Ecolabeling and Marketing of Environmental and Regional Products from Rural Areas

RUDECO Vocational Training in Rural Development and Ecology Module № 3

Ecolabeling and marketing of environmental and regional products from rural areas

Responsible University Orel State Agrarian University

159357-TEMPUS-1-2009-1-DE-TEMPUS-JPHES

This project has been funded with support from the European Commission. This publication reflects the views only of the authors, and the Commission cannot be held responsible for any use which may be made of the information contained therein.

УДК 631.95 ББК 65.325 Э40

ISBN 978-5-906069-66-5

Ecolabeling and marketing of environmental and regional products from rural areas/ O.V. Popova [and others.] Series of training manuals "RUDECO Vocational Training in Rural Development and Ecology“. М., 2012. . – 142 p.

RUDECO Vocational Training in Rural Development and Ecology

National Project Coordinator Sustainable Rural Development Center Russian State Agrarian University - Moscow Timiryazev Agricultural Academy, Russia

Grant holder and Project Management Eastern Europe Centre University of Hohenheim, Germany

Authors Olga Popova Svetlana Dolgova Аleksey Rezvyakov Aleksandr Merzlov Andrey Khodus Maxim Sadykov Aleksander Wirsig Martin Dieterich

Responsible University Orel State Agrarian University (OrelSAU)

Working Group Partners Russian State Agrarian University – Moscow Timiryazev Agricultural Academy Association of organic and biodynamic agriculture "AGROSOPHIE" terrafusca Ingenieure, Germany University of Hohenheim, Germany

Reviewer Alla Lazarenko, Doctor of Economic Sciences, Professor

Contact This text book or parts of it can be reproduced in any form for educational purposes with prior permission. For more information contact: Olga Popova, Orel State Agrarian University Email: [email protected]

November 2012

Preface The present guide is one of the series of the guides that were developed within the framework of the project TEMPUS 159357-TEMPUS-1-2009-1-DE-TEMPUS-JPHES “Vocational Training in Rural Development and Ecology” (RUDECO) under TEMPUS programme.

The project RUDECO aims to improve the vocational training system in the sphere of rural development and ecology and involves various agricultural universities in Russia and Europe. The project goal is to facilitate the universities in acquiring the necessary qualifications by means of conceptualization and development of study guides (modules), as well as by training the instructors who will participate in the vocational training of governmental employees.

The grant beneficiary and coordinator from the European Union is the University of Hohen- heim, Germany, a highly recognised university. The project is implemented by an international consortium which encompasses from Germany the Agency for Development of Agriculture and Rural areas of the Federal State Baden-Württemberg, the Academy for Spatial Research and Planning, the Enterprise «Terra Fusca Engineering»; the University of Udine (Italy); the Slovak University of Ag- riculture (Slovakia); the National Institute of Higher Education in Agronomy, Food and Environ- mental Sciences (France); the Agence de Services et de Paiements (France); the Warsaw University of Life Sciences and the Association of Sustainable Development of Poland.

Eleven Russian higher educational institutions participate in the project on behalf of Russia, along with the Ministry of Agriculture of Russia, A.A.Nikonov State Scientific Institution All- Russian Institute of Agrarian Issues and IT of the Russian Agricultural Academy, the administrations of Tambovskaya and Orlovskaya oblasts, as well as representatives of environmental organizations. The educational institutions engaged are: Buryat State Agricultural Academy named after V.R.Fillipov, Kostroma State Agricultural Academy, Moscow State Agroengineering University named after V.P.Goryachkin, Novosibirsk State Agrarian University, Omsk State Agrarian Univer- sity named after P.S. Stolypin, Orel State Agrarian University, K.A.Timiryazev Russian State Agrarian University-MTAA named after K.A. Timiryazev, Samara State Agricultural Academy, Stavropol State Agrarian University, Tambov State University named after G.R. Derzhavin, Yaro- slavl State Agricultural Academy.

The project goals are:

- Development of the vocational training system in the sphere of ecology and rural areas at 11 agrarian universities of Russia, enabling them to obtain a higher qualification;

- Development of 12 modules for representatives of governmental agencies on the national, regional and local level;

- Training of the representatives of Russian public institutions and representatives of public administration of various levels in the sphere of ecology and rural development using professional training from certified instructors;

- Implementing «training for trainers» using the support of European partners;

- Development of international cooperation of Russian institutions of higher education.

3 The series of modules covers the following topics:

- Sustainable development: key terms and theoretical basis (Introductory Module1, Rus- sian State Agrarian University – Moscow Timiryazev Agricultural Academy)

- Sustainable rural development: approaches for regional and local programmes elaboration (Module 2, Russian State Agrarian University – Moscow Timiryazev Agricultural Academy)

- Ecolabeling and marketing of environmental and regional products from rural areas (Module 3, Orel State Agrarian University)

- Eco-tourism and tourism in rural areas (Module 4, Buryat State Agrarian Academy of Agriculture named after V.R.Philippov)

- Conversion of conventional farming into organic farming (Module 5, Yaroslavl State Agricultural Academy)

- Environmental regulations and laws (Module 6, Stavropol State Agricultural University)

- Ecological related problems of intensive agriculture (plant and animal production) (Module 7, Omsk State Agrarian University)

- Participatory approach in rural development (Module 8, Kostroma State Agricultural Academy)

- Reducing pollution in rural areas caused by agricultural, industrial and municipal sol- id waste (Module 9, Novosibirsk State Agrarian University)

- Sustainable use of water resources in rural areas (Module 10, Samara State Agricultural Academy)

- Food safety and product quality control (Module 11, Moscow State Agroengineering University named after Goryachkin V.P.)

- Management of biological resources of rural areas (Module 12, Tambov State University named after G.R. Derzhavin)

The “Eco-labeling and marketing of environmental and regional products from rural areas” textbook is developed for tutors and professors who are involved in the system of professional and further training of personnel. The textbook consists of theoretical and legal basis of labeling of goods and services from rural areas; the EU and Russian generalized experience in this sphere; methodological approaches to the development of a marketing plan for rural entrepreneurs, administration and specialists of municipal governments.

The textbook allows acquiring knowledge and upgrading professional skills in the sphere of marketing of products from rural areas, to realize the importance of this activity for stable development of municipalities and to become familiar with the EU and Russian conceptual bases and experience in eco-labeling and promotion of environmental and regional products from rural areas. After studying the textbook, one will be able to form and execute the strategy and tactics in order to

4 obtain trademarks, develop marketing plans on products labeling and products promotion to regional, national and world markets.

The textbook is designed for those who have higher education in agricultural production or state (municipal) administration which is an important factor of efficient work. Experience in regional or municipal administration is desirable.

This textbook on module «Ecolabeling and marketing of environmental and regional products from rural areas» was developed by experts from Orel State Agrarian University plus col- leagues from Russian State Agricultural University - Timiryazev Academy, «Agrosofie» ( Russia), «Terra fusca Ingenieure» (Germany), Сontact addresses provided (see annex).

Module developers from Russian party express gratitude for coordinated work to all members of the consortium involved in RUDECO project: the Head of the Eastern Europe Center in Ho- henheim University Doctor Jochem Gieraths; project leader - director of the Institute of Landscape and Plant Ecology Doctor Martin Dietrich, project coordinator Angelika Thomas, Alexander Wirsig «Terra fusca Ingenieure», who rendered invaluable assistance in collecting and ordering the material about EU experience in ecolabeling and marketing of ecological and regional products of rural areas.

The introducing module on the key terms and theoretical basis of sustainable development basis is an ideal preparation for all the above listed specific modules. Persons who start to get involved in the field of ecology and sustainable rural development, we recommend to read this basic module first, before deepening one of the other topics. Readers interested in the modules and further training can address also all involved university partners to get further information or training about the listed modules.

Persons dealing with the presented topic “Theoretical bases of eco-labeling and marketing of environmental and regional products from rural areas” might be especially interested also in module 1 «Sustainable development: key terms and theoretical basis», module 2 “Sustainable rural development: approaches for regional and local programmes elaboration», module 11 «Food safety and product quality control».

5 Contents

Preface ...... 3 Contents ...... 6 List of figures ...... 7 List of tables...... 8 Introduction...... 10 1 Theoretical Approaches to Ecological Labeling and Marketing of the Ecological and Regional Production in Rural Areas...... 13 1.1 Terms and types of trade marks ...... 13 1.2 Foundations for ecological labelling of agricultural production and food stuff ...... 17 1.2.1 General signs for product safety ...... 18 1.2.2 Signs of ecological production safety according to some features or its complex organic origin...... 19 1.2.3 Labels to report recycling of products...... 22 1.2.4 Labels to raise environmental awareness and behaviour...... 23 1.2.5 Labels indicating dangerous goods for the environment ...... 23 1.3 Regional marketing and product marketing of rural areas...... 30 1.4 Test questions for topic 1...... 35 1.5 Literature on the topic ...... 35 2 German experience in promoting products with trade and ecological labels...... 36 2.1 German experience in labeling food products ...... 36 2.2 An example for the system of bio production certification ...... 42 2.3 Promotion of BIO and regional products in the EU...... 44 2.4 Test questions and practical group work task for topic 2...... 50 2.5 Literature on the topic ...... 51 3 Modern Marketing of regional and ecological products of rural areas in Russia...... 52 3.1 Labelling of food commodities and region branding in Russia ...... 52 3.1.1 Trade marks of domestic producers in the national commodity market ...... 52 3.2 Ecomarking in the Russian food market ...... 59 3.3 Registration procedure and legal protection of trademarks in Russia ...... 70 3.4 Marketing of the ecological and regional products of the rural areas...... 81 3.5 Test questions and group work for topic 3...... 88 3.6 Literature on the topic ...... 89 4 Methodological approaches to develop marketing plans...... 90 4.1 Algorithm of developing marketing plans for regional rural production...... 90 4.2 Methods of carrying out the analysis for marketing plan development...... 97 4.3 Test questions and group work for topic 4...... 120 4.4 Literature on the topic ...... 121 Glossary...... 122 Test questions and self-assessment...... 125 Annex: Training material...... 138 6 RUDECO partners and contact information ...... 139 Contact persons for the presented module...... 139 All RUDECO partners...... 139

List of figures Fig. 1.1 Examples of graphic designations ...... 14 Fig. 1.2 Examples of combined designations ...... 15 Fig. 1.3 Examples of well-recognizable trademarks...... 16 Fig. 1.4 Example of trademarks with protected designation of origin and protected geographical indication...... 16 Fig. 1.5 Guarantee system of bioproducts certification...... 25 Fig. 1.6 Symbols of some certification organizations of the EU in organic agriculture...... 26 Fig. 1.7 Example of bio labeling interpretation of EC...... 28 Fig. 1.8 Region as a Marketing object 14 ...... 30 Fig. 1.9. The main participants of the regional marketing...... 31 Fig. 1.10 Model of the complex regional marketing...... 32 Fig. 2.1 Labelling of products...... 37 Fig. 2.2 Quality marks of regional products in Germany...... 39 Fig. 2.3 Traditional agrarian products of Baden-Wurttemberg ...... 42 Fig. 2.4 Bio-shop in Germany ...... 45 Fig. 2.5 Purchasing prices for milk in 1999-2010 (per one farm)...... 46 Fig. 2.6 “Egg machine”...... 49 Fig. 3.1 Some famous informal regional brands of the USSR...... 53 Fig. 3.2 Brands of some subjects of the Russian Federation ...... 58 Fig. 3.3 Examples of the logotypes applied in existing systems of certification and other systems...... 60 Fig. 3.4 Eco-labels, informing a consumer about the absence of Chlorum and GMO in a product ...... 62 Fig. 3.5 Algorithm of products certification...... 67 Fig. 3.6 The use of words “bio” and “eco” in the names of products ...... 69 Fig. 4.1 Stages of strategic planning...... 91 Fig. 4.2 Strategic planning content ...... 91 Fig. 4.3 Process of operating planning in marketing...... 92 Fig. 4.4 Algorithm of marketing program developing...... 95 Fig. 4.5 Market budgeting ...... 96 Fig. 4.6 Basic directions of marketing research...... 98 Fig. 4.7 Technology of marketing research ...... 98 Fig. 4.8 Matrixes of assessment of strong and weak sides of a firm ...... 104 Fig. 4.9 Matrix of the strategic position and actions evaluation ...... 109 Fig. 4.10 Diagram of the different strategic states ...... 110 Fig. 4.11 The division of the types of the business (a separate product) ...... 117

List of tables

Table 1.1 Some eco-signs of national and supranational levels, meaning the safety of production5 ...... 18 Table 1.2 Widespread bio-labels on agricultural raw materials and food ...... 20 Table 1.3 Main restrictions by producing bioproduction...... 21 Table 1.4 Regionality and ecological properties in the regional marketing...... 33 Table 1.5 Possible sales forms of regional agricultural production...... 34 Table 3.1 Fees of the Patent Department ...... 75 Table 3.2 List of documents necessary to submit an application...... 76 Table 3.3 Evaluation of the perspectives of the Russian eco products market development ...... 84 Table 4.1 Marketing plan development algorithm ...... 92 Table 4.2 Directions and the questions of situation analysis under consideration ...... 93 Table 4.3 Methods of marketing budget definition ...... 94 Table 4.4 Technologies of market budgeting...... 95 Table 4.5 Methods of field researches ...... 99 Table 4.6 Content of qualitative and quantitative methods ...... 100 Table 4.7 Forms of carrying out SWOT-analysis and their content ...... 100 Table 4.8 Standard matrix of SWOT analysis...... 101 Table 4.9 General matrix of SWOT – analysis...... 101 Table 4.10 Matrix of express SWOT-analysis...... 102 Table 4.11 Classification of strong and weak sides ...... 103 Table 4.12 Example of internal environment factors calculation...... 103 Table 4.13 Strong (weak) sides allow getting the preset goals...... 104 Table 4.14 Decision development on every defined factor ...... 104 Table 4.15 Components of the analysis of opportunities ...... 105 Table 4.16 Opportunity I...... 106 Table 4.17 Opportunity II, III and IV (see table 16) ...... 106 Table 4.18 Contents of qualification groups...... 107 Table 4.19 Factors of stability of a situation (ES)...... 108 Table 4.20 industrial potential factors (IS)...... 108 Table 4.21 Competitive advantages factors (CA) ...... 108 Table 4.22 Financial potential factors (FS) ...... 109 Table 4.23 STEP-analysis components ...... 112 Table 4.24 Content of STEP-analysis components ...... 113 Table 4.25 Results of STEP-analysis...... 114 Table 4.26 Competitive forces...... 115 Table 4.27 Recommended list of possible questions...... 116 Table 4.28 Classification of types of strategic economic zones...... 117 Table 4.29 Recommendations of BCG matrix...... 118

8 Table 4.30 Recommendations of BCG matrix ...... 119 Table 4.31 Advantages and disadvantages of BCG matrix...... 119 Table 4.32 Figures of assessment of the strategic position by BCG matrix...... 120

9 Introduction The theme of the rural areas development is very acute in modern Russia. Demographic, social, economic and ecological problems bring down attractiveness of the country life. Meanwhile, the third of the population lives in rural areas, and these territories occupies the vast majority of Russia. That is why the increase of the sustainable development of the rural areas is an urgent goal of the government and population. The RUDECO project contributes to the solvation of that task. The global aim of that project is the creation of the professional training system in the sphere of the development of rural areas and ecology in the different universities in Russia and Europe.

The necessity of emphasizing the idea of the module, as a separate part of professional training, stipulated by increasing competition in the global, national and regional food markets. This competition makes more pressure on the small and medium-size rural entrepreneurs and technological re-equipment of the large agrarian commodity production stipulates the increase in rural unemployment. Therefore, it’s very important to create conditions for the diversity of the rural economics, for the development of the marketing relations on the local, regional and national markets and broadening of the ecological and regional niche for the agricultural products. Training of managers and specialists, the upgrading of their skill level in that sphere is one of the main factors which add to the solving of these problems.

Goals and objectives:

The main goal of the module “Ecolabeling and marketing of environmental and regional products from rural areas” is improvement of the rural managers and officials competence, and also the competence of the district, regional and national authorities in the sphere of the ecological labelling, development and registration of trade marks (service marks), and promotion of ecological and regional products of rural areas.

The module objectives include:

- to learn the concept bases of European quality policy and policy of sustainable rural development.

- to familiarize with EU experience in using regional brands and Eco labelling.

- to learn the technologies of ecological and regional agrarian product promotion.

- to study the order of product certification and registration of trademarks.

- to study the skills which help to develop marketing plans of ecological and regional products of rural areas in Russia.

The textbook consists of four parts.

The first chapter “Theoretical approaches to eco-labeling and marketing of ecological and regional products of rural areas” contains definitions of product labeling and different variants of trademarks, it covers the difference between them and deals with kinds and peculiarities of receiving the right on eco-labels, it reflects the theoretical approaches to the promotion of the rural areas products.

10 The second chapter “German experience of promoting goods with trade and ecological marks” is devoted to the questions of food labeling in Germany, to the certification procedures of bio-products, to the cooperation between the regional products manufactures and certify and inspection authorities, to the promotion of eco and regional products of rural areas on EU territory.

The third chapter “Modern state of regional and ecological products marketing of the Russian rural areas” is devoted to the trademarks of national producers and eco-labeling. It covers an order of the registration and protecting of trade marks in Russia, it also reflects ecological and regional products marketing of rural areas.

The fourth chapter “Methodological approaches to development of marketing plan” is devoted to the basic methodological techniques, used when developing the plan of ecological and regional products marketing of the rural areas. It covers the techniques of the plan composition.

The glossary gives the definitions of terms, which should be correctly understood for the effective adoption of the material.

Tests are given for the self-control of the students, which are taught with the help of that module.

“Partner and contact addresses” part helps to learn the ways of connecting with the authors of the textbook “Eco-labeling and marketing of environmental and regional products from rural areas», and also with the creators of the other modules of RUDECO project.

Annexes contain the additional information, appropriate for the complex learning of the questions in the module.

The topic of “The experience in promotion of products with trademarks and eco-labels in Germany” is closely interlinked with «Sustainable rural development: approaches for regional and local programs elaboration», «Eco-tourism and tourism in rural areas», «Conversion of conventional farming into organic farming», « Participatory approach in rural development».

Those who are interested in extending their knowledge in Part 3 “Contemporary state of marketing of environmental and regional products from rural areas in the Russian Federation” may turn to the following modules Sustainable rural development: approaches for regional and local programs elaboration», «Eco-tourism and tourism in rural areas», « Conversion of conventional farming into organic farming», «Environmental regulations and laws», « Participatory approach in rural development», «Food safety and product quality control».

The audience interested in additional information concerning the part “Methodological approaches to the development of a marketing plan” may find the following modules useful «Sustain- able rural development: approaches for regional and local programs elaboration», «Participatory approach in rural development».

11 Trainee requirements:

- High education in the sphere of agricultural production.

- Experience in regional or municipal administration is desirable.

During their work on the module, the trainees will learn:

- conceptual bases and policy of sustainable rural development

- the experience in ecological and regional labelling of agricultural products and food products in the European Union and Russia

- methodological approach to the development of the marketing plan and programs for promotion of ecological and regional products of rural areas

- the order and procedure of product certification on the basic bio (organic) and general security standards in Russia and abroad

- mechanism of legal registration and protection of trade marks in Russia

After the module is completed, the trainees will:

- understand the essence and necessity for marketing of ecological and regional products of rural areas

- know the questions of technical regulations, legal and informative support in the sphere of ecological labelling and promotion of regional and ecological products of rural areas

- be able to develop projects in the sphere of ecological labelling and/or regional brands inde- pendently

- obtain methods of ecological and regional products marketing, certification and declaring of products

- get oriented in foreign experience of using regional, ecological and trade labels within the context of regional programs in sustainable rural development

12 1 Theoretical Approaches to Ecological Labeling and Marketing of the Ecological and Regional Production in Rural Areas In the section general problems of market labeling of products of rural territories and the peculiarities of trade mark registration of rural territories production, the problems of ecolabeling, types and peculiarities of getting rights to ecological labeling, approaches to professional detailing of rural territories production.

Questions under consideration:

1.1 Terms and types of trade marks

1.2 Reasons for labelling ecological or agricultural production and food stuff

1.3 Regional marketing and product marketing rural areas

1.1 Terms and types of trade marks Trade mark is very important element of marketing of ecological and regional production of rural territories, making it recognized on the market.

Trade mark (mark), production brand and logotype are terms that are used as designation names allowing the differentiation of goods and services of one producers from others. At the same time notions “trade mark”, “brand mark” are the variants of the translation of English word trade mark . If we deal with service (restaurant, hairdressing, laundry business, etc.) and not with commodities the notion of service mark is used.

Thus, to trade marks and service marks we refer registered in the stated order designations that are able to differentiate correspondingly commodities and services of the legal persons or physical persons on one side from similar commodities and services of legal persons or physical persons on the other.

In other words, trade mark is the way of “individualization” of a trade mark franchisor among numerous producers of analogous goods or services or it is a “company’s image” at the commodity or service market, which allows a company - a trade mark franchisor providing its recognition by a consumer among a wide range of producers of analogous goods and services 1.

We can differentiate some basic problems to solve which the trade mark is designed 2

1. Trade mark (brand mark) is the way of “individualization” of an enterprise and also of produced goods or offered services.

2. Expressive, simple and easy to remember trade mark is intended to be associated by the consumer with distinct enterprise, quality of the offered goods or services.

1 http://www.sinor.ru/~semenk/tmterm.htm

2 http://goryunova.niv.ru/goryunova/master/registraciya-marki.htm 13 3. Trade mark being the most important element of the producer image trade mark helps the consumer to select goods and services.

4. Well-recognizable trade mark without thorough study of goods allows determining its origin and judging about its quality. The customer is ready to pay higher prize for goods being produced under well-known and proved itself trade mark than purchase comparatively cheap and possibly goods of bad quality produced by unknown producer.

5. Trade mark is irreplaceable as means of advertisement. Reflecting information about the goods quality and its producer, trade mark can be placed on goods, on packing and in the advertisement and allows the consumer its differentiating from analogous goods of other producers immediately.

Besides, trade mark is a property of the firm because it has its own cost in money equivalent (sometimes very high), it can be included into intangible assets of the enterprise, and it can be sold or provided in using.

Trade mark can consist from one or several words, letters, figures or images, emblems, monograms or signatures, colours, or colours combinations, it can be three dimensional, for example, as a form or any other special container design or goods packing.

Trade mark types

As a trade mark the following designations can be registered in any colour or colour combination: 1) Verbal designations - (words, combinations of letters that have verbal character, phrases and sentences):

existing words: «Sloboda» - vegetable oils and mayonnaises, «Jubileynoye» - cookies, «Pomo- dorka» - tomato paste, etc.

artificially formed and fantasy «Skeletons» and «Rastishkas» - dairy products for children, «Kirieshky» and «Kompashky» - croutons, etc,

firm slogan or slogan: «Russia is a generous soul» is a slogan of Samara chocolate factory «Russia», «Where pleasure – there I» of juice «Ja» Ltd «Lebedyansky», «Kvass is not Cola, drink Nikola» is a slogan of kvass « Nikola» of company «Deka».etc.

2) Graphic designations - (images of live beings, objects, nature and other objects, and also figures of any forms, line composition, spots, figures on the surface.

Fig. 1.1 Examples of graphic designations

14 3) Combined designations (different character element combination, graphic, verbal and volumetric, etc.).

Fig. 1.2 Examples of combined designations

4) Volume designations (three dimensional objects, figures and line combination, figures).

5) Other designations (sound, light, etc)

These terms are often used but there are no accurate definitions of the terms “trade mark”, “brand mark”, “logo’ or “trade mark” in the Russian Federation legislation.

Designations that are intended for individualization of goods and services of legal entities or individual businessmen and that allow differentiating goods and services of one producers from others are defined by article 1477 of Part IV of the Civil code of the Russian Federation with the term “trade mark” (for goods) and “service mark” (for services).

Trade marks can be not only individual but also collective: the right owners and mark users can be a group or association of enterprises. Organization that uses collective mark can use its own trade mark as well.

At the same time it possible to differentiate well-recognizable trade marks . To register the right for them is possible only in case if this trade mark has become well-known in the country among the corresponding consumers in relation towards the marked goods in the result of its intensive use. Legal protection for well-recognizable trade mark operates without terms, but it is extremely difficult to get it because of necessity to prove that this mark is really well-recognized. In Russia there are no accurate criteria and clearly registered procedure which can refer trade mark to well-recognizable. As one of the main proofs of well-recognizable trade mark can be the results of sociological poll done by independent specialized organization on the basis of the Rospatent recommendations, for example the Sociological service of Moscow State University, the All-Russian Public Opinion Research Centre 3.

Trade mark can be well-recognizable according to the decision of the appropriate bodies of the executive power of intellectual property. Examples of the well-recognizable trade marks:

3 Rules for recognition of a trademark as well known in the Russian Federation (approved by Order of Rospatent 17.03.2000 № 38 as amended and supplemented by the Order of Rospatent from 05.03.2004 № 33 15

Fig. 1.3 Examples of well-recognizable trademarks.

Name of a place of goods origin — according to article 1516, Part IV of the Russian Fed- eration Group of Companies, this designation noting the name of the country, urban or rural settlement, place or physical object, that has become well-known in relation to the goods, and its special features are defined by exceptionally typical for this geographical object nature conditions or human factors. Exclusive right of goods producers can be recognized for such name usage.

