Comté Case Study [France] Pierre Colinet, Marion Desquilbet, Daniel Hassan, Sylvette Monier Dilhan, Valérie Orozco, Vincent Requillart

Comté case study [France] Pierre Colinet, Marion Desquilbet, Daniel Hassan, Sylvette Monier Dilhan, Valérie Orozco, Vincent Requillart

To cite this version:

Pierre Colinet, Marion Desquilbet, Daniel Hassan, Sylvette Monier Dilhan, Valérie Orozco, et al.. Comté case study [France]. 2006. hal-02821752

HAL Id: hal-02821752 https://hal.inrae.fr/hal-02821752 Submitted on 6 Jun 2020

HAL is a multi-disciplinary open access L’archive ouverte pluridisciplinaire HAL, est archive for the deposit and dissemination of sci- destinée au dépôt et à la diffusion de documents entific research documents, whether they are pub- scientifiques de niveau recherche, publiés ou non, lished or not. The documents may come from émanant des établissements d’enseignement et de teaching and research institutions in France or recherche français ou étrangers, des laboratoires abroad, or from public or private research centers. publics ou privés. EUROPEAN COMMISSION DIRECTORATE-GENERAL JRC JOINT RESEARCH CENTRE Institute for Prospective Technological Studies (Seville) Sustainability in Agriculture, Food and Health

Case studies

3. Comté

30/11/06

DG JRC/IPTS

Preface:

"Case studies: A detailed report for each case study, including data sources, data sets, discussion of findings and results with regards to the above objectives."

"Objectives: • to assess the benefits and costs of quality assurance and certification schemes for farmers, processors, retailers and consumers; • to analyse the effects of quality assurance and certification schemes on European farmers with special focus on small-scale farmers; • to analyse the contribution of quality assurance and certification schemes to the development of rural areas."

Each case study assesses the benefits and costs of quality assurance and certification schemes along the food supply-chain from farmers to consumers. In the section on farmers particular attention is paid to the effects on small-scale farmers. The contribution of quality assurance and certification schemes to the development of rural areas is included in the case studies at various points and an in-depth discussion of this aspect is conducted in the "Final Report".

The following case studies have been conducted by ETEPS AISBL and JRC-IPTS: 1. Baena, olive oil, Spain 2. Boerenkaas, cheese, the Netherlands 3. Comté, cheese, France 4. Dehesa de Extremadura, cured ham, Spain 5. EurepGAP, fruit & vegetable, Europe 6. Label Rouge, chicken, France 7. Neuland, pork, Germany 8. Parmigiano Reggiano, cheese, Italy 9. Red Tractor, potatoes, United Kingdom

Legal notice The orientation and content of this report cannot be taken as indicating the position of the European Commission or its services. The European Commission retains the copyright to this publication. Reproduction is authorised, except for commercial purposes, provided the source is acknowledged. Neither the European Commission nor any person acting on behalf of the Commission is responsible for the use that might be made of the information in this report. © European Communities, 2006

REPUBLIQUE FRANÇAISE

Unité d'Economie et Sociologie Rurales Toulouse

Case study: Comté Cheese in France

INRA, University of Toulouse, France

Colinet P., Desquilbet M., Hassan D., Monier-Dilhan S., Orozco V., Réquillart V.

Table of Content

1 INTRODUCTION 5

1.1 Purpose of the study...... 5

1.2 Study team...... 5

1.3 Criteria for selecting the QAS case study ...... 5

1.4 Previous research and data availability ...... 6 1.4.1 What previous research has been done on the scheme? What reports are available? ...... 6 1.4.2 What secondary data are available about the product? At producer level, consumer level and intermediary steps in the chain? ...... 6

1.5 Information collection...... 8

1.6 Types of analysis conducted ...... 9

2 OVERVIEW OF THE QAS 10

2.1 Organization and general objectives of the scheme ...... 10 2.1.1 The AOC and PDO quality labels...... 10 2.1.2 The Comté AOC...... 11 2.1.3 Specifications of the Comté AOC...... 12 2.1.4 Compliance Monitoring...... 15 2.1.5 Management of Comté PDO by the CIGC...... 16 2.1.6 Production control by the CIGC through a reference quantity system ...... 17 2.1.7 A principle of increasing production imposed by the public authorities ...... 17 2.1.8 Other missions of the CIGC...... 21

2.2 Overview of the production chain...... 22 2.2.1 General presentation of the chain...... 22 2.2.2 System of payment for unripened cheese by CIGC contract ...... 24 2.2.3 Evolution of prices at the various stages of the chain ...... 28 2.2.4 Evolution of production of Comté and Emmental and exportsof Comté...... 29

3 FARMERS 32

3.1 Analysis of requirements for farmers set out in the specification ...... 32 3.1.1 Current specification of Comté ...... 32 3.1.2 Changes of the specification being considered ...... 35

3.2 Additional description of production activities ...... 36 3.2.1 Production, special characteristics of QAS ...... 36 3.2.2 Additional value-adding activities e.g. on-farm processing, packaging, demonstrations (tourism)...... 36 3.2.3 Marketing, special marketing channels for QAS ...... 36

3.3 Types of producers, market share of the QAS at producer level (e.g. % of all milk produced), production and price of QAS and reference products (trends)...... 36 3.3.1 Different uses of milk from the PDO area ...... 36 3.3.2 Utilization of milk for the production of Comté and French Emmental...... 39 3.3.3 Trends in the price of milk for making Comté, in the PDO area and French standard milk...... 40

3.4 Numbers of producers of QAS and reference/ substitute products, size distribution of QAS participants and non-QAS participants ...... 42

3.5 Yields and productivity, production costs, profitability and value added...... 42 3.5.1 Accountancy analysis of farm incomes – 2004 FADN data ...... 43 3.5.2 Production costs and farm incomes, in equivalent 1000 litres milk – data from FADN 2004 46 3.5.3 Comparison of average PDO and non-PDO farms from the CERJ sample of the Jura 50 3.5.4 Comparison of various types of farms in the Comté area (Pacteor sample of the Doubs) 51

4 CHEESE MAKERS 55

4.1 Technology and technical requirements ...... 55

4.2 Number and type of traders, specialization in QAS or general...... 56

4.3 Quality of unripened cheese ...... 59

4.4 Input prices and production costs...... 60

4.5 Selling prices...... 64

4.6 Introduction of ‘terroirs’ or ‘districts’...... 66

4.7 Effects of the reform of the Common Agricultural Policy ...... 67

5 RIPENERS 69

5.1 Number and type of ripeners, specialization in QAS or general ...... 69

5.2 Processor activities...... 69

5.3 Input prices and production costs...... 70

5.4 Sales prices...... 72

6 RETAILERS 73

7 THE DEMAND FOR COMTE 76

7.1 AIDS demand model ...... 77

7.2 Consumers’ choice...... 78

7.3 Instrumental variables...... 80

7.4 Results ...... 81

7.5 Discussion...... 83

Introduction

Purpose of the study

The “Appellation d’Origine Contrôlée” or “AOC” is the French equivalent of the Protected Designation of Origin (PDO) as defined at the European level, which gives quality certification to a product deriving its authenticity and specific characteristics from its geographical origin. In France, PDO cheese production accounts for 10% by volume and 20% of the value of the total cheese sales. This study provides an economic analysis of Comté, the main PDO cheese variety in France, which accounts for a quarter of the PDO cheese sales nationwide. This study is based on several elements: an analysis of the PDO specifications and the policy for regulating Comté volumes by attributing production rights to cheese- makers; a study of the vertical relations and price transmission within the supply chain; a presentation of the Comté milk market and technical-economic results of the agricultural producers of this milk in comparison with other dairy products of the same region, as well as Emmental, which we use as a reference product for Comté; an econometric analysis of consumer demand for the various types of hard cheeses in France.

Study team

The study was carried out by five members of the MAIA team of the INRA in Toulouse (Marion Desquilbet, Daniel Hassan, Sylvette Monier-Dilhan, Valerie Orozco and Vincent Réquillart), as well as Pierre Colinet, a student at the Higher School of Agriculture, Purpan.

Criteria for selecting the QAS case study

− There exist many PDO products in France, primarily in the wine and cheese sectors. For example, there are 29 PDO cheeses produced from cow milk. − Comté is the leading PDO among French cheeses, with an expanding market. The production of Comté reached 48,000 tonnes in 2004, whereas the production of Cantal, the second most important PDO cheese, was approximately 19,000 tonnes, and the total production of PDO cheese was 165,000 tonnes (Frayssignes, 2005). Thus, Comté represents more than a quarter of PDO cheese production in France. It is situated on the market of hard cheeses. The production of Emmental, the main cheese in this category,

is about 230,000 tonnes. Over the last decade (1990-2000), the Comté production increased by almost 30% and the price of milk for Comté increased by almost 20%, whereas the milk price in France increased by less than 5% during this same period. − The Comté industry implemented an original structure for organisation of the sector with the attribution of production rights to cheese-makers and the definition by the Intra-Chain Comté and Gruyere Committee of standard contracts managing the relations between the cheese-makers and ripeners. It is thus interesting to analyse in detail the operation of this sector and the key factors explaining its success. − There are interactions with the Common Agricultural Policy, since dairy production is a sector coming under an important Common Market Organisation within the European Union. The Comté PDO label thus makes it possible to analyse the interactions between agricultural and quality policies in the dairy sector, whose agricultural policy is evolving.

Previous research and data availability

What previous research has been done on the scheme? What reports are available?

Various descriptive studies have already been carried out on Comté. Compared to these previous articles, our study provides a more detailed analysis of the economic aspects of this sector. Barjolle D., Revillon S., Sylvander B., Chappuis J.M., 2006. Fromages d’origine : dispositifs de gestion collective. 13 pages. Bussy C., 1994. Filière de production laitière et Appellation d’Origine Contrôlée (PDO) – Exemple du Comté produit dans le Jura français. Revue Suisse d'Agriculture, 26, 5-9. Torre A et Chia E., 2001. Pilotage d’une PDO fondée sur la confiance : Le cas de la production de fromage de Comté. In Annales des Mines, Gérer et Comprendre, 65, Septembre, 55-68. Website of the Intra-Chain Committee for Comté Gruyere, http://www.comte.com. 1.4.2 What secondary data are available about the product? At producer level, consumer level and intermediary steps in the chain? − To study and compare the structures of the various farm types and their economic situations, we use two departmental databases of farms specialised in dairy production, one from the Centre of Rural Economy of the Jura (CERJ) (Chambre d’agriculture du Jura, 2005), the other from the Pacteor network of the Doubs Chamber of Agriculture

with individual data for 71 farms producing milk for Comté (Ravey and Roussel, 2005) (for more details, see box 1). The comparison with production conditions in France, Brittany (production area for most of the Emmental, the reference product used for Comté) and Auvergne (with production conditions comparable with the Franche-Comté (mountainous area) and a strong presence of PDO cheeses) relies on the use of average FADN data about specialist dairying farming (TF 41). These various data are analysed for the year 2004. Box 1. Databases of farms in the PDO Comté area 1. For 2004, the CERJ database includes 258 specialised dairy farms (TF 41), among which 215 produce PDO milk and 43 produce standard milk. We have the average data for each of the two types of farms (PDO and non-PDO). In this database, PDO production includes Comté and other PDOs of the area (Morbier, Mont d’Or and Bleu du Haut Jura). In 2005, Comté accounted for 62% of the milk collection in the PDO area, as against 10% for the other PDOs, 4% for Emmental Grand Cru (Emmental red label, but non-PDO) and 24% for industrial cheeses (cf. section 3). The average data for PDO and non-PDO farms in the CERJ sample thus gives in principle a good approximation of the average Comté and standard farms of this area. 2. The Doubs Chamber of Agriculture monitors and advises a network (called Pactéor) of 75 specialised milk producers located in the mountainous area of Doubs, for which it collects technical and economic situation reports. Among these farmers, 71 produce milk for making Comté. The farms are classified into four categories: − extensive (producing less than 2,800 litres of milk per hectare), − fairly intensive (producing from 2,800 to 3,400 litres of milk per hectare), − intensive (producing more than 3,400 litres of milk per hectare) − groups with a large herd (farms producing more than 330,000 litres of milk and having more than 50 dairy cattle). We have individual data on these farms. Comparisons are difficult between the various sources of information. The sample of the Pacteor network allows us to compare different cattle farming systems but is not representative of the dairy production of the Doubs, since it involves a network of farms monitored by the Chamber of Agriculture that obtain better economic results that the departmental average. Similarly, it is not always possible to compare the data concerning the farms of the Jura department with data derived from FADN. Most of the comparisons are developed from information coming from the same set of data.

− The econometric analysis of the demand for Comté and substitutes is based on data from a panel of consumers managed by SECODIP (a consumer survey and publicity company). The database brings together a whole set of purchases for a panel of 8,000 consumers. This base provides a large number of details on the nature of the food purchases (date, product, price, quantity, presentation, mark, place of purchase, etc). The data used cover the period 1998-2003.

Information collection

This study was made possible thanks to co-operation with many actors of the sector during discussions and contacts by telephone and e-mail: - Jean-Jacques Bret, Aurélia Chimier, Florence Compagnon and Denise Renard, Intra-Chain Gruyere and Comté Committee (CIGC) in Poligny, who granted us an interview and provided data on production plans, economic situation reports, CIGC contracts and the number of actors at each level of the sector, as well as many documents on the operation of the sector. - Gabriel Paris, Departmental Federation of Cooperative dairies of the Jura (FDCL Jura) in Poligny, who granted us an interview and provided data on the production costs and characteristics of the cooperative dairies, the operation of the various parts of the sector, as well as volumes and prices of French Emmental and Comté. - Denis Clerget and Corinne Girres, Statistical Department of the Regional Directorate of Agriculture and Forests (DRAF) for Franche-Comté in Besançon, who granted us an interview and provided us with data on volumes of the various cheese-making productions in the Doubs and Jura according to the cheese dairy status (co-operative or private) (milk figures 1991-2004), prices of milks according to quality in the PDO area, and dairy production in Franche-Comté. - Anne-Marie Meudre of the Jura Chamber of Agriculture in Lons-le Saunier, who granted us an interview and provided data on the farm characteristics and accounts in the department of Jura (summary tables of the CERJ data base), farmers’ production costs and various data about the sector. - Matthieu Cassez of the Doubs Chamber of Agriculture in Valdahon, who granted us an interview and provided data on the characteristics and accounts of farms in the Doubs department belonging to the Pacteor network, as well as information on dairy producers’ agricultural practices. - Antoine Bérodier of the Comté Technical Committee (CTC) in Poligny, who granted us an interview and provided technical information on dairy processing and general information on the sector. - Benoit Ruch of the National Institute of Designations of Origin (INAO) in Poligny, who accepted to give an interview and provided us with the decrees and regulations of the Comté PDO label as well as other legal texts and information on the sector.

- Pierre Parguel and Florence Arnaud of the Stockfarming Institute (Institut de l’Elevage) in Besançon, who granted us an interview and provided technical data on the dairy production and general information on the sector. - Olivier Vallat of the Trade Association Chamber of Emmental and Comté Ripeners (CEC) in Besançon, who granted us an interview and provided data on the volumes and prices of Emmental Grand Cru and general information on the sector. - Mr. Labrune of Entremont, Poligny, who granted us an interview. - Patrice Geslin and Michel Roc, Intra-Chain Association for hard cheeses (SIGF), who provided us with data on volumes of French Emmental produced in various areas. -Yannick Mourthaux, GIE (groupement of economic interest) dairy quotas Jura, who granted us an interview. - Pierre-Emmanuel Belot of the Jura Milk Recording Association, who provided us with data on the composition of livestock in the Jura department.

Types of analysis conducted

This study comprises two aspects. The first aspect is based on the synthesis of a large amount of information allowing a detailed analysis of the main characteristics of the PDO. Information was obtained by interviews with the actors in the field, which was cross-checked and further detailed by later contacts, as well as by access to external written sources (scientific articles, legislative texts and decrees, etc.), farm account databases and other sources of figures. The second aspect of the study consisted of analysing consumers’ demand using econometric methods.

Overview of the QAS

Organization and general objectives of the scheme

The AOC and PDO quality labels

The French AOC and the European PDO quality labels identify agricultural or agro- food products which draw their authenticity and typicity from their geographical origin. This status guarantees a close link between the product and the “terroir”, which is a clearly defined geographical area with its own geological, agronomical, climatic characteristics, as well as particular disciplines self-imposed by the people in order to get the best out of the land. This notion of terroir encapsulates both natural and human factors, and means that the resulting product may not be reproduced outside its territory. These labels aim at protecting a duly established reputation and guarantee exclusivity to the producers of this geographical area, by prohibiting other areas from using the name of the product in question, even if they comply with the same methods of production as in the AOC area. AOC is a collective right of use and its utilization is delegated to producers of the Appellation grouped together in an AOC Defence Syndicate (INAO, 2006a). The legal framework governing the Appellation d’Origine Contrôlée (AOC) in France has been constructed progressively in the 20th century. In 1905, the public authorities entrusted the administration with the task of defining the areas in which agricultural products could benefit from an appellation of origin, but without specifications as to quality. The definition of an Appellation d'Origine was set by a Law of 1919: “An Appellation d'Origine includes the name of a country, a region or an area serving to designate a product from that country, region or area, and with qualities and characters that exist due to the geographical environment, comprised of natural factors and human factors.” In 1919, courts were given the mission of defining the geographical area of the appellations and the “local, loyal and consistent” customs. In 1935, the recognition and regulation of AOCs for viti-viniculture products were entrusted to a public body under the supervision of the Ministry of Agriculture, the National Institute for Appellations of Origin (INAO), with its decision-making body, the National Committee of wines and eaux-de-vie. In 1955, this regime was extended to cheese, with the creation of the National Committee for cheeses with Appellation of Origin (CNAOF) (distinct from INAO). In 1990, these statuses were harmonized, with the extension of the

competence of the INAO to all unprocessed or processed agricultural or food products and the creation of two more National Committees, covering dairy products and other agricultural products. Since then, AOC approval follows a unique procedure, with several exchanges between the Defence Syndicate, the National Committee and a Commission of Enquiry appointed by the National Committee. Requests for changes of the rules of an AOC are also submitted to the INAO (INAO, 2006a). Specifications of AOCs obtained before 1990 have been or will be subject to revision, which is the case for a large number of cheese AOCs, among which Comté. Since 1992, the concept of “Appellation d’Origine” passed into the European legislation through the Protected Designation of Origin (PDO).1 According to the preamble to the European Regulation 92/1081 on PDOs, this quality label is beneficial both for the consumers and the producers. For the consumers, the PDO gives information on the origin of the products and makes available products of high quality while guaranteeing their method of production and origin. For the producers, it helps to guarantee higher incomes as a reward for genuine efforts to improve quality, at the same time keeping a rural population in less favoured or isolated areas.

