Marketing perspectives and instruments for chestnut products and services
Davide Pettenella
Dipart. Territorio e Sistemi Agro-forestali, University of Padua, Via Romea, I-35010 Legnaro, Padova, Italy. davide.pettenella@unipd.it
Abstract [Review article]
Market opportunities for sweet chestnut (Castanea sativaMill.) products and services have been expanding recently after a long lasting decline due to sanitary problems and to a reduced demand.
This paper describes first the main driving forces that are currently influencing the chestnut mar- ket, including the increased demand for “natural” products, new developments in harvesting and processing technologies and new trends in rural development policies in the European Union. In the second part, a brief analysis of various market segments is presented. Finally, new manage- ment and marketing instruments to promote chestnut products and services are discussed.
Keywords: chestnut, non-wood forest products, marketing
1 Introduction
After a period of decreasing production of timber and fruits in the ‘70s and ‘80s, a revival of economic interest in chestnut has been recorded in the second half of the ‘90s in various European markets including France (DROZVINCENTand VINCENT1997), Italy (MARESI
1998, RIBAUDO1997), Spain (BERROCAL DELBRIOand CARDENOSOHERRERO1997) and Turkey (YAVUZet al.1999). This paper aims to describe the main driving forces behind this new trend, to analyse various market segments and, finally, to discuss new management and marketing instruments to promote chestnut products and services.
2 Driving forces influencing the supply/demand of chestnut products and services
Demand for environmentally friendly products is increasing in all highly industrialised countries (BURROWSand SANNESS1998, LOBERand MISEN1995). Many traditional prod- ucts that once used to be strictly connected to the needs and consumption behaviour of low- income people (“chestnut: the meat of poor people” – NICESEand FERRINI1999) are now regarded as natural, healthy products1(FAO 1995, MEADLEY1989). The general increase in demand for “natural” products is a driving force that also has a positive influence on the chestnut market. Examples of the expanding consumption of chestnut wood and fruits as
“green” products are the following: chestnut poles in land consolidation works and in vine- yards, sawn chestnut wood for the production of outdoor furniture and of solid wood furni- ture with traditional design, organic marrons, chestnut flour for traditional cakes and tannin to produce leather treated with “natural” chestnuts (GIRCENTIand ROSA1995).
Another important driving force influencing the performance of the chestnut sector is the technological development in all three stages of the production chain: in forest management techniques (e.g. cultivars or ecotypes selection, silvicultural treatments, biological control of chestnut blight, new agroforestry systems – CARBONEand RIBAUDO1995, DUPRAZ1998);
in harvesting technology (e.g. integrated wood harvesting and chipping systems, tree shakers and fruit mechanical harvesters with aspirators – BALDINIand SPINELLI1988, BERRUTOet
1 Chestnut fruit has the lowest fat content of all the major edible nuts and is very low in calories (ROSENGARTEN1984).
al.1999, MONARCA1996) and in processing (e.g. laminated veneer boards, finger jointed beams and boards, thick sliced veneer, improved techniques for tannin extraction, pollution control techniques in tannin use, better use of industrial wood through joint production of tannin and panels, non-damaging methods to evaluate the extent of ring shakes – SACCHETTIet al.1999, TISLERand DEVJAK1996).
Rural development policies are also creating favourable conditions to propagate chestnut initiatives: Agenda 2000 is promoting the diversification of rural activities and new sources of non-agricultural income in European Union (EU) member countries (FRANCESCHETTI
1999). Outside the EU in some Balkan countries, in Switzerland, Turkey, the USA, Australia, Chile, etc. chestnut forests are playing a new role as an instrument in regional development (LOEWEet al.1994,PAYNEet al.1994, RIDLEYand SALESSES1999, YAVUZet al.1999). In many countries there is a positive trade off between chestnut production and tourism2 (CAMPOSPALACIN1993).
3 Market segments analysis
As shown in Figure 1, chestnut cultivation represents an exemplary model of multi-functional forestry. Indeed, from a marketing perspective, chestnut products are extremely diversified.
