Uncorking success: an analysis of revenue determinants in the Italian wine sector across farm sizes

Over the past few decades, Italy's wine industry has shifted from producing low-value, local wines to a modern sector that meets both domestic and international demand, with exports reaching €8 billion in 2023, second only to France. Despite these achievements, the sector faces challenges such as rising production costs, climate change, and a need for enhanced sustainability, particularly affecting small and medium-sized enterprises (SMEs). This paper investigates the key determinants of profitability across different farm sizes within the Italian wine sector, emphasizing the role of farm size in shaping financial performance. Using data from the RICA database (2008-2021), the study employs a random-effects regression model to assess the impact of various structural, management, and control variables on wine farm revenues. Findings highlight that large farms benefit more from mechanization, diversification, and the production of processed products, whereas small farms see greater gains from organic farming, direct sales, and agritourism. Furthermore, younger entrepreneurs positively affect small farms, while ownership of land has a negative impact on revenues across all farm sizes. EU subsidies consistently enhance revenues for all farm sizes, with a stronger effect for smaller farms. The study concludes that tailored management strategies, access to financial support, and regional specificities (such as mountainous areas) are crucial for enhancing the profitability and resilience of wine businesses in Italy, particularly small farms.