A Cornell Study On New York Wines Raises A Fresh Question:
What Do We Mean When We Ask About Local?
Jim Prevor’s Perishable Pundit, November 12, 2013
Each year The New York Produce Show and Conference features our University Exchange Program, where we bring in students, provide them with a special education program and expose them to the industry. Simultaneously, faculty members from the same universities provide presentations of their most cutting-edge research so they can fulfill their mission of disseminating knowledge.
One of the most popular presenters is returning for the fourth consecutive year and we asked Pundit Investigator and Special Projects Manager Mira Slott to get us a sneak preview:
Charles H. Dyson School of Applied Economics and Management
Director of Horticultural Business and Policy Program
Ithaca, New York
Q: Tell us about your latest research you’ll be sharing at this year’s edition of The New York Produce Show and Conference. In years past, you’ve intrigued attendees with ongoing studies on a range of topics including the viability of generic produce promotion, a case study on branding apple varieties, and industry issues surrounding immigration reform. Now you delve into local food demand at restaurants with a study titled, Do Restaurants Cater to Locapours? Using Zagat Survey Data to Examine Factors That Influence Wine List Selections.
What spurred the study?
A: There was a lot of research on local foods done in the past. Two problems limit the value of it. First, many of these studies target the final consumer at grocery stores or institutions and rely on consumer surveys, which can be unreliable. What consumers say they do often conflicts with their actions. Second, many of these studies had small sample sizes with a handful of people and limited data sets so the statistical accuracy raises questions.
Q: How does your study avert those problems?
A: What we’re doing is exploring institutional local demand at 1,500 New York State restaurants, but instead of doing individual surveys, we have access to 1,500 surveys. We are able to capitalize on the extensive data collected by Zagat, in addition to accessing the actual menus to build quantitative as opposed to qualitative results.
Q: So by targeting restaurants, you dramatically changed the data set trajectory…
A: Several studies have looked at consumer demand and price sensitivity for local foods at supermarkets. Other research has been done on local food procurement at institutions such as hospitals and schools. Within the past few years, Cornell researchers, including myself, have done a range of related studies on local foods. My colleague Todd Schmit, [Associate Professor at the Charles H. Dyson School of Applied Economics and Management], looked at what it takes to buy local foods at universities.
Miguel Gomez, [Assistant Professor at the Charles H. Dyson School of Applied Economics and Management], who also has presented studies at The New York Produce Show, researched local procurement at hospitals. [Editor’s note: you can read a selection of related studies conducted at Cornell here].
Q: When transitioning institutional local foods research to restaurants, why did you focus on wines?
A: The restaurant channel offered a novel opportunity to study demand for local foods utilizing local wine as the catalyst. Looking at beverages, alcoholic and non-alcoholic, wine had a clearly defined label, specifying its origins on the menu. New York State also has a sizable and acclaimed reputation for wines. It was a nice case study to analyze institutional demand for local food and beverage products. We could explore the demand for local wine and alleviate all the qualitative issues related to local foods.
Q: So trying to quantify the amount of local produce on menus would become significantly more challenging…
A: Exactly. It becomes nebulous and complex. How do you define what foods are local on the menu and what percentage is local? What quantity or portion of that dish is local based on the ingredients?
Restaurants have the capacity to sell wines, as well as different objectives than hospitals and schools, adding another interesting dimension. Why do some restaurants sell more local wines than others? With so many other institutions, you have to do surveys on purchases, collect information from those doing the buying. It’s never clear when you do a survey like that. You ask questions, but are never sure how honest the answers. If consumers get phone calls, they say they are interested in local foods, but when it gets right down to it, do they actually buy local?
With Zagat, we were able to collect much more comprehensive and informative data not associated with these basic surveys. In addition, we could analyze quantitative data on wines from the restaurant menus. That’s what got us to restaurants and wines.
