A comparison of the wine sectors in Catalonia,La Rioja,Languedoc-Roussillon and Emilia-Romagna

Abstract

This article presents an economic and financial analysis of the big wine companies in four of the sector’s leading territories: Catalonia, La Rioja, Languedoc-Roussillon and Emilia Romagna. The different sectors are compared over a seven-year period from 2008–2016. Financial indicators are used which are supported by the literature and built using information from the SABI and AMADEUS databases. The article first characterizes the areas under study and provides a review of the literature before going on to present the empirical study with the appropriate constrasts to explain the economic and financial health of these companies representative of the sector and especially their profitability.

Keywords

Wine sector Catalonia La Rioja Llenguadoc-Roussillon Emilia-Romagna Economic financial analysis profitability

1 Introduction

The wine sector carries much weight in the agri-food industry and this work analyses four territories with a strong wine-making tradition: Catalonia, La Rioja, Languedoc-Roussillon and Emilia Romagna. The aim of the study is to carry out an economic-financial analysis of the wine sectors in the four areas during the period 2008–2016 and conduct a comparison of them. The financial economic health of the large companies that make wine in these areas is evaluated for the period 2008–2016 using financial indicators endorsed by the literature.

The methodology used to construct the financial indicators and proceed with the analysis took information from the following databases: the Iberian Balance Sheet Analysis System (SABI) and the AMADEUS database (European database).

The samples comprised of large companies based in Catalonia, La Rioja, Languedoc-Roussillon and Emilia Roamaña, with a minimum operating income of €8,000,000 and minimum assets of €4,000,000 for two consecutive years (as established by accounting regulations) over the period 2008–2016.

The financial indicators used and descriptive statistics related to them allow for a conventional analysis of the financial statements, and the specific analysis of any changes in equity of the 72 companies in the sample, with the aim of presenting results and conclusions that will allow us to position these big wine companies in the market. After characterizing the areas under study, reviewing the pertinent literature and presenting the appropriate contrasts, the study provides the following: an analysis of the short and long-term financial situation, an economic analysis and an analysis of equity. The reason for conducting this study lies in the scarcity of academic publications that provide an economic and financial analysis of the wine sector in the areas under study and for the period analysed. In addition, the study is of interest in the current framework of the wine industry’s commitment to innovation and greater internationalization in different areas and countries. The research is completed with a series of conclusions that allow us to diagnose the economic and financial situation of the large wine companies in the four areas analysed during the period 2008–2016, together with the most notable characteristics of their comparison.

2 Characteristics of the four wine regions

In Catalonia, in addition to the wine industry, the cava industry also carries a lot of weight and now has an expansive tendency towards foreign markets. Of the 12 recognized Denominations of Origin (DO) - DO Penedès, DO Terra Alta, DO Catalunya, DO Tarragona, DO Conca de Barberà, DO Costers del Segre, DO Empordà, DO Montsant, DOQ Priorat (Qualified Denomination of Origin), DO Alella and DO Pla de Bages - DO Cava stands out as a differentiation strategy for quality and due to its own differential and geographical characteristics. Furthermore, the large Catalan firms are also present in La Rioja, Ribera del Duero, Castilla-La Mancha and other countries.

In La Rioja, a strong exporting tradition (it exports a third of the wines it produces) has led to the proliferation of auxiliary wine industries that have a decisive influence on the area’s GDP. The fact of there being a single DO Rioja has simplified the exportation of its wines and consequently awareness of it on foreign markets, unlike the 12 DOs based in Catalonia.

These are two very important wine-making areas in Spain. According to the STATIS-TA database, the Spanish vineyards with protected designation of origin with the highest consumption in 2015 were those in La Rioja and the cava wineries of Catalonia. In both cases, wine companies have undergone significant structural and economic changes, with little penetration of foreign capital, although agreements with companies from other countries are increasing. The exporting tradition of the two areas and their innovation with regard to products and processes result in their having the highest turnover for wine exportation, as evidenced by STATISTA figures.

In 2017, Spain became the world’s largest exporter of wine, by volume, with a turnover of almost €3 billion, according to data from the Spanish Wine Federation (FEV), while the world export market of bulk wine is also currently dominated by Spain [17]. It is worth noting that during the period analysed Catalonia made significant investments and La Rioja reduced its indebtedness, with capitalized companies that must improve cost management in order to increase and conserve market share.

