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Contributor : FAO-AGS (2008-02-28 14:58:13)
Differentiating Products: branding and certification
The Proposition
To compete successfully in the increasingly demanding, and sophisticated, market for agro-industrial products, producers in developing and transition economies must respond to buyer demands for a “differentiated” product.
The government has a role to play in facilitating an appropriate response, particularly by small and medium-size producers.
Rationale and Recommended Response (Click here to read)
Update on the debate
The discussion has been enriched with interesting contributions on practical experiences about the role of the public sector in providing support to enhance small-scale producers’ participation in market of differentiated products. According to them, governments have initiated particular programme and invested technical and financial resources in support of producers. These programmes are part of a national strategy to upgrade production and supply chain systems to comply with these new market challenges.
Current focus of the debate:
Are these experiences replicable in other countries? if yes, could they be shared in this forum?
Which is the scale of these experiences?
Which is their importance at the national level?
For summary of previous round of debate and questions click here
12 Comments
Kit Chan Director, K-Farm Sdn Bhd [ www.kfarm.com ] (2008-03-21 07:09:21)
In Malaysia, the Department of Agriculture (DOA) has developed the farm production certification scheme (SALM). It is a detailed scheme that covers all the important critical criteria of the production process that would provide sufficient confidence to consumers for locally produced fruit and vegetable crops . There is also the Agriculture Marketing Agency (FAMA)that promotes local produce under a brand name "Malaysia´s Best" where one of the qualification for the brand is a SALM certification. This is an examplary of public sector support for the small producers in differetiating their products in the market. This would be a "good practice" example of public sector involvement.
However, further involvement by the agencies from this level would encroach negatively into the food marketing business because public sectors do not have the capacity to deliver the marketing efficiencies as well as the private sector entities. That is always a difficult line to draw where the involvement of the public sector agency should be.
But it can never be wrong that the public sector provide the infrastructure - collection centres, cold room facilities, cool truck transportation, etc, to be made available to the small scale producers, for a reasonable fee for the usage of the facilities. Giving it away free is not recommended. Providing the technical advice and the knowledge of production and post harvest handling is a necessity. Without which, the certification and the marketing promotions will not generate any value.
In Malaysia, the Department of Agriculture (DOA) has developed the farm production certification scheme (SALM). It is a detailed scheme that covers all the important critical criteria of the production process that would provide sufficient confidence to consumers for locally produced fruit and vegetable crops . There is also the Agriculture Marketing Agency (FAMA)that promotes local produce under a brand name "Malaysia´s Best" where one of the qualification for the brand is a SALM certification. This is an examplary of public sector support for the small producers in differetiating their products in the market. This would be a "good practice" example of public sector involvement.
However, further involvement by the agencies from this level would encroach negatively into the food marketing business because public sectors do not have the capacity to deliver the marketing efficiencies as well as the private sector entities. That is always a difficult line to draw where the involvement of the public sector agency should be.
But it can never be wrong that the public sector provide the infrastructure - collection centres, cold room facilities, cool truck transportation, etc, to be made available to the small scale producers, for a reasonable fee for the usage of the facilities. Giving it away free is not recommended. Providing the technical advice and the knowledge of production and post harvest handling is a necessity. Without which, the certification and the marketing promotions will not generate any value.
Dr. Pablo Villalobos , (2008-03-19 14:56:19)
The government must play a fundamental role in the creation of a political and institutional framework which responds to the ever increasing demand for “differentiated products”, placing special emphasis on the small and medium-size producer sectors. In my opinion, there are three strategies to follow. First, a broad public and private coordination that allows for the exchange of information among the various parties, the search for strategic ties between both sectors and the homologation of technical criteria for the design of an agricultural policy fomenting production. Secondly, the design and implementation of programs and instruments especially defined for this segment of producers, to include among others, preferential loans, training and technological transfer in order to facilitate the implementation of the required quality standards. Thirdly, it is necessary to develop a promotion policy for the differentiated products which would permit establishing the links between the generated supply and the demand for this type of product.
Keeping the former in mind, in the Chilean case, special programs and instruments focusing technical and financial resources on the small-scale farmer have been designed with the purpose of promoting the use of quality assurance systems and good agricultural practices in their production systems.
The government must play a fundamental role in the creation of a political and institutional framework which responds to the ever increasing demand for “differentiated products”, placing special emphasis on the small and medium-size producer sectors. In my opinion, there are three strategies to follow. First, a broad public and private coordination that allows for the exchange of information among the various parties, the search for strategic ties between both sectors and the homologation of technical criteria for the design of an agricultural policy fomenting production. Secondly, the design and implementation of programs and instruments especially defined for this segment of producers, to include among others, preferential loans, training and technological transfer in order to facilitate the implementation of the required quality standards. Thirdly, it is necessary to develop a promotion policy for the differentiated products which would permit establishing the links between the generated supply and the demand for this type of product.
