Index
Italicized page numbers indicate tables or figures.
Abreu, David, Abreu label, 204
Accolade Wines, 294
acidity, 67–68; acetic acid and, 47, 48
acquisitions, 129, 190, 198, 199, 279, 286, 293–97, 325n.36; mergers and, 288, 294
age-worthy wines, 243, 268, 303
aging of wine, 35, 38; aging potential, 40, 254; bottle aging, 44, 102, 262; containers for (see maturation vessels); flavors or aromas and, 44–45; grape quality and, 268, 311–12n.2; as maturation (see maturation)
Akerlof, George A., adverse-selection “lemons theory,” 181
alcohol, taste of, 47. See also taste of wine
Alcohol and Tobacco Tax and Trade Bureau (TTB), 150, 151, 152, 156–57, 318n.4
alcohol consumption, 208; overconsumption or abuse, 138, 285, 306, 318n.14. See also consumption of wine
alcohol content of wine, 10, 50, 118–20, 317n.29; blending and, 99–100; increase in (Alston study), 119–21; labeling requirements, 121; misrepresentations and errors regarding, 105, 121–23; of Old and New Worlds compared, 119–20; of red vs. white wines, 119
Almaden label, 294
Alston, Julian M., et al., on yield per acre of California vineyards, 119–21
American Viticultural Area (AVA), 103
Anderson, Kym, and Signe Nelgen, 271, 283, 289
Argentina: favorable climate for wine growing, 280; price factors in, 227, 258; wine consumption, 283t.6, 289; wine production and firms in, 283t.5, 289
Argentinian wines, 258
aroma compounds, 44–46
artisanal wineries, 91, 111, 169
Ascentia Wine Estates, 294
Ashenfelter, Orley, on auction prices of Bordeaux and Shiraz wines, 269, 312n.11; Liquid Assets, 270
assets: intangible, 182, 198, 301–302; asset specificity, 191, 193–94. See also entrepreneurial investment
asymmetric information, 121, 122–23, 301, 320n.28; in outsourcing, 192–93; and transaction costs, 192, 301; wine-firm quality behavior and, 180–84
auction markets: auction houses, 243; for Bordeaux wine, 260–63
Australia, wine production and firms in, 31, 279, 283t.5, 289, 295
Australian Wine Research Institute, 255
Australian wines: Grenache, 264; Shiraz, 247, 255, 268, 277, 278
bag-in-box container, 104. See also packaging
batonnage, 83
Beam Wine Estates, 205, 294, 295
Beckstoffer Vineyards, 197, 200, 206
Belgium, wine consumption in, 283t.6
benefits of red wine, 8, 238, 317n.10, 317–18n.12
Beringer Chardonnay, 21
Beringer Wine Estates, 21; Foster’s acquisition of, 294, 295, 296, 325n.36
Bien Nacido vineyard, 76
big-box stores (e.g., Costco), 125, 139. See also large retailers
Blackstone label, 294
blending process: grapes from different regions may be used, 268; labels using outsourced grapes, 112, 174; properties of varietal grapes and, 56, 99–100, 311–12n.2, 315n.19; retailer requests, 155–56; Rubired grape widely used in, 311n.3; as a specialized production task, 196, 198, 199, 296; using bulk wines in, 111, 114; winemaking technique of, 35, 42, 83, 98–100, 156, 202. See also grapes; single blends
blind tasting method, 248–49, 251, 254, 255, 256, 261
Blossom Hill label, 101
Blue Nun label, 277
Bombrun, Helene, and Daniel A. Sumner, 258, 267
Bordeaux region, 243, 315n.10; climate, 266
Bordeaux wine, 260–61, 266–67; as age-worthy, 268; futures markets and wine ratings, 260–63; market for immature, 269–70; secondary markets for (Bryon and Ashenfelter), 270–71
bottle closure: corks, 38, 101–2; screw caps, 101, 102, 315n.7
bottling, 38, 101–2; “estate bottled” (term), 103; skills and equipment for, 193–94, 198
bouquet. See tertiary aromas
brand loyalty, 8–9, 184, 205, 219, 244, 301–2
brand names, 6, 38, 102, 106, 108, 292, 310ns.4 and 5, 316n.11, 318n.3, 318–19n.4; economic value of, 295, 301–2; labels of large retailers, 112, 117, 118, 285, 305
Brettanomyces yeast, 48
British supermarket chains, 118
Brix units, 67
BRL Hardy, Australia, 294
brokers and broker trading, 26, 73, 305, 316n.5; for bulk wine, 26; for grapes (also wine-grape market), 73
Bronco Wine Company, 106, 109, 116, 117, 160, 174, 176, 199, 304, 316n.6; Charles Shaw label, 4, 112, 117–18, 184, 305
Brown-Foreman firm, 321n.37
Bryon, R.P. and Orley Ashenfelter, on secondary markets for Bordeaux and Shiraz, 270–71
Buccola, Steven T., and Loren VanderZanden, on demand for wine in Oregon, 234
bulk wine market, 25, 107–8, 110–11, 115–16; broker trading, 26; buyers, 110–12; pricing factors, 112–16, 113; role in industry, 105, 305; suppliers, 108–10. See also case-goods producers; commodity wine segment; private-label market
bulk wine production, 107, 108–10, 117; excess grapes used in, 76; packaging, 104. See also commodity wines
bulk wines: defined, 106–7; as fillers for “higher quality” wines, 104. See also private-label wines
Burgundy region: France, 49, 56, 62, 65, 112, 243, 267, 285; landscape and climate, 303
Byron, R.P., and Orley Ashenfelter, on wine prices in Australia, 170
Cabernet Franc grape: blending properties, 311n.2; in Bordeaux wines, 264
Cabernet Sauvignon grape, 162, 312n.10
Cabernet Sauvignon wine, 14, 39, 49, 54, 255, 311–12n.2, 312n.10, 313n.18; grape, 37, 42, 49; market for, 218; of the Napa Valley, 268, 272; region affecting wine scores, 256; sensory characteristics, 48, 49. See also by region or brand
California: favorable climate of, 56, 258, 265, 272; highest wine producing state, 60–61; North Coast Chardonnay, 82, 258, 259, 264; price elasticity for Merlot in, 234–35. See also by wine firm, e.g., Robert Mondavi; and wine region, e.g., Napa Valley
Cameron Hughes label, 204
canopy management, 63, 66, 75, 82, 114, 165, 273. See also vineyards
capital equipment, 12, 32, 69, 167, 202–3, 313–14n.34, 321n.33; asset specificity, 191, 193–94; mechanical harvesters, 32, 60, 64, 69–70, 172, 197, 200, 299, 313n.34; technology, 172–73; transaction costs and, 193–94
