1. The impact of setting on wine tasting experiments: Is the process of wine tasting inherently flawed? Geoffrey Lewis Professorial Fellow, Melbourne Business School g.lewis@mbs.edu Steve Charters MW Professor & Head of Research, School of Wine & Spirits Business Burgundy School of Business steve.charters@escdijon.eu Benoît Lecat Wine and Viticulture Department Head California Polytechnic State University blecat@calpoly.edu 1 American Association of Wine Economists 10 th Annual Conference June 21 - 25, 2016 Bordeaux, France

2. Prior Research This research is an extension of work done in Melbourne (Lewis & Zalan, 2014) and in Dijon (Lewis, Lecat & Zalan, 2015) where we demonstrated that 'objective characteristics' (brand, label and price) overwhelm subjective appreciation of the wine. These experiments, following earlier work by Plassman (Plassman et al., 2008), involved manipulation – the tasters were presented with 5 wines, but in fact only 3 wines were involved, two of the wines being presented twice. With the Dijon research the manipulation went to the extent of re-labelling two of the wines, with the tasters pouring the wine from the mis-labelled bottles. The earlier study was conducted at the School of Wine & Spirit Business (Groupe ESC Dijon Bougogne) in 2014 with two experimental groups: 1.English-language program students in the Master of Wine Business and Master of Wine Management programs (n=31), and 2.Students in the French-language program CIVS (Commerce International des Vins et Spiritueux), the leading post-graduate wine business program in France (n=27) 2

3. 2014 Research Design The experiment was structured in two rounds: Round 1 - Can you identify the Village Appellation? The participants were asked to identify the Village appellation of three red Burgundies, indicating their Rating (scale 1-6) and Willingness to Pay. This round was conducted to get participants used to the process and to make them less likely to suspect experimental manipulation. Round 2 - The Burgundy Appellation Challenge The participants were presented with five red Burgundy wines from the same producer and vintage and were asked to assess the classification (Grand Cru, Premier Cru, Village Cru, Bourgogne Regional Appellation) of the wines. The question was posed whether some classifications were over/under- rated or over/under-priced and how they valued these wines based on quality, regardless of the classification. They were again asked to rate the wines (on a scale of 1-6) and indicate their WTP. 3

4. Round 2 – Presented and True Prices WinePresented Price (on the tasting sheet) 1 €48 Grand Cru 2 €31 Premier Cru 3 4 €20 Village Appellation 5 €8 Regional Appellation 4

5. Round 2 – Presented and True Prices WinePresented Price (on the tasting sheet) True Price (Estate price) 1 €48 Grand Cru 2 €31 Premier Cru 3 4 €20 Village Appellation 5 €8 Regional Appellation 5

6. Round 2 – Presented and True Prices WinePresented Price (on the tasting sheet) True Price (Estate price) 1 €48 Grand Cru 2 €31 Premier Cru€8 Regional Appellation 3 €31 Premier Cru 4 €20 Village Appellation€48 Grand Cru 5 €8 Regional Appellation We anchored Wines 1, 3 and 5, and manipulated the price of Wines 2 and 4, unlike the Australian experiment, where we anchored Wines 2, 3 and 4, and manipulated the price of Wines 1 and 5. 6

7. Group 1: (English Language Program) Results (n=31) 7

8. Group 2: (French Language Program) Results (n=27) 8

9. The results from the 2014 experiments confirmed that, even with a group of experienced tasters (WSET 2/3), objective characteristics overwhelmed subjective assessment of the wine. Ratings and Willingness to Pay were driven by the appellation, labelling and price of the wines. The largely French-speaking CIVS students' assessment (Ratings) of the wines was more accurate than the other students, but their Willingness to Pay did not fully* reflect their Ratings. Hence, the 2015 AAWE conference paper was entitled: "Do the French have better palates … but no better sense of value?" Results from the 2014 Dijon experiment * Their WTP for Wine 4 was higher than Wines 2 & 3, but not as high as for Wine 1 (even though they Rated Wine 4 higher than Wine 1). 9

