Introduction to the Issue
(FULL TEXT PDF)
This issue of the Journal of Wine Economics opens with “Alcohol Consumption in the United States: Past, Present, and Future Trends” by James Fogarty and Derby Voon (Fogarty and Voon, 2018). The authors examine long-run changes in U.S. alcohol consumption patterns at the state level and present forecasts for per capita consumption of beer, wine, and spirits in 2022, employing ARIMA. They find that, for about 30 years beginning in the early 1970s, there was a clear trend towards increased convergence in both the level of consumption and the consump- tion mix among U.S. states for. However, since the early 2000s, the opposite has been true, and consumption levels have dispersed. The authors forecast a further increase in dispersion rather than convergence in per capita consumption. Although beer has been the dominant alcoholic beverage in most states, this dominance is likely to weaken. Per capita wine consumption is predicted to increase by 2022, but will not exceed a market share above 45%, measured in grams of ethanol, in any state.
Florine Livat and Hervé Remaud analyze “Factors Affecting Wine Price Mark-up in Restaurants” (Livat and Remaud, 2018). Drawing on 1,869 price observations from 267 restaurants they regress the percentage mark-ups on various wine and res- taurant characteristics. They find that a sommelier’s experience or having a somme- lier at all does not influence a restaurant’s wine price mark-up. Likewise, the regression results suggest that mark-ups decline with increasing (wholesale) price of the wine; expensive wines exhibit smaller mark-ups. In contrast, restaurant char- acteristics such as being associated with a hotel, high meal prices and various meal style characteristics all exert a positive effect on the mark-up.
In “Wine Cycles in South Africa,” Nick Vink, Willem H. Boshoff, Johan Fourie, and Rossouw van Jaarsveld (Vink et al., 2018) shed some light on the economic history of the wine industry in South Africa. Drawing on several sources, the authors first construct a harmonized production time series starting in 1700. They then relate the various production cycles with cycles in real GDP per capita over the same period, matching it to the historical narrative. “In this regard, a 300-year annual data series of South African wine production explains the evolution not only of one of the largest agricultural sectors, but of the South African economy in general” (p. 182).
The fourth paper, entitled “Hoppiness Is Happiness? Under-fertilized Hop Treatments and Consumers’ Willingness to Pay for Beer,” by Gnel Gabrielyan, Thomas L. Marsh, Jill J. McCluskey, and Carolyn F. Ross (Gabrielyan et al., 2018) focuses on the effects that different nitrogen regimes have on the perceived quality of hops and its impact on the willingness of consumers to pay for beer in an experimental setting. Their research question is somewhat related to the low yield– high quality assumption (or myth) for wine. Similar to the findings of Matthews (2015) and Uzes and Skinkis (2016) for wine, Gabrielyan et al. do not find any negative correlation between hops yield and beer quality. “The results indicate that uninformed consumers in a blind tasting could identify the differences in beer made from hops across the fertilization treatments and, thus, implying that all else equal sufficient fer- tilizer is required to achieve satisfactory hoppiness for which consumers are willing to pay” (p. 160).
The last paper of this issue, authored by Kym Anderson and Kimie Harada (Anderson and Harada, 2018), examines “How Much Wine Is Really Produced and Consumed in China, Hong Kong, and Japan?” The authors find that production and consumption data in these countries are exaggerated for several reasons. First, imported bulk wine is often added to domestically produced wine without being declared on the label; similar issues arise from wine made from imported grape juice concentrate. Second, wine is often double-counted, that is, domestic wine pro- duced in one region of the country may be blended with wine produced in another region, with both regions claiming it as their contribution to national production. Third, some smuggled wine re-exports and imports are unrecorded. Overall, the deviations between officially reported and calculated production data in both China and Japan are non-trivial, suggesting that “foreign suppliers may face consid- erably less competition in the Chinese and Japanese markets from local producers than official data imply” (p. 216).