With regard to French wines, and particularly those of the Lenguadoc-Roussillon region, wine companies have undergone important changes in the face of global competition. The region is home to 40% of all French vineyards, with different denominations and more than 30 wines holding the Appellation de Origine Contrô lé e (AOC). The wine companies of Languedoc-Roussillon have made investments in non-current assets as a response to innovation in the wine sector, external financing and high indebtedness being covered by sales increases and better results in the period analysed, with clear specialization and differentiation strategies creating greater added value. It should be noted that Languedoc-Roussillon wines underwent a renovation in the 1980 s, and the oldest sparkling wine in the world, Blanquette de Limoux, which is even older than Champagne, is known worldwide thanks to its commitment to exportation. It is an area with a large number of denominations of origin in red, ros $\overset{´}{e}$ and white, sweet, natural and sparkling wines.

As for Italian wines, Emilia Romagna is a fertile and productive wine region, home to the renowned Lambrusco brand. Lambrusco is an old wine of humble origins, whose prestige derives from it being the world’s best-selling Italian product, with a presence in many different countries. Emilia Romagna is highly productive, producing approximately 7 million hectolitres of wine per year, of which 15% have the Denominacione di Origine Controllata (DOC). Approximately 20% of Italian wine is produced in the Emilia Romagna region, Lambrusco being made in four DOC areas around Modena and Reggio. Also, light red and white wines are produced in Sangiovese and Trebbiano.

It should be noted that France and Italy were among the top five countries in the world with regard to spending money on wine in 2015, according to the STATISTA database.

3 Review of the literature

Analysing a business and assessing its success or failure has been a key aspect in academic studies when it comes to determining its ability to generate wealth and return on investment. For this reason, over recent years several studies have been conducted to identify and investigate indicators that serve to provide objective evidence of whether a business’ performance or profitability is good, bad or improvable. In fact, evaluating performance or profitability is considered a critical aspect in the management of all types of organizations [27]. The use and interpretation of said indicators on an internal or external level (by managers, shareholders, financial entities or even public administrations) has become widespread, with the aim of evaluating business strategy and encouraging any necessary change. In recent years, several studies have analysed the profitability of companies in different countries and economic sectors [5], using various indicators such as net operating profitability [24,11, 24,11], return on total assets (ROTA) [9,23, 9,23] or return on assets (ROA) [21]. Other indicators have included liquidity ratio, turnover of accounts receivable or the ratio between working capital and total assets [28]. Zhu [36] considered the analysis of profitability to be complex and therefore require more than one simple criterion to characterize it. Venkatraman and Ramanujam [30] thought the same. According to Cuervo and Rivero [8], the basis of economic-financial analysis lies in quantifying the profitability-risk binomial that would be presented in a triple functionality: the analysis of profitability per se, solvency analysis and analysing capital structure to verify its suitability and whether it is stable. That is, it is useful to follow this classification of economic or asset return (which relates the result before interest with the assets used to obtain it) and financial return (where the result is related to the company’s own funds after interest). On the other hand, financial leverage relates these two concepts to one a other or links them. Novy-Marx [22] indicates that profitability measured by the gross earnings derived from assets is a useful tool for predicting return on investment, a correlation being observable between the two variables (gross earnings and return on investment). In this sense, those companies with the highest return on assets generate much more return than those with less. The author argues that control of profitability is key to ensuring that strategies create value and favour the company’s rise in value and the liquidity of its shares, ultimately favouring shareholders. Collins and Montgomery [7] stated that companies’ profitability is based on the particular characteristics of the resources available to them and whether they are substitutable, can be imitated, and their duration. This would connect with the view expressed by Porter, developed in multiple works, one being with McGahan and Porter [20], where comparative advantages sustain the profitability of a business and, ultimately, its success.

With regard to the indicators used, it should be noted that they can have important disparities when comparing sectors. That is to say that a certain number being considered very positive for an indicator in one sector does not mean it will be considered the same in another [18]. In this sense, and in the case at hand, several studies have been published on the specific features of the sector. Analysing companies in the agricultural sector [33] found that performance or profitability are not easy to detect, and much less so if we are faced with companies that are the result of mergers and acquisitions, meaning that aspects related to accounting, finance, operations, or even perception should be taken into account. More specifically, in the wine sector, as stated by Fazzini and Russo [13], the extent to which widely used profitability measures can be useful for a sector such as wine must be considered. In this sense, solvency analysis has previously been used to explain the performance of agricultural cooperatives (studies regarding liquidity, ratios measure companies’ capacity of debt payment and cash generation [2,4,14 , 2,4,14]). And we can find studies by Schumacher and Boland [25] or Dorsey and Boland [12] on the world of businesses linked to agricultural cooperatives.

