Original Research

The liability of emergingness and country-of-origin effect on South African wine

Schalk van Wyk, John M. Luiz

Received: 23 June 2023; Accepted: 09 Jan. 2024; Published: 04 Apr. 2024

Copyright: © 2024. The Author(s). Licensee: AOSIS.
This is an Open Access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

Purpose: The study explores the country-of-origin effect on the product evaluation of wine offerings from South Africa in European markets. We examine whether a liability of emergingness manifests and its characteristics from an African context.

Design/methodology/approach: Using a qualitative approach, we examine the country-of-origin effect building on the existing theories and gaining insights from multiple perspectives and participants who are involved in the South African and European wine supply chains.

Findings/results: We reveal country-product category interaction and show that the wine category has certain dynamics (complexity, vastness of choice, and limited consumer knowledge) that leads consumers to rely more on extrinsic properties in their product evaluations. We show that a liability of foreignness and emergingness, and particularly Africanness, is at work in terms of the product evaluation of South African wine in European markets.

Practical implications: We integrate the country-of-origin effect with the liability of foreignness (specifically emergingness and Africanness) research and demonstrate its manifestation in an African context. We contribute towards emerging market country-of-origin effect research, highlighting the liability of emergingness, and unpack its multidimensionality and connections between product category and country engagement dynamics, and how these are affected by consumer involvement, the retail environment, and engagement with expertise.

Originality/value: Understanding how country-of-origin effects manifest with products from emerging markets is of increasing importance given the continued economic shifts towards that part of the world. We examine avenues for South African producers to mitigate country-of-origin effects.

Keywords: country-of-origin; country image; liability of foreignness/emergingness/Africanness; South Africa; product evaluation; wine sector; emerging markets; international marketing.

Introduction

Between 1990 and 2023, there has been a marked shift in the global economy towards emerging and developing markets as their share of global gross domestic product (GDP) (purchasing power parity [PPP]) rose from 37% to 59%, and similar shifts have occurred with trade volumes (IMF, 2023). This has been accompanied by the rapid internationalisation of emerging market multinational enterprises (EMNEs). However, research shows that there are a limited number of brands from emerging markets that have achieved global recognition. For example, Interbrand’s (2019) report on global brands presents only one from emerging markets in their rating of 100 Global Brands. The connotation of products and brands from developing countries or emerging markets is often still associated with inferior quality (Islam & Hussain, 2022; Magnusson et al., 2008; Oumlil, 2020). Research demonstrates that consumers tend to be more positive about products from countries that have a more favourable image and therefore a consumer’s preconceived ideas about the country-of-origin (COO) can have a significant impact on the way they evaluate its quality (Andéhn & Decosta, 2016; Chen et al., 2021; Hornikx et al., 2020; Kock et al., 2019; Moon & Oh, 2017).

Prior studies have revealed that EMNEs face multiple barriers when internationalising: not only may they encounter the liability of foreignness (LOF) but also the negative associations of their home country or what is referred to as the liability of emergingness (LOE) by virtue of being from an emerging economy (Zhang, 2022). The poor perception of their home countries is argued to hinder the EMNEs from gaining legitimacy in host markets (He & Zhang, 2018). Often associations with developing and emerging markets are of economic and institutional underdevelopment (Luiz et al., 2021) and the problems that emanate therefrom, and this feeds through into product perceptions from these countries (Ahmed et al., 2004). This may create more challenges for products from emerging markets in gaining acceptance in foreign markets and as a result increases the costs of operating abroad (Zhou & Guillen, 2016).

Our research question is whether there is a COO and LOE effect on South African wine in European markets? Studies show that the COO effect is more prominent in an environment where little intrinsic information about a product is available and that in such cases consumers may default to extrinsic cues and heuristic evidence for product quality guidance (Halkias et al., 2022; Laroche et al., 2005; Terblanche & Pentz, 2019). Wine has been argued to be such a category, as research shows that the vast majority of consumers lack intrinsic knowledge about the wine (Bruwer et al., 2017a; Veale & Quester, 2009; Veselá & Zich, 2015). Wine has several interesting features in terms of a product category to investigate the COO effect: there is an historical divide between Old and New World wines; it is relatively low technology intensive and therefore there is no inherent reason that should favour high-tech intensive, high-skill economies; everyday wine is relatively inexpensive, and yet consumption behaviour of wine has elements of experiential and symbolic qualities that are domain- and lifestyle-specific (De Toni et al., 2022; Bruwer et al., 2017b; Pentz & Forrester, 2020; Priilaid, Human, Pitcher, Smith, & Varkel, 2017).

