute to explaining this empirical evidence. our study suggests the cvpp wineries key-conditions for benefitting of the rive sa: – to be strongly rooted in their land (i.e., to be as much as possible self-sufficient for grape production); – to undertake a coherent strategy, based on the values of a heroic sa coupled with the prestige of the unesco world heritage, whereas the values preservation of the local culture is a core subject to work for the common good of that wine community; – to promote the knowledge on rive sa, by boosting sales especially at the cellar door, which represents the best channel to communicate consumers the values embedded in the rive brand; – to get actively involved in crucial wine tourism events to build and operate higher value-generating positioning (i.e., primavera del prosecco, prosecco wine route, etc.). in a scenario where prosecco is becoming increasingly popular worldwide, the knowledge of factors that make rive sa adoption likely may help the tutelary consortium define an appropriate promotion strategy to widen the use of rive sa among cvpp producers as a tool for further differentiating their prosecco along with their own brand. it should be based on four aspects to be considered: – to looks to a model for economically and technically sustaining heroic viticulture and vine-grower’s backbreaking work, to preserve socio-economics and cultural values, landscape and biodiversity values [68-70]; – to implement distinguishing promotional activities with in-person information, exclusively in the cellar door and in horeca channels, which are the most relevant in generating higher value for consumers [71]; – to improve the ties between rive sa and landscape values, which can be grasped passionately by the territorial firms, thanks to key wine tourism events promoted in the prosecco hills of conegliano and valdobbiadene (i.e., conegliano valdobbiadene’s wine festival, unesco world heritage site’s association, etc) [45]; 56 luigino barisan, luigi galletto – to maintain careful and close control of the quality from the grapes selection phase to the sales phase (i.e., through ad hoc members’ courses and training, etc). our study has some limitations. first, this research is focused on cvpp firms that produce sparkling wines in a sa in italy. second, while the most significant drivers in rive sa adoption were identified, they do not represent the whole of sparkling wine production in italy or, for example, sparkling wines in other areas with steep-slope viticulture. third, further research on this topic is necessary over time to capture changes in firm strategies depending on circumstances (i.e., due to the market or the protected designation of origin’s product specification rules) that can enable or constrain sa adoption. finally, the results should be viewed as a first step in the attempt to build a theory of sa economics concerning drivers that support the firm’s choice of a sa. we believe that our study provides useful intuitions for those who would broaden this research strand in different countries with other specificities. references [1] a. corsi, e. pomarici, and r. sardone, italy: from quantity to quality. in: anderson, k.(ed.),the world’s wine markets – globalisation atwork. london: edward elgar, 2004. 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jrebelo@utad.pt; lsofi a@utad.pt; jcaldas@utad.pt *corresponding author. abstract. th is article presents an international comparison of the main determinants of wine prices in specialist online wine shops. hedonic price functions were estimated for 9624 wines spread among four datasets from france, italy, germany and australia. to explain price variation data was collected on wine classifi cation, closure type, wine origin, medals or awards, vintage, alcohol content, color, and grape variety. results from quantile regression models show that the wine vintage is a common price driver in all markets and quantiles. a quite similar eff ect was found for alcohol content. in terms of color, the implicit prices for red and white wines are also structurally diff erent between countries, particularly in origin, blend, closure, awards and age. th us, the markets should be assumed as heterogeneous, and the extrapolation of the results from one market to another may lead to erroneous management decisions. keywords: country-based comparison, hedonic analysis, pricing, quantile regression models, specialist retailer prices. 1. introduction inherent to globalization, in the last two decades, the wine industry has undergone profound changes, highlighting the entrance of new fi rms in the international market, especially from new producing countries, the decrease in wine consumption in traditional ones, and changes in consumer habits and behavior. wine is increasingly becoming an experience and complex good, with diff erent and new attributes valued by the consumer, driving the wineries to reconfi gure their behavior and the type of wine to be produced to be successful in the market [43]. th e change in consumer profi le is refl ected in the requirement of more and better information, access to new communication technologies, the way and the time to make purchasing and consumption decisions, leading to choices based on attributes such as the type of wine, age, grape variety, color, geographical origin, expert and consumer opinion, and price. th erefore, price is a core component in both wineries and consumers’ decision-making process, being the relationship between wine price and its 34 tânia gonçalves, joão rebelo, lina lourenço-gomes, josé caldas determinants a widely addressed topic in the wine economics literature [42]. since the wine market is characterized by a large number of firms with different sizes and supplying different wines, the wineś prices are not only affected by the quantity demanded but most importantly by a set of attributes considered by consumers. in light of this finding, the wine prices are typically studied using a hedonic pricing model based on lancaster’s approach, which associates the price of a good to its various objective and subjective attributes or characteristics taken by consumers when facing a buying decision. the main theoretical foundation of the hedonic price function studies comes from rosen’s [45] pure competition model for differentiated products, which assumes that the demand and supply for attributes interact to determine the implicit marginal attribute market prices. the empirical application of the hedonic price theory in the wine industry started in the early 1990s. it remains a widely used methodology, whose findings are most relevant in wine marketing [e.g.2,4,6,10,15,16,26,28 ,32,37,41,42,44,46,49,51]. in general, the estimation of a hedonic price function comprises three main types of explanatory variables. firstly, the so-called objective attributes, such as color, vintage, alcohol content and grape variety, which tend to be detailed on the label and are therefore easy to identify [15,16,20,32,33,34,46,49]. secondly, the sensory attributes, such as aroma, finish or harmony, information that usually comes from expert opinions (ratings) or medals awarded [8,9,11,25,28,35,41,48]. finally, the third category of variables addresses the influence of reputation, both individual and collective, of wines and producers amongst consumers. the individual reputation is essentially based on the producer and own brand, while the collective reputation refers to variables such as umbrella brand, geographic origin, wine classification (e.g. reserve) and the type of producer [5,10,14,22,23,31, 32,36,38,39]. a recent study by [42] 1offers a thorough classification of all the determinants of wine prices, using a hedonic framework, developed by the academic research (117 papers published) between 1993 and 2018. in addition to the determinants referred above as objective and sensory attributes, included in their classification as “public information” price determinants (informa1 the review is organized according to four main categories of wine price determinants: geographical and agricultural factors (weather/climate, soil and terroir, region of origin/appellation/grape varieties); temporal factors (age and vintage year); public information (information on the label, information given by experts or rating agencies and the causality between perceived quality and revealed prices); the impact of supply on wine prices (producer size or quantity produced, production costs). tion on the label, information given by experts or rating agencies), these authors also emphasized the importance of other determinants such as weather/climate [3,7,24,26,28,54] or the supply for wine [17,26,40,46,50]. ashenfelter et al. [3] found that increasing the temperature of 1 °c results in a price increase of 61.6% of bordeaux grands cru, a result confirmed by jones and storchmann [28] for the bordeaux wine region. more recently ashenfelter and storchmann [7] presented a notable review of the economic implications of climate change on wine prices. additionally, focusing on how wine supply impacts wine prices, and considering the quantity supplied as a significant determinant of prices, some studies have shown that the impact on prices is positive for small wineries and negative for the largest ones [40,46]. moreover, other studies, where the quantity supplied is measured by the number of cases of wine or the number of bottles produced [17,26,50], seem to indicate that both the quantity produced and the producer size hurt prices. considering the increasing heterogeneity of the wine in the markets as well as in the distribution channels, the analysis of the price determinants has been extended to price segments and distribution channels [1,12,18,45], including the on-line or e-commerce channel. for example, using a hedonic price approach for the portuguese wine market, drawing on data from a specialist retailer and a large supermarket, the recent study of [45] found that the significance of the various price determinants differs between distribution channels. the online or e-commerce channel is growing and gaining market share [44] against the traditional distribution, which constitutes a challenge, but also an opportunity for wineries, namely for the small and medium ones. moreover, assuming that the wine price determinants do not vary according to wine color, several studies on wine pricing literature mentioned above include an analysis of wine in a broad sense (comprising both white and red wine). however, for specific characteristics, this hypothesis may be unsuitable [17], and in fact, recent studies corroborate the assumption that some attributes perform differently for red and white wines [e.g., 13]. for this reason, there is a trend to a market segmentation based on red versus white wine [52], which leads us to the estimation of different hedonic functions depending on color, in the cases under study. even though the empirical studies typically use data from a specific country market, there is a trend towards the generalization and conveyance of the results from certain markets to other markets. this is a strong assumption that should be tested since it neglects the heterogene35wine price determinants. is there a homogeneous international standard? ity of international markets, preferences, and behavior of consumers. in other words, a better understanding and generalization of the empirical results raise the issue of homogeneity of wine price determinants not only between different price-segments but also among different countries, driving to the research question of this paper of whether the results for one market are transferable to other markets. thus, the main contribution of this paper is to strengthen the empirical knowledge on the determinants of wine price, in general, and for red and white wines, in particular, and to point clues for more detailed knowledge of the consumer preferences. following the mainstream of the literature and based on the hedonic price approach2 we analyze the wine price determinants in different countries (australia, germany, france and italy) using the same data structure, a specialist online wine shop in each country. these four countries are all large producers/consumers’ countries, three of them, france, germany and italy, are regarded as “old world wine countries”, while the remaining one, australia, is included in the “new world wine countries”. the paper is organized as follows. the second section presents the material and method used, providing details about the data sources and the model applied. the third section includes the results, where these are presented for the whole sample of still wine (pooled data) and for subsamples of red and white wines, for each country. finally, section four concludes the paper. 2. material and methods 2.1 data the four countries referred above were selected according to their importance on the world wine industry, both in terms of their production and consumption. in 2018 (oiv, 2019), regarding world production (in volume) italy ranks the first place, france the second, australia the ninth and germany the tenth. concerning world consumption, also in volume, france ranks the second place, italy the third, germany the fourth and australia the tenth. in france, almost 83% of the consumption is covered by domestic wine [53] where a large share is sold as pdo (protected designation of origin) and pgi (protected geographic indication). similarly, in italy, almost 95% of the wine consumed comes from the domestic market [1] and it is mainly sold under the pdo 2 since our aim is to compare information that is homogeneous within the sample, the terroir attribute is not included due to its specificity in location, and thus varying from country to country. and pgi classifications. the australian market is almost 90% supplied by domestic production, with a growing dominance of supermarket distribution and increased relevance of online sales [29]. contrary to australia, france, and italy, which are big wine exporters, in germany imports represent almost 50% of the domestic wine consumption, and sales are 85% off-premise and 15% on-premise [19]. different sources of wine prices have been used in the literature [21], namely the suggested prices, as published in prominent guides; en primeur prices obtained from broker houses; retailed prices reported in consumer or websites, obtained through the direct survey, or gathered by private data provider such as nielsen; auction prices; and restaurant prices. the choice of the data source seems to depend both on the goal of the study and data availability and can influence the results and its economic interpretation. in this research, we focus on specialist retailers (wine stores) in each market, selling through brick-and-mortar outlets and online, as a representative part of the off-trade more sophisticated retailers, compared to supermarkets. we consider these specialty stores as they generally are more selective in their wines and carry wines in more price segments. a preliminary survey on wine forums and wine news was carried out to identify wine stores in each country under analysis. therefore, four databases, in a total of 9624 bottled wines, were used to achieve the intended goals of this study. french data were retrieved from “vinatis” online shop, www.vinatis.com, with 2094 observations after refinements on outliers’ detection. data for italy were collected from “xtrawine”, www.xtrawine.com, comprising 2803 observations. data for australian market were collected from “vintage cellars” online shop, www. vintagecellars.com.au, which gave a total of 2063 observations. finally, data for germany were collected from “vinexus”, www.vinexus.de, with 2664 observations. the period for data collection was from may 22 to october 27, 2019. a first glance of the sites indicates that the information is more detailed by french and italian wineries than by the australian and german ones. the french site highlights the type, country, region, appellation, grape variety, color, price, award, alcohol, style, and store instructions. the italian market reports about the type, origin (zone), award, producer, appellation, price, and food matching. the australian site features the country, brand, region, and price range, while germany includes type, country, region and variety. in summary, based on the assumption that the information provided by stores is demand-driven, we can conclude that consumers in tra36 tânia gonçalves, joão rebelo, lina lourenço-gomes, josé caldas ditional markets (france and italy), seem to be looking for more complex information, although in all of them there is common information, such as the type of wine, the brand, and region. however, a more robust and incisive analysis is needed to verify whether the information presented is relevant for price formation in each market and whether its effects are similar within markets, taking also into account the segmentation by color. thus, accordingly to the literature review and constrained by the information collected the price explanatory variables used in this paper are a drawn on objective attributes (alcohol content, wine age, grape varieties, wine color), sensory attributes as the result of medals or awards won (rating by experts), and reputation (wine origin – imported or domestic, wine classification as reserve/grand reserve, and closure type – cork or screw cap). the price (explained variable) is expressed in euros per bottle with a standard 75cl size. in order to reduce heterogeneity, a natural log is applied to the price. table 1 includes the description of the variables used in the hedonic price function. table 2 includes a summary of the descriptive statistics for the variables included in the estimation of the hedonic price function and appendix a includes the phi correlation between binary variables in each country. this coefficient shows that, in general, the variables are not correlated or show a very low degree of correlation, except for a positive correlation between medals and cap type in the italian market, which means that an awarded wine is associated with a cork cap. additionally, in australia, we found a negative correlation between wine origin and closure type, which suggests that domestic wine is negatively associated with cork cap, and positively with screw cap closure. regarding the descriptive statistics, the average alcohol level is similar in the four markets (between 13% and 14%), with a high concentration around the average (coefficient of variation3 or cv of 6% and 7%). the average age (vintage) is also similar, around 4 years, being slightly higher in italy, although there is a higher relative dispersion in australia, a cv of 97%, against 51% in france and 47% in germany and italy. relatively to the behavior of the explanatory discrete variables we have to emphasize that: there is a predominance of red wine, especially in germany (82% of observations); the awards or medals are relevant in europe, especially in france and italy (81% and 72% of the sample, respectively); in the producing countries (australia, france, and italy) the supply is mainly characterized by domestic wines, while in germany it only represents 14% of this feature; cork stoppers predominate in the traditional producer and consumer countries (97% in france and 70% in italy), being only 17% in australia and 38% in germany; the “reserve” label appears as irrelevant in any of the markets; and in terms of grape varieties, the blend has more expression in france (46%), followed by italy (31%). single varietals (cabernet sauvignon, syrah and chardonnay) have more prominence in australia, with chardonnay having some weight in france (10%) and germany (9%). the average price is roughly €22 in germany, €32 in italy, €35 in australia and €44 in french, with dispersion around the average of 96%, 120%, 189% and 148%, respectively. the average price of red wine is substantially higher than that of white wine, except in italy. considering the supply structure by price segments, as we can observe in figures 1 and 2, the german retailer has the highest share of wine bottles in the lowest class (up to 10 €), 27% of the total. moreover, close to 70% of its wines on sale cost up to €20 and 83% cost up to €30. 3 coefficient of variation, which shows the extent of variability in relation to the mean of the population. table 1. variables included in the analysis. variables description price continuous variable expressed in euros classification 1 if the wine is classified as reserve/grand reserve 0 otherwise closure 1 if the wine has a cork cap 0 if screw cap wine origin 1 if the wine is a national production 0 otherwise medals/awards 1 if the wine is an awarded wine 0 otherwise age continuous variable alcohol continuous variable color 1 if red wine 0 otherwise grape blend cabernet sauvignon syrah other red sauvignon blanc chardonnay other white 1 if the wine is blended 0 otherwise 1 if the grape varietal is 100% cabernet sauvignon 0 otherwise 1 if the grape varietal is 100% syrah 0 otherwise 1 if the wine has another red varietal 0 otherwise 1 if the grape varietal is 100% sauvignon blanc 0 otherwise 1 if the grape varietal is 100% chardonnay 0 otherwise 1 if the wine has another white varietal 0 otherwise 37wine price determinants. is there a homogeneous international standard? only 1% cost more than €100. comparatively, the australian retailer has a lower percentage of low-price wine (16%), exhibiting the majority of its bottles (60%) a cost up to €20. in this retailer, the more expensive wines represent 6% of the total. distinctly, the french winery has the highest proportion of high-priced wines (8%, above €100) and the lowest proportion of cheap wines (12%, up to 10€). despite the lower proportion of more expensive wines (5%), the price structure of the italian wines tends to be closer to the french one. overall, this analysis shows that the indication provided by the average prices is aligned with the finer analysis given by price segments, suggesting that the price structure is not identical between the wine cellars, which reinforces the relevance of investigating its determinants for price quantiles. 2.2 method the traditional linear regression models describe the average relationship between a set of explanatory variables and the dependent variable, based on the conditional mean function. however, this approach may table 2. descriptive statistics. variable specialist shop vintage cellars – 2063 observations australia vinexus – 2664 observations germany vinatis – 2094 observations france xtrawine – 2803 observations italy mean cv min max mean cv min max mean cv min max mean cv min max wine price (euro) (median) 35.28 (16.11) 1.89 2.48 576.59 21.85 (14.9) 0.96 4.2 200 43.63 (21.9) 1.48 5.9 530 32.69 (20.0) 1.20 5.06 378.81 red wine price 44.19 1.79 2.48 576.59 22.5 0.97 4.2 200 50.0 1.41 5.9 530 32.9 1.19 5.06 378.20 white wine price 17.05 0.89 3.34 154.99 19.1 0.87 4.6 179 33.0 1.56 6 470 32.4 1.21 5.86 378.81 alcohol content (alccont) 13.50 0.07 9 16.5 13.39 0.07 9.5 16.5 13.44 0.06 9 17 13.59 0.06 9 17 age 3.93 0.97 1 69 3.99 0.47 1 23 3.94 0.51 1 50 4.61 0.47 2 23 prop.1 prop.1 prop.1 prop.1 color (red=1; white+rosé=0) 0.67 0.82 0.64 0.56 awards or medals (yes=1; no=0) 0.14 0.51 0.81 0.72 wine origin (national=1; imported=0) 0.75 0.14 0.90 0.77 closure (cork=1; screw cap=0) 0.17 0.38 0.97 0.70 reserve (yes=1; no=0) 0.01 0.04 0.02 0.07 grape blend (yes=1; no=0) 0.05 0.12 0.46 0.31 cabernet sauvignon (yes=1; no=0) 0.15 0.06 0.01 0.01 syrah (yes=1; no=0) 0.28 0.04 0.08 0.01 other red (yes=1; no=0) 0.20 0.61 0.23 0.32 sauvignon blanc (yes=1; no=0) 0.08 0.07 0.02 0.04 chardonnay (yes=1; no=0) 0.11 0.09 0.10 0.05 other white (yes=1; no=0) 0.13 0.01 0.11 0.25 note: prop.1= proportion of 1 38 tânia gonçalves, joão rebelo, lina lourenço-gomes, josé caldas provide only a partial view of this relationship, where we can only focus on different points of the conditional distribution. for his reason, quantile regression models have been a useful and popular alternative to the traditional linear regression models. introduced by [30], these models provide appropriated modelling in the presence of different parts of the conditional response distribution changing at different rates. the quantile regression model for qy(τ|x), at the τth quantile of y given a vector of covariates x=x is: qy(τ|x)=β0(τ)+β1(τ)xi1+…+βp(τ)xip, i=1,…,n (1) being β0(τ) the scalar intercept and τ∈(0,1). β(τ) are estimated by solving the following minimization problem: (2) where ρτ(r)=τ max(r,0)+(1-τ)max(-r,0) is referred to as the check loss. the solution to the minimization problem estimates different regression curves for various points of the distribution and yields distinct sets of figure 1. wine price segments. figure 2. kernel density estimate for price. 39wine price determinants. is there a homogeneous international standard? regression coefficients. τ = 0.5 corresponds to the median regression. 3. results in order to test possible structural differences between the four markets, in a first stage (pooled data analysis) and using robust ols, joint regressions for the four samples are estimated (without color separation), followed by an application of the chow test. results from this test on 22 dataset combinations (combinations between one dataset and the three others; combinations between one dataset and the two others; and combinations between paired datasets – see table b.1, appendix b) allow us to conclude that the determinants of wine prices in the four markets are structurally different. given the kernel density of the dependent variable, quantile regressions were considered, estimated and tested. in a second stage (red and white wines analysis), after the application of the chow test for structural differences between wine color (see table b.2, appendix b), a separated analysis for red and white wine was made to check whether the determinants of prices vary among both wines. 3.1 pooled data analysis with a general overview by markets, and for all price segments, the results from quantile regressions (tables 3 and 4) and interquantile differences tests (appendix c) show that the greatest divergences in price determinants occur between the 25th and 50th and 25th and 75th quantiles. the importance of alcohol and blend in price formation in all countries but france seem to be homogeneous in all ranges. results show that in the australian retailer, closure type, age, medals and color are the positive price determinants. for the european samples, age, medals, chardonnay variety and alcohol content are significant in germany and france, while in the italian sample the sauvignon blanc variety has a negative effect in the formation of higher price ranges. in the case of chardonnay, it performs differently in the lower range of german retaileŕ s prices (25-50 quantiles) and in italy, but homogeneously in france. additionally, national origin is only important for all price ranges in france, which contrasts with italian results, where imported wines have higher prices. thus, the only similarity for the four markets, and in all price segments, is the positive and significant effect of wine vintage for price determination, showing a different influence in all price ranges, except for higher-priced wines in australia (50-75 quantile). moreover, for all but the upper price category (75-quantile) in australia, the alcohol content is also a positive and significant driver of the wine price. a similar pattern was found for australian, german and french shops, with the price being determined by medals in all segments. alcohol content influences the price determination in all european shops, while in australia it only influences the medium-low price range. in the german and australian retailers, the wine origin appears to be important only for cheaper wines. additionally, cork closure type has a positive effect on wine prices in french and australian shops, in the medium-low price range (25-quantile and 50-quantile) and in all segments, respectively. the other variables seem to influence wine prices with different magnitude and sign, across price quantiles and retailers. regarding grape variety, chardonnay is a positive determinant in the case of the most expensive wines (50-quantile and 75-quantile) in australia, for cheaper wines in italy and in all segments in the german and french retailers. regarding color effect (red wine), it is positive in all price segments in australia and only for cheaper wines in germany. on the contrary, it penalizes all price groups in italy and the cheaper segment in france. sauvignon blanc variety has a positive influence on the definition of wine prices only in the german retailer, but only in the low price range. in france, syrah variety has a positive effect on all price levels. results for closure ty pes may suggest that, in europe, perceptions that associate screw-capped bottles with low-quality wine may be declining, as the cork closure does not affect the italian retailer price formation and a negative effect in the medium-high price segments in germany. on the other hand, despite being phased out by the majority of australian winemakers since 2000, the cork cap seems to be a positive determinant of wine prices in australia in all price ranges. also, reserve or grand reserve status has a positive and homogeneous effect in the determination of wine prices in the low-price segment and for the most expensive wines in australia, which contrasts with the other retailers under analysis. this seems to suggest that this quality signal may not be important in these markets, or other wine quality classifications may take place. the negative effect found for blend coefficient suggests the importance of single-varietal wines in all retailers. 3.2 red and white wines analysis appendix d includes the detailed results of the quantile regression by color for each country, being all the regressions globally and statistically significant, and 40 tânia gonçalves, joão rebelo, lina lourenço-gomes, josé caldas table 5 summarises these findings, showing the sign and statistical significance of the estimated coefficients. in the australian shop (table d.1), the determinants of wine prices, excluding closure, perform very differently for red and white wines, and the reserve category became now insignificant. cork closure, origin, age, medals, alcohol, and blend are important attributes for the red wines price setting. we may highlight the positive and homogeneous effect of alcohol content in all price segments, while blended wines receive a negative price premium in all price ranges and a red wine produced in australia has a negative premium in the highest one. in the case of white wines, some predictors became irrelevant in price formation – reserve, origin, age, and blend – and the remaining, except chardonnay, have a homogeneous effect in the different quantiles. the alcohol content is a significant predictor only for cheaper wines, and awards or medals do not influence the medium range. in the german wine retailer (table d.2), the price of red wines is negatively influenced by the reserve category, cork closure, blended varieties, and cabernet sauvignon. on the other hand, the national origin is a positive determinant for cheaper red wines, but a negative determinant for higher-priced white wines. the wine vintage, alcohol, and awards received have a positive influence, both in the red and white wine prices. in the case of the most expensive white wines, medals and awards do not influence pricing. inversely to the reds, a blended white wine receives a positive price premium, particularly in higher segments, and the two white varieties under analysis have a homogeneous and positive effect on price setting. in the french retailer (table d.3), all wine characteristics are important for red and white wine’s price fortable 3. quantile regression results for australian and german shops. vintage cellars – australia vinexus germany 25-quantilea 50-quantilea 75-quantilea olsb 25-quantilea 50-quantilea 75-quantilea olsb reserve 0.130** (0.065) 0.081 (0.061) 0.150* (0.084) 0.085 (0.053) -0.030 (0.024) -0.106*** (0.027) -0.150*** (0.032) −0.103*** (0.019) closure 0.353*** (0.031) 0.450*** (0.032) 0.466*** (0.044) 0.432*** (0.024) -0.013 (0.012) -0.040*** (0.014) -0.039** (0.015) −0.042*** (0.010) wine origin 0.047** (0.019) -0.017 (0.018) -0.037 (0.024) −0.017 (0.016) 0.055*** (0.015) 0.009 (0.017) -0.004 (0.018) 0.028** (0.013) age 0.015*** (0.004) 0.020*** (0.004) 0.026*** (0.005) 0.022*** (0.004) 0.059*** (0.005) 0.077*** (0.005) 0.089*** (0.004) 0.067*** (0.003) awards or medals 0.074*** (0.021) 0.164*** (0.027) 0.240*** (0.041) 0.174*** (0.023) 0.092*** (0.012) 0.096*** (0.013) 0.097*** (0.014) 0.098*** (0.009) alccont 0.032*** (0.010) 0.030*** (0.011) 0.009 (0.012) 0.027*** (0.009) 0.075*** (0.008) 0.065*** (0.010) 0.071*** (0.009) 0.081*** (0.007) blend -0.080** (0.035) -0.081*** (0.028) -0.060 (0.051) -0.042 (0.032) -0.040*** (0.019) -0.038* (0.022) -0.024 (0.028) −0.011 (0.016) cabernet sauvignon -0.053* (0.029) -0.049** (0.027) -0.017 (0.041) 0.001 (0.024) -0.070*** (0.019) -0.072** (0.029) -0.084*** (0.032) −0.069*** (0.022) syrah -0.005 (0.023) -0.008 (0.021) 0.037 (0.035) 0.047** (0.021) -0.037 (0.035) -0.023 (0.037) -0.050 (0.045) −0.024 (0.028) sauvignon blanc -0.054*** (0.019) -0.087*** (0.022) -0.079*** (0.028) −0.078*** (0.018) 0.102*** (0.035) 0.042 (0.029) 0.023 (0.038) 0.059** (0.023) chardonnay -0.004 (0.025) 0.073*** (0.022) 0.147*** (0.033) 0.082*** (0.022) 0.067*** (0.021) 0.075*** (0.023) 0.135*** (0.031) 0.097*** (0.018) color 0.072*** (0.027) 0.122*** (0.021) 0.206*** (0.027) 0.128*** (0.021) 0.060* (0.035) 0.034 (0.029) 0.043 (0.038) 0.058** (0.023) constant 0.491*** (0.138) 0 .644*** (0.147) 1.005*** (0.159) 0.658*** (0.130) -0.296**** (0.109) -0.042 (0.129) -0.014 (0.117) −0.237*** (0.086) observations 2063 2664 r-squared 0.14 0.23 0.32 0.44 0.17 0.20 0.24 0.35 *, **, *** denotes significance at 10%, 5%, 1%. abootstrap standard errors in parentheses; replications=1000. brobust standard errors in parentheses; ols = ordinary least squares, included as reference. 