UNIVERSITY OF LJUBLJANA FACULTY OF ECONOMICS MASTER’S THESIS TAMARA ČAVOR UNIVERSITY OF LJUBLJANA FACULTY OF ECONOMICS MASTER’S THESIS CONSUMER BEHAVIOR ON THE MONTENEGRIN WINE MARKET Ljubljana, July 2015 TAMARA ČAVOR AUTHORSHIP STATEMENT The undersigned Tamara Čavor, a student at the University of Ljubljana, Faculty of Economics, (hereafter: FELU), declare that I am the author of the master’s thesis entitled Consumer Behavior on the Montenegrin Wine Market, written under supervision of Prof. Dr. Barbara Čater. In accordance with the Copyright and Related Rights Act (Official Gazette of the Republic of Slovenia 21/1995 with changes and amendments) I allow the text of my master’s thesis to be published on the FELU website. I further declare the text of my master’s thesis to be based on the results of my own research; the text of my master’s thesis to be language-edited and technically in adherence with the FELU’s Technical Guidelines for Written Works which means that I o cited and/or quoted works and opinions of other authors in my master’s thesis in accordance with the FELU’s Technical Guidelines for Written Works and o obtained (and referred to in my master’s thesis) all the necessary permits to use the works of other authors which are entirely (in written or graphical form) used in my text; to be aware of the fact that plagiarism (in written or graphical form) is a criminal offence and can be prosecuted in accordance with the Copyright and Related Rights Act (Official Gazette of the Republic of Slovenia 55/2008 with changes and amendments); to be aware of the consequences a proven plagiarism charge based on the submitted master’s thesis could have for my status at the FELU in accordance with the relevant FELU Rules on Master’s Thesis. Ljubljana, July 17th 2015 Author’s signature: ________________________ TABLE OF CONTENTS INTRODUCTION .................................................................................................................... 1 1 GLOBAL TRENDS OF WINE MARKET ..................................................................... 4 1.1 The World Vineyards: Development and Trends ................................................... 4 1.2 Wine Production ..................................................................................................... 5 1.3 Wine Consumption ................................................................................................. 7 1.4 Wine in Montenegro ............................................................................................... 9 1.4.1 Vineyards and Wine Production in Montenegro ............................................. 9 1.4.2 Wine Consumption in Montenegro ............................................................... 10 2 CONSUMER BEHAVIOR AND ITS APPLICATION TO THE WINE MARKET ................................................................................................................................ 12 2.1 Definition of Consumer Behavior ......................................................................... 12 2.2 Consumer Behavior Analysis ............................................................................... 13 2.3 The Impact of Internal Factors on Consumer Behavior........................................ 14 2.3.1 Demographics and Consumer Behavior ........................................................ 15 2.3.2 Product Knowledge and Consumer Behavior ............................................... 17 2.3.3 Product Involvement and Consumer Behavior .............................................. 22 2.4 The Impact of External Factors on Consumer Behavior ...................................... 25 2.5 Consumer Decision Process .................................................................................. 28 2.5.1 Wine Consumer Decision Making Process ................................................... 30 2.5.2 Product Attributes and Purchase Decision .................................................... 31 2.6 The Conceptual Model of Wine Consumer Behavior........................................... 35 3 RESEARCH METHOD FOR CONSUMER BEHAVIOR ON THE MONTENEGRIN WINE MARKET .................................................................................... 39 3.1 Methodological Approaches ................................................................................. 39 3.2 Research Design ................................................................................................... 40 3.3 Questionnaire Design ............................................................................................ 41 3.4 Data Collection ..................................................................................................... 42 3.5 Ethical Considerations .......................................................................................... 43 3.6 Research Limitations ............................................................................................ 44 4 RESEARCH FINDINGS AND DISCUSSION ............................................................. 44 4.1 Presentation of Sample Characteristics ................................................................. 44 4.2 Consumer Behavior related to Wine Purchase and Consumption ........................ 45 4.3 Attitude towards Montenegrin Wine .................................................................... 47 4.4 Hypotheses Testing ............................................................................................... 51 5 RECOMMENDATIONS FOR WINE PRODUCERS ................................................ 56 CONCLUSION ....................................................................................................................... 56 i REFERENCE LIST ............................................................................................................... 58 LIST OF TABLES Table 1. The Major World Wine Producers 2013 ................................................................. 6 Table 2. Wine Consumption by Country .............................................................................. 7 Table 3. Overview of Product Attributes in Wine Decision Making Process ..................... 33 Table 4. Number of Attributes - Multiple Regression ........................................................ 52 Table 5. Mean of Attributes' Ratings .................................................................................. 54 LIST OF FIGURES Figure 1. World Vineyards Areas (with estimates for 2013 in Mhl - Millions of hectoliters) ............................................................................................................................................... 5 Figure 2. World Wine Production 2000 - 2013 (in Mhl - Millions of hectoliters) ............... 5 Figure 3. Global Wine Consumption (in Mhl) ..................................................................... 7 Figure 4. Production of Wine in Montenegro, 2000 – 2012 (in hl) .................................... 10 Figure 5. Consumption of Wine in Montenegro, 2006 – 2011 (in Thousands, 9 litre cases) ............................................................................................................................................. 10 Figure 6. Wine consumption per capita in Montenegro (in litres of pure alcohol in 2010) 11 Figure 7. The Wheel of Consumer Analysis ....................................................................... 13 Figure 8. The Means-End Chain of Product Knowledge and Product Involvement .......... 18 Figure 9. A Basic Model of Consumer Product Behavior .................................................. 23 Figure 10. The Consumer Decision Process (CDP) Model ................................................ 28 Figure 11. The Conceptual Model of Wine Consumer Behavior ....................................... 36 Figure 12. Age Structure of Respondents ........................................................................... 44 Figure 13. Monthly Household Earnings ............................................................................ 45 Figure 14. Frequency of Wine Purchase ............................................................................. 46 Figure 15. Place of Wine Consumption .............................................................................. 46 Figure 16. Shopping Wine .................................................................................................. 47 Figure 17. Purpose of wine consumption ........................................................................... 47 Figure 18. Attitude towards Montenegrin wine .................................................................. 48 Figure 19. View on Pricing by Age Group ......................................................................... 48 Figure 20. Perception of Quality and Image by Age Group ............................................... 49 Figure 21. Views on Promotion Efforts by Age Group ...................................................... 49 Figure 22. Views on Pricing by Gender ............................................................................. 50 Figure 23. Perception of Quality and Image by Gender ..................................................... 50 Figure 24. Views on Promotion Efforts by Gender ............................................................ 51 Figure 25. Summary of Hypotheses Testing ...................................................................... 55 ii INTRODUCTION Wine industry is a very important industry with its own tradition that lasts for hundreds of years. It has