South Africa provides an interesting context for the study COO effects on wine as it is one of the largest wine producers globally (ranked 8th in 2022) producing 1 020 000 000 L in 2022 (SAWIS, 2022). To put this into some comparative perspective, the country’s wine production is larger than that of Germany but slightly smaller than that of Argentina and Chile. The South African wine market has a value of close to $1 billion and on average about half of the country’s wine production is exported (fluctuated between 40% and 57% in the past decade) (SAWIS, 2022).

The study makes several contributions. Firstly, we contribute towards COO effect research more generally, illustrating its multidimensional nature and unpacking its complex webs of association. Secondly, we contribute towards the understanding of how COO effects manifest with products from emerging markets, which is of increasing importance given the continued economic shifts towards that part of the world. Furthermore, there is little research that has examined the COO effect as applied to African products. In general, the African continent has benefited less from global shifts towards emerging markets and there are very few examples of recognised African global brands, and we provide some understanding of potential challenges.

By integrating COO and LOE research we demonstrate the dual hurdles that products from emerging markets need to overcome because of the often-negative connotations associated with their country image. We show that South Africa is not only affected by this hurdle of foreignness and emergingness but also this is more pronounced because of skewed perceptions associated with Africanness (Jaffe, 2015; Papadopoulos & Hamzaoui-Essoussi, 2015).

Literature review

The country-of-origin construct

The COO effect can be defined as the influence that stereotyping and generalisations about a country have on people’s evaluations of that country’s products and brands (Suh et al., 2016). Explanations for why COO impacts product evaluations and purchase behaviour have largely focussed on consumer decision-making as a cognitive process that relies on the assimilation of informational cues – both intrinsic (elements that are embedded in the product such as texture, product performance, and colour) or extrinsic (relating to elements such as price, brand reputation, or the COO) (Bloemer et al., 2009; Halkias et al., 2022). Consumers often face inherent difficulties in accessing intrinsic information before a purchase decision is made, and they subsequently rely on extrinsic cues to guide their evaluation (Halkias et al., 2022). The application of extrinsic cues during product evaluation, exposes a consumer’s ability to judge products with the potential for bias or stereotyping.

However, the COO effect or application of country biases onto a consumer’s product evaluation is not a binary process but is rather multidimensional and therefore its impact is not linear with a variety of factors at play (Andéhn & Decosta, 2016; Witek-Hajduk & Grudecka, 2019). Conceptual frameworks around COO models indicate the presence of individual, product, and country-related factors and that these variables moderate the COO effect (Barbarossa et al., 2018; Moon & Oh, 2017; Samiee, 2011).

Honing in on individual factors, Ferguson et al. (2008) argue that consumers have two sets of criteria, which impact how much emphasis they place on intrinsic or extrinsic information (of which COO is one), namely the consumer’s level of motivation and their ability to gather adequate information. Individuals who are motivated are likely to gather as much information as possible (intrinsic and extrinsic) in their product evaluation because of the higher value or the significance of the outcome the product provides. In some situations, the information on a product is not readily available or where a consumer is a novice to the product type, then the lack of product familiarity may lead consumers to rely on unseen or extrinsic product information to help make decisions (Rojas-Méndez et al., 2018).

Turning to product categories, research suggests that the type of product, its attributes, and the supporting brand image, have a bearing on how COO may impact quality evaluation (Puente-Diaz & Cavazos-Arroyo, 2020). Various generalisations exist about positive country-category assumptions – German automobiles, Scandinavian design, or French wine come to mind. Zeugner-Roth and Bartsch (2020, p. 366) differentiate between three dimensions of a product’s attributes that may influence the application of the COO effect during product evaluation, namely its utilitarian, hedonic and symbolic values. They describe utilitarian products as ‘instrumental and functional’, hedonic products provide ‘experiential consumption’ that are accompanied by elements such as pleasure, while symbolic products answer to the needs of self-expression and status. They propose that it is likely that a product whose primary function is utilitarian and originates from a country whose image is congruent with utility (a positive link to that category) will lead to its COO, thus positively influencing a consumer’s evaluation of the item.

If we focus on our particular product category, namely wine, its consumption may have an element of experiential and symbolic qualities. Studies on wine consumption show that COO effects may feature, although often implicitly, in the consideration of consumers in their wine purchasing decisions (Veselá & Zich, 2015). Wine is a complex product (both intrinsically and extrinsically) because of a variety of reasons, including different grape varieties, vintages, brands, and price points. It is also a product where taste is not necessarily consistent (as it would be for a soft drink) and thus there is a risk that consumers may not like their selected wine choice (We thank an anonymous reviewer for stating this point.). As we highlighted in the introduction, there is also an historical divide between Old and New World wines. Research has found that consumers perceive Old World wine as more authentic and are thus willing to pay more for it than the New World wine (Barber et al., 2020; Moulard et al., 2015). Other factors that affect wine selections include the awards won and external ratings (Babin & Bushardt, 2019), brand name, price level, as well as objective knowledge-related wine traits (such as grape variety and vintage year) (Bruwer et al., 2017b; Sogari et al., 2018). Wine knowledge has been shown to substantially influence the extent of information search engaged, as well as the attributes employed to evaluate wine, but the majority of wine consumers have limited knowledge about wine, raising the prominence of COO effects (Bruwer et al., 2017b; Spielmann, 2015).

