Is there an eco-certification premium but an eco-label discount?

Why don’t green-minded vintners and vignerons always display their eco-friendly methods on the label?

I’ve often asked why and replies generally come in the form of the producer’s desire to have the wine liked for the quality as opposed to the methodology per se. Or, where organic in spirit, a common reply has been a dislike for administrative costs of filing and/or wanting to maintain the flexibility to spray if necessary.

An academic paper presents findings that may not lead to more eco-labeling: Certifying a winery as organic or Biodynamic will raise the price of wine 13 percent but putting that on the label will see the price fall by 20 percent.

Magali Delmas and Laura Grant, of UCLA and UCSB respectively, examined 13,400 California wines from an eight-year period ending in 2005 to reach their conclusions, which will appear in a forthcoming issue of the journal Business & Society. It’s certainly possible to quibble with their data: only 28 of the all-California wineries were certified and only 16 of the wines in the data set received the eco-labeling. The wines were expensive (about $37 a bottle) and the quality bump, as measured by WS scores, was slight (less than one point) as well as low, scoring less than 84.

They explain the premium for certification largely as the good will recognition akin to club membership. It would be interesting if they could explore quality further as I think that could be more convincing than the social effect in explaining the premium.

To explain the discount for labeling, they cite various winemakers who say that “organic” remains a stigma in the eyes of consumers. Such a comment seems oddly disconnected with the current era of Whole Foods and local and sustainable foods; younger consumers don’t see it as a stigma, I’d venture to say.

Part of the reason for the discount, they argue, is consumer confusion over the various labels and certifications, particularly since so few wines qualify for the organic standard, thus only qualifying for the looser “made from organically grown grapes” standard. They also show that consumers have little knowledge of Biodynamics with only 17 percent of respondents in a previous study being familiar with the term and only eight percent having tried a Biodynamic wine. (Of the respondents who were unfamiliar with the term, the single largest response as to what it meant was that it was genetically engineered or modified.)

What do you think–why is there an apparent discount for eco-labeling as opposed to eco-certification?

Delmas, M. and Grant, L. Forthcoming. “Eco-labeling Strategies and Price-Premium: The Wine Industry Puzzle.” Business and Society. (pdf)

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18 Responses to “Is there an eco-certification premium but an eco-label discount?”

  1. My experience is that “organic wine” can be linked to wines that have oxidized and taste like vinegar in many consumers eyes. This is an artifact of the labelling laws that use different forms of a phrase to indicate that a wine is made with or without added sulfites.

    This of course has nothing to do with how it was farmed or whether the is made in a way that it can handle a lack of added sulfites without turning, but consumers have had enough bad experiences with “Organic Wines” (meaning no added sulfites, vs “Made with Organically Grown Grapes” meaning limited added sulfites), to turn away.

    This is a shame and it doesn’t do anyone any good. Wines made without sulfites should have a label, but tying that label to how they were farmed is a vestige that should be removed from our wine laws. It is confusing to consumers and, as demonstrated by this study, hurts the value of wines grown on organically farmed land.

  2. It would be interesting to have organic wines require no special labels. Instead, have non-organic wines be clearly labeled with exactly what non-organic processes were used.

    It would definitely be more informative to the consumer.

  3. I would be interested in what the authors of this study would find on more current vintages, 2006+ to see if consumer attitudes have changed at all. Seems to me there’s slightly more acceptance and understanding of what an organic and/or biodynamic wine is. Certainly a lot written about this for the past 4 years. Some very good wines with these monikers in the marketplace now. The big problem as all have cited is confusion with what these terms mean.

  4. Organic wines for a long time just weren’t that good. The process was supposed to trump the experience for the consumer, most of whom don’t buy for green reasons alone. People will often pay more for organic food because it tastes the same or better and they believe it to be better for them (plus you can score social points in some circles by announcing you eat this way) – in other words, a personal benefit. There are no social points to be gained by drinking organic wine, and, in general, people save their philanthropy for charities, not consumer purchases, so my guess is consumers will need to have more confidence in the overall quality – and in some cases the shelf life – of organic wine before it will achieve price parity with other comparable wines.

  5. Tyler,

    Dcpatton hit on something important. The problem is that organic winemakers are the ones who have the burden of certification, and all the headaches that go with it, in the first place.

    In a perfect world, organic wine would just be what we mean when we say “wine.” After all, it’s how wine was made for centuries. But because we now add the “organic” prefix, a chemically-farmed laboratory-manipulated product is easier for a consumer to understand. It’s just “wine.” He’s also late for dinner, uncomfortable asking questions in wine stores, and will just take that bottle over there, thank you. Imagine a reverse situation, where customers have to stop to ask a salesperson “excuse me, what does ‘factory wine’ mean?”

