Economists Travel to Italy to Investigate Farmer-Owned Brands
When consumers are willing to pay premium prices for products with the characteristics that they desire, niche markets often result. However, the very success of that niche market often leads to imitation, expanding the supply and ultimately reducing producers' profitability. ISU economists Dermot Hayes and Sergio Lence recently traveled to Italy to study that country's model for farmer-owned brands. The key factor in the success of these brands is that they allow producers not only to differentiate their products but also to legally control supply. This can be accomplished in a number of ways, including restricting the growing region based on its exceptional attributes, limiting membership in a producer group, imposing strict production or quality standards, or restricting access to a product ingredient or process. In Italy, the researchers found several exciting examples of farmer-owned brands, such as Brunello di Montalcino, a wine produced by an association that limits the quantity of grapes and the production area. Another success story is Parma Ham, owned by a group of ham processors who maintain control over the curing location and methods, a process that purportedly gives this product its unique flavor. Lence and Hayes describe how this model might work in the U.S. Midwest in a paper titled "Farmer-Owned Brands?." Contact Hayes, (515) 294-6185, or Sandy Clarke, CARD Communications, (515) 294-6257.
(Released October 2002)