Idea Transcript
Edited by
Massimo Sargiacomo
Accounting and Management of the Agribusiness Industry
By adopting a managerial and accounting perspective, in this volume we seek to provide some answers to specific issues related to the wine, chocolate, coffee, diary, poultry and beekeeping industry, at the same time paying attention to financial statement analysis of the existing companies in the broad Mediterranean area, as well as to the propensity of earnings manipulation of EU agribusiness companies vìs-à-vìs US based industries.
EDITORS Massimo Sargiacomo is Professor of Accounting and Public Management at the Department of Management and Business Administration of University G. d’Annunzio, where he is also Director of the PhD programme in “Accounting, Management and Business Economics”. Prof. Sargiacomo has extensively published books and articles, and he is member of editorial boards of “A” class ASN-VQR journals.
ISBN 978-15-268-1895-9
£ 27.00
Edited by
Massimo Sargiacomo
Accounting and Management of the Agribusiness Industry Accounting and Management of the Agribusiness Industry
There are no doubts at all that Agribusiness activities and Food are on the political agenda of any country in the world, as well as on the tables of many supranational organizations, as a pivotal point for the future of human beings. According to the World Bank 2016 Report on Enabling the Business of Agriculture, “the challenge of feeding a world population of 9 billion people by 2050 can be met only through vibrant, productive, profitable and sustainable food and agriculture sectors” (World Bank Group, 2016, p. VII). Indeed, in the last decade the growing international debate on the Agribusiness sector and Food industry witnesses the increasing concern on the different issues pertaining to economic sustainability, innovation, accounting, quality, management, safety, etc...(e.g.: FAO, 2016; WFP, 2016), whose different perspectives cannot allow to concurrently answer to all the main questions, as per their paramount importance for the future of the planet.
Massimo Sargiacomo
Edited by
Edited by Massimo Sargiacomo
Accounting and Management of the Agribusiness Industry
Milano • New York • Bogotá • Lisbon • London Madrid • Mexico City • Montreal • New Delhi Santiago • Seoul • Singapore • Sydney • Toronto
Published with the financing of Dipartimento di Economia Aziendale of the University “G. D’Annunzio” of Chieti-Pescara
Copyright © November 2016
McGraw-Hill Education, London, UK
Rights of translation, reproduction, electronic storage and total or partial adaptation by any mean whatsoever (including microfilms and Photostat copies) are not allowed. Given the intrinsic features of the Internet, the Publisher is not responsible for any possible change in both the addresses and the contents of the mentioned Internet websites. Names and brands mentioned in the text are generally registered by the respective producers. Programme and Portfolio Manager: Natalie Jacobs Programme Manager B&E: Marta Colnago Programme Manager Custom: Daniele Bonanno Production: Donatella Giuliani Cover: Route 42 Studio, Milano Print: Digital Team (Fano, PU) ISBN 9781526818959
Contents
Foreword Massimo Sargiacomo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Authors
.............................................
XI XV
1. Mediterranean food value chain: focus on Italy
Giacomo Fabietti, Patrice De Micco, Mariapia Maraghini, Angelo Riccaboni . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
1.1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
1.2
Agriculture and Food in the Mediterranean area: the key issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
1.3
The agri-food sector in the Mediterranean: a macroeconomic overview . . . . . . . . . . . . . . . . . . . . . . . . .
8
1.4
The agri-food sector in the Mediterranean: an accounting perspective. . . . . . . . . . . . . . . . . . . . . . . . . .
22
1.5
Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34 37
2. Earnings Manipulation in the Agribusiness Industry: Evidence from US and EU Listed Companies Francesco De Luca, Francesco Paolone . . . . . . . . . . . . . . . . . . . . . Learning objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
41 42
2.1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
42
2.2
IFRS and US GAAP agriculture accounting . . . . . . . . . . . . . . 2.2.1 IAS 41-Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . 2.2.2 ASC 905-Agriculture . . . . . . . . . . . . . . . . . . . . . . .
44 44 46
2.3
Literature background and research hypothesis . . . . . . . . . .
48
VI
Contents
2.4
The Beneish Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
51
2.5
Data Collection and Model Reclassification . . . . . . . . . . . . .
53
2.6
Main findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
55 57 57
Appendix 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
61
List of European listed companies in the sample . . . . . . . . . . . . . .
61
List of US listed companies in the sample. . . . . . . . . . . . . . . . . . . .
63
3. Supply Chain Management, Value Chain and Accounting issues in the Wine Industry Paola Signori, Massimo Sargiacomo. . . . . . . . . . . . . . . . . . . . . . . . Learning objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65 65
3.1
The wine industry is global . . . . . . . . . . . . . . . . . . . . . . . . .
66
3.2
Porter’s value chain applied to the wine industry . . . . . . . . .
69
3.3
Cost Accounting in the Wine Industry . . . . . . . . . . . . . . . . .
71
3.4
Main Accounting issues in managing stocks in the Wine Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
76
3.5
Supply Chain Integration in the wine industry . . . . . . . . . . . 3.5.1 The importance of Supply Chain Orientation . . . . . 3.5.2 Horizontal collaboration and clustering strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
79 81 83
3.6
Innovation and Experimentation: forms and styles in the wine industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
84
3.7
Concluding remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
87 88 89
4. Business Model and Value Drivers of the Chocolate District Valter Cantino, Simona Alfiero, Massimo Cane, Paola De Bernardi
93
4.1
The origin of chocolate . . . . . . . . . . . . . . . . . . . . . . . . . . . .
94
4.2
The cocoa-chocolate value chain . . . . . . . . . . . . . . . . . . . . .
95
4.3
The international chocolate market . . . . . . . . . . . . . . . . . . .
99
4.4
The Italian chocolate market . . . . . . . . . . . . . . . . . . . . . . . .
104
Contents VII
Performance analysis of the Italian Chocolate Industry . . . . . . . . . . . . . . . . . .
108
4.5
The chocolate market in Piedmont . . . . . . . . . . . . . . . . . . .
110
4.6
Structural characteristics and processes, according to the business model Canvas . . . . . . . . . . . . . . . . . . . . . . .
112
4.7
Case studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.7.1 Pastiglie Leone . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.7.2 Venchi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
117 116 124 130 131
5. The Coffee Sector: how the Supply Chain Management creates added value for micro-companies
Massimo Pollifroni, Elisa Giacosa, Damiano Cortese, Simona Fiandrino . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
137
5.1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
137
5.2
The Research Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
139
5.3
The local sector analysis . . . . . . . . . . . . . . . . . . . . . . . . . . .
140
5.4
The Supply Chain Management in the Coffee Sector: a Literature Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4.1 The Supply Chain Management: its evolution . . . . . 5.4.2 The Coffee Sector Supply Chain: key features. . . . .
142 143 145
5.5
The Supply Chain Management in the Coffee Sector: some Practical Issues for a conceptual model. . . . . . . . . . . .
147
5.6
Conclusion, implications and limitations . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
150 152
6. Creating Value within the Dairy Supply Chain Ilenia Confente, Paola Signori . . . . . . . . . . . . . . . . . . . . . . . . . . . . Learning Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
159 159
6.1
The dairy industry: facts and trends . . . . . . . . . . . . . . . . . . . 6.1.1 The dairy industry in Italy . . . . . . . . . . . . . . . . . . . .
161 161
6.2
The market-driven dairy chain and the role of consumers’ preferences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2.1 The dairy value chain . . . . . . . . . . . . . . . . . . . . . . . 6.2.2 Value and power in dairy supply chains . . . . . . . . .
162 162 164
VIII
Contents
6.2.3
6.3
6.4
Dairy products and consumers preferences . . . . . . . Box 6.1 – The “Got Milk?” advertising campaign Strategies to expand primary demand . . . .
166
Sustainability and Service ecosystems . . . . . . . . . . . . . . . . . Box 6.2 – The “Green Grass Dairy project” An innovative sustainable dairy chain in Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . . Box 6.3 – B Corporation A sustainable business model . . . . . . . . . .
169
International Marketing: implications for the dairy industry. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4.1 Made in and Country of origin effect . . . . . . . . . . . Box 6.4 – The Chobani case study A successful “Greek” yogurt, launched by a Turkish entrepreneur in the USA with the spirit of the shepherd . . . . . . . . .
168
171 172 173 174
175
6.5
Supply chain coordination in the dairy industry . . . . . . . . . .
178
6.6
Digital marketing and co-creation . . . . . . . . . . . . . . . . . . . . Box 6.5 – The “Mila” case study Digital marketing as a source of innovation . . Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
180 183 184 184
7. The poultry industry in Italy: cost analysis and profit drivers Christian Corsi, Daniela Di Berardino . . . . . . . . . . . . . . . . . . . . . . . Learning objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
189 189
7.1
The evolution of the poultry industry in Europe and in Italy . . .
190
7.2
The structure of the Italian poultry sector . . . . . . . . . . . . . . 194 7.2.1 Economic players in the poultry sector . . . . . . . . . . 1957.2.2Operational characteristics of poultry farming in Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195 7.2.2 Operational characteristics of poultry farming in Italy 196 7.2.3 The cost of livestock drivers . . . . . . . . . . . . . . . . . . 198 7.2.4 The factors determining the profitability of farms . . 201
7.3
The transformation process . . . . . . . . . . . . . . . . . . . . . . . . . 7.3.1 The economic advantages of the processing industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.3.2 The criteria for determining the costs of supply . . .
201
Diversification of products in the poultry industry . . . . . . . .
207
7.4
203 206
Contents IX
7.5
The value chain of the poultry sector. . . . . . . . . . . . . . . . . .
209
7.6
The financial results of the processing industry in the Italian poultry sector: example of excellence . . . . . . .
212
7.7
Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
213 214 214
8. Food safety and quality management in beekeeping: the ADI Apicoltura case Tiziana Di Cimbrini, Stefania Migliori . . . . . . . . . . . . . . . . . . . . . . . Learning Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
217 218
8.1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
218
8.2
The principles of HACCP and the barriers to SMEs. . . . . . . .
220
8.3
ADI Apicoltura: company profile . . . . . . . . . . . . . . . . . . . . . Focus section – The honey industry. . . . . . . . . . . . .