Other indicators of profitability would be efficiency ratios, which detect entrepreneurial capacity for maximizing the utility of assets and financing. In this particular area we find studies which establish that an economic structure is more profitable the more it adapts to the financial structure [4,19, 4,19]. Other studies [15,27, 15,27] analysed size as a key element in explaining the performance of wine companies, finding a positive correlation between profitability and size. They therefore linked the ability to be competitive with size, this being an incentive to group companies. Studies carried out on the basis of data from the Farm Accountancy Data Network [29] confirm the low performance of most small production units, compensated for by the economic viability and competitiveness of medium-sized and large companies. In addition, considerable differences emerged between the production of table wines and quality wines and between wineries that sell only grapes and those that carry out the entire production chain themselves. In a study on the determinants of capital structure among French wine companies [31] concluded that cost of capital was a key indicator in explaining higher profitability. In this sense, a link was found between size of company, legal status, cost of capital and the effect this has on profitability. In the same line, Boda and Szucs [3] compared Hungarian and French wine companies, analysing their profitability and capital structure and their accessibility to external financial resources. In both cases, important differences were observed between the two countries due to differences in capital structure and profitability, as well as regulatory impact. Emphasis must be placed on the the cost of personnel when calculating profitability, as pointed out by Vlachos [32] since controlling this is fundamental in the wine industry.

Another aspect affecting profitability is a company’s age. In the study of American wine companies carried out it was observed how the age of companies was also related to profitability, older ones having better indicators as well as more organizational dynamism, with a direct relationship being found between these variables [16]. Beyond the importance of indicators and aspects to be considered, the most recent studies have looked at their evolution in some detail:

A study carried out on 400 French wine-making companies between 2003 and 2014 found that those companies that managed their working capital better (payments and collections) had the best capacity to improve profitability, concluding that professionalization of the personnel responsible for these aspects is key to achieving this increase[3]. In a study focused on the wine sector in Moldova, [10] contributed a new factor for improving profitability in comparison with other European areas, which is choosing appropriate methods for the location of vineyards and the training of human resources. This author emphasizes that said element acts as a lever for change and has an effect on corporate profitability. Another study conducted on Italian companies observed differences between the largest wine companies and cooperatives during the years 2008–2012, the former having better indicators due to more financial capacity and access to EU aid [13]. Thus, they also concluded that managing working capital and capital structure must be considered as a key aspect of profitability. In a study on the Spanish agricultural sector, [35] highlighted the importance of company structure, risk management and innovation as the main aspects linked to greater profitability, together with the importance of a suitable location. A study conducted by Zheng and Wang [34] on the growth of wine companies in China concluded that, beyond efficiency in cost structure or production, a good pricing strategy and pressure to operate in an oligarchical fashion when establishing tariffs are key to improving profitability and the survival of the sector. On the other hand, Cardebat [6] also highlighted adequate pricing for achieving greater profitability in the wine sector.

4 Empirical study

The study analyses economic and financial comparisons of the wine sectors in Catalonia (16 companies), La Rioja (14 companies), Languedoc-Roussillon (26 companies), and Emilia Romagna (16 companies). The sample of 72 large-scale companies, with normal annual accounts, draws on the SABI and AMADEUS databases. The criteria used to select the sample are the following:

Main economic activity: Wine making according to CNAE Code 2009 : 1102.

Status: Active.

Minimum operating income: €8,000,000.

Minimum assets: €4,000,000.

Period: 2008–2016

The companies in the sample represent between 70% and 80% of the total operating income of the wine companies in each region. To make the comparison for the period 2008–2016, the main financial indicators and relevant descriptive statistics were used for the four territories under study. The study analyses these wine companies’ short and long-term financial situation, results and capitalization. The indicators analysed are as follows:

For the short-term analysis: the working capital (current assets - current liabilities) and short-term solvency (current assets/current liabilities).

For the long-term analysis: indebtedness (total debts/net worth and liabilities); quality of debt (short-term debt/total debts); and asset turnover (operating income/total assets).

For the analysis of results: financial profitability (ROE = Net Income/Equity); economic profitability (ROA = Earnings Before Interest and Taxes/Assets); added value (operating income - operating expenses); and productivity of personnel (added value/personnel costs).

For capitalization: evolution of net equity for the period analysed.

4.1 Comparison of short-term financial situation

The main objective of analysing the short-term financial situation is to determine the capacity of these wine companies to meet their short-term payment obligations.

Before proceeding with the analysis, it should be noted that Catalonia and La Rioja are more capitalized and have more non-current assets in the period analysed.

Regarding working capital, this is positive in all areas for the analysed period, and there is a decreasing trend in the Catalan wine sector, which has higher amounts, especially at the beginning of the period 2008–2016 (Table 1).

