ANALYTICS REPORT

TO: E. AND J. GALLO WINERY

FROM: JOSH ROMBACH

SUBJECT: CASE ASSIGNMENT 2

DATE: 12/4/2022

Introduction

In this case assignment, I have been tasked by E and J Gallo to determine the correlation between
price and rating for their respective wines. I did this by completing multiple regression models
based on the data set that I received. This in turn allowed me to conclude that the company
should not base their price on ratings and should in turn use other means to determine price.

Data Analysis

Correlations and Scatterplots

After determining the correlations between each wine, I have concluded that red white and rose
all have a similar correlation of 0.45 whereas the sparkling wines are more correlated at 0.75. I
also found that there is correlation between both rating and price. Although there is subtle
correlation the impact on price is not the same across the 4 types.

Overall Regression Model

Regression Equation
̂ = 11139.97 + 88.51(𝑅𝑎𝑡𝑖𝑛𝑔) − 0.0023(𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑅𝑎𝑡𝑖𝑛𝑔𝑠) − 5.68(𝑌𝑒𝑎𝑟)
𝑃𝑟𝑖𝑐𝑒

R2 Interpretation
26% of variation in price is accounted for by variation in rating, number of ratings, and year.

Rating
H0: Wine rating does not significantly impact the price of the wine.
HA: Wine rating significantly impacts the price of the wine.

Because the p-value of 0 is less than our significance level of 0.05, we can reject the null and
accept that wine rating significantly impacts the price of the wine.

As rating increases by 1 point, price of the wine will increase $88.51 on average and all else
constant

Number of Ratings
H0: Number of Ratings does not significantly impact the price of the wine.
HA: Number of Ratings significantly impacts the price of the wine.

Because the p-value of 0.0025 is less than the significance level of 0.05, we can reject the null
and accept that number of ratings significantly impacts the price of wine.

As number of ratings increases by 1 rating, price of the wine decreases by $0.0025 on average
and all else constant.

Year Produced
H0: Year does not significantly impact the price of wine.
HA: Year does significantly impact the price of wine.

Because the p-value of 1.29 is greater than the significance level of 0.05, we can accept the null
hypothesis and conclude that year does not significantly impact the price.

Effect of Rating on Price by Wine Type

Red Wine: As rating increases by 1 point, price increases by $124.31 on average and all else
constant.

White Wine: As rating increases by 1 point, price increases by $54.40 on average and all else
constant.

Rose Wine: As rating increases by 1 point, price increases by $25.50 on average and all else
constant.

Sparkling Wine: As rating increases by 1 point, price increases by $190.20 on average and all
else constant.

Analysis Takeaways and Recommendations

When looking at the correlation between the 4 types of wine, we can see that red, white, and rose
all have very similar correlations of around .45 whereas sparkling wines correlation was .75
which is more. Although the correlations were similar, the impact to each wine was not the same.

For Gallo to continue to sell wines at each different price point I think it would be important to
take rating and price into account. Even though there is a correlation between rating and price, I
do not recommend that Gallo solely base price off rating. This would cause all the highly rated
wines to be very expensive and would mean less people would be purchasing the wines.
Discussion of Tableau

Click here to see a dashboard of how rating affects price across the wine types.

There will be filter dropdowns on the dashboard that affects both visuals.

Conclusion

After completing the case for E and J Gallo, I have concluded that it is not in the best interest of
the company to base the price of their wines on the respective ratings. Although there is a
correlation between the two, purely basing price on rating would mean that many of the wines
would be too expensive and this in turn would limit the number of wines in each price category.
If there are any further questions, feel free to contact me at joshrombach@arizona.edu.

Appendix
Overall Regression Output
SUMMARY OUTPUT

Regression Statistics
Multiple R 0.510193356
R Square 0.260297261 Josh Rombach
Adjusted R Square 0.260127682
Standard Error 62.4502063
Observations 13090

ANOVA
df SS MS F Significance F
Regression 3 17959202.25 5986400.748 1534.963426 0
Residual 13086 51035769.9 3900.028267
Total 13089 68994972.14

Coefficients Standard Error t Stat P-value Lower 95% Upper 95%

Intercept 11139.97378 360.1814014 30.92878681 8.8508E-203 10433.9659 11845.98165
Rating 88.51270089 1.945987493 45.4847224 0 84.69828268 92.32711909
NumberOfRatings -0.002250351 0.000746691 -3.013765482 0.002585211 -0.003713974 -0.000786729
Year -5.679980276 0.177407303 -32.01660921 1.2906E-216 -6.027724363 -5.332236188

Red Wine Regression Output

SUMMARY OUTPUT

Regression Statistics
Multiple R 0.451251386
R Square 0.203627813
Adjusted R Square 0.203535811
Standard Error 75.82554439
Observations 8658

ANOVA
df SS MS F Significance F
Regression 1 12725338.25 12725338.25 2213.289689 0
Residual 8656 49767786.11 5749.513183
Total 8657 62493124.36

Coefficients Standard Error t Stat P-value Lower 95% Upper 95%

Intercept -444.4222315 10.31104326 -43.10157765 0 -464.6343312 -424.2101318
Rating 124.306849 2.642262295 47.04561286 0 119.1273858 129.4863122
Josh Rombach

White Wine Regression Output

SUMMARY OUTPUT

Regression Statistics
Multiple R 0.465742847
R Square 0.216916399
Adjusted R Square 0.216707966
Standard Error 27.38629444
Observations 3759

ANOVA
df SS MS F Significance F
Regression 1 780534.3113 780534.3113 1040.699756 9.2151E-202
Residual 3757 2817784.276 750.0091233
Total 3758 3598318.587

Coefficients Standard Error t Stat P-value Lower 95% Upper 95%

Intercept -187.088626 6.454738385 -28.98469541 6.9807E-167 -199.7437578 -174.4334943
Rating 54.39879516 1.686267829 32.25987842 9.2151E-202 51.09270585 57.70488446
Josh Rombach

Rose Wine Regression Output

SUMMARY OUTPUT

Regression Statistics
Multiple R 0.433450447
R Square 0.18787929
Adjusted R Square 0.185807554
Standard Error 14.51280194
Observations 394

ANOVA
df SS MS F Significance F
Regression 1 19100.59642 19100.59642 90.68686561 1.77449E-19
Residual 392 82563.5967 210.6214202
Total 393 101664.1931

Coefficients Standard Error t Stat P-value Lower 95% Upper 95%

Intercept -82.82078777 10.04519824 -8.244813671 2.5227E-15 -102.5699901 -63.07158542
Rating 25.49864359 2.677594965 9.522965169 1.77449E-19 20.23440056 30.76288662
Josh Rombach

Sparkling Wine Regression Output

SUMMARY OUTPUT

Regression Statistics
Multiple R 0.731381124
R Square 0.534918349
Adjusted R Square 0.533239353
Standard Error 50.64704122
Observations 279

ANOVA
df SS MS F Significance F
Regression 1 817233.6047 817233.6047 318.5943416 5.85621E-48
Residual 277 710539.0113 2565.122785
Total 278 1527772.616

Coefficients Standard Error t Stat P-value Lower 95% Upper 95%

Intercept -712.6377734 43.42264702 -16.41166125 9.48059E-43 -798.1180786 -627.1574683
Rating 190.1903445 10.65539211 17.84921123 5.85621E-48 169.2145121 211.166177
Josh Rombach