Case Study: multidimensional comparison of local and global organic fresh apple supply chains in Spain (Task 3.5) Case Study XY(Task 3.5)
Authors – Partner 2015
The research leading to these results has received funding from the European Union’s Seventh Framework Programme for research, technological development and demonstration under grant agreement n° 311778 www.glamur.eu
2 Case Study: multidimensional comparison of
local and global organic fresh apple
supply chains (Task 3.5)
Gonzalo Gamboa, Sara Mingorría, Marina Di Masso
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3 Summary In the present report, a comparison between a Local and a Global organic apple supply chains is presented. At the farm level, the main difference between chains is the prioritized commercialization channel decided by the farmer. Some farmers prioritize selling their production through direct sales, while other farmers prefer to commercialize their production through a wholesaler. Farmers involved in the Local chain prioritize to sell first to individuals, consumers’ groups or other farmers specialized in vegetable production who complement vegetable boxes with fruits. When this channel is served, the apples are sold to the wholesaler. In contrast, farmers involved in the Global supply chain prioritize to sell the apples through an organic wholesale cooperative, of which the farmer is member. The wholesale cooperative sells vegetables and some processed products to retailers, supermarkets, schools canteens, and exports to other countries. In productive terms, there are no major differences between local and global farmers: apple production is combined with other fruit trees in the same farm, such as pear, peach, apricot and plum trees. The most common apple varieties cultivated are Gala, Golden, Fuji, Granny Smith, which are planted in about 2 hectares of land. Harvesting is concentrated in August, September and October. After harvest, apples are storaged up to five months in cooling chambers. In both chains, part of the production is sold as dessert apples and the rest is sold as apples for juice. The last cannot be sold in the market, mainly because of their small size or for being affected by hail. Also, some farmers have to sell apples to juice producers even if the apples meet size and aspect requirements because of market saturation. Local farmers manage to sell about half of the production as dessert apples and the rest is sold as apples for juice. Global farmers are able to sell as much as 85% of the production as dessert apples to the wholesaler. In fact this is the former aim of the wholesale cooperative; namely, to enable farmer members to commercialize their products and make the farm economically viable. The comparison between chains is done according to a set of socio-‐economic and biophysical indicators. The indicators are the technical translation of some of the attributes defined previously in WP2 of the project. The selection of the attributes is based on the relevance to the research questions and the available information to value the indicators. In general terms, one can say that the global chain performs better in economic and biophysical terms. It creates more jobs per tonne of apples due to the contribution of the retail sector. Also, the net income and the economic labour productivity generated by the farmer are higher in the global chain. In biophysical terms, the global chain consumes less fossil fuel per hour of human activity due to more efficient transportation systems. On the other side, farmers participating in the local supply chain obtain higher share of the value added created across the chain. www.glamur.eu
4 Summary ................................................................................................................................. 4 1. Introduction ................................................................................................................... 7 2. The Spanish fresh apple sector ....................................................................................... 8 3. Case study description ................................................................................................... 9 3.1. Distinction of “local”, and “global” apple chains ....................................................... 9 3.1.1. Common characteristics of farms ...................................................................... 10 3.1.2. Local fresh apple chain ...................................................................................... 11 3.1.3. Global apple supply chain ................................................................................. 11 3.2. Main critical issues of the local and global chains .................................................... 13 4. Research Design ........................................................................................................... 14 4.1. Research Questions design ..................................................................................... 14 4.2. Attributes and indicators selection process ............................................................. 14 5. Methods ...................................................................................................................... 16 5.1. Metabolic Analysis, MUSIASEM .............................................................................. 16 5.2. Data collection ........................................................................................................ 17 5.2.1. Primary data collection ..................................................................................... 17 5.2.2. Secondary data sources ..................................................................................... 18 5.3. Methodological observations and key performance distinctions ............................. 19 5.4. Data quality check .................................................................................................. 20 6. Results and discussion .................................................................................................. 22 6.1. Comparative evaluation of apple supply chains ...................................................... 22 6.1.1. Local apple supply chain .................................................................................... 22 6.1.2. Global apple supply chain ................................................................................. 23 6.2. Performance indicators: key findings ...................................................................... 24 7. Conclusions .................................................................................................................. 26 8. References ................................................................................................................... 28 www.glamur.eu
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6 1. Introduction This case study report describes the results on the performance of two fresh organic apple supply chains in Spain. Both cases analysed are located in Lleida, in a region shared by Catalonia and Aragon (see Figure 1). In the first case, we analyse a Local apple supply chain, in which apples are produced by small agro-‐ecological farmers, and sold directly to consumer groups located in Lleida and Barcelona city. The second case study is a Global supply chain, in which apples are distributed through the two main organic wholesalers in Barcelona, and sold to supermarkets, school canteens, restaurants, export, producers, and small wholesalers. In our analysis we consider production, transport, and distribution and retail stages, from the production until the point of sale to the consumer. Once a set of attributes to describe and represent the food chains has been defined (WP2), the performance of the apple supply chains under a set of multidimensional indicators is assessed, which are linked to the attributes previously defined. Figure 1. Map of Spain. Location of Catalonia and Aragon autonomous communities The case study on apples is part of the case study group ‘fruits and vegetables’, which is one of the five groups defined in the GLAMUR project, namely, wine, pork, grains, dairy and fruits and vegetables. Our direct partner is KULEumen, Belgium. Hence, the work of both teams is coordinated to have a common subset of indicators evaluated for the local and global apple supply chains. This will enable a comparison between the two countries, which will be carried out within WP4. www.glamur.eu
