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THE COMPETITION IN 1997
U.S. and
Competitor Expenditures on Export Promotion and
Export Subsidies for Agricultural, Forestry and Fishery Products
Italy
Traditionally, almost all federal promotion funds have been handled by the Institute for Foreign Trade (ICE). However, in a move toward more regional autonomy, as opposed to federal management, ICE is being restructured and has seen some of its power transferred to the regions. Industry consortia also have been very active in export markets. Although it is difficult to verify exact expenditure levels because of the complicated funding process used for these programs, it is estimated that $39.6 million was spent during 1997 by public institutions at the national and regional levels. Of this amount, a little over $16 million is contributed by the Ministries of Commerce and Agriculture and the rest comes from the individual regional governments. Additional industry expenditures, usually on a matching basis, are estimated to be nearly $28 million.
Italian Promotion Activity:
ICE: ICE devotes most of its resources to trade show participation and ad campaigns with a main slogan focusing on "quality of life". it’s traditional promotional activities focus on maintaining/increasing Italy's market share in Europe for horticultural products, meats and cheeses and in the United States for traditional Italian food exports such as wine, cheeses, olive oil, cured meats, and confectionery products.
Most of ICE's funding comes from the Ministry of Commerce which is obligated to provide a portion of its promotion budget to agriculture. For calendar year 1997, this amounts to 8.8 billion lire (USD 5 million). In the past, ICE received around 15 billion lire (USD 8.5 million) from the Ministry of Agriculture, but, after this year, the money will be given directly to the regions for promotion activities. Approximately 15 billion lire (USD 8.5 million) is distributed among the regions based on their population and amount of agricultural trade. For 1997, ICE received only 5 billion lire from MinAg (USD 2.8). Now that the regions have their own promotional funds, they have discovered that they do not have the staff or expertise to run international promotional activities. As a result, many regions are returning to ICE for help, passing back some or most of their funding to ICE. Sicily and the Veneto region were cited as examples returning 5 billion lire (USD 2.8 million) and 3.3 billion (USD 1.8 million) respectively. All of these funds are to be used for co-financed promotions, similar to USDA's FMD and MPP programs. The cooperating group is usually a producers' association, consortium, or regional government and the promotion is always generic, never branded. However, "regional" products can be promoted, such as "Parma" ham. For promotions done within the European Union (EU), ICE covers 50% of the cost, but for activities outside of the EU, ICE pays 2/3 of the cost. Total funds available for ICE were estimated at the beginning of the year to be 28.2 billion lire (USD 15.9 million).
For 1997, ICE has budgeted 78.7% (USD 12.5 million) of its funds for the promotion of general food products, 6.8% (USD 1.1 million) will be used for the promotion of wine, and 14.5% (USD 2.3 million) will be used for horticultural products. Horticultural products are marketed almost exclusively in the EU and wine is promoted in both North America and the EU. Food products are promoted much more widely, but the bulk of the money is spent in the EU and North America. Presently, there are about 80 ICE offices abroad (4 in the United States). The offices are staffed by local employees but work closely with the Italian Embassies and Consulates.
In addition to its activities in Europe and North America, ICE is beginning to focus on new markets such as Asia (Japan, Korea, Singapore, and China), Eastern Europe and Russia, and Latin America (Argentina and Brazil). In November 1997, the government of Italy sponsored a large, "Made in Italy" promotion in Beijing where ICE played a big part promoting food and agricultural products. Part of their promotions are based on the increasing demand for authentic Italian restaurants in China and the rest of Asia. ICE hopes to use these venues to expand exports of many traditional Italian products. A similar "Made in Italy" promotion is also scheduled for Argentina in 1998.
Regional government promotions: The Italian regional governments are beginning to play an increasing role in export promotion, given that 85 percent of federal agricultural allocations now are under their control, rather than under the federal Ministry of Agriculture. Through grants and subsidies from the Italian state, the Italian regions are given free or reduced-cost space at all national food and agricultural shows. In general, the 20 Italian regions use the same criteria to allocate funds as ICE. Italian regional funds are channeled through consortia or cooperatives for advertising campaigns or trade show participation to promote "typical" or "denomination-controlled" Italian products such as Parma ham or Parmigiana Reggiano. Recipients of regional funds must demonstrate and document their ability to promote exports. The amount devoted to export promotion varies by region and year.
