As shown earlier (using Maryland as an indicator), Imported wines at the supplier level are priced higher than domestic wines.

Wholesalers In the slightly more or less for If there is a blas in the tend to give the shipping costs variable.

Individual markets we examined may pay their wines than those in Maryland, but prices, selection of this Eastern state advantage to Imports because of the Since our supplier price data come from

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a market other than those used for wholesale prices, we cannot "step through" the price progression from suppliers to wholesalers. But such limitations, while they might be critical for other purposes, do not prevent us from making dependable price comparisons between domestic and imported wines at the supplier level.

Over the three-year period, average prices of Imports held virtually steady between $20.30 and $20.70 per case for the 750ml size. Case prices of the 1.5L containers stayed within a narrow range of $18.59 and $19.09. Domestic prices rose slightly, with case prices for the 750ml and 1.5L reaching $16.21 and $13.82 respectively in 1983.

We find that the source of the greater relative price disadvantage for the Imported 1.5L begins at the supplier level. While domestic suppliers gave an average of 18.4% discount for the 1.5L case (compared to 750ml cases), Importers only discounted an average of 8.6%. As we have seen, the relatively larger price disadvantage for 1.5L Imports carries through to the wholesale and retail levels.

Imported brand prices averaged 27.8% greater than their domestic counterparts in the 750ml size over the three years, and 43.1% greater than the domestic wines in the 1.5L containers during the same period. Since supplier prices were picked up in one market only, comparisons of such prices among the markets is not possible.

As discussed earlier, our sample selection appeared to introduce a downward blas In the measured domestic prices and an upward bias in the import prices. This section summarizes the Impact on average prices of taking three low-priced brands --Annie Green Springs, Boone's Farm and T.J. Swann--out of the domestic sample; and of taking Mouton Cadet and Tytell from the imported sample. This exercise was performed for all three years with similar results in each year.

At the supplier level, the effect was to raise the average domestic prices for both the 750ml and 1.5L bottles by about $1.00 a case and to reduce prices of both sizes of Imports by about $.30 a case. The net effects were to reduce the Imports' price disadvantage by about 9 percentage points for the 750ml and about 11 percentage points for the 1.5L. Nevertheless, even after these adjustments, suppliers of domestic wines were selling 750ml cases an average of $4.47 per case less than those of Imports in 1983, and held a $4.90 per case price advantage on the 1.5L size.

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Similar results were found at the wholesale level. Average prices of domestic brands rose a few percentage points, and those of Imports fell. Imports still faced a substantial price disadvantage In all three years. Wholesalers were selling 750ml Imported brands for an average of $6.11 per case more than domestics, and 1.5L Imported brands at $9.22 more per case.

At the retail level, removal of the inexpensive brands from the domestic sample left average prices unchanged (as ads for these brands were not found in our survey period). Mouton Cadet and Tytell were only advertised in three of the markets during the period we tracked advertising. Since they have a relatively small market share, removal of these brands had little impact on measured Import prices in those markets. Overall, removing these five brands from the sample reduced the domestic retail advantage for the 750ml from $.63 per bottle to $.59 per bottle, and that of the 1.5L from $1.25 per bottle to $1.22 per bottle.

In our judgment, the changes at no level of distribution are large enough to reduce our confidence in our original conclusion that domestic wines hold a price advantage over imported wines.

Analysis

The price differences we found between average prices of Imported versus domestic wines are large--large enough to retain an advantage for domestic wines even if our procedures tended to overstate actual differences by a substantial amount. Furthermore, Our findings for different years in different markets and at each distribution levels are mutually supporting. None is contradictory.

not

Available data determined the weighting procedure we adopted. Sales volumes by individual brand or wine line are available at the city or even the state level. Consequently, we adopted a methodology of weighting all markets by the national

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share of market held by each winery. This will result In an overstatement of prices in some markets and an understatement in others. The overall effect, however, should be neutral. A small upward blas in the average price disadvantage for imports has been introduced by our not weighting the state or metropolitan area markets by size in calculating the five-market averages. This occurs because Colorado, the smallest of the markets, also showed the highest relative prices for imports. As a result, the five-market average difference between import and domestic prices may be overstated by several percentage points. This amount, however, Is not sufficient to offset the large price differentials we observed in the individual markets.

Actual retail prices would have been preferable to advertised prices, and price measurements might have been taken throughout the year rather than during October (and part of November at the retail level) as we have done. Average shelf prices will not mirror advertised prices, and prices in other months may be different from those in October and November. Yet we have a great deal of confidence in our conclusions. Not only are most percentage differences large in the five markets (meaning that corrections in the opposite direction of even larger values are required to reverse these conclusions), but they are generally consistent with observed price differences at the supplier and wholesaler levels, and .among markets and

container sizes.

The supplier price data have been taken from one market only, and will differ from those in the wholesale and retail markets used for those price calculations. While use of this data limits our ability to follow the pricing of products between the supplier and wholesaler levels, it does not prevent us from drawing conclusions regarding the general question of relative price levels between domestics and imports. As we observed earlier, if a blas is introduced in the price data, the use of Maryland for supplier prices probably reduces the observed domestic price advantage.