Table 1
Evolution of working capital in the four analysed regions for 2008–2016

Thousands of euros 2008 2009 2010 2011 2012 2013 2014 2015 2016

Working capital Catalonia 18,933 17,661 13,773 13,044 12,556 13,946 13,443 10,797 9,172

Working capital La Rioja 11,141 11,600 12,192 13,457 13,190 13,555 13,856 15,096 13,107

Working capital Languedoc-Rosellón 3,119 4,111 4,423 5,145 4,590 5,623 4,048 5,002 3,903

Working capital Emilia Romagna 4,632 4,680 6,800 5,220 4,838 7,261 7,152 7,812 10,451

Thousands of euros	2008	2009	2010	2011	2012	2013	2014	2015	2016
Working capital Catalonia	18,933	17,661	13,773	13,044	12,556	13,946	13,443	10,797	9,172
Working capital La Rioja	11,141	11,600	12,192	13,457	13,190	13,555	13,856	15,096	13,107
Working capital Languedoc-Rosellón	3,119	4,111	4,423	5,145	4,590	5,623	4,048	5,002	3,903
Working capital Emilia Romagna	4,632	4,680	6,800	5,220	4,838	7,261	7,152	7,812	10,451

Solvency, which measures the company’s ability to deal with short-term debt, reflects correct levels of liquidity (between 1.5-2), especially in the case of Catalan and Riojan companies. In the companies located in Languedoc-Roussillon and Emilia Ro- maña, short-term solvency is more irregular (Table 2).

Table 2

Evolution of short-term solvency in the four analysed regions for 2008–2016

	2008	2009	2010	2011	2012	2013	2014	2015	2016
Short-term solvency Catalonia	1.532	1.540	1.418	1.414	1.425	1.445	1.419	1.317	1.416
Short-term solvency La Rioja	1.913	2.122	2.378	2.399	2.231	2.180	2.054	2.165	2.321
Short-term solvency Languedoc-Rosellón	1.258	1.336	1.420	1.464	1.382	1.461	1.273	1.316	1.216
Short-term solvency Emilia Romagna	1.172	1.171	1.249	1.165	1.131	1.223	1.224	1.237	1.503

These indicators show that the short-term financial situation of the large vineyards in the four regions analysed for the period 2008–2016 can be defined as acceptable, especially Catalonia and La Rioja.

4.2 Comparison of the long-term financial situation

The main objective when analysing the long-term financial situation is to measure the company’s ability to satisfy long-term debts. According to the criterion provided by [1] balanced growth occurs when companies display adequate asset management (Δ Sales> Δ Assets), prudent financial management (Δ Assets> Δ Debts) and good cost management (Δ Results> Δ Sales). In the sample analysed, when differentiating between the four regions studied for the period 2008–2016 it is observed that there is no balanced growth in Catalan wine companies (because there is no efficient asset management, although financial management is prudent and cost management adequate), whereas there is balanced growth in the companies based in La Rioja, Languedoc-Roussillon and Emilia Romagna.

Furthermore, the debts of Catalan wine companies decreased by 4%, assets increased by 2% and sales decreased by 13%. As regards wine companies in La Rioja, debts increased by 1%, assets by 22% and sales by 60%, while in the wine companies in Languedoc-Roussillon, debts increased by 47%, assets by 51% and sales by 60%; and the companies in the Emilia Romagna sample increased their debts by 29%, assets by 38% and sales by 112% (Table 3).

Table 3
Balanced growth in the four analysed regions for 2008–2016

Asset management Prudent financial management Cost management

Δ Sales Δ Assets Δ Assets Δ Debts Δ Results Δ Sales

Growth Catalan companies –12.992% 1.557% 1.557% –3.970% 100.517% –12.992%

Growth La Rioja companies 59.723% 22.110% 22.110% 1.181% 256.592% 59.723%

Growth Languedoc-Rosellón companies 60.416% 50.635% 50.635% 46.780% 91.014% 60.416%

Growth Emilia Romagna companies 111.477% 37.910% 37.910% 28.919% 3.575.068% 111.477%

	Asset management	Prudent financial management	Cost management
Growth Catalan companies	–12.992%	1.557%	1.557%	–3.970%	100.517%	–12.992%
Growth La Rioja companies	59.723%	22.110%	22.110%	1.181%	256.592%	59.723%
Growth Languedoc-Rosellón companies	60.416%	50.635%	50.635%	46.780%	91.014%	60.416%
Growth Emilia Romagna companies	111.477%	37.910%	37.910%	28.919%	3.575.068%	111.477%

Regarding the total turnover of assets, which informs us of the average time it takes to recover the value of the asset, the Catalan and Riojan wine companies take less than a year to recover the value of their investment, while in the Languedoc-Roussillon and Emilia Romagna wineries this figure is around the year mark (Table 4).

