GIs products, governance and price dynamics: Some evidence from Italy. Filippo Arfini Department of Economics, University of Parma, Italy [email protected] FAO, Rome, May 24 2010 Dop, Igp e Stg un lungo dibattito legislativo - Wile “typical products” are the results of the interactions between people and their territory DO, GI and PDO / PGI are the results of legislative actions; - Their function is to protect producers and consumers but also to promote rural development; - The low systems that protect and make visible GI products to consumers can be considered a successful tool also for producers? PDO / PGI products: a very hot debate … - GI are the result of collective actions; - GI reputation is related to quality, but … quality is the result of collective, corporate choice and coordination; - Quality, commercial strategy and governance are key factor for reach efficiency on the market... - Which typology of GI exist? - Which Marketing problems arise? - Which actor should take decisions? Contents - The PDO/PGI link with the territory of origin; - The role of protection associations; - The economic aspects and marketing strategies; - A tentative of classification of Italian GI; - Conclusion. The PDO/PGI link with the territory of origin PDO per province PGI per province The PDO/PGI link with the territory of origin Olive Oil Horticulture and cereal Cheese The PDO/PGI link with the territory of origin The majority of Designations (89 PDO and 51 PGI) are based within a single Region. There are also cases where the typical area cover more regions for …historical, economic and … political reasons. The PDO/PGI link with the territory of origin Numbers of regions Regions involved Asiago 2 Prov. aut. di Trento, Veneto Gorgonzola 2 Piemonte, Lombardia Montasio 2 Veneto, Friuli Venezia Giulia Parmigiano Reggiano 2 Emilia Romagna, Lombardia Pecorino Romano 3 Toscana, Lazio, Sardegna Pecorino Toscano 3 Toscana, Umbria, Lazio 3 Lombardia, Veneto, Piemonte Mozzarella di Bufala Campana 4 Campania, Lazio, Molise e Puglia Provolone Valpadana 4 Prov. aut. di Trento, Lombardia, Veneto, Emilia Romagna Caciocavallo Silano 5 Calabria, Campania, Molise, Puglia, Basilicata Grana Padano 5 Emilia Romagna, Lombardia, Piemonte, Prov. aut. di Trento, Veneto 11 Abruzzo, Emilia Romagna, Friuli-Venezia Giulia, Lazio, Lombardia, Marche, Piemonte, Toscana, Umbria, Molise, Veneto PDO Products Taleggio Salamini italiani alla cacciatora Category Cheese Based product meat The PDO/PGI link with the territory of origin PGI Products Category Cotechino Modena Zampone Modena Salame Cremona Mortadella Bologna Based product meat Vitellone bianco dell’Appennino Centrale Fresh meat Numbers of regions Regions involved 3 Emilia Romagna, Lombardia, Veneto, 3 Emilia Romagna, Lombardia, Veneto, 4 Lombardia, Emilia Romagna, Piemonte e Veneto 8 Emilia Romagna, Piemonte, Lombardia, Veneto, Marche, Lazio, Prov. Aut. Trento, Toscana 8 Emilia Romagna, Toscana, Marche, Abruzzo, Molise, Campania, Lazio, Umbria Which are the implications for: -Link whit the territory; -Link whit the agricultural phase; -Link whit the local production system; -Perceived quality and market destination; -Governance and marketing; The role of protection associations Organization applying for