A version of this paper was presented at the Sonoma State University's Department of Economics Seminar Series as well as the annual meeting of the American Association of Wine Economists in Portland, Ore.

There is a memorable scene in the movie "Sideways," in which the lead character, a Pinot Noir fan, adamantly refuses to drink Merlot. As wine consumers have gone on to mimic actor Paul Giamatti's anti-Merlot quip, the effect of the movie has become folklore within the wine industry. For example, in the April 2008 issue of Wine Business Monthly, George Schofield refers to the "debacle following the release of the 'Sideways' motion picture" when discussing the effects of the movie on Merlot sales. Upon further examination, however, the "Sideways Effect" was supported by scant anecdotal evidence.

If the film did in fact alter consumer-buying patterns, changes in the demand for either Merlot or Pinot Noir should be reflected in the price and/or quantity sold of each varietal. Thus, we examine the trends in price and cases sold of Merlot and Pinot Noir from 1999 to 2008, periods before and after the release of the 2004 movie. Our approach is simple: We estimate demand functions for each varietal before and after the movie's release, and test for statistical difference. Finally, we reanalyze the data by price to test for any differential effects of the movie.

The movie

"Sideways" was released Oct. 22, 2004, nominated for five Academy Awards on Jan. 25, 2005--it won one, for best-adapted screenplay--and closed May 19, 2005. In the 30 weeks the movie was in theaters, gross domestic ticket sales topped $70 million, with worldwide sales reaching more than $100 million, making it the 40th highest-grossing movie of the year. The No. 1-grossing movie of the year, "Shrek 2," grossed more than $440 million and nearly $1 billion worldwide that same year. "Sideways" was released on DVD in the United States and Canada in April 2005.

The data

To examine the effect of the movie on Merlot and Pinot Noir consumption, we use annual scan data from U.S. retail chains. Annual data was used because it allowed us to examine a period sufficiently previous to the release of the movie in 2004. In addition to Merlot and Pinot Noir, we also examine the "non-Sideways" red wines Cabernet Sauvignon and Syrah as controls.

Finally, to control for the effects of promotion that may have occurred as a result of the movie, we include variables for promotion. Promotion in the data set is defined as one of four types: (1) Features, which includes such things as mailers and newspaper advertisements. (2) In-store displays. (3) A combination of features and displays. (4) Temporary price reductions of 5% or more. For our purposes, we only distinguish between promoted and non-promoted price and sales.

Results

Any changes in the demand for either Merlot or Pinot Noir caused by the movie "Sideways" should be reflected in the price and/or quantity of each varietal. For Merlot, a reduction in demand resulting from the negative portrayal in the movie should reduce price and/or quantity. Conversely, for Pinot Noir, an increase in demand should increase price and/or quantity. Thus, we examine the trends in price and cases sold of Merlot and Pinot Noir for periods before and after the movie's release. The movie was released in October 2004 and nominated for an Academy Award in January 2005. Since the wine data is end-of-year data, we chose 2005 to delineate the period before and after the movie.

Case volume

First consider annual case volume of Merlot, Pinot Noir and the control group of non-Sideways red wines consisting of Cabernet Sauvignon and Syrah. The largest red varietal seller by volume in the U.S. is Merlot, followed by Cabernet Sauvignon, Syrah and Pinot Noir, with Merlot and Cabernet Sauvignon selling almost twice as much as Syrah and Pinot Noir.

To adjust for the differences in volume, we index annual case volume to one in 1999, thus allowing us to examine the relative growth rate of each group. Figure 1 shows indexed average annual case volume of Merlot, Pinot Noir and the control group from 1999-2007. Figure 1 shows an interesting pattern of growth of the three groups. Prior to 2004, the three groups appear to move similarly with Pinot Noir consistently at a higher growth rate than Merlot and the control. This is true of both promoted and non-promoted case volume. However, after 2003--and especially 2004--the patterns of growth appear to diverge.

Visual inspection of Figure 1 shows the case volume of Pinot Noir growing, while the growth of Merlot appears to flatten out and even decline following the movie's release in 2004. For the control group of non-Sideways red wines, growth appears to continue an upward trend started in 2004. Statistical tests confirm what is apparent from Figure 1: Pinot Noir observed a relatively large increase in case volume, while Merlot and the control group experienced small but statistically significant declines in their growth rates.

Additionally, because of the similarity in the growth rates of Merlot and the control group, we test for differences in the growth rate of Merlot and the control group. Our results indicate that the growth rate of Merlot was indeed less than that of the control group, while the growth rate of Pinot Noir was greater than that of the control group. At this point, case volume of Merlot and Pinot Noir appear to follow the expected effect if the movie "Sideways" did decrease demand for Merlot and increase demand for Pinot Noir.

While the results so far appear to coincide with conventional wisdom regarding the effect of "Sideways" on wine consumption, it is possible that much of the growth in annual wine sales is confounded by the increased coverage of the Nielsen data since 1999.

To correct for this, we construct three new variables examining the ratio of case volume among the three groups. We examine the ratio of Merlot to Pinot Noir, Merlot to the control group, and Pinot Noir to the control group. Figure 2 shows a graph of all three new variables. Once again, we index the ratios to one for ease of interpretation.

