PurposeThis study aims to identify the economic impact of a potential implementation of a Climatic Reserve for the Swiss predominant white grape variety (Chasselas) vinified in the AOC (controlled designation of origin) category. The Climatic Reserve would imply the possibility of harvesting an additional quantity of grapes whose commercialization in wine would be delayed until it is approved by the relevant authority.
The impact of a potential implementation of this wine supply management tool is simulated through an innovative method that combines the vector autoregressive (VAR) model to estimate the influence of the previous consumptions and productions on the current consumption and linear regression [ordinary least square (OLS) method] to estimate the price elasticity to measure the evolution of the price depending on the simulated consumption. The VAR model is based on state-level data about production, stocks, and consumption (all the channels of distribution combined), while the OLS regression for estimating price elasticity uses the retail market data (Nielsen Panel). With the sales and price variables on a monthly frequency design, the latter represents about 40% of the wine market in Switzerland.
According to simulations carried out at the level of a region from the canton of Vaud in Switzerland (2000–2018), the increase in turnover linked to the release of the Climatic Reserve would be +3.1% for the indigenous white grape variety Chasselas.
The Climatic Reserve is a wine supply management tool that could complement the existing yield restriction, which does not significantly influence the quantities sold, according to previous studies. Our paper contributes to the literature by demonstrating the economic advantage of this supply management tool to deal with the increasingly frequent climatic hazards in wine production and market. The methodology could be applied to other wine regions (contexts) or other agricultural sectors.