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GIs products, governance and price dynamics: Some evidence from Italy. FAO, Rome, May 24 2010 Filippo Arfini Department of Economics, University of Parma,

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Presentation on theme: "GIs products, governance and price dynamics: Some evidence from Italy. FAO, Rome, May 24 2010 Filippo Arfini Department of Economics, University of Parma,"— Presentation transcript:

1 GIs products, governance and price dynamics: Some evidence from Italy. FAO, Rome, May 24 2010 Filippo Arfini Department of Economics, University of Parma, Italy Filippo.arfini@unipr.it

2 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?

3 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?

4 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.

5 The PDO/PGI link with the territory of origin PDO per province PGI per province

6 The PDO/PGI link with the territory of origin Olive Oil Horticulture and cereal Cheese

7 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.

8 The PDO/PGI link with the territory of origin PDO ProductsCategory Numbers of regions Regions involved Asiago Cheese 2Prov. aut. di Trento, Veneto Gorgonzola2Piemonte, Lombardia Montasio2Veneto, Friuli Venezia Giulia Parmigiano Reggiano2Emilia Romagna, Lombardia Pecorino Romano3Toscana, Lazio, Sardegna Pecorino Toscano3Toscana, Umbria, Lazio Taleggio3Lombardia, Veneto, Piemonte Mozzarella di Bufala Campana 4Campania, Lazio, Molise e Puglia Provolone Valpadana4 Prov. aut. di Trento, Lombardia, Veneto, Emilia Romagna Caciocavallo Silano5Calabria, Campania, Molise, Puglia, Basilicata Grana Padano5 Emilia Romagna, Lombardia, Piemonte, Prov. aut. di Trento, Veneto Salamini italiani alla cacciatora Based product meat 11 Abruzzo, Emilia Romagna, Friuli-Venezia Giulia, Lazio, Lombardia, Marche, Piemonte, Toscana, Umbria, Molise, Veneto

9 The PDO/PGI link with the territory of origin 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; PGI ProductsCategory Numbers of regions Regions involved Cotechino Modena Based product meat 3Emilia Romagna, Lombardia, Veneto, Zampone Modena 3Emilia Romagna, Lombardia, Veneto, Salame Cremona 4Lombardia, Emilia Romagna, Piemonte e Veneto Mortadella Bologna 8 Emilia Romagna, Piemonte, Lombardia, Veneto, Marche, Lazio, Prov. Aut. Trento, Toscana Vitellone bianco dellAppennino Centrale Fresh meat8 Emilia Romagna, Toscana, Marche, Abruzzo, Molise, Campania, Lazio, Umbria

10 The role of protection associations 76% 14% 3% 6% 1%

11 Product category Farms Industries (dairies, factories, etc...) total supply chain Firms registered in Association s Incidence % Firms with certified product Incidence % (a)(b)( c )(d)(d/c)(e)(e/c) PDO84.2594.66788.9268.3109,38.3379,4 Balsamic Vinegar 6938245132872,723552,1 Other meat products 6215775470,14862,3 Processed meat 6.6212656.8864065,93905,7 Cheese37.1112.29739.4083.0457,71.9775,0 Olive Oils33.7041.61835.3224.10911,61.0863,1 Fruit, vegetables and cereals 6.583766.6592463,74.52067,9 Bread3131620125,01381,3 Spices106110710295,36863,6 PGI28.1971.91230.10924.29580,76.26820,8 Fresh meat3.5766794.2552.68563,12.69763,4 Processed meat 3818822612856,612756,2 Olive Oils10.25162710.87810.46596,22612,4 Fruit, veg. and cereals 14.33241814.75011.01774,73.18321,6 Total112.4566.579119.03532.60527,414.60512,3 The role of collective organizations: the representativenes of the supply - chain

12 The role of Consortia: remarks Consortia do not necessarily represent all the producers of the primary sector. Consortia represent only some part of the 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. Consortia are not producer organisations. Consortia are not inter-professional organisations. Consortia cannot plan the production volumes. 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. 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.

