E-business and terroir-linked products in Italy: a case study on Romagna wine producers Maurizio Canavari a, Alessandro Farneti a, Marco Lucchi a, Martyn Warren b a Dipartimento di Economia e Ingegneria Agrarie, Alma Mater Studiorum Univeristà di Bologna, Italy maurizio.canavari@unibo.it alessandro.farneti@studio.unibo.it marco.lucchi@alma.unibo.it b Rural Futures Unit, School of Geography, University of Plymouth, UK. mwarren@plymouth.ac.uk Abstract Viticulture and oenology in Romagna can boast a distinctive cultural tradition: Romagna wine makers are recognised to be able to reach high standards, and wine produced in this terroir seems to fit the attributes identifying a typical product connotation. This study considers the opportunity to use electronic commerce as a meaningful instrument for selling the terroir-linked product abroad, both on the EU and overseas markets. The main objective of this paper is to evaluate the level of e-commerce readiness for Romagna wine producers via a questionnaire-survey submitted to the members of the protection consortium Ente Tutela Vini di Romagna. The main issues addressed in the analysis will be the role played by the attribute area of origin on present marketing initiatives taken by the producers and whether e-commerce is considered a viable solution in order to improve the value of Romagna wines. Key words: Wine, Area-of-Origin Effect, Local Economies, E-Commerce. 1. Introduction Viticulture and oenology in Romagna can boast a distinctive cultural tradition; the history of the art of wine making for this Italian sub-region finds its roots back to the Etruscan period. However, during the 1950s and '60s the main goal for wine producers became the production of large quantities of cheap wine, with scant attention paid to the productions of excellence. Since that time, new emerging producers have contributed to reducing the gap of reputation with other regions of older quality tradition in wine production: Romagna wine makers are now recognised to be able to reach high standards, and wine produced in this terroir seems to fit the nine attributes identifying a typical product connotation (Mattiacci and Vignali, 2004): territory, commodity economics, legal regulation, industrial nature, time, tradition, specificity, identity, nutritional surplus. This gives the area a potential basis for leveraging new business opportunities. This study considers one of those opportunities: the use of electronic commerce as a meaningful instrument for selling the terroir-linked product abroad, both on the EU and overseas markets. Within this framework, the main objective of this paper is to evaluate the level of attention to e-commerce for Romagna wine producers. The analysis is performed via a questionnaire survey submitted to the members of the Romagna wine protection consortium Ente Tutela Vini di Romagna, founded in 1962. The main issue addressed in the analysis is the role played by the attribute area-of-origin on present marketing initiatives taken by the producers. An important issue to be dealing with is whether e-commerce is considered a viable solution, and if it might better be a single-business tool for wine makers, or if it might be handled by a third party, whether as an independent venture business or as a collective marketing action. The results will be useful for the elaboration of strategies aimed at enhancing the value of Romagna wines, and will be transferable to marketing of other local-specific food and drink products. 2. Objectives and Methodology 415
The main objectives of this analysis may be synthesised as follows: Grouping the wine producers according to their attitudes to e-commerce tools: wine producers are assigned to three different categories, including those already featuring an e-commerce service, those considering the opportunity to apply for on-line trading and those not showing any intention of adopting electronic commerce; lighting the opinions of wine producers on the role played by the attribute area-of-origin on the value enhancement policies linked to e-commerce: wine producers are asked to express their opinion about crucial issues such as the importance of Area-of-Origin promoting their wines, along with their attitude to participate to a collective marketing action whereas e-commerce is considered a viable solution to enhance the value of Romagna wines. Considering the previous two aspects jointly. The analysis has been performed via a questionnaire survey submitted to a sample of forty members, out of one hundred associates of the Romagna wine protection consortium Ente Tutela Vini di Romagna, founded in 1962. The largest part of the interviewees (twenty-five cellars) have been approached during the international oenological exhibition Vinitaly 2005, which took place in Verona. The remaining part of the sample (fifteen cellars) has been directly reached to the vineyard location. The questionnaire has been initially drawn up and tested, then improved during the survey progress to finally achieve its definitive output. It is structured in three parts, aimed at: collecting general vineyard information and characterisation; detailing marketing initiatives taken by the producers; measuring the level of e-business inclination and collecting the opinion on the importance of area-of-origin to enhance the value of the respondent's product. The questionnaire allowed collection of a large amount of information, even though only some of this is considered in the present work. In order to select the most relevant variables to be discussed, a series of Chi square