The Comté AOC

Comté is a very ancient regional product of the East of France whose presence can be found in Roman times. For many centuries, the know-how and manufacturing processes were tacitly respected and transmitted by oral tradition. We must wait for the 18th century to see the first written records. Before being called Comté, this cheese came under the broad denomination of “Gruyere”. The driving force behind the creation of the AOC was the craft union of the authentic Gruyere of Comté, which appeared in 1945, whose vocation was to promote the quality of Comté compared to the other Gruyere cheeses. In 1968, it was replaced by the Intra-Chain Gruyere and Comté Committee (CIGC) (Vernus, 1988). In 1952, Comté was recognized as an AOC by a court, according to the 1905 and 1919 laws, after the craft union initiated a lawsuit against a cheese-maker of Dijon who was using the name Comté. This court mandated an expert to delimit the production area of Comté and ruled out that only producers of this area were allowed to use the name Comté. The first

1 According to French law, only AOCs can become PDOs. In France, there are currently 467 AOCs in the wine and spirits sector, 47 cheese or dairy AOCs, and 25 AOCs for agro-food products other than wine and dairy products. All of these products together generate a turnover larger than 17 billion euros. 11

decree of the Comté AOC was published in 1958, after the creation of the CNAOF in 1955 (Ruch, interview).

Specifications of the Comté AOC

An AOC decree defines primarily the area of production and the production and processing methods. The area of production covers mainly two departments, Jura and Doubs, located in the region Franche Comté which includes one more department : Haute-Saône. Milk production, cheese production and maturation as well as packaging have to take place in this area.

Figure 1. Area of production of the Comté AOC

Source: CIGC website.

Several changes have been made to the 1958 decree. In the original decree, the area of authorised production and the condition “in accordance with local, loyal and consistent customs” were the only limitations imposed (INAO, 1958). Gradually, other rules have been introduced on milk production as well as processing, as summarized in Table 1. The main current rules are as follows (INAO, 1998a): 12

− For production, mandatory use of local cow breeds, prohibition of the use of silage, limitation to one cow per hectare of fodder area, limitation of feed concentrate to 30% dry matter in the total feed, requirement to carry out two milkings per day. − For processing, requirement to collect milk within a radius of 25 km from the point of collection, duration of cheese ripening at least equal to 120 days, regulations on the duration and temperature for the various processing stages.

Table 1. Evolution of the specifications of the Comté AOC 1986 decree 1998 decree 2006 draft amendment of the decree Milk − Cows must belong to − The stocking rate is limited to − Farm size is limited. production the Montbéliarde or one cow per hectare of French Simmental grassland pasture. − Production is limited to breeds. 4600 litres/ha of main − Concentrates given to fodder area. − Silage and other animals must represent less fermented feed are than 30% of the consumed − The stocking rate is prohibited. total dry matter. limited 1,3 livestock units/ha. − Two milkings per day are mandatory. − Concentrates must be less than 1800 kg/cow/year. Cheese Milk has to be collected within Size limits to cheese dairy a radius of 25 km. dairies are introduced. processing

Ripening Minimum of 90 days of − Minimum of 120 days of cheese ripening. cheese ripening.

− Mandatory manual operations during the ripening stage.

Other − Casein plate for cheese − A special dispensation must − Grate comté production changes identification. be granted for prepacking is authorized. outside the PDO area. − Specific labelling other − introduction of “terroirs” than Comté is − Brand labelling is authorized. or particular forbidden. geographical terrains, known as “crus” (analogous to districts) within the PDO area.

Source : INAO 1986, INAO 1998, INAO 2006a and 2006b.

The PDO regulation has an impact at various levels. The producers of PDO Comté highlight the impact related to the link between the requirements of the specifications and the quality of the cheese: further below, we will see that this link is globally based. The CIGC also insists on the pursuit of more general objectives of regional employment in the

agricultural and agro-food sectors and land-use planning of the territory. Thus, the limitation of the collection area of the cheese-making companies to a maximum radius of 25 km indeed tends to reduce the industrial concentration in this sector. In addition, the extensive herd management system favours the use and maintenance of grassland areas. On the other hand, the limitations on the animal stocking rate per hectare and fodder for the herds do not introduce a constraint on the total production capacity. Indeed, the current level of stocking in the area is much lower than that defined in the specifications. These various points are discussed in a more detail in chapter 3. In 2006, a new draft amendment of the decree reinforces the above elements (INAO, 2006b) (INAO, 2006c): reduction in animal stocking rate per hectare, ceiling on dairy production per hectare, limitation on the size of the farms and of the processing units. Taking into account the above remarks, the specifications can be reinforced by adopting measures that are mainly nonconstraining due to the low level of intensification of the Comté area. This action takes on a “communication” aspect that aims at reaffirming the “specific” character of Comté production. The “quality of production” aspect is also strengthened by the project of defining districts for Comté, moulded on the image from wine growing. Therefore, this amounts to increasing the supply segmentation. On the other hand, the sector is encouraging a possible freeing up of the market by its plans to launch a new market for grated cheese. This practice of searching for new markets is common to other PDOs, whether in the cheese sector or not (feta in the Roquefort area, grape juice made from the “chasselas” grapes of Moissac), to provide new opportunities for production surpluses. Like other AOCs that were already in force before the 1992 PDO Regulation, Comté was granted the European PDO label in 1996 through a simplified procedure, involving no specific enquiry from the European Union, and granted on the basis that it was already an AOC in France (European Commission Regulation 1107/96). Each change in the AOC specifications is initiated by the CIGC. It goes through the nomination of a Commission of Enquiry by the National Committee of Dairy Products of the INAO. This Commission is usually composed of three to five members (milk producers, processors, ripeners, some from AOCs, others no, and “qualified personalities” not being actors of the dairy sector; all of them from outside of the AOC region). The assignment of this Commission of Enquiry is to check that the proposal of the AOC Defence Syndicate is in line with the concept of AOC. The Commission of Enquiry has more or less regular and intense exchanges with the AOC Defence Syndicate (for Comté, the CIGC), may consult any AOC participant other than the Defence Syndicate, and may ask for changes on various points of

proposed specifications or ask for additional specifications. When it considers it as appropriate, the Commission of Enquiry gives potentially intermediate reports, in all cases a final report, to the National Committee of the INAO. Finally, the National Committee proposes a draft decree. Before the French decree is published, there is no exchange with the European level. At the time the French decree is published, the INAO asks a change of the PDO to the European Commission. At the European level, the change in PDO specifications follows a normal (and not a simplified) procedure. The European Commission may ask additional information to the INAO. As long as the change in the PDO is not implemented at the European level, the decree applies at the French level, Europe maintains the protection of the name. The formal change in the PDO specification is usually long, around three years.

Compliance Monitoring

The INAO team of Poligny (a town in the PDO area) is in charge of monitoring compliance of actors with production and processing specifications of the Comté AOC. This team comprises a director and two technicians and is also in charge of compliance monitoring for other local PDOs, one technician for cheese (Mont d’Or, Morbier, Bleu du Haut Jura) and one technician for Jura wines. At the national level, INAO is funded by the State (75%) and by the AOCs (25%). For Comté, the CIGC contribution is 3 euros per tonne of Comté produced, i.e. roughly 150 000€/year for a total INAO budget of 600 000€/year for Comté. It is not possible to evaluate which part of this budget goes to compliance monitoring. The monitoring of a farm, a processing unit or a ripening unit may occur either on a random basis, or after observation of suspicious practices locally, or after a denunciation. Monitoring may take two forms: documentary or field. Documentary monitoring consists in analysing data obtained mainly from declarations of monitored actors. For example, cheese dairy processors declare systematically which farmers deliver milk to their processing units. From this declaration, it is possible to evaluate whether the requirement of collecting milk within a radius of 25 km is fulfilled or not. Field monitoring involves going on the farm or the processing or ripening unit, making visual inspection and checking invoices and accountancy documents. In a farm, the aim is for example to check the absence of silage or to evaluate the annual volume of concentrates per cow; in a processing dairy unit, to check the durations, temperatures and hygrometry at different processing stages. At the ripening stage, controls of the organoleptic quality are organized in collaboration with the CIGC. Each year

around 100 to 150 units are monitored on the field, in total (farms, processing units, ripening units) and for all PDO cheeses. After monitoring, results are reported to a consultative commission of approval of production conditions, composed of two farmers, two processors and two ripeners. Then, if need be, the local INAO director decides on a penalty. The only official penalty is withdrawing the declaration of aptitude, i.e. forbidding AOC production (not forever, but until practices have been changed). This penalty has occurred only five times in the last 15 years, but may constitute an effective threat to force actors to change their practices. In the future, this penalty system should evolve with the possibility of financial penalties or mandatory trainings. More usually, the monitoring system will change during year 2007. The AOC Defence Syndicate will have to choose between two monitoring systems, one in which a certification agency will detect and punish non-compliant actors, or one in which an inspection agency will only detect non-compliants, while the INAO will stay in charge of giving penalties. The agency will be funded entirely by the Defence Syndicate, therefore funding will be a component of the future choice of the syndicate (with the second option being less costly). Another component of this choice will be the desire or not to break away from the INAO by adopting or not the first option (certification agency independent from the INAO). For Comté, the decision has not been taken yet (Ruch, interview).

Management of Comté PDO by the CIGC

The CIGC represents the different actors of the industry. The CIGC managing bodies comprise the plenary assembly and the board. The plenary assembly is made up of sixteen representatives from four different colleges, each college having four representatives: 4 farmers, 4 cheese-makers, 4 ripeners and 4 retailers. The plenary assembly votes the main orientations of the CIGC, and the committee implements them. Within the board, there is a commission on each sphere of activity of the CIGC: advertising, information, economics and technical aspects. The CIGC has two missions, namely (CIGC website): − to allow producers of to the difficult “terroir” of the Jura mountains to carry out a sustained economic activity, positive for land settlement and landscape protection; − to ensure observation of consumers’ expectations in terms of environment safeguarding, non-industrialized craft processes and natural and authentic products.

Production control by the CIGC through a reference quantity system

A major activity of the CIGC is managing the production of the industry through the sale of rights to produce. In practice, these rights take the form of green plates (made of casein) that are affixed to the cheeses. The rights are allocated to the producers of unripened cheese on a historical basis, being sold for approximately 4€ each in 20062, which corresponds to 0.1 €/kg of cheese or approximately 2% of the selling price of unripened cheese. If cheese producers wish to exceed their reference quantity, they can buy additional plates by paying a supplementary charge equal to, in 2006, 20 times the basic production levy, that is to say, 80 €/plate, i.e. 2 €/kg, which accounts for approximately 40% of the final price of Comté. The CIGC uses revenues from sales of rights to produce mainly for advertising (cf. section 2.1.8).

A principle of increasing production imposed by the public authorities

The control of production, which is in principle not competitive, is a right granted to the CIGC by the public authorities (Agriculture as well as Economy and Finance ministries). Each year, the CIGC defines a production plan and sumits it to the Public Authorities. This practice is authorized within the framework of the French law 74-639 of 12th July, 1974 relating to the intra-chain dairy organization, whose article 1 stipulates that “the national or regional agreements concluded in the framework of the intra-chain organization can be approved by joint decrees of the Minister for Agriculture and the Minister for the Economy and Finance. The intra-chain organization shall be made up from those organizations most representative of the actors in the chain, which comprise the milk producers, the agricultural dairy co-operative groupings and the milk processing industries. If approval is granted, the measures thus adopted by the intra-chain organization are compulsory for all the producers and processors of the area concerned”.3

2 Each year, the CIGC allocates a number of green plates to the cheese dairies according to the following calculation: Total reference green plates = total dairy references × coefficient of specialization × yield / average weight of whole cheeses. - Total dairy references correspond to the whole of the milk collected by the processing unit. - The coefficient of specialization is the proportion of milk used in the manufacture of Comté. - The yield is the average yield of processing of milk into cheese for the sector in 2001/02, that is to say, 9.67%. - The average weight of a whole cheese corresponds to the average weight in 2001/02. It is about 40 kg. Adjustments can be made if the processing unit proves that its yield is higher than 9.67%. A claim cannot be made when the yield is higher than 10.1% (CIGC, 2006). 3 This practice relates only to the approved agreements. Thus, in 1994, the CIGC wanted to apply a production ceiling (production plan) without prior agreement of the public authorities. A cheese dairy referred the matter to the Fair Trading Council, which condemned the CIGC to a fine (Fair Trading Council, 1998). The production plan thus clearly results from a negotiation between the CIGC and the ministries. 17

The annual production plan is based on an analysis of the Comté market and its evolution. It proposes measures for managing the market that will come into force during the following campaign. In particular, it defines: - Increases in production and rules of attribution of “green plates” to the various companies; - The measures to be taken in the event of companies exceeding the production limit; - Measurements of the flow of Comté towards industries of processed cheese production; - Extraordinary measures such as an additional requirement of sale towards processed cheese industries or a percentage reduction of production rights (CIGC, plans de campagne, various years). Table 2 allows us to compare the effective production figures for the last campaigns with the variations of production defined in the production plan. It also provides information on the other measures implemented in these production plans. It shows that the increase in production is usually higher than the increase in production references. The additional levy to be paid for exceeding the production limit is gradually increasing over time, clearly to discourage any production beyond the quota. It is nevertheless hard to know the level of production exceeding the global quota. In the same way, it is difficult to know whether over- quota productions occur because they are profitable or for other reasons (unforeseen changes in production level, etc.).

Table 2. Main measures taken in the production plans and trends in the production of Comté Production Actual increase in Initial increase Final increase Additional levy % minimal sales Levy if not (tonnes) production in production plan granted* (over-quota towards second compliant to (tonnes) (tonnes) (tonnes) production) processing and melting melting 2000/2001 48290 1515 800 1095 11 x basic levy 3% 0.53 €/kg 2001/2002 49054 764 200 375 11 x basic levy 3% 0.53 €/kg 2002/2003 49177 123 ** 400 400 15 x basic levy 3% 0.53 €/kg 2003/2004 49641 464 ? 400 *** 15 x basic levy 2% 1 €/kg 2004/2005 50043 402 ? 0 ** 15 x basic levy 2% 1 €/kg 2005/2006 Approximately ? 300 ** 15 x basic levy 2% 1 €/kg 600 2006/2007 1000 20 x basic levy 2% 1.5 €/kg

Source : CIGC production plans. *The final increase granted is higher than the initial increase because some producers (establishing young farmers fulfilling certain conditions) automatically obtain production references. Therefore, the quantity of in-quota references is initially unknown. ** In 2002/2003, it was decided to reduce the reference levels by 2%. This explains why the production increase was lower than that granted by the production plan. *** Since 2003/2004, the calculation of the production reference levels has been changed. Some cheese dairies now have a potential to increase their production, insofar as they can improve their cheese-making yield. The resulting increase in production will thus be spread out over several years because it is related to an increase in the production yield.

The increases in production decided in the production plan are granted to the cheese dairies according to their distribution in three categories: − unit under redevelopment of more than 2 million litres: for example, changing from Emmental production to Comté production; − unit in place of more than 2 million litres; − unit of less than 2 million litres (whether under redevelopment or in place). The production plan establishes a percentage of increase in production (in the form of green plates for basic production) for each of these three categories. Table 3 summarizes the increases decided over recent years.

Table 3. Comparison between demand for additionnal green plates and actual increases in green plates from 1997 to 2005. In tons of unripened cheese

Units under Quantity Total units in place redevelopment units < 2 million litres demanded increase (> 2 million litres) (> 2 million litres) Quantity Quantity Quantity satisfaction Quantity Satisfaction Quantity satisfaction (tonnes) (tonnes) (tonnes) rate (tonnes) rate (tonnes) rate

1997/1998 3353 952 280 15.60% 570 39.15% 102 100% 1998/1999 3948 1226 300 17.80% 600 30.99% 326 100% 1999/2000 4621 649.4 150 7.50% 300 12.39% 199,4 100% 2000/2001 5770 1095 400 13.49% 350 14.23% 345 100% 2001/2002 5358 375 100 3.50% 100 4.30% 175 100% 2002/2003 400 200 10.16% 200 7.94% 2003/2004 400 200 100 100 100% 2004/2005 0 2005/2006 4990 300 128 5,88% 72 2,73% 100 57% Source: CIGC production plans.

