Food Quality and Preference 25 (2012) 171–182

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Food Quality and Preference

journal homepage: www.elsevier.com/locate/foodqual

Market price differentials for food packaging characteristics

Simone Mueller Loose a,b,⇑, Gergely Szolnoki c
a
MAPP Centre for Research on Customer Relations in the Food Sector, Aarhus University, Haslegaardsvej 10, 8210 Aarhus V, Denmark
b
Ehrenberg-Bass Institute for Marketing Science, University of South Australia, P.O. Box 2470, Adelaide SA 5000, Australia
c
Geisenheim Research Center, Section of Economics and Market Research, von-Lade-Str. 1, 65366 Geisenheim, Germany

a r t i c l e i n f o a b s t r a c t

Article history: Consumers’ experimentally measured food preferences are strongly influenced by extrinsic product char-
Received 26 December 2011 acteristics such as labelling and packaging. So far it is unknown if and to what degree these preferences
Received in revised form 20 February 2012 for food packaging are also reflected in market price differences. Using a scanner data set for red wine
Accepted 23 February 2012
market transactions in two US markets, this study estimated price premiums and discounts related to
Available online 3 March 2012
a range of packaging characteristics employing a hedonic pricing model. Models partitioning market
prices into attribute related price components were first estimated, giving each product the same weight.
Keywords:
Additionally, products were weighted by unit sales, whereby higher demanded products were more
Hedonic pricing
Label design
strongly reflected in marginal price estimates. Separate models were estimated for domestic and
Label colour imported products to assess the generalisability of implicit packaging prices. Overall, the largest price dif-
Scanner data ferences were found to relate to region of origin followed by label design type, grape variety, label colour
Revealed versus stated preferences and label information. The packaging elements bottle closure and bottle form could only explain low
price variance shares. The importance of packaging elements in explaining market price differences
increased when taking into account unit sales as an indicator of consumer acceptance. Packaging vari-
ables were more important for imported rather than for domestic products, where grape variety and label
information accounted for larger market price differences. Congruent price premiums for a number of
packaging elements across domestic and imported products suggest a generalisable packaging based
market price differentiation, which was also found to largely agree with previous experimental findings.
Implications for food consumer research and food product marketing are discussed.
Ó 2012 Elsevier Ltd. All rights reserved.

1. Introduction This study employs the hedonic pricing methodology, partition-

The effect of extrinsic product characteristics such as label
information and packaging on consumers’ experimentally mea-
sured food preferences is well documented. It is so far unknown
to which degree these stated preferences for food packaging are
also reflected in market price differences and to what extent exper-
imental results and observed market price differentials agree with
each other. Insights into the ability of packaging characteristics to
explain market price differentials would allow food product devel-
opers to tailor product appearance to conform to other products in
a certain price category. Knowledge about changes of implicit price
premiums observable for packaging elements over time might pro-
vide food marketers with strategic insights into upcoming or
receding product design trends.
⇑ Corresponding author at: MAPP Centre for Research on Customer Relations in
the Food Sector, Aarhus University, Haslegaardsvej 10, 8210 Aarhus V, Denmark.
Tel.: +45 8716 5157; fax: +45 8615 3988.
E-mail addresses: SiMu@asb.dk, simone.mueller@marketingscience.info
(S. Mueller Loose).
ing observed product market price into implicit price premiums
for individual product characteristics. Wine, a product highly
differentiated in its intrinsic and extrinsic characteristics, was cho-
sen as a suitable food product for this study. The ability of different
extrinsic product characteristics to generate product expectations
has been particularly well researched for wine (Mueller & Szolnoki,
2010). Also, wine is a highly differentiated product with several
thousand different products existing in the market. This abundance
of different product characteristic combinations provides sufficient
data observations for the hedonic price analysis. Nevertheless, the
methodology presented here is applicable across food products in
general.
A unique scanner data set tracking actual market transactions,
product availability and market prices for more than one thousand
different red wines over one year in two US markets was used to
address the research questions. The data set covers all commer-
cially relevant price tiers and includes information on price
discounts and promotions, thereby truly reflecting those prices
consumers face in store.
This paper has four main objectives. First we examine the extent
to which product price differences for red wine can be related to