13 Specific actions of Consortia and marketing problems Marketing mix Market Product Quality, Name and brand, Packaging, Certification, Services, Price Discounts Payment conditions, Etc. Distribution Retail channel Retail strategies … Communication Collective promotion Retail promotion Direct marketing In red: responsibility of collective action

14 collective brands versus firm brands The role of collective organisations: the marketing strategies

15 The economic aspects and marketing strategies Gross Saleable Production at production level (Euro) GSP per firm (Euro) (member of Consortia) Standard deviation of GSP per firm (Euro) PDO4.207.291.5471.011.3231.786.041 Balsamic Vinegar8.500.00020.79312.000 Other meat products850.00015.741- Processed meat1.233.769.2151.035.1632.105.737 Cheese2.767.630.4111.529.0891.623.137 Olive oils36.468.82216.69222.790 Fruit, vegetables and cereals157.943.1001.852.1374.127.318 Bread1.800.00090.000- Spices330.0004.7222.750 PGI728.021.6231.062.0032.324.591 Fresh meat33.000.00014.3008.864 Processed meat493.809.3803.456.0653.172.669 Olive Oil37.553.1523.588- Fruit, vegetables and cereals163.659.09143.086100.138 Total4.935.313.1711.028.601 1.979.559

16 The economic aspects and marketing strategies Designatio ns Product Volume of sales () % of TotalCumulative % PDO Grana Padano (cheese) 950,000,00019.2 PDO Prosciutto di Parma (ham) 850,000,00017.236.5 PDO Parmigiano Reggiano (cheese) 827,300,00016.853.2 PDOMozzarella di Bufala Campana (cheese) 300,000,0006.159.3 PDO Prosciutto di S. Daniele (ham) 300,000,0006.165.4 PDO Gorgonzola (cheese) 200,000,0004.169.4 PGI Mortadella Bologna (processed meat) 200,000,0004.173.5 PGI Bresaola della Valtellina (processed meat) 165,000,0003.376.8 PDO Mela Val di Non (apples) 157,000,0003.280.0 PGI Mela Alto Adige o Sudtiroler Apfel (apples) 120,000,0002.482.5 PDO Pecorino Romano (cheese) 105,175,9362.184.6 PDO Asiago (cheese) 95,000,0001.986.5 PDO Fontina (cheese) 93,370,7251.988.4 PGI Speck dell Alto Adige (processed meat) 91,000,0001.890.2 PDO Provolone Valpadana (cheese) 41,697,0000.891.1 Other Pdo products 287,747,8865.86.7 Other Pgi products 152,021,6233.1 Total 4,935,313,171100.0

17 The power on the role of collective brand The economic aspects and marketing strategies

18 collective brands versus firm brands The economic aspects and marketing strategies

19 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.

20 The economic aspects and marketing strategies Direct selling Traditio nal Mod. dristribu tion Ho.Re.C a Domesti c Market ExportEU Non EU. PDO2625391086155248 Balsamic Vinegar255911545555150 Other meat products5590010000 Processed meat8305399466238 Cheese242939887135248 Olive Oil4514241780205545 Fruit, vegetables and cereals321848381192972 Bakery products11 7459551000 Spices135910189384060 PGI1618561089113268 Fresh meat024716100000 Other meat products2019471489126833 Olive Oil20570540602872 Fruit, vegetables and cereals171855109193070 Total23 441087134555 Retail channel and product category. (Source: our elaboration of Qualivita data 2008)

21 The economic aspects and marketing strategies Product Volume commercialized at Gdo (First 15 products per turnover) Average Price of Production (/kg-l) Average Price of Sale on the prevailing channel (/kg-l) Increase () Increase (%) 20-40%0,851,330,555,9 Mela Alto Adige o Sudtiroler Apfel (apples)0,600,900,350,0 Mela Val di Non (apples)1,101,750,759,1 40-60 %6,1011,475,488,0 Asiago (cheese)4,279,365,1119,2 Bresaola della Valtellina (processed meat)15,0027,5012,583,3 Gorgonzola (cheese)4,059,375,3131,4 Mozzarella di Bufala Campana (cheese)7,5013,005,573,3 Parmigiano Reggiano (cheese)8,4412,464,047,6 Pecorino Romano (cheese)4,308,254,091,9 Provolone Valpadana (cheese)4,609,955,4116,3 60-80 %9,9623,4613,5135,6 Prosciutto di Parma (ham)7,4226,6419,2259,0 Prosciutto di San Daniele (ham)12,5025,7513,3106,0 Speck dellAlto Adige (processed meat)n.a.18,00-- 80-100 %5,5210,194,784,6 Grana Padano (cheese)5,5210,194,784,6 Total5,8911,805,9100,3

