Should consumers pay a premium for sustainable wine? If yes, how much?
According to Sellers (2016), producing sustainable wine is both a challenge to the winery and the marketing team to differentiate the product in the highly competitive market. However, the two most crucial factors are high production cost (25 to 30% higher than conventional wines) and the willingness of consumers to accept this premium. In his survey based on the Spanish wine market, result showed the percentage of Spanish respondents as high as 77.9% were willing to pay the premium of an average of 12.87%. But how can it be compared globally?
The percentage of willingness to pay customers were off to a good start but it seemed the selling price would not be economical sustainable to the winery. What can wineries do to increase the amount of premium to pay on these 77.9% consumers? If we think critically, there are vast amount of factors such as cost of certification; fine wine sectors which many had good reputation may had already started sustainable practices; consumers’ behaviour towards wine quality and health (Fanasch & Frick, 2020).
Why it matters
Wine business, like other food industries is also driven by market and regulatory forces to become sustainability. As such, environment, social and economic problems relating to the wine industries become magnified. To overcome these concerns, wine companies had to incorporate sustainability within their supply chain as a means of differentiation to maintain or increase productivity and competitiveness (Pomarici & Vecchio, 2014).
What about New Zealand?
References
Fanasch, P., & Frick, B. (2020). The value of signals: Do self-declaration and certification generate price premiums for organic and biodynamic wines?. Journal of Cleaner Production, 249, 119415.
Lawson’s Dry Hill Launch New Wines. Lawson’s Dry Hills. https://nzwinedirectory.co.nz/lawsons-dry-hill-launch-new-wines/
Pomarici, E., & Vecchio, R. (2014). Millennial generation attitudes to sustainable wine: An exploratory study on Italian consumers. Journal of Cleaner Production, 66, 537-545.
Sellers-Rubio, R., & Nicolau-Gonzalbez, J. L. (2016). Estimating the willingness to pay for a sustainable wine using a Heckit model. Wine Economics and Policy, 5(2), 96-104.
Sellers, R. (2016). Would you pay a price premium for a sustainable wine? The voice of the Spanish consumer. Agriculture and agricultural science procedia, 8, 10-16.
Sharon L. Forbes, David A. Cohen, Ross Cullen, Stephen D. Wratten, Joanna Fountain.(2009).
Consumer attitudes regarding environmentally sustainable wine: an exploratory study of the New Zealand marketplace,Journal of Cleaner Production,Volume 17, Issue 13
Schäufele, I., & Hamm, U. (2017). Consumers’ perceptions, preferences and willingness-to-pay for wine with sustainability characteristics: A review. Journal of Cleaner production, 147, 379-394.
Veseth, M. (2019). Is Sustainable Winegrowing Sustainable? The Wine Economist. https://wineeconomist.com/2019/07/23/sustainability-2/
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ReplyDeleteThis is a very practical topic. We research and learn how to put the concept of sustainable and organic wine into the production process, but in the end, the best feedback is consumer demand and popularity. It is great to read about the recognition and acceptance of environmentally sustainable wines by New Zealand consumers. This is an encouragement to the development trend of the entire industry.
ReplyDeleteThere is a similar survey in Germany by Hauck, K., & Szolnoki, G. (2020), most wine consumers were unaware that the wine was organic when they were buying wine. More importantly, widespread suspicion and lack of knowledge about organic wine undermined the positive demand for these products. Therefore, to improve consumers' willingness to buy organic wines needs to increase the visibility of sustainability and organic certification, and carry out more publicity activities to improve the public image of organic wines. Obviously, New Zealand is doing very well.
Reference:
Hauck, K., & Szolnoki, G. (2020). German Consumers’ Perceptions of Organic Wine—A Qualitative Approach. Sustainability, 12(18), 7729.
Yes, the lack of knowledge could be the key of not able to bring more movement towards production of sustainable wines (including organic and biodynamic) and putting an acceptable price tag. Apparently, there are more findings required to understand about biodynamic, organic and conventional wine sectors in term of sensory, regional/origin and motivation attributes upon which the additional price becomes relevant. Each and every market has their set of perception and economic value towards these products which wine marketers have to survey and study in order to sell their wines.
DeleteAccording to Di Via et al (2019) study conducted in Sicily (Italy), still largely pointed out the lack of knowledge among consumers about organic wines and the unwillingness to pay more. Sensory attributes has no positive relation between ‘color’, ‘taste’, ‘aroma’ and willingness to pay an additional price. However, findings also show consumers who are willing to pay more for organic wines have less concerns for origin and brand but have greater concerns for personal motivations such as environmental protection, distinctness and curiosity - acclaimed brand and locally produced.