Carneros Valley, 266
case-goods producers, 107, 108, 110–11, 113–16; sometimes buying private-label wines, 116. See also bulk wine market
case-goods sales, 158
Casella Wines, 278; Yellow Tail label, 277–78
Castle Rock Winery, 5–6, 153, 204–5
Cave de Tain, French cooperative, 293
Cavit, Italian cooperative, 293. See also cooperatives
Caymus Cabernet Sauvignon, 14, 39
“Cellared by” (term), 318n.3
cellar master, 200–201
Chablis region, 49. See also France
Champagne, and California sparkling wine, 286
Champ label, Australia, 294
Chardonnay grape, 42, 50, 56, 99
Chardonnay wine, 19, 21, 54, 93, 99, 183, 203, 217, 277; blending properties (lacking), 99; California North Coast, 82, 258, 259, 264; demand for, 218, 225, 234; dining recommendations, 232; grape, 37, 42, 48–49, 56; pricing, 325n.16; sensory characteristics, 48–49, 93; winemaking techniques for, 50, 94, 95. See also by label
Charles Shaw brand (Trader Joe’s), 4, 112, 117, 117–18, 184, 305
Château Lafite Rothschild label, 268–69
Château Mouton Rothschild label, 243, 263, 266, 279
Chenin blanc wine, 54, 104, 217, 225
Chile, 259, 267, 276, 279, 287; bulk wine suppliers from, 110, 115, 305; favorable climate of, 280; natural environment, 280; wine exports, 281, 282–83, 283, 285, 286; wine imports, 289; wine production in, 121, 284, 289, 312n.12, 315n.15
chilling wine, 87–89
China: consumption of wine in, 276, 281, 285–86; future export market, 281; production of wine in, 283t.5, 284, 289, 324n.12
choice, 11; and scarcity, 11–12. See also marginal utility
citric acid, 47
clarification: cold stabilization, 96, 97–99; settling method, 87–89. See also stabilization
climate: of Bordeaux region, 266; of California, 56, 258, 265, 272; cool or warmer climates preferable for specific grapes, 42, 49–50, 56, 62, 63, 68, 311–12n.2; effects on wine quality, 8, 57, 58–59, 254, 265–66, 272; microclimates, 71, 98; places with most favorable climates, 56, 115, 258, 265, 266, 272, 280, 282, 303; weather effects and unpredictability (see weather)
clonal selection and cloning, 35, 55–56, 312n.4
cluster thinning, 13, 66, 165, 313ns.23 and 34
cobweb theory (Ezekiel), 79, 81, 314n.10
cold maceration, 87
Columbia Valley, 107
commodity wines, 61, 85, 116, 192, 194, 309n.2; as “fighting varietals,” 217, 225, 229, 231, 234–35, 302; grape yields, 62, 65; international distribution, 277–78; lower sugar content, 86, 192; market factors, 4, 107, 158, 176–77; shipping of, 106
commodity wine segment, 6, 61, 304; barriers to entry, 177–78; consumer price responsiveness, 284, 302; exports, 110; investment and production characteristics, 65, 98, 106, 176, 321n.35; oligopolistic aspect, 174, 184–85, 304; outsourcing grapes, 192; outsourcing of vintner tasks, 190–91, 194; price and quality behavior, 184–86, 309n.2. See also bulk wine market
computerized fermentation tanks, 273
Constellation Brands, 16, 295; diverse portfolio, 294–95, 296; global winery investments, 287; Project Genome study, 209, 322n.2
consumer preferences: appealing to, 51–52, 121–22; brand loyalty and repeat purchases, 8–9, 184, 205, 219, 244, 301–2; buying decisions, 3, 7–8, 103, 122, 186, 209, 302–3, 323n.9; cost-quality tradeoff, 18–20, 30–31, 210, 214; demographic characteristics and, 208–10, 235–39, 302–3; determining (see sensory characteristics of wine); in taste and quality of wine, 31; theory of choice and utility (see hedonic theory); whether rational or irrational, 7–8; wine scores influencing, 121–22. See also demand; wine snobs
consumer-trained panel (CTP) approach, 246–48
consumption of wine: aggregate sales in U.S., 210–12, 211; and consumer tastes (see consumer preferences); frequent wine consumers, 209; income and, 227–31, 302; moderate amounts of red wine beneficial, 8, 9, 33, 81, 238, 317ns.10 and 12; nontraditional wine consuming countries, 281; per capita consumption, 2, 10, 213, 214–15; price of substitute goods and, 30–31, 231–35; top countries in, 31, 283t.6. See also demand; and by country
contingent valuation (CV) approach, 248–50
contracts and contractual arrangements, 6–7, 161–62, 193; with distributors, 320n.28; of firms and independent vineyards, 4–6, 18, 37, 60–61, 76, 110, 114, 153, 154, 166, 190, 194, 205; futures contracts, 79–80, 261–62; legal contracts, 164, 320n.21; for private label wines, 116–18; spot market contracts with producers, 107; transaction costs (see transaction costs), 162, 190–92. See also grape contract market; outsourcing
cooperatives, marketing, 73–74
cooperative wine firms, 290, 291–93, 325ns.22, 25 and 26; member-investment in, 290–91
cork taint, 48
corporations, 151, 159–60, 178, 290, 319n.14; family-owned or private, 152–53, 160–61; public, 160–61, 167–68, 171–72, 293–95
Costco. See large retailers
costs: fixed costs, 22, 23–24, 195, 197, 200; of premium wine production, 195, 202–3; of wine production, 321n.35, 322n.9. See also transaction costs
critics, 51, 253–57, 305. See also wine scores; and by name, e.g., Parker, Robert
crushing grapes, 86–87; and fermentation, 156, 196. See also pressing grapes
Cuellar, Stephen S., et al.: grape-supply cycle for California North Coast Chardonnay, 82; on off-premises retail sector, 223–25, 231; on price elasticity, 225–27, 231
cultural influences, 9
custom-crush wineries, 4, 6, 37, 108, 113, 150, 155, 161–62, 163, 169, 177, 191, 193, 198, 199–200, 206, 300, 318n.3
Davis Bynum label, 183; Pinot noir, 183
demand: and cross-price elasticity, 222, 232–35, 323n.13; demand curve for wine, 20–21, 20; factors affecting, 30–31; and income, 7, 227–28, 314n.11; law of demand, 228–29; and supply, 32. See also consumer preferences; consumption of wine
