GIs: Market Potential GIs: Market Potential & Players& Players’’ Strategies Strategies in the EUin the EUJeanJean--Louis RastoinLouis RastoinMontpellier Montpellier SupAgroSupAgro / UMR / UMR MoisaMoisarastoin@supagro.inra.frrastoin@supagro.inra.fr

Cal-Med Consortium Workshop IIIMediterranean Products in a Global Market PlaceEuropean Mediterranean InstituteBarcelonaApril 26th-27th, 2007

OutlineOutlineResearch question: Research question: What strategy based on the GIs What strategy based on the GIs Market in the EU ?Market in the EU ?3 key points:3 key points:

-- The The ““Food LabelingFood Labeling””-- Food Market SegmentationFood Market Segmentation-- Strategic analysisStrategic analysis

•• The The ““Food LabelingFood Labeling””

EU : multiplicity of labelingEU : multiplicity of labelingOfficial Quality Official Quality SignsSigns

PDO / PGIPDO / PGIGTSGTSPCC (France)PCC (France)National labels National labels ((e.g. Label Rouge e.g. Label Rouge in Francein France))ISO Norms ISO Norms 9000/14000/220009000/14000/22000

Private SignsPrivate SignsCommercial Commercial Brands Brands ™™Collective Collective BrandsBrandsNorms (IFS, Norms (IFS, EurepGapEurepGap, , BRC, GFSI)BRC, GFSI)

Registered GIs in the UE in 2006Registered GIs in the UE in 2006

Fruits, vegetables and cereals 162 22,8%Cheeses 154 21,6%Fresh meat and lights 100 14,0%Oils and fats 94 13,2%Meat-based products 79 11,1%Mineral waters 31 4,4%Other products of animal origin 23 3,2%Bread, pastry, cakes 18 2,5%Other Annex products 18 2,5%Beers 18 2,5%Fish, molluscs and crustaceans 9 1,3%Essential oils 3 0,4%Natural gums and resins 2 0,3%Hay 1 0,1%Total PDO + PGI 712 100,0%Total PDO 414 58,1%Total PGI 298 41,9%Source : EU-DGARD, Agriculture in the EU, Statistical and Economic Information 2006, Bruxelles, 2007

Total PDO+PGI

EU List of Quality Wines Produced in EU List of Quality Wines Produced in Specified Regions (QWPSR), 2007Specified Regions (QWPSR), 2007

Country / GI Number ShareSlovenia * 540 29%France 472 25%Italy 374 20%Spain 103 6%Romania * 52 3%Bulgaria 51 3%Portugal 49 3%Slovakia 47 3%Greece 43 2%S/Total, 9 countries 1 731 93%Other 8 countries 129 7%Total UE 1 860 100%Brasil 1 Vale dos VinhedosUSA 1 Napa Valley* Without Official registrationSource : EU - List of quality wines produced in specified regions, 22/03/2007 - (Published pursuant to Article54 (4) of Council Regulation (EC) No 1493/1999)

EU Production of quality wines (QWPSR), EU Production of quality wines (QWPSR), 20052005

2002-2005

Change

Total (M.hl)

QWPSR (M.hl)

QWPSR share

QWPSR

1 France 51 635 27 907 54% 6%2 Italy 48 882 15 000 31% 20%3 Spain 38 031 12 860 34% 13%8 Germany 12 469 9 514 76% 11%

11 Portugal 6 816 3 287 48% -21%18 Austria 2 500 2 221 89% 10%31 Czech Republic 532 470 88% 97%13 Greece 4 226 401 9% 19%

EU-25 169 821 73 068 43% 11%Sources: FAOSTAT , 01 April 2007 and EUROSTAT, 15 April 2007

2005

Countries

World rank

(Total prod.)

The rise of EU PDOThe rise of EU PDO--PGI registration numberPGI registration number

Number of PDO + PGI 2000 2006 ChangeOther Annex I products (spices) 8 18 125%Bread, pastry, cakes 10 18 80%Fish, molluscs and crustaceans 5 9 80%Essential oils 2 3 50%Meat-based products 54 79 46%Oils and fats 65 94 45%Fruits, vegetables and cereals 117 162 38%Other products of animal origin (eggs, honey, etc.)