Q: With the focus on wines, what can the produce industry learn? Aren’t there different variables affecting local produce compared to wines that influence the study model and its results if applied to produce? For instance, wouldn’t the perishable nature and limited windows of availability of local produce impact the analysis? At another level, could the consumer who’s interested in local wines vary from the one that is interested in local produce?
A: We can’t directly make inferences for demand of local food or local produce. It depends on consumer rationale. There is a part of population that is interested in local food in general. If local wine or local food are on menu, they’ll buy it. We can infer that if a restaurant has interest in putting local wines on the menu, they’re likely interested in putting local meats or local produce on it as well.
Wine is not perishable like produce, so it’s easier to have on the menu year round. If a restaurant is going to search out and buy local New York wines, it takes effort. Not all carriers make it easy for restaurant owners. Although there are different types of constraints on procurement of local produce, there are commonalities.
Ease of making these products available on the menu is not straightforward. It is not easy to find or get access to New York State wines. Local wines are highly regulated and restaurant buyers have to deal with that constraint.
Those restaurateurs interested in local wines may be the folks who also have the energy to deal with the challenges of procuring local produce.
Q: Is the local wine market growing at a similar pace as demand for local produce and other local food categories?
A: Just as we were starting to think about this study, an op-ed piece by a wine writer on wines of New York appearing in the Oct 2011 issue of Wine Spectator observed seeing more local food products at restaurants, but asked, ‘how come we’re not seeing local wines at the same rate?’ Perhaps the local wine movement is lagging behind local food by a year or two. We thought it would be interesting to find out.
Q: Could you elaborate on the methodology?
A: With the interest in demand for local food and all these restaurants out there, we could use Zagat restaurant scoring mechanics to mine data. There are 5,000 restaurants in New York with a Zagat rating. That is a lot of data. We were able to find menus for 1,500 of those restaurants, so narrowed our study to those. We could comb through menus to learn which restaurants were more or less focused on local wines. We used a combination of these two sources for our information.
Q: What were the key points of data you selected from the Zagat guide?
A: Zagat uses a list of some 40 attributes to provide four scores for each restaurant based on a 30-point scale. The four scores assess food quality, décor, service and cost. Those are the metrics. There is also other valuable information. For instance, restaurants can be segmented out by cuisine category and special features such as green/local/organic.
We also collected menu information, such as number of entrees, more specific types of food the establishment serves and details on beverages. We counted the number of wines from different parts of the world and the prices; how many from California, from Europe -- more specifically from France, Italy, Spain, and from South Africa. How many local wines do they have on their menu? We also could assess a general dedication or emphasis for local foods.
Q: With all the variables in play, were you able to isolate factors impacting demand for local wine?
A: All restaurants were in New York State, but Manhattan showed some anomalies. If you look at restaurants in Manhattan, the ones that have higher cost scores have less local wines on the menu, but this is not true in the four outer boroughs.
Q: Why is that?
A: We surmise that might be the case because the high end Manhattan restaurants have general buying preferences for European and California wines. We’re not sure how this finding translates to other food and beverage categories. But some of the other findings have more clear links.
Q: Did you find the cuisine category to be an important determinant?
A: Cuisine type that the restaurant serves really influences the willingness of a restaurant to put local wines on the menu. We saw a notable connection with restaurants described as serving New American cuisine. That category encompasses a compilation of food types and definitions, but is broadly viewed as places that serve fresh, innovative foods. Sometimes you hear fusion restaurants, so this could fit in as well.
While we saw a positive effect of more local wines with New American cuisine, we saw a negative effect of less local wines with traditional European and Asian cuisines. And other cuisine types didn’t have a significant statistical effect on local wine selection. That was a more surprising effect.
Q: Were you able to weigh the statistical importance of each of the four Zagat ratings -- food quality, décor, service and cost — in impacting the local wine offerings?
A: A powerful indicator of a restaurant’s commitment to serve local wines was if they earned a high Zagat score for décor. It was not the food quality, not the cost, not the service, but the décor that really seems to matter; and not just in Manhattan, but everywhere in New York State.
