The financial efficiency of small food and drink producers across selected European Union countries using data envelopment analysis

Abstract

There is an increasing awareness about the importance of the role that small food and beverage producers play in the socio-economic development in many countries. However, since they face many specific problems which create obstacles for their existence, small producers should be identified and supported. To properly analyze their position, one should consider multiple criteria within their operational, financial, marketing and strategic activities. This paper analyzes small food and drink producers from selected countries in the European Union and estimates their financial efficiency using raw financial variables instead of financial ratios. The research is based on the data obtained from the Amadeus database for the period from 2011 to 2015. The relative efficiency is determined by using the data envelopment analysis (DEA). The results show that the number of efficient small companies in the sample had varied throughout the analyzed period. The same holds for the number of efficient companies within countries and within the food and drink industry. Approximately 23% of food producers were relatively efficient, while the share of efficient drink producers increased over time from approximately 20% to 23%. Moreover, we detect countries having the greatest percentage of efficient small producers in the sample. The DEA approach identified efficient producers which have better liquidity, efficiency, leverage and profitability and pointed out cash liquidity as the area of inefficiency for the inefficient companies. This analysis provides policy makers with information for developing policies which could improve the strength of small food and drink producers on a country level.