differentiated product marketing. systems of product identification government-mandated traceability...
TRANSCRIPT
SYSTEMS OF PRODUCT IDENTIFICATION
• Government-Mandated Traceability
– Motivations:1. Facilitate and monitor
traceback to enhance food safety
2. Enhance consumer information about food safety and quality
3. Protect consumers from fraud and producers from unfair competition
4. Protect domestic producers
• Voluntary Traceability
– Motivations:1. Differentiate and market
foods with subtle or undetectable quality attributes
2. Facilitate traceback for food safety and quality
3. Improve supply-side management
SYSTEMS OF PRODUCT IDENTIFICATION
• Motivations for Voluntary Traceability1. Differentiate and market foods with subtle or
undetectable quality attributes• “Credence” attributes: Characteristics that consumers
cannot discern even after consumption– Content attributes: Affect actual physical properties of
product, but difficult for consumers to perceive
– Process attributes: Concerned with production process, usually cannot be detected even with specialized testing equipment
SYSTEMS OF PRODUCT IDENTIFICATION
• Motivations for Voluntary Traceability1. Differentiate and market foods with subtle or
undetectable quality attributes• Firms sometimes resort to third-party entities to validate
claims about quality attributes– Examples:
» Good Housekeeping Institute
» American National Standards Institute (ANSI),
» Underwriters Laboratories (UL)
» Council of Better Business Bureaus
» International Organization for Standardization (ISO)
» Government inspectors
SYSTEMS OF PRODUCT IDENTIFICATION
• Motivations for Voluntary Traceability1. Differentiate and market foods with subtle or
undetectable quality attributes
2. Facilitate traceback for food safety and quality• Traceability helps producers reduce time to
identify and remove contaminated foods from production lines and/or from market, before food item reaches consumers
SYSTEMS OF PRODUCT IDENTIFICATION
• Motivations for Voluntary Traceability1. Differentiate and market foods with subtle or
undetectable quality attributes
2. Facilitate traceback for food safety and quality
3. Improve supply-side management• Traceability helps manage product flows and track
retail activity
SYSTEMS OF PRODUCT IDENTIFICATION
• Motivations for Mandatory Traceability1. Facilitate and monitor traceback to enhance
food safety• Mandatory traceability enables authorities to identify
sources of food contamination/hazards and contain risks faster
SYSTEMS OF PRODUCT IDENTIFICATION
• Motivations for Mandatory Traceability1. Facilitate and monitor traceback to enhance
food safety
2. Enhance consumer information about food safety and quality• If producers are not providing as much information
about safety/quality as consumers desire, mandated traceability may allow consumers to choose food products better matching their preferences
SYSTEMS OF PRODUCT IDENTIFICATION
• Motivations of Mandatory Traceability1. Facilitate and monitor traceback to enhance
food safety
2. Enhance consumer information about food safety and quality
3. Protect consumers from fraud and producers from unfair competition• By enforcing traceability, the government may assure
consumers and competitors that firms claiming to sell products with credence attributes can substantiate their claims
SYSTEMS OF PRODUCT IDENTIFICATION
• Motivations of Mandatory Traceability1. Facilitate and monitor traceback to enhance
food safety
2. Enhance consumer information about food safety and quality
3. Protect consumers from fraud and producers from unfair competition
4. Protect domestic producers• Mandatory traceability to identify domestically
produced vs. imported foods may allow domestic producers to command a premium
SYSTEMS OF PRODUCT IDENTIFICATION
• Examples of Mandatory Traceability Certified Organic Country-of-Origin Labeling (COOL) Age verification for Japan Grass-fed beef Naturally raised livestock
SYSTEMS OF PRODUCT IDENTIFICATION
• Examples of Mandatory Traceability Certified Organic Products
o Products grown and processed according to USDA’s national organic standards and certified by USDA-accredited State and private certification organizations
o Organic Foods Act of 1990 established national standards for organically produced commodities Organic growers must have to be certified under
USDA’s National Organic Program A person may sell or label an agricultural product as
organically produced only if product has been produced and handled in accordance with National Organic Program
SYSTEMS OF PRODUCT IDENTIFICATION
Country-of-Origin Labeling (COOL)o 2002 Farm Act
Retailers must ensure verifiable audit trail COOL not required for foods that are ingredients of
processed food items Foodservice establishments exempt from COOL “Unknown origin” label not allowed 2002 Farm Act
o Was to become mandatory Sept 30, 2004
o Delayed until Sept 30, 2006
o Delayed again until Sept 30, 2008
SYSTEMS OF PRODUCT IDENTIFICATION
Country-of-Origin Labeling (COOL) Disagreement on how to implement Presumed US
Make importers label Anything not labeled is presumed to be US
Verifiable audit trail Move the product with a signed affidavit Keep records to back up claim if audited
Regardless of cost at farm level there is a cost beyond the farm gate to segregate and document
NAIS is NOT COOL
• COOL is an amendment to the 1946 Agricultural Marketing Act– Retailers inform all consumers– Sec of Ag cannot implement traceback
• NAIS (National Animal Identification System)– Animal health surveillance– Confidential system, only federal veterinarians
The Proposed NAIS SystemNational Database
USDA Required
Third Party
Database
Potential Industry Use
Feedlot PackerAuction
BarnCow/Calf Producer
SYSTEMS OF PRODUCT IDENTIFICATION
• ISO, Greek for “equal”
• International standard for quality systems
• In a nutshell:– Say what you do– Do what you say– Document it with records
SYSTEMS OF PRODUCT IDENTIFICATION
Age verification for Japan– Japan will accept 20 months or less– Two methods to confirm age
• Physiological maturity A40• Production records
– Need records to export variety meat
Based on ISO principles
Age verification for Japan
• Signed affidavits alone are not sufficient to qualify cattle for the EV Program for Japan.
