An Organic Discount?

For most products, an “organic” label results in a significant price premium. However, a new study finds that the opposite is true for California wines labeled as “made from organically grown grapes.” California wines made from organic grapes are generally better, as measured by ratings in Wine Spectator, and command a price premium of about 13%-as long as the wine doesn’t carry an organic label. The higher rating, and subsequent price premium, is due to the higher quality of wines made from organically grown grapes. “Growers have to devote more time and attention and take better care of organically certified vines than conventional vines, and our results show that these efforts are apparent in the product,” says Magali Delmas, the study’s lead author. But once vintners slap an eco-label on the bottle, the price premium disappears (although the wines still carry a higher Wine Spectator rating). Laura Grant, Delmas’s coauthor, suspects the price difference is due to consumer confusion over organic wine (which is made without chemical preservatives), and wine made with organically grown grapes (which does contain preservatives): “Organic wine earned its bad reputation in the ’70s and ’80s. Considered ‘hippie wine,’ it tended to turn to vinegar more quickly than non-organic wine. This negative association still lingers.” Vintners seem to be aware of the price penalty – two-thirds of vintners who use organically grown grapes do not label their wines as such.[%comments]

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  1. Bruce says:

    Reading through the authors’ paper in its current form, I wondered:

    - was the 13% premium for wines that had undergone certification related to consumer preference or the winemaker’s price demand for a product he/she considered worth more?

    - wine ratings, and wine pricing, are all over the board. I’m not convinced that the Wine Spectator ratings are a relevant measure of quality (nor are the self-reported anecdotes of growers). Might have to try and correct for other variables: purchase locations, production volume, marketing, etc.

    - the mention of biodynamic ag/wines may only confuse the research…except as an indicator that perceptions may be founded on little or no information.

    - I love the statement that people may be interested in purchasing certified wines as an alternative to contributing to environmental organizations; sign me up!

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  2. Spencer Mills says:

    Part of the reason people may not be willing to pay as much for eco friendly wine is the mistaken assumption by new buyers that the technology associated with cultivating eco friendly wine is new and relatively untested in the long term. Wine is something that requires a lot of time and patience and if buyers are willing to spend a considerable amount of money in a recession then they are going to make sure they get their money’s worth.

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  3. Thom says:

    Organic wine may have been around for many years, but only recently has it become easy to find. Since consumers aren’t used to seeing these wines they probably perceive them as new.
    New ideas (even if they aren’t new at all) are scary to wine consumers. Most people buying wine are just trying to not screw up. Those people pay less money for the unknown.

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  4. avirr says:

    I always assumed that they’d be more expensive than conventional wine. Plus I am not an oenophile and often find low-cost wine as good as the high end.

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  5. Jonathan Beacher says:

    With wine, taste is everything. Whether or not the wine is likely to taste good makes the majority of the decision to purchase the bottle.

    I think what’s at play here is that consumers infer from the ‘organic’ label that the taste is of largely secondary importance (the possibly-derived-value) to the ecological attributes of the drink.

    I was born in ’88 and certainly don’t associate organic wine with the hippie movement of the 70s. Nor is it likely the growingly younger demographic of wine drinkers do.

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