Abstract
Purpose: We address if cooperatives can compete with private wineries regarding product quality and reputation. Cooperative reputation for quality is subject to individual growers supplying varying grape qualities and on their management ability to produce and market high quality wine. Hence, cooperatives may face varying grape qualities with more uncertainty about wine quality further downstream. In contrast, private firms may have more control over production and in turn gain a higher reputation with final consumers.
Design: We analyze a data set for private and cooperative wineries from Alto Adige with retail prices and relevant evaluations for wine quality and producer reputation. It allows to differentiate local cooperatives vs. private wineries as well as IGT and DOC designations. We employ a hedonic pricing model to test whether wines from private producers receive a reputation premium relative to cooperatively produced wines. Moreover, we hypothesize that wines from private wineries receive a price premium relative to cooperatively produced wine.
Findings: Our results reject the hypothesis that relative to cooperatives, private producers receive a reputation premium. In contrast, we estimate a significantly positive cooperative reputation premium as well as a significant quality premium. Regional cooperatives and privately owned firms evolve towards segmenting IGT and DOC denominations. Cooperatives get a collective reputation premium by focusing on DOC rules while non-cooperatives use an IGT strategy emphasizing their brands.
Practical implications: Our results indicate that cooperatives are able to successfully coordinate for improved grape quality and to receive a quality and reputation premium in the market. The strategic use of denomination rules allows private wineries and cooperatives to capture premium prices in different market segments