The Performance of Protected Designations of Origin: An Ex Post Multi-Criteria Assessment of the Italian Cheese and Olive Oil Sectors

1 Promoting differentiation of production (DIFF)

The indicators used with respect to this objective for the two sectors are different. The measurement of the degree of product diversification obtained by implementing the PDO schemes was particularly challenging in the case of cheeses because this is already a highly differentiated food. Thus, two indicators are used to indirectly express the contribution to differentiation by the PDO cheeses: quantity produced and the dimension of the area for the production of PDO. The idea here is that, other things being equal: i) the smaller the quantity the less homogenous is the total supply of cheese in the marketplace; and ii) the smaller the production area the higher is the specificity of the relationships quality/place of production. (Hence, both variables are minimized in order to reach the differentiation objective.) See paper text for further discussion.

1. PDO certified quantity (average quantity in tons, over the time interval 2004–2008). Source: Authors’ elaboration on data by ISMEA.

2. Dimension of the production area (in percentage over the overall cheese PDO area in Italy). This variable is not used for olive oils. Source: Authors’ elaboration on ISTAT data according to PDO specifications that indicate the municipalities, provinces, and regions included in the PDO area.

1. An indicator that considers simultaneously two parameters that are determinants of the final quality of the olive oil. The first is the amplitude of the harvest period (in terms of number of days available for harvesting, indicated in the specifications). This certainly depends on the climatic conditions of the area but generally the longer the time available, the lower the quality of the olives gathered. The other parameter is the number of days permitted between picking and processing: the longer the time between collection and processing, the higher the risk of a deterioration of the raw material. Source: Authors’ elaboration based on PDO specifications.

2. Panel tests on olive oil are used to detect whether oil that has chemical qualities necessary to be considered extra-virgin can also be considered appropriate from the organoleptic point of view. The specifications indicate the minimum grade that must be obtained to be considered a PDO product. Source: Authors’ elaboration based on PDO specifications.

3. Acidity is an indicator useful to evaluate the good quality of olive oil, indicated in the specifications (the maximum level allowed is indicated): the lower the better the quality of the product. Source: Authors’ elaboration based on PDO specifications.

4. An indicator that considers simultaneously the number of polyphenols and the number of peroxides. Polyphenols are natural antioxidants and can have positive health effects. Their minimum presence is a guarantee of quality. Similarly, the determination of the number of peroxides is a good measure of olive oil quality, in the early stages of its preservation. The lower the peroxide value, the better the quality of olive oil and its state of preservation. Source: Authors’ elaboration based on PDO specifications.

2 Providing reliable information for consumers on the origin and other quality attributes of typical products (INFO)

1. Reliability of the information conveyed by the PDO name. This indicator addresses whether the name of the denomination indicates the actual area of production, through a discrete variable (0 = not reliable 1 = partially reliable, 2 = reliable). A good example of this is Pecorino Romano cheese. It is scored 0 because it is produced, for the most part, in Sardinia (the specification includes Sardinia and Tuscany, beyond Lazio). Another example is Pecorino Toscano, mainly produced in Tuscany with a small part produced in Lazio (it is assigned a value of 1). Fontina Valdostana is actually produced in Valle d’Aosta and gets a score of 2 to reflect that the name conveys reliable information. This indicator is not used for olive oils where there are no cases of imprecise denominations. Source: Authors’ elaboration according to PDO specifications that indicate the municipalities, provinces, and regions included in the PDO area.

2. Precision of the name with respect to the actual origin (binary variable, 0 = not precise, 1 = precise). This indicator distinguishes PDO cheeses relative to how precisely identified is the geographical area of the denomination (the wider the area, the less precise the information). Source: Authors’ elaboration according to PDO specifications that indicate the municipalities, provinces, and regions included in the PDO area. Although the same acronym as in the PDO cheese case is used, for olive oils the indicator is different. The precision of the information conveyed through the PDO is related to the range of the area covered and to the existence of additional sub-denominations within the PDO/PGI (1/0 values).

3. Participation of PDO firms in the Consortium is also included in the information objective because the main function of the Consortium is to support promotion and advertising (beyond safeguarding the PDO from fraud). A higher participation to the Consortium should correspond to a more intense activity of promotion of the PDO product image on the market, aimed at increasing consumers’ awareness. Source: reports by Qualivita Foundation.

4. Investments in advertising (thousands of euro, sum of investments in the last 5 years), indicated by the Consortium to the Qualivita Foundation, shows how much effort is made by the producers in promotion and publicity. Source: reports by Qualivita Foundation.

5. Three Olives Prize assigned by Slow Food: This indicator is specific for olive oils. The “Extra-virgin olive oil guide” published by Slow Food, assigns the “Three Olives”, a prestigious prize awarded each year to the best Italian extra-virgin olive oils. This indicator considers the number of Three Olive Slow Food Awards obtained in 2009 and 2010 and is considered as a proxy of the resonance and visibility of the PDO oil. Source: Slow Food-Italy website.

