chapter 2 - Bentham Science

60 Research Topics in Agricultural and Applied Economics, Vol. 2 Ortúzar and Alfranca
These five varieties represent 70% of the total of varieties grown. Varieties of grapes have been widely studied by
hedonic wine research (Troncoso & Aguirre, 2006; Geve, 2005; Cardebat & Figuet, 2004; Schamel & Anderson,
2003; Landon & Smith, 1997; Oczkowski, 1994).
Consumers have evolved in their knowledge of wine attributes, and they tend to look for more quality wines, rather
than consuming larger quantities of it (Schnettler & Rivero, 2003). On the other hand, in a specific market such as
the Chilean market where new world producers participate, it is expected that wineries focus on differentiating
elements among them, rather than commonalities. Therefore, brands appear to be more valued than origin, because
consumers are exposed in more direct ways to marketing activities by major wineries (Schamel, 2006). On the other
hand, it has been established that brand is a differentiating component because it plays a key role in wine choice by
displaying attributes associated with quality and wine styles (Jiménez, 2006; Deltas & Eleftherios, 2006; Diewert,
2003). Brand wine is not a clear-cut concept (Mitchael & Greatorex, 1989; Glukman, 1990), and the best way for it
to represent the specific characteristics of a product is its greater degree of disaggregation, because it represents the
relationship between characteristics and price in a better way (Requena-Silvente & Walter, 2007)
In the Chilean market, glass bottles wine prices are higher than wines in other packaging materials (Buzeta, 2005). In this
paper, glass, box and plastic have been considered as packaging materials. The database shows that glass bottles have an
average price of $3,456 whereas other packages are on average $1,581. This shows that there is a high price difference.
Wine guides only consider glass bottled wine for their evaluations, because glass bottles can ensure a minimum degree of
quality (Sanchez, Sanchez, Prieto & Prieto, 2007). Then the type of package has an association with the quality of wine.
Size of packaging has an impact on the consumer’s satisfaction (Gerstner & Hess, 1987), in the case of the Chilean wine
market; size has a high impact on value, although this percentage decreases as size of packaging increases its value
(Buzeta, 2005).
In the first section of this article, we provide an analysis of research evidence on the importance of availability, a
brief description of the Chilean wine industry and a literature review of hedonic studies of wine, specially about the
Chilean market. In the second section, we provide a description of the database, segmentation and hedonic
methodology, and hedonic estimation and discussion.
DATABASE
Store panels 3 have been used in hedonic analysis of different products (Ioannidis & Silver, 1999; Silver & Heravi,
2001; Heravi, Heston & Silver, 2003, among others).
The store panel used for the current study (Nielsen Scantrack 4 ) includes 340 Chilean supermarkets, and it provides
census information of sales, prices, and percentages of market share, and weighted distribution 5 in terms of bar code
products. It includes a splitting of Santiago in 6 areas. The database covers a time period that runs between the week
starting on September 19 th 2004 and the week ending on September 10 th , 2006. This represents a total of 104 weeks.
The price is in Chilean currency (peso chileno), and the attributes for wine are color, brands, weighted distribution,
bottle size and type of packaging (e.g., glass or plastic). Many of these variables will be treated as dummies due to
their nature. Only bottle size and weighted distribution will be treated as continuous variables.
Unfortunately, this information is aggregated, and there is no information by store or supermarket chains, as a result
of a confidentiality agreement of cooperation between supermarkets and Nielsen Chile.
Regular prices were adjusted with the Consumer Price Index (CPI) for alcoholic beverages (provided by INE),
because for the period considered for this study inflation in Chile has been 10.5% in two years (time period cover by
this study). Inflation is reported on a monthly basis and in order to adjust it to the weekly basis of the database, the
monthly inflation was divided by four or five weeks, depending on the length of each month.
3
Store panel is a data from a number of observations over time on stores, specifically for this case. supermarket store
4
Nielsen Scantrack is the name of database used in this study.
5
Weighted distribution is the percentage of stores in volume of category, which sell a specific product. Its frame of reference is all the existing
supermarkets in Chile