demographic factors, aging population, 31
Diablo Creek brand (Safeway), 117
Diageo Chateau & Estate Wines, 101, 156
direct shipment: direct shipping laws, 142–45; direct-to-consumer, 5, 124, 126, 144; direct-to-retailer, 125–26, 132
disease resistant clones, 55
diseases of grapes and grapevines, 62, 66; fungal diseases, 63; sorting out diseased grapes, 70, 86
distribution of wine, 3, 305; direct-to-consumer, 5, 124, 126, 144; direct-to-retailer, 125–26, 132; distribution channels, 124–25; economic effects of regulations on, 147–48; fulfillment agents, 4, 126, 127, 131, 305; importers (see also imported wines), 102, 126, 127, 128; through brokers (see brokers and broker trading). See also large retailers; retail sales; state licensing and regulation; storage
Domaine Leroy Chambertin, 243
Dubois, Pierre, and Céline Nauges, on effect of Parker scores on Bordeaux futures prices, 262–63
Duckhorn label Merlot, 39
economic incentives, 11, 17–18, 76–77, 136, 191, 281, 304; for cooperatives, 291–92; for cooperative wine firm, 291–93; noneconomic motives, 168–70, 300–301. See also financial incentives
economic organization: of firms (see wine firm organizational structure; wine firms); of markets (see global market; wine market)
economic policy, national, 280. See also government regulation
economic theory of regulation, 143–47; interest groups, 144–47; Stigler’s theory, 318n.23
economic value: of brand names, 301–2; in sensory attributes of wine, 248
economies of scale, 109, 176, 178, 184, 196–99; acquisitions and, 195–96; diseconomies of scale, 195, 200–201, 297, 301; small wine firms and, 199–200, 202, 290–91
economies of scope, 197–200, 296
Ellig, Jerry, and Allan E. Wiseman, on regulation effects in Virginia, 147–48
entrepreneurial investment, 176–77, 195–96, 321n.32; in commodity wine segment, 321n.35; equipment options (see also capital equipment), 70, 98, 100, 194, 202; long-term, 278; in vineyards, 64, 108, 194; in wine cooperatives, 290–91. See also costs; variable inputs; wine firms
entry barriers, 144, 176, 177–78, 186; for commodity wines, 177–78
equipment. See capital equipment
“estate bottled,” 103
European nations, regulation of winemaking and grape growing, 179
evapotranspiration measurement, 71
Ewing-Mulligan, Mary, and Ed McCarthy, on quality standards of wine, 311n.10
excess leaf production, 59
excess supplies: of blending wines, 109; of grapes, 76, 110, 114. See also bulk wine market
excise taxes, 23, 32, 84, 99, 136, 138; federal excise tax, 15, 84, 150; state excise taxes, 125. See also taxes on alcohol
exports: exporting nations, 3, 115, 276, 280–85, 283; exporting nations—Chile, 281, 282–83, 283, 285, 286; future export markets, 281, 287–88; governments promoting, 281, 287; increase in global export market, 277–82; luxury wine exports, 278, 284; nontraditional wine consuming commodity wine exports, 110; shipping aspects, 101; U.S. exports, 106, 110, 276, 283, 284, 286–87, 307
Ezekiel, Mordecai, 314n.10. See also cobweb theory
fermentation process, 35, 44, 89; extraction and fermentation temperature, 91; malolactic fermentation, 45–46, 50, 89, 92–93, 96, 99, 103; newly fermented wine, 96; punching-down technique, 91–92; role of yeast in (see also yeast), 35, 90–92
fermentation tanks, 12, 21, 32, 34, 89–90, 196–97, 200, 273; as maturation vessels (see maturation vessels)
“fighting varietals,” 217, 225, 229, 231, 234–35, 302
filtration, 50, 92, 96, 97–98; filtration systems, 200; unfiltered wine sometimes preferred, 43. See also reverse osmosis
financial incentives, 17, 69, 85, 166, 191–92; exports promotion, 287
Finger Lakes region of New York, 57
fining process, 315n.16
flying winemakers, 278–80
Folwell, R.J., et al., on cost of wine production, 321n.35, 322n.9
food and wine recommendations, 232
foreign investment, 278, 278–80, 286–87
Forman Vineyard wine firm, 153
Foster’s Group, 161, 283–84, 294–95
France, 112, 279, 287, 315n.15; alcohol content of wine, 119–20; Chablis region, 49; consumption of wine in, 208, 214, 276, 281, 283t.6, 289; dominating premium and luxury segment, 284; excess supply of wine from, 291; exports of wine, 276, 284; French growers and wine growing methods, 315n.10; regulation of winemaking and grape growing, 62, 179; U.S. imports of wine from, 286; vine density in, 63–65; wine production and firms in, 31, 59, 267, 282, 283t.5, 288, 289, 312n.12. See also Bordeaux wine
Franciscan, 294
French grapes, 62, 311n.3. See also by name, e.g., Cabernet Franc grape
French growers and wine growing methods: batonnage, 93; emphasis on terroir, 59–60
French inheritance laws, 112
French paradox, 238; average life span, 33
French wines, pricing, 251
futures markets: Ashenfelter on, 269, 312n.11; global, 287–88; for grapes, 74–75, 79–81, 114, 261–62; wine, 244, 253, 260–63, 292
Gallo, E. & J. firm, 5, 106, 152–53, 157, 185, 201–2, 304; acquisitions, 295; nonwine products, 321n.36; family-owned, 152–53, 172; producing own wine bottle, 194, 199; size and market share, 2, 4, 5, 106, 157–58, 160, 174, 201, 220, 288, 289; Wine Manager System, 204. See also Turning Leaf label
geographical information systems, 71
Gergaud, Olivier, and Victor A. Ginsburgh, on influence of soil (see also terroir), 266
Germany, 49, 116, 280, 282, 312n.12; regulation of winemaking and grape growing, 179, 267; top wine importer, 285–86; wine consumption in, 116, 283t.6; wine production and firms in, 59, 283t.5, 288, 289. See also Blue Nun label
