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Eco-Labeling Strategies: The Eco-Premium Puzzle In The Wine Industry

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  • Delmas, Magali A.
  • Grant, Laura E.

Abstract

Eco-labeling signals that a product has been eco-certified. While there is increasing use of eco-labeling practices, there is still little understanding of the conditions under which eco-labels can command price premiums. In this paper, we argue that the certification of environmental practices by a third party should be analyzed as a strategy distinct from although related to the advertisement of the eco-certification through a label posted on the product. By assessing eco-labeling and eco-certification strategies separately, we are able to identify benefits associated with the certification process independently from those associated with the actual label. More specifically, we argue in the context of the wine industry that eco-certification can provide benefits, such as improved reputation in the industry or increased product quality, which can lead to a price premium without the need to use the eco-label. We estimate this price premium of wine due to the eco-certification of grapes using 13,400 observations of wine price, quality rating, varietals, vintage, and number of bottles produced, for the period 1998-2005. Overall, certifying wine increases the price by 13%, yet including an eco-label reduces the price by 20%. This result confirms the negative connotation associated by consumers with organic wine. The price premium of this luxury good due to certification acts independently from its label, a confounding result not previously demonstrated by related literature.

Suggested Citation

  • Delmas, Magali A. & Grant, Laura E., 2008. "Eco-Labeling Strategies: The Eco-Premium Puzzle In The Wine Industry," Working Papers 37325, American Association of Wine Economists.
  • Handle: RePEc:ags:aawewp:37325
    DOI: 10.22004/ag.econ.37325
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    File URL: http://ageconsearch.umn.edu/record/37325/files/AAWE_WP13.pdf
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    References listed on IDEAS

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    Cited by:

    1. Chen, Xuqi & Gao, Zhifeng & Swisher, Marilyn & House, Lisa & Zhao, Xin, 2018. "Eco-labeling in the Fresh Produce Market: Not All Environmentally Friendly Labels Are Equally Valued," Ecological Economics, Elsevier, vol. 154(C), pages 201-210.
    2. Dastrup, Samuel R. & Graff Zivin, Joshua & Costa, Dora L. & Kahn, Matthew E., 2012. "Understanding the Solar Home price premium: Electricity generation and “Green” social status," European Economic Review, Elsevier, vol. 56(5), pages 961-973.
    3. Miemie Struwig & Chris Adendorff, 2018. "Consumers' Perception of Eco-labels in South Africa," Athens Journal of Business & Economics, Athens Institute for Education and Research (ATINER), vol. 4(2), pages 163-178, April.
    4. Cristiano Codagnone & Giuseppe Alessandro Veltri & Francesco Bogliacino & Francisco Lupiáñez-Villanueva & George Gaskell & Andriy Ivchenko & Pietro Ortoleva & Francesco Mureddu, 2016. "Labels as nudges? An experimental study of car eco-labels," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 33(3), pages 403-432, December.
    5. Megan E. Waldrop & Jill J. McCluskey & Ron C. Mittelhammer, 2017. "Products with multiple certifications: insights from the US wine market," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 44(4), pages 658-682.
    6. Schamel, G., 2018. "Grape Supply and Implicit Prices for Wine Quality Attributes," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277043, International Association of Agricultural Economists.
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    9. Mann, S. & Reissig, L. & Ferjani, A. & Ayala, T., 2011. "Worauf kommt es Schweizer Konsumenten von Biowein an?," Proceedings “Schriften der Gesellschaft für Wirtschafts- und Sozialwissenschaften des Landbaues e.V.”, German Association of Agricultural Economists (GEWISOLA), vol. 46, March.
    10. Bazoche, P. & Deola, C. & Soler, Louis-Georges, 2008. "An experimental study of wine consumers’ willingness to pay for environmental characteristics," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 43651, European Association of Agricultural Economists.
    11. Delmas, Magali A. & Gergaud, Olivier & Lim, Jinghui, 2016. "Does Organic Wine Taste Better? An Analysis of Experts' Ratings," Journal of Wine Economics, Cambridge University Press, vol. 11(3), pages 329-354, December.
    12. Tatiana Bouzdine-Chameeva & Coralie Rames-Briois & Philippe Barbe, 2013. "Les circuits de distribution des vins bio en France," ECONOMIA AGRO-ALIMENTARE, FrancoAngeli Editore, vol. 15(3), pages 103-123.
    13. Eugenio Pomarici & Riccardo Vecchio & Angela Mariani, 2015. "Wineries’ Perception of Sustainability Costs and Benefits: An Exploratory Study in California," Sustainability, MDPI, Open Access Journal, vol. 7(12), pages 1-11, December.
    14. Negro, Giacomo & Hannan, Michael T. & Fassiotto, Magali A., 2012. "Category Signaling: Biodynamic and Organic Winemaking in Alsace," Research Papers 2101, Stanford University, Graduate School of Business.
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    16. Gunnar Gutsche & Bernhard Zwergel, 2016. "Information barriers and SRI market participation – Can sustainability and transparency labels help?," MAGKS Papers on Economics 201624, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    17. Luigi Galletto & Luigino Barisan, 2019. "Carbon Footprint as a Lever for Sustained Competitive Strategy in Developing a Smart Oenology: Evidence from an Exploratory Study in Italy," Sustainability, MDPI, Open Access Journal, vol. 11(5), pages 1-20, March.
    18. Maumbe, Blessing M. & Brown, Cheryl, 2013. "Entrepreneurial and Buyer-Driven Local Wine Supply Chains: Case Study of Acres of Land Winery in Kentucky," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 16(1), pages 1-23, February.
    19. Yusuf Yılmaz & Engin Üngüren & Yaşar Yiğit Kaçmaz, 2019. "Determination of Managers’ Attitudes Towards Eco-Labeling Applied in the Context of Sustainable Tourism and Evaluation of the Effects of Eco-Labeling on Accommodation Enterprises," Sustainability, MDPI, Open Access Journal, vol. 11(18), pages 1-27, September.
    20. Galbreath, Jeremy, 2017. "Drivers Of Environmental Sustainability In Wine Firms: The Role And Effect Of Women In Leadership," Working Papers 253851, American Association of Wine Economists.
    21. Galbreath, Jeremy, 2015. "Response to the risk of climate change: A case study of the wine industry," Working Papers 231251, American Association of Wine Economists.
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    Demand and Price Analysis; Environmental Economics and Policy;

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