7 The general objective of case studies is to collect, analyze and compare data on the performance of global and local chains for a given product. The data will feed into the comparative analyses of WP4 and the participatory integrated assessment in WP5. In the following section, we first briefly present the Spanish apple sector embedded in both national and international markets, secondly we present the background of our case studies through the distinction of local and global apple chains, the scope of the value chains, and a general presentation of the case study. In the following sections we present the research framework, developed through specific research questions and objectives, and the selection of corresponding attributes within the common list of 24 attributes of the GLAMUR project. Then, the process of selection and definition of indicators is explained, as well as the data collection process. After that, the performance of the different food supply chains is evaluated by means of the selected indicators, which are compared with national and sectoral benchmark clues. 2. The Spanish fresh apple sector The European Union produces about 20% of worldwide apple production. The main producer countries are Italy, France, Germany, Poland and Spain. Spain produces about 3.4% of the European apples (546.4 thousand tonnes in 2013) in 3% of the land land allocated to that purpose (data obtained from FAO web site). As for organic production, Spain has 600 hectares with an approximate production of 4,000 tones (Spanish Government 2012). Apple production in Spain is particular when compared with other European countries. Spain has traditionally grown apples in flat land and warm climate, in contrast with Italy, France, and Germany, where apples are grown in mountain areas. Spanish apples have been less competitive in the European market due to this excess heat. Thus, conventional and organic apples are being grown in some high mountain areas (La Vanguardia, 10/02/15). However, Spain imports from France and Italy more than half of their apple exports (AFRUCAT 2013). Apple has historically been the most cultivated fruit in Spain until the 1980s. Its production started to decrease when substituted by stone fruits such as peach and appricot, better adapted to warm cliamate. Catalonia and Aragon are the Spanish regions which have always concentrated the larger apple productions, representing a 60% of the cultivated land in Spain (Sala-‐Rios 1995). These reasons make apples a key product to be included in our selection, and Catalonia and Aragon the best regions selected to allocate our case studies. Organic apple production in Aragon and Catalonia is not found as monoculture, but combined with other fruit trees in the same farm such as pear, peach, apricot and plum trees. Moreover organic apple producers aim at cultivating the maximum number of better adapted to the place apple varieties, be them hybrid or local. The most common varieties in this region are: Gala, Golden, Fuji, Granny Smith, and Reinetas. Harvesting is concentrated in August, September and October. However, once harvested apples can remain up to five more months in cooling www.glamur.eu
8 chambers. An important part of the production is destinated to fresh consumption and another important proportion of production to elaborate juices. Data on production and productivity of organic apple may vary a lot from one year to another, due to (1) their climate sensitivity, (2) their alternativity (some varieties such as Fuji produce a lot one year and almost nothing the next), and (3) constant experimentation with new varieties. 3. Case study description 3.1. Distinction of “local”, and “global” apple chains The GLAMUR project has defined the following four criteria to differentiate what is global and what is local: 1.
2.
3.
4.
Geographical distance between producers and consumers The type of governance and organization of the supply chain Kind of resources, knowledge and technologies used The way supply chain stakeholders shape product identity with regard to the reference to the territory of production for food plays a relevant role or not In the case of the Catalan organic apple supply chains, the ‘geographical distance’ criterion is not useful to differentiate between chains, because in both Local and Global chains production is done in Catalonia and sold within and outside Catalonia. Neither technology nor knowledge used to produce apples nor the territorial aspects of production (i.e. identity) differentiate farms involved in Local and Global supply chains. In most of the identified cases, apple production is done under the same conditions. In Catalonia and Aragon organic apple producers get technical advice from a technical association (http://www.advecologica.org/). Most of them follow the basic criteria of the association for organic production: quality food production not harming the environment nor the people, through resources’ optimization and resticted use of agrochemicals, biodiversity maximization (using both hybrid and local varieties), and the use of renewable resources. For apple production farmes use a drip irrigation system, resistant nets (to protect form hail and plagues), and they plant local and hybrid varieties. At the farm level, what differentiates local and global farmers are their commertialization priorities. That is, a farmer that prioritizes selling his/her production to consumer cooperatives or to other farmers involved in vegetable box schemes is considered a Local farmer. A farmer that prioritizes to sell his/her production to a wholesaler is considered a global farmer. However, both farmers distribute their production through several commercialization channels. Accordingly, organic apple supply chains are mainly differentiated by the type of buyer of the first harverst, which is mainly: (a) an exporter, (b) a big wholesaler, or (c) consumers (directly or through another farmer). However, a larger amount of apples is not necessarily sold through the prioritized commercialization channel. In the case of the Local chain, a producer who prioritizes selling to consumption grups may not sell the larger share of his/her product to them because www.glamur.eu
9 these groups have a limited buying capacity. As already mentioned, most producers use a multi-‐
channel strategy to commercialize their product, combining direct sales with distribution through several intermediaries (e.g. export). The following table summartizes the differences between the local and global apple supply chains: Criteria Global Local Geographical distance Production in Catalonia Production in Catalonia Distribution inside and outside Catalonia Distribution inside and outside Catalonia Dripping systems and surface irrigation (in some cases) Dripping systems and surface irrigation (in some cases) Technology for packaging and transportation Technology for packaging and transportation Anti-‐hailing nets Anti-‐hailing nets Machinery Machinery Territorial aspects shaping the identity of the product Hybrid and local varieties Hybrid and local varieties Governance and organization of the supply chain (Prioritized distribution channel) Exports (France, Andalusia, Madrid, Pamplona) Direct sales Wholesale market Exports (France, Andalusia, Madrid, Pamplona) Resource, knowledge and technologies used More than 2 intermediaries (wholesale market and retailers) Wholesale market Prioritizes selling to wholesaler Prioritizes selling directly to consumers Mostly specilized in fruit production Fruit production and others 3.1.1. Common characteristics of farms As mentioned before, there are no major differences between the Local and the Global chains at the farm level.1 Thus, in this report we consider a common farm typology producing organic apples for both chains, which is characterized by the following aspects: 1) Land dedicated to apple production is about 2 hectares 2) Farmers cultivate 3 to 5 apple varieties. They look for productivity and pest-‐resistance. Also, they try to minimize the payment of royalties (e.g. choosing varieties such as Golden, Fuji and Gala) 3) Farmers allocate about 8 hectares to other fruits such as pear, plumb or peach 1
Differences appear, as we will see in the Results section, at the retail stage.