    Along with standards and certifications come all the arguments. The winemakers who add sulphites claim they are just as organic as the ones who don’t. Fantastic organic winemakers, who choose not to certify, point out all the manipulation you can do in the winery that make the label meaningless. People who love everything green, but know nothing about wine, see the label as quality assurance, while the all-knowing critic loves to point out you can grow your grapes as organic as Noah and still make a horrible wine.

    All these converging viewpoints forced under one tiny umbrella comes across as a confusing mess. That’s why for some people organic wine awareness has been raised along with the green/local movement and for others it is ridiculed. We’re using one phrase to describe many different philosophies and practices. The “I had an organic wine once and it was bad” phrase is still a marketing nightmare for so many fantastic winemakers. Everyone has had bad wine, but you’re more likely to remember a bad organic wine because of all the attention the word brings with it in the first place.

    That’s one reason many winemakers like to play both sides of the field. They certify, but don’t put it on the label. The quality assurance is there for the people in-the-know, but the headaches and questions from those who see it on a label and don’t understand it are not. It also prevents a winery’s biggest fear – being taken off their proper shelf in the store and stuck in some ad-hoc organic section behind the counter next to the kosher wines. There comes your price drop.

    If conventional wineries were the ones who had to certify, and put on labels what they were up to, it would be a lot more fun. Winegrowers who farm with battery acid could lobby Washington that winemakers with oak chips aren’t conventional enough and demand a secondary label “Made From Roundup Grapes.” They could pay double fees to be certified overseas, because New Zealand doesn’t accept the U.S. standard for Slightly Severe Manipulation. I think that would be fairer that the current system, where winemakers have to pay to explain what they are “not” doing.

  6. I don’t care if wine is ‘orgainic’, I care that is is well made and that I like it.

    It is in the best interest of winemakers and vinyards to ensure the sustainability of their own land and fruit, it doesn’t matter to me if they met some certification standard.

    In my experience, wines that make a big deal about being organic tend to be bad wines using the organic label as their point of differentiation. I’m sure there are exceptions.

  7. It would be interesting to hear what Randall Grahm – who recently went biodynamic and is certainly no slouch in wine marketing – thinks of this.

  8. Christine makes many excellent points. I would add that in my own conversations with winemakers, there has been a reluctance to use the “organic” label for two reasons: The first being that they fear their wines will be relegated to the “organic” section of the store, and the second being that “organic” represents a kind of special pleading that they feel puts the focus on the process rather than on the quality of the product. I mean, Beaucastel has been “organic” forever. Can you imagine them using the word on their labels?

    Add also the particularly American confusion over “organic” and “no sulfites,” and it’s not so hard to understand the reluctance to go green on the label.

  9. There is already too little room on a label to communicate to consumers what is in the bottle after warnings and other required government data. Adding an additional and definitely tiny logo of yet another bit information is not effective. I have looked into this extensively and have concluded that adding more non-related third party art to a fine wine renders it into a mass-market comodity look.

  10. I think that organic wine ‘discounting’ used to be the case. But things have changed rapidly in the last few years, in the other direction. Especially as domestic organic or biodynamic producers have raised their wine quality…think of Bonny Doon or Benzigers recent vintages for example.
    At the same time, more recognition of organic or biodynamic principles behind top European imports (i.e. DRC) and an obvious interest from the wine intelligentsia in vin naturel as well.
    None of the above wines are inexpensive nor discounted.
    Cheers, Amy

  11. I think there is some truth to the “stigma” of organic wines vs. all the other organic items that are selling well. For the first few years organic wines were thin and not, overall, very good. The same can not be said for the organic corn people buy at the market – it looks and tastes fresher (usually). The perceived quality of “organic” wine is still not very good, and it will take Mike Benziger and others a number of years of making their great “eco-friendly” wines to change that.

    The real issue here is quality, not sustainability.

    A Harvard Bus. Review study found that 70% of consumers would prefer to buy a sustainably made product vs. one that is not. However, overwhelmingly, they will not do so if it means trading off quality for sustainability. Nor should they.

    Any winery (or any other business) trying to slap a sustainable certification or claim on an inferior product is not going to benefit from people’s desire to spend their money on sustainably-made products. Our personal experience in this area has led us to this conclusion – if there are two products of equal quality (say, two bottles of wine rated 90), and one company makes their product sustainably, AND can simply communicate that fact, many people will choose the sustainably made product over the other. Some may even be willing to pay more.