globalization of wine, 111, 276–77, 280, 324n.8; causes of, 277–82; emergence of an international wine style, 277–78, 281–82; foreign and international influences on production, 278–80; multiple production sites, 177; technologies assisting, 279, 281–82
global market: distribution of firms (see also larger firms), 287–90, 289; expansion of exports (see also exports), 280; free-trade agreements, 280; international distribution of commodity wines, 277–78; organization of firms (see also wine firm organizational structures), 290–93; structure, 287–89, 289; U.S. participation in, 286–87, 306–7, 319–20n.19
global positioning systems, 71
Golden State Vineyards, 109
Goldstein, Robin, et. al.; on relationship of quality to price, 255–56
Goode, Jamie, 312n.8. See also terroir
government regulation, 4–5, 124, 179–80, 304, 306, 316n.29, 317n.29; Alcohol and Tobacco Tax and Trade Bureau (TTB), 150, 151, 152, 156–57, 318n.4; on amount of grape-types in a “single” blend, 99, 104; economic rationale for, 132–36, 135; on land-use, 179; pricing regulations, 5, 129; “regulatory goods,” 144; state powers (see state regulation and licensing); theory of regulation, 318ns.23 and 24; on waste management, 179; on water quality, 179; whether the public is served (see public-interest and government regulation). See also taxes on alcohol
Granholm v. Heald, 131, 142. See also Supreme court rulings
grape contract market: contractual arrangements with vineyards, 75–77, 320n.27; for crushed grapes (see custom-crush winery); long-term contracts, 9, 72, 73, 74–77, 162–64, 166; spot contracts, 9, 72–74, 75–76, 82, 110, 113, 114, 162–64, 204, 205. See also contracts and contractual arrangements
grape growing: outsourcing vs. insourcing, 190, 192, 205, 206; specialized skills in, 48, 196, 199, 204, 258. See also viticulture and vinification
grape juice weight, 67
grape location or region, 56–58, 99, 117, 120, 190, 242, 264–67, 303; places with most favorable climates, 258, 265, 272, 280, 282, 303
grapes, 54–55, 99, 312n.10; blending of, 266, 311n.2; cloning of, 35, 55–56, 312n.4; cluster thinning of, 66, 165, 313ns.23 and 34; grape must, 67–68, 86, 87–88; must weight, 67–68, 88; quality of (see quality of grapes); ripening and physiological maturity, 54, 58, 62, 67, 68, 88, 122, 165, 192, 587; shortage(s) of, 79; varieties, 263–64. See also blending; diseases of grapes and grapevines; picking grapes
grape supply cycles, 77–82, 78, 80, 114–15, 304
grapevines: diseases of, 62, 66; species, 53–54; vine clones, 55–56; vine rootstock, 56–57
Greenspan, Mark, survey of winery technologies, 313–14n34
Grenache grape, 54
Grenache wine: Australian, 264; Grenache Syrah Mourvedre, 315n.19
Haeger, John W., and Karl Storchmann: on Pinot noir prices and regions, 265, 275; on wine score effects, 258
Halliday, James, and Hugh Johnson, 311n.1, 312n.13
Harlow, Arthur A., 314n.10
heart disease, 8, 238, 317n.12
hedonic price approach, 250–53; implicit price and, 241, 244–46, 259–60, 323n.2; studies using, 240–41, 244, 246, 253–57, 264, 323n.1
Heien, Dale, and Greg Pompelli, on cross-price elasticity study, 233
Hodgson, Robert T., on wine competitions, 256
Hudson Vineyards, 314n.4
Hughes, Cameron, 204
implicit costs, 13, 14, 162. See also opportunity cost
imports: competition between, 173–74, 277; importer’s role, 102, 126, 127, 128; percentage of retail sales, 218; to the U.S., 218, 285, 286, 293
income elasticity, 229–31, 323ns.9 and 11
independent vineyards, 4–6, 18, 37, 76, 110, 114, 153, 154, 190, 194; commercial aspects, 53, 60–61, 197, 205–6
information asymmetry. See asymmetric information
Inglenook label, 294
insourcing, vs. outsourcing, 189–91, 207, 301
interest groups, 144–47
Internet: lowering information cost, 300; wine auctions, 243
investment-grade wine, 243
investments: in the commodity segment, 65, 98, 106, 176, 321n.35; foreign, 278–80
Italy, 243, 287, 296, 312n.11; excess supply of wine from, 291; imported wines, 101; regulation of winemaking and grape growing, 62, 179; vine density in, 63–65; wine consumption in, 31, 208, 214, 283t.6; wine exports, 101, 276; wine production and firms in, 267, 282t.5, 288, 289; wines most popular imports in the U.S., 218, 285, 293
Jenster, Per V., et al., on wine firms by nation, 289
joint ventures, transnational, 279
Jones, Gregory V., and Karl Storchmann: on climate effects, 266; on effect of Parker scores, 263
Kendall Jackson label, Chardonnay, 19, 99
Kosta Browne Winery, 154
Kramer, Matt: on range of wine flavors, 312n.3; on wine score effects, 256
Kroger. See large retailers
labels and labeling, 102–4, 105, 112; large retailers’ labels, 112, 117, 118, 285, 305; requirements regarding alcohol content, 121. See also brand names
labor, 11, 21, 64; as an economic input, 23, 25, 70; grape picking, 67, 68, 70, 87; labor intensive practices, 60, 66, 69–79, 70–71, 86, 91; specialized skills, 196. See also picking grapes
laboratory cultures, 91
Lancaster, Kelvin J., product characteristics approach, 310n.2
Landon, Stuart, and Constance E. Smith, on factors affecting price, 258, 266–67, 273–74
land-use regulations, 179
large retailers, 132, 139, 204; big-box stores (e.g., Costco), 125, 139; chain supermarkets, 117, 139, 155, 204, 285, 296; contractual futures and, 26, 106; private label wines sold by (see also by label, e.g., Charles Shaw label), 112, 117–18, 285, 305
large wine firms, 16, 101, 110–11, 185, 289–90; acquisitions of, 297; as corporate entities, 159–60, 167, 171; dominating the market, 3, 289; management of, 201. See also by name, e.g., Gallo
Laube, James, 254
legal contracts, 164, 320n.21. See also contracts and contractual arrangements
