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 Pref- erence for Wine Attributes in a Euro- pean Transition Country – the Case of Kosovo. Wine Economics and Policy 9(1): 63-72. doi: 10.36253/web-8285 Copyright: © 2020 E. Zhllima, D. Ima- mi, N. Bytyqi, M. Canavari, E. Merkaj, C. Chan. 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 Attri- bution License, which permits unre- stricted use, distribution, and reproduc- tion in any medium, provided the origi- nal 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 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, maur- izio.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 compe- tition 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 con- sumer 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 prefer- ences vary across groups – type of wine and origin appear far more important when compared to price, especially for the richest identified segment, whose consumers pre- fer 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. Pre- vious 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 Bal- kans 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 prod- uct attributes (Gjonbalaj et al., 2009; Zhllima et al., 2012) reflecting the benefit of collected evidences for help- ing 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 preferenc- es for wine in Kosovo, which is a small country aspiring to join EU. Kosovo is a typical case of a country lack- ing competitive advantages for exporting large quanti- ties 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 consider- ing 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 sec- tor’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 empiri- cal evidence for policy makers to orient their policies to national/local food and agricultural systems, designing a concept for consumer-driven agriculture that is innova- tive 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 strug- gling 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 over- view 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 Albani- ans, and it shares similarities with Albania (ethnic, cul- tural, 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 inde- pendent 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 con- tribution 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 agro- ecological 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 sec- tor in general, and vineyard and wine specifically, which resulted in growth and renewed investments in the sec- 65Emerging 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 con- tribution 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 produc- tion varieties, leads the Vranac variety with 477 ha cul- tivated, 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, Rrakaci- tel, Semion, White Burgundy, Zhillavka, Melnik and the white of Kladova (MAFRD, 2018). The production of wine consisted of 3.3 million lit- ters 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 consump- tion is about 1 liter per capita per year according to the official estimates, which is very low compared to neigh- boring Balkan Countries such as Albania (ca. 6 liters per capita per year), Serbia and Macedonia (ca. 20 lit- ers per capita per year), and much lower than the aver- age 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 secu- lar (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 most- ly 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 pres- ence or share of the production in the domestic market (aiming at substituting imports, which are strongly pre- sent especially in the upper end market segments), as part of market diversification and risk reduction strategy (FAO, 2016). However, that requires better understand- ing 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 pro- duction 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 pref- erences, 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 meth- ods 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 consum- ers actually purchase but it is criticized for not allowing exploration of new attributes or combinations of attrib- utes 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 Bhan- ja, 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 (Bar- rena 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 com- bined 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 estab- lished by Lancaster (1966) according to which the util- ity of a product is based on the bundle of attributes it has (quoted at Mtimet et al., 2008). It was earlier devel- oped by Louviere and Woodworth (1983) and was origi- nally used in the market research and transport litera- ture (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 web- based 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 selec- tion of attributes, assignment of their level, design of choice sets, collecting data and conducting analysis (Cat- tin and Wittink, 1982; Green and Wind, 1975). The stag- es for this study are shown in Table 1 below. Attributes in a conjoint design are fundamental characteristics of the product that describe and differ- entiate it from others in the market. We chose attrib- utes 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 represent- ative 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 indus- try 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 experi- ment, namely red and white. Discussions in the focus group with consumers identified also taste as a very important variable. There- fore, 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-to- face 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 experi- ments 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 con- sumer 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 rele- vant for the local industry and the policymaking institu- tions, 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 ques- tionnaire were generated. For each version, attributes and levels of the product were combined into 12 hypo- thetic 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 hypo- thetic market scenario for all the 12 scenarios of the questionnaire. Table 3 represents an example of hypo- thetic 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 ver- sion of the questionnaire and balances the two-way fre- quency 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 efficien- cy 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 obser- vations.  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 sur- vey respondents compared to Prishtina population sta- tistics. While gender wise, the sample structure is simi- lar 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. Socio- demographic 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 struc- ture 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 pref- erences. 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 preferenc- es 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 indi- vidual 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 choos- ing 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 individu- als 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 fol- lowing 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 class- specific scale parameter and βm is the class-specific estimated utility parameter, Zni are explanatory vari- ables of Xni. This approach assigns to any respondent a probabil- ity 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 meth- odology 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 impor- tance 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 sig- nificant. The wine consumers in Kosovo are grouped in 4 (four) distinct classes that differ in their preferenc- es 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 respond- ents 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) fol- lowed equally by the attributes of domestic and sweet tasting wine (ethno-red and sweet wine lovers). The last group with the smallest share of respond- ents (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 qual- ity guarantee. Several tests were run to assess possible socio-demo- graphic variable differences across groups - not statisti- cally significant differences were found for education, gender and age. The only variable which appears to dif- fer 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 qual- ity, 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 cal- culation 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 dif- ference. 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 Bal- kans, 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 con- sumer 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 qual- ity 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 tech- nologies 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 domes- tic 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, includ- ing 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 expe- riences 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 pro- tocols in order to control the alcohol content, by empha- sizing the flavor and sweetness of the wine. Considering these results, wine processors can stra- tegically 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 certifica- tion, 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 addi- tion to a better vertical coordination with raw mate- rial 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 neces- sary 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 Ori- gin (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. 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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