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Marketing local products:
Short and long distribution channels

[ Summary ]

Section I
Marketing local products via short distribution channels

 

“Short” or “long” distribution channels?

 


What a long way we have come in such a short time! Looking back we can see the scale of the revolution that has taken place in only 20 years.

In 1980, local agribusiness products, whether “farmhouse made” or “made by traditional methods”, were at the fringes of the mainstream food sector. In terms of production, local product development and farmhouse processing were chiefly concentrated in mountain areas, where people in the agricultural sector were required to counterbalance their natural handicaps by taking a “quality added value” approach, a typical example of which was farmhouse cheese [1].

By the late eighties, although promoting local products was considered to be a natural asset for Europe’s disadvantaged regions, any talk of collective approaches and business professionalism was seen as totally futuristic at the time. In those days, the key commercial concept was local direct selling.

Over recent years, the pace of change has accelerated as a result of rising demand coupled with rapid agricultural developments. Consumers have shown their increasing relish for products associated with a specific local region that are of distinctive quality, healthy and not only tasty, but also a source of pleasure and a little fantasy.

This stems from the urge of urban consumers to compensate for the stresses of modern living, the increasing uniformity of lifestyles and consumer patterns and environmental problems. A string of incidents, associated in particular with the uncontrolled use of animal feedstuffs, has served to accelerate and heighten the self- preservation instincts of consumers, who more than ever are demanding assurances as to the origin and traceability of the food they eat.

At the same time, changes in agriculture have intensified:

  • lower prices for ordinary products;
  • increased dependence on farming subsidies, which are due to be gradually phased out over time;
  • inexorable decline in jobs;
  • reduction in the number of farms.

So, in spite of the inertia exerted by ingrained habits, voices are starting to be heard loudly and clearly proclaiming that, although Europe’s rural areas have structural handicaps when it comes to ordinary goods (which can always be produced cheaper elsewhere), they have at their disposal a whole range of traditional resources waiting to be exploited, for which a ready market exists.

This aptly highlights the value of the triangle of territorial identity / breed or local variety / human input and know-how. In other words, now there is a growing awareness of the resources available in rural areas, animal breeds and plant varieties on the verge of extinction are being regenerated and these resources are being exploited to improve the quality of life.

An analysis of a number of cases has produced the following figures. In France, for example:

  • the value of a litre of milk increases by a factor of 2 to 4 when it is processed as farmhouse cheese;

  • processed farmhouse pork is worth EUR 6.40 per kilo carcass weight, compared with EUR 0.80 for conventional pork;

  • diversified situations and products lead to one agricultural job per 10 hectares in a disadvantaged area, whereas on large-scale farms on nearby irrigated plains the typical figure is now less than one job per 150 ha.

Exploiting local potential (sometimes known as “valorisation”) is an approach that was derided and considered marginal until only a short while ago. Now it is on the way to becoming a strategic goal for large sections of many European regions.

The goal of exploiting available resources does of course mean resolving numerous problems and means that farmers will need to learn new skills, such as processing techniques, compliance with EEC plant health standards, marketing and management skills, and so forth.

However, this is no longer enough on its own because, although up until now it has been possible to make do with small-scale individual solutions for supplying a niche market, things are now changing. Many of the numerous surveys carried out into the consumption of farmhouse and local products, as well as into potential consumer demand for organic products, point to a possible market share of 30%. The diversified range of products involved is therefore no longer aimed at a market niche, but at a market segment (itself segmented) that is now highly coveted by manufacturers and distributors alike because of its potential for growth and added value.

In economic organisation terms it is therefore easy to see that the issue can no longer be approached in the same way as in the past. It has become more important than ever to create structure and professionnalism.

This is all the more necessary since the distribution scene has changed radically in just a few years. Mass retailing has escalated dramatically and in some countries mass retailers have swallowed up between 60% and 80% of the food distribution sector. Mass retailers have become highly concentrated and have centralised their buying. They impose their own laws because they are in a position of dominance over the large and small suppliers who have come to depend on them.

To counteract such centralised buying, the solution is to group supply, standardise quality and professionalise services, which are all elements that are changing recent habits.

This does not preclude direct selling or “short” distribution channels, which satisfy the desire of urban consumers to know exactly who the producers are. That is why there is greater potential today for direct farm sales, “farmers’ markets” and collective points of sale for farmhouse products.

 

Two types of distribution channel but many forms of marketing
“Short” distribution channels “Long” distribution channels
  • Selling direct from the farm or the place of production, including selling to tourists
  • Mail-order selling
  • Selling over the Internet
  • Producers’ shop
  • Home deliveries
  • Selling to local restaurateurs
  • Selling to businesses
  • Selling at fairs, local markets, shows
  • Selling by the producer, on a separate stand, in local hypermarkets
  • Selling from hypermarket and supermarket shelves
  • Selling to wholesalers
  • Resale to retail merchants
  • Export

 

So, what should it be, “short” or
“long” distribution channels?


The answer, of course, is both.

Both distribution channels are necessary and complementary and they provide solutions to a wide range of situations, suited to the type of product (fresh products versus preserved or dried products, for example) and to the type of geographic region. In the typical case of farmhouse cheese, two examples aptly illustrate this:

  • Idiazabal cheese from Spain’s Basque Country is produced in small quantities (600 tons) for a large consumer pool (2.5 million inhabitants). In this case, only direct selling and short distribution channels are used.

  • The cheeses from the French Pyrenees and Portugal’s Castelo Branco are produced in significant quantities remote from any consumer centres. This makes national long distribution channels necessary in the case of both countries.[1]

Attempting to lay down doctrine would be to over-simplify the issue. The diverse solutions available to cater for the many different scenarios encountered are a valuable, not to say necessary, asset. This is why nowadays it is necessary to develop and professionalise not only short distribution channels for local products - on an updated, modernised basis - but also long distribution channels - supplied by collective structures that have achieved the necessary threshold of viability.

The objective of this dossier is therefore to:

  • enable LEADER local action groups (LAGs) and other local players to explore the potential of both types of distribution channel for developing their area’s products;

  • facilitate the choice of appropriate methods for marketing products via short distribution channels or long distribution channels;

  • encourage progressive risk-taking and risk limitation by carrying out a market survey in all cases where the investment warrants it;

  • define the basis of a marketing strategy, via short distribution channels or long distribution channels, that exploits the potential of the area/communities/products triangle, thereby promoting the development of activities that cannot be relocated because they are tied in with the specific resources and know-how of a local region.

 


[1] Daniel Pujol, “The collective organisation
of a sector for the local valorisation of agricultural
resources: the example of cheese processing”
(LEADER European Observatory/AEIDL, 1997).



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Agriculture
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