Shaking Up Fine Wine

Wine analytics aim to make pricing more transparent

For hundreds of years, a tiny group of châteaux and négociants (wine brokers) have determined the price that distributors, importers, and eventually consumers will pay for France’s top wines. These prices are based on the barrel scores of elite tasters along with the brokers’ own expertise—and a generous splash of guesswork about the market.

That tradition-bound system is getting a data-driven shakeup with the debut of a new pricing algorithm on London’s Liv-ex fine wine market.

The algorithm was developed by Berkeley Haas Visiting Professor Burak Kazaz (a professor at Syracuse University’s Whitman School of Management) and M. Hakan Hekimoglu of Rensselaer Polytechnic Institute. It incorporates weather patterns, market conditions based on the Liv-ex 100 index of top wines, and barrel-tasting scores of two leading critics to establish “realistic prices” for Bordeaux wines still aging in the barrel but slated to hit shops and restaurants next year.

“The realistic pricing will tell buyers and consumers whether a wine is underpriced or overpriced, leading to more effective and transparent purchase decisions,” says Kazaz. “It will also tell winemakers how they can determine their own selling price to négociants.”