designation 140 76% 120 100 80 PGI PDO 60 40 14% 6% 20 3% 1% 1% 0 Consortia Association Committees Cooperatives Producer Associations Private firms The role of collective organizations: the representativenes of the supply - chain Firms registered total supply in chain Association s Farms Industries (dairies, factories, etc...) (a) 84.259 (b) 4.667 (c) 88.926 69 382 62 Incidence % Firms with certified product Incidence % (d) 8.310 (d/c) 9,3 (e) 8.337 (e/c) 9,4 451 328 72,7 235 52,1 15 77 54 70,1 48 62,3 6.621 265 6.886 406 5,9 390 5,7 37.111 33.704 2.297 1.618 39.408 35.322 3.045 4.109 7,7 11,6 1.977 1.086 5,0 3,1 6.583 76 6.659 246 3,7 4.520 67,9 3 106 28.197 3.576 13 1 1.912 679 16 107 30.109 4.255 20 102 24.295 2.685 125,0 95,3 80,7 63,1 13 68 6.268 2.697 81,3 63,6 20,8 63,4 38 188 226 128 56,6 127 56,2 10.251 627 10.878 10.465 96,2 261 2,4 Fruit, veg. and cereals 14.332 418 14.750 11.017 74,7 3.183 21,6 Total 112.456 6.579 119.035 32.605 27,4 14.605 12,3 Product category PDO Balsamic Vinegar Other meat products Processed meat Cheese Olive Oils Fruit, vegetables and cereals Bread Spices PGI Fresh meat Processed meat Olive Oils The role of Consortia: remarks Some PDO/PGI products refer to niche markets; some others are “large-scale” productions. The role of Consortia depends upon the characteristics of the PDO/PGI supply chain. Consortia do not necessarily represent all the producers of the primary sector. Consortia represent only some part of the supply chain. Consortia are not producer organisations. Consortia are not inter-professional organisations. Consortia cannot plan the production volumes. Specific actions of Consortia and marketing problems In red: responsibility of collective action Product Marketing mix Distribution • Retail channel • Retail strategies … • Quality, • Name and brand, Packaging, • Certification, • Services, Market Communication Price • Discounts • Payment conditions, • Etc. • Collective promotion • Retail promotion • Direct marketing The role of collective organisations: the marketing strategies collective brands versus firm brands The economic aspects and marketing strategies Gross Saleable Production at production level (Euro) PDO Balsamic Vinegar 4.207.291.547 GSP per firm (Euro) (member of Consortia) 1.011.323 Standard deviation of GSP per firm (Euro) 1.786.041 8.500.000 20.793 12.000 850.000 15.741 - Processed meat 1.233.769.215 1.035.163 2.105.737 Cheese 2.767.630.411 1.529.089 1.623.137 36.468.822 16.692 157.943.100 1.852.137 Bread 1.800.000 90.000 Spices 330.000 4.722 Other meat products Olive oils Fruit, vegetables and cereals PGI Fresh meat Processed meat Olive Oil Fruit, vegetables and cereals Total 728.021.623 1.062.003 33.000.000 14.300 493.809.380 3.456.065 37.553.152 3.588 163.659.091 43.086 4.935.313.171 1.028.601 22.790 4.127.318 2.750 2.324.591 8.864 3.172.669 100.138 1.979.559 The economic aspects and marketing strategies Designatio ns PDO PDO PDO PDO Product Volume of sales (€) % of Total Cumulative % Grana Padano (cheese) Prosciutto di Parma (ham) Parmigiano Reggiano (cheese) Mozzarella di Bufala Campana (cheese) Prosciutto di S. Daniele (ham) Gorgonzola (cheese) Mortadella Bologna (processed meat) 950,000,000 850,000,000 827,300,000 19.2 17.2 16.8 19.2 36.5 53.2 300,000,000 