This research was only conducted in Sicily (Italy), and is worthwhile replicating for globally for comparison.
Reference:
Di Vita, G., Pappalardo, G., Chinnici, G., La Via, G., & D'Amico, M. (2019). Not everything has been still explored: Further thoughts on additional price for the organic wine. Journal of cleaner production, 231, 520-528.
This question can be observed from different sides. If we considering the winemaking process itself, sustainable wineries use less or no artificial additives at all. They also minimise the manipulations with wine, allowing wild yeast fermentation to occur and development of unique wine profile (BIO WINES VS WINES OF CONVENTIONAL AGRICULTURE, 2018). But it doesn’t make the job easier for winemakers, more likely opposite. Sustainable winemakers must keep precise control over their natural ferments and wine maturation in general, keep the quality up to a standard. The difference between harvests can be seen in naturally made wines; they represent a particular year with its aspects and impact of climate on fruit. Thus, sustainable wines provide exclusivity of the product and assurance in its quality; it is so-called the most ‘true wines’. Considering all those facts, higher cost for sustainable wines is expected and well deserved. And people who can appreciate the high-quality wine will not hesitate to pay a deserved price, as they are well aware of the philosophy and approach that lays behind.
ReplyDeleteReferences
BIO WINES VS WINES OF CONVENTIONAL AGRICULTURE. (2018, September 13). Villa Yustina. https://villayustina.com/en/bio-wines-vs-wines-of-conventional-agriculture/
This is a hard one because there are many factors such as brand, location and personal preference that influence whether or not consumers are willing to pay more for a bottle of wine regardless of sustainability, but I agree consumers should pay more for sustainable wine. Sharon Forbes (Forbes et al., 2009) research is very interesting and good to see that consumers are willing to pay extra for sustainable products.
ReplyDeleteBriana Tomkinson article in The Grapevine Magazine (Cyndi, 2020), talks about the popularity and growing interest around sustainable wine and how the willingness to pay more is increasing. This interest is particularly growing within the Millennials and Gen Z generations. This leads me to believe in the coming years when the market is more dominated by those generations there could be a big sway towards sustainable winegrowing and the willingness to pay higher prices.
As a group Gen Z and millennials are more committed to sustainable products then that of the older generations and could potentially be the ones to change the old ways of wine making (Lucas, 2020).
References
Lucas, A. (2020, December 15). Millennials and Gen Z Could Save the Wine Industry. Wine Enthusiast. https://www.winemag.com/2020/12/15/millennial-wine-market/
Cyndi. (2020, February 26). Sustainable Wineries Attract More Consumers. The Grapevine Magazine. https://thegrapevinemagazine.net/2020/02/sustainable-wineries-attract-more-consumers/
Forbes, S. L., Cohen, D. A., Cullen, R., Wratten, S. D., & Fountain, J. (2009). Consumer attitudes regarding environmentally sustainable wine: An exploratory study of the New Zealand marketplace. Journal of Cleaner Production, 17(13), 1195–1199. https://doi.org/10.1016/j.jclepro.2009.04.008
Thank you for your comment Jennifer Lee
DeleteThere are so many factors that influence the price of wine. Consumers should bear some of the cost implications for creating sustainable wines but nether less the responsibility lies with the winegrowers / companies. An interesting outcome from a survey in 2015, concluded that 89.2% winegrowers didn’t take up sustainable practices to increase revenue, it was a way to reduce environmental impacts This is important as I believe winegrowers should do the right thing for the land so that future generations can use it instead of immediate economic reasons.
It is not only Millennials and Gen Z that are more likely to pay more for sustainable wines but also those who are educated and have bought eco-labelled wines before. I think it is important for the sustainability message to be shared so that more people become aware of it and think about it when choosing a bottle of wine. Luckily New Zealand Winegrowers are on an active mission to share our sustainability story with wine influencers and consumers all over the world.
References
Baird, T., Hall, C., & Castka, P. (2018). New Zealand Winegrowers attitudes and behaviours towards wine tourism and sustainable winegrowing. Sustainability, 10(3), 797.
Tait, P., Saunders, C., Dalziel, P., Rutherford, P., Driver, T., & Guenther, M. (2019). Estimating wine consumer preferences for sustainability attributes: A discrete choice experiment of Californian Sauvignon blanc purchasers. Journal of Cleaner Production.
