Food Business Management and Marketing

1. HEALTH
General societal trends:

1. An ageing population in Europe: average lifestyle is growing and this has some implications in food
consumption.
 People have specific food and nutrition needs; these are different between younger and older people.
 Diets chosen from older or younger people are different.
 Older people have more time to prepare food.
2. Decreasing household size and individualization:
 In the past 6 people per family, now the average is 3.5.
 Increasing of the share of singles, so smaller households.
 This effects consumptions because causes higher demand for smaller portions and also for specific food like
time saving food and take away.
3. A more multicultural society: the implication is that you can find everything, from traditional food to food from
other cultures (sushi, cous-cous, kebab).
 Having different cultures means also having different religions thus different habits both in the type of food
and in its preparation
4. Migration within and from outside Europe: this is complementary to the previous point and to the globalization
phenomena.
 In some specific countries such as Germany, Italy, France, Spain, we have a new local regional trend: we have
a much more attention on typical local food, obtained in the specific country.
 This does not imply that we don’t eat global food, but we have both in our market (local and global).

General food consumption trends:

1. Decreasing consumers’ expenditure on food:

 The reason is Engel’s law (share of expenditures on food and non-alcoholic beverages in the total
expenditures of households).
 As the household income increases, the share of income spent on food decreases.
 From 1998 to 2917, the share of income on food decreased gradually from 30% to 24%. According to
countries groups, in EU15 countries the share is quite stable in the last two decades with about 15%.
2. Declining trust in food safety: caused by a lot of food scandals in the past (salmonella, mad cow).
 Today consumers have less trust in food companies. These companies must better communicate processes,
ingredients and so on. The adoption of specific quality labels are consequences of these food scandals
3. Increasing demand for convenience products: there is a tendency towards the consumption of highly processed
food and consumers are looking for time saving food, products quick to prepare.
 People prefer other activities instead of spending time at home cooking; more mothers are working and have
fewer time
4. Increasing awareness about hunger and obesity and the health aspects of food: dilemma of the agri-food sector,
on one hand we have people with hunger and on the other hand obese people.
 The general trend in the developed countries is the problem of overweight or obesity.
 800 thousand people with hunger food and 1 million people with problems of overweight or obesity
5. More sustainable and high-quality food on the rise: what are quality attributes?
 Ingredients, country of origin for ingredients (such as Italian), nutrients (low infects, low carbs, low sugar),
without chemical (organic production) or traditional methods, eco production, organic farming, taste (smell).
 The quality is very subjective, each of us has a ranking of attributes about each specific food and use them to
decide the food. Quality is the attribute that satisfies our ranking.
 Sustainability is a key aspect (we will analyse it later), as well as the increasing demand for organic products.
 Health and healthy food are important now, people pay more attention on them and the demand is
increasing for light products or some specific categories (free from…), calories.
6. Focus on the authenticity of food
HEALTH

In general, healthy food is: low calories, organic food, some functional food (specific characteristics), less processed
food, low salt/sugar.

 There can also be some specific categories, not only organic food, but also super foods (tomato, avocado, goji,
omega3, tofu)

Today everybody knows that what we eat has an impact on our health, so there is much more attention because
literature has shown a link between health and chronic diseases (diabetes, cancer, overweight).

Introduce some actions/measures to encourage consumers to eat healthier in 2 different ways:

1. Communication/information: provide information about healthy eating (i.e., at school), promoting the
understanding and the use of nutritional labels, promoting specific food categories (fish, vegetables)
2. Try to change the products: improve healthiness of a product by adding some functional components (i.e.,
adding to biscuits omega 3), reducing the bad nutrients (less sugars, less fats), “free from” products (free from
lactose, gluten), specific dietary intake from a nutritional perspective, organic food

Health is obviously important for everyone, but is not the only and usually not even the most important
criterion when choosing food. Healthy food is characterized by:
a. Specific dietary intake from a nutritional perspective (i.e., consume less calories, less fat…)
b. Functional food
c. Free from food
d. Organic food
Consumer knowledge: what do people know about healthy food?

 Consumers must have some knowledge on what constitutes healthy eating and healthful products which
can guide:
1. The composition of a diet
2. The composition of a meal (i.e., I prefer a meal with proteins, carbo, fat)
3. The choice of a product both across and within product categories (i.e., I prefer an organic tomato instead of
a conventional tomato)
 Many studies have reported a positive association between nutrition knowledge and healthful food behaviour

Here, we have the result of studies conducted in 6EU countries:

The question was: health experts recommend eating more,

about the same or less of these components?

% of people who answered correctly is quite high

This study indicates:

 The overall level of knowledge on nutrition recommendations was relatively good

 Consumers are aware of recommendations, but the nutritional knowledge on more technical and detailed issues
is less strong (e.g., I know that I must eat more fruits, but it is not clear what the nutrients are for specific food)
 The level of nutrition knowledge differs among socio-economic groups: women and people with higher
education levels have more nutrition knowledge. We can call these groups “high-knowledge groups”

We have 3 factors considered important for changing consumer behaviour towards more healthy choices:

1. Providing healthier alternatives to the consumer by introducing reformulation of the products

2. Related to knowledge of consumer: provide people with more knowledge about the relation between health and
consumption of specific products
3. Motivation of consumer to make healthier choices (very important): people can be very well informed, but they
are not motivated to make healthy choices. In this case the education has no effect.
→ We must combine education and motivation.

Here we have a model that we can use to analyse the motivation.

In this model we have a link between attributes of the product and

consequences of the product.

The model is named “the means-end-chain theory” and they look at

mental links people construct between attributes of a product they
buy and what they think are the consequences for themselves.

 It starts from an attribute of the products, the “concrete attribute” (i.e., a biscuit low in fat). Then, there is
the abstract attribute (low in fat, less calories). Stay slim is the functional consequence. Be attractive to
others is the psychological consequence and self-esteem gives the value.
 This model combines product knowledge (low fat and less calories) and self-knowledge (stay slim, be
attractive to others and self-esteem).
 This helps understand drivers and drives of motivation: e.g., I prefer this biscuit because it contains less fat

Here we have an example: this study investigated drivers of food choice for 6 product categories (breakfast
cereals, ready meals, yogurt, sweet snakes, biscuits, and cold drinks) in 5 EU countries. The idea is to use this
model to understand the link between attributes and motivation.
 At the bottom we find attributes and, in the middle, the perceived consequences for consumption of a product.
→ E.g., Good taste = enjoyable consumption; good price = save money
 The last passage is values (e.g., good taste, enjoyable consumption, satisfaction)

This research found that:

 Breakfast cereals are linked to health and enjoyment, biscuits to enjoyment and indulgence, yogurt to health,
sweet snacks to indulgence and cold drinks to enjoyment.

This study analysed also differences among countries: France, Italy, Poland, UK, Turkey. For each country we can read
the specific health value.

 Italy: both enjoyment and health tendencies, which are often linked. Brands are important.
 Turkey: complex set of knowledge and interlinked values
 Poland: driven by economic reasons, productivity
 UK: health is dominant (food-as-nutrients approach)
 France: focus much more on enjoyment (holistic approach) and look for well-being

Decision-making

What is the decision process for the food consumer? Brand, prices (it is also a good proxy of quality)

 Many food choices are habitual: I try the product and then I continue to buy it. It is difficult to process all the
attributes at the same time, so the decision-making process is very habitual
 The decisions in the purchase point are made very quickly (5/10 seconds).
 It is difficult that consumer processes several products attributes (Ingredients list, Nutrition table, Origin,
Appearance, etc.) and tries to aggregate them into an overall evaluation
 2 different systems (Kahneman, 2011): Spontaneous vs. Conscious

SYSTEM 1 – the spontaneous and intuitive decision

 The consumer recognises the brand as one they have used before and found it satisfactory
 He/she has not used the brand before, but recognises it as familiar and has some positive associations about a
brand or a region: i.e., Toscana in Italy (food is good)
 Attention to the packaging or appearance of product/ aesthetic motivation (the colours of packaging, the
composition of it, the graphics)
 In the spontaneous system the health-related information does not have a big role, unless the
healthfulness of the product can be linked to those few cues that govern the decision

Nutri-score is a label based on traffic lights from green to red, with different letters.
It is used to indicate different aspect of food with specific nutrients.

Food high in sugar and fats is in E, while healthy food is in A. The healthier is
towards green. It is important because can help people to choose products.

Some countries like Belgium or France have already introduced it on a voluntary basis, instead Italy is against this
system, since many Italian food products will end up with a low score (Parmigiano Reggiano, olive oil).

 Italy is working to introduce another label, not Nutri-score but Nutri-inform (how often you eat a specific food)

Communicating healthfulness

We have 3 different categories of attributes (search, experience, and credence). Healthfulness is a credence attribute

a. Search: refers to visual attributes of products (size, colour…). The consumer can seek pre-purchase information
b. Experience: an example is taste, so consumers can verify this attribute only after the consumption of the product
c. Credence: safety, freshness. These are quality feature of a products and they cannot be verified with the
experience, so the consumer cannot know certainly if an attribute is present in the product (organic and country
of origin are credence attributes; I cannot verify them).
 For this information I need high level information. Consumers receive or access information from external
sources such as the package, the media or through other consumers that have already tried the product.

Based on a survey, the results are: consumers

are going back to basics => all natural; GMO-free; no
artificial colours, …

Moreover, other points are:

 Sustainable is important
 Less is more: low cholesterol, low sugar, low fat…
 More is more: high in fibres, high in protein….

According to %, when we speak about health, the most

important trends nowadays are these four.

→ Explanation about the model mentioned before: Grunert food choice

2. SUSTAINABILITY
Sustainability is a very important trend today and a very current theme. There is much more attention on the issue
of sustainably, for producers and for consumers.

 Sustainability is an umbrella term which includes different elements: for example, production methods (such
as organic production), origin, local products, food waste, certified products. Sustainability can be declined in
these different ways.

Organic food: more sustainable, healthier. Organic production:

 It is a production method that complies with specific standards (some are public such as in EU)
 Organic farming promotes ecological balance and conserve biodiversity. Often, organic agriculture is used as a
synonym for biologic agriculture. Organic agriculture is based on 4 principles:
1. Health (sustain and protect the health of soil, plants, human and planet)
2. Ecology (to base agriculture on living ecological system and cycles)
3. Equity (based on relationships that ensure fairness about the common environment and life opportunities)
4. Care (manage agriculture in a responsible way to protect health and well-being of current and future
generations)
 This type of production is based on the absence of chemical input in the farming production methods: this is the
difference with conventional agriculture
 In EU this production method was introduced in 1991 with the regulation n.2092, and was subjected to several
changes over time. Firstly, it was only about cultivation. In 2007, organic animals were introduced and the last
change in 2012 introduced the possibility to use organic production for wine.
 This regulation requires a minimum requirement for cultivation, for production and for marketing and sales.
1) First step is conversion period: produce 2/3 years in the conversion period. In this time, you cannot use the
label “organic” for the product.
2) Then, start to produce organic: certifications. Producers, farmers, distributors must notify their activities to
the competent authority. Official control and label: 20 certification bodies.
3) Third step is related to commercial aspects, in particular imports: I can import from non- EU countries BUT
these products have to meet our standards
→ The cost of organic food is higher because of the lower yields, expensive materials, and more labour-intensive
production. Thus, it is important to obtain a premium price for these products (sometimes consumers are willing
to pay a higher price for organic products)
Processed product: if I consider a processed product (i.e., biscuits), where can I see organic characteristics? I look at
ingredients. If 95% of all ingredients are organic, the product can be defined as organic.

From 2012 is possible to certify also organic wine; before that, only grapes could be certified as organic.

→ Each country has its own specific standards and there are different logos associated to each standard.
→ If I export an Italian wine in USA, I can use the USA logo only if the standard meets the US standards (no SO2).
BENEFITS of organic agriculture:

 Reduces environmental impact from agriculture, uses less pesticides or nitrates in ground water
 Healthier food: no use of chemical products
 Improved biodiversity in agriculture
 Production without GM ingredients: food that does not contain modified ingredients
 Better tasting products; this was highlighted by some countries, but not all agree. It is still a discussed point
 More ethical animal husbandry: the breeding is made in a specific way
 Opportunity of food exports: i.e., in Australia, the consumption of organic food is high
 Regional development with interaction along the product chain from field to table

LIMITS of organic agriculture:

 It cost more than the conventional one. Even if the current market development for organic food products is
positive, consumers’ willingness (and capability) to pay a premium price is limited
 Lack of credibility of organic products and labels
 Availability is limited in most European countries. Many farmers find cooperatives and mark their products under
specific labels (Eco-natura Sì, a supermarket specified in organic food).
→ In the last years we can find more organic products in the supermarkets. Supermarkets need to differentiate
and the organic is a good way.
→ E.g., Conad, years ago, created a label called “verso natura”, which contains different organic products. In
these years Conad increased from 50 references to 300, because consumers demand is increasing.

