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Elliott Morss | July 29, 2014

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The Taste of Wine – Does It Matter?

© Elliott R. Morss, Ph.D.

The Taste of Wine – Does It Matter? A Global Economist’s Perspective (Part 2)

by Elliott R. Morss, Ph.D.

Introduction

In Part 1 of this 2-part series, I focused on wines being sold in the US with no mention of quality. Here, the focus will be on quality – more specifically, what do we know about what wines people like and why? And what role do prices, ratings, marketing and tastings play in consumers’ choices? There has been considerable research on this question, with much of it reported on in the Journal of Wine Economics. In the following paragraphs, I will summarize the findings and trace out their implications for wine buyers and sellers.

Price – Taste Relationships

Goldstein et al analyzed data from 6,000 blind tastings – a lot of blind tastings! I quote from their findings:

Individuals who are unaware of the price do not derive more enjoyment from more expensive wine. …we find that the correlation between price and overall rating is small and negative, suggesting that individuals on average enjoy more expensive wines slightly less….

Lecocq and Visser analyzed data from three data sets totaling 1387 observations on French Bordeaux’s and Burgundies. They report similar findings:

When non-experts blind-taste cheap and expensive wines they typically tend to prefer the cheaper ones.

They cite the following anecdote:

 Ernest Gallo, the patriarch of the family-owned E&J Gallo Winery in California (the largest winemaker in the world), recalls how, in the early stages of his career, he once sold wine in New York. He offered a buyer two glasses of the same red wine, the buyer drank the two glasses and asked for the prices of the “two” wines. Upon hearing that the first wine cost 5 cents per bottle, and the second 10 cents, the buyer declared he wanted the 10 cents bottle. The message behind this anecdote is confirmed by many wine auctioneers who have noticed that in the auction room higher wine prices act as a stimulant rather than as a deterrent, thereby reflecting that for bidders, part of the pleasure is apparently to know that a wine is famous and very expensive.

Goldstein et al report a similar finding from earlier research that both trained and untrained tasters favored wine they knew in advance was higher priced.

Overall, Lecocq and Visser conclude taste has very little to do with wine prices:

Our results indicate that characteristics that are directly revealed to the consumer upon inspection of the bottle and its label (ranking, vintage and appellation) explain the major part of price differences. Sensory variables do not appear to play an important role.

Ratings and the Raters

Goldstein et al raise questions about whether wine drinkers should put much stock in ratings and raters:

Our results indicate another reason for why the average wine drinker may not benefit from expert wine ratings: he or she simply doesn’t like the same types of wines as experts. This is consistent with Weil (2001, 2005), who finds that even among the subset of tasters who can distinguish between good and bad vintages, or reserve or regular bottlings, they are as likely to prefer the “better” one as the “worse” one.

The Raters: Who To Believe?

Dom Cicchetti analyzed how three “experts” rated Bordeaux wines in 2004. The experts were Robert Parker (RP), Wine Spectator (WS), and Jancis Robinson (JR). Using “agreement” statistics Cicchetti developed with other academics, he concluded that RP and WS were in fair to average agreement on their ratings, while RP and JS got a very poor agreement rating. Aside from the overall agreement ratings, here are a couple of examples on specific wines: RP rated 2 wines above average that JR rated as unacceptable and RP rated 19 wines excellent that JR rated as only average.

Richard Quandt had an interesting observation on raters and disagreements by comparing them to the Liquid Assets Wine Group:

…the Liquid Assets Wine Group: a stable group of eight persons who have been doing regular, blind wine tastings for about ten years. They are all experienced wine drinkers and yet in many cases (not in the majority of cases but in a sizeable minority) the disagreements are substantial. The relatively ideal conditions of this group do not hold for wine writers who, with rare exceptions, do not taste the wines that they write about blind, nor do they taste the same set of wines together on the same occasion, and hence their views are, at best, compromised.

Findings

So what does this research tell us so far?

  • Price is not a good proxy for wine drinkers’ tastes. If anything, it appears that most wine drinkers prefer less expensive wines.
  • Experts frequently disagree on their ratings. One expert rates a wine above average while another finds it unacceptable.
  • How a wine tastes has little to do with how a wine is priced. The primary determinants of price appear to be ratings and what is written on the front label.

Should we believe these findings? The sample sizes and research methodologies appear to be acceptable, but there is an important problem: the make-up of the sample.  Most of the data were drawn from high-end Californian and French Burgundy and Bordeaux wines. Virtually no research has been done to date on what I will call the “new” New World wines (NNWW), defined as the New World excluding the US: Argentina, Australia, Brazil, Chile, China, New Zealand, and South Africa (what ever happened to Eastern European wines? They entered the US market before NNWW).

The sampling problem in the research findings is of fundamental importance. For most people, the challenge is not to be able to distinguish between a  2005 A. Rousseau Gevrey Chambertin Clos St. Jacques and the lesser 2005 Alain Hudelot Noellat Nuits Saint Georges. Rather, the question is which among the excellent and less expensive wines arriving from the new wine countries tastes better. Note that “being able to distinguish between” is a form of expertise. It is different than asking “what tastes better”.

