13% price rise for medal-winning wines, says new study

A working paper posted yesterday on the website of the American Association of Wine Economists (AAWE) claims that producers can increase their prices by 13% if they gain a medal in a wine competition.

Judging wine in the Global Rosé Masters where medals are awarded according to oral consensus. Pictured clockwise from top right: Clive Barlow MW, Clement Robert MS, Beverley Blanning MW, Jonathan Pedly MW

The study, entitled The Causal Impact of Medals on Wine Producers’ Prices and the Gains From Participating in Contests, has three main aims, although the primary purpose of the paper is to ascertain the affect of a medal on the price of wine, rather than the level of demand – which is a more common focus of investigation.

Significantly, the study, which has not yet been subject to a peer review process, has shown that a producer whose wine receives a medal can raise their price by 13%.

As one would expect, it also concludes that the impact for a gold “turns out to be much larger than for silver and bronze”.

The study also shows that the effect is only statistically significant for “a small group of contests”, noting that such competitions are not only the most prestigious, but also those where “the judges are required to evaluate relatively few wines per day, and they grant medals by oral consensus”.

In short, the paper’s authors – Emmanuel Paroissien and Michael Visser – conclude that “the incentives to participate in competitions is high”, having calculated the profit producers may expect to get from participating in wine competitions.

The producers studied in this paper are solely Bordeaux wine makers, and the wine competitions are all held in France, where as many as 130 official wine competitions are conducted annually, according to the study.

Although the study is limited in its scope, it is particularly interesting to see that the most reliable relationship between rising wine prices and medals is found among those competitions where there is an unhurried and open approach to assessing the entries, as opposed to scoring large numbers of wines without discussion.

Certainly, the drinks business, with its Global Masters wine competitions, ensures that the judging of samples is done at a relaxed pace, while every wine is discussed before it is awarded a medal.

This ensures that each judge can justify their assessment of the wine, while also giving them the chance to revise their opinion – which is important, as another fellow wine professional may be more or less sensitive to a particular trait in a sample.

The study also showed that “only a minority” of competitions attribute medals that “are significantly correlated with wine quality”, while noting that the most prestigious contests use wine professionals only.

In our November issue of the drinks business we considered the role of wine awards in detail, and featured the opinions of a number of leading figures in the trade.

Notably, it was found that the role of awards is becoming greater in the UK market, because retailers are moving away from price promotion to accelerate wine sales – a development that has been driven by the rise of discounters such as Aldi and Lidl, which operate an EDLP (everyday low price) retail model.

“Wine is complicated, and anything – a fancy label, a price point, an award – that gives customers the confidence to try the wine helps,” says Aldi’s wine buyer, Mike James, who was interviewed by db for the article.

“We’re proud of our awards; I’ve always said that wine is subjective but [awards] are an objective subjective presentation of what we’ve done,” he adds.

Awards are, he notes, particularly good for lesser-known wines or regions as they can open up the category and inspire consumer to embrace a wider repertoire, when they would otherwise have played it safe with either a brand leader or well-known region, or by price.

As Robin Copestick of Copestick Murray, who was also interviewed for the piece, puts it: “If you’re not going into deep price discount, you have to find different ways of attracting customers, so there will be a big reliance on wine awards.”

To read more about the impact of wine awards on sales, see the November edition of db, while to see the working paper on wine awards and pricing, click here.

Finally, to find out more about The Global Masters click here.