Table 4

Total turnover of assets in the four analysed regions for 2008–2016

Días	2008	2009	2010	2011	2012	2013	2014	2015	2016
Turnover of assets Catalonia	249	211	234	238	232	224	210	225	213
Turnover of assets La Rioja	137	132	141	167	170	176	177	185	156
Turnover of assets Languedoc-Rosellón	360	344	309	368	395	398	408	400	383
Turnover of assets Emilia Romagna	225	318	338	346	350	372	351	349	345

With regard to indebtedness (Table 5), in the case of the Catalan and Riojan samples, we observe that these companies have an acceptable level of indebtedness, between 40% and 50%. In contrast, in the Languedoc-Roussillon and Emilia-Romagna samples, we note that these companies have a high level of indebtedness, between 70% and 80%. In all four areas, the debt is of poor quality, since short-term debts significantly exceed long-term debts.

Table 5

Indebtedness in the four analysed regions for 2008–2016

	2008	2009	2010	2011	2012	2013	2014	2015	2016
Indebtedness Catalonia	0.505	0.510	0.499	0.496	0.487	0.496	0.492	0.492	0.477
Indebtedness La Rioja	0.458	0.422	0.360	0.336	0.346	0.353	0.380	0.386	0.379
Indebtedness Languedoc-Rosellón	0.709	0.683	0.660	0.698	0.705	0.685	0.690	0.685	0.691
Indebtedness Emilia Romagna	0.767	0.740	0.744	0.762	0.766	0.745	0.722	0.720	0.717

Therefore, these large-scale wine companies enjoyed a good long-term financial position in the period considered. However, it would be advisable to correct the bad quality of the debt in these years of crisis renegotiating it, as far as possible, from short to long-term debt, while the Catalan wine companies should also improve asset management.

4.3 Economic analysis

Added value (value of income generated from wine-making) varies in the different regions. Specifically, the Catalan wine companies display a decrease throughout the analysed period while there is a trend towards growth in the wine companies in La Rioja, Languedoc-Roussillon and Emilia Romagna (Table 6).

Table 6
Added value in the four analysed regions for 2008–2016

Thousands of euros 2008 2009 2010 2011 2012 2013 2014 2015 2016

Added value Catalonia 2,544.903 124,285 561,666 1,595.561 902,888 539,884 168,999 776,257 928,060

Added value La Rioja 1,202.508 856,850 1,346.558 2,054.495 1,981.361 1,715.276 1,886.538 1,967.519 2,074.10

Added value Languedoc-Rosellón 5,447 70,821 –68,932 72,908 186,360 272,191 397,732 445,191 99,51

Added value Emilia Romagna 549,32 668,81 1,333.74 1,125.12 1,478.85 1,793.20 1,552.24 1,562.03 1,627.74

Thousands of euros	2008	2009	2010	2011	2012	2013	2014	2015	2016
Added value Catalonia	2,544.903	124,285	561,666	1,595.561	902,888	539,884	168,999	776,257	928,060
Added value La Rioja	1,202.508	856,850	1,346.558	2,054.495	1,981.361	1,715.276	1,886.538	1,967.519	2,074.10
Added value Languedoc-Rosellón	5,447	70,821	–68,932	72,908	186,360	272,191	397,732	445,191	99,51
Added value Emilia Romagna	549,32	668,81	1,333.74	1,125.12	1,478.85	1,793.20	1,552.24	1,562.03	1,627.74

Regarding staff productivity, the same happens as in the case of added value, although, the percentage of productivity is higher in the Riojan wine companies than in the other samples (Table 7).

Table 7

Staff productivity in the four analysed regions for 2008–2016

	2008	2009	2010	2011	2012	2013	2014	2015	2016
Staff productivity Catalonia	28%	1.4%	7.2%	21%	12%	7.2%	2.3%	10.3%	11.6%
Staff productivity La Rioja	62%	44.4%	67.4%	90%	98%	82.5%	88%	93.5%	91%
Staff productivity Languedoc-Rosellón	0.4%	4.1%	-5%	4.2%	10.4%	13%	17%	18%	3.7%
Staff productivity Emilia Romagna	23%	13.1%	26%	20.4%	26.2%	31%	26%	26%	24.3%

With regards to the profitability analysis for Catalan wineries, financial profitability (ROE) and economic profitability (ROA) declined notably in 2008, and, financial profitability (ROE) fluctuated during the period analysed (decreasing in 2011 and 2014, and increasing in 2015 and 2016). Regarding ROA, this was more stable, with growth in 2015 and 2016, although in 2011 and 2014 indebtedness caused problems for these companies since the ROA > ROE (Table 8).