Examples for this can be the name cognac (the strong alcoholic drink produced in the French province with the same name), “port wine” (produced in the definite region of Portugal), etc.

Fig. 1.4 Example of trademarks with protected designation of origin and protected geographical indication.

At the same time the first two are used in Germany collectively for many kinds of agricultural production (for detailed information see in part 2.1), and the last three contain the protection of place of origin of individual commodity (mineral water and butter) and trade mark owners stuff is written in the mark registration certificate.

Thus, trade mark is in “the employ” of a firm and goods optimizing advertising costs: widely promoted company or products are well-known to a customer, they are trusted. That is why strategic aim of every producer is to turn trade mark into relatively well-recognizable and widely promoted brand that has already gained the definite market share.

When we speak about the development of new product or service the definition of a “trade mark” is used more often and when product gains consumer’s acceptance and becomes well- recognizable and well-known and market share pressing up its competitors it will become a brand.

In this connection the question about the protection of trade marks from their unauthorized use by outsiders comes. The registration order and mark protection is particularized in article 3.2, but it is necessary to stress that there is a special warning mark designating the trade mark registration.

As warning marks in the world practice the following letter combinations " ТM" (shortening from trade mark), "SM" (shortening from service mark – mark of servicing) and also the words "Trademark", "Registered Trade mark", "Marquedeposee", "Marcaregistrada" have gained currency.

This designation application is a right and is not an obligation of a mark owner that is provided by article 5D of the Paris Convention.

16 In the Russian Federation trade mark owner can put together with a trade mark a warning mark (security mark) in the form of Latin letter "R" or Latin letter "R" in the circle ® or verbal mark "trade mark" or "registered trade mark, pointing that the applied meaning is a trade mark, registered in the Russian Federation.

Labeling "TM" according to the Russian Federation legislation has no legal protection. Such mark carries only informative function.

Taking into consideration all mentioned above it is possible to come to the conclusion that the existing practice gives wide opportunities to business entities to develop and register trade marks aiming at production marketing development and increase of its competitive ability.

1.2 Foundations for ecological labelling of agricultural production and food stuff Ideas of environmental protection, healthy lifestyle and nutrition in the developed countries of Europe and North America have begun quickly to gain the popularity from the middle of the last century. Now for successful commercialization of their production the producers must provide a guarantee for their consumers that the goods purchased by them are friendly to nature and people. And consumers are ready to pay for it. In Russia theses processes have just started to gather pace and in general the successful foreign experience is used in our country as an example.

As a source of information about product quality in general and its’ environmental friendliness for a consumer in particular serves a specific labeling on the goods packing.

Eco-labeling is a complex of ecological information about production, process or service in the text form, separate graphic colour symbols (identification mark) and their combinations. It is applied depending on the particular conditions directly on a product, a packing, a table, a label, a sticker or in the accompanying paper.

The aim of introducing an eco-labeling is authentic informing consumers about environmental friendliness of the purchased product and stimulation of producers to observe the standards and requirements on environmental protection. At the same time the producers get the right to label their production by eco-labels only in case if it compares favourably with ordinary like goods.

The procedure of goods expertise for the matter of their ecological certification eligibility is one of the most difficult procedures, the assortment of the goods being checked is defined by the mark, on which the goods claim. As a rule in developing labeling criteria and taking a decision on assigning the goods the right to the corresponding eco-labeling the special organizations (state, public, private, commercial and noncommercial) take part. They consist of the representatives of the state bodies, the departments of the environment protection, the state standardization offices, the public ecological organizations and the consumer rights protection societies, business circles.

Initially the international standards ISO-14000 (in Russia — GOST R ISO (All-Union State Standard) 14000) are put into the ground of the ecological expertise and certification. As “the an- cestor” and example during the formation of international and national ecological certification systems the certification for mark “Blue angel” (Germany) was accepted.

17 Nowadays in the world the considerable number of ecological labelings of different degree in consumer’s recognition, international and national market recognition exist. They characterize different aspects of ecological safety or indication about its complexity.

Depending on the information that eco-labeling conveys to production consumer they can be divided into the groups:

1. Inform about the ecological safety of the product or its packing for a person and environment as a whole.

2. Inform about the product safety by some character or complex biology of its origin.

3. Denote products, which require reworking or which are received as a result of it.

4. Urge to collect garbage and junk wastes more responsibly, to take care of nature.

5. Alert the danger of some products. 4

1.2.1 General signs for product safety One of the famous eco signs of the European Union is “Euro flower», by which products and services can be marked. These products and services are being followed the whole product life cycle, measuring environmental security criteria. Such goods include office equipment, house hold appliances, textiles and paper products, shoes and clothes. The demands to the sign are high and for the right to use it the enterprise must pay 0, 15 % from commodity circulation.

Ecological sign “Blue Angel”. The term of its awarding is amiable and environmentally sound process of production. Ecological criteria of giving the sign are formulated by the jury, which consists of control agencies and public associations’ representatives.

Table 1.1 Some eco-signs of national and supranational levels, meaning the safety of production55

Trade mark Country Trade mark Country Trade mark Country European USA FRG Union («Green («Blue stamp») Angel»)

Japan Scandi- Canada navia («Eco- («Nordic logical Swan») Choice)

4 http://ozpp.ru/consumer/useful/article9.html 5 http://asdemo.org/ecolabelling/index.php?CID=43 18 «Nordic Swan Label» - Swan Label of the Nordic countries- is one of the successful signs among the system of eco signs in the world. The affirmation of a sign to the products in Finland, Sweden, Norway and Island requires observation of very severe ecological norms and demands to the quality of the product.

The fact that unites the signs of that group is its testimony about certification of production or organization according to ISO 14000 and they guaranty not the bio quality of the product but the fact that the enterprise during its everyday activity doesn’t threaten the environment (“amiable to the environment”). Meanwhile, an enterprise can produce whatever it likes- from synthetic paints and linoleum to pesticides, harmful for nature, food additives, harmful for human organism. ISO 14000 standards appeared, at first, as the development of the EMAS system (environmental management) for lowing of the risk of negative impact by the industrial enterprise on the environment. In many countries a number of these standards is called not ecological but “Environmental management», to be exact, which initially excludes confusion in the sphere of implementation 4.

In 1994 the Global Eco-labeling Network was established, which includes many national ecological signs. Thereby, these signs improved the recognition in the global community. Now the Network unites 26 countries and state unions. The only represented state from the former Soviet Union is Ukraine, which national sign is “Green Crane”, officially included in the Network in 2004 6.

There are such signs in Russia too, which indicate the safety of the product. Particularly, the correspondence sign of the System of obligatory certification according to ecological requirements in Russia, ecological sign of International Ecological Fund (Eco bird), the sign of the Ecological certificate (for more information ref. ch.3.1.2 and MSAU module 11(Food safety and product quality control)):

1.2.2 Signs of ecological production safety according to some features or its complex organic origin Signs showing that refer to an ecological safe production may concern some features or the complex biological origin. It may concern the concrete substance: “pesticides free”, “preservatives free”, “GMO free” and etc., it may also characterize biological and natural origin of the product.

Relating to the production of rural areas, that means the agricultural raw material was grown according to ecological standards, which doesn’t require using of fertilizers and pesticides, presence

6 A.V.Shalanda. The concept of steady ecological education and enlightenment in the sphere of ecological agriculture in Russia. // www.green-pik.ru/doc/concepciya.doc

19 of such signs on the package of food products means that the product was made of such raw material. The most famous signs of such type are in the table 1.2.

Table 1.2 Widespread bio-labels on agricultural raw materials and food7

The new EU label for organic products (euroleaf), which began to operate on July 7, 2010

The label ‘Organic Farming — EC Control System’, approved by the European committee in March, 2000, officially commenced on July 1, 2010 simultaneously with the euroleaf but has not been used since June 30, 2012.

The label ‘Organic Seal’ of the USDA national program

The Swedish label of agricultural production ‘KRAV’.

The label ‘Bio-Siegel, has been used since 2001 in Germany.

The label of organic production which is used in Greece.

The label of product certification on organic origin, used in New Zealand.

One of the labels, used in Israel. Agrior Inspection and Certification is the Israel independent inspection organization, operating under IBOAA standards.

The label shows that the product is certified according to StO ‘Agrosofija’(The Russian Federation).

The label of products, grown on farms according to the principles of biodynamic production. It is used in Germany.

7 http://asdemo.org/ecolabelling/index.php?CID=43 20 Unlike the labels of the previous group, biological certificates are based on examination of the competitor about its compliance to standards of organic agriculture.

In particular, in the European Union the standards of ecological (organic, biological) production are fixed by EU Directive 'The all-European agreement on organic production of agricultural production No. 2092/91 of June 24, 1991». Since June 1, 2009 the new instruction 834/2007 operates.

It defines: 8

1. Norms of ecological farming. A ban on using gene-modified seed grain, cloning and radiation, synthetic and chemical means of tilling and plant protection on the farms making ecologically clean production. Use of seed grain, grown up on ecological farms.

2. Norms of ecological animal breeding. Use of ecological fodder, refusal of synthetic additives, growth-promoting factors and gene technologies. Free walking and a pasture of animals in summer. Ban on keeping of tethering cattle.

3. Labeling products of ecological agriculture. Till July, 2010 a single logo for all producers of EU Member States was used on a voluntary basis, at the same time there were private and national logos. At present there is a new obligatory logo, called 'a Bioleaf'. For receiving permission to use it, 95 % of components must have an organic origin, and only after opening a product you can change its content. So using private and national logos isn't forbidden, however they shouldn't take the central place in relation to EU labeling.9

In the concentrated look these restrictions may be presented in the following way (table 1.3.)

Table 1.3 Main restrictions by producing bioproduction

Allowed to use Forbidden to use The method the plant is grown Not genetically altered seeds Genetically alteres seeds Manual ravage of weeds Herbicides Compost and animal manure from bio - farms Chemical fertilizers With wreckers they struggle with the help of birds Pesticides and predatory insects Treatment by homeopathic medicine Fungicides The method raw materials are processed Natural preservatives: sugar, salt, vegetable oils, Chemical preservatives acids, essential oils Natural dyes The synthesized dyes Natural flavouring Artificial flavouring and taste improvers Pectin of apples and citrus, flour of fruit grains of The synthesized stabilizers carob tree, guar gum, ksantan, a carrageen from The synthesized thickeners (for example, starch) red algae, an agar-agar

8 Council Regulation (EC) No 834/2007 of 28 June 2007 on organic production and labeling of organic products and repealing Regulation (EEC) No 2092/91 //Official Journal of the European Union 20.7.2007 9 A. Tzvetkova. European market of pure ecological products and means of their promotion// Promotion of foodstuffs. Prod&Prod, 2010. №12 21

Not genetically altered ingredients Genetically altered ingredients (for example, starch as a filler) Pasteurization, salting, pickling, drying, vacuum Harmful technologies: nuclear splitting of a product, processing ultrasonic processing, chemical preservation, aera- tion of products in and without vacuum packing, processing of products by phenol and PAV

Packing: paper, glass, metal, packing from biologi- Plastic packing (demands preservatives) cally inactive substances (don't enter interaction with contents)

Thus, to define environmental safety of production, it is not enough to check only a finished product. The main approach is Good Manufacturing Practice (GMP standard) that is so called normal production practice. Though safety and quality of production is supervised, first of all they should control the production, applied technologies, and initial raw materials.

It’s necessary to pay attention to the fact that in Russia the only ecological label at the state level 'Chlorine Free ' points out that by production, processing or processing of a product chlorine, chlorine-containing oxidizers were not used.

1.2.3 Labels to report recycling of products Sometimes percentage in the goods of such materials is also specified. It has very indirect relation to the market of agricultural raw materials and food. 'A green point' (Der Grüne Punkt) is the most known among the Eco-labels of this category. It is put on packaging of the goods (glass, plastic, etc) and specifies that manufacturing firms and trading companies signed the contract with firm 'Dual System' (Duales System) and pay corresponding license contributions which are used only for the organization of collecting and sort- ing of packaging which are subject to utilization. After using the goods consumers sort packaging according to the material which they are made of. 'The dual system' collects and processes the packaging, marked with 'a green point'. This system was put to use in Germany, then in France, Bel- gium, Ireland, Luxembourg, Austria, Portugal, Spain and other European countries. In Russia labeling goods with 'A green point' is senseless, as there is no analogue of 'Dual system' in our country.

Different labels with variations on the subject of Moebius's loop or the closed arrows tell us about possibility of reusing the good or its packing:

The labels with Moebius's stylized loop and figure inside are used to designate types of plastic. The triangle closed by shooters shows to consumers that this product can be reprocessed. 22 1.2.4 Labels to raise environmental awareness and behaviour In fact they help to form and support loyal attitude to the nature:

1.2.5 Labels indicating dangerous goods for the environment

A label of threat of A label of threat of A label indicating need A label of chemic marine pollution to radiating pollution of separate collecting danger designate substances of used power sup- which are carried by plies waterways.

It is obvious that the labels of the first and, especially, the second groups answer the subject to ecological marking of production, so let's discuss them in detail. Firstly, it is necessary to note the conflict of concepts. The labels of the first group are still considered to be environmental goods in the Russian practice, though in the EU and The USA conceptual stuff they are called goods made on technologies, which are friendly to environment or safe for it. And under the terms "bio", «eco» and "organic" (the labels of the second group) they understand a product, made in the conditions of bio-dynamic agriculture (for more details look at paragraph 3.1.2). In Russia these concepts are still synonyms that lead to confusion of the concepts.

Thus, it is necessary to define that the labels of the second group will be discussed below.

Use of eco-labels is legally regulated, and a competitor receives the right to use this or that logotype only after certification of the production by the specialized organizations having accreditation to carry out such procedures. The product which does not have the "organic certificate”, given out by the authorized accredited organization, can't be considered BIO (ECO or Organic) (in detail see Chapter 2). Moreover, criteria of check and level of the indicators, necessary and sufficient for receiving a certain logotype, are defined by standards of the owner.

Main types of environmental standards can be generalized in the following way:

А) International private or intergovernmental frame standards, such as IF ОА M International Basic Standards or Food Code;

B) Main operating Standards or Instructions (for example, EU Instructions No. 834/200 or the American National Organic Program (USDA). 23 С) Private Standards of ecological production, such as Demeter, Naturland, Bioland, Geae, Ekowin, StO 'Agrosofija', etc.

Among the international frame standards (A) we should pay special attention to the IFOAM Basic Standards (International Federation of Organic Ag- riculture Movements, IFOAM is Noncommercial International Federation of Or- ganic Agriculture Development). Their purpose is to harmonize various programs of certification through creating universal frame conditions for environmental standards in the world, and main organization's objectives are support and association of producers of the agricultural products certificated by BIO of "bio", introduction worldwide ecologically, socially and economically significant systems based on ethical principles of organic agriculture:

A principle of health (the organic agriculture must support and contribute enhancement to the soil, plants, animals, people and the whole planet)

The principle of ecology (organic agriculture should be based on the existing ecological systems and cycles)

The principle of justice (organic agriculture should be based on the relations that guarantee the justice for the environment and living possibilities.)

The principle of care (organic agriculture should be managed carefully under the motto “Health Care and Well-being of the Present and Future Generations and the Environment”) 10

At present they can’t be used directly when being certificated but they can be useful to understand the principles and versions of all the programs of ecological certification all over the world. By the way, in Russia as well as in EC legislative base for organic production is created on the base of IFOAM documents.

The main working supranational (EU) and national standards (B) regulate the definite ecological markets. They define the main minimal “ecological” requirements for products and the process of their production according to labeling and corresponding market. There are different markets for ecological products with their own certification requirements, with their own Directives and Standards.

The most important of them are:

- European Union – Regulations (EEC) 834/2007 “Of ecological farming and corresponding labeling of agricultural products and food”

- The organic market of the USA – National Organic Program which entered into force in November 2002 (USDA)

- Japanese ecological market – Japanese Agricultural Standards (JAS)

- Switzerland, Israel, Argentina, Czech, Bulgaria, Australia – ecological regulations equivalent to regulations (EEC) 834/2007.

10 http://www.ifoam.org/about_ifoam/pdfs/POA_folder_russian.pdf 24 Despite different Standards and Directives the products are produced according to similar production rules and are a result of inspection measures equal in their effectiveness.

However, the products that, for example, are exported to EU must be certificated according to the Requirements of the Regulations EC for ecological production and the ones that are exported to the USA – in accordance with National Organic Program (USDA). 11

Anyway, to get an eco-label of Japan the local national standards are used , label “Organic” in the USA ) is given according to the Standards of the Agricultural Department of the USA (USDA), the independent organization in Israel Agrior Inspection and Certification operates according to Standards (IBOAA) Israeli Organization of Bioorganic Agriculture.

Let’s address to the certification procedures of bio-products in EC.

To get an all-European label “Euroleaf” normative acts are used EU – VO 834/2007 and EU –VO 839/2008, Application XI. Here we can find the minimal common standards of European Un- ion, giving the permission to call a product “a bioproduct”. These norms are set by the Special Di- rectives of Brussels. They concern not only the production of the organic food of vegetable and animal origin but the control over them. The all-European agreement on organic production regulates norms of ecological farming and animal husbandry, the control over agricultural products labeling. There is one required logotype – “ecoleaf” for organic food. To get a permission to use it one should have the conformity of products to the following criteria:

- 95% of the raw ingredients must have the organic origin

- the products must be packaged in such a way as to change its content could only be opening the package.

The ultimate goal of the manufacturer of organic products is to obtain the right to label it with this or that eco-mark, in order to inform future buyers of extra quality of the goods. This process is realized as a result of the work of the guarantee systems of bioproducts certification, which include specialized inspection and certification authorities.

Guarantee system of bioproducts certification

Specialized inspection and certification authorities

certification inspection labeling

Fig. 1.5 Guarantee system of bioproducts certification

11 A.V. Khodus.Ecological agriculture, ecological environmental management, ecolablling. http://www.biodynamic.ru 25 In its activity this system uses both the legal norms that establish mandatory requirements within state regulation and specific standards, which are voluntary agreements - the result of a con- sensus between consumers and producers of goods and services.Thus, the guarantee system (certification, inspection and labeling) ensures correspondance to the standards of the whole process of agricultural production of bioproducts and their processing up to the level of the final product, including its packaging, labeling and delivery to consumers.

The transitional two -year period is necessary for farmers to sell the usual agricultural products as organic ones. After the two-year period the most successful operators get a certificate “organic” and from this moment their products may be labeled as organic.

Both growers and processors of products must observe the rules, provided for by the EU legislation on organic agriculture. The growers and processors of products are regularly controlled by the authorized bodies of the EU.

The Control includes:

- inspection of the documentation for the purchase and sales, accounting of livestock, medical books, etc.

- selective sampling and analysis

- inspection of the conditions of keeping animals

- inspection of warehouses, fields, pastures, gardens and hothouses.

If the established requirements are not met, operators are deprived of the rights to sell their products as organic, and "certified organic" will be withdrawn.

Only accredited organizations, which may be located both in the EU countries and outside the Union have the right to control the products whether they meet the standards (for example, the EU or the IFOAM) and to give the ecological certificate. For example, the most famous certification and control of organic agriculture authorities in accordance with the Rules of the EU in Italy are Suolo t Salute Assosiation and the Institute of ethical and aesthetic certification in Italy and in Europe ICEA (Incnbnuto per la Certifiazione Etica ed Ambientale.In France it is French Agency for certification ECOCERT founded in 1991, in Germany it is ABCERT AG, one of the first certification organizations of the country in the sphere of eco (Fig. 1.5)12 . Moreover, the certifying organizations may have representative offices in other regions of the country or other countries.For example, ABCERT AG Agency, the head office of which is located in Еsslingen (Baden-Wurttemberg, Ger- many), has a representative office in Russia (Pushkino, Moscow region)

Fig. 1.6 Symbols of some certification organizations of the EU in organic agriculture

12 http://shulgina.my1.ru/blog/sertifikaty_na_upakovke_produktov/2012-05-18-338 26 Each certification authority has its own code number, which should:

- start with the abbreviation of EU member-state or a third country in accordance with international standards. The abbreviation consists of two letters of the code names of countries in ISO 3166 “Codes of names of countries and their parts» (for example, «DE», « Ru», « BL» and etc.);

- have an indication of the relevance for ecological/biological production in accordance with art. 23, paragraph 1, Regulation (EC) 834/2007 and Regulation 889/2008 (for example, «BIO», «ECO», etc.);

- indicate the corresponding number given at the accreditation (for example, «RU-BIO-001»);

- locate directly under Bio-Sign of European Community, if it is used at labeling: 13

RU-BIO-001

Eligibility of Bio-labeling of ЕС is defined by the following basic principles:

- voluntary participation of a competitor in certification for right for the use of a mark,

- there must be not less than 95% of bio-ingredients,

- naming of the production as BIO or ECO,

- designation of BIO ingredients quality 14

More than that all the ingredients that are included into the production content must be enumerated with mentioning those of them that are obtained with the methods of organic agriculture. At the same time:

- production corresponds to official rules of certification and inspection control;

- production is supplied directly from a producer or processor in the sealed packing;

- the name of a producer or processor and also naming or control body code is written on the production 15 .

As ingredient structure of production is extremely important not only for certifying bodies but also for consumers, European variants of Eco-labeling provide separate procedures to discover information about it. So, while using Euro list in the same field the raw origin from which it is produced should be specified.

13 A.V.Khodus.Ecological agriculture, ecological environmental management, ecolablling. http://www.biodynamic.ru 14 A.V.Khodus.Ecological agriculture, ecological environmental management, ecolablling. http://www.biodynamic.ru 15 http://www.organiccoffee.com.ua/index.php?option=com_content&view=article&id=94&Itemid=94 27 «Agriculture of EC (European Community)», if the initial ingredients are produced in EC

«Agriculture of non EC», if the initial raw is partially produced in the third countries, and partially not.If all the ingredients, with the help of which the final product is produced, were produced in the same countries, then “EC” sign or “non EC” sign may be replaced or the name of one country may be added (fig.). 16

RU-BIO-001 RU-BIO-001 RU-BIO-001 Nicht-EU-Landwirtschaft EU /Nicht-EU-Landwirtschaft Nicht-EU-Landwirtschaft Russland

Russian certified agency on BIO with 001 number Agriculture- non EC Agriculture EC/non EC Agriculture- non EC Producer of the ingredients- Russia

Fig. 1.7 Example of bio labeling interpretation of EC

Specially created structures deal with accrediting of certifying agencies directly. Meanwhile under accrediting we understand official acceptance by accrediting agency of competence by an individual and legal person to implement actions in the sphere of conformity assessment.

Certifying agencies, testing laboratories, inspection agencies, calibration laboratories, personnel certification authorities come under accreditation. The task is to supply harmonize procedure of conformity assessment in order to rise the competence, to reach high quality and effectiveness of supplied cervices.

In order to unite the approaches of organizing accreditation agencies hierarchy and organizing their work, International organization for Standardization (ISO) together with International Electro technical Commission (IES) prepared a document ISO/IES 17011 “General requirements to the agencies, implementing rating and accreditation of agencies in conformity assessment” 17 . This document serves as the basis for comparison of work of different accreditation agencies in order to reach mutual recognition.

Organizational activity in accreditation is supported and coordinated by different international and regional organizations; the most authoritative among them is International Accreditation Forum (IAF) 18 .

IAF- is a world association of accreditation agencies in the sphere of conformity assessment, and also of other organizations, which are interested in conformity assessment in such fields as

16 http://www.organiccoffee.com.ua/index.php?option=com_content&view=article&id=94&Itemid=94 17 http://www.pompred.ru/accred.php 18 http://www.iaf.nu/ 28 management systems, production, services, personnel and etc. The members of IAF accredit certifying and registry agencies, which gives certificates, proving, that management of a company, its production and personnel meet a standard.

Besides, International Organic Accreditation Service (IOAS) became world famous. It was established by IFOAM.

So far, 29 certifying agencies in the USA, Europe, Japan, Australia, China, Latin American countries have already been accredited or are in the process of accrediting. Nearly 50-60% from the world amount of accreditation services belongs to such companies.

There are also national accreditation structures. It is DAKKS, for example, national German accreditation agency.

So, the activity of agencies, accrediting eco-products in accordance with world, national and private standards, giving the right to the producer to use related label on its product, gets under strict control of accreditation agencies, checking correspondence of the organization itself to the accepted standards.

The important factor of quick and successful development of organic agriculture is the activity of private, in substance, national associations (C) of producers of organic agricultural production. Besides, in the EU countries and in the USA one can receive accepted in the country private certificate with the right of marking only in the case if that product has the bio sign of a higher(national)level(group B).

Germany is the main producer of such goods in the European countries. The major associations in Germany today are Demeter, Bioland, Naturland, which requirements are much higher and more severe, than the requirements of EU directive on organic production.

Let’s have a look at the most famous private eco labels in Germany.

It is the logo of the largest association in Germany, founded in 1971. It means the highest quality standard of organic products, more strict than national stan-

dards.

Bioland association includes ABCERT organization. It is the agency, certifying organic agricultural products. ABCERT has branches in some European countries, including Czech Republic, which is one of the leaders in the rates of development of organic agriculture on the EU market.

It is the logo of the oldest association in Germany, which was established in 1924. Demeter association gained rich practical experience in production of or-

ganic goods; it has effective methods, and also worked out very strict requirements to the certification of production and goods.