Thanks to the diversity of their marketing characteristics (see Table 1), they may easily match the socio-economic conditions and expectations of a large set of different producers (FAO 1995, RYALLand PENTZER1974) with regard to the length of the investment periods, the production scale and production costs, risk aversion, marketing capacity, etc.
2 In the South Tyrol, for example, in October and November “Törgelle” tours are very popular among German speaking people to taste, in a group of friends, the new wine and roasted chestnuts in a net work of mountain farmhouses and inns ‹http://www.meranerland.com/update/offers/offers/
toerggelen/index_eng.html›.
Fig. 1. Management systems, products and services characterising chestnut markets.
Fences, vineyard stakes, flower pickets, transmission lines, fuel, baskets, tannin, panels, handicrafts, etc.
Joinery, furniture, flooring, internal cladding, carpentry, etc.
Fresh fruit, fruit for candy- ing, roasting, boiling, drying,
or for flour making, etc.
poles
logs
fruit coppices
coppices with standards
high forests
orchards
By-products (e.g. edible mushrooms, honey, leaves) Environmental services and maintenance of rural economy and culture
Table 1. Marketing characteristics of chestnut products.
Wood Fruits
Positive
Different final markets (see Fig. 1) Good nutrient values; “natural” and healthy product Durable, rot-resistant timber Different final uses (roasted nuts, flour, cakes Forest management based on different and biscuits, porridge, syrup, marrons glacés, etc.),
rotation periods mainly in niche markets
Various by-products High added value products through processing Easy storage (refrigeration)
Various by-products Negative
Periodical productions (long period for Difficulties in obtaining a nut that is clean and
investments) of homogeneous size and quality
Difficulties in regularly supplying large Production variability
quantities of assortments Fresh nuts quality maintenance problems Harvesting costs; high and concentrated (nuts quickly dry out and harden)
labour requirements Fungal infection and insect attack on fresh fruit;
Difficulties in obtaining assortments weevil damage during storage and later of homogeneous size and quality Harvesting costs; high and concentrated No universally accepted grading rules labour requirements
The use of the Boston Consulting group matrix (KOTLERet al.1996) may offer an interesting opportunity to describe the variable economic nature of chestnut products in relation to pro fitability and investment requirements (see Table 2).
Table 2. The Boston Consulting group matrix: a tentative implementation in relation to some chestnut products.
Product Relative market share (with respect to competiting products)
growth High Low
High Large profits, high investments required Low profits, high investments required
“STAR” products “PROBLEM CHILD” products (e.g. laminated beams, veneer logs, (e.g. new niche products like: breakfast marons with certified origin) cereals based on ready-to-eat chestnut flour or flakes, chestnut beer and liquors) Low Large profits, low investments required Low profits, low investments required
“CASH COW” products “DOG” products
(e. g. poles for fences and land (e. g. large poles for transmission line, consolidation, sawlogs for construction chips for panel production, fuel wood and floors, jam)
The recent expansion of European market conditions for some chestnut products in the late
’90s is partly documented by official statistics (for the fruit production, see Table 3).
However, market development is not homogeneous as it is frequently affected not only by agronomic and economic, but also by local social and cultural variables (HENNION and VERNIN2000). For example, the demand for chestnut sawn wood for solid wood furniture production is high in Tuscany (Italy), logs for floorings are sought after in France, poles for land con solidation works are used in Switzerland, the production of chestnut laminated beams and panels is increasing in north-east Italy and chestnut flour has an expanding market in Bosnia. There are no figures available on these niche markets, however, and the evidence for them is mainly empirical and anecdotal. Nevertheless, the presence of different market conditions is well documented by the local variability in the prices paid at the farm gate to the producers (see Table 4).