New York University
Obituary Stephen B. Chaikind
The American Association of Wine Economists (AAWE) and the wine economics community were saddened to learn of the passing of Dr. Stephen Barry Chaikind on April 11, 2018 after a brief illness. He was 68 years old.
Dr. Chaikind was born on August 22, 1949, in New York City. He earned a Bachelor of Business Administration degree from Baruch College–The City University of New York (CUNY) in 1971, a Master’s degree in economics from the City College of New York in 1974, and a Doctor of Philosophy degree, also in economics, from the Graduate Center of the City University of New York in 1978.
His first job after completing his doctorate was with the Congressional Budget Office as Principal Analyst and Economist (1977–1984). In 1984, he became Chief Economist for Decision Resources Corporation, a large healthcare research and consulting company (1984–1989).
In 1989, Dr. Chaikind joined Gallaudet University in Washington DC, where he was a professor in the Department of Business until 2012. Upon his retirement, he was named Professor Emeritus. From 2011–2015, he also was an Adjunct Professor at Johns Hopkins University’s Master of Science in Applied Economics program.
Dr. Chaikind became a member of the AAWE in 2009 and, until his death, was one of its driving forces. Beginning with the Annual AAWE Conference in Reims (Champagne, France), he and his wife of 35 years, Hinda Chaikind, were active AAWE conference attendees. Dr. Chaikind contributed to the conferences with numerous research presentations and chaired several conference sessions. He com- piled a comprehensive and well used list of Sources for Wine Economics Data for researchers, which is posted on AAWE’s website. He also contributed many thought- fully written book reviews for the Journal of Wine Economics. In the fall of 2012, his paper “The Role of Viticulture and Enology in the Development of Economic Thought: How Wine Contributed to Modern Economic Theory,” in which he exam- ines the works by Adam Smith, David Ricardo, Karl Marx, John Stuart Mill, Léon Walras, Alfred Marshall, and others, was published in the Journal of Wine Economics. “…wine’s ubiquitous presence throughout civilized history has served as the basis and catalyst for the development of numerous economic concepts. The prominence of wine as a central factor in economic thought predates the modern era and continues to the present.”
New York University
Alcohol Consumption in the United States: Past, Present, and Future Trends
James Fogarty & Derby Voon
(FULL TEXT PDF)
This research examines long-run changes in alcohol consumption patterns for the United States, at the state level, and presents forecasts for per capita consumption of beer, wine, and spirits developed using the ARIMA methodology. The evidence is then presented on the extent of convergence in consumption through time. This evidence shows that from the 1970s through the early 2000s, a pattern of convergence in both the level of consumption and the consumption mix was evident, but since the early 2000s, and unlike the pattern observed globally, there has been a reversal of this trend. The changes in consumption through time are illustrated via ternary plots. Bayesian estimation methods are used to for- mally describe changes in historical consumption patterns and to investigate the impact of policy settings on consumption forecasts. There were no systematic correlations found between alcohol policy settings and forecast future consumption changes, or tax rate levels and forecast consumption changes.
(JEL Classifications: D12, I18, L66)
Factors Affecting Wine Price Mark-up in Restaurants
Florine Livat & Hervé Remaud
The purpose of this study is to examine how restaurants determine the percentage of wine mark-up. Wine sales are a substantial contributor to restaurants’ profitability, therefore a better understanding of the factors affecting mark-up is critical for the industry. Here, the mark-up is expressed as a percentage over the cost and refers to a cost-plus pricing strategy. Sommeliers from around the world, the majority of whom were members of the International Sommelier Association, were approached to complete our Internet-based questionnaire administered between February 2014 and May 2014. Of the 800 who began the survey, 267 fully completed the questionnaire, generating 1,869 observations. We regressed the declared percentage mark-up against restaurant and wine list characteristics, including managerial practices and wine steward characteristics, and showed that if the restaurants apply a simple rule of thumb to set wine prices, focusing on every price segment, it appears that sommeliers do not have much impact on the percentage mark-up.
