Wednesday, February 28, 2018

Do Wine Competition Medals Impact The Price Of Your Wine?

When you visit wineries, no doubt you’ve seen shiny medals on ribbons draped around bottles of wine. A new study by French economists examines whether wine competition awards have an impact on wine price and are indicators of quality.

Susan Sharpless Smith

By Dave Nershi, CSW, Vino-Sphere publisher

Judging A Book By Its Cover

Producers of “experience goods” such as books, movies or wine, all encounter the same problem. How do you demonstrate quality before the book is opened, the movie viewed or the cork popped?

Some information may be gleaned through word of mouth, social media or advertising. A wine consumer also has the information required on a wine label. Even so, hidden characteristics remain.

One way wine producers can inform potential buyers of the quality of their goods is by participating in (and winning medals at) wine competitions. French economists Emmanuel Paroissien of the University of Bordeaux and Michael Visser of University of Paris-Saclay examined the relationship between wine competition medals and the quality and price of your wine. In January, their research was released as an American Association of Wine Economists working paper: The Causal Impact of Medals on Wine Producers’ Prices and the Gains From Participating in Contests. (AAWE Working Papers are circulated for discussion and comment purposes. They have not been subject to a peer review process.)

The Link Between Competition Medals And Increased Wine Prices

Wine judgeParoissien and Visser used microeconometrics to study individual transactions from a large Bordeaux-based wine broker matched with the records of 11 important wine competitions including winners by medal color. In France, the government greatly limits the amount of marketing and publicity for alcohol. As a result, wine competitions take on added importance. There were 11 wine contests studied, with nine in France and two others in Europe.

The research provides good news for wineries participating in competition. Winning a medal has a strong effect on wine prices. Wine producers who win a gold medal can increase their prices by 13%. Garnering a silver or bronze medal allows a smaller increases, 4.4% and 4.2% respectively. According to Paroissien and Visser, the prestige of the competition makes a big difference, with awards at the most prestigious competitions allowing wineries to augment their prices with the largest markups.

Wine Judging, Medals And Wine Quality

The study by Paroissien and Visser is focused on Bordeaux wine prices. Do the findings translate to the New World? The economists respond, “It’s difficult to say since France is not really comparable to other countries. In the U.S. for example there are much fewer wine contests. How this affects the impact of medals is unclear. But it would be interesting to replicate our methods with other countries and wines.”

Judges at the Indy International wine competition.Illustrating one difference, French regulations prohibit contests from awarding more than 33% of the participating wines. Some stick closely to this limit, while others are even more restrictive.

There is considerable cost to a wine producer to participate in a contest: entry fee, samples, etc. Is this something a winery, perhaps one with limited finances, should undertake? The research suggests that it is profitable to participate in certain competitions, especially the most prestigious ones, even if the probability of actually winning a medal is small.

While the research shows a strong connection between winning a wine competition and increased wine prices, the linkage between wine medals and wine quality is a different story. The authors comment, “Only a minority of contests attribute medals that are significantly correlated with quality. These are primarily the ones founded a long time ago, and whose judges are required to evaluate relatively few wines per day.”

Photo credits: Wine medals - Susan Sharpless Smith Flickr via Compfight cc, Wine judging – Dave Nershi, Vino-Sphere

No comments: