Geographical Indications:Some economic aspects

GI seminar - Sharing values and traditionsTokyo, 12 December 2014

Diederik DE SMEDTEuropean Commission

DG Agriculture and Rural DevelopmentUnit A2 – Asia and Australasia

Value

• Sales value of EU GIs (all sectors): €54.3 billion in 2010 (estimated at wholesale stage in the region of production)

• 5.7% of the total EU food and drink sector

• Estimate of EU GI exports value: € 11.5 billion• 15% of EU food and drink industry exports

Value (2010)

3Source: Study done by AND-international in 2012 for European Commission, DG AGRI

Price

• On average, the price of a GI product is 2.23 times the price of a comparable non-GI products (2010)

Value premium rate in the EU27 by scheme

/!¥ does not reflect value added and profitability of the GI schemes as it does not take into account the additional cost of compliance with GI specifications

Price• Value premium rate higher for processed and elaborated products than for raw and fresh ones.

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6Source: Study done by Arreté Research and Consulting in Economics in 2013 for European Commission, DG AGRI

Gross margin: 13 GI Case

studies

Prices – GI Final products

7PPI=pricepremiumindicator(PriceGIproduct/Pricestandardproduct)(in%terms)

(5yearaverageformainmarketingchannelsonly)

Prices – GI Agricultural raw materials

8PPI=pricepremiumindicator(PriceGIagriculturalrawmaterial/Pricestandardagriculturalrawmaterial(in%terms)

Distribution of value in the supply chain

• GI cheese versus Standard cheeseAbsolute value (€) Relative value (%)

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Typical additional costs for GI production

Final productThe main additional costs are due to:• Need of additional phases / operations in the production process• Presence of significant limitations in productivity • Administrative costs for GI production (certification costs, cost of controls etc.)

Raw materials The main additional costs are due to:• Need of additional phases / operations in the production process• Presence of significant limitations in productivity • Specific / minimum quality requirements for raw materials • Administrative costs for GI production (certification costs, cost of controls etc.)

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Gross margins – Final products

11*Additionalgrossmarginindicator=(grossmarginGIproduct/grossmarginstandardproduct)

(5yearaverageformainmarketingchannelsonly)

Source: Study done by Arreté Research and Consulting in Economics in 2013 for European Commission, DG AGRI

Gross margins – Raw materials

12*Additionalgrossmarginindicator=(grossmarginGIrawmaterial/grossmarginstandardrawmaterial)

Factors contributing to a higher gross margin

• Intrinsic product differentiation (significant differences in the intrinsic features: quality parameters, organoleptic characters etc.). These are the specific characteristics of the products, that make them different of standard products.

• Representation of producers by an association or cooperative.

• Fame of the product. Effective marketing strategies. (Shorter and more direct marketing channels; sale of bottled products vs. sales in bulk (for GI wines and oils); orientation towards exports).

• Consumers’ willingness to pay for these products.

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More information?

http://ec.europa.eu/agriculture/quality/reports/index_en.htm

http://tastesofeurope.eu/video/

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