Country image, country-of-origin effects and the liability of emergingness

Country image refers to the ‘descriptive, inferential and informational (feelings and intentions) beliefs about that country’ (Roth & Diamantopoulos, 2009, p. 4412). Han and Nam (2019) suggest that when consumers are not au fait with a country’s products, country image may serve as a halo from which they surmise certain product qualities and it may impact their brand perception, while when they become acquainted with a country’s products, country image may become a summary construct that encapsulates consumers’ beliefs about product traits. For example, if a consumer is not familiar with a new wine offering from France, they may likely apply the summary effect in assuming wine from this territory is likely to be of good quality (Spielmann, 2015). This image is a function of many influences including economic development, political ideologies, local customs, food, and tourist attractions, and it is these country perceptions that consumers may apply during the COO effect (Fong et al., 2014; He et al., 2021; Herz & Diamantopoulos, 2013). But a country image is not a static construct and can change over time. Samiee (2011) cites Japan as an example of once being known for inferior products yet having over a relatively short period changed its country image and reputation to one of precision and reliability.

In general, products from emerging or developing markets are perceived to be inferior and of poorer quality than products made in more developed countries (Ahmed et al., 2004; Islam & Hussain, 2022; Oumlil, 2020; Sharma, 2011). Magnusson et al. (2008) suggest that these negative perceptions around emerging markets’ products may limit consumers’ confidence in these products, which may hinder consumers from paying higher or premium prices for them.

Thus, companies or brands from emerging countries that choose to internationalise may have a difficult task because they must confront various preconceptions that disadvantage them with regard to what customers expect from their products (Oumlil, 2020). This connects with the LOF and LOE literature which argues that companies or products from emerging markets face dual hurdles when trying to establish themselves abroad. Firstly, the LOF implies higher costs associated with doing business in foreign countries resulting in a competitive disadvantage relative to local firms (Zaheer, 1995). Secondly, the LOE occurs because the levels of economic and institutional underdevelopment characterised by emerging countries are connected to poor health and education outcomes, substandard technological capabilities, and inferior product quality – the assumption is therefore that the lower the level of economic development, the greater the LOE (Zhang, 2022). For South African products, this might prove particularly challenging because of the broader region-of-origin effect associated with African underdevelopment and implicit biases in this regard. This might not be an issue when buying unprocessed raw materials, such as cocoa beans from West Africa (the largest supplier of such beans) but that does not translate into a preference for consuming West African chocolate as we see by the absence of such products in global markets.

Collective behaviour and country-of-origin thresholds

An area that has been under researched concerning COO effects is whether non-linearities and threshold effects might be at play and how they are affected by and mediate on the variables that we have discussed here. The seminal work in this regard lies within the economic sociology literature as applied to studies on human behaviour. For example, Granovetter and Soong (1986) investigate the impact of a consumer’s demand for a product based on the knowledge that they have of previous buyers or the amount of people using a product – a so-called ‘bandwagon effect’, as the positive correlation between one’s purchases and those of others. This may be because of: (1) an increase in utility when more consumers use or buy such a product, (2) that the product may appear to be fashionable, (3) its usage may help the buyer to conform to a designated group, or (4) it may signal broader trust in this product.

These collective behaviours give way to the possibility of a threshold. An example of such a threshold is the proportion of those who must buy a product before a consumer is sufficiently motivated to do the same. It is described as ‘the point where the net benefits of the product begin to exceed net costs’ for that particular decision (Granovetter, 1978, p. 1420). He states that this collective behaviour and its subsequent thresholds is apparent in many aspects of everyday life including voting, joining a riot, or simply choosing a restaurant. This has implications for South African wine because it may have to overcome certain perceptions and biases associated with its COO and more specifically the connotation with underdevelopment of the broader African region. It is also the only significant wine producer on the continent and so cannot leverage a bandwagon effect associated with other regional wines – the way in which Chilean or Argentine wines or New Zealand and Australian wines can. This results in a lack of critical mass for South African wine that can be used to overcome such thresholds of resistance.

