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Margins of Fair Trade Wine along the Supply Chain: Evidence from South African Wine in the U.S. Market

Author

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  • Back, Robin M.
  • Liu, Xinyang
  • Niklas, Britta
  • Storchmann, Karl
  • Vink, Nick

Abstract

In this paper, we analyze profit margins and markups of Fair Trade (FT) wines sold in the United States. We are particularly interested in whether and to what extent the FT cost impulse in production is passed along to the supply chain. We draw on a limited sample of about 470 South African wines sold in Connecticut and New Jersey in the fall of 2016; about 90 of them are certified FT. For these wines we have free on board export prices, wholesale prices, and retail prices, which allows us to compute wholesale and retail margins and analyze the FT treatment effect. We run OLS, 2SLS, and propensity score matching models and find evidence of asymmetrical pricing behavior. While wholesalers seem to fully pass-through the FT cost effect, retailers appear to amplify the cost effect. As a result, at the retail level, FT wines yield significantly higher margins than their non-FT counterparts. (JEL Classifications: L11, L31, L43, L81, Q17)

Suggested Citation

  • Back, Robin M. & Liu, Xinyang & Niklas, Britta & Storchmann, Karl & Vink, Nick, 2019. "Margins of Fair Trade Wine along the Supply Chain: Evidence from South African Wine in the U.S. Market," Journal of Wine Economics, Cambridge University Press, vol. 14(3), pages 274-297, August.
    • Handle: RePEc:cup:jwecon:v:14:y:2019:i:3:p:274-297_4
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    Cited by:

    1. Niklas, Britta, 2024. "The effect of South African wine certifications on price premiums and marginal costs: A two-stage hedonic approach," Economic Modelling, Elsevier, vol. 132(C).

    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade

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