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03.07.2010

If Your Wine is Organic, Don't Tell Consumers

Apparently, organic wines taste better but consumers don't think they're worth as much money as conventionally produced wines. At least, that's a plausible interpretation of a study conducted by a UCLA professor and her graduate student that was recently published in Business and Society, the official journal of the International Association for Business and Society.

Professor Magali Delmas and PhD candidate Laura E. Grant conducted an analysis of 13,426 wines from 1,495 California wineries for eight consecutive vintages from 1998 to 2005. The two tracked correlations between the scores of the wines, their prices, whether they were made from certified organically grown grapes, and whether the wineries broadcast their organic certification on the label.

An overview of the study published last week in Science Daily suggests they found some very interesting results. Wines made with organic grapes during the time period they studied scored higher in the Wine Spectator by a point, on average, than wines made with conventional grapes. Whether this means, in fact, that organic wines taste better is open to some debate, but the statistics seem quite clear.

Perhaps the more interesting finding, however arose when the researchers looked at the price of those wines that were "eco labeled" and those that were not. The wines that chose to prominently display their certified organic status sold for 7% less than those that didn't. The prices used to define this gap were the suggested retail prices published alongside the scores in Wine Spectator magazine.

Assuming you believe in the economic principle that prices are set in the marketplace and reflect supply and demand, the conclusion you might draw here is that there is a significant negative value to labeling your wines as organic. Meaning, in short, that consumers don't want to pay as much for wines labeled as such.

Economists are often let of the hook, understandably, for explaining exactly why things are the way they are. Exactly why an eco-label is a penalty rather than a plus hasn't been determined, but I think some of it may have to do with the residual damage that early organic wines did to consumer perceptions when they hit the market in the 1980s. Many of these wines were very poorly made, and then their quality was further compromised by the lack of added sulfur dioxide, which meant that many consumers opened their bottles to find the wine fermenting for a third time. A rash of lousy wines prominently labeled as organic created a sweeping set of negative connotations that apparently the wine industry nor the American consumer has yet to leave behind.

For now, the right approach as an organic winemaker seems clear. Farm your grapes organically to make better wines, but for heaven's sake, don't tell your customers.

The study summarized in Science Daily was originally published about two years ago as a working paper by the American Association of Wine Economists.

Comments (29)

Pete wrote:
03.07.10 at 7:54 PM

Interesting. But: I'm a little skeptical of the relevance of a study published two years ago that relied on data that is from five to 12 years old. The past five years have seen a dramatic shift in the perceptions and reality of organic wine. I wonder if that gap -- not exactly whopping at 7%, by the way -- still holds.

Alder Yarrow wrote:
03.07.10 at 8:01 PM

Pete,

The data isn't 5 years old - remember we're just finishing the 2006 vintage in terms of what's on sale for most ageworthy red wines. But having said that, I agree, perceptions are shifting all the time.

ned hoey wrote:
03.07.10 at 10:05 PM

In the early 90s I walked into a neighborhood wine shop in Laurel Village (San Francisco) and inquired about organic wines. The shopkeeper's response was that organic wines were mostly
not good and good producers wouldn't dare label their bottles with that info if they were using
organic grapes. It really boiled down to marketing and cultural divides (which surprisingly existed
even in SF!). Wine marketing was geared toward aspiration, prestige, status and wealth. Organic was not associated or perceived by most upper middle class consumers as being a positive.

That resulted in many organic grapes not being marketed or labeled as such, which just perpetuates the issue. The self selection by better producers to leave that off the label means
many superb organic wines remain unknown to consumers, which does not drive a change in
perceptions. I think despite that, attitudes have been changing very fast. When it comes to this, 1998-2002 is ancient history. I really don't think that bit of info affects consumer choices at this time. To many other factors come ahead of that now.

03.07.10 at 10:07 PM

Interesting study Alder, thanks for drawing our attention to it.

As you point out, assuming the Spec is a subjective measure of quality, applicable to the broad consumer market, is problematic. It also restricts the analysis to wines reviewed in the Spectator, thus removing a large number of very small and very large production labels, although I suspect that would not have changed the findings.