• Cattle must be approved either through an approved USDA Process Verified Program or QSA Program. These Programs require supplier evaluations and re-evaluations.
Age verification for JapanQuality Management System
• A written management system that must address:– Documentation Requirements– Management Responsibility– Resource Management: – Production of Product– Measurement, Analysis and Improvement:– Record Requirements
Age verification for JapanProducer Requirements
• Records to validate age
• Procedures – Farm or Ranch Plan– Written management plan
• Records to validate activities
• Must be repeatable
Producer is evaluated by company and/or USDA to verify conformance.
Age verification for JapanManagement Plan
• Describe operation/farm
• Define practice– What is done– Who does it and how are they trained– How is it recorded– Where are the records
Seed Stock / Cow Calf
Stocker / Backgrounder Preconditioning /Feedlot
Provide enough information for an auditor to verify the origin and ownership of the animals identified and to verify the stated designation. Properly identify and record all animals according to the designation
Identify and segregate animals as to the origin designation. Properly identify all animals sold. Maintain the integrity of the identification. Maintain ownership transfer.
Upon receipt properly identify animals according to their designation. Segregate and control animals. Properly identify all animals sold. Maintain ownership records.
Birth records Transportation records Transportation records Receiving records Receiving Records Receiving Records Purchase records Purchase Records Purchase Records Cow/Calf tag ID system ID system ID system Sales receipts Sales Receipts Sales Receipts Feed bills Feed bills Feed bills Feeding records Transfer of ID System Pen records Animal inventory Feeding records Feeding Records Acreage inventory Declaration documents Shipping records Site maps Preconditioning Records Rate of gain records –Yield records APHIS VS Forms APHIS requirements APHIS requirements Production estimates VS Forms and Records VS Forms and Records Health records Health Records Ownership records Segregation plan Segregation plan Segregation plan State Brand requirements State Brand requirements State Brand requirements Replacement activities Replacement activities Accounting process for inbound
animals Beef Quality Program Beef Quality Program Beef Quality Program
Product v. Process Certification
• Tighter product specification– Sorted by processor
• Process specification– How it is produced
• Role of and return to producer????
Commodity v. Product• Commodity
– Undifferentiated– Perfectly competitive markets
• Products– Differentiated– Monopoly - Workable competition– Niche Market, branded, labeled, etc
Motivation• Commodity market
– Price takers– Cost driven– Long-run P=minimum ATC
• Product markets– Price makers– Costs not as important– Potential for sustained higher profit
margins
Commodity system
• Extremely efficient• Challenges
– Co-mingling from many sources– Consumers signals not transmitted– Little incentive to improve because benefits not
passed through to producer– Expand to capture economies of size
Product system
• How to differentiate?
• Managed supply chain– Allows traceback to producer– Restricts production– Focus on quality
Procedures• Why is the product different?
– How it is produced– Where it is produced– What is produced– What it includes– What it doesn’t include
• Develop marketing around the difference
Procedures
• Limit production and access to control supply– Can’t look like price fixing to regulators– Geographical restrictions
• Swiss cheese• Champaign
– Trade secret– Emphasis on quality
• Traceability to verify
Farmer-Owned BrandsHayes and Lence
• Parma Ham– Restricts area where ham can be cured– Claim unique climate and winds– Restricts breeds and regions where hogs can be
produced– Italian hog prices averaged $7.44 more than
German hogs 1999-2001
Farmer-Owned BrandsHayes and Lence
• Vidalia Onions– Selected region in south Georgia– Used existing state law to restrict area– State-owned trademark– Premiums of $.30-$.34 per pound– First spring sales are 30-50% higher
Iowa 80 Beef• Minimum Certification Requirements
– Verified to be sired by a 100% Angus bull. – Source verified to the farm of birth using an
identification system– Fed in an Iowa feedlot for a minimum of 180 days. – Fed a high-concentrate ration that totals at least 75
percent corn or corn co-products over the feeding period.
– Age verified and processed at 18 months of age or less.
– USDA grades upper one-third Choice or Prime.