tests have been performed between several combinations of cross-tabulated data. This allowed us to investigate the probability of independence among the variables and to further investigate the ones that showed a significant relationship. The selected features have been used both to set up an operative background for the questionnaire survey and to attempt finding statistic explanations for the attitude towards e-commerce. These indexes are: Vineyard extension (hectares); Management average age (years); Share of quality wine production (percentage); International sales (percentage); Computerisation Level (composite index), A specific question considered the adoption of e-commerce tools as a marketing option. The wineries are classified in three groups: Non adopters; Willing to adopt; Adopters. Further indicators are aimed at specifically understanding the adoption and use of electronic commerce are referred to the importance of the following factors in taking the decision of adopting (or not adopting) e-commerce tools: Investment required Product suitability; Security issues; Client demand; 416
On-line competition; Logistic issues. Finally, a question was specifically focused on the respondent's perception of the role of Area-of-Origin on the enhancement of the value of the winery products, expressed on a 5-point Likert scale. A simple descriptive analysis of the main issues is presented in the following section. Further analysis is going to be performed once the data collection phase is completed. 3. Results and Discussion The scenario for viticulture in Romagna should be summarised through the following general variables: Vineyard dimension. The Romagna sub-region is a rather small area and the farmland structure is subjected to a strong fragmentation; thus there is a large number of small-medium sized farms and vineyards. The sample surveyed confirms this situation, since roughly 15% of vineyards show a surface area more than 100 hectares, the median value being 24 hectares; Average management age. The medium age of the management members is nearly 50 years old, and in only three cases was the management-owner s average age less than forty years; Share of quality wines. The quality attribute for wine production may be referred to Spawton s (1991) segmentation of wine global market into two separated segments characterised by different marketing mix strategies, one for the so called beverage wines and another one for the so called fine wines. With particular attention paid to the product marketing mix elements such as geographical indication, grapes variety, limited quantity, ageing and regional that belong to the fine wine segment, the questionnaire defines the quality wine for the purposes of this research. The average value of quality wine production for the vineyards sample is higher than 50%, whilst an significant proportion is still regarded as table wine ( beverage wine ). International sales. This information includes both exports to European and Non-European countries; 80% of the cellars interviewed have commercial trades abroad, even though both the median and mean values of exports is less than 20% of total sales. According to the collected data, export is concentrated in Europe, particularly in Germany, whilst United States and Japan are the main destination markets out of Europe; Computerisation level. This composite index has been calculated combining the output value for seven discrete and binary variables in the questionnaire: presence of a server (0 or 1), number of computers compared to employees (npc/nemp), quota of computers connected to a local area network (lanpc/npc), quota of computers connected to the Internet (netpc/npc), type of Internet connection (0 4/4), presence of an LAN/Internet manager (0 or 1) and of a web site (0 or 1). Consequently, the population has been classified into three groups labelled as "poor" (1 st quartile), "average" and "high level" (4 th quartile) of computerisation, according to the score achieved on the composite index. The main descriptive statistics for some of the variables are reported in Tab. 1, together with the Chi Square Test, which is used to verify the non-parametric independence of the variable considered from the E-commerce adoption variable. 417
Variables Mean Median Standard Chi Square Test Deviation P(, 2 <, 2 0.95) Vineyard Extension (ha) 705.23 24 2210.73 0.73 Average Management Age (years) 44.82 42 7.39 0.28 Share of Fine Wines (percentage) 76.55 95 30.20 0.88 International Sales (percentage) 17.75 15 16.52 0.53 Computerisation Level (composite index) 4,49 4,55 1,29 0.05 ** Logistic Issues (5-point Likert scale) 2.85 3 1.54 0.03 ** On-line Competition (5-point Likert scale) 2.17 2 1.15 0.10 * Client Demand (5-point Likert scale) 3.00 3 1.41 0.14 Security Issues(5-point Likert scale) 3.02 3 1.65 0.40 Product Suitability (5-point Likert scale) 3.07 3 1.54 0.05 ** Investment (5-point Likert scale) 2.65 3 1.45 0.33 Collective I. Solution(5-point Likert scale) 2.95 3 1.44 Third Party I. Solution (5-point Likert scale) 2.75 2.5 1.60 Individual I. Solution (5-point Likert scale) 3.75 4 1.37 Private I. Solution (5-point Likert scale) 3.42 4 1.64 Terroir Attitude (5-point Likert scale) 4.60 5 0.49 0.34 E-commerce adoption (n=40) No = 18.45 Show interest = 14.35 Yes = 8.20 Table 1 Descriptive statistics for some of the variables The classification according to the computerisation index has been cross-tabulated with the level of e-commerce adoption (Fig. 1), and the two variables are not independent, since they satisfy the condition J 2 >J 2 0.95 for a Chi square test. While the "interested to adopt" are mainly classified in the "high" computerisation level group, the "adopters" are more concentrated in the "medium" one. The "poor" computerisation level includes a similar share of "non adopters" and "interested to adopt". E-commerce adoption Yes Show Interest No Medium Poor 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Distribution by groups of computerisation level Fig. 1. The e-commerce adoption according to vineyard computerisation level. Logistic issues Indexes On-line competition Customer demand Security issues Product suitability Medium Low Investment required 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Importance degree Fig. 2. The importance degree for specific factors for those showing an interest in implementing e-commerce in the winery. 418