Given the small number of organic labels out there, I have to wonder if there are sufficiently representative samples at all price points to make this judgement. There are a lot of variables that affect price - brand, variety, region, owner perception, production volume, distribution and merchandising, and so on. The heart of the question is: if all the other variables are held constant, what is the effect of "organic" on the label? E.G. For Christian Miller Howell Mountain Cab 2005, what is the market clearing price with "made from organic grapes" on the label vs. the exact same wine without it? Regression has a hard time answering this question without a sufficiently large "organic" sample spread across all the other variables. That's why market researchers often rely on shopping simulation or package exposure tests to answer this type of question, where they can control the other variables.

The question of whether an earlier generation of poorly made organic wines gave wines with "organic" on the label a bad rep is tricky. One one hand, research shows that many consumers don't distinguish between organic wines (potential problems from no SO2) and "made from organic grapes" (easy to make with sound quality); meaning that the far more numerous "organic grape" wines could suffer for the sins of a few organic wines. But the market penetration of the original organic wines was very very small, and research also shows only a very small number of consumers ascribe lower quality to organic or sustainable wines. The trade, on the other hand, has a long and unforgiving memory.

Alder Yarrow wrote:
03.07.10 at 10:13 PM

Christian,

Thanks for the thoughtful comments. I think I saw some research recently showing that, in fact, most consumers have no idea what organic means on a wine label (forget Biodynamic or Sustainable), and certainly can't tell the difference between organically grown grapes and organic wine.

John Kelly wrote:
03.07.10 at 11:00 PM

It seems to me that wine is not a fungible commodity where pricing is determined by a dynamic workout between ask and bid prices. It may be that producers who value putting "organic" on the label skew to groups that can't set their pricing at high end of the scale - small, new wineries, or wineries in regions that don't carry a location premium. Or maybe this group is motivated by consideration of other factors - social conscience, perhaps - to set their pricing slightly lower on average.

03.08.10 at 7:48 AM

One variable that strikes me as more potent than any other is the choice of wines that get labeled as "organic". If one looks at Cabernet Sauvignon, for example, very few high-end Cabernets are labeled "organic" even if they are because the producers of those wines are choosing to put other value terms on tne bottle.

There are also far more "organic" wines in the market place today than there were over the period of the study. The whites in the market are 2007 and 2008, with a few 2009s already trickling in for the early bottled varieties. And as you point out, Alder, the study was origninally published two years ago. If so, did it even include Cab Sauv and PN from the 2005 vintage.

Obviously, we all take a back seat to Christian Miller, whose professional work in wine trends, sales, habits, is among the best in the business. I think his implied comments about the negative hangover of wines made without SO2, many of which were simply oxidized and otherwise "challenged", may also contribute to the negative view of some organics.

But, on the whole, I suspect that the study, with its start date of 1998, is simply missing much of the organic/sustainable movement as it has played out in the last couple of years.

Finally, a one-point jump in scores, while not insignificant, still means that there is very little perceived difference in quality and that individual wines will vary from great to uninteresting whether organic or not.

Matthew Cain wrote:
03.08.10 at 9:07 AM

Alder -

Another interesting post. Both this and your glass industry post in February are particularly relevant to my business model.

What I can tell you from a close up view is that the wine world has changed dramatically in the last 2 years. What we continue to find is that the consumer is on board with both alternative packaging and organics. Both are reasons that consumers are buying my wines, rather than being reasons for shying away.

There are still some members of the trade, at the wholesale and the retail level, who are shying away from wine in boxes and/or wines that are organic. However, I believe that they are missing the unmistakable shift and change of attitude at the consumer level.

Thanks again for another great post.

Greg Brumley wrote:
03.08.10 at 1:38 PM

Alder,

Tomorrow, I begin providing marketing services to my first organic winery. For me, your post is about as timely as it gets! I appreciated Mr. Miller's and Mr. Olken's perspectives, as well.

I'm very excited about this winery because it has great heritage yet is forward focused -- and because it offers the best pinot I've tasted, for just $32.

The label doesn't mention organic. It shouldn't. Organic is a key element of the earth-to-bottle craftsmanship which sets grat wine apart. When presented in that context on the website, in POPs & promotional communications, and as part of the tasting visit, organic is an excellent sales tool.