0950-3293/$ - see front matter Ó 2012 Elsevier Ltd. All rights reserved.
doi:10.1016/j.foodqual.2012.02.009
172 S. Mueller Loose, G. Szolnoki / Food Quality and Preference 25 (2012) 171–182
product packaging characteristics, providing a measure for packag-
ing related market price differentiation. In a second step we analyse
if products with high consumer demand differ more systematically
in implicit price premiums for packaging attributes than niche
products. Therefore the hedonic pricing analysis is extended by tak-
ing consumers’ product acceptance in the form of unit sales into ac-
count as product weights. Third, we assess if domestic and
imported products differ in their price variation related to packag-
ing attributes. Differences in wine labelling traditions and consum-
ers’ lower ability to meaningfully interpret foreign label
information would suggest that packaging plays a larger role in dif-
ferentiating imported products. Finally, we relate estimated impli-
cit market prices for packaging characteristics to results from
previous experimental packaging research. Thereby we assess the
congruency of packaging related findings from stated and revealed
preference approaches.
1.1. Impact of product packaging on stated preferences
The effect of extrinsic product attributes on consumers’ sensory
product evaluation in laboratory experiments has been extensively
documented in the literature (Combris, Bazoche, Giraud-Héraud, &
Issanchou, 2009; Lange, Issanchou, & Combris, 2000; Lange, Martin,
Chabanet, Combris, & Issanchou, 2002; Stefani, Donato, & Cavicchi,
2006). This research stream, which is based on consumer stated
preferences about liking, purchase intent or willingness to pay,
concurs that product expectations can be generated from cues such
as product information, labelling and packaging (Deliza & MacFie,
1996). Thereby consumers unconsciously use symbolic informa-
tion connoted by packaging features to draw inferences about
the product content (Becker, van Rompay, Schifferstein, & Galetzka,
2011).
Consumer preferences for product design and packaging colour
have been intensively studied in marketing research. Orth and
Malkewitz (2008) identified five design prototypes, which generate
different product impressions and affect how consumers perceive
product traits such as product quality, prestige and value for
money. The effect of colour on consumer preferences is based on
conditioning and associative learning processes (Crozier, 1999;
Grossman & Wisenblit, 1999), but was found to strongly depend
on the product and the cultural context (Aslam, 2006; Wei, Ou,
Luo, & Hutchings, 2012). Accordingly, cross-cultural differences
are to be expected, when examining consumer preferences for
product design and packaging colour (Malhotra, Agarwal, & Peter-
son, 1996).
A number of studies across different cultural contexts have
examined consumers’ preferences for wine packaging cues. Boud-
reaux and Palmer (2007) measured the effect of wine label image,
label colour and label layout on purchase intent and associated
product personality for US west coast consumers. The label image
had the strongest effect and wine related images such as grape or
chateaux graphics received the highest valuation, while unusual
animals were least preferred. Warm colours (red, orange) and neu-
tral colours (white, black) had a positive effect on purchase intent.
Also using US west coast respondents, Orth and Malkewitz (2008)
examined associations consumers have with different wine pack-
aging design prototypes. Natural and delicate wine designs were
perceived to be of higher quality, massive and contrasting designs
were most strongly associated with being inexpensive and natural
designs were related with higher value for money than nondescript
designs.
While the previous two studies focused on consumers’ associa-
tions with different packaging types, several studies examined the
relative effect of wine packaging elements on stated choice relative
to other wine attributes. For Australian red wine consumers, Muel-
ler, Lockshin, and Louviere (2010) identified price and label style as
the most important choice drivers followed by brand, label colour,
region of origin and bottle form, but only few origins and brands
were included in the experiment. Overall, chateau and graphic
labels were more preferred than traditional and minimalistic la-
bels, and white and yellow labels had a higher utility than orange
and grey colours, but preferences strongly differed across five con-
sumer segments. Studying young wine consumers from Western
Australia, Jarvis, Mueller, and Chiong (2010) found wine label sym-
bols and headlines to effect wine choice more strongly than grape
variety and region of origin. The chateau label style was preferred
over animal labels or labels without any symbol. Set in a Chinese
cultural context, Convey (2011) identified price and country of ori-
gin as stronger choice drivers for red wine than label colour and la-
bel style. Chinese consumers preferred burgundy red, black and
white labels over other colours such as blue, green, yellow and or-
ange. Chateau labels were uniformly preferred over clean labels
and chateau labels with highlighted accents received highest
acceptance.
Concurring elements can be identified across these studies, such
as a higher preference for chateau labels over labels with animals
or no graphical element. Findings for colour preferences seem to
be culture dependent. All choice based studies agreed in the exis-
tence of several consumer segments, which differed in both the
particular preferred design and colour as well as in their choice
sensitivity to packaging in general (Mueller & Szolnoki, 2010).
When analysing market price differences related to packaging
attributes, it should therefore be taken into account that these
experimentally observed preference differences could counteract
or cancel each other out on the aggregated market level. In such
a case, price differentials estimated from aggregated market data
would underestimate individual consumer preferences for packag-
ing attributes.
1.2. Analysis of implicit market prices
A considerable number of studies applied hedonic price analysis
to estimate implicit prices for product attributes. They are based on
the hypothesis that any product represents a bundle of character-
istics that define its overall value (Lancaster, 1966). Hedonic pric-
ing analysis originated in agricultural economics (Waugh, 1928)
and later was mainly used in environmental economics to infer
the monetary value of non-directly traded goods. Thereby market
prices of bundled goods, such as house prices, are analysed to sep-
arate the implicit value for non-market goods like environmental
characteristics. For an overview see Bockstael and MacConnell
(2007) and Nerlove (1995). The theoretical foundation for the
application of hedonic pricing analysis to market goods was laid
by Rosen (1974), positing that goods are valued for their utility-
generating attributes. Under the assumption of perfect competi-
tion this theory suggests that competitive implicit prices reflect
consumers’ utility of these attributes when making a purchase
decision. However, if competition is not perfect or the market is
not in equilibrium, then these implicit prices can also be influenced
by producers’ or intermediaries’ pricing decisions, but the impor-
tance of this assumption only received very limited attention in
most hedonic pricing studies (Nerlove, 1995).
Following Rosen’s approach, a large number of studies esti-
mated implicit prices for wine product characteristics such as re-
gion and country of origin (Nerlove, 1995; Oczkowski, 1994;
Panzone & Simões, 2009), grape variety (Schamel & Anderson,
2003; Steiner, 2004), producer characteristics (Ling & Lockshin,
2003), wine critic scores (Costanigro, McCluskey, & Mittelhammer,
2007; Landon & Smith, 1997; Oczkowski, 2001; Schamel & Ander-
son, 2003; Steiner, 2004), availability of label information in a wine
magazine (Costanigro et al., 2007) or intrinsic characteristics oper-
ationalised by expert sensory evaluations (Brentari, Levaggi, &
 S. Mueller Loose, G. Szolnoki / Food Quality and Preference 25 (2012) 171–182
Zuccolotto, 2011; Cardebat & Figuet, 2004; Combris, Lecocq, & Vis-
ser, 1997, 2000). To our best knowledge, no previous study has
studied implicit prices for food packaging attributes.
The majority of hedonic price analysis studies in food research
assumed that implicit prices exclusively reflect consumer prefer-
ences not taking into account the identification issues between de-
mand and supply functions from market price–quantity
observations already pointed out by Working (1927). Contrary to
common practice, Nerlove (1995) emphasises that coefficients
estimated in hedonic regression reflect both supply and demand
considerations, producer costs and consumer preferences.
From the previous studies only Nerlove (1995) seems to have
assessed the degree to which the assumptions of perfect compe-
tition and market equilibrium were satisfied. Very few or no
barriers to market entry and exit is one of the requirements for
perfect competition to be prevalent. For the US wine market,
the state specific three-tier alcohol trade system, characterised
by a complex arrangement of licensed importers, wholesalers
and retailers, poses a major entry barrier for any wine producer,
particularly for import wines. Also, high food retailer concentra-
tion suggests that intermediaries can exert influence on market
prices, incongruent with the assumption of perfect competition.
In front of this background, we cannot assume that there is per-
fect competition in the US wine market. Accordingly, implicit
prices may not only reflect consumer preferences but are very
likely also influenced by producer and retailer decisions. Hence,
we do not claim that the implicit prices we estimate are a perfect
and unbiased indicator of consumer preferences but can also
reflect producer cost factors.
Contrary to consumer experiments, hedonic price analysis is
unable to establish causality. It could therefore be argued that con-
sumer experiments result in more valid measures for consumer
preferences. However, it has to be considered that laboratory
