Geographic Indications

1
Geographic Indications

• A business opportunity
• and a rural development tool

2
Part I

• Geographic Indications in France
• A dynamic sector of the Food Industry

3
18 B turnover

• 18 B turnover in 2001 for geographic indication
  (GI) products, accounting for 15 of global food
  industry turnover.
• GI products over-perform export statistics, with
  a share of 30 of food industry exports.

Total production B / 2001
Exports B / 2001
Fond Ind. (1)
GI products. (2)
()
Fond Ind. (1)
GI products. (2)
()
30
15
(1) Food Industry
(2) Protected Designation of Origin (PDO)
Protected Geographic Indications (PGI)
Source MAAPAR, INAO, CFCE
4
GI products segmentation

• Wine products account for 75 of global GI
  products turnover.
• All categories (wine, cheese, others), apart
  from spirits, have registered high growth rates
  on the 1997-2001 period, with an average of 6,8/
  year.

turnover 2001 / B
()
turnover 1997 / B
agry 97 -2001 () (3)
5
6,6
1
4,7
11
5,2
8
0
PGI (1)
Others (2)
Cheeses
Spirits
75
8,1
PDO wines
13,86
100
6,8
Total
18,06
(1) Protected geographic indications
(2) fruits, vegetables, spices...
(3) Average growth rate per year
Source MAAPAR, INAO, ENITA Clermond-Fd
5
GI sector features A new vitality for rural
areas

• With 580 products, the GI sector concerns 21
  of French farmers.
• GI producer number increased by 14 between 1997
  and 2001, whereas the total number of farmers
  decreased by 4 on the same period. GI provides
  rural areas with a new vitality.

products
Farmers ( 000)
Total France
GI farmers
Type PDO wines Dairy prod. Food prod. PGI TOTAL
Number 450 43 22 65 580
Example St Emilion Champagne Comté,
Roquefort Olive oil, honey poultry, fruits
vegetables
1997 2001
1997 2001
(4)
14
GI farmers 1997 18 2001 21
Source MAAPAR, INAO, ENITA Clermond-Fd
6
Wine production trends

• Since 1994, PDO wines have accounted for more
  than 50 of total production.
• Within a decreasing market (1 decrease / year),
  GI products show a steady growth ( 2,4/ year).

agry 75 -2000 () (1)
Yearly wine production ( 000 hl)
(1)
2,4
(2,9)
Other wines
PDO wines
(1) Average growth rate per year
Source ONIVINS
7
Comparative turnover trends

• GI products turnover has increased by 6,8 /
  year since 1997.
• This sector is particularly dynamic if compared
  to the traditional farming sector ( 0,7
  / year) and the food industry (3,7 /year).
• The sector is characterized by a high
  volatility, due to wine production, very
  sensitive to crop hazards.

agry 97 -2001 () (1)
Geographic Indications
6,8
4,2
GNP(2)
Turnover / Base 100 in 1997
3,7
Food Ind.
0,7
Farm production
(1) Average growth rate per year
(2) Gross National Product
Source INAO, CNAOL, ENITA Clermond-Fd,
évaluation MAAPAR
8
Geographic Indications in France

• GI sector performs particularly well in France.
  It over-performs  export  and  growth rate 
  references.
• The success of the model is based on this
  dynamic evolution, implying a growing number of
  farmers ( 14 between 1997 and 2001).

• GIs represent 15 of the Food Industry

• A dynamic export sector, accounting for 30 of
  food exports

• GIs over-perform food industry and farm
  production growth rates

Total Production B / 2001
Exports B / 2001
Turnover evolution base 100 in 1997
GI.
GI.
Food Ind.
()
Food Ind.
()
()
GI
15
30
Source MAAPAR
9
Part II

• Geographic Indications
• A tool to create value

10
Retail price of GI products is higher

• The retail price of GI products is higher than
  the price of similar products. This difference
  pays for the process production commitments,
  and the quality signal to the consumer. The gap
  is on average 30 for cheese.
• This gap can be considerably more important for
  a few specific products, such as wine.