222 224
8.4
The HACCP system implementation in ADI Apicoltura . . . . . 8.4.1 Definition of the team responsible . . . . . . . . . . . . . 8.4.2 Flow diagrams and hazard analysis . . . . . . . . . . . . . 8.4.3 The CPPs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
226 227 227 232
8.5
Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
241 243 244
Foreword
There are no doubts at all that Agribusiness activities and Food are on the political agenda of any country in the world, as well as on the tables of many supranational organizations, as a pivotal point for the future of human beings. According to the World Bank 2016 Report on Enabling the Business of Agriculture, “the challenge of feeding a world population of 9 billion people by 2050 can be met only through vibrant, productive, profitable and sustainable food and agriculture sectors” (World Bank Group, 2016, p. VII). Indeed, in the last decade the growing international debate on the Agribusiness sector and Food industry witnesses the increasing concern on the different issues pertaining to economic sustainability, innovation, accounting, quality, management, safety, etc. (e.g.: FAO, 2016; WFP, 2016), whose different perspectives cannot allow to concurrently answer to all the main questions, as per their paramount importance for the future of the planet. In this volume we use an accounting and managerial perspective to analyse different issues related to the agribusiness industry. Therein, it is interesting to note that in the last decade there has been an increasing attention in the managerial and accounting research agenda of agriculture, food and agribusiness industry (e.g.: Bell and Shelman, 2011; Quinn, 2014; Walker, 2014, Messeni Petruzzelli and Svejenova, 2015). Indeed, whilst much time has passed since prior sporadic studies in this field of research (e.g., Maxwell, 1946; Cribari, 1953; Freear, 1970), a continuous flow of new research has emerged in the last years (e.g.: Consorti et al, 2016; D’Amico et al, 2016; Shelman et al, 2016; Slavich and Castellucci, 2016). By adopting a managerial and accounting perspective, in this volume we seek to provide some answers to specific issues related to the wine, chocolate, coffee, dairy, poultry and beekeeping industry, at the same time paying attention to financial statement analysis of the existing companies in the broad Mediterranean area, as well as to the propensity of earnings manipulation of EU agribusiness companies vis-à-vis US based industries. In particular, De Micco, Fabietti, Maraghini e Riccaboni, initially stress the pivotal relevance of agriculture and food in the global agenda of the future. In a related manner, in light of the current global economic, social and environmental scenarios, they investigate the main issues related to agriculture and food in the Mediterranean area. The
XII
Foreword
co-authors then illustrate a macro-economic analysis of the agri-food sector. Moreover, by analysing the aggregated financial statements of the companies, it is later provided a thorough accounting-based examination of the sector, focusing either on the Mediterranean area and on the Italian economy. The main future challenges of the Mediterranean agri-food companies are finally portrayed, thus concluding the opening chapter. In chapter 2 Francesco De Luca and Francesco Paolone provide a portrayal of the different trends of the probability of accounting manipulation within the agribusiness industry with respect to US and EU-based companies. By adopting the Beneish Model (1999, 2013), and at the same time exploiting the Orbis Bureau Van Dijk database, the co-authors have tested the existence of earnings management (EM), at the same time ascertaining whether there is a relation between accounting standard adoption (US GAAP or IFRS) and EM propensity. Whilst EU-based companies (adopting IFRS) seem to be more inclined to earnings management, US-based companies (using US GAAP) show – on average – lower probability of earnings management. Empirical evidences can be explained by the different respective provisions, thus allowing to conclude that IFRS adoption leaves more space for earnings manipulation than US GAAP. Paola Signori and Massimo Sargiacomo in chapter 3 offer an overview of the main features of the global wine industry, at the same time highlighting how firms are facing pivotal challenges in an increasing global scenario. Starting from a precise portrayal of the main primary and secondary activities which compose the value chain in the wine industry, the chapter highlights how to build up an effective cost accounting architecture in a small-medium size wine company. By so doing the main accounting issues related to stock management are also illustrated. The way to achieve an effective supply chain integration in the wine industry is subsequently explained, thus concluding the chapter by depicting the contours of innovation and experimentation as main pivotal elements for the survival and re-launch of the wine business in all the world. In Chapter 4 Valter Cantino, Simona Alfiero, Massimo Cane and Paola De Bernardi seek to highlight the main features of the chocolate industry, which is often described by many influential commentators as a “recession proof” sector. The co-authors illustrate the industry’s environmental prospectives and competitive trends, at the same time focusing on the historical and traditional Piedmont district. After having portrayed the main features of Italian and international market, it is adopted the business model Canvas in order to analyse the the cocoa-chocolate value chain, and highlight the main factors which enable the sector’s companies to generate economic and social value for all their stakeholders. The chapter is concluded by the investigations of some case-studies of chocolate businesses. Massimo Pollifroni, Elisa Giacosa, Damiano Cortese and Simona Fiandrino in chapter 5 seek to enhance an understanding of the coffe sector, by unveiling how supply chain management could create added value for micro-companies. The co-authors aptly explain how the coffe sector is one of the most important industries in some countries
Foreword
XIII
– Italy included – where it represents a pivotal source of development, growth and economic sustainability. After the contextualization step, it is proposed a conceptual model aimed at illustrating an approach to SCM in coordinated networks of micro-sized companies belonging to the coffee sector. Findings are thus elaborated and presented, as well as conclusions and implications of the study. Ilenia Confente and Paola Signori in chapter 6 provide an overview of facts and trends in the global dairy industry, paying particular attention to the Italian scenario. Customer value and buying power are consequently analyzed, in order to better highlight the main features of the dairy supply chain structure, at the same time elucidating how trends, preferences, managerial and relational abilities are concurrently mounting successful approaches. Co-authors have then investigated sustainability issues, as per the paramount relevance and implications they have for managerial decisions and business models. International marketing strategies and digital marketing are conclusively explained, thus portraying how they can be successful deployed to the specific product categories. In Chapter 7 Christian Corsi and Daniela Di Berardino have thoroughly explored the evolutionary path of the poultry sector, which in the last two decades has witnessed a transformation from a constellation of small- and medium-sized rural forms of production into a broader industrialization and strong vertical integration, thus fostering economies of scale of a small number of strong competitors. The operational characteristics of the supply chain are thus investigated, devoting much attention to the cost drivers and profitability of the primary actors. The criteria for determining the costs of supply are thus illustrated, at the same time providing evidences either of the products diversification and about the value chain features. The chapter is concluded by the study of an interesting business case. Tiziana Di Cimbrini and Stefania Migliori in chapter 8 focus their investigation on food safety and quality management in beekeeping. The co-authors initially describe the principles of Hazard Analysis and Critical Control Point – whose methodology is referred to by various organization as the system of analysis and control of health risk associated with a food product – at the same time illustrating the main barriers which hamper its successful application to the beekeping industry. They subsequently provide a comprehensive examination of the ADI Apicoltura case – which is a SME operating in the beekeeping industry – at the same time illustrating how HACCP may represent a pivotal tool to become familiar with TQM Conclusions are addressed to provide some reflections on the key-factors guiding to success in the HACCP implementation, as well as on its contribution to the competitiveness of the investigated firm. Pescara, 29 September 2016 Massimo Sargiacomo
References
Bell D.E - Shelman M.L. (2011), KFC’s Radical Approach to China, Harvard Business Review, 89(11), 137-142. Consorti A. - D’Amico L. - Sargiacomo M. (2016), Accounting and Management in the Pasta Industry: the De Cecco Case (1886-1955), in D’Amico L., Di Pietra R., Sargiacomo M. (2016) (Eds.), Accounting and Food: Some Italian Experiences (42-68), London: Routledge. Cribari A. (1953), Some remarks on a cost accounting system for medium sized wineries, American Journal of Enology and Viticulture, 4(1), 183-185. Dal Poggetto J.P. (1985), A Practical Guide to Winery Cost Accounting, California: Touche Ross. D’Amico L. - Di Pietra R. - Sargiacomo M. (2016) (Eds), Accounting and Food: Some Italian Experiences, London: Routledge. Food and Agriculture Organization of the United Nations (2016), The State of Food and Agriculture, www.fao.org. Freear J. (1970), Robert Loder, Jacobean management accountant, Abacus, 6(1), 25-38. Maxwell G.A. (1946), Winery Accounting and Cost Control, New York: Prentice Hall. Messeni Petruzzelli A. - Svejenova S. (2015), Cooking up New Ideas across Levels and Contexts: Introduction to the Special Issue on Innovation and Entrepreneurship in the Food Industry, Industry and Innovation, 22(8), 649-653. Shelman M.L. - McLoughlin D. - Pagell M. (2016), Origin Green: When your brand is your supply chain, Organizing for Sustainable Effectiveness, in Cagliano R., Caniato F.A., Worley C.G. (2016) (Eds.), Organizing Supply Chain Processes for Sustainable Innovation in the Agri-Food Industry (Organizing for Sustainable Effectiveness, Volume 5) (205-233), Emerald Group Publishing Limited. Slavich B. – Castellucci F. (2016), Wishing Upon a Star: How apprentice-master similarity, status and career stage affects critics’ evaluation of former apprentices in the haute cuisine industry, Organization Studies, 37(6), 823-843. Walker S.P. (2014), Accounting and rural rehabilitation in New Deal America, Accounting, Organizations and Society, 39(3), 208-235. Walker S.P. (2015), Accounting and Preserving the American Way of Life, Contemporary Accounting Research, 32(4), 1676-1713. World Food Programme (2016), European Union & World Food Programme, www.wfp.org. World Bank Group (2016), Enabling the Business of Agriculture 2016: Comparing Regulatory Good Practices. Washington, DC: World Bank.
Authors
Simona Alfiero is Assistant Professor in Accounting and Management Control at the Department of Management of University of Turin. Massimo Cane is Assistant Professor in Accounting and Management at the Department of Management of University of Turin. Valter Cantino is Director of the Department of Management of University of Turin, where he is also Full Professor of Accounting and Business Management. Ilenia Confente is Assistant Professor of Management at the Department of Business Administration of the University of Verona. Christian Corsi is Assistant Professor in Accounting and Management at the University of Teramo, where he is either Rector’s Delegate and CEO of the Spin-off “Cisrem”. Damiano Cortese is Research Fellow in Business Administration at the Department of Management of the University of Turin. Paola De Bernardi is Assistant Professor in Accounting and Management Control at the Department of Management of University of Turin. Francesco De Luca is Associate Professor in International Accounting and Financial Reporting at the Department of Management and Business Administration of the University G. d’Annunzio, where is also Director of the Master of Science Program in “Economics and Management”. Tiziana Di Cimbrini is Assistant Professor in Accounting and Management at the Faculty of Political Sciences of University of Teramo. Patrice De Micco, is a Post-Doc Researcher on Sustainability Management and Processes at the Department of Business and Law of University of Siena. Daniela Di Berardino is Assistant Professor in Business Administration at the Department of Management & Business Administration of University of Chieti-Pescara. Giacomo Fabietti is Post-Doc Researcher at the Department of Business and Law of University of Siena. Simona Fiandrino is PhD Student in Business Administration at the Department of Management of the University of Turin. Elisa Giacosa is Assistant Professor in Financial Accounting at the Department of Management of the University of Turin. Maria Pia Maraghini is Associate Professor of Management Control at the Department of Business and Law of University of Siena and Rector’s Delegate for the “Santa Chiara Lab” center, aimed at promoting students’ employability and open innovation.