17 23 35%

Beers 14 18 29%Fresh meat and lights 82 100 22%Cheeses 142 154 8%Mineral waters 31 31 0%Natural gums and resins 2 2 0%Hay 1 1 0%Total PDO + PGI 550 712 29%Source : EU-DGARD, Agriculture in the EU, Statiscal and economic information 2006 and 2000,

Distribution of GIs by EU countries, 2006Distribution of GIs by EU countries, 2006

Countries / Products

Animal origin

Vegetal origin

Beverages

All products

PDO % Total

Italia 63 92 0 155 68%France 103 44 0 147 47%España 44 53 0 97 58%Portugal 68 25 0 93 58%Elláda 22 62 0 84 73%Deutschland 19 7 43 69 54%UK 22 4 3 29 45%Österreich 8 4 0 12 67%Total EU 25 365 298 49 712 58%Med countries 300 276 0 576 60%Med/Total 82% 93% 0% 81%Source : EU-DGARD, Agriculture in the EU, Statiscal and economic information 2006, Bruxells, 2007

2.2. Food Market Food Market SegmentationSegmentation

Segmentation: The 3 Food MarketsSegmentation: The 3 Food Markets

INNOVATIVE MARKET

Segment : HealthProduct : « Nutraceutics »Value : Technological

advance

NICHE MARKET

Segment : High qualityProduct : « authentic »Value : Place of Origin, organoleptic & cultural attributes

MASS MARKET

Segment : day-to-dayProduct : basic, safeValue : price, segmentation

French Food Retail MarketFrench Food Retail MarketSegmentation & Trends Segmentation & Trends -- 20042004

SegmentRetail sales (€ Bil.)

Market share

Annual average

growth rate for the last 10

yearsMass Market 104 79% 0 -1 %

Innovative Market 6 5% 15-20 %

"Quality Label" Market 21 16% 5-10 %

Total 131 100% 1-2 %

Source : Rastoin, 2005

Quality labeling as a driver for economicQuality labeling as a driver for economicdevelopment (France, 2004) development (France, 2004) -- 11

ProductsQuality labels

(number)

Farmers (number)

(€ Bil.) %

Wine and brandies 467 49 000 8,6 55%

Other PDO 74 120 000 1,7 11%

Total PDO 541 169 000 10,3 66%

Red Label 348 1,4 9%

PCC 208 2,8 18%

Organic food 1 11 000 1,2 8%

Total 1 098 180 000 15,7 100%

Total agri-food firms 6 000

Source : Agreste, Enquête 2004 sur les produits agroalimentaires sous SOIQO

Producers Sales

Quality labeling as a driver for economicQuality labeling as a driver for economicdevelopment, 2004 (France) development, 2004 (France) -- 22

2004 - France

Products with quality and place of origin labels

(PDO, RL, PCC)Total Mean

Quality label

(number)

Average Price

(€/kg)

Meat 2 772 7 408 3,36

Cheese 1 652 27 59 8,04

Meat preparations 644 17 37 14,44

Fruits, vegetables & cereal 531 5 107

Other products 207 7 29

Butter and creams 73 24 3 3,95

Eggs (price/unit) 45 7 6 0,16

Total 5 924 9 649

Source : Agreste, Enquête 2004 sur les produits agroalimentaires sous SOIQO

Revenue (M.€)

The EU Market for GIs Products (excl. Wine), The EU Market for GIs Products (excl. Wine), 20042004

Countries € Bil. ShareItaly 3,8 30%France 2,4 19%Spain 1,4 11%Portugal 0,3 2%Greece 0,3 2%5 Med countries 8,2 64%EU - 25 12,7 100%

PDO share in total food consumptionMed countries 2,3%Other EU countries 1,1%Total food consumption EU-25 (€ bil.) 776Source : nos estimations d'après Eurostat et Insee, 2007

Economic Size of « Terroir » Private Labels of Large retailers– France -

NANANANA100 M100 M€€305 M305 M€€Sales Sales (2002)(2002)

140140250250180180300300Items Items (2003)(2003)

PatrimoinePatrimoineGourmandGourmand

(Cora)(Cora)