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10 4) Harvesting is performed in short periods of time, and apples are stored in cooling chambersto be sold in the following 5 months 5) Productivity is highly determined by the experience and knowledge of the farmer. The average productivity is about 30 Kg/tree or 12 tonnes/ha 6) Apples of small size and/or with dents are sold to juice producers The following sections describe in more detail the Local and Global supply chains. 3.1.2. Local fresh apple chain The farmers involved in the local food chain prioritize direct sales to consumers (i.e. box scheme) (See Figure 2). They produce the fresh apples and other fruits, and then sell them to other farmers specialized in vegetables production. The latter complement the vegetable box with fruits and sell directly to consumers. About 60% of the production is commercialized for fresh consumption, at an average price of 1.40 €/Kg. The remaining 40% is sold to produce apple juice at an average price of 0.28 €/Kg. Figure 2. Flow chart of the local apple supply chain 3.1.3. Global apple supply chain The fresh organic apple GSC has 3 main stages: production, distribution, and retail. A general view of the GSC is presented in Figure 3. This chain considers a farmer that is member of a distribution cooperative, the most important organic wholesaler in Barcelona. The cooperative was created in 1992 with the aim of increasing the economic viability of its members’ farms. It is the oldest distribution platform of fresh and processed organic food in Catalonia and counts with 25 members. www.glamur.eu
11 As members of the cooperative, these farmers are able to sell a larger share of their production for fresh consumption. That is, about 85% of apples go to the wholesaler and about 25% is sold to juice producers (i.e. industry). This has an impact in terms of income due to the fact that the price of apples for fresh consumption is much higher than the price of apples for producing juice. It has to be noticed that, in average, the price for fresh consumption in the global chain is slightly lower than in the local chain (1.35 €/Kg against 1.40 €/Kg). The price of apples for juice production is the same for all farmers (= 0.28 €/Kg) The members of the distribution cooperative plan their production jointly and they supply about 20% of the commercialized products. About 10% of the products are supplied by close collaborators, with whom the cooperative programmes the supply of products at the beginning of the year. The remaining 70% of products are supplied by non-‐members. Eleven people work in the wholesaler coperative. The 2.000 m2 premises are located in Mercabarna, the main wholesale market in Catalonia. The turnover of the cooperative is about 5 million euros. Apples represent about 7% in terms of volume with respect to total sales. According to the Catalan government (CEO 2012), 50.7% of organic buyers purchase food in shops specialized in organic products. According to this, we have considered the commercialization in organic shops specialized in fruits and vegetables as the last step in the Global supply chain. Figure 3. Flow chart of the global apple supply chain In this case, we have collected data from a store run by 2 partners which opened in Gràcia in 2012. A small portion of the sold product is packed (preserves, juices, and dried pulses). More than 80% of the fruit and vegetables they sell come from the main organic wholesaler in Barcelona or from another big organic production and distribution company. Only 5% of the www.glamur.eu
12 product sold in the store is transported by small producers. The information collected from this shop was contrasted against business plans provided by the Andalusian government2. 3.2. Main critical issues of the local and global chains On the basis of the interviews to Local and Global producers, these are the main identified critacal issues of the organic apple FSCs: Unstable demand The demand of organic apple is highly variable. In the case of the Local chain, this situation is compensated by the fact that producers are members of a network, which works on a commitment and loyaltybasis, and in which prizes are not variable according to market drifts, but negotiated between its members. In the case of the Global chain, this is compensated by being a member of the biggest organic wholesaler in Catalonia, which buys all the not-‐damaged apples produced. Diversified production Organic apple production in the area under study is not found as monoculture. Generally apple producers, be them Local or Global, cultivate other products in their farms (usually other fruits, vegetables). Producers always sell a share of their production -‐those apples that canont be sold to the market-‐ to the industry, to make apple juice. This share is bigger when climatic conditions are worse, because more apples are damaged. Producers get lower prizes when selling to the industry. In this context, some small producers are considering making the juices themselves (i.e. diversifying production), in order to retain a larger share of added value. Accumulated knowledge Climate sensitivity is one factor explaining the variability between annual productions in organic apple production, in all types of chains.However, technology improvement given by accumulated knowledge allows experienced farmers to better adapt to this condition. Diversified distribution Despite small producers sell mainly to consumption groups, the product is generally commercialized using a multi-‐channel strategy, which means selling their product to a variety of 2
http://www.juntadeandalucia.es/servicioandaluzdeempleo/web/opnegocio/web/guest/300-planes-denegocio?p_p_id=PlanesNegocio_WAR_PlanesNegocioportlet&p_p_lifecycle=0&p_p_state=normal&p_p_mode=view