Table 8

ROE and ROA in the four analysed regions for 2008–2016

	2008	2009	2010	2011	2012	2013	2014	2015	2016
Catalonia: ROE (%) and ROA (%)	4.2/2.5	0.6/0.1	1.7/0.6	0.4/1.7	2.3/1.0	1.4/0.5	–1.0/0.1	1.7/0.8	6.8/0.9
La Rioja: ROE (%) and ROA (%)	3.2/2.9	2.9/2.1	4.3/3.5	5.6/5.0	5.2/4.9	4.6/4.1	5.7/4.3	5.9/8.1	8.1/6.1
Lang. Rosellón: ROE(%) and ROA(%)	–3.1/0.02	2.0/0.3	1.9/–0.3	–0.0/0.3	–0.3/0.8	3.3/1.1	2.8/1.5	3.7/1.2	–0.17/–1.7
Emilia Romagna: ROE(%) and ROA(%)	0.2/1.1	1.2/1.3	3.3 /2.5	2.9/1.9	6.5/2.3	5.1/2.9	5.0/2.5	3.6/2.8	5.1/2.3

For the sample of companies from La Rioja, both financial return (ROE) and economic profitability (ROA) displayed an increasing trend and, with the exception of 2015, there was always a trend of ROE > ROA, denoting that indebtedness did not cause problems for these companies (Table 8). On the other hand, the wine companies of Languedoc-Roussillon displayed a financial return (ROE) with lower values than the aforementioned regions, fluctuating notably in the period under study. Economic profitability (ROA) was more stable in this period and ROE exceeded ROA, corroborating that indebtedness was not harmful except for years 2008, 2011 and 2012 (Table 8).

Regarding the Italian region of Emilia Romagna, ROE and ROA increased over the years, with the noteworthy finding that ROA was higher than ROE in 2008 and 2009, meaning that indebtedness could be harming these companies. The high financial profitability of 2012 stands out (Table 8).

Regarding the net profit of the wine companies in the four regions, different behaviours are observed. In the Catalan wineries, profits fell in the analysed period, while in the Riojan companies net profit tripled and the Languedoc-Roussillon and Emilia-Romagna wineries also present growing profits, especially in recent years (Table 9).

Table 9

Net profit in the four analysed regions for 2008–2016

Thousands of euros	2008	2009	2010	2011	2012	2013	2014	2015	2016
Net profit Catalonia	1,692	300	800	194	989	653	- 506	793	798
Net profit La Rioja	712	671	1,060	1,563	1,378	1,249	1,546	1,650	2,540
Net profit Languedoc-Rosellón	–182	141	133	–0.46	–23	260	226	336	–16
Net profit Emilia Romagna	27	160	447	402	961	810	856	644	989

4.4 Analysis of net equity

Regarding net equity, Catalan wine companies saw a slight decrease throughout the years analysed, although there was capitalization in the last four years. In contrast, companies in the other regions saw a considerable increase in net equity. However, the average value for net equity was much higher in the case of the Catalan wine companies than in the other regions throughout the period considered (Table 10).

Table 10
Net Equity in the four analysed regions for 2008–2016

Net Equity Thousands of euros 2008 2009 2010 2011 2012 2013 2014 2015 2016

Catalonia 49,613.36 47,869.52 45,560.66 44,986.90 43,856.50 45,693.50 46,284.62 46,737.81 53,180.39

La Rioja 22,233.03 22,597.80 24,485.32 27,546.88 26,352.29 26,721.79 26,923.68 27,652.14 31,121.43

Languedoc-Rosellón 5,799.03 6,972.47 6,949.21 6,535.19 6,632.67 7,766.53 8,018.22 8,984.44 9,276.65

Emilia Romagna 11,555.99 13,015.11 13,439.58 13,772.72 14,705.88 15,690.85 17,096.09 17,840.10 19,365.26

Net Equity Thousands of euros	2008	2009	2010	2011	2012	2013	2014	2015	2016
Catalonia	49,613.36	47,869.52	45,560.66	44,986.90	43,856.50	45,693.50	46,284.62	46,737.81	53,180.39
La Rioja	22,233.03	22,597.80	24,485.32	27,546.88	26,352.29	26,721.79	26,923.68	27,652.14	31,121.43
Languedoc-Rosellón	5,799.03	6,972.47	6,949.21	6,535.19	6,632.67	7,766.53	8,018.22	8,984.44	9,276.65
Emilia Romagna	11,555.99	13,015.11	13,439.58	13,772.72	14,705.88	15,690.85	17,096.09	17,840.10	19,365.26

4.5 Hypothesis testing

The hypotheses that are contrasted in line with that found in the literature review are as follows:

H1: There is a significant relationship between economic profitability (ROA) and companies’ legal status.

H2: There is a significant relationship between economic profitability (ROA) and company size.

Statistical methods were used for qualitative variables to perform the contrasts proposed in the first hypothesis, while for the second, statistical methods were used for quantitative variables, such as Pearson’s correlation coefficient.