Savoir des Savoir des SaveursSaveurs

((SystSystèèmemeU)U)

NosNos RRéégionsgionsontont du Talentdu Talent

((LeclercLeclerc))

RefletsReflets de de FranceFrance

(Carrefour)(Carrefour)

Source: Linéaires N° 178, Février 2003

TM (at INPI) with “Terroir” in France: more than 1000 in 2000

3.3. Suppliers in the EU Suppliers in the EU market : market : strategic analysis & strategic analysis & performancesperformances

The place of the GIs in firm The place of the GIs in firm strategies : Theoretical basisstrategies : Theoretical basis

Individual strategies : RBVIndividual strategies : RBV (Barney, (Barney, WernerfeltWernerfelt, , ArrArrèèglegle et et QuellinQuellin))Collective strategiesCollective strategies : : «« agglomeratedagglomerated »» or or «« federativefederative »»strategies (strategies (AstleyAstley & & FombrunFombrun, 1983, , 1983, BresserBresser & & HarlHarl, 1986) = competing , 1986) = competing firmesfirmes coming closer on common coming closer on common objectives on a territorial basisobjectives on a territorial basis=> => ““TerroirTerroir strategiesstrategies””

The The ““TerroirTerroir”” EffectEffectSeveral definition (agronomists, Several definition (agronomists, economists, managers, sociologists, economists, managers, sociologists, anthropologists, geographers, anthropologists, geographers, historians,historians,……))

«« Local products based on a strong Local products based on a strong territorial identity and reputation, and/or territorial identity and reputation, and/or typical products based on specific typical products based on specific modes of production and whose quality, modes of production and whose quality, reputation or any other characteristics reputation or any other characteristics are attributable essentially to their are attributable essentially to their geographic origingeographic origin »» ((SylvanderSylvander, EU Dolphins project, final , EU Dolphins project, final report, 2004)report, 2004)

““TerroirTerroir”” as an individual strategy support: as an individual strategy support: Resources, competencies, Resources, competencies, capabilitiescapabilities

Specific assets

-Tangible-Intangible

-Know-how-Creativity-Relationship (social capital)

-Territory-History-Brand-Networks•Vertical•Horizontal

Knowledge-Technology-Marketing-Management-Finance

R

C

Basic Distinctive

Performance

Capabilities

Market

““TerroirTerroir”” in in SMEsSMEs Strategic and Strategic and Governance Models: an empirical Governance Models: an empirical

surveysurveyGovernance Structure

400 SMEs (Languedoc-Roussillon) Patrimonial / Independent

Entrepreneurial / Open

Stokholder’s equity

Managerial / Financial

Market access

Sub-contracting - - - ( +/- ) + + +(9%) Basic

Geographic closeness + + + (25%) ( +/- ) -

Sub-contracting - ( +/- ) + + +

Geographic closeness + + +(38%) ( +/- ) -

Stra

tegi

es

Differentiation "terroir"

Focalization - - - + + + (28%) ( +/- )

+: Governance/Strategy adequacy

-: Governance/Strategy conflict Source: Couderc J.P., Falque A., Rastoin J.L., Remaud H., 2002, Configurations stratégiques de la petite entreprise agroalimentaire, XIème conference de l’AIMS, Paris, 5-7 juin

SMEsSMEs Brands and Performances in Brands and Performances in Languedoc Roussillon Region (1998)Languedoc Roussillon Region (1998)

Source : Aurier P., Couderc J.P., (2000), DADP, Inra, Montpellier

Label AV/Employee (K.€)

AV/Sales (%)

Terroir (Brand or PDO/PGI) 133 49 Owner’s Name Brand 50 37 Other 51 27 Total 400 SME 100 43

Milk Price Differentiation, 2004, France

28

29

30

31

32

33

34

35

36

37

38

Label PDO PCC Other QS Without QSSource: Desbois and Nefussi, 2007

119

115

102 101100

Index

Sample : 670 Dairy farmsrepresenting 37 400(RICA/FADN)