experiments often face different kinds of problems with incentive
compatibility and social demand bias, particularly when it comes
to the measurement of price and willingness to pay (Norwood &
Lusk, 2011). Also, to manage complexity laboratory experiments
can only examine few product attributes and attribute levels; they
are rarely able to reflect the full variance of products available in
the market. This limitation to few experimental factors can lead
to an overestimation of their true effect size (Gao & Schroeder,
2009). Accordingly, stated preferences in consumer experiments
and revealed preferences from market analysis can be seen as
two imperfect measurements of the same underlying consumer
preferences, which should be triangulated, contrasted and com-
pared to establish validity and to identify more generalisable pat-
terns (Mueller, Osidacz, Francis, & Lockshin, 2010).
Existing hedonic pricing studies for food and wine considered
each product with the same weight when estimating implicit
prices. Thereby niche products with low sales and highly de-
manded products are given the same importance. Complementing
the traditional approach we suggest to also utilise information con-
sumers have provided about their product preferences in the form
of unit sales data, indicating how many units of a product have
been purchased by consumers over a certain time period. Weight-
ing products by their market share or unit sales in the hedonic
pricing model, an approach previously taken in land economics
(see for instance Parsons, 1990), allows us to reflect consumer pref-
erences across the total of all wine purchases, not just across all
products bought at least once. This approach mitigates the effect
of outlier and niche products, which exist in the market because
the importer and wholesaler managed to acquire a retailer listing,
but which are rarely purchased by consumers. By weighting prod-
ucts by unit sales, stronger emphasis is given to those product
characteristics which are highly demanded by consumers. This
weighting approach requires sales information, which was not
173
accessible to previous hedonic pricing studies that mainly used
one point in time wine guide information instead of true market
transaction data.
It is common to estimate implicit prices separately for sub-mar-
kets to analyse if they differ in their pricing structure. Schamel and
Anderson (2003) estimated different models for products from
Australia and New Zealand, Costanigro et al. (2007) examined dif-
ferences in the implicit pricing structure between four different red
wine price segments and Brentari et al. (2011) separately analysed
implicit prices for different retail formats. Several factors lead us to
expect the pricing structure between domestic US wines and im-
ported wines to differ. Particularly wines from France, Italy and
Spain, the ‘old wine world’, have traditionally marketed and la-
belled their products with a strong regional focus. Their wine laws,
such as the AOC or AOP, still prescribe the use of varietal blends
and do not allow the indication of grape varieties on the front label.
This is contrary the ‘new wine world’, such as the US, where grape
varietals play a dominant role in product labelling and marketing
(Goodman, 2009). Accordingly we would expect that grape variety
has a stronger impact on price differentiation for domestic US
wines compared to imported wines. A second reason relates to
product cue predictability, consumers’ reduced ability to interpret
and utilise label information of imported wines they are less famil-
iar with. From the expected lower price separation for grape vari-
ety and front label information we expect packaging to play a
relatively larger role for price differentiation for imported wines.
1.3. Research questions
This study contributes to the existing body of research by
addressing the following four research questions:
(1) To what degree can market price differences for red wine be
accounted for by product differences in packaging character-
istics? The answer to this question indicates the extent to
which wine offered at different price levels systematically
differs in its packaging characteristics, providing insights
for product development and pricing decisions.
(2) How are implicit prices for packaging affected, when con-
sumers’ revealed product preferences are taken into account
in the form of unit sales? An increased importance of pack-
aging would indicate that products with high consumer
demand are more systematically differentiated in their
packaging characteristics across different price levels.
(3) How strongly do domestic and imported products differ in
their implicit prices and the degree of price variation related
to packaging attributes? Congruent packaging price premi-
ums would indicate rather generalisable findings across
products from different origins.
(4) To what extent do implicit market prices for packaging char-
acteristics concur with experimentally measured wine pack-
aging preferences? Congruency between stated and revealed
preferences would indicate that market price premiums
reflect consumer preferences to a larger degree than produc-
tion costs and pricing decisions by market intermediaries.
2. Description of the data set
This study utilised a unique retail measurement data set from
the AC Nielsen ScantrackÒ, tracking red wine retail prices, unit
sales and store availability across 149 retailer chains and 18 liquor
retailers for two major US metropolitan markets, Chicago (IL) and
Tampa (FL). The data set covers transactions over thirteen four
week periods from 29 July 2007 to 26 July 2008, representative
of wine sales in these two markets over one full year. The data is
based on retailers reporting sales (checkout counter scanner data)
174 S. Mueller Loose, G. Szolnoki / Food Quality and Preference 25 (2012) 171–182
and actual product prices to AC Nielsen, which aggregates those for
each single product over a four week period.
Our data base reflects actual market transaction at true market
prices. It thereby is distinguished from most previous hedonic
wine price studies, which were mainly limited to recommended
retail prices in wine reviews or wine guide databases. These prices
often differ from later market prices, one reason being that price
promotions and price discounts are not reflected. Also, wine guides
are mainly limited to premium and superpremium products,
neglecting products in lower price segments, which represent the
dominant market sales share. This study is limited to red wine.
Red and white wine differ in their average prices, grape varieties,
region of origins and ageing requirements, commanding separate
analysis (Thrane, 2004).
2.1. Market and data selection
Scanner data from two major metropolitan areas in Illinois and
Florida were selected, which represent the 2nd and 3rd highest per
capita wine consumption in the US, after California. Contrary to the
US west coast, where domestic wine consumption dominates, the
two selected markets have a considerable import wine market
share of about 40 percent. Our data covered the Chicago (9.1 mil-
lion inhabitants) and Tampa (5.4 million) metropolitan areas,
jointly representing 4.8% of the US population.
Retail data for Tampa covered red wine sales in food retail and
liquor stores. The Chicago data additionally contained drug stores,
but these represented only 3% of the total wine sales volume. The
wine sales share of the food retail and liquor store channels were of
similar size (47% food retail and 53% liquor stores in Tampa and
49% and 48% in Chicago).
The raw data sets included 2449 individual products for Chicago
and 2539 products for Tampa. To avoid a price confound by vol-
ume, in a first step all products different from 750 mL were ex-
cluded, leaving about 75% of products. In a second step, wines
which were sold in both markets were selected, in order to avoid
modelling products with only local relevance. This left 1168 red
wines in the data set for further analysis.
2.2. Wine identification
In the raw data sets each wine was characterised by the brand,
country of origin and wine name on the label, which either con-
tained the grape variety or region of origin. Based on this product
identification photographs showing the front label and the total
product were accessed for all 1168 wines through the internet or
requested from producers. Information in the raw scanner data
base on region of origin and grape variety was validated against
online and producer information and supplemented if possible.
2.3. Price, units sold, store availability
We calculated a unit weighted average price from promotional
and non-promotional prices over the total one year time period
across markets and sales channels that represents our dependent
variable. The total number of units sold was calculated by adding
units across all sales channels and both markets across the full
year. An availability index was provided in the raw data set for
each product by sales channel, indicating the percentage of stores
at which the product was listed. We calculated an aggregated
availability indicator for each product by a sales volume weighted
average across markets and sales channels. Descriptive summary
statistics in Table 1 show that our data set covers a very wide range
of the commercially relevant red wine market spectrum. It in-
cludes all relevant price tiers, wines with wide and limited store
availability and more and less frequently selling wines.
2.4. Origin and grape variety variables
Based on the product information in the data set and the down-
loaded label images all products were classified by country and re-
gion of origin. The 1168 products originated from 14 different
countries and 104 regions of origin. Small origin groups only con-
taining very few products were condensed into larger categories
and a total of 27 country specific regions were included in the anal-
ysis as effects coded nested categorical variables (Table 2).
From a total of 31 identified red wine grape varieties nine had
sufficient observations to enter the model as categorical variables.
Agreeing with our argumentation in Section 1.2, imported wines