No one has mentioned the part of the Science Daily article which I found most compelling: Not only was wine labeled as organic priced 7% below average, organic wine which was not labeled as such priced 13% ABOVE average. The 7% differential isn't all that dramatic...but a 20% differential sure is.

Yet another post which causes us to think and share. Attaboy, Alder.

Greg Brumley
Santa Rosa, CA

Alder Yarrow wrote:
03.08.10 at 2:07 PM

Greg,tThanks for the comments, and thanks for pointing out the 13% premium which I stupidly forgot to include.

roh wrote:
03.08.10 at 5:56 PM

This study is seriously flawed and funded by an organization that is in business to promote "green" enterprise in California. This highlights just one of the ever growing problems with organics as they become a multi-billion dollar business - the organic movement has been taken over by corporate America.

Nonetheless, the recurring dogma that states organic growers do not use chemical pesticides is a lie. Anyone who says otherwise is a fraud. The belief than organic practices are safer or healthier is now trying to be backed up by flawed science funded by corporations who profit off "greenwashng" Trouble is this type of research is very difficult to do with wine as it is all about "taste"
Fact is there are many small, quality minded vineyards that are not organic who practice high levels of sustainable agriculture and are making very good wines. Organics have become ideology and are less prone to being a dynamic force for change in the future.

Lastly, those of you who believe organic wines have no additives? The only reason these wines are now much better than they used to be is because they allowed the use of sulfites in organic wine production a couple years back. Tats right, now most organic wines contain some levels of added sulfites and the wines are much better for it!

Anonymous wrote:
03.08.10 at 6:57 PM

Roh, Dude,

Please take the time to read the blog and the comments before you deride claims no one made.

03.09.10 at 8:22 AM

Alder:

Thanks for the post. I agree with the basic premise and have tasted some nasty organic wines (old and more recently). No doubt there is a massive shift back to organic and more sustainable farming practices in the wine industry. As Edward Wallo from Yorkville Cellars noted recently, the wine industry was fully organic for thousands of years up until the last 50+ years with the introduction of chemical-based herbicides and pesticides. So with that perspective, what we see is wine returning to its roots.

I'm not a winemaker nor a scientist but I expect it may be a stretch for consumers to ever find certified organic (no additional sulfites added) wines that match up with those with additives in terms of taste, complexity, noteworthiness, etc.

In the meantime, we will have a blast reviewing all comers in the categories of Organic Grapes (both certified and not), Biodynamic and Organic Wine - whether the wineries choose to label them as such or not.

Cheers,
Brent

Anthony Craig wrote:
03.09.10 at 9:37 AM

You need to distinguish between Organicaly Grown and Organicaly made. Many wines that are organically grown are made in the conventional way, ie. the use of SO2 (Sulfite) to prevent the wine from microbial spoilage and oxidation during aging. These wines in my experience are superior. Organicaly Grown & Made is another beast entirely. If I recall my history correctly, the great European trade routes florished only when wine had acheived a real inproved perception in quality, thanks to the addition to SO2 to wine. Wine then surplanted beer as the drink of royalty and lifted wine up from the gut rot it had previously been. Although I do not equate modern organicaly Made wine as gut rot, there are few examples of wines made in the absence of SO2 that age well. If you make wine without SO2 it is not for aging, better drink it quickly before it turns to vinegar. It is the latter that has created this poor perception of the ECO-wine.

03.09.10 at 10:13 AM

Alder:

Your post and the comments make for very enlightening reading...well, most of them. My take on the organic wine issue is actually a question: According to the survey, if organic wines "apparently" taste better yet suffer from problems associated with their image, eco-friendliness [sic], etc., how much of this is a reaction to the self-righteousness of some advocates...or their ignorance?

Amy Gardner wrote:
03.09.10 at 10:33 AM

Hi Alder, another great post. Just my two cents in the organic debate. I was at an industry meeting about the merits of organic labeling and pushing organic wine. A large chain CEO said that it isn't necessary, or helpful for that matter, to say wine is organic. The consumers tend to think of wine as an organic product--I mean organic as that which is derived from living organisms. Consumers view wine as a wholesome beverage; made directly from grapes and a naturally occurring product. Consumers are not thinking of the chemicals that go into growing the grapes, or any thing added during the production of the wine. So selling organic certified wine may be targeting the really socially, environmentally conscious consumer more than the average drinker.

