Geography versus Brands in a Global Wine Market
Producer brands increasingly dominate global wine markets, while generic advertising promotes regionality and exports (e.g. Australia, Spain). We analyze U.S. price data and quality indicators for 24 wine regions within eleven countries using a hedonic model. We assess the value of producer brands vs. geographical indicators, defining an indicator for high, average, and low quality producers (brands) within a region based on relative peer performance, i.e. whether they consistently produce qualities above or below their regional average. In contrast to high quality producers from France and Italy, their counterparts from the new world never exceed prices for high quality Napa Valley brands. Thus, new world wine still has to catch up with the old world in terms of regional reputation, but leading brands are able to pick-up much of the price differential. Generic promotions, export quality controls and regional quality leaders emphasizing origin in their own marketing may level the playing field for laggard regions.