At an individual level, threshold models indicate the non-linear nature of consumer decision making. Groth (2001, p. 148) argues that an individual’s thresholds can be shifted or ‘pierced’ to alter buying decision with important implications for marketers. He highlights three factors that may assist to shift a person’s individual threshold during decision making: (1) removing inhibitors or barriers to making a purchase decision, (2) demonstrating the ability of a product, and (3) altering of psychic-utility factors. We are interested in whether and how thresholds may impact COO effects associated with South African wine and the LOE or more specifically the liability of Africanness.

Research methodology

Using a qualitative approach, we examine the COO effect building on the existing theories and gaining insights from multiple perspectives and participants who are involved in the South African and European wine supply chains. Our study, which is contextually embedded, seeks to understand real-world phenomena and the context, and how the COO and LOE effect may manifest with South African wine products in European markets (focussing on three of its largest markets, namely Germany, the United Kingdom, and Sweden), lends itself to such an approach (Creswell & Poth, 2017; Yin, 2014).

We utilised in-depth personal interviews with key stakeholders who had experience within the European and South African wine business. Semi-structured questionnaires were used as we wanted to facilitate an open ended, free flow of information to gain the expert perspectives from our respondents. Participants were asked questions related to the brand image of South Africa, how this influenced perceptions of South African wine, whether there were price thresholds attached to the country’s wine in the European market and if these thresholds could be pierced. We also asked questions on how COO effects manifested more generally in the wine industry (including New versus Old World wines), and how different countries and brands navigated these effects.

The population comprised all individuals working directly or indirectly within the wine industry in South Africa or in Europe with knowledge about South African wine and European markets. This included respondents working in European wine retailers and supermarkets, wine distribution businesses, wine marketing businesses, and South African wine brand owners, and industry bodies. We utilised a purposeful sampling strategy structured around the criterion that the selected respondents had the necessary expertise into the research problem and where they were likely to yield insight into the COO phenomenon. We focussed on three of the largest export markets for South African wine (the United Kingdom – ranked as the largest, Germany in second place, and Sweden in sixth place) (SAWIS, 2022). We then gathered data on the largest buyers of South African wine in these countries and ensured representation from the major supermarket purchasers, independent wine retailers, wine distributors, as well as industry representatives. Likewise, in South Africa we examined the export data to determine who the major South African wine exporters were and therewith drew up a list of participants. Our respondents therefore came from a variety of backgrounds within the wine industry as presented in Table 1. We conducted 15 interviews in total as data saturation became apparent at this point.

Each of the interviews was recorded, with permission, and then transcribed verbatim. Interviews were conducted using Zoom video online technology and lasted between 60 min and 120 min, and were conducted between September 2021 and March 2022.

Transcripts from the interviews were analysed by the researchers in their entirety while memos were made on the margins of the transcripts. This added to the collation of emergent ideas and potential pre-codes for analysis. The thematic coding process followed three distinct stages: pre-coding, first-cycle, and second-cycle coding.

During first-cycle coding, the focus was on the use of analytical coding as opposed to simple descriptive pre-codes. Subsequently, this led to some of the existing codes being re-written or refined. Finally, second-cycle coding led to the codes with similar meaning and/or purpose being condensed into more theoretical categories. The first theme, ‘Reliance on extrinsic assessment’, was informed by the combination of second-order constructs, which in turn built on first-order concepts. These constructs highlighted the difficulty that consumers faced in accessing intrinsic product information because of the complexity and range of wine offerings, and as a result consumers relied on extrinsic elements to provide security of choice. Theme two, addressed the association between South Africa’s country image (its positioning as a New World, emerging market, and African) and how it connected to the wine product category. Finally, the theme ‘Moderating effects on quality assessment’ showed the differences between high- and low-involvement consumers and the various situational factors that impact on the buying decision (see Figure 1).

FIGURE 1: Analytical coding process leading to aggregate theoretical dimensions.

Internal and external validity and reliability are an integral part of the research process. We ensured internal validity through triangulation and drawing on external sources of data for corroborating evidence, including export shipment data. Member checking was utilised to ensure the credibility of our findings and interpretations. Not only were respondents sent transcripts to ensure that we had correctly captured their words but were also sent a draft of our findings to gain their critical insights into our interpretations.

Reliability in this study was enhanced by using a consistent interview protocol for all data collection (Yin, 2014). Interviews were transcribed verbatim. Coding was initially performed independently by the researchers before we compared notes allowing for an iterative process. Furthermore, the use of computer software (Nvivo) not only improved the organisation of data but also aided in the consistency of the coding practice. We maintained a full record of each step of our research process and of our coding to allow for a transparent audit trail. Ethical clearance for the research was provided by the University of Cape Town.