legal entities. See wine firm organizational structures
“lemons theory” (adverse-selection), 181
licensing, 150; licensing agreement, 137; licensing requirements, 128–29, 137–38, 142, 144
long-term income growth, 229
long-term investments, 292
long-term quality reputation, 274
Lucky Duck brand (Walmart), 117
Luxembourg, wine consumption in, 283t.6
luxury wineries, 4, 70, 85, 93, 98, 177; investment in, 194, 304. See also artisanal wineries
luxury wines, 12, 27, 61, 65, 86, 309n.2; branding of, 176; consumers of, 121–22, 276–77; insource production common, 190–91; measuring the quality of, 192
luxury wine segment, 8, 158, 174, 176–78, 188–89, 304; exports of, 278, 284; France dominating, 284; monopolistic competition in, 304; submarket pricing, 186–89, 217
maceration: cold, 87; extended, 92–93
MacNeil, Karen, on wine quality, 310n.7
macroeconomic factors: and pricing, 210, 217; resource allocation, 11–12, 134, 305–6
malic acid, 47
malolactic fermentation, 45–46, 50, 89, 92–93, 96, 99, 103. See also fermentation process
Manning, Willard G., et al.; on externalities of alcohol consumption, 138
marginal utility, law of diminishing, 19–20, 219, 228, 240, 310n.4
marketing cooperatives, 73–74
Mark West label, Pinot noir, 295
maturation, 8, 45, 54, 93, 94, 95; as aging (see aging of wine); length of, 93–94, 179; non-barrel-matured wine, 96
maturation vessels, 12, 35, 83, 98, 103; costs of, 116–17, 217; oak barrels (see oak barrel maturation); stainless steel tank maturation, 45, 50, 95–96
McCoy, Elin, The Emperor of Wine, 183
mechanical harvesters, 32, 60, 64, 69–70, 172, 197, 200, 299, 313–14n.34
Médoc appellation, 266
Mega Purple concentrate, 42, 273, 311n.3
Mendelson, Richard, 318n.14
mergers, 288, 294. See also acquisitions
Merlot grape, 33; blending properties, 266, 311n.2
Merlot wine, 39, 54, 58, 99, 183, 217, 258, 264, 302, 324n.16; in the film Sideways, 237; income elasticity, 231, 323n.11; market for, 218, 225; of price elasticity of California Merlot, 234–35. See also by region and label
Michigan, 146–47
micro-oxygenation, 95–96, 273, 315n.15
Mildara Blass firm, 296
mineral content of soil, 59–60, 312n.13
Mondavi, Robert, 279
monitoring systems for harvesting, 71
moral hazard, 320n.26
Napa Valley, 37, 154, 184, 242; Cabernet Sauvignon (see also other wines), 268, 272; higher priced and luxury wines from, 27, 256, 267; superior and more expensive vineyard land, 58, 62, 103, 177, 242, 267, 272, 303, 312n.10. See also by winery, e.g., Sattui
négociant (wine merchant), 111–12, 118, 316n.11; non-producers vs. vintner-merchants, 155
nepotism, 16, 25, 168, 170–71, 207
Nerlove, Marc, 251
New World: “New World philosophy,” 85–86, 273; wine production in, 119, 169, 282–83, 284, 288, 289, 317n.27
noneconomic motives, 168–70, 300–301
nonmarket goods, 16–17, 21, 168–69
Norwegian wine tastes, 250, 251
oak barrel maturation, 42, 45, 50, 90, 184, 256; barrel-making process, 94–95; costs of, 217, 299, 300; French oak barrels, 45, 184
Oak Leaf brand (Walmart), 117
Oakville region, 267
Oakville wines, fetching higher prices, 267
Old World: emphasis on terroir, 59, 312ns.12 and 13; “Old World philosophy,” 85, 264; wine production in, 59, 63–64, 169, 280, 282, 312n.12
oligopoly, in the commodity wine segment, 174, 184–85, 304
opportunistic behavior, 164–65, 191–92, 194, 301, 302
opportunity cost, 11, 12–15, 17–18, 19, 21, 190, 269, 300, 309; measures of, 19, 21, 22, 134. See also implicit costs
Opus One winery, 279
Oregon: Pinot noir, 234, 258; Willamette Valley, 37, 56, 107, 193; wine firms, 234
outsourcing, 37, 137, 154, 203, 205–7; asymmetric information and, 192–93; bottling, 101; contracting involved, 152; decisions involving, 166–67; economic considerations, 195, 198–203; minimizing, 154; outsourcing contract, 152; transaction costs, 192–95; vs. insourcing, 189–91, 198, 205, 207, 301
oxidation, 42, 45, 48, 70, 88, 94, 101
packaging: bottle closure, 38, 101–2; bottle packaging, 100–101; box packaging, bag-in-box container, 104. See also labels and labeling
Parker, Robert, 40, 183, 254, 260; promoting an international wine style, 281–82
Parker score, 253, 310n.8; futures contracts for Bordeaux and, 260–63
Paul Hobbs, 207, 279; winery, 312n.10
Paul Masson, 294
Peltzman, Sam, on economic regulation, 318n.23
Penn, Cyril, on wine quality, 310n.7
Pernod Ricard, 295
phylloxera, 56–57; rootstocks immune to, 57
picking grapes, 67, 68, 70, 87; handpicking, 67, 68, 70, 87; mechanical harvesters, 32, 60, 64, 69, 70–71, 172, 197, 200, 299, 313–14n.34; sorting grapes, 86–87, 163, 196
Pinney, Thomas, on wine cooperatives, 325n.22
Pinot grigio wine, market for, 218, 225
Pinot gris wine, 54, 217, 234; market for, 218, 225, 264
Pinot noir grape, 35, 87, 99, 311–12n.2
Pinot noir wine, 54, 183, 184, 231, 234, 258, 264, 265, 295; blending qualities (lacking), 99; of Burgundy, 265; climate conditions for grapes, 63; in the film Sideways, 237; market for, 218, 225; prices by region, 265–66, 275–76
Posner, Richard A., on legal contracts, 320n.21
premium and luxury submarkets, 187–89
premium wine producers, 109, 111, 304; costs of, 195, 202–3; utility-maximizing rather than profit maximizing in, 188–89
premium wine segment, medium-sized firms, 174
premium wines, 98, 217, 293, 309n.2, 322n.9; mid-range but variable prices, 3, 188, 229, 304
pressing grapes, 35, 50, 70, 86–87, 98–99; mechanical presses, 315n.7. See also crushing grapes
price elasticity, 222–23, 225–27; demand and cross-price elasticity, 222, 232–35, 323n.13; studies of, 225–27, 231, 233, 234–35
price inelasticity, 227
