Wine Firm’s Size and Economic Performance: Evidence from Traditional Portuguese Wine Regions

Abstract

The wine market is an excellent example of monopolistic competition, demonstrating both vertical and horizontal product differentiation. The propensity toward monopolistic competition and the asymmetric preferences of wine consumption can justify the coexistence of different sized wineries. The main goal of this chapter is to analyze the economic performance of wineries, using indicators widely employed in economic and business literature, and to assess the potential influence of size on firm's performance. To achieve this goal, different statistical tests are applied to firms´data collected from two representative Portuguese demarcated wine regions (Douro and Vinho Verde). The results confirm that the wine firm's performance is a multidimensional construct, exhibiting similarities and differences, according to the index used. The size of firms increases their export performance but exhibits a nonstatistical effect on the financial performance. The indices of productivity and productive efficiency show that there is no standard behavior. The results of this study can be useful both for managers and public decision-makers, given the importance of controlling economic performance in order to guarantee the industry's competitiveness in an increasingly globalized wine business.

Horizontal Differentiation and Determinants of Wine Exports: Evidence from Portugal

“…This is the case with wine, which is a highly differentiated experience good for which consumers consider several attributes in the selection process (e.g., price, taste, color, and brand). This has led some studies (e.g., Costanigro, McCluskey, and Mittelhammer, 2007; Rebelo et al, 2018) to suggest that there are several markets for wine instead of just one. As happens for other consumption goods, the quality can be assessed by observable technical characteristics that determine whether a wine is good or bad, pointing to vertical differentiation.…”

“…In recent years, several studies have used the gravity model to examine the effects of different factors on exports in general, but also in the wine sector in particular (e.g., Dascal, Mattas, and Tzouvelekas, 2002; Castillo, Villanueva, and García-Cortijo, 2016; Dal Bianco et al, 2016, 2017; Gouveia, Rebelo, and Lourenço-Gomes, 2018). The variables commonly used include economic factors affecting trade flows in the origin countries, economic factors affecting trade flows in the destination countries, and natural or artificial factors enhancing or restricting trade flows.…”

Macroeconomic Determinants of Wine Production in the European Union

“…The linear SCP paradigm was valorised and the relationships between market structure, behaviour and performance were defined as complex and interactive (Martin, 1988). The SCP paradigm has been used as a theoretical model for the analysis of the wine industry and other related industries in many academic works (Stasi, Seccia, & Nardone, 2010;Outreville, 2015;Rebelo., Gouveia, Lourenco-Gomes & Marta-Costa, 2018;Bobenič & Bruothova, 2019).…”

“…To understand the impact of the policy of CAP on strengthening the competitiveness of the wine sector, it is important to understand the market structure. For Rebelo et al (2018), the wine industry is a perfect example of monopolistic competition due to the large number of producers, sellers and buyers present in the same market, the coexistence of wineries of different sizes, technologies used, differentiated products, both vertically and horizontally, and free exit and entry into the industry in the long run. Within the wine industry, consumers perceive the products of different producers as different and wine producers have some control over price, which has been reinforced in the European wine industry by the 2014-2020 CAP reform.…”

Untitled

“…Para las bodegas de dicha región obtienen una relación positiva en el tamaño de la firma y en la intensidad de la exportación. Para un pequeño país productor como Portugal, con una fuerte presencia en el mercado internacional, Rebelo et al (2018) obtienen que el mercado de vino justificaría la coexistencia de bodegas de diferentes tamaños y tecnologías de producción, cargando diferentes precios para distintos vinos de acuerdo con las preferencias y la disponibilidad de pago del consumidor. Sus resultados no son claros en cuanto al resto de determinantes, indican que, la performance de las bodegas es un constructo multidimensional que exhibe similitudes y diferencias de acuerdo con los índices usados, pero al final, obtienen con claridad que el tamaño de las firmas es lo que claramente incrementa su performance de exportación (Rebelo et al, 2018).…”