Paul Moser wrote:
03.09.10 at 10:56 AM

A distinction needs to be made between organically made wines and wines made from organically grown grapes. The former are often terrible (especially the whites) because making wine without SO2 is iffy at best. Wine can be protected with gas (CO2, argon, etc.) up to a point, but gas can't do anything like the thorough anti-oxidant job done by SO2. Conventionally made wines produced from organically grown grapes, on the other hand, are often really superior, usually giving a winemaker healthier, cleaner fermentations.

Wendy wrote:
03.09.10 at 11:13 AM

While Organic farming is a undeniably a worthy persuit and, for me, would be a positive thing on a lable, organic winemaking has a negative conotation in the industry and it's passed along as common knowledge. As Anthony Craig points out, the wines are often spoiled or oxidized or will be soon. It's chemistry.

03.09.10 at 2:08 PM

great info for wine retailers! helps to sort through the rumors, scandal and innuendo surrounding the issue. we place small green stickers on the bottles of organic wines, so labeled, or not.

03.09.10 at 4:26 PM

Dave - the study in question wasn't a survey, so they don't really know the answers to your questions. They used Spec ratings as a proxy for quality and MSRP plus case production as a proxy for demand. My research has indicated there is a backlash per your hypotheses, but it's a minority of wine consumers.

Amy - consumer research shows that roughly 1 in 10 core wine consumers think that wine is "already green." But the leading reason wine consumers state they don't buy sustainable or organic wines is that they don't see them, can't identify them or don't trust the claims. The key issues boil down to visibility and confidence.

Jake wrote:
03.09.10 at 4:34 PM

Lol. This is pretty ironic. The best organically grown vinerons don't put something on their label that designates quality, when those are the very producers that are making the higher quality wines...

While a lower tier niche winemaker does put Organic on the label to sell the quality, and it is often poo-pooed because organically made wines have such a bad reputation.

And the consumers don't know what to think as they don't differentiate between organically made and organically grown but if they bought that bottle at the health food store with green organic sticker on it, they are probably going to shy away....

03.09.10 at 6:29 PM

We have spent an awful lot of time here bringing the spectre of fully organic wines into this conversation (i. e., those made without any sulfur preservative to keep them from going bad quickly) when, in fact, those wines are few and far between.

Better to focus on organicly grown and biodynamic wines which are made in ways that are friendly to the planet if one is interested in process and not in taste regardless of proces (bad process and good taste do not really go together in any event).

If enough makers will simply state the truth on the label and make good wine, they will get a following much in the same way that my family eased into organic produce.

03.09.10 at 9:38 PM

Of course it wasn't a survey. Silly me for using an incorrect descriptor! :-)

Mark wrote:
03.10.10 at 7:15 AM

Personally, I think a winery on the California central coast (Stolpman) has the right idea. Although they are organically farmed, they aren't attempting to use that as a selling point, but more of a value added feature after people have tried the wine. I don't think many consumers even really know what the long term effects of organic farming or dry farming really are....if they do, clearly they haven't shown that they care as of yet.

Greg Roberts wrote:
03.11.10 at 3:29 AM

Its bizarre that certified organic labeled wines would sell at a discount when its estimated that organic viticulture requires 20%-30% more manpower than conventional viticulture.

Clearly, there's a problem of perception and the perceived value of organically labeled wines with consumers. It this wasn't the case Domaine de la Romanee Conti which has been organic since the 80's would label their wine as such.

Josh wrote:
03.13.10 at 6:23 PM

Another interesting issue we've been kicking around the office this week as well because we currently make several "made with organic" wines with several whole vineyards about to be certified, which affects my brand planning for a number of other wines.

Look, it doesn't really matter about "organic" versus "made with organic grapes" right now because a separate branding in the consumer consciousness hasn't been sufficiently created as of yet. What does exist is a series of populations of consumers for whom some kind of signifier does matter, so it boils down to how you message it without over-messaging it, if you will.

At job #2, we've deal with this for a very long time (30+ years) because of various religious certifications. We did the same thing when it came to the CCOF seal--and the same thing with the International Riesling Foundation's sweetness scale, for that matter: provide the information on the back label in a fairly inconspicuous manner so that if you need to find it, you'll find it, and if you aren't looking for it, it doesn't interrupt what you are looking for.