The satisfaction rate corresponds to the ratio between the requests for green plates and the additional green plates that are granted. It is clearly decreasing over time. The small units remain favoured compared to the others, but 2005/2006 is the first year during which the rate of satisfaction (57%) was not 100% for units producing less than 2 million litres. This shows that the potential of increase in production remains strong. Lastly, the increase in production is also related to the start-up of young farmers taking over dairy farms under PDO, which automatically triggers the attribution of green plates. Indeed, when young farmers take over a dairy farm, they benefit from an additional attribution of quota, in addition to the quota of the farm that is being taken over. This

additional attribution is 0 to 30,000 litres, depending on to the initial farm quota. The green plates attributed for this reason can account for large volumes. Thus, in 2006, the equivalent of 150 tonnes of cheese was granted as green plates to young farmers (Mourthaux, interview).

Other missions of the CIGC

Communication about Comté is a very important branch of activity of the CIGC: advertising campaigns, organization of events around the various actors of the industry. The advertising budget is by far the most important expenditure of the CIGC. These collective expenses are considerable if we compare them with the expenditure incurred by the cheese industry, which spends on average approximately 1% of its turnover in advertising.

Table 4. Advertising expenses of the Comté industry In million euros 2000 2001 2002 2003 2004 Total sales turnover 219 231 238 242 243 Advertising expenses 3,6 3,7 3,6 3,7 4,2 Advertising over sales (%) 1.7% 1.6% 1.5% 1.5% 1.7% Source: CIGC data.

Table 5. Advertising expenses (1000 Euros)

Variation 2000 2004 2000-04 National advertising campaign 2 265.9 1 907.9 -16% Roads of Comté - 476.6 House of Comté - 49.9 Advertising USA 95.5 209.2 +119% Advertising Japan - 140.1 Advertising Germany 624.3 610.0 -2% Advertising Belgium 155.9 293.5 +88% Other actions 504.8 482.8 -4% Total 3 646.3 4 169.9 14% Source : advertising data from CIGC.

As shown in Table 5, the advertising is now more oriented towards exports. With respect to France, an effort is made towards tourism activities (roads of Comté, ...) at the expense of collective publicity on the product.

Overview of the production chain

General presentation of the chain

The sector is made up of four successive stages: milk production, cheese-making processing, ripening and distribution. Milk is produced by farmers located in the PDO area fulfilling the PDO specifications. Their milk is collected at maximum twenty-four hours after milking by a cheese dairy (often called a cheese-making chalet) that manufactures unripened and pre-ripened cheese. The processing and pre-ripening phase lasts approximately 21 days. The unripened cheese is then matured for three to twenty-four months. The ripened cheese is sold to the retailers (primarily supermarkets and hypermarkets, but also specialized outlets or export) (Bret, interview). The average production yield of unripened cheese from milk is 9.91%. Thus, we obtain 9.91 kg unripened cheese from 100 litres of milk, or we need 10.1 litres of milk to produce one kg of unripened cheese (DRAF Franche Comté, 2006). The average production yield of matured cheese from unripened cheese is 93.4%. Thus, we obtain an average of 93.4 kg of matured Comté from 100 kg unripened cheese4. We can distinguish three main systems of organisation, which differ by the level of integration of the agents (Diagram 1).

4 The ripening yield given here corresponds to an average estimate: the cheese looses more water at the beginning, during pre-curing (0.1% per day); the loss is greater if the cheese is initially wet (doubling the loss when the moisture content of the cheese rises from 55% to 57% ); the loss becomes even greater with longer ripening (and can reach 10%);

Diagram 1. Organisation of the Comté production chain

NWA means National Weighted Average (see below).

The classical scheme is that of a non-integrated organisation, where the cheese dairy and the ripener are independent of one another. This scheme accounts for approximately 85% of the Comté production. The cheese dairy sells unripened cheese to a maturing specialist (or ripener), who, after ripening, sells it to the final retailer. The cheese dairy is either a co- operative (75% of Comté production) or a private company (10% of Comté production). All ripeners are private firms. Between the cheese dairy and the ripener, the transaction is usually based on a standard contract known as a CIGC contract. One third of the exchanges are carried out strictly according to this contract, while the remainder take this contract as a starting point. This contract mainly defines how the price of unripened cheese is determined. This price is based directly on the final selling price of ripened cheeses via the calculation of a reference price (called National Weighted Average or NWA, see below). Two cases arise for the payment of milk producers. If the cheese dairy is a co-operative, the milk price is deducted from the selling price of unripened cheese and the costs of processing cheese milk. If the cheese dairy is a private firm, the sale of milk is contractual. In this scheme, a share of the risks of price variation of the Comté is taken on by the cheese dairies, which are paid according to the selling price of the ripened product. Conversely, the ripener’s payment is largely based on the lump sum refund of the costs of ripening (see below, determination of the NWA) (Bret, interview).

The second scheme is a vertical integration of the ripening activity by cheese-making co-operatives. It accounts for approximately 10% of the production of Comté. This scheme is used by the Agricultural Cooperative Union of Traditional Cheese-making dairies (UCAFT). This cheese-making dairy co-operative carries out part of the ripening at a ripener integrated into the system, while sub-contracting another part to a ripener who is paid a percentage of the selling price. This system is different from the CIGC contract, which is based on the average selling price of ripened cheeses. Here, the subcontracted ripener is paid according to the selling price of his own cheeses. The dairy producers are paid according to the co- operative system. Taking into account vertical integration, the price risks are supported by the agricultural producers (Paris, interview). The third scheme is an integration of unripened cheese production and ripening by private operators who purchase their milk through contracts with milk collection co- operatives. This system accounts for approximately 4% of the total Comté production. It is carried out primarily by the Entremont dairy group. Only part of the production of this firm is carried out through this scheme. For the major part of its production, this industrial dairy entrusts the production of unripened cheese to a co-operative in a form more or less resembling a CIGC-type contract (Paris, interview). The current structure of the vertical chain is a result of history. In the beginning, only the first scheme (non-integrated organization) existed. The second scheme appeared in the 1930s, but partially collapsed and continued to exist on a smaller scale after the 1980s. The third scheme appeared in the 1980s and took a significant scale in the 1990s.

System of payment for unripened cheese by CIGC contract

A CIGC contract lays down rules about the transaction between the unripened cheese maker and the ripener (CIGC, 2004b). This contract consists of ten articles defining the conditions of payment for the cheese and the way to determine the price of unripened cheese.5 This selling price or NWA (National Weighted Average) results from a calculation in several stages. In brief, we can describe it as follows. Each month, the average selling prices of ripened cheeses are calculated using the ripeners’ declarations of cheese sales (prices and volumes). This value is called the “all

5 Contract for the purchase of Comté according to the quality of the products, “article 6: The price is determined, on the basis of removed weight, with reference to the rate fixed by the Intra-Chain Contracts Commission for the month of manufacture concerned.”

inclusive charge NWA” and represents the average sales turnover of the ripeners per tonne of cheese (see box below for more details). Expenses corresponding to the ripeners’ production costs (or a part of these costs) are deducted from the “all inclusive charge NWA” to obtain the base NWA, which is the reference for transactions between the cheese-makers and the ripeners. The actual payment of the cheese dairy is then still dependent on one factor, the quality of the goods (see Table 4). A coefficient is applied to the base NWA according to the cheese quality (cheeses are classified into four categories, with the better the quality, the higher the coefficient) (CIGC, Commission interprofessionnelle des contrats, 1998-2005).

Table 6. Payment scale for unripened cheese according to the base NWA (in force since 01/01/2004) Period Quality A B C D November to April 88.50% 75.50% 65% 65% May to October 95% 82% 65% 65% Source: CIGC.

Thus, the price paid by a given ripener to a given cheese dairy is based on a scale depending on the average price of Comté calculated over the whole production of the industry rather than on the price of the specific product manufactured by a given cheese dairy (except for the classification in main quality categories). The transaction takes place as if, for each class of cheese quality, the origin of the unripened cheeses has no importance. In the same way, whether a cheese is ripened by a company or an other does not influence the payment of unripened cheese.

Box 2. Determination of the National Weighted Average

Each month, the CIGC calculates the average sale price of cheeses, called the National Weighted Average (NWA). It is based on the average selling price of cheeses, all categories taken together, on exit from the maturing cellar. This value is calculated from the ripeners’ declarations to the CIGC of the quantities sold and their turnover in the month. A base NWA is calculated by deducting the ripening costs from this NWA, which is inclusive of all charges. These ripening costs include transportation, general overheads and financial expenses as well as storage costs.(1)

Diagram 2. Determination of the base NWA according to the all inclusive charge NWA

As several months elapse between milk production and ripened Comté production, a precise time schedule is also defined for the payments. It is presented on diagram 3 (CIGC, 2004b).

(1) This deduction is recent, since it appeared in 2004. In 1998, the duration of ripening increased from 90 to 120 days. The ripeners required that the additional costs of ripening should be taken into account. These costs were estimated at 4.25% of the NWA on exit, which thus comes to be charged in addition to the expenses already considered

Diagram 3. Scheduling of deliveries and definition of payments to the cheese-making dairy

The unripened cheese is delivered to the ripener by the cheese dairy approximately 21 days after the start of manufacture. In the second month of ripening, an advance payment is paid to the cheese dairy for the delivered cheeses. In the third month, a floating NWA is determined that is used to calculate the purchase price of the cheese. To smooth out the fluctuations occurring from month to month, this floating NWA corresponds to the average of the “all inclusive charge NWA” over the last six months. Then, the deductions previously described are used to calculate the base NWA. In the fourth month, the cheeses are classified according to four quality classes: A, B, C or D (A being the best quality). This classification is made in agreement between the cheese-maker and the ripener according to the taste, body, openness, rind hardness and shape of the cheese.(1) The final use of the cheeses depends on their category. Cheeses of class A and B are intended for consumption “as they are”. The cheeses of category A are wrapped around by a green band, while those of category B are surrounded by a brown band. The cheeses of category C go through a second processing (cheese for pizzas, for example). The cheeses of category D are used as ingredient in the processed cheese industry. For each quality of cheese, the price of unripened cheese is equal to a certain percentage of the NWA, according to a scale pre-established by the CIGC. The scale currently in force was defined in 2004 (Table 4). The scale distinguishes two periods, to encourage stronger production during the summer period. In the sixth month, the total value of the delivery is calculated. The ripener then pays the cheese-maker the balance on the instalments. To this sum can be added any rebates or other commercial actions made by the ripener with regard to the cheese-maker. The system of payment has evolved over time due to changes in the definition of the NWA and the payment scale for the various categories (Paris, interview). (1) In 2005, 89% of cheeses were of category A, 9% of category B and 2% of category C and D.

Evolution of prices at the various stages of the chain

Here, we analyse the changes in prices over time at the various stages of the Comté industry. Table 7 reports the prices of Comté and unripened cheese taking into account the changes in the way unripened cheese price is calculated (changes in some expenses deducted from the all inclusive charge NWA and changes in the coefficients of quality applied to the base NWA).

Table 7. Trends of the NWA, the price of unripened cheese and revenues of ripeners (€/tonne of unripened cheese) all inclusive charge average selling price of average revenues of NWA (price of ripened unripened cheeses6 ripeners cheese) Average 2003-2005 5 553 4 677 876 Average 1998-2000 5 306 4 562 744 Variation 247 115 132 Variation (%) 4.7% 2.5% 17.7% Source: CIGC contracts.

The average Comté price increased by approximately 5% between the period 1998- 2000 and the period 2003-2005. This rise of selling price made it possible to increase the purchase price of the unripened cheeses (which increased by 2.5% on average), and increase the turnover of the ripeners. In terms of selling value, 47% of the increase in the price of Comté was distributed to the agricultural producers and 53% to the ripeners. The price of milk for Comté is significantly higher than the average milk price in France. In Graph 1, we present the trends of the average prices of milk in France and milk used for the production of Comté. The difference between these prices increased over time. In particular, whereas the price of milk in France varied little over the period 1990-2003, the price of milk for the production of Comté increased by more than 10%.

6 Details on the calculation of the annual average sales of unripened cheeses are given in the section on cheese- makers.

Graph 1. Comparison of the price of milk in France and the price of milk for Comté (€/1000L).

400,0 350,0 300,0 250,0 200,0 150,0

Euro/1000L 100,0 50,0 0,0

3 5 987 989 991 003 1981 1983 1985 1 1 1 199 199 1997 1999 2001 2 Year Milk price in France milk price for comté cheese

Source: Agreste figures and data on milk 1981 to 2004, CIGC.

Evolution of production of Comté and Emmental and exportsof Comté

Graph 2. Comté and Emmental: change in production between 1994 and 2004 (in 1000 tonnes)

140

120

100 Block Emmental Grated Emmental 80 Comté 60

8 0 2 9 0 0 04 9 0 1994 1996 1 20 20 2

Source : SIGF and DRAF.

Table 8. Exports of Comté cheese to Belgium and Germany Belgium Germany 1998 315 378 1999 401 476 2000 415 644 2001 542 882 2002 532 1107 2003 466 1093 2004 572 1156 Source : CIGC.

As shown on Graph 2, Emmental production has slightly increased over time, with a decrease in the production of Emmental in block and a significant increase of the production of grated emmental. As a whole Comté production is about 1/5 of Emmental production. Although Comté is mainly consumed in France, there is an important effort to export this product. Indeed, the exports to Belgium and Germany have increased from about 700 tons in 1998 to more than 1700 tons in 2004.

References CIGC. Plans de campagne, 1996/1997, 1997/1998, 1998/1999, 1999/2000, 2000/2001 2001/2002, 2002/2003, 2003/2004, 2004/2005, 2005/2006, 2006/2007. CIGC. Commission interprofessionnelle des contrats, 1998-2005 CIGC, 2004. Accord général entre les coopératives fabricants et industriels laitiers, 5 pages. CIGC, 2004b. Contrat pour l’achat de comté en fonction de la qualité des produits, 6 pages. Council of the European Communities, 1992. Council Regulation (EEC) No 2081/92 of 14 July 1992 on the protection of geographical indications and designations of origin for agricultural products and foodstuffs. DRAF Franche Comté, 2006. Synthèse des données Agreste les chiffres du lait de 1991 à 2005. European Commission, 2006. Commission Regulation (EC) No 1107/96 of 12 June 1996 on the registration of geographical indications and designations of origin under the procedure laid down in Article 17 of Council Regulation (EEC) No 2081/92. Institut National des Appellations d’Origine (INAO), 1958. Décret du 18 Janvier 1958 relatif à l’appellation d’origine contrôlée Comté. Modifié par décret le 13 avril 1976. INAO, 1986. Décret du 29 Décembre 1986 relatif à l’appellation d’origine contrôlée Comté. INAO, 1998a. Décret du 30 Décembre 1998 relatif à l’appellation d’origine contrôlée Comté. Modifié par décret du 10 Janvier 2000.

INAO, 2006a. Website http://www.inao.gouv.fr. INAO, 2006b. Projet de modification du décret relatif à l’appellation d’origine contrôlée Comté. INAO, 2006c. Projet de modification du règlement d’application de l’AOC Comté. Monnet J.C., 1996. Délimitation géographique et caractérisation des terroirs du comté à partir des critères agro-pédologiques puis climatiques. Vernus M., 1988. Le comté, une saveur venue des siècles. Textel, p.24 et pp 207-218.

Farmers

Analysis of requirements for farmers set out in the specification

The PDO Comté area shows a strong orientation towards dairy production, and a strong specialization of the farms producing milk. In 2000, 44% of the farms in the Comté area belonged to the specialist dairying type of farming (TF 41), and these accounted for 88% of the farms producing milk in this area. By comparison, 18% of the farms in France belonged to TF 41, accounting for 68% of the farms producing milk in France.7 The table below presents average data for various types of farm, which is useful for discussing the levels of constraint induced by the requirements for farmers defined in the Comté specification.

Table 9. Characteristics of specialized dairy farms (TF 41) of the CERJ and FADN databases CERJ FADN Jura, Jura, France Brittany Franche- PDO non-PDO Comté Main Fodder Area (hectares) 84.6 101.2 50.8 43.7 74.7 Annual Work Units (AWU) 1.82 2 1.62 1.74 1.53 Number of dairy cows 39.8 49.3 38.8 40.4 37.9 Milk production (litres) 232,288 269,267 224,962 258,798 207,662 Production by dairy cow 5,836 5,458 5,798 6,406 5,479 Number of dairy cows per hectare 0.47 0.52 0.76 0.92 0.51 of Main Fodder Area Stocking rate in Livestock Units 0.81 0.88 1.4 1.6 0.9 (LU)/ha Main Fodder Area Milk production in litres/ha Main 2,746 2,661 4,428 5,922 2,780 Fodder Area Milk production per AWU 127,631 134,634 138,865 148,734 135,727 Source : Chambre d’agriculture du Jura 2005 and Agreste 2006.

Current specification of Comté

The decree and implementing regulations of Comté currently define five requirements for the farmers. Two of these do not, in principle, introduce any constraints for the farmers, while the other three can imply some constraints. The two requirements that are in principle nonconstraining concern the cattle breeds used for producing milk and the stocking rate per hectare.

7 These figures are calculated according to the figures of the 2000 Agricultural Census, DRAF Franche-Comté 2006 and Agreste 2005.