Findings and discussion

Theme one: Reliance on extrinsic assessment

Respondents argued that, generally, consumers are not that knowledgeable about the wine product category, that its intrinsic variables are complex, and that the category offers a vast amount of choice in a single purchase experience. Thus, to objectively assess wine offerings based on its intrinsic elements becomes very challenging for a consumer and that they therefore often default to extrinsic cues. R1 stated:

‘You know, it’s not a category where people understand the intrinsic very well. I mean, I’ve probably been asked a million times in my life, you know, what makes a good wine? So, I think they just use common logic that if it’s more expensive, it’s going to be better.’ (R1)

R8 concurred highlighting extrinsic elements that consumers use during wine evaluation:

‘Sometimes it’s a country, sometimes it’s a brand for some kind of reason, but once again, I think the majority of the consumers have very little knowledge or interest in what’s actually inside of the package.’ (R8)

These comments suggest that the dynamics of the wine category provide fertile ground for the application of bias or extrinsic based assessment and we unpack this further next.

The role of complexity in quality assessment

Participant R13 described the wine buying experience as ‘overwhelming’ for consumers while R7, who represents a German wine distribution company, admitted that:

‘There are so many wines on the shelf, so even for us, it’s sometimes when I’m there on my own, just going through it and having a look at it, I’m sometimes like, wow, there are a lot of wines. How do you decide?’ (R7)

A practical illustration of the amount of choice a consumer faces within a European retail setting was given by R2: a senior retail buyer at one of the United Kingdom’s largest supermarket groups. She confirmed that a typical retail store would stock between 700 and 800 wine variants at any given time representing 18 countries of origin. She alluded to the challenges this creates for South African wine because it struggles to get ‘airtime’ within the vast panoply of available wines. R6 explained the dilemma for South African wine as consumers getting very little opportunity to interact and engage with its products and therefore ‘the preconceived ideas hold sway’. R9 echoed a similar sentiment saying that:

‘[Y]ou’ve got the challenge that because consumers are not presented with premium South African wines in their everyday life and experience in Europe, they don’t see it, they don’t find it in their local supermarket, and because they don’t find it, so … there is no demand … because they don’t believe it exists or doesn’t know it exists.’ (R9)

Extrinsic features provide security of choice

The data further suggest that the intrinsic characteristics of wine creates complexity for a consumer. One such intrinsic element is the cultivar of wine or the grape used to produce wine. Respondents argued that the combination of generally low product knowledge and the complexity that the wine category offers, creates an environment where consumers may have little option but to rely on heuristic or extrinsic information to navigate the quality of wines within a retail environment, which creates problems for South African wines as consumers default to well-known brands or categories or countries as signposts of quality. R13 explained:

‘I think the brand message makes things very simple for the consumers … a reassurance that that product is going to be what they expect it to be. But I do think that country is the big driver here. I do think people go looking for a wine from a particular country.’ (R13)

Theme two: Country image, liability of emergingness, and product category interaction

Respondents indicated that a positive country image, supported by a rich and intriguing culture, may have positive implications for wine offerings from a country while the reverse was true for a negative country image or association. They highlighted the unique ‘romanticism’ (R12) of the wine category and how certain elements of a country’s culture positively connect with the wine category.

Country image and exposure

Respondents (R1, R4, R7, R9, R12, R14, R15) underscored the impact that a country’s cultural significance and gastronomy has on the quality assessment of its wine offerings. R12 opined:

‘When you look at a country like Italy, what is the image of Italy? It’s La Dolce Vita. It’s sort of, you know, fine food, wine, lifestyle, living La Dolce Vita. It’s fast cars and the Amalfi Coast. That, to me, is the way I perceive Italian wines and Italian food’. (R12)

Respondents did not associate a country’s technological or manufacturing prowess with their quality assessment of a country’s wine offerings. For example R14, a German, stated that, ‘Germany has an image for technology, but less for wine. We are trying to build that up. I think wine is the cultural thing.’ R2 pushed this further by suggesting that:

‘I don’t think customers think, “Jeez, I wonder if the Banana Republic can make wine”, but they do think, “Can that Banana Republic make that phone?” I think people think of it like food and they don’t know why they like it or they do not like it and they don’t understand it as much.’(R2)

Our responses suggest that the quality perceptions of wine, as related to the COO effect, are more closely related to a country’s ‘warmth’ than it is to ‘competence’.

We prompted respondents to share their perception of South Africa to unpack the dimensions that may impact the quality association of its wine offerings. Overall South Africa’s country image was described as ‘complicated’ with positive sentiments associated with it as a sunny tourist destination but also negatively related to its troubled history of racism, perceptions of crime, and its emerging market status. In addition, it was affected by a broader regional association of underdevelopment within Africa (R3, R8, R15).