Figure 2 provides an even starker view of the diverging trends of Merlot and Pinot Noir. Consider first the ratio of Merlot to Pinot Noir. If the movie "Sideways" induced a decrease in Merlot consumption while simultaneously increasing Pinot Noir consumption, then we would expect the ratio of the two to decrease. This is in fact what we observe in Figure 2 for both promoted and non-promoted volume.

Figure 2 also shows that the ratio of Merlot to the non-"Sideways" control appears to be relatively stable prior to the movie, then decreases slightly after. Conversely, the growth in the ratio of Pinot Noir to the control group increases significantly after the movie's release. Once again, tests indicate that all changes resulting from the movie "Sideways," shown in Figure 2, are statistically significant.

Price

The next variable we examine is price. Conventional economic theory tells us that as long as supply is not perfectly elastic, any change in demand should result in a price change. If the demand for Merlot fell due to the negative publicity surrounding "Sideways," then we should observe a decrease in the price of Merlot.

Similarly, if the demand for Pinot Noir rose as a result of "Sideways," we should observe an increase in price. Figure 3 shows data on the real price of Merlot, Pinot Noir and the non-"Sideways" red wine control group of Cabernet Sauvignon and Syrah. All prices are indexed to one, so that we can observe the relative changes in the growth rate of each. Figure 3 shows that indeed promoted and non-promoted price of Merlot falls, while the promoted and non-promoted price of Pinot Noir rises following "Sideways."

The effects on non-promoted price provide the most convincing argument for a "Sideways" effect. While the fall in the price for Merlot continues a trend that started in 2003, the increase in the price of Pinot Noir that starts in 2005 following the movie appears to reverse the downward trend that began in 2003. Additionally, our analysis indicates that these changes are all statistically significant.

Interestingly, it appears that "Sideways" also resulted in an increase in non-promoted price of the non-"Sideways" red wine control group, while producing a small but statistically significant increase in promoted price of the control group. Combined with the data on case volume, the effect on price indicates that "Sideways" had a positive impact on overall wine consumption.

While our results show that "Sideways" did increase wine consumption, the rising tide of consumption did not lift all varietals evenly. Our results clearly show that Merlot suffered a small decrease in both price and sales volume, while Pinot Noir benefited from the movie as indicated by significant increases in price and sales volume.

Analysis by price

Finally we examine whether "Sideways" had different effects on different price segments of wine consumers. For example, if high-end wine consumers are more representative of core consumers than low-end wine consumers, and core wine consumers are less susceptible to movies and promotions than casual wine consumers, then we would expect "Sideways" to have a larger effect on lower-priced wines than on higher-priced wines. To see if the effects of the movie differ by price, we re-examine the data segmenting the wines into three categories: less than $10, $10-$19.99, and $20-$40.

Figure 4 shows indexed annual case volume for Merlot for the three price points. Visually, Figure 4 appears to confirm the hypothesis that lower priced segments are more affected than higher priced segments. Figure 4 shows that case volume of the lowest priced Merlot (under $10 per bottle) suffered a small but statistically significant decrease following the release of "Sideways." For the higher priced segments of Merlot, the results are mixed with volume increasing for two of the three categories. The results are generally small for all categories except for the highest priced ($20-$40) segment of promoted Merlot, which saw a significant increase in case volume despite the movie's negative portrayal.

While the results for Merlot confirm that consumers of lower priced Merlot were more affected by the movie than drinkers of higher priced Merlot, the results for Pinot show the opposite. Indexed annual case volume of Pinot Noir is shown in Figure 5. Interestingly, for both promoted and non-promoted case volume, the highest price segment of Pinot Noir saw the largest increase in sales volume followed by the lowest priced segment before and after the "Sideways" release. Figure 5 also indicates that wine producers took advantage of the movie to promote Pinot Noir, as indicated by the large increase in promoted volume of high end Pinot Noir ($20-$40) relative to the non-promoted growth.

Conclusion

Virtually all the results are consistent with the theory that "Sideways" had a negative impact on the consumption of Merlot, while increasing the consumption of Pinot Noir. However, far from having a "devastating" effect on Merlot, the positive impact on Pinot Noir appears greater than the negative impact on Merlot. In fact, while the main impact of the movie on Merlot was to slow the growth of case volume, the case volume of Pinot Noir increased significantly.

We see a similar effect with respect to price, where the price of Merlot falls while the price of Pinot Noir increases. The movie did, however, appear to cause a general increase in wine consumption, as measured by the control group red wines.

When examined by price, we see that the negative effects of Merlot are confined mostly to the lower priced segment, under $10 per bottle, while the effects on Pinot Noir are positive across price-points, with the largest impact being on the highest price point of $20-$40 per bottle.

Dr. Steven S. Cuellar is an associate professor of economics at Sonoma State University and senior research economist at Sonoma Research Associates. Dan Karnowsky, president of Sonoma Research Associates, and Frederick Acosta, research associate at Sonoma Research Associates, co-authored this research. To comment on this article, e-mail edit@winesandvines.com.