− The milk used for the production of Comté must come only from cows belonging to the Montbéliarde or French Simmental breeds. These are traditional breeds of the area, whose milk, rich in proteins, presents a good aptitude for cheese dairy processing (Montbéliarde is the main breed used by the French PDO cheese-making sector). The few scientific studies undertaken on this topic indicate that cattle breed influences the sensory characteristics of cheeses, at least for cheeses manufactured from full-cream milk (which is the case for Comté) (Coulon et al., 2005). In practice, the breed requirement does not appear constraining, because the local farmers usually use these breeds even if they do not produce Comté. Thus, the cattle population of the Jura department currently includes 92% of Montbéliarde, 3% of Simmental and 5% of herds of other breeds, the livestock of Doubs being rather similar (Belot, interview). However, only 72% of milk utilization in the PDO area is subject to the specification of using Montbéliarde or Simmental breeds (cf. below). − The stocking rate is limited to one cow per hectare of grassland pasture. This rule aims at preserving extensive structures. However, in an area with a vocation for extensive farming, this ceiling limits very few of the farms (Meudre, 2006). Thus, the CERJ data (for the Jura) show an average stocking rate of 0.47 milk cows per hectare in PDO farms, as against 0.52 in non-PDO farms. The individual data from the Pacteor sample in the Doubs (not presented here) show that the 71 Comté farms of this network have stocking rates ranging from 0.21 to 0.68 cows per hectare. These figures are well below the ceiling authorized by the Comté specification. The three requirements that can introduce an effective constraint are connected with the prohibition of silage, the limitation on the use of concentrates and the requirement to carry out two milkings per day. − The products of silage and other fermented feeds are prohibited, to prevent risks arising from the quality of the silage. Indeed, butyric spores can develop in badly preserved silage, thus contaminating milk at the time of milking. This can then cause major problems in the manufacture of Comté (late swelling, unpleasant taste and odour) (Demarquilly, 1998). In practice, the prohibition of silage does not appear really constraining with regard to corn silage, whose production would in any event be ill adapted to the mainly mountainous PDO area. However, the prohibition of grass silage can be constraining (Meudre, interview). This prohibition is a subject of debate in the sector, certain farmers disputing the risks from grass silage and wishing to be able to resort to its use. Actually, when grass silage is of good quality, the existing scientific

work indicates that its use has only a limited effect on the sensory characteristics of the cheese, apart from the colour of the paste (Coulon et al., 2005). − The concentrates given to animals must represent less than 30% of the consumed total dry matter. The limitation of concentrates aims to limit smoothing out of the chemical qualities of the milk, which has a negative influence on the taste of the cheese. An excessively high quantity of concentrates would mask characteristics that could be provided by the local flora. At the same time, with less concentrates, the fodder is less rich, particularly in proteins, which limits the overall production. The current rule of 30% dry matter is approximately equivalent to 1800 kg per cow and per annum (Arnaud, interview). Among the 71 Comté farms of the Pacteor network, 18 are beyond this limit. In other words, the limitation of concentrates is constraining for many farms and is currently not enforced by all of them (Cassez, interview). − It is mandatory to carry out two milkings per day. The changeover to a single daily milking leads to a reduction in dairy production (from 20 to 30%), but allows farmers to free up their time. Some farmers would thus wish to go over to a single daily milking, at least at the end of lactation (summer) or on Sundays (Fréquence Réseau n°22, May 2006). Up to now, scientific studies on this subject do not indicate any significant change of the sensory characteristics of cheese resulting from single daily milking (Coulon and al. 2005). The following table recapitulates the requirements of the PDO Comté specification for farmers.

Table 10. Summary table of the main elements of the Comté specification for farmers introduces a improves sensory Causes a limitation role in land use significant characteristics of of the level of and occupation of constraint cheese production territory yes (could be Mandatory breeds no possibly obtained no no of cow with other breeds) Limit of stocking No, provided it is None, provided it no Not determined rate per hectare nonconstraining is nonconstraining Yes, if problem Prohibition of potentially for yes with silage quality, yes silage grass silage (extensification) otherwise no Limitation of Yes, for some yes yes yes concentrates farms (extensification) no (on the Requirement to contrary, single Yes, for carry out two Not determined milking would yes (employment) some farms milkings per day decrease production)

Changes of the specification being considered

In the new change of the PDO Comté decree currently being discussed (INAO, 2006b), there are plans to introduce various limitations on the production level or the uses of inputs: − limitation of the stocking rate to 1.3 livestock units (LU) per hectare. This rule is a little more constraining than the current limitation of one cow per hectare, which, in this area, corresponds to approximately 1.5-1.7 livestock units per hectare (Arnaud, interview); − milk production ceiling of 4,600 litres per hectare; − limitation of the farm size to 200,000 litres of milk for the first Annual Work Unit (AWU) and 150,000 litres for each subsequent AWU, with impossibility of exceeding 5 AWUs. The available data suggest that these three rules are nonconstraining for the majority of the farms. Thus, in the CERJ sample, the average PDO farm has a stocking rate of 0.81 livestock units per hectare and produces 2,750 litres of milk per hectare, and 127,000 litres of milk per AWU, with 1.8 AWUs. The average non-PDO farm has a stocking rate of 0.88 livestock units per hectare and produces 2,650 litres of milk per hectare, and 135,000 litres of milk per AWU, with 2 AWUs. For the two types of farms (PDO/non-PDO) in the CERJ sample, the averages are well below the ceilings considered. We do not have any data allowing us to determine the distribution of these parameters. The majority of the 71 farms of the Pacteor network in the Doubs are below these ceilings (one intensive farm produces 4,870 litres per hectare, while five farms slightly exceed the ceiling per AWU).

− Limitation of the use of concentrates to 1,800 kg per cow and per annum. This rule is approximately equivalent to the current 30% dry matter rule, and thus does not lead to an additional constraint.

Additional description of production activities

Production, special characteristics of QAS

The PDO claims a link between the mode of cattle rearing (breed of cattle, local flora, extensive management of the herds) and the taste quality of cheeses. While the available scientific literature supports the existence of such a link, it is impossible, in the current state of knowledge, to demonstrate precisely how each requirement of the specification could influence the sensory characteristics of cheese (Coulon et al., 2005, Martin et al., 2003).

Additional value-adding activities e.g. on-farm processing, packaging, demonstrations (tourism)

The region also develops touristic activities in relation to Comté production. Thus, in 2002, 115 000 people visited the cheese-making dairies, 30 000 visited ripening cellars and touristic animation is developed with a museum in Poligny and the road of Comté.

Marketing, special marketing channels for QAS

All of the milk in the Comté area is delivered to cheese dairies, which use it for the manufacture of unripened cheese. In 2005, 85% of Comté milk was transformed by co- operatives and 15% by private cheese dairies (DRAF Franche-Comté, 2006).

Types of producers, market share of the QAS at producer level (e.g. % of all milk produced), production and price of QAS and reference products (trends)

Different uses of milk from the PDO area

Most of the milk processed in the PDO area is used for the production of cheese. Thus, in 2005, − 62% of the milk processed in the PDO area was used for the production of Comté, − 10% was used for the production of other PDOs (approximately 7% for Morbier, 3% for Mont d’Or, and a very small proportion for Bleu du Haut Jura), − 4% was used for the production of Emmental grand cru Label Rouge,

− 24% was used for the production of industrial cheese (7% for Emmental, 7% for Raclette, and 9% for other cheeses) (cf. graph 3).

In terms of methods of production, − The specifications of the other PDOs (Morbier, Mont d’Or, Bleu du Haut Jura) impose rules that are nearly identical to those regarding the production of milk for Comté (same breeds of cows, same limit of the stocking rate to the hectare, prohibition of silage, requirement to carry out two milkings per day; limitation of concentrates to 1,800 kg per hectare per annum already effective for Mont d’Or and in course of discussion for Morbier) (source: INAO, 2006a and INAO, 2000). − The specification of Emmental grand cru Label Rouge is also rather similar to Comté (prohibition of silage, stocking rate limited to 1.6 livestock units per hectare, limitation of concentrates to 50% of the ration; on the other hand, there is no requirement on the breed of cows nor any requirement to carry out two milkings per day) (SFAET, 2004). − There are no particular constraints on the production of industrial cheeses (French Emmental, Raclette, Gruyere).

Graph 3. Utilization of the milk processed in the PDO area

Industrial 24%

Emmental grand cru 4% Comté Other PDO (Morbier, Mont d’Or, Bleu du Haut Jura) 62%

10%

Sources: tonnages of the various dairy products of the area (DRAF Franche-Comté); technical coefficients of production (i.e., milk volume used per tonne of dairy product) (CTC for Morbier and raclette, SIGF for Emmental, Mont d’Or trade association, DRAF Franche-Comté with calculation based on the specialized units for Comté).

The milk used for the other PDOs and Emmental grand cru, which satisfies the criteria of the PDO specification, represents a quarter of the milk used for making PDO Comté. The CIGC (2006) estimates that 100 million litres of the milk produced in the PDO area is intended for the production of other cheeses, but is processed in cheese dairies of the Comté area. This milk is being increasingly used for the production of Comté (units under redevelopment). Between 1995 and 2004, the milk deliveries of the PDO area decreased, but the volume of milk used for making Comté increased: the share of milk used for Comté compared with the milk deliveries of the area increased from 55% in 1995 to 64% in 2004 (cf. table 11).8

8 There is no strict equivalence between the milk delivered and processed in the area. Thus, in 2004, the equivalent of 8% of deliveries was exported from the PDO area before processing, while the equivalent of 5% of deliveries was imported there for processing – the milk collection of the area represented 97% of the deliveries (Franche-Comté Agreste, milk figures for 2004). These primarily correspond to milk exports from the Jura towards the Saone-et-Loire for the production of yoghourt, and milk imports to the Doubs for the production of industrial cheese. From the table given below on the utilization of milk processed in the area, an approximation of the uses of the milk produced in the area can be obtained by substituting 8% of the uses for the production of industrial cheese by uses for the production of yoghourt.

Table 11. Share of milk used for Comté in milk deliveries of the PDO area Share of milk 1 000 000 Milk deliveries in the PDO including: milk used used for Comté Litres area in Comté in the PDO area 1995 798 439 55.0% 2000 792 487 61.4% 2001 775 478 61.7% 2002 791 497 62.8% 2003 760 479 63.0% 2004 764 490 64.1% Source: Agreste, 2005.

These figures indicate that, even if the production of Comté is rising and represents an increasing proportion of the use of milk produced in the PDO area, there remains an important potential for increased production. This is even without considering the increases in output and only taking account of possible substitutions with the other uses of milk in the area. Indeed, analysis of the production plan (chapter 2) shows that the applications for green plates, mostly not satisfied, represent about 10% of the production of Comté. This confirms that the delimitation of the geographical area in which the production of Comté is authorized does not currently lead to a constraint of capacity on its production.

Utilization of milk for the production of Comté and French Emmental

Milk used for Comté production is on a small scale compared with milk used for the production of French Emmental. Since 2000, milk for Comté has maintained an approximately constant proportion (14%) of the milk used to produce Comté and Emmental (see table 12).

Table 12. Utilization of milk for the production of Comté and French Emmental milk used for making milk used for making milk used for making million Comté and French French Emmental Comté litres Emmental 1996 3,206 2,778 (87%) 428 (13%) 1997 3,165 2,733 (86%) 432 (14%) 1998 3,362 2,905 (86%) 457 (14%) 1999 3,301 2,839 (86%) 468 (14%) 2000 3,402 2,916 (86%) 487 (14%) 2001 3,538 3,060 (86%) 478 (14%) 2002 3,581 3,085 (86%) 497 (14%) 2003 3,394 2,915 (86%) 479 (14%) 2004 3,525 3,036 (86%) 490 (14%) 2005 3,464 2,965 (86%) 499 (14%) Source: DRAF Franche-Comté, 2006 and SIGF, 2006.

Trends in the price of milk for making Comté, in the PDO area and French standard milk

The price of milk used for making Comté is higher than the price of milk used for other productions in the PDO area, itself higher than the price of standard milk in France (which can be used as a reference price for milk intended for the production of French Emmental). The three prices follow the same variation trend, with an increase up until 2001 followed by a reduction. The trend in the price of standard milk is directly related to the reform of the Common Agricultural Policy. The “parallel” trend in the price of milk of PDO products is consistent with the idea that PDO cheeses are in competition with cheeses produced from “standard” milk. In this case, the price of PDO milk cannot be set independently of the price of standard milk (additional developments are given in section 4.7). Between 1991 and 2004, there was a 14% increase in the price difference between milk for Comté and standard French milk, an 8% increase in the price difference between milk for Comté and PDO-area milk used for other productions.

Table 13. Price of French milk, milk of PDO area excluding milk used for Comté, and milk used for Comté (nominal euros/100 litres) price of milk in price of price of milk PDO area, French used for excluding milk standard milk Comté used in Comté (3)/(1) (3)/(2) (2)/(1) €/100 L (1) (3) (2)

1991 28.49 29.96 31.71 111% 106% 105% 1992 29.09 30.78 33.20 114% 108% 106% 1993 29.47 31.51 34.53 117% 110% 107% 1994 29.29 34.40 34.96 119% 102% 117% 1995 29.33 31.78 34.50 118% 109% 108% 1996 29.30 32.29 34.07 116% 106% 110% 1997 29.19 31.73 34.26 117% 108% 109% 1998 29.59 31.62 35.25 119% 111% 107% 1999 28.95 30.52 35.92 124% 118% 105% 2000 29.70 31.38 36.94 124% 118% 106% 2001 30.86 33.10 37.57 122% 113% 107% 2002 30.16 32.41 37.26 124% 115% 107% 2003 29.36 31.70 36.86 126% 116% 108% 2004 28.45 31.12 35.83 126% 115% 109% Source: DRAF Franche-Comté, 2006. Standard milk in France corresponds to a standard quality of 32 g/l protein and 38 g/l fat content.

Graph 4. Price of French milk, PDO-area milk excluding milk used for Comté, and milk used for making Comté, trends for 1991-2004 (nominal euros/100 litres)

35 price of milk used for Comté

33 price of milk in PDO area, excluding milk used in Comté 31 (2) price of French standard milk (1) 29

3 5 6 8 9 1 2 4 92 9 9 9 9 9 00 0 0 03 0 9 9 9 0 0 0 0 1991 1 19 1994 1 19 1997 1 19 2 2 20 2 2

Numbers of producers of QAS and reference/ substitute products, size distribution of QAS participants and non-QAS participants

The following table presents the trend in cow milk production and deliveries, as well as the number of producers and the average production per farm, in the PDO Comté area, in Brittany and in France.

Table 14. Trend in the production and deliveries of cow milk, number of producers and average production per farm for 1992 and 2004 1992 - 1992 2004 2004 PDO Comté area (Jura + Doubs) 849 812 - 4% Production of cow milk Brittany (million litres) 5,037 4,822 - 4% France 24,577 23,740 - 3% PDO Comté area (Jura + Doubs) 779 763 - 2% Cow milk deliveries Brittany (million litres) 4,707 4,613 - 2% France 2,237 2,225 - 1% PDO Comté area (Jura + Doubs) 5,565 3,948 - 29% Number of cow milk Brittany producers 31,658 19,109 - 40% France 172,634 103,051 - 40% PDO Comté area (Jura + Doubs) 153 206 +35% Average production of Brittany cow milk per farm 159 252 +59% France 142 230 +62% Source: CNIEL, 2006.

From 1992 to 2004, milk deliveries in France fell by 1%, with a 40% reduction in the number of dairy producers and a 62% increase in production per farm. Over the same period, deliveries followed the same trend in the PDO Comté area and in Brittany, showing a decrease of 2%. This reduction in milk deliveries led to a reduction in the number of milk producers and an increase in the production per farm that have been smaller in the PDO area. The number of dairy producers in the PDO area fell by 29%, as against 40% in Brittany, while the production per farm increased by 35%, as against 59% in Brittany. In the PDO Comté area, the decrease in deliveries is the consequence of an expansion of the Comté milk deliveries that does not compensate for the reduction in the other dairy outlets of the area. According to the CIGC, there was a slight fall in the number of Comté milk producers (- 1.5% between 1992 and 2004).

Yields and productivity, production costs, profitability and value added

We examine successively FADN data for TF 41 in Franche-Comté, Brittany, Auvergne and France; information on PDO and non-PDO farms in the Jura department from the CERJ

database; information on farms producing milk in the Doubs department from the Pacteor database.

Accountancy analysis of farm incomes – 2004 FADN data

We present here a cost and income analysis based on FADN data, such as carried out by Chatellier and Delattre (2003). Box 3 summarizes the definition of economic indicators used for the comparison of farms.

Box 3. Definition of economic indicators

Total output (net of purchases of livestock) - Total intermediate consumption - insurance - deductions and rebates = Value-added - taxes and other dues - wages paid - rent paid (tenant farming) + flat-rate refund of VAT + farm subsidies + insurance payments = Gross Operating Margin (GOM) - provisions for depreciation - financial charges + transfer of charges + other operating income + financial products = Pre-tax operating result - social security costs of the owner = Net result

Annual repayments = financial charges + repayment of capital on loans (long and medium term) Source: Chatellier, 2002, according to accountancy scheme.

The characteristics of specialist dairy farming in the studied areas are presented in the table below.

