The Robert Mondavi Institute for Wine and Food Science is pleased to announce that Julian Alston, professor in the Department of Agricultural and Resource Economics, has been named the new Director of the RMI Center for Wine Economics.

More information on professor Alston can be found at the following link: http://www.agecon.ucdavis.edu/people/faculty/info.php?id=6

The RMI Center for Wine Economics will focus on economic developments in the domestic and international markets for wine and their implications for competitiveness of the wine industry California and the United States. The Center will emphasize applied research but will be engaged in teaching and outreach activities related to its theme of wine economics. The research program will encompass a variety of concurrent projects funded through grants and contracts and cooperative agreements. It will be based initially on currently established projects—that emphasize the implications of science and technology of production, and government policies and programs, as they affect grapes and wine—but will expand over time to incorporate new programs and projects developed expressly for the Center.

The Center will serve as a primary source for information on wine economics through a state-of-the-art web page, to be launched July 1, 2008. The web page will include information from the Center’s own projects and programs as well as links to other sources of information, especially sister Centers around the state, nation, and the world.

Agricultural and Resource Economics Update

Please click here to find the most recent issue of the Agricultural and Resource Economics Update. This special issue of the update focuses on issues in the California wine and wine grape industry.

The International Conference on World Wine Markets

August 8-10, 2007
Conference Presentations

Agustin Huneeus Presents Liquid Sugars Lectureship

(Left) Agustin Huneeus (2nd from left) joins Clare Hasler, Rachael Goodhue, and Richard Howitt (Professor and Chair of Agricultural and Resource Economics) at the reception following his lecture

On February 21, 2006, members of the UC Davis Department of Agricultural and Resource Economics welcomed Mr. Agustin Huneeus of Quintessa Winery as their 2005-2006 Liquid Sugars Lecturer. Mr. Huneeus’ visit was cosponsored by the Department of Viticulture and Enology and the newly formed RMI Center for Wine Economics and Business.

Mr. Huneeus has contributed to the wine industry for over forty years, in both the U.S. and Chile. He began as CEO of Concha y Toro in Chile in 1960. Since then, he has been instrumental in the success of many other wineries, including Veramonte in Chile, and Estancia, Franciscan Oakville Estate, Mount Veeder, and Quintessa in California. Mr. Huneeus is also a founding member of the Honorary Board of the RMI.

During his visit, Mr. Huneeus met with groups of interested faculty members and students from the Department of Agricultural and Resource Economics and the Department of Viticulture and Enology. He was joined by Aaron Pott and Jim Sweeney, Quintessa’s winemaker and the managing director of Huneeus Vintners, respectively. The discussions covered many aspects of winegrape growing, winemaking, and wine marketing. 

One interesting discussion addressed the relationships among price, cost, and quality. Prices are not chosen based on production costs, but based on a category. If the quality of a wine is high, it will be priced accordingly, even if the costs of production are much lower. On the other hand, if the wine is unprofitable to produce it will not continue to be sold. Mr. Huneeus noted that if a wine in a given price category, such as the $5 to $7 range, exceeded the expected quality for that range, the winery would find it difficult to raise the price of that product. Instead, it would be better off creating a new product, with a new, higher price. The wine’s quality would fit consumers’ expectations for the new category.

During his lecture, Mr. Huneeus talked about the challenges and opportunities facing the California wine industry. He shared two important concepts with the audience: first, what we see today in the wine business, in terms of distribution, pricing, and other activities, will not be there five years from now, due to globalization and other competitive forces; and second, an important principle for success in the wine business is that it is not a brand business. In a brand business, such as packaged consumer goods, firms seek to increase market share by inducing brand loyalty. As their market share increases, they are able to increase profits by exploiting economies of scale.

The wine business operates as a category business. Rather than seeking a specific brand, consumers choose a category, such as Napa cabernet sauvignon, and then a price point. Mr. Huneeus identified the primary factor driving this difference being the large number of wine brands in total (50,000), and the large number available in an average supermarket (800) where an average consumer makes a wine choice relative to the small number the consumer recognizes. When consumers have this many choices, it is very difficult to develop brand loyalty. 

The wine business, according to Mr. Huneeus, has never been better. Sales and volume have increased significantly over the past few years and the quality of wine has improved dramatically over the past few decades. As advice and a challenge to students interested in entering the wine industry, he said that the hero of the future for the wine industry will be different from the hero of the past. Future heroes will be the people who can make wine more accessible to consumers by diminishing snobbery without eliminating wine’s mystique.

The Liquid Sugars endowment was donated by Warren Mooney, co-founder of Liquid Sugars, an early distributor of corn fructose sweeteners. The endowment is intended to facilitate student and faculty interaction with agribusinesses in order to increase understanding of the important issues facing the sector today. The lectureship is one of its primary activities.

Rachael Goodhue is an Associate Professor in the Department of Agricultural and Resource Economics at UC Davis and is the Director of the RMI Center on Wine Economics and Business