Dairy Farms EBITBA, France, 2004

0

5

10

15

20

25

30

35

Label PDO PCC Other QS Without QSSource : Desbois et Nefussi, 2007

132

114

92 95100

Index

Dairy Farm, Return on investment, France 2004

24

25

26

27

28

29

30

31

32

33

PDO PCC Other QS Without QSSource : Desbois et Nefussi, 2007

Source : adapted from Sylvander B, (2004), Final Report, Dolphins Project, EU-FPR 5th, Inra-Urequa, Le Mans, p. 26

Collective Strategies Parameters / Rationales

Individual strategies (Firms’ rationale) Territorial rationale Sectoral rationale

Characteristics One enterprise

Several enterprises & Institutions in a given geographic area

Several enterprises in the same sector

Dynamic Competitive market Spatial co-operation Vertical co-operation

Objective Profit maximization, market value

Create value for the territory

Supply Chain growth (product orientation)

Production model Specialized Diversified Specialized Intensification level High Low (sustainability) High/Low

Code of practice Integrated Negotiated Negotiated Player’s organization Autonomous Regional coordination Vertical coordination

Patrimony Portfolio & Brands (Goodwill)

Territory (geography & history) Product

Flexibility High Impossible Regular

Agri-Food Strategic Models

Relevance of Relevance of ““TerroirTerroir”” labeling in labeling in PlayersPlayers’’ StrategiesStrategies

entreprise

Customer 1

Customer 2

Customer 3

Terroir 3 (Country)

Terroir 2 (PGI)

Terroir 1 (PDO)

Different Territorial Anchorage, depending on :

• Customer’s perception

• GI notoriety

• Perceived “Terroir” specialization

Source: Benkhira-Fort, 2005

Concluding remarksConcluding remarksVery High GI and Quality Labeling density Very High GI and Quality Labeling density in the EU (risk related to Consumers getting in the EU (risk related to Consumers getting confused)confused)

The market share of GIs in the EU Food The market share of GIs in the EU Food Market is low except in Med CountriesMarket is low except in Med Countries

An important growth potential for An important growth potential for SMEsSMEs““TerroirTerroir”” based strategies (Economic based strategies (Economic performances and Sustainable performances and Sustainable Development requirements)Development requirements)

Uncertainty on institutional framework Uncertainty on institutional framework (WTO dispute, EU policy)(WTO dispute, EU policy)

Distribution of GIs by countries, excluding Distribution of GIs by countries, excluding the EU in 2004the EU in 2004Country Frequency Percent

1 USA 42 22,0%2 India 16 8,4%3 Ethiopia 14 7,3%4 China 12 6,3%5 Togo 9 4,7%6 Turkey 7 3,7%7 Mexico 6 3,1%8 Peru 6 3,1%9 South Africa 6 3,1%

10 Japan 5 2,6%11 Morocco 4 2,1%12 Argentina 3 1,6%13 Cameroon 3 1,6%14 Ghana 3 1,6%15 Korea 3 1,6%

Total Top 15 139 72,8%Total 49 countries 191 100,0%

GIANT Database, http://www.american.edu/ted/giant/global_analysis.dJim Lee and Tamara Dorabawila, American University, 2004

Consumption pattern

- festive eating- Cooking,

recipes

Local referencesTradition &

Region Know-How

Production pattern

- natural, safe- pesticides

free

Packaging - material- colors- design

Accessibility- marketing

channel- willingness

to pay

Terroirproduct

Key Factors for defining Consumer’s Behaviour

What What ““TerroirTerroir”” Labeling for Labeling for enterprises ?enterprises ?GI and Label Complementarity(Brandade de Nîmes Raymond Geoffroy)GI alone (Pélardon des Cévennes, Cassoulet de Castelnaudary)GI in the product label (Porc du Pays d’Oc, Grisettes de Montpellier, Cap Camargue)GI in the corporate label (VigneronsCatalans, Provence Régime)

Source: Benkhira-Fort F., 2005, EFFETS PRINCIPAUX ET DE CONGRUENCE DE LA RÉGION D’ORIGINE, DU PRODUIT ET DE LA MARQUE SUR L’ÉVALUATION DES PRODUITS : UNE APPLICATION AUX PRODUITS ALIMENTAIRES DE TERROIR », PhD Thesis, Université de Montpellier II - CREGO