Country-of-origin and product categories and subcategories

Respondents confirmed that certain product categories are impacted differently by the COO and invariably used the example of French wines being considered of high quality. However, additional nuance became apparent as respondents intimated at a ‘country-subcategory’ effect with particular wine variants from wine producing countries being deemed to have a higher perceived quality and consumer awareness. For example, they mentioned the quality of Argentinian Malbec, which was seen more favourably than Argentinian wine in general and likewise with the Sauvignon Blanc produced in New Zealand.

R3 argued that certain wine producing nations had actively employed a strategy targeting country-subcategory perceptions to independently build the image of their wine offerings, mentioning Argentina’s ‘single minded focus on one grape variety’ to be a driver of their success in linking Argentinian Malbec to quality associations, on a broader scale. There was a sentiment from respondents R1, R2, R6, R12 and R13 that these country-subcategory ‘signposts’ (R3) can create consumption trends whereby consumers with less knowledge, or those less engaged within the wine category, may be positively influenced. R1 referred to recent examples of such trends within the wine category:

‘Two examples and they both relate to Italian grapes of dubious quality. But first, Pinot Grigio, which went from being a very unremarkable white wine style, but very inoffensive and quite cheap, to being either the number one or number two in most market’s white wine variety. And hot on the heels, Prosecco. Consumers who are drinking the product probably couldn’t name a brand within the category that used those grape varieties or that wine style as the brand in itself. But two huge categories, still today, that have just snowballed as a result of consumers jumping on the bandwagon.’ (R1)

Historical perception of value

The responses indicated that South African wine is often connected to the word ‘value’ and that the predominant view of its selling proposition is that of ‘good value’ (R1, R3, R8, R10, R13 and R15):

‘What was often said about South Africa is that the quality for the price you pay is really exceptional … The main customer is thinking of good value, you might even say cheap. I hate that word, but as in affordable.’ (R3)

The broader perception that South African wine’s key selling proposition relates to value appears to lock its products into specific price categories or relative price points, compared with wine offerings from other nations:

‘I think, for many years we’ve been selling superior quality wine at, like, £5.99. And that’s what many people’s image of South African wine is in the UK. So, yeah, the country image is really at the bottom end.’ (R10)

‘It is really difficult to move South Africa away from that entry level and convince consumers that there are wines that you can pay more for, I think, once having developed that image of kind of cheap, cheery wine. Once people are used to paying a low price, it’s very difficult to then persuade them out of that.’ (R13)

Respondents argued that this perception of South African wine dates back to the early 1990s as economic sanctions were lifted as South Africa transitioned out of apartheid. This led to a rush of South African exporters to European markets who wanted to exploit new business opportunities. The intense competition among South African wine producers, in effect, caused a race to the bottom in attempting to win over European customers. Respondents highlighted that South African wine represented good quality wine at lower prices, compared with that of European offerings. Also as a result of sanctions, South Africa was excluded from the rapid globalisation of wine markets in the 1970s and 1980s further exacerbating this trend as a latecomer to market. This created the benchmark at which South African wine is still judged today. South African wine’s value perception is thus largely derived from an over-delivery on the intrinsic benefits versus its cost.

Theme three: Moderating effects on quality assessment

Our data suggest that there are various factors that have moderating effects on how the COO phenomena manifests in terms of wine evaluations. These are clustered around the level of involvement by consumers, situational factors and the retail environment, and the role of expertise.

The role of involvement in quality assessment

Respondents differentiated between low- and high-involvement consumers and stated that low-involvement consumers have less knowledge or interest in wine, while high-involvement consumers are more engaged within the category or even treat wine as a hobby, actively seeking out discovery of new variants:

‘Typically, consumers who are more engaged within the category and more experienced with it, will explore within the category. And so, they may be more open to trial or trialling different products, different brands, different countries of origin.’ (R6)

Low-involvement consumers were argued to favour well-known brands within the wine category to assist in their quality assessment:

‘When it comes to brands, people that are looking for brands and want to have the same wine and brand all over again … They’re very much buying the brand.’ (R15)

Involvement also manifests during wine consumption occasions, as it influences how the COO phenomenon is applied. Respondents R1, R2 and R5 suggested that consumers see wine consumption occasions differently and sometimes as a mechanism to deliver status. Thus, there are high-involvement and low-involvement occasions that may alter a consumer’s desire to express prestige or sophistication:

‘That’s why people buy own-brand for every day and then premium for when they have to show off.’ (R2)

‘If they think they want to take a gift and be a bit more sophisticated, they may take that French bottle or Italian bottle or Spanish.’ (R5)

This connects to earlier literature that differentiates between the utilitarian, hedonic, and symbolic attributes of products (Zeugner-Roth & Bartsch, 2020), and we see wine potentially exhibiting all three in different settings. This, in turn, has implications for how the COO may manifest and how the country image is aligned to such attributes. Respondents pointed to the challenges that South African wine has as regards hedonic and symbolic value as opposed to utilitarian, and that this depresses the price point that consumers are willing to pay for the wine and under what circumstances they are willing to buy it.