6.1 59.3 300,000,000 200,000,000 200,000,000 6.1 4.1 4.1 65.4 69.4 73.5 Bresaola della Valtellina (processed meat) Mela Val di Non (apples) 165,000,000 3.3 76.8 157,000,000 3.2 80.0 Mela Alto Adige o Sudtiroler Apfel (apples) Pecorino Romano (cheese) Asiago (cheese) Fontina (cheese) 120,000,000 2.4 82.5 105,175,936 95,000,000 93,370,725 2.1 1.9 1.9 84.6 86.5 88.4 Speck dell’ Alto Adige (processed meat) PDO Provolone Valpadana (cheese) Other Pdo products 91,000,000 1.8 90.2 41,697,000 0.8 91.1 287,747,886 5.8 6.7 152,021,623 3.1 3.1 4,935,313,171 100.0 PDO PDO PGI PGI PDO PGI PDO PDO PDO PGI Other Pgi products Total The economic aspects and marketing strategies The power on the role of collective brand The economic aspects and marketing strategies collective brands versus firm brands The economic aspects and marketing strategies Factors that contribute to influencing the adoption of a collective trademark policy “against” a company brand policy . The size of the companies compared to the competitors of the reference market and the presence of leader companies in the market segment. The level of homogeneity of the companies making up the Consortium. The added value of the product and the sector of the supply chain involved. Precise strategic choices and/or marketing policies. The characteristics of reference market, supply chain and the capacity of the companies are influencing the Consortium strategies. The economic aspects and marketing strategies Retail channel and product category. (Source: our elaboration of Qualivita data 2008) Direct selling PDO Balsamic Vinegar Other meat products Processed meat Cheese Olive Oil Fruit, vegetables and cereals Bakery products Spices PGI Fresh meat Other meat products Olive Oil Fruit, vegetables and cereals Total 26 25 5 8 24 45 32 11 13 16 0 20 20 17 23 Mod. Domesti Traditio Ho.Re.C dristribu c Export nal a tion Market 25 39 10 86 15 59 11 5 45 55 5 90 0 100 0 30 53 9 94 6 29 39 8 87 13 14 24 17 80 20 18 48 3 81 19 11 74 5 95 5 59 10 18 93 8 18 56 10 89 11 24 71 6 100 0 19 47 14 89 12 5 70 5 40 60 18 55 10 91 9 23 44 10 87 13 EU Non EU. 52 51 0 62 52 55 29 100 40 32 0 68 28 30 45 48 50 100 38 48 45 72 0 60 68 0 33 72 70 55 The economic aspects and marketing strategies Average Price of Production (€/kg-l) Average Price of Sale on the prevailing channel (€/kg-l) Increase (€) Increase (%) 20-40% 0,85 1,33 0,5 55,9 Mela Alto Adige o Sudtiroler Apfel (apples) 0,60 0,90 0,3 50,0 Mela Val di Non (apples) 1,10 1,75 0,7 59,1 40-60 % 6,10 11,47 5,4 88,0 Asiago (cheese) 4,27 9,36 5,1 119,2 15,00 27,50 12,5 83,3 Gorgonzola (cheese) 4,05 9,37 5,3 131,4 Mozzarella di Bufala Campana (cheese) 7,50 13,00 5,5 73,3 Parmigiano Reggiano (cheese) 8,44 12,46 4,0 47,6 Pecorino Romano (cheese) 4,30 8,25 4,0 91,9 Provolone Valpadana (cheese) 4,60 9,95 5,4 116,3 60-80 % 9,96 23,46 13,5 135,6 Prosciutto di Parma (ham) 7,42 26,64 19,2 259,0 12,50 25,75 13,3 106,0 Speck dell’Alto Adige (processed meat) n.a. 18,00 - - 80-100 % 5,52 10,19 4,7 84,6 Grana Padano (cheese) 5,52 10,19 4,7 84,6 Total 5,89 11,80 5,9 100,3 Product Volume commercialized at Gdo (First 15 products per turnover) Bresaola della Valtellina (processed meat) Prosciutto di San Daniele (ham) The economic aspects and marketing strategies Product