(JEL Classifications: C23, D21)
Hoppiness Is Happiness? Under-fertilized Hop Treatments and
Consumers’ Willingness to Pay for Beer
Gnel Gabrielyan, Thomas L. Marsh, Jill J. McCluskey & Carolyn F. Ross
The market structure and recipes for beer has been rapidly changing with craft beers attracting more consumers. Perceived hops quality (hoppiness) is one of the main attributes that micro- brewers alter to differentiate their products to satisfy consumers’ changing tastes and prefer- ences. We hypothesize that, in addition to manipulating beer-processing conditions, the conditions under which the hops are grown may also influence the final sensory properties of the beer. Using hops from a field experiment coupled with sensory attributes and sociode- mographic characteristics from a contingent valuation survey, we analyzed the impact of under-fertilized hop treatments during the growing season on consumers’ willingness to pay for beer. The results indicate that uninformed consumers in a blind tasting could identify the differences in beer made from hops across the fertilization treatments and, thus, implying that all else equal sufficient fertilizer is required to achieve satisfactory hoppiness for which consumers are willing to pay.
(JEL Classifications: C91, D12, L66, Q11)
Wine Cycles in South Africa
Nick Vink, Willem H. Boshoff, Johan Fourie and Rossouw van Jaarsveld
In this article, medium-run cycles in wine production in South Africa are extracted and related to similar cycles in real GDP per capita during the same period. In addition to removing noise in the historical data, smoothing out short-run fluctuations also eliminates the short-run impact on agricultural production due to idiosyncratic shocks such as weather events, wars, and vine diseases. By isolating the medium-run cycles, it is possible to verify the timing and duration of each cycle, matching it with the historical narrative. In this regard, a 300-year annual data series of South African wine production explains the evolution not only of one of the largest agricultural sectors, but of the South African economy in general.
(JEL Classifications: C10, N57, Q10).
How Much Wine Is Really Produced and Consumed in China,
Hong Kong, and Japan?
Kym Anderson and Kimie Harada
Statistics on the wine market in countries where it is not traditionally produced or consumed are estimates using simple methods. In northeast Asia those statistics are exaggerated for a combination of several reasons. One is a labelling issue: imported bulk wine is able to be added to domestically produced wine without the front label having to declare the bottle may contain foreign product. Similar freedom applies to wine made from imported grape juice concentrate. A second (particularly in China) is a double-counting issue: domestic wine produced in one region of the country may be blended with wine produced in and pack- aged for final sale from another region, with both regions claiming it as their contribution to national wine output. A third possibility is a smuggling issue: some wine re-exports and imports are unrecorded. These possibilities of the wine market being exaggerated are signifi- cant for firms seeking to export to and sell in such countries, especially in the fast-growing ones of northeast Asia. This article shows the extent to which estimates for the region could change for such indicators as per capita wine consumption, wine self-sufficiency, and the region’s share of global wine consumption, when alternative assumptions are made in response to these issues.
(JEL classifications: F14, L66, Q13, Y10)
JOHAN SWINNEN and DEVIN BRISKI
Beeronomics: How Beer Explains the World
Reviewed by Richard J. Volpe
Pages 221 – 223
DENISE DEPAOLO and KARA SWEET
South Dakota Wine: A Fruitful History
Reviewed by Jacob R. Straus
Pages 224 – 225
The Wine Lover’s Daughter: A Memoir
Reviewed by Neal D. Hulkower
Pages 225 – 228
The Wines of Canada
Reviewed by Richard E. Quandt
Pages 228 – 230
IAN TATTERSALL & ROB DESALLE
A Natural History of Wine
Reviewed by Tim Elliott and Philippe LeMay-Boucher
Pages 230 – 232
The Gourmands’ Way: Six Americans in Paris and the Birth of a New Gastronomy
Ten Restaurants That Changed America
ALICE WATERS: Coming to My Senses
The Making of a Counterculture Cook
Reviewed by Stephen Chaikind
Pages 232 – 236