XVI Authors
Stefania Migliori is Assistant Professor in Accounting and Management at the Department of Management & Business Administration of University of Chieti-Pescara. Francesco Paolone is a Post-Doc Researcher on Business Administration at the Department of Law of Parthenope University in Naples, and Visiting Researcher at Aalborg University in Denmark. Massimo Pollifroni is Associate Professor in Public Accounting, Public Management and Business Ethics at the Department of Management of University of Turin. Angelo Riccaboni is Full Professor of Management Control at the Department of Business and Law of University of Siena and Chair of the PRIMA Consortium on Food and Water. Massimo Sargiacomo is Professor of Accounting and Public Management at the Department of Management and Business Administration of University G.d’Annunzio, where is also Director of the PhD Programme in “Accounting, Management and Business Economics”. Paola Signori is Associate Professor in Marketing and Supply Chain management at the Department of Business Administration of the University of Verona, where she is also Deputy-Director of “Polo Didattico Studi sull’Impresa”.
1 Mediterranean food value chain: focus on Italy1 )ICOMO(ÅIETTI2TRICE&E/ICCOAngelo Riccaboni, Mariapia Maraghini
There is little doubt that agriculture and food represent two of the most discussed topics in the debate on the future of human development on Earth. As also highlighted by the series of international events that have taken place during the past year, issues such as food safety, security and sustainability have been increasingly challenging the capability of all social actors to cope with more and more discouraging global socio-economic and environmental trends. This is particularly true with reference to agri-food companies, especially those operating in the Mediterranean area, where the sector is a pillar of the majority of the economies and, consequently, in Italy, where the sector remains a vital component of a generally stagnant national economy. Given this premise, the purpose of this chapter is to provide an overview of the agri-food sector in the Mediterranean area. In particular, after a brief introduction in paragraph 1.1, paragraph 1.2 analyzes the main issues related to agriculture and food for the Mediterranean area in light of the current global economic, social and environmental scenarios. Then, after having presented a macroeconomic analysis of the agri-food sector in the Mediterranean area and in Italy in paragraph 1.3, paragraph 1.4 provides an accounting-based examination of the sector in both the Mediterranean basin This chapter is the result of a joint effort by the authors who share its formulation. However, the writing of the specific sections was divided as follows: Angelo Riccaboni wrote paragraph 1.1; Giacomo Fabietti (corresponding author) wrote paragraphs 1.2, 1.4; Patrice De Micco wrote paragraph 1.3. The conclusions are to be attributed to all authors. 1
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and the Italian economy, through an aggregated financial statement analysis on the companies operating in the sector. Finally, paragraph 1.5 concludes the chapter with some remarks highlighting evidence arising from the chapter and main future challenges for Mediterranean agri-food companies.
1.1
Introduction
Agriculture and food certainly represent two of the key themes in the debate over the future of life on Earth. Beyond the unquestionable importance that agriculture plays in the global economic scenario2, in fact, it is now evident that conventional agricultural archetypes and agri-food value chains are threatening the natural environment3 more than ever, producing severe consequences as regards food supply and making it quite difficult for food systems to provide adequate nutrition to a significant part of the world population4. Agriculture and food issues are particularly pressing in the Mediterranean region, one of the most culturally and environmentally significant areas in the world, with an extremely ancient human occupancy. Agriculture and animal husbandry emerged there during the Neolithic age, and many great empires and rich civilizations of antiquity were born there. For millennia, the region has played a leading role in the diffusion of knowledge and world trade. The
According to Worldbank data, the population living in rural areas represented 47.5% of total population (2012). In the same year, agricultural land constituted 37.5% of total land available, of which, however, only 10.8% was arable. Moreover, agriculture contributed to 3.1% of the global GDP, providing an amount of product exports of 1450 billion US$ (2013), equal to 7.9% of world merchandise trade, and employing people for an amount equal to 30.5% of total employment (2010). 3 As highlighted by UN data for 2012, about 75% of crop diversity has been lost since the beginning of the 20th century At the moment, such a phenomenon is directly affecting 1.5 billion people worldwide, and it is estimated that about 24 billion tonnes of fertile soil are lost each year. Moreover, according to FAOSTAT data, agriculture is still responsible for about 70.7% of freshwater withdrawals (2013) and heavily weights on consumption of fertilizers, estimated at 141.3 kg/ha (2012). 4 As highlighted by FAO et al. (2012), lack of sufficient caloric intake still involves 870 million people, while 1 billion or more people suffer from micronutrient deficiencies, and another 1.4 billion suffer from being overweight or obesity. 2
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In conclusion, evidence provided by the chapter suggests that technological innovation, despite being important, is not sufficient to overcome problems undermining the full deployment of the potential of the agri-food sector. A key role, on the contrary, will also be played by organizational and management innovation (which can contribute to manage technological innovation in day-to-day activities) and, above all, by cultural innovation, as a means to change the way businesses perceive the pursuit of higher quality, safety and sustainability of food production. This, therefore, calls for accounting and management studies to strengthen research efforts, in the awareness that, given the multidimensionality of food and sustainability issues, they will have to establish a closer collaboration with other disciplines.
3FGFSFODFT ABIS S. (2012), Pour le futur de la Méditerranée: l’agriculture. Bibliothèque de l’IReMMO, Paris. AGRIFOOD MONITOR (2015a), Tendenze, mercati e prospettive per il made in Italy – report performance economico-finanziarie. Available online at: http://www.agrifoodmonitor.it/it/economico-finanziarie. Retrieved in August ,2016. AGRIFOOD MONITOR (2015b), Tendenze, mercati e prospettive per il made in Italy – report struttura di filiera. Available online at: http://www.agrifoodmonitor.it/it/struttura-di-filiera. Retrieved in August, 2016. AGRIFOOD MONITOR (2015c), Tendenze, mercati e prospettive per il made in Italy – report commercio internazionale. Available online at: http://www.agrifoodmonitor.it/it/commercio-internazionale. Retrieved in August,2016. ARCESE G., FLAMMINI, S., LUCCHETTI, M.C. MARTUCCI, O. (2015), Evidence and Experience of Open Sustainability Innovation Practices in the Food Sector, Sustainability, 7. BUSCO C., RICCABONI A. (2003), Knowledge management e integrazione di culture: il ruolo del controllo di gestione, proceedings of the XXVI AIDEA national congress. BUSCO C, SCAPENS R.W. (2011), Management accounting systems and organisational culture: interpreting their linkages and process of change, Qualitative research in accounting & management, 8(4). BUSCO C. (2002), Sistemi di controllo e cultura aziendale. CEDAM, Padua.
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CHERIET F., RASTOIN J.-L. (2014), Mediterranean agricultural and agri-food trade: caught between American giants and emerging Asian countries, in MediTERRA 2014, Presses de Sciences Po, Paris. CIHEAM (2015), Statistical Review on Mediterranean countries Available online at: https://www.ciheam.org/uploads/attachments/70/CIHEAM_Statistical_Revi ew_2015.pdf. Retrieved in August, 2016. CIHEAM (2008), MediTERRA 2008. The future of agriculture and food in Mediterranean countries. CIHEAM–Sciences Po Les Presses, Paris. CIHEAM (2012), Final declaration. 9th meeting of the Ministers of Food, Agriculture and Fisheries of the Member Countries of CIHEAM, Valletta, 27 September 2012. DANIELE V., GHEZZI R., OSTUNI N. (2014), I mediterranei d’Europa. Divari di sviluppo e convergenza economica, in FERRAGINA E., MALANIMA P. (eds.) Rapporto sulle economie del Mediterraneo. Il Mulino. DRIOUECH N., HMID A., EL BILALI H., LIPINSKA I., BERJAN S. (2014), Agri-food logistics in the Mediterranean region: challenges and opportunities. Available online at: https://www.researchgate.net/publication/271269644_Agrifood_logistics_in_the_Mediterranean_region_challenges_and_opportunities . Retrieved in August, 2016. EBRD, FAO (2015), The Agrifood sector in the southern and eastern Mediterranean – a collection of notes on key trends. FAO, Rome. EL DAHR, H. (2012), Producers' organisations and food supply, in MediTERRA 2012, Presses de Sciences Po, Paris. FAO, CIHEAM (2015), Mediterranean food consumption patterns - diet, environment, society, economy and health. Available online at: http://www.fao.org/3/a-i4358e.pdf. Retrieved in August, 2016. FAO, WFP, IFAD (2012), The State of Food Insecurity in the World 2012. Economic growth is necessary but not sufficient to accelerate reduction of hunger and malnutrition. Rome, FAO. GIOVANNONI, E., MARAGHINI M.P. (2011), L’innovazione aziendale: un quadro concettuale, in GIOVANNONI E., MARAGHINI M.P. (eds.) Dalla creatività all’innovazione: approcci, strumenti ed esperienze per il governo dei processi innovativi in azienda. Knowità, Arezzo. GISMONDI R., D’ORAZIO M., CIRIANNI A. (2015), Scenari e tendenze dell’agricoltura italiana tra tradizione e innovazione – i risultati economici del comparto agro-alimentare: aziende agricole e imprese. Available online at: http://www.istat.it/it/files/2015/12/R.Gismondi_-M.-DOrazio_A.Cirianni_Workshop17dic.pdf. Retrieved in August, 2016.
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ISMEA (2015a), La competitività dell’agroalimentare italiano – Check up 2015. Available online at: http://www.ismea.it/flex/cm/pages/ServeBLOB.php/L/IT/IDPagina/9737. Retrieved in August, 2016. ISMEA (2015b), Agrosserva – IV trimestre 2015. Available online at: http://www.unioncamere.gov.it/P42A3030C189S123/Pubblicato-il-RapportoAgrOsserva-sul-IV-trimestre-2015.htm. Retrieved in August, 2016. JESCHONOWSKI D.P., SCHMITZ J., WALLENBURG C.M., WEBER J. (2009), Management control systems in logistics and supply chain management: a literature review, Logistics Research, 1. MENEDER (2013), Tendances de l’efficacité energétique dans les pays du bassin Méditerranéen, Juillet. PRIMA (2014), Joint Programme. Available online at: http://www.unisi.it/sites/default/files/allegatiparagrafo/PRIMA_0.pdf. Retrieved in August, 2016. MILLSTONE E., LANG T. (2008), The atlas of food. Second edition. London, Earthscan. PADILLA M. (2008), Dietary patterns and trends in consumption, in MediTERRA 2008. CIHEAM–Presses de Sciences Po, Paris. RICCABONI A. (2015), Towards a more sustainable Mediterranean area: PRIMA initiative and the role of Agri-food businesses. CIHEAM Watch Letter, 34. SKURAS D., PSALTOPOULOUS D. (2012), A broad overview of the main problems derived from climate change that will affect agricultural production in the Mediterranean area. FAO/ OECD Workshop: Building Resilience for Adaptation to Climate Change in the Agriculture Sector, 23– 24 April 2012. Rome, FAO. UNEP, MAP, Plan Bleu (2008), The Blue Plan’s sustainable development outlook for the Mediterranean. Sophia Antipolis, France. VAREIRO D., BACH-FAIG A., RAIDO’ QUINTANA B., BERTOMEU I., BUCKLAND G., VAZ DE ALMEIDA M.D., SERRA-MAJEM L. (2009), Availability of Mediterranean and non-Mediterranean foods during the last four decades: comparison of several geographical areas. Public Health Nutrition, 12(9A).
