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Drinking cheaply: the demand for basic wine in Italy

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  • Cembalo, Luigi
  • Caracciolo, Francesco
  • Pomarici, Eugenio

Abstract

The wine market has evolved dramatically over the last three decades. The premium wine segment has expanded significantly to the detriment of basic wines. Nevertheless, in traditional wine producing and consuming countries, inexpensive wines still account for a large market share, both in volume and value. Marketing strategies for such wines are changing in an attempt to tap this increasingly crowded market segment. Despite its importance, the basic wine segment has not been studied in-depth and is often assumed to have no product differentiation. This paper tried to ascertain the existence of a possible degree of heterogeneity within nonpremium wines and to measure, by means of elasticity computation, the relationships among categories of wines aggregated with criteria that go beyond price. A demand system (censored QUAIDS) was estimated, using a statistically representative panel of 6,773 Italian households, to see to what extent, if any, substitution occurs in home consumption of basic wines, which is the main channel of distribution of inexpensive wines in Italy. Although price is an important lever in supply policies, our results also suggest the importance of packaging, such as carton as an alternative to glass.

Suggested Citation

  • Cembalo, Luigi & Caracciolo, Francesco & Pomarici, Eugenio, 2014. "Drinking cheaply: the demand for basic wine in Italy," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 58(3), July.
    • Handle: RePEc:ags:aareaj:262414
    DOI: 10.22004/ag.econ.262414
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    1. Eugenio Pomarici & Alessandro Corsi & Simonetta Mazzarino & Roberta Sardone, 2021. "The Italian Wine Sector: Evolution, Structure, Competitiveness and Future Challenges of an Enduring Leader," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 7(2), pages 259-295, July.
    2. Anna Carbone & Federica Demaria & Roberto Henke, 2021. "The Sophistication of International Wine Trade: A New Import Measure," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 7(2), pages 199-218, July.
    3. Caracciolo, Francesco & D’Amico, Mario & Di Vita, Giuseppe & Pomarici, Eugenio & Dal Bianco, Andrea & Cembalo, Luigi, 2016. "Private vs. Collective Wine Reputation," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 19(3), pages 1-20, August.
    4. Mohammed, Rezgar & Murova, Olga & Chidmi, Benaissa, 2018. "Examining Demand Elasticities for Differentiated Yogurt," 2018 Annual Meeting, February 2-6, 2018, Jacksonville, Florida 266417, Southern Agricultural Economics Association.
    5. Balogh, Jeremiás Máté, 2016. "A földrajzi távolság, a kulturális hasonlóság és a szabadkereskedelem hatása a borkereskedelemre [Effects on the global wine trade of geographical distance, cultural and linguistic similarity, and ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(7), pages 858-881.
    6. Rezgar Mohammed & Olga Murova, 2019. "Examining Demand Elasticities in the U.S. Differentiated Yogurt Market," Applied Economics and Finance, Redfame publishing, vol. 6(6), pages 69-79, November.

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