WTP for organic fish: there are some statistical methods to estimate WTP. The most used is called “the choice
experiments.”

 Organic fish is obtained in a specific area with a good-quality of water, etc.

 We have some labels, 4 different attributes: production method (organic vs conventional), origin (Veneto region,
Italy and imported from EU), size (small, medium, big), price (9,13, 16).
 We ask consumers to choose their favourite production: the most important attribute is origin (Veneto and then
Italy). In this case, the attribute of organic is not so important.
→ The aim of the experiment is to understand which attribute is more important for consumers (in order to
make a ranking) and then you can estimate the WTP for each attribute.
 Currently 72.3 million hectares are under organic agricultural management (end of 2019 for most data).
 The distribution of the organic agricultural land is as follows: Oceania (35.9 million hectares); Europe (16.5
million); Latin America (8.3 million); Asia (5.9 million); North America (3.6 million); Africa (2.0 million).
 Oceania has half of the global organic agricultural land.
 Europe, a region that has had a very constant growth of organic land over the years, has over 23 percent of the
world’s organic agricultural land followed by Latin America with 12 percent.
 Apart from the organic agricultural land, there are further organic areas such as wild collection areas. These areas
constitute more than 34.8 million hectares.

Fair trade (explanation with guest speaker)

 For many people the circumstances of how a product has been produced became more important
 Exploitation of growers, producers, and workers frequently occurs during the production of goods: use of child
labour, unsafe working conditions, exploitative trading partnerships, discriminatory hiring practices, low wages,
excessively long shifts, and forced labour
 These practices are also often associated with damage to the environment: overfishing, deforestation, soil and
water contamination, and wetlands destruction
 The goal of fair trade:
✓ The goal of fair trade is to contribute ‘to sustainable development by offering better trading conditions to,
and securing the rights of, disadvantaged producers and workers’ in the South
✓ The motivation behind fair trade is to work with marginalised producers and workers to help them move
from a position of vulnerability to security and economic self-sufficiency

Origin

Country of origin effect: consumer differentiate products from different countries (i.e., I prefer German beer, Swiss
chocolate, or Italian wine).

 Consumers sometimes use COO as a quality attribute. It links the product of a country to the territory =>
important for the quality of the product.
 It helps consumers in the evaluation process and helps the farmers to differentiate the food products
 The origin of agricultural products plays an important role for costumers: you know the producer.
 In some developed nations, more and more customers prefer domestic food products: better quality, shorter
ways of transportation, less carbon dioxide emission, higher identification with the product based on traditions.
Some of these are linked to sustainability, which is an important aspect in the choice of food.
 Region of origin refers to a smaller area, which has some specific characteristics, aspects, and advantages. These
are more homogeneous with respect to the whole country in terms of natural and human characteristics.

I.e., Champagne → understand link between product (wine) and territory. The effect of this link makes possible to
obtain a unique product. Today this is very important because in a global world in which competition is high the
possibility to differentiate our production with a link to territory is interesting to produce an unique product (I can
grow these type of wine in another region but it is NOT the same result)

Food waste

Analysing sustainability also implies the topic of food waste, which is nowadays a very important topic.

 One third of all food produced worldwide is wasted at some point along the food value chain.
 We must distinguish between loss (first part of the chain: transportation, production) and waste (it is generally
generated in the last part of the chain by restaurants or consumers).

Now, we speak generally. Why so much food is wasted? With this amount of waste, it is difficult to support the
growing human population, estimated to reach 9 billion by 2050.

Corporate social responsibility: it is the last one topic about sustainability.

 The demand for products obtained with respect to social aspects is increasing (child labour, minimal wages,
labour conditions, working hours, …). Consumers pay more attention to this social sustainability
 A standard for managing ethical workplace conditions throughout global supply chains was established by Social
Accountability International (SAI) via ‘Social Accountability 8000’ (SA8000).
 A new standard for CSR from the International Organisation for Standardisation (ISO), Social Responsibility 26000
(ISO 26000), has been published in 2010.
→ ISO26000 and SA8000 are 2 examples of tools that can be used by farmers/companies to guarantee to
consumers some social aspects.
 Also, generic initiatives regarding sustainability issues have been developed at the branch level. For example,
with reference to marine resources: we have specific certification for fish products.
→ Example for corporate sustainability: Ben&Jerry’s https://www.youtube.com/watch?v=Lu2VBQBpn7U

3. AUTHENTICITY
How can a company be considered authentic by consumers? Definition of Authenticity:

 It is used to describe anything that is genuine, real, or true or characterized by honesty, simplicity, original
 In the marketing literature there is not any widely acceptable definition of authenticity but it is related to
the concepts of genuineness, timeless and traditions, originality, cultural, personal or positive valuation
 It denotes:
a. Uniqueness, cultural or traditional associations, characteristics of the production process, presence
of an authority
b. Heritage and pedigree, stylistic consistency, quality commitments, relationship to place, method of
production

Specifically, food and wine have a strong cultural element in some countries and they are related with the
perception of authenticity. Authentic food may be used by inhabitants of geographic areas or specific
communities to connect them to the past, to traditions.

Definition of authenticity: “it is based on the evaluation of individuals rather than being solely related to the
inherent attributes of the brand and corresponds to a variety of attributes since there is no unique definition of
the authenticity concept”.

→ In other words, authenticity is subjective: each consumer perceives differently the authenticity of a product.
 This is a pyramid (going up we increase the
value of the product). 2 variables: price and
competitive position.

First stage-Commodities: raw materials of

agriculture (sugar, coffee). Competition is based
on costs. So, I have leadership in the market if my
production costs are lower than others’.

Second stage-Goods: think about a commodity

such as wheat and the good is pasta. I use the
raw material and I transform it in pasta, but each
company has a specific recipe. In this stage the
transformation of commodities gives us a
differentiated good. Competition is based on
differentiation.

Third stage-Services: add services to on our good (i.e., pre-cooked pasta). Add something for time saving, for
example. In this case competition is based on services.

Fourth stage-Experiences: pasta cooked from Cracco. You add value on the product, with an experience
connected.

Another example: coffee

1. Raw materials from different parts

2. You produce coffee, it can be in various way (Lavazza, Hilly, Starbucks)
3. Coffee at bar
4. Coffe in Piazza San Marco (experience)

FOOD PRODUCT authenticity: authenticity of a food may be related to some important aspects such as the following
3 factors:

1. Traditional methods of production: respect the rules of production (usually strict). For example, Parmigiano
Reggiano follows a strict procedure when being produced. A company that wants to produce it must follow strict
rules.
 The production process influences the production and evaluation. A different product comes from other
methods (this method is only for Parmigiano). Authenticity is connected to these traditional methods.
 Example Champagne and prosecco: for Champagne the second fermentation is given in the bottle (metodo
classico), much longer. In the case of Prosecco, the method is called charmant or Martinotti. The
fermentation of wine is made quicklier.
2. History: have a long history behind the brand can increase the trust that consumers have towards it.
• Companies use the history aspect in communication. I.e., they write in the packaging the time from which
the company exists, which can increase trust and quality
3. Territory: the place where the products is produced can completely change its image and thus its authenticity.
• The perception of consumers is different on the basis of territory. Sometimes territory works as a guarantee
for the product: consumers are more likely to trust it

These are the 3 points that define the authenticity of a product.

Coca-Cola? Is it authentic for consumers or not?

 For many consumers the company is not considered authentic because it uses an industrial process BUT Coca-
Cola is one of the most authentic US brands. It represents the US world => it is SUBJECTIVE. It may be considered
an industrial product.
PRODUCERS authenticity is defined by:

1. Heritage: all the intangible attributes linked to a specific group such as history and reputation. This sort of
tradition gives companies an extra-value. Coca cola is a good example; the drink has been produced since a long
time ago.
→ If you have an history, it means that you have a reputation that is built over time (important for consumers)
2. Commitment: the passion and the dedication that companies adopt in producing and delivering their value => if
the company is really committed to provide consumers a high value proposition or a distinctive value proposition.
3. Social orientation: any extra goals that do not concern profit which could also be an aim of the company. They
often become part of the companies’ philosophy and values.
→ Consumers link authenticity not only on commercial goals and profit, but to other goals.

What makes a producer more authentic than other? These 3 characteristics.

Vodka example: if we think about vodka, we think about Russia. The point is that in the vodka market authenticity
can be built.

• One of the most known vodkas is “Grey Goose” which is French. It is considered a real authentic vodka.
• “Absolut vodka” (Swedish vodka) has also a tradition, but consumers do not consider it a traditional product. This
company had to build its authenticity, and the way was a very innovative communication (associating the name
with absolute, with respect to many different other companies of communication). We don’t have tradition in
this case, but authenticity has been built. We rely on the reputation for the producer and this is why we speak of
producer authenticity and not product authenticity.

Authenticity attributes in the luxury wine sector.

This pyramid represents the relationship between 6 attributes of

authenticity. The first one is quality commitment.

We use these 6 attributes to create and the end the

brand aura, important for the consumer (start from the bottom).

1. Heritage and Pedigree: i.e., the Antinori family is one of the most important families for wine
• The incorporation of firms’ histories in their communication activity, in the visits of their facilities are crucial
• The age of the winery is perceived as a guarantee
• Heritage and pedigree allow a winery to distinguish from late comers and mass-market wines

In the wine market we have the old world for wine (Italy, France, Portugal), and then new world (south Africa,
Australia, Chile). In the new one, farmers or wineries cannot use this history component because they do not have a
long story compared to wineries of the old world.

2. Stylistic consistency
• Product is fundamental in establishing an image of authenticity
• Consistency is defined as the uniform level of quality and taste among all the products of a winery.
• It is not easy because agri-food production is based on raw materials which depend on nature. Climate,
temperature, the rain, affect the quality of materials => you have a better or a worst wine
• It is not possible to obtain the same product => not easy for wineries to uniform the level of quality and to
uniform the taste of wine.
 • Consumers will sanction wineries whose quality and taste are discontinuous among different products

Wine Spectator: American magazine that focuses on wine cultures and gives auto ratings to certain types of wine
and for specific years. If your rating is high, you must maintain a high level. If raw materials are different, the rate
can change a little bit, but not so much => consumers will sanction the discontinuous product.

3. Quality commitments
• Wine quality needs to be narrated and made explicit to the consumer: quality needs to be communicated
• The commitment of the firm to quality needs to be made clear and tangible: for example, care in selecting
grapes, quality of the HR working on production, use of oak, time in the cellar before release and the like
• Marketing needs to clearly communicate these commitments
• Retention of old production methods as a commitment to preserve the original quality of a wine
4. Relationship to a place
• The relationship of a wine to a place has value for sophisticated consumers looking for authenticity
• If the relationship with the place is well communicated, the consumer will perceive the product as unique of
its environment
• The uniqueness of the place and the “hand of the artist” (the oenologist) make the product perceived as
authentic
5. Method of production
• Consumers put a prize on wineries that narrate in detail the specificities of their production processes
• Visibility of the production process reassures about the care put into the product and about what goes (and
how) into the bottle
6. Downplaying commercial motives
• The larger the volumes, the lower the perception of authenticity: we to try to produce a rare product
• Wines that are produced in large batches will be perceived as less authentic than those produced in small
batches and relatively difficult to find in stores and distribution
• Labels that are more “modest” and less “noisy” are perceived as less commercial and thus more authentic

4. CONVENIENCE AND BUNDLING

CONVENIENCE FOOD: another of the big trend in food industry. Characteristics of convenience food:

• Convenience is an attribute of a food product for which the demand is increasing

• Convenience is referring to different aspects:
a. Time utilisation (time-saving) in preparation, consumption and clean up after consumption. It is the case of
pre-cooked or frozen products
b. Accessibility
c. Portability and handiness (snack): convenience food includes minimizing physical and mental effort (what to
do for dinner?)
• Nutritional problems: we have different categories in food. The first regards fresh foods/fruits/vegetables which
can be excellent choices in a well-balanced diet. Other categories regard pre-packaged food, high sugar, salt, fat,
and other additives. Thus, sometimes some categories of convenience food are considered junk food.
• Economy Myth: in some sense convenience food can be cheap. Individuals who use huge amount of convenience
food sometimes claim that they have no choice. They buy convenience food because they do not have other
possibilities, because they cost less than healthier choices.
→ This is connected to nutritional problems (obesity, overweight is linked to this problem).