Purchase environment and the buying decision

Respondents suggested that the retail environment in which a consumer accesses a wine offering may accentuate the reliance on COO as a measure to evaluate wine and subsequently influence decision making. They mentioned that the majority of retailers in Europe group their wine offerings per country in order to merchandise the shopping space within a store. This is performed to assist consumers in navigating the vast amount of wine offerings they would face in such a retail environment. For example, a retailer would individually group all the wine from France, Italy, South Africa and various other countries within a store. Subsequently, the first filter a consumer will apply when browsing for wine, will be the COO of wines. R2, R3 and R15 argued that this poses a further challenge for wine offerings from new or lesser-known wine producing nations. Furthermore, because retail shelf space is limited, the number of variants each country is allocated is predetermined, with countries such as South Africa being apportioned less space, which further limits exposure and visibility to consumers and subsequently less opportunity for engagement.

The respondents stated that where consumers engage with wine offerings also matters. They explained that most consumers purchase wines at supermarkets and that this limits guidance and expertise from store personnel and therefore preconceived ideas often hold sway. Furthermore, the supermarkets tend to mostly stock low- and mid-level priced wines, which limits exposure to high-end premium South African wines because consumers do not get a chance to interact with them. On the other hand, specialist liquor retailers have a larger influence on how consumers evaluate wine and the levels of direct engagement they create for various smaller wine producing nations. R5 mentioned the influence that educated staff within the speciality retail environment have on a consumer’s evaluation of wine by stating that they convey the ‘story behind the wines’ and ‘the retailer portrays the image of that wine or the varietal or the producer and conveys that story’. R6 share this sentiment by suggesting that ‘the salespeople can influence and educate consumers as to the merits, both price and value of countries such as South Africa; you can grow an understanding and encourage trial’. This suggests that engagement with the expertise of staff within this specific retail environment can play an important role in diluting the COO effect, especially for less knowledgeable consumers.

Thresholds, engagement, and expertise

Our findings show that COO effects may be subject to certain threshold effects and that barriers can be overcome when there is enough engagement with expertise, in a direct or indirect manner. Groth (2001) and Granovetter (1978) allude to how thresholds can be shifted or ‘pierced’. What came out strongly was that not knowing about South African wines and its quality meant that many consumers were reluctant to buy them and that the country and regional association of underdevelopment and emergingness resulted in a liability. However, once consumers tried these wines, they were more likely to be well disposed towards them and to become repeat consumers. The difficulty was in initially overcoming that reluctance. Not all consumers have the same threshold levels and it is likely that less adventurous buyers or less knowledgeable consumers have a higher threshold and will require higher levels of engagement.

Respondents (R1, R2, R3, R13 and R15) mentioned that wine critics and journalists can also be very influential in moving the dial concerning wine markets. They discussed concrete examples of where a wine journalist’s opinion had almost immediate effects on wine sales with R2 speaking of a ‘huge uplift’ and R3, ‘we track that and we see the impact it has on sales and it definitely, definitely does influence sales’. R2 suggested that well known wine critics had the ability to alter how consumers viewed wine produce from specific countries and could mitigate COO stereotypes.

Respondents also argued that expert opinion may appear in a less formal manner within social settings. The referral of new or lesser-known wine by friends or the visible consumption of wine within social settings could dilute the impact of the COO effect because of the social trust it creates:

‘If you’re going to somebody else’s party; I mean, it is this kind of social contract and third-party endorsement that, kind of, acts as the marketing and as the tool for the producer.’ (R5)

This social trust not only offers security in the evaluation of these wines but also adds value in terms of the collective behaviours of others in terms of a bandwagon effect. Our experts felt that this was particularly important in the wine market because of the vast choice and complexity and its high involvement products.

Conclusion

Our findings highlight several key features of the manifestation of the COO and LOE effect. Firstly, it shows how different elements of country image are particularly salient for wine associations such as cultural and gastronomic heritage. In the case of South Africa, intricate country image patterns were evident ranging from its sunny climate to its fraught political history and violence. But what also came through very strongly were challenges related to the LOF and LOE. While the wine literature has shown that consumers perceive Old World wine as more authentic and thus willing to pay more for it than the New World wine (Barber et al., 2020; Moulard et al., 2015), our respondents alluded to the additional challenge that South African wine faces associated with coming from Africa. Not only is it the only significant wine producer on the continent but it faces the biases of the association of underdevelopment connected to the broader region and that influences quality perceptions.