An example of a region with an active export promotion program is that of Emilia Romana, which had a promotion budget of $4 million in 1997, most of which was matched by private funds. The region is prohibited from providing more than 50 percent of the budget for a particular activity, and regionally funded activities cannot receive other public funds, although they can be linked to other programs funded by other organizations such as ICE. More than one third of the region’s budget was spent on promotion of fruits and vegetables, while another quarter of the budget was used to promote wine. Parma ham and Parmigiano-Reggiano cheese each received allocations of between 5 and 10 percent of the regional budget. Chief promotion activities are trade shows, in-store tastings, public relations aimed at the food press.
Producer consortia: Some examples of active producer groups, consortia, include the cheese, rice, meat, confectionery and wine consortia. The consortia work on their own, in conjunction with regional governments and ICE, and together to promote their products in major EU markets, as well as in North American.
The Pecorino Romano (Cheese) Consortium regularly funds a multi media advertising campaign (radio, television, and magazines) in Europe and the United States. In addition to the ad campaign, they participated in the Fancy Food show in New York and plan on attending ANUGA in Germany. All of these activities are cost-shared through either ICE or their regional government in Sardinia. Currently, the Consortium is focusing more attention on the German market, using a public relations campaign and in store taste tests.
The Italian Association of Rice Producers (Ente Risi) promotes consumption of rice in the Italian market and in a few, select European Union markets. The USA Rice Federation has a long standing cooperative effort with Ente Risi for the generic promotion of rice consumption in the United Kingdom. Ente Risi is funded partly by producer check-offs and partly by mandatory processor check-off funds.
The Parma Ham Consortium is extremely well organized and competitive and has several promotional activities in Europe and the United States each year. In France, the Consortium worked with ICE on a multi- year project to promote a basket of Italian food products which included large ads in leading consumer magazines. The consortium also producers brochures on how to use and preserve Parma Ham and point-of- sale materials including store posters and meat counter displays.
The Confectionary Industry Association (AIDI) works with ICE by participating in food shows and by publishing an ad campaign for traditional Italian products such as panettoni, torroni, and a variety of chocolate candies, etc.
The Chianti Classico Consortium is 100 percent member financed (600 members in total, of which approximately 200 are bottlers). The Consortium export about 70 percent of its production, mainly to Germany, the United Kingdom and the United States. The Consortium participates in food shows and holds about 10 events per year in the larger cities of the importing countries. These events consist of press conferences, seminars for importers and distributors, and wine tastings.
Competitor Activities:
The most active, broad based competitor group in Italy is the Society for the Promotion of French Agricultural and Food Products (SOPEXA). The Milan based office is one of the largest in the EU and is staffed by 10 full time employees and up to 10 part time consultants. SOPEXA/Milan handles five major commodity promotions: meats, seafood, prunes, nuts, wine/cheese. In addition, SOPEXA works with other French producer groups upon request and with the approval of their Paris headquarters. Activities include on-going PR and advertising contracts, trade show pavilions, trade promotion gifts/gadgets and representational events.
The French (via SOPEXA) are beginning to change their foreign marketing strategy to focus on single brands or labels of product, rather than providing the generic promotions such as USDA provides. The French believe that by focusing on a single product or brand they can provide greater opportunities in the overall Italian market. Products they are focusing on include Emmenthaler cheese, prunes, Beaujolais Nouveau wine and Belgian endive. France is also promoting its beef as safe, with BSE strictly under control in France.
The Spanish are also pushing niche markets for their products similar to the already well established Spanish ham (jamon seco) and white tuna which are sold through specialized distributors. They are also taking advantage of the concern over BSE in English beef such that their beef has become the fourth largest Spanish export item to Italy behind olive oil, fresh fruit, and fresh and frozen fish. The Spanish are also pushing their vegetables to complement the Italian fresh vegetables. They will be present in CIBUS with over 30 companies and will also be present in VinItaly.
Many countries are cutting back on their promotional activities due to overall budget constraints. As with the French and Spanish, many of these countries, such as Great Britain, and Australia are targeting niche markets where they feel they can make a greater impact with fewer dollars.
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