The Seal of Quality - - A New, Market-Oriented Agricultural Development Tool Association for International Agriculture and Rural Development Washington, D.C. June 7-8, 2004 By Kristin Penn International Development Division Land O’Lakes, Inc.

2 Topics Brief Introduction to Land O’Lakes The Seal of Quality Concept SOQ Case Study – Macedonia Program Implementation Lessons Learned

3 Land O’Lakes - Since 1921 Integrated and diversified national cooperative with more than 300,000 farmer-members A national leader in: Deli cheese Butter Eggs Feed Seed Plant food Crop protection products

4 Land O’Lakes International Development Works within agricultural and food systems in developing countries Implement a customized approach to address country-specific impediments to economic growth. For example: Uganda - value adding and consumer marketing Montenegro - access to services Colombia - market-driven alternative

The Seal of Quality Concept

6 Growth Impediments Scenario +- + Abundant natural resources +Surplus human resources -Underutilized facilities - Policy failures = a degraded system with low capacity utilization, low productivity, minimal product value, poor product quality and minimal market and consumer information

7 A Solution – Seal of Quality Targeted technical assistance aimed at marketing chain impediments Expedites producer’s competitive potential and access to local and export markets Provides a link between lowest- and high-potential producers, processors, retailers and consumers for positive impacts throughout the market chain

8 The SOQ Concept Relentless consumer-based focus on product quality Seal award to firms who comply with and adhere to strict quality standards Strict and transparent scientific and systematic compliance measures, tested independently Seal and award process are “owned” and controlled by producers and processors

9 Key SOQ Concept Variables Existing market constraints Consumer sophistication and understanding Target country market conditions Availability of unutilized production Processing capacity for market growth Production process quality control Availability of commercial protections for effective process control

SOQ Case Study - Macedonia

11 The Situation Low productivity Fragmented marketing chain Termination of Soviet production subsidies and traditional markets Collapse of former state-run firms New firms with limited products, substandard packaging, inconsistent quality, lack of standardization and branding

12 The Needs Transparent systems for production certification and compliance monitoring and enforcement Technical assistance to enable overall efficiencies and profitability in manufacturing and marketing Consumer awareness and confidence in the Seal of Quality to increase demand

13 Implementation Formation of the National Association of Private Meat and Dairy Processors Development of transparent procedures and voluntary quality standards for certification Establishment of an independent food testing laboratory

14 8-Step Certification Process 1.Membership and product seal application 2.Adoption of standard production procedure 3.Processor’s plant inspection 4.Product testing at project laboratory 5.Product testing at State Veterinary Institute Laboratory 6.Sensory testing by independent certifying board 7.Test review and determination by certification board 8.Test procedure verification and seal award

15 SOQ as Marketing Tool Marketing campaign based on consumer survey Introductory PR campaign and pilot program  National promotional campaign  seal introduction  awareness building  deepening understanding  changing consumer behavior  reminding consumers  reinforcing consumer habits and awareness

16 The Results The meat processing industry tripled; the dairy industry increased by 44 percent Forty companies expanded their product lines by a total of 162 new products Processors cumulatively invested over $20 million in their facilities Processors and retailers form 223 new strategic partnerships Client firms reduced production costs by 50 percent SOQ certification was awarded to 37 firms for 205 products

17 Lessons Learned Ensure industry ownership of the program Require greater cost-sharing from project on-set Avoid threats to state labs Provide producer assistance through SOQ processors Deepen public understanding of the SOQ process Strengthen reinforcement of SOQ usage Use retail assistance to help ensure SOQ product quality Application of SOQ concept to low-income producers

18 Conclusions Focus on sustainability of certification association Expansion of program to other sectors Assistance to meet EU ascension policies Program expansion to Albania, Honduras and several East African countries.