2 Earnings Manipulation in the Agribusiness Industry: Evidence from US and EU Listed Companies1 Francesco De Luca, Francesco Paolone
Accounting manipulation has been the subject of accounting discussions across the world, especially during times of financial crises. This article investigates the different trends of the probability of accounting manipulation within the agribusiness industry with respect to US and EU-based companies. We will be referring to the Beneish Model (1999, 2013), while using the Orbis Bureau Van Dijk database. We will be testing the existence of earnings management (EM) and comparing the final scores from US and EU companies along a trend line in order to assess whether there is a relation between accounting standard adoption (US GAAP or IFRS) and EM propensity. Main findings have shown that EU-based companies adopting IFRS appear to be more inclined to earnings management; while, on the contrary, the probability of earnings management tends to be lower for US-based companies adopting US GAAP on average. This could be explained by considering the different provisions under IFRS and US GAAP for agribusiness companies. In fact, accounting for EU agricultural producers is based on IAS 41-Agriculture, whereas companies adopting US GAAP should follow the Financial Accounting Standards Board Codification 905 guidance. Such preliminary analysis has allowed us to argue that, ceteris paribus, IFRS adoption leaves more room for earnings manipulation than US GAAP.
The chapter is the result of a joint effort by the authors who share its formulation. However, the writing of the specific sections has to be divided as follows: Francesco De Luca (corresponding author) paragraphs 2.1, 2.2, 2.6; Francesco Paolone paragraphs 2.3, 2.4, 2.5. 1
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Learning objectives After reading this chapter you should be able to: • Understand which are the main differences in agribusiness accounting within the IFRS and US GAAP frameworks; • Understand how it is possible to assess the probability of earnings manipulation for a company; • Find which accounting environment (IFRS or US GAAP) is more inclined to earnings management within the agribusiness industry.
2.1
Introduction
The main reason why company executives are often inclined to adopt accounting manipulation practices, including earnings management (EM), lies on the concern about achieving a performance that does not meet the stakeholders’ expectations. Prior studies (Burgstahler and Dichev, 1997, Barth et al., 1999; Healy and Wahlen, 1999) have also claimed that executives acknowledge the importance of meeting earnings targets (i.e. loss avoidance or analysts’ forecasts) as well as recognizing that their attainment represents a relevant motivation for real activities manipulation (Trombetta and Imperatore, 2014). According to the definition provided by Stolowy and Breton (2004, 6-7), Accounting Manipulation is defined as: “the management discretionary decisions in order to make accounting choices that may affect the transfer of wealth between companies, between the company and capital providers, and, finally, between the company and its managers”. This article aims to assess the propensity to accounting manipulation within the agribusiness industry. To this end, we have run a preliminary analysis on two groups of listed companies: the first one is made up of EU-based companies, while US- based companies belong to the second group. Given that EU-based companies adopt IFRS and US based companies adopt US GAAP, we have intended to investigate if one accounting environment is more favorable to EM than the other one. This analysis started with the collection of accounting data performed by the two groups. And, after that, applied the earnings management assessment model as proposed by Beneish (1999). Beneish (1997) had selected some accounting ratios able to capture financial statement distortions and provide timely assessments of the likelihood of distortions, especially when considered in conjunction with management incentives. Therefore, first of all, we used the
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Summary This study investigates the different trends of account manipulation probability within the agribusiness industry with respect to US and EU-based companies. We adopted the Beneish Model (1999, 2013) and we tested the existence of earnings management (EM) by comparing the final scores from US and EU companies along a trend line in order to assess whether there was a relation between accounting standard adoption (US GAAP or IFRS) and EM propensity. By considering the threshold of -1.78 (Beneish et. al, 2013), we observed that in the European environment, only in 2008 and in 2014, the average of M-Score of the considered sample was lower than -1,78: it follows that, in other years, the average scores were higher than -1,78 and that there was more propensity to manipulate accounts. The percentage of potential manipulator companies was lower than 50% only in 2007, 2009, 2010, and 2011 and in this sense we can affirm that, under IAS 41, adoption risk of EM practices is quite diffused. On the contrary, the analysis of the US environment, showed a different evidence. In fact, only in 2008 the average M-Score (5) appeared higher than the cut-off value, while for all other years the average scores were under the threshold. It follows that in the US GAAP environment, ceteris paribus, there is a lower risk of EM practices within the agribusiness industry. In conclusion, findings have confirmed that ASC 905 guidance is more conservative than IAS 41 and appears to leave less room for EM practices. We argue that, instead, fair value accounting for agriculture assets and produce leaves more room for preparers of financial reporting carrying on EM practices.
References ACCOUNTING STANDARDS BOARD (ACSB) (2015), Discussion Paper: Agriculture, Toronto, Canada. AMERICAN INSTITUTE OF CERTIFIED PROFESSIONAL ACCOUNTANTS (AICPA) (1985), Statement of Position 85-3 Accounting by Agricultural Producers and Agricultural Cooperatives, AICPA, New York. ANDERSON S.E. - LYNN STALLWORTH H. (2016), Sweetness and spice: Tax issues for foodies, Issues in Accounting Education, 31 (1), 111-117. ANTONELLI B. (2007), Lobbying towards the IASB: an analysis of the comment letters submitted in response to ED65 - Agriculture, in Frattini G. (ed.), Improving Business Reporting: New Rules, New Opportunities, New Trends, Giuffrè, Milano.
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BARTH M.E. – LANDSMAN W.R. – LANG M.H. (2008), International accounting standards and accounting quality. Journal of Accounting Research, 46 (3), 467-498. BARTOV E. (1993), The Timing of Asset Sales and Earnings Manipulation, The Accounting Review, 68, 4. BARTOV E., GIVOLY D., HAYN C. (2002), The rewards to meeting or beating earnings expectations. Journal of Accounting and Economics, 33, 173-204. BENEISH M.D – NICHOLS D.C. (2009), Identifying Overvalued Equity, Johnson School Research Paper Series, No. 09-09. BENEISH M.D. (1997), Detecting GAAP Violation: Implications For Assessing Earnings Management Among Firm With Extreme Financial Performance, Journal of Accounting And Public Policy, 16, 271-309. BENEISH M.D. (1999), The Detection Of Earnings Manipulation, Financial Analysts Journal, 55, 24-36. BENEISH M.D. (2001), Earnings Management: A Perspective, Managerial Finance, 27, 3-17. BENEISH M.D., LEE M.C., NICHOLS D.C. (2013), Earning Manipulation and Expected Returns, Financial Analysts Journal, April, 57-82. BURGSTAHLER D., DICHEV I.D. (1997), Earnings management to avoid earnings decreases and losses ,Journal of Accounting and Economics. 24, 1, 99-126. CENTORRINO G. (2012), La valutazione delle attività biologiche e dei prodotti agricoli nello IAS 41, Franco Angeli, Milano. DE ANGELO L. (1986), Accounting numbers as a market evaluation substitutes: a study of management buyouts of public stockholders, The Accounting Review, 61, 400-420. DECHOW P.M. – DICHEV I.D. (2002), The quality of accruals and earnings: the role of accrual estimation errors, The Accounting Review, 77, 1. DECHOW P.M. – SLOAN R.G. – SWEENEY A.P. (1995), Detecting Earnings Management, The Accounting Review, 70, 193-225. DYE R.A. (1988), Earnings management in an overlapping generations model, Journal of Accounting Research, 26, 195-235. FINANCIAL ACCOUNTING STANDARDS BOARD (FASB) (2009), Accounting Standard Codification Section 905 Agriculture. FASB. Norwalk, CT. FISCHER M. – MARSH T. (2013), Biological Assets: Financial Recognition and Reporting Using US and International Accounting Guidance, Journal of Accounting and Finance, 13(2). GOPINATH M. – PICK D – WORTH T. (2002), Price Variability and Industrial Concentration in U.S. Food Industries, Journal of Agricultural Economics, 53(3), 589-606.
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GORTON G.B. (2008), The Panic of 2007, NBER Working Paper, 14358, September. GUJARATHI M.R. (2015), Diamond Foods, Inc.: Anatomy and motivations of earnings manipulation, Issues in Accounting Education, 30(1), 47-63. HAND J.R. (1989), Did firms undertake debt-equity swaps for an accounting paper profit or true financial gain?, The Accounting Review, 64, 587-623. HEALY P.M. – WAHLEN J.M. (1999), Commentary: a review of the earnings management literature and its implications for standard setting, Accounting Horizons, 13 (4), 365-383. HEALY P.M. (1985), Evidence On The Effect Of Bonus Schemes On Accounting Procedure And Accrual Decisions, Journal Of Accounting And Economics, 7, 85-107. HUIJGEN C. – LUBBERINK M. (2005), Earnings conservatism, litigation and contracting: the case of cross-listed firms, Journal of Business Finance and Accounting, 32, 1275–1309. INTERNATIONAL ACCOUNTING STANDARDS BOARD (IASB) (2001), IAS 41 – Agriculture, London, UK. JONES J. (1991), Earnings management during import relief investigations, Journal of Accounting Research, 29 (2), 193-228. KASZNIK R. – MCNICHOLS M. (2002), Does meeting earnings expectations matter? Evidence from analyst forecast revisions and share prices, Journal of Accounting Research, 40, 727–759. LORAAS T.M. – KEY K.G. (2010), Integrating AIS and accounting for income taxes: From calculation to disclosure, Issues in Accounting Education, 25 (3), 583-597. MARSH T. - FISCHER M. (2013), Accounting For Agricultural Products: US Versus IFRS GAAP, Journal of Business & Economics Research, 11(2). MATSUMOTO D. (2002), Management’s incentives to avoid negative earnings surprises, The Accounting Review, 77, 483-514. MISHKIN F.S. (1991), Asymmetric information and financial crises: a historical perspective, Financial Markets and Financial Crises, University of Chicago Press, 69-108. MULFORD C.W. – COMISKEY E.E. (2002), The Financial Numbers Game: Detecting Creative Accounting Practices, New York: John Wiley & Sons. PEEK E. – MEUWISSEN R. – MOERS F. – VANSTRAELEN A. (2013), Comparing Abnormal Accruals Estimates across Samples: An International Test, The European Accounting Review, 22 (3), 533-572. RONEN J. – SADAN S. (1981), Smoothing Income Numbers: Objectives, Means, and Implications, Reading, MA: Addison-Wesley.
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ROYCHOWDHURY S. (2006), Earnings Management through real activities manipulation, Journal of Accounting and Economics, 42, 3. SCHIPPER K., (1989). Commentary: earnings management, Accounting Horizons, 3 (4), 91-102. STOLOWY H. – BRETON G. (2004), Accounts Manipulation: a literature review and proposed conceptual framework, Review of Accounting and Finance, 3, 1. TROMBETTA M. – IMPERATORE C. (2014), The dynamic of financial crises and its non-monotonic effects on earnings quality, Journal of Accounting and Public Policy, 33, 205-232. TRUEMAN, B. – TITMAN S. (1988), An explanation for accounting income smoothing, Journal of Accounting Research, 26, 127-139. WILLEKENS M. – BAUWHEDE H. (2003), Auditor reporting conservatism as a defense mechanism against increased Post-Enron litigation risk. Working paper.