Example: apples are convenience food with a high nutritional value. Convenience food such as frozen dinners, frozen
meals, potato chips, pizza are popular as well as cookies (convenience snack).

→ Ready-to-serve convenience foods are often found in cans.

 Why convenience food is a
mega trend?

These are the four reasons.

BUNDLING – definitions

 ‘The act of marketing two or more products and/or services in a single package for a special price’
 ‘The selling of two or more products and/or services at a single price’
 ‘Bundling is a sale of two or more separate products in one package’
 ‘… it involves combining two or more existing products which have been until now marketed separately’

The value for consumers is higher if they buy 2 products together instead of buying them individually.

 Advantages: lower price

 The decision to bundle include different variables that must be considered:
a. Volume variable: bundling increases unity sales volume. I decide to bundle because I increase the sales
volume of the product
b. Margins: bundling can reduce margins because I sell with a special price.
c. Exposure: bundling may offer new channel opportunities or exposure to new potential consumers.
d. Risk: bundling may cannibalize more profitable sales.

Different types of bundling

Here we have different forms of bundling.

a. Basic forms of bundling:

 Pure bundling (only the bounding is sold)
 Mixed bundling (both the bundle and the individual products are offered). 2 different situations:
1. Mixed joined bundling (ex. McDonald’s menu)
2. Mixed leader bounding. Priced are settled for individual products and for the bundle.
b. Special forms of bundling:
 Tie-in bundling: the buyer of the main product agrees to buy one or several complementary goods which are
necessary to use the tie-in good, exclusively at the same suppliers. I.e., printer and toner
 Add-on bundling: the add-on product will not be sold unless the lead product is purchased. I.e., cars: the
basic model of car is the lead product and then I can buy extra features, such as airbags, etc.
 Sales rebates: companies frequently offer consumers a year and rebate on total annual sales, across all the
companies’ products
 Cross couponing: manufacture companies frequently use coupons to promote some products. I.e., Coca-Cola
which promotes diet coke bottles.

Bundling trend – advantages:

 Bundling is a trend that provides added convenience and value to consumers, through reduction of costs of
search and related transaction costs
 The saving is due to offering products in bundles, so that the customer can save:
✓ Time (they do not have to seek for separate products)
✓ Money (bundled product is in many cases cheaper than the separate products)
✓ Effort (by reducing transaction costs)

5. FAIR TRADE
Fairtrade is a global movement for change that works directly with businesses, consumers, and campaigners to make
trade better support circumstances for farmers and workers.

 Fairtrade is also a certification mark, that means the producers and businesses have met the stringent social,
economic, and environmental standards.
 Fairtrade Pillars:
1. The Fairtrade Minimum Price
 Price that aims to cover the average costs of producing their crop sustainably
 It is calculated by Fairtrade together with the producers
 It is a vital safety net for the small-scale farmers when market prices drop
2. Fairtrade Premium
 It is an extra sum of money paid on top of the selling price, that producers or workers can invest in their
own development, according to their nerds
  These could be a well or a hospital, better farming equipment or even training and investment to help
them switch to organic farming.
 Governance of Fairtrade: on the top we have Fairtrade International (based in Bond, Germany) that establishes
fair trade rules with producers.
 The 50% of fairtrade international is own by farmers, represented by 3 countries: Asia, Africa, America
Latina/Caribbean. The other 50% is owned by national fairtrade organizations, such as Italy.
 At the centre, we can find “Flocert” that controls adhesion to fairtrade standards, controls producer
organizations, traders that buy at fairtrade conditions and companies.
 More than 1.9 farmers and workers are in fairtrade certified producer organizations. Producers are organized
in organizations, there are 1880 fairtrade certified producer organizations in 71 countries.
 17% of farmers and 41% of workers in fairtrade are women

77% OF CONSUMERS WANT FOOD BRANDS TO TELL THEM WHERE PRODUCT INGREDIENTS COME FROM. 50% OF
CONSUMERS WANT TO KNOW IF HUMAN RIGHTS OF PEOPLE WHO PRODUCE THEIR FOOD WERE RESPECTED. -
74% OF CONSUMERS WANT GOVERNMENTS TO MAKE IT EASIER TO PURCHASE SUSTAINABLE FOOD

Sustainability according to Fairtrade: there are 3 pillars

1. Economic: fairtrade minimum price, fairtrade premium, long-term trade relationships

2. Social: access to democratic decision-making processes, no child labour (no forced labour), training opportunities
3. Environmental: minimize and safe use of agrochemicals, no use of GMO, promotion of organic production,
protection of biodiversity

There is a strong fairtrade movement in UK of 300 schools (where they buy fairtrade for their activities), over 2.000
fairtrade towns and hundreds of volunteer groups.

6. MARKET SEGMENTATION IN AN INTERNATIONAL CONTEXT

Segmentation is based on the realization that as different as customers are, they can be grouped together by similar
value expectations.

 This equates to subdividing the market into groups of customers who are homogeneous within the group, but
who are heterogeneous with respect to customers who belong to other groups
 Each group is a market segment, and every segment is defined by a preference for a different combination of
benefits that customers expect to obtain and sacrifices that they expect to make
→ 11.1-11.3 in the book

Tools for segmentation: the process

1st: identifying criteria

Segmentation criteria are variables that

form the basis for distinguishing various
segments and assigning individual
customers to the most appropriate one.
 These are possible variables
used for segmentation.

There are 4 main categories

of variables.

STUDY THEM!!

1. BEHAVIOURAL segmentation
 Consumers are divided into groups according to uses of a product
 Occasion segmentation groups consumers according to special occasions of product use and regularity of use
 Consumers can be grouped based on their:
a. Preference for a particular product attribute. I.e., organic product
b. Usage occasion: ex. Champagne
c. User status
d. Rate of product usage: it is the frequency
e. Loyalty status, buyer readiness stage and attitude. I.e., tea around the world
2. PSYCHOGRAPHIC segmentation
 Psychographic segmentation is closely related to lifestyle/social class
 Psychographics involves mapping or profiling consumers based on their psychological attributes and
evaluating their activities, interests, opinions
 When analysing consumer lifestyle regarding food, the following elements have been distinguished:
a. Ways of shopping
b. Cooking methods
c. Quality aspects
d. Consumption situation
e. Purchasing motives
The values and lifestyle system: VANS Framework

This model distinguishes different segments. Each segment has its

characteristics:

Innovators = the top VALS group, are successful consumers with

many resources, concerned with social issues and open to change.

Thinkers = are satisfied, reflective, and comfortable.

Achievers = are career-oriented and prefer predictability to risk or

self-discovery.

Experiencers = are impulsive, young, and enjoy offbeat or risky

experiences.

Believers = have strong principles and favour proven brands.

Strivers = are similar to Achievers but have fewer resources, they

are concerned about the approval of others.

Makers = are action-oriented and tend to focus their energies on

self-sufficiency.

Strugglers = are at the bottom of the

economic ladder.

They are most concerned with meeting

the needs of the moment and have
limited ability to acquire anything
beyond the basic goods needed for
survival.

EXAMPLE: Lipton
3. DEMOGRAPHIC segmentation: it is the most used segmentation. Variables are linked to age, gender, income,
family size, marital status, occupation, religion, education.
i.e., JELL-O: gelatine dessert. Craft promotes this product to children as a fun snack. For adults the massage of
this products is that it is tasty and has less calories.
4. GEOGRAPHIC segmentation
→ Dividing the market into different geographical units such as Nations, Regions, States, Counties, Cities,
Neighbourhoods, Census tract.

The strategy behind the geographic segmentation: people who live in the same area share similar needs.
Companies have specific advertising on specific areas. It combines geographic data with demographic data:

 Geoclustering called PRIZM (Potential Rating Index by Zip Markets)

 Inhabitants in the PRIZM Cluster: similar lives, cars, jobs, magazines

PRIZM (Potential Rating Index by Zip Market): it is a segmentation model that groups consumers into 66 different
segments.

 Principal drivers: socio-economic rank and urbanicity

 Core demographic dimensions: household income, age of householder, family composition and home ownership
 Segments are collapsed into 14 social groups, 11 life stage groups, and custom groups

This model compares demographic variables, different consumer behaviour, geographic data for different markets.

EXAMPLE: Tomato ketchup produced by HEINZ: it captures 80% of the market share in Europe and 60% in US. This
product is different for different markets (European prefer it spicier, while American sweeter). A specific product is
declined in a specific market according to the preferences of consumers in that specific market (adaptation).

GLOBAL market SEGMENTATION: in the agrifood sector, segmentation was mainly applied to domestic markets.
International market segmentation probably did not receive similar attention.

In an environment which is more and

more competitive and international, it is
very important to use an international
market segmentation.

So, understand similarities AND

differences among different consumers,
related to specific countries.

For global segmentation we can use different criteria to segment the market to try to have a homogeneous group of
consumers: there are different variables. I.e., we can use the variable of “cultural related to the specific cultural
aspects of a country” or “world segment”.
LIMITATIONS of global market segmentation

• It is based on country variables and not consumer behaviour patterns: Italian consumers have some specific
characteristic about wine consumption and Spanish consumers have other specific characteristic; we use the
country to segment.
→ We DO NOT consider consumer behaviour patterns, because in each country we have specific targets (i.e.,
students, workers, babyboomer…)
→ Some countries have specific characteristics about consumption patterns on food. The preferences
are not only connected do specific countries but also the behaviour of the consumer.
→ Market segmentation based only on country is not the best segmentation we can have.
• It assumes homogeneity of the country segment
• It overlooks the existence of homogeneous consumer segments that exist across national boundaries.
• Such tool does not consider the variation within countries and the prediction of consumption is limited.

Here, we have a table related to

conventional and unconventional
approach.

International segmentation should

be based on grouping of micro
segments both within a country or
among countries.

EXAMPLE: Cross-national
segments of milk distinguished
according to consumer, habits
preferences, and customs.

The image shows different

areas around the world and the
specific habits for milk
consumption.
7. FOOD CHAIN
Food supply chain is the process, operations and actors that help take the food from raw materials to our plates; “the
set of trading partner relationships and transactions that delivers a food product from producers to consumers”.

It is a very complicated network (a lot of

actors and relationships).

Environment is influenced by factors such as

economic, social, political, technological; we
must consider them.

1. Producers – farmers: the food supply chain starts at producers

• There are globally at least 570 million farms, of which more than 90% are family farms.
• In the European Union (EU) small farms are located particularly in peripheral regions
• Small farms might appear inefficient: low resources mean low investments in production and in HR, so low
innovation. However, small farms are very important for some positive points:
a. Rural sustainability: economic sustainability because sometimes in rural areas it is more difficult to have
other economic activities. A small farm maintains the economic activity of the area.
b. Efficiency in mobilizing resources
c. Support high levels of biodiversity: they use biodiversity for competition
d. Develop innovative business models to overcome their intrinsic structural limitations (network contract)

The network contract is one of the tools to overcome the small size of firms:

• The network contract can be defined as a signed agreement by several enterprises. “Il buon gusto Veneto” is
an example in which different companies of pasta, cookies, cheese, etc. cooperate.
• Reasons for companies to work together: promotion and communication, co-marketing activities, and others
• Together, it serves as economic activities which has established and placed one or more common goals
through the formalization of a contract
• It is considered as an instrument or organizational model capable of conditioning the transaction costs and
the business performance

“I’m very small, but all together we have the capacity to have advantages connected to a very large company”

2. Processors: entities that transform the food product. This process is also known as “food manufacturing”. They
prepare fresh foods in a ready-to-eat form, processing raw materials.
• In most countries, the agri-food industry is primarily the largest subsection of the manufacturing industries
• The agri-food industry is highly heterogeneous in terms of its structure and geographic space. It is composed
of a high variety of sectors (bakery products, meat, wine, and so on)
• Each of these sectors has distinct technological, economic, and managerial characteristics
• The food industry is under pressure from two powerful and interrelated forces: concentration and
globalization
• A rapid concentration dictated by economies of scale. Ten countries concentrate 85% of the agrifood
industry's global production and 70% of its workforce in order to reach economy of scale
• 600,000 businesses worldwide, the majority of which are very small, with "territorialized" products
which often trade on the strength of their organoleptic qualities and local cultures

In the EU, very small businesses (0 to 9 employees) and small and average businesses (10 to 249) accounted for
86% of the 360,000 businesses in the agrifood sector.

