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Tennessee Consumers' Willingness to Pay for Tennessee Wine

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Tennessee Consumers' Willingness to Pay for Tennessee Wine University of Tennessee, Knoxville TRACE: Tennessee Research and Creative Exchange Masters Theses Graduate School 5-2016 Tennessee Consumers’ Willingness to Pay for Tennessee Wine Connie Nichols Everett University of Tennessee - Knoxville, [email protected] Follow this and additional works at: https://trace.tennessee.edu/utk_gradthes Part of the Agricultural Economics Commons Recommended Citation Everett, Connie Nichols, "Tennessee Consumers’ Willingness to Pay for Tennessee Wine. " Master's Thesis, University of Tennessee, 2016. https://trace.tennessee.edu/utk_gradthes/3766 This Thesis is brought to you for free and open access by the Graduate School at TRACE: Tennessee Research and Creative Exchange. It has been accepted for inclusion in Masters Theses by an authorized administrator of TRACE: Tennessee Research and Creative Exchange. For more information, please contact [email protected]. To the Graduate Council: I am submitting herewith a thesis written by Connie Nichols Everett entitled "Tennessee Consumers’ Willingness to Pay for Tennessee Wine." I have examined the final electronic copy of this thesis for form and content and recommend that it be accepted in partial fulfillment of the requirements for the degree of Master of Science, with a major in Agricultural Economics. David W. Hughes, Major Professor We have read this thesis and recommend its acceptance: Christopher N. Boyer, Kimberly L. Jensen, Margarita Velandia Accepted for the Council: Carolyn R. Hodges Vice Provost and Dean of the Graduate School (Original signatures are on file with official studentecor r ds.) Tennessee Consumers’ Willingness to Pay for Tennessee Wine A Thesis Presented for the Master of Science Degree The University of Tennessee, Knoxville Connie Nichols Everett May 2016 Copyright © 2016 by Connie Nichols Everett All rights reserved. ii ACKNOWLEDGEMENTS I would like to express my sincerest gratitude to Dr. Chris Boyer, Dr. Kim Jensen, Dr. David Hughes and Dr. Margarita Velandia. Their guidance and encouragement has been invaluable in the completion of my thesis. I must also express my very profound gratitude to my loving husband, Dr. Blake Everett, and parents, Charles and Frances Nichols, for the unfailing support and continuous encouragement they have provided throughout graduate school. This accomplishment would not have been possible without them. Oh Lord my God I will give thanks to you forever. Psalms 30:12 iii ABSTRACT With a large and growing market, grape production and wineries are emerging in areas of the United States that have not been previously recognized as wine producing states. Tennessee is an example of such a state that has a history of limited wine grape production, but has recently seen a growing interest in state produced wines by consumers. However, there is no information regarding whether a Tennessee produced and labeled wine would impact consumers’ purchases and willingness-to-pay (WTP) for wine. The objective of this research is to determine the factors influencing consumers’ purchases of Tennessee labeled wine and to estimate consumers’ WTP for Tennessee produced and labeled wine. Data were collected through an online consumer survey conducted in September 2015. The survey presented respondents with a choice between a ‘base’ wine and a Tennessee labeled wine. Three separate probit models were used to estimate the likelihood that the Tennessee consumers would purchase a Tennessee labeled red, white or muscadine wine. Estimated coefficients from the models were used to calculate WTP for each of the Tennessee wines. Factors such as gender, income, frequency of purchases, importance of buying local, and importance of low price all influence consumers’ WTP. The overall average price consumers were willing to pay for Tennessee labeled white wine was $19.48/bottle, ($7.48/bottle premium above the base wine), $16.62/bottle for the Tennessee labeled red wine, ($4.62/bottle premium above the base wine), and $16.03/bottle for the Tennessee labeled muscadine wine ($6.03/bottle premium above the base wine). The results of this study may help guide marketing and promotion decisions for Tennessee wine producers. iv TABLE OF CONTENTS CHAPTER I INTRODUCTION ........................................................................................ 1 Willingness to Pay for Tennessee Wine ......................................................................... 1 Objectives ....................................................................................................................... 2 CHAPTER II LITERATURE REVIEW ........................................................................... 3 Demographics of Wine Consumers ................................................................................ 3 Demographic Influences on Wine Consumption .................................................... 4 Consumer Preference and Willingness to Pay ................................................................ 5 Consumer Perception .............................................................................................. 5 Regional and Local Indicators ................................................................................ 6 Organic and Environmental Indicators ................................................................... 8 Potential Shopping Outlets ..................................................................................... 9 Studies of Wine Tourism ................................................................................................ 9 Preferences for Local Tennessee Products ................................................................... 10 CHAPTER III MATERIALS AND METHODS ............................................................ 13 Survey and Data Collection .......................................................................................... 13 Conceptual Model ......................................................................................................... 15 Econometric Model ....................................................................................................... 16 Tennessee Red and White Wines Probit Models .......................................................... 18 Tennessee Muscadine Wine Probit Model ................................................................... 20 Analysis of Anticipated Shopping Outlets .................................................................... 22 CHAPTER IV RESULTS AND DISCUSSION.............................................................. 24 Tennessee Labeled Red and White Wines .................................................................... 24 Tennessee Labeled Muscadine Wines ......................................................................... 27 Analysis of Anticipated Shopping Outlets .................................................................... 28 CHAPTER V CONCLUSIONS ...................................................................................... 31 REFERENCES ................................................................................................................. 34 APPENDICES .................................................................................................................. 41 APPENDIX A: Tables and Figures .................................................................................. 42 APPENDIX B: Survey Instrument ................................................................................... 56 VITA ................................................................................................................................. 73 v LIST OF TABLES Table 1. Descriptions and Summary Statistics of Dependent and Independent Variables for Tennessee White and Red Wines .............................................................................. 43 Table 2. Descriptions and Summary Statistics of Dependent and Independent Variables for Tennessee Muscadine Wines .................................................................................... 45 Table 3. Estimated Coefficients and Marginal Effects from the Probit Model for Tennessee Labeled White Wine ................................................................................................. 47 Table 4. Estimated Coefficients and Marginal Effects from the Probit Model for Tennessee Labeled Red Wine..................................................................................................... 48 Table 5. Estimated Coefficients and Marginal Effects from the Probit Model for Tennessee Labeled Muscadine Wine ......................................................................................... 49 Table 6. Prior Shopping Outlets for Wine and Anticipated Outlets for Tennessee-Labeled Wines and Test of Association ............................................................................................. 50 vi LIST OF FIGURES Figure 1. Location of the Survey Respondents ............................................................... 51 Figure 2. Example Choice Experiment Questionnaire- Red/White Wines ................... 52 Figure 3. Example Choice Experiment Questionnaire- Muscadine .............................. 53 Figure 4. Number of Respondents that would Purchase Tennessee Wine Over the Other Choices at Different Prices ..................................................................... 54 Figure 5. Types of Retail Outlets Where Tennessee Wine Consumers Anticipate Shopping for Tennessee-Labeled Wines and Where They Usually Shop Now ..... 55 vii CHAPTER I INTRODUCTION AND GENERAL
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