The following article, by Eddie Oczkowski from the School of Accounting and Finance at Charles Sturt University, summarises a paper he recently published in the International Journal of Wine Business Research. It describes recent efforts to determine if there are price premiums associated with the use of synonyms for some varietal names in Australia, such as Sauvignon Blanc and Fume Blanc, or Shiraz and Syrah.
As is well known, all wines are different. For wines identical in every respect the old adage ‘no two bottles are alike’ often applies. In general though, numerous features differentiate wines including grape variety, grape region source, production and maturation methods, vineyard practices and vintage. Significant research in marketing and economics has examined wine choice in the context of these varying attributes.
An aspect of wine differentiation which appears to have been under-examined is where a wine producer has freedom to choose among alternative names for a particular wine variety. In other words, a specific wine variety is employed in production but regulations may permit the choice of alterative names to appear on the wine’s label. The case is interesting as the choice of names may be strategically made for ‘marketing’ reasons to attract a higher price, rather than for wine stylistic or actual wine composition reasons.
For wines made in Australia, legislation controls the type of information that can be used in naming a wine (see Wine Australia’s ‘Compliance Guide for Australian Wine Producers’). Regulations govern wine label information on brand name, year of vintage, geographic region and grape variety. It transpires that for a unique grape variety, a producer in some cases can strategically choose the grape variety name that appears on the label. The International Organisation of Vine and Wine (OIV) lists vine varieties and their synonyms permitted for use by Australia. Grape varieties are listed alphabetically according their prime names and acceptable synonyms. A major question of interest is are there clear differences between wines which have alternate wine variety names and, in particular, are their price premiums associated with some synonym varietal names compared to their prime names?
To assess the impact of variety name choice we examined wines sampled in James Halliday’s Australian Wine Companion over the annual guide publication years of 2011 to 2016. Three alternative names for varietals were identified as being in prominent use in Australia: 1) Sauvignon Blanc (prime name) and Fumé Blanc (synonym); 2) Pinot Gris (prime name) and Pinot Grigio (synonym); and 3) Shiraz (prime name) and Syrah (synonym). For Sauvignon Blanc, about 4% of wines were labelled as Fumé Blanc. For Pinot Gris, about 40% of wines were labelled as Pinot Grigio. For Shiraz approximately 4.5% of wines were labelled as Syrah. In terms of time trends only the use of synonym Syrah has increased in use with the number of sampled wines doubling from 45 in 2011 to approximately 90 in 2016, (Oczkowski 2018, p187).
Some interesting general trends are indefinable for distinguishing wines in terms of prices, Halliday quality scores, vintage, cellaring potential and the like. In general and on average, Fumé Blanc commands a higher price, attracts higher ratings, is released later and has a longer cellaring potential than Sauvignon Blanc. Pinot Grigio commands a lower price, attracts lower ratings, is released earlier and has a shorter cellaring potential than Pinot Gris. While, Syrah commands a higher price, attracts higher ratings, is released earlier and has a longer cellaring potential than Shiraz, (Oczkowski 2018, p190)
Variation also exists in the regional source for the varieties. Compared with Sauvignon Blanc, Fumé Blanc appears to be in greater use in some cool climates such as: South West Australia, Port Phillip Zone and Yarra Valley. Even though Pinot Grigio is extensively used across Australia the greatest use of its name appears to be in warm climate areas such as the Big Rivers Zone, NorthEast Victoria and warmer parts of South Australia. The use of Syrah appears to be most prominent in cool climate areas such as the Yarra Valley, Mount Barker, Adelaide Hills and Mornington Peninsula (Oczkowski 2018, p190)
Of potentially most interest to wine producers is the identification of any price premium associated with the use of a varietal synonym name. A simple comparison of average prices of the alternate names fails to provide accurate evidence of the price premium as other factors also influence price. Prices may differ because of quality differences, grape region, cellaring potential and vintage differences. In other words a Syrah may have a higher price than a Shiraz not because of the name employed but because of a substantial quality difference. To adequately control for these other factors, we estimated hedonic wine price models using regression analysis which recognise these other factors that influence price to identify the price difference due to the use of the varietal wine synonym name alone.
Hedonic price function results across the six years (2011-2016) suggest that the largest premiums are associated with Syrah rather than Shiraz with an average annual premium of 27%. The next largest average premium is 14% associated with Pinot Gris rather than Pinot Grigio. While the smallest premium is 9% associated with Fumé Blanc rather than Sauvignon Blanc. In terms of time trends only the premium for Fume Blanc has fallen off over more recent years.
It is of interest to comment on whether these price premiums between names is primarily driven by marketing considerations or has some sensory substance. There are some expectations about the stylistic differences between these alternate varietal names. Fume Blanc is expected to be more ‘woody’ than Sauvignon Blanc. Pinot Gris is luscious, while Pinot Grigio is crisp. Shiraz is full bodied and bold while Syrah refined and elegant. There is some evidence however to suggest these difference may not always be apparent. A number of tasting notes published in the Grapegrower & Winemaker’s sister publication, the Wine & Viticulture Journal, suggest that significant sensory differences may not exist. For example, tasting commentary suggested that Fumé Blanc was as much a marketing term as opposed to a varietal term. While for Pinot G, tasters said whether a wine was labelled Pinot Gris or Grigio was no guide as to the style inside the bottle. An analysis of wines in the Australian Wine Companion points to many examples of Syrah wines being described as full-bodied, powerful, strong tannins, deep and dense.
A common feature of the three identified premiums is Frenchness and this is consistent with some previous marketing literature on brand names and the use of French associated names for hedonic products such as wine. The implications of these results for producers may be important. The costs of changing the varietal name on a label are relatively low and it appears that no significant stylistic changes are needed to ‘justify’ a varietal name change. If only a small number of producers make name switches for these varieties then the price premiums maybe largely unaffected (Oczkowski 2018, p198). Clearly, however, if we all make the change then premiums are lost.
The full article is published as: Oczkowski, E. (2018) The impact of different names for a wine variety on prices. International Journal of Wine Business Research 30(2):185-200.