Hi Guys,
ReplyDeleteWhat an interesting and thought provoking topic! Thanks for the insight into what you have found.
If wine production costs more to achieve sustainability wise, then surely the consumer should pick up this cost, right? Otherwise, how is it economically viable to uphold wine production in such a way?
Sustainability in the wine industry is key to ensuring the continuity of safeguarding the industry to enable future generations to continue this legacy (Sellers-Rubio & Nicolau-Gonzalbez, 2016). The continuous argument surrounding economic viability of such methods, means that consumer education surrounding environmental benefits results in the consumer being more willing to pay a premium for sustainably produced products (Sellers-Rubio & Nicolau-Gonzalbez, 2016).
In terms of the consumer’s behaviour towards purchasing sustainably produced wine, several factors influence their decision making depending on the type of environmental product being considered (Rahman, 2018). Marketing needs to take this into consideration when advertising sustainably produced wine, as it affects the consumer’s willingness to pay more (Rahman, 2018).
I think it comes down to consumer education, surrounding why we need to produce wine sustainably, to enable consumer’s to make an informed decision when purchasing wine (Anonymous, 2008). The majority of wine consumer’s do seem to care about sustainably produced wine, but education and marketing is lacking in this area (Anonymous, 2008).
Thanks,
Sarah
References
Anonymous. (2008, May 14). Video: Core Wine Consumers Interested in Sustainable Wines, But Find They Are Not Always Clearly Marked, Available: Educational campaign will help consumers easily identify certified sustainable wines. PR Newswire. http://search.proquest.com/docview/446872247/abstract/D3E86D6ED59B435BPQ/1
Rahman, I. (2018). The Interplay of Product Involvement and Sustainable Consumption: An Empirical Analysis of Behavioral Intentions Related to Green Hotels, Organic Wines and Green Cars. Sustainable Development, 26(4), 399–414. https://doi.org/10.1002/sd.1713
Sellers-Rubio, R., & Nicolau-Gonzalbez, J. L. (2016). Estimating the willingness to pay for a sustainable wine using a Heckit model. Wine Economics and Policy, 5(2), 96–104. https://doi.org/10.1016/j.wep.2016.09.002
Hi Sarah,
DeleteYou have made many relevant points here, in particular pointing out generation of wine consumers. An interesting study conducted by Wolf et al (2005) in California comparing Generation X, Y and Baby Boomers showed diverse purchasing behaviours.
Segmentation of sustainable wine consumers in California (Wolf & Higgins, 2017) showed at least 42% of wine consumers rated sustainable wine as desirable. High percentages of these sustainable wine consumers are female, married, and well educated; more than 50% of them understood about sustainable wine production; 25% of them thought organic and sustainable were same; and lastly 90% of them were inclined to pay a premium of over USD5.00 to purchase a sustainable produced wines.
Although this research was only carried out in California, it highlighted the importance in further understanding wine consumer behaviours towards sustainable wines. Clearly, not all sustainable wine consumers understands the differences of biodynamic, organic and sustainable wines. The increment of educational campaign will definitely boost the confidence of these consumers and hopefully influence those who were not aware.
References:
Wolf, M. M., Carpenter, S., & Qenani-Petrela, E. (2005). A comparison of X, Y, and Boomer generation wine consumers in California. Journal of food distribution research, 36(856-2016-57473), 186-191.
Wolf, M. M., & Higgins, L. M. (2017). Segmenting the Sustainable Wine Consumer. Journal of Food Distribution Research, 48(1).
Hi Guys!
ReplyDeleteI think you have chosen a really important topic that is becoming more and more relevant in the world of today. I agree that producing sustainable wine that consumers will love is a hugely difficult task to undertake however, I think that the more we understand what consumers are actually looking for in a wine, the better we will be able to market sustainable wine to them.
A study conducted by Di Vita et al., 2019, investigated to what extent consumers are inclined to pay more for organic wine. Overall results showed that consumers were indeed willing to pay an additional price for organic wine compared to conventional wines.
An interesting aspect of this study was that it investigated the motivations behind purchasing organic wine. The results showed that ‘curiosity’ is a major factor in consumers motivation to purchase organic wine. Other leading motivations included ‘distinctiveness’ and ‘environmental protection’.
What this tells us, is that consumers are seeking more knowledge of organic and other sustainably produced wines, and that as an industry we need to provide this information to the consumer in order to broaden the consumption of sustainably produced wines.