41wine price determinants. is there a homogeneous international standard? mation, except wine origin, which became insignificant for white wines pricing. the effect of sauvignon blanc variety is positive for cheaper wines, while negative in the case of the most expensive segments. the majority of red wine price determinants perform differently across the different quantiles, except closure type, wine origin and cabernet sauvignon variety. according to the interquartile differences tests’ results, in the case of white wines, the determinants of price have a more homogeneous effect in the price formation. finally, for the italian retailer (table d.4), both wine origin and vintage have a similar effect in both red and white wine prices but perform differently across wines quantiles. italian wines receive a negative price premium, with a higher magnitude for more expensive wines, while vintage positively affects prices in all segments. alcohol content has a homogeneous and positive effect in all quantiles, while a blended wine receives a negative price premium. the analysis by wine color, revealed that closure type became statistically significant while having a cork cap negatively affects the price of cheaper red wines but having a positive impact on the price of white wines. syrah variety also became a determinant of price, having a negative influence on the medium-lower range prices. sauvignon blanc variety appears to particularly have a negative impact in the prices setting in the most expensive segments of white wines. broadly, the results show that the implicit prices of wine attributes such as wine origin and blend category differ for red and white wines, in line with [13], in all retailers except for the italian. additionally, closure type also performs differently in germany and italy, adding to this last one, the different effects of awards or medals. in australia, the ageing potential for red table 4. quantile regression results for french and italian shops. vinatis – france xtrawine italy 25-quantilea 50-quantilea 75-quantilea olsb 25-quantilea 50-quantilea 75-quantilea olsb reserve -0.114*** (0.033) -0.137*** (0.032) -0.215*** (0.058) −0.186*** (0.036) 0.011 (0.017) 0.006 (0.025) -0.031 (0.025) −0.005 (0.017) closure 0.141*** (0.028) 0.156*** (0.040) 0.075 (0.067) 0.174*** (0.031) 0.017 (0.046) 0.056 (0.068) 0.058 (0.070) 0.043 (0.039) wine origin 0.042** (0.019) 0.082*** (0.027) 0.090** (0.043) 0.036 (0.027) -0.177*** (0.015) -0.259*** (0.019) -0.344*** (0.030) −0.273*** (0.015) age 0.078*** (0.007) 0.104*** (0.006) 0.115*** (0.007) 0.092*** (0.004) 0.059*** (0.003) 0.073*** (0.004) 0.084*** (0.006) 0.061*** (0.004) awards or medals 0.058*** (0.015) 0.076*** (0.018) 0.106*** (0.025) 0.104*** (0.014) 0.052 (0.046) 0.029 (0.068) 0.051 (0.070) 0.073* (0.039) alccont 0.070*** (0.009) 0.095*** (0.012) 0.104*** (0.015) 0.081*** (0.009) 0.089*** (0.007) 0.093*** (0.008) 0.102*** (0.011) 0.108*** (0.006) blend -0.096*** (0.016) -0.134*** (0.019) -0.158*** (0.027) −0.122*** (0.016) -0.073*** (0.010) -0.076*** (0.012) -0.085*** (0.015) −0.104*** (0.011) cabernet sauvignon -0.141* (0.076) -0.266* (0.147) -0.092 (0.258) −0.165 (0.011) -0.113* (0.061) -0.067 (0.065) -0.024 (0.071) −0.049 (0.048) syrah 0.141*** (0.025) 0.084** (0.036) 0.079* (0.046) 0.077*** (0.027) -0.036 (0.038) -0.007 (0.058) -0.042 (0.125) −0.008 (0.048) sauvignon blanc -0.005 (0.042) -0.038 (0.037) -0.161*** (0.039) −0.076*** (0.027) 0.005 (0.021) -0.007 (0.022) -0.102*** (0.019) −0.074*** (0.021) chardonnay 0.108*** (0.029) 0.112*** (0.030) 0.115*** (0.044) 0.114*** (0.025) 0.093*** (0.021) 0.039* (0.023) -0.033 (0.035) 0.006 (0.022) color -0.047** (0.019) -0.029 (0.020) -0.021 (0.028) −0.007 (0.017) -0.063*** (0.010) -0.054*** (0.012) -0.074*** (0.016) −0.059*** (0.011) constant -0.219* (0.117) -0 .526*** (0.150) -0.435** (0.197) −0.279** (0.121) -0.149* (0.089) -0.081 (0.091) -0.012 (0.131) −0.204*** (0.078) observations 2094 2803 r-squared 0.20 0.23 0.24 0.37 0.26 0.29 0.29 0.43 *, **, *** denotes significance at 10%, 5%, 1%. abootstrap standard error in parentheses; replications=1000. brobust standard errors in parentheses; ols = ordinary least squares, included as reference. 42 tânia gonçalves, joão rebelo, lina lourenço-gomes, josé caldas wines is very distinct from that of white wines, corroborating [17]. 4. conclusions this investigation aimed to understand whether exists a homogeneous international standard on the attributes that influence wine prices sold in a similar distribution channel. to achieve this goal, we estimated hedonic price functions on four different wine markets, using data from specialist retailers. the results led us to conclude that, despite the standardization of the world wine market, locally and by market and market segment, there is still differentiation in the consumer appraisal of wine price attributes and therefore in the price determinants. data collected show that, on average, the demand structure in australia, germany, france and italy is very similar in terms of alcohol content, vintage and reserve/grand reserve category. domestic wine is dominant in producing countries. moreover, while old world (italian and french) privilege blend, cork cap and awarded wine, new world stress the varietal component of wine and screw tops. the price structure is heterogeneous, both within the country and between countries. french wine presents the highest average price while german wine shows the lowest one; additionally, the wine share in the lowest and highest price segments is also distinct within each market. table 5. summary of quantile regression results by color, for each country. variable quantile australia germany red white red white 25 50 75 25 50 75 25 50 75 25 50 75 reserve n.s. n.s. n.s. n.s. n.s. n.s. n.s. (-) *** (-) *** (-) *** (-) ** (-) *** closure (+) *** (+) *** (+) *** (+) *** (+) *** (+) *** (-) * (-) *** (-) *** n.s. n.s. n.s. wine origin (+) ** n.s. (-) ** n.s. n.s. n.s. (+) *** n.s. n.s. n.s. n.s. (-) ** age (+) ** (+) *** (+) *** n.s. n.s. n.s. (+) *** (+) *** (+) *** (+) *** (+) *** (+) *** awards or medals (+) *** (+) *** (+) *** (+) ** n.s. (+) * (+) *** (+) *** (+) *** (+) ** (+) *** n.s. alccont (+) *** (+) *** (+) ** (+) *** n.s. n.s. (+) *** (+) *** (+) *** (+) *** (+) *** (+) *** blend (-) *** (-) *** (-) * n.s. n.s. n.s. (-) ** (-) * (-) * n.s. (+) * (+) ** cabernet sauvignon n.s. n.s. n.s. (-) *** (-) *** (-) *** syrah n.s. n.s. n.s. n.s. n.s. n.s. sauvignon blanc (-) *** (-) *** (-) ** (+) *** (+) *** (+) *** chardonnay n.s. (+) *** (+) *** (+) *** (+) *** (+) *** france italy red white red white 25 50 75 25 50 75 25 50 75 25 50 75 reserve (-) ** (-) ** (-) *** (-) *** (-) ** n.s. n.s. n.s. n.s. n.s. n.s. n.s. closure (+) *** (+) ** (+) ** (+) *** (+) *** n.s. (-) ** n.s. n.s. (+) ** (+) *** (+) ** wine origin (+) ** (+) ** n.s. n.s. n.s. n.s. (-) *** (-) *** (-) *** (-) *** (-) *** (-) *** age (+) *** (+) *** (+) *** (+) *** (+) *** (+) *** (+) *** (+) *** (+) *** (+) *** (+) *** (+) *** awards or medals (+) *** (+) *** (+) *** (+) *** (+) *** (+) * (+) *** (+) *** (+) * n.s. n.s. n.s. alccont (+) *** (+) *** (+) *** (+) *** (+) *** (+) *** (+) *** (+) *** (+) *** (+) *** (+) *** (+) *** blend (-) *** (-) *** (-) *** (-) * (-) * n.s. (-) *** (-) *** (-) *** (-) *** (-) *** (-) *** cabernet sauvignon n.s. (-) ** n.s. n.s. n.s. n.s. syrah (+) *** (+) * n.s. (-) * (-) * n.s. sauvignon blanc (+) * n.s. (-) ** n.s. n.s. (-) *** chardonnay (+) *** (+) *** (+) *** (+) *** n.s. n.s. *, **, *** denotes significance at 10%, 5%, 1%; n.s. stands for non-significant effects 43wine price determinants. is there a homogeneous international standard? the findings show that the price determinants are structurally different (i) among countries, (ii) for price segments in each country, and (iii) whether the wine is red or white, disallowing to extrapolate results from one market to other markets, and from red to white wines. however, both between the four markets and across market segments there are similarities and differences in the effects of wine attributes on prices. regarding similarities, the age or vintage is a positive driver of the price for all ranges in all countries, except for australia when comparing red to white wines. the alcohol content plays an identical positive effect (for total wine or pooled data, and by color), except for the highest-priced wine in australia, which also applies in the case of white wines. for total wine, medals or awards are positive wine determinants in all markets, except in the italian market. however, when segmenting by color, it has distinct effects. in the case of australia, medals or awards positively contribute to increasing the price of the cheapest and the most expensive white wines. oppositely, in italy, this attribute is only relevant for red wines, and in germany, the price of the most expensive white wines is not determined by an award or medal. being a blended wine decreases the price of wine (total, red, and white) and cabernet sauvignon presents consistently a negative influence, particularly on the medium-low price range. when compared to other varieties, chardonnay is a positive determinant, excluding the lowest price range in australia and the highest in italia, signing that it is one of the most recognized varieties in the world. indeed, this is the most popular white variety in australia, with an increasing effect and especially relevant in the medium-higher priced wines. additionally, in this country, for the definition of white wine’ prices in all segments, it is also important to have a cork closure. in summary, despite some similarities, we found that the wine price determinants are very specific of each market, and also depending on the wine color. this demonstrates that wine is a complex and heterogenous product, and that there is not a homogeneous international standard. in fact, in australia the prices of wine (total) and the red one are positively influenced by a cork closure, vintage, awards or medals received, and alcohol level, and blended wines receive a negative price premium, as happens with national red wines in the highest segment of prices. in germany, the price of total wine, and also by color, is positively influenced by age, awards, and alcohol, being its effects increasing with price segments. however, in the case of white blended wines they receive a price premium in higher segments (contrasting with other countries). the white varieties positively influence all price ranges, and for an increase in price segments, sauvignon blanc has a decreasing effect, while chardonnay registers an increasing contribution. in france, for total wine and the red, cork cap, vintage, awards, and alcohol level have a positive effect in the majority of price ranges. french wines and syrah variety are important predictors of the price for cheaper/ medium red segments. in the case of white wines, and as it happens with the reds, age, awards, and alcohol level are determinants of wine prices, with chardonnay playing an important role similar to germany. the cork closure is only relevant for cheaper wines. in italy, age and alcohol are the most important attributes for higher prices of wine (total) and also for red and white wines. adding to what was stated above regarding awards/medals, these only produce a positive effect on the price of red wine. the cork closure in whites has an increasing impact as price segments increase, which registers an opposite effect for cheaper red wines, and no influence in higher segments. contrary to the other retailers, chardonnay variety is only important for cheaper wines. our results lead to the robust conclusion that there is not a single world wine and even a single country market but different wine markets, which is also true for red and white wines, with the significance or sign of attributes in wine price determination changing among countries and across price market segments. thus, generalizing results based on country data and neglecting the effects of market segmentation on wine price determinants may lead to erroneous conclusions and managerial decisions that should be avoided. the findings of this study recommend wineries to define marketing strategies and to supply wines according to the characteristics of the target market and to achieve a better match between supply and demand, to enhance their market shares, not only for different price segments but also different wine styles. this work is not free of drawbacks, since the data sources from specialized wine retailers tend to cover only a small market share and/or market shares, unlike those of supermarkets/large distributors. additionally, specialist retailers are off-trade channels who purchase wine through an agent or a wholesaler, leading to a double mark-up reflected in higher consumer prices, when compared to supermarkets, and the determinants of wine prices tend to be different when comparing specialist shops with other channels [18, 45]. future research should include other important determinants, such as the specific wine varieties (for white and red wines) for 44 tânia gonçalves, joão rebelo, lina lourenço-gomes, josé caldas each country, and to address the effect of appellations and terroir on prices, which we believe may have a significant effect on price. acknowledgments this work is supported by the project vinci – wine, innovation and international competitiveness, under the operation number soe3/p2/f0917, feder – interreg sudoe, and national funds, through the fct – portuguese foundation for science and technology under the project uidb/soc/04011/2020. the authors thank to anonymous referees and also to eduarda correia for her support in data collection. the usual disclaimer applies. references [1] a. corsi, the italian wine industry, in: a. ugaglia, j-m. cardebat, a. corsi (eds), the palgrave handbook of wine industry economics. palgrave macmillan, cham, 2019 [2] amédée-manesme, c. o., faye, b., le fur, e., heterogeneity and fine wine prices: application of the quantile regression approach, appl econ. 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[53] ugaglia, j-m. cardebat, l. jiao, the french wine industry, in: a. ugaglia, j-m. cardebat, a. corsi (eds), the palgrave handbook of wine industry economics. palgrave macmillan, cham, 2019 [54] wood, d., anderson, k., what determines the future value of an icon wine? new evidence from australia, j. wine econ. 1(2) (2006) 141-161. https://doi.org/10.1017/s1931436100000171 47micro-wineries as drivers for local economic development and innovation in lagging areas appendix a table a1. phi correlation between binary variables for each country. reserve cap origin medals blend cabsauv syrah sauvblanc chardonnay color france reserve 1.0000 cap -0.0119 1.0000 origin -0.1305*** 0.2301*** 1.0000 medals 0.0164 0.1227*** 0.0489** 1.0000 blend -0.0265 0.0613*** 0.0703*** 0.0498** 1.0000 cabsauv 0.0357 -0.0711*** -0.1160*** -0.0022 -0.0502** 1.0000 syrah -0.0438** 0.0166 0.0284 0.0123 -0.2644*** -0.0198 1.0000 sauvblanc -0.0203 -0.0654*** 0.0071 -0.0117 -0.1224*** -0.0092 -0.0378* 1.0000 chardonnay -0.0205 -0.0170 0.0444** -0.0340 -0.3138*** -0.0235 -0.0969 *** -0.0449** 1.0000 color -0.0297 0.1017*** -0.0626*** 0.1261*** 0.1601*** 0.0525** 0.2165*** -0.1745*** -0.4475*** 1.0000 italy reserve 1.0000 cap 0.0032 1.0000 origin 0.0808*** 0.0977*** 1.0000 medals -0.0033 0.9454*** 0.0105 1.0000 blend 0.0163 0.0648*** 0.0680*** 0.0434** 1.0000 cabsauv -0.0328* -0.0562*** -0.0277 -0.0084 -0.0804*** 1.0000 syrah -0.0215 -0.0140 -0.0541*** 0.0003 -0.0815*** -0.0143 1.0000 sauvblanc -0.0344* -0.0014 -0.0877*** -0.0108 -0.1368*** -0.0240 -0.0243 1.0000 chardonnay -0.0554*** 0.0175 -0.2550*** 0.0337* -0.1517*** -0.0266 -0.0270 -0.0453** 1.0000 color 0.1047*** 0.0458** 0.1050*** 0.0400** 0.1463*** 0.1063*** 0.1076*** -0.2259*** -0.2505*** 1.0000 australia reserve 1.0000 cap -0.0077 1.0000 origin -0.0404* -0.4023*** 1.0000 medals -0.0214 0.0947*** 0.0082 1.0000 blend 0.0366* 0.0300 -0.0071 -0.0193 1.0000 cabsauv -0.0232 0.1204*** 0.0445 0.0786*** -0.0895*** 1.0000 syrah -0.0348 -0.0138 0.2723*** 0.1274*** -0.1370*** -0.2596*** 1.0000 sauvblanc -0.0041 -0.1063*** -0.1725*** -0.0299 -0.0657*** -0.1246*** -0.1908*** 1.0000 chardonnay 0.0413* -0.1039*** 0.0810*** -0.0645*** -0.0764*** -0.1448*** -0.2217*** -0.1064*** 1.0000 color -0.0194 0.2139*** 0.0823*** 0.1272*** 0.0971*** 0.2877*** 0.4407*** -0.4329*** -0.5031*** 1.0000 germany reserve 1.0000 cap 0.0715*** 1.0000 origin -0.0812*** -0.1250*** 1.0000 medals 0.0371* 0.1722*** -0.1564*** 1.0000 blend 0.1507*** 0.1241*** -0.1435*** 0.0719*** 1.0000 cabsauv 0.0428** 0.0510*** -0.0941*** 0.0500*** -0.0933*** 1.0000 syrah -0.0296 -0.0229 -0.0796*** 0.1012*** -0.0752*** -0.0484** 1.0000 sauvblanc -0.0243 -0.1015*** -0.0371* 0.0043 -0.1037*** -0.0668*** -0.0538*** 1.0000 chardonnay -0.0294 0.0111 -0.0848*** -0.0127 -0.1195*** -0.0770*** -0.0620** -0.0855*** 1.0000 color 0.0323* 0.1175*** 0.0501*** -0.0244 0.0362* 0.0735*** 0.0593*** -0.7895*** 0.0942*** 1.0000 notes: 0.90 to 1.00 (−0.90 to −1.00) very high positive (negative) correlation; 0.70 to 0.90 (−0.70 to −0.90) high positive (negative) correlation; 0.50 to 0.70 (−0.50 to −0.70) moderate positive (negative) correlation; 0.30 to 0.50 (−0.30 to −0.50) low positive (negative) correlation; 0.00 to 0.30 (0.00 to −0.30) negligible correlation (hinkle, wiersma, & jurs, 2003). ***, **, * stands for significance at 1%, 5%, 10%, respectively. 48 tânia gonçalves, joão rebelo, lina lourenço-gomes, josé caldas appendix b – structural differences between datasets table b1. chow test results for the 22 combinations between datasets. h0 result βa-βf,g,i=0 f(13, 9671) = 96.6821; p-value=0.0000 βf-βa,g,i=0 f(13, 9671) = 18.6034; p-value=0.0000 βg-βa,f,i=0 f(13, 9671) = 78.2422; p-value=0.0000 βi-βa,g,f=0 f(13, 9671) = 61.9454; p-value=0.0000 βa-βf,i=0 f(13, 6985) = 59.7917; p-value=0.0000 βa-βf,g=0 f(13, 6859) = 86.2516; p-value=0.0000 βa-βi,g=0 f(13, 7551) = 122.783; p-value=0.0000 βf-βa,i=0 f(13, 6985) = 28.8852; p-value=0.0000 βf-βa,g=0 f(13, 6859) = 12.0781; p-value=0.0000 βf-βi,g=0 f(13, 7592) = 31.7239; p-value=0.0000 βg-βa,i=0 f(13, 7551) = 91.5821; p-value=0.0000 βg-βa,f=0 f(13, 6859) = 69.2847; p-value=0.0000 βg-βi,f=0 f(13, 7592) = 27.6741; p-value=0.0000 βi-βa,f=0 f(13, 6985) = 53.9544; p-value=0.0000 βi-βa,g=0 f(13, 7551) = 50.6602; p-value=0.0000 βi-βf,g=0 f(13, 7592) = 51.5812; p-value=0.0000 βa-βf=0 f(13, 4173) = 44.0896; p-value=0.0000 βa-βg=0 f(13, 4739) = 100.381; p-value=0.0000 βa-βi=0 f(13, 4865) = 76.3607; p-value=0.0000 βf-βi=0 f(13, 4906) = 33.0689; p-value=0.0000 βf-βg=0 f(13, 4780) = 15.4393; p-value=0.0000 βg-βi=0 f(13, 5472) = 31.7139; p-value=0.0000 notes: a = australia; g = germany; i = italy; f = france. table b2. show test results between wine color. data h0 result pooled data βr-βw=0 f(8, 9681) = 12,3703 ; p-value=0.0000 australia βr-βw=0 f(8, 2047) = 9,03773 ; p-value=0.0000 germany βr-βw=0 f(8, 2648) = 5,03464 ; p-value=0.0000 france βr-βw=0 f(8, 2078) = 4,60065 ; p-value=0.0000 italy βr-βw=0 f(8, 2787) = 5,6072 ; p-value=0.0000 notes: r = red; w = white. 49micro-wineries as drivers for local economic development and innovation in lagging areas appendix c interquantile differences tests by countries table c1. australia. variable 25–75 quantiles 25–50 quantiles 50–75 quantiles cap f(1, 2050) = 4.30 prob > f = 0.038** f(1, 2050) = 10.86 prob > f = 0.001*** f(1, 2050) = 0.15 prob > f = 0.701 reserve f(1, 2050) = 0.10 prob > f = 0.755 f(1, 2050) = 1.09 prob > f = 0.297 f(1, 2050) = 0.97 prob > f = 0.325 color f(1, 2050) = 31.29 prob > f = 0.000*** f(1, 2050) = 9.46 prob > f = 0.002*** f(1, 2050) = 29.69 prob > f = 0.000*** age f(1, 2050) = 5.01 prob > f = 0.025** f(1, 2050) = 4.84 prob > f = 0.028** f(1, 2050) = 2.63 prob > f = 0.105 origin f(1, 2050) = 14.59 prob > f = 0.000*** f(1, 2050) = 14.23 prob > f = 0.000*** f(1, 2050) = 1.69 prob > f = 0.194 medals f(1, 2050) = 15.29 prob > f = 0.000*** f(1, 2050) = 7.03 prob > f = 0.005*** f(1, 2050) = 4.39 prob > f = 0.036** alcohol f(1, 2050) = 2.64 prob > f = 0.104 f(1,2050) = 0.11 prob > f = 0.737 f(1, 2050) = 2.28 prob > f = 0.131 blend f(1, 2050) = 0.17 prob > f = 0.676 f(1,2050) = 0.00 prob > f = 0.963 f(1, 2050) = 0.30 prob > f = 0.582 cabernet sauvignon f(1, 2050) = 0.71 prob > f = 0.3986 f(1,2050) = 0.03 prob > f = 0.864 f (1, 2050) = 0.92 prob > f = 0.338 syrah f(1, 2050) = 1.47 prob > f = 0.225 f(1, 2050) = 0.02 prob > f = 0.889 f (1, 2050) = 2.24 prob > f = 0.135 sauvignon blanc f(1, 2050) = 0.47 prob > f = 0.4918 f(1,2050) = 1.95 prob > f = 0.162 f (1, 2050) = 0.07 prob > f = 0.786 chardonnay f(1, 2050) = 18.75 prob > f = 0.000*** f(1,2050) = 14.90 prob > f = 0.000*** f (1, 2050) = 5.89 prob > f = 0.015** ***, **, * stands for significance at 1%, 5%, 10%, respectively. 50 tânia gonçalves, joão rebelo, lina lourenço-gomes, josé caldas table c2. germany. variable 25–75 quantiles 25–50 quantiles 50–75 quantiles cap f(1, 2651) = 2.00 prob > f = 0.158 f(1, 2651) = 3.81 prob > f = 0.051* f(1, 2651) = 0.01 prob > f = 0.927 reserve f(1, 2651) = 14.71 prob > f = 0.000*** f(1, 2651) = 17.53 prob > f = 0.000*** f(1, 2651) = 3.08 prob > f = 0.079* color f(1, 2651) = 0.22 prob > f = 0.638 f(1, 2651) = 1.40 prob > f = 0.236 f(1, 2651) = 0.05 prob > f = 0.819 age f(1, 2651) = 36.59 prob > f = 0.000*** f(1, 2651) = 18.80 prob > f = 0.000*** f(1, 2651) = 12.80 prob > f = 0.000*** origin f(1, 2651) = 7.26 prob > f = 0.007*** f(1, 2651) = 26.24 prob > f = 0.000*** f(1, 2651) = 0.53 prob > f = 0.470 medals f(1, 2651) = 0.09 prob > f = 0.769 f(1, 2651) = 0.10 prob > f = 0.750 f(1, 2651) = 0.00 prob > f = 0.962 alcohol f(1, 2651) = 0.14 prob > f = 0.707 f(1, 2651) = 1.48 prob > f = 0.224 f(1, 2651) = 0.28 prob > f = 0.600 blend f(1, 2651) = 0.21 prob > f = 0.643 f(1, 2651) = 0.01 prob > f = 0.937 f(1, 2651) = 0.43 prob > f = 0.510 cabernet sauvignon f(1, 2651) = 0.13 prob > f = 0.714 f(1, 2651) = 0.00 prob > f = 0.947 f (1, 2651) = 0.15 prob > f = 0.697 syrah f(1, 2651) = 0.07 prob > f = 0.791 f(1, 2651) = 0.17 prob > f = 0.678 f (1, 2651) = 0.51 prob > f = 0.476 sauvignon blanc f(1, 2651) = 3.58 prob > f = 0.058* f(1, 2651) = 6.13 prob > f = 0.013** f (1, 2651) = 0.26 prob > f = 0.613 chardonnay f(1, 2651) = 4.72 prob > f = 0.029** f(1, 2651) = 0.17 prob > f = 0.680 f (1, 2651) = 3.80 prob > f = 0.052* ***, **, * stands for significance at 1%, 5%, 10%, respectively. table c3. france. variable 25 – 75 quantiles 25 – 50 quantiles 50 – 75 quantiles cap f(1, 2081) = 1.09 prob > f = 0.296 f(1, 2081) = 0.46 prob > f = 0.499 f(1, 2081) = 1.53 prob > f = 0.218 reserve f(1, 2081) = 1.77 prob > f = 0.183 f(1, 2081) = 0.49 prob > f = 0.483 f(1, 2081) = 1.20 prob > f = 0.274 color f(1, 2081) = 0.85 prob > f = 0.355 f(1, 2081) = 0.70 prob > f = 0.404 f(1, 2081) = 0.11 prob > f = 0.737 age f(1, 2081) = 45.40 prob > f = 0.000*** f(1, 2081) = 23.15 prob > f = 0.000*** f(1, 2081) = 6.64 prob > f = 0.010*** origin f(1, 2081) = 1.54 prob > f = 0.214 f(1, 2081) = 2.29 prob > f = 0.130 f(1, 2081) = 0.06 prob > f = 0.802 medals f(1, 2081) = 3.23 prob > f = 0.072* f(1, 2081) = 3.00 prob > f = 0.084* f(1, 2081) = 1.39 prob > f = 0.238 alcohol f(1, 2081) = 4.93 prob > f = 0.027** f(1, 2081) = 8.54 prob > f = 0.004*** f(1, 2081) = 0.46 prob > f = 0.499 blend f(1, 2081) = 6.51 prob > f = 0.011** f(1, 2081) = 5.04 prob > f = 0.025** f(1, 2081) = 1.25 prob > f = 0.263 cabernet sauvignon f(1, 2081) = 0.05 prob > f = 0.827 f(1, 2081) = 0.30 prob > f = 0.581 f (1, 2081) = 1.14 prob > f = 0.285 syrah f(1, 2081) = 1.98 prob > f = 0.159 f(1, 2081) = 3.88 prob > f = 0.049** f (1, 2081) = 0.01 prob > f = 0.903 sauvignon blanc f(1, 2081) = 9.66 prob > f = 0.002*** f(1, 2081) = 1.08 prob > f = 0.299 f (1, 2081) = 6.51 prob > f = 0.011** chardonnay f(1, 2081) = 0.04 prob > f = 0.840 f(1, 2081) = 0.02 prob > f = 0.901 f (1, 2081) = 0.01 prob > f = 0.913 ***, **, * stands for significance at 1%, 5%, 10%, respectively. 51micro-wineries as drivers for local economic development and innovation in lagging areas table c4. italy. variable 25–75 quantiles 25–50 quantiles 50–75 quantiles cap f(1, 2790) = 0.17 prob > f = 0.685 f(1, 2790) = 0.38 prob > f = 0.539 f(1, 2790) = 0.00 prob > f = 0.983 reserve f(1, 2790) = 3.00 prob > f = 0.083* f(1, 2790) = 0.04 prob > f = 0.850 f(1, 2790) = 3.61 prob > f = 0.057* color f(1, 2790) = 0.86 prob > f = 0.355 f(1, 2790) = 0.93 prob > f = 0.334 f(1, 2790) = 3.04 prob > f = 0.081* age f(1, 2790) = 14.96 prob > f = 0.000*** f(1, 2790) = 12.34 prob > f = 0.001*** f(1, 2790) = 4.61 prob > f = 0.032** origin f(1, 2790) = 23.44 prob > f = 0.000*** f(1, 2790) = 31.12 prob > f = 0.000*** f(1, 2790) = 6.79 prob > f = 0.009*** medals f(1, 2790) = 0.00 prob > f = 0.998 f(1, 2790) = 0.13 prob > f = 0.714 f(1, 2790) = 0.05 prob > f = 0.828 alcohol f(1, 2790) = 1.07 prob > f = 0.300 f(1, 2790) = 0.53 prob > f = 0.469 f(1, 2790) = 0.59 prob > f = 0.441 blend f(1, 2790) = 0.68 prob > f = 0.409 f(1, 2790) = 0.05 prob > f = 0.827 f(1, 2790) = 0.49 prob > f = 0.484 cabernet sauvignon f(1, 2790) = 1.24 prob > f = 0.265 f(1, 2790) = 0.43 prob > f = 0.514 f (1, 2790) = 1.16 prob > f = 0.281 syrah f(1, 2790) = 0.00 prob > f = 0.954 f(1, 2790) = 0.04 prob > f = 0.838 f (1, 2790) = 0.01 prob > f = 0.940 sauvignon blanc f(1, 2790) = 16.32 prob > f = 0.000*** f(1, 2790) = 0.29 prob > f = 0.593 f (1, 2790) = 22.3 prob > f = 0.000*** chardonnay f(1, 2790) = 15.54 prob > f = 0.000*** f(1, 2790) = 8.14 prob > f = 0.004*** f (1, 2790) = 5.45 prob > f = 0.020** ***, **, * stands for significance at 1%, 5%, 10%, respectively. 52 tânia gonçalves, joão rebelo, lina lourenço-gomes, josé caldas appendix d quantile regression results by color for each country table d1. australia. red white 25-quantilea 50-quantilea 75-quantilea olsb 25-quantilea 50-quantilea 75-quantilea olsb reserve 0.159 (0.120) 0.081 (0.102) 0.062 (0.131) 0.715 (0.081) 0.103 (0.063) 0.045 (0.097) 0.128 (0.032) 0.104* (0.061) closure 0.406*** (0.031) 0.469*** (0.030) 0.468*** (0.047) 0.450*** (0.027) 0.253*** (0.052) 0.285*** (0.050) 0.367*** (0.015) 0.299*** (0.050) wine origin 0.076** (0.037) -0.052 (0.048) -0.124** (0.055) −0.024 (0.024) 0.017 (0.020) -0.001 (0.009) -0.002 (0.018) −0.015 (0.018) age 0.016** (0.007) 0.023*** (0.004) 0.032*** (0.005) 0.022*** (0.004) 0.006 (0.004) 0.005 (0.004) 0.014 (0.009) 0.017*** (0.005) awards or medals 0.113*** (0.032) 0.165*** (0.042) 0.240*** (0.031) 0.193*** (0.027) 0.041** (0.024) 0.077 (0.049) 0.059* (0.036) 0.085** (0.034) alccont 0.050*** (0.016) 0.048*** (0.018) 0.051** (0.024) 0.032** (0.014) 0.022*** (0.008) 0.011 (0.011) 0.001 (0.012) 0.025** (0.011) blend -0.101*** (0.036) -0.073*** (0.028) -0.078* (0.045) −0.049 (0.035) -0.083 (0.070) -0.034 (0.101) 0.145 (0.124) 0.009 (0.077) cabernet sauvignon -0.054 (0.034) -0.047 (0.030) -0.037 (0.034) −0.003 (0.025) syrah -0.025 (0.023) -0.005 (0.025) 0.020 (0.042) 0.044** (0.022) sauvignon blanc -0.061*** (0.019) -0.066*** (0.020) -0.055** (0.022) −0.074*** (0.018) chardonnay 0.009 (0.020) 0.069*** (0.024) 0.167*** (0.040) 0.087*** (0.021) constant 0.279 (0.228) 0.514*** (0.250) 0.671** (0.336) 0.715*** (0.194) 0.674*** (0.119) 0.928 (0.155) 1.112*** (0.152) 0.721*** (0.150) observations 1386 677 r-squared 0.14 0.24 0.30 0.42 0.06 0.09 0.17 0.23 *, **, *** denotes significance at 10%, 5%, 1%. abootstrap standard errors in parentheses; replications=1000. brobust standard errors in parentheses; ols = ordinary least squares, included as reference. interquartile differences: red: 25-75 (age***; origin***; medals***); 25-50 (closure**; origin***); 50-75 (age**; origin**; medals*); white: 25-75 (chardonnay***); 25-50 (chardonnay***); 50-75 (chardonnay***). 53micro-wineries as drivers for local economic development and innovation in lagging areas table d2. germany. red white 25-quantilea 50-quantilea 75-quantilea olsb 25-quantilea 50-quantilea 75-quantilea olsb reserve -0.012 (0.020) -0.083*** (0.029) -0.127*** (0.029) −0.089*** (0.021) -0.096*** (0.036) -0.118** (0.053) -0.252*** (0.057) −0.181*** (0.035) closure -0.024* (0.014) -0. 058*** (0.020) -0.050*** (0.019) −0.052*** (0.011) 0.044 (0.042) 0.039 (0.031) 0.021 (0.035) 0.010 (0.023) wine origin 0.060*** (0.016) 0.003 (0.018) 0.010 (0.015) 0.032** (0.014) 0.040 (0.035) 0.007 (0.041) -0.054** (0.024) −0.024 (0.031) age 0. 057*** (0.005) 0.075*** (0.003) 0.084*** (0.003) 0.064*** (0.003) 0.069*** (0.013) 0.097*** (0.013) 0.099*** (0.023) 0.081*** (0.010) awards or medals 0.097*** (0.012) 0.107*** (0.019) 0.129*** (0.016) 0.113*** (0.011) 0.068** (0.029) 0.085*** (0.031) -0.007 (0.031) 0.034* (0.021) alccont 0.075*** (0.009) 0.064*** (0.008) 0.078*** (0.006) 0.084*** (0.007) 0.078*** (0.023) 0.059*** (0.020) 0.057*** (0.022) 0.067*** (0.015) blend -0.046** (0.021) -0.044* (0.024) -0.041* (0.024) −0.020 (0.017) 0.107 (0.095) 0.132* (0.071) 0.217** (0.040) 0.163*** (0.063) cabernet sauvignon -0.062*** (0.017) -0.073*** (0.016) -0.097*** (0.030) −0.071*** (0.022) syrah -0.054 (0.045) -0.025 (0.035) -0.067 (0.062) −0.031 (0.028) sauvignon blanc 0.136*** (0.050) 0.111*** (0.034) 0.086*** (0.032) 0.126*** (0.029) chardonnay 0.137*** (0.049) 0.133*** (0.032) 0.214*** (0.050) 0.197*** (0.032) constant -0.229** (0.107) -0.016 (0.107) -0.057 (0.079) −0.210** (0.094) -0.377 (0.299) -0.054 (0.244) 0.659** (0.301) −0.122 (0.195) observations 2183 481 r-squared 0.18 0.21 0.25 0.34 0.15 0.18 0.24 0.31 *, **, *** denotes significance at 10%, 5%, 1%. abootstrap standard errors in parentheses; replications=1000. brobust standard errors in parentheses; ols = ordinary least squares, included as reference. interquartile differences: red: 25-75 (reserve***; age***; origin**; medals*); 25-50 (closure**; reserve***; age***; origin***); 50-75 (age**). white: 25-75 (reserve**; origin***; medals*); 25-50 (age**); 50-75 (reserve**; origin*; medals**; chardonnay*). 