In Russian Federation the most well known sign in that group is “Eco-Control” sign , which denotes that product is certified according to StO standard “About

ecological agriculture, ecological environmental management and related labeling of eco products ” NP “AGROSOPHIYA”.

29 See more details in chapter 2 and 3

1.3 Regional marketing and product marketing of rural areas So far product marketing of the rural areas is the part of the regional marketing, it’s important to define the terms that make it possible to understand the actuality of that direction of the regional development.

Within that publication we understand regional marketing as market-oriented conception of the management directed at the sustainable development of the region, where the region is historically evolved geographical territory, whole internally and different from other regions in the set of criteria, where we can see economical and socio-cultural activity of the territory identified population.

The special feature of the regional marketing manifests itself in the fact that the region as marketing object has characteristic properties as some kind of venture with its population, image and interconnection of the separated elements, and also a product with its goods and services (fig 1.8.).

- Landscapes and nature - Business owners - Infrastructure - Population - Recreation - Authorities - Regional goods and services - Private and public societies in different branches in the region Integration Cooperation

Region as a Region as product venture

Region as market

Communication - Population - Guests of the region, tourists - Private venture, inve stors etc. Fig. 1.8 Region as a Marketing object 14

Thus the conception of the complex regional marketing should consider the region as a whole market subject, integration of various enterprises and target groups, maximally effective usage of internal resource, industrial and labour potentials of the region, knowledge of economic and social problems of development, distribution characteristics of the branches of regional complex and interregional distinctions.

30 The main participants of the regional marketing programs in the rural areas are political and administrative authorities on the different levels, associations and unions of entrepreneurs and population, publicity, Chamber of Handicraft and Chamber of Commerce and Industry, entrepreneurs, mass media, coordinators and multiplicators of regional market, invited experts and counsel- ors, tourists, investors. 19

It’s possible to divide the participants on the internal and external target groups. On the scheme you can see such gradation for the rural municipal district. (Table 1.9.)

Thus:

local entrepreneurs (principally small and medium biasness) are interested in the strong demand, market nearness, qualified manpower, steady future perspectives etc.

local population: in the entrepreneurial activity, retaining and expanding of the new workplaces, worthy life conditions;

Administration and Administration and political structures political structures (regional/federal level) Tourists Municipal mass- media Invited external Local investors experts

Internal Communi- External target target cation and Over regional mass- groups groups Entrepreneurs cooperation media

Potential eToOver Community regional mass-media

CH, CCI Associations and un- Associations and unions of entrepreneurs ions of entrepre-neurs and population and population (regional/federal level) (муниципальный ур о-

Fig. 1.9. The main participants of the regional marketing

14 Source: Meyer, Jörn-Alex. Regionalmarketing: Grundlagen. Konzepte. Anwendung. – München: Vahlen, 1999.

31 tourists: in visiting of unique remarkable sights, the best possibilities for the recreation

investors: in profitability and safety of investments, secure procedures of purchase and sale of propriety

administration: in the better competitiveness of the region in comparison with the other regions

For the successful regional marketing and sustainable development of the area one need a cooperative process integrating the marketing subjects and you should consider the region as the single market operator and also consider economic, social and ecological features of the development.

Complex regional marketing

intensification of the integration processes

Agriculture Recessing Trade Tourism Better realization (ul- Increase in demand Increase in sales (to Increase in demand timate consumers, (by agricultural pro- the final consumer) (by tourists) recessing and trade ducers) Great demand (from New tourist supplies organization) Local raw materials agricultural and and services (a rest Better quality of the Better recessing processing enterpris- on the farm, tradi- agricultural production ers) tional regional dishes Better realization on the public catering (trade homes) Local food products of a good quality establishments)

Great recycling rate Better quality Better sales of products Increased incomes, work places

Fig. 1.10 Model of the complex regional marketing. Source: Schade G., Leitow D. Regionalmarketing- strategien in Ostdeutschland // Ausbildung und Beratung im Agrarbereich. – 2001

The greatest benefit from the complex regional marketing and integrated approach in the rural area could receive the small and medium agro-industrial complexes.

Using of given approach for emphasizing the process of economic integration in agrarian sphere is able to have a complex positive effect on the situation in the rural area:

- economic effect consists in decreasing transaction costs, forming of add value and increasing of sales amounts of regional production, which leads to rising of economic effectiveness of local enterprises;

32 - social effect is in preserving of exists and creating of new work places, increasing in incomes of local community;

- ecological effect is in lowering of environmental load as a result of carrying and production distances reduction, more efficient usage of natural resources of the territory etc.

So far as the successful examples of regional marketing programs are concerned, which have been implemented in some regions in Europe, it is found that the basis of success was the mutual actions of enterprises, specializing on ecological and traditional agriculture (table 1.4.).

Table 1.4 Regionality and ecological properties in the regional marketing

Features unity/advantages Regionality and Regionality ecological properties ecological properties Traditional cuisine Natural taste Positive image Taking into account regional pe- Environmental protection meas- Unloading of environment culiarities ures/ecological agriculture Definite origin of raw material Definite means of production Transparence for consumers Independent control of a raw pur- Independent control of means of Quality warranty chase and processing methods production Region logo Eco-label The best design and marketing Source: Schade G. Liedtke D. Probleme der Regionalvermarktung im Berliner Umland. // Schriftreihe Agrarspectrum.- Frankfurt, 2001 – Bd. 30.

In regional marketing the unity of ecological purity and known place of origin of products should be used as complementary preferences.

Usage of regional marketing in agrarian sphere has its specific character.

Trade policy. High quality, regional logo/trade mark and transparent production process is an integral specific feature of food products when regional marketing is used in agro business.

Price policy . During price policy formation in the regional marketing one should take into account factors, which influence consumers’ preferences of local buyers: support of local economy, sense of public spirit for their own region, freshness, the best quality and taste of regional food products, health benefit, more trust, production according to environmental protection requirements.

Communication policy. Measures, applying within the framework of a given course, don’t differ from the same measures in the traditional marketing, but when advertising the accent is made on the local mass media and print production; presentations on the local exhibitions, fairs and festivals, for supporting sales different presentations, test sales, store demonstrations and promotional material distribution on the trade place are used.

Marketing policy. Marketing policy determines the way of the product from the producer to the consumer. There are two main trade channels:

1. Direct sales: rural shops and markets

2. Sales with the help of dealers: special shops (butcheries, bakeries etc.), public catering establishments (cafés, confectionaries etc.), retailers and wholesale dealers. 33 Summing up EU experience we can perform advantages and disadvantages of the main trade channels of the regional products in the following way (table 1.5)

Table 1.5 Possible sales forms of regional agricultural production 20

manufacturers of agricultural production sales forms advantages disadvantages From the field, Transparent scheme. Manufacturing and High time consumptions, limited line and from the court- selling attracts clients and allows fix a prof- volume of own output, access to the point of yard, near the itable price. purchase. road Direct suppliers It attracts loyal customers. It is not officially Transport and personnel is required for taxed. selling. Seasonality. Rural shops and Beneficial price, possible line extension Real estate investment, high time con- street-stands through additional purchases, loyal cus- sumptions, limited own output. tomers. Collective farm/ Beneficial price, central place, attractive High time consumptions. Seasonality. peasants market atmosphere. Shops in the dis- Beneficial price, central place, line exten- Expenses on refill of assortment, positioning trict and regional sion. of regional products (advertisement, regional centers shelves). Mobile store Available for non-mobile clients. The Transport and separate personnel for sell- choice of a better trade place. ing is required. Special shops High commodity circulation, loyal custom- Limited volume and assortment. ers. Vegetable whole- High volume of sales, possibility of prelimi- Low price. sale store nary order. Super market of High commodity circulation, low marketing Low price. cheap goods expenditures. High quality High purchasing ability of clients. Sales of More severe demands in quality. Strict goods super mar- regional products at optimal price. production control is required. Additional ket expenditures. School, factory Regular selling. Efficient for MSB enter- Sometimes advanced preparation is re- canteens etc. . prisers, farmers. quired, demands for quality. Restaurants, ca- Perspectives for selling regional products, Limited amount of delivery, insufficient in- fes high attraction for clients, profitable price. terest of the owners (at this moment).

During the direct sale the manufacturer is in immediate contact with consumer, which helps to explain to the client the advantages of his own product, but it is connected with high expenses of time and labour. Above mentioned market outlet is the most important one from the regional marketing philosophy point of view (direct deliveries, farmers/village shops and stalls, peasants markets). But the portion of direct sales in the total amount is only 5-10% in the EU countries.

That is why active search for intermediate seller is necessary together with the direct marketing for the broadening of the sales network. The important market outlets are special shops (bakeries, butchers’ shops), public catering establishments (restaurant, cafes, canteens) and retail enterprises. Source: Shade G. Liedtke D. Problems of the regional Marketing // Written by Agrarspec- trum .- Francfurt , 2001 – P. 30.

20 Merzlov A.V., Ivashov D.N. Regional marketing as the main factor of sustainable rural development. Materials of the international scientific Russian Iranian conference- M.: MTAA, 2002.- P. 189-190 34 1.4 Test questions for topic 1 1. Name the types of trademarks.

2. What is the conventional trademark?

3. What purposes are pursued by producers during the developing and registration of trademarks on the production or services?

4. What type of trademarks is unacceptable for small and average rural producers?

5. What information does warning marks carry?

6. What classifications of eco signs do you know?

7. What is the difference between certification of agricultural production on ISO and certification on "organic" standards?

8. What type of certification (on ISO or on "organic" standard) is acceptable to small and average rural producers and why?

9. List the basic principles of organic agriculture.

10. What does the regional marketing mean?

11. What are the effects from the usage of complex regional marketing in rural areas?

12. Name the main sales channels of regional production.

1.5 Literature on the topic

1. Ecolabeling. The joint pilot Belarus project – Denmark – Sweden – Lithuania// URL: http://asdemo.org/ecolabelling/index.php?CID=43 2. Meyer, Jörn-Alex. Regional marketing: Bases. Draughts. Use – München: Vahlen, 1999 3. Shade G. Liedtke D. Problems of the regional Marketing // Written by Agrarspectrum .- Francfurt , 2001 – P. 30. 4. Poyandayeva I. What hides behind the words "Natural", "BIO", "Organic"? Let's talk about standards.//URL: http://visnyshka.blogspot.com/2012/05/bio.html 5. Certification and marking of production of organic agriculture//URL: http://www.pompred.ru/accred.php 6. Tretjakov I.V. Trademark registration//URL: http://goryunova.niv.ru/goryunova/master/registraciya- marki.htm 7. Tsvetkova A. European market of pure ecological products and ways of their promotion //food Ad- vance. Prod&Prod, 2010. №12 8. Shalanda A.V. Concept of continuous ecological education in the sphere of ecological agriculture in Russia//URL: www.green-pik.ru/doc/concepciya.doc

35 2 German experience in promoting products with trade and ecological labels This section examines international activities in the sphere of ensuring the quality of regional products, develops the general scheme of agro-producers’ bio-products certification in Ger- many, states the questions of interaction between regional products producers and certify inspections in order to protect the quality of agro-products, taking into account their meaning and representing their interests on the market.

Questions under consideration:

1. German experience in labeling food products.

2. The system of bio production certification (on ACERT AG. company example).

3. Promotion of BIO and regional products in the EU countries.

2.1 German experience in labeling food products Food manufacturing is one of the main branches of economy in Europe and is one of the five largest branches in Germany. In 2010 turnover in the food industry has made euro 150 bln. Ger- many together with France is one of the largest food manufacturers in Europe. Meat and milk processing, bakery and alcoholic beverages production are the branches with the highest turnover in the German food industry. Such branches as fruit and vegetable production, mineral water and other beverages bottling are also very important.

In 2010 growth of the food production turnover in Germany was 1, 2%. The export business became the motive force of the development with the growth of 9%. Due to that fact the branch achieved the record volume export of euro 42, 9 bln, representing 28% of total turnover. The major part (84%) is for sale in the extent of the pan-European market; 16% of export production is deliv- ered outwards of the European Union, primarily to Russia, the USA and Switzerland 21 .

Advance of the German food products abroad is based on the five factors: high quality, safety, optimal price, supply reliability and taste qualities. «Made in Germany» is the sign of the quality of food products, which are in demand in the whole world. Nomenclature covers traditional German products and even modern innovations in the sphere of food production. Herewith German food producers are always oriented on the demand and desires of the consumer.

Consumers, which are sensitive to the price and at the same time pay a lot of attention to the quality, are peculiar to the food production market in Germany. It takes a specific goal for the company to suggest high quality at maximum profitable price.

More and more consumers now pay attention to the quality and they want to know how, where and in what environment the goods were produced. Herewith they make high demands to the stability of the price making chain, social correspondence and ecological compatibility of the production method.

21 http://www.catalog.horeca.ru/newspaper/foods/362/ 36 Quality together with the price is the main criteria when buying and nowadays it acquires more meaning. Marks, which are confided, help greatly when the quality is evaluated.

The general scheme of food products labeling in Germany includes three levels:

- Supranational ( ЕС ) – Bio and PGI/PDO/TSG;

- National(Germany) – QZ-BW;

- Private (Demeter, Bio land etc.).

In this country, as well as in the other countries of the EU, the regulation works which means that national and regional (private) mark is given to the product which has already been marked on the supranational level (fig. 2.1).

Projects are financially Projects are financially supported by Plenum pro- supported by Plenum gram: program: a) Ebbes guad`s – 100% b) Albkorn - Alpine fruit drop juice of the wheat flour production. meadow tree;

AlbLeisa project – traditional Alpine bio lentil production.

Fig. 2.1 Labelling of products

At the same time, the EU does not demand absolute unification of the food products labeling, admitting the right of the region to be specific and unique. For this purpose the range of signs is used. They identify geographical origin of the product.

37 Three European Union schemes of geographical indications and traditional specialities include: protected designation of origin (PDO) , protected geographical indication (PGI) , and traditional speciality guaranteed (TSG), which were encouraged to protect the quality agricultural products and foodstuffs 22 .

The legislation relating protected designation of origin and traditional speciality guaranteed first came into force in 1992. Now they are based on the legal framework provided by the Council Regulation (EC) No 510/2006 of 20 March 2006 23 . This law ensures that only products genuinely originating in that region are allowed to be identified as such in commerce. It was enforced within the EU and being gradually expanded internationally via bilateral agreements between the EU and non-EU countries.

The purpose of the law is to protect the reputation of the regional foods,to help producers obtain a premium price for their authentic products, and eliminate the unfair competition and misleading of consumers by non-genuine products 24 .

The Council Regulation protects the names of wines, cheeses, hams, sausages, seafood, ol- ives, beers, Balsamic vinegar and even regional breads, fruits, raw meats and vegetables.

Foods such as Gorgonzola, Parmigiano-Reggiano, Melton Mow bray pork pies, Asia go cheese, Camembert, Somerset Cider Brandy and Champagne can only be labeled as such if they come from the designated region. To qualify as Roquefort , for example, cheese must be made from milk of a certain breed of sheep, and matured in the natural caves near the town of Roquefort-sur- Soulzon in the Aveyron region of France, where it is infected with the spores of a fungus (Penicil- lium roqueforti) that grows in these caves 25 .

This system is similar to appellation systems used throughout the world: appellation d'origine contrôlée ( France), the denominazione di origine controllata (Italy), the denominação de origem controlada (Portugal), denominación de origen (Spain). In many cases, the EU PDO/PGI system works parallel with the system used in the specified country and in some cases is subordi- nated to the appellation system that was already instituted, particularly with wine in France. With cheese, for example Maroilles has both PDO and French classifications, but generally only the French classification will be shown.

In countries where Protected Geographical Status laws are enforced, only products which meet the various geographical and quality criteria may use the protected indication.

Protected designation of origin, protected geographical indication, and traditional speciality guaranteed (PDO, PGI, TSG) are treated as intellectual property rights by the Customs Regulation 1383/2003 (Regulation concerning customs action against goods suspected of infringing certain intellectual property rights and the measures to be taken against goods found to have infringed such rights), and infringing goods may be seized by customs on import.

22 http://ec.europa.eu/agriculture/quality/schemes/index_en.htm 23 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32006R0510:en:NOT 24 http://agritrade.cta.int/en/content/view/full/1794 25 http://ec.europa.eu/agriculture/quality/door/list.html 38 Eco-label, used only on the territory of the Federal Land Ba- den-Württemberg.

Label, belonged to the Ministry of Agriculture of Baden- Württemberg. It guaranties the quality of produced goods of Ba- den-Württemberg. It specifies strict mechanism of using seed raw material, fertilizers and strict regulations of growing, and also additional supervision, which leads to receiving the product of high quality just right on the field. And it also helps transparency of the whole production chain.

The origin of seeds + Production +

Manufacturing in the region

The origin of seeds The protection of or geographical origin. Emphasizing the re- Production gional belonging of

or the product. Manufacturing in the region

The protection of the original compounding. It means technological process of production.

Fig. 2.2 Quality marks of regional products in Germany

Within the European Union infringement may be treated as counterfeit, misleading advertising, passing off or even as a question of public health. Outside Europe, the protection of PGS products usually requires bilateral agreements between the EU and the importing countries.

The origin of the product is only one of the criteria for use of the protected terms.The product must also meet various quality criteria, while the label "Traditional Speciality Guaranteed" (TSG) does not impose any restrictions on the geographical origin of the product.

The protection of geographical indications in EU was extended to foodstuffs and other agricultural products in 1992, which gives much more power to ensure a harmonized protection across the European Union. It is currently governed by the Regulation on the protection of geographical indications and designations of origin for agricultural products and foodstuffs (No 510/2006).

39 To qualify for a PDO, the product must have qualities and characteristics which reflects its region of production: it must also be produced, processed and prepared exclusively within that region, besides seed grain should be from that region too.

An application for a PDO or a PGI, according to the criteria in the Regulation relevant to Member State, is forwarded to the European Commission for final approval. All applications are published at both the national and Community stages of examination. If the European Commission doesn’t receive any objections against proposals of PDOs or PGIs, and business community is sure there would be no harm to its business, an application is approved.

A recurrent objection is that the proposed denomination is a generic term for the product in question: generic names cannot be registered. For example, Cheddar cheese was deemed to be a generic name, but the PDO "West Country farmhouse Cheddar cheese" was allowed 26 . Feta was deemed not to have become generic, and was registered as a PDO to the disappointment of cheese makers outside of Greece.

Protected designation of origin (PDO) The Protected designation of origin is the name of an area, a specific place or, in exceptional cases, the name of a country, used as a designation for an agricultural product or a foodstuff,

which comes from such an area, place or country, whose quality or properties are significantly or exclusively determined by the geographical environment, including natural and human factors, whose production, processing and preparation take place within the determined geographical area.

In other words, to receive the PDO status, the entire product must be traditionally and en- tirely manufactured (prepared, processed AND produced) within the specific region and thus ac- quire unique properties.

Protected geographical indication (PGI) The Protected geographical indication is the name of an area, a specific place or, in exceptional cases, the name of a country, used as a description of an agricultural product or a foodstuff,

which comes from such an area, place or country, which has a specific quality, goodwill or other characteristic property, attributable to its geographical origin, whose production, processing or preparation takes place within the determined geographical area.

26 http://ec.europa.eu/agriculture/quality/door/registeredName.html?denominationId=785

40 In other words, to receive the PGI status, the entire product must be traditionally and at least partially manufactured (prepared, processed OR produced) within the specific region and thus ac- quire unique properties.

Traditional specialty guaranteed (TSG) The Traditional specialty guaranteed is a trademark for an agricultural product or a foodstuff, which has a certain feature or a set of features, setting it clearly apart from other similar products or foodstuffs belonging to the same category 27 . The product or foodstuff must be manufactured using traditional ingredients or must be characteristic for its traditional composition, production process, or processing reflecting a traditional type of manufacturing or processing.

In other words, to receive a TSG status, the product does not have to be manufactured in a specific geographically delimited area; it is sufficient that it be traditional and different from other similar products.

Indications which serve exclusively to identify the place of origin of goods cannot be registered as trademarks, however marks which also serve to identify the quality of a product originating in a certain region may be registered so long as they have not become generic in the trade concerned. Trade marks which have been registered before the registration of a PDO or a PGI may continue to be used, but the registration of an equivalent trade mark after the approval of a PDO or PGI is impossible (Art. 13, Regulation (EC) No 510/2006). The existence of a trade mark (registered or unregistered) may be a reason to refuse the registration of a PDO or a PGI [Art. 7(3)(c), Regulation (EC) No 510/2006].

Hence the Polish geographical designation "Herbal vodka from the North Podlasie Lowland aromatized with an extract of bison grass" or Wódka ziołowa z Niziny Północnopodlaskiej aro- matyzowana ekstraktem z trawy żubrowej, so phrased as to avoid infringing the trade mark " Żu- brówka".

In certain cases, the name of widely popular products became generic, and therefore could not be protected afterwards. Cheddar cheese, for instance, is produced in many countries, including the US, Australia and New Zealand. Hence the "Cheddar" name is not protected, but the more specific name "West Country farmhouse Cheddar" can apply for protection of geographical designation of origin. Other products are protected in Europe but not elsewhere: Buffalo Mozzarella for instance is protected in Europe, but the name is used without restrictions by US dairy companies 28 .

Regional indication is given in Germany by the Ministry of Agriculture and Food Products of Federal Land. One can use the indication free, if they have Euro certificate and European Minis- try of Agriculture registration. The usage of private national standard indications, such as Bioland 29 , Demeter 30 , Naturland 31 and etc. is paid and it means “super” quality. Violation of private standards

27 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32006R0509:EN:HTML 28 http://www1.american.edu/ted/mozzarella.htm 29 http://www.bioland.de 30 http://www.demeter.de 31 http://www.naturland.de 41 may result in implementation of penalties at the rate of 300-500 euro. That is why, at first you should receive European Certificate “Vitality Leaf», and only after that one of the private standards, which means the highest quality of a product.

Regional identity is the first step at the beginning of food promotion. It helps the region to become attractive for potential consumer. Geographical signs protection and development of the local identity improve the significance of the region itself and create its positive image.

Fig. 2.3 Traditional agrarian products of Baden-Wurttemberg

2.2 An example for the system of bio production certification Top-rank leader in the sphere of inspection service and certification is ABCERT AG 32 company (Stuttgart, Germany).

ABCERT AG company was established in 1992, and its representative offices have been working in Check republic, Italy, Germany and Russia (Pushkin, Moscow region) since 2008. AB- CERT AG company is the largest certify company in Germany on “Bio”, accredited EN 45011 and EN 45011 accordingly. (Standards, which determines the general applications to the food certify organizations, for accepting them competent and reliable product certify companies)

The company staff consists of 145 members all over Europe (55 permanent employees and 90 externs). ABCERT AG headquarters is situated in Esslingen (Esslingen am Neckar) with its branch in Augsburg and 6 regional offices all over Germany.

The basic lines of ABCERT AG business is 33 :

- BIO inspection and certification of Agricultural and Processing Companies on(EG) 834/2007; - BIO inspection and certification of wild herb mixtures on (EG) 834/2007; - BIO inspection and certification of trade network and Internet shops on (EG) 834/2007; - BIO inspection and certification of organic forage manufacture on (EG) 834/2007; - Inspection and certification according to Bioland, Demeter, Naturland, Soil Association, KRAV; NOP, Global G.A.P., QS-Qualitätssicherung, “The system of international and sustainable biomass production” (ISCC) 34 .

32 http://www.abcert.de 33 http://www.organic-bio.com/ru/

42 - Certification of wood and paper production according to PEFC standards, certificate of technological chain CoC.

For rendering of above mentioned certification services, ABCERT AG was accredited by national German accredit authority- DAKKS.

Its shareholders are farming enterprises (50% of shares are belonged to the farmers of Bioland union). ABCERT AG certifies all kinds of regional trade marks according to Euro standards.

ABCERT AG clients are:

- 7500 agrarian enterprises; - 2500 processing companies (RITTER SPORT company, PORSCHE and Bundestag restaurants in Berlin, Franz Bayerl Holzindustrie, Scheuffele Holding, Moco Holzwerk and others.)

Agrarian food producers receive evident benefits from certification:

- new clients, beneficial price; - entry to the new markets; - achievement of the confidence in the groups with social and ecological interests; - image and marketing improvement by using Bio-logo; - many consumers and customers now demand only certified products; - more trust from the clients by regarding improved world standards; - possibility of receiving “green” credits.

Bio certificate controls:

- raw material production; - goods manufacturing.

Certificate provides double control on analysis account:

- the quality of the raw material; - the method of reproducing.

Constant control. During Bio-certificate functioning certified agency conducts:

- planned and unplanned inspections of certifying manufactory; - buying of the products from the shops for the quality control.

For regional products promotion and representations of its interests on the market agro-food producers appeal to the different partnerships and societies, which conduct training seminars on marketing stimulation, organize fairs and exhibitions, and also helps to submit joint request to Brus- sels for receiving trade mark. MBW Marketinggesellschaft 35 is one of such marketing companies,

34 Beginning in January 2011, only certified "stable" grains and oilseeds, as well as biomass, are authorized for use in the production of bio-energy in the European Union 35 http://www.fbw-markenqualitaet.de/ 43 which nominal capital is divided between Ministry of Agriculture, Food and Protection of Consum- ers of Federal Land Baden - Württemberg (52%), Farmers and Butchers Union, Unions of Agrarian Economy, Unions of Eco products manufactures (48%).

Procedure of receiving quality label is the following:

1. Producers and manufacturers make a decision to receive label during general meeting.

2. They make a request with the help of appropriate authorities (MBW Marketinggesellschaft) and pass it to the German patent Bureau (Deutsches Patent- und Markenamt (DPMA)).