were found to have a considerably higher share of products con-
sisting of other or blends of different grape varieties (see Table 2).
2.5. Front label information variables
While the variables for grape varieties and regions of origin de-
scribed in Section 2.4 relate to objective constituting product char-
acteristics retrieved from the data base or from the producer, we
separately analysed the price impact of providing this information
to consumers on the front label of the product. It can be argued
that information stated on the front label is more easily accessible
to consumers than information provided on the back label or
elsewhere.
Six dummy variables were used to measure price differences re-
lated to the existence (yes/no) of front label information for grape
variety, country of origin, region of origin, medals, specific produc-
tion information (organic, reserve, estate bottled, single vineyard,
estate grown, old wine) and other information (e.g. on history of
winery). There were no sufficient observations available in our
data set to separately estimate price premiums for individual pro-
duction information, such as organic, as differentiated by Costani-
gro et al. (2007).
2.6. Packaging variables
We first aimed to categorise the products according to the five
design types developed by Orth and Malkewitz (2008), which were
developed for wines on the US west coast, but it turned out that
particularly imported wines did not seem to fit under any of the
available categories. It was therefore required to develop new label
design type categories. To categorise products according to wine
label design styles a random selection of 500 of the product photo-
graphs were printed in colour. We asked eight regular wine con-
sumers from South Australia, who differed in gender, age and
wine involvement, to sort the 500 wine photographs into groups
they perceived to be distinct wine label categories.
Although respondents differed in the number of categories they
created, whereat more wine interested consumers not surprisingly
showed a stronger differentiation, we observed a large accordance
in the general type of categories identified. In a consensus meeting
respondents agreed on eight wine label design categories for which
one example label is provided in Table 3. The nondescript and del-
icate label types are identical to the same design types in Orth and
Malkewitz. The animal graphic and artwork graphic label types were
perceived as two distinct subcategories of the ‘contrasting’ design
type in Orth and Malkwitz. Respondents also expressed the need
to subcategorize the ‘natural’ category in Orth and Malkewitz
and two types of clean and chateau labels were discriminated.
Within both of the clean and chateau categories a difference was
made by respondents between the standard and the highlighted
versions, where the latter was characterised by the use of red
and golden accents and label highlights. Respondents did not iden-
tify any products for the ‘massive’ design type in Orth and Malke-
witz, most likely because we had excluded products with more
 S. Mueller Loose, G. Szolnoki / Food Quality and Preference 25 (2012) 171–182
Table 1
Descriptive summary of continuous variables for n = 1168 red wines (August 2007–July 2008), Chicago (IL) and Tampa (FL) metropolitan areas.
Median
Price $11.32
Store availability [0;100] 32.7
Units sold 5,084
Sales volume $67,211
Note: Sum of total sales value in data set was $90.8 million.
than 750 mL from the data set. The development of our label de-
sign style categories was completed in late 2008 and it can be
interpreted as a confirmation of our approach that a product cate-
gory specific market research company later independently devel-
oped a relatively similar wine label typology, also consisting of
eight label types (WineIntelligence, 2011).
The colour of wine labels was first coded in detail and then later
summarised into seven categories. Thereof two were the non-col-
our groups white and black and a middle category contained cream
and grey colours. Two colour categories for labels with one domi-
nant colour or a mix of several colours were developed. Similar to
the approach by Boudreaux and Palmer (2007) colours were fur-
ther partitioned into a ‘warm’ subcategory with psychologically
activating colours (red, orange, yellow) and a ‘cold’ subcategory
(blue, green, violet).
Three different bottle shapes, straight, rounded and other were
identified. In the wine industry the straight and round shapes are
also called ‘Bordeaux’ and ‘Burgundy’ style, but we refrained from
using these regional names for bottle shape to avoid any potential
confusion with the identical region of origin variables. The am-
phora-shaped bottle form with wider shoulders and a straight nar-
rowing body is the most prominent examples of several ‘other’
bottle shapes.
Products were categorised into cork and screw cap categories
according to the wine closure they had on the product photo. Sim-
ilar to a consumer at the time of the decision in store, from the out-
side we were unable to discriminate natural from synthetic cork
closures. A low effect of natural versus synthetic cork could be ex-
pected anyway because US consumers’ valuation was found to only
weakly differ between both cork types but a negative effect was
expected for screw caps (Marin & Durham, 2007). We also cannot
exclude the possibility that producers provide different closure
versions of their products to different retailers.
After all categories for label design style, label colour, bottle
shape and bottle closure were determined, objective coding books
were developed showing several examples defining each label var-
iable category. Using these coding books two independent coders
categorised each of the 1168 products in the data set. Both coders
agreed in their coding of the label categories for 88.4% of all prod-
ucts. An agreement was reached jointly for those cases where both
coders differed in their packaging categorisation.
2.7. Variables not included in the model
Information on the alcohol content (Brentari et al., 2011; Ner-
love, 1995) was not considered in our model because wines of dif-
ferent vintages and potentially different alcohol levels were sold
under the same product name over the course of one year and can-
not be separately identified in the data set.
Because the products analysed in our study were derived from
market representative retail scanner data and not retrieved from
selective product reviews or wine guides, comparable standardised
information on the chemical composition or sensory descriptive
evaluation through one uniform panel (Brentari et al., 2011; Com-
bris et al., 1997; Nerlove, 1995) was not available to us.
175
Mean Stdev Min Max
$14.76 $11.42 $3.09 $157.43
34.8 22.2 0.2 95.9
16,537 30,620 28 303,420
$165,686 $268,723 $407 $2,438,080
Although consumers’ sensory liking was found to be affected by
wine ratings (Siegrist & Cousin, 2009), several reasons motivated
us to not include wine critics’ scores in the hedonic pricing model.
First, the majority of wines sold through food retail and liquor
stores are not rated by any wine critic. For a subsample of 210
products from our data set we identified less than 10% of wines
of one vintage to be rated by any of seven different wine critics.
This large amount of missing data poses severe estimation prob-
lems (Kamakura, Basuroy, & Boatwright, 2006). Second, there are
several sensory studies which found a disconnect between con-
sumers’ blind product preferences and expert evaluations (Delgado
& Guinard, 2011; Goldstein et al., 2008; Schiefer & Fischer, 2008),
suggesting that critics’ ratings are only very limitedly informative
of consumers’ sensory preferences. Last, there is a potential model
specification endogeneity issue for those critics who do not assess
wines blindly, as price was found to exert a very strong subliminal
effect on human product evaluation (Plassmann, O’Doherty, Shiv, &
Rangel, 2008). For informed product assessments it can be sug-
gested that the impact of price on wine critics’ ratings is potentially
larger than the impact ratings have on market price (Thrane, 2004).
This unresolved causality in the theoretical relationship between
price and wine ratings should also be taken into account when
interpreting marginal price effects for critics’ scores reported in
previous hedonic pricing studies.
3. The model and specification tests
According to conventional hedonic models (Rosen, 1974), the
price of a product is a linear function of its characteristics for which
implicit prices are predicted. For this study the suggested relation-
ship between price, market availability and product characteristics
can formally be written as:
Price ¼ f ðavailability; grape variety; origin; front label information;
label style; label colour; bottle form; closureÞ þ e ð1Þ
The model assumes that price is affected by a product’s avail-
ability, its grape variety (eight variables), its origin (26 nested vari-
ables for country and region), its packaging, and its front label
information. Each product’s packaging is defined by its label style
(seven variables), label colour (six variables), bottle form (two vari-
ables) and closure, including a disturbance or error term e. Six bin-
ary variables were used to quantify the presence or absence of
front label information: country of origin, region of origin, grape
variety, additional specific production information and other infor-
mation. Availability entered the model as a linear and quadratic
term and was mean centred to avoid collinearity issues. All cate-
gorical variables were effects coded, allowing us to calculate an im-
plicit price for the reference category that is not confounded with
the constant, which in our model represents the average price
(grand mean).
Following our discussion in Section 1.2, we extend common
practice in hedonic pricing research for food products by also con-
sidering consumer preferences in form of unit sales when estimat-
ing implicit prices. When weighting products according their unit
sales, price differentials are estimated across the total sum of
176 S. Mueller Loose, G. Szolnoki / Food Quality and Preference 25 (2012) 171–182