3 Supply Chain Management, Value Chain and Accounting issues in the Wine Industry1 Paola Signori, Massimo Sargiacomo
This chapter offers an overview of the main features of the global wine industry, at the same time portraying how firms are facing pivotal challenges in an increasing global scenario. The chapter illustrates the main primary and secondary activities which compose the value chain in the wine industry. In a related manner, it is explained how to build up an effective cost accounting architecture in a smallmedium size wine company, at the same time disclosing the main accounting issues related to stock management. The chapter subsequently highlights how to achieve a supply chain integration in the wine industry, and finally depicts the contours of innovation and experimentation as pivotal elements sustaining the survival and relaunch of the wine business in the world. Learning Objectives: This chapter covers the following topics: • Value chain in the wine industry • Supply Chain Management; • Cost Accounting architecture in the wine industry; • Main Accounting issue in stock management; • Innovation and Experimentation styles; • Supply chain orientation and design.
1 The chapter is the result of a joint effort and formulation. Nevertheless, Paola Signori (corresponding author) wrote sections 3.1, 3.5, 3.6 and 3.7, while Massimo Sargiacomo wrote sections 3.2, 3.3 and 3.4.
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of a value-based approach provides a better evaluation of value drivers that affect overall revenues, cost-of-goods sold, expenses and assets (Rappaport, 1987). Activity-based costing provides a financial and performance view of the processes and activities comprising the supply chain (Pohlen, 2005). In the wine business, firms typically interact with many others, dealing in multiple supply chains with numerous suppliers and customers, so that internal measures are not sufficient to reflect the real complexity of the broader value chain. Recognizing the potential benefits of supply chain integration, in the future we will see more collaboration in wine supply chains, to work on improvements in both efficiency and effectiveness in wine distribution (Flint et al., 2016). Innovations in supply chain design and management will enable markets to be reached at costs never seen before. Wineries will work with partners, taking advantage of recycling and reverse logistics. Moreover, partnership will become better in information and data sharing to advance value chain accounting techniques. Unfortunately, around these topics very few best practices can actually be found in this industry, mainly famous for other managerial strengths. Despite this and other contributions, which have covered important accounting and supply chain issues, practitioners still need more wine industry-related research following these lines of investigation: supply chain metrics linking performance with shareholder value; cost accounting and activity -based management; balance scorecard; stock and management issues; and dynamics and trends of supply chain innovation. Although we hope that this chapter can represent a new beginning toward those directions, the above mentioned topics seem to deserve more attention from the academic community in the near future. Summary The purpose of this chapter was to offer an overview of the global wine industry, to describe its challenges and how firms and their leaders are addressing the opportunities created by them, at the same time covering different issues about supply chain integration, related accounting perspectives and value chain analysis. In particular, we offered a focus on wine value chains, to understand primary and secondary sources of value, and to discuss related accounting issues and techniques. After presenting the wine value chain, this chapter also emphasized the importance of upstream and downstream integration, horizontal collaboration and clustering strategies as potential drivers of value. Innovation forms and styles, supply chain design
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potentials, and some insights around sustainability are finally introduced to complete the discussion.
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DJORCEV M.- FLINT D.J. - SIGNORI P. (2015), Marketing approaches for small scale organic wine producers in Slovenia: proposing the DODS cluster model, in The proceedings of the 14th International Marketing Trends Conference, ESCP Europe, 1-16. FLINT D.J. - GOLICIC S.L. - SIGNORI P. (2011), Sustainability through Resilience. The very essence of the Wine Industry, The Faces of Wine Sustainability, Proceedings of the 6th AWBR International Conference, Bordeaux: Bordeaux Management School BEM. FLINT D.J. - SIGNORI P. - GOLICIC S.L. (2016), Contemporary Wine Marketing and Supply Chain Management, New York: Palgrave Macmillan. FLINT D.J. - SIGNORI P. - GOLICIC S.L. (2016A), A Global Overview of Wine, in Contemporary Wine Marketing and Supply Chain Management (pp. 1-14). Palgrave Macmillan US. FLINT D.J. - SIGNORI P. (2016), Developing a scale for business network clustering, Proceedings of the annual International Marketing Trends 2015. Paris: ESCP Europe. FLINT D.J. (2006), Innovation, symbolic interaction and customer valuing: thoughts stemming from a service-dominant logic of marketing, Marketing Theory, 6(3), 349-362. GOLICIC S.L. - FLINT D.J. - SIGNORI P. (2016A), Building Business Sustainability through Resilience in the Wine Industry, International Journal of Wine Business Research, in press. GOLICIC S.L. - FLINT D.J. - SIGNORI P. (2016B), The triple bottom line in the global wine industry, in Bruwer J., Lockshin L., Corsi A., Cohen J. and Hirche M. (Eds.), 9th Academy of Wine Business Research Conference Proceedings (438-447), Adelaide: Ehrenber-Bass Institute for Marketing Science, University of South Australia. GONZALES-GOMEX J.I. - MORINI S.(2006), An Activity-Based Costing of Wine, Journal of Wine Research, 17(3), 195-203. HULT T.M. - KETCHEN D.J. - ADAMS G.L. (2008), Supply chain orientation and balanced scorecard performance. Journal of Managerial Issues 20(4), 526544. HUSSAIN M. - CHOLETTE S. - CASTALDI R. (2007), Determinants of wine consumption of US consumers: an econometric analysis, International Journal of Wine Business Research, 19 (1), 49-62. JUCHAU R.(1996), Australian wine companies: asset reporting practices, Australian Accountant, 66(2), 32-39 LEE J.Y.-JAVOBS B.G. (1993), Kunde Estate Winery. How process and activitybased cost analysis meets the needs of a small manufacturer, CMA Magazine, 67(3), 15-19.
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4 Business Model and Value Drivers of the Chocolate District1 8LTER%NTINO5IMON#LFIERO/SSIMO%NE2OL&E$ERNRDI
This chapter is the result of research carried out in the chocolate sector and its main aim is to illustrate the most important features of an area that is frequently described as “recession-proof”. Products are characterised by the “lipstick” effect because consumers are prepared to give up most luxuries in an economic crisis, but not chocolate. In fact, chocolate sales have seen continual growth over the last few years. This research aims to comprehensively outline the sector through analysis and study of the “chocolate industry”. It will illustrate the industry’s environmental prospectives and competitive trends both at international and national level, while rounding up the data with an in-depth look at the historical and traditional district in Piedmont. With this in mind, we will use the framework interpretation represented by the business model Canvas to highlight the cocoa-chocolate value chain with its standard processes and relative incisive factors for success. These factors key resources, key partners, key activities, etc. – allow the companies of this sector to create economic and social value for all their stakeholders. We will conclude by illustrating some case studies of chocolate businesses that represent different parts of the chocolate value chain and therefore have distinct and specific degrees of vertical integration and horizontal concentration. The chapter is the result of a joint effort by the authors who share its formulation. The authors are Valter Cantino, Simona Alfiero, Massimo Cane, Paola De Bernardi. 1
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We hope that this chapter will contribute to the reader’s knowledge of this apparently mature sector which has thousands of years of history and a value chain which has undergone fundamental changes in recent years and which has a strategic role in the global and local economic market.
4.1
The origin of chocolate
Chocolate means many things to different people: it can be a special treat, a guilty pleasure, a delicacy to be slowly tasted or a healthy and high-energy food. Chocolate is a type of food made from roasted or ground cocoa beans which can be consumed in the form of blocks, paste or as an ingredient or flavouring agent in other foods. Consumer chocolate is the final product of a processing and manufacturing sequence that begins with cocoa beans. Cocoa beans are the seeds of a tree called Theobroma cacao, which literally translates as “food of the gods” (Katz, 2003). The cocoa tree flowers turn into pods that contain 30 to 40 bitter-tasting beans that, as a result of the fermentation process, develop the typical chocolate taste. Cocoa first became popular among Meso-american people: Olmec, Aztec and Maya, who produced and consumed a spicy drink called xocoatl. This concoction was introduced in Europe in the early sixteenth century. The Spanish brought back chocolate at the end of the Conquest of Mexico (1519) and, even though chocolate drinking spread to the rest of Europe, it remained an aristocratic treat, becoming a common drink for the nobility during the first half of the seventeenth century. The period of rapid innovation began in 1828 when a Dutch chemist transformed the chocolate industry, inventing the cocoa press, which allowed the separation of the cocoa butter from the cocoa beans. The remaining dry chocolate mass could then be pulverised and used as chocolate powder. A second invention, the Dutching process, paved the way for a boom of chocolate consumption. It allowed the processing of the cocoa cake with alkaline salts with the result that the product could mix well with water. About 20 years later, in the United Kingdom, a way was found to make good use of the cocoa butter: mixing the cocoa powder with cocoa butter, instead of water, enabled the production of solid chocolate (Coe and Coe, 1996). It was not until 1847 that a British company made the first chocolate bar, combining cocoa powder, sugar and melted cocoa butter (instead of water). Rodolphe Lindt invented the conching procedure in 1879, to make solid chocolate smoother, better tasting and less gritty. Processed chocolate caught on quickly on a larger scale. Meanwhile, in the USA, Pennsylvania, Milton Hershey had established a “chocolate town” centered around the
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Cost of employees
10,974,619
Depreciation and amortisation
3,559,024
7.15%
264,466
0.53%
Change in stocks
-877,998
-1.76%
Other operating expenses
1,908,510
3.83%
Interest and other financial charges
2,169,160
4.36%
91,451
0.18%
2,789,523
5.60%
49,793,529
100%
Provisions for risks
No operating expenses Income tax Total
22.04%
Source: our elaboration on Venchi 2015 Financial Report.
In 2015, by selling the industrial production of “chocolate” and “ice-cream” that was mainly spread by agent networks and retail, the turnover showed an increase of around 15.6%, reaching circa 53 million euros. A breakdown by category shows that the retail sector reached 40%, leaving the remaining 60% of sales of chocolate and semi-finished products to ice-cream parlours. An analysis of the revenue per geographic areas shows that 15% was invoiced abroad (with a significant growth compared to the previous year), while the remaining 85% was generated in Italy.