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13 actors, mainly consumption groups, but also farmers’ markets, organic wholesalers, or even to the conventional market in those specific cases in which apples cannot be sold in the market nor to the industry (i.e. diversifying distribution). Many organic products distribution channels are saturated, and this makes producers to constantly reinvent their commercialization strategies, due to different criteria (be them purely economic –putting greater amounts of fruit to the market-‐, or purely ethical –commiting to agreocology principles and thus selling mainly trough short distribution channels). 4. Research Design 4.1. Research Questions design The general objectives of the case studies are the following: •
•
To examine supply chain arrangements and the relations between the actors involved in the chain To analyse key food chain performance from a set of attributes and indicators In order to meet these objectives, the following research questions have been defined between the Spanish and French teams: •
•
•
How and at which stage does each chain create added value and how is this added value distributed among actors? How and to what extent do the two chains contribute to national, sectoral, territorial economy, including employment? How and to what extent does each chain consume, preserve, deteriorate or reproduce natural resources (air, land, water, fossil fuels)? In order to answer these questions we have selected 13 attributes, which are translated into indicators in order to measure them. 4.2. Attributes and indicators selection process From the GLAMUR grid proposed in the WP2 synthesis, the Spanish team has chosen the attributes which are relevant to their research questions about apple chains. Attributes have been translated into indicators, which are calculated at farm and chain level. The number of indicators per each attribute depends mostly on the available information. The number of indicators has been limited to a maximum of 20 in order to enable adequate understanding and analysis of the information. Following Gallopín (1997) indicators are considered as variables; an operational representation of an attribute of a system. In other words, an indicator is an image of an attribute defined in terms of a specific measurement or observation procedure. The value (i.e. the state of the variable) gives information on the condition and/or trend of an attribute (or attributes) of the system considered. Indicators provide the means to monitor and evaluate social, economic and environmental conditions and www.glamur.eu
14 trends of a system (OCDE 2003). In sum, indicators would be useful to measure achievement, monitor changes or evaluate the performance of a system. Table 1 presents the set of indicators considered in the apple case study performed by the Spanish team. Table 1. Attributes and indicators for the evaluation of the Global and Local apple supply chains Related Attributes Indicators IndicatorDescription from WP2 Report Fair trade Distribution of addedvalue Added value generated in each stage of the chain (obtained by the corresponding actor) with respect to the added value generated in the whole chain Contribution to Gross income per unit of land Gross income of farmers, per unit of land use. economic It is calculated by multiplying the volume of sales development by the price; that is, the turnover related to the sales of products. The result is divided by the land used to perform production, distribution and retail activities. Net income per unit of land Net income of farmers, per unit of land use. It is calculated by substracting the costs of production and the taxes to the gross income. The result is divided by the land used to perform production, distribution and retail activities. Gross income per unit of labour Gross income of farmers, per unit of labour It is calculated by multiplying the volume of sales by the price; that is, the turnover related to the sales of products. The result is divided by the total amount of hours used to perform production, distribution and retail activities. Net income per unit of labour Net income of farmers, per unit of labour. It is calculated by substracting the costs of production and the taxes to the gross income. The result is divided by the total amount of hours used to perform production, distribution and retail activities. Number of jobs per unit of land Number of jobs per unit of land use, in each stage of the chain and in the whole chain. It is calculated by dividing the total amount of hours required to produce, distribute and retail, divided by the land use. Number of jobs per production Number of jobs per one hundred tons of production, in each stage of the chain and in the whole chain. It is calculated by dividing the total amount of hours required to produce, distribute and retail, divided by the total amount of apples. Affordability Price (Ability to provide food at Sale prices to consumers with respect to acceptable price) household budget allocated to food Biodiversity Agro-‐biodiversity Number of crops present in the farm Pollution CO2equivalent per land use Tons of CO2equivalent directly emitted, per unit of land use, in each stage of the chain and in the whole chain. It is calculated by multiplying the amount of www.glamur.eu
15 burned fossil fuels by the corresponding emission factor, and divided by the total land use allocated to produce, distribute and retail. CO2 equivalent per labour Tons of CO2equivalent directly emitted, per labour, in each stage of the chain and in the whole chain. It is calculated by multiplying the amount of burned fossil fuels by the corresponding emission factor, and divided by the total human activity allocated to produce, distribute and retail. Resource use Consumption of energy carriers per Direct consumption of electricity, natural gas and land use liquid fuels, per unit of land use, in each stage of (Energyconsumption) the chain and in the whole chain Consumption of energycarriers per Direct consumption of electricity, natural gas and labour liquid fuels, per unit of labour, in each stage of the (Energy consumption) chain and in the whole chain Creation and Economiclabourproductivity Added value per hour of human activity in each distribution of added step of the chain and for the whole chain. value It is calculated in each stage of the chain bysumming the salaries, the net income of the farmer/wholesaler/retailer