Wine price (2) /l
Cheese retail price (1) /kg
P.D.O.
Other wines
P.D.O.
All cheeses
? 30
? 230
(2) Based on exports 99-2001
(1) Based on retail benchmark SECODIP, 2002
Source MAAPAR, ONIVINS, CFCE, INAO
11
Geographic Indication a growth incentive

• Geographic indication creates value. Following
  the GI registration, output increases, as well as
  land value.
• The implementation of a joint distinctive signal
  is a positive asset to support a well-known
  product on the market. It also creates confidence
  in order for the producers to invest.

Output increases the example of Morbier
Land value increases the example of olive
fields of Nyons
agry 99-02 () (1)
2002 5000 tons 40 farmers
Value of the land / Drôme
9,5
Olive trees PDO
1998 2500 tons 25 farmers
Price /ha
7,4
Olive trees non PDO
1,8
Orchards
PDO, dec 2000

• Other cheese PDO have shown strong increase of
  their output after PDO qualification
• Rocamadour 8/year after 1996
• Valencay 16/year after 1998

• The value of olive PDO land increases 2 faster
  than the value of basic olive land.
• Nyons producers have replanted 10 of the land
  that was declining before GI registration.

Source MAAPAR, AOC   Morbier , AOC  olive et
huile dolive de Nyons , INAO
(1) Average growth rate per year
12
Geographic indications / trademarks
distribution of value is more favorable to
farmers with GIs

• Primary producers (farmers) fully benefit from
  their participation in GI production, by getting
  a higher price for their products.
• This bonus on the purchasing price pays for the
  production process commitments that must
  guarantee that the product is typical. It also
  pays for the renown of the product.

Distribution of value / olive oil
Milk purchasing price to producer
non PDO Trademark
? Compared to medium price
PDO
90
20 /l
Retail price
35
30
15
14 /l
5
-
Purchasing price to farmer

• In both cases, the share to the producer is
  about 60 of retail price.
• For PDO, purchasing price to farmer is
  50higher.
• In France, commitments on yield efficiency are
  limited, the price difference goes mainly to the
  benefits.

Brie de Maux
National average 2002
Beaufort
Reblochon
Comté
Maroilles
Source INRA, INAO, Huile dolive de Nyons
13
Geographic Indications A tool to create value

• Geographic indications has 3 microeconomic
  effects
• higher retail price for GI products
• production growth
• better value distribution
• GIs are an efficient rural development tool
  the creation of value of a GI product is higher
  and is better distributed at the local level.

• GI product retail price is higher
  (ex 30 on cheese)

• GI qualification is a vehicle for growth,
  through the setting-up of a joint distinctive
  signal

• The distribution of value is more favorable to
  GI producers

Price gap between PDO cheese and others /kg
Distribution of value ex Olive oil
Evolution of production MORBIER
PDO
Non PDO
2002 5000 tons 40 farmers
All cheeses
PDO
20 /l
Retail price
? 30
14 /l
1998 2500 tons 25 farmers
Purchasing price to producer
PDO, dec 2000
Source MAAPAR
14
The example of camembert

• 3 positive effects from the PDO  Camembert de
  Normandie 
• A higher retail price (25 on national
  trademarks non PDO)
• A drop on private label prices less important
  for PDO products, due to a more balanced business
  relationship.
• A vehicle for growth in a decreasing market.

Price of camembert (/u)
Consumption evolution (Kg/ household)
1991-98
National trademarks
Private labels (retail)
? 91-98
others
P.D.O.
others
1991
1998
P.D.O.
? 25
? (11)
? (28)
others
(31)
P.D.O.
31
(27)
Total
5,07
3,70

• A 25 premium on PDO products
• A better resistance to price pressure on private
  labels (11) against (28).

• A growing PDO market, 31 , in a decreasing
  market, (27) .