Table 2
Sample composition for categorical variables in percent.

Unweighted – share of products Weighted – share of units sold

Total sample Domestic US Import Total sample
n 1168 630 538 19.3 million
Grape variety
Cabernet blends 2.9 2.1 3.9 2.3
Cabernet Sauvignon 23.0 31.0 13.8 29.0
Malbec 2.7 0.2 5.6 1.3
Merlot 17.1 22.5 10.8 21.8
Pinot Noir 12.5 17.6 6.5 11.1
Shiraz 11.6 6.3 17.8 12.5
Tempranillo 1.5 0.0 3.3 0.7
Zinfandel 6.8 12.5 0.0 5.0
Others 21.8 7.8 38.3 16.2
Region of origin
US_Alexander Valley 2.1 3.8 1.2
US_California 17.0 31.5 30.0
US_Central Valley 3.9 7.1 7.9
US_Napa 9.8 18.3 3.9
US_Sonoma 6.6 12.2 5.3
US_Washington 2.6 4.8 4.9
US_Oregon 1.5 2.9 0.4
US_other 10.5 19.5 6.2
Argentina 3.9 8.6 1.6
Australia_SEA 6.4 13.8 17.0
Australia_other 5.8 12.6 3.0
Chile_Central Valley 1.0 2.2 1.0
Chile_Colchagua 1.6 3.5 0.5
Chile_Maipo 0.9 2.0 0.6
Chile_other 1.3 2.8 0.9
France_Beaujolais 1.0 2.2 1.8
France_Bordeaux 0.8 1.7 0.7
France_Rhône 0.8 1.7 0.3
France_other 2.3 5.0 1.4
Italy_Chianti 3.5 7.6 3.4
Italy_Toscana 1.5 3.2 0.8
Italy_Veneto 2.5 5.4 1.3
Italy_other 3.1 6.7 1.9
South Africa 2.1 4.5 0.7
Spain_Rioja 1.4 3.0 0.9
Spain_other 4.5 9.7 2.2
Other origins 1.7 3.7 0.3
Front label information
Country of origin 31.2 0.8 66.7 29.9
Region of origin 83.0 89.8 74.9 81.8
Grape variety 82.8 94.4 69.1 88.6
Medal 1.6 1.0 2.4 1.0
Production method 1.5 10.5 12.6 8.0
Other information 8.0 0.3 16.9 6.6
Label type
Clean 7.7 7.1 8.4 8.0
Clean_highlight 27.1 24.6 29.9 27.5
Chateau 10.3 10.0 10.6 6.7
Chateau_highlight 12.2 14.6 9.5 17.8
Delicate elegant 6.3 6.0 6.7 7.0
Animal graphic 9.2 8.4 10.0 12.8
Artwork graphic 23.5 25.4 21.4 18.9
Nondescript 3.7 3.8 3.5 1.4
Label colour
Cream, grey 17.4 20.2 14.1 15.6
Black 6.6 6.7 6.5 3.8
Unicolour warm 9.9 7.5 12.8 13.8
Unicolour cold 6.4 6.2 6.7 7.7
Multicolour warm 4.9 5.1 4.6 3.8
Multicolour cold 12.6 12.9 12.3 13.1
White 42.2 41.6 42.9 42.3
Bottle form
Straight 67.0 60.3 74.9 73.8
Rounded 13.4 18.4 9.7 10.1
Other 19.6 21.3 15.4 16.1
Bottle closure
Screw cap 8.5 5.1 12.5 7.8
Cork 91.5 94.9 87.5 92.2
 S. Mueller Loose, G. Szolnoki / Food Quality and Preference 25 (2012) 171–182 177

Table 3
Label design category examples.

Label style Example Label style Example

Clean Delicate elegant

Clean highlight Animal graphic

Chateau Artwork graphic

Chateau highlight Nondescript

Note: further label examples can be obtained from the authors.

products sold in the two markets under consideration, not only specification is the most common model form (Brentari et al.,
across products offered on the shelf. As expected, we observed a 2011; Cardebat & Figuet, 2004; Combris et al., 1997; Nerlove,
negative correlation between price and unit sales, which was only 1995; Oczkowski, 2001; Panzone & Simões, 2009; Schamel &
of moderate size (r = 0.215, p < 0.001) and did not introduce any Anderson, 2003; Steiner, 2004). An examination of the correlation
collinearity issues. Weighting was performed by means of fre- matrices for the coefficient estimates suggested that no serious de-
quency weights in STATA 11.0. gree of multicollinearity as dependency between price and error
The theoretical model described in Eq. (1) limits the type of term was present in the data.
explanatory variables, but it does not restrict the functional form The equation that was estimated according the log-linear spec-
to be estimated. When using OLS regression, the functional form ification for the pooled model is given as:
of hedonic price models is empirically determined by applying a
number of tests, identifying the model specification which least X
8
2
violates the assumptions of linear regression. In the empirical liter- ln P i ¼ const þ aAvailmc þ bAvailmc þ cj Grapej
j¼1
ature of hedonic pricing, a variety of different functional forms
have been explored and specifications from the ladder of power X
26 X
6 X
7

(including p2, p1.5, linear p, log linear ln p, p0.5, Box–Cox, p0.5, þ dj Regionj þ ej Infoj þ fj Labelj
j¼1 j¼1 j¼1
p1, p1.5 and p2) are usually examined.
We performed a Ramsey RESET test to all those price transfor- X
6 X
2
þ g j Colourj þ hj Bottlej þ kClos þ ei ð2Þ
mations to choose the functional form for the unweighted and
j¼1 j¼1
weighted model. For the unweighted model the inverse quadratic
(p0.5) and log linear (ln p) specifications performed similarly well The domestic model was identical to Eq. (2) with the exception
(RESET test of 0.68 and 1.28) but for the weighted model the log lin- that it contained only six parameters cj for grape varieties grown in
ear model strongly outperformed any other specification (RESET the US and seven parameters dj for domestic US regions. Similarly,
test of 1.69). To allow a consistent comparison of estimates across the import model contained seven parameters cj for grape variety
the unweighted and weighted models we decided to use the log lin- and 18 parameters dj for non-US regions or origin.
ear specification across both models. This choice concurs with the Because of the log-linear transformation, each coefficient esti-
majority of hedonic wine pricing studies, for which the log-linear mate a–k represents the percentage price premium or discount
178 S. Mueller Loose, G. Szolnoki / Food Quality and Preference 25 (2012) 171–182
from the average price related to a product attribute. The price im-
pact of overall product packing is assessed based on the partial
contribution of the packaging variables to the model’s explained
variance, their relative effect size. Thereby the model is estimated
with and without the variables for label type, label colour, bottle
shape and closure, whereas the observed difference in explained
variance represents the contribution of packaging variables (Eq.
(3)).
Contribution to model fit ¼ R2 total model
 R2 model without packaging variables
The attribute importance of individual characteristics Aj is asse-
sed through the range (max–min) of estimated price effects rela-
tive to the sum of estimated price ranges across all attributes
(Eq. (4)):
maxðestimateÞ  minðestimateÞ
Aj Aj
Attribute importances Aj ¼ Pn : ð4Þ
i¼1 maxðestimateÞ  minðestimateÞ
Aj Aj
4. Results
4.1. Importance of packaging in explaining price variation
The effect size of packaging characteristics in explaining market
price differences is assessed by their contribution to explained var-
iance (Eq. (3)). According to results in Table 4, packaging variables
overall contribute about 3.5% to explained variance (Adj. R2) of the
pooled unweighted model, which is a rather modest improvement.
The importance of each attribute was calculated according Eq. (4)
based on estimated implicit price premiums from Table 5. Impor-
tance weights in percent and attribute ranks are provided in Table 6.
Across all products region of origin had the highest importance,
representing 54% of the sum of price ranges in the unweighted
pooled model. These strong estimated price effects for region of ori-
gin concur with similar findings in previous hedonic price studies
(Combris et al., 1997; Schamel & Anderson, 2003). In the light of
imperfect competition these price differences can be related to dif-
ferences in consumers’ perceived regional reputation as well as to
differences on the supply side, such as production costs, market
power or differences in market access. Packaging attributes jointly
account for 27.9% of the sum of estimated implicit price differences,
thereof label design type and label colour were more important than
closure and bottle form. In the pooled unweighted model label type
was the second most important attribute in explaining price differ-
ences followed by label information and grape variety.
4.2. Effect of weighting products by unit sales
Weighting products by unit sales in the hedonic price model
estimates implicit prices across all 1.93 million units sold and
Table 4
Effect size – contribution of packaging variables to explained variance of models (in percent).
Pooled model (n = 1168) Unweighted
Unweighted
Weighted
Domestic US model (n = 630) Unweighted
Unweighted
Weighted
Import model (n = 538) Unweighted
Unweighted
Weighted
Notes: For frequency weighted model R2 is identical to Adj. R2 at four decimal digits.
thereby gives more weight to highly demanded products. Because
price and units sold are weakly correlated (see Section 3) the aver-
age price and price dispersion reduces for all weighted models
(bottom of Table 5). This indicates that very highly priced and
lowly priced niche products are sold less frequently and are there-
fore deemphasised in their impact on implicit price estimates.
How does weighting by unit sales affect the ability of the hedo-
nic price model to explain price differences? The explained vari-
ance (Adj. R2) increases through weighting by between 3.5% in
the domestic model, 5.8% in the pooled model to 15.1% in the im-
ð3Þ port model (Table 4). This increase in explained variance indicates
that prices of more highly demanded products can be better ex-
plained by their product attributes compared to niche products.
What is the effect of taking unit sales into account for the effect
size of packaging characteristics? Across all models the contribu-
tion of packaging variables to the explained variance is higher for
the weighted compared to the unweighted model (Table 4). This
increase is highest for the domestic model (5.7%) and smaller for
imported wines (1.7%). A similar result is observed for packaging
attributes’ importance as share of price range in Table 6, which
slightly increases across all models and where the effect is largest
for domestic products, increasing from 29.2% to 36.4% joined attri-
bute importance. This indicates that products with higher demand
are more strongly differentiated in their product packaging across
different price tiers.
Stronger price discrimination by packaging attributes can also
be observed when comparing the estimated percentage price pre-
miums and discounts across the unweighted and weighted model
(Table 5). For the pooled model, the number of significant price ef-
fects reduces for grape variety, region, bottle form and closure,
while more label design types become statistically significant.
For domestic products we observed an increase in the number of
significant price effects for label type, label colour and bottle form,
when taking unit sales into account, while the price discount for
screw caps became insignificant. The increase of attribute impor-
tance for packaging attributes mainly came at the cost of region
of origin and front label information, for which the share of esti-
mated price differences decreased across all weighted models. This
suggests that there are lower regional and information related
price differences for highly demanded products but that niche
products with lower sales are more strongly price differentiated
by region of origin and front label information.
4.3. Differences in the pricing structure between domestic and
imported products
A number of differences appear when analysing domestic and
imported wines separately. First it can be observed that domestic
wines on average sell at higher prices than imported wines
($16.96 versus $12.18) and that this difference is slightly reduced
when taking unit weights into account ($11.23 versus $8.68), also
see Table 5. This price difference is also reflected in the sales value
All variables Without packaging Contribution packaging
R2 57.07 53.02 4.05
Adj. R2 54.74 51.27 3.47
Adj. R2/R2 60.56 54.15 6.41
R2 62.44 57.61 4.83
Adj. R2 59.89 56.07 3.82
Adj. R2/R2 63.40 53.89 9.51
R2 48.33 39.93 8.40
Adj. R2 42.91 36.00 6.91
Adj. R2/R2 57.98 49.34 8.64
 S. Mueller Loose, G. Szolnoki / Food Quality and Preference 25 (2012) 171–182 179

