Efficiency of winemaking in developing countries: Evidence from the Ukraine and Bosnia and Herzegovina

This paper aims to the evaluation and comparison of the efficiency of winemaking in two developing countries (Ukraine and Bosnia and Herzegovina (B&H)) from the perspective of their development.

In this research study, four models of data envelopment analysis (DEA), correlation and other tools of the data analysis are used to analyze the efficiency of wineries in two developing countries. Returns to scale, scale efficiency, super-efficiency and some other indicators are examined. The research is based on the sample, including 33 wineries of Ukraine and B&H.

Characterized by the same average efficiency and number of leaders, in Ukraine, medium and large wineries are developing more efficiently than small ones, whereas the opposite is true for B&H. The authors found the high potential growth of efficiency on Ukrainian (up to 28.9 per cent) and Bosnian wineries (up to 28.3 per cent). The ways for its realization were suggested. Cross-country efficiency analysis enabled us to find inter-country leaders of wine industry. The authors grouped inefficient wineries, calculated the potential for inputs reduction and found the main directions for the improvement of efficiency for each group.

The research is limited to a single industry in only two developing countries. Future studies can be devoted to the comparison of the efficiency of wineries in developed and developing countries. The results can determine which countries can be leaders in the global wine market in the future.

This study provides useful information for: researchers of wine market in developing countries enabling them to understand the current state, basic problems and efficiency levels of wineries in Ukraine and B&H; domestic policy-makers- to improve regulation of wine industry as to make it more competitive and efficient; wine producers in these countries- to find the benchmarks using the best practices to adapt them in own business and to increase an efficiency.

On the example of Ukraine and B&H, this study has shown that each respective country has its own conditions of doing wine business. This is the first paper that compares the efficiency of wine industry in Ukraine and B&H.