Q: Did that surprise you?
A: At first I wasn’t sure how to interpret that. Talking to restaurant owners that scored high in décor, these were people who paid attention to details and were mindful of small things. Owners who had these attributes were more willing to put local wines on their list and more likely to have local ingredients on the menus. We weren’t able to test the local food component scientifically, but it was a take-away.
Q: How about in the reverse? If a restaurant fits in the green/local/organic food category? Wouldn’t local wines fall naturally into that setting?
A: If a restaurant had a check mark on the local and organic feature, it would be more likely to have local wines. We were expecting to see that result intuitively, but it wasn’t nearly as strong as the décor score or restaurants in the New American cuisine category.
Similarly, the more domestic wines a restaurant has on their list, the more likely they will include New York State wines as well. Again, this was not quite as strong an effect as the décor, which was overwhelming. That might be a take-away for someone selling local food products. The importance a restaurant owner places on local ingredients spans a very wide distribution of restaurants, all sizes and prices, not just the white linen table cloth category.
Q: In the Zagat guide, descriptions of the restaurants include quotes from consumers. Did you take those comments into account?
A: The consumer quotes provided additional perspective but were too difficult to include in our statistical analysis.
Q: Did you examine the restaurant owner’s motivations and criteria for purchasing local wines?
A: My graduate student, Joseph Perla, built that motivation question into the middle of the paper. We don’t know if all things on the menu are based on profit margins and revenue. Introducing local wines can be a means of differentiating the restaurant brand and to have a suite of items on your menu. You are able to say you have an interest in local foods and beverages. We think this connection between the décor score and local wine offerings exemplifies that.
Q: How can research from your New York State local wine study be applied to other regions in the U.S., local food categories, and more specifically to stakeholders in the produce industry?
A: I know this study is not as produce-focused as other research I do. But I think it is bigger than wine. Demand for local foods in institutions hasn’t been well explored. We want to learn more about what institutions buy local and what types of margins influence these patterns. It was useful to target local wines as a stepping stone in this research. We’ve written the study up and submitted it to an academic journal. A piece on the study came out in the Cornell Chronical.
I can make the sell that wine is so much easier to track than produce. In a salad, some of the ingredients might be local but quantifying that presents enormous complexities.
Q: Local produce also has a seasonal window, so a chef might feature a seasonal product, dish or menu selection, constantly adjusting based on quality and availability, which could be difficult to study scientifically. At the same time, consumers have many different interpretations of what defines local. Did this influence your results?
A: The secondary objective of this study was to better define what the term local means. We split the data up in several ways. People talk about local within 100 miles, 400 miles or within a region or state. We learned that when going 50 to 100 miles outside wine regions, the demand for local wines diminished.
Restaurants ‘down state’ don’t necessarily see Finger Lake wines as local, but may see Long Island wines as local. This definition of local might be more local than what some people suggest it is. That may extrapolate to other states or other products. The lesson is, don’t abuse this term local or stretch it too far, because there is a sense that local is closer to home than people think.
Red wines from Long Island tend to show up close to Long Island, and are sold relatively close. There is this ongoing debate of what is local. The definition is perhaps a little narrower than what many people thought.
Q: You’ve definitely made the case that your study can provide new insight for produce industry executives…
A: More and more people are becoming interested in local food demand at institutions. There are a lot of small data sets exploring this phenomenon and people are relying on surveys. In that vein of research looking at institutional demand, Zagat provides a more honest data set.
Collecting data directly from menus is more truthful because it is actually what the restaurant is doing. This study offers a new perspective on what types of restaurants are likely to purchase local foods and produce, as well as shedding light on the definition of local.
Q: What other studies are in the pipeline?
A: Ed McLaughlin [Robert G. Tobin Professor of Marketing, Director of the Charles H. Dyson School of Applied Economics and Management’s undergraduate program, and director of the Food Industry Management Program] and I have been working more on the merits of a generic produce promotion program and what are the constraints of a general promotion. A survey of grower/packer/shippers in the U.S. is in the pipeline.