category (Niche productions) PDO Average Price of Production (€/kg-l) Average Price of Sale on the prevailing channel (€/kg-l) Increase (€) Increase (%) 10,5 18,6 8,0 76,3 45,0 87,5 42,5 94,4 8,3 11,0 2,7 33,2 12,5 24,3 11,8 93,9 Cheese (kg) 7,0 11,9 4,9 70,9 Olive Oil (l.) 11,4 15,8 4,4 39,0 Fruit, vegetables and cereals (kg) 4,3 7,1 2,8 66,0 Bread (kg) 1,8 2,3 0,5 27,8 Spices (gr.) 7,5 9,0 1,5 20,3 PGI 4,6 8,5 3,9 83,9 Fresh meat (kg) 6,1 14,0 7,9 129,6 Processed meat (kg) 12,5 23,0 10,5 84,0 Olive Oil (l.) 10,4 12,0 1,6 15,4 Fruit, vegetables and cereals (kg) 3,6 7,4 3,8 105,8 Total 8,7 15,9 7,2 83,4 Balsamic Vinegar (bott. 100 ml) Other meat products (kg) Processed meat (kg) The economic aspects and marketing strategies Product category / Volume of products trade by big retailers (in %) Dop Processed meat 0-20 40-60 60-80 80-100 Cheese 0-20 20-40 40-60 60-80 80-100 Olive oil 0-20 20-40 40-60 60-80 80-100 Horticulture 0-20 40-60 80-100 Average Price of Production (€/kg-l) 11,0 13,8 20,7 13,3 8,8 12,0 8,2 8,5 8,3 8,4 6,3 6,9 10,1 10,7 9,8 9,4 12,0 7,2 3,7 5,5 4,2 1,4 Average Price of Sale on the Increase (€) prevailing channel (€/kg-l) 18,2 23,4 29,5 24,3 18,2 20,9 12,8 12,1 10,1 13,9 12,9 9,2 14,6 14,8 14,8 14,7 15,9 8,0 6,0 6,5 9,5 2,0 7,2 9,7 8,8 11,0 9,4 8,9 4,6 3,6 1,9 5,5 6,6 2,3 4,5 4,1 5,0 5,2 3,9 0,8 2,3 1,0 5,3 0,6 Increase (%) 65,4 70,3 42,5 82,5 107,1 74,5 56,2 42,3 22,4 64,9 103,4 33,6 44,6 37,8 50,7 55,3 32,4 11,4 62,2 18,2 126,2 42,9 The economic aspects and marketing strategies Product category / Volume of products trade by big retailers (in %) Production Retail price price (€/kg-l) (€/kg - l) Margin (in euro ) Margin ( in % ) PGI 5,1 9,3 4,2 81,8 Processed meat 10,3 21,5 11,2 109,3 0-20 18,0 50,0 32,0 177,8 60-80 11,0 21,0 10,0 90,9 Olive oil 10,0 12,0 2,0 20,0 80-100 10,0 12,0 2,0 20,0 Horticulture 4,3 7,7 3,5 81,1 0-20 7,9 12,8 4,9 62,1 20-40 12,3 18,2 5,8 47,3 40-60 1,7 2,7 1,0 56,1 60-80 2,2 4,3 2,0 91,1 80-100 2,6 5,3 2,7 102,9 Others products: total 9,0 15,2 6,2 68,8 A tentative of classification of Italian GI By non-hierarchical methodology based on k-means five indices applied to 98 Designations were obtained (R2= 0.75): • Cluster 1) Ratio between the number of companies with certified product and the total companies registered with protection consortia or associations (in %); Coordination; • Cluster 2) Ratio between the consumer price in the prevalent channel and the production price (in %); Market efficiency • Cluster 3) Volume of certified product sold by direct sales channel (in %); Market channel; • Cluster 4) Volume of certified product sold by traditional sales channel (in %); Market channel; • Cluster 5) Volume of certified product sold by modern distribution sales channel (in %); Market channel. A tentative of classification of Italian GI 1 High Value Chain Processed Cheese meat PDO PDO 13 3 2 2 Traditional retail TOTAL CLUSTER 1 TOTAL CLUSTER 2 Balsamic Processed Cheese vinegar meat PDO 32 2 3 Modern Distribution Others TOTAL CLUSTER 3 meat products PDO 41 1 4 Direct sales TOTAL CLUSTER 4 11 1 Fruit, vegetables and cereal Spices PDO PDO PDO PGI PDO 6 10 5 2 6 1 Fresh meat PGI 1 Cheese Olive oil PDO 2 PDO 5 Fruit, vegetables and cereal PDO 1 Olive oil PDO 5 Quality control and