54 tânia gonçalves, joão rebelo, lina lourenço-gomes, josé caldas table d3. france. red white 25-quantilea 50-quantilea 75-quantilea olsb 25-quantilea 50-quantilea 75-quantilea olsb reserve -0.190** (0.082) -0.142** (0.059) -0.258*** (0.075) −0.239*** (0.054) -0.067*** (0.024) -0.131** (0.053) -0.145 (0.095) −0.113*** (0.043) closure 0.169*** (0.044) 0.175** (0.076) 0.251** (0.124) 0.242*** (0.052) 0.118*** (0.030) 0.117*** (0.043) 0.047 (0.063) 0.128*** (0.037) wine origin 0.07** (0.032) 0.092** (0.039) 0.093 (0.079) 0.035 (0.037) -0.011 (0.033) -0.028 (0.060) 0.052 (0.041) 0.022 (0.029) age 0.091*** (0.008) 0.111*** (0.005) 0.121*** (0.008) 0.097*** (0.006) 0.074*** (0.007) 0.080*** (0.011) 0.104*** (0.014) 0.088*** (0.008) awards or medals 0.065*** (0.015) 0.067*** (0.024) 0.119*** (0.027) 0.123*** (0.021) 0.057*** (0.022) 0.067*** (0.015) 0.072* (0.039) 0.074*** (0.020) alccont 0.061*** (0.013) 0.078*** (0.019) 0.093*** (0.018) 0.068*** (0.013) 0.100*** (0.012) 0.126*** (0.015) 0.141*** (0.027) 0.119*** (0.014) blend -0.142*** (0.034) -0.179*** (0.036) -0.237*** (0.045) −0.166 *** (0.023) -0.042* (0.023) -0.050* (0.027) -0.002 (0.042) −0.009 (0.023) cabernet sauvignon -0.162 (0.126) -0.288** (0.027) -0.099 (0.240) −0.169 (0.109) syrah 0.096 *** (0.024) 0.071* (0.039) 0.003 (0.041) 0.050* (0.029) sauvignon blanc 0.057* (0.031) 0.005 (0.041) -0.075** (0.031) −0.012 (0.027) chardonnay 0.137*** (0.027) 0.170*** (0.034) 0.188*** (0.047) 0.174*** (0.026) constant -0.218 (0.194) -0.357 (0.268) -0.484* (0.275) −0.185 (0.194) -0.554*** (0.169) -0.775*** (0.197) -0.891*** (0.334) −0.741*** (0.183) observations 1330 764 r-squared 0.18 0.21 0.22 0.32 0.25 0.26 0.27 0.43 *, **, *** denotes significance at 10%, 5%, 1%. abootstrap standard errors in parentheses; replications=1000. brobust standard errors in parentheses; ols = ordinary least squares, included as reference. interquartile differences: red: 25-75 (age**; medals**; alcohol**; blend***; syrah**); 25-50 (age***); 50-75 (reserve*; medals**; blend*; syrah*). white: 25-75 (age**; sauvignon blanc***); 25-50 (alcohol*); 50-75 (age**; origin*; blend*; sauvignon blanc**). 55micro-wineries as drivers for local economic development and innovation in lagging areas table d4. italy. red white 25-quantilea 50-quantilea 75-quantilea olsb 25-quantilea 50-quantilea 75-quantilea olsb reserve 0.006 (0.021) -0.008 (0.031) -0.016 (0.022) −0.004 (0.021) 0.039 (0.043) 0.019 (0.041) -0.045 (0.043) 0.001 (0.031) closure -0.174** (0.086) -0.099 (0.064) -0.031 (0.108) −0.063 (0.056) 0.107** (0.051) 0.128*** (0.044) 0.292** (0.129) 0.148*** (0.047) wine origin -0.164*** (0.028) -0.258*** (0.023) -0.356*** (0.049) −0.270*** (0.021) -0.185*** (0.019) -0.241*** (0.029) -0.331*** (0.034) −0.269*** (0.022) age 0.060*** (0.004) 0.066*** (0.005) 0.073*** (0.006) 0.058*** (0.005) 0.057*** (0.006) 0.080*** (0.005) 0.099*** (0.008) 0.062*** (0.007) awards or medals 0.254*** (0.087) 0.197*** (0.071) 0.176* (0.105) 0.185*** (0.056) -0.055 (0.045) -0.056 (0.041) -0.209 (0.131) −0.036 (0.048) alccont 0.080*** (0.007) 0.081*** (0.008) 0.085*** (0.015) 0.097*** (0.008) 0.095*** (0.010) 0.098*** (0.009) 0.111*** (0.017) 0.118*** (0.010) blend -0.076*** (0.012) -0.082*** (0.014) -0.086*** (0.015) −0.103 *** (0.013) -0.060*** (0.010) -0.062*** (0.020) -0.075*** (0.027) −0.102*** (0.017) cabernet sauvignon -0.100 (0.073) -0.076 (0.067) -0.086 (0.054) −0.070 (0.046) syrah -0.059* (0.033) -0.100* (0.054) 0.050 (0.103) −0.017** (0.045) sauvignon blanc 0.011 (0.021) 0.005 (0.025) -0.095*** (0.022) −0.072*** (0.022) chardonnay 0.102*** (0.022) 0.051 (0.034) -0.027 (0.036) 0.015 (0.024) constant -0.130 (0.092) 0.046 (0.095) 0.182 (0.184) −0.103 (0.102) -0.225* (0.133) -0.195* (0.103) -0.193 (0.216) −0.337*** (0.124) observations 1557 1246 r-squared 0.24 0.25 0.22 0.38 0.29 0.34 0.38 *, **, *** denotes significance at 10%, 5%, 1%. abootstrap standard errors in parentheses; replications=1000. brobust standard errors in parentheses; ols = ordinary least squares, included as reference. interquartile differences: red: 25-75 (age***; origin***); 25-50 (age*; origin***); 50-75 (origin**); white: 25-75 (reserve*; age***; origin***; sauvignon blanc***; chardonnay***); 25-50 (age***; origin**); 50-75 (age***; origin***; sauvignon blanc***; chardonnay***). wine economics and policy 10(1): 101-118, 2021 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/wep-9508 wine economics and policy citation: lydia chikumbi, milan ščasný, edwin muchapondwa, djiby thiam (2021) premium price for natural preservatives in wine: a discrete choice experiment. wine economics and policy 10(1): 101-118. doi: 10.36253/wep9508 copyright: © 2021 lydia chikumbi, milan ščasný, edwin muchapondwa, djiby thiam. this is an open access, peerreviewed article published by firenze university press (http://www.fupress. com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information fi les. competing interests: the author(s) declare(s) no confl ict of interest. premium price for natural preservatives in wine: a discrete choice experiment lydia chikumbi1,*, milan ščasný2, edwin muchapondwa1, djiby thiam1 1 school of economics, university of cape town, rondebosch 7701, cape town, south africa. e-mail: chklyd001@myuct.ac.za; edwin.muchapondwa@uct.ac.za; djiby.thiam@ uct.ac.za 2 charles university prague, environmental center, czech republic. e-mail: milan.scasny@czp.cuni.cz *corresponding author. abstract. th e south african wine industry has recently launched the world’s fi rst ‘no sulphite added’ wine made from indigenous rooibos & honeybush toasted wood chips. th is wood chip contains antioxidant properties known to protect wine from oxidation. on the other hand, so2 as a preservative, is oft en perceived by wine consumers as causing headaches and migraines. diff erentiated wines based on their so2 content may be a profi table marketing avenue for the struggling industry. we interviewed more than 600 wine consumers to investigate their perceptions of wine preservatives and preference for several wine attributes. specifi cally, we use discrete choice experiments to elicit willingness to pay for the innovative alternative based on rooibos & honeybush wood chips. in addition to wine preservatives, we also examine consumers’ preferences for organic wine attributes and wine quality measured by a 100-point quality score and cost. based on the results from the mixed logit model, we fi nd that consumers are willing to pay an additional €3.53 (r56.48) per bottle of wine with natural rooibos & honeybush wood chips, while they are ready to pay €1.22 (r19.52) more for organic wine and €0.10 (r1.60) for each point on the quality score. consumer preferences are not statistically diff erent between red and white wine but diff er considerably across consumers. in particular, those who believe so2 in wine causes headaches are willing to pay at least three times more for replacing sulphur-based preservatives with a natural one. marketing implications are off ered for the wine industry. keywords: wine preservatives, willingness to pay, discrete choice experiment. introduction south africa’s wines have been progressively internationally competitive, with a viable and positive trend since 1994. th e wine industry is the eighth in overall volume production globally and contributes approximately 4% to the world’s wine. it exports half of its produce, and its local wine per capita consumption is estimated at 7.73 litres [1]. th e wine industry generates r54.96 billion annually, contributing 1.2% to south africa’s gdp in 2019; r7.17 billion in taxes to the south african government; and income for 102 lydia chikumbi, milan ščasný, edwin muchapondwa, djiby thiam farmers worth r6.16 billion [1]. the wine industry plays an important role in south africa’s labour market providing over 300,000 jobs. more importantly, the industry is linked to the rest of the economy through producers’ purchase of goods such as fertilizers, herbicides and pesticides, and services related to insurance, finance, research & development and advisory. despite the benefits rendered, however, the wine industry is under serious threat. in recent decades, the input cost of production has increased significantly in the south african wine industry. from 2006 to 2017, a steady upward trend in input production costs raised concerns about the welfare and sustainability of the industry. the increase and changes in production input costs have negatively affected the primary producers to the extent that over a thousand grape farmers have shut down operations [2] of a total of 3,145 remaining grape farmers, 13% are producing at sustainable income levels, 44% are operating at the break-even point, and the rest are making losses. furthermore, the area under vine cultivation has reduced drastically from 102,146 hectares in 2006 to 95,775 hectares in 2016 [2]. in response to the potential impact of uncertain events, farmers implement various risk management strategies with respect to their production plans, the available finance, physical and human capital, and the degree of aversion to risk. these risk management strategies may include (among others) crop diversification, crop insurance, effective coordination, technology and innovation. for example, innovation is widely accepted to be a driving force for agricultural development. progressively, scientists and extension agents recognize the key role of innovative farmers and acknowledge their experiments and innovations for agricultural development [3–5] and for farming systems resilience [6,7]. it has been shown that firms’ capacity to innovate, and new product development in particular, has a significant potential to improve firm performance and increase market share [8–11]. however, product innovation cannot fully achieve this goal without effective market orientation [12–14]. this may require engaging various parties in understanding customers’ current and future needs and the key factors for developing and designing a new or improved product that meets those needs [15]. in line with a product innovation strategy supported by market orientation, the wine industry may explore the potential of a natural preservative for wine as an alternative, with a view to developing a new product that will increase industrial specialisation and consequently improve the competitiveness of south african wines in global wine competition since time immemorial, sulphur dioxide (so2) has been used by winemakers to preserve wine [16]. because of its antioxidant and antibacterial properties, so2 plays an important role in not only preventing oxidation, but also maintaining freshness [17]. it is important to note that trace amounts of (endogenous) so2, about 10–40 ppm, i.e., 10–40 mg per litter, are naturally formed by wine yeast during fermentation [18], but winemakers add extra so2 throughout production [19] to prevent spoilage and enhance aging potential [17]. thus, while too much sulphur can ruin a bouquet, wine can spoil quickly when sulphur is missing. although some studies believes the health effects of so2 are overstated [20], there is overwhelming evidence that so2 may induce adverse reactions in wine drinkers suffering from sulphite sensitivity [21–24]. a wider share of the consumer population perceives that drinking even moderate amounts of wine, particularly red varieties, triggers minor health effects, including respiratory and gastrointestinal symptoms, headaches and migraines [16,25,26]. it is estimated that about 1% of wine consumers are sulphite-sensitive [27]. while medical science has not reached a consensus on whether so2 does in fact cause the reported minor health effects, public health authorities have made it mandatory for wine makers to restrict the use of sulphur in wines and display its quantity on wine bottles. this was made possible by the formation of specific legislation to control sulphite levels in final products [28]. the role of this legislation was to regulate and monitor the upper limits of sulphite and to help to standardize oenological methods in lowering sulphite concentrations in wines [29–31]. for instance, in south africa – our study site – the liquor product act 60 of 1989 requires that dry white wine produced after january 1995 may not contain more than 160 mg/l sulphur. off-dry and sweeter wines may contain up to 200 mg/l, while sulphur content is allowed to be up to 300 mg/l for late harvests. the limit for dry red wine is 150 mg/l. organic wines still contain sulphur, albeit at very low levels; however, if the level of sulphur is below 10 mg/l, the product may be labelled “no sulphur added”. the shelf life of these wines is necessarily limited1. 1 in the european union, regulation 1333/2008 amended by commission regulation 59/2014, sets a limit for total so2 at 150 mg/l in red wines and 200 mg/l in white wines, and because some individuals are sensitive to so2, it is mandatory to include ‘contains sulphites’ on the label if total so2 is over 10 mg/l (i.e., so2 content of not more than 10 mg/kg or 10 mg/l is not considered to be present). ec regulation 203/2012 sets the limit for organic wines at 100 mg/l for red wines and at 150 mg/l for white and rose wines. organic and natural winemakers restrict its usage even further. for instance, the charter of the authentic – natural winemakers’ association in the czech republic 103premium price for natural preservatives in wine: a discrete choice experiment even though replacement of so2 is uncommon, there is a small number of wine-makers who produce wine with lower so2. as noted earlier, organic wines usually contain trace amounts of sulphur. in some countries, such as the us, all organic wines are so2-free, excluding so2 naturally formed by wine yeast [32]. this is, however, not the case in south africa, where wines can be classified as organic regardless of whether they contain so2 or not. given that the absence of added so2 in wines can be viewed as a quality differentiation factor, and that ‘no sulphite added’ wines may appeal to healthconscious consumers, this study is warranted. since the emergence of these health effects, winemakers around the world are encouraged to find alternative healthy ways to preserve wine. natural preservatives like yeast and other natural components of grapes and wine are used as an alternative to sulphur-based preservatives. other alternatives to conventional wine-making include carbon dioxide additive, chemical preservation, fermentation, filtration, firming, oxidative wine making, pasteurisation, reductive winemaking, stabilisation, sterile bottling, and temperature management, hydrostatic pressure, pulsed electric fields, ultrasound radiation and ultraviolet radiation [33]. bentonite – a pure natural absorbent swelling clay – has been used for ages to support sedimentation of yeast sludge and to bind thermosensitive proteins that prevent wine turbidity. other nature-based substances such as plant proteins, collagens and gelatine are commonly used for wine clearing. the ongoing search for unique and innovative wine products has sparked interest in the global wine market; finding alternatives to so2 is one such goal. breaking into this niche, in 2013 south africa produced the first wine made from natural preservatives (rooibos & honeybush). rooibos (aspalathus linearis) and honeybush (cyclopia) plants are indigenous to the western and eastern cape provinces of south africa [34,35] and have been harvested and processed mainly to produce herbal teas [36]. research concerning the antioxidant capacity has been conducted by the department of oenology at the university of stellenbosch in collaboration with two wineries (audacia and kwv) to utilise this indigenous wood for wine preservation [19], [36–38]. drawing attention to consumer behaviour in the marketplace has highlighted a trend of consumers choosing healthy food products. most consumers, particularly in recent times, are attentive to artificial additives and prefer to purchase organic foods [39]. given requires limits of so2 at 90 ml/l for red and orange wines and 100 ml/l for white and rose wines, see http://vinarstvivykoukal.cz/wp-content/ uploads/2016/07/stavek-charta-autentistu-a2.pdf. that ‘no sulphite added’ wines seem attractive to healthconscious consumers, it is interesting to explore this potential niche market in depth to gauge consumers’ perceptions of the importance of these wines. determining whether consumers choose such wines is important as it would reveal whether wine players (in the south african wine context) can exploit this source of avenue in an effort to save the struggling industry. indeed, key evidence that would inform wine players is how valuable ‘no sulphite added’ wine is to consumers, and what share of consumers would consider such a trait as important in their buying decisions. several peer-reviewed papers address consumers’ willingness to pay (wtp) for wine without added so2 [21–24]. while there is agreement about the negative effects of so2 on health, and even that consumers are ready to pay more money to avoid added so2 in wine, no study examines consumers’ preferences for so2 alternatives. we conduct a novel study by estimating the premium price that wine consumers are willing to pay for so2 alternative. to fill the research gap, our study uses a primary survey and discrete choice experiment (dce)2 to analyse preferences for three qualitative non-monetary attributes of wine: natural preservatives, organic production, and quality measured by a 100-point score, and the fourth attribute is price. specifically, we aim to answer the following four research questions: (1) are consumers ready to pay for wines made with natural preservatives (rooibos & honeybush), organic production, and with a higher quality score?; (2) do preferences for wine colour and hence marginal willingness to pay for the three qualitative wine attributes differ for red and white wine?; (3) since a sulphur-based preservative is perceived to trigger headaches, are consumers who believe that so2 in wine causes headaches willing to pay more for the wine attributes, particularly for rooibos & honeybush preservatives?; and, lastly, (4) do preferences vary among various consumer characteristics such as gender, race, and the frequency of wine drinking? we use the stated preference approach to understand consumers’ perceptions and, in particular, how consumers would value a wine that was produced using rooibos & honeybush as a preservative for both conventional and organic production. we find that wine consumers in south africa are willing to pay a price premium of €3.53 per bottle of 2 although the dce has some limitations such as hypothetical bias (see lusk and schroeder, 2004), it allows researchers to control for exogenous factors that may otherwise weaken the results and also ensures that the effects of each attribute on preferences are identified (kroes and sheldon, 1988). 104 lydia chikumbi, milan ščasný, edwin muchapondwa, djiby thiam wine if rooibos & honeybush rather than so2 is used as a wine preservative, and this premium does not differ between red and white wine. of 611 wine consumers interviewed, about 68% believe that consuming a moderate volume of wine causes headaches, and the same consumers are willing to pay three times more for the natural preservatives (€5.67) than those who do not think so2 in wine causes headaches (€1.82). the price premium for organic wine is smaller, about €1.22, and it does not differ much between the two segments. wine quality (measured by a 100-point quality score) matters as well, but respondents are willing to pay only about €0.10 and €0.15 for the two segments. there is large heterogeneity in consumers’ preferences. the remainder of the paper is organised as follows. section 2 reviews the literature. section 3 describes the methodology and the data used for the analysis. section 4 summarizes the empirical results, and section 5 concludes. 2. literature review there is no valuation study that examines consumers’ preferences for an alternative to sulphur-based preservatives in wines . however, several studies analyse preferences for wines with ‘no sulphites’added – two elicited stated preferences, one aimed at revealed preferences. using a conjoint choice approach, costanigro et al. [22] analyse the willingness to pay for non-sulphated wines in the us. analysing the best-worst choices by ordered logit, they find that us consumers are, on average, willing to pay $1.23 (€1.11) per bottle of wine to avoid added so2. they also find that 34% of respondents experienced headaches after drinking wine, and these consumers are ready to pay more for wine with no sulphur, $1.23 (€1.11). similarly to the study by costanigro et al. [22], d’amico et al. [23] also use a direct survey to analyse the purchase interest of italian wine consumers for organic wine with no added sulphur. estimating the ordered logit, they find that the majority of italians (54.5%) were not willing to pay a premium for no added sulphur, and only 10% would pay a small premium. environmental consciousness and ‘wine curiosity’ led consumers to pay a higher price for organic wines with no added sulphur. on the other hand, naturalness and designation of origin increased the probability of paying a premium price for wine with no added sulphur. the study also discovered that insufficient information is a barrier to accepting a higher price for organic wines and wines with no added sulphur. this study also highlights the need to educate consumers on health effects in order to obtain a positive evaluation of the healthrelated attributes of wine. instead of stated preferences, grogan [24] aims at revealed preferences to examine the value of added sulphur in french organic wines using an organic wine dataset from 546 wineries. estimating the hedonic pricing model, they find that the addition of the so2 preservative reduced the price of red organic wine by 23% for wines that were intended to be drunk immediately after purchase; however, this effect becomes positive for wines that were intended to be cellared for at least one to three years. adding so2 had neutral to positive effects for most white wines. a more recent study by amato et al. [21] analyses consumers’ willingness to pay for wine bearing a so2free label in italy and spain using experimental auctions. they employed a tobit model for the analysis. results in both countries show that consumers who associated the headaches with drinking wines with so2 are also willing to exchange the habitually consumed bottle of wine with a ‘no-added sulphite’ wine and they would even be willing to pay something extra for such wine. in addition to research that directly examines the effect of added so2 on wine price and consumer decisions, other studies examine consumers’ preferences and willingness to pay for wines perceived to be healthier. for example, a study by barreiro-hurlé et al. [40] reveals a positive valuation for resveratrol-enriched wine, a health-promoting ingredient. organic wines are also often perceived as being health-promoting [40,41], and health-conscious consumers are particularly receptive to marketing campaigns promoting natural (and organic) wines [17]. another stream of literature focuses on organic wines [42,43]. these studies highlight the effect of environmental concerns, and, as olsen et al. [44] argue, the price premium for organic wine may be viewed as the financial “self-sacrifice” made in order to protect the environment. it is important to note, though, that ‘organic’ is a multifaceted attribute encompassing numerous consumer values, and consumers may even have difficulty explaining why they value organic wine over other varieties [40]. several studies aim at various intrinsic (such as sensory characteristics) and extrinsic wine attributes (such as price, grape origin, vintage, or brand). gil and sánchez [45] vary wine price, age, and origin and find that, in the absence of other quality cues, the origin is the most important wine attribute. robertson et al. [46] examine the subjective knowledge about wine associated with the relative importance of four extrinsic product attributes. they find knowledge of wine age, brand, and the region of wine origin to be increasingly impor105premium price for natural preservatives in wine: a discrete choice experiment tant, whilst the price of wine was the dominant attribute regardless of the level of product knowledge. similarly, mueller et al. [47] use informed sensory hedonic tests to understand the interplay of wine sensory characteristics and extrinsic attributes such as packaging, price and brand awareness. with enrichment of choice experiments by the sensory tests, they were able to simulate consumers’ purchase, which allowed them to examine preferences for new wines and predict their market uptake. lockshin et al. [48] and mtimet and albisu [49] examine how market involvement influences the valuation of wine attributes such as brand, region of production, quality medals, and aging. to sum up, despite relatively large literature on consumers’ preferences for wine attributes, including organic quality and the non-use of so2 as a wine preservative, literature that would elicit consumers’ preferences for a natural preservative is non-existent. this study therefore fills the gap by investigating consumer preferences for rooibos & honeybush (a natural preservative) and evaluates specifically whether or not, and to what extent, consumers are willing to pay for wines that are preserved by it. 3. methods and data 3.1 sampling and implementation strategy historically, black south africans were prohibited from purchasing and consuming clear liquors, making the white consumer group the largest group of wine drinkers [50]. however, after the change of regime (postapartheid) and with the growing number of black middle class, whites are no longer the majority wine consumers. nevertheless, there are no background statistics on wine consumer segments. for this reason, we used multistage sampling to select areas and places to conduct the interviews. in the first stage, cape town city was purposely chosen from the western cape province3 because it has the largest number of people and wine consumers [51]. about 95% of south african wine is produced in this province. the second stage involved randomly selecting clusters of shopping malls across the city. these malls encompass retail businesses that sell wine, i.e., restaurants, liquor-stores, supermarkets and bars. the third and final stage involved randomly select3 western cape is a province of south africa located on the southwest coast of the country and has 6.6 million inhabitants, of which two-thirds live in the metropolitan area of cape town, which is also a provincial capital and tourist destination. the total population of south africa is about 58 million. ing wine customers who went shopping in the pre-selected shops to form the sample. eligibility criteria included any person above age 18 (this is the legal alcohol drinking age in south africa) and who had consumed at least a bottle of wine (750 ml) in the last 6 months. participants were approached by enumerators and asked if they could voluntarily take part in a wine survey for academic purposes. five enumerators were recruited from postgraduate students enrolled at the school of economics at the university of cape town, who were trained prior to pre-testing of the instrument. no incentive was offered to the survey participants. the interview was conducted in english and the enumerators used a pen-and-paper mode of interviewing. a survey instrument was comprehensively pre-tested in two waves of testing with 44 and 52 wine consumers in the western cape province of south africa during 10-14 june 2019, and 24-28 june 2019, respectively. based on respondents’ feedback, the survey instrument was modified to improve its readability and comprehension. the questionnaire consisted of four sections. the first section contained a brief explanation of the purpose of study without mentioning details of the study so as to minimise a potential framing bias. questions regarding the wine acquisition practice were asked. the second section dealt with consumer information and knowledge about so2 content in wine, perceived health effects, cultivar production types and quality score of wine. the discrete choice experiment was presented in the third section. in the event respondents chose no change (status quo), respondents were asked to provide their main reason in order to identify protest responses. the final section collected socio-economic and other relevant information about the respondents. to facilitate understanding and render the survey more pleasant to respondents, visual information was included (see, figure 1). the main survey was conducted between july 8–22, 2019, and a total of 611 participants completed the survey. the demographic characteristics of the sample are reported in table 1. while the sample may not be representative of the south african population, the recruiting strategy was highly successful in targeting respondents in areas where the majority of wine consumers reside. almost everyone purchased at least a bottle of wine in a typical month. the majority of respondents (78%) are aged 21-50 years. there are 42% males and 51% females, while 7% choose not to provide information about their gender. the majority of the respondents reside in africa (80%), some in europe (10%), while 4% and 3% came from northern america and asia, respectively, and the rest (3%) from other parts of the world. regarding race, 106 lydia chikumbi, milan ščasný, edwin muchapondwa, djiby thiam our sample included 33% caucasian, 31% african, 23% coloured (mixed race), and the minority being indian and asian (5% each). in addition, over 66% held a university degree. median net annual household income is between r200,000 and r350,000 (€12,500–€21,875), coinciding with the average annual household income for south africa at r270,000 [51]. however, one third of the respondents preferred not to provide information about their income. to understand how respondents perceive so2 in wine, we asked them several questions. first, we asked “do you have allergies to sulphur-contained foods and beverages such as wine?”, followed by the question “do you know, or have you heard of, someone who suffers from sulphite allergies in wine?”. the final and the key question was “do you believe that drinking even moderate amounts of wine give you a headache?”. about 25% of respondents reported being allergic to so2 in foods and beverages; 61% claimed to know someone who suffers from so2 effects. about 68% believed that drinking even a moderate volume of some type of wine may result in a headache. we name this group as ‘headache’, while the remaining respondents constitute the ‘no-headache’ group. about 15% of the respondents drink wine almost daily, 19% drink wine several times a week, 27% and 22% drink wine at least once a week or a fortnight, and only 5% drink wine rarely. when analysing observed preference, we name ‘heavy drinkers’ as those who drink wine almost daily or several times a week, and ‘light drinkers’ as those who drink wine once a month or less often (61% of our sample). ‘heavy’ wine drinkers’ and ‘light’ wine drinkers constitute approximately 34%, and 17%, of the sample size, respectively. when making their choice, our survey participants had in their mind a wine with a price of about 195 rand (std=116) for a (750 ml) bottle, with a minimum at 35 rand and a maximum at 900 rand. in euro equivalents, our respondents, on average, typically buy a bottle of wine for €11.5 (std=6.85), with €2.07 and €53 for the cheapest and the most expensive wine, respectively. this price also set the cost of the status-quo wine to which a price premium is added for the alternative wines. 