Brand Damage Valuation: Theory and Practice

When wines are “corked”, as determined by distributors, retailers, or consumers, a winery's brand image is damaged and return on winery marketing is lost. A tainted product can easily disrupt or destroy the competitive advantage gained by a winery over years of differentiation techniques through marketing and image. This problem exists for wineries worldwide. Large lawsuits have recently occurred due to problems with wineries using defective intermediate products, especially corks. While there is some debate as to corked wine's cause, this study focuses assessing monetary damages in such a case and the breadth of financial effects on a winery. Tainted products easily disrupt or destroy competitive advantage gained by wineries over years of differentiation techniques through marketing. Augmentation of explicit and implicit costs, and reduced revenues, contribute to financial damages. This study provides insight on what damages to include in these calculations and how forensie economics views the discount rates to use and the dates defining business disruption.