The Seal of Quality - - A New, Market-Oriented Agricultural Development Tool

Association for International Agricultureand Rural DevelopmentWashington, D.C.June 7-8, 2004

By Kristin PennInternational Development DivisionLand O’Lakes, Inc.

2

Topics

Brief Introduction to Land O’Lakes The Seal of Quality Concept SOQ Case Study – Macedonia

Program Implementation Lessons Learned

3

Land O’Lakes - Since 1921

Integrated and diversified national cooperative with more than 300,000 farmer-members

A national leader in: Deli cheese Butter Eggs Feed Seed Plant food Crop protection products

Ag Member States

Dairy Member Locations

Printed 02/08/01

4

Land O’LakesInternational Development

Works within agricultural and food systems in developing countries

Implement a customized approach to address country-specific impediments to economic growth. For example:

Uganda - value adding and consumer marketing

Montenegro - access to services Colombia - market-driven alternative

The Seal of Quality Concept

6

Growth Impediments Scenario

+ -

+ Abundant natural resources

+ Surplus human resources

- Underutilized facilities

- Policy failures

=

a degraded system with low capacity utilization, low productivity, minimal product value, poor product

quality and minimal market and consumer information

7

A Solution – Seal of Quality

Targeted technical assistance aimed at marketing chain impediments

Expedites producer’s competitive potential and access to local and export markets

Provides a link between lowest-and high-potential producers, processors, retailers and consumers for positive impacts throughout the market chain

8

The SOQ Concept

Relentless consumer-based focus on product quality

Seal award to firms who comply with and adhere to strict quality standards

Strict and transparent scientific and systematic compliance measures, tested independently

Seal and award process are “owned” and controlled by producers and processors

9

Key SOQ Concept Variables

Existing market constraints Consumer sophistication and understanding Target country market conditions Availability of unutilized production Processing capacity for market growth Production process quality control Availability of commercial protections for

effective process control

SOQ Case Study - Macedonia

11

The Situation

Low productivity Fragmented marketing chain Termination of Soviet production subsidies

and traditional markets Collapse of former state-run firms New firms with limited products, substandard

packaging, inconsistent quality, lack of standardization and branding

12

The Needs

Transparent systems for production certification and compliance monitoring and enforcement

Technical assistance to enable overall efficiencies and profitability in manufacturing and marketing

Consumer awareness andconfidence in the Seal ofQuality to increasedemand

13

Implementation

Formation of the National Association of Private Meat and Dairy Processors

Development of transparent procedures and voluntary quality standards for certification

Establishment of an independent food testing laboratory

14

8-Step Certification Process

1. Membership and product seal application2. Adoption of standard production procedure3. Processor’s plant inspection4. Product testing at project laboratory5. Product testing at State Veterinary Institute

Laboratory6. Sensory testing by independent certifying board7. Test review and determination by certification board8. Test procedure verification and seal award

15

SOQ as Marketing Tool

Marketing campaign based on consumer survey

Introductory PR campaign and pilot program

National promotional campaignNational promotional campaign seal introductionseal introduction awareness buildingawareness building deepening understandingdeepening understanding changing consumer behaviorchanging consumer behavior reminding consumersreminding consumers reinforcing consumer habits and awarenessreinforcing consumer habits and awareness

16

The Results

The meat processing industry tripled; the dairy industry increased by 44 percent

Forty companies expanded their product lines by a total of 162 new products

Processors cumulatively invested over $20 million in their facilities

Processors and retailers form 223 new strategic partnerships

Client firms reduced production costs by 50 percent SOQ certification was awarded to 37 firms for 205

products

17

Lessons Learned

Ensure industry ownership of the program Require greater cost-sharing from project on-set Avoid threats to state labs Provide producer assistance through SOQ processors Deepen public understanding of the SOQ process Strengthen reinforcement of SOQ usage Use retail assistance to help ensure SOQ product

quality Application of SOQ concept to low-income producers

18

Conclusions

Focus on sustainability of certification association

Expansion of program to other sectorsAssistance to meet EU ascension

policiesProgram expansion to Albania,

Honduras and several East African countries.