traditional retail TOTAL CLUSTER 5 Fruit, vegetables and cereal PDO PGI 2 6 Processed meat PDO 4 PGI 4 Fruit, vegetables and cereal PDO 1 PGI 3 Cheese PDO 7 Olive oil PDO 7 PGI 1 Fruit, vegetables and cereal PDO 2 PGI 13 Bread PDO 1 A tentative of classification of Italian GI 1 High Value Chain Processed Cheese meat PDO PDO 13 3 2 2 Traditional retail TOTAL CLUSTER 1 TOTAL CLUSTER 2 Balsamic Processed Cheese vinegar meat PDO 32 2 3 Modern Distribution Others TOTAL CLUSTER 3 meat products PDO 41 1 4 Direct sales TOTAL CLUSTER 4 11 1 Fruit, vegetables and cereal Spices PDO PDO PDO PGI PDO 6 10 5 2 6 1 Fresh meat PGI 1 Cheese Olive oil PDO 2 PDO 5 Fruit, vegetables and cereal PDO 1 Olive oil PDO 5 Quality control and traditional retail TOTAL CLUSTER 5 Fruit, vegetables and cereal PDO PGI 2 6 Processed meat PDO 4 PGI 4 Fruit, vegetables and cereal PDO 1 PGI 3 Cheese PDO 7 Olive oil PDO 7 PGI 1 Fruit, vegetables and cereal PDO 2 PGI 13 Bread PDO 1 C3 Bresaola della Valtellina (dried beef), Gorgonzola cheese, Grana Padano cheese, La Bella della Daunia (olives), Parmigiano Reggiano cheese, Pecorino Toscano cheese, Pomodoro di Pachino (tomatoes), Prosciutto di S. Daniele (ham), Riso Nano Vialone Veronese (rice), Salamini italiani alla cacciatora (mini salamis), Speck dell' Alto Adige (smoked ham), Uva da tavola di Canicattì (grapes),. A tentative of classification of Italian GI 1 High Value Chain Processed Cheese meat PDO PDO 13 3 2 2 Traditional retail TOTAL CLUSTER 1 TOTAL CLUSTER 2 Balsamic Processed Cheese vinegar meat PDO 32 2 3 Modern Distribution Others TOTAL CLUSTER 3 meat products PDO 41 1 4 Direct sales TOTAL CLUSTER 4 11 1 Fruit, vegetables and cereal Spices PDO PDO PDO PGI PDO 6 10 5 2 6 1 Fresh meat PGI 1 Cheese Olive oil PDO 2 PDO 5 Fruit, vegetables and cereal PDO 1 Olive oil PDO 5 Quality control and traditional retail TOTAL CLUSTER 5 Fruit, vegetables and cereal PDO PGI 2 6 Processed meat PDO 4 PGI 4 Fruit, vegetables and cereal PDO 1 PGI 3 Cheese PDO 7 Olive oil PDO 7 PGI 1 C2 Aceto Balsamico Tradizionale di Modena (balsamic vinegar), Asiago (cheese), Brisighella (olive oil), Caciocavallo Silano (cheese), Mozzarella di Bufala Campana (cheese), Fruit, vegetables and cereal PDO 2 PGI 13 Bread PDO 1 A tentative of classification of Italian GI 1 High Value Chain Processed Cheese meat PDO PDO 13 3 2 2 Traditional retail TOTAL CLUSTER 1 TOTAL CLUSTER 2 Balsamic Processed Cheese vinegar meat PDO 32 2 3 Modern Distribution Others TOTAL CLUSTER 3 meat products PDO 41 1 4 Direct sales TOTAL CLUSTER 4 11 1 Fruit, vegetables and cereal Spices PDO PDO PDO PGI PDO 6 10 5 2 6 1 Fresh meat PGI 1 Cheese Olive oil PDO 2 PDO 5 Fruit, vegetables and cereal PDO 1 Olive oil PDO 5 Quality control and traditional retail TOTAL CLUSTER 5 Fruit, vegetables and cereal PDO PGI 2 6 Processed meat PDO 4 PGI 4 Cheese PDO 7 Olive oil PDO 7 PGI 1 Fruit, vegetables and cereal PDO 2 PGI 13 Bread PDO 1 Fruit, vegetables and cereal PDO 1 PGI 3 C4 Alto Crotonese (olive oil), Canino (olive oil), Carciofo Romanesco del Lazio (artichokes), Collina di Brindisi (olive oil), Fagiolo di Lamon della Vallata Bellunese (beans), Formai de Mut dell' Alta Valle Brembana (cheese), Marrone di San Zeno (marron-chestnuts), Molise (olive oil), Murazzano (cheese), Scalogno