Efficiency analysis of the Portuguese wine industry using accounting and operational metrics

Abstract

Wine is an integral part of the economy and culture of many countries. Despite that, in Portugal – one of the main wine-producers – there is a lack of empirical evidence regarding the efficiency of these firms. Thus, the purpose of this article is to assess such efficiency using a four-step approach, which includes the selection of relevant financial and operational variables, a cluster analysis for the identification of homogenous decision making units, a data envelopment analysis for the efficiency quantification, and an econometric model to determine the variables with most influence on efficiency. The results indicate that 36% of the firms are efficient, in part due to the considerable number of inefficient firms in the regions of North, Centre, and Lisbon and Tejo. The performance of the Setubal, and Alentejo and Algarve regions is noteworthy, since these obtained the highest percentage of efficient companies. The findings also suggest that, in order to improve efficiency, wine companies should reduce inventory and fixed assets and increase sales revenue.