Table 15. Characteristics of specialist dairy farming, TF 41, FADN data

Franche-Comté Brittany Auvergne France Utilized Agricultural Area (UAA) (ha) 84 58 55 63 % Main Forage Area (MFA) 89% 75% 90% 80% Annual work units (AWU) 1,5 1,7 1,4 1,6 including % Family Work Units (FWU) 98% 95% 96% 96% Number of milk cows 38 40 34 39 Milk production (1000 litres) 208.7 258.8 162.7 225.0 Milk price in (euro/litre) 0.34 0.31 0.30 0.32 Total output (1000 euros) 92.4 116.9 67.9 101.0 including: cow milk 74% 67% 74% 71% livestock 19% 21% 20% 20% crop products 4% 7% 4% 6% Farm subsidies (1000 euros) 19.8 18.6 18.0 18.8 including: cattle premiums 25% 33% 21% 31% compensatory arable area premiums 19% 50% 11% 37% other farm subsidies 56% 17% 69% 32% Intermediate consumption (1000 euros) 50.7 66.0 41.4 58.8 Value-added (1000 euros) 37.8 48.5 23.7 39.2 Gross Operating Margin (GOM) (1000 euros) 49.4 58.6 36.4 49.7 Pre-tax operating result (1000 euros) 27.2 33.7 18.7 27.3 Net result (1000 euros) 19,4 26,5 14,04 20,04 Milk production (1000 litres/milk cow) 5.5 6.4 4.8 5.8 Number of milk cows/ha MFA 0.5 0.9 0.7 0.8 Herbivore LU/ha MFA 0.9 1.6 1.1 1.4 Milk production (1000 litres/ha MFA) 2.78 5.92 3.28 4.43 Milk production (1000 litres/AWU) 135.7 148.7 116.3 138.9 Gross margin for herbivores and fodder crops (1000 euros) 75.0 94.6 52.8 79.8 Net result per FWU (1000 euros/work unit) 13.0 16.0 10.5 13.2 Value-added/output 41% 42% 35% 39% Intermediate consumption/output 55% 56% 61% 58% Farm subsidies/pre-tax operating result 73% 55% 96% 69% Annual repayments/gross operating margin 29% 34% 29% 34% Source: Agreste, 2006.

Farm holdings in Franche-Comté are larger and more extensive than in Brittany: 75 hectares of forage area as against 43 in Brittany, 0.5 cows per hectare of forage area as against 0.9 in Brittany, milk production of 5,500 litres per cow as against 6,400 in Brittany. The price obtained for milk is 10% higher (340 euros per tonne, as against 310 in Brittany). In spite of these difference in milk prices, the ratio of the intermediate consumption to the output value in Franche-Comté (55 %) is very close to that in Brittany (56%). The farms of Franche-Comté are more dependent on subsidies than those of Brittany (farm subsidies account for 73% of the operating result, compared with 55% in Brittany). The Brittany farms primarily receive direct aids linked to production (with beef premiums and arable crop premiums accounting for 88% of the aid), whereas the Franche-

Comté farms, usually located in disadvantaged areas, benefit from Compensatory Allowances for Natural Handicaps or French Agro-Environmental Measures. Farms in Franche-Comté are more indebted than farms in Brittany, as shown by the ratio of debt servicing to the gross operating margin (annual repayments/GOM), which measures the capacity of the farm to face its debt load (ratio of 29% in the two mountain areas and 34% in Brittany). In spite of the better utilization of milk obtained in the PDO Comté area and the greater importance of farm subsidies, the profitability of the farms in Franche-Comté remains lower than in Brittany: gross operating margin of 49,400 euros (as against 58,600 euros in Brittany), pre-tax operating result of 27,200 euros (as against 33,700 euros in Brittany), net result per family work unit of 13,000 euros (as against 15,900 euros in Brittany).9 As a comparison, the table also presents the situation of farms in the Massif Central (Auvergne region). Also located in a mountainous zone, and also selling a large part of their milk under PDO quality labels, these farms have clearly lower economic results than in Franche-Comté. Graph 5 gives the net results per FWU in the different areas.

Graph 5. Net result per family work unit (1000 euros)

18.0 15.9 16.0

14.0 13.0 13.2

12.0 10.5 10.0

8.0

6.0

4.0

2.0

0.0 Franche Brittany Auvergne France Comté

The differences in net result per FWU between the areas result from differentials in the milk price, other outputs than milk, subsidies, farm size, production costs and labour productivity. We present below an analysis in terms of equivalent litres of produced milk.

This allows us to highlight the effects of these various explanatory factors in a clearer way than the preceding analysis based on accountancy results.

Production costs and farm incomes, in equivalent 1000 litres milk – data from FADN 2004

We compare the production costs of milk and the incomes of the farms in the selected areas, by calculating the whole of the production costs of milk in equivalent 1000 litres of produced milk (method equivalent to that of the Institute of Stockfarming, 2004). The table 16 presents the calculation of the total output in terms of milk equivalent, expressing this production per hectare and family work unit. For the average farm of each area, the outputs of produce other than milk are converted into equivalent 1000 litres by dividing the outputs of these other produces in euros by the price of milk in this farm. The production costs are then normalized to this total equivalent 1000 litres of milk.

Table 16. Calculation of the total output of the average farm of each area (equivalent 1000 litres of milk) – 2004 Franche- Average farm Comté Brittany Auvergne France Milk production (1000 litres) (1) 208 259 163 217 Total output (1000 euros) (2) 92.4 116.9 67.9 101.2 Of which: milk sold (1000 euros) (3) 68.3 78.6 50.9 70.5 other produce (1000 euros) (4) = (2) - (3) 24.1 38.3 17 30.7 Price of milk (euro/litre) (5) 0.34 0.31 0.30 0.32 Equivalent other produce (1000 litres) (6) = (4)/(5) 71 124 57 96 Equivalent milk (1000 litres) (7) = (1) + (6) 279 382 219 313 Production in equivalent 1000 litres of milk per hectare 3.3 6.6 4.0 5.0 Production in equivalent 1000 litres of milk per family work unit (FWU) 186 230 164 202 Source : Agreste, 2006.

The production in equivalent 1000 litres per hectare is lower in Franche-Comté (3.3) than in Brittany (6.6) and Auvergne (4.0). The labour productivity is much higher in Brittany (230,000 litres equivalent milk produced per family work unit) than in Franche-Comté (186,000 litres equivalent milk) or in Auvergne (164,000 litres equivalent milk). The differences in labour productivity between farms imply that the ranking of incomes per family work unit and 1000 litres of milk equivalent is not identical from one area to another. An analysis of the income expressed in 1000 litres equivalent milk is presented in the two following graphs.

9 Family Work Units include only unpaid labour input, while Annual Work Units include total labour input, in full-time person equivalent.

Graph 6. Milk price, farm subsidies, other products, costs and income (euros per 1000 litres equivalent milk), 200410

500

450 37,0 400 47,0 40,0 71,0 26,0 350 60,0 49,0 82,0

300

other products 250 farm subsidies price of milk 200 340 320 150 310 300

100

0 Franche comté Brittany Auvergne France

500

450

400 108,0 99,0 98,0 350 95,0 300 net result 250 total costs 200 340 330 322 150 290

100

0 Franche Brittany Auvergne France comté

This graph shows that the Franche-Comté obtains the best income per litre of equivalent milk produced. Therefore, the low level of output per family work unit explains why the incomes per work unit are rather mediocre in Franche-Comté (see graph 5). The differences in milk-equivalent net results between regions are due mainly to the following factors. − The production costs are higher in Franche-Comté and Auvergne that in Brittany. − The price of milk is definitely higher in Franche-Comté than in Brittany, due to the PDOs (0.34 versus 0.31 euros per litre). In Auvergne, in spite of the presence of PDOs, milk obtains a lower price than in Brittany (0.30 euros per litre).

10 The other products group together the flat-rate refund refund of VAT, insurance payments, transfer of charges, other operating income and financial income.

− The subsidies are higher in mountain areas (Franche-Comté and Auvergne) than in lowlands (Brittany) (mainly due to the handicap compensatory allowances). Finally, the net results per equivalent 1000 litres of milk produced are higher in Franche-Comté, and are slightly higher in Auvergne than in Brittany. To conclude, we analyse the differences in production costs between regions. The following table details the production costs in equivalent 1000 litres of milk.

Table 17. Production costs in euros per equivalent 1000 litres of milk, 2004 €/ equivalent 1000L Franche Comté Brittany Auvergne France Intermediate consumption 181,9 172,6 188,7 187,9 including supplies for animals 53.9 36.8 72.9 51.9 Cattle feed 48.3 29.7 61.7 43.8 veterinary products 5.6 7.1 11.2 8.0 including supplies for land 23.4 32.3 21.5 31.4 manure and soil improvement material 14.5 14.1 14.4 15.6 seeds and seedlings 4.9 9.9 4.3 8.6 plant health products 4.0 8.3 2.7 7.2 Including cost of mechanization (excluding depreciation) 22.0 17.6 24.7 21.6 fuels and lubricants 8.4 6.7 9.0 7.9 upkeep, equipment repair 13.6 10.8 15.7 13.7 including work by a third party 18.7 29.8 19.2 27.9 including supplies 8.2 8.7 10.6 9.2 Financial charges 7.1 12.4 6.8 11.1 Social security costs of the owner 28.0 18.9 21.4 22.0 Other costs 118.4 84.9 113.4 99.6 Rents and tenant farming 25.7 16.3 17.6 20.0 Insurance 14.1 7.5 12.9 9.6 Taxes and other dues 3.6 4.2 4.4 4.7 Wages paid 1.2 2.7 2.6 3.4 Provisions for depreciation 73.8 54.2 75.9 62.0 including equipment 47.5 32.0 53.8 37.8 including buildings 25.6 20.2 19.4 22.0 Total expenditure 335.5 288.8 330.3 320.6 Source : Agreste, 2006.

For the French average farm belonging to TF 41, the costs are composed of 59% intermediate consumption, 3% financial charges, 7% social security costs of the owner, and 31% other costs. In graph 7, we present a break-down of the costs in the three regions and in France.

Graph 7. Production costs in Franche-Comté, Brittany, Auvergne and France (euro/equivalent 1000 litres), 2004

400

350 28 21,4 22 300 18,9 250 118,4 113,4 99,6 social security costs of owner 84,9 other costs 200 6,8 11,1 7,1 12,4 financial charges intermediate consumption 150

100 181,9 172,6 188,7 187,9

0 Franche Brittany Auvergne France Comté

Source : Agreste, 2006.

The graph shows higher total costs in Franche-Comté compared with Brittany, while only the financial charges are lower, by 5 euros per 1000 litres. In Franche-Comté, the intermediate consumption and the social security costs of the owner are both higher by 9 euros per 1000 litres, while the other costs are higher by 33 euros per 1000 litres. On the whole, production costs in Franche-Comté are 16% higher than in Brittany (i.e. by 47 euros/1000 litres). The following items are more expensive in Franche-Comté than in Brittany: − Provisions for depreciation of buildings and equipment, notably due to the higher cost of construction in mountain areas because of the topography and higher required resistance; importance of preserved fodder generating costs for cattle sheds for drying in barns, and consequently more expensive specific equipment (Institute of Stockfarming, 2004). − Animal feed (in spite of a lower output per cow and a higher cereal on-farm consumption because of the greater development of grassland farming in Franche- Comté). The explanation is twofold (Institute of Stockfarming, 2004): i) the supplementation of grazing regimes is on the whole more demanding in concentrates for

the same level of production per cow, and ii) the unit price of the purchased concentrates is higher in mountain areas, because the transportation costs (distance to ports and lower volumes consumed by farms). − Rents and tenant farming. The land value is lower in mountain areas than in lowlands, but the pasture grazing system leads to the use of larger areas for the same production of milk. The main items that are less expensive in Franche-Comté compared with Brittany are work by a third party and supplies for the land. In Brittany, the rotation is very different, with the presence of maize that involves much more work by third parties than in pasture systems (farms often hire companies to collect the silage maize), and more seed purchases and plant treatment preparations.

Comparison of average PDO and non-PDO farms from the CERJ sample of the Jura

The following table shows the average characteristics of PDO and non-PDO farms in the CERJ sample of the Jura, for specialist dairy farming (TF 41) in 2004.

Table 18. Characteristics of TF 41 farms in Jura, CERJ data, 2004. Non-PDO PDO Utilized Agricultural Area (ha) 126,9 92,9 including Main Forage Area (MFA) 80% 91% Annual work units (AWU) 2.0 1.8 including Family Work Units (FWU) 95% 97% Number of milk cows 49 40 Milk production (1000 litres) 269 232 Price of milk (euro per litre) 0.33 0.37 Total agricultural output (excluding grants) (1000 euros) 130.3 112.3 including: milk sold 67% 75% livestock produce 21% 20% crop products 12% 5% Total subsidies (1000 euros) 26.3 19.8 including: animal subsidies 26% 24% crop subsidies 58% 36% other annual subsidies/aids 17% 40% Gross operating margin (1000 euros) 54.8 51.8 Operating result (1000 euros) 24.5 23.6 Result of the accounting year (1000 euros) 27.6 28.5 Production per milk cow (1000 litres/milk cow) 5.5 5.8 Number of milk cows/ha MFA 0.52 0.47 Stocking rate LU/ha MFA 0.88 0.81 Milk production (1000 litres/ha MFA) 2.66 2.75 Milk production (1000 litres/work unit) 134.6 127.6 Operating result/family work unit (1000 euros/work unit) 12.9 13.3 Source: Chambre d’Agriculture du Jura, 2005.

PDO farms are smaller than non-PDO farms (93 ha as against 127 for non-PDO; 1.82 annual work units as against 2 for non-PDO). They are centred on milk production, with 91% of the land given over to grazing, as against 74% for non-PDO farms, and they receive a 12% higher price for their milk (0.37 euros/litre, as against 0.33 euros/litre for non-PDO farms). Both types of farm are very extensive, with a slightly lower stocking rate for PDO farms (0,81 LU/ha as against 0,88 for non-PDO farms). The milk sales of PDO farms account for 75% of the total agricultural output excluding subsidies, as against 67% for non-PDO farms. The operating result per family work unit is very close in the two average farms (13,300 euros for PDO farms, compared with 12,900 euros for non-PDO farms). In spite of a higher milk price, PDO farms obtain economic results similar to non- PDO farms. This suggests that the profitability of PDO milk is not higher than that of non- PDO milk. Nevertheless, we should qualify this assumption: non-PDO farms of this sample draw a greater proportion of their income from crop products. The similar profitability of the two types of holding in fact probably reflects non-PDO farms having a lower profitability in dairy production, but stronger in crop production, particularly cereals. The choice to allocate less area to crops in PDO farms is probably explained by differences in soil quality, with PDO farms being located in zones that are less favourable for cereal crops. As a matter of fact, the Comté PDO area is located mainly in mountainous areas, but has a small part in plain with easier production conditions. Using expertise from actors of the PDO area to determine the area located in plain, and using statistical data on milk references per district of the PDO area, we evaluated that around 15% of the milk reference of the PDO area is located in this zone of plain. The non-PDO farms are mainly located in this area, which explains the differences in structures of farms (Cassez, Meudre, Paris, interviews; DRAF 2006).

Comparison of various types of farms in the Comté area (Pacteor sample of the Doubs)

Data from the Pacteor sample highlight the diversity of farm types among the specialized producers of milk for Comté. The farms of this sample are defined as becoming more extensive as their milk production per hectare decreases (see box 1).

Table 19. Characteristics of TF 41 farms of Comté, Pacteor data, Doubs, 2004 semi extensive intensive intensive large herd Utilized Agricultural Area (ha) 102.68 99.84 83.34 151.47 including Main Forage Area (MFA) 97% 96% 96% 96% Annual Work Units (AWU) 1.70 2.20 2.10 3.10 Number of milk cows 41 48 45 73 Milk production (1000 litres) 253.2 292.6 300.7 464.9 Price of milk in euro per litre 0.36 0.36 0.36 0.36 Total agricultural output (except subsidies) (1000 euros) 112.7 130.7 134.7 210.1 including milk sold 78% 80% 82% 80% Farm subsidies (1000 euros) 27.7 27.8 25.5 46.3 Gross operating margin (1000 euros) 57.0 60.3 60.4 102.4 Operating result (1000 euros) 34.3 33.3 35.5 63.9 Milk production (1000 litres per milk cow) 6.1 6.2 6.7 6.4 Number of milk cows/ha MFA 0.4 0.5 0.6 0.5 Stocking rate (LU/ha MFA) 0.7 0.9 1.0 0.9 Milk production (1000 litres/ha MFA) 2.5 3.1 3.7 3.2 Milk production (1000 litres/AWU) 149 133 143 150 Farm subsidies/operating result 81% 84% 72% 72% Operating result/family work unit (1000 euros/work unit) 20.2 15.1 16.9 20.6 Source: Ravey and Roussel, 2006.

The extensive group of the sample yields an operating result per family work unit equivalent to that of the large-herd group, and higher than that of the semi-intensive and intensive groups. In other words, these data suggest the viability of a system that covers a large area to produce milk, which is positive in terms of land use. However, we would need to back up this conclusion using more representative data.

To summarize, in spite of a better utilization of milk and higher subsidies, Franche- Comté obtains smaller net results per family work unit than Brittany. This analysis could be usefully supplemented by a study based on individual farm data. Indeed, the variations of economic performance are important within each region (Chatellier 2002). In addition, the available data do not allow us to identify any significant difference in profitability between PDO and non-PDO farms of the Comté area, and seem to suggest a higher profitability of the extensive farms in the PDO area. However, the data given here for the PDO area are intended primarily as an indication, since they are based on farm data whose representativity is unknown (CERJ sample) or where they are known to be unrepresentative (Pacteor data).

References Agreste Franche-Comté, 2005. Les chiffres du lait 2004. n°&104, novembre. Direction Régionale de l’Agriculture et de la Forêt, Ministère de l’Agriculture et de la Pêche.