Summary Its characteristics of being a popular product nationwide and the peculiarities of its companies, make the chocolate sector a worthy subject for research and analysis aimed at highlighting evolving trends and understanding the distinctive factors for success, through business case studies. In the first part of this study, evolving trends concerning supply and demand have been analysed. This brought to light how the dynamics of the chocolate market and the relative companies have been characterised by a continual evolution over the last ten years. Up until 2000, chocolate consumption and manufacturing were mostly concentrated in Europe and North America. In the last ten years, however, a new trend in consumer and production models has been recorded. As far as demand is concerned, new consumer markets have developed in South America, Asia and Arab countries, which represent the new frontiers of chocolate-manufacturers, able to counterbalance the slowing down of traditional markets like Europe and North America. Selling abroad and consequently being present on rapidly developing foreign markets therefore represents one of the first factors of success for companies in the sector. Another factor for success is represented by the size of the
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company and its position in the complex chocolate value chain. Depending on size, companies position themselves differently along the value chain. Large companies who address the public en masse are not normally present in the raw materials sector, but they are present in semi-finished products. Small to medium sized enterprises concentrate on the selection and safeguarding of top rate raw materials. In fact, this sometimes happens following their purchase of a cocoa plantation, so they can offer a first class product with a premium price policy. Traceability, sustainability and use of new communication tools and product sales online also represent factors able to influence the company’s chances of long-lasting success.
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5 The Coffee Sector: how the Supply Chain Management creates added value for microcompanies Massimo Pollifroni, Elisa Giacosa, Damiano Cortese, Simona Fiandrino
5.1 Introduction The food industry represents one of the most significant engines for the growth in the Italian and European economic context, and has important influence in terms of employment and company revenue (Bigliardi and Galati, 2013; Food Drink Europe, 2014; Pritchard, 2016; Williams and Nestle, 2016). Like many other countries, Italy has a strong food tradition (Bresciani et al. 2016; Giacosa et al. 2014a). This is due to a complementary combination of high-quality products that are widely appreciated in both domestic and international markets, favored by various factors such as territorial prosperity, mild climate and producers’ astute entrepreneurship (Vrontis et al., 2016). Important literature on the food industry has closely investigated several segments (Bell and Valentine, 1997; Giacosa et al., 2014b; Sargiacomo et al., 2016). The coffee sector is one of them, due to the value of this business in the world economy (Chamber of Commerce, 2016). In particular, the Italian coffee sector is characterized by a strong presence of micro, small and medium-sized companies, which help impact regional competitiveness (Bresciani and Ferraris 2014) thanks to a long-standing tradition and developed attitudes and capabilities (Contò and Lopez 2008). Large-sized companies are also present: they have a worldwide brand and a well- established reputation for tradition and innovation (Bresciani et al., 2013).
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not distinguish between companies based on age or status of family businesses, which could impact both on the company and their stakeholders’ needs. Each company’s individual characteristics may influence which SCM mechanisms they apply. In addition, we only focused on the coffee sector, due to its being representative. Future research could improve the proposed model by firstly distinguishing between different types of companies and, secondly, by comparing the coffee sector to others regarding emerging different features and their impact on applying the SCM; • The model’s validity: our model has not been tested empirically as the purpose of this research was the creation of a conceptual model. However, its empirical testing will be the purpose of future research. In fact, it will be important to carry out an empirical analysis and take multiple case studies or examples from the analyzed sector.
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FUCHS D., KALFAGIANNI A., ARENTSEN M. (2009), Retail power, private standards, and sustainability in the global food system, Corporate power in global agrifood governance, 29-59. GEREFFI, G. (1994), The organization of buyer-driven global commodity chains: how U.S. retailers shape overseas production networks, Commodity chains and global capitalism, Praeger Publishers. GEREFFI G., HUMPHREY J., STURGEON, T. (2005), The governance of global value chains, Review of International Political Economy, 12(01), 78-104. GIACOSA E. (2011), L’economia delle aziende di abbigliamento, Giappichelli, Torino. GIACOSA E. (2012), Mergers and Acquisitions (M&As) in the Luxury Business, McGraw-Hill, Milano. GUNASEKARAN A. - NGAI E.W.T. (2012), The future of operations management: An outlook and analysis, International Journal of Production Economics, 135(2), 687-701. HAGELAAR G.J. - VAN DER VORST J.G. (2001). Environmental supply chain management: using life cycle assessment to structure supply chains. The International Food and Agribusiness Management Review, 4(4), 399-412. HAGELAAR G. J., VAN DER VORST J. G., MARCELIS W. J. (2004), Organising life-cycles in supply chains: linking environmental performance to managerial designs. Greener Management International, 45(1), 27-42. HELO P., SUORSA M., HAO Y., ANUSSORNNITISARN P. (2014), Toward a cloud-based manufacturing execution system for distributed manufacturing, Computer in Industry, 65(4), 646-656. HERNÁNDEZ J. E., LYONS A. C., STAMATOPOULOS K. (2016), A DSS-Based Framework for Enhancing Collaborative Web-Based Operations Management in Manufacturing SME Supply Chains, Group decision and Negotiation, 1-23. HITE J. M. - HESTERLY W. S. (2001), The evolution of firm networks: from emergence to early growth of the firm, Strategic Management Journal, 22(3), 275-286. HORVAT A., ANTIC S., JEREMIC V. (2015), A new perspective on Quality Characteristics Determining Supply Chain Management of Coffee Production. Engineering Economics, 26(3), 239-244. KIM N., IM S., SLATER S.F. (2013), Impact of knowledge type and strategic orientation on new product creativity and advantage in high technology firms, Journal of Product Innovation Management, 30(1), 136-153. KOLK, A. (2005), Corporate Social Responsibility in the Coffee Sector: The Dynamics of MNC Responses and Code Development, European Management Journal, 23(2), 228-236. LAMBERT D.M. - COOPER M.C. (2000), Issues in Supply Chain Management,
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Industrial Marketing Management, 29(1), 65-83. LAU C.M. - WOODMAN R.W. (1995), Understanding organizational change: a schematic perspective, Academy of Management Journal, 38(2), 537-554. LI S., RAGU-NATHAN B., RAGU-NATHAN T.S., SUBBA RAO S. (2006), The impact of supply chain management practices on competitive advantage and organizational performance, Omega, 34(2), 107-124. MACDONALD K. (2007), Globalising justice within coffee supply chains? Fair Trade, Starbucks and the transformation of supply chain governance, Third World Quarterly, 28(4), 793-812. MARKETLINE INDUSTRY (2015), Hot Drinks in Italy, Marketline industry, London. MIGCHELS N. G. (2001), The ties that bind: a dynamic model of chain cooperation development, Doctoral dissertation, Technische Universiteit Eindhoven. NIEDERHAUSER N., OBERTHÜR, KATTNIG S., COCK J. (2008), Information and its management for differentiation of agricultural products: The example of specialty coffee, Computers and Electronics in Agriculture, 61(2), 241-253. PAOLONE G. - D’AMICO L. (1991), Introduzione all’Economia aziendale, Libreria dell'Università Editrice. POLLIFRONI M. (2010), Green Public Accounting. Profili di rendicontazione ambientale per un’azienda pubblica responsabile e sostenibile, Giappichelli, Torino. PRITCHARD B., ORTIZ R., SHEKAR M. (2016), Routledge Handbook of Food and Nutrition Security, Routledge, New York, Abingdon. RAI A., PATNAYAKUNI R., SETH N. (2006), Firm Performance Impacts of Digitally Enabled Supply Chain Integration Capabilities. MIS Quarterly, 30(2), 225246. RAUSCHER I. - ANDRIANI P. (2009), Illycaffè and the Brazilian espresso knowledge network, Dynamic learning network: models and cases in action, Springer, New York. ROTARIS L. - DANIELIS R. (2011), Willingness to pay for fair trade coffee: A conjoint analysis experiment with Italian consumers, Journal of Agricultural & Food Industrial Organization, 9(1), 1-22. SARGIACOMO M., D’AMICO L., DI PIETRA R. (EDS.) (2016), Accounting and Food: Some Italian Experiences, Routledge, New York. SECCHI R. (2012), Supply chain management e made in Italy: lezioni da nove casi di eccellenza, Egea, Milano. SEPTIANI W., MARIMIN M., HERDYIENI Y., HADITJAROKO L. (2016), Method and Approach Mapping for Agri-food Supply Chain Risk Management: A literature review, International Journal of Supply Chain Management, 5(2), 51-64.
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STROZZI F. - COLICCHIA C. (2015). Information processing and management using citation network and keyword analysis to perform a systematic literature review on Green Supply Chain Management. Journal of scientometric research, 4(3), 161-171. TRUJILLO J. - MARTINEZ ROJAS M. (2015), Methodology for decisions making in transportation logistics function For Supply Chain (SC) Colombian green coffee study, Proceedings of the International Conference on Industrial Engineering and Operations Management Dubai (IEOM), United Arab Emirates (UAE), March 3–5. THIERRY M., SALOMON M., VAN NUNEN J., VAN WASSENHOVE L. (1995). Strategic issues in product recovery management. California management review, 37(2), 114-135. UTTING K. (2009), Assessing the impact of fair trade coffee: Towards an integrative framework, Journal of Business Ethics, 86(1), 127-149. VALKILA J., HAAPARANTA P., NIEMI N. (2010), Empowering coffee traders? The coffee value chain from Nicaraguan fair trade farmers to Finnish consumer, Journal of Business Ethics, 97(2), 257-270. VIERE T., SCHALTEGGER S., VON ENDEN J. (2007), Using supply chain information for EMA–the case of a Vietnamese coffee exporter, Issues in Social and Environmental Accounting, 1(2), 296-310. VRONTIS D., BRESCIANI S., GIACOSA E. (2016), Tradition and Innovation in Italian Wine Family Businesses, British Food Journal, 18(8), 1883-1897. WILLIAMS S. N. - NESTLE’ M. (2016), Big Food. Critical perspectives on the global growth of the food and beverage industry, Routledge, New York. WOGNUM P.N., BREMMERS H., TRIENEKENS J.H., VAN DER VORST J.G., BLOEMHOF J.M. (2011), Systems for sustainability and transparency of food supply chains– Current status and challenges, Advanced Engineering Informatics, 25(1), 6576. YU H. - FANG W. (2009), Relative impacts from product quality, service quality, and experience quality on customer perceived value and intention to shop for coffee shop market. Total Quality Management, 20(11), 1279-1285.
6 Creating Value within the Dairy Supply Chain +LENI%ONFENTE2OL5IGNORI
This chapter focuses on the dairy sector and it aims to point out some important topics that are linked to the marketing and the supply chain within this industry. In the introduction, this contribution strives to provide an overview of facts and trends in the global dairy industry, with particular attention to Italy. Next, important concepts concerning customer value and buying power are discussed in order to better understand the dairy supply chain structure and how trends, preferences, managerial and relational abilities are driving successful approaches. Another section is dedicated to sustainability issues, whichalso are drawing increasingly attention to this industry, as one of the core value affecting managerial decisions and business models. We will conclude by discussing some implications of international marketing strategies and providing some insights about how digital marketing can be applied to these product categories. Learning Objectives: This chapter covers the following topics, all related to the dairy industry: • Facts and trends in the dairy industry • Value and power in the dairy supply chain • Dairy products and consumer preferences • Ecosystem services and sustainability • International marketing • Digital marketing and co-creation 5IF DIBQUFS JT UIF SFTVMU PG B KPJOU FGGPSU BOE GPSNVMBUJPO /FWFSUIFMFTT *MFOJB $POGFOUF DPSSFTQPOEJOH BVUIPS XSPUF TFDUJPOT BOE XIJMTU 1BPMB 4JHOPSJXSPUFTFDUJPOT BOE
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ignored demand for Mila products that comes from far outside south Tyrol, and that extends to Italy’s central regions. On a daily basis, customers would ask information on where to buy the Mila products in their city. This is what has pushed Mila to start working on a search engine that, within a few months, will be embedded into the Mila website, allowing visitors to find the nearest seller and the products available, even far away from south Tyrol. Source: Signori and Flint, 2016. To learn more see the "Social & Media page" at www.mila.it
The big challenge for companies is to understand and meet customers’ needs and wants. Marketing communication plays an important role in affecting consumers’ behaviour and preferences. Its effect has been enhanced thanks to the advent of Web 2.0 that has allowed and promoted the interaction and co-creation of contents by users. Social media communities represent the right context where consumers can share their word of mouth about personal dairy consumption and preferences. Digital marketing analysis now represents a real time updated source of information useful for innovation.