Related to this, are threshold effects that illustrate the stickiness of COO perceptions (linked to emergingness and Africanness) and that, in the absence of product knowledge, consumers default to these perceptions. This is surprising given that the average wine purchases are relatively low-cost and yet buying decisions seem to have high thresholds of resistance to overcome.

Secondly, we provide an integrative framework that captures the core aspects of our study highlighting the multidimensional nature of the COO effect (see Figure 2). The research suggests that there are environmental elements that impact how consumers collect information while assessing a product. The wine category has certain dynamics (including the complexity, the vastness of choice, and the limited consumer knowledge) that leads consumers to rely more on the extrinsic properties to navigate the wine category. Our respondents argued that the level of consumer involvement plays an important role with wine purchases and that this is because it not only provides both experiential consumption but also features of self-expression and status. The framework demonstrates that situational factors related to the point of sale and the dynamics of the retail environment are significant with the buying of wine, particularly where negative stereotypes associated with the LOE are in the background and need to be overcome. The final part illustrates the COO effect on a consumer’s product quality evaluation with various influences at play: the product’s value proposition being a function of the combined intrinsic and extrinsic elements relative to its cost and in relation to its competitive offerings (Groth, 2001).

FIGURE 2: Factors influencing the country-of-origin effect.

Contributions and implications

Our study contributes to the literature on COO effects, but from a unique perspective, as very little is known about how it manifests for products from the African continent. By integrating a LOF and LOE perspective, we demonstrate the complex positioning of South Africa within a global landscape. As an emerging economy and middle-income country, it encompasses the challenges of liabilities connected to emergingness that affect product perceptions from these countries. This is on top of the unique distinctions that are already drawn between Old World and New World wines. Our study introduces an additional liability of Africanness with its stereotypical associations of underdevelopment. This African bias results in a high threshold effect with consumers needing substantial convincing to purchase value added products from the continent.

Our research provides practical implications for exporters of African products, more broadly, but also wine exports from emerging markets. In better understanding how a country is perceived, exporters and marketers of products can apply tactical strategies to either accentuate or underplay a product’s COO. Addressing this would require a deliberate effort of collaboration between South African wine industry associations, publicly funded bodies that promote South Africa’s country image abroad, tourism organisations, and the various wine producers from the country.

While past analysis has demonstrated a region-of-origin effect showing how attitudes towards a region of origin influences product preferences and perceptions and that alluding to the region might influence an evaluation positively (Van Ittersum et al., 2003). We show how the reverse is also possible and how South African wines are negatively associated with prejudices towards the broader African region. The implications of this extend beyond that of South African producers and has consequences for the continent as a whole and its positioning. Our study also points to the success that some wines from the New World have had in promoting a wine varietal, as in the case of Argentina and New Zealand, and this provides potential for South Africa to ‘signpost’ a particular wine varietal or cultivar.

Limitations and avenues for future research

This is an exploratory study and as such has limitations, as our purpose was not that of generalisability. We did not interview consumers but rather focussed on key stakeholders in the wine supply chain as our focus was on the perceptions of experts and their opinions, but future research could examine the South African COO effect with consumers more directly. Likewise, further research could employ a quantitative design or a mixed-methods approach to investigate how our findings manifest with a larger sample and to ensure statistical reliability and wider generalisability.

There is also an opportunity for more in-depth studies on South Africa’s country image, its defining dimensions, and how these vary between certain geographic export markets. South Africa has strong historical and trade relationships with many European markets, which may impact the image that South Africa holds in the minds of its consumers. This may differ in other geographies such as Asian markets or the United States, which may impact on how the COO effect manifests. In general, how past colonial ties might influence COO effects present intriguing possibilities.

South Africa is a middle-income country (Luiz, 2016), and how the COO effect maps onto perspectives related to the broader African region is untested although our results are suggestive. Our study posits a liability of Africanness as a special case of emergingness and its association with levels of underdevelopment that may affect product perceptions. We would in general call for more research on how the COO and region-of-origin effect is likely to impact African firms looking to expand globally given the growing interest in opportunities in Africa and whether this manifests differently for different product categories.

Acknowledgements

J.M.L. has no competing interests. S.v.W. works in a related sector but received no financial compensation related to the research.

J.M.L and S.v.W. contributed towards the conceptualisation, writing and editing of the research.

Ethical clearance to conduct this study was obtained from the University of Cape Town, Graduate School of Business Ethics Committee (No. N/A).

This research received no specific grant from any funding agency in the public, commercial, or not-for-profit sectors.

The data used in this study are based upon primary qualitative research and re anonymised as was guaranteed under the ethics clearance process.

The views and opinions expressed in this article are those of the authors and are the product of professional research. It does not necessarily reflect the official policy or position of any affiliated institution, funder, agency, or that of the publisher. The authors are responsible for this article’s results, findings, and content.

References