Table 5
Hedonic pricing model estimates (percent price premium or discount).

Dependent variable ln (price) Pooled model Domestic US model Import model

Un-weighted Coef. Weighted Coef. Un-weighted Coef. Weighted Coef. Un-weighted Coef. Weighted Coef.
Availability
Linear term 0.005⁄⁄⁄ 0.010⁄⁄⁄ 0.006⁄⁄ 0.015⁄⁄⁄ 0.003 0.002
Quadratic term 8.77+,⁄⁄⁄ 9.45+,⁄⁄⁄ 9.22+,⁄⁄⁄ 13.9+,⁄⁄⁄ 7.20+,⁄⁄ 3.76+
Grape varietals
Cabernet Sauvig. 0.018 0.003 0.038 0.006 0.005 0.069
Cabernet blends 0.028 0.001 0.148 0.191⁄⁄ 0.050 0.051
Malbec 0.130 0.176 0.098 0.215
Merlot 0.101⁄⁄⁄ 0.032 0.170⁄⁄⁄ 0.058 0.062 0.021
Pinot Noir 0.009 0.021 0.018 0.223⁄⁄⁄ 0.102 0.019
Shiraz 0.126⁄⁄⁄ 0.051 0.293⁄⁄⁄ 0.314⁄⁄⁄ 0.029 0.025
Tempranillo 0.090 0.128 0.119 0.221⁄⁄
Zinfandel 0.030 0.056 0.110⁄ 0.021
Others 0.002 0.053 0.089 0.057 0.031 0.140⁄⁄
Region of origin
US_Alexander Val. 0.667⁄⁄⁄ 0.539⁄⁄⁄ 0.272⁄⁄⁄ 0.262⁄⁄⁄
US_California 0.146⁄⁄⁄ 0.186⁄⁄⁄ 0.518⁄⁄⁄ 0.435⁄⁄⁄
US_Central Valley 0.146⁄⁄ 0.111⁄⁄ 0.209⁄⁄⁄ 0.132⁄⁄⁄
US_Napa 0.847⁄⁄⁄ 0.664⁄⁄⁄ 0.434⁄⁄⁄ 0.371⁄⁄⁄
US_Sonoma 0.423⁄⁄⁄ 0.333⁄⁄⁄ 0.025 0.058
US_Washington 0.196⁄⁄⁄ 0.096 0.226⁄⁄⁄ 0.384⁄⁄⁄
US_Oregon 0.647⁄⁄⁄ 0.573⁄⁄⁄ 0.255⁄⁄⁄ 0.304⁄⁄⁄
US_other 0.363⁄⁄⁄ 0.218⁄⁄⁄ 0.032 0.043
Argentina 0.227⁄⁄ 0.101 0.018 0.296⁄⁄
Australia_SEA 0.206⁄⁄⁄ 0.163⁄⁄⁄ 0.007 0.012
Australia_other 0.312⁄⁄⁄ 0.213⁄⁄⁄ 0.394⁄⁄⁄ 0.307⁄⁄⁄
Chile_Central Val. 0.338⁄⁄⁄ 0.282⁄⁄⁄ 0.127 0.131
Chile_Colchagua 0.158⁄ 0.126 0.011 0.013
Chile_Maipo 0.019 0.029 0.209⁄ 0.178⁄
Chile_other 0.231⁄⁄ 0.452⁄⁄⁄ 0.098 0.320⁄⁄
France_Beaujolais 0.763⁄⁄⁄ 0.380⁄⁄⁄ 0.639⁄⁄⁄ 0.354⁄⁄⁄
France_Bordeaux 0.152 0.277⁄⁄⁄ 0.071 0.126
France_Rhône 0.402⁄⁄⁄ 0.058 0.335⁄⁄ 0.009
France_other 0.167⁄⁄ 0.027 0.053 0.066
Italy_Chianti 0.294⁄⁄⁄ 0.166⁄ 0.111 0.102
Italy_Toscana 0.015 0.102 0.192⁄⁄ 0.000
Italy_Veneto 0.071 0.019 0.295⁄⁄⁄ 0.180⁄⁄⁄
Italy_other 0.083 0.314⁄⁄ 0.252⁄⁄⁄ 0.161⁄
South Africa 0.195⁄⁄ 0.037 0.039 0.032
Spain_Rioja 0.315⁄⁄⁄ 0.008 0.153 0.124
Spain_other 0.274⁄⁄⁄ 0.210⁄⁄⁄ 0.119⁄ 0.167⁄⁄
Other origins 0.077 0.087 0.262 0.162
Front label information
Country origin 0.042⁄⁄ 0.030 0.333⁄⁄⁄ 0.202 0.029 0.022
Region of origin 0.040⁄⁄ 0.043⁄⁄ 0.066⁄⁄ 0.057⁄ 0.034 0.030
Grape variety 0.067⁄⁄⁄ 0.007 0.133⁄⁄⁄ 0.032 0.016 0.006
Medal 0.063⁄ 0.072⁄⁄ 0.023 0.079⁄ 0.009 0.034
Production method 0.097⁄⁄⁄ 0.112⁄⁄⁄ 0.100⁄⁄⁄ 0.139⁄⁄⁄ 0.104⁄⁄⁄ 0.100⁄⁄⁄
Other information 0.210⁄⁄⁄ 0.135⁄⁄⁄ 0.014 0.086 0.231⁄⁄⁄ 0.136⁄⁄⁄
Label type
Nondescript 0.220 0.211 0.289 0.255 0.107 0.151
Clean 0.070 0.192⁄⁄⁄ 0.042 0.246⁄⁄⁄ 0.128⁄⁄ 0.070
Clean_highlight 0.095⁄⁄⁄ 0.147⁄⁄⁄ 0.126⁄⁄⁄ 0.170⁄⁄⁄ 0.070⁄ 0.117⁄⁄⁄
Chateau 0.022 0.085 0.074 0.154⁄ 0.018 0.030
Chateau_highlight 0.087⁄⁄⁄ 0.129⁄⁄⁄ 0.110⁄⁄ 0.187⁄⁄⁄ 0.065 0.034
Delicate elegant 0.001 0.004 0.041 0.019 0.040 0.026
Animal graphic 0.085⁄⁄ 0.100⁄⁄ 0.070 0.120⁄ 0.078 0.071
Artwork graphic 0.044 0.108⁄⁄ 0.141⁄⁄⁄ 0.160⁄⁄ 0.036 0.005
Label colour
White 0.018 0.032 0.007 0.045 0.024 0.010
Cream, grey 0.093⁄⁄⁄ 0.064 0.037 0.014 0.189⁄⁄⁄ 0.216⁄⁄⁄
Black 0.155⁄⁄⁄ 0.123⁄⁄⁄ 0.154⁄⁄⁄ 0.174⁄⁄ 0.170⁄⁄⁄ 0.103⁄
Unicolour warm 0.095⁄⁄⁄ 0.130⁄⁄⁄ 0.070 0.129⁄⁄ 0.142⁄⁄⁄ 0.163⁄⁄⁄
Unicolour cold 0.102⁄⁄ 0.133⁄⁄⁄ 0.111⁄⁄ 0.143⁄⁄ 0.189⁄⁄⁄ 0.226⁄⁄⁄
Milticolour warm 0.002 0.096⁄⁄ 0.020 0.086⁄ 0.072 0.132⁄
Multicolour cold 0.067⁄⁄ 0.051 0.003 0.048 0.124⁄⁄⁄ 0.071
Bottle form
Straight 0.074⁄⁄⁄ 0.029 0.039 0.095⁄⁄⁄ 0.114⁄⁄⁄ 0.024
Rounded 0.014 0.026 0.016 0.041 0.047 0.049
Other bottle form 0.088⁄⁄⁄ 0.003 0.023 0.135⁄⁄⁄ 0.161⁄⁄⁄ 0.025