I really enjoyed the facts and statistics that this blog post provided, thank you for sharing. I’d love to hear your thoughts on my comments. Cheers
References
Di Vita, G., Pappalardo, G., Chinnici, G., La Via, G., & D’Amico, M. (2019). Not everything has been still explored: Further thoughts on additional price for the organic wine. Journal of Cleaner Production, 231, 520–528. https://doi.org/10.1016/j.jclepro.2019.05.268
Interesting topic as it is very difficult to put a number on what sustainability produced wine should be worth compared to conventional wine. In a Wine Institute study done last year consumer and trade research showed an increased demand for sustainably produced wines particularly by Millennials and Gen Z. Sustainably produced wines had the highest future purchase consideration of 71% with Millennials leading the way in purchasing sustainably produced wine with 9 out of 10 willing to pay more by an average of US $3 per bottle. (Wine Institute, 2020). When choosing wine the importance of them being produced sustainably increased from 21% in 2016 to 32% in 2019 (Wine Institute, 2020) so even though sustainable wine producers might not be seeing the benefits yet if trends continue this way it might not take long for it to change.
ReplyDeleteWine Institute. (2020). Consumer & trade research shows increased demand for sustainably produced wine. https://wineinstitute.org/press-releases/consumer-trade-research-shows-increased-demand-for-sustainably-produced-wine/
This was a good read, made some good points. As such it is no surprise that the research conducted by Forbes et al. (2009) indicated that New Zealand consumers show a preference towards cleaner products given New Zealand’s reputation of ‘clean and green’ and attitude towards agriculture in general. However the research referred to another completed by Peattie (2001) that found that around a third of Americans believe that green products were technically inferior to those produced without any environmental care and Scott et al. (2007) suggested that consumers do have a somewhat high awareness of organic wines however it has not translated to significant purchasing demand; Jack (2008) reports that only 11% of UK food purchase decisions are significantly influenced by the ‘green’ factor. Another research conducted on German households found that despite the positive attitude towards environmentalism the price of organic wines act as an effective barrier for low income households.
ReplyDeleteReally this tells us there is still a long way to go, if consumers are not purchasing sustainable products then the option becomes non-viable as it cannot support itself. So potentially until there is a major shift in consumer purchasing, automatically seeking a higher price for sustainable wines may be a hinderance to getting a change in the industry rolling. As it is now, is there potential for sustainable wines to be dismissed as a fad and lose the benefits of sustainable viticulture practices as the market moves on? Should wineries focus on getting knowledge to the consumers to stop this from happening? Would love to know what your opinions on this are.
Reference:
Forbes, S. L., Cohen, D. A., Cullen, R., Wratten, S., & Fountain, J. (2009). Consumer attitudes regarding environmentally sustainable wine: an exploratory study of the New Zealand marketplace. Journal of Cleaner Production, 1195-1199.
Peattie, K. (2001). Golden Goose or WIld Goose? The hunt for the green consumer. Business Strategy and the Environment , 187-199.
Schaufele, I., & Hamm, U. (2018). Organic Wine Purchase Behaviour in Germany: Exploring the attitude-behaviour-gap with data from a household panel . Food Quality and Preference , 1-11.
Scott, J. (2007). The impact of ethical consumers for Australian wine . Australian and New Zealand Wine INdustry Journal, 40-44.
Hi Finn, Geoff and Henri,
DeleteThere are definitely a pool of wine consumers that are aware of sustainable wines and also willing to pay. Study conducted by Driver et al (2019) on Californian sustainable Sauvignon blanc consumers clearly segmented out this group of wine consumers. They could be the key drivers of helping New Zealand winegrowers and producers to shift from conventional to organic winegrowing. While this is only possible because SWNZ had incorporated sustainable wine practices into New Zealand with a good standardised system.
Szolnoki's (2013) study on comparison of sustainability in the wine industry across 7 cross-national found that there were many more underlying confusion and disputes among not just consumers but also the winegrowers in France, Germany, USA, Hungary, Italy, Greece and Spain. Sustainability wine production is a dense topic and there are till date no standardisation internationally (unlike ISO and HACCP); every country has their own labels, laws and management system or none; there is always lack of information and transparency.
References:
Driver, T., Tait, P. R., Rutherford, P., Li, X., Saunders, C. M., & Dalziel, P. C. (2019). Consumer preferences and willingness-to-pay for sustainable wine products: Incentives for improving environmental management practice for New Zealand winegrowers.
Szolnoki, G. (2013). A cross-national comparison of sustainability in the wine industry. Journal of Cleaner Production, 53, 243-251.
It's such an interesting but important topic for our industry.