22 The economic aspects and marketing strategies Product category (Niche productions) Average Price of Production (/kg-l) Average Price of Sale on the prevailing channel (/kg-l) Increase () Increase (%) PDO10,518,68,076,3 Balsamic Vinegar (bott. 100 ml)45,087,542,594,4 Other meat products (kg)8,311,02,733,2 Processed meat (kg)12,524,311,893,9 Cheese (kg)7,011,94,970,9 Olive Oil (l.)11,415,84,439,0 Fruit, vegetables and cereals (kg)4,37,12,866,0 Bread (kg)1,82,30,527,8 Spices (gr.)7,59,01,520,3 PGI4,68,53,983,9 Fresh meat (kg)6,114,07,9129,6 Processed meat (kg)12,523,010,584,0 Olive Oil (l.)10,412,01,615,4 Fruit, vegetables and cereals (kg)3,67,43,8105,8 Total8,715,97,283,4

23 The economic aspects and marketing strategies Product category / Volume of products trade by big retailers (in %) Average Price of Production (/kg-l) Average Price of Sale on the prevailing channel (/kg-l) Increase () Increase (%) Dop 11,0 18,2 7,2 65,4 Processed meat 13,8 23,4 9,7 70,3 0-20 20,7 29,5 8,8 42,5 40-60 13,3 24,3 11,0 82,5 60-80 8,8 18,2 9,4 107,1 80-100 12,0 20,9 8,9 74,5 Cheese 8,2 12,8 4,6 56,2 0-20 8,5 12,1 3,6 42,3 20-40 8,3 10,1 1,9 22,4 40-60 8,4 13,9 5,5 64,9 60-80 6,3 12,9 6,6 103,4 80-100 6,9 9,2 2,3 33,6 Olive oil 10,1 14,6 4,5 44,6 0-20 10,7 14,8 4,1 37,8 20-40 9,8 14,8 5,0 50,7 40-60 9,4 14,7 5,2 55,3 60-80 12,0 15,9 3,9 32,4 80-100 7,2 8,0 0,8 11,4 Horticulture 3,7 6,0 2,3 62,2 0-20 5,5 6,5 1,0 18,2 40-60 4,2 9,5 5,3 126,2 80-100 1,4 2,0 0,6 42,9

24 The economic aspects and marketing strategies Product category / Volume of products trade by big retailers (in %) Production price (/kg - l) Retail price (/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

25 A tentative of classification of Italian GI By non-hierarchical methodology based on k-means five indices applied to 98 Designations were obtained (R 2 = 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.

26 A tentative of classification of Italian GI 1 High Value Chain TOTAL CLUSTER 1 Processed meat Cheese Fruit, vegetables and cereal PDO PGI 133226 2 Traditional retail TOTAL CLUSTER 2 Balsamic vinegar Processed meat CheeseOlive oil Fruit, vegetables and cereal Spices PDO PGIPDO 3226105261 3 Modern Distribution TOTAL CLUSTER 3 Others meat products Fresh meat Processed meatCheeseOlive oil Fruit, vegetables and cereal Bread PDOPGIPDOPGIPDO PGIPDOPGIPDO 4111447712131 4 Direct sales TOTAL CLUSTER 4CheeseOlive oil Fruit, vegetables and cereal PDO PGI 112513 5 Quality control and traditional retail TOTAL CLUSTER 5 Fruit, vegetables and cereal PDO 11

27 A tentative of classification of Italian GI 1 High Value Chain TOTAL CLUSTER 1 Processed meat Cheese Fruit, vegetables and cereal PDO PGI 133226 2 Traditional retail TOTAL CLUSTER 2 Balsamic vinegar Processed meat CheeseOlive oil Fruit, vegetables and cereal Spices PDO PGIPDO 3226105261 3 Modern Distribution TOTAL CLUSTER 3 Others meat products Fresh meat Processed meatCheeseOlive oil Fruit, vegetables and cereal Bread PDOPGIPDOPGIPDO PGIPDOPGIPDO 4111447712131 4 Direct sales TOTAL CLUSTER 4CheeseOlive oil Fruit, vegetables and cereal PDO PGI 112513 5 Quality control and traditional retail TOTAL CLUSTER 5 Fruit, vegetables and cereal PDO 11 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),.

