Dynamic Analysis of Brand and Regional Reputation: The Case of Wine

Abstract

AbstractGlobalization has created an international wine market and global brands. However, consumers continue to regard regional origin as a dominant criterion in their wine buying decisions. Indicators of collective regional reputation as well as individual producer (or brand) reputation guide consumers in their buying decisions. We measure regional and brand reputation indicators for 27 growing regions around the world. Regional reputation is based on a region's overall quality performance through time. Positive and negative brand reputation based on relative regional peer performance is a distinct feature of this empirical application. Noting competing as well as common interest among regional producers, we hypothesize that wines from producers with a high quality reputation rely more on their own strengths and will depend less on their region's reputation and vice versa. We also test whether this assertion is valid over time covering six recent vintages. We apply a hedonic model to measure the significance of these regional and brand reputation indicators in determining wine prices. Our model largely confirms our hypothesis, but it also suggests that for some regions (Germany and New Zealand), high quality brands rely heavily on overall regional reputation. In other regions (including Napa and Sonoma Valley), high reputation brands seem to lose their strength and start to rely on regional reputation. Regions holding on to their strong individual brand reputations include the Rhone Valley, Spain, and Bordeaux. The analysis sheds light on how regional and producer brands are performing as wine markets mature in terms of global branding and consumers becoming more knowledgeable about wine regions, quality, and reputation. (JEL Classification: D4, L1, Q13)