Will consumers pay more for sustainable wines?

What does the latest research tell us about the impact on the bottom line?

 

Will consumers pay more for sustainable wines?
  • James Wright
  • 2019-06-25
With an increasing number of wine regions declaring their green credentials, let’s pose an important question: Who’s paying for it?
It’s clear many countries, regions and wine estates are heading down the sustainability path. And it’s also clear that, as an industry, we need to protect ourselves from claims that wine, as a non-essential foodstuff, is not sustainable. However, another important point is that for the majority of the industry to go down this route, it really needs to work financially, otherwise we will have to fall back on push initiatives (including legislation).
Where can the financial incentives come from? On the cost side, there are all sorts of initiatives that address environmental and social goals and at the same time save money, such as smart use of home-grown biologicals to replace expensive fungicides, use of solar-powered robots to undertake heavy physical or potentially harmful tasks, thereby improving worker health and reducing soil compaction and wage bills.

'Can we charge more for a bottle of sustainable wine?'
How about the revenue side? Can we charge more for a bottle of sustainable wine? Will an increase in bottle price compensate for a potential drop in production?
To gain some insight into the revenue side potential, let’s take a look at the latest research into the marketing and sale of sustainable wine.
The First Report on Sustainable Winegrowing found a correlation between average bottle price and sustainability status. The average price of wines with high sustainability status was €19.01 while those with low sustainability status was €15.39.
However, a literature review revealed very mixed results between sustainability and preparedness to pay a higher price and the correlations are based on what the wine company charges for its wine (which can be influenced by many other factors) and sustainability programs implemented. So were the companies in the survey able to charge more for their sustainable wine or is it a case of higher revenue streams result in money left over for sustainability?

'Environmental claims affect perception of quality'
Schaufele I 2017 conducted a literature review of 34 articles looking at consumer perception of sustainability claims. The studies primarily looked at environmental sustainability and they indicate that environmental claims affect perception of quality. However, the studies did not investigate live market responses.
Hot off the press is an excellent summary of the current situation both in the marketplace and in research – Pomarici E 2019

Here are a few key points from this paper:
• Research from 2010-2015 indicated a very mixed relationship between sustainability and a willingness to pay.
• More recent research indicates a more positive relationship between the two.
• More studies need to be conducted in real-life market situations.
• Most studies focus on organic production and this needs to be expanded to a broader view of sustainability.
Also fresh off the press is the Wine Intelligence Global SOLA report looking into the global opportunities for organic, Fairtrade and lower-alcohol wine (SOLA: Sustainable-Organic-Low Alcohol). Among other aspects, the report looks at purchases over the previous six months combined with intention to purchase and indicates opportunities are developing in specific markets for ‘SOLA’ wines. For more details, follow the link above.
The California Sustainable Winegrowing Program Certification Cost-Benefit Analysis Tool assumes a 5% increase in sales from the proportion of customers interested in sustainability, which could be significant if the market you are selling into is interested/concerned about sustainability or insignificant if the market is apathetic.
In summary, the studies to date have primarily focused on ‘willingness to pay’ or ‘intention to buy’ rather than real-time purchases. What we need to pull in the less innovative/concerned majority of wine producers are more hard numbers – that is, accurate answers to the question: What is the real price premium for a specific sustainable wine in a specific market?

James Wright is an international viticulture and management consultant and author of www.vitisynth.com and the newsletter VitiSynthesis.

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