and the taxes. The added value of the chais is calculated by aggregating the added value of the chain stages. The results are divided by the human activity allocated to each stage of the chain. Added value per unit of land The sum of the profit, the depreciation cost and the labour cost, both in absolute terms, per unit of land use. Added value is calculated considering the same method than in the calculation of the Economic Labour Productivity, but the results are divided by the land use required is each stage of the chain and in the whole chain. Labour relations Wages level Average salary of workers in each stage of the chain Efficiency Land productivity Amount of product obtained per unit of land use Labour productivity Amount of product obtained per unit of labour Foods ecurity Food availability Availability of food in the market (e.g. number of months per year) 5. Methods 5.1. Metabolic Analysis, MUSIASEM According to Georgescu-‐Roegen (1971) any metabolic system can be represented by using fund and flow categories. On the time scale of the representation, fund categories transform inflows into outflows, and flows are either consumed or generated in order to reproduce the funds. Therefore, fund categories remain “the same” over the duration of the representation (e.g. capital, people, Ricardian land). Flow categories refer to elements appearing and/or disappearing over the duration of the representation (e.g. added value, water, energy, matter). www.glamur.eu
16 What we call production is in reality a transformation process of resources into useful products and waste products: a transformation of some materials into others (the flow elements) by some agents (the fund elements). The MuSIASEM approach (Giampietro et al. 2009) is an operationalization of the fund-‐flow model. It differentiates those categories that have to be reproduced, from those that are used for the reproduction of the system and its compartments. Also, it provides an accounting framework useful to define biophysical indicators that can be scaled up and down. We can combine fund and flow categories in order to characterize the system in quantitative terms. As a result, we can define extensive and intensive indicators. Extensive indicators are those that can be added. They characterize the size of the system and its compartments in terms of either fund categories representing what the system is, or flow categories representing what the system does. Extensive indicators are calculated by aggregating and dis-‐aggregating figures across levels. Intensive indicators are those that represent a ratio. They describe how the system does what it does. When these ratios are constructed with funds or flows categories referring to different levels, these fundk-‐1/fundk and flowk-‐1/flowk shares represent the relative sizes of lower-‐level fund elements compared to upper-‐levels fund elements. They provide information on the structural relation between the functional parts (e.g. the size of the Agricultural sector – level k-‐
1 – with respect to the Agriculture, fishing and forestry sector – level k –, in terms of land uses, human activity or flow of electricity or CO2 emissions). When the ratios are constructed with funds and flow categories referring to the same level, a flowk/fundk ratio represents the speed and intensity of the system’s metabolic processes; i.e. the speed to which flows are consumed or produced per unit of fund category (e.g. flow of electricity per square meter, measured in kW·∙h/m2·∙year, or the flow of added value created per hour of human activity, measured in €/h)). 5.2. Data collection 5.2.1. Primary data collection Primary data collection encompasses in-‐depth interviews performed to two farmers and to the technical advisor of organic fruit producers. One of the farmers is in the first years of apple production and his productivities are lower than the average. The other farmer is one of the most experienced organic apple producers in Catalonia. Her productivities almost double the average productivities in organic apple production. By combiniong this information, we have derived the average characteristics of an organic apple farm operating in Lleida, the province with higher production of fruits (and apples) in Catalonia. Also, the main organic wholesaler of Catalonia and one retailer were interviewed. A common objective of the interviews was to describe the operation of the different stages in which actors participate. The main aspects considered in the interview encompass the following issues: www.glamur.eu
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Description of productive, distribution and retail activities (depending on the actor interviewed) Description of operational aspects of the enterprise. Advantages and obstacles of the supply chain in which they participate Relations with other actors of the chain Perception of other supply chains and actors Interviewees were asked about salaries, purchase and sale prices, and amount of product produced/distributed/sold, among other issues. In the case of wholesalers, they were asked to provide the following information (per year): ●
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Labour costs and labour requirements Costs of equipment, machinery and transport Cost of renting the premises/land Costs of energy carriers consumption (electricity, natural gas and diesel) Total turnover in monetary (i.e. €) and mass terms (i.e. Kg) Turnover of fruits and vegetables, in monetary (i.e. €) and mass terms (i.e. Kg) Turnover of aples, in monetary (i.e. €) and mass terms (i.e. Kg) Share of total sales, in monetary (i.e. €) and mass terms (i.e. Kg), to different customers (e.g. retail shops, school canteens, small distributors) Share of vegetable sales, in monetary (i.e. €) and mass terms (i.e. Kg), to different customers (e.g. retail shops, school canteens, small distributors) Share of apple sales, in monetary (i.e. €) and mass terms (i.e. Kg), to different customers (e.g. retail shops, school canteens, small distributors) Origin of products, in monetary (i.e. €) and mass terms (i.e. Kg) Origin of vegetables and fruits, in monetary (i.e. €) and mass terms (i.e. Kg) Origin of aples salad apples, in monetary (i.e. €) and mass terms (i.e. Kg) Data correspond to the year 2014. 5.2.2. Secondary data sources Secondary data sources have been used to both check the quality of data obtained by primary data collection techniques and to complement that information. The main sources of secondary data sources are presented in the following table: Table 2. Secondary data sources Task Spain Quality check, and secondary data for the production stage ● Acero, A. 2014. Influencia de las mallas antigranizo en producción de manzana ecológica. PhD thesis, University of Zaragoza www.glamur.eu