3. Distributors and retailers: distributors are companies that are the link between producers, processors, markets.
 • The distributor sources either fresh products or processed food from the processor and then distributes it to
various channels; channels are retailing companies or can be also restaurants.
• Distributors will generally buy in bulks (huge quantity) and use an infrastructure of warehouses and
distribution centres to deliver the product.
• These entities are very important, especially when supply chains are global and have to cross international
boundaries.

Retailers, on the other hand, are the entity that we see as consumers.

• The situation about retailing is very different in EU countries: i.e., in Scandinavia supermarkets are the only
sales channel (100%), while in other countries supermarket are less than 50%. Supermarkets relate to more
traditional distribution channels
• Retailing is still highly diverse across Europe
• Although most chains compete on low prices, other chains compete on quality and wide selection of goods:
the strategies connecting to the distribution channels can be different.
→ We can find retailers focused on price (hard discounts), or channels more focused on quality of
production, the selection (portfolio proposed to consumer).
• In some chains other issues, such as fair trade, animal welfare and organics, have become more important
recently, as part of brand management and segmentation strategies.
• Moreover, whereas some supply chains are characterized by retailer-driven integration, others are
dominated by large manufacturers, yet others by fragmentation

SUPPLY CHAIN DIFFERENTIATION: food supply chains are differentiated by

• Nature of collaboration between stakeholders (transactional vs relational):

a. Transactional: actors between the supply chain go to the market and evaluate quality/quantity of food and
decide the price every time.
→ I.e., if you produce cheese, you need some raw materials and buying them on market implies high
transactional costs because of quality evaluations.
→ Here, actors prefer at the specific market the specific product
b. Relational: the way in which I decide to use relations with suppliers. I can use different tools like the supply
contract, in which I decide some aspects such as price, quality or quantity of raw materials.
→ Here, actors decide to collaborate together
• Form (chain vs network): the first one is a normal/simply supply chain and the second one is a more integrated
and connected supply chain
• Spatial proximity (local vs global)

FOOD VALUE CHAIN: the degree of collaboration is the difference between food chain and food value chain.

• The different level of collaboration gives us different situations: in food chain the collaboration is very low
(we mainly sue the market) and in food value chain the collaboration is very high.
• In food value chain, we have strategic alliances between farms and partners (food industries, retailers,
distributors) that deal in significant volumes of high-quality, differentiated food products and distribute rewards
equitably across the chain.
• The aim of this food value chain is to create a higher value related to this collaboration between actors when
distribute rewards across the different partners of the chain

We can have different tools to create alliances:

1. Supply contract: in this case, we generally have a long-term collaboration. It is the easiest form to collaborate
between partners because it is a simple contract.
• I decide some details on my raw materials: quantity, quality, etc.
• The long-term contract allows a stable alliance between partners: each year we decide the new standards.
2. Vertical integration: I decide to combine different stages across the supply chain. I.e., raw material production
and the production process are together under the same actor. This is the strongest alliance, not so used.
• Advantages of vertical integration: value creation
 • Disadvantages: less flexibility in supplier selection

In the first case we have 2 actors that collaborate, in the second case we have one actor that controls different stages
(usually the food farmer integrates the former stage of raw material production).

Food supply network: in this case interrelationships evolve dynamically through changing trade relationships from
within a network of different enterprises that are active at each one of the stages of the value chain.

• This is more complicated, since we have a lot of actors within our supply chain and this allows to create a higher
value with a strong collaboration in the network.
• Not only the main actors (farmers, processors, distributors), but also other actors are involved (such as
organizations). This is the reason why we call it food supply network.

Example: Parmigiano Reggiano. High number of farmers who produce milk, plus a lot of cheese makers and 10
wholesalers. The complexity is high because we have a high number of actors involved.

• 265.000 cows, who produce 19mln q of milk

• 50.000 people involved in the supply chain 1.5mln of profit
• 30% mountain production

DATA & TRENDS – EU food and drink industry SEE SLIDES 6.1

Other values: companies have an important role in EU also about cultural and societal dimensions, not only the
economical side:

• Rural communities
• Landscape: UNESCO heritage
• Tourism
• Traditions

These are important topics, sometimes we link agri-food products to these values.

Example of network contract: Pastasciano (pasta sector). This is an example of network contract (such as Il Buon
Gusto Veneto). we have 30 farms which use this contract network to produce this pasta. The producers use a selected
grain (old grain/ancient) called “Senatore Cappelli”. The price of the pasta is 5€/kg (high) because of specific raw
materials, specific process for pasta, but the idea is to link pasta with values stated above. The idea of this producer
is: “we produce this landscape, which is important for Italian tourism, why you don’t pay us this value?”.

Sometimes, food products include these different values, and we don’t pay for these values

TRENDS & CHALLENGES

1. Globalization: The agri-food value chain is becoming increasingly global, for 2 reasons: 1. Decreasing
transportation and transaction costs, and 2. Trade liberalization
2. Structural changes: why? 1. Reduction in farm number, 2. Gradual development of farms to small companies
managing larger operations, 3. The competition of food companies is shifting towards food chains/networks
3. Changes in consumer preferences: consumers are the main driver of development of the agrifood supply chain
and demand is becoming more sophisticated (increasing for healthy products or environmentally friendly ones)
4. Environmental awareness: increasing attention to environmental aspects. The agri-food value chain contributes
significantly to the environmental impact and greenhouse gas emissions. EU decided to invest more on organic
surfaces. (Goal: 25% EU surface based on organic production by 2030)
5. New information and communication technologies: the ICT revolution brought to companies an excellent
opportunity to facilitate, improve and in some cases to even transform their business processes and their way of
doing business.
• ICT can improve consumer health because we have some technologies for trackability (as a consumer I can
know where the product is obtained, since the supply chain is very long now).
• ICT can increase productivity because of reducing losses, and of a better – more efficient – use of sources.
STRATEGIC & OPERATIONAL GOALS

• Resource efficiency: I have less resources (such as water scarcity) and a higher demand for raw materials, which
can be used for different reasons
• Food safety: it means food that is safe to eat, while “food security” means access to food. In Europe, we talk
more about food safety, but in other parts food security is a problem.
• Transparency: consumers want to have information on origin, raw materials, and today the demand for
transparency is high. The food industry needs to give more transparency to consumer
• Trust: about food security, the problem is trust. It was generated by food problems, such as salmonella. 2
ways to increase trust and transparency:
1. Certification (100% Italian products for example). There are different certifications to guarantee the origin.
2. Direct contact with farmers: recently, we have more direct sales. Consumers prefer this channel because they
have higher trust. They know the producer in this way.
• Sustainability

FOOD PARADOXES, by “Barilla Centre for food and nutrition”:

1. Food access and food excess:

• “An obese planet dying of hunger”: we produce enough food to feed everyone on the planet, but worldwide
hunger is still a serious problem with 821 million people suffering from shortage of food. At the same time,
2.1 billion people are suffering from obesity or are overweight.
• This contradiction arises from unbalanced lifestyles and a range of deep and complex faults in our
production, commercial and distribution systems, as well as education regarding food and nutrition

Solutions:

a. Improvement of agricultural/agro-industrial/commercial policies to ensure a more balanced access to food.

b. It is connected to resources: try to use in different ways resources and distribute better the use of natural
resources especially in the stage of cultivation of raw material.
c. Control of price volatility
d. Food education

2. Use of natural sources: “should we feed people, animals, or cars?”

• We urgently need to feed a growing global population, and yet 40% of the world's cereal resources are used
to feed livestock and produce fuel.
• Solving this paradox is a significant challenge because it means making responsible choices and allows us to
question what sustainability is all about.
• Sustainability is the ability to maintain the ecological processes which occur within an ecosystem into the
future. And this is why sustainability means taking responsibility for younger generations.
• To tackle the second food paradox, it is important to place the concept of sustainability as a guiding principle
behind all our decisions and prioritise the wellbeing of people and the planet.

Solutions:

a. Improving the efficiency in the way natural resources are used. We have a problem connected to losses and
waste, more efficiency is related to reduction of food waste and loss.
b. Agricultural system that improves equality and social well-being in rural areas.

3. Food waste: “to ensure there is enough food for everyone: don't waste it”
• Every year, we waste a third of the world's production of food in the supply chain, during the processes of
conservation, processing, distribution, and consumption.
• The amount of food wasted is four times more than the quantity needed to feed all the people around the
world who are malnourished.
• Food waste is both an economic and a moral problem, as well as an environmental issue: when waste breaks
down in landfill sites, it releases methane gas, which is 20 times more harmful than carbon dioxide.
 • We need to increasingly raise awareness about it to encourage people to adopt behaviour conducive to
improving food access for all

We must distinguish between food losses and food waste. Food waste is present when food fit for consumption is
wasted accidentally or intentionally at the retail level (we do not eat it all and throw it away).

Food losses occur along the food chain (during transport or storage) and are not always under the control of the
actors involved. It is more difficult to control the losses along the chain because food losses are due to inadequate
technologies or to lack of knowledge and skills. There are different types of losses along the supply chain.

FOOD LOSSES and FOOD WASTE

This image shows the different stages of our food supply chain and we can find the reasons for food waste and food
losses at various stages. Food losses are generated mainly in the first part of food supply chain, while food waste is
connected mostly to distribution and final consumption.

Food supply chain is very complex and it is becoming more and more longer. The complexity and the length are the
first cause related to losses. When there is a short supply chain there is less risk to losses, because there is more
control in the production. Reasons:

• The expectation by consumers for variety of choices, and for convenience of choices are important motivations.
• A growing portion to population moving from rural areas to cities, so this has consequences in food supply chain.

1st stage: production. Causes to food losses in this stage:

• Limitations in agricultural techniques and transportation and storage infrastructure: in developing countries, we
do not have good transportation.
• Climate and environmental factors: poor weather conditions have a bad consequence on the production,
resulting in crop losses (lower production). Cold has consequences on fruits, vegetables
• Production surpluses: we have more production than demand. It is a very common situation in EU. An example is
milk: high production, to contain the high offer on milk, to maintain the production on a specific level. When
there is high offer of a product, we have important consequences:
1. Decrease of price
2. Most part of raw materials have a very short shelf life; these are fresh products that I cannot stock and use
next year
• Compliance with regulations and standards: specific standards are set by the market (i.e., An apple must have a
specific size/colour. If does not have these features, it is thrown away. Consumers have a certain relevance; when
buying fruit and vegetables, we use aesthetic observations.

2nd stage: processing: causes to food loss/waste

• Technical limits and limits on processing and production processes. An example of technical limit is given by
tomato: if I have to transport it in a long distance, the high temperature can influence its quality or cause food
losses.
• Another cause of waste is due to preferences of consumers: suppose you eat chicken, which part do you prefer?
Other parts can be used to feed animals.

3rd stage: distribution chain: causes to food waste

• Limits of the distribution system

• Errors in order forecasting and management of reserves. I.e., during summertime, we eat a lot of watermelon.
When summer is cold, I do not choose it, but the supermarket has to order the product months before.
• Deterioration of products and packaging: when packaging is not perfect, the product remains unsold.
• Marketing and sales strategies: for example, when I have promotions such as “buy 2 products and pay only 1”, in
the end I consume only 1 and the other one is wasted

4th stage: consumption stage: 2 ways to consume: domestic consumption and restaurants.

• In this stage, there is the highest degree of waste: in the chain, 50% (in EU) is related to the final consumption.
• The main causes of food waste:
a. Excess purchases: we buy a lot; i.e., 2 products and we eat only 1
b. Excess portions prepared: I cook too much and I throw it away
c. Difficulty in correctly understanding the labelling: “use by” is the date by which food needs to be consumed,
“best by” means the food is better before that date, but can be safe also after it.
d. Errors in food storage: i.e., in the end I have some products expired.