Fig. 2 examines the influence of multiple factors affecting those among the cellars sampled that expressed interest in implementing an e-commerce service for their business. They assigned a higher degree of importance to product suitability, security matters especially for payment transactions together with their clients portfolio needs and demands. They attributed minor relevance to the investment required for starting up the e-commerce service. A similarly low importance was assigned to logistic organisation (from the comments obtained during the face-to-face interviews, most felt that it was like an external service to be dealt with by, say, a courier) and, finally, to on-line competition. The same analytical approach for wine producers without electronic commerce and with no intention to implement it revealed that none of the factors considered seems to significantly affect their behaviour, suggesting that new and diverse issues might be investigated; whilst logistical organisation along with product suitability are the main reasons of concern with cellars already featuring an e-commerce service. Along with testing the e-business inclination and e-commerce readiness of the associates sample of the wine protection consortium Ente Tutela Vini di Romagna, the additional aim of this case study is to analyse the role played by the attribute area-of-origin on present marketing initiatives taken by the producers; even though all the interviewees understood the elevate importance of the terroir to promote the traditions-linked product and to affect the final consumer buying intention, it has been possible classifying vineyards into two different terroir-attitude classes. Fig. 3 synthesises the relation existing between those classes and the level of electronic commerce adoption. It is interesting to note that those who are strongly convinced that the local brand of the area-of-origin plays a vital role are significantly less oriented towards adopting e-commerce. It may be interpreted as a perception of incompatibility between the local dimension of the traditional quality wine, with the image of a "global" and "technological" tool assigned to the Internet. Opinion on the importance of the "terroir" factor Very 0% 20% 40% 60% 80% 100% Distribution by groups of E-commerce adoption No Show Interest Yes Fig. 3.The e-commerce adoption within two classes of terroir-attitude E-commerce features Collective Third part Individual Private Poor Medium 0% 50% 100% Interest degree Fig. 4. The interest degree for different e-commerce features 419
Finally, Fig. 4 compares the degree of interest verified for diverse possible electronic business implementation solutions. It s apparent how cellars surveyed are definitely oriented to implementing a private web site and to promoting an individual marketing action when approaching on-line commerce, rather than gathering in a third-party handled virtual winery participating of a collective marketing initiative, for instance co-ordinated under the wine protection consortium Ente Tutela Vini di Romagna supervision. 4. Conclusions The preliminary results of the analysis performed on the wineries enrolled in the Ente Tutela Vini di Romagna consortium shows mixed trends. On one side, a significant quota of producers are interested in implementing an e-commerce facility within their marketing organisation, and most of the firms are quite well-prepared to adopt it. On the other side, there is still a strong orientation towards individual solutions, whose efficiency may suffer for the small dimension of the single businesses. Furthermore, even though the opportunity to promote traditional and local wines on the Internet is not excluded, there are some hints that the e-commerce tool is perceived as not completely coherent with a logic of value enhancement, achieved through focusing on the local dimension and to the importance of the area of origin. Obviously, this is just the perception showed by the Romagna wine producers, and it could be confirmed or denied through a specific study involving the analysis of the purchase behaviour on the Internet, performed both on professional buyers and consumers. 5. Acknowledgements The analysis has been designed and conducted mainly by Alessandro Farneti, who also performed the data collection. Martyn Warren co-ordinated the research team and revised the first draft of the paper, Maurizio Canavari supervised the research design, revised the first draft and wrote section 4. Marco Lucchi collaborated in the questionnaire design. 6. References Mattiacci, A., Vignali, C., 2004. The typical products within food glocalisation. British Food Journal, 106(10/11), 703-713. Spawton, T., 1991. Marketing planning for wine. European Journal of Marketing, 25(3). 420