18 Quality check and complementary data for the distribution stage ● Andalusian Government 2014. Business plan of an organic shop specialized in fruits and vegetables. Available online: http://www.juntadeandalucia.es/servicioandaluzdeempleo/web/opnegocio/we
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PlanesNegocioportlet_articleId=72090 5.3. Methodological observations and key performance distinctions From an individual farm to a farm typology3 The selection of farms for this analysis is based upon a purposive sampling: a non-‐probabilistic sampling of individuals holding some characteristics relevant to address the research questions (Given 2008). This choice entails not producing a statistically representative sample aimed at drawing statistical inference. Rather, the selection of farms is based on an extreme or deviant sampling. In this case the sample includes extreme cases in terms of productivity. On the one side, a farmer with more than 20 years of experience in organic apple production has been considered. Thanks to the acquired knowledge during these years, this farmer has been able to double the expected productivities in organic apple production. On the other side, a fermer with three years experience in organic apple production has been included. The trees of these farms have not reached the expected levels of productivity yet. In fact, its productivity is about 60-‐70% of the average productivities in organic apple production. After collecting and structuring this information, we were able to check and compare other parameters such as the use of time and the cost structure of the farms. The main outcome of this comparison is that the farms are quite similar in terms of cost structure, use of labour and resources. The main difference is the productivities obtained in each tof them. Therefore, and for the purpose of the evaluation of apple supply chains, we combined the data and construct a farm typology, which is in between the two farms considered. 3
The MuSIASEM approach in based on the use of typologies to represent the system under analysis: in this case, a
farm. A type is a simplification of real entities. A representation based on a set of expected relations (which lead to an
expected performance). The characteristics of a given type are always associated with the possibility of performing a
given, expected function (Giampietro 2004).
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19 Diversity of products witin the food supply chains One of the first difficulties when analysing food supply chains is the fact that most producers, wholesalers and retailers handle a diversity of products. Hence, it is very difficult to know and evaluate the performance of the food supply chain of one single product. In the case of producers, most of the collected data on use of time and resources is specific to apples production. In the case of small distributors (i.e. farmers including apples in their vegetable boxes), wholesaler and retailer data correspond to the overall use of resources and activities performed by these actors. In these cases, the allocation of economic and biophysical resources is done according to the weight of the different products. That is, for instance, the time (and resources) required to handle one kilogram of apples is equal to the time (and resources) required to handle one kilogram of other product. Diversity of distribution channels for each actor Another difficulty we have found when analysing food supply chains is that farmers participate in more than one distribution channel. In order to deal with this issue, we have allocated the use of resources according to the weight of apples commercialized to the prioritized chain. Then, for the purpose of this evaluation, it has been considered that the wholesaler sells all the apples to organic shops specialized in fruits and vegetables. Human activity Labour required by apple supply chains is evaluated in terms of hours of human activity. In both the Local and Global supply chains, human activity allocated to apple production was obtained directly from farmers. In the case of the wholesaler (11 workers), a workload of 40 hours/week and 48 weeks/year is assumed. In the case of the retailer (2 workers), the workload is of 30 hours/week and 51.5 weeks/year. Then, in both cases, the time allocation is based on the weight of apples with respect to the total amount of products sold. To calculate the indicator ‘number of jobs’, the total amount of hours required in each chain is calculated by assuming that one worker works 172 h/week, during 11 months. Transport Economic and biophysical resources used for transport are allocated to actors assuming the transport of apples. In the Local chain, the buyer pays the transportation of the apples from the farm to the distribution point. In the case of the Global supply chain, the farmer pays the transport to the wholesaler and the retailers pay the transport from the wholesaler to the shop. 5.4. Data quality check The following Table 3 presents the quality check of the data used for the evaluation of the apple supply chains. www.glamur.eu
20 Table 3. Data quality check Item Reliability of the source Completeness Temporal correlation Geographical correlation Further technological correlation Quality score Local 0,8 0,6 1 1 0,8 A Global 0,8 0,8 0,8 1 1 A www.glamur.eu