Regarding the qualitative variable, to test whether legal status is related to economic profitability, a mean difference analysis was carried out (comparing the distribution means of the quantitative variable with the category variable). Since this analysis requires the variables to fulfill the assumptions of normality and homogeneity, the Kolmogorov-Smirnov statistical test and the Levene test were performed (Tables 11 and 12) and the variables were found to fulfill normality assumptions (p > 0.05), so we proceeded with an inferential evaluation using the Student T test for independent samples.

Table 11
KOLMOGOROV-SMIRNOV normality test for the economic profitability variable

Statistic df p

Catalonia Commercial 0.081 14 0.200

Cooperative 0.112 2 0.200

La Rioja Commercial 0.123 13 0.200

Cooperative 0.091 1 0.200

Languedoc-Rosellón Commercial 0.331 13 0.123

Cooperative 0.108 13 0.200

Emilia Romagna Commercial 0.145 7 0.166

Cooperative 0.072 9 0.200

		Statistic	df	p
Catalonia	Commercial	0.081	14	0.200
	Cooperative	0.112	2	0.200
La Rioja	Commercial	0.123	13	0.200
	Cooperative	0.091	1	0.200
Languedoc-Rosellón	Commercial	0.331	13	0.123
	Cooperative	0.108	13	0.200
Emilia Romagna	Commercial	0.145	7	0.166
	Cooperative	0.072	9	0.200

In addition, all variables in both samples meet the homogeneity of variances criterion under the Levene test (p > 0.05), and for these variables it is assumed that there is equality of variances for determining the statistical t (Table 12).

Table 12

Inferential statistics for the qualitative variable ECONOMIC PROFITABILITY for wine companies

		Homogeneity		Student T
		Levene	p	t	p
Catalonia	Commercial	0.003	0.958	2.893	0.006
	Cooperative
La Rioja	Commercial	1.113	0.375	2.385	0.012
	Cooperative
Languedoc-Rosellón	Commercial	1.977	0.122	–0.611	0.599
	Cooperative
Emilia	Commercial	1.886	0.114	–0.811	0.331
Romagna	Cooperative

Analysing the results of hypothesis testing obtained by means of the Student T test, it is confirmed that the legal status of the wine companies in the two Spanish regions have an influence on economic profitability. Regarding the other two samples, Languedoc-Roussillon and Emilia Romagna do not display this association with economic profitability (Table 12). Regarding the quantitative variable, the main descriptive statistics of the two quantitative variables used in the study (economic profitability and short-term solvency) are shown in Table 13.

Table 13

Descriptive statistics for the quantitative variables economic profitability and short-term solvency

Region	Variable	Mean	Standard deviation
Catalonia	Economic profitability	0.912%	4.476%
	Short-term solvency	1.416	1.024
La Rioja	Economic profitability	6.133%	7.560%
	Short-term solvency	2.321	1.845
Languedoc-Rosellón	Economic profitability	–1.745%	3.775%
	Short-term solvency	1.216	1.972
Emilia Romagna	Economic profitability	2.374%	2.751%
	Short-term solvency	1.503	0.744

By applying the Pearson correlation method (which indicates the relationship between variables that follow a normal distribution), we observe that the variables follow a normal distribution with the Kolmogorov-Smirnov test (Tables 14 and 15). We then proceeded to analyse the correlation between economic profitability and short-term solvency for each of the regions (Table 16). There is an evident significant relationship between economic profitability and short-term solvency in the Spanish wine companies (Catalonia and La Rioja), which indicates that the higher the short-term solvency, the higher the economic profitability. This strong correlation between short-term solvency and economic profitability is a very notable finding.

Table 14

KOLMOGOROV-SMIRNOV normality test for the quantitative variable Economic profitability

	Statistic	p
Catalonia	0.054	0.200
La Rioja	0.044	0.200
Languedoc-Rosellón	0.071	0.200
Emilia Romagna	0.073	0.200

Table 15

KOLMOGOROV-SMIRNOV normality test for the variable Short-term solvency

	Statistic	p
Catalonia	0.066	0.200
La Rioja	0.042	0.200
Languedoc-Rosellón	0.086	0.200
Emilia Romagna	0.078	0.200

Table 16

Pearson’s correlation coefficient for Short-term solvency and Economic profitability

	Pearson’s correlation coefficient	p
Catalonia	0.293	0.011
La Rioja	0.334	0.024
Languedoc-Rosellón	0.036	0.903
Emilia Romagna	1.229	0.103

5 Discussion of results

For the period analysed Ð 2008–2016 –the economic structure of Catalonia displayed higher percentages of non-current assets than the other regions; and with regard to financial structure, Languedoc-Roussillon and Emilia Romagna had a higher net equity than La Rioja and Catalonia, which are more capitalized regions.

