1. Would You Accept the Challenge of Creating the Next Champagne
Would You Accept the Challenge of Creating the Next Champagne? International Business Strategies for Developing Country Geographical Indications
William A. Kerr
Department of Bioresource Policy, Business and Economics
University of Saskatchewan, Canada
and
May T. Yeung
MBA – Aberystwyth University
Estey Centre for Law and Economics in International Trade
Canada
Presented to: School of Management and Business, Aberystwyth University, February 2012

2. Geographical Indications
Geographical indications (GI) impart exclusive rights to market designated products from a specified geographic area
Well known examples are Champagne, Scotch Whiskey, Port, Parma ham, Roquefort
Originally based on Terroir - something unique associated with the physical attributes of the soil and/or water (possibly in interaction with climate or other natural phenomenon)
Uniqueness based on Credence Attributes
Require legal protection from the government – granted intellectual property status

3. Some Well Known Geographical Indications

4. Geographical Indications – The EU Strategy
An important pillar of EU rural development policy
EU now has about 5000 registered indications with new registrations growing rapidly – 300 in process

5. Geographical Indications – The EU Strategy
The EU strategy has also been to expand eligibility beyond Terroir to include local traditional production methods
Categories of GIs in the EU:
Protected Designation of Origin (PDO)
mandates that the product must be produced AND processed in the geographical area
Protected Geographical Indication (PGI)
the product must be produced OR processed in the geographical area

6. Geographical Indications – The EU Strategy
While the EU’s domestic market is an important element of the EU GI strategy, realizing the full potential benefits of GIs requires the extension of GI protection into the international marketplace
The international protection of intellectual property is governed by the World Trade Organization’s (WTO) Agreement on Trade Related Aspects of Intellectual Property (TRIPS)
Currently, protection for wines and spirits is relatively strong but very weak for other products

7. Geographical Indications
Increased international protection of GIs is a major issue for the EU
“In the EU, GIs are an integral part of the strategy for returning the agricultural sector to competitiveness” (Josling, JAE, 2006, p. 359)
Commitment to negotiate on GIs is part of the Doha Ministerial declaration pertaining to TRIPS – but no progress
EU has been making stronger GI protection part of its regional trade agreements – e.g. Southern Africa, South Korea, Canada, etc.

8. Geographical Indications
The EU needs allies at the WTO to achieve its goal of strengthening GI protection
It has been trying to secure the support of developing countries
It has been:
Suggesting that GIs are a viable development strategy
Offering protection for developing country GIs in the EU market in exchange for developing countries protecting EU GIs

9. Are GIs a viable development strategy?
This is a question for International Business Professionals to answer
The interface of International Business and Public Policy
If you were asked, as a member of the business community in a developing country, should the government support the EU at the WTO/or grant GI recognition in a trade agreement with the EU, what would you advise?

10. Are GIs a viable development strategy?
If a product is granted legal status as a Geographical Indication then it will have a monopoly in the market
Barriers to entry for competitors
Marketing can be used to increase demand for the product

11. Clawbacks and Greenfields
Some GIs have a considerable profile with consumers but do not have GI protection because they are considered generic terms in some markets – Port, Parma Ham, Feta Cheese, Burgundy
If these terms could be given protection – clawed back – there may be considerable monopoly rents that could be captured
Developing countries have few products that have sufficient profile with consumers in developed countries that clawbacks would yield easily obtainable monopoly rents – Darjeeling tea?, Basmati Rice?
Most developing country products would be faced with a greenfield development of a GI profile with consumers in developed countries

12. Acquiring and defending the GI
Gaining recognition/
registration of GI
Link with quality and GI
Consumer willingness to pay
Consumer education
Timing and competitors
Objections
Defending/enforcement of GI
Monitoring
Passing off
Legal recourse
Contingency plans
Recalls
Disaster management
Safety
Recognition + Enforcement = Exclusivity

13. Establishment & Promotion
GI’s require an effective & complete marketing plan
Introductory stage
Build awareness & provide information
Value of GI
Origin and why its special
How to prepare, use, enjoy
Usually takes a long time

14. Samples of Prospective Products for GI Protection from Developing Countries
Sambhalpuri cotton
Alphonso mangoes
Pochampalli silk
Feni
Wyanadan tumeric
Multani Sohan Halwa
Nehari
Gathuthi tea,
Ngoc Linh
Buon Ma Thuot
Hoa Loc
Kisii tea, Kericho tea (Kenya)
Bosung Green tea, Cheongan Chestnut (South Korea)
Korla Fragrant Pear, Hami Melon (China)

15. Exotic GI’s
What is the fruit
What are its special properties
What does the logo mean
Korla Fragrant Pear
First cultivated 1500 years ago in Xinjiang Province in China
SAIC (State Administration for Industry and Commerce) trademarked GI in China
To the uninitiated consumer, its just another pear and another logo

16. Establishment & Promotion
Sustainability phase
Promote sustained consumption beyond novelty consumption
Counter competitors’ duplicates or passing off
Exact duplicates can be legitimate so long as they don’t use the GI
Hire marketing expertise

17. Marketing Expertise Successful brand development without a GI
Tea isn’t grown in Britain but this is a highly regarded brand

18. GI vs. Marketing Expertise
Coffee is not grown in Canada, but this is really good coffee with a great brand and no GI

19. GI information alone can’t “sell” a product

20. Marketing a GI

21. Legitimate competition

22. Quality, Reputation and Cheating
Stringent quality Control & reputation preservation
Collective support of standards
Internal enforcement of standards
Group dynamics
Internal disputes
Maintain quality
Performance and integrity
Proactive supply chain management
Value chain relationships
Protect reputation
Equitable distribution of returns
Quality assurance
Information flows
Monitoring and incentives
Stake in success of GI
Value chain buy in
Protect quality and reputation of product
Transportation, storage, retail, reporting of problems

23. Dealing with Success Managing Change
Success = need to expand
Adapt/improve product to consumer requirements
New entrants with new production, standards or marketing ideas
New regulations
Tradition vs innovation
Philosophy and values
Anticipate that demands change may take place and have a means to adapt

24. Would You Accept the Challenge of Creating the Next Champagne?
Questions for you:
What do you think the probability of creating a successful greenfield GI from a developing country in a developed country’s market?
What would you advise a developed country government regarding supporting the EU on GIs?

25. Conclusions
Any business plan must be long term and have a dynamic element
There needs to be a mechanism to manage the entire supply chain
Threats to the monopoly will come as a result of initial success
Greenfield establishment of GIs in foreign markets is a very risky development strategy

26. Thank you If you are interested:
Yeung, M.T. and W.A. Kerr (2011) Are Geographical Indications a Wise Strategy for Developing Country Farmers?, Journal of World Intellectual Property, 14 (5):
Giovannucci, D., T. Josling, W.A. Kerr, B. O’Connor and M.T. Yeung (2009) Guide to Geographical Indications – Linking Products and Their Origins, Geneva: International Trade Centre, 207pp.