The most important action is to educate

consumers.

Here are some examples to reduce food

waste.

SUSTAINABILITY CHALLENGES

Sustainable supply chain management is considered to be the umbrella term that comprehends all three bottom
lines together: economic, social, environmental.

Sustainable food supply chain description

→ The UK Sustainable Development Commission has combined many different stakeholder views to produce a
description of ‘sustainable food supply chains’ as those that:
1. Produce safe, healthy products in response to market demands and ensure that all consumers have access to
nutritious food and to accurate information about food products
2. Support the diversity of rural and urban economies and communities: the food industry is important to rural
areas, it supports diversity of rural and urban economies
3. Enable viable livelihoods to be made from sustainable land management, both through the market and through
payments for public benefits: landscape is a public benefit
4. Respect and operate within the biological limits of natural resources (especially soil, water, and biodiversity);
5. Ensure a safe and hygienic working environment and high social welfare and training for all employees involved
in the food chain;
6. Achieve consistently high standards of animal health and welfare;
7. Sustain the resources available for growing food and supplying other public benefits over time, except where
alternative land uses are essential to meet other needs of society.

Today consumers have more attention to these aspects; a lot of efforts have been done and has to be done.

Measuring sustainability: how can I measure sustainability?

a. Economic sustainability: financial measures (such as profitability, ROI, etc)

b. Environmental sustainability: measuring the impact of businesses and processes (carbon emissions, packaging
waste, fuel consumption, energy usage, etc);
c. Social sustainability: measures the social impact (labour conditions, pay scales, investment in the community, fair
and ethical pricing, etc).

Life-cycle Sustainability Assessment: one of the methos that helps measure environmental performance. It is
difficult to create a full life-cycle assessment in a long supply chain since we must map in every stage resources used.

→ Here, we find a modification of the typical life-cycle assessment, we have also some other attributes such as
social attributes => we call it Life-cycle Sustainability Assessment
• Ecological footprint: indicates the quantity of land required to provide resources for a specific activity.
• Carbon emissions: greenhouse gas emissions from running processes.
• Carbon footprint: negative environmental impact associated with economic activities.
• Food miles: the distance travelled by a food product or its components from source to consumption.
• Eco-labelling: Eco-labelling and social labelling are market- based mechanisms designed to demonstrate that
products have been sourced with due regard for social and environmental consequences

This is the idea based on life-cycle. In each stage of our supply chain, from raw material to deposal/recycling, we use
these indicators.

i.e., Salcheto Winery was the first in the world to certify the carbon footprint of a bottle of wine.

Corporate Social Responsibility: very important for food companies, since this sector has a high impact and
dependence on the economy, environment, and society. This tool is very relevant for food companies.

As said before, there are 3 challenges in food sector:

1. Connected to high impact and strongly dependence on natural and physical resources
2. Connected to food basic human needs (people have high attention on what they eat because food covers basic
needs => so more attention to health, animals, etc.)
3. Related to the complexity of our sector: on the one hand, we have a very small farm; on the other, we have big
companies.

More than 200 standards related to corporate social responsibility.

• The last two decades saw an emergence of numerous CSR schemes, demonstrating that sustainability has
become a serious item on the public and corporate agendas
• A study about corporate social responsibility (CSR) in the food chain identified 216 CSR standards, guidelines,
and initiatives in the agribusiness sector
• Some were founded by consortia of the food industry such as SAI (Sustainable Agriculture Initiative), which was
established by Groupe Danone, Nestlé, and Unilever. However, most of the CSR schemes claim to be based on
multi-stakeholder involvement.

ISO 26000 (International Standard Organization) guidelines

CSR is defined as: “the responsibility of an organization for the impacts of its decisions and activities on society and
the environment, through transparent and ethical behaviour that contributes to sustainable development, including
health and welfare of society, takes into account expectations of stakeholders, is in compliance with applicable law
and consistent with international norms of behaviour and is integrated throughout and practiced in an organization’s
relationships”

Examples of CSR schemes: most CSR schemes addresses specifically one product or one food chain.

• There are CSR schemes for cocoa, tea and coffee (UTZ, Starbucks Coffee)
• Palm oil (RSPO – Roundtable on Sustainable Palm Oil)
• Soybean (RTRS – Round Table on Responsible Soy)
• Milk and dairy products (Mother Dairy)
• Fish (standard called MSC – Marine Stewardship Council)
• Wine, flowers (Fairtrade), cotton, sugar, sugarcane, fruit processing and tobacco

MSC (Marine Stewardship Council): goals of this standard are

✓ Diversify the fish product, associating it with a sustainability message from boat to plate: today we have a
problem with fish stocks. In the Mediterranean we have 200 different species of fish and we eat almost 10
species. Diversifying fish is a good way to be sustainable.
✓ Ensure the sustainability of fishing for large retailers and buyers
✓ Assure consumers that the fish they are buying has been captured by applying the fishing methods that are
suitable for the stock and the protected species

GLOBAL vs. SHORT/LOCAL FOOD CHAIN

Nowadays we can have very global value chain or short/local value chain: a company must decide which one to
adopt for its production.

Globalization of Food&Beverage: it has always been a global business with over $1.1 trillion of agricultural trade
today; the global food system has become highly complex and interconnected. Some examples:

• The largest coffee producer worldwide is Brazil. In 2016, Brazil produced a staggering 2,595,000 metric tons of
coffee beans
• New Zealand is the largest milk exporter (5,5 billion US$ in 2018)
• Burger King: one hamburger can contain ingredients from 200 suppliers located throughout the States and
around the world.
• Nutella: countries involved in the production of Nutella are many. 75 countries consume Nutella

Global value chains are divided into 2 main categories, depending on which actor has the most significant influence:
this can be the manufacturer or the buyer => we have producer-driven or buyer-driven global value chain

1. Producer-driven GVCs: producer is the main actor.

The producer has high barriers to entry because many

commodities require capital or specific technologies or
economies of scale.

Examples are the automotive or aeronautical industry.

The value chain is mostly coordinated by the producer and the capacity of distributors to deliver parts provided by
subcontractors and finished goods to the market.

• Firstly, manufacturers with a lot of a lot of suppliers with domestic or foreign subcontractors, and after
distributors and retailers/dealers
2. Buyer-driven GVs: buyer is the main actor

Here, we have low barriers to entry. Producers are bound

to the decision of buyer trough the function of design and
marketing.

Examples: agriculture, toys, or clothes sector.

GVCs governance types: which is the governance of a specific value chain?

a. Markets: market linkages do not have to be completely transitory; the linkage can persist over time with
repeated transitions. The cost of switching to new partners must be low for both parties.
b. Modular value chains: suppliers make a specific product for costumers (i.e., I make bananas for a specific
customer).
• In this case, suppliers take full responsibility for competences about process technology.
• Use generic machineries that limit transaction-specific investments
c. Relational value chains: more complex situation, in this chain we have an interaction between buyers and sellers,
which often creates mutual dependence and high level of assets specificity. There are 2 factors here:
• Spatial proximity could have a very important role for this governance, in supporting linkages
• Trust and reputation might be very important to build up a relational value chain overtime. They could be in
different areas but the thing that supports the value is trust between partners.
d. Captive value chains: small suppliers are dependent on much larger buyers. This is the case of agriculture in
which we have small suppliers, farmers, and raw material producers which depend on much larger buyers.
• Suppliers face significant switching costs and are therefore captive.
• Such chains are frequently characterized by a high degree of monitoring and control by leader firms
e. Hierarchy: governance is characterized by vertical integration. The dominant form of governance exerts
managerial control: we have control from headsquares to subsidiaries or affiliates.

Read the paper file:///C:/Users/User/Downloads/FoodDrinkEurope-Data-Trends-2022-digital.pdf

Theory of GVCs governance

• The complexity of information and knowledge transfer required to sustain a particular transaction, particularly
with respect to product and process specifications: this transfer can be high-complexity or low-complexity
• The extent to which this information and knowledge can be codified and, therefore, transmitted efficiently and
without transaction-specific investment between parties
• The capabilities of suppliers in relation to the requirements of the transaction.

We have these 3 factors by Gereffi. For each of these factors, we have 2 values: high or low. At the end, we have 8
possible combinations of factors which define the governance type, but only 5 combinations are used. For example,
low complexity and low ability to codify is unlikely to occur.

Key determinants of global value chain governance

5 governance types: each type provides a different
trade-off between risk and benefits of outsourcing.

We have a range about the degree of explicit

coordination and power asymmetry: the range is
from low degree to high degree.

The market situation is characterized by a low complexity of transactions, high ability to codify and high capabilities
in supply chain. On the other hand, in hierarchy we have a leader actor and a lot of small supplier farms.
 5 GVCs governance types in the food market

Some dynamics of GVC governance:

1 = increasing complexity of transactions also reduces

supplier competence in relation to new demands.

2 = decreasing complexity of transactions and greater

ease of codification.

3 = better codification of transactions; and 4 = de-codification of transactions

5 = increasing supplier competence; and 6 = decreasing supplier competence

LOCAL/SHORT food chain: local and short have some differences

a. Local Food System (LFS): a system in which foods are produced, processed, and retailed within a defined
geographical area. Very less actors are involved in the short food chain.
b. Short Food Supply Chain (SFSC): the foods involved are identified by, and traceable to a farmer. The number of
intermediaries between farmer and consumer should be ‘minimal’ or ideally null.

Is a short food chain also a local food chain? No, because we can have short food chains but not necessarily local. I.e.,
e-commerce is a case of short food chain not necessarily local, in which I can buy banana for example.

There is a high interest in local and short food supply chain both from consumers and from researchers and policy
makers. Why?

1. Environmental issues: global chain can have a high impact on sustainability

2. Easier to control (linked to food security): we have a direct contact with the producer/farmer. In a global chain, I
do not know the suppliers of specific raw materials. I.e., I don’t know the supplier of Nutella
3. Less transactions costs: in the short food supply chain we ideally do not have transaction costs
4. In long supply chain the value return to farmers is very short. The short/local supply chain is a way for farmers to
gain a higher value.
5. Sustain small farmers

Short relates to few or no intermediaries. But Local? What is local? There are a lot of definitions of local. Examples
from the UK: the local level is connected to round 50km. Then, other situation in which the area is larger (100km), it
may be a region (Veneto region). The idea is an area, specific area.

→ Examples of Local food systems: farmers market, buy directly for the farmers, community support agriculture.
3 FORMS of SFSC: Face to face, Spatial proximity, Spatially extended

Examples of SFSC, for each form

1. Face-to-face
• Consumer purchases a product directly from the producer/processor on a face to-face basis. Nowadays, the
direct sale is growing.
• Authenticity and trust are mediated through personal interaction: you buy also because you want to know
better the product, its characteristics, how to preserve it and so on
• Internet presents opportunities for a variant of face-to- face contact through on-line trading and web pages:
this direct channel is important for producers because it is another way to sell the products.
• A good lesson from the pandemic: producers should have different sales channels and also the web channel
is a good opportunity
2. Spatial proximity
• Products are produced and retailed in a specific region (or lace) of production
• Consumers are made aware of the ‘local’ nature of the product at the point of retail
• These products combine specific authentic food products
• Consumers can buy these products in local supermarkets, specialty stores as well as in restaurants

This category overlaps with the face-to-face category and includes the same retail species, but in addition it can
include special categories which sell local products and elements of the hospitality industry that sell local food
(hotels, restaurants). This category can also include the public sectors such as hospitals, schools, universities.

3. Spatially extended
• All types of retail space are potentially appropriated for this type of short food supply chain. In this case we
have different types of retail.
• The product information is communicated through product packaging and promotion branding
• There are certifications and legislations to protect the name of products with distinct geographical region.
I.e., PGO (protection of designed origin) or PGI (protected geographical indication).
• Information about the place of production and those producing the food is translated to consumers who are
outside of the region and may have no personal experience of that region. I.e., Prosciutto di Parma

Impact of LFS/SFSC

5 capital assets framework, to

explain the impact of LFS and SFSC.
Impacts of LFC/SFSC: social, economic, environmental

Social impacts of LFC/SFSC

1. Social interaction, trust, social embeddedness: social interaction is essential and provides a unique experience
for consumers. Products can be explained to consumers, and many people prefer to talk with producers for the
characteristic of specific products.
• This point is related to trust. Trust includes also responsibility from consumers, because they have the
responsibility towards producers of being part of the local community.
2. Sense of community: LFC tries to create a sense of community
3. Increased knowledge leading to behavioural change: today consumer want more information and knowledge
about food production; this can lead to a behavioural change.

