Title: Quality differentiation in the Italian wine industry: terroir-based vs. brand-based strategies

Authors: Luca Camanzi; Cristina Grazia; Eric Giraud-Héraud; Giulio Malorgio

Addresses: Department of Agricultural and Food Sciences, University of Bologna, Viale G. Fanin, 50 – 40127 Bologna, Italy ' Department of Agricultural and Food Sciences, University of Bologna, Viale G. Fanin, 50 – 40127 Bologna, Italy ' Institut des Sciences de la Vigne et du Vin (ISVV), 210 Chemin de Leysotte, 33 882 Villenave-d'Ornon cedex, France ' Department of Agricultural and Food Sciences, University of Bologna, Viale G. Fanin, 50 – 40127 Bologna, Italy

Abstract: This study assesses the reasons that induce wine firms to choose their differentiation strategy, namely a terroir-based or a brand-based approach, considering both endogenous factors (e.g., firm size, nature of upstream-downstream relations) and exogenous conditions (market size/opportunities, collective brand reputation). First, we provide an empirical characterisation of the Italian denomination of origin wine processing and bottling industry as well as of firms' quality differentiation strategies, by means of a cluster analysis (CLA). Based on these results, we developed an industrial organisation model explaining the incentives for firms to adopt each strategy in a competitive context, focusing on the trade-off between terroir-based strategies and brand-based strategies. We conclude that brand-based strategies are motivated mostly by scale economies, short-run market opportunities and synergies between brand and designations of origin, while the main reasons prompting firms to choose terroir-based strategies relate to supply chain control, low demand uncertainty and competition intensity.

Keywords: quality; differentiation; Italian wine industry; terroir; industrial brand; strategies; consumer; designation of origin; IGT; Indicazione Geografica Tipica; DOC; Denominazione di Origine Controllata; DOCG; Denominazione di Origine Controllata e Garantita; CLA; cluster analysis; vertical integration; cooperatives; industrial organisation model.

DOI: 10.1504/IJGSB.2017.088920

International Journal of Globalisation and Small Business, 2017 Vol.9 No.2/3, pp.86 - 104

Available online: 19 Dec 2017

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