21 6. Results and discussion In this section, we present the preliminary results of the performance evaluation of the analysed food chains, in comparative terms. We also suggest some further considerations related with some of the previously stated main critical issues which we think are necessary to take into consideration when assessing the performance of food chains (i.e. the interpretation of the results). 6.1. Comparative evaluation of apple supply chains In this section, an evaluation of the complete apple supply chains is presented. As mentioned before, the global supply chain only considers the apples sold from producers to the organic wholesaler in Barcelona. That is, the chain commercializing about 41 tones of apples. The last stage in the Global supply chain is retail. In order to evaluate this step, it has been considered that the apples are sold in small organic stores, specialized in fruits and vegetables. 6.1.1. Local apple supply chain The following table presents the characteristics of the Local apple supply chain. This supply chain is based on a short supply chain involving one intermediary. Apple producers sell their production to other farmers, who include apples in a vegetable box for direct sales to consumers. Table 4. Characteristics of the Local apple supply chain Total land use Land use apples Human activity Production /purchases Purchases price Farm Distribution Chain Units 2
20’000 1’000 21’000 m 12’000 39 12’039 m 415 436 851 15’000 17’500 17’500 2
H Kg 15’000 1.4 1.4 16’625 16’625 1.4 2.1 2.1 1’500 24’500 26’000 € 626 27 653 € Labour costs 1’456 2’931 4’387 € Familiar labour 3’376 3’376 € Processing & cooling 2’700 2’700 € 4’286 € 41’401 € Sales Sales price Costs Direct costs Cost machinery Transport Direct costs www.glamur.eu
9’658 4’286 31’744 €/Kg Kg €/Kg 22 Land 90 Other indirect costs 126 180 Amortization 1’560 Indirect cots 216 € 180 € 1’560 € 1’830 126 1’956 € 11’488 31’870 43’358 € 21’000 34’913 55’913 € 627 106 733 € Net income 9’512 3’042 12’555 € Value added 14’972 6’079 21’051 € 6.7 6.7 6.7 495 453 948 5’000 4’529 9’528 kWh 156 156 kWh 1’177 2’477 Total costs Income & Taxes Gross income Taxes Salaries Energy consumption & CO2 emissions Diesel consumption Energy consumption Diesel Electricity consumption 1’300 CO2 emissions €/h lts/year Kg CO2/year 6.1.2. Global apple supply chain The next table presents the characteristics of the Global supply chain. In this case, the apples are sold by the producer to the main wholesaler in Barcelona, who sells the apples to specialized shops, cooperatives, small wholesalers, school canteens and others. In this case, organic shops specialized in vegetables and fruits are considered. Table 5. Characteristics of the Global aple supply chain Total land use Land use apples Human activity Production /purchases Purchases price Sales Sales price Costs www.glamur.eu
Farm Wholesaler Retail Chain Units 2
30’000 2’000 800 32’800 m 17’000 15 50 17’065 m 588 163 1’421 2’171 h 21’250 21’250 19’125 21’250 Kg 2
21’250 1.35 2.3 1.35 €/Kg 19’125 17’213 1.35 2.3 3.5 17’213 Kg 3.5 €/Kg 23 Direct costs Cost machinery 2’125 886 34’000 24’817 4’176 12’429 1’913 60’942 € 886 € Labour costs 2’062 Familiar labour 4’783 Processing & cooling 3’825 Transport 1’334 1’000 15’016 39’176 39’158 93’350 € Land 128 762 4’015 4’905 € Other indirect costs 255 1’185 1’739 3’178 € Direct costs Amortization 2’210 Indirect cots 18’667 € 4’783 € 3’825 € 4’247 € 2’484 4’694 € 2593 1’947 8’238 12’777 € 17’608 41’123 47’396 106’127 € 28’688 43’988 60’244 132’919 € 566 -‐59 650 1’157 € Net income 10’513 2’924 12’197 25’635 € Value added 17’924 7’040 25’276 50’241 € 6.7 17.2 7.0 701 294 6 7’083 2’959 64 10’105 kWh 185 5’424 5’610 kWh 769 17 Total costs Income and Taxes Gross income Taxes Salaries Energy consumption & CO2 emissions Diesel consumption Energy consumption Diesel Electricity consumption CO2 emissions 1’841 10.5 €/h 1’001 lts/year 2’627 Kg CO2/year 6.2. Performance indicators: key findings From the previous results, a set of performance indicators have been calculated for the whole chains and the corresponding stages. Table 6 presents the evaluation of the Local supply chain and its stages (production and distribution). Table 7 presents the evaluation of the Global apple supply chain and its stages: production (farm), distribution (wholesale) and retail (organic specialized shop). Table 6. Performance indicators of the Local apple supply chain Indicators Farm Distribution Chain Units Land productivity 1.25 450 1.45 Kg/m www.glamur.eu
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24 Labour productivity 36.2 40.1 20.6 Kg/h Gross income per unit of land 1.8 896 4.6 €/m Net income per unit of land 0.8 78.1 1.0 €/m Gross income per unit of labour 51 80 66 €/h Net income per unit of labour 22.9 7.0 14.8 €/h Value added per unit of land 1.2 156 1.7 €/m Economic labour productivity 36.1 13.9 24.7 €/h Number of jobs per unit of land 0.2 59.2 0.4 Worker/ha Number of job per production 1.5 1.3 2.6 Worker/100 Ton Consumption of energy carrier land use 0.4 120.2 0.8 kWh/m Consumption of energy carrier per labour 12.1 10.7 11.4 kWh/h CO2 per land use 108 30’218 206 Kg/m CO2 per labour 3’134 2’698 2’911 Share of profit 71 29 100 2
2
2
2
2
Kg CO2/h % Table 7. Performance indicators of the Global apple supply chain Indicators Farm Wholesaler Retail Chain Units Land productivity 1.25 1’376 382.5 1.25 Kg/m Labour productivity 36.2 130 13.5 9.8 Kg/h Gross income per unit of land 1.7 2’849 1’205 7.8 €/m Net income per unit of land 0.6 189 244 1.5 €/m Gross income per unit of labour 49 270 42 61 €/h Net income per unit of labour 17.9 17.9 8.6 11.8 €/h Value added per unit of land 1.1 456 506 2.9 €/m Economic labour productivity 30.5 43.2 17.8 23.1 €/h Number of jobs per unit of land 0.2 55.8 150.2 0.7 Worker/ha Number of job per production 1.5 0.4 3.9 5.4 Worker/100 Ton Consumption of energy carrier land use 0.4 204 110 0.9 kWh/m Consumption of energy carrier per labour 12.1 19.3 3.9 7.2 kWh/h CO2 per land use 108 49’817 331 154 gr CO2/m CO2 per labour 3134 4718 12 1’210 Share of profit 36 14 50 100 2
2
2
2
2
2