3. DPMA makes formal and deep inspection of the request.

4. Checked material must be published in the special newspaper in the period of three months.

5. DPMA makes the second inspection and after that pass a resolution about ad judgment a sign. If the decision is positive, the request is sent to the regional Department of Justice.

6. The Department of Justice sends the request to European Commission.

7. European Commission approves materials within 6 month.

8. If negative reviews are absent, the entry is made into the EU register, which means the quality mark has been accepted.

After receiving a mark three stages of control are made:

- Self-control as the bases for everybody;

- Neutral supervision-farmer alliances control the sellers;

- Whole system control (MBW is responsible for that).

Bio products are checked once a year necessarily.

Hereby, the involvement of manufactures mechanism works. It attracts manufactures to the solving of growth of the agro-food quality questions, taking their meaning into account and representing their interests on the market.

2.3 Promotion of BIO and regional products in the EU Many European countries take evident efforts in order to develop the production and promotion of pure products. Natural, organic or bio products occupies strong place on the stalls of special and ordinary shops in Europe. Sales of eco products are not very high in the total volume on the market, but annual growth of the cultivation area for it designates evident trend.

Ecological farms in Europe produce legumes, cereals, milk, tea, honey, mushrooms, eggs, meat, vegetables, aquaculture, yeast and vine. According to the figures of Rossbusinessconsulting (RBC), world bio products turnover is 36,4 bln. euro, annual average increase is 4 bln. euro. More- over, eco products market wasn’t affected by the economic crises. 10% growth in sales of Eco products has been noticed since 2008.

44 From the market size viewpoint, Germany, France and Great Britain are the leaders (according to Agrarmarkt Informationsgesellschaft AMI 36 (D) data). An Eco product spending per capita has been grown tangibly in Denmark, Austria, Germany and Great Britain. According to predic- tions, eco products segment of the market will keep the high dynamics over next ten years in many countries.

Environmental production share is about 4% of agrarian land in Europe (7,39 mln.ha), including 3 mln. of bio land and 3,2 mln.of bio grassland. The largest quantity of ecoland is in Italy (1,15 mln. ha.), then in Spain(1 mln.) and Germany(0,87 mln.).Product expansion also takes place. Thus, in Germany in 2010 the general amount of ecoproducts, which have national bio mark on their label, exceeded in 55 thousand items. According to RBC, the biggest amount of sales was noticed in the hot beverages segment (13%), bakery (10, 3%), spices (9, 7%), meat and meat products (8, 1%), confectionary (6, 1%).

According to Ökologische Lebensmittelwirtschaft BÖLW 37 (D) data, sales on the German organic products market were 5, 8 bln. euro in 2009. The number of organic farms increases till 21047 farms (5, 6% from all farmers). Also the quantity of retail bio-markets increases noticeably: 15086 sq.m. of new places appeared.

Fig. 2.4 Bio-shop in Germany

The difference between the prices for bio-products and food products, produced with the help of traditional methods is 17%-40%.

36 http://www.bhkw-infozentrum.de 37 www.boelw.de 45 Average price on milk in Germany Including S-class and extra charge, cent/kilo netto from the farm; milk fat 4,2% and protein content 3,4%

Fig. 2.5 Purchasing prices for milk in 1999-2010 (per one farm) 38

European Union pays much attention to the legislative background of the production and sale of the pure ecological products, which evokes a lot of trust from the consumers. Much effort is made to promote bio products on the market. We may single out six main branches in that sphere:

1. Organization and conducting special exhibitions on bio products The largest is BioFach , which is conducted in Nur- emberg, Germany (for the twenties time in 2010). Interna- tional Federation of Organic Agriculture Movements (IFOAM) patronizes the exhibition. Regional BioFach exhibitions take place in Japan, China, Brazil and the USA. Bio- Fach is not only an international exhibition but the congress, where different master classes take place, where experts in the sphere of organic production make reports and discuss important problems; it is also a platform “The future of pure ecological products` trade”.

The range of goods, represented on the exhibition, demonstrates the main stages in the production of the pure ecological products and products for different spheres of human`s activity: raw material and ready products, production and technologies, marketing and promotion.

38 www.biomilchpreise.de 46 Visitors of the exhibition are the representatives of different retail and wholesale companies, public catering enterprises, which sale organic products and many others. In 2010 43669 specialists from more than 120 countries visited BioFach. 2557 expositions were presented there.

The other important event in the sphere of the organic goods productions is the annual exhibition of bio wines, which has been taking place in France since 1993. The exhibition is wholly devoted to wines, produced from grapes which have been grown on bio farms. The main event is “Wine making party”, which takes place in the bio food and drink tasting format.

Among other exhibitions of bio products there is also Biolife exhibition (Italy). Thematic sections of the exhibition are as follows: products, wines, bio cosmetics and etc. The first exhibition of eco wines took place in Navarra (Spain) in May 2010. More than fifty producers not only from Spain but also from France and Portugal took part in it.

2. International contests of bio products One of the largest contests is MUNDUSvini International Wine Awards. It is one of the lines of the main testing competition, which takes place in Germany under the patronage of Interna- tional Organization of Vine and Wine (OIV) and International Union of Oenologists(UIOE).

Germany is large wine producer and one of the leading importers. That is why the contest is attractive both for German producers and for international companies, which try to take hold on the international market.

Unstained reputation, wide scope of the target audience through the trade press allowed to attract more than two thousand samples of products during the first year of the contest. In 2010 Russian wine “Donskaya Chasha” was awarded with golden medal of 2009(Vedernikov Winery, Rostov region).

In 2009 distinctive experiment was made: wine fair and Bio-Weinpreis MUNDUSvini Bio- Fach award took place within the framework of the BioFach exhibition. Combination of the technical achievements and capacities of the BioFach with the MUNDUSvini reputation offer the chal- lenge for organic wine making.

Organic sector of the food products market, and its wine making segment as well, develops rapidly, it means that Bio-Weinpreis MUNDUSvini BioFach award is a special marker for the further improvement and development of the organic wine production.

3. Product promotion through retail According to Rossbusiness consulting data, the main sales outlet of pure ecological products is retail chain, including discounters. In Austria 67% of bio products are sold through retailers. Spe- cial shops are on the second place (in terms of sales volumes); drop shipment delivery is on the third place.

Several years ago not only bio supermarkets but also ordinary affiliated retailers and discounters made a decision to work with bio assortment (for example there were nearly 500 of them in Germany in 2009). The activities of supermarkets and discounters (Plus, Rewe, Norma, Aldi and

47 others) in promoting products led to a growth of sales volumes. Many retail shops make promotion campaigns of bio products under their own logo; they pay much attention to the product expansion and introduce new organic products. Bio products’ price makes it possible to claim that it satisfies demands of all social groups, not only of prosperous ones. The difference in price of organic and nonorganic products is gradually decreasing. It hasn’t ever disappeared, but tendency to lowing of prices can’t help but makes the demand to grow.

4. The European Union activity (International Federation of Organic Agriculture Movements, IFOAM). The European Union helps by subventions and in conducting scientific researches. For example, the world IFOAM congress takes place regularly. New scientific papers, which have been examined by the experts, are represented on the congress.

German bio farms, which organized production according to EU principles, have been receiving support from both state and EU budget since 1989. Also programs of financing the devel- opments in eco products marketing are at work. Large-scale promotion campaign takes place in Check republic, which encourages consuming eco products. It is financed by the EU and by state agricultural investment fund.

5. The informing of the consumers Conducting of different promotion events for children and teenagers as future active consumers. In Italy organic products are used to prepare school lunches, in Check republic the program “Organic school” are at work, which helps to conduct training courses for students and staff of the school. The same training courses are organized by British mark Food for Life , which arranges culinary courses, excursions to bio farms, helps to widen school gardens, where bio vegetables are grown. In Germany the prize for healthy life style prevention exists and also they conduct culinary courses for student and their parents.

6. The development in the system of eco products delivery, directly from the producer to the consumer. Not every farmer can afford to have his own shop, and whole sale means less profit as a rule. For the solvation of that problem the direct delivery of Eco products to the school canteens and to the public caterings are practiced in many European countries. So called subscription baskets are developed, with the help of which the consumer makes an order on the producer’s website and the producer delivers products to the fixed place once a week.

Additional encouragement of the farmers exists in Latvia. The farmers work according to the system of subscription baskets: clients pay a certain price for delivery, and also help on the farm (twice a year), which helps to establish familiar relations between producers and consumers.

In some cities in Austria and Germany self-sufficient gathering of bio vegetables is practiced on the farmed out area. The supporting of the farmers is realized in the following way: there are special slot machines on the streets of the cities, where you can buy eggs, the package of potatoes or milk in a bottle of local production.

Fig. 2.6 “Egg machine”

So, enumerated measures help to gain accessibility and growth of consumers’ awareness about regional food products and it helps to stimulate the interest to traditional European cooking, which is known by its variety, quality and perfection.

Euro experts consider that consumers of bio products don’t abandon their habit even during the crises and don’t save money on the quality of their own food. They are sure that the market of the organic products will grow in the long-term outlook.

49 2.4 Test questions and practical group work task for topic 2

Questions for revision:

1. What group of eco signs does this sign belong to? In what country is it used? 2. What does the guarantied system of bio products certification include? 3. What is certification and what refers to inspection services? 4. Who does the accrediting of the certifying agencies? 5. Give examples of the national private standards, what is the difference from the base standards? 6. Name the stages of receiving quality mark. 7. What PDO sign means? 8. What PGI sign means? 9. What TSG sign means? 10. Characterize the stages of the labeling system of bio products in Germany? 11. Name the main ways of regional products promotion to the market.

Group work 1. Divide into three groups: “Producers”, “Consumers”, “Local authorities” and discuss positive and negative sides of production and sales of regional products with bio labels (for example traditional sorts of traditional Alpine bio lentil with Bio Leaf and Demeter signs), and what trade channel you consider to be more profitable for your group (for that purpose you should decide between your groups what products you will examine, because trade channels of corn And meat will differ). Support your position in front of the other groups and discuss the results.

2. Divide in to two groups “Optimists” and “Pessimists” an discuss in your groups what experience of the EU countries in bio labeling and marketing of the regional products of rural areas can be or cannot be used on the Russian territory. Discuss your results.

50 2.5 Literature on the topic

1. Agritrade. Informed Analysis, Expert Opinions. // URL: http://agritrade.cta.int/en /content/view/full/1794 2. Carmona J.L.L.. Agricultural quality standards in European Union (EU). How they fit into a broader framework. // URL: http://www.unece.org/fileadmin/DAM/trade/agr/promotion /2011_Croatia/AgriculturalQualityStandardsInEU_JoseLuisLopezCarmona.pdf 3. Council Regulation (EC) No 509/2006 of 20 March 2006 on agricultural products and foodstuffs as traditional specialities guaranteed. Official Journal L 093 , 31/03/2006 P. 0001 - 0011 // URL: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32006 R0509: EN:HTML 4. Geographical indications and traditional specialities. // URL: ttp://ec.europa.eu/agriculture/ quality/schemes/index_en.htm 5. Schaack D., Moewius J., Gerber A., Zander K., Heinrich J. Zahlen • Daten • Fakten. Die Bio- Branche 2012. http://www.boelw.de/uploads/pics/ZDF/ZDF_Endversion_120110.pdf 6. The food industry in Germany: Tendencies and innovations on highly competitive market// URL: http://www.catalog.horeca.ru/newspaper/foods/362/

51 3 Modern Marketing of regional and ecological products of rural areas in Russia This chapter describes the problems of goods and eco labeling in the market of agricultural raw materials and foodstuffs of Russia and its regions, technology of labels obtaining and protection of rights of their proprietors, shows specific character of branding of regions and municipalities, generalizes the approaches to promotion of ecological and regional production of rural territories.

Questions under consideration:

1. Labelling of food commodities and region branding in Russia. 1.1 Trademarks of the domestic producers in the national commodity market. 1.2 Ecolabeling in Russia commodity market. 2. Registration procedure and legal protection of trade marks in Russia. 3. Marketing of ecological and regional production of rural territories.

3.1 Labelling of food commodities and region branding in Russia

3.1.1 Trade marks of domestic producers in the national commodity market Historically formation, development and promotion of regional brands in Russia was closely connected with inter industry specialization of the territories of Russia empire. So, the provinces of the industrial Centre supplied to the domestic market and exported textile and leather, Ural, cities Tula and Solonets – metal and metal goods; the Black-earth centre - grain; the Volga region, Ukraine — cattle; Novgorod, Pskov, Smolensk — flax and hemp; the coast of the north and south seas – salt and fish; Siberia — furs. Moscow, Dmitrov, Yaroslavl, Nizhny Novgorod, Kazan, Ar- changelsk, Vologda became the most important trade centres. All these stimulated active development of all domestic trade forms 39 .

However, in that case, the topic of regions specialisation of the country bore spontaneous character, which is defined by the quality of produced products and economical characteristics of its productions and realization. So, first quality characteristics of a product played positive role in formation of the image of related region as a producer of a competitive product. After that, the place of the origin of the product became the original certificate of its quality.

Only since the second half of ХХ century the formation of brands have assumed regular and consistent character. Since this time we have got to know the regional brands for food commodity and craft production of rural territories, being used in modern Russia until now (Fig. 3.1).

39 Kuznetsov A.V. The forming and development of regional brands / Regionology, 2008. №3//URL: http://regionsar.ru/node/147?page=0,1

Fig. 3.1 Some famous informal regional brands of the USSR (Kostroma cheese, Vologodskoe butter, Bryansk potato, Astrakhan watermelon, Gzhel, Khohloma)

But their origin was informal, “common” because official registration and correspondingly protection of collective trade mark (for brand of the regional production being produced by several producers using traditional technology) or individual trade mark (for production being produced using some unique technology by an exclusive producer in the region) in agriculture, rural crafts and works of the USSR was not realized practically.

In the post- Perestroika period the situation slowly and randomly but began to change for the better.

The pioneers on the registration and protection of their trade marks in the market of agricultural raw material and food supplies are the food industry enterprises (and first of all confectionary and liqueurs and spirits).

At present the series of trade marks has acquired intrinsic value and brand status. In the rating of brands of Russian companies according to rate of capitalized value of trade marks the enterprises of food industry occupy worthy positions (Application 1).

Notable that in this rating there are the trade marks, reflecting the image of the enterprise–possessor of right (for example “Baltika”, “Babaevsky”, “Krasny Oktyabr”, “Sladko”), and the separate goods or product line (waffle cake «Prichuda” of confectionary plant «Bolshevik», dairy products “Domik v derevne” and “Chudo”, juices «J7» of company «Vimm-Bill-Dann», juice lines “Tonus”, «Ya» and «Fruktovy sad” of company «Lebedyansky» etc.).

Obviously the rating includes the largest companies, as a rule, of holding type and very often with foreign investors. Only they possess serious possibilities to arrange advertising campaigns for winning new or expanding the existing rooms in the market. Thus, JSC «Vimm-Bill-Dann Food Product» spends 5% from total turn over on marketing and advertisement 40 . It goes without saying that theses successes and large scale promotion actions in brand promotion would not be attained by no one regional agricultural enterprise or processing industry. But there is no common sense in it because of the limitation of their raw zones, production volume and local market outlets. But the experience of this company «Vimm-Bill-Dann» convincingly shows the tendency of the last 10 years: citizens of Russia especially of cities tend to buy food products associated with a village, with naturalness of good origin, its environmental friendliness.

40 Elena Kostyuk. The most valuable brands of Russia//BusinessWeek Russia.//URL: http://www.adme.ru/ citigroup/samye-cennye-brendy-rossii-bbdo-39359

53 So, the brand concept “Domik v derevne” is based on the idea that it is extremely successful for a citizen to consume natural dairy products from a village, from household production, from a grandmother. Generalized character of a hostess of a well-groomed and satisfied with life cow evokes positive associations of a consumer though it is known that it is standard milk of Russian farms. 41

The formation of trade mark conception is not obligatory difficult process requiring help from specialized marketing institutions. For example JSC “Dairy integrated plant “Penzensky” has the intention to patent a new product - «Yoghurt». The advertising campaign has begun in May and sales - in June. At the same time the automobiles named “Yo-auto” of the initiator of e-branding Michael Prokhorov, will hit the store only in December of the current year.

In the application form of the integrated plant sent to the Rospatent is mentioned that the meaning of the starting letter “Yo” (« ё») is “positive exclamation”. At the same time the combination “ghurt” means “together” that “in general symbolizes cheerful mix of milk pleasure”. 42

But it is necessary to assume that the process of trade mark registration in modern Russia does not get wide spreading among the regional producers of agricultural raw material and production but even among large representatives of food industry. Though cost of labour, time and means for carrying out this procedure are not burdensome for subjects of middle and big business (see art 1.3).

The analysis of web-sites in the I-net shows that even large-scale producers with the registered signs for their goods or goods lines, for their own company name and logotype do not inform their potential consumers and partners about it. So, there is no information about it on the web-sites of brand leaders “Rot Front”, “Krasny Oktyabr” and others, though Rospatent registered some signs of theses enterprises.

Separate category of trade marks are the marks protecting geographical position of goods or services origin . As a rule this role is played by the collective trade marks obtained by the manufacturer association.

Good example of the recent time (2010) is the experience of the Vologodskaya region where after a long term legal proceedings the origin place of pre-revolution branded product “Vologda butter” was protected.

The proprietors of certificate for the right to use this butter mark are seven enterprises included into the State Register: Federal State Unitary Enterprise “Scientific-Experiment Dairy Plant” “Vologda State Dairy Managemental Academy named after N.V. Vereshchagin”; Production Com- plex «Vologodsky dairy integrated plant»; JSC «Cherepovets dairy integrated plant»; JSC «Suk- honsky dairy integrated plant»; Close Joint Stock Company Industrial Trade Company «North milk»; JSC «Belokrestsky butter plant»; LLC agricultural enterprise “Ustyugmoloko”.

41 Elena Kostyuk. The most valuable brands of Russia//BusinessWeek Russia.//URL: http://www.adme.ru/ citigroup/samye-cennye-brendy-rossii-bbdo-39359 42 Arzamastzev P. “Yo-gurt”- creative reg.58 http://echo.msk.ru/blog/ritty/881761-echo/

54 The Vologda butter» is produced according to uniform technical documentation of TU 9221-001-54002969-2009 «Butter Vologda. Specifications» in which more firm requirements to raw material quality and indicators of safety of a final product in comparison with the State standard are established.

Today the same difficult way is followed by milk processors of the Kostormskaya region, wishing to protect the other oldest brand of Russia – the Kostroma cheese. Now, by different estimates, in Russia nearly 100 thousand tons allegedly the "Kostroma" cheese is on sale in a year. In the Kostroma region from this quantity, by different estimates, it is made from 1 to 3 percent.

However for registration of the sign protecting a place of goods origin Kostroma must prove that "the Kostroma cheese" is a unique product which can be made only on the basis of milk of exclusively Kostroma cows.Besides, registration of this trade mark type can take some years. On other bowl of scales are the possible benefits for dairy cattle breeding and milk processors in the region.The agrarian and industrial complex department of the Kostroma region considers that at the expense of the long period of sympathy of the Russian consumers to the Kostroma cheese and an exclusive right of production of this product in the region, the local agrarian and industrial complex will receive a powerful impulse for development. However similar expectations do not always come true. For example, after the "Vologda" butter is allowed to produce only in Vologda, its production has decreased to 10 thousand tons. 43

One of the most important reasons of this phenomenon is the circumstance that realization of control of competency of use of the registered signs by producers at national level is extremely complicated. There are many examples to illustrate this.

For example, in 2006 the registered rights to a trade mark of cheese “Sovetsky” were received by the Altay creamery. The owner sent to producers of cheeses the requirement to make a contract on brand use with him, and sent to open market notices of inadmissibility to sell cheeses “Sovetsky” produced by other manufacturers. But all these requirements were ignored by manufacturers and the enterprises of wholesale and retail trade, including large chain stores.

As a result, the region cheese makers united in non-profit partnership «The Altay union of cheese makers » and started the collective judicial proceedings. And only in spring 2012 the Ro- spatent registered a collective trademark on cheese “Sovetsky”, the exclusive right for its use was given to 10 cheese maker enterprises of the Altai region. 44

Thus, buying the "Sovetsky" cheese made outside of this region, you can be sure absolutely that it is an adulteration.

Let's note that this is the case when the goods name (cheese “Sovetsky”) isn't connected geographically with a place of activity and/or legal registration of the business subject, but to produce these goods under this brand is permitted only to producers of this region.

43 Rubankov K. Will be Kostroma cheese forbidden? “Kostromskaya Narodnaya Gazeta”, 2010. №46 http://navigator- kostroma.ru/pconomy/2010-11-3532 44 Maryin T. Travelling around a cheese plate//the St.-Petersburg sheets, 2012. http://www.spbvedomosti.ru/print.htm?id=10290169@SV_Articles 55 If to distract from active cheesemongers, as a brand indicating geographical place of goods production «Tula gingerbread» and «Astrakhan water-melons», «Astrakhan tomatoes», «Astrakhan fish» are registered. Melon growers of the Astrakhan region also try to fight against pirate goods in the Russian market.However attempts to enter own certificates on a wholesale quantity of goods, stickers of holographic emblems on water-melons don't protect them from the unfair dealers who pass off water-melons from other regions and the states (the market "is captured", first of all, with the Iranian and Turkmen water-melons) as the classical Astrakhan.

There is also other manifestation of the trade marks containing elements of geographical character, absolutely not connected with an applicant location. For example, Moscow firm "Utah" registered a number of the trade marks including verbal elements of geographical character: "Indian rajah", "Tea Ceylon big leaf", "Tea the Indian granulated. Pearl of Agra", "big leaf pure Ceylon imperial tea", "Imperial Ceylon big leaf tea". However in this case it is considered that in Moscow tea isn't cultivated; it is only packed up in the company branded packing, and is bought in India, on Ceylon etc. 45

Summarizing a modern situation with protection of a trade mark with elements of geographical character or protection of an origin place of goods from unauthorized use by domestic manufacturers it is possible to inform that it is the most difficult, control is carried out rather poor. It reduces the attractiveness of official registration of own trade mark in the opinion of the law abid- ing enterprises. Besides such registration doesn't oblige foreign producers to anything; for example, Ukraine and Finland continue to produce and deliver "Vologda" butter to Russia.

The well-known trade mark to which the agricultural and processing enterprises pay the attention extremely seldom gets into a separate group of trademarks in Russia.

As well-known trademark according to Art. 191 of the law of the Russian Federation «About trademarks, service marks and names of places of goods origin» the registered trademark or unregistered designation can be recognized, which is:

it is intensively used in the Russian Federation; it is gained wide popularity among the corresponding consumers; it is gained wide popularity concerning the goods of a certain person.

In particular, in the food market of Russia (and with popularity in foreign countries) as the well-known the following trade marks appear: vodka "Russian", «Smirnoff», "Smirnov ъ", «Mosk- ovskaya», «Stolichnaya» and «Russian standard», beer "Baltic", coffee «Nescafe», dry soups and food seasonings «Maggi» (Nestle company brand), flour and pasta «, Makfa», sugar candies "Bar- berry", the world's largest producer of food making, in addition, fodders for pets, pharmaceutical production and cosmetics «Nestle».

45 E.P. Skornyakov E.P. Trademarks protection with elements of geographical character//Patents and licenses, 2000. http://rbis.su/article.php?article=693 56 More over only the “Klinskoye”, “Barbaris” and “Russkaya” brands were recognized as well-known, already being registered in the Rospatent as the usual trade marks. All other subjects registered the name of the brand at once as well-known 46 .

Despite complexity of receiving a well-known trade mark, it is attractive to large holdings as it is provided on a constant (termless) basis. As for medium-sized and small enterprises, associations of agricultural producers, for them receiving such sign is almost impossible because of high cost of procedure of their receiving and low efficiency of this type of intangible assets in foresee- able prospect.

As for the regions of Russia, at local levels locally known trade marks of regional producers of agricultural raw materials and, especially, food are created. For example, in the Orel region the following producers are widely recognized and enjoy consumers’ confidence:

- JSC Agro Industrial Complex (AIC) «Orel Niva», turns out the product of poultry, including sausages, semi-finished meat products and delicacies under the same name, dairy production line «Rodnoye selo» and posses own retail network of shops with the same name. This holding positions its production as natural, but the enterprise has no the ecological certificates and registered trade marks;

- JSC “Orlovsky bread baking complex” - the producer of bakery and confectionery, including the line of pies and cakes,

- LLC Saburovo with own distribution network,

- JSC Agrofirm «Livensky meat».

At the same time, in the Orel region the market outlet of food producers from the neighbor regions is developed. The trademarks «Pogarsky milk», «Starodubsky milk», «Starodubsky cheeses», «Dyatkovsky milk» of the Bryansk region enterprises; «Tula gingerbread» - the Tula region; «Clear dawns» - production and processing of production of poultry farming in the Belgorod region etc. are well-known to consumers.

It is necessary to note that the local producers focused on the market of their region, often have no desire and urgent need to register their trade mark, because the consumers know well the enterprise name and location, quality and the name of production. However in case of an exit to the interregional or All-Russia market there is a need for fixing of the reputation and positive image of external consumers.But also in these cases the majority of producers don’t resort to trademark registration, preferring another way: the geographical name connected with own location is entered into a name of goods or the commodity line (for example, «Orel Niva» and «Orel bread-baking complex», «Livensky meat»- the cities Orel and Livny of the Orel region, «Pogarsky milk», «Dyatkovsky milk», «Starodubsky cheeses» - the cities Pogars, Dyatkovo and Starodub of the Bryansk region etc.).