3.2 experimental design designing a dce involves the selection and combination of the attributes and their levels to construct the alternatives included in hypothetical choice situations presented to respondents [52]. respondents are then asked to think about the situation in which they would be making their choices. identification of the attributes in our experiment was facilitated by the literature review addressing particularly recent studies [21–24]. in line with the state-of-the-art recommendations for stated preference studies [53,54], the design of our study was also based on findings from qualitative pre-testing that we conducted in focus groups with wine consumers from the cape town area. the qualitative pre-testing confirmed the suitability of the survey design and ensured the relevance and understanding of the attributes. for our study, the alternatives were described using a pre-defined set of attributes with levels that were table 1. socio-demographic characteristics of the sample (n = 611). variable percent gender males 42% females 51% age 18-20 4% 21-30 32% 31-40 24% 41-50 22% 51-60 15% 61-70 3% education high (secondary) school 12% some technical certificate/diploma 19% bachelor’s degree 22% honours degree 18% professional/master degree 16% doctorate degree 11% income r50,000 and less (€3,125 and less) 12% r50,000 to r100,000 (€3,125 €6,250) 5% r100,000 to r150,000 (€6,250 €9,375) 5% r150,000 to r200,000 (€9,375 €12,500) 5% r200,000 to r350,000 (€12,500 €21,875) 7% r350,000 to r500,000 (€21,875 – €31,250) 9% r500,000 to r750,000 (€31,250 – €46,875) 8% r750,000 to r1,000,000 (€46,875 €62,500) 5% r1,000,000 to r2,000,000 (€62,500 €125,000) 5% r2,000,000 and more (€125,000 and more) 4% i prefer not to answer 33% wine consumption almost daily 15% several times a week 19% once a week 27% once a fortnight 22% once a month 12% very rarely 5% headache 68% 107premium price for natural preservatives in wine: a discrete choice experiment experimentally varied around the level expected by the respondents. we used four attributes: wine preservative (so2-based vs. rooibos & honeybush), type of viticulture production (conventional vs. organic), wine quality score, and price (see, table 2). there are two types of wine preservatives in our choice experiment: rooibos & honeybush and so2 -based preser vative. type of viticulture production may either be organic (wine produced using organically grown grapes) or conventional (wine produced using grapes grown with added chemicals, i.e., fertiliser, pesticide). the two viticulture types were included to allow a direct comparison of the valuation of conventional wines preserved with so2 versus conventional wines preserved with rooibos & honeybush, and again organic wines preserved with so2 versus organic wines preserved with rooibos & honeybush. this distinction allows the assessment of the influence of rooibos & honeybush in both viticulture production types. wine quality score is defined according to the wine spectator [55] scores, whose expert ratings are recognised globally. specifically, these scores are defined accordingly as 95–100, classic: a great wine; 90–94, outstanding: a wine of superior character and style; 85–89, very good: a wine with special qualities; 80–84, good: a solid, well-made wine; 75–79, mediocre: a drinkable wine that may have minor flaws; and not recommended wine graded by 50–74 points. quality levels also represent our proxy for a wide range of attributes, i.e., brand name, taste, origin, which would otherwise make evaluation bulky had we included them in the experiment. we use the point-values of the quality score to avoid uncertainty, as described in table 2. lastly, price was defined as the extra cost (premium) respondents are asked to pay in addition to the price they usually pay for a 750ml bottle of wine. while the decision to pay a premium price for using rooibos & honeybush and other attributes in wine is essentially driven by the cost and benefits derived from its consumption, the individual choice is difficult to anticipate because of such reasons as information deficit and perceived or experienced health effects. the wine price was shown as an increment of what a consumer typically pays for a bottle of wine, and the premium included nominal rand values: 30, 45, 60, and 75, and euro equivalents are also shown on the cards in brackets.4 in relative terms, the offered bids represented 15% to 38% of the average price of the status-quo wine. since the bids were offered in absolute values, wine price premiums ranged between 3.3% and 214%, with the mean at 37%. the choice task included three alternatives, with one referred to as wine that is typically purchased (i.e., the status quo). the status quo option described a typical wine sold on the south african market (in the western cape province); that is, a 750ml bottle of conventional wine with so2-based preservatives, graded by a 75-point quality score, whilst the price in the status quo was respondent-specific. specifically, before the valuation part, we asked each respondent to state “what is the average price for which you typically buy a bottle of wine most often?”. we found that respondents typically paid approximately €11.5 for a bottle of wine (std.= €6.85), with a minimum at €2.1 and a maximum at €53. an example of a choice card as presented to our respondents is shown in figure 1. we then asked “which of the three alternatives do you prefer?”, and we repeated this valuation question four times for each different choice situation. since preference for red wine and white wine may differ, we elicited consumers’ preferences for red and white wines in two separate choice tasks. the order in which consumers’ preferences for red or white wine were elicited was assigned to each respondent at random.5 using ngene software, we generate a bayesianefficient design. the bayesian approach for optimal experimental design has become more prominent in the literature [53,56–63] due to its ability to optimise design criteria that are functions of the posterior distribution and can easily be tailored to the experiments’ objectives. further, the framework provides a formal approach 4 we used the exchange rate 0.059 euro per rand, based on the south africa reserve bank prevailing rate at the time. www.resbank.co.za 5 our experiment contained another split-sample treatment in which we expressed price either in rand or as a percentage change from the status quo level. in this paper, we use only responses with the price in rand. table 2. attributes and levels of the discrete choice experiment. attribute no. of levels levels preservatives 2 so2-based, rooibos & honeybush type of viticulture production 2 conventional, organic wine quality score 6 60, 75, 82, 88, 92, 100 price (increase compared to what you usually buy) 5 rands: 0, 30,45,60,75 (eur equivalent: 0, 1.77, 2.66, 3.54, 4.43) 108 lydia chikumbi, milan ščasný, edwin muchapondwa, djiby thiam for incorporating parameter uncertainties and prior information into the design process via prior distributions, and provides a unified approach for joining these quantities with the model and design criterion [64]. our design contains twelve unique choice combinations grouped into three, giving us four choice cards per each respondent. in total, we obtain 2,444 responses (from 611 respondents) for both choice tasks, one for white wine and another for the red wine experiment. 2.1 econometric framework the discrete choice experiments (dce) technique has grown in popularity since its introduction by batsell and lodish [65] and louviere and hensher [66]. the use of the technique has been extended to many disciplines such as transportation, agriculture and environment, telecommunications, marketing and human health [21,40,48,67–75]. applications also include conservation of wine varieties or valuation of wild crop conservation [76,77]. while dce has limitations on hypothetical bias [78], it allows the study of products that are not yet available on the market [79] or policies that are not yet implemented [80,81]. experimental designs not only allow researchers to control for exogenous factors that may otherwise weaken the results, but also ensure that the effects of each attribute on preferences are identified [82]. the choice model relies on the random utility theory [83], which assumes that individual n chooses the alternative j in choice situation t with regard to the highest utility: unjt=xnjt αn+βn∙(yn-pricenjt)+εnjt (1) where x represents a vector of alternative specific attributes (pr eservatives, viticultur e production, quality score), y is income, price is the price of wine, the vector of coefficients α and coefficient β are estimated and is a stochastic component identically and independently distributed with a constant variance kn2 (π2 /6), with kn2, being an individual-specific figure 1. example of a choice situation. red wine a red wine b wine you usually buy preservatives rooibos & honeybush viticulture production conventional organic conventional wine quality score 100 (great top wine) 60 (not recommended) 75 (a drinkable wine that may have minor flaws) additional cost per bottle r45 (€2.8) more r60 (€3.75) more as you usually pay which option do you prefer? ☐ ☐ ☐ 109premium price for natural preservatives in wine: a discrete choice experiment scale parameter. instead of separately estimating the parameters for each respondent, we follow a common practice and assume that the parameters follow specific distributions, which leads to the mixed logit model [84]. note that the coefficients are indexed by individuals’ n, allowing for (unobserved) preference heterogeneity. in fact, as a consequence of taste and people’s concerns, consumers may respond differently to different wine attributes, leading in turn to heterogeneity with respect to individuals’ expected net benefit and hence wtp for ‘no sulphite added’ wine. we accommodate such heterogeneity by employing econometric models that accommodate both the observable and unobservable component of individual utility from offered alternatives. mixed logit with all factors random, freely and fully correlated is estimated using maximum simulated likelihood technique [84] in stata 16. an individual will choose alternative j if unjt >unkt, for all k ≠ j, and the probability that alternative j is chosen from a set of c alternatives is given by: (2) the usual procedure is to estimate the distribution of the utility coefficients (i.e., the model in preferencespace) and then to estimate the willingness-to-pay as a ratio of two utility parameter estimates, as . in our alternative specification, we are interested to know whether preference for specific consumer segments differ. for this purpose, we fit the random utility model, additive in parameters, as follows: unjt=xnjt α1n+s×xnjt α2+(β1n+β2∙s)∙(yn-pricenjt)+εnjt (3) where s is a vector of dummies to describe specific segments such as: people who believe that drinking even moderate amount of wine causes headache (‘headache’, see table 4), race (african, caucasian) and gender (female); see table 5 and for frequency of wine consumption (heavy drinker, light drinker); see table 6 to control for observed preference heterogeneity. we assume the coefficient for the interaction terms to be fixed, which allows us to measure the difference in preference for the respective consumer segment and given attribute from the random mean.6 assuming the indi6 we note that the main (random) effect in these mxl models represent the utility of consumers in the baseline group, while fixed coefficients for all interactions between the wine attribute and consumer characteristics measures the differences in the utility of given segments from the utility of the baseline group. rect utility function is additive in its attributes, the final wtp estimate for segments s in the specification is given as . we also assume this specification to explore preference heterogeneity in wine colour, pooling the data from the two sub-samples. since we do not find preference for the attributes to differ between red and white wines, see table a1, we estimate all mixed logit models with pooled data. wtp are estimated by the delta method, using the nlcom stata command.7 3. estimation results table 3 presents the results for the mixed logit model estimated in the preference space with all factors random and freely correlated. we pool the data, without distinguishing wine colour. all coefficients are statistically significant at any convenient level and have expected signs, conforming to a priori expectations. it implies that respondents are willing to pay a premium for each of the three wine attributes, and the likelihood of purchasing a bottle of wine is decreasing with the increase in price. we also discover large unobserved preference heterogeneity for each of the four random attributes, indicated by the large and strong statistically significant standard deviations of the means. wtp estimates are presented in table 4, column (1). for rooibos & honeybush natural-based preservatives, respondents are willing to pay €3.53 per bottle, while the marginal price for organic winemaking is €1.22, a finding consistent with the idea that organic and so2 added ’ wines are differentiated attributes, though rooibos & honeybush evokes a richer and more complex set of values. these findings are consistent with a study by costanigro et al. [22] who found 34%of resppomdents were affected by sulphite in wine. based on a rank ordered logit estimation of best-worst choices, headache syndrome sufferers are willing to pay a ceteris paribus premium of $1.23 per bottle to avoid added sulfites. however, results show that headache sufferers are willing to pay more for wines without added sulphites than for organic wines. wtp for each point of the quality score is at €0.09 per 750ml bottle of wine. comparing the average price of wine that respondents had in mind when stating values, i.e., 200 rand or €11.85, the premium comprises 30% of the wine price for a rooibos & honeybush-based preserv7 stata command nlcom applies the delta method to compute the variance, standard error, wald test statistic, etc., of the transformations. it is designed for functions of the parameters and takes nonlinear transformations of the estimated parameter vector from some fitted model. 110 lydia chikumbi, milan ščasný, edwin muchapondwa, djiby thiam ative, and 10% for organic wine, about 0.8% per each point in the quality score. when comparing the difference between wine colour, we find no difference in preferences for the quality attributes between red and white wine (see mxl estimates in table 1a in appendix). wtp estimates are reported in table 1a, panel b. although quality and organic production seem to be valued slightly more for red wine, clearly, neither of the two wtp estimates is statistically different.8 when we control for differences in preferences for consumers who believe that so2 in wine causes headaches (see mxl estimate in table a2 in the appendix), we find willingness to pay for natural preservatives (rooibos & honeybush) as well as for wine quality is at least three-times larger than for consumers who do not believe so: €5.67 vs. €1.82 for rooibos, and €0.151 vs. €0.045 for the quality score in table 4, whilst their wtp for organic wines does not statistically differ from the other: €1.53 vs. €0.93, with wald=1.28 and p-value=.2572). see table 4, column (2) for ‘headache’ consumers and column (3) for the reference group with ‘no headache’ consumers. we conclude that, at the margins, individuals who believe their health may be affected by so2 in wine are also more sensitive to wine additives 8 wtp for rooibos & honeybush preservatives is €3.71 for red and €3.43 for white wine (wald statistics is 0.16, and p=0.6928); wtp for the organic attribute is €1.21 and €1.09, respectively (wald=0.07, p=0.7949); and wtp for 1-point in the quality score is €0.093 for red and €0.088 for white wine (wald=0.05, p=0.8316). and are ready to pay a higher premium for wines perceived to be healthier and of a higher quality. we estimated several mixed models, following eq. (3), to explore observed preference heterogeneity with respect to gender, race, and wine consumption frequency9. table 5 presents the wtp estimates based on mxl model with the interactions with gender (female) and race (being african, and caucasian), with non-female, asian and coloured as the reference category. as a reminder, since we assume the additive specification of the mxl model, the fixed coefficients for the interaction terms measure the difference in the utility from the random mean (see mxl result in table a3 in the appendix). we find that females value organic wines more than males, africans value rooibos & honeybush preservatives less than caucasians, while the preferences of caucasians do not differ from other races (those included in the reference category). this is expected considering that, on average, caucasians and africans in south africa are at opposite ends of wealth and income distribution, with other race placed in between. wtp estimates reported in table 5 show that non-african males will pay approximately €4.8 for rooibos-based preservatives, while non-african females are willing to pay €3.8 to avoid so2 added to wine. african males and females are willing to pay much less: €2.7 and €2.2, respectively. interestingly, only females are willing to pay for organic attributes; about 9 parameter estimates and tests are compiled in the appendix. controlling for other socio-economic variables (e.g., income, education, and other wine-measuring preferences) resulted in no significant differences in preferences and are not reported here. these results are available upon request. table 3. parameter estimates, mxl, pooled. means (s.e) standard deviations (s.e) rooibos 2.5031*** (0.2420) 3.3848*** (0.3090) organic 0.8659*** (0.1842) 1.7663*** (0.2740) quality 0.0663*** (0.0091) 1.0969*** (0.0115) price -0.7087*** (0.0783) 1.9161*** (0.0838) likelihood -1833.6175 lr chi2 1130.57 no. obs. 7,332 r(respondents) 611 k(parameters) 14 notes: *, **, and *** indicate the significance of the wtp mean estimates at 10%, 5%, and 1%. standard errors are provided in parentheses. all random parameters are fully correlated, with 1000 draws for simulations. table 4. willingness to pay estimates per bottle of wine, means in eur (see parameter estimates for the headache segment in appendix a2). pooled data (1) headache (2) no ‘headache’ (3) rooibos 3.5317*** (0.3683) 5.6704*** (0.9253) 1.8190*** (0.2979) organic 1.2217*** (0.2650) 1.5306*** (0.4893) 0.9301*** (0.2547) quality (per qs point)  0.0937*** (0.0126) 0.1506*** (0.0275) 0.0449*** (0.0103) notes: *, **, and *** indicate the significance of the wtp mean estimates at 10%, 5%, and 1%. standard errors are provided in parentheses. wald statistics for the quality test of the wtp means for headache vs. no headache segment is 15.79 (p = 0.0001) for rooibos; 1.28 p=0.2572) for organic; and 13.92 (p=0.0002) for quality. 111premium price for natural preservatives in wine: a discrete choice experiment €2.1 and €1.3 for caucasians and africans, respectively, while wtp for organic wines for males is not statistically distinguishable from zero, with the exception of male caucasians, who are willing to pay a similar amount as african or other race females, but this estimate is only weakly significant. males are, however, ready to pay more than females for wines with higher a quality score: €0.077 compared to €0.056 for africans, and €0.095 compared to €0.079 for the other race), except for caucasian males and females, who are actually willing to pay the same premium of €0.12. last, we analyse the differences in preferences for consumers who differ in their wine consumption frequency (see mxl results in table a4 in the appendix). we find that heavy drinkers would pay more for natural preservatives than light drinkers: €5.28 vs €3.21, organic attributes €1.96 vs €0.72, and quality score €0.14 vs €0.11. heavy drinkers seem to care more about wine additives and are willing to pay a premium for natural preservatives, organic attributes and high quality score for wine. light wine drinkers care less about organic attributes which are statistically not significant. see wtp estimates in table 6. 4. discussion and conclusions more than half of the sample of 611 wine respondents from south africa believes that drinking even moderate amounts of some type of wine causes headaches. a discrete choice experiment was conducted to explore the preferences of consumers in the cape town area for natural preservatives, organic wine, and quality measured by a 100-point quality score, and price attributes. this study is novel in that it estimates the premium price for not having added so2 in wine by substituting the conventional wine preservative with rooibos & honeybush – a natural preservative. this is the first analysis of its kind. we find that consumers from the cape town area are willing to pay about €1.2 per bottle for organic winemaking. only caucasian males are willing to pay for the organic quality and, on average, they are willing to pay as much as non-caucasian females (€1.3), while caucasian females are willing to pay €2.1 per bottle of wine for organic winemaking. wine quality matters as well: on average, consumers are ready to pay €0.10 per each point on the quality score. with regard to the key attribute – rooibos & honeybush preservatives – consumers are willing to pay even more, on average €3.5, though males are willing to pay slightly more than females. caucasian males will pay €4.8, which is almost double what african males will pay (€2.7). caucasian females will pay €3.7 compared to african females who are ready to pay €2.2. with regard to other studies, amato et al. [21] find that italian and spanish wine drinkers will pay €1.19 and €1.57, respectively, to avoid added so2. similarly, costanigro et al. [22] found 34% of respondents were affected by s2ulphite in wine. based on a rank ordered logit estimation of best-worst choices, headache syndrome sufferers are willing to pay a ceteris paribus pretable 5. willingness to pay estimates per bottle of wine, by gender and race, means in eur.   male + other race male + caucasian male + african female + other race female +caucasian female +african rooibos 4.7533*** (0.9426) 4.8661*** (1.1957) 2.677*** (0.5751) 3.7979*** (0.6707) 3.7561*** (0.7999) 2.207*** (0.4353) organic 0.3100 (0.5277) 1.2791* (0.6759) 0.5492 (0.4316) 1.2303** (0.4534) 2.1276*** (0.6145) 1.2588** (0.3624) quality (qs point)  0.0945*** (0.0247) 0.1532*** (0.0372) 0.0638*** (0.0187) 0.0794*** (0.0198) 0.1240*** (0.0265) 0.0560*** (0.0147) notes: *, **, and *** indicate the significance of the wtp mean estimates at 10%, 5%, and 1%. standard errors are provided in parentheses. table 6. willingness to pay estimates per bottle of wine for heavy vs light wine drinkers, means in euro. heavy drinkers light drinkers natural 5.2811*** (1.1534) 3.2056*** (0.7842) organic 1.9583*** (0.6592) 0.7247 (0.5167) quality (qs point) 0.1420*** (0.0333) 0.1055*** (0.0265) notes: ‘heavy drinker’ is a consumer who drinks wine at least several times a week, and ‘light drinkers’ is a consumer who drinks wine once a month or less often. *, **, and *** indicate the significance of the wtp mean estimates at 10%, 5%, and 1%. standard errors are provided in parentheses. wald statistics for the quality test of the wtp means for heavy vs. light segment is 2.24 (p = 0.1345) for rooibos; 2.40 (p=0.1215) for organic; and 0.83 (p=0.3629) for quality. 112 lydia chikumbi, milan ščasný, edwin muchapondwa, djiby thiam mium of $1.23 per bottle to avoid added sulfites. however, results show us wine consumers are willing to pay approximately €1.19 more per bottle of wine. it is important to note that the previous studies relied on a hypothetical so2-free alternative and hence they did not use real preservatives as in our case (i.e., using natural the preservatives of rooibos & honeybush). since using so2 as a wine preservative is very likely associated with adverse health effects, we investigated whether those who believe in these effects are also ready to pay higher premiums for healthier wines. we find that these consumers are indeed willing to pay at least three times more for an so2-free natural preservative and quality scoring than those who do not believe so. they are also ready to pay for organic winemaking, but their premium is only two thirds higher. the importance of these differences is even more significant if we consider the high percent (68%) of respondents who believe so2 causes headaches in our sample. we found no difference in preferences between the colour of wine (red or white); however, willingness to pay for the three wine attributes differ between red and white wines. heavy drinkers would pay more for natural preservatives in wine than light drinkers. this is a good message for winemakers since the high investment cost induced by introducing the new natural preservative may be recovered faster. our findings confirm that consumers’ decisions to purchase a bottle of wine in south africa are more influenced by natural preservatives and organic attributes rather than a higher quality score. our findings present a significant contribution, at least in the south african context, to understanding preference and hence a niche for the natural preservative market. the share of respondents who believe so2 causes headaches is astonishingly large and their preference for wine with less adverse health effects is also strong. these consumers represent an apparent and potentially important market segment for the wine industry and wine producers interested in wine product differentiation. although this study targets south african wine consumers, these findings are useful for other wine-producing countries and regions. further research could investigate whether our findings for south african consumers also hold in other regions. based on our findings, we recommend that the wine industry should provide greater clarity regarding organic winemaking standards. in particular, it should clarify what constitutes organic wine, perhaps by emulating the us standard that regards organic wine as wine made without added sulphur. it is clear, though, that respondents are aware about natural preservatives and are in tune with the natural/organic movement for healthier living. as there is no strong scientific consensus on whether so2 in wine causes headaches, investigations in medical research seeking to establish the root cause of headaches promises significant rewards for the wine industry. before embarking on investment, wineries should consider the additional costs involved with rooibos & honeybush alternatives and compare them with the expected premium for ‘no sulphite added’ wines. our empirical study provides the industry with the first evidence of consumers’ acceptance of a novel natural wine preservative and, more specifically, how wine consumers may respond. to fully understand consumer behaviour in relation to natural preservatives, more effort should be put into determining the factors that impact wine-consumer choice. understanding these factors can provide a better targeted marketing strategy suitable for capturing consumer preference for natural preservatives in wine. needless to say, the preferences of a wider sample should be investigated. in this sense, the relatively small sample size (≈600) and narrow geographic extent (the cape town metropolitan area) are the main limitations of our study. nevertheless, our results are in line with previous literature on “no sulphite added” but are silent about sulphur alternatives as in our case study. our study also supports the wine industry strategic exercise (wise) 2025 strategy, particularly on the theme of “technological and innovation”.10 the discovery of natural preservatives in wine making has the potential to further boost the south african wine industry’s competitiveness locally and abroad. acknowledgments financial support provided by the czech science foundation grant number 19-26812x. all authors also acknowledge financial support from the european union’s h2020-msca-rise project gemclime-2020 under ga 681228 for their secondments. reference [1] sawis, “south africa wine industry information systems, annual report,” 2020, [online]. available: http://www.sawis.co.za/info/annualpublication. 10 the wise strategy was launched by the south african wine and brandy company in 2015 to create a comprehensive industry-wide strategic exercise that would help transform the wine industry to become more competitive internationally by 2025. 113premium price for natural preservatives in wine: a discrete choice experiment [2] vinpro, “cost guide for grape production in the wine industry.,” 2018, [online]. available: https:// sales.vinpro.co.za/product/vinpro-cost-guide/. 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[84] d. revelt and k. train, “mixed logit with repeated choices: households’ choices of appliance efficiency level,” rev. econ. stat., vol. 80, no. 4, pp. 647–657, 1998. appendix table a1. estimation results, mxl with colour interactions. panel a – parameter estimates   mean (s.e) sd (s.e) interactions with red wine rooibos 2.7012*** 3.3068*** -0.4001   (0.3175) (0.3101) (0.3759) organic 0.7933*** 1.8402*** 0.0201   (0.2637) (0.2834) (0.3089) quality 0.0641*** 0.0907*** -0.0020   (0.0120) (0.0133) (0.0142) price (in euro) -0.7276*** 0.8832*** 0.0564   (0.1031) (0.0857) (0.1165) model characteristics log likelihood -1833.271 lr chi2 1127.78 no. obs. 7,332 r(respondents) 611 k(parameters) 18 panel b – wtp estimates per bottle of wine, means in eur red wine white wine rooibos 3.4287*** 3.7125***   (0.5210) (0.5154) organic 1.2122*** 1.0904***   (0.3654) (0.3581) quality 0.0926*** 0.0882*** (0.0168) (0.0161) notes: *, **, and *** indicate significance at 10%, 5%, and 1%, respectively. standard errors are provided in parentheses. all random parameters are fully correlated, with 1000 draws for simulations. wald statistics for the equality test of the wtp means for each attribute between red and white wine is 0.16 (p = 0.6928) for rooibos; 0.07 (p=0.7949) for organic; and 0.05 (p=0.8316) for quality, indicating that mean wtp values are not statistically different for red and white wines at any convenient level. 117premium price for natural preservatives in wine: a discrete choice experiment table a2. parameter estimates, mxl with headache interactions.   mean (s.e) sd (s.e) interactions with headache rooibos 2.1259*** 3.3019*** 0.5800   (0.3616) (0.2989) (0.4033) organic 1.0870*** 1.8310*** -0.3566   (0.3124) (0.2673) (0.3490) quality 0.0525*** 0.0895*** 0.0193   (0.0131) (0.0118) (0.0163) price (in euro) -1.1687*** 0.8493*** 0.6915   (0.1256) (0.0817) (0.1345) model characteristics log likelihood -1806.2427 lr chi2 1066.11 no. obs. 7,332 r(respondents) 611 k(parameters) 18 notes: *, **, and *** indicate significance at 10%, 5%, and 1%. standard errors are provided in parentheses. all random parameters are fully correlated, with 1000 draws for simulations. table a3. parameter estimates, mxl with interactions on gender and race.   mean (s.e) sd (s.e) interaction with female interaction with african interaction with caucasian rooibos 2.9056*** 3.2454*** -0.0740 -0.7970* -0.3700   (0.3938) (0.2993) (0.3704) (0.4552) (0.4453) organic 0.1894 1.8332*** 0.7277** 0.2429 0.4770   (0.3242) (0.2701) (0.3131) (0.3766) (0.3749) quality 0.0577*** 0.0913*** 0.0014 -0.0075 0.0220   (0.0152) (0.0115) (0.0144) (0.0179) (0.0173) price -0.6113*** 0.9123*** -0.1342 -0.1761 0.0902   (0.1220) (0.0832) (0.1193) (0.1478) (0.1428) model characteristics log likelihood -1822.3397 lr chi2 1090.13 no.obs 7,332 r(respondents 611 k(parameters) 26 notes: *, **, and *** indicate significance at 10%, 5%, and 1%, respectively. standard errors are provided in parentheses. all parameters are fully correlated, with 1000 draws for simulations. 