Our short-term analysis shows that none of the four regions had liquidity problems and the working funds of the 72 companies were positive for the analysed period. Despite having the highest amounts in the sample, the Catalan wine sector followed a downward trend in working capital over the period 2008–2016, although it did not present liquidity problems like La Rioja. Short-term solvency was more irregular in the companies based in Languedoc-Roussillon and Emilia Romagna.

Our analysis of the long-term financial situation indicates that there was balanced growth in the wine companies in La Rioja, Languedoc-Roussillon and Emilia Romagna; however, there is a need to manage assets and expenses more efficiently in Catalonia, despite financial management being prudent. Asset turnover was faster in Catalan and Riojan companies than in their French and Italian counterprarts, and the indebtedness of Catalan and Riojan companies was acceptable, unlike the high level of indebtedness displayed by the French and Italian companies in the sample. The poor quality of debt in all four regions should be noted.

As for profits, there was a notable increase in added value and staff productivity in companies in La Rioja in the period analysed, which consequently implies higher yields with an upward trend, both in terms of ROE and ROA, without the risk of indebtedness since ROE > ROA. In addition, the net profits in La Rioja increased significantly due to exports. Net profits were more irregular in Catalonia, with an increasing trend at the end of the period. It must be borne in mind that the unique DO Rioja and the region’s long-standing export tradition have simplified and facilitated exports of its wines and consequently awareness of the brand in foreign markets, which contrasts with the difficulty involved in disseminating the 12 DOs from Catalonia. With regard to the wine companies in Languedoc-Roussillon and Emilia-Romagna, profits rose, especially in the final three years of the study, although this was based on lower yields, especially in the case of the French companies in the sample.

With respect to capitalization, higher assets were found for Catalonia in the period under consideration, with a tendency towards growth in the final years of the study; in other words, these companies were the most capitalized. The companies in the remaining regions were capitalized during this period, since they increased their net worth (the companies in La Rioja by 24.37%, the companies in Llenguadoc-Rosellón by 55% and those in Emilia Romagna by54.39%).

Hypothesis testing revealed that the legal status of the wine companies in Catalonia and La Rioja influenced their economic profitability, unlike those of the other two samples, Languedoc-Roussillon and Emilia Romagna, which did not display this association. In addition, there was also a significant relationship between economic profitability and short-term solvency in the wine companies of Catalonia and La Rioja; that is, the higher the short-term solvency, the more economic profitability.

6 Conclusions

Based on the results of our economic and financial analysis of the large wine companies in Catalonia, La Rioja, Languedoc-Roussillon and Emilia Romagna –viewed as representative companies of the sector –for the period 2008–2016, we can conclude the following:

Large Catalan wine companies have invested heavily in non-current assets and these are capitalized companies, like the wine companies in La Rioja. The wine companies in Languedoc Roussillon and Emilia Romagna do not have any significant non-current assets or net assets, although they were capitalized in the period analysed due to their good results.

Companies do not present liquidity problems in any of the four regions analysed, especially Catalonia and La Rioja; short-term solvency is more irregular for companies in Languedoc-Rosellón and Emilia Romagna.

The wine companies in La Rioja, Languedoc-Roussillon and Emilia Romagna displayed balanced growth during this period, while those in Catalonia need to manage assets and expenses better due to important investments and their associated costs.

The Catalan and Riojan companies displayed acceptable levels of indebtedness, which contrasts with the high indebtedness of the French and Italian companies.

Riojan exports resulted in increased added value, which, combined with staff productivity, favour high returns and profits.

Catalonia’s net profits were more irregular, displaying an upward trend at the end of the period, which is in tune with returns, especially in the case of ROE, since ROA was more stable.

The wine companies in the Languedoc-Roussillon and Emilia-Romagna regions saw profits rise, especially in the last three years of the study, even though this was based on lower profitability, especially in the case of the French companies in the sample.

Of the companies in the sample, those in Catalonia displayed higher equity patrimonios m $\overset{´}{a}$ s elevados, with a tendency towards growth in the final years of the analysis. The remaining regions, which had lower equity, were capitalized in this period, and especially the French and Italian companies, due to the good results obtained.

Internationalization is crucial in the wine sector and the quality wines in the four regions analysed, which have received international recognition, have boosted exports.

The economic profitability of the Catalan and Riojan wine companies is explained by good short-term solvency and the legal status of the companies, in line with that found in the literature review.

Regarding the limitations, the sample of the investigation could be broader, encompassing all the companies that are engaged in this economic activity of wine making, to better contemplate the diversity of the areas analysed. In future research, we intend to deepen the differentials of each region in order to face the innovation and internationalization of companies that make wine.

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