As to commodity labeling of small subjects production of rural economy, in overwhelming majority of the Russia regions there is a huge gap in this question.

46 Мо rdvinova V.V. Well-known trade marks in Russia//the Patent attorney, 2007 . http://rbis.su/article.php?article=90 57 The production niche of rural crafts, food products made according to traditional local or own recipes, the goods produced on a basis of wild growing herbs , medicinal or ornamental plants on the national and regional consumer markets is almost empty. In this direction rural territories have a serious potential for development.

Separate problem of regional marketing and branding is territory positioning in environment by means of a sign and/or a slogan.

For the first time in Russia at the state level serious attention is paid to the need of improvement of the situation for this sphere for the Concept of advancing national and regional brands of goods and services of domestic production for 2007-2008. However obvious movements this frame program document without financial security of the developed mechanisms could not play objectively. In a number of regions during this period there were several attempts of increasing the competitive capacity of local producers in the regional market by means of development of programs under the general slogan «We buy local» (for example, programs «We buy Nizhe- gorodskoye», «We buy Permskoye», etc are well-known,.). But their efficiency for rural territories wasn't great.

Now the interest in regional branding and in marketing increases in Russia. So, the brands of the several Federation subjects are officially approved and applied (fig. 3.2).

Fig. 3.2 Brands of some subjects of the Russian Federation

It is necessary to note that the regional brand doesn't coincide with the official emblem of the territory. In fact, it should reflect key differences of the region (the republic, district) from other subjects of Russia, its mission and the main objects for local pride.

The first on this way are the Kursk and Omsk regions, the Republic Altai and the Nenets autonomous region, and only the brand of the last subject of the Federation was favorably accepted by experts in marketing. It reflects the main image values of the district: (from the left to the right - a traditional way of northern people life (nomad's tent) and the sphere of its economic activity (northern reindeer breeding and fishery), the main contribution to district and Russia economy as a whole (oil production)). The brand slogan is thought over too: «North European store room of Rus- sia». Thus, the brand of this region is informative and recognizable. The contribution of a brand to development of rural territories isn't estimated, but it is possible to assume that the potential of development ethno - and, probably, ecotourism received a number of additional bonuses for foreign and domestic esthetes in the tourist's industry sphere.

Other brands were resolutely condemned. So, a new brand of the Kursk region, created by Artemy Lebedev's design-studio for 40 thousand Euros, turned out not only uninformative, but also very similar to a logo of plastic plant from Orehovo-Zueva publicly traded company (http://www.karbolit.ru/).

58 A very detailed brand of the Omsk region doesn't allow to single out the main sights of the region. In the Republic Altai the form of a sign symbolizes a mountainous relief of the republic and the highest mountain of Siberia – the White Belukha. However, the regional sign isn't informative and doesn't cause prospective consumers' interest.

But imaging of a regional brand isn't reduced only to designing of its logotype. What is more important is to develop stable associative relations between the region's name and its uniqueness.

For example, everybody knows that Father Frost's Motherland is Velikij Ustjug, but a few know that this village is situated in the Vologda region. On the one hand, it is a good local authorities' work to attract tourists with such an idea: involvement of tourists (actual and prospective), involvement of locals' activity in the sphere of hotel, craft, restaurant and other types of business. However, judging by the analysis of forums on the Internet, having visited Father Frost's Mother- land, nobody, wants to visit it twice. The main reason of it is poor service quality and external weakness of a legend for children.

The Kostroma region is working at registration of a brand of the Snow Maiden's homeland. Suzdal in the Vladimir region is steadily associated with "cucumber" festivals, etc.

But the majority of subjects of federation and municipalities doesn't take into consideration this way of increasing appeal of the territory.

Moreover, it's necessary to mention that regional brands don't have obligatory state registration, and therefore, are not under the Russian Federation state protection.

It also concerns municipalities. Being perspective points of regional growth, local level of the power is often unable positively to influence a condition of the territories entrusted to it because of universal budget deficiency of the countryside, insufficient competence of specialists in local administrations, underdevelopment of local government and local initiatives (see Units Sustainable development modules: key terms and theoretical basis, Sustainable rural development: approaches for regional and local programmes elaboration, Participatory approach in rural development).

To sum it up, in Russia producers don't give due consideration to commodity and ecological marking of the production, work at formation and brand price growth of the goods, settlements and regions.

3.2 Ecomarking in the Russian food market In the Russian legislation the mention «organic products» appeared in 2008 when the chief state health officer of the Russian Federation G. Onishchenko issued the resolution concerning sanitary-and-epidemiologic requirements to organic products (SanPiN2.3.2.2354-08) 47 . In fact, these requirements are the translation of the western standards 'Organik' into Russian, but the normative documents regulating directly procedure of carrying out certification, and a control measure weren't developed. That's why before emergence of domestic system of certification according to require-

47 Sanitary-epidemiological rules and regulations "Hygienic safety and nutritional value of food products" SanPiN 2.3.2.1078-01 59 ments of the official Russian standards 'organik' a true 'organik' production is that one that has the international certificate.

In addition, the regulatory document at the national level in which they say about need and possibility of organic food production is «The doctrine of food security in the Russian Federa- tion» 48 . However, there are no real mechanisms of the Doctrine implementation in the development plan of the market of the organic food and sources of their financing in it.

As a positive point it should be noted in Russia and other countries since 2003 marking of the goods by the phrase «an ecologically clean product» is not accepted (GOST 51074-2003 «In- formation for the consumer. The general requirements»), which misled consumers as it's not possible to guarantee that the goods are absolutely ecologically clean, and process of its production is absolutely safe. Now, in Russia as well as abroad, it is possible to apply such catchphrases as « ecologically friendly», «sparing for the nature» etc.

Besides, it is told in the Russian legislation that «information on such product properties as «grown up with use of only organic fertilizers», «grown up without application of pesticides», «grown up without application of mineral fertilizers», "vitaminized", «without preservatives» and others is allowed only at existence at the manufacturer of confirmation of specified information», but it is not specified, by whom exactly it should be confirmed. Some companies create the commission at the enterprise and write out themselves all the confirming documents. So that's the way how a system of the pseudo-signs "organik", «natural BIO products» appears.

To sum it up, we will repeat that there is no developed system completely governing and regulating practice of food ecological marking in the national consumer market. Therefore let's address to existing practice of bio - markings in Russia.

In the modern food market of Russia the range of the legal logotypes applied in existing systems of certification and other systems of approval (recommendation) on ecological requirements, is not large (fig. 13).

Compliance logotype to the сcompliance logotype Ecologic certificate Logotype of the inter- system of obligatory certifi- to the Russian stan- national on the eco- cation dard ecological fund logical requirements Fig. 3.3 Examples of the logotypes applied in existing systems of certification and other systems of approval (recommendation) on ecological requirements in Russia

The first pictorial representation (compliances to System of obligatory certification according to ecological requirements and the Russian standard) are accepted at the state level and testify that the goods correspond to the State standards approved in Russia. However they don't fully correspond to the conventional ideas of safety and environmental friendliness of food and are often applied in the market of the industrial goods.

48 Food Security Doctrine of the Russian Federation, approved by Presidential Decree of 30.01.2010g. № 120 Chapter 5 60 Eco label of the International ecological fund gives out the Certification body of OS 'MEF' accredited in the System of obligatory certification on ecological requirements (OS 'MEF', to ac- creditations ROSS.RU.001.01. ETOO).

If it is necessary to have the international certification, the Body of ecological certification of the International ecological fund (OS 'MEF') promotes obtaining directly international and national certificates (The international certification of systems of ecological management on compliance of ISO 14001:2004; the International certification of management systems of safety of food production on compliance to requirements: Food and foodstuff - ISO 22000, IFS (The international food standard), NASSR(hygiene management according to orders of the Commission on grocery rules), EUREPGAP (Appropriate agricultural practice), BRC (The British retail consortium); Hy- giene for manufacturers of packing - BRC/IOP (Packing institute) the Standard of packing, CEN Hygiene Management of packing production for food production; Safety of forages – Pastus Direc- tive published by the Austrian agrarian company Agrarian Market Austria Marketing Ltd. IFIS (IFISA Standard of fodder components of the International union of safety of IFSA forages); Certi- fication of systems of ecological management on compliance to requirements of GOST P ISO 14001-2007, quality management systems on compliance to GOST P ISO 9001-2008 requirements 49 .

OS MEF carries out the ecological certification on the following objects:

1. The objects which are subject to obligatory certification or declaring of compliance (according to the lists approved by the resolution of the Russian Federation government d/d 29.04.2002 No. 287);

2. Objects which are subject to voluntary ecological certification:

- systems of ecological management of the organizations on ISO 14001, - production which is subject to voluntary certification 50 .

During functioning of the International ecological fund, the right to use a logotype «MEF Bird» has been received by many enterprises.

The above mentioned signs are given on the ground of production quality conformance inspection for requirements of Russian certification system 51 .

More than, that the domestic producers often use signs that show the absence of some hazardous or dangerous for consumers’ health and environment substances or compounds. There are the following signs in the market of production of Russia rural territories Fig. 14):

49 http://www.ecochistyproduct.ru/certification/?id_news=7 50 http://www.rodniki.bel.ru/bit/pr_ecoprod_rus.html 51 It should be noted that the site has not been updated with the IEF 04/04/2011, although information on the termination of the fund has been received 61

Fig. 3.4 Eco-labels, informing a consumer about the absence of Chlorum and GMO in a product

But at the state level there is only one sign of ecological labeling – “Free from Chlorum”. It was developed by Greenpeace of Russia and approved by Gosstandard of the RF in 1998. It is labeled on a product according to GOST R 51150–98 “Production free from chlororganic components”. The presence of a sign guarantees that in the process of production, processing and utilization of production there is no pollution of the environment with chlororganic components.

Sign «Free from Chlorum» marks the production of forestry and timber stockpiling, wood, cellulose, paper, carton, fiber and products from them; polymer materials: fibres, threads, plastic materials, foams, resins, synthetic rubbers and products from them; chemical production goods: paints, polishes, mastics, enamels, base paints, fertilizers; consumer goods, games and toys.

Standard is not applied to food and pharmacological production and combined fodder but it can be applied to food packaging.

To get the permission for goods labeling «Free from Chlorum» is necessary to submit to Au- thorized Body for certification the description of technological process of goods production and the list of raw material being used in the production. The producer must declare the fact of absence of Chlorum and its components in the technological process and in the finite product.

The round sign "Doesn't contain GMO" was entered by the Government of Moscow in 2007 and guaranteed that production passed check doesn't contain transgenes. However, at the beginning of 2012 the authorities of the capital cancelled production labeling by this sign having recognized five years' experience in this direction unsuccessful and 170 million rubles – spent actually for nothing. In fact, this sign contradicted the federal legislation which demands producers to inform consumers what is in a product, instead of about what isn't present in it. 52 .

The square sign "Without GMO" (and its analog "Without transgenes") is the declaration of the producer; its application doesn't demand carrying out tests and production assessment on the maintenance of GMO body according to compliance.

However, the specified signs have practically nothing in common with those analogs of the developed countries which have really complex assessment not only qualities of the final product but also compliance of processes of its production (including technologies and initial components) to the rigid environmental standards allowing to carry a product to "BIO" ("ECO", "Organic") (see. Chapter 1).

Currently among the existing certificating organizations recognized in the national consumer market Non-profit Partnership on development of ecological and biodynamic agriculture of "Agro- sofiya" (the Eco-Control company, Moscow) and the St. Petersburg Ecological union (St. Peters- burg) are widely known.

52 http://www.ng.ru/economics/2012-04-11/4_gmo.html 62 These organizations, besides ecological certification, are engaged in organizational and educational activity among producers and consumers in the consumer market of Russia. But the processes of transition of domestic to organic production pass more slowly than it would be desirable

The main reasons of this phenomenon are the following:

- gaps in the national legislation,

- weakness of observance control of competency of signs use by participants of the food market

- insufficient knowledge of potential consumers as biodynamic agriculture in environmental protection and biofood – in preservation of their own health,

- low level of purchasing power of the population,

- high specific weight of production of personal part-time farms of the population, including summer cottages of citizens, in food supply of the country,

- absence of systematized information about the certificating organizations "BIO", on the one hand, and the owners of a bio-sign – on the other, etc.

Speaking about imperfection and discrepancy of the regulatory base which is hampering the development of the organic food market it can be noted that the Law on the ecological safety, accepted by the State Duma in 1999, does not work still and there is no nationally recognized criteria for assessing the ecological safety of production and officially approved requirements of ecological safety for the various directions of economic activity; regulation and control of their self-producers, government support of eco-farmers including small entities of the rural economy dealing non- agricultural activities (agro-and eco-tourism, arts and crafts).

As a result of the above reasons, the Russian producers often underestimate the benefits to be gained by the environmental certification and bio-labeling. According to data of A.V Shalanda 53 with demands for certification the applicants who already have their products conformity certificates previously issued in the GOST R certification system and other systems address mainly. This is because the presence of such a certificate does not allow Russian producers to enter the world market due to the mismatch of the national standards to the world level of certification.

Let's address to a current state of bio-certification in the market of agricultural raw materials and food in Russia.

NP "Agrosofiya" (www.biodynamic.ru) was found in 2003 as a result of the merger of separate initiatives to develop ecological and biodynamic farming in Russia and has played an important role in this regard.

The development of technical regulations "About ecological agriculture, environmental, natural resources and appropriate labeling of green products", which were also adopted as the Stan- dard of organization of NP "Agrosofiya" can be called a key contribution of this organization in the

53 Shalanda A.V. The concept of continuous ecological formation and education in the field of ecological agriculture in Russia //URL: www.green-pik.ru/doc/concepciya.doc 63 market development of bio-products. Public discussion of the regulations was carried out not 2 months, as expected, but 16, however, the Regulation has not been adopted so far. But this procedure allowed approving and recognizing at the All-Russian level a cognominal StO (a standard of organization) Agrosofiya, on which Russian producers have been conducting the ecological production and pass certification since 2004. In this normative act, among other things, it is noted that terms "bio", «eco» and "organic" are equivalent concepts (though in English such production is called "organic" (Great Britain, the USA, Australia), in other languages it is either «eco» or "bio" or a combination of «eco» and "bio" (as, for example, in Germany)). 54 .

StO "Agrosofiya" was harmonized and equivalent to the Resolution of EU 2092/91 «About the organic farming and related labeling of products and foodstuffs», defining "the rules of the game" for bio-branch of the countries of the European Union and now - to the Resolution EU 834/2007 which came into force since 2009. 55 .

It is necessary to note that in Russia there is only one type of national certification for confirmation bio-qualities – voluntary certification "BIO".

The system of voluntary certification of ecological and biodynamic managing "BIO" is developed according to the Federal law from December 27, 2002 of N 184-FZ "On technical regulation", completely corresponds to the accepted international practice in the field of ecological certification and has the state registration in the Federal Agency for Technical Regulation and Metrology (Gosstandart) under the number ROSS RU.3238.04 БХ 00.

This system is built on completely different principles than the ISO certification. It should be noted that the systems of ISO (9000, 14000 and 22000) also have basic differences from one another. It is often possible to hear that production certificated on ISO 14000 is ecological, though these standards guarantee not bioquality of production but only that the enterprise during the daily activity doesn't represent threat to environment. They initially appeared as EMAS system development (management of environment) for decrease in risk of negative influence of the industrial enterprises on environment.

GOST R ISO 9000-2001 "Quality management system. Requirements" guarantee output of stable quality according to requirements of the market. Again we are not talking about the bio- capacity but the quality in general, as high and not very. The main thing is that such production will successfully find its sales in the market and the enterprise will increase profit for as long as possible.

GOST R ISO 22000-2007 "System of management of safety of food production" is a bit different subject but also not directly related to the issue of bio-product quality. 56 .

However, the general principle, as in the case of ISO certification, and for organic certification is that it is certified, above all, the production process, and only then output as a consequence.

54 Khodus А.V. BIO-EKO-Organik: Quality philosophy//Meat technologies, 2009. N6 55 Shalanda A.V. The concept of continuous ecological formation and education in the field of ecological agriculture in Russia //URL: www.green-pik.ru/doc/concepciya.doc

56 Khodus А.V. BIO-EKO-Organik: Quality philosophy//Meat technologies, 2009. N6 64 In accordance with "Certification system of ecological and biodynamic managing "BIO", Russian bioproducers can confirm with system of voluntary certification of ecological and biodynamic managing compliance to various eco standards: The Russian Federation (StO "Agrosofiya" "About ecological agriculture, ecological environmental management and the corresponding marking of ecological production" are used, for example,), the European Union, Israel, Argentina, Aus- tralia (Regulations of Instructions of ecological production EC 834/2007), the USA (standards of the National organic program (NOP)), Japan (Japanese agricultural standards (JAS)), etc. (for example, Standards of biodynamic production Demeter) depending on the target bio- market 57 .

Generally the main objective of bio-certification can be formulated as the provision of the guarantees to the consumer that the product is really made according to norms of ecological and biodynamic agriculture and environmental management. Consequently, these bio-eco-organic- products must have a confirmed properly bio-certified voluntary certification of system "BIO". On the label of the product it must be necessarily indicated who held certification process, such as "certified by "Eco-Control". 58 .

It should be noted that right product certification of bio company does "Eco-Control" which is a member of the NP "Agrosofiya" since its foundation, a member of the International Federation of movements for ecological agriculture IFOAM (International Federation of Organic Agricultural Movements - IFOAM).

The certification procedure is performed in the following algorithm 59 :

1. Collecting and processing of preliminary information.

2. Inspection and processing of the received data, report formation.

3. Analysis of information and decision about certification level.

4 Bringing information to the customer.

At the beginning of 2012 "Eco-Control" there are 36 customers in the Russian Federation. 60

Besides the bio-production certifications by the member of NP "Agrosofiya" company "Eco-Control" the non-profit partnership offers the producers a possibility to receive a trademark «Pure BIO dews», the claim to which can receive only manufacturer with bio-certification.

The role of the NP "Agrosofiya" in this matter is reduced to checking the correctness of the applicant of the instruction on bio-quality products and services and the procedure is carried out as follows:

1. inquiry and demand in NP "Agrosofiya" by the applicant for the trademark «Pure BIO dews»;

57 Khodus А.V. The system of voluntary certification “BIO”. Eco-control. 58 Khodus А.V. BIO-labeling. 59 Khodus А.V. BIO- labeling. 60 ECO- labeling, 2012. 65 2. analysis of documentation and labeling by experts of non-profit partnership;

3. request to "Eco-Control" on the availability of bio-certificate issued in accordance with StO "Agrosofiya" "About declaration of compliance to ecological norms" at the applicant;

4. issue of the certificate and the conclusion of the Contract on sign use "Pure BIO dews" by NP "Agrosofiya".

NP "Agrosofiya" offers a row preference on advance of bio-production to the producers who have received a sign «Pure Dews» and «Pure BIO dews»: participation in Program actions "Pure BIO dews"; inclusion in the BIO Catalogue of the enterprises and production, noted by these signs; participation in bio-exhibitions; assistance in carrying out PR companies. 61 .

The ecolabel "Vitality Leaf" developed and assigned to the products and organizations in St. Petersburg Ecological Union (SPbEU). This system of voluntary ecological certification is based on the international ISO 14024 standard. This is key difference of system of certification "A life leaf" from the System of certification of the "BIO" "Eco-Control", which belongs to NP "Agrosofiya".

SPbEU is registered at the Federal Agency for Technical Regulation and Metrology (certificate ROSS RU. И457.04 ЧГ 00). It is a member of the World Organization of Eco-labeling (GEN) with the program of eco-labeling "Leaf of Life" and the International Association of Organic Agri- culture (IFOAM).

Eco-label «Leaf of life» is granted to goods of different categories (agricultural products, foodstuff, construction materials, etc.), however, the general requirements to the objects certification are:

- lack of substances that are acknowledged hazardous, according to the international agreements, recommendation documents, environmental marking standards (heavy metals, persistent organic and toxic pollution, etc.);

- environment friendly goods.

Certification decision is taken by the Social-Advisory Board of the St. Petersburg Ecological Union, which consists of representatives of public authorities, controlling organs, certification organs, public organizations and scientific institutions, independent experts.

However, only 4 manufacturers of agricultural raw materials and foodstuff got an eco-label, two manufacturers of them having invalid certificates.. 62 .

Thus, eco-label «Leaf of life» has not gained special popularity among domestic producers of agricultural raw materials and foodstuff and is, de facto, a regional labeling.

The certification procedure is performed according to the following scheme (Fig.15) 63 .

61 http://www.biodynamic.ru/ru/sertification/ 62 www.ecounion.ru 66

Application Filing of Certificate application form Central administrative body of the system (St.PE С)application Processing of the application Decision upon and taking a decision certification

Positive decision

Certification body Evaluation of the accordance Certification with the criteria report

Accordance is checked

Board of advisers Evaluation of the accordance Board of advis- with the procedure ers’ report

Accordance is checked

Certifi- Central administrative body of Conferment of label cate/permissio the system (St.PE С) “Vitality Leaf” n to use the

Fig. 3.5 Algorithm of products certification

The evaluation of the products compliance or the organization compliance to the requirements of the certification is done on the basis of:

- laboratory research of the finished product (the control of the content of heavy metals, ni- trates, persistent organic pollutants, benzpyrene, polyaromatic hydrocarbons)

- laboratory research of soils (heavy metals, oil products remains, biogenic elements);

- audit of production (the analysis of the farm location, growing and storage conditions, field maintenance);

63 Vitality Leaf. Russian Eco labelling of products, goods and services. www.ecounion.ru/doc presentations /anisimova.pdf 67 - audit of the documentation (fertilizers applied, machinery, availability of necessary permis- sions and documents).

Thus, when examining the object compliance to the Standard requirements proceedings of the entire life cycle of the product are being studied.

Since 2010 the accredited experts of the St. Petersburg Ecological Union have been providing the certification on ORGANIC international standards on the territory of Russia.

The procedure of «Organic» certification is carried out according to the following algorithm:

- Application to the certification organ on the ICEA (Italy) 64 (this is a Declaration of the transition to organic agriculture)

- Inspection of the farm for compliance to the «Organic» standard by the organic inspectors.

- The decision of the Commission whether a farm meets the standard. ICEA gives a certificate of compliance to the ORGANIC/BIO standards

- Annual inspection of compliance to the «Organic» standard by the experts.

- There are some obvious differences between certification procedures for labels of the «Vi- tality Leaf» and «Organic»:

- usually laboratory tests of the product are not conducted in «Organic» certification

- methods of «Organic» certification focus producers on the maximum «cooperation» with nature, excluding the extensive methods of agriculture,

- the criteria of «Organic» does not have a purpose to improve the environmental aspects of the enterprises-processors, more focusing on the «ideal» farms,

- methods of «organic» are more suitable for small and medium-sized farms, and for the lar- ger ones the best option is the certification on the basis of the ISO 14020 standard. Certifica- tion according to the GOST R ISO 14024-2000 standard «Labels and Declaration of environment Environmental labeling of type I. Principles and procedures» 65

Unfortunately, we should admit that producers, especially small and medium-sized enterprises of the food industry, can put eco-labels without any legitimate reason, if there are no proper controls. Besides, there is a common practice of having its own quasi-labels and names for products that are consonant with the words or containing the words «bio», «natural», «organic». For example, kefir «BIO», dairy products «ECO», etc. (Fig. 3.6).

Such actions mislead the consumers, especially when there is no bio-labeling on the package. Also unscrupulous manufacturers and sellers put the Soviet symbols (which are useless nowa-

64 http://www.icea.info 65 A.V. Kuznetsov. The development of ecological agriculture and food-processing industry. New quality. New possibilities.//URL: gov.cap.ru/home/24/irina/vi_forum/kuznecov.ppt 68 days) on the goods, for example, a Sign of quality or which do not correspond to reality (ice-cream, confectionery and sausage products with capital letters GOST or with the slogan «Taste familiar from childhood»).

Fig. 3.6 The use of words “bio” and “eco” in the names of products

Thus, for example, in full-cream ice «22 kopecks» there is no cream and milk , they are replaced by vegetable fats and dry milk, although the manufacturer guarantees the «Soviet quality»; the smoked sausage of the manufacturer in Moscow stated «the Jewish. GOST», but in the Soviet era was no national Standard GOST existent for a product with such a name at all. And, unfortunately, there are a lot of such examples.

Russian consumers of nowadays, unfortunately, are still poorly informed about the fact that the organic farms and their products are different from traditional. In 2008. Saint-Petersburg Eco- logical Union held a sociological study of Saint-Petersburg inhabitants at the age of 18 and older The results showed that the respondents, explaining the definition of environmentally friendly («ecological») product were divided into two approximately equal groups: 46.5% of those surveyed associate this notion with the products that contain only natural components, for 43% -these are , first of all, products, safe for human health. At the same time, the minimum impact on the environment during the production of «environmentally friendly» products was obvious only for 9.7% of the respondents. Besides, there was a tendency to the fact that the motive for the purchase of environmentally safe products becomes not only health care (73% - 2005. 47% - 2008.), but also the environment care (11% - 2005. 48% of 2008).