Table 3. Chestnut production in selected European countries (1965–2000; 1000 tons). Note: n.a.: not available. Source: FAO (FAOSTAT Agriculture Data – Agricultural Production – Crops Primary;
‹http://apps.fao.org/›)
1965 1970 1975 1980 1985 1990 1995 2000
France 82 48 39 24 14 14 11 13
Greece 15 17 16 14 10 11 12 12
Italy 87 66 69 63 39 50 72 52
Portugal 47 92 33 20 17 20 19 33
Russian Federation n.a. n.a. n.a. n.a. n.a. n.a. 12 16
Spain 88 82 25 24 28 24 10 10
Turkey 33 48 47 59 59 80 77 60
Other European countries 89 112 158 50 14 37 104 154
Europe 440 465 388 256 181 235 318 351
World 529 565 452 472 414 484 498 484
Europe/world 83.2% 82.3% 85.8% 54.1% 43.8% 48.5% 63.8% 72.4%
Table 4. Changes in the average national chestnut prices paid at the farm gate to the producers in select- ed European countries (1966–1995), local currency/ton. Source: FAO (FAOSTAT Agriculture Data – Producers Prices – Crops Primary; ‹http://apps.fao.org/›)
1966 1970 1975 1980 1985 1990 1995
France (Franc) 340 608 860 1280 1800 2500 3000
Greece (Drachma) 4 5 10 31 92 239 398
Italy (Lire x 1000) 92 125 188 647 787 1320 1540
Portugal (Escudo) 2 3 6 39 50 108 192
Spain (Peseta) 8 12 16 33 80 60 79
converted to show trends: 1966 = 100
France 100 179 253 376 529 735 882
Greece 100 110 244 729 2194 5690 9486
Italy 100 137 205 707 859 1441 1681
Portugal 100 139 265 1656 2116 4612 8205
Spain 100 150 198 415 1019 764 1004
Differences in the prices of raw material and in the patterns of development of local markets are stimulating international trade of wood assortments and fruit. Some countries (e.g. the Russian Federation) are increasing their export capacity of large diameter logs, while Italy and Turkey are exporting fruit to Central Europe.
Small poles and high quality saw logs are still, from an economic point of view, the two most important wood products and have the largest market share. As reported in Table 5, prices of the two assortments are, if compared with other alternative species (common acacia, pine, etc.), quite high, at least on the Italian market.
The profitability of chestnut production greatly depends on the place along the market chain where the products are sold. Thus forest owners who are able to sell their products on the roadside or who can deliver to the industrial firm will normally gain much more from their investments (FAO 1995). Vertical integration is, in the chestnut sector as well as in other forest investments, the way to reinforce the market power of the forest owners and to reduce their role as price takers. This may explain the strategic role of marketing associations among forest owners in the development of local production capacities.
Table 5. Prices for chestnut poles and industrial products (Italian market, 2000–2001). Source: prices published in various numbers of the Italian journal Sherwood in 2000 and 2001.
Assortment Min (Euro) Max (Euro) Market place
Poles for vineyard (Ø: 8–10 cm; length: 2.5–3 m) 2.1/unit 2.8/unit Roadside (on the lorry) Poles for fences (Ø: 6–8 cm; length: 4 m) 2.1/unit 2.3/unit Roadside
Saw logs (Ø: >20 cm; l: > 4 m) 87/ton 129/ton Roadside
Small logs for panels 31/ton 36/ton Roadside
Logs for construction (Ø:>35 cm; length: > 4 m) 154/ton 180/ton Roadside Residues from the forest (with bark) 20/ton 26/ton At the farm gate Small logs for panels (Ø: <20 cm) 33/ton 39 /ton At the farm gate
Small logs for tannin 43/ton 46/ton At the farm gate
Residues with cork 20/ton 25/ton At the farm gate
Sawn wood 387/m3 439/m3 Wholesale
Construction beams 516/m3 671/m3 Wholesale
Construction beams (from France) 748/m3 774/m3 Wholesale
4 New management and marketing instruments
Four instruments are playing a remarkable role in the expansion of some promising chestnut markets: certification, networking and promotion, new approaches to selling and the pro- curement policies of public authorities.
