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 Repu- tation Really Matter?. Wine Economics and Policy 9(1): 73-84. doi: 10.36253/ web-8018 Copyright: © 2020 S. Trestini, A. Sti- letto, 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 Com- mons Attribution License, which per- mits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. Data Availability Statement: All rel- evant 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 research- es 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 qual- ity 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 designa- tion 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 hypermar- kets, 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 pro- duction 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 tra- ditional 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 spar- 1 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 vol- umes 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 coun- tries, 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 increas- ing 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 grow- ing culture of this beverage [2,3]. According to Euromonitor [4], wine shares the alco- holic 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, spar- kling 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 regu- lar 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 East- ern 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 dec- ade, with a remarkable growth in the number of hyper- markets and supermarkets, even if the presence of small retail stores is still relevant. Indeed, alcoholic drinks’ off- trade consumption in Poland is 6.3 times higher than on- trade 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 encour- aging their purchase by Poles. From 2010 to 2015, off- trade 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 out- lets, 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 spar- kling 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 under- stand 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 mar- ket in Poland; in particular, this study applies a hedon- Table 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 con- tainers 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 mil- lion 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 sig- nals 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 reputa- tional cues, will largely explain retailers’ price variabil- ity. Various studies adopt this method in the wine sector, estimating the price effect both on the label informa- tion and sensorial evaluations [5, 6, 7, 8, 9, 10]. However, from the literature analysis it emerges that there are lim- ited 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 lit- tle 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 con- sumer may be surprised and, at the same time, con- fused by the huge number of different wines on the shelves. Wine, in fact, can be considered as a set of dif- ferent 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, consid- ering 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 spe- cific 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 Ocz- kowski [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’ apprecia- tion of the product but do not belong to the good itself (such as jury grade and cellaring potential, etc). Gener- ally 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, label- ling 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, cre- dence attributes [22] are going to be relevant in explain- ing 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 tra- ditional 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” mar- ket 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 oth- ers, Schamel and Anderson [25], Schamel [26] and Cos- tangiro 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] inves- tigated, through a hedonic price model, the effect of pri- vate 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 high- priced wines, collective reputation in terms of geograph- ical denominations appears to be particularly important for high-priced wines. This is confirmed by Rossetto and Gastaldello [29] who found that wines in the higher- price range benefit from strong consumer loyalty. Ver- donk et al. [30] highlighted that brand image and rep- 76 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 Ital- ian sounding name positively affects consumers’ WTP just because of brand reputation. Within this context, the influence of the reputation of the iconic “Cham- pagne” was bound to be studied. Lee and Sumner [32] investigated the effect of the term “Champagne” on spar- kling 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 objec- tive characteristics also play a role as explanatory vari- ables of the model in order to evaluate the effects of quality attributes on wine prices. With regard to the for- mer 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 con- sumers are more likely to use objective features as quali- ty 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 var- iables 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 arti- cle of Lecocq and Visser [37] that aimed to explore the effect of sensory and objective features on three differ- ent data sets (two on Bordeaux wines, and one on Bur- gundy wines). They found that the objective character- istics, 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 previ- ously 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 con- tains observations on white sparkling wines and Cham- pagne 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 Decem- ber, 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 compari- son to other locations. Data were collected from December 2016 to Febru- ary 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 dis- tricts 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 mar- ket 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 hypoth- esis 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 val- ued 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 char- acteristics. The partial derivative of the price function represents the marginal price of that attribute. Further- more, 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 specifica- tion; ii) there is a sufficiently large number of differen- tiated 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 func- tional form that should be applied, it should be remem- bered that the most used are the linear [39, 40], semi- logarithmic [41, 10] and Box Cox linear [43]. As reported by León [43] in his comprehensive lit- erature analysis of hedonic price, the Box Cox transfor- mation [44] can be useful not only as a flexible function- al 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 lin- ear transformation (1) is equivalent to: 𝑙𝑙𝑙𝑙𝑙𝑙 (𝜆𝜆 = 0)𝑙𝑙(𝜆𝜆) = ' 𝑙𝑙! (𝜆𝜆 ≠ 0) (2) By applying an OLS regression the log-linear func- tional form was shown to be preferable, in line with many Table 3. Number of retailers by category distributed among districts. Districts Retailers category Super- markets Hyper- markets Discounts Special- ized 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 multi- collinearity. Multicollinearity was checked through the VIF (Variance Inflation Factor): no variable in the model showed VIF greater than 5 [49]. The presence of hetero- scedasticity was verified applying the Breusch-Pagan [50] and White tests [51]. We found a violation of the hypoth- esis 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 log- linear 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 vari- ables and ε the random error. This form allows the per- centage variation of the product price to be explained that is independently attributable to a specific character- istic. The variables included in the model refer to objec- tive 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 vari- ables 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 collec- tion) and the collective brand of Designation of Origin (DO), namely the Appellations, (Asti, Champagne, Cre- mant, Cava, Prosecco DOC4, Prosecco DOCG are the most frequent in the dataset). Our hypothesis is that the price is higher in cen- tral 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 influ- ence the price, hence supermarket, spec_shop, hypermar- ket, 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 hyper- markets 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 supermar- ket 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 phe- nomenon 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 mod- el, 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 con- sidered as dummy variables. We expect that these vari- ables 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 posi- tive 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 spar- kling wine with an alcohol content equal to 11%. Refer- ence baseline is assumed to be a wine without designa- tion of origin or vintage specification, produced with- out 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 with- out 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 sta- 79Price 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 com- parison 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 infor- mation about the quality of wine, the brand plays a posi- tive 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 Tres- tini 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 consum- ers, 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 pur- chase, 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 spe- cialised shops. They found that this premium is nearly 200% for wines without relevant quality signals and low- er for quality wines. Polish specialised shops guarantee a premium price lower than that estimated in traditional wine consumer countries (i.e. Italy), perhaps suggest- ing 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 national- ity of the bottler of some wines, not produced with Pol- ish 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 find- ing 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 sound- ing 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’ pur- chasing decision: they may interpret price as a quality signal, due to the asymmetric information [57]. Nowa- days, 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 opportu- nity 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 imita- tions. 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 inex- pert consumer, who places value on a name that emu- lates the positive reputation of the Italian food and bev- erage 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 pre- mium 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 signifi- cance 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’ per- ception of the quality of wine. This is particularly true when the place of production is far from the consump- tion area [58] and consumers have limited connections to wine producers. In this framework, Champagne has the greatest impact on price, but Prosecco DOCG, Pro- secco DOC and the other Italian geographical indica- tions, 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 peri- od: 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 cat- egories (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 con- sumption. 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 sig- nificant 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 con- sumers in Poland who, ceteris paribus, may prefer wines with slightly lower alcohol content. 3. CONCLUSIONS This paper aims to estimate the hedonic price mod- el 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 attrib- utes coherently with the estimated model in a tradi- tional 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 consum- er 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 guar- antee 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 mar- Table 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. Inter- national sparkling wine in a new wine market is current- ly 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 premi- um 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. Informa- tion asymmetry is relevant in evaluating this market situ- ation, as well as confirming that the majority of consum- ers 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 mar- ket. Moreover, they may be useful for understanding the dynamics within this market category, thus allow- ing 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 charac- teristics 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 guaran- tee a direct connection with the consumer, because they are considered higher price features. Since brand reputation is the critical success fac- tor 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 data- set 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. 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Kennedy (1981), Estimation with correctly inter- preted dummy variables semilogarithmic equations [the interpretation of dummy variables in semiloga- rithmic equations]. Am. Econ. Rev. 71(1981), 801-801. [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