Agreste, 2006. Chiffres et Données Agriculture. Rica France tableaux standard 2004. n°177, mars 2006. Ministère de l’Agriculture et de la Pêche.

DRAF Franche Comté, 2006. Electronic files synthesizing data of Agreste « les chiffres du lait » 1991 to 2005.

Chambre d’agriculture du Jura, 2005. Tableau de bord, économie agricole du Jura année 2004. pp. III-7 et III-8.

Chatellier V., 2002. Les exploitations laitières françaises sont-elles assez performantes pour faire face à une baisse du prix du lait ? INRA Productions Animales, 15, 17-30.

Chatellier V., Delattre F., 2003. La production laitière dans les montagnes françaises : une dynamique particulière pour les Alpes du Nord. INRA Productions Animales, 16, 61-76.

Centre National Interprofessionnel de l’Economie Laitière (CNIEL), 2006. La maison du lait. Données chiffrées.http://www.cniel.com/site.asp?where=scripts/public/stat.asp.

Coulon J.B., Delacroix-Buchet A., Martin B., Pirisi A., 2005. Facteurs de production et qualité sensorielle des fromages , INRA Productions Animales, 18, 45-62.

Demarquilly, 1998. Ensilage et contamination du lait par les spores butyriques. INRA Productions Animales, 11(5), 359-364.

Fréquence Réseau, 2006, n°22, May.

INAO 2000. Décret du 22 décembre 2000 relatif à l’appellation d’origine contrôlée Morbier.

INAO, 2006a. Décret du 17 mai 2006 relatif à l’appellation d’origine contrôlée Mont d’Or ou Vacherin du Haut Doubs.

INAO, 2006b. Projet de modification du décret relatif à l’appellation d’origine contrôlée Comté.

INAO, 2006c. Projet de modification du règlement d’application de l’AOC Comté.

Institut de l’Elevage, 2004. Le coût de production du lait en France : évolution sur la période 1990-2001. Synthèse d’une étude réalisée dans le cadre d’un contrat avec l’ONILAIT. n°333A.

Martin B., Buchin S., Hurtaud C., 2003. Conditions de production du lait et qualités sensorielles des fromages, INRA Productions Animales, 16, 283-288.

Monnet J.C., 1996. Délimitation géographique et caractérisation des terroirs du comté à partir des critères agro-pédologiques puis climatiques.

Ravey P., Roussel J.M., 2005. PACTEOR, campagne 2004-2005 zone plateaux montagnes. Chambre d’Agriculture du Doubs.

SFAET, 2004. Référentiel technique « emmental français est-central » grand cru label rouge.

SIGF,2006. Données chiffrées. www.emmental.fr.

Cheese makers

Technology and technical requirements

Comté production is carried out primarily in co-operative cheese dairies (also called cheese-making dairies or chalets). This co-operative structure accounts for approximately 85% of the production (see chapter 2). The cheese dairies produce unripened cheese that is then sold to the ripeners (see chapter 5). Cheese dairies making Comté are subject to production constraints following from the PDO rules, listed in the PDO decree. − The main constraint is the prohibition of collecting milk outside a radius of more than twenty-five kilometers. This limit was not established in relation to physical difficulties of collection (mountainous terrain or rigorous climate), the objective is rather to preserve the small-sized and numerous structures of collection (Labrune, interview). − There are also some requirements on the cheese-making technique. For the main processing stages, it is mandatory to comply, notably, with precise durations and temperatures. These requirements all aim at ensuring the regularity of the quality of production. They do not appear as a real constraint, but more the setting down of authentic practices in the form of law.

The average production yield of unripened cheese from milk is 9.91%. Thus, 9.91 kg of unripened cheese are obtained from 100 litres of milk and 10.1 litres of milk are needed to make one kg of unripened Comté (see box on technology).

Box 4. Main stages in the production of unripened Comté cheese (CTC, 2003) The first processing is cream separation. Only part of the milk is skimmed. Skimmed and unskimmed milks are then mixed and stored in a vat. Once in the vat, the milk is heated to around 30°C, the vats are seeded with yeast and maturation begins. After 20 to 90 minutes, the rennetting takes place and the curd is formed. The curd is mixed and sliced until coagulation is obtained with some hardening. The curd then is cut out and heated once more, but this time at higher temperatures (53-57°C). The curd is then unmoulded and, in parallel with this operation, the whey is drawn off. At this point, a casein plate is placed on the hoop-side of the whole cheese to certify the authenticity of the Comté cheese so produced. The pressing phase then begins, which lasts between 6 and 20 hours. Once formed, the cheese is unmoulded and salted, after which the pre-maturing begins. During pre-maturing, the cheese is handled every 2 or 3 days (turning, salting, rubbing and smearing). After 10 to 50 days of pre-maturing, the cheese is sold to a ripener for ripening in cellar.

A major change is envisaged in the draft decree of 2006. There are plans to introduce size limits for the cheese dairies, by placing a ceiling on the annual volume of milk that can be processed by a cheese-making unit11, while limiting the number of vat to five, each vat being required to have a volume of less than 5,000 litres (INAO, 2006).

Number and type of traders, specialization in QAS or general

As explained in Chapter 3, various types of cheeses are produced in the PDO area: Comté; other PDOs (Mont d’Or, Morbier and Bleu du Haut-Jura); industrial cheeses, mainly Emmental and Raclette. In this area, between 1992 and 2005, the cheese production increased significantly from 68,000 to 82,000 tonnes (Table 20). The proportion of the production under PDO increased, rising from 58% in 1992 to more than 73% in 2005. Comté accounts for approximately 80% of the PDO cheese produced within the PDO area. Up until 2000, the production of so-called industrial cheeses declined to 15,000 tonnes. Since then, this has risen to about 20,000 tonnes, which represents one quarter of the cheese production.

11 More precisely, the volume in litres should be lower than the best year of the unit between 2000 and 2004, which is stepped up each year by thirty times the increase in the average milk output of farmers producing milk for Comté. This limitation would not apply to small units.

Table 20. Production of various types of unripened cheese in the PDO Comté area (Jura + Doubs departments)

Total cheese Industrial cheese and production Comté Other PDO cheeses Emmental Label Rouge tonnes tonnes % tonnes % tonnes % 1992 67,910 35,016 51.6% 4,585 6.8% 27,911 41.1% 1993 68,149 36,154 53.1% 4,991 7.3% 26,633 39.1% 1994 70,572 39,666 56.2% 5,188 7.4% 25,342 35.9% 1995 68,870 41,859 60.8% 6,020 8.7% 21,268 30.9% 1996 68,754 40,912 59.5% 7,137 10.4% 19,928 29.0% 1997 70,957 41,127 58.0% 7,378 10.4% 18,496 26.1% 1998 68,845 43,903 63.8% 8,237 12.0% 16,149 23.5% 1999 71,369 44,305 62.1% 8,078 11.3% 15,629 21.9% 2000 73,880 47,138 63.8% 8,277 11.2% 15,629 21.2% 2001 73,880 46,576 63.0% 8,626 11.7% 16,877 22.8% 2002 78,363 48,631 62.1% 8,768 11.2% 20,593 26.3% 2003 76,385 46,760 61.2% 9,308 12.2% 19,945 26.1% 2004 79,192 48,371 61.1% 10,280 13.0% 20,171 25.5% 2005 82,111 49,435 60.2% 10,808 13.2% 21,506 26.2% Source: DRAF synthesis of documents providing “milk figures” between 1991 and 2005.

A large part of Comté production (i.e. 58% in 2005) is carried out in specialized units that only produce this cheese. However, the proportion of the output produced by specialized units is in decline: it accounted for 75% of the Comté production in 1997. The remainder of the production of Comté takes place in mixed units that produce primarily PDO cheeses (in addition to Comté, Morbier and Mont d’Or). Within these units, Comté accounts for 70% of the production (DRAF,Franche Comté, 2006). This association of different PDO products is consistent, considering that the production specifications for milks are almost identical12. In this way, milks can be utilized in cheese processing for all the PDO products of the area. Non- specialized units therefore offer the advantage of being able to adapt the volumes of each production to the price trends of each cheese variety.13 Although the allocation of milk over the different cheeses is decided by cheese-makers, usually farmers producing milk for Comté know what their milk will be used for, i.e. Comté or possibly also other PDOs (farmers know which cheese-maker is collecting their milk and what type of cheeses he produces).

12 See chapter 3. 13 In the case of Mont d’Or, for example, production is usually carried out with winter milk. It is thus possible to make Comté with summer milk and Mont d’Or with winter milk. In this case, the flexibility of the cheese- making unit is fundamental (Labrune, 2006) .

Table 21. Volumes of unripened Comté produced in specialized cheese dairies and mixed cheese dairies

Comté production of Total Comté Proportion of production Tonnes specialized units production from specialized units 1991 25,504 33,359 76% 1992 27,372 35,016 78% 1993 27,561 36,154 76% 1994 25,774 39,666 65% 1995 29,715 41,859 71% 1996 28,652 40,912 70% 1997 30,678 41,127 75% 1998 31,165 43,903 71% 1999 31,396 44,305 71% 2000 32,513 47,138 69% 2001 33,296 46,576 71% 2002 33,108 48,631 68% 2003 30,387 46,760 65% 2004 30,395 48,371 63% 2005 28,703 49,435 58% Source: DRAF synthesis of documents giving “milk figures” between 1991 and 2005.

The number of units producing Comté, taking co-operative and private units together, fell by more than 25% between 1991 and 2005 (Table 22). As a comparison, the number of units producing Emmental in the area dropped sharply, falling from 39 in 1991 to 7 in 2005. This trend is explained by the decrease in the Emmental production in this area and by an increase in the size of the units (lower than 1,000 tonnes in 1992, and now higher than 3,000 tonnes). The average size of Comté units has doubled from 1991 to 2005 rising from 150 tonnes in 1991 to approximately 300 tonnes in 2005. The average unit size of Comté production remains modest as compared to the average size of emmental units in France which is larger than 2600 t/year, that is more than 8 times the average size of Comté units (Table 23). Moreover, 74% of the production of French Emmental is produced by only 12% of the cheese-dairy manufacturers (i.e. an average of 16,400 tonnes per unit).14 Most of the large units are concentrated in the West of France, while the small units are distributed over the mountain massifs of the East. The top seven companies manufacturing Emmental produce nearly 92% of the total output (SIGF website). Thus, the production of Emmental is far more concentrated than that of Comté, and is carried out in much larger-sized manufacturing units.

14Correlatively, 75% of the cheese dairies carry out only 20% of the production volume.

Table 22. Number of Comté manufacturers and average size of units

Average production of Comté per unit Numbers of cheese-making dairies producing Comté (tonnes/year) total including private firms including co-operatives 1991 225 34 191 148 1992 205 30 175 171 1993 199 32 167 182 1994 192 29 163 207 1995 189 26 163 221 1996 187 30 157 219 1997 181 26 155 227 1998 181 28 153 243 1999 179 28 151 248 2000 177 29 148 266 2001 180 29 151 259 2002 178 28 150 273 2003 174 26 148 269 2004 168 26 142 288 2005 162 26 136 305 Source: DRAF synthesis of documents giving “milk figures” between 1991 and 2005.

Table 23. Emmental production: number of units, volume of cheese in tonnes and average production per unit.

Volume of Average Number of cheese produced production per manufacturers in tonnes unit (tonnes/year) 1994 124 198,654 1,602 1995 119 214,833 1,805 1996 114 223,346 1,959 1997 97 217,192 2,239 1998 86 236,012 2,744 1999 81 232,768 2,874 2000 92 239,914 2,608 2001 88 256,135 2,911 2002 93 258,011 2,774 2003 97 244,907 2,525 2004 89 253,311 2,846 2005 94 245,094 2,607 Source: SIGF website.

Quality of unripened cheese

The production of unripened cheeses is subject to a classification into four quality groups (cf. section 2). This classification is established from a scale defining the precise criteria for evaluating cheeses. In practice, the ripeners and cheese-makers carrying out this classification are nevertheless allowed some considerable room for manoeuvre.

Table 24. Percentage of unripened cheese according to quality level (A, B, C and D)

% 1998 1999 2000 2001 2002 2003 2004 2005 A 81.66 84.18 87.75 87.81 88.96 89.65 89.24 89.28 B 14.52 12.82 10.38 9.93 8.89 8.30 8.90 8.62 C and D 3.83 3.01 1.84 1.74 2.21 2.16 1.86 2.15 Source: CIGC contracts.

The proportion of grade A Comté has increased over the last ten years. Thus, nearly 90% of the Comté output nowadays belongs to category A (highest quality).15 The categories C and D account for only 2% of the production. This could result from i) technological research and development that aimed to improve the process, ii) improvement in the technical skills of cheese makers and investments in the different units. However, it is also important to have in mind that the classification procedure, even if it is based on precise criteria, results from agreements between cheese makers and ripeners.

Input prices and production costs

The main inputs for the manufacture of unripened cheese are milk purchases and labour costs. The following table shows the trends in production costs of the Jura co-operatives specialized in Comté. In 2004, the average production cost of unripened Comté is 4.75 €/kg, out of which three quarters are milk purchases. However, given the co-operative structure of this branch of the sector, the milk price is a direct result of the sale of unripened cheese to the ripeners.

15 The values reported in the table come from CIGC contracts. These contracts represent approximately one third of the production. However, according to the CIGC, they correctly represent the distribution by quality over the whole of the sector.

Table 25. Production costs of unripened cheese, co-operatives of the Jura (€/1000 L milk) Production cost Purchase price (except milk) of milk Total production cost €/1000 L milk €/1000 L milk €/1000 L milk €/kg Comté 1998 88 345 (80%) 433 4.37 1999 91 351 (79%) 442 4.46 2000 93 361 (80%) 454 4.58 2001 98 370 (79%) 468 4.72 2002 99 370 (79%) 469 4.73 2003 107 367 (77%) 474 4.78 2004 110 361 (77%) 471 4.75 Source: Paris, 2006a.

Table 26 presents the distribution of the production costs, excluding the cost of milk, for all the co-operatives of the Jura department, for the average period 1998-2004. The main costs are wages, which account for 40% of the production costs outside milk.

Table 26. Distribution of production costs, excluding price of milk – average 1998-2004

in Percentage compared to euro/1000L the total cost Wages 43 39% Fixed costs 27 25% Operational costs 27 25% Depreciation + financial charges 18 17% Total cost 110 Source: Paris, 2006a.

It is noteworthy that the production costs show a great variability between the various co-operatives in the Comté area. In 2005, according to the analyses of the Federation of the Cooperative dairies of the Jura, these production costs ranged between 84€/1000L and 180€/1000L for the co-operatives in question. However, some of the co-operatives have other activities than Comté production (other PDO production, other activities). The comparison of costs is therefore difficult and it was not possible given the data we had to separate among these different costs. Table 27 reports the trend in the average cost of processing of milk into Comté. It was obtained using the accountancy data of a sample of 17 co-operatives making Comté in the Jura department.

Table 27. Trend of the cost of processing of milk into Comté (in €/1000 L milk) and revenue from sales of the products

Total cost Labour costs Milk price Cheese Other revenue (except milk) revenue 1998 88.4 38 344.5 412.1 50 1999 91.5 38 350.6 418.9 50 2000 93.0 38 361.3 442.9 47 2001 97.6 41 370.5 439.6 54 2002 99.1 41 370.5 437.9 47 2003 106.7 44 367.4 429.0 46 2004 109.8 43 361.3 426.1 48

Sources: milk price: DRAF/Agreste; cheese price: CIGC. Costs calculated from data of Jura FDCL.

Thus, the labour costs account for approximately 40% of the total processing cost of milk into Comté (not including cost of milk). As part of the turnover, the sales of products related to Comté production (butter in particular) account for approximately 10% of the total revenue. Beyond these average values, cost variability exists among the different co-operatives. This variability is illustrated by the following graphs which show, for the various co- operatives, the total costs and price of milk paid to the producers according to the size of the processing unit for the year 2004.

Graph 8. Total production cost as a function of volume processed

560

540

520

500

euros/1000l 480

460

440 0 1 000 000 2 000 000 3 000 000 4 000 000 5 000 000 6 000 000 litres

Graph 9. Labour cost as a function of volume processed

40 Euros perlitres 1000

30 0 1 000 000 2 000 000 3 000 000 4 000 000 5 000 000 6 000 000 Volume of milk transformed in litre

Graph 10. Milk price as a function of volume of milk processed

375

370

365

360

355

price in euros/1000L 350

345

340 0 1 000 000 2 000 000 3 000 000 4 000 000 5 000 000 6 000 000 volume of milk in litre

Source: Calculated from the Jura FDCL.

We set up panel models (17 co-operatives over 7 years) to study the possible occurrence of scale effects. While all the models tested highlighted the existence of fixed effects, they did not reveal any significant effects due to size of operation on the costs or the price of milk paid to the producer. Thus, we did not find a scale effect in relation to the volume transformed. In the absence of economies of scale, the limitation of the size of the units has no consequence on the cost efficiency as it means that the cost is not affected by the size of the unit. However, it is noteworthy that most of the observations relate to firms ranging very little in size (between 2 and 3 million litres). It is thus difficult to extrapolate to significantly larger size (as those observed for emmental production). Moreover, it is possible that a more in depth analysis of scale economies (involving additional variables) would lead to different results. The results also suggest that there is a strong fixed effect. This means that there is room for improving the costs efficiency of some units. The constraints associated with the collection zone made it possible to maintain the rather dense network of cheese dairies in the PDO area. These dairies are primarily co- operatives, which allows the dairy producers to benefit from the value added to the product during its processing into Comté.

