Do the French have superior palates but no better sense of value? An experimental study

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1 Do the French have superior palates but no better sense of value? An experimental study Geoffrey Lewis (corresponding author) Professorial Fellow, Melbourne Business School 200 Leicester Street, Carlton, Victoria 3053 Tel , g.lewis@mbs.edu Benoît Lecat Professor, Department of Wine Management Burgundy School of Business 29 rue Sambin - BP Dijon Cedex benoit.lecat@escdijon.eu Tatiana Zalan Associate Professor, Torrens University Australia 220 Victoria Square, Adelaide, South Australia 5000 Tatiana.Zalan@tua.edu.au Abstract This study is an extension of our earlier work in an Australian setting aimed at exploring the way the price of wine (an objective characteristic) influences willingness to pay (WTP) and appreciation (see Lewis & Zalan, 2014). The key conclusions from the Lewis and Zalan (2014) study were that for non-expert wine drinkers (1) there is no relationship between intrinsic wine character and enjoyment (individuals rated the same wines quite differently) and (2) price influences both appreciation of wine and WTP, but the latter more strongly. For this study we conducted a wine tasting experiment at the Burgundy School of Business with two experimental groups: (1) English-language program students in the Master of Wine Business and Master of Wine Management programs and (2) students in the Frenchlanguage program CIVS (Commerce International des Vins et Spiritueux), the leading postgraduate wine business program in France. The experiment was different from the Australian study in a number of important ways. The composition of the tasting groups differed in that the students were knowledgeable about wine, all having achieved WSET level 2 as well as nearing completion of post-graduate wine business programs. A second difference was that the price manipulation was slightly modified and the protocol was refined in several ways: a strict WSET tasting procedure was adopted and the manipulation was strengthened by relabelling bottles so that as participants poured the wines into their glasses they could fully engage with the objective characteristics. The experiment was structured in two rounds. In Round 1 (Can you identify the Village Appellation?), the participants were asked to identify the Village appellation of three red Burgundies. The bottles were masked, but the three different appellations and producers were shown on the tasting sheet. Participants were asked to provide their ratings (on a scale of 1-6) and indicate their willingness to pay for the wine. The primary purpose of Round 1

2 was to put participants at ease so they would be less likely to expect manipulation in Round 2. In Round 2 (The Burgundy Appellation Challenge) the participants were presented with five red Burgundy wines from the same producer and vintage and were asked to assess the classification (ranging from Grand Cru to Bourgogne Regional Appellation) of the wines. The question was posed whether some classifications were over/under-rated or over/underpriced and how they valued these wines based on quality, regardless of the classification. They were also asked to rate the wines (on a scale of 1-6) and indicate their willingness to pay for each of the wines. Round 2 was conducted under five price conditions, with a price manipulation similar to Plassman et al. (2008). Wine 1 was presented as Grand Cru (at its true price shown as 48). Wine 2 was presented as a Premier Cru at 31 (actually, Wine 5 Regional appellation, true price 8). Wine 3 was presented as a Premier Cru (price shown as 31, its true price). Wine 4 was presented as a Village Appellation (price shown as 20, but was actually Wine 1 Grand Cru, true price 48). Wine 5 was presented as a Regional Appellation (at its true price 8). We anchored Wines 1, 3 and 5, and manipulated the price of Wines 2 and 4, unlike the Australian experiment, where we anchored Wines 2, 3 and 4, and manipulated the price of Wines 1 and 5. The wines were listed on the tasting form along with their appellations and retail prices, and the participants poured the wines themselves from the labelled/mislabelled bottles. In this way the wine tasters were fully exposed in Round 2 to objective characteristics of the wines. As with the Australian experiment, the tasters were debriefed at the end of the tastings about the nature of the experiment, in recognition of the challenges of experimental designs in economics involving manipulation (Cooper, 2014). The two groups of tasters were equally knowledgeable about wine (WSET level 2, similar self-reported knowledge of the appellations of Burgundy, and the number of correctly identified wines in Round 1 (see Table 1). In Round 2, the experimental manipulation, the overall findings were consistent with the Australian study the Presented Price influenced both appreciation (ratings) and WTP. As with the Australian study, WTP was influenced more than appreciation. Group 1 s ratings (broadly) and WTP (very closely) tracked the Presented Prices rather than the True Prices (Figure 1), indicating that their responses were dominated by objective characteristics. In the case of Group 2, ratings and WTP also broadly tracked Presented Price, with the exception of the rating of Wine 4 (Figure 2). Wine 4 (actually Wine 1 Grand Cru) presented as a Village Cru was rated higher than Wine 1. To the French students, the Village Cru tasted much better than they expected, and so they rated it more highly than the same wine when it was presented as a Grand Cru (see Brochet, 2001, on the influence of expectations on taster experiences). It appears that the French students demonstrated keener palates and more confidence in assessing the wines regardless of objective characteristics. And yet in spite of what their palates told them, the objective characteristics (label and Presented Price) strongly influenced their WTP: despite their higher rating, they were only willing to pay 24.26, compared with for same wine when presented as Grand Cru (see Table 3.2). In conclusion, we find compelling evidence that even for knowledgeable wine drinkers, WTP is influenced by objective cues, such as price and labelling. While this is consistent with our earlier experiment using a non-expert group, it suggests objective characteristic may have less influence on appreciation for more knowledgeable wine drinkers. For the French students the manipulation with one of the wines did not override their palates, but it did seem to override the way they valued the wine (WTP). Was this the result of a combination of the effect of objective characteristics, intrinsic wine quality, and expectations?

3 References Brochet, F. (2001). Chemical Object Representation in the Field of Consciousness. Application presented for the grand prix of the Académie Amorim following work carried out towards a doctorate from the Faculty of Oenology, General Oenology Laboratory, 351 Cours de la Libération, Talence Cadex. Cooper, D. (2014). A note on deception in economic experiments. Journal of Wine Economics, 9(2): Lewis, G., and Zalan, T. (2014). Strategic implications of the relationship between price and willingness to pay: Evidence from a wine-tasting experiment. Journal of Wine Economics, 9(2): Plassman, H., O'Doherty, J., Shiv, B., and Rangel, A. (2008). Marketing actions can modulate neural representations of experienced pleasantness. Proceedings of the National Academy of Sciences, 105(3):

4 Figure 1: Group 1 (English-language Programs) Results (n=31) True Price Presented Price WTP Rating Euros per bottle ,00 5,00 4,00 3,00 2,00 1,00 Rating (1-6) Wines Figure 2: Group 2 (French-language Program) results (n=27) True Price Presented Price WTP Rating Euros per bottle ,00 5,00 4,00 3,00 2,00 1,00 Rating (1-6) Wines

5 Table 1: Round 1 Differences between the two groups of tasters Number of wines correct None correct One correct Three correct Group % 38.7% 41.9% Group % 48.1% 40.7% Table 2: Round 2 Differences between the two groups of tasters Difference in rating of same wines Difference between WTP and True Price Group Group Refer to Tables 3.1 and 3.2 for data and calculations Table 3.1: Summary data for English-language students (n=31) Wine 1 Wine 2 Wine 3 Wine 4 Wine 5 Diff. Rating True Price ( ) Presented Price ( ) WTP ( ) Rating (1-6 scale) Diff. WTP &True Price ( ) Total difference ( ) Table 3.2: Summary data for French-language students (n=27) Wine 1 Wine 2 Wine 3 Wine 4 Wine 5 Diff. Rating True Price ( ) Presented Price ( ) WTP ( ) Rating (1-6 scale) Diff. WTP &True Price ( ) Total difference ( ) 35.15