2. POs and PDOs: A Tale of Two Marketing Models Tim Josling Stanford University

3. Josling Cal/Med Sonoma2 Introduction (Lower Expectations) The Policy Context of POs The Policy Context of PDOs Complements or Substitutes? Transferability of marketing models Conclusions?

4. Josling Cal/Med Sonoma3 The Policy Context of POs First Session discussed role of POs in EU Fruit and Vegetable Regime No exact equivalent in California Satisfy several policy needs –State supported intervention in diverse markets –Encouragement of producer disciplines –Channel for funds for F&V producers (South) –Countervailing power (against supermarkets)

5. Josling Cal/Med Sonoma4 The Policy Context of PDOs Pierre has/will describe a PDO/PGI, and the Institutions that register/monitor the GI Some interest in California in PDOs but little/no encouragement from policy instruments (State or Federal) EU PDOs satisfy three policy needs –Main instrument for “quality” improvement –Regional identity and development of tourism –Capture of rents from product differentiation

6. Josling Cal/Med Sonoma5 Complements or Substitutes? POs associated with “old” CAP –More appropriate for oversupplied markets? –More appropriate for undifferentiated commodities? PDOs associated with “new” CAP –Encouraging demand rather than reducing supply? –Extracting rents from differentiation?

7. Josling Cal/Med Sonoma6 Complements or Substitutes? But POs are now encouraged to promote product in their operational programs They can target children in fruits and vegetables promotion (fits in with nutrition policy) They can distribute freely to schools, hospitals, up to five percent of the marketed quantity (cost paid by EU) They must devote 10 percent of their OP to environmental measures (as well as cross- compliance) Co-financing of organic production (60 percent)

8. Josling Cal/Med Sonoma7 Complements or Substitutes? And PDOs tend to (and are sometimes encouraged to) control supply Depend on control of competitive products from at home or abroad No financial transfers to PDOs, but assistance for registration process

9. Josling Cal/Med Sonoma8 Complements or Substitutes? POs are often quite small –majority have less than 50 members –median VMP is 4 mill euro –Mean is 10 million euro – pulled up by large Dutch POs –Spend about 6 per cent of VMP on Operational Funds (including withdrawal)

10. Josling Cal/Med Sonoma9 Complements or Substitutes? POs can join with other POs (PGs, APOs, and transnational POs) Large firms can use POs for disposal of surplus production PDOs limited by geographical identity: cooperation with other PDOs problematic PDOs challenged by large firms preferring their individual reputation and greater control

11. Josling Cal/Med Sonoma10 Complements or Substitutes? Financial assistance for POs is still mainly for fresh Fruits and Vegetables (though processed tomatoes eligible) Products with separate CMOs (olives, wine, potatoes) are not supported through F&V POs PDOs are more common in wine, meats and cheeses, though in some countries they are widely established for fruits and vegetables PDOs often do include products with separate CMOs

12. Josling Cal/Med Sonoma11 Complements or Substitutes? POs are dominant in Belgium and the Netherlands (<70 % organized) and widespread in France (46 %) Share of POs in Ireland and the UK increasing rapidly (above 50 percent) Almost none in Portugal, Greece and Finland Spain has many small POs (41% of EU total) Italy is less than 30 percent “organized”

13. Josling Cal/Med Sonoma12 Complements or Substitutes? PDOs for F&V are most common in Italy (47), France and Spain (25 each), Portugal (22), and Greece (21) Very few F&V PDOs in Austria, UK, Germany, Denmark, Netherlands, Finland PDOs least common in Ireland, Belgium, Poland, Sweden and Slovenia (0)

14. Josling Cal/Med Sonoma13 Transferability of marketing models Do marketing models (POs and PDOs) transfer to other countries or regions? Within EU, some evidence of POs spreading: –Policies to encourage their establishment successful in UK, Ireland –Attempts to try to increase share of farm sales that go through PO not very effective in France, Italy, Spain –Easing of restrictions on POs has been necessary to increase attractiveness –But additional obligations may have offset that effect

15. Josling Cal/Med Sonoma14 Transferability of marketing models PDOs have spread in some countries –government encouragement (e.g. UK “European Food Names” promotion) –Set up registry points, inspection bodies No expansion of PDOs in other member states (Belgium, Netherlands) F&V PDOs still mainly in France, Spain, Italy, along with Greece and Portugal

16. Josling Cal/Med Sonoma15 Conclusions? For fruit and vegetable marketing a choice exists between a “non-exclusive” collective marketing agency with government funding (PO) or an “exclusive” production/marketing club that aims to reduce competition and develop reputation (PDO) Where POs are dominant, PDOs seem to offer nothing (Belgium and Holland) Where products have not historically been “locally” identified then PDOs offer little (UK, Ireland, Northern EU)

17. Josling Cal/Med Sonoma16 Conclusions? Where producers are only partially organized, and CMOs are less protective, PDOs seem to offer scope for product differentiation Needs to be based on more comprehensive quality control and local and reputational attributes (France, Spain, Italy, Portugal, Greece) Reward is rents from differentiation rather than EU financing for market (crisis) management

18. Josling Cal/Med Sonoma17 Conclusions? POs and PDOs will continue to co-exist (complementary) POs unlikely to take on the obligation to monitor production methods and quality standards and exploit geographical identities PDOs unlikely to seek EU/local funds for withdrawal operations Success of either form of cooperative marketing may depend on retailers’ decisions and supply chain compatibility