Summary This chapter opens with an overview of the trends regarding supply and demand for dairy products. There are different resources and factors that can be taken into account when considering the competitive environment of the diary chain. A high degree of integration among dairy chain partners, a high level of know- how in the industry and a high degree of supply differentiation to meet customer needs represent key factors to enable dairy companies to succeed in their markets. Effective supply chain management can help companies to link and synchronize actors and activities involved in producing and delivering milk and dairy products to the final consumer. Moreover, service-orientation, sustainability and the adoption of modern communication tools represent other factors that can help companies to gain and maintain a competitive advantage on a global scale.
ReferenceT --- (2015), Empowering women in Afghanistan: reducing gender gaps through Integrated Dairy Schemes, FAO - Food and Agriculture Organization of the United Nations, Rome. --- (2015), Latte e derivati bovini - Scheda di settore, ISMEA, Retrieved in September, 2016 from www.ismeamercati.it.
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BESKE P. - LAND A. - SEURING S. (2014), Sustainable supply chain management practices and dynamic capabilities in the food industry: a critical analysis of the literature, International Journal of Production Economics, 152(JUNE), 131143. BONIFACE B. - UMBERGER W. - STRINGER R. (2013), Factors Influencing Consumption of Dairy Products: An Exploratory Study in Kota Kinabalu, Sabah, Malaysia, Journal of Agribusiness Marketing, Vol. 6, December 2013, 14-36. BOROS R. – MCLEOD A. (2015), Empowering women in Afghanistan: reducing gender gaps through Integrated Dairy Schemes, Food and Agriculture Organization of the United Nations (FAO), Rome, Retrieved in September 2016 from www.fao.org. BRUINSMA J. (ED.) (2003), World agriculture: towards 2015/2030 - An FAO Perspective, Earthscan Publications Ltd, London, Retrieved in September, 2016 from www.fao.org. CHEVALIER J. - MAYZLIN D.(2006), The Effect of Word of Mouth on Sales: Online Book Reviews, Journal of Marketing Research, vol. 43 (August), 345-54. CONFENTE I. (2015), Twenty-Five Years of Word-of-Mouth Studies: A Critical Review of Tourism Research, International Journal of Tourism Research, 17(6), 613-624. COZZI G. - FRANCESCHIN E. - SEGATO S. (2014), Stato dell’arte del settore lattierocaseario alpino e il Progetto Green Grass Dairy. I formaggi protagonisti della Zootecnia alpina, 11. DOUPHRATE D.I. - HAGEVOORT G.R. - NONNENMANN M.W. - LUNNER KOLSTRUP C. - REYNOLDS S.J. - JAKOB M. - KINSEL M. (2013), The dairy industry: A brief description of production practices, trends, and farm characteristics around the world, Journal of agromedicine, 18(3), 187-197. FARNWORTH C.R. (2011), Gender-Aware Value Chain Development, UN Women, Retrieved in September, 2016 at www.un.org/womenwatch/ FLINT D.J. - SIGNORI P. - GOLICIC, S.L. (2016), Conclusions and the Future of Wine Marketing and SCM, In Contemporary Wine Marketing and Supply Chain Management (231-236). Palgrave Macmillan US. FORBES-BROWN S. – MICHEELS E.T. - HOBBS J.E. (2016), Consumer Willingness to Pay for Dairy Products With the 100% Canadian Milk Label: A Discrete Choice Experiment, Journal of International Food & Agribusiness Marketing, 28(3), 203-224. GODES D., MAYZLIN D. (2004), “Using Online Conversations to Study Word-ofMouth Communication”, Marketing Science, 23(4), 545. KAPLAN A. M. (2012), If you love something, let it go mobile: Mobile marketing and mobile social media 4x4, Business horizons, 55(2), 129-139. KAPLAN A.M. - HAENLEIN M. (2010), Users of the world, unite! The challenges and opportunities of Social Media,Business horizons, 53(1), 59-68.
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KERIN R.A. - HARTLEY S.W. - RUDELIUS W. (2017), Marketing,13th ed., McGraw-Hill. KIM A.J. - KO E. (2012), Do social media marketing activities enhance customer equity? An empirical study of luxury fashion brand, Journal of Business Research, 65(10), 1480-1486. LILJANDER V. - GUMMERUS J. - SÖDERLUND M. (2015), Young consumers’ responses to suspected covert and overt blog marketing, Internet Research, 25(4), 610-632. LUSCH R. F. - VARGO S.L. - TANNIRU M. (2010), Service, value networks and learning, Journal of the academy of marketing science 38(1), 19-31. MADAU F.A. - FURESI R. - PULINA P. (2016), The existence of buyer power in the Italian fresh milk supply chain, British Food Journal, 118(1), 70-82. NEWMAN C.L. – TURRI A.M. – HOWLETT E. – STOKES A.(2014), Twenty Years of Country-of-Origin Food Labeling Research A Review of the Literature and Implications for Food Marketing Systems, Journal of Macromarketing, 34(4), 505-519. REINER, G. – TELLER C. – KOTZAB H. 2013, Analyzing the Efficient Execution of InStore Logistics Processes in Grocery Retailing – The Case of Dairy Products, Production and Operations Management, 2(4), 924–939 RICHTER A. - KOCH M. (2007), Social software — status quo und Zukunft. Technischer Bericht, Nr. 2007–01, Fakultät für Informatik, Universität der Bundeswehr München. SIGNORI P. - CONFENTE I. (2014), Consumer’s e-signals Prism analysis: impact and implications for corporate communication strategy, Sinergie Italian Journal of Management, 175-191. SIGNORI P. – FLINT D.J. (2016), Digital Marketing Innovations and their role in service ecosystems, the exchange of value and social impact, Conference Proceeding of the XXVI International RESER Conference, Naples. SIGNORI P. - FLINT D.J. - GOLICIC S.L. (2015), Toward sustainable supply chain orienta-tion (SSCO): mapping managerial perspectives, International Journal of Physical Distribution & Logistics Management, 45(6), 536-564. SINHA O.P. (2007), Agro-industries characterization and appraisal: Dairy in India, Food and Agriculture Organization of the United Nations (FAO), working document, Rome, Retrieved in September, 2016 from www.fao.org. VALDANI E. - GUERINI C. - BERTOLI G. (2000), Marketing globale, Egea. VARGO S.L. - AKAKA M.A. (2012), Value cocreation and service systems (re) formation: A service ecosystems view, Service Science 4(3), 207-217. VITALIANO P. - IFAMR I. (2016), Global Dairy Trade: Where Are We, How Did We Get Here and Where Are We Going?, EVERY GENERATION NEEDS ITS LEADERS., 27.
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WEINRICH R. - KÜHL S. - ZÜHLSDORF A. - SPILLER A. (2014), Consumer attitudes in Germany towards different dairy housing systems and their implications for the marketing of pasture raised milk, International Food and Agribusiness Management Review, 17(4), 205-222.
7 The poultry industry in Italy: cost analysis and profit drivers1 %HRISTIN%ORSI&NIEL&I$ERRDINO
The chapter analyzes the structural characteristics of one of the most selfsufficient and greatest GDP contributors in the agri-food sector: the poultry industry. Various factors, both institutional and market-related, have affected the profitability and the structure of the sector in the last two decades, resulting in a substantial abandonment of small and medium-sized rural forms of production in favor of broader industrialization and strong vertical integration, which has favored the increase in economies of scale. The first part of the chapter explores the evolutionary path of the poultry sector, focusing on the factors and strategies that have enabled enterprises to overcome repeated crises, by recovering a part of their profit margins. The operational characteristics of the supply chain are then analyzed, with particular regard to the cost drivers and profitability of the primary actors in the supply chain. The second part of the chapter explores the transformation process of the poultry industry, as well as the economic benefits of the processing industry and the criteria for determining the costs of supply. Additionally, evidence of the diversification of the products and of the features of the value chain is given. The analysis is completed with the study of a business case, an example of Italian excellence in the poultry sector. The chapter concludes with the authors' remarks on the future prospects of the sector.
The chapter is the result of a joint effort and formulation. Nevertheless, Daniela Di Berardino wrote sections 7.1 and 7.2, whilst Christian Corsi (corresponding author) wrote sections 7.3, 7.4, 7.5 and 7.6. 1
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Learning objectives After reading this chapter you should be able to: • Understand the structure and the strategies of the poultry industry; • Understand the cost allocation criteria in the supply chain; • Understand the cost drivers and the profit drivers within the sector; • Recognize the critical factors in the cost management accounting in this industry.
7.1
The evolution of the poultry industry in Europe and in Italy
Over the past fifty years, the Italian poultry sector has been radically transformed from a marginal agricultural sector, based on small family farms with low levels of profitability and typically rural forms of production, to a highly integrated industrial structure, ranking among the top 7 producers in Europe and contributing 3.5% to the total national food industry turnover (INEA, 2015). The late industrialization of the sector in Italy, compared to the major European producers, such as the UK, France, and Germany, can be attributed in part to the slow development of commercial distribution. Some studies (Tessari and Godley, 2014) indicate that, since the fifties, relations between producers and retailers in Anglo-Saxon countries have been very solid, which gave impetus to production, simultaneously favoring automation and an increase in size of poultry farms. In contrast, until the eighties in Italy, the distribution network was predominantly fragmented and represented by small independent retailers, operating on a small scale while being weakly linked to numerous small producers. The latter, on the other hand, were mainly represented by diversified family farms, associated with equally small and diversified farms that did not allow for large-scale production. In addition, they lacked forms of integration, which were already strong overseas and able to organize production while reducing time and costs. The gradual development of the distribution network, in which the French and Anglo-Saxon buying groups assumed a dominant role, also allowed simultaneous increases in the demand and production in Italy. The growing need has been met by increasing the level of automation, hence increasing investments in technological and manufacturing innovation by manufacturers, and thus production volumes. At the same time, the need to improve productivity and speed up the time of conversion of factors in products has led to increased specialization in production, both for farms and producers, resulting in an improved collaboration that over time has been perfected in the form of a strong vertical integration of the supply chain. The primary result of this transformation has
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manage its profit margins over time and efficiently address the expansion of production lines.