Economic benefits

1. Rural Development and Economic Regeneration: contribute to the growth of rural communities/area, that are
mainly marginal area with problems of economic activity.
2. Farm level economic Impacts

Environmental impacts

1. Reduction in energy use and carbon footprint

2. Other environmental impacts: destruction of specific habits, pollution of soil, problem of deforestation.

Consumer attitudes to LFS/SFSC

• ‘Local food’ has a better resonance for consumers compared to ‘Short Food Supply Chain’: they prefer local food.
• ‘Local food’: no clarity about a proper definition
• Consumer’s motivations to buy local foods:
✓ Environmental aspects: consumers connect this local food production with less environmental impact
✓ Health reasons: local means that I know the producers
✓ Perception of higher quality: consumers consider local as a quality key of the products; products taste better
because they are fresher, I know the characteristics, etc.
✓ Enjoyment of shopping in local outlets: some consumers prefer local outlets instead of supermarkets, famer
markets, or local shops
✓ Support local farmers, economies, and communities: I can choose to buy a local product in local
communities. I know that I have an impact on local economies.

The VALUE OF THE ORIGIN in the global competition

The origin could be a very important attribute in decision-making and can have an important role for competition,
providing a competitive edge. Literature had underlined that there is a positive link between COO and quality
perception of consumers.

• Connected to food, we can have a positive image; i.e., “Made in France” cheese or wine. On the other hand, USA
is considered a strong brand for specific products (such as convenience ones), but bad for other products.

Origin and place: the topic of territory is very important. Why do consumer value a territory? What is behind it?

• Consumers value the origin as an important signal of product quality.

• Territory is the history of competences and network of subjects that together can produce a certain product
category of a certain quality: there is a production system which produces a high-quality product.
• The territory transfers its entire essence to the product.

Leverage on Origin: do consumers value origin? And if so, how can a company leverage on this? How can it build a
positioning in the market?

• Origins acquire value only through a clear positioning. To be strong, positioning should be built on characteristics
that are different from competitors and relevant for consumers.
Origin and culture

• Origin means also culture, that is, a set of values and beliefs that characterizes a group of people.
• Each culture has its own lifestyle that can be transmitted through the consumption of its typical products.

Cognitive aspects: product positioning is based on marketing mix, but also cognitive and affective aspects are
important.

• COO is stated to be a quality cue for reliability, safety, and durability, reducing the perceived buying risks
a. High-involvement purchasing decisions (we have a high involvement, in this case knowledge of product is
more complex)
b. Low-involvement purchasing: the COO can have high influence for consumers.
• Its importance as a quality cue especially increases in buying situations when there is lack of other information
available on the product.
• For products under a less known brand, COO may act as a brand itself. For products under a well-known brand,
origin tends to be less important, but it still can help to reinforce brand attributes.

Affective aspects:

• Under the affective level, COO emotional connotations can be formed through direct experiences (travels for
example)
• Consumers use brands to express predilection for a certain lifestyle in an act of self-expression
• A country’s personality can act as a self-expressive attribute and favour the fulfilment of self-esteem
• Congruence between brand personality and consumer personality

8. PLACE BRANDING, FOOD TOURISM, and LOCAL DEVELOPMENT

The context: globalisation and international place competition to attract tourists, businesses, and residents.

→ Place branding = a growing set of theories and managerial practices aimed at leveraging the reputational capital
of places. It is aimed at attracting businesses, residents, tourists (destination branding)

Iversen & Hem, 2008: a place brand consists of developing and communicating an image based on the positive values
and perceptions of the place. BUT:

• Unlike product branding, place branding is rarely controlled by a single central entity—it involves multiple
stakeholders, often with competing interests.
• People learn about places from various sources so brand strategists have less control over places as brands
compared with product brands.

Destination branding can be viewed as a way to communicate a destination’s unique identity by differentiating a
destination from its competitors.

• It has 2 important functions: identification and differentiation

• Globalisation entails a process of glocalisation
• Local resources – both geographical and cultural – can represent a “unique perceived value” to consumers and
tourists, essential to differentiate the place and make the local resources into a form of competitive advantage
• Food is considered both a reflection of the culture of a place and an expression of a society and its people
• Food-place association helps a place to be remembered by tourists and contributes defining its identity

Food as a sustainable branding strategy

• Food and gastronomy build on locally-available resources (agricultural & livestock productions/fisheries) and on
local knowhow (e.g. processing and cooking).
• Local gastronomy is therefore based on and reinforces local identity, by differentiating a place from competitors:
it helps the branding process.
• Food is becoming an essential component in destination choice motivation.
• Food is gradually replacing geographical location as the brand destination: place is a vehicle for experiencing
authentic food in meaningful ways.
• Experience economy: food relates to many elements of destination experience and it links different elements of
the experience together

Food branding elements

• Products (food and beverages)

• Practices (eating and meals)
• Art and customs of preparing and eating (gastronomy)
• Sensory elements (taste, smell, touch, look)
• Origins of food (organic, ethnic cuisines, locally produced, …)
• Food preparation (ways of cooking)

Local food and GI products

• They originate from a particular area. It is their origin, based on their local identity or typicality, which
differentiates them from other products (i.e., Prosciutto di Parma)
• GIs (Geographical Indications) distinguish a certain food brand that is linked to a specific place of origin. This can
be registered (and protected!) under EU laws
a. PDO: Protected Designation of Origin
b. PGI: Protected Geographical Indication

Short food SC = direct selling of local food in local markets/farms/shops shorten distances between producers and
consumers/tourists (respatialization and resocialization).

Landscape (terroir): represents a synthesis between local biodiversity and sociocultural traditions.

Local gastronomy (culinary practices) is linked to the culture, tradition, and identity of the place and its people.

• There are local food consumption places e.g. restaurants, agritourism, wineries, bars, etc.
• The context in which the food is served and consumed represents a branding element; it attracts tourists
because it contributes to authenticity
• There are also food events and festivals which celebrate the community’s local identity, values, and pride, and
can support destination branding (i.e., Boston Local Food Festival)

These should be connected and integrated for F&G (food and gastronomy) for Sustainable Place Development:
landscape, consumption places, gastronomy, food systems, events and festivals, and local and GI products.

Linking food, place, and people

• Place-based qualities give peculiar characteristics to food products, foster biodiversity and ensure specific
gastronomic traditions (i.e., tortellini)
• People are the local actors. They instil local skills, historical and cultural practices, knowhow in producing,
processing, and transforming products (i.e., sfogline)
• They include farmers, fishermen, producers and processers, chef and food service industry, festival organizers
and managers, policymakers and authorities involved in the food system and the community

Food and authenticity

Concerns exist over tourism’s role in globalization and the potential for cultural homogenization, including food, has
led to debates about tourism’s role in the ‘McDonaldization’ of culture.
• Globalisation does not necessarily only produce homogenisation, but could support impetus for transforming the
nature and meaning of the local.
• Food is expressive of a region and its culture has meant that it can be used as a means of differentiation for a
destination in an increasingly competitive global marketplace.

Food NEOPHILIA and NEOPHOBIA

Experiencing unfamiliar local food may represent a challenge for tourists: food can be perceived as attraction or
impediment. Neophilia VS Neophobia:

a. Neophilia: the search for new foods and the love of tasting novel dishes
b. Neophobia: distrust of new foods and abhorrence of the unknown
→ Place and food cultures are different, but so are tourists!

Branding strategies

→ There exist different branding strategies to market destinations. I.e., Tuscany emphasises the “back-to-the-roots”
rhetoric: aestheticization of the rural and authentication of the traditional and typical.

Different places = different food culture. For example, the Smalahove is a typical dish of Norway

It contributes to the image of Voss as a tourism destination.

It is not marketed with landscape or environmental conditions, but together with the theme
of adventure, addressing different consumer/customer segments through a co-branding of
extreme sports and extreme food.

PROSECCO CASE

GIs as territorial brands and Wine GIs:

• GIs create “a monopolistic right to use a geographical name (and the sign associated with it) only on behalf of
those producers who operate in the area”.
• GI brands originate and cannot be separated from their territory, offering to enterprises within the territorial
brand an overarching and collective brand identity (Charters & Spielmann, 2014).
• EU PDO: production, processing and preparation must ALL take place in the same geographical area. Establish a
“close and objective link” between the features of the product and geographical origin.
✓ For wines: need to use grapes from the geographical area where wine is produced.
• Italy further divides EU PDO into DOCG and DOC, where DOCG certification is acknowledged only for highest
quality wines with stricter rules.
• 2008 EU Common Market Organization Reform: until 2009, Prosecco was the name of the grape variety, not of
the place of origin. EU PDOs protect place: necessary a correspondence between place and product

Pre (left) and Post (right) CMO reform:

Example of Tocai/Tokaji wines: Tocai Friulano used to be a wine from Friuli. Hungary obtained the PDO for Tokaji and
now only Hungary can use this name. Wine from Friuli is now simply Friulano.
 Today: Prosecco
Producing Areas and
Consortia

• The link between an agricultural product (“Prosecco”) and a geographical area is never completely natural and
essential. It can change!
• Through PDO, place managers sought to further protect the brand Prosecco by creating a link with a nearby
town (Prosecco), and by extending the area of production so to include this new brand ‘epicentre’.
• Places’ boundaries and features change over time and are socially constructed and negotiated by several
business and political stakeholders.
• The definition of places can also change to increase the production of an agricultural product and then generate
better economic performances.

To remember:

✓ Reflect on what resources differentiate and identify a destination, and which place assets should be marketed
together with food and gastronomy.
✓ Who is the tourist we are talking to: positioning and target groups.
✓ Avoiding to copy successful strategies from other destinations: each place has different geographical and cultural
characteristics.

9. TRADITION vs. INNOVATION IN THE FOOD SECTOR

Another dilemma for food companies is to decide between tradition or innovation. Definition of Traditional Food
Product (TFP):

1. “TFP belongs to a defined space, and it is part of a culture that implies the cooperation of the individuals
operating in that territory” => it is part of a group
2. “In order to be traditional, a product must be linked to a territory and it must also be part of a set of traditions,
which will necessarily ensure its continuity over time.”
→ Local food is not necessarily traditional food, but traditional food is local food
More recently, the following definition was derived: «Traditional food products are food products of which:

1. the key production steps are performed in a certain area at national, regional, or local level
2. are authentic in their recipe (mix of ingredients), origin of raw material, and/or production process
3. are commercially available for about 50 years
4. are part of the gastronomic heritage»

GEOGRAPHICAL DIFFERENCES: in Europe we have a very different situation about traditional food because we can
have on one hand North-European countries in which traditional food are low, while in southern Europe there are
many traditional foods.

→ Geographical location is a necessary condition to classify certain food products as traditional food products
→ There is a large diversity in the production of traditional foods in Europe

Where is the difference in these 2 systems?

• Different climate situation: it has an impact on the agricultural systems

• Greater concentration of small enterprises in the southern Europe: small companies imply higher quality
and higher possibility to produce a product into territory.
• Different culture: within countries or even within regions different food cultures could exist
• Traditional foods from one country or region can be regarded as a novel food in another country or region.

Designation of Origin Labels (DOLS): 3 different logos in EU

1. PDO: protective designation of origin.

• PDO can be used if the characteristics of the product are connected essentially or
exclusivity to the territory (the quality of the products depends on the territory).
• As consequence, all the steps are obtained in the specific area. Products are produced,
processed, and prepared in the specific geographical area, using the recognised know-
how of local producers and ingredients from the region concerned (i.e., Parma).
2. PGI: protective geographical indication.
• Products whose quality or reputation is linked to the place or region where it is
produced, processed, or prepared, although the ingredients used need not
necessarily come from that area.
• The link with territory is less strong, because only a specific characteristic of the product
is linked to the territory. In this case, it is enough that just one step of the production
process is obtained in the specific area (i.e., Radicchio di Treviso)
3. TSP: traditional speciality guaranteed.
• Identifies products of a traditional character, either in the composition or means
of production, WITHOUT a specific link to a particular area.
• The logo is not connected to a specific territory, but to a specific production method.
• In Italy: Pizza Napoletana. We certify a production method, not a territory.