Selling prices

The selling prices of unripened cheeses result from a series of calculations (section 2) based on the all-inclusive-charge floating NWA (average of the selling prices of Comté by the

ripeners over the last six months). The contract cost-base price of unripened cheese is obtained by deducting the contractual costs of ripening from the all- inclusive-charge NWA. A coefficient corresponding to the classification of cheese in the quality scale is then applied at this cost-base price. We then obtain the price paid by the ripener to the cheese-maker for this quality of cheese (CIGC, 2004). The following table gives the values for each calculation step, as well as the cheese- dairy selling price of each category per year. The annual average price corresponds to the average price of the various categories, weighted by the quantities of cheese in each category. The system for calculating the price of unripened cheeses from the NWA has varied over the course of time. Higher and higher fixed costs have been deducted from the NWA to determine the “contract cost-base price”, i.e. the price used in calculating the payment for unripened cheeses. This trend has been matched by an increase in the coefficients used for determining the price of unripened cheese.16 (CIGC, Commission interprofessionnelle des contrats, 1998-2005).

Table 28. Trend of the selling prices of unripened cheeses according to their quality All Annual inclusive average charge Category A Category B Category C and D price NWA Contract Price of floating cost-base Price of A Price of % C and C and D (€/t) Year (€/T) price (€/T) % A (€/T) % B B (€/T) D (€/T) 1998 5,186 5,246 81.66 4,332 14.52 3,777 3.83 3,095 4,205 1999 5,307 5,312 84.18 4,428 12.82 3,825 3.01 3,134 4,313 2000 5,423 5,365 87.75 4,483 10.38 3,864 1.84 3,166 4,393 2001 5,564 5,330 87.81 4,565 9.93 3,955 1.74 3,239 4,474 2002 5,524 5,035 88.96 4,597 8.89 3,986 2.2 3,268 4,514 2003 5,585 5,093 89.65 4,651 8.30 4,032 2.1 3,307 4,572 2004 5,577 4,839 89.24 4,455 8.90 3,825 1.86 3,146 4,375 2005 5,495 4,762 89.28 4,369 8.62 3,750 2.7 3,095 4,289 Source: calculation based on CIGC contracts.

The recent reduction in the value of the all-inclusive-charge NWA could be explained by the effects produced by the reform of the dairy agricultural policy. Thus, the price of standard milk has dropped during these last few years, allowing a fall in the price of Emmental, a competitor of Comté. In return, the price of Comté registered a fall.

The classification of cheeses into quality groups seems to have reached its limits insofar as 90% of the produced cheeses are in class A. This could explain the desire of some producers to create districts to differentiate cheeses by quality.

Introduction of ‘terroirs’ or ‘districts’

Historically, Comté was produced using a mixture of milks from different farms. Currently, this is still the case (Bret, interview). The draft decree for 2006 proposes to make this milk mixing mandatory (INAO, 2006). A farm enterprise will thus not be able to carry out differentiation on its own scale. The draft decree for 2006 considers the introduction of ‘terroirs’ or particular geographical terrains, known as ‘crus’ (analogous to specific areas of production, or districts), within the PDO area. This would result in showing up a differentiation among the groups of producers taking part in these different districts. The potential districts were determined by a study of the university of Franche-Comté in 1995-1996 (Monnet, 1996). To obtain this distinction of ‘crus’, several rules would have to be fulfilled: no overlap between several districts in the collection area of the participating cheese dairies; sensory characterization by a specialized jury analysing six samples from each district over at least a two-year period, and deciding if the sensory qualities of the cheese are sufficiently consistent and specific to benefit from the concept of ‘cru’; production of milk limited to 3,500 litres per hectare and maximum use of concentrates of 1,500 kg per cow per annum; processing of at most thirty times the average volume per Comté farm for each cheese dairy. The various districts would be labelled in addition to the designation of origin (INAO, 2006c). Within the CIGC, the processors’ college defended this differentiation of districts, while the ripeners took an opposite view. These latter fear that the introduction of “terroirs” would lead to a reduction in the price of Comté lacking a ‘cru’, without, on the other hand, increasing the price of Comté bearing a ‘cru’ label (Vallat, interview). To discuss the implications of this project, let’s use the well-known model of product differentiation developped by Mussa and Rosen. Assume that before segmentation of the Comté market, there are two vertically differentiated products, Comté as a high quality good and Emmental as a low quality good (denote the respective qualities k2 and k1, with k2 > k1). In such a context, consumers who consume the high quality good (Comté) are those who value quality the most. Introducing a ‘cru’ could be interpreted as a segmentation of the high

16 The price of unripened cheese is equal to the contract cost-base price multiplied by a coefficient that depends

quality market, by creating an upper quality (which quality k3 would be such that k3 > k2). Because there exists a production plan for Comté production, we can assume that the total production of Comté is given. Then, if the new quality is effectively introduced (that is, if it is profitable for the producers to develop this new quality), it is easy to show that:

− If the quality of the non ‘cru’ Comté is not changed (that is, if k2 is constant), the introduction of the ‘cru’ will not affect the price of non ‘cru’ Comté . Consumers will benefit from this new quality, as they still have the choice to consume the non ‘cru’ product whose price and quality remain unchanged.

− However if the quality of the non ‘cru’ Comté is affected (that is, k2 decreases either for objective or subjective reasons), then the selling price of the product will be negatively affected as well as the profit of producers of this product. − Conversely, if the introduction of ‘crus’ increases the perceived quality of the non ‘cru’

Comté (that is, k2 increases), then the selling price and profit of producesr of this product will increase. The implicit debate is thus on the impact on the perceived quality of non ‘cru’ Comté that would result from the introduction of ‘cru’.

Effects of the reform of the Common Agricultural Policy

Due to the current reform of the European dairy policy, the price of standard milk decreases and it is likely that it will continue to decrease. As a consequence, it is likely that the price of Emmental will also decreases. How will Comté be affected? To answer to this question, we can analyse what happened in the past and estimate if there are statistical links between the price of standard milk and the price of milk for Comté. The statistical relation between these two prices is verified over a long period (between 1991 and 2004, the correlation coefficient is equal to 0.72). Because standard milk is used for making a large number of dairy products, its price does not depend solely on the production of Emmental. It depends strongly on the Common Agricultural Policy, which fixes the intervention prices of butter and dried milk. On the other hand, the price of Comté milk depends on the price of standard milk as well as the production of Comté, taking into account the organizational arrangement for the payment of milk in this sector. In fact, the annual variation in the price of Comté milk is well explained statistically by variations in the price of Comté milk and the sales of Comté (1991-2004).

on quality.

Table 29. Estimate of variations in the price of Comté milk (€/1000 litres) 1991-2004

Coefficient Student t Variation in price of milk 0.596 4.02 (€/1000 litres) Variation in Comté sales - 5.84 - 4.56 (1000 tonnes) Trend (€/1000 litres/year) - 0.93 - 3.50

NR = 14; R² =0.81; F=19.22.

According to these results, a 1 € increase (or reduction) in the standard milk price results in a 0.6 € increase (or reduction) in the Comté milk price. An increase of 1000 tonnes in the sales of Comté results in a fall in the milk price of 5.8 €/1000 litres. This is equivalent to a direct price elasticity of – 1.58. This elasticity, calculated at the average point over the period 1991-2004, is consistent with the estimates provided by the AIDS model, which yields a conditional direct price elasticity of – 1.59 and an unconditional elasticity of – 1.28 (see section 7). Therefore, it is likely that part of the decrease in the price of standard milk will be ‘transmitted’ to the price of milk for Comté. However, one has to keep in mind that Comté producers will also benefit from direct payments that will compensate farmers for the loss in revenues due to the milk price decrease.

References CIGC. Commission interprofessionnelle des contrats, 1998-2005 CIGC, 2004. Accord général entre les coopératives fabricants et industriels laitiers, 5 pages. CTC, 2003. Diagramme de fabrication type du comté, 6 pages. DRAF Franche Comté, 2006. Synthèse des données Agreste « les chiffres du lait » de 1991 à 2005. INAO, 2006. Projet de modification du décret relatif à l’appellation d’origine contrôlée Comté. Paris G., 2006a. FDCL, Coût de production des coopératives du Jura, p.1 et p.11. Paris G., 2006b. FDCL, données comptables 2004 de l’échantillons d’étude des coopératives à Comté de la FDCL Jura. SIGF, 2006. Données chiffrées. www.emmental.fr.

Ripeners

Number and type of ripeners, specialization in QAS or general

About fifty ripeners of Comté are currently operating. However, we should take account of the fact that they do not all have a significant activity compared to the market. Only about thirty units ripen more than 50 tonnes of cheese and, according to the CIGC, only about twenty really occupy an important place.

Processor activities

The activity of the ripener consists of maturing unripened cheese for a duration that varies from a minimum of 3 months up to 24 months. According to actors in the chain, the average maturing duration is about 6 to 8 months. During ripening, the cheeses are turned regularly and “taken care of” i.e. rubbed with salt and smeared. Nowadays, this work is increasingly mechanized. Some of these practices are laid down in the PDO decree and implementing regulation. There is no major limitation on the activity of the ripeners. For example, there are no constraints on the size of units (even in the draft decree), just some compulsory requirements in the technical process of ripening. On leaving the ripening cellar, the cheeses are sold in block form destined either for distribution or packing companies, being presented in prepackaged form or as portions for distribution. As shown in the following graph, sales in block form decreased and are substituted by sales in portion.

Graph 11. Ripeners sales by type of comté presentation

50000

45000

40000

35000 block form 30000 prepacked slices 25000 portion

tonnes grated and melted 20000 total 15000

10000

5000

0 2 4 6 8 0 2 4 9 9 9 9 9 0 0 0 0 0 0 19 19 19 19 19 2 2 2

Input prices and production costs

As a whole, the purchase price of unripened cheese by the ripeners is governed by CIGC agreements (see 2.2.2). Over the course of time, various systems have succeeded each other for calculating the purchase price of unripened cheese from the average selling price of Comté. The changes were applied in several stages, and concerned the mode of deduction on the all-inclusive-charge NWA to obtain the cost base purchase price of unripened cheeses: − Before 2001, only a coefficient according to quality was applied to the all-inclusive- charge NWA to obtain the cost base price. The coefficients were then approximately 83% for A, 72% for B and 60% for C and D. − From 2001 to 2004, the quality coefficients were increased by approximately 8 points for each quality. However, a new deduction was then introduced, based on the price inclusive of all charges. This value is computed each year, and is applied to compensate for the increase in the quality coefficients. There appears to be no break in the trend of cost base price compared to the all-inclusive-charge NWA after the establishment of this new system. − Since 2004, the quality coefficients have shown almost no increase despite the appearance of a new deduction. This recent deduction is explained by the tendency to a longer ripening for cheeses, the market in fact requiring increasingly ripe cheeses. The ripeners thus have higher ripening costs. This charge is now passed on to the sector, with a deduction of 4.25% being applied to the NWA once other charges are deducted .

The table below gives the trend of the average selling price of Comté, purchase price of unripened cheese and the average revenue of the ripeners.

Table 30. Trends in the NWA, price of unripened cheese and revenue of ripeners (€/tonne unripened cheese)

NWA Annual average price Average revenue of (All inclusive charge of unripened cheeses ripeners price)

1998 5186 4457 729 1999 5307 4572 735 2000 5423 4657 766 2001 5564 4743 821 2002 5524 4785 739 2003 5585 4847 739 2004 5577 4637 940 2005 5495 4547 949

Source: CIGC contracts.

Thus, the average revenue of the ripeners increased by 30% between 1998 and 2005. Since we did not any obtain information on the variation of ripening costs, it is impossible to estimate the trend in the ripeners’ margin per tonne.

Sales prices

Graph 12. Trend in ripeners’ sales according to type of presentation of Comté

6500

6000

5500 Block form 5000 prepacked slices portion grated and melted 4500

euros/tonne average

4000

3500

3000

2 4 6 90 9 9 9 02 04 9 9 0 0 1 1 19 19 1998 2000 2 2

Source: CIGC, monthly declarations.

The types of presentation correspond to: − block form: Comté sold as whole cheeses − prepacked cut: Comté sold as cheese slices that are conditioned for better conservation; − portions: sold in the form of pieces weighing 1kg or less; − grated and processed cheese products: proportion of the cheese without Comté designation and to be used for processed cheese. The prices noted above are based on the prices given in the ripeners’ monthly declaration to the CIGC to determine the all-inclusive-charge NWA. There is no great difference between the prices according to the type of presentation except a significant decrease in the price of portion since 2000. It is possible that the duration of ripening has changed over the course of time. Unfortunately, no data are accessible on the average duration of ripening.

Retailers

Before focussing on the demand side, we briefly overview the last stage of the supply side: the retailers. According to INSEE17, the market share of hypermarkets and supermarkets for food products is 67% in 2003, hard discount accounts for 12.7% and small supermarkets and traditional self service stores for 8.5%.

Table 31. The French retailing networks in 2003 Retailing networks Market share for food products(%) Hypermarkets and Supermarkets 67 Hard discount 12.7 Small supermarkets and 8.5 traditional self-service stores Other 11.8 Total 100 Source: www.lineaires.com.

For food products, the retail sector is very concentrated. The five main retailers (Carrefour, Leclerc, Auchan, Intermarché, Système U) represent 74% of the turnover. The concentration is greater at the level of the central buying offices: the first five ones represent 93.8% of the turnover.

Table 32. Market shares of the french central buying offices in 2005 Market share for food products (%) Centrale Carrefour 25.8 Lucie (Leclerc 16% & Système U 8%) 24.0 IRTS (EMC Distribution 13.4% & Auchan 13.0%) 26.4 Intermarché 13.0 Provera(Cora) 4.6 Hard Discount (Lidl, Aldi, Norma & Penny Market) 4.3 Other 1.9 Total 100 Source: www.lineaires.com.

Now, we focus on the retailing of Comté, using the data set SECODIP18. The data provide information on the purchases of households. The consumption measured by this panel represents only part of the overall consumption of Comté. Indeed, non-domestic consumption and industrial purchases (incorporated into ready meals) are not taken into account.

17 INSEE : Institut National de la Statistique et des Etudes Economiques (National Institute of Statistics and economic Studies). 18 SECODIP : Société d’Etudes de la Consommation, de la Distribution et de la Publicité (company specializing in consumer surveys, distribution and advertising studies).

We focus on the demand for Comté by considering only the purchases carried out via mass distribution (Hypermarkets, Supermarkets and Hard Discount) because these distribution circuits account for more than 85% of the Comté Market. Over the last 10 years, the traditional Comté market has undergone a significant reduction in its relative importance: 34% in 1990, 15% in 1999, around 7% in 2003.

Table 33: Share of Consumption per Distribution Circuit 1990 1999 Hypermarkets 26.8 41.7 Supermarkets 39.6 42.7 Small supermarkets and 4.9 3.8 traditional self service stores Specials 26.1 11.8 Markets 9.9 4.2 Other 16.1 7.7 Total 100 100

Source www.comte.com.

The market survey company counts the purchase acts of 8000 French households. Data are related to the period 1998-2003. Information is available for each act of purchase, in particular, the type of product, the presentation (cheese packed or not), the quantity, the price, the brand and the type of shop where the purchase is carried out (Supermarkets, Hard Discount, Conventional). These individual data are weighted, so that the panel is representative, and aggregated at the national level over a number of 4-week periods, that is to say 78 periods. We needed to construct time series for the quantities of each type of cheese, the prices and the market shares. Appendix 1 presents the main data used.

According to milk industry actors (CNIEL and CIDIL19), the main substitutes of Comté are the other hard cheeses (HC). We distinguish three groups: - Emmental-Gruyère: this group is primarily made up of Emmental, an industrial product whose development for mass production dates back to the 1960s (Franche-Comté and especially the West of France) and secondarily of Gruyère. - Other HC PDOs: Beaufort, Abondance and Parmesan. The first two are small French PDOs and the third is an Italian PDO.

19 CNIEL: Centre National Interprofessionnel de l’Economie Laitière (French National Intra-Chain Centre of the Dairy Economy). CIDIL: Centre d’Information sur l’Industrie Laitière (Dairy Industry Information Centre).

- Other HC Non-PDOs: group of products characteristic of international agro-food, comprising two Dutch cheeses (Leerdammer and Maasdam) and a French product (Fol Epi). In terms of texture, these products are located at the limit of the semi-hard cheeses. Nevertheless, the actors in the chain regard them as potential competitors of Comté.

The purchases of hard cheeses are largely dominated by Emmental- Gruyère (more than half). The market share of Comté is definitely lower but still considerable (approximately one quarter). The two other aggregated groups have weaker market shares: 15% for the Other HC Non-PDOs and 5% for the Other HC PDOs.

Table 34. Average market share in terms of value % 1998 1999 2000 2001 2002 2003 Comté 26 26 27 26 27 27 Emmental-Gruyère 56 55 54 54 53 52 Other HC PDOs 4 5 5 5 5 6 Other HC Non-PDOs 14 14 14 15 15 15 Total 100 100 100 100 100 100 Source: SECODIP panel.

The rise in prices over the period 1998-2003 is approximately the same in these four groups of cheese. The price hierarchy over the studied period is as follows: Comté is situated at a price level higher than industrial cheeses, whether these are Emmental-Gruyère or Other HC Non-PDOs, and definitely lower than Other HC PDO cheeses.

