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Buying an Experience

How the ‘Terroir Focus’ Changed Changed the Behavior of Wine Consumers

Voor mijn masteropleiding Economic and Consumer Psychology aan Universiteit Leiden mocht ik een paper schrijven over de impact van emoties op ons gedrag als consument. Dat moest natuurlijk over wijn gaan! Leest wellicht niet zo gemakkelijk weg als alle andere artikelen op Kelderpraat, maar desalniettemin een leuke longread over de impact van de zogenoemde terroir-focus op het gedrag van consumenten. Enjoy!

What is terroir?

As introduced by Pine and Gilmor in 1998, the experience economy is the trend that products evolve from their physical status to the memory of an experience. It’s a phenomena that we see in wine consumers too, with an increased focus on the concept of terroir. Terroir is an often used term in the world of wine and could be roughly translated into ‘sense of place’. Terroir consists of the surroundings of the grapevine (such as the soil, (micro)climate, weather, physical landscape, and winemaker), which influence the taste of the actual wine (Schaller, 2017). On the label, a winemaker is allowed to write the name of the specific place, or appellation the wine is coming from. In this case, the label not only tells us what to expect of the wine in terms of alcohol percentage, grape variety etcetera, but also tells us where the wine is coming from which could enhance the terroir-sensation of the consumer. This terroir-sensation might be the crux of the experience wine is giving to its consumers and might be of influence the perceived taste, quality and likability of the wine. Take for example a wine that originates from Burgundy, France. If you have ever seen the romantic scenery of the region, buying, tasting or drinking that specific wine might evoke the emotions which you originally had about Burgundy.

The focus on terroir from the wine consumers over the last year, has urged the world of wine to create more and more appellations. These appellations are legally defined and protected geographical locations and have their own terroir and thus their own status, scarcity and market value. This paper will evaluate on emotional factors driving the terroir-inflation of the wineworld and the impact terroir has on the perceived value of wine. Hereby it will mainly focus on how scarcity grows due to the terroir focus, how this enhances the position of wine as a status good and how a bottle of wine can evoke emotions which belong to a specific region. Because the age-old region of Burgundy in France is often referred to as the birthplace of terroir this paper will use it as its main example, but it will also put it in perspective by comparing it to more recent wine growing regions in order to truly understand the commercial aspect of terroir in consumer decisions.

Welcome to the experience economy

In an issue from the Harvard Business Review from 1998, Pine and Gilmore argued that our economy would eventually evolve into an experience economy. In the experience economy, consumers are not focussed on the actual product or service, but on the experience that comes with it. These consumers are even willing to pay more for the product or service, as long as the experience is there (Pine & Gilmore, 1998). This seems to be the result of something that Lerner and colleagues (2015) called incidental emotions, emotions that originally belong to a certain place, but are carried over to something else. The concept of the experience economy seems to capture just that:  the perception of emotions that do not originate from the product or service itself, but from the sensation the product or service is delivering. This enhanced perception of emotions the product is delivering might also explain the consumer focus on buying terroir-driven wines and how smelling and drinking these wines might actually be an experience on its own. The wine does not only bring sensory stimulations by tasting it, it also makes you experience certain emotions which are originally associated with the area the wine is coming from, its terroir. Take for example a red wine coming from Burgundy in France, a winemaking region that is known for focussing on expressing terroir in their wines. Smelling this wine might give you herbaceous and organic aromas. These aromas might remind you of the romantic and farm-like scenery of Burgundy which might elicit feelings of happiness and joy. These emotions could actually be carried over from the origin to the wine because people and thus consumers often find it very hard to understand where a certain emotion originated from (Lerner et al., 2015). Research by Lin, Pearson and Cai (2011) also showed that food influences the view one might have on a certain region, taking the role of some sort of brand identity of the place. It is this role of brand identity that really drives the role of terroir in the legislation of appellations in. In these appellations the typicality of the wine is linked to a certain geographical marker, giving it a form of traceability, functioning as a product that carries the incidental emotions which originated from somewhere else.

Further on in this paper the possibilities for winemakers to enhance the carryover effect of positive emotions of the winegrowing region to the perception of the wine will be discussed. 

