Eszterházy Károly College Faculty of Natural Sciences
The most competitive venue of the market economy is the product chain, where entrepreneurs are struggling for the consumer's favor. The most important key to success is the negotiability of a product which is influenced by efficiency of the competition and marketability of the product chain. "The product chain is the system of relations, which is realized among business companies participating in the processes of procurement and sales.” The concept of local product chain means the different stages of production the local product goes through from production to sales. We can distinguish short-and long product chains depending on length. If the product is sold after rapid processing, then we are talking about short product chain. If the raw material goes on for further processing need, then we are talking about long product chain. The local product chains are generally related to short product chains, as the place of sale is local. (ENYEDI-NAGY 1999)
The system-wide co-operation among the partners is essential for the operation of the product chain. That is the only way they can enforce their interests. This "integration" is divided into two time groups. The first one is the top-down short-term integration. The organizing force can be trade (tourism / hospitality), as that market has the most information available. In this type of organization profit maximization is limited since commerce sales coordinate. The second one is a bottom-up long-term integration, which is organised by the producers in order to reach a larger number of customer.
In case of the local product chain the long-term co-operation could be the key to success in the case of growing demand, as the increasing costs of production and sales organization may be reduced. In member countries who joined the European Union prior to 2004, had a direct contact with the consumer market via co-operations they owned and directed. In Hungary co-operations are not dominant because of violent expansion of productive co-operations and their still active psychological impact. The number of members of national productive co-operations slowly started to grow despite the bad habits, thanks to the support of the state and EU funds aimed at the producer support through productive co-operations.
The product chain consist of many sections from production to consumption which are significantly different form large-scale product chains. The whole process emphasizes the quality and the uniqueness of product. If it comes to food production, the common features of materials, individual breed characteristics - this is usually a result of traditional breeding - and production location are also add to the specific summary of geographic factors. During processing the procedures improved for centuries also come into view. I note, however, that in case of local products that do not have strong traditions local, small-scale industry specific knowledge namely the procedure used for processing is also crucial. In many cases, packaging is made of local, natural materials, but we have to take into account the fact that not all the sub-regions has the necessary infrastructure, artisanal tradition, but this can be remedied. The packaging could be one of the smoothest expression of the local cultural history, which will greatly increase the prestige value of the product.
Stock storage, distribution to commercial channels, in other words the products’ logistics in this case do not require excessive capacity, since the product generally do not target millions. Quality control is an essential task to maintain the quality of the local products, and even using a variety of food analytical tests we can do a lot to consolidate prestige, and a higher added value. Without the quality excellence of local products, the justification of positive impact on human health cannot be guaranteed. Modern Food Science can also add to the enjoyment and biological value of the product with natural flavors and additives (vitamins, trace elements) originating from the local region. Delivery has a small part within the value of the product because of the relatively small quantity to be transported and the short distances. On the other hand there can be significant differences in the logistics of local products (storage and distribution). Trade takes place in authorized specialist shops or in restaurants within the region or in local patriots’ public institutions / regional businesses’ kitchens. In case of the sale of local products we must pay attention to correctly choose retail stores and restaurants, because these have key influence on the product’s position in the market. The region's image, characteristics and excellence must be present in the standard and also in the uniqueness of sale channels. In case of consumption the quality and reliability of the service are the critical factors. The consumer is also the guardian of local values, the conservator of high added value in the region, and one of the best bush with his or her satisfaction. (SPRINGER-HEIZE 2005)
region-specific production conditions (tradition)
processing (tradition, special recipe)
packaging (material may not be local)
deposition / cooling
quality control (out of the region)
trade (local site / specialized stores / restaurants)
consumption (individual retail / hospitality)
Sale channels for local products
In case of the sale of the local product multiple sales channels can be used, but essentially the sale happens locally, it is not common outside the region. Commercialization is only a few percent of the total sales. The aim is to increase the customer base, and to deliver more local goods to the customers. In Hungary the sale of a local product is rather complicated and the law limited. Control happens by product groups. For example, the state regulates the rural and agro-tourism activities and handicrafts in production and sale with different tax laws and government regulations.
In Hungary the most commonly used sales channels for local products are the following:
Farmer market: Occasional or regular vending opportunities for producers. The consumer purchases the goods directly from the farmer, which is beneficial in many ways. The customer gets to know the farmer and the production process as well. Direct communication can help develop a personal relationship. Customer base is the local community, guests and tourists. The advantage of direct sales is that the wholesaler and the retailer is left out of the distribution process, so the customer get the fresh products at a lower price, and the seller can earn higher profits.
Producers’ / local product shop and mobile shop: A retailer in a farm, or very close to it. The purpose of local product shops is that farmers can sell their products together. In the framework of The New Hungary Rural Development Programme the state supports the creation of producers' shops. It is important to note that domestic applications want to solve local farmers’ selling problems as a social a character. The Hungarian Farmers' Societies and Farmers Unions (MAGOSZ) purpose is that higher income could remain at the producers and they could become competitive suppliers on the regional market. In our country sales become ever more prevalent with the help of mobile shops based on European examples, which allows seasonal agricultural products to increase sales.
Delivery: In the rural areas its been a custom t for decades to deliver products to consumers from house to house. This kind of sale is built on trust and direct contact between people, as the seller and the buyer often know each other well. The delivery gives a long-term stable customer base to the producer. This kind of service is dynamically rises is the western part of the EU, this impact is soon to get into Hungary.
Figure 34. Liederladen is a local food delivery company which only obtains goods from Stuttgart (source: own picture)
Local Product Festival: By fairs and festivals the consumer becomes familiar with local products. In most cases, these events are seasonal, so they can not generate a constant demand, their importance is the building of a personal relationship between the customer and the producer. The fair shows the producer and the product itself, the consumer has opportunity to evaluate and compare the products, as well as a good exchange experience and also opportunity to customer needs assessment. The purpose of the local product festival is the promotion of the products produced in the region. Often, in addition cultural, entertainment and culinary programs are offered to the visitors.
Internet commerce: In developed countries, including Hungary, a growing proportion of the total online shopping sales. The consumer chooses the product on the website that is shipped after the order. The seller must update the list of products and prices several times a day to ensure effective operation of the site. More and more producers are choosing this form of sale to ensure customer base expansion.