Keeping the former in mind, in the Chilean case, special programs and instruments focusing technical and financial resources on the small-scale farmer have been designed with the purpose of promoting the use of quality assurance systems and good agricultural practices in their production systems.
Dr. Damian Ihedioha , (2008-03-18 10:56:25)
I think that the public sector can play a facilitative role by creating an enabling environment for small and medium scale agro-businesses to operate. This they can be by setting standards and quality criteria that the businesses would meet before their products can be allowed into in-country or international markets. The enforcement/monitoring unit of such a public institution should be charged with certification of such products. Adherence to the public sector rules by these SMEs could be basis for tax and other waivers.
In Nigeria, the pioneering role of the National Agency for Food, Drug Administration and Control (NAFDAC)is a good case in hand. This agency has set standrads for various SMEs, which they enforce. In turn, the products of these SMEs get certified, has NAFDAC inscription on the products, and enjoy some waivers from government.
I think that the public sector can play a facilitative role by creating an enabling environment for small and medium scale agro-businesses to operate. This they can be by setting standards and quality criteria that the businesses would meet before their products can be allowed into in-country or international markets. The enforcement/monitoring unit of such a public institution should be charged with certification of such products. Adherence to the public sector rules by these SMEs could be basis for tax and other waivers.
In Nigeria, the pioneering role of the National Agency for Food, Drug Administration and Control (NAFDAC)is a good case in hand. This agency has set standrads for various SMEs, which they enforce. In turn, the products of these SMEs get certified, has NAFDAC inscription on the products, and enjoy some waivers from government.
Vinay Chand , (2008-03-16 01:57:56)
There appears to be much scepticism as to a possible role for the public sector in product differentiation and I would like to support this sceptic trend. Product differentiation through branding is very important indeed. It helps determine the balance of power between exporters, importers and retailers for one thing with helathy margins for brands. But the public sector is not particularly good at these sort of things and it does depend on farmer organisations or coops developing brand identities for fresh produce and processors or exporters to do so for products.
There appears to be much scepticism as to a possible role for the public sector in product differentiation and I would like to support this sceptic trend. Product differentiation through branding is very important indeed. It helps determine the balance of power between exporters, importers and retailers for one thing with helathy margins for brands. But the public sector is not particularly good at these sort of things and it does depend on farmer organisations or coops developing brand identities for fresh produce and processors or exporters to do so for products.
Pilar Santacoloma , (2008-03-11 15:06:04)
I would like to refer to last comments by Luz, Kit and Divina.
They pointed out different views about the neccesary support for farmers and SMEs to respond to the buyer demand for differentiated products. The next question would be:
How can the public sector facilitate the greater involvement of small-scale producers in markets for high value, differentiated products?
Is it realistic to expect that the public sector can assume this role effectively?
What are “good practice” examples and what lessons can be drawn from their experience?
I would like to refer to last comments by Luz, Kit and Divina.
They pointed out different views about the neccesary support for farmers and SMEs to respond to the buyer demand for differentiated products. The next question would be:
How can the public sector facilitate the greater involvement of small-scale producers in markets for high value, differentiated products?
Is it realistic to expect that the public sector can assume this role effectively?
What are “good practice” examples and what lessons can be drawn from their experience?
Kit Chan , (2008-03-11 09:58:28)
I like to refer to the comment of Luz Sandoval, (2008-03-10 11:10:06)
Relying on government for the technical assistance would not be easy in most cases. Rather than waiting, I would propose that you reach out with your own efforts to your local universities, and network outside your country and build your own control system. It is possible to do on your own. There is sufficient information resources in the internet to make a headstart. The FAO sites is one great site. We came through in similar ways. Do not despair.
I like to refer to the comment of Luz Sandoval, (2008-03-10 11:10:06)
Relying on government for the technical assistance would not be easy in most cases. Rather than waiting, I would propose that you reach out with your own efforts to your local universities, and network outside your country and build your own control system. It is possible to do on your own. There is sufficient information resources in the internet to make a headstart. The FAO sites is one great site. We came through in similar ways. Do not despair.
Divina D. Bawalan , (2008-03-11 05:26:16)
The basic problem for SME’s to obtain organic certification is affordability. At present, the cost of getting organic certification is an investment in itself. Hence, only very big companies can afford to fund the cost. Likewise, validity period for organic certification only ranges from 12 months (1 year) to 18 months ( 1.5 years) depending on the certifying organization. In addition, various certifying organizations have specific countries or areas where their organic seals are recognized . (i.e. there is no organic certifying body which is universally accepted and there is no certainty that an organically certified product by one organization can be marketed as such in every country) . Under this condition, a company will not invest in organic certification unless the price differential between the organically certified and non-organic product is big enough that it can recover its investment before the validity of organic certification expires. Further, before attempting to get organic certification, a company should establish first a quality assurance system to ensure its production of high quality product because this is more important.