prices of wine, 213, 221–25; average price per bottle in the U.S., 215; consumer preferences and, 8, 184–86, 215–16, 219–21, 225, 284, 302, 309n.2; decisions regarding, 3, 198–99, 227, 233, 271; implicit price (hedonic price theory), 241, 244–46, 259–60, 323n.2; price values (Bombrun and Sumner), 258, 267; quality of wine and, 244–46, 255–56; theories of (see hedonic price approach); U.S. annual prices, 215. See also price elasticity; supply and demand; and by wine or wine segment
pricing factors: in bulk wine market, 112–16, 113; collusion over prices and factors reducing, 185–86; by country or region, 170, 251, 258, 265–66, 275–76; critic ratings (see wine scores); Landon and Smith study of, 258, 266–67, 273–74; macroeconomic, 210, 217; market share (Tinney), 218, 322n.2; political market price, 144; regulations (see also government regulation), 5, 129; supply and demand (see also supply and demand), 28–31, 147
private-label market, 105, 116, 117, 156, 305; contract arrangements, 116–18
private-label wine: defined, 116; quality labels, 117, 118. See also by name, e.g., Charles Shaw (Trader Joe’s)
producer-sponsored wine clubs, 126
product characteristics approach, 310n.2
production costs, 194–204; diseconomies of scale, 200–202; for lager vs. smaller firms (see economies of scale); smaller firms outsourcing (see also outsourcing), 199–200; specialized labor and tasks contributing to, 196–99
production function, 314n.1
production of wine, 35–36, 108, 321n.23; buying decisions in, 79, 81; contractual aspects (see contracts and contractual arrangements); costs of, 194–205; management of vineyards (see viticulture and vinification); regulations governing (see government regulations); shared production, 151–52; top countries in, 282, 283t.5; winemaking (see winemaking processes). See also capital; labor; wine industry
product quality. See quality of grapes; quality of wine
profit maximization, 6–7, 18, 21, 304; level of output determination, 23; and utility maximization, 16–17
prohibitions, state, 140, 318n.14
Project Genome study, 209, 322n.2
pruning: machine pruning, 299; winter pruning, 69
public-interest and government regulation, 5, 124, 136–39, 306; evidence for a public interest perspective, 139–41; exports promotion policy, 287. See also government regulation; taxes on alcohol
punching-down technique, 91
Purple Wine Company, 295
quality of grapes: and aging, 268, 311–12n.2; defects, 75; flavor compounds, 68; and grape location or region, 57–58, 99, 117, 120, 190, 242, 264–67, 303; irrigation and, 65; quantity-quality trade-off in grape yield, 9, 50, 62–63, 76, 107, 217, 273, 292, 299, 300; sugar-to-acid ratios, 49, 66, 67–68, 266; tannin, 68. See also sugar content
quality of wine, 38–40, 48–51, 210, 216, 243, 268; “cachet value,” 176; categories of (see also commodity wines; luxury wines; premium wines), 174, 182, 184, 309n.2; consumer weighing quality vs. cost, 18–20, 210, 214; control over aspects of production and, 205–7; defects vs. faultlessness, 47–48, 97, 102; future quality evaluation, 59, 108, 182, 268–70; investment-grade wine, 243; more intense flavoring favored, 120, 122, 165; notions of, 52, 251, 310n.7, 311n.1; standards of, 252, 256, 311n.10; storage effects, 127–28; weather effects on vintage (see also climate), 268, 272; yeast strains and compounds affecting, 36, 39, 44–45, 47, 48, 50, 67, 85, 90–91. See also sensory characteristics of wine
Quandt, Richard E., on wine critics, 51
quantity-quality trade-off, in grape yield, 9, 50, 62–63, 76, 107, 217, 273, 292, 299, 300
racking and fining process, 96–97
rational self-interest, 11, 14–17, 300, 306, 309n.3; and seemingly irrational behavior, 1, 7–8, 300
Ravenswood, 294
red wine: alcohol content, 119; benefits of moderate consumption, 8, 33, 81, 238, 317ns.10 and 12; best grape vineyards, 206; bottling of, 315n.21; cold stabilization process for, 96, 97–99; deepening color of, 42, 311n.3, 315n.15; French, 251; secondary fermentation, 45, 95; tannin in, 47, 315n.16; winemaking process for, 87, 91–93, 94
refractometer, 67
regulation of the wine industry. See government regulation
remote sensing technology, 71
resource allocation, 11–12, 134, 305–6
retail market, 257–60
retail sales, 130, 225; winery direct-to-retailing, 132. See also large retailers
Reuter, Jonathan, on score effects, 257
reverse osmosis, 99, 122, 315n.10
Richard’s Wild Irish Rose, 294
Rickard, Bradley J., et al., on price effects and availability, 147
Riekhof, Gina M., and Michael E. Sykuta, 141
Riesling grape, 49
Riesling wine, 48, 54, 63, 93, 217, 225
Robert Mondavi Winery, 205, 294
Robinson, Jancis, 311ns.1 and 10
Rodney Strong wine firm, 183
Romanée-Conti wines, 243
Rosen, Sherwin, hedonic price theory, 323n.1
Rothschild. See Château Mouton Rothschild
Rubired grape, 311n.3
Ruffino label, Italy, 294
Russia, wine consumption in, 283t.6
Russian River Valley, 266
Safeway. See large retailers
sales of wine, aggregate U.S. data, 210–12, 211, 213
Sam’s Club. See large retailers
San Martin, Guillermo S., et al., on pricing factors in Argentina, 258
Sattui, V. Winery, 154
Sauvignon blanc, 54, 93, 183, 217, 225, 264
scarcity, 219, 263, 269, 299–300; and choice, 11–12; supply curves for wine, 27, 28
Schamel, Günter: on pricing effects, 267; on wine-score elasticities and effects, 258–59, 274
Schorske, S., and A. Heckathorn, on brand names, 318–19n.4
Scott Morton, Fiona, et al., theory of wine firm behavior, 187–89
Screaming Eagle label, 4, 176, 220, 243
secondary market, 25, 243, 268–69; auctions, 26–27, 303; vintage and price on, 268
secondary nonalcoholic fermentation, 45