118 lydia chikumbi, milan ščasný, edwin muchapondwa, djiby thiam table a4. parameter estimates, mxl with frequency of wine drinking interactions. random factors fixed interactions mean (s.e) sd (s.e) interactions with heavy drinkers interactions with light drinkers rooibos 2.4721*** 3.4320*** 0.2285 -0.1926 (0.3131) (0.3101) (0.4321) (0.5180) organic 1.0082*** 1.6719*** -0.0068 -0.4929 (0.2443) (0.2835) (0.3439) (0.4081) quality 0.0641*** 0.0983*** 0.0085 0.0109 (0.0116) (0.0117) (0.0170) (0.0204) price (in euro) -0.8659*** 0.9153*** 0.3545** 0.1548 (0.1055) (0.0861) (0.1389) (0.1649) model characteristics log likelihood -1826.8435 lr chi2 1109.95 no. obs. 7,332 r(respondents) 611 k(parameters) 22 notes: *, **, and *** indicate significance at 10%, 5%, and 1%, respectively. standard errors are provided in parentheses. all random parameters are fully correlated, with 1000 draws for simulations. wine economics and policy 11(1): 107-126, 2022 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/wep-9946 wine economics and policy citation: giacomo del chiappa, juan carlos martín, concepcion román (2022) developing wine tourism experiences. a discrete choice analysis using bestworst scaling data. wine economics and policy 11(1): 107-126. doi: 10.36253/ wep-9946 copyright: © 2022 giacomo del chiappa, juan carlos martín, concepcion román. this is an open access, peerreviewed article published by firenze university press (http://www.fupress. com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information fi les. competing interests: the author(s) declare(s) no confl ict of interest. developing wine tourism experiences. a discrete choice analysis using best-worst scaling data giacomo del chiappa1, juan carlos martín2,*, concepcion román2 1 department of economics and business. university of sassari & crenos, sassari, italy. e-mail: gdelchiappa@uniss.it 2 institute of tourism and sustainable economic development (tides), university of las palmas de gran canaria, las palmas, spain; research in economic environs and society (trees), north-west university, potchefstroom, south africa. e-mail: jcarlos.martin@ ulpgc.es; concepcion.roman@ulpgc.es *corresponding author. abstract. th e aim of this research is to aid winery managers in bundling a plethora of diff erent service features to meet the wine tourists’ expectations. a discrete choice model using best-worst scaling (bws) data is estimated to obtain the relative importance of the attributes included in the analysis. findings show that the most important aspects that make wineries attractive are: to off er wine tastings and “tour & visits”, to provide visitors with wine specialists/tour guides and, fi nally, to make the surrounding area and natural environment as pleasant as possible. furthermore, the study highlights that wine tourists’ preferences are heterogeneous. keywords: wine tourism, sardinia, choice experiments, best-worst scaling, discrete choice models. 1. introduction any fi rm in any sector has to make an eff ort to fully understand the customer’s needs and expectations and to meet them, thus, generating satisfaction and willingness to buy again the product/service and/or to recommend it to others both online and offl ine. during the last few decades, wineries around the world have been approaching wine tourism as a valid and eff ective distribution channel [1], a way to promote the products and to be in close contact with potential customers. th us, wineries can sustain their national and international sales and market share. hence, their ability to deeply understand what attracts visitors to wineries and what makes them satisfi ed has become pivotal both for academia and the industry [2]. according to victorino et al. [3], the lack of an appropriate combination of the resources with the necessary skills and knowledge impede fi rms from innovating their products, service and experi108 giacomo del chiappa, juan carlos martín, concepcion román ences. innovation is a prerogative that creates value for the customers making them satisfied and loyal [4]. tseng et al. [5] viewed service innovation as a strategical tool to keep a firm competitive. however, knowledge of consumers’ reactions to innovations in traditional and symbolic markets such as wine [6] is still very limited so to anticipate the possible acceptance of such innovations is, in the best of the cases, very risky. furthermore, especially in wine sector, innovation can be seen as an antagonist of tradition because part of the prior and authentic experience can be in part lost, so such innovation can be a failure in the marketplace [7]. furthermore, the number of academic studies aimed to investigate which are the main service features that make visitors at wineries satisfied is not such large, tend to apply mostly factor and structural equation model (sem) analysis [8,9], and tend to ignore italy [10] despite its relevant role both in term of wine production and wine tourism. thus, the novelty of the paper is based on two main features: the methodological approach and the case study of sardinian wine tourism. best–worst scaling (bws) has been found to be an efficient way to elicit taste-based preferences that obtain the key drivers of service provision in different contexts [11]. the method has been applied in different fields such as transportation [12,13]; marketing [14,15]which can be greatly ameliorated by the use of a new technique, bestworst scaling (bws; health care [16,17]; food industry [18,19]; wine choice in italy [20]; and tourism [21,22]. scarpa et al. [22] find that repeated best-worst selection tasks facilitate the cognitive burden of multi-attribute stated preference surveys. kim et al. [21] contend that bws has been almost absent in the tourism literature, and it is still unclear why this is the case as there are many topics that could be benefitted from its application. these authors use bws to identify the most important key drivers that characterize hotel choice under two different scenarios: luxury and economy hotels. in this paper, the authors transform survey data obtained from the use of traditional semantic scales into a bws data set with the purpose of analysing the main drivers of customers’ preferences for wine tourism. the applied method extracts, from each observation, substantially more information than that obtained by analysing the scores reported by respondents independently. thus, the present research is an additional case of the scant bws studies in tourism, and it is expected that the methodology could be applied more frequently in the future since it represents an efficient method to elicit taste-based preferences. this said, there is a need to deepen our understanding of wine tourism and bws is an adequate methodological alternative to achieve this purpose. for this reason, experimental designs to extract bws datasets, jointly, with advanced discrete choice models estimations are proposed in the study to better delineate the key drivers that develop successful wine tourism products. bws datasets are free of the biases inherent in traditional response scales and are ideal for handling the comparative evaluation of large amount of indicators which are mostly qualitative in nature [12] (p. 108). this would strongly support wine producers and managers in their attempt to effectively plan and implement their product and service design in ways that their visitors can be satisfied with the visit and prone to return to it and/or to recommend it to others [23,24]. according with existing literature, the product and service design consists of the evaluation of available resources that aims to being innovative and unique [25]. the customer value is obtained through a perfect alignment between the perceived service and the expectations. hence, wineries need to find the true value drivers differentiating these from those attributes which can be costly to the firm without providing the adequate rate of return. specifically, wineries need to analyse whether being able to taste the local produced wine, being able to visit the vineyards and the cellar, being able to buy wine, being able to be accommodated, among others, are true value drivers. based on the literature review, the paper proposes to design the high-valued winery tourism products based on 29 different attributes used to describe the main operational capabilities of wineries, such as tangible product characteristics, staff attributes and other more affective and emotional attributes. hence, the aim of this research is twofold. first, it aims to analyze the degree of importance of different attributes that could be considered by visitors when selecting a wine tourism destination. secondly, it aims to ascertain whether socio-demographic characteristics of visitors (gender, age, place of residency) and travel-related variables (prior experience with visitation at wineries and length of stay) influence their assessment. to achieve these aims, the study data collected in the period june-september 2015 from a sample of 271 visitors at wineries in the island of sardinia (italy) were used to generate a discrete choice bws dataset after creating an appropriate experimental design. this allowed us to estimate different choice models in order to obtain the relative importance of the attributes included in the analysis. the flexibility of the modelling strategy followed also enabled us to draw interesting conclusions regarding the heterogeneity in wine-tourists’ preferences, which contrast with the traditional method based on the 109developing wine tourism experiences. a discrete choice analysis using best-worst scaling data analysis of sample average scores. our results provide interesting managerial implications that can be used for promoting wine-tourism in the region. 2. literature review wine tourism has been previously defined by charters and ali-knight [26] and getz and brown [27]. recently, sousa [28] extends the definition given in [27] as a simultaneous form of consumer behavior, a destination strategy that develops and markets wine-related attractions, and a marketing opportunity for wineries to educate and to sell wine-related products directly to consumers. prospective on wine tourism needs to rely on new product development process [29] that consists of six major steps: (1) idea generation; (2) screening; (3) business analysis; (4) concept development; (5) final testing; and (6) commercialization. the current study mainly deals with the fourth step. ottenbacher and harrington [30] show that there is a connection between the use, the process and the likelihood success increase. hjalager [31] contends that the process can also act as a catalyst for improving existing services that increase the product perceived value. gómez et al. [32] perform a systematic review of wine tourism research over the period 1995-2014 and found eight different topic areas: (1) wine tourism development; (2) winery and cellar door; (3) wine tourist behavior; (4) wine events and festivals; (5) marketing and promotion; (6) critical success factors; (7) wine tourism models; and (8) education and other. the two most researched topics were wine tourism development (35%) and wine tourist behavior (26%). a further analysis of subtopics revealed that regional development and market segmentation of wine tourists are the most relevant with shares of 19 and 17 percent respectively. notwithstanding, it seems obvious that these two subtopics are highly related. charters and ali-knight [26] contend that wine tourism development and market segmentation is usually based on important behavioral aspects of wine tourists such as motivations, expectations and experiences. quintal et al. [33] further include the push-pull winescape indicators of the hedonic experience to generate a segmentation basis for cluster analysis. in this sense, it is important that push factors could also include travel constraints and impediments. for example, cho et al. [34] comment that wine tourism market segmentation have not adequately addressed the issues related to travel constraints, barriers or impediments that some tourists might have to not visit wineries. this is an important aspect for which wine tourist destination marketing campaigns can be misleading. alebaki and iakovidou [35] compared a number of approaches that have been used to find market segments in wine tourism, analyzing the main indicators included, and found that the psychographic scales are mainly based on the following motivations and wine lifestyles: (1) needsbased motivations, value-based motivations, benefits and expectations; (2) push-pull factors; (3) core wine product, core destination appeal and cultural product; (4) purpose of the winery visit; and (5) wine lifestyles that include wine interest, wine cellaring behavior and wine club participation. similarly, molina et al. [36] summarized the psychographic scales as: (1) interest in wine; (2) interest and knowledge in wine; (3) interest in wine and motivation; (4) motivations; (5) sensation seeking; (6) attitudes and behavior; (7) values and lifestyle; and (8) constraints framework. festa et al. [37] contend that although wine tourism in italy is recently achieving recognition in the world, there is still a number of lags on institutional, managerial, and professional developments that impede some italian destinations of getting its full potential. wine tourism is offering new niche markets for cellars that can foster micro tourist destination competitiveness [38– 40]. the potential synergies between these two industries are gaining the academic attention as a particular region tourism attractiveness can be increased with wine and food products promotion [1,41–43]. wine tourism products share some commonalities with other agricultural products regarding the perceived value for its provenance associated cultural stories and lineage [44]. the authenticity can be molded by the peculiarities of the grapes type, the blending process, the winescape, the traditions, the feasts, and the ethnography associated to winemakers and growers. the development of wine tourist products and its marketing need to be addressed by well-grounded quantitative studies that help wineries and destination marketers in achieving a successful and innovative product. winescape was defined by peters [45] as “the winsome combination of vineyards, wineries, and supporting activities necessary for modern wine production, [which] yields regions that offer sojourners and dwellers alike a certain charm – a warm ambience, a memorable experience of place – not found in most other agricultural landscapes’ (p. 124).” the definition lacks concretion on the supporting activities that can be pursued in experiencing the place. since the seminal winescape definition, a lot of studies have analyzed wine tourism using winescape scales [46–49]. regarding the methods that have been used to analyze wine tourism development and market segmenta110 giacomo del chiappa, juan carlos martín, concepcion román tion, as usual in social science, the literature abounds in qualitative, quantitative and mixed methods. within the category of qualitative studies, we highlight here the work by frost et al. [44] that uses interpretivism as way to conduct the exploratory analysis. this method consists in putting researchers in the shoes of the interviewees in order to better extract the experiences and opinions on the main attributes of winescape. the authors find that a representative sample of wineries in south east australia uses heritage as a key marketing component. the heritage concept is promoted via family history, ethnicity, 19th century buildings and vineyards. within the category of quantitative methods, cluster analysis is the most popular approach [9,50,51]. for example, bruwer et al. [50] analyze the relationship between motivations and destination image perception, and find that the visitors can be segmented in five and three different clusters for motivations and destination image, respectively. the wineries are located in in barossa valley –south australia. the motivation clusters are named as wine learners, dining enthusiasts, wine buyers, wine enthusiasts and wine connoisseurs. curiously, the authors do not name the destination image clusters. meanwhile, gu et al. [9] identify four different clusters regarding the involvement level of chinese tourists who participate in wine tourist routes in australia, namely, low involvement, highly involved, interest-driven and high-risk perception. and finally, priilaid et al. [51] perform a cluster analysis to analyze the visitors’ interest and engagement in wine consumption and wine education in south africa’s cape region. the authors find three clusters, namely, enthusiasts, consumers and explorers. other methods, besides the mentioned cluster analysis, that have been used to obtain market segments in wine tourism are the following: tourists’ self-classification on the basis of their interest in wine and the knowledge about it [26]; multiple correspondence analysis (mca) applied to wine tourists’ motivations [52]; and latent class segmentation analysis based on interest in wine, motivations and demographic characteristics of tourists [36]. discrete choice is not as popular as cluster analysis in the research of wine tourism. in a recent literature review, boncinelli et al. [53] find 35 studies that use choice experiments to analyze consumers’ wine preferences. out of the 35 studies, none of them analyze the consumers’ wine preferences in a context of wine tourism. in addition, the category ‘occasion’ that is the special or usual consumption situation does not include tourism as one of the possible situations, instead more general situations such as at home or with friends are included in the analysis. this fact is very unusual as wine industry can be considered as a mix of commodity supply, cultural or lifestyle experience, and hospitality or tourism destination [54]. this section ends with the study by tafel and szolnoki [55] in which the mixed-methods framework is applied for the first time in wine tourism to a sample of german wineries. the authors conclude that wine tourism is especially successful for those wineries which are located near to large cities. in germany, wine tourism should reinforce the cultural heritage preservation and strength the economic cohesion of some disadvantaged rural areas. the authors present the mixed-methods approach as more convenient than a quantitative method because of its flexibility to determine the main challenges that wineries are facing. interestingly, the most important key personal challenge to participate in wine tourism is the lack of human resources which increases the owner workload and labor fatigue. 3. data and methodology 3.1 survey and sample description the study is based on a questionnaire that was structured into two sections. in the first one, respondents were asked to provide general information about their socio-demographic profile (age, gender, level of education, etc.). the second section asked individuals to assess the extent to which 29 different attributes are important for them when deciding to undertake a wine tourism-related experience at a winery (5-point ordinal scale: 1=not at all important, 5= extremely important). the items were sourced from prior studies [27,56,57]. the questionnaire was originally designed in english and then translated into italian, french and german. based on existing literature, different possible methods of translation exist [58]. this study opted for a back translation approach, which is a common approach in tourism-related settings [59]. hence, the original english questionnaire was translated by bilingual speakers for each language; a translation back to the original language was then performed by other bilingual speakers. this method of back-translation was used for quality assurance, as the target of this research is an international audience. once the survey was designed, a pilot study was conducted by two trained students who interviewed face-to-face a sample of 40 visitors at the end of their visit at one of the several sardinian wineries that kindly agreed to collaborate in the study (15 wineries spread around the overall region). based on the pilot study small changes were done to further improve the read111developing wine tourism experiences. a discrete choice analysis using best-worst scaling data ability and comprehension of some statements included in the survey. the final data collection was then run face-to-face by 4 interviewers who intercept potential respondents at the end of their visit at the winery for only 10 specific wineries which were selected given the similar characteristics they have, medium and high involvement in wine tourism activities such as guide tours, wine tasting and information brochures. one of the researchers responsible for leading the research team trained the interviewers about when and how to approach visitors and how to support them in filling the survey without interfering in their assessment. specifically, the interviewers were asked to collect data on different days and time spans of the week intercepting all the visitors and offering them the possibility to voluntarily take part in the study (no prize and/or incentive was offered). the data collection was conducted in the period june-september 2015 and a convenience sample of 271 complete questionnaires was finally obtained. table 1 shows the socio-demographic profile of respondents. overall, it can be seen that the profile of the respondent is characterized by being female, 26-35 years old, non-resident in sardinia, a frequent visitor to the island, and staying a week or less for the vacation. 3.2 generation of a choice data set from survey data in order to analyze which attributes are considered more/less important when deciding to undertake a winetourism related experience at a winery, the assessment provided by the 29 attributes included in the survey (see table 2) was used to generate a best-worst scaling (bws) case 1 choice data set [60]. for this, we created an efficient choice experiment consisting of 58 choice sets of 4 attributes each. the experimental design was created with the software ngene [61]. in this regard, it is important to note that for 29 attributes, it is not possible to build a balanced incomplete block design (bibd) because no solution can be found for those cases where the necessary conditions of design parameters are met [11]. for each particular choice set in the experiment, the most important attribute (best option) was considered the one that obtained the highest score in the survey. in the same fashion, the least important one (worst option) was that with the lowest score. in case two or more attributes were rated with the highest/lowest score, the most/least important one was selected randomly. also, when obtaining the least important attribute, the one considered the most important, was removed from the choice set. following this procedure, we were able to generate, for every respondent, a total of 116 choice observations (58 for most important and 58 for least important responses) which provide valuable information regarding how the individual makes trade-offs among different attributes. this makes a total of 31436 choice observations that will be used during the estimation process to determine the relative impact of each attribute on the overall importance function. the typical bws choice question as presented in figure 1 corresponds to the first choice scenario in our experiment. hence, if a respondent gave the scores of 2,4,5, and 3 to the attributes shown in this choice set, the best choice (i.e. the most important one) was assigned to that showed in the third place, whilst the worst one (i.e. the least important) to that showed in the first place, considering the three remaining options. in the example of figure 1, the information provided by the respondent in the importance table is transformed in the choice task indicating that the attribute shown in third place is more important than those presented in the first, second and fourth position. additionally, the attributes shown second and fourth are considered more important than the one presented first. therefore, the information extracted from the translation of the answers given for the importance of the 29 attributes was transformed in each of the choice tasks included in the whole set of the 58 choice tasks. table 1. socio-demographic profile of the wineries visitors. variable category n percent gender male 125 46.13 female 143 52.77 age <=25 26 9.59 26-35 73 26.94 36-45 59 21.77 46-55 57 21.03 56-65 23 8.49 >=66 16 5.90 sardinia residence resident 74 27.31 non-resident 197 62.96 visits 1 13 4.80 2 33 12.18 3 29 10.70 4 19 7.01 5 24 8.86 6-9 12 4.43 10 or more 55 20.30 vacation length <=7 days 84 31.00 8-14 days 59 21.77 15-21 days 44 16.24 >=22 days 18 6.64 112 giacomo del chiappa, juan carlos martín, concepcion román efficient choice experiments represent the appropriate tool to obtain choice data sets that enable reliable parameter estimates with smaller sample size. this is a very convenient method as, normally, the number of tasks required to obtain all combinations of attributes is unfeasibly large. efficient designs are based on the minimization of some efficiency measure, typically the d-error, which is derived from the asymptotic variancecovariance matrix and some prior information about the parameter estimates [62]. in our case, parameter priors were obtained from the estimation of a multinomial logit model that used a data set generated in the same fashion described above, but considering, for each respondent, 50 sets of 4 attributes were selected at random. the design obtained is characterized by twenty-four attributes appearing eight times in the choice questions, three appearing seven times, one appearing nine times, and one appearing ten times. the number of times each attribute is paired with each other is cero in 32% of the pairs, one in 52% of the pairs and two in 16% of the pairs. it is worth noting that figure 1 was not really presented to respondents, and it is simply used for the ease of exposition of the approach used to construct bws data using the information provided in the table of importance for the 29 attributes included in the survey. the degree of similitude between results obtained from applying the described method and those obtained when individuals face real best-worst tasks must be empirically tested. unfortunately, this comparison is not possible in this study, as the survey was not prepared to include a best-worst choice experiment. therefore, the analysis of the robustness of the method proposed is out of the scope of the current study and is left for future research. 4. the econometric model once survey data were transformed into choice data, it is possible to build a discrete choice model under the random utility maximization framework [63]. in our case, the alternative j makes reference to the position within the choice task. (first, second, third and fourth). thus, the utility ujks for the importance question associated with the alternative j for individual q in choice task s is represented by: ujks=αj+ βkdjqsk+εjqs (1) where αj is the alternative specific constant that accounts for not measured effects; βk is the marginal utility or the importance, in this case, associated to the table 2. attributes included in the analysis. number name 1 to be able to taste the wines produced at wineries 2 being able to visit wineries 3 the visiting hour of the wineries are long/extended 4 being able to buy the wines produced at the wineries 5 having wine specialists take care of you during visits 6 the existence of specific gastronomic activities 7 the existence of a varied gastronomic offer 8 the possibility of eating at the wineries 9 the existence of organised trips (lodging, visit, tasting, etc.) 10 the existence of specific lodging 11 the existence of sports activities in the area 12 the appeal of the natural environment in the area 13 the existence of organised wine tourism trips 14 the area to be visited is famous for its wines 15 the fame of the wine in the region 16 the existence of well-defined wine routes in the region 17 the climate of the area 18 the existence of specific gastronomic activities 19 the existence of a varied gastronomic offer 20 the possibility of participating in cultural tourism in the area 21 the existence of stores/open-air markets for agricultural products from the area 22 the existence of stores/open-air markets for artisan products from the area 23 the possibility of taking wine tasting courses 24 being able to increase my knowledge of wine 25 the possibility of participating in wine production activities 26 meeting the winery owners 27 the existence of activities for children 28 the existence of wine museums or exhibitions 29 the existence of leisure/wine therapy activities which attributes, from the list below, do you consider most and least important in the selection of a wine tourism destination? most important least important □ the existence of specific lodging □ □ the existence of well-defined wine routes in the region □ □ the existence of activities for children □ □ to be able to taste the wines produced at wineries □ figure 1. best-worst choice scenario. 113developing wine tourism experiences. a discrete choice analysis using best-worst scaling data kth attribute; djqsk is a dummy variable taking the value 1 if the attribute k is present in alternative j for individual q in choice scenario s and 0 otherwise; and εjqs is a vector of random terms independently and identically distributed type i extreme value, yielding a standard multinomial logit model (mnl). as in this case we have 29 attributes, only k=28 dummy variables are generated, and the attribute represented by the statement 29 is used as the reference attribute. thus, in the first choice scenario (s=1) presented in figure 1, the attributes number 10, 16, 27 and 1 are included in the first, second third and fourth alternatives, respectively. in this regard, for example, in the utility of the first alternative (j=1) for individual q, djqsk will be equal to 1 for k=10 and 0 for k≠10. data from least important tasks are simply generated by coding variables djqsk as -1 if the attribute is present in the alternative and 0 otherwise. note that the minimum utility option is obtained after the maximization of the negative of the utilities of the remaining options, once the most preferred alternative (i.e. the most important attribute) is removed from the choice set. we will further assume that the marginal utilities corresponding to most and least important tasks are identical, except for scale differences. in order to account for this potential differences, a scale factor term is included in equation (1), yielding: ujks=exp(λww)(αj+ βkdjqsk)+εjqs (2) where, w=1 if the observation comes from a worst choice task. the modelling approach is based on that used by [12] when analyzing the importance and satisfaction of public transport attributes in australia. considering that a choice scenario s has j alternatives, the probability that alternative i is chosen as best and r, r≠i is chosen as worst for individual q in choice scenario s is: (3) where v is the systematic component (i.e., the nonrandom term) of the utility in equation (2). this model assumes that best-worst choices are made sequentially and is referred in the literature as best then worst mnl model [64]. the model also assumes that the utility of an alternative in selecting the worst option is the negative of the utility of the same alternative in selecting the best option, except for potential differences in scale. one of the main drawbacks of the mnl model is the inability to analyze random taste heterogeneity in the population. thus, model parameters are interpreted as point estimates of the marginal utilities for a homogenous population. models of the family of mixed logit [65] allow for the analysis of the random taste heterogeneity by specifying random coefficients in the utility function. for the purpose of our analysis, the normal distribution was considered. thus, coefficients in expression (1) are expressed as βk=μk+σkηk, where μk and σk are parameters to estimate, representing the population mean and standard deviation, respectively; and ηk is a standard normal distributed random variable. systematic heterogeneity in the population parameters can also be accounted for by specif ying interactions with some set of covariates vr, such as socio-demographic and contextual variables. in our case the heterogeneity in mean is considered. hence, coefficients are expressed as βk=μk+( μkrvr)+σkηk where μkr are parameters to estimate, characterizing the heterogeneity in mean of the random coefficient in the population. as we were focused in analyzing how the visitors profile could affect the perception of the different attributes, some socio-demographic variables, as well as charactertable 3. covariates used in the analysis. name variable scale v1 i am interested in wine and in the activities related to it likert 1-5 1= strongly disagree,… ,5=strongly agree v2 the possibility to visit wineries and to experience activities related to wine were sufficient elements for taking a trip to sardinia likert 1-5 1= strongly disagree,… ,5=strongly agree v3 i frequently read magazines that are specialized in wines likert 1-5 1=strongly disagree,….,5 strongly agree v4 gender 1 male, 0 female v5 age 1 = “<= 25”; 2 = “26-35”; 3 = “36-45”; 4 = “46-55”; 5 = “56-65”; 6 = “>= 66” v6 prior experience 1 first visit, 0 otherwise v7 length of stay 1 = “<= 7 days”; 2 = “8-14 days” 3 = “15-21 days” 4 = “=>22 days” v8 place of residency 1 resident in sardinia, 0 otherwise 114 giacomo del chiappa, juan carlos martín, concepcion román istics of the visit, and the interest in wine related activities were included in the set of covariates. the final list of variables used in our models is presented in table 3. 