(continued on next page)

180 S. Mueller Loose, G. Szolnoki / Food Quality and Preference 25 (2012) 171–182

Table 5 (continued)

Dependent variable ln (price) Pooled model Domestic US model Import model

Un-weighted Coef. Weighted Coef. Un-weighted Coef. Weighted Coef. Un-weighted Coef. Weighted Coef.

Closure
Screw cap 0.049⁄⁄ 0.030 0.084⁄⁄ 0.034 0.040 0.027
Cork 0.049 0.030 0.084 0.034 0.040 0.027
Constant 2.749⁄⁄⁄ 2.402⁄⁄⁄ 2.668⁄⁄⁄ 2.650⁄⁄⁄ 2.567⁄⁄⁄ 2.300⁄⁄⁄
n 1168 630 538
R2 0.571 0.606 0.624 0.634 0.483 0.580
Adj. R2 0.547 0.599 0.429
Average price $14.76 $10.21 $16.96 $11.23 $12.18 $8.68
Stdev. average price $11.42 $5.62 $13.05 $6.26 $8.46 $4.05
Aver. availability 34.8 62.3 35.2 62.6 34.4 61.8
Stdev. aver. availab. 22.2 21.5 22.6 20.8 21.8 22.6

Notes: +(105), ⁄⁄⁄

p < 0.01, ⁄⁄
p < 0.05, ⁄p < 0.10, sum of weights = 1.9312  107.

Table 6
Attribute importance as share of implicit price ranges in percent.

Pooled model Domestic model Import model

Unweighted Rank Weighted Rank Unweighted Rank Weighted Rank Unweighted Rank Weighted Rank
Region of origin 54.0 1 47.4 1 30.0 1 27.8 1 42.3 1 31.4 1
Label type 10.6 2 15.2 2 13.6 4 15.2 3 8.5 6 12.7 4
Grape variety 8.6 5 12.9 3 26.1 2 26.2 2 9.0 5 20.7 3
Label colour 8.6 4 10.9 4 8.4 5 10.9 4 15.5 2 21.0 2
Label info 9.5 3 8.8 5 14.7 3 9.7 5 10.1 4 8.1 5
Closure 3.3 7 2.6 6 5.3 6 2.3 7 3.3 7 2.6 7
Bottle form 5.4 6 2.3 7 2.0 7 7.9 6 11.3 3 3.5 6
Sum packaging attributes 27.9 31.0 29.2 36.4 38.5 39.8
Sum other attributes 72.1 69.0 70.8 63.6 61.5 60.2

Note: Packaging attributes are label type, label colour, closure, bottle form. Other attributes are region of origin, grape variety and label info.

