Abstract
The French opposition to the war in Iraq in early 2003 prompted calls for a boycott of French wine in the US. We measure the magnitude of consumers’ participation in the boycott, and look at basic evidence of who participates. Conservative estimates indicate that the boycott resulted in 26% lower weekly sales at its peak, and 13% lower sales over the 6 months period that we estimate the boycott lasted. Although theory suggests consumers would not participate in boycotts due to a free-rider problem, these findings indicate that businesses should be concerned that consumers may boycott their products. We also find that neither political preferences nor media attention are important determinants of boycott participation.
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Notes
Simply search the term “boycott” at Google to see the numerous current examples of purported boycotts. Or see the long list of current boycotts at EthicalConsumer.org. John and Klein (2003) argue that around 40% of Fortune 50 companies may be subject to a boycott at any one time, and they note survey evidence indicating that 18% of Americans participate in boycotts.
Adams Wine Handbook (2003), p. 43. The revenue share of French wine would be significantly higher than 2.7% for 2002, due to the relatively high average price of French wine.
As we explain in Section 4 the data for Boston is unreliable.
In fact, in the data we observe that sales of high priced wine (and French wine in particular) dramatically spikes upward around Christmas time.
Fershtman and Gandal (1998) use product-level data to measure the impact of the Arab boycott on Israel on consumer and producer welfare in the Israeli automobile market. In this case, Arab nations effectively stopped Japanese car manufacturers from selling products to Israel. Consumer participation in the boycott was not an issue in that case.
Off-premise sales of wine in 2002 for the entire U.S. accounted for 78.7% of all wine sales, by volume. See Adams Wine Handbook 2003, p. 30.
We also observe the volume, name and type of wine for each product.
Adams Wine Handbook2003, p. 8. The figure for total US sales includes table wine, wine coolers, champagne and sparkling wines, dessert and fortified wines, and vermouth/aperitifs. Table wine accounts for 90% of the aggregate, by volume. The total figure also covers wine in sizes other than 750 ml bottles.
In fact the data is weekly, so this boycott period is defined as March 17, 2003 to May 11, 2003. As a robustness check, we also try both longer and shorter time periods for the boycott.
A caveat is that it only takes one store in a city to stock a wine and have positive sales for it to remain in this sample. Hence, a sales reduction may still be driven by other retailers removing wines from shelves. Note that we explore the role of retailers in more detail below.
For the 3 month window we start the boycott period at the date of the first news article that mentions the boycott. For the 1 month window, and for the 2 month window in the base specifications, we start the boycott period at the beginning of the Iraq war.
The number of observations is less than row (1) because there are instances in which we observe the promotional price but not the regular price. A price for each category is only observed if there are strictly positive sales in that category.
The specific holidays are Valentine’s Day, Thanksgiving, Christmas, and New Years.
This is not a constraint imposed for estimation.
Factual sales are based on our estimated model, rather than the raw sales data.
Note the dataset extends about 9 months after the start of the boycott.
By comparison, in February 2002, prior to the war in Iraq, 15% of Republicans and 16% of Democrats held unfavorable views of France. See “Image of France Begins to Recover in American Eyes”, The Gallup Organization, February 18, 2004.
The estimate for \(\hat\theta\) in specification (3) is insignificantly different from zero at the 1% level.
As throughout the paper, these magnitudes represent the predicted proportional increase in sales if there was no boycott, using the level of sales with the boycott as the base.
In Fig. 5, high price French wine is the only category to display a dramatic spike in sales in the holiday period.
Prior research suggests the news media may be an important factor: Della Vigna and Kaplan (2007) shows that news coverage, and the Fox News Channel in particular, impacts on voting behavior.
Recall, in Table 3 we report the correlations between news coverage of the boycott from different sources, including Bill O’Reilly. The correlation between O’Reilly and the various newspapers is positive but never greater than 0.5.
Actually, the exact prediction is $7,409,385. Note that the observed revenue is $7,409,541, which is remarkably close, suggesting this is a reasonable approach.
The exact figure is $694,822,551, and is defined as the “landed duty-paid value” of wine imported from France to the U.S. for the period March 2003 to August 2003, from the U.S. International Trade Commission.
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Thanks to Dave Baron, Lanier Benkard, Paul Devereux, John McMillan, Harikesh Nair, Paul Oyer, Garth Saloner, Andy Skrzypacz and Alan Sorensen for helpful advice. We also thank our editor (Peter Rossi) and anonymous referees for valuable feedback.
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Chavis, L., Leslie, P. Consumer boycotts: The impact of the Iraq war on French wine sales in the U.S.. Quant Mark Econ 7, 37–67 (2009). https://doi.org/10.1007/s11129-008-9043-y
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DOI: https://doi.org/10.1007/s11129-008-9043-y