Main reasons for legal recognition

1. Consumers: these labels are important to differentiate products and to provide info on different credence
attributes of food products. They are a guarantee of origin. 3 categories of attributes in the food market:
• Search attribute (a specific brand)
• Experience attribute (connected to consumption)
• Credence attribute (production methods or origin).
2. Farmers and processor: these labels should allow a fair remuneration for effort in building individual and
collective reputation. For farmers, it is important to have a legal recognition because they have protection and a
higher remuneration sometimes.
3. Collectivises: these labels preserve cultural heritage and are related to specific products of marginal areas.

TFP (traditional food) and CONSUMERS:

• Renewed interest by consumers in traditional foods

• The drivers of TFP consumption are familiarity, naturalness, quality, specific taste, safety (they recognize these in
traditional food)
• Barriers of consumption are convenience and health: some of these products are connected to cheese and meat
and the healthy aspect is not so high (if I consume every day, it is not so healthy). Also, convenience is a barrier
because traditional products do not have this service (time-saving for example).
• A crucial question is the WTP higher prices for these products. Not every time we have a premium price for the
product. EU schemes are used because are important tools to protect these products
• An important role is represented by the labelling schemes
• GIs (geographical) facilitate consumer choices when there is information asymmetry = when producers have all
information about products (production methods, freshness, etc.), and consumers do not.
→ When there is asymmetric information, low quality products drive away high-quality products because if you
go to the supermarket and you have 2 apples, you buy the cheaper one.
→ In this way, we have to use a quality signal: i.e., origin of the country, organic apple, etc. in order to reduce
information asymmetry
• Third-party certification improves the ability of reputation to operate as a mechanism for assuring quality. A
third party outside to the company certifies the origin of the product and for consumers this certification is
connected to a higher credibility => higher value.

Negative aspect: the impact of the labelling schemes in many countries is limited by poor consumer and producer
awareness of the labels and a lack of understanding of the differences between the schemes: consumers sometimes
do not understand the differences of specific attributes for the product (i.e., organic).

TFP and PRODUCERS:

• These products have the potential to improve competitiveness and profitability: geographical labels can improve
these since you have a tool for differentiating your product. With some advantages, you can have a third-party
certification for example.
• TFPs are expected to lead to substantial price premiums compared to similar average products
• PDOs and PGIs provide a means for the realization of markups and to protect the integrity of traditional products
from misuse and falsification.
• New challenges such as further improve the safety, healthiness, and convenience of products: connected to new
consumption trends. We have a consumer who is more oriented towards quality, safety, convenience.

TFP and COLLECTIVITIES: traditional food is important also for the local community

• GIs (geographical indications) identify the correspondence between the attributes of a product and a community:
the product is the expression of the characteristics of the heritage, history, traditions
• The right to use the name is not exclusive to a single owner: each company in an area can produce the same
product (i.e., Parma ham). The name is not exclusive; each company can use the specific name.
• A crucial feature of GI product is the ‘collective’ nature of the reputation referred to several enterprises:
sometimes we have a high number of enterprises, not only one company, connected to the production system.
This could be complicated because we have to share for example the quality, the communication, the brand.
• The actors in the supply chain share the quality and the specific characteristics of the product.
• TFPs play also an important role for rural development

Can traditional food be innovative? Yes

Innovation in TFP

• Tradition and innovation are considered antonyms

• It is possible to improve especially nutritional characteristics to adapt to consumers’ needs.
• Both the agri-food sector and consumers are open to innovations in traditional food products (they maintain the
basis characteristics of a product => only improve it), and agree that the common prerequisite is to preserve the
traditional character of the food.
• However, innovation in the tradfoods sector is limited because of the size (companies are very small) and low
technology of companies.
• The main fields of innovations in tradfoods are packaging innovations and changes in product composition,
product size, and new ways of using the product

Typologies of Innovation in TFP: 4 types

1. Product innovation (e.g., changes in product composition, new product size or form, package innovation):
change a little the composition of product. I.e., reduction of oil
2. Process innovation (e.g., new solutions to improve quality assurance and traceability): blockchain as new
technology could be an example
3. Market innovation (e.g., use of new distribution channels, such as e.-commerce)
4. Organizational innovation (e.g., collaboration among food chain network members and joint product
development)
Production and Market innovations: List with innovations through which traditional food products may be modified
and commercialized: there are 23 possibilities of innovation in traditional food, summarized in these 6 categories:

1. Quality and/or nutritional

innovation (e.g., reduction of fat, sugar,
or salt content, addition of ingredients)
2. Convenience innovation (e.g.,
different portion sizes, year-round
availability, frozen food, ready-to-eat)
3. Marketing efforts (e.g., labelling or
branding)
4. Assortment expansion (e.g., more
variety, new combinations of
ingredients, diversification of shapes
and texture)
5. Market innovations (e.g., new/other
distribution channels)
6. Packaging innovation

Other typologies of innovation (book):

• Transformation of non-continuous into continuous processing;

• Establishing better control strategies over growing or processing conditions;
• Cost reduction;
• Adjustment of nutritional properties, and functionalization;
• Ensuring food safety.

Example: study conducted in Spain (Recuit de Drap) and Italy (Cacio Romano) regarding traditional cheese vs. the
innovated version. The innovation was firstly in packaging (modified atmosphere packaging) and then connected to
nutritional aspects (addition of Omega 3). The study analysed if consumers could accept these 2 innovations: both
innovations were not accepted by consumers, particularly the packaging (considered not ideal for traditional food).

MARKETING STRATEGIES

→ TFP producers are mainly SMEs: negative consequences are

 Lack of appropriate tools to implement marketing strategies
 Limited financial and management resources
 Small production
 Local/regional markets

Indeed, on local/regional market TFPs have some competitive advantages

 Higher-quality perception by consumers

 Response for gastronomic/wine tourism
 Link with territory: certified link usually
 Premium price

Marketing strategies followed by companies in the TFP are mainly 4:

1. Product strategy which needs a

 Higher dialogue with existing and potential customers
 Activity on social media to better meet consumers’ needs: better communication to reach consumers
2. Quality control process: how to use the quality signals and how to communicate this value connected to signals?
 Communication of value signals
3. Territorial marketing strategies
4. Marketing of experience
Characteristics of a COLLECTIVE BRAND:

 Producers share a brand name

 Collective brand labels are associated with superior quality

About product, what can we do if we are a producer of traditional food? A good way is to use a collective brand.

 It is a granted to a group of producers that sell the same product and want to link quality to member companies
 They are registered in the name of a collective entity as an association, cooperative, or union
 This brand is not necessarily related to territorial origin as in geographical indications, but to procedures and
product characteristics

Benefits of collective branding:

 Sharing advertising expenses among partners

 Facilitating entry into new markets
 Stimulating the organisation of local producer groups
 Valuing local culture
 Gaining consumer confidence

Critical issues in collective branding:

 Free-riding effect, which occurs when a company benefits from the collective image of quality without having
invested so much in this creation
 Difficulties in managing both the product-country image and product quality
 Mean of assuring the consistent quality of products to ensure long-term brand equity

Examples: “Qualità Alto Adige”.

Generally, we have a consortium that
manages the different marketing mix.

We have greater visibility; the alternative

is to introduce a single brand. If you are a
small farm with a low production => the
investment to introduce a single brand
must be very high. The alternative is to
share a brand (it can be geographical or
other types of quality brands).

Some brands guarantee the origin (such as geographical, like PDO, or quality, like “Quality alto Adige”). Collective
brand is an umbrella brand which is not used only for food. Another type of collective band is “Pink Lady”.

→ This is a way for the product, but we have other ways.

Private label: it is a second interesting way for traditional producers. I.e., “Sapori e Dintorni” of Conad, a private label
that certifies the connection to the territory.

 Under this umbrella there are different traditional products of different geographical areas. In this case the
choice is using a private label.
Collective communication

 Generic advertising: a common effort between producers of a homogeneous good to disseminate information on
the characteristics of the product, with the aim of strengthening the demand for the commodity. Objectives:
✓ Disseminating information
✓ Changing consumer’s attitude towards the good
✓ Strengthen the demand for the good
✓ Economic benefits
 Institutional communication: it is a set of information activities by a non-profit entity to increase citizens’
awareness of a particular aspect, problem, need, etc (i.e., don’t drink and drive)
 It can be considered an instrument of economic policy
 It is a means of trying to bring a competitive advantage
 The subject can be public as well as the financial resources
 Differentiation also due to the product

Companies that carry out collective strategies must improve communication, in particular digital communication.

RESEARCH study:

Questions: How can digital presence be defined and measured?

Are there different digital marketing «strategies» among SMEs in
the food industry? Which factors affect the SMEs’ strategies in
developing a digital presence?

3 regions were investigated in this research: Veneto, Friuli

Venezia-Giulia, and Trentino-Alto Adige.

Presence: depicts the presence on social media for different

sectors (meat, fish, etc.)

Not all companies have a website, and very few have Instagram.

Social Networks (# of social profiles): 30% of cases are absent

from social media.

There are differences among sectors: meat, fish vis-à-vis “other”,

cereals and baked products.

Also regarding e-commerce there are differences among

sectors: cereals 31.3%, while fish 0%. There are in general few
“owned” e-shops.

Method: cluster analysis to group different companies considering the different tools and strategies. Tools used:
hierarchical clustering (agglomerative clustering – AGNES), similarity measure (DAISY), silhouette index (K=3),
software (R).
Results showed 3 clusters / strategic profiles:

1. Pragmatists
• Selective in the use of SM (social media): companies that use social media in a more selective way
• Integrated strategy (e.g.: E-commerce/owned media)
• Consumer engagement: highest consumer engagement
2. Unfocused
• Dispersive social media presence (e.g.: Pinterest and Twitter)
• Absence of e–commerce
3. Laggards
• Low values for all variables: both referred to presence and engagement
• Still lacking (in many cases) owned media

We have to improve under this point of view, also because costs are not high. But people need specific skills.

Communication, in the sense of the message/the content => how can I use territory in my communication? Social
media are an important tool to communicate the link to territory: videos, specific texts in which I try to explain it.

I.e., landscape is important for consumers, as a study confirms: there is a link between landscape and wine quality
perception.

→ They gave consumers the same wine and they associated a specific landscape to each class: consumers had to
choose the preferred wine, but the wine was the same.
→ Degraded and modern landscape were connected to a low-quality perception of wine, while traditional and
evocative had a higher one => we must use more and better the landscape connected to our territory

Quality control: this is the second strategy for communication. 2 actions:

a. Creation of quality: inside action. Different companies of the traditional food must decide together what defines
quality. If a lot of companies use the same label, the risk is that we have a heterogeneity of quality, so it is
important them to create together the quality.
b. Communication of quality (outside action): communicate to consumers the specific characteristic of quality with
tools. How? With PDO, organic label, and other collective brands.

Territorial marketing strategies: third strategy for communication. Here, territory becomes a product.

→ Why do you go to the sea in Sardinia? For the landscape, food, cultural aspect, services, etc. Like products, also
territories compete.
• When territory become products => we have citizen, investors, companies, tourists. A territory attracts
companies, and I can do it by giving services.
• Regards the competitive positioning of a territory aimed at attracting users, which will generate added value
• Marketing Model is applied to a territory

Example: Napa Valley (wine region) in California. It is connected to a message: the wine is connected to poetry.

→ Each territory has to create a uniqueness for tourists. Traditional food is a tool to create uniqueness because
tourists come into an area also for food and wine.

SEE PRESENTATION (POINT 8)

Marketing of experience is the last strategy. Why can I use it? Because food Is:

• Sensory in taste, sight, and smell

• Stories to tell: food is a story to tell
• Origin and places of production and consumption
• Tradition of products, countries, and recipes
• Place of preparation and consumption (at home or in a restaurant)
Challenges: communication, legal protection of labels, sanitary quality, research and development.

10. GLOBAL FOOD PRODUCT DEVELOPMENT

GLOBAL FOOD PRODUCT DEVELOPMENT

Globalization and economic integration are important factors for international businesses: there are different ways of
making operations international (i.e., direct investments, franchising…). A key decision is to choose between GI and
standardization.

