Italian red premium wine demand analysis using AIDS on scanner data

Abstract The denomination of origin system for Italian wine has always captured the interest of policy makers, producers and traders. A not yet analyzed issue is the relation among different denominations from the consumer standpoint. The economic scenario, an overall decrease in wine consumption, an increase in quality wine consumption and the increase in number of wines showing denominations of origin, is a peculiar framework for conducting the analysis. Which are the elasticity patterns of the different denomination of origins? Which of the wine categories have a loyal market? Which other do not? Do the Italian appellations for wine generate different consumer’s behaviors in terms of price response? Has consumption of wines with different denominations different seasonal patterns? How much in-store promotional activities influence wines demand? Italian red premium wine demand is analyzed using an Almost Ideal Demand System (AIDS). ACNielsen scanner data have allowed the analysis at wine typology and bi-weekly period aggregation level. Estimation has been carried out using the Generalized Method of Moments (GMM) estimator, which avoids assumptions about the error structure and accounts for endogeneity. Results show different behavior across appellations. Consumption of DOCG shows a high degree of loyalty. High own-price elasticity is shown for Table, DOC and IGT wines; it indicates a more sensitive response to price changes. Denominations show a certain degree of substitution among each other. Peaks in Italian wine demand are related to Christmas holidays, Easter holidays and the paycheck received at the end of each month. Wine demand is highly influenced by promotional activities.