Efficiency analysis of the designations of origin in the Spanish wine sector

Abstract

Although Spain has the largest cultivated vineyard area in the world, it is not the largest wine producer; it is third after Italy and France. With respect to exports, Spain is second. In order to increase wine sales, the offer must guarantee its quality. Since the 2008 European Union Commission Regulation on wine markets (OJ, 2008), quality is guaranteed in Spain for the Protected Designation of Origins (PDOs). In Spain, the number of PDOs has increased each year as well as the land associated with them. In the [2008][2009] season, 60% of the land with grapes belonged to PDOs, while in the 2009-2010 season, the percentage increased to 66.2%. Moreover, the production of quality wines is associated mainly to PDOs. Hence, the study of PDOs sheds light on the production of quality wines, a sector that is growing from year to year, being relevant to analyze the performance of such PDOs, in order to learn the main features of the best ones.To be classified as a DO in Spain, a PDO additionally needs to have the recognition as a quality wine with geographical indication for at least five years. We are going to analyze a subset of 34 DOs, covering a 59.3% of the wine surface of the whole set of Spanish PDOs and being the largest subset with available consistent data. We will evaluate their efficiency resorting to DEA (Data Envelopment Analysis), a non-parametric technique that solves a linear programming problem for each unit being rated.The efficiency literature related to the wine sector has analyzed farms, cooperatives, firms and agrifood sectors. Farms and cooperatives account for most of the specialized papers, starting with Townsend et al. (1998) AbstractThe wine Common Market Organisation has established two concepts for recognizing the quality of wines in the European Union (EU). The first corresponds to the so-called Protected Designation of Origin (PDO), and the second to the Protected Geographical Indication (PGI). The set of Spanish PDOs includes the subset of Spanish DOs (Designation of Origin), which have been recognized as quality wines by Spanish authorities since 1932. Spain accounts for 67 DOs but, due to a lack of data, only 34 of them are suitable for carrying out our analysis. We will analyze the efficiency of this subset for the 2008, 2009 and 2010 seasons resorting to Data Envelopment Analysis (DEA) and using a new additive based efficiency measure known as BAM (Bounded Adjusted Measure). Since we are using panel data, we will also evaluate the productivity associated with this data set resorting to Malmquist indexes. Our results show that the efficiency behavior of the subset of Spanish DOs is uniform over the time periods analyzed and that productivity experiments only minor and irrelevant changes. They also show that three DOs are in a very good competitive position while another three DOs are in a very bad position. We end up suggesting some economic reasons for explaining these results.

Efficiency of wine grape growers at farm level: a case study

“…Urso et al [19] acquaint the efficiency of grape and wine producers in the same paper. Tóth & Gál [20] research the efficiency of wine producers at a country level and Vidal et al [21] study the efficiency of the different denomination of origin (DO) existing in Spain.…”

Productivity growth in the winery sector: evidence from Italy and Spain

“…Townsend et al, 1998;Conradie et al 2006;Bonfiglio, 2006;Henriques et al, 2009;Bojnec andLatruffe, 2008, 2009;Zago, 2009, Vidal et al, 2013Aparicio et al, 2013). Townsend et al (1998) estimate partial and total productivity for a sample of wine grape producers located in South Africa analysing the effect of size on these productivity indexes.…”

Changes in productivity in the virgin olive oil sector: An application to Protected Designations of Origin in Spain

“…Additionally, the non-radial index just estimates productivity change partially since it only takes input inefficiencies into account. More recently, Vidal et al (2013) resorted to the BAM (Cooper et al, 2011b), a 'graph' weighted additive model, in order to measure productivity change and its sources from a dataset of the Spanish wine sector. They defined a Biennial Malmquist productivity index (Pastor et al, 2011) from the BAM values.…”