Structure, organization and a vision: Reasons for the success of wine cooperatives?

Abstract

Several studies have found that wine cooperatives struggle to produce high quality grapes allowing them to produce better quality wines and to receive higher retail prices. In contrast, cooperatives in South Tyrol perform well and receive price premiums for wine quality relative to privately-owned local competitors. We identify the structural, organizational and social factors (i.e., elements of social capital) that may contribute to the economic success of a cooperative enterprise, surveying individual members of 13 wine cooperatives in South Tyrol. Relative payment per kg of grapes (pay-out) delivered measures the economic success of member growers. We propose that “the strength of common vision among cooperative members” is an important element identifying the “working social capital” of cooperatives and examine whether it depends on specific social and organizational variables such as commitment, trust or the strengths of personal relationships, participation in training activities and/or the presence of specific grape quality assessment criteria. Moreover, we examine if the pay-out or economic success of cooperative members can be explained by a set of structural variables and working social capital. We estimate two regression models to explain both the working social capital (i.e., strength of a common vision among cooperative members), and pay-out or economic success that cooperative members receive for delivering grapes. Results indicate that specific social factors such as member commitment, trust, personal member-winemaker relations and gender as well as organizational factors (e.g., training activities, quality assessment criteria) help to explain working social capital while physical production capital (farm size), working social capital (common vision) and indicators of human capital (involvement, vineyard consulting) are important factors to explain the economic success of cooperative members.

The Sicilian cooperative system of wine production

“…The international literature has recently focussed on the competitiveness of wine systems, preferring to focus on smaller systems (usually regional) where a wine-producing "vocation" in this field is the exception when compared to national macro-systems (Rossi, 2013). Consequently, there exists copious references in the literature to the success of wine cooperatives, with authors having addressed this matter from several points of view (Schamel, 2019;Fanasch and Frick, 2018;Valette et al, 2018;Schimmenti et al, 2014). For example, various authors have focussed on the strategic process and the strategies used by cooperatives (Couderc and Marchini, 2011;Bono et al, 2012;Rossi, 2013) by making reference to comparative studies.…”

“…The coordination of quantities of grapes delivered by members to a given cooperative is a challenge for more traditional cooperatives. On the one hand, individual members can be motivated to oversupply their products to raise their revenues and on the other hand, this inevitably involves an increase in total market supply, leading to decreasing prices (Schamel, 2019). A recent empirical study (Cadot et al, 2016), focusing on 39 cooperatives in the Bordeaux wine region, demonstrated that members of traditional cooperatives prioritise their short-term income against the long-term survival of the organisation.…”

“…The governance principles of cooperatives can also lead to challenges of quality coordination (Pennerstorfer and Weiss, 2012). Schamel (2019) has highlighted that these challenges are the main reasons why cooperatives delay in obtaining rewards for quality signals. Schamel continues by stating that the economic success (i.e.…”

Competitive Strategies for Wine Cooperatives in the German Wine Industry

“…High grape pay-outs and member satisfaction can only be achieved if the cooperative is working successfully in the market and generating a surplus. Schamel [63] found that the success of wine cooperatives also depends on particular social factors (e.g. member commitment and trust) as well as on organizational control variables (e.g.…”