As to eco-labels, none of the labels on the packaging of the products was not familiar to 49,4% of respondents, and the rest of the respondents mentioned eco-labeling «Vitality Leaf», «Pure dew», «St. Petersburg quality mark» as the most recognizable labels. The majority of respondents (96,3%) appreciated the idea of the state support of production of the Russian ecologically friendly products . 66 .

Therefore, to develop the market of bio-products one should improve the general level of lit- eracy of potential consumers and producers of bio-food.

More than that, the low level of trust to the certifying organizations can be called one of the main threats to the development of the Russian eco-market. Strengthening the control and responsibility for the results of activity will enable to overcome the mistrust of potential consumers and producers of bio-products not only to the specific certifying organ, but also to the system as a whole.

66 Shalanda A.V. The concept of continuous ecological formation and education in the field of ecological agriculture in Russia//URL: www.green-pik.ru/doc/concepciya.doc 69 The main result of the development of Russian eco market is the proof that it is possible for domestic manufacturers in Russia to manage on the environmental principles right now. The solution of the existing problems, first of all, the absence of the Russian eco-standards adopted at the state level is a question of time. Bearing in mind, that in the rural areas a quarter of Russia's population live without decent work and payment for their work and with vague prospects for the future, such activities, as production of bio-products, eco-textiles, eco-timber, bio-cosmetics, the development of eco-aquaculture, agro-eco-tourism could become a good addition to self-reliance of the population and additional source of foreign currency earnings 67 .

It is important for governing organs of all levels to realize that the more bio-manufacturers will appear, the more efficient and stable the functioning of the local society will be, the more taxes will be paid, the more stable the eco-system will be, the more healthy bio-products we will have in the shops, the more healthy people we will have in the country and the more tourists, spending their money in the eco-regions we will have.It is in this context first of all it is necessary to consider the profitability of ecological and biodynamic farming and in every possible way to promote initiatives for the development of Russian bio-projects at different levels - municipal, regional and Federal 68 .

3.3 Registration procedure and legal protection of trademarks in Russia Development and legal protection of a private trademark by the means of state registration are a necessary move to successful business.

Russian legislation does not protect signs which are not registered in Russian Patent Office with the exception of so-called famous trademarks which are protected under international com- mitments adopted by Russia. In other cases, registration of intellectual property in a federal executive body is an obligatory legal procedure for economic parties which want to obtain an exclusive right for a trademark 69 .

Legal protection is granted to a trademark if it conforms to the conditions and requirements of the Civil Code of the Russian Federation

The basis o the legal regulation of a trademark is the Law of Russian Federation issued on September 23, 1992 “About trademarks, service marks and denomination of the place of origin of commodities”. Besides, protection of intellectual property is secured by various state regulations and legislative acts, in particular: Constitution of the Russian Federation (article 44), the Civil Code of the Russian Federation (part 4, chapter 76), the Criminal Code of the Russian Federation (article 18P), Patent Act of the Russian Federation and others.

Russian Federation is a member of international treaties on trademarks protection. Thus, the Paris Convention for the Protection of Industrial Property signed by Russia as well as other countries on March 20, 1883 is a principal international treaty on the sphere of trademarks and service

67 Shalanda A.V. The concept of continuous ecological formation and education in the field of ecological agriculture in Russia//URL: www.green-pik.ru/doc/concepciya.doc 68 Khodus А.V. BIO-EKO-Organik: Quality philosophy//Meat technologies, 2009. N6 69 Registration of a trade mark. URL: http://www.businesspatent.ru/article/article.573.1.html

70 marks protection. Russia is also a member of the Madrid Convention for the International Registra- tion of Industrial and Trademarks signed (Madrid Agreement Concerning the International Regis- tration of Marks) on April 14, 1891; Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks signed on June 15, 1957; Vienna Agreement Establishing an International Classification of the Figurative Elements of Marks signed in 1958.

Legal protection of trademarks in Russia is carried out only after state trademark registration of a trademark in the established order in accordance with the Law “About trademarks, service marks and denomination of the place of origin of commodities” or by virtue of international treaties.

An artificial person or a natural person (entrepreneur) can be a proprietor of an exclusive right for a trademark, i.e. a right holder.

Having registered a trademark, its proprietor acquires an exclusive right for the trademark usage, for the labelling and promotion of his product. The proprietor can sale or grant to use his trade mark for the labelling of products and services to other individual, bring to the nominal capital of his enterprise or other subjects of economy as an intangible asset, grant bail or using it as assur- ance while getting a loan.

The exclusive right for a trademark can be carried out for individualization of goods, works or services concerning which the trademark is registered, in particular by trademark placement:

- on goods, including on labels, trade dresses of goods which are made, offered to sale, are on sale, shown at exhibitions and fairs or are otherwise introduced into a civil circulation within the territory of the Russian Federation, or are stored or transported for this purpose, or are imported to the territory of the Russian Federation;

- at performance of work and rendering of services;

- on documentation connected with introduction of the goods into civil circulation;

- in offers for sale of goods, for performance of work, for rendering of services, and also in announcements, on signs and in advertizing;

- on the Internet, including a domain name and other ways of addressing 70

Nobody can use a trademark protected in the Russian Federation without a permission of his owner. Illegal use of a trademark or any sign similar to a trademark involves civil, administrative, criminal liability according to the legislation of the Russian Federation. The order of protection of the civil rights from illegal use of a trademark is carried out according to the article 1515 (Part 4) of the Civil Code of the Russian Federation

Verbal, graphic, volume, sound and other signs or their combinations can be registered as trademarks. A trademark can be registered in any colour or a colour combination.

70 Registration of a trade mark. URL: http://www.businesspatent.ru/article/article.573.1.html

71 A trademark, as an object of the exclusive right, has an independent economic significance as is becomes a valuable property object. At this, the value of a trademark can constantly increase since it is conditioned by various factors:

- period of the existence on the market

- the territory of the disposal of commodities

- the effectiveness of the advertising

- activeness of perception

- memorability

- recognisability

As consumers trust stable producers more, in advertising symbols "R" and "TM" are precautionary used. This indicates that the trademark is respectively registered or is in a registration stage, and the producer, marking goods and services with this sign came to the market not for one day. For this reason the value of goods increases in the opinion of the buyer.

Registration of trademarks is carried out by the federal executive body specialized in intellectual property (its organizational department is - Federal Institute of Industrial Property (FIIP)) 71 . Registration of a trademark is performed for certain goods and services which are classified of the International Classification of the Goods and Services 72 , and also for a legal entity or a sole proprietor.

Trademark registration is rather a difficult and time-taking process which includes three main stages 73 :

STAGE I: Assessment of a protective power of a mark STAGE II: Examination of a mark STAGE III: Registration of a trademark

At the first stage, the possibility of registration of a mark as a trademark is assessed, since restrictions concerning signs as possible trademarks are provided by the legislation.

At the second stage, a mark which is planned to be registered as a trademark is examined against similarity with pre-existing applied-for marks or registered trademarks.

At the third stage, an application for the trademark registration is made up and submitted to FIIP.

71 The official site of FIIP.URL. http://www1.fips.ru/wps/wcm/connect/content_ru/ru 72 Classification of goods and services(ICGS 9) URL: http://www1.fips.ru/wps/portal/IPC/MKTU9_RTF/

73 URL: http://www.sinor.ru/~semenk/registration.htm 72 STAGE I: Assessment of a protective power of a mark74 The main purpose of this stage is the examination of formal signs which may be the absolute grounds for refusal of registration of a trademark.

Choosing the name for a trademark it is necessary to take into account that not all the names can be registered as a trademark. Therefore, it is necessary to check if it conforms to the criteria of protective powers which are established by the Legislation of the Russian Federation in the sphere of protection of trademarks before examination and registration of the chosen name of a trademark. According to Article 1483, Part 4, of the Civil Code of the Russian Federation “Grounds for Refusal of Official Registration of a Trademark”:

1. The following signs shall not be registered as trademarks if they are not capable of distinguishing or consisting only of elements that:

- have fallen into public domain to indicate the goods of a certain kind;

- are generally accepted symbols and terms;

- characterize goods, including indication of their type, quality, quantity,

- properties, purpose, or value and also the time, place, or means of their production or sale;

- represent the configuration of goods that is determined exclusively or mainly by the properties or purpose of the goods.

The indicated elements may be incorporated in the trademark as non-protected elements if they do not prevail.

2. The signs shall not be registered as trademarks if they consist only of elements that are:

- state armorial bearings, flags, or other state symbols and marks;

- abbreviations or full names of international and intergovernmental

- organizations, their armorial bearings, flags, or other symbols and marks;

- official signs or hallmarks of control and warranty, seals, awards, and other distinguishing signs;

- signs confusingly similar to the elements indicated in subparagraphs 1-3 of the present Para- graph.

Such elements may be included in a trademark as non-protected elements provided there is consent of an appropriate competent authority.

3. The signs shall not be registered as trademarks that are or contain the elements:

- that are false or capable of misleading a consumer in respect of goods or their producer;

74 URL: http://www.sinor.ru/~semenk/notrademaks.htm 73 - that are contrary to public interests, or to principles of humanity or morality.

4. The sign shall not be registered as trademark:

- if the signs identical or confusingly similar to the official names and images of particularly valuable objects of the cultural heritage of the peoples of the Russian Federation;

- objects of world cultural or natural heritage, and also with images of cultural values stored in special, general, and reserve collections if registration is sought in the name of persons who are not their owners, without the consent of their owners or of the persons authorized by the owners for the registration of such signs as trademarks.

5. By virtue of an international treaty of the Russian Federation, the signs shall not be registered as trademarks :

- if they are or contain elements that are protected in one of the States party to this international treaty;

- if signs identify wines or spirits as originating from its territory (or produced within the boundaries of a geographical object of this state) and have a particular quality, reputation, or other characteristics that are mainly determined by its origin, if the trademark shall be used for the indication of wines or spirits that not originating from the territory of the geographical object concerned.

The assessment of the protective power of an applied-for trademark for the absolute grounds for refusal of registration is free of charge. For carrying out the assessment it is necessary to provide the following documents:

1. The list of the activities and/or goods which will be provided under a trademark.(any format)

2. Verbal designation or the trademark image (.gif or .jpg format) of an applied-for trademark.

STAGE II: Examination of a mark 75 Before making an application for registration of a trademark, it is necessary to check it against similarity with the registered trademark. It allows to finding out whether this designation or a similar one is already registered as a trademark. If the result is positive and such trademark is already registered, the new applicant will be refused to register this designation as a trademark.

Besides, if a producer uses a trademark belonging to other person for commercial purposes, even though he/she may do thorough ignorance, becomes an infringer. This shall oblige the producer to compensate for the losses caused by illegal activity.

If a producer wishes to know if his/her designation is similar to the already registered ones, he may apply for:

- an examination of a designation for identity and similarity to the registered trademarks;

75 URL: http://www.sinor.ru/~semenk/Search.htm 74 - analysis of the examination results; - a report which concludes if it possible to register a certain trademark.

This type of examination is performed by the Patent Department. Curtain fees (figure 3.10) are to be paid and the required papers are to be executed.

The Patent Department fee depends on the terms of the patent search of goods which are similar and has been already registered, and also the quantity of the commodity or service group which mark will be registered.

Table 3.1 Fees of the Patent Department

Type of search Cost One verbal designation search within a month, one 4720 rub (for each class ICGS over one in addition ICGS class 1180 rub) One verbal designation search within 14 days, one 9440 rub (for each class ICGS over one in addition ICGS class 2360 rub) One verbal designation search within 5, one ICGS 14160 rub (for each class ICGS over one in addi- class tion 3540 rub)

If that search doesn’t reveal the designations similar to applied one, an application is drawn up to register it as a trade mark.

STAGE III: Registration of a trademark 76 The main objective of this stage is execution of the application for registration of a trademark and obtaining the certificate for it.

Registration of trademarks is carried out at the Federal executive body specialized in intellectual property – Patent Department of Federal Institute of Industrial Property (FIIP)

Application on trade mark registration should include:

1. Application for registration of designation as trade mark with indication of an applicant and his location and residence;

2. Claimed designation (verbal, graphic or combined);

3. List of goods concerning which trade mark registration is requested, being grouped according to classes of the International Classification of Goods and Services for Registration of Marks

4. Description of the claimed designation.

Application documents for registration of a trademark should be prepared according to the requirements of the Russian legislation and should include the following procedures:

- the description of a trademark applied for registration (verbal, graphic or combined);

76 URL: http://www.sinor.ru/~semenk/TMapplication.htm 75 - forming a list of the activities and/or goods which will be provided under a trademark

- providing an address for correspondence;

- sending application for a trademark registration to the Patent Department (TableNo.3);

- preparing to answer all the requests of the Patent Department during the stage of formal examination of the application;

- receiving the Patent Department decision concerning submission of an application for consideration;

- receiving the Patent Department decision concerning registration or refusal of registration of a trademark;

- receiving the Certificate of trademark registration from the Patent Department.

The term of consideration of the application for registration of a trademark is 12-15 months . The cost of registration of a trademark is a sum of the state tariffs and the tariffs which are subject to payment directly to the Patent Department, and also fees for designation examination, execution of documents and support of the application for trademark registration. Cost of registration of a trademark also depends on the quantity of the classes of goods and services for which trademark protection is applied. The state tariffs are free from the value-added tax (VAT).

Table 3.2 List of documents necessary to submit an application77 for Russian enterprise for private entrepreneur For foreign entrepreneur Copy of registration certificate Copy of private entrepreneur Full firm name in Latin and Rus- of an enterprise. certificate certified by a no- sian transliteration (not a transla- tary. tion but sounding – transliteration) OKPO code. Physical address for corre- Legal address in Latin and Rus- spondence with postal code sian transliteration with naming the country. The first two pages of organi- Contact telephone and con- Physical address for correspon- zation chart (the first and a ti- tact person. dence with postal code. tle). for correspondence with postal 14 images of a trade mark, Contact telephone and contact code size 8 x 8 sm. (6 pieces fit to person. ordinary sheet А-4). Contact telephone and contact Types of goods and services 14 images of a trade mark, size 8 person. which are subjected to trade x 8 sm. (6 pieces fit to ordinary mark registration. sheet А-4). 14 images of a trade mark, size Letter of attorney for patent Types of goods and services 8 x 8 sm. (6 pieces fit to ordi- agent to conduct record which are subjected to trade mark nary sheet А-4). management registration. Types of goods and services Letter of attorney for patent agent which are subjected to trade to conduct record management mark registration. Letter of attorney for patent agent to conduct record management

77 The registration of a trade mark URL. http://www.businesspatent.ru/article/article.573.1.html 76 Cost for drawing up the application documents is 5900 RUB (including VAT).

The state tariff on registration of the application for registration of a trademark also a service mark and also the decision-making by the results of formal examination is 2000 RUB.

The state tariff for carrying out the examination of the application for a trademark is 8500 rub for one ICGS class and 1500 RUB extra for each additional class.

The diploma of the state sample - the certificate of trademark registration is issued for a trademark registered in the State register of trademarks. It certifies a priority of a trademark and an exclusive right for a trademark concerning the goods specified by the certificate.

The trademark certificate is issued for 10 years, starting from the application date. This period can be extended by the application of the right holder submit in the last year of certificate’s validity, each time for ten years.

The Activity of legal protection of a trademark is limited to the territory of the country where it is registered. So, if a producer registers a trademark in Russia, nobody shall forbid registering the same designation in other countries. Therefore, if the commercial interests of a producer go beyond the borders of the Russian Federation, it is necessary to register the trademark in other countries.

Legal protection of a trademark can be ceased either as a result of invalid registration of a trademark or in case of trademark cancellation. Cancellation of the registration of a trademark, unlike invalid registration, means that from the moment of cancellation exclusive rights of the owner expire. However, up to the point of cancellation the owner had the exclusive right to use the trademark, so all the legal activity performed before cancellation keeps its legal consequences.

Concession of a trademark and providing license for trademark use The trademark is an object of intellectual property and as an object of a property it can be ceded or transferred in temporary use. Transfer of the right to a trademark is regulated by the Fourth part of the Civil Code of the Russian Federation.

The exclusive right to a trademark can be transferred by the owner to other legal entity or entrepreneur under the contract on a trademark concession (contract of the alienation of the exclusive right to a trademark).

The trademark can be ceded both for all the goods or services for which it is registered and for a part of these goods or services. However, the initial owner of a trademark loses the ownership of a concession subject 78 . Thus, Article 1489 of the Fourth part of the Civil Code of the Russian Federation regulates providing the license for trademark use. The right to use a trademark can be provided by the owner (licensor) to other legal entity or individual (licensee) who performs business activity under the license contract concerning all the goods or only part of the goods for which it is registered.

78 URL. http://www.tm-patent.ru/transfer_rights.html 77 After the conclusion of the license contract the trademark is not ceded (that is, initial owner preserves all rights to it), only permission to its use is issued. Therefore the owner can bring a number of restrictions on its use. It can concern the territory where the trademark will be used or the time period for which the license is provided. Other restrictions may also be brought.

The owner of a trademark can issue several licenses for trademark use at the same time, thus gaining income, for example, as royalty.

The contract on a trademark concession (the contract on alienation of the exclusive right to a trademark) and the license contract should be registered in the Patent Department, otherwise such contracts are invalid. The order of registration of the specified contracts is established by the Patent department 79 .

It is necessary to pay fees for registration of the contract on a trademark concession (contracts on alienation of an exclusive right to a trademark) or the license contract directly to the Patent department of the Russian Federation.

- 10000 rubles for the registration of the license contract concerning one trademark

- 10000 rubles for the registration of the contract on a concession of the trademark concerning one trademark

The cost of the registration of a contract on a concession of a trademark or a license contract and application documents for their registration is 3540 RUB (including the VAT) 80 .

Consideration of a contract on a concession of a trademark or a license contract in patent department (FIIP) is carried out according to the procedure presented in Table 3.3.

According to Article 1486 of the Civil Code of the Russian Federation, legal protection of a trademark may be early terminated with respect to all goods or part of the goods for the individualization of which the trademark has been registered as the result of the non-use of the trademark con- tinuously within any three years after its official registration.

Federal Institute of Industrial Property (FIIP) runs check Registration fee for license of the correspondence of the trade mark recordal of as- contract registration is 10000 signment submitted to approval or the correspondence of Timing of the in- rub. license contract to the statements of the Regulations of spection 3 months Registration fee for trade legislation handling relations in the sphere of intellectual mark assignment contract is property. 10000 rub.

At positive result of contract check FIIP forwards to contract holders: -notice of contract registration or change being entered In practice the period of registration of trade mark into the registered contract; assignment contract or license contract is 3-4 - copy of contract or document, verifying the mutual months. agreement of the parties on introducing changes into the registered contract with registration mark, containing registration date and registration number.

79 URL. http://www.tm-patent.ru/transfer_rights.html 80 URL. http://www.tm-patent.ru/transfer_rights.html 78 A request for the pre-term termination of the legal protection of a trademark as the result of its non- use may be filed by any interested person with the Chamber of Patent Disputes upon the expiration of the aforesaid three years provided that the trademark has not been used before such request was filed.

Consideration fee for the requests for pre-term termination of legal protection of a trademark in connection with its non-use filed to the Chamber of Patent Disputes is 12000 rubles.

The international registration of trademarks carried out according to the Madrid Agreement and its Protocol within the List of the participating countries of the Madrid Agreement and the Pro- tocol is possible in more than 80 countries at the same time.

The international registration of a trademark in the countries of the Madrid Agreement is possible only for those trademarks which are already registered in Russia 81 . Thus, the application for the international registration should contain: information on initial registration or initial application; the list of the countries where a trademark is requested to be registered; the list of goods and services for which registration is requested.

The application for the international registration of a trademark is drawn up in English in case the applied-in countries are participants of the Protocol to the Madrid Agreement. In other cases the application for the international registration of a trademark is drawn up in French.

The international registration of a trademark is applied via the Patent Office of the Russian Federation which sends the demand to the WIPO International Office.

The term of the examination of the application for the international registration of a trademark is limited to 12 months in the participating countries of the Madrid Agreement, and it is limited to 18 months in the countries of Protocol

The cost of the international registration of a trademark is a total of the fees paid to the WIPO International Office and the fees paid to FIIP.

International registration fees:

- starting fee: for a black-and-white or for a colour trademark;

- additional fees: for each class of goods and/or services, if there are more than three classes, for each country where registration of it is applied.

The state fee for the registration of the application and its posting to the International Office of the World Intellectual Property Organization is paid to FIIP. This application fee is 3600 roubles and 270 roubles extra for each ICGS class if their number exceeds 3 82 .

Thus, the cost of the international registration of a trademark depends on the type of a trademark, the countries in which trademark is registered, and number of classes of goods and/or services.

81 URL. http://www.tm-patent.ru/international_application.html 82 URL. http://www.tm-patent.ru/international_application.html 79 Violation of the right of the trademark owner is using, without the right-holder’s permission, a trademark or signs confusingly similar to his/her trademark with respect to the goods for the individualization of which the trademark has been registered or similar goods. Using purports a trademark use in civil circulation on the territory of the Russian Federation, in particular by using a trademark

- on goods including labels and packaging of goods, that are produced, offered for sale, sold, displayed at exhibitions and fairs, or otherwise introduced into civil circulation within the territory of the Russian Federation, or are kept or transported for this purpose, or imported into the territory of the Russian Federation;

- while performing work or rendering of services;

- on documents introducing goods into civil circulation;

- while offering goods for sale, work for performance, and services for

- rendering as well as in announcements, on signboard, and in advertising;

- in the Internet, including in a domain name and for other means of addressing.

Goods, labels, and packaging of goods on which a trademark or a confusingly similar sign are fixed illegally shall be deemed counterfeits.

The right holder has the right to demand of removing from civil circulation and destroying at the expense of an infringer of counterfeit goods, labels, and packaging of the goods on which a trademark or confusingly similar sign is illegally used.

A person who has infringed the exclusive right to a trademark in the performance of work or rendering of services shall be obliged to remove the trademark or confusingly similar sign from the materials that accompanied the performance of such work or rendering of services, including documentation, advertising, and signboards.

The right-holder has the right to demand at his option from the infringer instead of remuneration for damages payment of remuneration:

- 1. in the amount of from ten thousand roubles to five million roubles determined at the discretion of the court based on the nature of the infringement;

- 2. in double amount of the value of the goods on which the trademark is illegally fixed or in double amount of the value of the rights of the use of the trademark determined starting from the price that in comparable circumstances is usually taken for lawful use of the trademark.

A person who has made a precautionary marking with respect to a trademark not registered in the Russian Federation shall bear liability in accordance with the procedure provided by the legislation of the Russian Federation. According to the Crime Code of the Russian Federation (Article 180), illegal use of a trademark or service mark, name of the place of origin of goods, or similar designations for homogeneous goods, if this deed has been committed repeatedly or has caused sub- stantial damage, shall be punishable :

80 - by a fine in the amount up to 200 thousand roubles, or in the amount of the wage or salary, or any other income of the convicted person for a period up to 18months;

- or by compulsory works for a term of 180 to 240 hours;

- or by corrective labour for a term of up to two years.

Illegal use of special marking in respect to a trademark which is not registered in the Rus- sian Federation, or the name of the place of origin of goods, if this deed has been committed repeatedly or has inflicted sizable damage, shall be punishable by:

- a fine in the amount up to 120 thousand roubles, or in the amount of the wage or salary, or any other income of the convicted person for a period up to one year;

- compulsory works for a term of 180 to 240 hours;

- corrective labour for a term of up to one year.

The actions specified above committed by a group of persons by a preliminary collusion or by an organised group, shall be punishable by:

- a fine at a rate of 100 thousand to 300 thousand roubles or at the rate of the wage or other earnings of the convict for a period of one year to two years;

- or arrest for a term of four to six months;

- or imprisonment for a term of up to five years.

3.4 Marketing of the ecological and regional products of the rural areas Modern domestic experience in promotion ecological and regional products of rural areas to the final consumers is not very rich, because the value of natural and safe product for a person and nature increased in the mass mind only at the beginning of this century.

A relative lag in this question from the EU countries, the USA and Canada is explained from several points of view:

1. Closure of the country in the Soviet period together with the strict regulation of the technological processes in the agriculture and food manufacturing didn’t cause anxiety from people about safety of food products. The indicator of the quality of the product was the GOST sign on the package that is why there was no demand for ecological compatibility.

2. During the active reform period solvent demand of the main part of the population didn't allow to choose the quality of food products because of their high price.

3. Producers of agricultural raw material and food products began to stray from previous technologies for the increase of an output volume and mass of profit, but poor quality product found its purchasers in spite of the unsaturated market and low purchasing capacity of the population.

Today the situation is changing, so eco labeled products’ market develops slowly, but steadily, especially in the large megalopolises. It is accounted, in particular, that eco products segment of 81 the market is nearly 2% from the consumer market, meanwhile not less than 80% falls at Moscow and St. Petersburg.

So far as ecolabeling of products by domestic producers is not wide spread nowadays, such kinds of products belong to high price category. The promotion of such goods is carried out to the consumers through several channels in Russia:

- departments of eco products in the supermarkets, oriented on the middle class and high class(“Metro”, “Perecrestok”, “Stockman”, “Sedmoy continent” and others.);

- separate shops, positioning oneself as eco products sellers (“Bio market”, “Selskaya eda”, “NatureFood”, “Vsyo svoyo”, “Arivera”, “Lavka”, “Azbuka Vkusa”, “Alye parusa”, “Globus gurme” etc.);

- internet shops (“Eco derevushka” 83 , “Eco producty” 84 , “Fructovaya pochta” 85 , “E mne” 86 etc.).

