The Wine Paradox: Organic wine sells, but labels proclaiming it so don't help

Magali Delmas

Slapping "Green" on a Label Usually Increases Sales —
but not for Wine

 

Bren School affiliate professor Magali Delmas and Bren PhD student Laura Grant have received considerable media attention recently for a study in which they concluded that premium wines whose labels advertise that they were produced from organically grown grapes may face a price challenge in the marketplace.

Articles about the study, titled "Eco-labeling Strategies and Price-Premium: The Wine Industry Puzzle" have appeared on the Wine Spectator web site (the story will also run in an upcoming issue of the magazine's print edition), the New York Times' "Freakonomics" blog, the Miller-McCune webzine and the public affairs website at UCLA, where Delmas, an environmental economist, is an associate professor of management at the Institute of the Environment. The study originally appeared in the March 11 issue of the peer-reviewed scholarly journal Business and Society, the official organ of the International Association for Business and Society.

The study found that premium wines (defined as selling for $25 and up) made from organically grown grapes tend to receive numerical ratings higher than those for nearly identical wines made from non-organic grapes. Further, provided the label does not indicate that the grapes were grown organically, the wines made from organic grapes command a correspondingly higher price. However, the price drops when the "organically grown" information is included on the label.

"You've heard of the French paradox?" Delmas told UCLA newsroom writer Meg Sullivan. "Well, this is the American version. You'd expect anything with an eco-label to command a higher price, but that's just not the case with California wine."

As Delmas and Grant write in the abstract of their paper, "In the context of the wine industry, we show that eco-certification leads to a price premium while the use of the eco-label doesn’t."

Read the complete paper.

Laura Grant