5 parameters to consider when internationalising:

1. Market choice: the market in which the enterprise focuses

2. Products: the most important variable in agri-food sector. Decide between using the same product
(standardization) or creating a new product for the specific market (adaptation).
3. Localization of activities: the choice of where each activity will be located is an important choice. Decide whether
to produce or use a country for research and development
4. Marketing: use a global or local brand (standardization where we use the same marketing tools for different
countries or adaptation of the marketing mix)
5. Competitive moves: decide different operations in each country or region

The product is the most important variable, so great focus should be placed on product strategies.

The most important motivation that

conducts to adaptation is culture.

In agri-food market, cultural aspects are more

important than other sectors. For this reason,
most companies nowadays follow adaptation.

→ Adaptation strategy results from the necessity to meet local need/local preferences of consumers. I have to
change the product so it is more complicated.

Adaptation - 2 ways:

1. Voluntary adaptation: the company decides to adapt the product to the market
2. Adaptation driven by the market: i.e., Kellogg’s case. The first step in the specific foreign country was not the best
because they did not understand the need of market. Only in the second step, they decided to adapt.

Adaptation is necessary if you have a high variety of preferences or if you look at the cultural factors and have high
distance from the countries.

• Cultural aspects are fundamental and today food companies are more oriented towards the adaptation strategy
• Not easy to find an environment which is such homogeneous to economic factors, preferences, etc.
• On the other hand, standardization fits with a global market segment representative of consumers with similar
needs. In the standardization strategy, we have important variables like economy of scale that led the decision.

Factors that lead to product adaptation (if high variety

of preferences and needs) or product standardization (if
homogeneity).

Cultural aspects are the most important. Today, the agri-

food sector is more towards adaptation.
STANDARDISATION STRATEGY

Disadvantage:

Different markets mean different preferences and, in this

case, we do not consider the real needs of local consumers.

Advantages:

1. People can expect the same level of quality and product of any specific brand anywhere around the world (i.e.,
Coca-Cola is the same everywhere).
• Standardization supports positive consumer perception of the product because the quality is the same. If a
company enjoys a strong brand identity and a strong reputation, choosing to standardise might be the best.
2. Cost reductions due to economy of scale. Selling a large quantity of the same product and buying components
can reduce the cost per unit.
→ These economies of scale can be related to marketing costs, communication costs, operational costs

Successful example: Nespresso, which is the market leader in premium portion coffee. The idea is to buy a machine
and then to enjoy the Nespresso club on the Internet to purchase the capsule. Nespresso chose to apply the same
concept in different markets. They are successful because can achieve economies of scale in R&D and this also allows
them to have a consistent image across the world.

→ A standardization strategy is obviously much less complex for the company and it is quickly operational

ADAPTATION STRATEGY is more complicated and suggested in cases of:

1. High-competition market
2. Variations in consumers preferences
3. To meet essential country requirements: we can
have requirements about legal or technical aspects.

Adaptation of … the whole value proposition or some parts:

• Product: the most important and most frequent adaptation. I.e., Burger King in India where people do not eat
meat. We can adapt 1. recipes and tastes (i.e., Viennetta of Algida in UK is sold with strawberry), 2. change of
food menus (i.e., McDonald’s with Pasta Barilla), 3. change of name of the product (i.e., Algida)
• Communication: we have in mind two different things. You adapt the message or the communication media you
use to position the product in the market.
• Distribution strategy
• Brand

EPGR model

A model to understand if is better adaptation or

standardization strategy.

This model considers ethnocentrism, geocentrism,

polycentrism and regiocentrism (EPGR): book
INNOVATION STRATEGY

Innovation in food market is not so easy and we can have 2 types of innovation: radical and incremental innovation.

a. Radical innovation: you have a completely new product, not already existing in the market => modernised
products
• Significant impact on the market and on the activity of the firm because it changes the market structure,
creates a new market, and substitutes other products
• In the competitor view, it creates the major disruptive change
• Starts with the future and works backwards
b. Incremental innovation: improvement of previous product. There are minor modifications of existing products =>
products with enriched functional features
• Starts with the present and works forwards

New food products may be related to:

• Development of an existing line of products

• Change in the intended product use
• New form of an existing product
• Change of packaging
• Change of value added to the product

TYPES of innovation strategies

Innovation leadership strategy: rarely used for food

products.

Imitation strategy: more common for the food industry.

• This stagey could be of different types depending on the enterprise goals, market positions, resources, and
potential of the company.
1. Creative imitation strategy: based on a strong position on a developing new product in the market
• Requires some factors such as a well-developed R&D department, good investments on research by
the company and good marketing activities.
• The company uses the experience of the innovator and its new product to market an improved product
or to propose alternative characteristics.
2. Early imitation strategy: its implementation is connected to high outlies of acquisition of technologies.
• It implies that the enterprise supplies new product to the market thanks to purchasing licenses, patents,
knowhow, etc.
3. Flexible specialisation strategy: the company modifies the features and properties of products previously
offered by the innovator because they tried to respond to specific needs of specific market segment.
• This strategy is applied mainly by small- and medium-sized enterprises because they have small
resources and search for niche markets.
4. Contractual innovation strategy: involves introducing a product innovation which was commissioned by
other enterprises usually following the patterns and prototypes of the contracting party (we have protypes
and the strategy is to adopt the prototype).
 5. Late imitation strategy: involves the gradual introduction of small improvements supported by other
measures to diversify the products.
→ Adopted generally by companies operating in countries with a lower level of technical development.

Global brands: Coca-Cola, Pepsi, McDonal’s. Which are the features of global brands?

• Associated with their availability on various market and global image.

• Their image is composed of their universality, quality, but also social responsibility.

Different characteristics of global

brands.

11. MADE IN ITALY & GIN VENICE CASE STUDY

Several studies about the brand “Made in Italy” have illustrated its real meaning, placing it on top position for brand
awareness in most countries.

• Evokes attributes that positively characterise Italy as a country: creativity, aesthetics, quality, sophistication
• Facilitates the perception of a differential value through the product-country association

Each country has its own distinctive brands and “Made in …” linkages:

• Germany for robustness and reliability, USA for innovation, Japan for technology and functionality, China for low-
quality and low-price products, France for opulent and luxury products

COO can be split into:

a. Country of design: where the product is invented and developed

b. Country of assembly: where the product has been manufactured or assembled
c. Country of parts: where materials or components come from

COO can also be analysed at different levels:

1. Firm level: extrinsic feature of the products

2. Country level: foreign direct investment and export levels
3. Industry level: typical industries and products
4. Customs level: benefits in export duties and formalities

MADE IN ITALY ACCORDING TO CUSTOMER LEGISLATION

Customer legislation => the ‘origin’ is the economic nationality of goods traded in commerce. Rules of origin
determine where goods originate. For customs purposes, we have non-preferential and preferential origin:
a. Non-preferential origin: rules which are used to determine the COO of goods for the application of the most-
favoured nation treatment (MFN) but also for the implementation of a number of commercial policy measures
→ Anti-dumping and countervailing duties, trade embargoes, safeguard measures and quantitative restrictions
or tariff quotas
• There are two concepts to determine the origin of goods:
1. Wholly obtained products
2. Products having undergone a last substantial transformation
→ If only one country is involved in producing a good the wholly obtained concept will be applied.
• Two or more countries are involved in the manufacture of the product:
1. Annex 22-01 UCC-DA. Where the purpose of the processing or working operation carried out in another
country is to avoid the application of certain tariff measures, that operation shall be deemed not to be
economically justified. In such circumstances, the COO is determined by application of “residual rules”
2. Annex 22-01 UCC-DA. Certain working or processes never confer non-preferential origin on a product
obtained, even when the rule is fulfilled. These are known as minimal operations.
• Checking the declared origin: the non-preferential origin is a mandatory element of the declaration for
release for free circulation. Proof of origin is the certificate of origin
b. Preferential origin: rules which determine whether goods qualify as originating from certain countries, for which
special arrangements and agreements apply.
→ Where all the requirements are met, goods with preferential origin are eligible to be imported with lower
duty rates or at zero rate, depending on the preferential tariff treatment
• Wholly obtained applies mainly to natural products from the beneficiary country and to goods made entirely
from them. This means that a product cannot contain imported non-originating elements!
• Sufficiently worked or processed is a requirement for non-originating materials or components in order to
obtain origin. Sufficiently worked is according to the specification of the list rules.

In effect, it means that goods must either:

1. Be manufactured from raw materials or components which have been grown or produced in the beneficiary
country, or
2. At least undergo a certain amount of working or processing in the beneficiary country. Such goods are
“originating”

The principal common provisions are: originating status, cumulation, minimal operations, general tolerance rule,
no-drawback rule, principle of territoriality, direct transport rule, proof of origin, approved exporter.

First criteria both for non-preferential and preferential origin is the wholly obtained good: goods that are exclusively
produced in the territory, without incorporating materials from another country.

→ What is totally made in Italy? All vegetable and animal products.

Italian Law 135 – 25 September 2009: only products that are totally made in Italy (planning, manufacturing, and
packaging) are allowed to use the labels Made in Italy, 100% Made in Italy, 100% Italia, tutto italiano in every
language. Each abuse is punished by the Italian law.

MADE IN ITALY ACCORDING TO MARKETING

Made in Italy products are defined by: high quality, top creativity, unique design, masterfully craftmanship, style icon,
extreme elegance, local products, strong feeling with the territory, Italian way of life, etc.

• Representative products of Italy worldwide: cheese, pasta, cold cuts, wines, glasses, clocks, shoes and clothing,
furniture, cars, motorcycles, and bicycles, tiles.

GIN VENICE – CASE STUDY

La Serenissima (AD 697 – AD 1797):

• The Republic of Venice is still today the only case in which a City-State has managed to face the Great Powers of
its time direct competitors in international markets.
• This record was the result of the perfect combination of geopolitics and economic intelligence that allowed the
Serenissima to dominate the main trade routes, especially in the eastern Mediterranean basin, the Levant.

Spices were relevant in economics and culture during the Serenissima

• In 1258, in the area of Campo San Bartolomeo, the first “Scuola di Spezieri” opened its doors
• At the beginning, Spezieri developed into a unique brotherhood
• In the 14th century it split in two demergers: Spezieri “de fin” (expert pharmacists) and Spezieri “de grosso” (the
grocers)

In 1500, Venice was famous for the quality of its pharmaceutical products

• One of the most popular was theriaca: main ingredients were opium and spices imported from the Orient
• Production took place once a year, during summer. The manufacture had to take place in a public square under
the supervision of the authorities

Gin Venice

• A perfect blend of botanicals: painstaking research has gone into the creation of this product making it the
perfect blend of history, botanical which has been merged into a unique balance
• What’s inside the GIN?
1. Juniper. Originating from Boschi della Serenissima. Located in Cadore, Venice selected from here the best
performing woods to build vessels for spices trading.
2. Cardamom. Ginger’s next of kin, strongly aromatic. Cardamom provides to gin a remarkable personality
thanks to its uniqueness and extravagance.
3. Black pepper. Valuable enough to serve as a coin in 400, it adds to gin herbaceous scents slightly spicy.
Aromas of incense and woody flavours on the nose.
4. Coriander. During the Renaissance, at the time of Carnival used to celebrate thrown by gloats. Superb spice
for gin digestibility.
5. Skin of lemon. Originating from world’s northernmost crop, Garda’s lemon is a medium-sized fruit with fine,
fragrant skin.
6. Grains of paradise. Oriental spice merchants told of its origin from Garden of Eden. Pungent flavour and
hints of citrus, softer than black pepper.
7. Santonico. Well known as Sea Absinthium, it arises exclusively in northern Venice lagoon. Galenic pharmacy
of Santa Fosca, during the 1600s, used it as plague remedy. Beloved by French impressionists and subject of
their painting.
• The container: a breathtaking bottle bearing a Murrina, hand-crafted one at a time by Murano glass masters
using unique and ancient art form to create the glass used to embellish this Gin. A unique level.
• The murrina is the image of the iron of the bow of the Venetian gondola (represents the Grand Canal with all the
main places of Venice and islands).

Value of this gin:

• It is an all-senses experience extremely exciting also for eyes

• A collectible gin to taste
• Has an historical soul
• It is extremely delicate and unforgettable. Perfect for sunset aperitifs, a key to enjoy refined evenings
• Unique batch with only 500 numbered bottles

=> for many but not for all. A product is exclusive when you fight for it

→ Nothing is thrown away: the empty bottle is used to craft candles, glasses, lamps, etc.