SYRACUSE, N.Y., April 1, 2015 /PRNewswire/ -- Researchers
from the Martin J. Whitman School of Management at Syracuse
University have revealed a highly accurate model for pricing wine
futures. In a recently accepted paper in Manufacturing &
Service Operations Management, Burak Kazaz, PhD, Steven Becker
Professor, Laura J. and L. Douglas Meredith Professor of Teaching
Excellence and associate professor of supply chain at the
Syracuse University's Whitman School,
and his co-authors, Dr. Tim
Noparumpa (Syracuse Ph.D. '12) and Dr. Scott Webster (Arizona
State University, formerly Syracuse
University), examined the impact of wine tasting experts and
their reviews when it comes to selling wine before it is bottled,
known as "wine futures."
Their research shows how to price wine futures, as well as what
proportion of the wine should be sold in advance versus through
retail chains. It demonstrates that Bordeaux grand cru wineries increase their
profit by approximately 10 percent; they estimate that small and
artisanal winemakers in the U.S. can benefit from such financial
markets by improving their profits by 14 to 15 percent.
"Our work is significant as it is perceived as the first of its
kind in pricing wine futures with accuracy," said Dr. Kazaz.
"Earlier research thoroughly examines the pricing of bottled wine
but has not explored a model for pricing wine not yet bottled."
Dr. Kazaz and his research team used data obtained from
Liv-ex.com, the primary electronic exchange where merchants,
brokers, retailers and consumers can purchase wines in advance of
their distribution for retail operations to analyze barrel scores,
which are quality ratings expert reviewers give to wine tasted from
Barrel scores indicate the potential quality of the wine,
offering clues as to whether it will be a success or failure.
Winemakers use barrel scores to determine how much wine to sell as
futures and how much to retain for retail sale. The team determined
that barrel scores, together with consumer and winemaker
preference, influence the winemaker's allocation and pricing
What's more, the study concluded that it's more profitable for
winemakers to sell to a more diverse consumer population, which
would include futures and retail sales. Finally, the study offered
an empirical formula by which to price wine futures.
"Our study is groundbreaking for smaller artisanal and boutique
wineries, because it represents a way for them to maximize their
cash flow and profits, thereby allowing for more innovation," said
Dr. Kazaz. "Working with one such winery in the Finger Lakes wine
region in New York, we were able
to demonstrate that it should allocate a significantly larger
percentage of its wine as futures. This allows winemakers to
recover their cash investment earlier, reduce their risk and invest
Dr. Kazaz added that U.S. winemakers have a higher need for a
futures market and would benefit financially even more than
Bordeaux producers, which
historically have participated in the wine futures market.
About the Whitman School
The Martin J. Whitman
School of Management at Syracuse University was established as the
College of Business Administration in 1919. In 1920, it was only
the 16th collegiate business school in the nation to be accredited
by the AACSB. Today, the Whitman School of Management includes
programs in accounting, entrepreneurship, finance, management,
marketing, real estate, retail management and supply chain
management. In any given year, the Whitman School is home to nearly
2,000 doctoral, graduate and undergraduate students.
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SOURCE Syracuse University