share of domestic US wines (67.3%) relative to imported wines
(32.7%), which is higher than the domestic share of available prod-
ucts (61.1%). We are unable to identify the specific reasons for this
price difference, which could be related to demand effects such as
consumer ethnocentrism (Sharma, Shimp, & Shin, 1995) and repu-
tation effects (Combris et al., 1997), or supply side factors, such as
differences in market access and production costs, considering that
competition and therefore substitution are not perfect.
Second, prices of domestic products can consistently be better
explained by hedonic price models than the prices of imported
wines (higher explained variance in Table 4). There are a number
of potential reasons for this, such as the closer geographical prox-
imity allowing consumers to more easily discriminate between
familiar domestic regions and producers to better understand
and adjust to local consumers’ preferences. In contrast, only some
of the imported wines were produced specifically for the US mar-
ket but instead broadly target international and home market con-
sumer preferences.
Third, domestic and imported products differ considerably in
the relative importance attributes have in explaining price differ-
ences. Overall, packaging characteristics account for a larger share
of price range for imported products, but this difference reduces
when taking unit sales into account (Table 6). Contrasting to
domestic US wines, label colour has a higher importance for price
differences in imported wines than label design type. This could be
related to some traditional region specific European label styles,
which in the past showed less variation than new world wines
(Celhay & Passebois, 2011). There are fewer attribute importance
differences between domestic and imported wines for other pack-
aging characteristics.
Grape variety accounts for a quarter of the implicit price range
of domestic US wines but only for a tenth of that for imported
wines. This agrees with our suggestion in Section 1.2 and can also
be related to the better model fit for domestic wines. Less available
label information on grape varieties for imported wines can be re-
lated to their lower explained price variance. It is interesting to ob-
serve though that grape variety strongly increases in importance
when taking unit sales into account, suggesting that imported vari-
etal wines sell above average. This suggestion is also strengthened
by the fact that model fit increases most predominantly through
weighting for imported wines. In the weighted model domestic
and imported wines concur in comparable price premiums for pro-
duction method related and other front label information, but
other information on the winery seems to be more valued for im-
ported wines.
Finally, can we identify consistent price effects for packaging
elements across domestic and imported products, which would
suggest more generalisable patterns? For all packaging attributes
all significant price effects consistently point in the same direction
across domestic and imported models, suggesting congruent pric-
ing patterns for domestic and imported wines.
4.4. Congruency of implicit market prices with experimental findings
When comparing estimated implicit price effects to experimen-
tal findings discussed in Section 1.1, differences in the cultural con-
text have to be taken into account. For the label design types in
Table 5 we consistently observed high price premiums for nonde-
script labels followed by clean labels without highlights. This agrees
with US consumers’ perceptions of high quality reported by Orth
and Malkewitz (2008). For the pooled and domestic models we ob-
served a positive but insignificant respectively marginally signifi-
cant positive price premium for chateau labels, concurring with
US findings by Boudreaux and Palmer (2007). It is interesting to ob-
serve that both highlighted versions of the clean and chateau style
labels, characterised by red and golden accents, were significantly
 S. Mueller Loose, G. Szolnoki / Food Quality and Preference 25 (2012) 171–182
lower priced in our study, contrasting to findings for Chinese con-
sumers by Convey (2011). Similarly, clean labels generally received
price premiums over chateau labels in our study, opposite to Chi-
nese and Australian consumer preferences (Convey, 2011; Jarvis
et al., 2010; Mueller, Lockshin, et al., 2010). Delicate elegant design
styles, associated by consumers in Orth and Malkewitz (2008) with
higher quality, did not result in significant price premiums in our
study. We found a consistent price discount for animal graphic label
styles across all models, agreeing with experimental findings by
Boudreaux and Palmer (2007), Jarvis et al. (2010) and associations
of inexpensiveness for contrasting designs in Orth and Malkewitz
(2008).
For label colour we observed consistent positive price premi-
ums for black, followed by cream/grey colours, which were partic-
ularly high priced for imported products (Table 5). Uni-coloured
labels generally received a significant price discount, while there
was a tendency for warm multi-coloured labels to receive a modest
price premium. Our findings partially agree with Boudreaux and
Palmer (2007), who reported a positive impact on purchase intent
of US consumers by neutral (white, black) and warm colours. There
is also similarity to findings by Convey (2011) with the exception
of burgundy red, which seems to be a culturally determined highly
preferred colour for Chinese consumers. Concordance of our study
with findings by Mueller, Lockshin et al. (2010) is mixed, who re-
ported white and yellow to be preferred over orange and grey by
Australian consumers.
For bottle form our findings suggested a significant positive
price premium for non-standard bottles in the weighted domestic
and the unweighted import models. Mueller, Lockshin et al. (2010)
only tested straight and round shaped bottles and their low re-
ported attribute importance agrees with our findings (Table 6).
Cork closure only has a significant price premium in unweighted
models (Table 5) and has a low importance (Table 6), partially dis-
agreeing with the stronger experimental closure influence experi-
mentally measured for US consumers (Marin & Durham, 2007).
The overall comparison indicates a large degree of congruence
between estimated implicit prices and previous experimental find-
ings for US consumers. Preference measurements in different cul-
tural contexts show less agreement. Those studies measuring the
relative importance of attributes (Jarvis et al., 2010; Mueller, Lock-
shin et al., 2010) tended to overestimate the relative importance of
packaging characteristics compared to our findings, most likely be-
cause they only considered few origins and grape varieties in their
experiments, thereby under representing market variance.
4.5. Practical implications
Packaging characteristics of wine were found to be related to
market price differences and this differentiation followed similar
patterns across wines of different origins. Observed packaging
price premiums and discounts to a large degree agreed with find-
ings from previous experimental research in the US, suggesting
that the price differences are at least partially driven by consumer
preferences. Wine marketers can take advantage of this knowledge
by matching the packaging to the targeted price tier or by using
packaging to create consumer expectations of higher product va-
lue. This would suggest that for the US market higher priced wines
should be furnished with nondescript and clean label styles in neu-
tral colours. Other bottle forms and cork closures were also to
some degree related to higher price levels. Wine labels using art-
work or animal graphics as well as contrasting highlights are rec-
ommended for lower price tiers. Providing production method or
other information on the front label was observed to be related
to price premiums. Although providing grape variety information
did not relate to market price, higher sales were observed for im-
ported wines of the main grape varieties.
181
The fact that overall about 30% of wine price differences were
related to packaging characteristics suggests a moderate overall
potential for packaging related marketing activities. But packaging
related price differences were generally higher for highly de-
manded wine, suggesting that wine packaging can drive sales vol-
umes to a larger degree than price. Marketers seem to be bound by
price differences relating to intrinsic product characteristics region
of origin and grape variety, which are most likely determined by
production cost factors.
4.6. Limitations and future research
Analysing market price differences does not allow conclusions
about causality. Although we identified a large degree of congru-
ence with experimentally measured consumer preferences, we
cannot exclude that price differences are at least partially caused
by producer and retailer decisions and market influence. Future re-
search should further examine the underlying psychological pro-
cesses related to these label colour and label style preferences
(Becker et al., 2011), providing indication of their potential stabil-
ity. It seems particularly interesting to examine the degree to
which these preferences are learned or psycho-physically hard-
wired. This would also provide valuable insights into the degree
to which preferences for different extrinsic cues are malleable or
permanent.
The stability of packaging related market price differences over
time requires more research. It is unknown to what extend packag-
ing trends and design fashions, such as the critter-label wave for
wine earlier this century, impact price differentials over time. We
would also expect price premiums to be eroded if the majority of
producers start to adopt these packaging elements. Potentially,
price discounts for red and golden highlighted labels observed in
this study can be explained by an erosion effect, when producers
started to increasingly use them. Long term studies would allow
an answer to this question.
Even though this study observed strong agreement in packaging
price differences for domestic and international products, further
research is required to address product related and cross-cultural
differences in the relative pricing importance and price premiums
for different packaging elements. The research approach of this
study to triangulate findings from stated and revealed preferences
seems to be promising for other food products and markets.
5. Conclusion
This study used market transaction data to assess price premi-
ums and discounts related to food packaging characteristics for red
wine. Significant price differences observed for food label designs
and label colours suggest that products differ in their packaging
characteristics across different price levels. This packaging price ef-
fect was more pronounced for highly demanded than for niche
products. Imported wine, for which consumers have to rely on few-
er intrinsic diagnostic cues, were more strongly price differentiated
by packaging elements than domestic products. The congruency
we observed between packaging characteristics with price premi-
ums across domestic and imported products suggest pricing pat-
terns that are fairly generalisable. When comparing implicit
market price premiums to previous experimentally measured sta-
ted packaging preferences we observed some agreement within
the same country but differences across divergent cultures. Results
suggest that experimentally measured preferences for food pack-
aging are able to provide a first valid indication for later market
price differences. The effect size of experimental findings seems
to be overestimated for product attributes with high market
variance.
182 S. Mueller Loose, G. Szolnoki / Food Quality and Preference 25 (2012) 171–182
Acknowledgements
We thank AC Nielsen, particularly Danny Brag and Tom Greene
from the Beverage Alcohol Group, for providing us access to the
scanner data sets. The authors acknowledge project funding from
Australia’s grapegrowers and winemakers through their invest-
ment body the Grape and Wine Research Development Corpora-
tion with matching funding from the Australian Government
(GWRDC project USA 06/01). Gergely Szolnoki’s research visits
were financially supported by the Geisenheim Research Center
and the School of Marketing at the University of South Australia.
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