ReplyDeleteI am not sure if customers should pay a premium for the sustainable because of the additional costs come with sustainable practices. Because sustainable practices not only provide environmental and social benefits, but it also should come with economic benefits from reduces input costs and/or increase returns (Pomarici et al, 2015).
Sustainability has been a fundamental part of the New Zealand wine industry for over 20 years. As one of the new-world wine country, SWNZ has worked hard to differentiate our product and enhance our reputation. More and more customers willing to pay premium for sustainable wines reveals the economic benefits of sustainability and the increased competitiveness of NZ wines. Therefore, I do agree that consumers should pay premium for sustainable wine because this is one of the goal of our industry being sustainable and the economic benefits will in return encouraging us to do more for our planet and people.
when we look at the supermarket sales in Blenheim, we still selling much more cheap Australian wine than local sustainable wine by bottles and normal label sales even more than organic label within same brand. the price may just got $1-2 different, but most customer would honestly take the cheaper one. therefore, changing the process to bring the price point down to same level may be more convince winery to adopt sustainable.
ReplyDeleteGreat Topic and Great research! Wine and sustainability together are a fairly newest concept.
ReplyDeleteTo start with if we put ourselves in consumer shoes considering how complex is sustainable consumption is to the everyday consumer not just in context with wine it’s about everything else you see e.g., Energy, clothing, transport and waste and many more… it’s a stage where consumers start to have a sense of confusion as they don’t have enough knowledge about what sustainability is?
Having a sustainable certification is an opportunity but it also has its limitations, which need to be carefully applied across different spaces and consumers. Wine consumption as you already know it is complex it’s hedonic and have both personal and social influence on consumers. It gives you a deep dive in consumer attitudes. There have been many research groups surveys which finds consumers are willing to pay a price premium and some don’t, some consumers are willingness to pay more for sustainability if that is warranted. The main factor is the company and how they spread the knowledge to explain sustainability to consumers trust and will they actually do what they say, because consumers can get socially influence and how influencing judged by others
Barrows, L., (2019, October 24). Consumer responses to sustainability certification in the wine industry. (n.d.). The Australian Wine Research Institute. Retrieved February 21, 2021, from https://www.awri.com.au/industry_support/courses-seminars-workshops/webinars/resources-consumer-responses-to-sustainability-certification-in-the-wine-industry/
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ReplyDeleteSummary
ReplyDeleteA winemaking process that protects the environment, supports the social responsibility , maintains the economic feasibility, and produces wine is known as sustainable wine production. There are different organisations that helps winery to make sustainable wines and try to protect the environment. The production cost of a wine made sustainably is more than a wine made conventionally. Which means the sustainable wine will be more expensive. But the question is, does the costumers want to pay more for a wine which was produced sustainably? To find the answer for the question, the blog was written. The blog started with a survey of the Spanish wine market and the results were that most of the costumers were willing to pay more in Spain for a sustainable wine. The importance of the sustainability was also discussed in the blog and the NZ was market was reviewed in the blog.
Our blog raised several points regarding wine as a differentiated product among foods, cost of production and amount of premium consumers are willing to pay to keep sustainable wine production sustainable for both wine producers (business) and consumers (supply chain). In New Zealand, most if not all NZ wines were made under sustainable practices due to wineries were (SWNZ) registered members. It was pleasant to know that 80 percent of the customers in Sharon’s (2009) study are willing to pay more for a wine that was produce sustainably. There were also about 50 percent of consumers who think quality of wine are the same regardless of, if they were produced sustainability, aware or unaware that most of the wine produced in NZ are sustainably produced. Half of the costumers in America check the logo of sustainable wine before they buy. The logo which says the wine is made using sustainable techniques is usually seen by the costumers before purchasing any wine.
The consolidated comments we received had few points in common – 1) lack of knowledge (differences in terms of biodynamic, organic, and sustainable wines), 2) not able to verify the production method hence not able to value the credentials, 3) consumers’ perception and expectations such as quality and sensorial experience and 4) the purchasing trend of different age generations (baby boomer, Gen X and the millennial). 5) Lack of marketing of sustainable wines.
On the positive side, the trend is shifting towards supporting sustainable wine production with younger generations being curious, well-educated, and also more aware of environmental protection (Wolf & Higgins, 2017).in order to educate the costumers who do not have the understanding of the term sustainable it could be done through some advertisements. With social media more reachable, it is not difficult for wine companies to start marketing campaign to educate customers about how supporting sustainable wines can benefits the current and future generations.