Table 35. Average unit price (€/kg) 1998 1999 2000 2001 2002 2003 2003/1998 Comté 8.23 8.45 8.79 9.18 9.57 9.64 1.17 Emmental-Gruyère 5.93 6.03 6.26 6.54 6.81 6.87 1.16 Other HC PDO 14.43 14.28 14.54 15.36 15.91 16.26 1.13 Other HC Non-PDO 7.23 7.24 7.41 7.98 8.34 8.37 1.16

Source: SECODIP panel.

The demand for Comté

Comté is gradually seducing regions farther afield from Jura, without losing its customers from the eastern and central-eastern regions: the proportional figures corresponding to the eastern region in the table below have dropped, but only due to the relative increase in other regions; overall the quantity of Comté consumed is rising all over the country.

Table 36. Regional distribution of Comté consumption 1990 1999 Total France 100 100 North 4.1 5.5 East 6.8 7.7 Paris Region 16.7 18.8 West 5.1 7.9 Center West 2.7 3.7 Center East 55.2 39.4 South West 2.6 4.4 South East 6.7 12.6 Source: www.comte.com.

Among the 15% Well-off, 60% buy Comté. The percentage of buyers increases with income. More than a quart of the Modest buy Comté.

Table 37. % Buyers of Comté according to income group in 2004 % dans la population française % Acheteurs Comté Modest 15 28 Low to middling 42 40 Middling to high 30 50 Well-off 15 60 100 Source www.comte.com.

Our analysis of the demand for Comté aims at measuring the attachment of consumers to this PDO cheese and competing products, while identifying the standard intensity of substitutions between cheeses of the same type. For this purpose, we calculate the expenditure elasticity of demand, as well as own-price and cross-price elasticities. By linking in our results with those of the European Dairy Industry Model (EDIM) (EDIM, 2005), we can take into account other levels of substitution and measure the degree of sensitivity of the demand to the variations of income. We consider a model that is currently extensively used in empirical studies of demand: the Almost Ideal Demand System (AIDS,

Deaton and Muellbauer 1980a), which we briefly present here. We first describe the utility tree for modelling the consumers’ choices, and then present the data followed by the results.

AIDS demand model

The general specification of an AIDS model is a system of equations where each expenditure share equation is defined by:

n wi = α i + ∑γ ij log p j + β i log(Y / P) (1) j=1

pi qi where: i=1,...,n represents the good i, wi the budget share of good i w = , qi the i Y purchased quantity of good i and pj the price of good j. Y is the total expenditure for goods and P is a general price index. To avoid problems related to the non-stationarity of variables, we use the first difference form of AIDS (see Deaton and Muellbauer, 1980b): Y ∆w = α + ∑ γ ∆ log( p ) + β ∆ log( ) (2) i i ij j i s j P where Ps is a corrected Stone Index approximating P. To estimate this system of equations, we impose the usual theoretical restrictions of adding-up, homogeneity and symmetry, and we check for the concavity of the expenditure function. Moreover, we use instrumental variables to take into account the endogeneity of price and expenditure.20 Marshallian elasticities are directly calculated from the parameters of the model given in equation (2).21 These elasticities are defined by:

M β i Expenditure elasticity for good i: Ei = 1+ wi

M γ ii Own-price elasticity for good i: eii = − β i −1 wi

M γ ij β i Cross-price elasticity for good i with respect to good j: eij = − × w j wi wi

20 Dhar, Chavas and Gould (2003) consider these problems to be inevitable when the products are differentiated. 21 See Appendix 2 for the formula of Hicksian elasticities. The delta-method is used to estimate the standard errors of for elasticities.

Consumers’ choice

It is impossible to estimate a complete system of demand taking account of all the products potentially dependant between themselves: the number of parameters to be estimated increases quadratically, whereas the number of observations increases linearly. Classically, in applications of the AIDS model, we solve this difficulty by assuming weak separability. The commodities are partitioned into groups so that preferences within groups can be described independently of the quantities in other groups. This amounts to defining a tree of choices for the consumer. In practice, we specify an AIDS model for each level of the choice tree (for more details about the assumption of separability, see Deaton and Muellbauer, 1980a and Moschini et al., 1994). We apply the AIDS model at the level of hard cheeses. Our approach is consistent with the European Dairy Industry Model, which models a process of choice of the consumer on three levels and distinguishes a “Hard cheese” group on the third level (see diagram 4). We use the results of the first three stages of this model, and build stages 4 and 5 to meet the needs of our study (see diagram 5). The first stage is between food and non-food expenses. Then, among food expenses, the consumer chooses between meat, fresh dairy products, cheese and other. In a third stage, within the cheese group, the consumer chooses between soft, hard, semi-hard, blue, fresh and processed cheese.

Diagram 4. Utility tree in European Dairy Industry Model

Stages 4 and 5 relate to the break-down of the “hard cheese” group. With stage 4 the consumer chooses between two types of uses of hard cheese: grated or in portions. Stage 5 accounts for the choice between the following cheeses in portions: - Comté - Emmental-Gruyère - Other HC PDOs - Other HC Non-PDOs.

Diagram 5. Stages 4 and 5 of the choice tree

Hard 3rd stage

Portions Grated 4rth stage

COMTÉ Emmental Other PDOs Other Non-PDOs 5th stage Gruyère Beaufort, Leerdammer, Abondance, Maasdam, Parmesan Fol Epi

The SECODIP panel provided the data (price and quantities) describing the expenditure on hard cheeses taking place at stages 4 and 5 of the choice tree.

Instrumental variables

We present the instrumental variables selected to treat the endogeneity of the prices and expenditure. Concerning the prices, we introduce variables related to supply and demand. For the supply, we take account of the price of the raw material: standard milk.22 Indeed, the raw material is an important component of the price of the products: in the case of Comté, it represents approximately 3/5 of the wholesale price. We also introduce the delayed values of these prices to take account of the dynamics in these sectors. The cost of labour is taken into account via the index of wages in the food industry. For each type of cheese, the demand aspects are integrated through the percentage of pre-packed cheeses and the market shares of private labels sold whether in supermarkets and hypermarkets or hard discount outlets.23 For Other HC PDO cheeses, we take account of the proportion of each cheese in this aggregate.

22 For the “Other HC PDOs”, we also take into account the price of the milk for Comté. 23 The differences in price between “packed” and “not packed” are illustrated in Appendix 1.

The instrumentation of the expenditure in hard cheese is performed using the expenditure of the previous year and the gross national product. The first variable takes into account the inertia of consumption related to food practices and the second reflects the evolution of the average income in France.

Results

Table 38 reports the results for the hard cheese group. Conditional Marshallian elasticities result directly from the estimation of the model (2). All direct price elasticities are significant. Within this group, Comté has the strongest price elasticity. At this stage, cross- price elasticities are not significant.

Table 38. Conditional Marshallian elasticities Emmental- Other HC Other HC Comté Gruyère PDOs Non PDOs Comté -1.585*** 0.108 0.012 0.181 Emmental-Gruyère 0.216 -0.889*** 0.018 -0.009 Other HC PDOs -0.224 -0.734 -0.674* -0.742* OtherHC Non PDOs 0.334 -0.358 -0.199 -1.040*** ***, ** and * indicate the significance of elasticities at the 1%, 5% and 10% level, respectively

This analysis of the conditional demand is not sufficient. Indeed, it does not take account of other arbitrations that can take place in the choices of consumption (for example, reallocations of expenditure between the various types of cheeses). It is necessary to calculate unconditional price elasticities taking account of the whole set of elasticities at each level of the utility tree. By taking into account all the levels of the tree of utility tree, we can determine the income elasticity of demand.24 The calculation of unconditional elasticities is made possible by using the results of the EDIM study.25

24 Strictly speaking, this is an elasticity with respect to the total expenditure of households (i.e. except savings). For convenience, we will take it as being equivalent to the income elasticity. 25 In Appendix 2, we present the conversion of conditional to unconditional elasticities. In addition, to compute these unconditional elasticities from the conditional counterpart, we adopt the method suggested by Carpentier and Guyomard (2001).

Table 39. Unconditional Marshallian elasticities Emmental- Other HC Other HC Comté Income Gruyère PDOs Non PDOs Comté -1.282*** 0.822*** 0.091 0.375** 1.654** Emmental-Gruyère 0.401*** -0.492*** 0.087 0.119 0.856** Other HC PDOs 0.286 0.536 -0.576 -0.432 3.061** Other HC Non PDOs 0.633** 0.345 -0.121 -0.848*** 1.629** ***, ** and * respectively indicate the significance of elasticities to the level 1%, 5% and 10%.

The direct price elasticities of hard cheese range from -1.282 to -0.492. As in the case of conditional elasticities, Comté shows the strongest direct price elasticity (in absolute value). This cheese has two substitutes : Emmental-Gruyère and Other HC Non-PDO cheeses. On the other hand, these two products each have only one substitute: Comté. 26 The direct price elasticity of the Other HC PDOs is statistically non different of zero. Moreover, they do not have any close substitute. The Other HC Non-PDOs (-0.848) and Emmental-Gruyère (- 0.492) occupy intermediate positions between Comté and Other HC PDOs. An increase in incomes results in an increase in demand for all products. Emmental- Gruyère is situated at the boundary between lower ranked goods (income elasticity lower than 1) and normal ranked goods (unit elasticity). The three other products are higher-ranking goods whose consumption increases more than proportionally with the income, particularly for the group of Other HC PDOs. As a whole, income elasticity increases with the price, with values of: 0.86 for Emmental-Gruyère (average price of 6 €/kg), 1.63 for Other HC Non PDOs (8 €/kg), 1.65 for Comté (9 €/kg) and 3.06 for Other HC PDOs (15 €/kg). It is interesting to compare our results with other studies. Although there are no available data concerning the analysis of the demand for Comté, we can compare our results with those obtained in other studies. Price elasticities of Comté are definitely higher than those obtained at highly aggregated levels, such as those including all cheeses (- 0.177 according to EDIM, 2005). This is explained by the presence of close substitutes within the hard cheeses. Our results are close to those obtained at stage 3 of the decision tree (choice between types of cheeses), i.e. at a less disaggregated level (cf. Table 40).

26 The existence of substitutions between Comté and Emmental-Gruyère is confirmed by the hicksian elasticities (both conditional and unconditional), see Appendix 3.

Table 40 : Marshallian Unconditional Elasticities - Level 3 of the tree on diagram 4 Semi Hard Soft Hard cheese cheese Blue Fresh Processed Expenditure Soft - 0.604 *** - 0.071 0.434 *** 0.075 0.017 - 0.008 0.719 *** Hard cheese - 0.077 - 0.450 *** 0.076 - 0.006 0.306 *** - 0.057 0.947 *** Semi Hard cheese 0.653 *** 0.107 - 1.218 *** 0.100 0.217 - 0.063 0.935 *** Blue 0.321 - 0.025 0.285 - 1.158 *** - 0.099 0.446 *** 1.055 *** Fresh 0.019 0.322 *** 0.162 - 0.025 - 0.654 *** 0.031 0.664 *** Processed - 0.043 - 0.285 - 0.225 0.556 *** 0.151 - 0.270 ** 0.528 *** *** and ** indicate the significance of elasticities at the 1% and 5% level, respectively. Source: EDIM, 2005.

On the other hand, the elasticities measured for trade marks of the same product are situated at higher levels. Thus, in a study on the competition between six orange juice brands, Binkley et al. (2001) find -2.98 for the average direct price elasticity. On the beer market, Pinkse and Slade (2004) report an even higher average elasticity (- 4.6).

Discussion

Among the Hard Cheese group, the level of price elasticity reflects the competition between products which thus preserves their specificity, rather than between brands operating within the same niche. We would have predicted a low price elasticity for Comté, expressing the attachment of “connoisseur” consumers to a top-of-the-range product. This study reveals that this product has the strongest price elasticity of the hard cheese group. The purchasers of Comté are sensitive to the price, in agreement with the fact that this PDO good has become a staple commodity. This commercial success is reflected through the higher income elasticity of Comté compared with its main competitor, Emmental-Gruyère. We should point out the limitations of this study. The representativity of the SECODIP panel, which is ensured by a weighting based on sociodemographic variables, is valid for aggregate levels of consumption. For precise types of products such as Comté, the representativity is not fully guaranteed. Moreover, by aggregating the data, we are not able to take account of individual characteristics that can influence the demand.

References Binkley J., J. Eales, Jekanowski M. and R. Dooley (2001), “Competitive Behavior of National Brands: The Case of Orange Juice” Agribusiness, Vol 17(1):139-160. Carpentier A. and H. Guyomard (2001), “Unconditional Elasticities in Two-Stage Demand Systems: An Approximate Solution”. American Journal of Agricultural Economics 83(1) (February 2001):222-229 Dhar T., J.P. Chavas and B. W. Gould (2003), “An Empirical Assessment of Endogeneity Issues In Demand Analysis for Differentiated Products”. American Journal of Agricultural Economics 85 (3): 605-617 Deaton A and J. Muellbauer (1980), “Economics and Consumer Behaviour”, New-York, Cambridge University Press. J. Pinkse and M.E. Slade (2004), “Mergers, Brand Competition, and the Price of a Pint”, European Economic Review 48, 617-643.

Appendix 1 Presentation of the Data

Time series of prices, volumes and shares of the four types of Hard cheese

Trend in prices (euros/kg) 20

1998 July 1999 July 2000 July 2001 July2002 July 2003 July 4-week period

Source: SECODIP panel

Trend in volumes (tonnes)

5000

4000

3000

2000

1000

1998 July 1999 July 2000 July 2001 July 2002 July 2003 July 4-week period

Source: SECODIP panel

Trend in the share of expenditure

1998 July 1999 July 2000 July 2001 July 2002 July 2003 July 4-week period

Source: SECODIP panel

Price and volume proportion of packed versus unpacked cheeses

Average unit price in euros/kg of each group of cheeses with or without packing

1998 1999 2000 2001 2002 2003 10.62 11.27 Packed / / / / (0.82) (0.32) Comté Without 8.23 8.45 8.79 9.18 9.56 9.58 Packing (0.13) (0.12) (0.12) (0.15) (0.12) (0.16) 8.12 7.94 8.09 8.32 8.6 8.6 Packed NON (0.28) (0.11) (0.13) (0.12) (0.08) (0.17) PDO Without 5.74 5.83 5.99 6.24 6.5 6.4 Packing (0.05) (0.04) (0.06) (0.11) (0.04) (0.04) 13.49 15.75 13.99 13.85 15.93 18.5 Packed Other (2.64) (1.67) (1.01) (1.02) (3.28) (3.83) PDO Without 14.42 14.27 14.56 15.42 15.91 16.22 Packing (0.37) (0.42) (0.44) (0.34) (0.64) (0.6) 9.48 9.19 9.25 9.62 9.73 9.97 Packed Other (0.52) (0.32) (0.44) (0.28) (0.13) (0.22) cheeses Without 7.13 7.11 7.21 7.63 7.83 7.63 Packing (0.15) (0.23) (0.13) (0.22) (0.17) (0.22) We assume that packed are products with EAN while without packing are products without EAN Source: SECODIP panel

Proportion of packed cheese (% volume) % 1998 1999 2000 2001 2002 2003 Comté 0 0 0 0 0.96 3.44 NON PDO 7.93 9.85 12.62 14.31 15.23 20.47 Other PDO 0.8 2.07 5.58 4.38 1.74 1.93 Other cheeses 4.55 6.48 10.36 17.89 27.11 31.41 Source: SECODIP panel

Appendix 2 Elasticities

Carpentier and Guyomard (2001) give the formula to compute unconditional elasticities while satisfying the condition of symmetry.

Using i and j to denote two commodities belonging to commodity groups r and s, respectively, with δrs as a dummy equal to 1 if r =s and 0 otherwise, w(s)j as the budget share of good j in group s, and E M as the conditional Marshallian expenditure elasticity for good i (r )i in group r, then we can then write the unconditional elasticities for the second stage as follows:

H H H M M Hicksian: eij =δ rs .e(r)ij + w(s) j .e(r)(s) .E(r)i .E(s) j

δ eM =δ .eM + w .[ rs + eM ].E M .E M + w .w E M .E M .(E M −1) Marshallian: ij rs (r)ij (s) j M (r)(s) (r)i (s) j (s) j s r (r)i (s) j E(s) j Price elasticities are only taken as identical if they differ from the expenditure elasticities derived from Edgerton’s formula:

M M M Expenditure elasticity: Ei = E(r)i . E(r)

M M Where Ei is the unconditional expenditure elasticity and E(r) is the expenditure elasticity for group r. These formulas can be extended to calculate unconditional elasticities at every stage of the utility tree

Appendix 3 Hicksian elasticities

Conditional Hicksian elasticities Emmental- Other HC Other HC Comté Gruyère PDOs Non PDOs Comté -1.246*** 0.802*** 0.076 0.367** Emmental-Gruyère 0.392*** -0.530*** 0.05 0.087 Other HC PDOs 0.402 0.550 -0.555 -0.397 OtherHC Non PDOs 0.668** 0.325 -0.137 -0.856*** ***, ** and * indicate the significance of elasticities at the 1%, 5% and 10% level, respectively

Unconditional Hicksian elasticities Emmental- Other HC Other HC Comté Gruyère PDOs Non PDOs Comté -1.372*** 0.669** 0.032 0.299** Emmental-Gruyère 0.327** -0.599*** 0.028 0.052 Other HC PDOs 0.170 0.303 -0.636* -0.523 Other HC Non PDOs 0.544** 0.194 -0.180 -0.923*** ***, ** and * respectively indicate the significance of elasticities to the level 1%, 5% and 10%.