The effect of South African wine certifications on price premiums and marginal costs: A two-stage hedonic approach

Abstract

This paper analyses whether there are price premiums for certified and black economic empowerment (BEE) South African wines in the domestic market and the major export markets (Germany, United Kingdom, the Netherlands, and Belgium) and estimates what (marginal) costs are related to supplying these certifications. The results suggest price premiums for BEE wines, while for certified wines price premiums only apply in some markets and especially for those certifications that focus on the environment and organic production, but not for those that focus on fair trade or labor. The results for marginal costs suggest that subsidized BEE wines sell lower quantities but gain access to higher price segments, while the opposite holds true for certified wines. Additionally, for certified wines (except Fairtrade), younger and private producers have a comparative cost advantage.

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