The basic problem for SME’s to obtain organic certification is affordability. At present, the cost of getting organic certification is an investment in itself. Hence, only very big companies can afford to fund the cost. Likewise, validity period for organic certification only ranges from 12 months (1 year) to 18 months ( 1.5 years) depending on the certifying organization. In addition, various certifying organizations have specific countries or areas where their organic seals are recognized . (i.e. there is no organic certifying body which is universally accepted and there is no certainty that an organically certified product by one organization can be marketed as such in every country) . Under this condition, a company will not invest in organic certification unless the price differential between the organically certified and non-organic product is big enough that it can recover its investment before the validity of organic certification expires. Further, before attempting to get organic certification, a company should establish first a quality assurance system to ensure its production of high quality product because this is more important.
Luz Sandoval , (2008-03-10 11:10:06)
In our cooperative we see the participation in organic- fair trade certified product markets as an opportunity for market access and better prices. Unfortunately we do not get any government support in terms of technical assistance, auditors or inspectors, or even information.
In our cooperative we see the participation in organic- fair trade certified product markets as an opportunity for market access and better prices. Unfortunately we do not get any government support in terms of technical assistance, auditors or inspectors, or even information.
Pilar Santacoloma , (2008-03-10 10:17:26)
Damian righly highlighted that voluntary certification schemes relevant for small-scale producers are those which add-value to their operations. Surely this is the aim pursued by producers when entering in certification schemes. Then a question is which are good practices to capture the created value-added and which are the main challenges found in this process?
Damian righly highlighted that voluntary certification schemes relevant for small-scale producers are those which add-value to their operations. Surely this is the aim pursued by producers when entering in certification schemes. Then a question is which are good practices to capture the created value-added and which are the main challenges found in this process?
Kit Chan , (2008-03-09 17:45:36)
We have had some practical experiences on GAP certification with our farmers. Developing and organizing the GAP schemes is mostly academic. We can assume that the protocols of GAP are mostly commonsense and most farmers could and will probably find it practical and useful to follow. But this seem to have been our biggest oversight. The benefits of better market prices with certification is an externality; there are no guarantees in the market or in business. But there is a definite guarantee of benefiting from following the protocols of the GAP schemes by becoming a better farmer, a sensible farmer, a more commited farmer because he now performs his daily farm work based on rational instructions. There is benefits in keeping the store room safe and clean, for example. We can think of so many reasons why it is beneficial to do so (put a dollar and cents to it even). But more often than not it is not done. Simply being certified doesn´t amount to much. It is so important and so much better if the farmer understands the guiding principles of GAP and live a farmer´s life according to it. The benefits come from internalising the GAP process of crop production. This has been our biggest costs towards certification - providing agriculture extension to the farmers.
We have had some practical experiences on GAP certification with our farmers. Developing and organizing the GAP schemes is mostly academic. We can assume that the protocols of GAP are mostly commonsense and most farmers could and will probably find it practical and useful to follow. But this seem to have been our biggest oversight. The benefits of better market prices with certification is an externality; there are no guarantees in the market or in business. But there is a definite guarantee of benefiting from following the protocols of the GAP schemes by becoming a better farmer, a sensible farmer, a more commited farmer because he now performs his daily farm work based on rational instructions. There is benefits in keeping the store room safe and clean, for example. We can think of so many reasons why it is beneficial to do so (put a dollar and cents to it even). But more often than not it is not done. Simply being certified doesn´t amount to much. It is so important and so much better if the farmer understands the guiding principles of GAP and live a farmer´s life according to it. The benefits come from internalising the GAP process of crop production. This has been our biggest costs towards certification - providing agriculture extension to the farmers.
Dr. Damian Ihedioha , (2008-03-06 14:20:40)
Voluntary certification schemes that would be relevant to small-scale farmers and agro-processors are those schemes that would add value to the operations of the business outfits. If a certification scheme itemazies the benefits inherent in making a buy-in, for instance reduction in tax to be paid, assurance of sufficient markets share for the commodity, enterpreneurs will normal avail themselves of the opportunities.
Voluntary certification schemes that would be relevant to small-scale farmers and agro-processors are those schemes that would add value to the operations of the business outfits. If a certification scheme itemazies the benefits inherent in making a buy-in, for instance reduction in tax to be paid, assurance of sufficient markets share for the commodity, enterpreneurs will normal avail themselves of the opportunities.
Pilar Santacoloma , (2008-03-05 15:06:10)
From our work experience, organic and fair-trade certification schemes are the most relevant to small-scale farmers and processors so far. By entering in the certification process, farmers and processors improve managerial and business skills, natural resource management and social networking. From the financial viewpoint, they obtain price premium in vibrant and growing markets. Institutional support and coordinated supply chain are key factors in their success. But how long it is expected these markets will growth ?
From our work experience, organic and fair-trade certification schemes are the most relevant to small-scale farmers and processors so far. By entering in the certification process, farmers and processors improve managerial and business skills, natural resource management and social networking. From the financial viewpoint, they obtain price premium in vibrant and growing markets. Institutional support and coordinated supply chain are key factors in their success. But how long it is expected these markets will growth ?