Summary The chapter analyzes the operational factors, the strategies and the determinants of cost and profit in the poultry sector, one of the most self-sufficient sectors in terms of production, but also one with precariously balanced profitability. The most penalized players in the supply chain are the farms, whose margins are eroded by the cost of feed and the bargaining power industry of processing. This has also allowed the creation of a payment network connecting the different operators involved in the poultry industry over time, a tight integration that characterizes all phases. This has been possible thanks to the establishment of agistment contractual relations, which bring significant benefits in terms of livestock management, achievement of production output and economic benefits for those involved. Moreover, from the economic-financial analysis of a company characterized by excellence in the Italian poultry sector, it emerges how this sector shows good profitability levels despite a decreasing and, at the same time, a notso-solid financial equity structure.
References BAGNARA G. (2001), Situation and prospects for the poultry market, Emilia Romagna Agriculture Magazine, Agriculture Special, September. BITTANTE G., I. ANDRIGHETTO, RAMANZIN M., Fundamentals of Livestock: breeding, nutrition and feeding, LIVIANA EDITRICE, PADOVA, 1990. BOATTO V., DEFRANCESCO E., L. ROSSETTO, TRESTINI S. (2008), The poultry industry in consumption and renewal strategy crisis, Agriregioni Europe, Vol.4, 13. COZZI G., RAGNO E (2003), Meat production and market in Italy, Agriculturae Conspectus Scientificus, Vol. 68 (2), pp. 71-77. CRPA (2007), Italian poultry farming and production costs (Italian poultry industry and the production costs, NOTIZIE, N. 9. CRPA (2011), Italian poultry farming and production costs (Italian poultry industry and the production costs, NOTIZIE, N. 1. CRPA (2015), PROMOTING good condition in laying hens, Studies and Research (Eng. Healthy recommendations for broilers). INEA (2015), Study on the status and prospects Italian aviculture, (A Study on Italian poultry industry) INEA, ROME.
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ISMEA (2016), Eggs: consumption declined in the first eight months News, September 19, 2016, www.ismea.it ISTAT (2001), economic data, www.istat.it NOMISMA (2016), Italian poultry farming: a sustainable model And the integration of the industry in the meat sector, Bologna. OFFICE DE L'ELEVAGE (2008), The Marche des Produits avicoles dans le Monde, http: agriculture.gouv.fr/ ROSETTO L. (2005), The profitability of poultry farming: production and market risks (Eng. Profitability of poultry farms: the risk of production and market risk), in AA.VV., The agricultural sector in Veneto (The supply chain department in Veneto), Veneto Agriculture, pp. 98-124. TESSARI A., GODLEY A. (2014), Made in Italy. Made in Britain. Quality, brands and innovation in the European poultry market, 1950–80, in Journal of Business History, vol.56 (7), pp. 1053-1083. UNAITALIA (2015), Current and future challenges of poultry breeders, UNA, December. USDA (2015), Structure of the Global markets for meat, AIB.
8 Food safety and quality management in beekeeping: the ADI Apicoltura case1 6IZIN&I%IMÅRINI5TEFNI/IGLIORI
The HACCP methodology is referred to by various organizations as the system of analysis and control of health risks associated with a food product. It is a systematic approach to the identification, evaluation and control of those steps in food manufacturing that are critical to product safety. Currently, HACCP principles are the basis of most food quality and safety assurance systems (Codex Alimentarius, EU and US food legislation, most private standards). Experiences and literature have highlighted a number of barriers to the successful implementation and operation of HACCP in SMEs, such as inadequate knowledge, time-related issues relating to monitoring and recording, excessive documentation. On the other hand, the HACCP principles represent an opportunity for SMEs to familiarize with the basic principles of Total Quality Management and, consequently, to adopt them in all the other activities increasing their competitiveness. Considering the above mentioned aspects, the aim of this chapter is to show, by means of a case study, how a SME can successfully overcome the possible barriers to adopt the HACCP and use it as a tool to become familiar with the principles of Total Quality Management. The chapter is structured as follows. After the introduction, section 2 describes the principles of HACCP and the main barrier to their application in SME. Sections 3 and 4 illustrate the case of ADI Apicoltura, a The chapter is the result of a joint effort by the authors who share its formulation. However, the writing of the specific sections has to be divided as follows: Tiziana Di Cimbrini (corresponding author) paragraphs 8.1, 8.4, 8.5; Stefania Migliori paragraphs 8.2, 8.3 and the focus section. 1
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SME operating in the industry of beekeeping, and which has successfully adopted the HACCP. The conclusion provides some reflections upon the key factors of the success in adopting HACCP and its contribute to the competitiveness of the firm investigated.
Learning Objectives After reading this chapter you should be able to: • to understand the process of implementation of the internationally recognized quality control procedures (HACCP) in a leading company operating in beekeeping; • To link the adoption and effects of HACCP to wider quality management policies; and • To draw implications about the impact of HACCP on corporate success and competitiveness of SME.
8.1
Introduction
The management of quality in the agribusiness industry is characterized by the specificity of the demand it must satisfy. There is now a growing concern about food in the population. Increasingly, what people eat is of utmost importance, especially in aspects related to health and nutrition. Considering that the demand for quality cannot be separated from a need for "safe" food, safety is an unavoidable requirement of food quality and includes hygiene and healthiness but also taste, smell, nutritional value and origin. The consumer’s attention to food safety and quality has increased and to boost consumers’ confidence, it is essential to implement systems that require producers and companies to follow criteria of food safety. The new challenges related to consumers, their selection criteria and the perception of food risk (Jonge et al., 2004; Yeung & Yee, 2012) can be overcome by using an objective tool, the Hazard Analysis and Critical Control Points (HACCP). HACCP is a process control system that identifies, prioritizes and controls potential hazards in the food production process. Emphasis is on identifying CCPs in the process where microbiological, chemical or physical contaminants may be introduced into the product. These CCPs are strictly monitored and controlled to reduce the chance of a hazard occurrence. Because HACCP is process-based, its plans are unique for every company, and for every specific food product. This has been proved to be the most, or one of the most, effective way to ensure food safety (Ropkins & Beck, 2002; Ropkins, Ferguson, & Beck, 2003; Arvanitoyannis & Traikou, 2005; Varzakas & Arvanitoyannis, 2007;
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namely the contribution to the firm’s competitiveness through the effects on production efficiency, cost price, extrinsic advantage of the production practice and intrinsic advantage related to the product’s attributes. The typical SME can be described as having a busy day-to-day existence without designated staff to get involved in long-term planning of non-essential activities, i.e. those not directly related to production. HACCP implementation is able to play an educational role in terms of quality management systems in presence of commitment and motivation of the ownership. This attribute of HACCP is due to the fact that it is a process-oriented approach. It has been defined as a philosophy with structure, based on principles that allow a certain degree of flexibility (Caswell and Hooker, 1996). It is a food safety system and even if its implementation may lead to product quality improvement, it is a distinctly separate programme from total quality management. However, HACCP complements total quality management because it offers continuous problem prevention and, if the firm adopts a performance rather than a compliance approach to its implementation, it provides the establishment with a total quality culture. Summary ADI Apicoltura has successfully overcome the typical barriers faced by SMEs in implementing HACCP thanks to a set of critical factors. Concerning the organizational dimension, the commitment and the direct involvement of the owners have led the Iacovanelli family to develop a hands-on experience of the technological change requested by the HACCP. Concerning the information dimension, a customized recording system has been developed in order to avoid excessive documentation and the risk of transforming the implementation into a bureaucratic procedure. Concerning the managerial dimension, a routine of continuous improvement of the HACCP plan has been established. All these factors have allowed ADI Apicoltura to use the experience of implementing the HACCP system as a tool to channel the ownership's natural inclination towards quality into a set of rational procedures inspired by Total Quality Management. This result has led the company to increase its competitiveness in national and international markets. The main idea we wanted to convey through this chapter is that the implementation of this system of food safety control can be an opportunity for the SMEs, which can overcome their limits and familiarize with the basic principles of a managerial approach to quality. However, this case study has brought us to the conclusion that at least two prerequisites are necessary to seize this opportunity. First, the commitment and motivation of the owners is essential to trigger a proactive instead of a compliance approach to the implementation. Second, the preference for flexible solutions is necessary to
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allow the HACCP principles to fit the company’s peculiarities.
References ARVANITOYANNIS, I. S. - TRAIKOU, A. (2005). A comprehensive review of the implementation of hazard analysis critical control point (HACCP) to the production of flour and flour-based products. Critical reviews in food science and nutrition, 45(5), 327-370. ARVANITOYANNIS, I. S., PALAIOKOSTAS - C., PANAGIOTAKI, P. (2009). A comparative presentation of implementation of ISO 22000 versus HACCP and FMEA in a small size Greek factory producing smoked trout: a case study. Critical Reviews in Food Science and Nutrition, 49(2), 176–201. http://doi.org/10.1080/10408390701856058 ARVANITOYANNIS, I. S. - VARZAKAS, T. H. (2008). Application of ISO 22000 and Failure Mode and Effect Analysis (FMEA) for industrial processing of salmon: a case study. Critical Reviews in Food Science and Nutrition, 48(5), 411–429. http://doi.org/10.1080/10408390701424410 ARVANITOYANNIS, I. S. - VARZAKAS, T. H. (2009). Application of Failure Mode and Effect Analysis (FMEA) and cause and effect analysis in conjunction with ISO 22000 to a snails (Helix aspersa) processing plant; A case study. Critical Reviews in Food Science and Nutrition, 49(7), 607–25. http://doi.org/10.1080/10408390802145294 BAŞ , M., YÜKSEL, M., - ÇAVUŞOĞLU, T. (2007). Difficulties and barriers for the implementing of HACCP and food safety systems in food businesses in Turkey. Food Control, 18(2), 124-130. CASWELL, J. A., - HOOKER, N. H. (1996). HACCP as an international trade standard. American Journal of Agricultural Economics, 78(3), 775-779. COM (2013), European Commission, Relazione della Commissione al Parlamento Europeo e al Consiglio in materia di attuazione delle misure relative al settore dell'apicoltura del regolamento (CE) n.1234/2007 del Consiglio, Bruxelles, 16.8.2013, COM(2013) 593 final. DAMIKOUKA, I. - KATSIRI, A. - TZIA, C. (2007). Application of HACCP principles in drinking water treatment. Desalination, 210(1-3), 138–145. http://doi.org/10.1016/j.desal.2006.05.039 DI FELICE R., (2015), Programma quadro per l'attuazione nella regione Abruzzo dei regolamenti comunitari in materia di miglioramento della produzione e commercializzazione dei prodotti dell'apicoltura, Regione Abruzzo. EVES, A. - DERVISI, P. (2005). Experiences of the implementation and operation of hazard analysis critical control points in the food service sector. International Journal of Hospitality Management, 24(1), 3–19.
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