5. estimation, results and discussion during the modelling process, different discrete choice models were built. in a first stage, two multinomial logit models were estimated. the first (mnl1) considers the utility specification defined in (1). in this case best and worst choices are treated identically. in the second one (mnl2), a scale factor for worst choices is estimated, according to equation . as can be inferred from the estimates presented in table a1 in the statistical annex, all parameters resulted significant at the 99% confidence level, with the only exception of that of the attribute 27 “the existence of activities for children”. it is worth noting that this result should not be interpreted as this attribute is not considered important by the winery visitors, but rather its value is not significantly different from the base statement “the existence of leisure/ wine therapy activities”, that is coded as 0. in the same fashion, positive and negative estimates are interpreted as being more and less important that those equal to 0, respectively. in order to facilitate the comparison of our estimates with the average score obtained for each item, results were re-scaled between 0 and 1 by considering the difference between each estimate and the minimum value and dividing the result by the value range. as can be inferred from results presented in table 4, the top and bottom 5 rated items coincide in the same set of attributes, independently on the method used. thus, the attributes considered more important lie among the group 1,2,4,5, and 12, which are more related to the visit to winery; whilst the less important ones lie in the group of attributes number 10,11,27,28 and 29, which are referred to the existence of certain type of facilities in the area. a different method to avoid the confounding effect due to differences in scale is the obtaining of the share of preference, spk, for each attribute k. they predict the probability that each attribute is chosen as the most important using the following expression [66]: spk= (4) the share of preference for the attributes considered in the analysis are presented in table 4. it is worth noting that this normalization method yields the same ordering of the attributes than the previous re-scaling method. even considering that results are rather similar, there exist differences in the rank order obtained by the average score method and the multinomial logit models, as can be seen in the spearman correlation matrix presented in table 5, where the highest discrepancy is obtained for the average score and the mnl1 model. in this respect, it is important to point out that this analysis is not based on data obtained by a really best-worst survey where individuals evaluate each item in comparison with the other ones presented in the choice set. therefore, this potential source of differences provided by the relative comparison of the attributes is not considered in our analysis. these differences have been manifested in similar analyses carried out by other authors in other context [12]. an important advantage of using discrete choice modelling is the potential of this methodology to deal with preference heterogeneity [67]. thus, in the second stage of the modelling process, different random parameter logit models were tested in order to determine the group of attributes that were heterogeneously perceived by the population. in this regard, after testing different specifications, the coefficients of attributes number 2, 4, 5, 12, 17 and 22 were found to be random, following the normal distribution. these attributes are: being able to visit wineries, being able to buy the wines produced at the winery, having wine specialists take care of you during visits, the appeal of the natural environment in the area, the climate of the area and the existence of stores/ open-air markets for artisan products from the area. the heterogeneity found for these attributes have important managerial implications that will be discussed below. to further explore other sources of heterogeneity, the means of these random coefficients were interacted with some of the covariates presented in table 3. the estimation results corresponding to the model with the better fit are presented in table a2 in the annex. the majority of the estimates resulted significant at the 95% confidence level. the only exceptions were the fixed coefficient for attribute 27 (“the existence of activities for children”) and the interaction of the mean for the coefficient of attribute 5 (“having wine specialists take care of you during visits”) with covariate v7 (“vacation length”). the sign obtained for these interaction terms help us to interpret the meaning of the heterogeneity in the population mean for these random coefficients. the statements presented in table 6 summarize this interpretation. thus, for example, the importance of attribute 2 “being able to visit wineries” is higher for males (note that the coefficient µd2*v4 for the interaction term d2*v4 115developing wine tourism experiences. a discrete choice analysis using best-worst scaling data is positive), decreases as the age of the visitor increases (µd2*v5 is negative) and decreases as the individual agrees more with “the possibility to visit wineries and to experience activities related to wine were sufficient elements for taking a trip to sardinia” (note that µd2*v2 is negative). the other interaction terms can be interpreted in the same fashion. a similar interpretation can be done if the focus is put on the different covariates. in this regard, the higher agreement with “i am interested in wine and in activities related to it” (i.e. an increase in v1) impacts negatively upon the importance of “the climate of the area” and “the existence of stores/open-air markets for artisan products from the area”. a negative impact on the importance of climate is also appreciated for those with a higher agreement with “i frequently read magazines that are specialized in wines” (v3). also, a higher agreement with “the possibility to visit wineries and to experience activities related to wine were sufficient elements for taking a trip to sardinia” (v2) reduces the importance given to “being able to visit wineries”, “being able to buy the wines produced at the wineries”, “having table 4. re-scaled results and share of preference. multinomial logit models. attribute average score mnl1 mnl2 share of preference mnl1 mnl2 1 to be able to taste the wines produced at wineries 1.000 0.966 0.978 0.076 0.089 2 being able to visit wineries 0.890 0.997 0.986 0.083 0.092 3 the visiting hour of the wineries are long/extended 0.625 0.763 0.796 0.042 0.042 4 being able to buy the wines produced at the wineries 0.891 1.000 1.000 0.084 0.097 5 having wine specialists take care of you during visits 0.844 0.919 0.945 0.066 0.077 6 the existence of specific gastronomic activities 0.639 0.692 0.736 0.034 0.032 7 the existence of a varied gastronomic offer 0.570 0.623 0.693 0.028 0.027 8 the possibility of eating at the wineries 0.473 0.545 0.618 0.022 0.020 9 the existence of organised trips (lodging, visit, tasting, etc.) 0.448 0.618 0.662 0.027 0.024 10 the existence of specific lodging 0.390 0.503 0.568 0.019 0.016 11 the existence of sports activities in the area 0.000 0.000 0.000 0.004 0.002 12 the appeal of the natural environment in the area 0.697 0.851 0.878 0.054 0.058 13 the existence of organised wine tourism trips 0.493 0.572 0.638 0.024 0.022 14 the area to be visited is famous for its wines 0.405 0.642 0.681 0.029 0.026 15 the fame of the wine in the region 0.502 0.624 0.683 0.028 0.026 16 the existence of well-defined wine routes in the region 0.485 0.585 0.627 0.025 0.021 17 the climate of the area 0.485 0.699 0.719 0.034 0.030 18 the existence of specific gastronomic activities 0.503 0.712 0.729 0.036 0.031 19 the existence of a varied gastronomic offer 0.533 0.709 0.724 0.035 0.031 20 the possibility of participating in cultural tourism in the area 0.572 0.634 0.676 0.028 0.025 21 the existence of stores/open-air markets for agricultural products from the area 0.525 0.729 0.760 0.038 0.036 22 the existence of stores/open-air markets for artisan products from the area 0.485 0.648 0.710 0.030 0.029 23 the possibility of taking wine tasting courses 0.512 0.509 0.612 0.020 0.019 24 being able to increase my knowledge of wine 0.661 0.678 0.741 0.032 0.033 25 the possibility of participating in wine production activities 0.599 0.719 0.763 0.037 0.036 26 meeting the winery owners 0.550 0.619 0.700 0.027 0.028 27 the existence of activities for children 0.115 0.344 0.416 0.012 0.009 28 the existence of wine museums or exhibitions 0.339 0.459 0.541 0.017 0.014 29 the existence of leisure/wine therapy activities 0.140 0.323 0.393 0.011 0.008 top 5 bottom 5 table 5. spearman correlation matrix. average score mnl1 mnl2 average score 0.85 0.90 mnl1 0.98 mnl2 116 giacomo del chiappa, juan carlos martín, concepcion román wine specialists take care of you during visits” and “the appeal of the natural environment in the area”; and in contrast, increases the importance given to “the climate of the area” and “the existence of stores/open-air markets for artisan products from the area”. this group of individuals seems to be sufficiently motivated to travel to sardinia simply by the fact of being able to visit the wineries and not so much by the services and activities offered inside them. regarding the socioeconomic profile, males and older people (v4 and v5) tend to put more importance on “being able to visit wineries”, as well as on “the climate of the area”; and males give less importance to the “the existence of stores/open-air markets for artisan products from the area”. the increase in the duration of the holidays (v7) and being a resident in sardinia (v8) impact both negatively on the importance of “having wine specialists take care of you during visits”; and a longer holiday also reduces the importance of “the existence of stores/openair markets for artisan products from the area”. the estimation of random coefficients in mixed logit models allows for the application of bayesian statistics to obtain individual level parameters for these random coefficients [65]. the graphs, depicted in figure 2, represent the kernel density estimates for the distribution of the marginal importance of these random coefficients, with the corresponding confidence interval. in all cases, the distributions present a moderate dispersion, confirming the existence of random heterogeneity in the perception of the attributes, being this higher for the upper bound distributions of the confidence intervals. finally, and in order to compare these results with those obtained for the mnl specifications, the share of table 6. interpretation of the heterogeneity in mean. the mean of the importance of being able to visit wineries decreases as the degree of agreement with “the possibility to visit wineries and to experience activities related to wine were sufficient elements for taking a trip to sardinia” increases increases for males decreases as age increases the mean of the importance of being able to buy the wines produced at the winery decreases as the degree of agreement with “the possibility to visit wineries and to experience activities related to wine were sufficient elements for taking a trip to sardinia” increases increases for those who are from sardinia the mean of the importance of having wine specialists take care of you during visits decreases as the degree of agreement with “the possibility to visit wineries and to experience activities related to wine were sufficient elements for taking a trip to sardinia” increases decreases as vacation length increases decreases for those who are from sardinia the mean of the importance of the appeal of the natural environment in the area decreases as the degree of agreement with “the possibility to visit wineries and to experience activities related to wine were sufficient elements for taking a trip to sardinia” increases the mean of the importance of the climate of the area decreases as the degree of agreement with “i am interested in wine and in the activities related to it” increases increases as the degree of agreement with “the possibility to visit wineries and to experience activities related to wine were sufficient elements for taking a trip to sardinia” increases decreases as the degree of agreement with “i frequently read magazines that are specialized in wines” increases increases for males increases as age increases the mean of the importance of the existence of stores/ open-air markets for artisan products from the area decreases as the degree of agreement with “i am interested in wine and in the activities related to it” increases increases as the degree of agreement with “the possibility to visit wineries and to experience activities related to wine were sufficient elements for taking a trip to sardinia” increases decreases for males decreases as vacation length increases 117developing wine tourism experiences. a discrete choice analysis using best-worst scaling data preferences has been obtained for the random parameter mixed logit model. in this case, as we have obtained individual-specific posterior estimates for the mean and standard deviation of the random coefficients, the share of preference has been obtained at the individual level using the posterior mean of the parameter (conditional on individual current choices) for each individual and then averaging the figure 2. distribution of random coefficients. kernel density estimates. 118 giacomo del chiappa, juan carlos martín, concepcion román results in the sample. results presented in table 7 are very similar, in terms of the rank order of importance, to those obtained for the mnl models yielding high spearman correlation values (0.95 for mnl1 and 096 for mnl2). 5.1 managerial implications the previous literature on wine tourism agrees in that to effectively develop wine tourist products is necessary to analyze visitors’ preferences regarding the attributes that conform the wine tourism experience, as well as the individual factors that foster or limit the participation on the market. despite interest in wineries research has increased, insights into the importance of the attributes that drive more successful tourist products need to be further deepened. this is particular evident when the specific context of italy is considered; in fact, despite italy can be considered one of the world countries with more well-known wine tourism destinations, the number of studies that analyze the wine tourism markets in italy is not aligned with the number of existing wineries that offer wine tourist products [68]. this study was therefore carried out to extend the existing knowledge on how to develop this type of products taking into account the important heterogeneity that exists. overall, our findings show that there are six attributes that are estimated as random parameters which serve to conclude that there exist heterogeneous market segments that need to be further scrutinized in order to develop satisfying wine tourist experiences. the six attributes are: (1) being able to visit wineries; (2) being table 7. share of preference. random parameter mixed logit model. attribute rp mixed logit model 1 to be able to taste the wines produced at wineries 0.1003 2 being able to visit wineries 0.1385 3 the visiting hour of the wineries are long/extended 0.0371 4 being able to buy the wines produced at the wineries 0.1355 5 having wine specialists take care of you during visits 0.0561 6 the existence of specific gastronomic activities 0.0304 7 the existence of a varied gastronomic offer 0.0216 8 the possibility of eating at the wineries 0.0142 9 the existence of organised trips (lodging, visit, tasting, etc.) 0.0180 10 the existence of specific lodging 0.0126 11 the existence of sports activities in the area 0.0022 12 the appeal of the natural environment in the area 0.0700 13 the existence of organised wine tourism trips 0.0147 14 the area to be visited is famous for its wines 0.0157 15 the fame of the wine in the region 0.0200 16 the existence of well-defined wine routes in the region 0.0174 17 the climate of the area 0.0723 18 the existence of specific gastronomic activities 0.0237 19 the existence of a varied gastronomic offer 0.0248 20 the possibility of participating in cultural tourism in the area 0.0206 21 the existence of stores/open-air markets for agricultural products from the area 0.0228 22 the existence of stores/open-air markets for artisan products from the area 0.0233 23 the possibility of taking wine tasting courses 0.0139 24 being able to increase my knowledge of wine 0.0272 25 the possibility of participating in wine production activities 0.0265 26 meeting the winery owners 0.0187 27 the existence of activities for children 0.0062 28 the existence of wine museums or exhibitions 0.0103 29 the existence of leisure/wine therapy activities 0.0056 top 5 bottom 5 119developing wine tourism experiences. a discrete choice analysis using best-worst scaling data able to buy the wines produced at the winery; (3) having wine specialists take care of you during visits; (4) the appeal of the natural environment in the area; (5) the climate of the area; and (6) the existence of stores/openair markets for artisan products from the area. these results are similar to those obtained by bruyer et al. [50] and kim et al. [69], in which the core wine destination components were tasting wine, winery visits and natural landscape. however, the findings on heterogeneity extend the knowledge that exists in the development of tourist winery products as all the stakeholders involved in the development of wine tourist products in sardinia need to be aware that a unique solution that fits all consumers’ expectations is unlikely to exist. this important conclusion is achieved by estimating a discrete choice model based on bws data with rigorous models that account for random and systematic heterogeneity. it is interesting to see that winery managers could have directly under their control five out of the set of the six attributes mentioned above. the climate is the only attribute which can be considered as a natural endowment of the region and escape from the direct control of the managers. in addition, destination marketers in sardinia could be at least especially helpful in the attributes 3, 4 and 6. in this respect, sardinia could develop an educational program that provides enough skills to those in charge of the winery visits. the educational programs to improve the skills of winery visit guides should not only be developed for those already winery workers but also for the future entrants. the idea is to develop a cohesive standard program that allows guides to deliver authentic and unforgettable experiences in the winery. given the heterogeneity nature of the attribute, it is highly recommended that the visits could be tailored to visitors’ preferences. duarte-alonso and kok [70] identify the main traits and features of the future professionals in charge of providing experiences in wineries. regarding the sixth attribute, the existence of stores/ open-air markets for artisan products from the area, it would be interesting to explore the possibilities of a concerted effort between different stakeholders that include wineries, hotels, local food industry, craft artisans in sardinia as well as tourist sardinian board. in this regard, some municipalities in sardinia are organizing wine and food festivals throughout the year, and this trend should be even reinforced by the most important wineries of the island. on the other hand, winery managers and policy makers do not need to focus in the following five attributes: (1) the existence of specific lodging; (2) the existence of sports activities in the area; (3) the existence of activities for children; (4) the existence of wine museums or exhibitions; and (5) the existence of leisure/wine therapy activities. it is interesting to highlight that the results show that the core wine attributes are the most important to potential visitors instead of other complementary offer the can be developed in the wineries or the destination. this suggests that investments in complementary offer like sport, lodging, children’s activities, museums and therapies might not be a wise strategy, and the respective stakeholders, destination policy makers and marketers as well as winery managers should be aware of this. the above results contrast highly with those mentioned in back et al. [71] because the authors analyze the winery marqués de riscal in la rioja (spain) which is well-known in the sector for developing an iconic postmodernist hotel designed by the renowned canadian architect frank gehry as part of a broad wine tourist development named “city of wine”. the marqués de riscal project also included a wine-therapy spa, two restaurants and conference and events facilities. in summary, a complementary offer that was not positively valued by the current wine tourist demand in sardinia. furthermore, the interaction of other eight covariates serve to measure how the heterogeneity is affected by other attitude variables towards wine in general and other socio-demographic variables. in this case, eight covariates are found to have an effect. thus, there are three attitudinal variables regarding wine: (1) i am interested in wine and in the activities related to it; (2) the possibility to visit wineries and to experience activities related to wine were sufficient elements for taking a trip to sardinia; and (3) i frequently read magazines that are specialized in wines. in addition, there are five sociodemographic covariates: (1) gender; (2) age; (3) prior experience; (4) length of stay; and (5) being a sardinian resident or a domestic/international traveler. results suggest that the development of wine tourist products needs to take into account not only the attributes under the winery control but also the visitors’ attitude towards wine in general and other important segmentation covariates in order to match potential visitors’ preferences. for example, the existence of stores/open-air markets for artisan products from the area which could engage visitors with complementary products providing an incentive to visit wineries [57] is found in sardinia to be negatively affected by being interested in wine and in the related activities to it, by being male and by having a longer vacation duration; the first result confirms prior studies [72]. 120 giacomo del chiappa, juan carlos martín, concepcion román 6. conclusions the findings are significant for researchers, wine producers and managers. on the one hand, they provide further theoretical and methodological insights into the scientific debate devoted to analyze how different service features need to be bundled to design and to run an effective service/experience winery product that is able to please the visitors’ expectations and needs. from a managerial point of view, our findings provide useful information to destination marketers, policy makers, wine producers and managers attempting to deep their knowledge about the most relevant visitors’ expectations and needs so that the information can be used to plan and run marketing and promotion campaigns also recognizing the nuances in the way these expectations/needs changed based on the socio-demographic characteristics of their guests and their travelrelated variables. for example, our findings show that visitors travelling in sardinia as authentic wine lovers identify as critical aspects for the visit the climate of the area and the complementary offer of local artisan stores and open-air markets. thus, this niche market should not be promoted with other attributes like the possibility of buying wine during the visit, the natural landscape or having wine specialist during the visit. similarly, winery products based on the appeal of the natural environment in the area is not found to have a positive interaction with any segmentation variable so the attribute should not be included in the promotional brochures. thus, we extend the results obtained by bruwer and lesschaeve [73] in which winescape construct is analyzed integrating three theoretical concepts, namely servicescape, destination choice and place-based marketing theories. in the case of the niagara peninsula wine region, the authors suggest that managerial efforts should promote the area with equilibrated messages between “the core wine tourism product elements such as wine tasting and/ or buying and the hedonic experience elements (p. 625).” the authors conclude that the promotional material needs to be based in sound scientific approach. although this study helps to fill a gap in the existing knowledge in the literature and proposes some implications for practitioners, limitations still remain. firstly, it is based on a convenience sample and is highly site specific (i.e. sardinia, italy), thus rendering hardly generalizable. future studies might replicate the study in other wine tourism destinations to verify the robustness and generalizability of our findings taking into account the concerns expressed by one of the reviewers. in this sense, it is necessary to analyse whether the results of the current approach are robust in comparison with the real best-worst choice experiments. furthermore, this study considered a limited set of socio-demographics and travel-related variable. future studies might consider widening the set of these variables and ascertain their moderator effect on visitors’ expectations and needs (e.g., travel party). in a similar vein, future studies could also consider the moderating effect exerted by other psycographic variables (e.g. personality, life style, etc.). references [1] bruwer, j.; 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[73] bruwer, j.; lesschaeve, i. wine tourists’ destination region brand image perception and antecedents: conceptualization of a winescape framework. j. travel tour. mark. 2012, 29, 611–628, doi: 10.1080/10548408.2012.719819. 124 giacomo del chiappa, juan carlos martín, concepcion román statistical annex table a1. estimation results. multinomial logit models. name variable description mnl1 mnl2 par var estimates t-test p-val estimates t-test p-val αasc1 asc1 alternative 1 specific constant -0.282 -16.8 0 -0.61 -20.76 0 αasc2 asc2 alternative 2 specific constant -0.541 -30.38 0 -0.859 -32.41 0 αasc3 asc3 alternative 3 specific constant -0.454 -25.79 0 -0.629 -28.13 0 λw w w=1 for worst choices (scale factor) 0 -0.625 -17.61 0 βd1 d1 to be able to taste the wines produced at wineries 1.9 33.99 0 2.44 32.32 0 βd2 d2 being able to visit wineries 1.99 35.72 0 2.47 33.85 0 ßd3 d3 the visiting hour of the wineries are long/extended 1.3 23.14 0 1.68 22.5 0 ßd4 d4 being able to buy the wines produced at the wineries 2 35.39 0 2.53 33.88 0 ßd5 d5 having wine specialists take care of you during visits 1.76 30.46 0 2.3 30.21 0 βd6 d6 the existence of specific gastronomic activities 1.09 19.98 0 1.43 19.28 0 ßd7 d7 the existence of a varied gastronomic offer 0.887 16.35 0 1.25 16.65 0 βd8 d8 the possibility of eating at the wineries 0.656 12.06 0 0.938 12.64 0 ßd9 d9 the existence of organised trips (lodging, visit, tasting, etc.) 0.872 16.3 0 1.12 15.46 0 ßd10 d10 the existence of specific lodging 0.532 9.77 0 0.729 9.53 0 βd11 d11 the existence of sports activities in the area -0.954 -16.47 0 -1.64 -15.46 0 βd12 d12 the appeal of the natural environment in the area 1.56 28.17 0 2.02 27.31 0 βd13 d13 the existence of organised wine tourism trips 0.736 13.62 0 1.02 13.49 0 βd14 d14 the area to be visited is famous for its wines 0.941 18.23 0 1.2 17.06 0 βd15 d15 the fame of the wine in the region 0.889 16.17 0 1.21 16.07 0 βd16 d16 the existence of well-defined wine routes in the region 0.774 14.56 0 0.974 13.25 0 βd17 d17 the climate of the area 1.11 20.97 0 1.36 19.62 0 βd18 d18 the existence of specific gastronomic activities 1.15 21.11 0 1.4 19.25 0 βd19 d19 the existence of a varied gastronomic offer 1.14 20.93 0 1.38 19 0 βd20 d20 the possibility of participating in cultural tourism in the area 0.919 17.37 0 1.18 15.99 0 βd21 d21 the existence of stores/open-air markets for agricultural products from the area 1.2 21.59 0 1.53 20.56 0 βd22 d22 the existence of stores/open-air markets for artisan products from the area 0.961 17.57 0 1.32 18.15 0 βd23 d23 the possibility of taking wine tasting courses 0.549 10.08 0 0.912 11.76 0 βd24 d24 being able to increase my knowledge of wine 1.05 19.21 0 1.45 19.24 0 βd25 d25 the possibility of participating in wine production activities 1.17 21.15 0 1.54 20.63 0 βd26 d26 meeting the winery owners 0.874 16.17 0 1.28 16.89 0 βd27 d27 the existence of activities for children 0.0634 1.17 0.24 0.0938 1.17 0.24 βd28 d28 the existence of wine museums or exhibitions 0.403 7.39 0 0.615 8.08 0 l*(0) -39057.763 -39057.763 l*(β) -35356.212 -35182.887 ρ2 0.095 0.099 adj. ρ2 0.094 0.098 num. obs. 31436 31436 125developing wine tourism experiences. a discrete choice analysis using best-worst scaling data table a2. estimation results. random parameter mixed logit model. parameter name variable name variable description rpl1 estimate t-test p-val confidence interval low up fixed parameters αasc1 asc1 alternative 1 specific constant 0.2682 10.84 0.00 0.22 0.32 αasc2 asc2 alternative 2 specific constant -0.1536 -5.82 0.00 -0.21 -0.10 αasc3 asc3 alternative 3 specific constant -0.2546 -9.57 0.00 -0.31 -0.20 βd1 d1 to be able to taste the wines produced at wineries 2.8895 34.97 0.00 2.73 3.05 ßd3 d3 the visiting hour of the wineries are long/extended 1.8950 24.50 0.00 1.74 2.05 βd6 d6 the existence of specific gastronomic activities 1.6941 23.58 0.00 1.55 1.83 ßd7 d7 the existence of a varied gastronomic offer 1.3537 19.47 0.00 1.22 1.49 βd8 d8 the possibility of eating at the wineries 0.9324 13.40 0.00 0.80 1.07 ßd9 d9 the existence of organised trips (lodging, visit, tasting, etc.) 1.1706 16.78 0.00 1.03 1.31 ßd10 d10 the existence of specific lodging 0.8166 12.03 0.00 0.68 0.95 βd11 d11 the existence of sports activities in the area -0.9244 -13.18 0.00 -1.06 -0.79 βd13 d13 the existence of organised wine tourism trips 0.9655 14.13 0.00 0.83 1.10 βd14 d14 the area to be visited is famous for its wines 1.0334 15.13 0.00 0.90 1.17 βd15 d15 the fame of the wine in the region 1.2778 17.68 0.00 1.14 1.42 βd16 d16 the existence of well-defined wine routes in the region 1.1350 16.57 0.00 1.00 1.27 βd18 d18 the existence of specific gastronomic activities 1.4453 20.15 0.00 1.30 1.59 βd19 d19 the existence of a varied gastronomic offer 1.4935 20.91 0.00 1.35 1.63 βd20 d20 the possibility of participating in cultural tourism in the area 1.3054 19.04 0.00 1.17 1.44 βd21 d21 the existence of stores/open-air markets for agricultural products from the area 1.4061 18.57 0.00 1.26 1.55 βd23 d23 the possibility of taking wine tasting courses 0.9129 13.25 0.00 0.78 1.05 βd24 d24 being able to increase my knowledge of wine 1.5851 22.00 0.00 1.44 1.73 βd25 d25 the possibility of participating in wine production activities 1.5594 21.53 0.00 1.42 1.70 βd26 d26 meeting the winery owners 1.2105 17.05 0.00 1.07 1.35 βd27 d27 the