April 5, 2014 in Opinion

Guest opinion: Enjoy fine, affordable Washington wine while you can

Jon R. Miller
 

A friend in California once told me that the Bay Area, where he grew up, has 17 seasons. I always felt fortunate in the Inland Northwest to have just four. And everyone here knows that “The Coast” has only two.

I bet you’ve had similar experiences with Californians. They’ll let you know that they have warm beaches, the Sierras, the Lakers, the 49ers, swimming pools, palm trees and movie stars. They also have houses with high prices and lots of equity, which they can cash out, move north, and be rich. Yes, often our California neighbors let us know that just about everything is better in California.

This California chauvinism must apply to wine as well, because nothing else can explain the persistent price premiums paid for California wines. Even though quality is not higher for California wine, people are willing to pay more for it. In a paper recently published in the journal Enometrica, my colleague Eric Stuen and I studied wine prices and quality ratings for over 18,000 varietal wines reviewed by Wine Spectator for the vintages 1996-2005. Not one of the nine varietals had an average quality rating that was greater in California than in Washington, yet eight of the California varietals had a higher average price. This regional disconnect between price and quality rating is largest for cabernet sauvignon and chardonnay. With quality ratings no higher than Washington wines, average prices are well over 60 percent higher for these California wines.

When we looked at samples of individual wines, we found that many variables such as location, reputation and measures of quality were related to a wine’s price in sensible and statistically significant ways. Even after accounting for the effect of these variables, a California price premium persisted.

We attribute this persistent price premium to California wine chauvinism, a willingness to pay more simply because the wine comes from California. We’re not saying that wine buyers are wrong in their views. We all have brand loyalties. And California wines have earned theirs. After all, California is the largest U.S. wine production state by far. California wine won the “Judgment in Paris” and put the U.S. on the world wine map. “Napa” is universally known as a quality American Viniculture Area, and the movie “Sideways” increased the demand for pinot noir and reduced it for merlot.

In comparison, Washington wines are still relative newcomers. While experts bestow high ratings on Washington wines, few have attained the iconic status of many California wines. It will happen someday. Washington wines will command higher prices consistent with their relative quality. But in the meantime, we wine consumers can drink highly rated Northwest wine at a price discount. Let’s enjoy it while we can before a “Judgment in San Francisco” ruins everything.

Jon R. Miller is professor of economics in the College of Business and Economics at the University of Idaho. He can be reached at jrmecon@uidaho.edu.


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