How do critic scores affect wine prices? A study of Napa Valley wines
There are many factors that affect the price of wine, including quality, age, vintage, appellation of origin, etc. Many studies have been published breaking down the factors that affect wine prices, particularly in Bordeaux, but Napa Valley remains largely unstudied. Given the prominence of the region, it is interesting to study how critic scores affect wine prices in this market.
The Data
For this study, we used a dataset of 851 Global Wine Scores from Napa Valley from the vintages 2006–2015. The dataset generally consists of premium wines as these are the most likely to be rated by 3 or more critics and thus have a Global Wine Score. Here is a summary of our data:
- Mean Score: 93.12
- Minimum Score: 84.75
- Maximum Score: 99.8
- Standard Deviation: 2.65
Each of the wines comes from the Napa Valley AVA (American Viticultural Area) or a sub-AVA within Napa Valley as seen in the map below.
The Methodology
Using a multiple linear regression model, we developed an equation for the price of wine dependent on several key variables: Age, Vintage, Color, AVA, Grape Variety (or blend type if a blend), and Global Wine Score. The Global Wine Score represents the views of all critics who have scored a wine, so this reflects the average expert opinion of a particular bottle of wine. We also separated the age of the wine from the vintage, so the vintage variable captures the collective reputation of that vintage rather than the age of the wine itself.
One difficulty that arises when studying the impact of expert scores on prices is the fact that wines that receive high scores are also generally of good quality. Therefore, researchers attempt to control for wine quality by introducing other variables to the equation that measure quality. In our model, both the AVA and vintage variables can act as a control for quality level, although it is hard to perfectly separate wine quality from scores.
The Results
We found that critic scores had a statistically significant effect on wine prices (significant at the 1% level). In the equation, a 1-point increase in Global Wine Score would result in a 63€ increase in average price per bottle for the wine trade. When running an analysis that separates the wines into two groups, those with scores below 95 points and those rated 95 points and above, we can see that the impact of score on price is much greater for wines with scores over 95 points.
We also found that no other variable in the equation was significant to the price of wine, suggesting that the Global Wine Score accurately captures these factors in the score. Thus, the effects of vintage variation, grape variety, appellation, etc., are all taken into account with the score and the score is a reliable indicator of wine quality.
The Impact (or lack thereof) of Geography
We were surprised to find that no AVA had a significant impact on price, because other studies focusing on both Bordeaux and California wines showed that appellation of origin had a significant impact on price (1, 2). In the study of California wines, the appellation “Napa Valley” was found to have a 60.9% price premium to the generic appellation of “California” (1). In our study, we only included wines from the premium appellations within Napa Valley. Therefore, it is possible that there is not a strong correlation between price and AVA within Napa Valley, despite the fact that Napa Valley is a premium region when compared to the rest of California.
For example, one of Napa’s most expensive wines, Screaming Eagle, comes from the more “generic” Napa Valley AVA despite being one of the top scoring wines in the region. Labeling laws for Napa Valley dictate that if a wine is labeled with the sub-AVA (i.e. Oakville), the label must also display the regional appellation, Napa Valley. This law was implemented to help customers by reducing confusion and to help build the reputation of Napa Valley as a whole. Therefore, some producers who make their wine wholly within a sub-AVA still choose to label the wine with only “Napa Valley” for the sake of simplicity.
Conversely, the appellation of origin was found to have a significant impact on the price of Bordeaux wines (2). Given the rigid AOC (Appellation d’origine contrôlée) structure and the overall notoriety of the major Bordeaux appellations, it makes sense that they would have a larger impact on price than the sub-AVAs in Napa Valley.
Concluding Thoughts
We found a significant positive effect of expert scores on the price of Napa Valley premium wines and note that the magnitude of the effect is greater as the score increases. This is consistent with other research that has studied the impact of wine critic scores on prices, where large positive effects have been found (3, 4, 5). The majority of the research in this area focuses on the impact of Robert Parker scores for Bordeaux wines, and his scores have consistently been found to have a large positive impact on wine prices. This is consistent with our findings and thus we can conclude that expert scores also have a strong influence on the price of Napa Valley wines. The lack of other significant variables in the model suggests that the Global Wine Score captures the effects of vintage variation in the score and offers a comprehensive view of wine quality.
The overall fit of the model is relatively low, (r-squared: 0.269, meaning the equation explains 26.9% of the variation in price), which indicates that there are more variables that impact the price of wine than those used in our model. In the studies of Bordeaux wine, appellation and classification were found to have large impacts on price (3, 4, 5). Given the lack of strong AVA identities in Napa, including brand names and vineyard designations in the regression equation would likely increase the overall fit. These variables could help improve the model just like appellation and classification rank are important to the price models of Bordeaux wines.
Since the Global Wine Score combines the scores of many critics, the effect of the Global Wine Score on a wine’s price shows how the consensus of expert opinion impacts wine prices. Overall, the findings of our research align with other research showing that expert scores increase the market price of fine wines.
Notes & Sources
This project was completed as part of a Master’s Thesis for one of our team members that will be published in December 2018 through KEDGE Business School.
- Bombrun, H., & Sumner, D. A. (2003). What Determines the Price of Wine? (AIC Issues Brief №18). University of California Agricultural Issues Center. Retrieved from http://aic.ucdavis.edu/pub/briefs/brief18.pdf
- Lecocq, S., & Visser, M. (2006). What Determines Wine Prices: Objective vs. Sensory Characteristics. Journal of Wine Economics, 1, 42–56. Retrieved from https://www.cambridge.org/core/journals/journal-of-wine-economics/article/what-determines-wine-prices-objective-vs-sensory-characteristics/DC094815DC7E3A5DB26D3BCBB9B9B352
- Ali, H. H., Lecocq, S., & Visser, M. (2008). The Impact of Gurus: Parker Grades and En Primeur Wine Prices. The Economic Journal, 118, F158–F173. Retrieved from https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1468-0297.2008.02147.x
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- Hay, C. (2010). The political economy of price and status formation in the Bordeaux en primeur market: the role of wine critics as rating agencies. Socio-Economic Review, 8, 685–707. Retrieved from https://academic.oup.com/ser/article-abstract/8/4/685/1672026