existence of activities for children 0.1024 1.52 0.13 -0.03 0.23 βd28 d28 the existence of wine museums or exhibitions 0.6111 8.79 0.00 0.47 0.75 random parameters (estimated mean) µd2 d2 being able to visit wineries 4.1943 11.12 0.00 3.45 4.93 µd4 d4 being able to buy the wines produced at the wineries 4.1684 16.04 0.00 3.66 4.68 µd5 d5 having wine specialists take care of you during visits 3.6615 9.95 0.00 2.94 4.38 µd12 d12 the appeal of the natural environment in the area 3.1261 14.37 0.00 2.70 3.55 µd17 d17 the climate of the area 2.3399 5.08 0.00 1.44 3.24 µd22 d22 the existence of stores/open-air markets for artisan products from the area 2.3287 6.42 0.00 1.62 3.04 random parameters (estimated standard deviation) σd2 d2 being able to visit wineries 2.5911 15.04 0.00 2.25 2.93 σd4 d4 being able to buy the wines produced at the wineries 2.1704 17.58 0.00 1.93 2.41 σd5 d5 having wine specialists take care of you during visits 1.9262 14.56 0.00 1.67 2.19 σd12 d12 the appeal of the natural environment in the area 2.0137 15.50 0.00 1.76 2.27 σd17 d17 the climate of the area 1.7108 15.40 0.00 1.49 1.93 σd22 d22 the existence of stores/open-air markets for artisan products from the area 1.4104 14.22 0.00 1.22 1.60 126 giacomo del chiappa, juan carlos martín, concepcion román parameter name variable name variable description rpl1 estimate t-test p-val confidence interval low up systematic heterogeneity in mean µd2*v2 d2*v2 being able to visit wineries * the possibility to visit wineries and to experience activities related to wine were sufficient elements for taking a trip to sardinia -0.2892 -3.56 0.00 -0.45 -0.13 µd2*v4 d2*v4 being able to visit wineries * gender 1.0052 4.08 0.00 0.52 1.49 µd2*v5 d2*v5 being able to visit wineries * age -0.2183 -2.88 0.00 -0.37 -0.07 µd4*v2 d4*v2 being able to buy the wines produced at the wineries * the possibility to visit wineries and to experience activities related to wine were sufficient elements for taking a trip to sardinia -0.3137 -3.55 0.00 -0.49 -0.14 µd4*v8 d4*v8 being able to buy the wines produced at the wineries * place of residency 0.4779 1.81 0.07 -0.04 1.00 µd5*v2 d5*v2 having wine specialists take care of you during visits * the possibility to visit wineries and to experience activities related to wine were sufficient elements for taking a trip to sardinia -0.2129 -2.38 0.02 -0.39 -0.04 µd5*v7 d5*v7 having wine specialists take care of you during visits * length of stay -0.1167 -1.08 0.28 -0.33 0.10 µd5*v8 d5*v8 having wine specialists take care of you during visits * place of residency -0.7163 -2.53 0.01 -1.27 -0.16 µd12*v2 d12*v2 the appeal of the natural environment in the area *the possibility to visit wineries and to experience activities related to wine were sufficient elements for taking a trip to sardinia -0.2664 -3.83 0.00 -0.40 -0.13 µd17*v1 d17*v1 the climate of the area * i am interested in wine and in the activities related to it -0.4665 -3.98 0.00 -0.70 -0.24 µd17*v2 d17*v2 the climate of the area * the possibility to visit wineries and to experience activities related to wine were sufficient elements for taking a trip to sardinia 0.3473 3.98 0.00 0.18 0.52 µd17*v3 d17*v3 the climate of the area * i frequently read magazines that are specialized in wines -0.2006 -2.03 0.04 -0.39 -0.01 µd17*v4 d17*v4 the climate of the area * gender 0.7373 3.38 0.00 0.31 1.16 µd17*v5 d17*v5 the climate of the area * age 0.1619 2.46 0.01 0.03 0.29 µd22*v1 d22*v1 the existence of stores/open-air markets for artisan products from the area * i am interested in wine and in the activities related to it -0.2050 -2.47 0.01 -0.37 -0.04 µd22*v2 d22*v2 the existence of stores/open-air markets for artisan products from the area * the possibility to visit wineries and to experience activities related to wine were sufficient elements for taking a trip to sardinia 0.1494 2.23 0.03 0.02 0.28 µd22*v4 d22*v4 the existence of stores/open-air markets for artisan products from the area * gender -0.5425 -2.94 0.00 -0.90 -0.18 µd22*v7 d22*v7 the existence of stores/open-air markets for artisan products from the area * length of stay -0.1490 -2.03 0.04 -0.29 -0.01 l*(0) -39057.763 l*(β) -32295.715 ρ2 0.173 adj. ρ2 0.172 num. obs. 31436 wine economics and policy 10(1): 3-21, 2021 firenze university press www.fupress.com/wep issn 2212-9774 (online) | issn 2213-3968 (print) | doi: 10.36253/wep-9101 wine economics and policy citation: giulia maesano, giuseppe di vita, gaetano chinnici, gioacchino pappalardo, mario d’amico (2021) what’s in organic wine consumer mind? a review on purchasing drivers of organic wines. wine economics and policy 10(1): 3-21. doi: 10.36253/wep-9101 copyright: © 2021 giulia maesano, giuseppe di vita, gaetano chinnici, gioacchino pappalardo, mario d’amico. this is an open access, peerreviewed article published by firenze university press (http://www.fupress. com/wep) and distributed under the terms of the creative commons attribution license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. data availability statement: all relevant data are within the paper and its supporting information fi les. competing interests: the author(s) declare(s) no confl ict of interest. what’s in organic wine consumer mind? a review on purchasing drivers of organic wines giulia maesano1, giuseppe di vita2,*, gaetano chinnici1, gioacchino pappalardo1, mario d’amico1 1 university of catania, italy 2 university of turin, italy e-mail: giuliamaesano@hotmail.it; giuseppe.divita@unito.it; chinnici@unict.it; mario. damico@unict.it *corresponding author abstract. consumer interest in organic wine is growing, but the eff ects of organic label, consumer quality perception and the support for the benefi ts claim of organic wine are not yet fully understood and at times doubtful. th e literature shows a very heterogeneous picture regarding consumer behaviour and preferences for organic wine. th is study seeks to understand the link between organic wine and consumer’ purchasing drivers. using a systematic literature review, the paper explores the characteristics of consumer of organic wine, the motivation on consumer behaviour and preferences for organic wine, as well as the sensory quality and the presence of additives when evaluating wine quality and in shaping consumers’ attitudes. th e results show how socio-economic and psychological characteristics of consumer as well as quality perception aff ect their behaviour for organic wine. little consensus on the benefi ts in terms of improved sensory quality of organic wine compared to conventional one. among sensory qualities, taste has been found to be both a key driver and barrier to organic wine consumption. based on literature studies, consumers have positive opinions toward organic wine, which is perceived as healthy and environmental friendly. however, despite the growing market interest in wine, scientifi c information about the organoleptic diff erences between conventional and organic remains scarce and the topic requires more in-depth analysis. understanding the profi le of consumer and the factors that infl uence consumer’ behaviour provide information to the organic wine industry. keywords: organic wine, consumer behaviour, taste, sensory quality, wine additive, sustainability, wtp. 1. introduction consumer demands for safer, better quality, and healthier foods has led to an increased demand for organic products [1]. th e belief that organic products provide benefi ts for health [2,3], environment [4,5,6] and the high quality standards, such as better taste, are positively related to the attitude towards organic wine [7,8,9]. however, the sup4 giulia maesano, giuseppe di vita, gaetano chinnici, gioacchino pappalardo, mario d’amico port for the benefits claim for organic wines is not yet fully understood and at times doubtful in the literature. studies comparing organic and conventional wine show that positive attitudes and buying intentions consumers have about organic food in general do not seem to extend to organic wine. interestingly, a study on wine consumption identified different consumer segments with preferences for organic food, but heterogeneous preferences for organic wine [9]. in line of this, in the survey of janssen et al. [10] a quarter of the organic food consumers declared to not buy organic wine and may willing to buy more organic wine if their favourite type and variety of conventional wine would be available in organic production at similar quality and price levels [10]. the organic label on wine has been associated with a lower quality product, which is the reason why consumers tend to prefer organic wine to the conventional equivalents at lower prices [11]. olsen et al. [12] provide possible explanations for consumers’ resistance to purchasing organic wine showing that wine is primarily associated with sensory quality, which is the main feature underlying wine consumption [13]. nowadays, even if there is the image of organic wines has improved, an important obstacle to its consumption is still the bad reputation linked to the wine taste [13,14]. from producer’s point of view, because of the lack of clarity on the value added by organic method production and relative label, some wineries currently adopt organic practices without being certified. according to delmas and grant [14] some american organically wine-makers do not use organic label on the bottle or become certified but do not provide the information on their bottle label. the reason could be that most of these wineries think that there is a negative image linked to lower sensory quality, associated with organic wine. also in australian market the organic attribute receives a low value by the so-called “average australian wine consumer” not willing to pay premiums for it [15,16]. australians consumers do not value organic products in general, more than conventional ones and are not willing to pay more for sustainability features [17]. despite the relatively low weight of organic wine in the overall wine market, many consumer studies identified the potential for increasing organic wine purchases [18]. in light of contrasting empirical findings on consumer perceptions of organic wine, there is an on-going debate about growth potential of organic wine. as a consequence, by examining the existing literature on preference’s and consumers’ behaviour that characterize the organic wine demand, we investigate the role that sociodemographic characteristics, motivations, beliefs, sensory features and wine additives play in directing consumer choices towards organic wines. the objectives of the study therefore are: (1) to identify the socio-demographic characteristics of organic wine consumers trying to detect their profile; (2) to understand the drivers and motivations on consumer behaviour and preferences for organic wine; and (3) to determine consumer perception when evaluating sensory quality of organic wine and in shaping consumers’ attitudes. this study would contribute to further understanding of wine consumers in relation to their preferences and perception of organic wine. the aim of the paper is to generate a set of findings regarding consumer behaviour towards organic wines in order to provide a brief summary of the current literature on this topic. the paper explores the characteristics of consumer of organic wine, the motivation on consumer behaviour and preferences for organic wine, as well as the sensory quality and the presence of additives when evaluating wine quality and in shaping consumers’ attitudes in order to solve the gap in the economic literature. understanding the profile of consumers and the factors that influence consumer’ behaviour provide information to the organic wine industry. 2. methodology the review was carried out in order to select studies and to summarize the literature about consumer preferences, purchasing behaviour, willingness to pay and quality perception towards organic wine. the review followed a detailed and replicable protocol [19]. a flow chart is provided in figure 1. the review was carried out following the preferred reporting items for systematic review and meta-analysis (prisma) [20,21,22]. data were collected using the main scientific/economic electronic research databases. the literature searching was conducted in the on-line scientific database: google scholar, web of science, scopus, and science direct in order to include the relevant literature [20]. the search was carried out from april to june 2020, and it included studies that were conducted after 2004, which was considered to be a suitable range for including the recent trends on the topic under investigation and to avoid outdate articles. we finished the search on the 3th of june 2020. the keywords used in this searching method, combined with the word “wine” and “organic”, were the following: “preferences”, “perception”, “consumers”, “con5what’s in organic wine consumer mind? a review on purchasing drivers of organic wines sumption”, “attitudes”, “behaviour”, “willingness to pay”, “motivation”, “choices”, “attributes”, “label” “taste”. the first keywords were used to limit the search to studies that consider organic wine, while the second group to identify the studies based on consumer behaviour analysis and preferences. only research papers written in english were included in the database in order to delimit the literature characterized by high visibility within the scientific community. because of the problems of availability and readability for some related literature, it is hard to include all studies in this field. figure 1 shows a flowchart of the database searches and the exclusion criteria followed. the search initially produced a total of 5102 records. the screening process for the selection of relevant literature was conducted in two stages: screening and eligibility [21,22]. in the screening phase, the selected papers were examined and the number decreased to 3218 by applying the primary exclusion criteria. only articles written in figure 1. flow chart diagram visualizing the database literature searching procedure. the exclusion criteria are indicated. source: prepared by authors for use in this investigation. table 1. attributes related to organic wine chosen for the review. variable reference consumer behaviour and preferences chinnici et al. [23]; mceachern and mcclean [24]; fotopoulos et al. [25]; loureiro [26]; chang and zepeda [27]; poveda et al. [28]; krystallis et al. [29]; olsen et al. [12]; bazoche et al. [30]; bernabeu et al. [31]; remaud et al. [15]; stolz and schmid [13]; barber et al. [32], forbes et al. [33]; zepeda and deal [34]; barber et al. [35]; brugarolas et al. [2]; mueller and remaud [36]; siriex and remaud [16]; chiodo et al. [37]; mann et al. [3]; olsen et al. [38]; barber and taylor [39]; corsi and strøm [40]; loose and lockshin [41]; loose and remaud [42]; pagliarini et al. [43]; vecchio [44]; ay et al. [45]; costanigro et al. [46]; pomarici and vecchio [47]; rahman et al. [48]; wiedmann et al. [7]; bazoche et al. [49]; kim and bonn [50]; ogbeide [51]; rojas-méndez, et al. [52]; saltman, et al. [53]; van tonder and mulder [54]; bonn et al. [4]; d’amico et al. [5]; delmas et al. [55]; pomarici et al. [56]; sellers [57]; sogari et al. [8]; abraben et al. [58]; amato et al. [59]; seralini and douzelet [60]; deneulin and dupraz [61]; espinoza et al. [62]; pomarici et al. [63]; sarabia-andreu and sarabia-sánchez [64]; schäufele et al. [9]; capitello and sirieix [65]; di vita et al. [66]; dominici et al. [67]; gassler et al. [68]; mauracher et al. [69]; rahmani et al. [70]; séralini, et al. [71]; streletskaya et al. [72]; janssen et al. [10]; jorge et al. [73]; lim et al. [74]; sohn, et al. [75]; szolnok, et al. [76]; taghikhah et al. [77]. purchasing motivation chinnici et al. [23]; mceachern and mcclean [24]; fotopoulos et al. [25]; chang and zepeda [27]; poveda et al. [28]; olsen et al. [12]; bazoche et al. [30]; bernabeu et al. [31]; stolz and schmid [13]; barber et al. [32]; forbes et al. [33]; zepeda and deal [34]; barber et al. [35]; brugarolas et al. [2]; siriex and remaud [16]; mann et al. [3]; olsen et al. [38]; barber and taylor [39]; rahman et al. [48]; wiedmann et al. [7]; bazoche et al. [49]; kim and bonn [50]; rojas-méndez et al. [52]; bonn et al. [4]; d’amico et al. [5]; pomarici et al. [56]; sogari et al. [8]; pomarici et al. [63]; schäufele et al. [9]; capitello and sirieix [65]; di vita et al. [66]; dominici et al. [67]; gassler et al. [68]; rahmani et al. [70]; janssen et al. [10]; jorge, et al. [73]. sensory quality perception loureiro [26]; stolz and schmid [13]; forbes et al. [33]; siriex and remaud [16]; mann et al. [3]; loose and lockshin [41]; pagliarini et al. [43]; delmas and grant [14]; rahman et al. [48]; wiedmann et al. [7]; garaguso and nardini [78]; kim and bonn [50]; ogbeide [51]; delmas et al. [55]; abraben et al. [58]; seralini and douzelet [60]; espinoza et al. [62]; gassler et al. [68]; séralini, et al. [71]. willingness to pay deneulin and dupraz [61]; loureiro [26]; poveda et al. [28]; krystallis et al. [29]; bazoche et al. [30]; remaud et al. [15]; forbes et al. [33]; barber et al. [35]; brugarolas et al. [2]; mann et al. [3]; olsen et al. [38]; corsi and strøm [40]; loose and lockshin [41]; loose and remaud [42]; pagliarini et al. [43]; vecchio [44]; ay et al. [45]; costanigro et al. [46]; pomarici and vecchio [47]; wiedmann et al. [7]; ogbeide [51]; d’amico et al. [5]; pomarici et al. [56]; sellers [57]; sogari et al. [8]; abraben et al. [58]; amato et al. [59]; espinoza et al. [62]; pomarici et al. [63]; schäufele et al. [9]; di vita et al. [66]; gassler et al. [68]; mauracher et al. [69]; rahmani et al. [70]; streletskaya et al. [72]; jorge et al. [73]; lim et al. [74]. source: prepared by authors for use in this investigation. 6 giulia maesano, giuseppe di vita, gaetano chinnici, gioacchino pappalardo, mario d’amico english were included in this study [21]. duplicates from different databases were excluded at this stage. in the eligibility phase, articles were selected based on information in the title and then in the abstract [21,22]. the examination of the title and abstract led to the elimination of several articles that were not focused on consumer behaviour or not focused on consumer behaviour in relation to organic wine. in this stage, the number of papers was reduced to 325. subsequently, in the inclusion phase, each paper was further reviewed based on the information contained in the full text in order to decide whether each study meets the eligibility criteria for the purpose of this review [21]. finally, after excluding irrelevant articles based on their objectives, a sample of 72 articles was selected to respond to our research question in the categorization and analysis stage. 2.1. overview of selected studies the final set of articles was divided in four sections, according to the core-investigated topic (table 1): – consumer behaviour and preferences (n = 67) – purchasing motivation (n = 36) – willingness to pay (n = 37) – studies on organic wine sensory quality (n = 19). within this section, two sub-sections were found with articles that dealt specifically with taste and sensory quality perception and additive wine perception. a total number of 72 articles were selected as suitable for the literature review. several articles investigated more than one topic. therefore, the sum of the figures is greater than 72. figure 2 describes the temporal distribution per year of the reviewed articles from 2005 to 2020. although the total number of articles was quite limited, there was an increasing trend of papers published in the latest years. this attests the growing attention toward the topic under investigation in this review. nevertheless, the relative small number of articles demonstrates the need for further research on specific issues that will hereby be presented. the studies analyzed in this review were carried out worldwide. figure 3 shows an overview of the countries where the selected studies were carried out: 48 studies were from in european countries, including italy (18), france (8), germany (6), spain (8), switzerland (4), the united kingdom (2) and greece (2); 16 studies were conducted in the usa; and the rest were from canada (2) and south africa (1). several articles investigated more than one country. therefore, the sum of the figures is greater than 72. figure 2. numbers of articles per year (2005–2020). source: prepared by authors for use in this investigation. figure 3. area where the selected studies were conducted. source: prepared by authors for use in this investigation. 7what’s in organic wine consumer mind? a review on purchasing drivers of organic wines 3. results 3.1. socio-demographic characteristics gender as occurred for organic products in general, previous research shows also for wine the relevance of gender in buying organic, highlighting that women are more organic wine-sensitive than man [3]. in addition, also a high wtp may be due to a gender status: women tend to pay more attention to such products compared to men [36,35,26,3,44,47,57]. controversy, d’amico et al. [5] and another study carried out by di vita et al. [66] found that italian women are those less willing to spend a large amount of money for organic wine. age there are lots of early studies on the age influence consumer’s organic attitude and behaviour by different researchers. most of them are likely to support the statement that younger individuals are likely to be more sensitive to environmental issues [31,8,69]. however, despite being interested in eco-friendly practices might not have a financial budget to buy organic products, which are considered more expensive [3,8]. conversely, other research shows that being older significantly increases the probability of buying organic wines and a high wtp [44,47,57,63]. education level of education is another demographic variable positively correlating with organic attitudes. the positive relationship has been identified by large amount of previous studies [79,80]. based on studies carried out by diamoantopoulos et al. [81], consumers with high level of education are expected to have much clearer and full perspective understanding on ecological issues. in addition, a high level of information regarding wine in general, but also specific claim for the sustainability of the wine, led consumers to prefer organic wine [3]. income income is another social-demographic variable affecting organic attitudes and behaviours described by straughan and roberts [82]. they pointed a common belief: the higher income level the person has, the more he/she is likely to support organic food purchasing. besides, as one of social-demographic factors, income is usually taken as a predictor of sustainable behaviour [82]. schäufele and hamm [9] demonstrated that the german attitude consumers buying organic wines are in line with their real behaviour. however, the higher price of these products is an obstacle for some low-income consumer segments. according to these findings, high wtp may be due to a higher household income [26,56,57,9]. however, d’amico et al. [5] did not found this correlation. 3.2. value and belief environmental concerns consumers with an environmental orientation show a better willingness to buy organic wine [28,32,39] and are more likely to pay higher price premium [35,38,5,8]. consumers who had the highest expenditure share for organic wine showed strong pro-environmental attitudes and a preference for sustainable products [18]. the analysis conducted by pomarici et al. [56] on italian wine consumers revealed an interest in ecofriendly wine and the demand to preserve natural resources and reduce water consumption when producing wine. in addition, consumers with a higher interest in environmentally friendly wines spent more for wines consumed at home and the consumer segment with a low involvement in environmentally friendly wines was mainly focused on the price when it comes to wine choice [56]. a study carried out by schäufele and hamm [18] indicated that ethica lly concerned wine consumers accounted for 35% of all german wine-purchasing households. however, only 21% showed a relatively high level of action when it came to environmentally conscious wine purchase behaviour. the rest of the ethically concerned wine consumers were indeed sustainably oriented, but did not convert these attitudes into actual purchase behaviour, probably because of the so-called “price barrier”. controversy, in some studies, environmental concerns do not appear to be good predictors of attitude toward organic wine [52] and consumers’ perception of environmental friendliness had neither an effect on the purchase of organic wine [3,50] nor on the consumption of organic wine [3], nor on the preference for organic wine [48]. the authors explain these results with an absence of trust in the organic label or a lack of information regarding organic certification. that’s because wine follows different trends and mechanism compared to other organic food products. studies show that some consumers have a low involvement and interest in sustainability issues and very low wtp for eco wine. they consider price the only important attribute for their purchasing decision [31] and do not consider an eco-label as a strong element of differentiation and they identify these wines with a low overall quality [26]. in a study conducted by bazoche 8 giulia maesano, giuseppe di vita, gaetano chinnici, gioacchino pappalardo, mario d’amico et al. [30] it seems that some consumers are not willing to pay any price premium for environmental benefit of sustainable wine even when they are informed about the possible negative effects of pesticides used in the winegrowing process and think that sustainability issues do not concern the wine industry. healthy concern studies demonstrate that organic grapevines suffer more biotic stresses than conventional one and therefore produce higher amounts of secondary metabolites, such as phenolic compounds [83]. higher amounts of phenolic compounds or other health-related compounds in organic wine comply with consumer perception that these products are healthier. nevertheless, such trends are still not fully demonstrated [84,85,83]. according to literature [32,52], organic wines are perceived to be healthier and with lower amounts of pesticide than conventional wine. many studies in the literature compare the health properties of organic and conventional wine [85,86,87]. however, these studies showed little or no significant differences between organic and conventional products. positive health effects are strong determining factor in organic wine preferences [7,4]. perceiving organic wine as healthier than other wines was the best predictor for swiss consumers’ choice of organic wine [3]. even for greek organic food buyers, the organic label had a health-related aspect and was found very important in purchasing wine [25]. moreover, consumers with a healthy life style are willing to pay a higher price for an organic wine [28]. in studies performed by mceachern and mcclean [24], stolz and schmid [13], and later by sirieix and remaud [16], organic wine was perceived to be healthier than conventional wine, mainly due to the absence of synthetic pesticides and additives in the winemaking process. however, the authors found that organic wines still face some problems in terms of sensory perception. jorge et al. [73] studied the role of consumer tolerance of ambiguity in explaining organic wine purchase behaviour, showing that the positive influence of consumers’ healthy attitude on their willingness to pay for organic wine is weak in individuals less tolerant of ambiguity. evidence shows that positive consumer attitudes are not always reflected in their willingness to pay for organic wine. geographical and local origin geographical origin has been indicated as important purchasing criteria in wine consumption [5] and its role has discussed by several authors of consumer studies showing that origin attribute was more important purchase criteria than production method [31,37,3,10]. the study carried out by mann, et al. [3] on swiss consumers revealed that the country of origin attribute was more important than the organic attribute in wine chose [3]. also for ‘protected designation of origin’ (pdo) label was considered more important than production method (organic or conventional) since it was the most important attribute in wine choice. in addition, consumers who appreciate organic wine assign greater importance to the local claims [88]. interestingly, an important finding that came from the survey carried out by remaud et al. [15] was the strong link between the region of origin and organic attributes in wine preferences. however, authors underlying that consumer do not always associate the regional product with the organic process [15]. the literature is full of studies that have investigated the role of geographical indication such as pdo and organic label on consumer’s choice, showing that pdo certification prevails on the organic claim [89,90,91]. the role of geographical indications certification over organic certification has been also detected for organic wines [92]. with regard to locally attribute, the organic wine consumption is different from the dynamics related to the locally produced food [3]. locally produced wines have received particular attention by scholars [5,93], but the studies that analysed the connection between local and organic wines are still limited. 3.3. attitudes habits habits play a major role in food purchasing decisions. they are affected by contextual variables and the formation of attitudes and thus conciliate between behaviour and attitudes/context [34]. the study of capitello et al. [65] found that consumers involved with wine demonstrate a greater ability to evaluate product-attribute associations for sustainable wines than do ethically minded consumers who are not involved with wine. according to the result of studies carried out by barber et al. [32] and gassler et al. [68] organic wine consumer generally had a higher intention to buy organic food, in general. being responsible for food shopping, wine purchasing and consumption frequency, and interest in sustainable food shopping may increase the purchase probability for social, environmental or ethical labelled wine as well as the willingness to pay a price premium [44,56]. vecchio [44] found wine consumption frequency and caring about environmental sustainability in wine 9what’s in organic wine consumer mind? a review on purchasing drivers of organic wines shopping to be significant factors influencing the wtp premiums for wines with an environmental and an ethical feature. additionally, pomarici et al. [56] showed that the consumer segment, which was highly interested in environmentally friendly wines, was characterised by individuals who drink wine more frequently. in general, environmentally oriented consumers spend more for wines consumed at home, and their wine choices are more influenced by grape variety [56]. mauracher et al. [69] found that consumers characterized by a low consumption frequency have a higher wtp for organic wine. organic wine is regularly being purchased by only 3% of the german wine drinkers, merely 4% of consumers purchase organic wine at least once a month, 25% at least once a year and approximately 75% do not buy organic wine at all [76]. based on these results, they assumed that a certain share of the estimated total consumption of approximately 1 million hectolitres organic wines in germany is being purchased unintentionally. this result underlines the outcomes of corsi and strøm [40] who stated that the attribute organic wine is not the key driver for buying wine. external environment contextual factors are external conditions, which can be constraints or incentives for the purchase of wine with organic characteristics. the study of sarabia-andreu and sarabia-sánchez [64] is the first to report on the potential influence of implicit and explicit attitudes on organic wine purchase intention. it has been found that only explicit attitudes significantly influence organic wine purchase intention. in contrast, implicit attitudes, more strongly connected with non-conscious behaviour drivers, are not significant predictors of this intention. moreover, only attitudes towards intrinsic attributes and arousal feelings significantly explain purchase intention. in 2020 for the first time, the study of sohn, et al. [75], provided insights into the impact of the productunrelated retail atmospherics on organic wine purchase intentions, discovering the psychological mechanisms between social cues and organic wine purchase intentions, and showing that consumers seem to integrate the mere presence of social cues in their virtual shopping environment to form these purchase intentions. trust trust was important in efforts to enhance perceptions of sustainability practices of retailers and the impact of organic wine’s health-related benefits [4]. bonn et al. [4] revealed that trust in either the producer or retailer may completely reverse the impact of price on the purchase of organic wine from negative to positive. this points to the importance of consumers’ attitudes when looking at the influence of context on purchase behaviour. trust in the winery was found, besides taste, the main factor influencing consumers’ behavioural intentions to purchase organic wine [50]. this suggests that consumers are more likely to purchase organic wine if they trust the retailer selling the product. curiosity for the first time, chinnici et al. [23] in a study on consumption of organic food highlighted consumer’ curiosity as driver affecting consumers preferences towards organic wine. this result was confirmed by tsourgiannis, et al. [94], whom founded curiosity as one of the main factors in organic wine purchase, and later by d’amico et al. [5] in a study on consumer preferences for organic wines without sulphites that identified curiosity as relevant buying motivation. di vita et al. [66] also found that consumers attached greater importance to personal motivations such as curiosity. 