10. In 2014 the experiment was conducted at ESC Dijon, School of Wine & Spirits Business in the typical WSET-style wine-tasting that the tasters were familiar with. In a letter to the Journal of Wine Economics, commenting on the work of Plassman et al., Jeffrey Postman, a New York cardiologist, offered the following observation: Some wines are much better than others, but the satisfaction one gets from them is so much more nuanced in a social setting than in a blind tasting, the latter is but a pale shadow of the former. The message that I take home from the Plassman experiment is that blind tasting has little to do with the real life experience of tasting wine. Based on Postman's challenge, we hypothesized that we would get quite different results if we replicated the 2014 Dijon experiments in a 'natural setting'. To that end we conducted an experiment with the same group of tasters – the class of 2016 instead of the 2014 cohort – using exactly the same experimental structure, but under the guise of a 'French Food & Wine Experience' where the students tasted the wines while enjoying a meal and considering the question of how the wines matched with the food. Repeating the Experiment in a 'Natural Setting' 10

11. The experiment was conducted at a well-respected Dijon restaurant, Dame d'Aquitaine and presented to the students as a "French Food and Wine Experience" to celebrate the completion of their course. One luncheon was held for English-speaking students and one, a week later, with the French-speaking students. The invitation indicated we would be exploring how wine and food went together. Students arrived at the restaurant and seated themselves at tables of 6-8. At each table there was a member of the ESC Dijon faculty, ostensively to act as 'host', but in fact to act as a participant-observer. The participant-observers were briefed prior to the experiment and were informed that some manipulation was involved, but they were not informed of the details. To avoid participant-observers influencing the student responses to the wine, during the introduction to the luncheon, students were told that we had specifically asked the faculty members not to share their opinions about the wines. Repeating the Experiment in a 'Natural Setting' 11

12. As in the 2014 study, the experiment was structured in two rounds: Round 1 – Can you identify the White Wine Variety? Three wine wines (Sancerre, Bourgogne and Alsace) were served with the entrée. The participants were asked to identify the region of three white wines, indicate their Rating of the wines (scale 1-6) and their Willingness to Pay. This round was conducted to get participants used to the process and to make them less likely to suspect experimental manipulation. This round was debriefed and a prize was awarded to the student whose WTP was closest to the retail prices of the wines. Round 2 – The Burgundy Appellation Challenge The participants were presented with five red Burgundy wines from the same producer and vintage (ranging from Grand Cru to Bourgogne Regional Appellation) and were asked to assess how the wines matched with the main course. The question was posed whether some classifications were over/under-rated or over/under-priced and how they valued these wines based on quality, regardless of the classification. They were again asked to rate the wines (on a scale of 1-6) and indicate their WTP. Repeating the Experiment in a 'Natural Setting' 12

13. Structure of the Tasting 13

14. 2016 Dijon Results – Ratings and True Price 14

15. 2016 Dijon Results – WTP and True Price 15

16. 1.The 'natural wine consumption setting' of a restaurant meal enjoyed with friends did nothing to reduce the impact of objective wine characteristics. The tasters did not detect the manipulation, even though the similarity of some of the wines were discussed around some of the tables. 2.Again, the French tasters up-rated the Village Appellation (actually the Grand Cru), but not to the extent the tasters in the 2014 experiment did, who actually rated the Village Appellation more highly than the Grand Cru. 3.This result suggests (subject to further statistical analysis), contrary to our expectation, that a formal WSET-style setting may be a better setting for assessing wines that a 'natural wine consumption setting'. 4.But in both settings objective characteristics (appellation, label & price) overwhelmed the tasters' subjective assessment of the wines. The question remains as to whether our experimental design accurately tested Postman's proposition and this offers possibilities for further research. Conclusions 16

17. Discussion Thank you! 17