In what connection favorites are internet shops, according to sales volumes. So in such shops the main part of goods is imported products.

Sailing of products, which are called natural and real country food, received much more distribution. Products in such shops don’t have any eco labels, and their selection is made from reliable providers (therefore megalopolises have to make purchasers in the neighbor regions).

This principle is used in internet shops such as “Aromaty leta” 87 , “Khoroshiy product” 88 , “Diamart” 89 , “Eda is derevny” 90 etc.

There are also classical shops with physical trade areas. So, such shops as “Naturalnye producty”, “Izbyonka”, “Naturalnye molochnye produkty” etc. are famous in Moscow. The producers from Belarus position themselves as suppliers of food which is natural but not having eco labels. Their shops: “Products from Belarus”, working under slogan “Natural! Tasty! Chip!” are very popular not only in megalopolises but also in small towns in Russia.

So, in the under-saturated market conditions of eco labeled food, its high price and low purchasing power of the large part of the Russian population, the basic market chain of those products is internet shops, which allow to low selling cost and to expand customer base.

Besides, there are several associations, funds and commercial and noncommercial organizations in Russia today, which unites the producers of eco products. They help to develop bio market, organize contests, revealing domestic products of high quality. Consequently, they managed to form “The Union of pure ecological food producers” (ROSSEP) and unite nearly 4000 enterprises. Foun-

83 http://www.ecoderevushka.ru/ 84 http://www.ekoprodukti.ru/ 85 http://www.fruity-mail.ru/ 86 http://i-mne.com/ 87 http://www.aromat-leta.ru/ 88 http:// хороший -продукт .рф / 89 http://diamart.su/ 90 http://eda-iz-derevni.ru/ 82 ders of the Union are joint stock company “Green-Pick” (Kirov),Russian trans-regional mushroom growers’ association, consumers society “M-cooperation” (Moscow), OOO “Agro biotechnology” (Moscow), OOO “SSHP “Ginseng”(Bryansk) and OOO “Mir-expo”(Moscow). The aim of the Un- ion is organization of the manufacture and promotion of the eco products at the Russian and world markets.

International association of producers, suppliers and consumers of eco products arouses interest. This association includes Russian and international companies, which focuses on production, processing and selling of the pure ecological products and eco services for the Russian market. The main aim of the association is production, supply and sales of the pure ecological products and services with guarantied and protected quality; the influence on the development of a civilized market of the pure ecological products, and also implementation of the international eco standards 91 on the market.

International Russian and regional forums, conferences and exhibitions make contribution to the development of the national market of the eco products. They make not only educational functions, but also bring together potential and real manufactures of bio products, wholesalers and retailers, consumers.

The theme of nutrition is actively developed by the magazine “Provisions promotion. Prod&Prod” 92 . Complex seminar “Production and Promotion of plant breading, gardening and winegrowing of “organic category” on the south of Russia” took place in 2010 under support of the magazine and noncommercial fund “Agrarian civilization», Kuban State Agrarian University and “St. Petersburg Ecological Union”. The main aim of the action was the dialog between science, producers, trade and community for preparing manufacturing base in Krasnodar region and demand conditions of organic products 93 .

Many constituents of the Russian Federation got involved in the creation of the eco products market and production methods. In some regions ecological safety concept was accepted, international standards, ecological technologies for producing natural and safe goods, ecological certification of products and systems of ecological management of the enterprises are expanded. Contests of safe ecological products take place regularly. They carry out the delivery of agricultural products according to international standards. For example, the law №39 “About production safety in Mos- cow” dated 12.07.2006 was passed in Moscow; expansion of usage ecologically safe products at school canteens was stipulated; the certain regulatory structure on GMO exists; the system of facul- tative certification GUP “Moscow quality” works.

In Tatarstan Republic they worked out the target program “Ecological safety for the period through to 2015”, which includes the program “Agro ecological safety”. They organize annual contest “ECO leader” with the nomination “Natural, ecologically safe production”.

91 http://www.ecocluster.ru/about/aims/ 92 http://habeas.ru/prod/portrait-and-rubricator 93 Shalanda A.V. The concept of continuous ecological formation and education in the field of ecological agriculture in Russia//URL: www.green-pik.ru/doc/concepciya.doc

83 The system of certification “Real Vologda product” made of natural raw material works in Vologda region.

Practical seminars play an important role in the development of an eco-market in Russia, which take place on the territory of successful bio enterprises. Such events are usually held at NP “Agrosophia”, for example.

If we are going to analyze the perspectives of eco products development, we can realize the following (table 9):

Table 3.3 Evaluation of the perspectives of the Russian eco products market development 94

Advantages Disadvantages Negative ecological environment in the large Rus- Absence of a common eco-product notion and crite- sian megalopolises ria of its difference from any other product

Absence of a legal frame work, which can regulate Fashion and growing effective demand on the production and turnover of Eco products, and also healthy life style and healthy diet. ecological use of natural resources

Possibilities Threats The growth of the population’s prosperity in the big Absence of a clear understanding by producer and cities in Russia. seller of the eco products place on the market. Readiness of the business to invest, to produce and Sluggish work with the consumer. sell ecological food products.

However, despite the fact that Russia is 15-20 years slow from the world leaders(the USA, Germany, Great Britain, New Zealand, Switzerland) in the level of bio products market development, the perspectives of organic production in the country are quite considerable not only in terms of domestic consumption, but also in terms of export.

In relation to the marketing system of regional agricultural products , they show serious variability in section of separate federal states. When using the same technologies of goods promotion from the manufacture to the final consumers, activity of one or the other elements of marketing system and trade mechanisms differs in a way.

In the major part of the regions in Russia agricultural production has the low export potential. This is why wholesale buying of agricultural raw material right from the producer prevails. Meanwhile, milk and cattle for slaughtering, vegetables for preserving are bought right by processing enterprises; fresh potatoes, vegetables and greenery are sold in their own retail shops, on the markets and fairs, with the help of self-delivery from the fields and direct deliveries through the retail enterprises.

94 Mishchenk о M. The Russian Eco product market. Threats and possibilities//URL: http://www.ecounion.ru/ en/site.php? content=detailcontent.php&blockType=206&blockID =665

84 Large pig-breeding complexes, cattle fattening enterprises and poultry farms have their own processing and retail system. Therefore they act like net-sellers of retail trade and bulk quantity of finished goods and ready-to-cook food. For example, OAO Agro industrial Complex “Orlovskaya Niva” and OAO “Snezhka”(Orel an Bryansk region accordingly)- diversified agricultural enter- prisers of holding company type, which includes processing enterprises (livestock companies, first of all) and their own retail chain(“Rodnoe Selo” and “Snezhka”accordingly). The part of its production is sold in shops in Orel and Bryansk region, more than that both enterprises are suppliers of natural food shop “Izbyonka” in Moscow, though none of them didn’t registered their trademarks and they don’t have eco labels. This principle is used on ZAO “Krasnodonskoe” in Volgograd region, pig-breeding complex “Plemzavod Ubileiny” in Tyumen region, OAO “Omsky becon”, ZAO Plemzavod “Irmen” in Novosibirsk region.

In regions with intensive development of agriculture (Belgorod, Lipetsk, Voronezh regions, Krasnodar and Stavropol territories etc.), and also in regions with high distribution poten- cial(Moscow and Leningrad regions and territories related to them, acting as suppliers of raw material), other marketing approaches to the sales prevail.

The vertical integration processes were actively developed in such federated states. These integration processes were initiated by the food industry enterprises. Against the better start possibilities in comparison with the agriculture in the period of reforms, capacious markets and increased profitability in comparison with simple agricultural activities such strategy brought as a result the formation of large holdings with the closed (or almost closed) technological cycle: production – processing – trading. The one of the biggest operators on the meat market in Russia joint stock Company “Cherkisovo Group” working under the slogan “Quality from farm to counter” is organization of such type. The holding consists the agricultural organizations from the ten European regions of the Russia: Moscow, Pensa, Vologda, Lipetsk, Briansk, Tambov, Kursk, Voronezh and Orel.

On the diary market the biggest producer in Russia is “Wimm-Bill-Dann” 95 . Probably it is one of the leaders on the Russian food market in respect of production quantity and realization, number of trademarks and brands.

The important role on the regional agricultural raw product and food markets have the companies with the investment and manufacturing business entities that earlier didn’t work in the agricultural sphere as external investor. For example, agroindustrial investment company “Efko” in Belgorod region re-equipped technically oil-extracting factory, made a stabile raw-material base. The company gave agricultural producers technics, material and technical resources, it has trade houses in Moscow, St-Petersburg, Voronezh, Novosibirsk, Ekaterinburg 96 . At first it became the leading brand of the vegetable oil “Sloboda”, then of the mayonnaise and ketchup under the same name. The company informs on the official website that the oil and mayonnaise have an ecological certificate “Organic control”, though that sign would not become legal in Russia or European Union or United States of America.

95 http://www.wbd.ru/ 96 http://www.sloboda.efko.ru/ 85 But in whole, external investors in the major part of Russian Federation regions bring very often more problems than help in the regional agro-industrial complexes and economical systems of the regions 97 .

So, the vertical integrating structures of the agricultural complex have an important role in the marketing systems in the regions and Russia. They perform the function of wholesale and retail sellers on the national market of food and agricultural raw material market.

The important market channel for agricultural production of the individual farms is the cooperation in the form of the horizontal integration of the agricultural producers for the joint processing and realization of their production. For example, in Tyumen regional farmers founded 12 district consumers’ cooperative societies, which in 1995 created a regional consumers’ cooperative society “Moloko”. It has controlling block of shares of diaries in four districts of the region, sells the production with the name of the firm on it and the trademark through its own trading network and it has the trade representation in Surgut 98 .

By principally another scheme works the credit-marketing agricultural consumers’ cooperative society “Podvorije” in Saratashski region of Orenburg with the view to provide the farms with the motor fuels, seeds, fertilizers, plant protective materials, to organize the purchasing of the agricultural production, its wholesale and retail trade.

But unfortunately the consumers’ cooperative societies are not preva- lent in Russia.

The development of the information technologies contributes to the expansion of the marketing technologies through the facilitation of the access to the market for the producers and consumers of the agricultural raw materials and food. As examples we can name the following information resources in the Website:

1) all-Russian wholesale trade sites:

- AllBiz ( http://www.ru.all.biz/enterprises/177610/bg1050109/) - Plus7.ru. (http://plus7.ru/)

2) regional sites:

- Advertisements. Goods. Services (Krasnodar) (http://rtu.ru/) - Penza2.ru (http://penza2.ru/tags/)

97 Popova O.V., Popov S.V.. The problems of the formation and realization of the anti-recessionary activity systems in the agro-industrial complex in Russia. 98 Marketing/ А.V. Poshatayev, М.V. Moskalev, Е.I. Semenova and others.; Under redaction of А.V. Poshataev. – М.: KolosS, 2007, 367 p. 86 3) corporations’ sites:

- LLC «Novaya Economicheskaya Politika» (Voronezh) (http://www.zernovrn.ru/board/index.php) - Group of companies «Timerchan» (Republic Tatarstan) (http://www.timerhan.ru/) - LLC «Magadov group» (Voronezh) (http://www.magadov-groups.ru/).

The important role on the regional food markets play agricultural marketplaces and trade fairs. They are organized in the cities and towns in Russia and could be regular or temporary. Usu- ally it’s unified trade places for the farmers that sell vegetables, fruit and animal products. There are also special trade fairs such as Kostroma Cheese Market, Honey Trade Fair, organized on the orthodox feast Honey Spas, fish markets near the fisheries.

The separate category of the peasant fair trades are celebration activities. For example in the Orel region on the orthodox Trinity feast there is the fair of the folks handicrafts in the national park Orlovskoye Polessie for the regional and extra regional craftsmen.

In Briansk such fair on the last Sunday of August became a trade market not only for farmers and agricultural producers, but also for the manufacturers of the agricultural machinery, fertilizers and plant protective materials.

On the whole we should note that the system of the regional marketing of the rural aeries in Russia stands in the direct relation from the activities of regional authorities, because of the relative weak developed local self-government institutes in the country. That’s why the rural population has the serious difficulties with the selling of the production: the system of the consumers’ cooperative societies existing in the Soviet Union was destroyed, and the attempt to revive it under the State development program of the agriculture and regulation of the agricultural product markets, raw materials and products in 2008-2012 was not especially successful.

87 3.5 Test questions and group work for topic 3

Questions for revision: 1. Name the brands of your region, which are familiar to you.

2. What organization does the registration of trade marks in Russia?

3. What does the commonly used “trade mark” mean?

4. What standard act regulates the protection of civic rights from illegal usage of trade mark?

5. What are the stages of trade mark registration procedure?

6. What certify organizations in Russia do you know?

7. What certify organization grants “Eco-control” sign? “Vitality Leaf”? “Eco bird”?

8. What are the principle differences between the conditions of rendering the “Eco-control” and “Leaf of life” signs?

9. On what conditions and what organization gives the right to the producer to use “Chistye rosy BIO” sign on their products?

10. Has the brand of your region been designed? If yes, what is the difference between the brand and official coat of arms and what is its massage?

11. Name the main trade channels of bio products.

12. What is the difference between the promotion of regional goods by small and medium en- terprisers of rural areas?

Practical tasks for the group work: 1. Divide into groups of 3-5 students. Think and write on separate stickers what kinds of craft and cottage industry is your region (municipal unit) famous for, what is the famous specialty in your region and what unique feature does it obtain

2. Discuss in the groups the ideas about possibility and expediency of registration of the rights on these a kind of regional production of rural territory. Discuss specificity and prospects of ad- vancement of this production on the regional (national) market. Choose the most successful from the point of view of group idea, develop a trade mark, a slogan and the concept of ad- vancement of this production. Fill the demand for trade mark registration. Each group protects their project at intergroup meeting.

3. The same groups should answer, what benefits can be received from the manufacture of bio- production in the municipality and what difficulties they can meet. What kind of production with the bio-sign could be most perspective realized and what kind of channels you should choose for marketing? Discuss the results of your reflections in group. Choose the best idea. 88 Choose the certification authority and fill in the application form for trade mark registration. Defend your project at intergroup meeting.

3.6 Literature on the topic

1. Elena Kostyuk. The most valuable brands of Russia//BusinessWeek Russia.//URL: http://www.adme.ru/ citigroup/samye-cennye-brendy-rossii-bbdo-39359 2. A.V. Kuznetsov. The development of ecological agriculture and food-processing industry. New quality. New possibilities.//URL: gov.cap.ru/home/24/irina/vi_forum/ kuznecov.ppt 3. Kuznetsov A.V. The forming and development of regional brands / Regionology, 2008. №3//URL: http://regionsar.ru/node/147?page=0,1 4. A.V.Poshataev, M.V.Moskalev, E.I.Semenova's Marketing/, etc.; Under the editorship of A.V.Poshataeva. – М: the Colossus, 2007 г. 367 with. 5. Maryin Travelling around a cheese plate//the St.-Petersburg sheets, 2012. №134//URL: http://www.spbvedomosti.ru/print.htm? id=10290169@SV_Articles 6. Mishchenk о M. The Russian Eco product market. Threats and possibilities//URL: http://www.ecounion.ru/ en/site.php? content=detailcontent.php&blockType=206&blockID =665 7. Мо rdvinova V.V. Well-known trade marks in Russia//the Patent attorney, 2007.//URL: http://rbis.su/article.php?article=90 8. Trade mark registration.//URL: http://www.businesspatent.ru/article/article.573.1.html 9. The Russian Eco products standards //URL: http://www.rodniki.bel.ru/bit/ pr_ecoprod_rus.html 10. E.P. Skornyakov Trademarks protection with elements of geographical character//Patents and licenses, 2000.//URL: http://rbis.su/article.php?article=693 11. Khodus А.V. BIO-EKO-Organik: Quality philosophy//Meat technologies, 2009. N6 12. Khodus A.V.Ecological agriculture, ecological wildlife management, ecological marks//URL: http://www.ecounion.ru/ru/site.php?blockID= 565&blockType=151&content=detailcontent.php 13. Shalanda A.V. The concept of continuous ecological formation and education in the field of ecological agriculture in Russia//URL: www.green-pik.ru/doc/concepciya.doc 14. Ecological certification and declaring of production and management systems//URL: http://www.ecochistyproduct.ru/certification/?id_news=7

89 4 Methodological approaches to develop marketing plans The chapter “Methodological approaches to the development of marketing plan” examines the stages of strategic planning and their contents, shows the place of the process of operational planning in marketing, presents the algorithm of marketing plan development, gives the directions and technology of marketing research realization and discovers the content of method of conjoint analysis of external and internal environment and reflects the order of their practical application.

Questions under consideration

1. Algorithm of developing marketing plans for regional rural production

2. Methods of carrying out the analysis for marketing plan development

4.1 Algorithm of developing marketing plans for regional rural production In the conditions of market economy the stability and success of every economic entity can be provided only by effective planning of its economic activity. The most important task for an enterprise is to attain the set goals on sales promotion and to capture market share on the basis of competently created plan of marketing activity. This will provide the increase of control of the results of its business activity and help to estimate its competitive position in the external environment and develop clear and specific response plan to achieve strategic and tactic goals of an enterprise.

These positions concern the manufacturers, who:

Want to register the trade mark on production which is already popular in the market

Plan to produce new kinds of a commodities

Have decided to pass to organic manufacture in order to sell bioproducts at the market

Besides, working out of the marketing plan will be extremely important for manufacturers who plan to revive traditional local crafts with the next registration of a trade mark with protection of the name of the goods, and also when working out projects for getting grants for development of rural territories.

Development of a marketing plan is a complex, cycle process having the aim to get potential possibilities of an enterprise to correspond to the market requirements. 99 From the point of formation the marketing plan is a document where the main goals of marketing of goods and services of enterprise and the ways of their achievement are prescribed. 100

99 Best P. Marketing of a consumer. M: Mann, Ivanov and Ferber. 2008. 98 pages

100 Westwood G. Marketing plan SPb: Piter. 2001, 256 pages

90 Marketing activity planning in different enterprises is realized in different ways depending on the preset goals and objectives, planning period duration, planning system organization, etc. The range of marketing plans contents is rather wide: sometimes they are sales department decisions; sometimes they include definite business strategies and different marketing aspects in the enterprise activity. 101

Marketing planning in the market conditions consists of strategic planning (long-term) and tactical (current) planning 102

Strategic marketing plan developed for 3-5 years and more reflects the main factors and forces that as it is expected will influence on organization. It has long-term goals and determined marketing strategies with mentioning the resources necessary for their realization.

Generally strategic market planning stages can be presented in Fig. 4.1

Organization Strategy of organi- programme Goals and Planning of business port- zation growth objectives folio organization

Fig. 4.1 Stages of strategic planning

This plan is improved and revised annually and serves as a basis for an annual marketing plan. The strategic marketing plan is directed to solve marketing activity goals towards its organization or its separate strategic business entities (SBE). But this succession is applied to rural economic entities (small enterprises, individual businessmen and private subsidiary farming) and to municipal unit authorities at the generation of strategy of the territory development in a total.(fig 4.2.)

Accomplished objec- alternative strategies strategies estimation Choice of the most ef- tives fective strategy (tasks) Researches and devel- staff production Marketing opments Fig. 4.2 Strategic planning content

Core plan of marketing describes the current marketing situation, goals of market activity, market strategies for the current year. It includes the program of measures and resources provision (Fig. 4.3).

101 Bronnikova T.S., Chernyavskiy A.G. Marketing: Textbook. Taganrog: Publisher TRTU.1999 http://www.aup.ru/books/m99/6_7.htm

102. Bronnikova T.S., Chernyavskiy A.G. Marketing: Textbook. Taganrog: Publisher TRTU.1999 http://www.aup.ru/books/m99/6_7.htm 91

Goals of Develop- Choice The forma- Opera- Marketing marketing ment of al- of the tion of the tive budget activity for ternative best marketing schedule separate strategies strategy activity plan planning food products and markets

Fig. 4.3 Process of operating planning in marketing

It covers the plans for separate food lines, separate goods (services) and separate markets and includes the solutions on the following directions:

- Marketing researches. - Food policy. - Price policy. - Commodity distributive policy. - Communicative policy.

In general the development process of marketing plan meets the following algorithm.

Table 4.1 Marketing plan development algorithm

Stages Content I stage. Analysis of market forces, organization competitive position (subject of rural econom- Situation analysis ics or rural settlement) and the achieved results, full-scale analysis of the condition of marketing activity of a planning object is done, its mission is defined, the market segmentation is done gradually, market attraction is estimated (segment size, sales volume, demand dynamics, purchasing ability and etc.). II stage. Analysis of weak and strong sides, possibilities and risks with the purpose of defining SWOT –analysis. the main factors that influence the results of the planning of objectives. III stage. On the ground of product portfolio analysis from the point of market attraction and Strategic plan de- competitive advantages of the planning object the strategy is developed and the cur- velopment. rent goals are defined, strategic directions of activities are concretized by means of tactic measures planning. For every target segment of the market the corresponding commodities (services) of the required quality and quantity, their prices, points of sales and strategy of their promotion to consumers must be planned. IV stage. On the basis of the definite strategic plan the list of marketing tools is compiled. Detailed marketing These tools are used to achieve the preset goals being structured in the goal tree strategy form with global corporative goal at the top. V stage. For realization of marketing strategy all the necessary investment resources for stra- Marketing budget. tegic tasks solution are included into the budget. The program execution resource sufficiency is checked. If the resources are not enough the goals and objectives will be revised, the strategies and the planned measures will be corrected. VI stage. Marketing and operational results for 3-5 years are forecasted. Forecast of marketing plan realization VII stage. It is estimated whether the planning object achieves the necessary results (market Results estimation. share, revenues and financial results)?.

92 Situation analysis. Analysis goal is a definition of significant aspects of the planning object activity that can be unnoticed. It is necessary to get as much information about the market as possible to have better understanding of consumers needs, competitors policy, canals systems of sales promotion, company positioning, margins and the profit level of market participants 103 (table 4.2.).

Table 4.2 Directions and the questions of situation analysis under consideration

Analysis directions Questions under consideration Size Market demand Growth potential Environment Final consumer Consumer analysis Negotiant Nonconsumers Structure Competitor profile analysis Differnce analysis Substitute goods Market share Competitive position Price/quality Cost/value Sales Work results Degree of consumers satisfaction Margin/profit

SWOT-analysis. The SWOT-analysis is used to define weak and strong sides and possibilities and risks. In the planning process it is very important not to lose the link between the situation analysis and the SWOT-analysis. Both analytical processes must be organized as interconnected parts of planning process. The success of the following steps is defined by the depth of the situation analysis in a total and by the degree of operational problems study in the course of the SWOT- analysis.

Strategic plan. On this stage the strategic and tactical measures list is generated and the strategic plan is developed. The main assignment of the strategic plan is to define the strategic direction of the development, formulation of current tasks, and also marketing tactics formulation. On the ground of study of the factors that influence the market attraction and competitive advance the optimal portfolio of commodities and long-term plan of share in every commodity market are defined.

Marketing complex strategy. Common marketing strategy - that is to protect or increase the market share, narrow the focus, leave the market gradually or immediately – is defined by the strategic plan but to solve every operational task or problem the company needs in more detailed marketing tactics. At this stage the marketing tools that help to realize the plan are defined. At the

103 Best P. Marketing of a consumer. M: Mann, Ivanov and Ferber. 2008. P.208

93 same time every marketing tool corresponds to the define problem that the company is faced with in the context of the situation in the market

The strategy offers the definite measures towards the planned market share, positioning, price formation, distribution canals, creating value to customer. And all this must become the information content of the company contact with the target segment. Such detailed degree is necessary for adequate market estimation and the strategy influence on the company profitability.

Marketing budget. The marketing program as any other plan can not be realized without the corresponding budget. In national practice where the traditions of centralized planning with the priority of production target are strong enough every foreseen market expenditures are examined as peculiar “self-denial deed” from the side of finance services. 104

The budget reflects the planned revenue positions, cost value and profit margin (Fig. 3). Revenue position is defined by the anticipated sales volume in value terms, and the expenditures are defined with the sum of all cost types. The approved budget is a basis to provide the commodity production and marketing activity. In marketing practice different methods of marketing budget definition are used, none of which is universal and perfect. The most common methods are presented in Table 4.6 105 .

Table 4.3 Methods of marketing budget definition

Method of Financing Peculiarities of application Financing “from possibili- It is realised according to the principle “How much can you allocate”. This ties». method is applied by the planning objects that are focused on production and not on marketing. Method of “fixed interest». It is based on transfers of assigned share from previous or sales expectations. Method of “correspon- It supposes practice accountance and level of costs for marketing of the com- dence to a competitor” petitor enterprises (subjects of agricultural economics and rural settlements), with allowance for correlation in forces and for market share. To realize this method is necessary to observe some conditions. First, it is necessary to choose the competitor close by results, interests and market position.. Second, it is necessary even though approximately to define the volume of the marketing budget of the competitor. That is very difficult. Method of maximum ex- It supposes that it is necessary to spend as much resources as possible for penses marketing. At all visible “progressiveness” of this approach its weakness is in ignorance of expenses optimization technique.

It is necessary to stress that most reasoned will be the budget compiled by application of the integrated approach with the separate elements of all studied methods. This way of budgeting can be based for example on the orientation to the present task, taking into consideration competitors actions and resources that can be allocated for marketing.