gr CO2/h % As the reader can see, the performance of the farms involved in the Local and Global supply chains are very similar. Productivity highly depends on the knowledge and experience acquired by the farmer through the years. Also, technology can play a role in increasing productivity: www.glamur.eu
25 antihailing nets and pest control are of fundamental importance to produce apples. Also, technical advice and support provided by the territorial association ADV Ecològica de Ponent4 has managed to equate the productivities of old and new organic producers. In economic terms, the farmer participating in the Local supply chain obtains a 4 € per hour of labour more than its counterpart in the Global chain in terms of Net income, and generates about 5 € per hour of work more than the Global farm in terms of value added. These results only consider the apples for fresh consumption. However, when considering the whole production of apples (i.e. including the apples sold for juice production) the results are very different. As the global farmer is able to sell a larger share of its production for fresh consumption, the Net income per unit of labour obtained by the global farmer almost triple the Net income obtained by the local farmer (15.3 against 6.7 €/h respectively). Also, the Economic labour productivity generated by the global farmer is about 30% higher than the Economic labour productivity of the local farmer (28.2 against 19.2 €/h respectively). When comparing the whole chains, the results indicate that the local chain is able to handle larger amount of apples per hour of labour, which entails less jobs generated per tonne of apples. This is mainly due to the jobs created in the retail sector, which makes that the global chain creates the double of jobs per tonne of apples handled across the chain. In environmental terms, the local chain consumes more fossil fuels and generates more CO2 emissions per hour of human activity than the global chain. This is mainly due to the use of small trucks to distribute vegetable boxes to consumption points dispersed in the territory. Finally, it can be said that the local chain favours the farmer in terms of distribution of value added. In this case, the farmer retains about 70% of the value added generated across the chain. In the case of the global chain, the farmer retains about one third of the value added generated along the chain. 7. Conclusions In this report we have addressed an evaluation and comparison of two organic apples supply chains in Spain: Global and Local. Our results show that the Global chain obtains better results in economic terms, mainly because the global farmer is able to sell a larger share of its production for fresh consumption (i.e. dessert apples), at higher prices than apples for juice production. Farmers in the Local chain are not able to sell all their production as dessert apples either directly to consumers or through the wholesaler. This is so even if the apples meet the 4
This is an association of farmers that hire agricultural engineers and technicians to provide technical advice and
support to the members of the association.
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26 requirements of size and aspect (i.e. suitable for dessert table). This is one of the important problems faced by producers: the organic apple market is saturated (i.e. supply is higher than demand). In fact, producers that are not members of the organic wholesale cooperative face more difficulties to commercialize their production. They have to sell an important part of the production for juice production, at prices below the cost of production. In this sense, selling apples for juice is a strategy to sell small apples and apples affected by hailing, and also a strategy to sell surpluses. In distributive terms, it is interesting to mention that the farmers involved in the local chain retain a higher share of the value added created along the chain. In this study, we haven’t evaluated the supply chain of processed apples (i.e. juice). In this sense, it seems worth studying whether the production of juice is an alternative to be implemented by the farmers themselves in order to improve their economic results. As mentioned in the report, climate variability has an important impact on productivities. According to the interviewed people, these impacts have been reduced tanks to the technical advice given by the ADV Ecològica de Ponent, whose technicians monitor productive activities and their results. It is well known by producers of the region that productivities increase with knowledge and experience. www.glamur.eu
27 8. References Acero, A. 2014. Influencia de las mallas antigranizo en producción de manzana ecológica. PhD thesis, University of Zaragoza AFRUCAT-‐ Associació empresarial de Fruita de Catalunya 2013 http://www.afrucat.com/ca/ Andalucian Government 2014. Business plan of an organic shop specialized in fruits and vegetables. Available online: http://www.juntadeandalucia.es Gallopín, G., 1997. Indicators and Their Use: Information for Decision-‐making. In: Moldan, B. & Billharz, S. (Eds) Sustainability Indicators. Report of the project on Indicators of Sustainable Development. Scope 58. Georgescu-‐Roegen, N. (1971). The enthropy law and the economic process. London, England: Harvard University Press. Giampietro, M., Mayumi, K., & Ramos-‐Martin, J. (2009). Multi-‐scale integrated analysis of societal and ecosystem metabolism (MuSIASEM): Theoretical concepts and basic rationale. Energy, 34(3), 313–322. Given, L.M., (Editor) 2008. The SAGE Encyclopedia of qualitative research methods. SAGE Publications Inc. US. OECD, 2003. Environmental Indicators: Development, measurement and use. Organization for Economic Co-‐operation and Development. Environment. Sala-‐Ríos, M. 1995. El sector de la fruta dulce en España: Nuevas corrientes comerciales y competitividad. Revista española de economía agraria, 1995, núm. 171, p. 135-‐160. Spanish Government 2012. MARME-‐ Ministerio de Medio Rural y Marino: Base de datos de consumo en hogares del Ministerio de Medio Ambiente Rural y Marino de España Available on line: http://www.magrama.gob.es/es/ www.glamur.eu
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