sensory characteristics of wine, 243, 246, 256, 264, 305; clarity and color, 41–42; consumer-trained panel (CTP) approach to determine consumer preferences, 246–48; contingent valuation (CV) approach to determining, 248–50; descriptions of for consumers, 51–52. See also hedonic price approach; smell of wine; taste of wine
Sharp, Andrew, 311n.1
Sherman Antitrust Act, 146
shipping: out-of-state, 131; polyurethane bladders, 106
Shiraz, 247, 255, 277, 278; age-worthy, 268. See also Australian wines
Silver Oak Cabernet Sauvignon, 12
Simi, 294
Simon, Harvey B., on alcohol consumption effects, 317n.12
Simply Naked label, 186
single blends, regulations regarding, 99, 104
small wine firms, 16, 127, 158–59; economies of scale, 199–200, 202, 290–91
smell of wine: aroma compounds, 43–46; nonsensory characteristics affecting, 43–44, 48–51
snob effect, 220–21
Sonoma Mountain region, wines fetching higher prices, 267
South Africa: favorable climate of, 280; natural environment, 280; wine imports, 289; wine production and firms in, 280, 282, 283t.5, 289
Southern Wine and Spirits, 146
Spain: exports of wine, 284; wine consumption in, 214, 281, 283t.6, 285; wine production and firms in, 267, 283t.5, 289
specialized assets, for transaction costs, 191, 193
Specialty Wine Retailers Association, 317n.11
Spencer, Sam, 204
spinning cone method, 122
St. Helena valley, 150
stabilization: and clarification, 35, 95, 96–98; cold stabilization, 96, 97–99. See also clarification
stainless steel tank maturation, 45, 50, 95–96
state licensing and regulation, 128–29; direct shipping laws, 142–45; of distribution and retailing, 128–29, 132, 137, 140; franchise laws, 129–30, 140; often benefitting in-state over out-of-state firms, 143; out-of-state shipping, 131; Supreme Court rulings on, 131, 142–43, 146, 318n.14. See also government regulation
Steiman, Harvey, 254
Steiner, Rudolf, 66
Sterling Merlot, 231
Stigler, George J., theory economic regulation, 318n.23
still wines, 296
Stockton, Diana, 319n.5
storage, 109, 127–28; wine bottles, 194
subsidies, public, 32
sucinic acid, 47
sugar content of grapes, 86, 192, 196; ripeness and, 68–69, 76, 122; wine alcohol content and, 118, 120–21
sugar-to-acid ratios, 49, 66, 67–68, 266
sulfiting wine, 87–89, 102, 179; sulfite-free wines, 67, 313n.27
supply, 79–80, 80; availability and prices of wine, 147, 220–21; cost factors affecting, 32; grape supply cycles, 77–82, 78, 80, 114–15; non-cost factors affecting, 33
supply and demand, 32, 314n.11; analysis of, 27–33, 28, 29, 30; and the bulk wine market, 108–16, 113. See also demand; scarcity; supply
Supreme Court rulings, 131, 142–43, 146, 318n.14; violations of the Sherman Antitrust Act, 146
“survival of the fittest” argument, 17, 170–72
Swedish wine tastes, 251
synthetic stoppers, 101–2
Taber, George M.: on the Chinese wine industry, 297; on claims of terroir, 312ns.12 and 13
tannin, 47, 68, 87, 93, 99; extended maceration extracting, 93
tariffs, 280
tartaric acid, 47
taste of wine: components of, 46–47, 84–85; nonsensory characteristics affecting, 48–51; taste attributes, 47–48, 247–48; taste components, 46–47
taxes on alcoholic beverages, 138, 138–39, 318n.14; state and federal excise taxes (see excise taxes)
Taylor California Cellars, 294
Teague, Lettie: on alcohol content, 317n.29; on grape prices, 312n.10
Tempranillo, 54
Tenuta San Guido Sassicaia wines, 243
terroir: effects on quality, 57, 59–60, 266; Old World emphasis on, 59, 312ns.12 and 13. See also climate; landscape; soil
tertiary aromas, 45–46
Tesco supermarket chain, 118
Texas, 146
Thrane, Christer, 251
Tinney, Mary-Colleen, on market share and pricing, 218, 322n.2
To Kalon vineyard, 184, 206, 312n.10
trade-offs: cost-quality trade-off for consumers, 18–20, 30–31, 210, 214; quantity-quality trade-off in grape yield, 9, 50, 62–63, 76, 107, 217, 273, 292, 299, 300
Trader Joe’s. See large retailers
“trading-up” vs. down, 217, 228–29
transaction costs: and assets (see also capital equipment), 193–94; and asymmetric information, 192, 301; of contracting (see also contracts and contractual arrangements, ), 162, 190–92; of outsourcing (see also outsourcing), 192–95; for specialized assets, 191, 193
Treasury Wine Estates, 16, 295
Trinchero Family Estates, 199
Tsolakis, D., et al., on price elasticities of Australian wines, 223, 227
TTB. See Alcohol and Tobacco Tax and Trade Bureau (TTB)
Turning Leaf label: Pinot noir, 110; price elasticity, 225
Tuscany, Italy, 243
Twenty-First Amendment, U.S. Constitution, 128
types and styles of wine, 84–85; grape-input, 86–87
uneconomic behavior, 300–301
United Kingdom (UK): role in global market, 285; wine consumption in, 283t.6
United States (U.S.): aggregate sales of wine, 210–12, 211, 213; global market participation, 286–87, 319–20n.19; number and size of firms, 289; prices of wine in (see prices of wine; pricing factors; supply and demand); regulatory environment (see government regulation; state licensing and regulation); wine consumption in (see also consumption of wine; consumer preferences), 31, 283t.6; wine exports, 106, 110, 276, 283, 284, 286–87, 307; wine imports, 218, 285, 286, 293; wine production and firms in (see also production of wine; wine firms), 283t.5, 289, 317n.11. See also by firm, state and wine region
utility maximization, 16, 18, 168, 172–73, 187–89, 304; and profit maximization, 16–17, 320–21n.28. See also marginal utility; rational self-interest
variable inputs, 21–23, 116, 195, 202–3, 310n.6
Veseth, Mike: on wine cooperatives, 290; on wine globalization, 324n.8
Vincor label, Canada, 294
vine density, 63
vine viruses, 62