Table 6 lists some of the most relevant schemes for the certificationof wood and non- wood products. The schemes mentioned in the Table are associated with “umbrella” labels to mark the products origin from small producers who meet the scheme’s standards. Trade marks, private (eco)labels, and other environmental declarations are used quite frequently, especially by companies that are selling processed fruit.
Table 6. Certification schemes applied in the chestnut market. Source: ‹http://www.europa.eu.int/comm/
agriculture/qual/en/prod_en.htm› (for PDO and PGI), ‹http://www.politicheagricole.it/Testate/cittadino/
defaultcittadino.htm› (for TSG).
Scheme Examples
Registration of Protected Designation marron from Castel del Rio (PGI – I), marron of Origin (PDO) and Protected Geographical from Mugello (PGI – I), chestnut from Monte Indication (PGI) under Council Regulation Amiata (PGI – I), chestnut from Montella
2081/92 (PGI – I), chestnut from Terra Fria (PDO – P),
chestnut from Marvão – Portalegre (PDO), chestnut from Padrela (PDO), chestnut from Soutos da Lapa (PDO)
Traditional Speciality Guaranteed (TSG) under eight different flour specialities from Tuscany, Council Regulation 2082/92 Calabria and Liguria Regions (I)
Organic production certification under Council marron from Mugello (I) Regulation 2092/91 and under the system of the
International Federation of Organic Agriculture Movements (IFOAM)
Certification of the forest management system some chestnut forests in UK (FSC) and of the chain of custody under the Forest
Stewardship Council (FSC) and the Pan-European Forest Certification (PEFC) schemes
Networking and promotion activitiesare an essential instrument to reinforce producers’
market power. Some successful examples are the Italian Associazione Nazionale Città del Castagno(an association of municipalities interested in the sector), the American Chestnut Foundation in the USA, the Chestnut Growers of Australia (RIDLEYand SALESSES1999), the Castanea Project under the EU Leader Project, and the Chestnut Road (Strada del Castagno)in Tuscany, which promotes agri-tourism activities in Italy. Local thematic fairs and exhibitions are very common promotion instruments all around Southern Europe, while less common are model chestnut farms or chestnut museums (like that in Val di Roggio, Lucca – Italy; ‹www.museodelcastagno.it/›).
The selling systemis a crucial element in the “chestnut chain”. Many local associations have been founded by forest growers to process and market wood products and fruit, both in Europe and in the USA (WALLACE1994). A new and very profitable method of selling directly to consumers is to allow them to collect the nuts themselves and enjoy a few hours of recreation at the same time. Then either a flat rate is charged or the rate depends on the weight of the collected fruit. E-business is also changing traditional approaches to selling, both through the B2C (“Business to Consumers”; mainly for foodstuffs like jams, dried nuts and flour, see, for example, ‹www.esperya.com/›) and through the B2B (“Business to Business”; e.g. sales of semi-finished products, poles and DIY [do it yourself] products).
Procurement policies by public authorities(direct public investments, regulations, criteria for providing incentives, environmentally responsible purchasing programs, etc.) are another powerful instrument to increase the demand for chestnut wood. Some examples are: the use of chestnut wood in land consolidation works, in public parks and garden furniture and in insulating barriers along motorways; the provision of incentives to farmers to use chestnut poles as vineyard stakes; and the issue of regulations prescribing the use of chestnut beams in restoring old buildings.
5 Conclusions
Marketing chestnut products and services is a complex activity due to the wide variety of options in identifying the target markets, in informing the consumers and in adapting the processing, storage, distribution and selling systems.
Since the producers are mainly small-scale, non-industrial forest owners living in rural marginal areas, successful marketing needs to be effectively supported by external insti - tutions. Partnerships and the coordination of initiatives between public authorities and pri- vate operators may prove to be the key factors in developing this promising multi-functional forest resource.
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Accepted 25.2.02
