The effect of wine policy on the emerging cold-hardy wine industry in the northern U.S. states

Abstract

The recent development of cold-hardy and disease-resistant grape cultivars have enabled rapid expansion of the wine industry in northern states in the United States. As the nascent enterprises seek sustainable profitability, it is important to understand what factors are making the industry sustainable. Using the primary dataset collected in 2012 from 82 wineries currently operating across 10 northern states, this study examines how state-level policies are influencing the revenue of the emerging wine industry. OLS and quantile regression methods are employed to account for heterogeneous effects of policy instruments on sales of wineries. The empirical results show that policies directed at the wine industry have heterogeneous effects on the revenue streams of wineries depending on the location of a winery along the revenue distribution curve of wineries in northern U.S. states.

Fine Water: A Hedonic Pricing Approach

“…The results presented above are all based on estimating our hedonic regression as an ordinary least squares (OLS) regression, but some previous studies on wine have Continued estimated similar hedonic regressions as quantile regressions (Cacchiarelli et al, 2014;Costanigro et al, 2010;Lee and Gartner, 2015). Unlike an OLS regression, which estimates the conditional mean of a dependent variable, a quantile regression estimates a conditional quantile of the dependent variable such as the 25th, 50th, or 75th quantile.…”

Revenue Management Perspectives in Small-Farm Winery Operations

“…To meet minimum in-state fruit requirements, owners may need to purchase grapes from external growers or reduce production level. Lee and Gartner (2015) discovered that a higher minimum in-state fruit content requirement negatively correlates with winery revenue levels.…”

“…Although large, well-established wineries in California dominate the U.S. wine industry, small-farm wineries are steadily emerging with at least one winery in every state. Researchers discovered that over the last two decades there has been over a triple-digit percentage growth in small-farm wineries in some U.S. states including Washington, Oregon, and New York (Lee & Gartner, 2015;Lim, 2017;Tuck, Gartner, & Appiah, 2016).…”

Consumer Stigma and the Reputation Trap Hypothesis: An In-Store Experiment with Colorado Wines

“…The essential pull factor behind the expansion of wine-making into nontraditional regions has been consumer demand for agritourism experiences (Franken, Gómez, and Ross, 2018), with 30 million annual wineries visits supporting a labor force of more than 50,000 (WineAmerica.Org., 2014). Government policies leveraging wine production to support rural economies have also played a fundamental role (Clark and Jablonski, 2018), with three major thrusts: (1) a legislative shift towards a simpler regulatory and fiscal environment for alcohol production (Lee and Gartner, 2015); (2) an extensive effort to both develop grape varieties better suited to suboptimal growing conditions and improve quality (e.g., the Northern Grape Project 1 for cold climates, see Lee and Gartner (2015)); and (3) state branding and marketing campaigns supporting local agricultural products (Nganje, Hughner, and Lee, 2011). 2 The crucial remaining question is whether burgeoning wine regions (e.g., Colorado, Virginia, Texas, New Jersey, Missouri, Wisconsin) will remain a localized phenomenon linked to tourism and entertainment or if an expansion into the mature U.S. wine market is both possible and advisable.…”