    In short, quality is still the first and over-riding variable. To do research that quantifies the impact of “eco-friendly” labeling, the researchers would need to compare the difference in all wines scoring an 84 (to use the example from the article above). If I read your blog correctly, the only thing the research shows is that people aren’t willing to pay $30+ dollars for wines rated 84, even if they are labeled “eco-sustainable.” This shouldn’t be used as an argument against making and marketing quality wines sustainably.

    As Mark Twain once said (roughly), there are lies, damn lies, and statistics…

  12. I just read this on Business Wire about Pacific Rim in WA.

    “Last year, Pacific Rim released a Riesling Made with Organic Grapes. The grapes are sourced from their Wallula Biodynamic Vineyard – the first and ONLY Demeter certified Biodynamic vineyard in Washington State. The wine was awarded the #3 TOP 100 BEST WINE BUY of 2009 from Wine Enthusiast. Subsequently, demand for the wine has exploded.”
    The front comment on their website:

    99.2% of all components for our Riesling are organic. We even use native — not commercial — yeast to best present the natural character of our vineyard. We use no pesticides and every element within our sustainably-farmed vineyard is native to the vineyard.”
    Their wine ratings:
    92 points Riesling Made with Organic Grapes
    93 points Biodynamic Wallula Vineyard Riesling
    92 points Solstice Vineyard Riesling
    89 points Dry Riesling
    89 points Sweet Riesling
    90 points Framboise
    89 points Vin de Glaciére Riesling

    As you probably know, the winery is owned by Randall Grahm

  13. One more thought about organic/biodynamic wines: I love the wines that Joe Dressner brings in from Thierry Puzelat. They are truly wild and delicious. But we will never stock them at our shop. It is already a steep hill to climb to get people to try these wines at all. The hill gets even steeper when we know that in a case of Puzelat wines, there is an excellent chance that three out of twelve will have gone bad, because no sulfites have been added. It just isn’t commercially feasible: Hard to sell, and then an unacceptably high possibility that the wine is flawed. Yes, I can send the wines back and the distributor will give credit, but my credibility with my customers takes a serious hit. As much as I personally love the wines, and admire Dressner for bringing them in, I can’t justify the risk.

  14. First, I think the wine must be good. Then, I would love to see all of the processes on the label- if you add a small dose of SO2, yeasted, aged the wine in barrels (with chips) . . all of it should be on the label. We require this on cosmetics, and on food (wine is food . . . but anyway).

  15. Here is another look at the same article with a few more bits of information.

  16. My 2c worth, as a small organic wine producer (in Spain):
    1. I’m in favour of puting as much info as possible on the label
    2. Not decided whether to apply for organic label/certification or not. On the one hand why should we pay NOT to pollute – the polluters should pay! But on the other hand maybe it’s necessary for sales and exporting?
    3. I would never go ‘both ways’, ie keeping open the possibility of using chemicals in case of an ’emergency’.
    4. Making quality wine comes first – calling it organic is no excuse for a bad low-quality wine

  17. I’ve been importing and selling exclusively organic wines for the past 2 1/2 years. From where I sit, there is a definite generational gap in the organic wine debate.

    Many people that were drinking wine 15-20 years ago remember some of the first organic wines on the market, and several were indeed less than stellar. However, to think that this past reality in some way distorts the perception of the new generation of wine drinkers in 2010 is simply not accurate.

    In our business, what we see is that the 21-35 year old customers are very interested in the fact that our wines are organic. Rather than seeing it as a negative or even a question mark, organic certification is one of the reasons they buy our wines.

    We find the same situation with our packaging… Adult juice boxes as Tyler often calls them. Rather than a turnoff, we find that consumers are fully on board with alternative packaging for all of the right reasons.

    They want a positive experience with a wine that delivers value and great taste. If it can offer these qualities and also be organic and less impactful on the planet, so much the better.

    Drink Well, Do Good. That’s our philosophy.

  18. @ Matthew –

    Thanks for stopping by and underscoring the point about generational perceptions. Your wines also retail at $12/liter, much lower than the ones in the above data set. Maybe that plays a role too.

    @ Everyobody – Today I saw Doug Tunnell of Brick House, which he said had put some form of organic or Biodynamic certification on the label for the past 16 years. (Brick House is in the Willamette Valley, Oregon.) I asked him about the findings of this study rang true for him.

    His reply: “I don’t see that.”


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