vineyards: age of and yield, 74; land available for, 177; location of, 57–58, 75; terrain and characteristics of, 70–71, 85; variations within, 71, 98–99; water consumption (see also irrigation), 71. See also viticulture and vinification
vintage, 267–73; aging and, 267–68; labeling of vintage year, 267; secondary market effects, 268; weather effects on, 32, 39, 49, 68, 70–71, 81, 263, 268, 272, 303, 312n.11
viticulture and vinification, 53, 60–61, 82, 113, 204, 271, 311n.1; canopy management, 63, 66, 75, 82, 114, 165, 273; the cellar master, 200–201; cultivation and growing decisions, 65–67; factors in locating, 56–60; harvesting decisions, 67–69; irrigation systems, 65, 200; organically farmed, 66; organic farming, 66–67; “overcropping,” 65–66; planting decisions, 63–65; production decisions, 69–71. See also grape growing; independent vineyards; winemaking processes; yield
Vitis vinifera, 54. See also grapevines
wage rate, 309
Wal-Mart, 117
Washington State, study, 248–49; Columbia Valley, 107
waste management regulations, 179
water quality regulations, 179
weather: effects on vintage, 32, 39, 49, 68, 70–71, 81, 263, 268, 272, 303, 312n.11; uncertainty of and risks, 11, 58–59, 63, 73, 74, 76, 82, 114, 165, 297; weather monitoring technology, 197, 200, 313–14n.34. See also climate
websites, 204
Weil, Roman, on wine tasting, 51–52
white wine: artificially colored, 42; bottling of, 315n.21; winemaking process, 92–94
White Zinfandel, 33, 227. See also Zinfandel
Whole Foods, 6; wine buyers and private labels, 117, 155–56
Willamette Valley, 37, 56, 107, 193
William Hill Winery, 295
Williamson, Oliver E., on legal contracts, 164
Wine Advocate, 40, 183, 242, 254, 256, 261
wine as a product, 1–2, 8–9, 301–2; as an agricultural good, 34–35; benefits of moderate consumption, 8, 9, 33, 81, 238, 317ns.10 and 12; as a class of differentiated goods, 37–38; as an economic good, 36–38. See also production of wine; winemaking
Wine Business Monthly, 153, 157
wine consumption. See consumer preferences; consumption of wine
wine cooperatives, 290, 293, 325n.22
Wine Cubes brand (Target), 117
wine firm organizational structures, 153–55, 158, 290–93; cooperatives (European), 290–93, 325ns.22, 25 and 26; corporate (see corporations); limited liability company (LLC), 159–60; partnerships, 116, 151, 155, 159, 319n.13; proprietorships, 7, 158–59, 160, 172, 290
wine firms: concentration and consolidation of (see also acquisitions), 29, 293; concentration ratio measure of size, 157–58; contracting issues (see contracts and contractual arrangements); defining, 5–7, 151–52, 155–56; distinguished from winery (see also winery), 149; investment in (see entrepreneurial investment); kinds of (see wine firm organizational structures); larger (see large wine firms); profit maximization, 7, 16–17, 24, 167–68, 171–72; size and form of organization, 160–61; smaller (see small wine firms); taxes on, 319n.15; theory of wine firm behavior (Scott Morton et al.), 187–89. See also production of wine; wine industry
wine grapes See grapes; viticulture
Wine Group, The, 109, 110, 157, 174
wine industry: economic importance, 2; industry initiatives, 280–81; largest firm (see large wine firms); number and size of wine firms, 154–58; structure and economic organization of, 2–4, 11. See also commodity wine segment; luxury wine segment; premium wine segment; and by nation or firm
wine industry regulations. See government regulation
wine journals: low correlation in wine scores, 256; whether biased toward advertisers, 257. See also Wine Advocate; Wine Spectator
winemaking processes, 35, 50, 98; aging (see also aging of wine), 35, 38; blending (see also blending process), 35, 42, 83, 98–100, 156, 202; clarification and stabilization, 96–98; grape pressing (see pressing grapes); for red wine, 87, 91–93, 94; separation of skins and sediment, 93; for white wine, 92–94. See also clarification; production of wine; stabilization; viticulture and vinification
wine market, 1, 218, 218, 225, 301; direct-search market, 25–26; global market structure, 287–89, 289; large firms dominating (see also large wine firms), 3; secondary market, 243; selling decisions, 173, 174, 270, 304. See also distribution of wine; global market; prices of wine; supply and demand
Wine Market Council, 237–38, 322n.2
winery, 149–51, 156–57; alternating-proprietor winery, 150; bonded winery, 150, 151, 154, 156–57; custom-crush winery, 4, 108–9, 113, 150–51, 155, 161–62, 169, 177, 198, 199–200, 206, 300, 318n.3; licensing of, 150. See also winemaking
wine scores, 182, 236, 253–57, 274, 324n.16; blind tasting method and, 248–49, 251, 254, 255, 256; elasticities in, 258–59; influence on producers, 237, 274–75; as a measure of quality, 255–60, 303; price effects, 258; vs. consumer preferences, 255–56. See also critics
wine snobs, 1, 8, 219–20; “image seekers,” 209
Wine Spectator, 183, 242, 260, 265, 267, 269, 272, 274; wine scores of, 85, 253–56, 275
wine tasting, 51–52; blind tasting method, 248–49, 256. See also quality of wine
Wood, Danielle, and Kym Anderson, on vintners, 271
Yang, Nan, et al., study of blind tasting, 248–49
yeast: dead yeast cells, 96, 98; fermentation and, 35, 90–92; strains and compounds affecting flavors, 36, 39, 44–45, 47, 48, 50, 67, 85, 90–91; undesirable strains of, 48, 87–88
Yellow Tail label, 277–78
yield: factors affecting, 73, 74, 113, 114; per acre, 50, 61–62, 69, 76, 82, 312n.15, 313n.18; quantity-quality trade-off, 9, 50, 62–63, 76, 107, 217, 273, 292, 299, 300; regulations limiting, 179
yield monitors, 71
Zinfandel, 54, 99, 183, 225, 258; grape, 33; grape—and climate factors, 63; lower cost of, 99; red (most common), 258; White Zinfandel, 33, 227