3.4. information and knowledge information and awareness regarding the influence of information, the studies of wiedmann et al. [7] and ay et al. [45] provided empirical evidence that a higher level of information was related to a more positive perception or preference for organic wine. different results were reported by bazoche et al. [30]: whereby information on the harmful consequences of pesticide use did not have a significant effect on consumers’ wtp for organic and environmentally friendly wine. however, adding visual information (labels, no tasting) compared to blind tasting significantly increased consumers’ wtp. in this regard, van tonder and mulder [54] revealed the importance of images when buying organic wine in a retail environment because organic labels should contain ‘natural’ images. espinoza et al. [62] compared french preferences for wines from resistant varieties, certified organic wine, and conventional wine. they showed that providing consumers with environmental and health information improve strongly consumers’ preferences and wtp for organic wine, while it penalises those for conventional wine. streletskaya et al [72] investigated consumer demand when information about production standards is provided. they found that while organic labels carry a willing10 giulia maesano, giuseppe di vita, gaetano chinnici, gioacchino pappalardo, mario d’amico ness to pay price premium, information about certification standards and conventional wine making practices could reduce wtp for all wines. providing information about organic certification standards reduced consumer wtp for both absence labelled and conventional wine categories. this effect largely disappears for organic wine, but not wine made with organic grapes, when information about conventional winemaking practices is also provided. knowledge and expert rating research has shown that knowledge, in general, is directly related to consumer wine purchase behaviours determining that what consumers think they know about a subject is a better predictor than what they actually knew [32]. the level of knowledge about organic products was directly related to the acceptance of organic wine for spanish consumers [2] and the probability of paying a premium price for organic wine with no added sulphites for italian consumers [5]. in the study of kim and bonn [50], consumers declaring a greater knowledge of organic wine stated a significantly higher willingness to purchase and to recommend organic wines. on the other hand, people with a higher overall wine knowledge only had a higher behavioural intention to recommend organic wine. purchase intention and label awareness correlated significantly [42] and knowledge of the environmental label increased italian consumers’ wtp premiums for the environmental labelled wine [44]. sellers [57] showed that spanish consumers with a higher level of knowledge about sustainable products had higher wtp values, while the level of knowledge about wine culture had a negative impact on the willingness-to-pay a price premium. however, pomarici et al. [56] showed that the consumer segment found to be highly interested in environmentally friendly wines was characterised by individuals who considered themselves more experienced regarding wine, paid more attention to the information on the back-label and were more affected by grape variety when choosing wine. 3.5. sensory properties of organic wine taste taste is one of the most important key factors in assessing wine quality both for organic and conventional wines [48]. however, its role in the organic wine consumer perception is quite controversial. in recent study, rahmani et al. [70] showed that wine taste, evoked emotions and actual liking significantly influenced consumers’ preferences, especially in the case of organic and selected vintage organic wine. the taste attribute of organic wine received some criticism and constitutes a perceived risk [51] and a purchase barrier [18]. some consumers express disappointment as they think that organic wine tastes worse than conventional wines, mainly due to too much acidity; and only very few consumers indicated that they appreciate the taste of organic wine [13]. in a survey on us consumers, the taste alone has always influenced the participant’s preference for wines. after tasting wine, the attribute organic had no further influence their purchase decision [48]. in the study of rojas-méndez, et al. [52] on canadian consumers, organic wine was not consumed by wine drinkers since they do not associate it with good taste or positive past experience. controversy, other studies showed that consumer detected advantages in terms of taste of organic wine [3]. in the recent study carried out by lim et al. [74] the preference for organic wine was correlates positively with the perception of quality implied by the eco labels. kim and bonn [50] found that organic wines have a significantly better taste compared to the conventional ones. furthermore, wiedmann et al. [7] showed that appearance and taste of organic wine was judged to be better than conventional wine, regardless of their knowledge and attitude towards organic products in general. seralini and douzelet [60] found that the tastes of organic wines were judged by consumers to be less artificial and to last longer. pagliarini et al. [43] found that consumers would be willing to pay more for organically produced wines than traditional ones those. however, consumers were not able to distinguish between organic and conventional wines in a blind tasting. this result indicates that the willingness to pay a premium price for organic wine may be due to consumers’ attitudes and involvement in sustainability issues. also new zealand consumers believed sustainable wines to be of equal or better quality than conventional wines and were prepared to pay a higher price for these wines [33]. gassler et al. [68] studied taste and quality perceptions of german consumers and their wtp for organic wine with a blind tasting and found that organic wine was perceived as tastier and of higher quality and value. delmas and gergaud [55] showed that eco-labelled and organic wines receive better ratings by wine critics. when eco-labelled and regular wines were tasted, without respecting similar varieties, soils, and years, in another large study using 74,148 bottles from 3,842 californian vineyards, the organic wines were also significantly pre11what’s in organic wine consumer mind? a review on purchasing drivers of organic wines ferred. according with their results, eco certification is associated with a statistically significant increase in wine quality rating. being eco certified increases the scaled score of the wine by 4.1 points on average [55]. this result was confirmed in a study analysing french wines in a blinded manner, but using this time similar varieties, soils, and years, for two neighbour vineyards, one being sprayed with synthetic pesticides, the other not [60]. controlling for a variety of wine attributes, the analysis carried out by abraben et al [58] finds that wines produced with organic practices, but not certified as organic and wines certified, but not labelled as organic receive a higher price compared to conventional wine, for wines with low quality ratings. according with their results, as the wine’s quality rating increases, the positive effects of organic practices and certification on price decrease, and for wine with higher quality ratings, organic practices and certification is associated with lower prices relative to otherwise comparable conventional wine. aroma regarding to the aroma attribute, it has been considered as relatively unimportant [25] or significant only for specific target of organic wine consumers. therefore, this attribute has been generally taken into consideration jointly with other sensory features [25]. controversy, few studies comparing sensory and hedonic qualities of organic and conventional wine highlighted differences in sensory perception among consumers [43]. however, although the health benefits of wine consumption are published in medical studies, the research has not made the link of added personal benefits due to environmental practices. for example, the study carried out by garaguso and nardini [78] showed that organic red wines produced without addition of sulphites are comparable to conventional red wines with regard to the total polyphenol and flavonoid content, the phenolic profile, and the antioxidant activity. interestingly, consumers take into account also the processing methods for the sensory qualities of wine, while production methods are considered to have a lower impact on the taste. in purchasing decision, the major role is played by processing method, and look at production of wine merely as a purchasing criterion of minor importance [13]. dominici et al. [67] investigated the impact of the hand-harvested method on consumer wine preferences. according to their results, consumers prefer wine produced with hand-harvested grapes, but there is not interaction between organic and hand-harvested attributes in consumer preferences. colour as regards the role of colour attribute of wine, it has been extensively investigated in consumer studies on conventional wines [95], but its role is still limited in the literature of organic wine consumer. however, it has been observed that colour attribute is not considered a relevant attribute in organic wine consumption [3]. the survey carried out on swiss consumers [3] revealed that the organic attribute was more important than wine colour, but, at the same time, less important than the price and the country of origin. the study of šottníková et al. [96] deals with the colour and sensory evaluation of conventional and organic wines, showing that colour evaluation and sensory evaluation did not showed any noticeable differences between conventional organic and wines. phenolic profiles of organic wine according to a study by mulero et al. [85], wines produced from organic and conventional grapes harvested in the same location and fermented using a similar protocol showed difference in their respective phenolic profiles. cozzolino et al. [84] compared the mid-infrared spectra of both commercial organic wines and nonorganic wines and found that organic and conventional wines do result in different phenolic profiles [84]. martin and rasmussen [83] used geographically paired monovarietal wines produced in california, using the same winemaking protocol. in these wines, the concentration of total phenolic compounds was significantly higher in organic pinot noir wines compared to conventional ones, whereas conventional syrah wines showed higher levels of total phenolic compared to organic ones, suggesting that grape varieties may react differently to organic production methods. however, wine sensory analysis showed no noticeable difference in the visual aspect, the aroma intensity and quality, nor the taste of organic and conventional wines [83]. 3.6. the role of additives in organic wine perception sulphite taste perception organic wines contain less preservative such as sulphur dioxide, a natural substance used in both conventional and organic processes for inhibiting unwanted yeasts and bacteria [59]. as described by provost at al. [97], besides being free of synthetic pesticides, many organic wines contain lower amounts of sulphur dioxide than conventional wines [98], which may constitute a commercial advantage [46]. garaguso and nardini [78] examined total polyphenols and flavonoids content, phenolic profile and anti12 giulia maesano, giuseppe di vita, gaetano chinnici, gioacchino pappalardo, mario d’amico oxidant activity of organic red wines produced without sulphur dioxide/sulphites addition in comparison to conventional red wines. polyphenols and flavonoids content were slightly higher in organic wines in respect to conventional wines, however differences did not reach statistical significance. the phenolic acids profile was quite similar in both groups of wines. antioxidant activity was higher in organic wines compared to conventional wines, although differences were not statistically significant. their results indicate that organic red wines produced without sulphites addition are similar to conventional red wines with regard to the total polyphenols and flavonoids content, the phenolic profile and the antioxidant activity. the use of sulphites is perceived as the least natural feature [99] and has attracted attention among scholars, since it is perceived as risky additive and unhealthy by consumers [46]. with this regard, there are evidences that consumers are willing to pay higher price for wines without sulphites, confirming the negative perception of this additive [46,5,59]. nowadays, the use of sulphites is widespread in winemaking; thus, consumers may be more familiar with the attribute from wine labels compared to other attributes about additives, processing aids and technologies. d’amico et al. [5] found a higher willingness to pay for wines without added sulphites, but inadequate information discourages consumers from paying a price premium for wine without sulphites in italy [5]. in the study of capitello et al. [65] on italian and french consumers, wine with no added sulphites was perceived differently from the other types of sustainable wines. in line with these results, italian and spanish consumers were willing to trade conventional wine with wine without sulphites, and more than 80% of the consumers were willing to pay additional premium prices [60]. as found in the review carried out by deneulin and dupraz [61], even for swiss consumers the sensory quality is considered the main value for wine. they are also willing to pay more for wines with the label “no-added sulphites” or “organic and biodynamic”. the content of copper in organic wine copper is the major chemical component authorized for treatments of organic agriculture. most copper-containing agricultural inputs are fungicides [60]. the copper concentration may influence the taste of wine, and this could explain why wines with less copper may be preferred to wines with synthetic pesticides. research confirm that copper pollution has been found to affect the phenolic compound content, colour, and antioxidant activity of wine, which may change the taste [100]. séralini et al. [72] have studied the levels, taste, and toxicity of copper in wines compared the use of copper in chemically treated and organic vineyards. they asked to describe the tastes detected, founding that tasters were able to detect the taste of copper in a wine spiked in a blinded manner to a level of 0.15 mg/l. when added at 1 or 1.5 mg/l it was found to clearly modify the taste of wine. tasters were asked also to describe the nose or mouth detection in primary and preliminary testing at the minimal level of copper that was found in organic wines. according with results, copper breaks the complexity of nose and mouth sensations, especially for red wine. the description was easier for white wine: a brisk nose and a slightly acidic taste. around 1 mg/l, it was always identified in comparison with the same natural wine that was not spiked and negatively disrupted the taste for tasters. provenzano et al. [101] determined the copper content in organic grapes and wines in relation to the total and available copper content in soil. it was shown that if the use of copper-containing products in the vineyard complies with the eu rules for organic viticulture. the level of copper in organic wines ranged from 0.1-0.4 mg/l, within the legal limits established for safeguarding the health of consumers. it has been shown [102] that from 10 mg/l it inhibits fermentation, as do agrochemicals residues, but often this is compensated for in treated wines by adding significant amounts of modified yeasts. this is a common practice in wines when fungicides are applied in the vineyard and detected as major pesticides in non-organic wines [60], since most natural yeasts are killed by fungicides. briefly, more copper and cupric residues are found in non-organic wines than in organic ones, due to less chemical applications in the latter case, and more time between the last application and the harvest. 4. discussion the results obtained from literature studies on consumer perceptions of organic wine are at times doubtful and cannot automatically be translated or applied to identify a homogenous class of organic wine consumers. the multidisciplinary study of consumer’ science has highlighted that several factors can motivate consumer’ behaviour towards a more sustainable consumption: among these are relevant cognitive aspects, such as values, 13what’s in organic wine consumer mind? a review on purchasing drivers of organic wines belief, attitudes and motivation – but also external factors – such as incentives, norms and public policies [103]. as has been shown by the many studies already carried out, the profile of organic consumers is highly variable, since its behaviour is strongly influenced by sociodemographics and psychological characteristics of consumer as well as quality perception of organic wine. the results of the literature research categorise six different variables influencing the purchase of organic wine: (1) consumer’ socio-demographics characteristics, (2) value and belief, (3) attitude, (4) information and knowledge, (5) sensory properties of organic wine, and (6) the role of additives in organic wine perception. intrinsic characteristics of consumer, such as sociodemographic characteristics influence consumer preferences for organic wine [18] and have resulted useful to identify an organic consumer ‘profile. the stereotypical organic wine consumer is female and with a comparatively high level of education and income. we found also that gender and income have a positive correlation with the willingness to pay an additional price for organic wine. our study confirms the high relevance of other different factors that shape behaviour towards organic wine consumption. among these, value and belief towards healthy and the environment concerns are positively associated with consumer behaviour toward organic wine. most wine consumers, in fact, purchase organic wine for its perceived health and environmental benefits [3]. there is a linkage between environmental values and the purchase of organic wines [38]. environmental consciousness of consumers was identified as one of the most important drivers in their buying behaviour towards organic products [27,34,33,4]. health-related aspect was found as good predictor in purchasing wine [25,3] and consumers with a healthy life style are willing to pay a higher price for an organic wine [28]. also values and beliefs regarding geographical and local origin are often motivators for the purchase of organic wine [3]. with regard to attitude, habits play a major role in food purchasing decisions. they are affected by contextual variables and the formation of attitudes and thus conciliate between behaviour and attitudes/context [34]. also curiosity [66] and trust [4] represents important drivers for promoting the consumption of wine produced from organic grapes. studies provided empirical evidence that also a higher level of information and knowledge were related to a more positive perception and preference for organic wine [7,45] determining that what consumers think they know about a subject is a better predictor than what they actually knew [32]. in wine consumption, hedonic aspects have a higher impact on the purchase behaviour than the utilitarian aspect [104]. despite the importance of extrinsic cues for determining the quality and influencing the purchasing decision, consumers are mainly driven by sensory qualities of wine [13]. considering the hedonic features of wine [105], the organic attribute is subordinate to sensory characteristics, which were found very influential in determining wine purchasing decisions [106]. a concern among consumers is that organic wine might require a trade-off between sensory quality and organic features [107]. while consumers wish to protect the environment, they are not willing to do this choosing a product of inferior sensory quality [108]. in other words, in order to achieve low environmental impact, green products would have not to be of lower sensory quality [14]. among sensory qualities, taste has been found an important determinant influencing consumers’ behavioural intentions to purchase organic wine [43,7,50]. taste constitutes both a key driver and barrier to wine consumption [107] and one of the major perceived risks, as outlined by mitchell and greatorex [109]. however, in general, wine consumers do not have an adequate level of sensory perception expertise [32], and they are not always able to identify sensory difference between organic and conventional wines [43]. several studies focused on the role of sensory attributes in consumer behaviour for conventional wines [110,111,95]. but the number of studies focused on sensory attributes for organic wines is still limited [3,43,7]. for these reasons, the role of sensory attributes in organic wine consumption is not well defined or at time doubtful and could be deeply analysed in future researches. a segment of research dealing with organic wine consumption has been addressed to investigate the role of additives in organic wines [13]. outcomes also revealed the prominent role in the absence of sulphites. saltman, et al. [53] have found that consumers would like that additives used during winemaking be mentioned on the wine label. studies comparing organic and conventional growing systems mostly addressed the carry-over of mineral pesticides such as copper from grape to grape juice or wine [101,112], and the impact of organic management on grape and wine composition [84,85], wine’s sensory attributes [83] and wine’s healthiness [113,86,87]. it is not fully clear the potential impact of organic grape management on wine and properties. studies comparing the quality of organic to conventional wine may face many challenges related to, for example, the increase 14 giulia maesano, giuseppe di vita, gaetano chinnici, gioacchino pappalardo, mario d’amico of wine healthiness for organic wine, the improve wine sensory attributes of organic wine or mineral pesticides such as copper carry over to wine. given the review’s findings, we assume that there is a segment of consumers with positive perceptions concerning to organic production methods of wine, who are willing to pay a premium price for such a wine. however, the results underline that the effect of the variable “price” depends on consumers’ attitude, values and beliefs regarding organic wine. consumers are willing to pay an additional price for organic wine since they attach greater importance than conventional wine to personal motivations [66]. in fact, overall, our findings show that the additional price premium for organic wine seems to be due to attributes not pertaining directly to the organic wine. intrinsic characteristics of organic wine such as sensory attributes (i.e. taste, colour and aroma) do not affect the additional price whereas consumer’ characteristics such as value and belief and attitude significantly affect the evaluation of organic wine [66]. price is another factor that affects preferences for organic wine. in particular, consumers that state that price is a very important factor in the wine choice are less willing to pay for organic wine. in line with previous studies, consumers who are less interested in the sustainability of wine mainly pay attention to the price when choosing a bottle, while in contrast, the more environmentally oriented consumers spend, on average, more for wines consumed at home [56]. several authors concluded that price and origin were more important purchase criteria than production method [31,37,3,10], pointed out a negative image regarding quality and higher price of organic wine [13,38]; while other studies emphasised the importance of the organic label as a cue for quality [43,7,10]. consumers value the organic claim more than the other social responsibility and environmental claims and are willing to pay a price premium for organic wines [74]. however, the attitude is not due to the perception of organic wine sensory quality [42]. when consumers perceive a wine as having high quality they might be less willing to pay for further environment-friendly certifications [114,115]. environmental sustainability is less important than taste of the wine [41] and consumers are not willing to pay more for the environmentally friendly wine when quality is perceived lower [26]. 5. conclusion the increasing of demand for organic food is an important pathway towards sustainable food systems [77] since organic food has important environmental and health benefits. increasing consumers’ demand for organic food reinforces the rate of organic farming adoption and the level of farmers’ risk acceptance. the available results suggest that producing wine with sustainability features, particularly for organic wine, is a promising strategy for quality differentiation. in this regard, the role of consumers and their preferences is an important factor in shaping the transition to a sustainable food supply chain. understanding what is in consumer mind and what drives consumers wine choice, as well as their individual motivations and perceptions has always been crucial for successfully marketing wine, especially as the consumption patterns and preferences for wine have changed significantly since the late 1980s [116,25]. the future of organic wine will depend, to a large extent, on consumer demand. thus, a consumer-oriented approach to understanding organic wine preferences is important not only in its own right, but also in terms of shifting market dynamics. the organic wine characteristics such as health and environmental benefits should be reinforced into the mind of wine consumers. aside from the health and environmental benefits, marketing effort should promote the taste of organic wine. in order to influence consumers’ attitudes, organic wines should be extended to them as a package of product that has health and environmental benefits, better taste, and positive experience. the benefits associated with health have to be highlighted since health-conscious people are more likely to have positive attitudes toward organic wine. the inclusion of “no added sulphite” could appear clearly and promote to consumers [52]. previously, organic wine was perceived as healthier but less tasty than conventional wine [13]. the results highlight that there is still prejudice concerning the sensory characteristics related to organic wine. in fact, many consumers still have the idea that is good for the environment but not for those who drink it. this prejudice has its roots at the early beginning of organic winemaking, when organic producers focussed on grape production rather than on processing. in more recent times, organic wines have reached better reputation, giving clear evidence that good sensory quality can be achieved even with organic techniques. in this regard, blind testing of organic and conventional wine would help to clarify whether the rather negative image of organic wine is just a prejudice or if organic wine still faces a lack of sensorial quality. therefore, regular organic wine tasting events should be conducted with the wine makers. 15what’s in organic wine consumer mind? a review on purchasing drivers of organic wines interestingly, some consumers perceive organic wine as genuine taste compared to conventional wine [13,16]. the authors suggest trying to incorporate terms such as genuine and distinctive taste in the communication strategy of these wines. the review also indicated that, due to the low awareness of the broad concept of “sustainability”, marketers and retailers should disseminate relevant information on environmental aspects of organic wine production to raise consumers’ knowledge of sustainable wine production in order to influence purchase behaviour. environmental and health benefits can require scientific analyses to determine; this is above the scope of most consumers thus creating difficulty in convincing individuals about these benefits. therefore, taste must be promoted just as vigorously as environmental and health benefits in the organic equation in order to attract a premium. finally, nowadays despite the importance that consumer attach to natural wine as well resveratrol enhanced wines [117,118], no study was addressed to test the preference and the environmentally consciousness of consumers for healthier and natural organic wine. in addition, health aspects of organic production processes like the absence of pesticide residues will be an important argument for potential consumers of organic wine [119,120]. this is even more important than to improve the only moderate taste image of organic wine. understanding the profile of consumers, purchasing drivers and the quality perception towards organic wine provide useful information to the organic wine industry [121]. further research should be addressed to analyse also the role of high polyphenols content in organic wines, both naturally enhanced or artificially enriched, as well as for the natural wines, in order to gain a better understanding of the current trends. furthermore, new marketing research techniques such as neuromarketing and eye tracking could be useful to identify future market perspectives of organic wine. with regard to the limitations of this study, we highlight that, due to the relative restricted number of studies analysed, the results should be generalized with caution. acknowledgements the work was carried out in the framework of the activities of the project modesti by starting grant “piano di incentivi per la ricerca di ateneo 2020/2022 (pia.ce.ri.)” unict (5a722192150). project leader: gaetano chinnici. references [1] c. d’souza, m., taghian, p. lamb, r. peretiatkos, green products and corporate strategy: an empirical investigation, society and business review. 1(2) (2006) 144-157. https://doi. org/10.1108/17465680610669825. 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