Market Benefits

For a firm investing time and resources into sustainability, engagement extends beyond employees and internal stakeholders to customers through targeted marketing and communication since consumers and retail purchasers are increasingly concerned about sustainability. Society is pushing business to “move beyond narrow, money-making self-interest by focusing on broader issues of sustainability” (Galbreath, 2009, p. 316). Firms who respond to pressure for increased commitment to sustainability have a justified financial case for doing so; Rochlin et al. (2015) found that sound corporate responsibility management has the potential to:

• Increase revenues up to 20%

• Enhance firm’s brand and reputational value by 11%

• Increase price premiums up to 20%

• Affect variation in customer satisfaction by 10% or more

• Motivate purchasing behaviors of up to 60% of customers

While these summarized benefits are largely associated with multinational corporations, wineries and vineyards have taken note because selling wine depends heavily on the ability to engage consumers around quality, price, and the story behind the wine. As Kent Mann from Sutter Home points out, “today’s consumers are more informed and want to be part of the

54 Wine Institute. (2016, October). No Shortcuts. No Regrets Retrieved from

http://www.sustainablewinegrowing.org/amass/library/22/docs/D2E%20News%20Print_Oct.'16.pdf

55 Wine Institute, 2017 April.

56 Wine Institute, 2016 December.

environmental movement. They want to feel like they’re partnering in your sustainability.”⁵⁷ By addressing the pressure from consumers and retail to adopt sustainability, and by engaging with potential customers on sustainability efforts, wineries and vineyards can benefit from a higher willingness to pay (WTP), consumer behavior patterns that preference sustainability, and higher market share among key wine buying demographics.

3.3.1 Willingness to Pay (WTP)

Researchers have found that customers are generally more willing to pay for a bottle of wine that has a sustainability claim or certification (Berghoef & Dodds, 2011; Barber et al., 2009; Forbes et al., 2009; Lopes et al., 2016; Ogbeide et al., 2014; Thach & Olsen, 2010). How much consumers are willing to spend varies throughout the research:

• Forbes et al. (2009) found consumers willing to spend 5-10% more

• Australian consumers were willing to pay a $1-$4 premium (Ogbeide et al., 2014)

• On a $23 bottle, consumers were willing to pay a $7 premium (Berghoef & Dodds, 2011)

Even though Lopes et al. (2016) found that consumers had a higher WTP for sustainable wine, the research also found that Biodynamic and Organic certifications negatively affect price. This discrepancy between price trends and WTP for Organic and Biodynamic wines could be from an unwillingness to trade perceived quality for ethical or environmental reasons; organic and biodynamic are often confused by consumers (Lopes et al., 2016; Delmas et al., 2008) or consumers are unfamiliar with sustainability terminology (Zucca et al., 2009), which could negate the price premium potential. However, other research (Veal, 2009; Forbes et al., 2009;

Peattle, 2001; D’Souza et al., 2006) found that the majority of consumers do not see ‘green’

wine to be of a lower quality. Forbes et al. (2009) found half of survey consumers did not expect sustainability to impact quality, and 36.7% believed it would increase quality. Wineries are not the only beneficiaries of price premiums for their products; wineries like Bogle Vineyards (LWC, 2014), Michael David (LWC, 2014), Jackson Family Wines, and Francis Ford Coppola Winery all pay wine grape growers premiums or incentives for sustainably certified fruit.⁵⁸

57 Wine Institute, September 2015.

58 Quackenbush, J. (2017). “Sustainable’ Sonoma wine could fetch $7-a-bottle more, survey says” North Bay Business Journal. Retrieved from http://www.northbaybusinessjournal.com/events/6542237-181/sustainable-sonoma-wine-consumer-sales?artslide=0

3.3.2 Consumer Behavior

Wineries with well marketed sustainability efforts could benefit from a higher willingness to pay, and from an increased ability to attract consumers and influence purchasing behavior. Rochlin et al. (2015) estimate that the core customers that will motivate purchasing behavior based on a firm’s sustainability reputation represents up to 20% of customers; this segment identifies with a firm’s sustainability ethos and is willing to promote that brand over another. Consumers with a pre-disposition to purchase ‘green’ products will move the market in favor of products considered sustainable compared to those that are non-sustainable (Barber et al., 2009). While Lopes et al. (2016) found that Organic and Biodynamic Certification negatively affect consumer purchasing intent, researchers also found that sustainability claims can positively impact consumer purchasing intent (Berghoef & Dodds, 2001; Delmas et al., 2008; Forbes et al., 2009) The Natural Marketing Institute in partnership with the Wine Institute found in a national survey of over 4,000 adults that 34% of wine consumers indicated that environmental or sustainable attributes are often/sometimes a factor in wine selection (Wine Institute, 2013).

3.3.3 Market Share

According to Rochlin et al. (2015) the potential market benefits for wineries and vineyards also depends on the effectiveness of the firm’s communication or marketing. Barber et al. (2009) found that nearly half of survey respondents would do ‘more for the environment’

(buy more green products) if they knew how. Delmas et al. (2008) found that consumers are confused by certifications claims. Combined, these trends indicate the need for marketing and communication around sustainability that is educational. Customer loyal, purchasing behavior, or WTP could be more difficult to motivate if wineries and vineyards cannot connect with customers about their sustainability efforts.

Conversely, both Millennials and the LOHAS (Lifestyle of Health and Sustainability) or eco-conscious consumers have demonstrated a knowledge and an interest in sustainability.

LOHAS have showed a large and growing interest in information on sustainable practices at wineries and vineyards. 52% of LOHAS respondents in the Wine Institute (2013) survey indicated that environmental or sustainable attributes are often/sometimes a factor in their wine selections. Additionally, LOHAS were also the largest wine purchasing demographic surveyed.

43% of LOHAS purchased wine for the household in the prior three months (Wine Institute, 2013). For wineries to potentially increase their market demand with these segments they can

concentrate their marketing efforts accordingly rather than trying to educate the less concerned buyers (Klohr et al., 2013).