Source INRA
15
A typical example Comté vs Emmental

• Comté (PDO) and Emmental (generic) are both
  produced in Franche Comté. They meet almost
  similar production and process requirements.
• Comté, supported by GI registration, has shown
  a steady growth of production and an increase in
  prices, to the expense of Emmental.
• This economic vitality allows for an increase in
  the number of farming working units / ha, and
  contributes to the stabilization of people in
  rural areas.

• Comté output is now over Emmentals.
• Transfer of production.

• Price gap has increased to the benefit of Comté,
  an up-market product.

• Comté PDO contributes to the stabilization of
  farmers in Doubs (comparison with Vosges, an
  administrative area with similar characteristics).

Production Comté vs Emmental in Franche Comté
(tons)
Retail price (/kg)
2000
agry (1)
Emmental
1,6
Comté
? 46
? 20
Comté
(3,1)
Emmental
(2) Farming Working Unit
Source Comité Interprofessionnel du Comté,
Agreste, SIGF, SCEES, panel SECODIP
(1) Average growth rate per year 85-2000 ()
16
A Vietnamese example Nuoc Mam from Phu Quoc

• The implementation of a geographic indication
  for Nuoc Mam from Phu Quoc in 2001, increased the
  value of the product and attracted a foreign
  investor (Unilever) which injected 1 million US
  on a partnership with local producers.

GI results
Nuoc Mam from Phu Quoc

• High increase in prices on domectic market (from
  0,5 to 1,5 /l)

• A well-known product in Vietnam and outside the
  country
• 90 firms produce Nuoc Mam on Phu Quoc island
• A 10 million-liter production
• 1/2 million liter exported
• 80 of counterfeited products in Japan and the EU

2000
2003
X 3
2001, GI

• 1 M US from Unilever to upgrade a processing
  and bottling plant.
• Knorr trademark.
• GI / trademark association, vehicle for local
  development.
• GI implementation a tool to fight against
  counterfeiting.

Source Bureau National Interprofessionnel du
Cognac, UNDP
17
Part III

• TRIPS(1) negotiation what is at stake?

(1) Agreement on Trade-Related Aspects of
Intellectual property rights
18
TRIPS negotiations the stakes for the French
sector
Improve protection / fight against counterfeiting
International protection budget to put under
control

• The implementation of a multilateral register
  for wines and spirits and/or the extension of
  protection to other products would improve French
  geographic indication protection on foreign
  markets, excluding EU.
• Counterfeiting is estimated to 6-7 of global
  turnover of exporting companies.
• Cognac producers estimate their sales loss in
  Asia to M 100 on a total turnover of B 1,5
  (6,5).
• French exports of GI products outside EU are
  estimated at B 2, which could lead to a M 150
  at stake on counterfeiting.
• A guarantee to break into new markets.

• INAO international protection budget 750
  000 in 2002, representing 5 of global budget.
• A strong increase 17 /year over the
  1998-2002 period.

• These numbers do not include direct actions
  engaged by French producers.

Source MAAPAR, INAO
19
What impact on GI protection spending
Extension of additional protection to products
other than wines spirits
The multilateral register for wines and spirits

• The implementation of a register for wines and
  spirits will improve and simplify protection
• Example procedure Homemade Wine / Canada.
• 3 intervention levels may be required, according
  to the complexity of the conflict

• In case of an usurpation, producers of products
  other than wines spirits will no longer have to
  prove that the consumer has been deceived by the
  counterfeited GIs.
• Example Reblochon / Canada

Estimated protection budget
40 000
File customer deception
20
X 5

• A saving that can be estimated at 20 of
  procedure fees in this case.
• Situation may significantly vary from
  one country to another

• Implementation of register will have 2 effects
• It will favor recourse to simpler and less
  expensive procedures.
• In case of a legal procedure, it will strengthen
  the possibilities of reaching a favorable
  outcome.

Source MAAPAR, INAO