Economists Question Real Value of Wine

Author describes sting of Wine Spectator awards to indicate perceptions may rest on false inferences

by Peter Mitham
Wine Spectator Sting
Dr. Peter Roberts, from Goizueta Business School at Emory University in Atlanta, Ga., and Robert Hodgson, winemaker at Fieldbrook Winery in Fieldbrook, Calif., and professor emeritus at Humboldt State University, were rewarded with wine in recognition of presenting the most notable papers at the conference.
Portland, Ore. -- Cutting through perception to get at the real value of wine and wine-related businesses was a key focus of presenters at the second annual conference of the American Association of Wine Economists in Portland, Ore., on Aug. 14-16. One of the most talked-about presentations was the intro to author Robin Goldstein's discussion of whether or not wine value correlates with consumer appreciation of a wine's intrinsic qualities (not necessarily, he found).

Working with a colleague in Italy, Goldstein said, he wanted to discover what it takes for a restaurant's wine list to receive an award of excellence from the Wine Spectator. The magazine's ratings are a signal of quality to many consumers, and Goldstein was curious regarding the underpinning of that value. Goldstein said that he and his partner accordingly established a virtual restaurant in Milan, Italy, complete with its own website.

He said they submitted the supposed restaurant's wine list for an award of excellence. The list included some of Wine Spectator's worst-rated wines and vintages of recent decades. Goldstein paid the obligatory $250 application fee, and in Wine Spectator's August 2008 issue, his putative Osteria L'Intrepido was one of 22 Italian dining spots to receive an award of excellence. L'Intrepido's "riserva" wine list now is posted online along with an explanation of the venture. It should be mentioned that, although most of the listed vintages were rated by the magazine's tasters at under 80 points, some came from respected Italian producers and were priced accordingly, from 80 to 300 euros per bottle. The list contained at least one ringer, a 90-point 1995 Tenuta San Guido from Sassicaia, at 300 euros.

Wine Spectator executive editor Thomas Matthews was unaware of the apparent subterfuge when Wines & Vines phoned today for comment. He declined to comment until the magazine had thoroughly investigated the apparent sting. One day later, Matthews forwarded a link to Wine Spectator's official response to the fraud: snipurl.com/winespectatorscam [forums_winespectator_com].

Goldstein's revelation was merely a preamble to the discussion of the role played by expert opinion in creating a consumer experience. The formal paper that followed concluded that a high rating of a wine, and in turn a premium price (or--although it wasn't stated--award of excellence for the wine list that features it), wouldn't necessarily lead to a consumer appreciating a wine any more than if it brought a lower price. The gambit, if nothing else, demonstrated that even a list of lowly wines can be recognized as being of excellence.

While this was one of the most flagrant examples discussed of a betrayal of the value consumers and the market perceives in choice wines--and wine lists--the work of other researchers also questioned inferred value.

Awards at the conference went to notable papers by Dr. Peter Roberts, an associate professor in the Goizueta Business School at Emory University in Atlanta, Ga., and Robert Hodgson, winemaker at California's Fieldbrook Winery.

Hodgson's presentation examined the reliability of judges at wine competitions, focusing on why a wine might win gold at one competition and fail to place in another.

Roberts, for his part, looked at the role that winemakers play in establishing the value and reputation of wines. Roberts argued that wineries that land a known and well-respected winemaker see the value of their new releases trend upward, even if the winemaker had nothing to do with the production of the wines. The winemaker's presence allows the winery to enjoy a reflected glory that may or may not indicate the value of future releases, but which has an immediate positive impact on the winery's reputation and the prices it can command for its wines.

Reputation was also central to the paper presented by Florine Livat of the Bordeaux Management School and Amy Mumma of Central Washington University, which addressed the development of the Washington State wine industry.

Looking at the relationship between the collective reputation of the state's wine industry and the contributions made by individual viticultural areas to that reputation, Livat and Mumma sought to determine how wineries in different AVAs benefit from their membership in the Washington Wine Commission (WWC). The WWC is a state-sanctioned commodity commission that collects an assessment from every grower and winery in the state. The funds are allocated for marketing, research and education. Participation is mandatory and all industry members contribute, but are all equally served by WWC's efforts?

Studying four key viticultural areas, Livat and Mumma determined that the greater the reputation of an individual AVA, the less important the need for an association with the larger geographical area. Red Mountain and Walla Walla, two of Washington state's smallest but most respected viticultural areas, tend to enjoy recognition independent of Washington state as a whole, Mumma explained. On the other hand, Columbia Valley and Yakima Valley AVAs are closely associated with the reputation of the state as a whole.

The question for the WWC, then, is whether or not it works to develop the identity of Red Mountain and Walla Walla as Washington AVAs to benefit the state's other viticultural areas, or if it works harder to boost the reputation of AVAs that are less well known. "There's a lot of political and branding issues here," Mumma said.

The conference drew close to 100 participants for events that included not only conference papers but tours of wineries in both Oregon's Willamette Valley and Walla Walla, Wash. It was the second conference since the association's founding in 2006. AAWE's next conference is scheduled for Reims, France in June 2009.
Posted on 08.20.2008 - 08:36:59 PST
Peter Mitham's article is not surprising. As any long time reader of the Wine Spectator knows they only require a wine list to be submitted to be eligible for an award. Unlike Michelin, they do no follow-up on the restaurant submitting the list. They don't verify the list, the service or apparently the existence of the restaurant. The whole thing is a fraud and marketing scam. I have often been disappointed following the Wine Spectator's recommendations when choosing a restaurant to visit based on their "Awards".We must remember the WS is a trade paper and their job is to promote the sale of wine (good and bad) ; in this they do a good job.
Carmel, CA USA

Posted on 08.20.2008 - 09:25:18 PST
i've owned high zoot restaurants that received the award of excellence from the spectator. i realized after a few years of consecutive awards from the spectator that no one came busting down my cellar door to verify the vertical of Petrus...
cleveland, OH USA

Posted on 08.20.2008 - 11:06:38 PST
In the discussion of Livat and Mumma's paper they refer to the Washington Wine Commission as being voluntary. In fact it is not a voluntary organization ; it is a State sanctioned commodity commission that is mandated to collect an assessment from all growers and wineries in the state for marketing, research and education purposes.
Grandview, WA USA

Posted on 08.20.2008 - 17:43:53 PST
I've seen articles here and in other publications recently that indicates to me that it is currently in vogue to question the cost of wines, the value received, critical ratings and now silly little popularity lists in obviously commercial magazines. I've been a wine consumer for 30 years and I, like probably most people, have done just fine on my own sorting out fact, fiction, cost and value. Why is it that in every arena there appears self appointed policemen who believe it is their job to show the rest of us, ie. the world, that we have naively been led to folly. So, you tell us the Wine Spectator is flawed, wine tastings are humanly in error, some wines may cost too much, and there are winemakers who are more popular than others. At the risk of being equally as petty here's a research postulate, beware of research papers, some researchers, may, for some reason, have an ax to grind.
Shoreview, MN USA

Posted on 08.20.2008 - 11:22:35 PST
Thanks for the catch. We have corrected the article. -- Editor
Jim Gordon
Napa, CA USA