The transition from European and US wines to NNWW wines is underway. Gokcekus and Fargnoli examined the Wine Spectator’s annual Top 100 lists, published since 1988. During that period, the average real price of the Top 100 decreased from $43 to $26, with quality unchanged at about 93 points. The number of countries included in increased from 6 to 12 countries. Their quantitative analysis found that when a NNWW replaced a European or US wine, the average real price of the Top 100 list falls by 2.5%.

I concluded Part 1 of this series with the following quote:

10 years ago, it was difficult to find a reasonably good wine for $10. This is not true anymore. Good $10 wines are available for every varietal.

In the following paragraphs, I explore the implications of this observation for wine consumers, restaurants, and liquor stores.

Consumers – Finding Out What You Like

Let me start by saying the evidence presented above suggests many consumers like brand names, expensive wines, wines with 90+ ratings, etc., and they subjugate taste to these factors. OK. Who is to challenge a consumer’s criteria for selecting a wine?

But for taste, I suggest the following process.

  1. First, choose one of the following four wine characteristics and varietal:
  • Light White (Sauvignon Blanc);
  • Heavy White (Chardonnay);
  • Light Red (Pinot Noir);
  • Heavy Red (Cabernet Sauvignon).
  1. Subscribe to some wine rating service (just to give you a frame of reference).
  2. Take your varietal choice to a large liquor store where prices seem reasonable (avoid small stores – there are real economies of scale in selling wine). Tell the sales person you want to try a few from your varietal choice costing no more than $14. The next time back try another sales person. In a reasonably short period, you will find someone who has a pretty good sense of what you like. You are on your way!

A Concrete Example – My Own Journey

Many years back, my favorite wines were White Burgundies and then Italian Barolos. But for 15 years, I have focused on heavy reds. Most French and American Cabernets were too expensive for me, so I bought French Rhone blends that to this day remain quite inexpensive. I had an inherent distrust of liquor store salesmen, so I purchased a subscription to the Wine Spectator (WS) online ratings. For three years, I did not enter a liquor store without a spreadsheet from WS for the varietal I was shopping for. In my WS database search I filtered on price ($25 or less) and quality (an 88 or higher rating).

The Australians were making their marketing push for Shirazes, another heavy red, at very low prices. I could get the Rosemont Shiraz for only $8 and a Rosemont Cabernet/Shiraz blend for the same price. Then WS rated Yellowtail “The Reserve” Shiraz at 90. I could get it for $10. So I did a blind tasting with friends. The Rosemont Blend won, followed by the Yellowtail. Great: two good heavy reds for $10 or less. I then said am I missing something by not drinking more expensive Shirazes? WS rated the Schild Shiraz at 96, a very high rating. Amazingly, I could get it for $25 a bottle! Another blind tasting with friends. Nobody singled out the Schild as exceptional against my $10 Shiraz selections.

I did the same thing with Malbecs. I started with the Rutini Trumpeter rated 89 by WS available for less than $8. For comparison, I chose a Cantena Zapata available at $25 and an Achával-Ferrer Finca Altamira at $112. In blind tastings, the Cantena was better than the Trumpeter, but the Altamira tasted no better than the Cantena.

Note my descriptive terms for wine: “won, “was better than”. I have problems with the professional tasters’ descriptive terms. For more on this, see Quandt’s excellent “On Wine Bullshit” article referenced above.

But for your taste determination, note my method, not my selections:

  • choose a varietal;
  • use a rater to keep you from wasting money on very bad wines;
  • start with low-priced wines and work up; and
  • always do blind tastings (not hard – just don’t look while someone positions the wines in front of you).

I repeat: in buying wines, you might not care about taste. I know someone who likes the proprietor of a wine shop, and he is happy with anything the proprietor recommends. A friend of mine wants to be known as someone with expensive wine “tastes”. He never buys a wine that costs less than $25. Ok, fine with me! I drink his wines whenever he asks me over without complaining.

But if you care about taste, I urge you to use the method outlined above.

Implications for Wine Sellers (Restaurants and Liquor Stores)

You have a tough task. You have to please all your clients, so you have to have expensive and inexpensive wines, wines with recognizable names and labels, and wines from all over.

I will only offer this:

  1. The era of European/US dominance in wines is over. Prices are coming down as the new countries perfect their wines. You can be out in front on this by featuring lower-priced new New World wines;
  2. Consumers are becoming more knowledgeable, and as they do, the demand for less expensive wines from the NNWW countries will grow.

Bibliography

Cicchetti, Dom, “Documented Disagreement Among Wine Experts: A Rational Response for Consumers”, prepared for the 2010 Annual Meeting of the American Association of Wine Economists.

Gokcekus, Omer and Andrew Fargnoli, “Is Globalization Good for Wine Drinkers in the United States?” Journal of Wine Economics (JWE),v. 2, no. 2

Goldstein, Robin, Almenberg, Johan, Dreber, Anna, Emerson, John W., Herschkowitsch, Alexis, and Jacob Katz, “Do More Expensive Wines Taste Better? Evidence from a Large Sample of Blind Tastings”, JWE, v. 3, no. 1.

Lecocq, Sébastien and Michael Visser, “What Determines Wine Prices: Objective vs. Sensory Characteristics”, JWE, v. 1, no. 1.

Quandt, Richard E., “On Wine Bullshit: Some New Software?”, JWE, v. 2, no. 2.

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