Download POs and PDOs: A Tale of Two Marketing Models

POs and PDOs: A Tale of Two
Marketing Models
Tim Josling
Stanford University
Introduction
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(Lower Expectations)
The Policy Context of POs
The Policy Context of PDOs
Complements or Substitutes?
Transferability of marketing models
Conclusions?
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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
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State supported intervention in diverse markets
Encouragement of producer disciplines
Channel for funds for F&V producers (South)
Countervailing power (against supermarkets)
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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
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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?
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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 crosscompliance)
• Co-financing of organic production (60 percent)
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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
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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)
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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
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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
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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 thanJosling
30Cal/Med
percent
Sonoma “organized”
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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)
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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
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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
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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)
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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
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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
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