Burgundian scarcity

Wine is, for ages, often seen as a beverage that is meant for the wealthy and in Ancient Greece it was even seen as a divine drink that was referred to as juice of the Gods (Jitâreanu, 2012). This age-old reputation of wine might have enhanced its present form as a status good, a product which is used to signal wealth, education or social ties with people with high status (Sivanathan & Petit, 2010).

In today's world, not every wine has the same status as others. This status is, besides the taste of the wine, often created by the perception of the consumer. As said, this perception of wine is not solely judged on the actual taste of the wine. Hence the fact that the rarest and most expensive wines are even sold through actions to people who have not tasted it first. In line with this, research by Lecocq and Visser (2012) showed that wine consumers focus more on what is on the outside rather than what is on the inside of the bottle. Their research showed that objective characteristics on the label, such as a specific vintage, appellation or producer, have a larger impact on someone’s price determination of a bottle of wine than the actual taste of the wine. This means winelovers and collectors are on the hunt for wines because of their reputation and not for their taste (Chiffoleau & Laporte, 2006). This means that winemakers can actually use the reputation of those markers almost as a brand on their label. Specifying these markers which consumers can find on the bottle might then actually have a positive impact on the perception of wine consumers.

Take Burgundy as an example, where the terroir-focus of the Burgundian winemakers since Medieval times caused very specific geographical markers to be allowed on the label, which means that some of those wines only come from a single vineyard that only has the size of a couple hectares. In Burgundy it makes sense that consumers are looking for specific appellations and might have become the main focus of wine consumers to judge the quality of wine from Burgundy. The wines themselves are, across the whole region, generally made from pinot noir and chardonnay in a dry and still style. Yet, we find huge differences in the wines, which are likely to be coming from the vines growing in (subtly) different circumstances. Because of the large number of different appellations in Burgundy, the amount of wines coming from a certain place in the region is limited. This limited number of actual wines creates a scarcity in the market which, according to economic philosopher Adam Smith, will lead to an increase in price (Robertson & Taylor, 1957). It is this scarcity that also enhances the role of wine as a status good because being able to get your hands on the wines from certain appellations probably means you are good for it.

This scarcity is one of the main igniters behind the absurd prices wine consumers and collectors are facing with wines from Burgundy. In 2021, Europe was hit hard by a severe frost which destroyed roughly around 25% of the total crop and the increased energy prices hit wine producers as well. Unfortunately this cannot explain the extreme rise in price of Burgundy wines compared to other high(er) end wine producing regions, but understanding its function as a status good can. Because of the role of wines from Burgundy as a status good, the wines are not only bought to be drunk, but also as an investment. Take for example reports from China, where wine has the reputation of jewelry and is used to show off among the newly rich (Mackinnon, 2011). This newly found use of those high-end wines might be one of the main igniters of the extreme prices we find on the market.

If the Burgundians can do it, so can we!

Does this mean that if winemakers focus on the terroir storytelling they will be able to sell their wines to a higher price? Can we all copy Burgundy’s example and just divide our wine region in smaller plots to push up the price? It surely looks that way if we shift our view from one of the oldest wine growing regions in the world to a more recent one: California. The United States created their own appellation system, heavily based on the French version, in 1978 and included the country’s most important wine region, Napa Valley, three years later. Since then, Napa Valley introduced a total of 16 sub-appellations with unique terroir conditions which may be printed on the label. Research by Keating in 2020 showed that some of these sub-appellations can predict a price increase in the range from three up to more than thirty percent, completely in line with the trend we saw in Burgundy with wines coming from smaller geographical markers. Thus there most likely is a commercial motive for wine producers to have a terroir-focussed storytelling when they want to sell their wines to consumers, responding to emotional associations that might pop-up and enhancing the need of the scarcity that is created by only picking grapes from a small(er) parcel.

But if we keep the research by Lerner and Colleagues in mind (2015), we will remember that the crux of the impact of the terroir story on the perception of the wine has to do with the positive incidental emotions, such as happiness and joy, which are carried over from the winegrowing area to the wine in the glass. This means the emotion you are trying to carryover, the one originally associated with the specific terroir of the vine, has to be an emotion that is seen as positive. Research by Mogilner and colleagues (2011) also found that positive emotions such as happiness affect consumers’ choices, so it is likely that such positive associations would result in a more positive evaluation of the wine.

