Pricing behaviour of the New World wine exporters

Abstract

Purpose In recent decades, New World winemakers have increased their wine export to European markets and became considerable market players in the EU. Therefore, this paper aims to explore whether the major New World wine producers are able to exploit its market power at European destination markets. Design/methodology/approach The paper applies the pricing-to-market (PTM) model of trade in respect of asymmetric effect of exchange rate changes by using monthly bilateral wine data between January 2000 and December 2016. Findings First, there is evidence of PTM in three New World wine exporters, namely, Chile, South Africa and the USA. Chile was able to apply price discrimination across Danish, German, Dutch and the British wine markets. Second, South Africa set their prices in Belgian, Dutch and Swedish markets, while the USA discriminated their wine prices in Denmark and Sweden. In contrast, this advantage was not observable in the case of Argentina and Australia. Third, the local-currency price stability was explored in Chilean wine import prices (exported to Belgium, the Czech Republic), South African wine prices (exported to France, Denmark, Germany), in US wine prices (sold in Germany and the UK). Furthermore, the analysis of the asymmetric effects of exchange rate changes suggests that depreciation of the exporter’s currency relative to the Euro had not a significant impact on EU wine import prices. On the whole, the estimated pricing to market model indicates that a non-competitive pricing behaviour of New World exporters was limited and was rather due to the market-specific characteristics. Research limitations/implications The research provides multiple advice for New World wine producers. First, in general, European consumers do not pay an extra price for the New World bottled wines. Second, only Chilean, South African and North American wine exporters can expect higher prices for its wines from European buyers only. Moreover, European wine markets are fairly competitive where New World wine exporters do not have significant market dominance. Therefore, New World wine exporters should strengthen its wine marketing and branding strategy to gain higher market share in Europe and to attract attention to its wines. Finally, exchange rates relative to Euro should be continuously monitored by the New World wine exporters because it might deviate the wine export prices significantly. Originality/value The study applies the pricing-to-market model to major New World wine exporters on the European Union’s destination market. The paper also makes valuable contributions to the wine literature by testing the asymmetric effects of exchange rate changes on wine import prices. It analyses the nature of price discrimination, whether it is market-specific or exchange rate influenced, or both.

A dynamic analysis of wine pricing in Argentina

“…Considering the effects of costs: gasoline cost variation positively affects pricing. Argentina is a relevant wine producer and consumer, with 80% of production locally consumed while struggling to export more (Balogh, 2019). The contribution analyzes data collected from online stores looking for patterns in dynamic wine pricing in the retail market.…”

“…Despite this, the wine industry expanded with new grapes and production in nontraditional regions. It also exports to the international market and struggles to become an even more important player (Balogh, 2019). Consumer profile in the country might show four distinct segments according to socioeconomic level and age: experts (high income, older), aspirational (high income, younger), traditional (low and mid-income, older) and beginners (low and mid-income, younger) (Ocaña, 2006).…”

Policy Success in Canada

“…In 2020, an export strategy was designed by the BC Wine Institute (British Columbia Wine Institute, 2020) with cooperation from all actors, and significant financial support from Ottawa. Following the examples of Australia and New Zealand, the industry increasingly looks at complex and long-term strategic approaches (British Columbia Wine Institute, 2019) and attempts to break into the large yet complex European market (Balogh, 2019). While Ontario and British Columbia remain the strongest players, the Québec government also increased its support policies starting in 2013 when it bolstered financial support to wine makers from $125,000 per year to $300,000.…”

The quality of the Argentinean Malbec and the weather in the Mendoza region

“…Other authors have explored the importance of implementing a reliable geographical indication system to help promoting the Malbec (Defrancesco et al , 2012); the potential benefits of producing organic wines (Zilber et al , 2010); and the pricing behavior of New World (e.g. Argentina, Chile and South Africa) wine exporters (Balogh, 2019). In summary, the wine quality of the Argentinean Malbec has not been directly studied yet.…”