Until there's enough general consumer awareness to warrant it, that's about as far as we'll go with using organic on the labels. We've seen no change in sales in going from non-organic to made with organic on the labeling, and the scores and medals have been the same. You still always have to make a good wine regardless of anything else, right?

Greg Brumley wrote:
03.14.10 at 2:37 PM

Josh,

We can really get wrapped up in positioning, can't we.

For small family wineries, I think the issue isn't branding, it's relationships. The trick isn't obtaining many thousands of customers (upon whom one would impress a "brand image"), its obtaining repeat purchases from a much smaller pool of customers with whom the winery has developed individual relationships.

"Organic" attracts/builds these relationships as part of the craftsmanship message. Its the winery's craftsmanship and story which attract customers, and the personal relationships which create a bond. Labels can't do either.

Bottom line: no information has contradicted -- or altered -- the research conclusions which Alder brought to our attention.

Josh wrote:
03.16.10 at 2:22 PM

Greg,

I didn't say any info I might have added to the discussion would alter the conclusions. I'm interested in the various different populations and how to create the relationships with them on their terms--which is the essence of branding where I come from whether done one-on-one or via any other method of contact.

Equally a component to that process is label design and messaging--and anyone who doesn't think so needs to go and look at consumer sales for any kind of product, not just wine.

Absolutely, this boils down to relationships, but it also has to do with how those connections are managed. Would I much rather just go and work on the art of making good wine? Yup--except that's an excellent strategy for going out of business.

Until a large enough producer or trade group puts the time and money into changing public awareness (and I can think of several of these pushes over the last few years which have worked quite well)--re-brands what it means to produce organic wines 'cause like it or not, that's how it's done--public awareness probably won't change much on this issue, which means growers who do things with the bigger picture in mind and producers who work with them are getting a negative return on their efforts--not the best way to scale up a new category of wine sales, imho...

Greg Brumley wrote:
03.16.10 at 7:52 PM

Josh,

I live in Small-Winery-Direct-to-Consumer-Sales Land. None of your issues matter in our world. As a matter of fact, you should immigrate.

As I understand it, you’re a small winery selling Gewurztraminer at $20-25. Begorrah, man, we’re your very own people!

This is a simplification, but two kinds of wineries spend a lot of time worrying what goes on the label, what kind of sticker works, or how the bottle looks on a dealer’s shelf: (1) Large wineries because they live on volume purchases far more than customer loyalty; (2) small wineries which are trying to compete in the 3-tier system dominated by large wineries and the distributors who love them – and whose owners, we dearly hope, can make a killing in the stock market.

If you want to swim in those waters, God bless you. (A word to the wise: the guy swimming around with his fin above the waves is not Charlie the Tuna.)

I think it’s safe to say that, for the most part, the producer committed to organic regimens is a small winery – the best of whom are focused on direct-to-customer sales. If the lady’s extrapolation of Wine Spectator numbers is correct, it won’t cost that vintner much because he hasn’t bet the company on the 3-tier system. In any event, all he has to do is leave the label mute on the organic issue and make those points on his website and mixed into his direct communications with individual customers.

See, I think that’s the problem. Most people (including you, it appears) think of “consumer sales” in terms of large volumes of potential customers. Direct sales are not about that. They’re about an INDIVIDUAL relationship between a winery and a single customer. That relationship most-effectively begins at the winery in a tasting. It is nurtured by many personal contacts throughout the year (telephone, in the shipment, email, social media).

In our world, the buyer doesn’t base her purchase decisions on the label. She gives the label little attention until she opens the shipment. The purchase decision was long-since made. The buyer isn’t concerned about “organic” on the label because he already knows organic methods are part of the craftsmanship in “my California winery’s” great wine.

Positioning, and point-of-sales data, and how-I-get-my-bottle-near-eye-level are serious issues if you’re making 100,000 cases a year. If you want to make money in the 10,000 or less world, get on the phone with your customers. If one of them doesn’t like your label, he’ll tell you about it while he’s ordering another half case. Then you’ll be able to put the statistics and the retail psychology white papers in your light reading where they belong.

Good luck,

Greg Brumley

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