A Tale of Two Wines: Merlot, Pinot Noir, and the movie Sideways

by robekulick

For those of you who don’t remember the movie Sideways, one of the major themes of the movie is that Merlot is bad and Pinot Noir is good.  In fact the climax of the movie is a super lame speech by the main character where he essentially justifies his character flaws by comparing his own personality to the fickle and relatively difficult to grow Pinot grape. Needless to say I’m not a huge fan of the movie in general. Oh, and I like Merlot. Anyway, after the movie came out, it was widely perceived that the demand for Pinot Noir and Pinot Noir prices increased and demand for Merlot and Merlot prices decreased as a result of the movie. So were these perceptions accurate?

Well, this very cool working paper done under the auspices of the Journal of Wine Economics has some answers!

http://www.wine-economics.org/workingpapers/AAWE_WP25.pdf

Cuellar et al. explain:

(1) In terms of sales volume,

"The regression results show a small and mostly statistically significant decrease in both Merlot/Pinot Noir and Merlot/Control 
and a large and statistically significant increase in PinotNoir/Control."

(2) In terms of price,

"While directionally, all the 
coefficients move consistent with theory that the movie Sideways decreased the demand 
for Merlot and increased the demand for Pinot Noir, the magnitude of the changes differs 
between Merlot and Pinot Noir.  While the price of Merlot continues a decline started in 
2003, well before the movie began, Merlot does exhibit a small statistically significant 
decrease in price.  For non-promoted Pinot Noir, however, price in 2005 reverses a 
downward trend beginning in 2003.  For promoted Pinot Noir, price increases following 
the movie after being stagnant from 2001-2004.  Results for non-promoted and promoted 
Pinot Noir are statistically significant."

Overall they conclude:

"This paper tests the so called Sideways effect. Specifically we investigate 
whether or not the movie Sideways had a significant effect on the consumption of Merlot, 
Pinot Noir and overall wine consumption.  Our results are consistent with the theory that 
the movie Sideways had a small negative impact on the consumption of Merlot while 
increasing the consumption of Pinot Noir.  However, far from having a “devastating” 
effect, the positive impact on Pinot Noir appears greater than the negative impact on 
Merlot.  For example, while the sales of Merlot slow following the movie, sales of Pinot 
Noir increase significantly.  We observe a similar effect with respect to price.  Following 
the movie Sideways, the price of Merlot continues an already decreasing trend, while the 
price of Pinot Noir reverses a decreasing trend and increases following the movie.  The 
estimated demands confirm these results showing a small decrease in the demand for 
Merlot and an increase in the demand for Pinot Noir.  Furthermore, the paper shows that 
there appears to be a general increase in wine consumption, as measured by the control 
group red wines, as a result in the movies popularity."

So the movie Sideways wasn’t good for Merlot, but it seems as if the decline in popularity of Merlot is in the large part a result of a broader phenomenon. On the other hand, it does seem that the movie Sideways has been a boon for Pinot Noir and red wine in general. But Merlot really is good stuff, so I encourage all of you to try a little in the near future. In terms of relative prices, it really is a  good deal!


 

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