di Romagna (shallots). A tentative of classification of Italian GI 1 High Value Chain Processed Cheese meat PDO PDO 13 3 2 2 Traditional retail TOTAL CLUSTER 1 TOTAL CLUSTER 2 Balsamic Processed Cheese vinegar meat PDO 32 2 3 Modern Distribution Others TOTAL CLUSTER 3 meat products PDO 41 1 4 Direct sales TOTAL CLUSTER 4 11 Fruit, vegetables and cereal PDO PGI 2 6 Olive oil 1 Spices PDO PDO PDO PGI PDO 6 10 5 2 6 1 Fresh meat PGI 1 Cheese Olive oil PDO 2 PDO 5 Processed meat PDO 4 PGI 4 Fruit, vegetables and cereal PDO 1 PGI 3 Fruit, vegetables and cereal PDO 1 Fruit, vegetables and cereal PDO 5 Quality control and traditional retail TOTAL CLUSTER 5 C1. Fiore Sardo (cheese), Fungo di Borgotaro (mushrooms), Kiwi Latina, Limone Costa d'Amalfi (lemons), Prosciutto di Modena (ham), Prosciutto di Parma (ham), Prosciutto Toscano (ham). C5 Mela Val di Non Cheese PDO 7 Olive oil PDO 7 PGI 1 Fruit, vegetables and cereal PDO 2 PGI 13 Bread PDO 1 A tentative of classification of Italian GI 1 High Value Chain Processed Cheese meat PDO PDO 13 3 2 2 Traditional retail TOTAL CLUSTER 1 TOTAL CLUSTER 2 Balsamic Processed Cheese vinegar meat PDO 32 2 3 Modern Distribution Others TOTAL CLUSTER 3 meat products PDO 41 1 4 Direct sales TOTAL CLUSTER 4 11 Fruit, vegetables and cereal PDO PGI 2 6 Olive oil 1 Spices PDO PDO PDO PGI PDO 6 10 5 2 6 1 Fresh meat PGI 1 Cheese Olive oil PDO 2 PDO 5 Processed meat PDO 4 PGI 4 Fruit, vegetables and cereal PDO 1 PGI 3 Fruit, vegetables and cereal PDO 1 Fruit, vegetables and cereal PDO 5 Quality control and traditional retail TOTAL CLUSTER 5 C1. Fiore Sardo (cheese), Fungo di Borgotaro (mushrooms), Kiwi Latina, Limone Costa d'Amalfi (lemons), Prosciutto di Modena (ham), Prosciutto di Parma (ham), Prosciutto Toscano (ham). C5 Mela Val di Non Cheese PDO 7 Olive oil PDO 7 PGI 1 C2 Aceto Balsamico Tradizionale di Modena (balsamic vinegar), Asiago (cheese), Brisighella (olive oil), Caciocavallo Silano (cheese), Mozzarella di Bufala Campana (cheese), Fruit, vegetables and cereal PDO 2 PGI 13 Bread PDO 1 C3 Bresaola della Valtellina (dried beef), Gorgonzola cheese, Grana Padano cheese, La Bella della Daunia (olives), Parmigiano Reggiano cheese, Pecorino Toscano cheese, Pomodoro di Pachino (tomatoes), Prosciutto di S. Daniele (ham), Riso Nano Vialone Veronese (rice), Salamini italiani alla cacciatora (mini salamis), Speck dell' Alto Adige (smoked ham), Uva da tavola di Canicattì (grapes),. C4 Alto Crotonese (olive oil), Canino (olive oil), Carciofo Romanesco del Lazio (artichokes), Collina di Brindisi (olive oil), Fagiolo di Lamon della Vallata Bellunese (beans), Formai de Mut dell' Alta Valle Brembana (cheese), Marrone di San Zeno (marron-chestnuts), Molise (olive oil), Murazzano (cheese), Scalogno di Romagna (shallots). Conclusion • Do exist a rather varied picture of GI products, where designation of origin, as such, provides only partial information to consumers and is certainly not a guarantee of success; • The distinction between PDO and PGI is not relevant in term of market efficiency, while is important product differentiation; • PDO / PGI food chains need commercial strategy and coordination; • Which organization should act in order to improve the market efficiency of GI producers on modern market?