Luckily for winemakers who work in regions without an epic reputation, the appellation is not the only variable which we find on the label of a bottle of wine. Take for example the vintage on the bottle, which represents the year the grapes of the wine were harvested. Because of the impact of its environment, the taste of the wine is influenced by factors which can vary from vintage to vintage. But as discussed earlier, the objective factor of the information the consumer can find on the bottle of wine has a larger impact on someone’s price determination of a bottle of wine than the actual taste of the wine  (Lecocq & Visser, 2012). This means that  the communication about a good or bad vintage can have a perception of the taste of the wine in the glass. Therefore it is important to communicate positive information about the winegrowing area in order to create a positive association between that and the wine.

In the media you find a lot of media outings of wine regions which communicate their shortcomings as a success. Take for example the 2021 vintage I discussed earlier: the press release from the Comité Champagne communicated that, despite very difficult growing situations and a loss in yield of around 30%, the quality of the grapes was exceptional and is likely to result in an amazing vintage. Not only can good winegrowing attributes of a vintage contribute to a positive association, influential events can too. Take for example the 1945 vintage in Burgundy. Despite having fairly good growing conditions, it is also the year that the Second World War ended which makes it a very special vintage in which the perception is likely to be heavily influenced by positive emotions (Mogilner et al., 2011).

Discussion and possible implications for wineproducers

So as discussed above, the terms which are used on the bottle of wine are influencing the wine consumers. In some sense, the terroir and its corresponding appellation became a brand on its own in the world of wine. This brandisation of a certain origin is something we have seen in different markets too, for example in the Danish food industry in which the storytelling of terroir became the main brand aspect of many products (Gyimóthy, 2017). Winemakers should really take this terroir-focus of the modern wine consumer into consideration. Research has shown that markers on a bottle of wine, such as the appellation, is of significant influence on the perceived quality and even price of the wine (Chiffoleau & Laporte, 2006) and research by Lecocq and Visser (2006) also showed how poor quality estimations of wine are in regard to their actual price. They also showed that these markers or terms on a bottle of wine such as origin or vintage has a large influence on our perception of the wine.

If we refocus on the experience economy theory of Pine and Gilmor (1998), we can understand why it is not just the actual wine wine consumers are focussed on. They are focussed on the story of the wine and are on the hunt for cues that help them perceive the story of the wine. These cues capture the concept of incidental emotions which was discussed earlier, and transport the positive emotions which are associated with the surroundings of the vine, the origins, to the perception the consumer has of the wine. This transportation of emotions makes it possible to feel emotions of happiness and joy when we smell the barnyard-like smell of a red Burgundy. Not because every wine consumer is a fan of barnyards, but because it resembles the romantic scenery of Burgundy.

Besides positive associations, winemakers should also be on the lookout for negative associations a consumer might have with certain markers on the bottle of wine. If we take for example the impact a certain historic vintage might have on the perception of a wine (Lecocq & Visser, 2012), we also have to take in consideration the possible impact of negative events. Besides the actual quality of the wine, one can imagine that it is harder to sell wines from specific vintages due to unpopular events, such as the start of the COVID-19 pandemic in 2019 or the election of Donald Trump in 2016.

Wine is one of those weird luxury products in which the price of the wine is not completely in line with the work or costs the maker has put in it. Of course, some price differences can be understandable due to differences in harvesting- or winemaking techniques, purchase costs of the vineyard or differences between yields, but this does not explain the full picture. If we look at the possibility for winemakers to influence the scarcity of a certain wine, it helps to understand some of the differences. Winemakers more and more have the opportunity to create wines from a single sub-region or even vineyards which decreases the possible yield that is possible for a certain wine. If we combine this understanding of scarcity with the possibility this appellation-inflation creates by having very terroir-focussed storytelling, helps us understand the different statuses wines can have in the eye of the consumer. Wine is and always has been a status good which is, in the case of certain wines, of heavy influence on the perception and pricing of it.

Therefore this paper will not be a viral “how to sell wine” article which simplifies all the factors in play, but it gives an insight to possible emotional constructs that influence the rational and irrational behavior of wine consumers and tries to represent a decent understanding of the marketing value terroir might have on these consumers.

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Geschreven door Rik Hogeland
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