Profitability in the Italian Wine Sector: An Empirical Analysis of Cooperatives and Investor-Owned Firms

This study compares the profitability of cooperatives and investor-owned firms in the Italian wine sector. From a review of the financial ratios that have traditionally been applied in previous studies, we identify the key factors that affect firm profitability (proxied by sales growth) and analyse them for the five-year period from 2008 to 2012. Italian wine cooperatives offer a particularly suitable environment in which to apply our study because they have benefitted from EU regulation and several supporting measures since 2008, allowing them to invest in infrastructure and improve efficiency in order to produce quality wine, grow their brands, and penetrate export markets. In particular, this study expands the body of knowledge on this topic by focusing on the factors that affect the profitability of cooperatives and investor-owned firms and by considering time series data. We find that the EU support measures for cooperatives have led to an increase in their financial performance since 2008. Moreover, cooperatives typically have lower liquidity levels and significantly high debt as a proportion of net equity compared with investor-owned firms. Hence, consistent with the findings in the literature, the influence of financial performance on profitability is clearly related to business type.