28 A tentative of classification of Italian GI 1 High Value Chain TOTAL CLUSTER 1 Processed meat Cheese Fruit, vegetables and cereal PDO PGI 133226 2 Traditional retail TOTAL CLUSTER 2 Balsamic vinegar Processed meat CheeseOlive oil Fruit, vegetables and cereal Spices PDO PGIPDO 3226105261 3 Modern Distribution TOTAL CLUSTER 3 Others meat products Fresh meat Processed meatCheeseOlive oil Fruit, vegetables and cereal Bread PDOPGIPDOPGIPDO PGIPDOPGIPDO 4111447712131 4 Direct sales TOTAL CLUSTER 4CheeseOlive oil Fruit, vegetables and cereal PDO PGI 112513 5 Quality control and traditional retail TOTAL CLUSTER 5 Fruit, vegetables and cereal PDO 11 C2 Aceto Balsamico Tradizionale di Modena (balsamic vinegar), Asiago (cheese), Brisighella (olive oil), Caciocavallo Silano (cheese), Mozzarella di Bufala Campana (cheese),

29 A tentative of classification of Italian GI 1 High Value Chain TOTAL CLUSTER 1 Processed meat Cheese Fruit, vegetables and cereal PDO PGI 133226 2 Traditional retail TOTAL CLUSTER 2 Balsamic vinegar Processed meat CheeseOlive oil Fruit, vegetables and cereal Spices PDO PGIPDO 3226105261 3 Modern Distribution TOTAL CLUSTER 3 Others meat products Fresh meat Processed meatCheeseOlive oil Fruit, vegetables and cereal Bread PDOPGIPDOPGIPDO PGIPDOPGIPDO 4111447712131 4 Direct sales TOTAL CLUSTER 4CheeseOlive oil Fruit, vegetables and cereal PDO PGI 112513 5 Quality control and traditional retail TOTAL CLUSTER 5 Fruit, vegetables and cereal PDO 11 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).

30 A tentative of classification of Italian GI 1 High Value Chain TOTAL CLUSTER 1 Processed meat Cheese Fruit, vegetables and cereal PDO PGI 133226 2 Traditional retail TOTAL CLUSTER 2 Balsamic vinegar Processed meat CheeseOlive oil Fruit, vegetables and cereal Spices PDO PGIPDO 3226105261 3 Modern Distribution TOTAL CLUSTER 3 Others meat products Fresh meat Processed meatCheeseOlive oil Fruit, vegetables and cereal Bread PDOPGIPDOPGIPDO PGIPDOPGIPDO 4111447712131 4 Direct sales TOTAL CLUSTER 4CheeseOlive oil Fruit, vegetables and cereal PDO PGI 112513 5 Quality control and traditional retail TOTAL CLUSTER 5 Fruit, vegetables and cereal PDO 11 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

31 A tentative of classification of Italian GI 1 High Value Chain TOTAL CLUSTER 1 Processed meat Cheese Fruit, vegetables and cereal PDO PGI 133226 2 Traditional retail TOTAL CLUSTER 2 Balsamic vinegar Processed meat CheeseOlive oil Fruit, vegetables and cereal Spices PDO PGIPDO 3226105261 3 Modern Distribution TOTAL CLUSTER 3 Others meat products Fresh meat Processed meatCheeseOlive oil Fruit, vegetables and cereal Bread PDOPGIPDOPGIPDO PGIPDOPGIPDO 4111447712131 4 Direct sales TOTAL CLUSTER 4CheeseOlive oil Fruit, vegetables and cereal PDO PGI 112513 5 Quality control and traditional retail TOTAL CLUSTER 5 Fruit, vegetables and cereal PDO 11 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),. C2 Aceto Balsamico Tradizionale di Modena (balsamic vinegar), Asiago (cheese), Brisighella (olive oil), Caciocavallo Silano (cheese), Mozzarella di Bufala Campana (cheese), 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). 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). C5 Mela Val di Non

32 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?


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