The entire ag and food industry is working on transparency. Practices many take for granted are not often understood by the general consumer, so the push for education is on.
But how much information is too much? And what is the right amount of information? Basically, the question is: How much of the sausage-making background of any process is too much for consumers?
The wine industry is getting a look at that from a new study published recently by Oregon State University that shows consumers are more willing to pay for wine that comes with an organic or organic grape label, but providing information about certification standards and organic production practices reduces consumer willingness to pay for all wines.
The study also found that added information about conventional winemaking practices restores consumer willingness to pay for wine labeled organic — but not for wines made with organic grapes or conventional wines. The study was published in the journal PLOS One.
Nadia Streletskaya, an economist with OSU who collaborated on the research with colleagues at Cornell University, says the study provides insight on consumer perception of organic and organic grape labeling, and how labels that highlight the absence of ingredients are perceived by consumers who don’t know standard production practices.
Organic wine and wine made with organic grapes differ in the amount of sulfites added for preservation, and whether other ingredients used in production such as egg whites or yeasts are certified organic.
The study has implications for winemakers, who are increasingly providing information to consumers about how wine is made — either on the web or in their tasting rooms, Streletskaya says. “Not many wineries will take people through all the steps of production, but there is a growing tendency to share more details on production, and that might be counterproductive,” she says.
Information and pricing
Here’s the irony. Researchers found that given no information about how wine is made, consumers would be willing to pay more for wine labeled as either organic or made with organic grapes compared to conventional wine. When consumers were educated about certification standards for labeling wine as organic or made with organic grapes, willingness to pay for all wines declined.
However, willingness to pay for organic wines, wine made with organic grapes and conventional wine remained the same.
Consumers were less willing to pay for two out of three types of wine — conventional or made with organic grapes — when they were given added information about conventional wine production practices that consumers might be less familiar with, such as the use of yeasts, the protein casein or egg whites, or genetically modified yeast.
Willingness to pay for organic wine, however, rebounded to original levels when information about conventional winemaking practices was provided. Information about wine production practices might “remove the cultural and mythical appeal of wine,” Streletskaya says.
She adds that wine is a peculiar product. “A lot of people who consume wine don’t really know much about wine. They think it grows in a bottle in a wine cellar. For example, once people find out something is added that doesn’t make it spoil, they aren’t as excited. Another strong possibility for their lessened willingness to pay is that adding information might make it harder for people to choose a product, because they have more information to work through.”
In the study, researchers conducted a series of auctions with three different groups of people, in which each person was given $35 to bid on a bottle of wine. In one case, they weren’t given any information about production practices. In the second, they were provided information about organic and organic grape labels.
In the third group, subjects learned about conventional winemaking practices, in addition to the information about organic and organic grape certification standards provided to the second group.
“This is where we found very strong impact,” Streletskaya says. “Suddenly, their willingness to pay for pure organic wine shoots up, compared to organic grape wine and conventional wine. But their absolute level of willingness to pay for organic wine is the same as when no production information is given.”
Co-authors on the study were Jura Liaukonyte, associate professor, and Harry M. Kaiser, professor, both in Cornell University’s Charles H. Dyson School of Applied Economics.