3 Enhancing market performance of PDO products (MP)

1. Price premium of the PDO cheese with respect to a corresponding generic product (as a percentage, average over the time interval 2004–2008). On average, a PDO cheese has a price that is approximately 30% higher than the corresponding generic product (defined through the ISMEA data bank on prices of dairy products). However, there are some cases in which the PDO has a lower price than the generic product (e.g., on average Pecorino Romano costs 37% less than a generic hard cheese Pecorino Locale). Source: Authors’ elaboration of DATIMA, ISMEA databank on prices for the Italian agro-food sector.

2. Variation of price premium of the PDO with respect to a corresponding generic product (in percentage, averaged over the time interval 2004–2008). This indicator has been used only for olive oils as time variations were too small for cheese. Source: Authors’ elaboration of DATIMA, ISMEA databank on prices for the Italian agro-food sector.

3. Variation of PDO quantity certified (from 2004 to 2008, in percentage). On average, there was an increase of more than 10% in PDO cheese production over the time interval considered. Source: Authors’ elaboration of data by ISMEA.

4. Actual versus potential use of the PDO certification. This indicator expresses the quantity produced and certified relative to the amount of product potentially certifiable under the territory defined in the specification. Source: Authors’ elaboration of data by Qualivita Foundation.

5. Variation of estimated turnover for the time interval considered (2004–2008). Source: Authors’ elaboration of data by ISMEA.

6. The average market share calculated in terms of quota of turnover with respect to the total turnover on the Italian reference market (averaged on the time interval 2004–2008). Source: Authors’ elaboration of data by ISMEA (numerator) and Federalimentare (denominator).

7. Share of certified production that is exported (averaged over the time interval 2004–2008). Source: Authors’ elaboration of data by ISMEA.

8. Variation of share of exported certified production (from 2004 to 2008 in percentage points). This indicator was used only for cheeses because for olive oils time variations were too small. Source: Authors’ elaboration of data by ISMEA.

4 Enhancing producers’ bargaining power (BP)

1. Ratio of estimated turnover at producer price over estimated turnover at consumer price within the PDO (average percentage for the time interval 2004–2008). Source: Authors’ elaboration of data by ISMEA.

2. Absolute variation of the ratio of estimated turnover at producer price over estimated turnover at consumer price within the PDO (average from 2004 to 2008 in percentage points). Source: Authors’ elaboration of data by ISMEA.

3. Firms associated with the PDO Consortium over the total number of firms in the PDO chain (percentage in 2008). Participation in the Consortium indicates that firms do not behave in isolation, but coordinate with others in order to gain a stronger image in the market. This may enhance the bargaining power of each firm when interacting with downstream stages of the supply chain. Source: reports by Qualivita Foundation.

4. Share of production sold through direct sales (average percentage over the time interval 2004–2008). Source: Authors’ elaboration of data by ISMEA. Direct selling implies that producers fix the final price to the consumer, allowing them to retain most of the value added of their product, without being subjected to reductions by downstream distributors (who in most cases have a stronger bargaining power).

Indicators for the BP objective are the same for cheeses and olive oils.

5 Promoting local development (LD)

1. Use of highly distinctive and deeply rooted traditional raw material and/or techniques indicated in the specification. For cheeses this is a qualitative indicator (binary variable, 1 = presence, 0 = absence). In contrast to the PDO cheese case, for olive oil this indicator considers the percentage of traditional olive tree cultivar (typical of the territory of origin) that must be present among the main varieties (i.e., main and secondary varieties need to be indicated in the specifications). The indicator is based on three classes of percentages (1 = <30%; 2 = 30 to 70%; 3 = >70%) of the main variety. Source: Authors’ elaboration based on PDO specifications.

2. Quota of production sold on the local and regional market (average percentage over the time interval 2004–2008). Source: Authors’ elaboration of data by ISMEA.

3. Share of production sold through direct sales (average percentage over the time interval 2004–2008). This indicator is repeated under this objective because direct selling has an impact also in terms of the local territory. First, the value gained through the sale of PDO products remains in the local territory. Second, the direct sale of the typical products, not limited to local people but also for example to tourists, contributes to increasing the visibility of the area of origin itself. Source: Authors’ elaboration of data by ISMEA.

4. Promotion on the territory (binary, 0 = absence, 1 = presence of local fairs or Slow Food Presidia, 2 = both). Both local fairs and Slow Food Presidia indicate initiatives for the promotion of the local product in the territory of origin. Local initiatives (fairs, events) and Slow Food Presidia were identified through internet search engines. This has been used only for cheeses.

5. The number of PDO businesses per 100 ha of area of production indicates the intensity of presence of PDO operators interested in the PDO. This has been used only for the olive oils sector. Source: Authors’ elaboration of ISTAT data.