We also are still looking at labor policy reform and a bigger guest worker program. It seems like a pretty distant possibility now. It has gone on the backburner because it is so politically charged. Still, there is work to be done on that. We are examining impacts under different outcomes. In a status quo piecemeal reform, what it would mean for prices and trade? We’re building that program.
And we’re doing some other work on branding these new apple varieties, which are being released from Cornell, and looking at how much they should pay the university to have access to these new varieties.
Q: You’re certainly juggling a fascinating research portfolio. We are very appreciative you are taking time out to present your latest research once again at the upcoming New York Produce Show and Conference.
This study is fascinating. We are not surprised by the fact that the high-priced Manhattan restaurants are less inclined to offer New York state wines. First, these restaurants serve a lot of tourists, and although tourists can have an interest in things local, the high price of wine probably leads many to stick with what they know. Second, wine is not just an item sold in the restaurant; it is often the key profit-driver for white table cloth restaurants.
We dined at an upscale Korean restaurant last year right after The New York Produce Show and Conference. The food was good but lacked the spiciness we are used to at more humble Korean eateries. When we inquired, and we were with people who knew the chef so got the straight-and-narrow, it was explained to us that selling wine was crucial to the restaurant’s P&L and that the fiery hot Korean food would overpower the wine — so selling wine was so important, they lowered the heat of the food, changed its authentic flavor, in order to sell wine. So these restaurants in Manhattan with sky high rents have to sell high price point wines — and New York wines generally lack the caché to demand such prices.
Beyond this, though, the study raises a question: what, precisely, are we asking when we ask consumers if they are interested in buying local? Wine — being not really perishable and easily transported and sold through commercial channels — should, in theory, be marketed everywhere.
In other words, if New York State wines are just as good as French or California wines, there is no reason why they shouldn’t be sold at a nice restaurant in Omaha, Nebraska. That they rarely are implies either that locals are willing to pay a premium for them and keep them to themselves — a proposition for which there is no evidence — or that the quality of the wines is not as high as those from other production areas.
Many who are experts in wines consider New York to have excellent white wines, but won’t even drink the red and, whatever the facts, the popular perception is not favorable toward New York wines:
…one part of the report, based on a national survey of 1,000 wine consumers, included an analysis of consumer perceptions of wines from the four top states — California, Oregon, New York and Washington.
"When respondents evaluated the wines of these states, California stood out in the areas of value (62%), enjoyment (88%), and future purchase intent (87%). Oregon was assessed similarly to California in terms of value (58%), and perceived as being a better value than wines from Washington (52%) or New York (50%). New York wines ranked lowest in quality compared to all of the other three states (46%).”
This seems to us to be relevant. When we are asking consumers would they buy local broccoli, we don’t think the intent if the question is to ask “Will you buy local broccoli even if the quality is not as good as California broccoli?”
We think the premise is that the quality will be equal, and that the question should be: “If we can grow local broccoli that is just as tasty and delicious as California broccoli, would you prefer it? Would you pay a premium for it?” This question can be applied to any produce item.
In such a case, consumers usually answer pro-local because the idea that it is local implies certain things to consumers: 1) It will be fresher, 2) It will be less expensive because of savings in shipping, 3) It will be better for the environment because of less shipping and related carbon output, and 4) it will help enrich the local community.
With wine you are not dealing with a parity product so the question is somewhat different. When we go to the Finger Lakes Region, we love to try the local wines, but that is wine tourism. We lean toward Cabernet, but in the Finger Lakes one drinks Riesling. So the question with local wine becomes: “Is the customer prepared to change his inclinations in order to buy local?”
That is a powerful question, and we look forward to Professor Rickard’s presentation at The New York Produce Show and Conference.
You can register for the show right here.
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We look forward to learning from Professor Rickard, the other presenters and from each other.