For California Vintners, It's Not Easy Being Green

"Green" labels do not pack the same wallop for California wines that they do for low-energy appliances, organically grown produce and other environmentally friendly products, but it's not because there's anything wrong with the wine, a new UCLA-led study has found.

In fact, wines made with organically grown grapes actually rate higher on a widely accepted ranking, said Magali Delmas, a UCLA environmental economist and the study's lead author. And these wines tend to command a higher price than their conventionally produced counterparts, so long as wineries don't use the word "organic" on their labels. 

But when wineries do use eco-labels, prices plummet.

"You've heard of the French paradox?" quipped Delmas, associate professor of management at UCLA's Institute of the Environment and the UCLA Anderson School of Management. "Well, this is the American version. You'd expect anything with an eco-label to command a higher price, but that's just not the case with California wine."

The anomaly points to a marketing conundrum for environmentally friendly vintners and a buying opportunity for oenophiles, say Delmas and her co-author, Laura E. Grant, a Ph.D. candidate in environmental science and management at the University of California, Santa Barbara.

"Wine made with organic grapes — especially if it has an eco-label — is a really good deal," Grant said. "For the price of conventional wine, you get a significantly better quality wine."

The findings appear in the current issue of the peer-reviewed scholarly journal Business and Society, the official organ of the International Association for Business and Society. The organization is devoted to research on corporate social responsibility and sustainability issues.

Delmas, an economist and sociologist by training, specializes in analyzing incentives that induce companies to engage in environmentally beneficial practices. Grant, also an economist, is married to a sommelier.

The researchers studied 13,426 wines from 1,495 California wineries. Vintages ranged from 1998 to 2005, and more than 30 varietals and 25 appellations were represented.

First, Delmas and Grant tracked down each wine's rating from Wine Spectator, a prominent wine publication. Then they tabulated the number of wines made with grapes that had been certified by a third party as organically grown, a grueling and expensive process that obligates the vineyard to devote considerably more time and effort to cultivating grapes than conventional agricultural methods, which rely on chemical herbicides, pesticides and fertilizers.

The researchers also looked at whether wineries chose to label their certified wines as organically grown or whether they chose to keep their efforts to themselves.

Certification and eco-labels had no impact on pricing or ratings for cheaper wines, the researchers found. But using organically grown grapes proved be a double-edged sword for wines that cost more than $25. 

So long as they didn't carry eco-labels, these wines commanded a 13-percent higher price than conventionally produced wines of the same varietal, appellation and year. Their ratings on Wine Specator's 100-point scale, in which wines tend to range between the mid-50s and high 90s, were also higher. Wines made from organically grown grapes averaged one point higher than their conventionally produced counterparts. 

While the higher Wine Spectator scores still prevailed when producers slapped eco-labels on their bottles, the financial rewards for going to the trouble of making certified wine evaporated. The "made from organically grown grapes" label not only wiped out the price premium for using certified grapes but actually drove prices 7 percent below those for conventionally produced wines, the researchers found. 

The average price for a wine with an eco-label was $37.65. By contrast, a certified wine without an eco-label commanded an average price of $40.54.