Therefore, the place and budget role in the algorithm of marketing program developing can be visualized in the following way (Fig. 4.4).

104 Graham G.Khuley marketing. Buisness-class. M.: Unity-Dana, 2004. P.174

105 Graham G.Khuley marketing. Buisness-class. M.: Unity-Dana, 2004. p. 174 94

Revision of the marketing activity

Prognosis of the state of the market and resource possibilities

Target-setting and criteria selection for their attainment

Development of the marketing strategies

Planning of the tactical activities

Do you have sufficient resources? No Yes

Agreeing on & approving marketing program

Fig. 4.4 Algorithm of marketing program developing

Market budgeting is one of the most complicated stage of the marketing plan development. During its development is necessary to observe the correspondence between the strategy, operational tasks and the budget. There are three ways of market budgeting based on the concrete plan and the preset elements of marketing strategy being created to achieve the targeted results (ta- ble4.5.).

Table 4.4 Technologies of market budgeting

Technology Technology of application Developed “top-down» Market budget is defined on the basis of sales plan, paying attention to the correlation of market expenses and total sales in earlier peri- ods. Developed taking into considera- Marketing budget is defined as an aggregation of required flows for tion the exist class of customers attraction and retention of consumers at preset correlation of new and second customers. Developed “down-top” Budget is compiled on the basis of aggregate estimated costs individual to the planned market measures.

95 At realization of the marketing program development process it is necessary to apply methods of system analysis and particularly method of structuring (decomposition) (fig. 4.5.).

Forecast of marketing plan realization. At this stage it is necessary to define perfectly when these or those results must be achieved (connected with the same indicators – market share, revenue, profit), to evaluate at any moment how successfully the strategy is realized. Operation indicators include evaluation of external market - consumers awareness degree, consumers satisfaction degree, product accessibility, perception of the product and service from the point of quality, market share, and also evaluation intrinsic criterion, for example, revenues, margin, market activities.

Fig. 4.5 Market budgeting

At this stage the data of market activities efficiency are defined. There are three approaches to plan the market activities efficiency:

1. It is based on the demand evaluation, expressed in monetary items, This approach is the most common, because usually all the necessary information is easy to access..

2. If the revenues indicators are more important it is possible to evaluate market activities efficiency taking into consideration indicators of physical output and realization.

3. If the product and services assortment is wide, the evaluation of market activities efficiency can be done on the assumption of the number of their consumers.

96 The degree of confidence of these evaluations directly depends on so far are problems and tasks, strategic plans and market strategy are specified and also so far marketing budget is adequate to market tactics of the subject of rural territory or rural settlement in total.

Results evaluation. This stage presupposes regular monitoring over market changes and return level of marketing activity and comparison of the obtained results with the planned targets. If the realization of the market plan does not produce the desired results, fixed in the strategic plan, it is necessary to revise the marketing plan and also all information and assumptions on which it is based on.

If the plan and actual results do not match, it will be necessary to do some definite actions.

First, it is possible analyse the existing policy of pricing, patronage and dealers refund and per-unit production costs and market budget to understand whether there are some other opportunities to improve the efficient results.

Second, it is possible to revise all marketing plan. It is necessary to do the situation analysis and problem of the efficient analysis, to define the presence of alternative marketing tactics, that suit more for achieving the present targets. In any case marketing strategy must be connected with the current market situation, efficient problems, the resources, and also with assessment of market and the company activity indicators.

The degree of details, the planning horizon, periodic monitoring and the number of some other parameters of marketing activity are defined by the object of planning and its targets (introduction of pioneer product, commodity or service, development of house brand with the following its registration, capture of new and expansion of the functioning market outlets and etc.). This is a very difficult and multisided work. But never the less having developed the marketing plan the subject of rural economics or rural municipal entity gets an opportunity of more intensive development, of increasing its competitive ability in the market and makes a contribution to its future and welfare.

4.2 Methods of carrying out the analysis for marketing plan development Market research is a systematic search, collection, processing and integration of information that is referred to all problems of goods and services of the market or connected with them.

Market research task is generation of market information to make decisions in the sphere of interaction of marketing system subjects that will provide the market required quantity and quality of goods transactions at compliance with the requirements of the main factors of external environment and a consumer.

Market research target consists in the development of the concept of common view about the structure and regularities of a market dynamic and about the grounding necessity and possibility of a definite producer for more effective adaptation of manufacturing, structure technologies and also production or services introduced to the market to demand and end-user requirement. The objects of market researches are environment, market and economic subject (enterprise, individual entrepreneur, farm or private farm holding). The research objects in the frame of the studied module “Eco-labeling and marketing of ecological and regional production of rural territories” can be agricultural municipal enterprise, voluntary associations of citizens or agricultural economic subjects 97 that initiate common project in the sphere of regional marketing. Market research directions are presented in Figure 4.6.106

Market research

Research of market outlets Research of marketing tools

Research of external environ- Research of internal environment ment

Research of productive forces Research of motives market

Marketing intelligence Benchmarking

Fig. 4.6 Basic directions of marketing research

Technology of marketing research includes three constituents (Fig. 4.7):

Research technology

Research Research in- struments methods

Object of the research

Fig. 4.7 Technology of marketing research 107

106 Marketing researches. URL: http://www.dis.ru/MARKET/index.htm

107 Kotler F. Marketing Management SPb.: Piter, 2003. p. 797

98 Research methods can be secondary and primary (field). The data obtained in the process of marketing research are subjected to processing, generalization and interpretation by analytical marketing methods, including trend analysis, methods of nonlinear regression and correction, discrimi- nate, cluster, factor analysis etc. Methods of field researches are presented in table 4. 5.

Table 4.5 Methods of field researches

Method Characteristics Polling, interview Personal interview (standard, nonstandard, free), by phone, in written form, using complex topics, group interview. Observation With participation and without participation of a respondent, using ratio-delay method (by means of an observer or apparatus), field or laboratory. Other forms Experiment, panel (store, owners), market testing.

Let’s get acquainted with the most popular marketing research methods that won international acclaim and being applied at developing plans on territory, new products implementation, goods and services, directions of market outlets expansion.

SWOT – analysis. The condition of planning object depends on the degree of its successful reaction to different impacts from outside. Analyzing external situation it is necessary to differentiate the most vital factors for definite time period. Interconnected examining of these factors and research object possibilities allows solving the coming on problems. At solving the problems of different level it is necessary to understand clearly whether the critical factors are controlled by it; whether they are internal or external; whether they are modifiable by the object efforts or whether they are external events that can not be influenced by the object. One of the widely used methods of conjoint analysis of external and internal environment of the definite object is SWOT-analysis. It is essential element of research, obligatory preliminary stage at compiling any level of strategic and marketing plans. The results obtained in the course of situation analysis are basic elements at developing strategic goals and targets. 108

Term «SWOT» is an abbreviation from Strengths – strong sides, Weakness - weak sides, Opportunities, Threats. Thus, SWOT analysis is an analysis of weak and strong sides of an enterprise and also opportunities and threats from external environment. «S» and «W» are referred to the company condition, but «O» and «T» - to external enterprise environment. 109

The goal of SWOT-analysis is to define and study strong and weak sides of research object, and also opportunities and threats of a market. Knowledge of strong sides will help to use opportunities of market more effective and avoid its threats; understanding of weak sides will allow protecting them in time, and also planning activity to minimize losses from threats.

SWOT-analysis is carried out by means of qualitative and quantitative methods.

108 URL: http://marketing.by/main/school/theory/0012841/ 109 Lamben Zh.Zh. Management, oriented to market. Strategic and operational marketing SPb.: Piter, 2004. p.440 .

99 Table 4.6 Content of qualitative and quantitative methods

Qualitative methods Provide the choice of possible strong and weak sides of an enterprise, opportunities and threats, come from market Quantitative methods Enable to estimate the importance and strength of factor influence on an enterprise

In practice several forms of SWOT-analysis are carried out:

Table 4.7 Forms of carrying out SWOT-analysis and their content

Type of SWOT-analysis Characteristic of SWOT-analysis type The most commonly encountered (due to simplicity of carrying out) type of qualitative analysis, that allows defining what weak sides of a research object can help to fight with threats and use the opportunities of external environment and what weak sides will interfere to do it. The Express SWOT-analysis scheme of carrying out has absolute advantage: it is very obvious and simple. Disadvantages: only the most obvious factors get into points of all table cells but even though, part of these factors disappears in crossing matrix because it can not be used. The basic indicators are presented. They characterize the object activity (enterprise, private entrepreneur, farm or private auxiliary enterprise, rural settlement, association) at the current moment and mark out the perspectives of future development. Advantages: allows approximately quantitative assessment of those factors that were defined (even in the Summary SWOT-analysis cases when a research object does not have objective information); opportunity (on the basis of carrying out all type of strategic analysis) transfer immediately to strategy generation and development of package plan, necessary to realize the strategic goals. Disadvantage: complicated analysis procedure (in the course of strategic sessions it can take 1-2 days depending on the deepness of factors working out.). This is an effort to match express SWOT-analysis and summary SWOT- analysis. For it at least three main types of strategic analysis are done preliminary (usually it is STEP-analysis , analysis on model «5 strengths» of Porter and analysis of internal environment on one of these methods). Then all factors are united into tables from which the Mixed SWOT-analysis cross matrix is formed. Usually quantitative assessment of factors is not done. Advantage: depth of analysis. Disadvantages psychological factor (in practice very often the common result is formation of a very beautiful matrix and satisfaction or forgetfulness of all the factors, being included into large SWOT-table, because only the factors that are included into matrix remain in front of the eyes or in mind of the analytic).

Constituent parts of SWOT analysis are internal auditing of the research object and external environment auditing.

1. Internal auditing of an enterprise includes weak and strong sides analysis. The research objective, resources, its business processes, competitive abilities are estimated and formulation of steady competitive position is proved out or changed at carrying out the internal auditing.

2. External auditing is an analysis of threats and the external environment valuable opportunities. In the process of doing external auditing the market attraction and other opportunities and threats of external environment are estimated.

100 After carrying out internal and external auditing the detected strong / weak sides are associated with opportunities / threats on the ground of compilation of matrix of SWOT-analysis (table 4.8).

Table 4.8 Standard matrix of SWOT analysis

Strong sides Opportunities 1. 1. 2. 2. 3 3 etc.. etc. Weak sides Threats 1. 1. 2. 2. 3 3 etc.. etc.

Express SWOT- analysis. At the first stage of express SWOT- analysis the main factors that can be referred to the strong and weak sides of enterprise and also to opportunities and threats of the external environment are selected. All factors are put into the table (table 4.9).

Table 4.9 General matrix of SWOT – analysis

Factors + (positive) - (negative) Internal environment (zone А) Strong sides Weak sides External environment (zone В Opportunities Threats and С)

Further, crossing matrix is built. For it from all factors presented in Table 9 we select those that can be correlated with each other on the principle: «Strong side 1 helps to use Opportunity 1, Weak side 1 can destructively tell if Threat 1 comes true, etc. After it different pairs of factors are compared and if they influence on each other they will be stored in the matrix. The matrix example of express SWOT-analysis is presented in table 4.10.

101 Table 4.10 Matrix of express SWOT-analysis

Strong sides ( С) of an enterprise Weak sides ( СС ) of an enterprise С1 СС 1 С2 СС 2 .. .. Сx ССу Opportunities, provided by the С1 allows using В1 and В2 and СС 1 can prevent to use В2 and external environment ( В): etc. В4 and etc. В1 В2 ... Вm Угрозы внешней среды ( У): С2 allows withstanding to У1, У2 СС 2 can lead an enterprise to У1 и У5 т.д.... distress in case of appearing of У2 У3, У5 и У6 ,etc. ... Уn

From table 10 is obvious that the factors that provide development in present and future fall out of the matrix, if they are not connected with hypothetic opportunities and threats of external environment. For example, the strong side “the presence of managers of high qualification» can dis- appear from express-analysis, if there is not the corresponding opportunity or threat for it. In practice such threats as “global economic crisis” were not included into SWOT-analysis categorically. Never the less the abovementioned factor “the presence of managers of high qualification» in the conditions of the crisis can transform from strong side into weak one, if an enterprise has not facili- ties to provide them with job it is more difficult to fire such employees out than marketing experts, shop-assistants or workers. Their wages and bonuses are considerably higher. 110

Summary SWOT-analysis is carried out after all types of strategic analysis, after detecting key factors that influence at present or can influence on the situation at the enterprise in the future, (time horizon — from 1 to, usually, 5-10 years). 111

Data obtained in the course of analysis are stored in the corresponding matrix elements (see table 4.11).

In the course of further analysis different methods are used for every element analysis: analysis of strong and weak sides of an enterprise, analysis of opportunities and threats.

110 URL. http: www.m-arket.narod.ru 111 URL. http: www.m-arket.narod.ru 102 Table 4.11 Classification of strong and weak sides

Reputation (relations formed in the society and groups of target consumers towards a firm / brand, and in specific cases towards a country-producer or goods market, image of producer history but often branch and region / country («this is a well-known tea brand», «having compared Indian, Ceylonese and Georgian tea I have chosen Indian tea»); fi- Strong sides nance, administrative, functional and organization opportunities (usually in comparison with competitors, more rarely – according to regional feature: «it is necessary to direct all profit to strengthen the brand and to extension, until competitors appear in this market», «we are local economic mainstay»); extending its opportunities of resources (human, material, organization, financial, political, etc.). Resources and competencies that are differentiated in the strong sides but interfere with normal enterprise work or prevent to reach the preset targets, or resources and competen- Weak sides cies that the producer has but they are not included into its strong sides, and also the absence of necessary resources and competencies (only when the producer can not provide himself with them due to his own technological or any other reasons.).

The factors determined in the course of analysis strong or weak sides are qualitative, they are reflected as a simple list in the corresponding elements of matrix (table 4.8 or 4.9).

For more objective analysis it is possible to give the assessment to every factor using weights (from 0 to 1) and Likert scale (chose any meaning: from 0 to 5, from 1 to 7, from 0 to 100 etc.).

Table 4.12 Example of internal environment factors calculation

Factor Assessment Weight Ratio Zone А. Internal environment. Strong sides 1. Managment 1.1. Factor 1 1.2. Factor 2 …. 2. Operation management (enterprise organization) 2.1. Factor 1 2.2. Factor 2 …… etc

Except table variant graphic image can be used to determine weak and strong sides. Factor getting into this or that matrix quadrant allows immediate defining of the measures to be done. (Fig. 4.8).

103 Factor weight for the market Aggravation probability 0,0 1,0 0,0 1,0

1. 2. 2.

10 Don’t stimulate, Support, 10 1. Urgently gradually reduce develop, Gradually improve significance search lose, the situation possibilities abate the force of of solution the factor

3. 4. 3. 4. Ignore, Take Don’t support Strengthen, periodically check preventive meas- stimulate, ures, work out develop the revision Evaluation theof factor’s force Evaluation theof factor’s force

1 1 program Our strong points Our weak points

Fig. 4.8 Matrixes of assessment of strong and weak sides of a firm112

If at the enterprise there is an opportunity to obtain the data about the competitors the comparison of strong and weak sides is presented in table 4.13.

Table 4.13 Strong (weak) sides allow getting the preset goals

Functions Strong Factor power (from … to …) (weak) sides Research object Competitor 1 Competitor 2 Competitor 3 Competitor 4

Management Factor 1

Factor 2

…

It is possible to use another table to develop solution on every of the determined factors (Ta- ble. 4.14):

Table 4.14 Decision development on every defined factor

Functions Problem Strength Weight (probability Potential im- Possible ways (importance) of aggravation) pacts of solution Management Problem 1 Problem 2 ......

112 www.m-arket.narod.ru

104 Force and Weight are defined as in table 12.

Opportunities and threats can deeply affect activity of the object of planning and therefore the main objective is to take advantage of possibilities in time and neutralize the consequences of the threatening events (see table 4.15).

Table 4.15 Components of the analysis of opportunities

Opportunities arise from identification of new classes of buyers, definition of unsatisfied requirements or creation of new means Identification of opportunity. or ways of satisfaction of existing requirements. The analysis of opportunities is connected with search of the markets which the organization could serve with profit for itself.. In the course of the analysis it is established whether the revealed market opportunity answers the definition of business Opportunity and organization compari- idea, its mission and distinctive competences. As a rule the as- son. sessment of the strengths and weaknesses of the company is carried out and the success conditions in the market are defined. At a stage of quality standard assessment of the opportunity is compared to characteristics of its market niche. Attractiveness depends on: (1) competitors activity, (2) customers demands, (3) market demand, (4) social, political, economic and techno- logic forces, (5) enterprise abilities. In turn each of these factors involves a certain type of required buyers, needs of buyers and Assessment of the opportunity also means of satisfaction of these requirements and it is necessary to establish all these communications. At a quantitative stage the assessment of potential market capacity and a forecast of sales volumes are given. Here budgets of the financial, personnel, marketing and production resources necessary for an assessment of profitability of market opportunity are made.

The main threats of the organization from the environment are analyzed by means of Porter's Five Forces model. At applying this type of the analysis the following questions are considered:

1. Invasion threat (exit to the market of new players);

2. Market power of suppliers (for example, unacceptable prices of rent, price for raw materials, quality of the equipment etc.);

3. Threat of emergence of substitutes (goods / services substitutes);

4. Market power of the buyers (price sensitivity; switching on other forms of receiving the services which were earlier provided by us);

5. Actions of the competitors (expansion of their activity, creation of more attractive offers by them etc.).113

The assessment of the opportunities and threats can be carried out by the same technique as the assessment of strong and weak points. However, in order the analysis was not a mere statement of facts it is necessary to develop actions for the most important factors (Table 4.16 and 4.17).

113 URL. http: www.m-arket.narod.ru

105 Table 4.16 Opportunity I

Environment List of possibilities Who monitors Whether can be used (+0–) To monitor (great force, low probability) 1. Microenvironment Opportunity 1.1. Opportunity 1.2 …. 2. Microenvironment Opportunity 2.1. Opportunity 2.2. …

Table 4.17 Opportunity II, III and IV (see table 16)

Environment List of opportunities Opportunity of Possible effects How to use growth (+0-) Use (great force, high probability) 3. Microenvironment Opportunity 3.1. Opportunity 3.2 … 4. Microenvironment Opportunity 4.1. Opportunity 4.2. … Explore (small force, high probability) 5. Microenvironment Opportunity 5.1. Opportunity 5.2 … 6. Microenvironment Opportunity 6.1. Opportunity 6.2. … Ignore (small force, high probability) 7. Microenvironment: Opportunity 7.1. Opportunity 7.2. … 8. Microenvironment Opportunity 8.1. Opportunity 8.2. …

Threat analysis is conducted on a similar scheme. The result of the analysis will be the ready plan, part of the plan of strategic development of the enterprise.

As a result of SWOT – analysis the developers of the marketing plan will be able to see clearly the advantages and disadvantages of the research object, including, in relation to competitors. And to identify the factors which can negatively affect the activity of the enterprise or, on the contrary, contribute to its development and prosperity.

106 The revealed information is the basis for the next stage of the development of a marketing plan - analysis of the business units of the company.

Directly from SWOT-analysis it is another method of the constructive analysis – SPACE- analysis follows. Its components are:

Directly from SWOT analysis other method of the constructive analysis – SPACE-analysis follows. Its components are:

1. FS - financial strength of the enterprise (the "strong side" of Finance);

2. CP - competitiveness of production ("strength" on production);

3. AB - advantages of branch;

4. MS - market stability.

The first and second factors are the main things that determine the strategic position of the enterprise, the third and fourth are the characteristics which are of great importance for the industry as a whole.

In SPACE-analysis these factors are represented in the form of schedules with coordinate division of a scale from minus 6 to plus 6. The factors have two characteristics: the importance (V) and probability (P) of action. Thus two factors are identified which the object of research uses to the maximum extent and which carry it to a certain qualifying group (position). The positions are classified as aggressive, competitive, conservative and defensive.(table 4.18)

Table 4.18 Contents of qualification groups

Items Contents This condition is typical in attractive branch with insignificant uncertainty of a situation. The object of research receives competitive advantages which it can keep and increase by means of financial poten- Aggressive tial. The threats are insignificant, it is necessary to concentrate on the provision of interests. Mecha- nisms aimed at the expansion of production and sales, price war with competitors, development of new market segments, brand promotion. This condition is characteristic for an attractive industry. The object of research gets competitive advantages in rather unstable situation. A critical factor is Competitive the financial potential. It is necessary to fend off the threats connected with loss of financing. The main mechanisms are search of financial resources; development of marketing networks. This condition is usually observed in the stable markets with low growth rates. In this case the efforts are focused on financial stabilization. The most important Conservative factor is the competitiveness of a product. The main mechanisms are cost reduction with increasing product quality; reduction in production and exit to more perspective markets.

Defensive This state occurs in a situation where the object of research operates in an attractive industry or field of

107 activity, but it lacks competitiveness and financial resources. A key strategy is to focus on mechanisms of countering threats, withdrawal from the market. The SPACE method is estimation of four groups of factors (on a scale from 0 to 6) by the experts for the object of research. (Table 4.19- 4.22)

Table 4.19 Factors of stability of a situation (ES)

Factor Factor assessment Technological changes little 0 1 2 3 4 5 6 a lot Rates of inflation low 0 1 2 3 4 5 6 high Variability of demand small 0 1 2 3 4 5 6 big Range of the prices of competing small 0 1 2 3 4 5 6 big products Barriers for access on the market little 0 1 2 3 4 5 6 a lot Pressure of competitors weak 0 1 2 3 4 5 6 strong Price elasticity of demand nonflexible 0 1 2 3 4 5 6 flexible

Table 4.20 industrial potential factors (IS)

Factor Factor assessment Growth potential Small 0 1 2 3 4 5 6 large Income potential Small 0 1 2 3 4 5 6 large Financial stability Low 0 1 2 3 4 5 6 high Technology level Simple 0 1 2 3 4 5 6 complex Resources utilization degree Non-effective 0 1 2 3 4 5 6 effective Capital intensity Large 0 1 2 3 4 5 6 small Market availability Easy 0 1 2 3 4 5 6 difficult Production capacity Low 0 1 2 3 4 5 6 high

Table 4.21 Competitive advantages factors (CA)

Factor Factor assessment Market share Large 0 1 2 3 4 5 6 not large Product quality High 0 1 2 3 4 5 6 low Product life cycle Initial 0 1 2 3 4 5 6 final Product substitution cycle Fixed 0 1 2 3 4 5 6 removable Customer loyalty Strong 0 1 2 3 4 5 6 weak Competitors’ using of capacities Strong 0 1 2 3 4 5 6 weak Vertical integration High 0 1 2 3 4 5 6 low

108 Table 4.22 Financial potential factors (FS)

Factor Factor assessment Income on investments Low 0 1 2 3 4 5 6 high Financial dependency Non-balanced 0 1 2 3 4 5 6 balanced liquidity Non-balanced 0 1 2 3 4 5 6 balanced Necessary capital re- Large 0 1 2 3 4 5 6 small sources Funds flow Weak 0 1 2 3 4 5 6 strong Easy market leaving small 0 1 2 3 4 5 6 Large Enterprise risk Large 0 1 2 3 4 5 6 small

On the base of factor’s assessment the average value of the factors inside each group is defined, and then the values got are put on the coordinate axes (Fig.4.9).

Fig. 4.9 Matrix of the strategic position and actions evaluation

As the result there will be a square of one of the types shown in Fig 4.10. 109

Fig. 4.10 Diagram of the different strategic states

The side in the quadrant FS-IS that is maximally removed from the centre of the coordinates proves that the research object is in the aggressive strategic state, in the quadrant IS-ES it is in the strategic state. Maximal remote of the side to the quadrant CA-FS or CA-ES proves the conservative or defensive strategic state of the research object.

STEP – analysis. Any economic subject is closely connected with the environment that greatly influences it because it is a source of resources necessary for maintenance of activities.

The impact of the external environment on an economic subject can exist in different forms giving favourable conditions and opportunities for either effective functioning or threatening its existence.

The external environment is very diverse. It comprises a lot of components that influence an economic subject in different ways (degree, character, and periodicity).

The two components of the external environment that influence the development of the enterprise in different ways are microenvironment and immediate environment.

110 The impact of the external environment on the development of the economic subject is studied with the help of STEP-analysis model as a marketing instrument for revealing the Social (S), Technological (T), Economic (E)and Political (P) aspects of the environment that influence the development of the enterprise. STEP-analysis is also called PEST-analysis. STEP-analysis isn’t common for all organizations because each of them has its special set of key factors.114

There are two kinds of STEP-analysis: 115

1. SLEPT- analysis (plus legal factor) or STEEPLE-analysis that includes socio-demographic, technological, economic, ecological, political, legal and ethnic factors. Besides, a geographical factor can be considered.

2. PESTLE– analysis, having legal and environmental factors, is a version of PEST-analysis.

The adding of a new letter to the usual name of the method is a tribute to the fight for ecology that is very important nowadays and as the result there appears the large number of laws and programs adopted at the international and national levels. Nowadays it is impossible for many branches not to consider ecological factors. All ecological factors can be classified into four existing factor groups:

1. Depending on a branch a movement for healthy living, pure water, fish, air, etc. can be added to the social factors;

2. Expenses for purification of water, air, wastewater, etc. can be added to the economic factors.

3. Development of new technologies considering the ecological factors, solar energy, non-petrol car engines, new technologies of environment purification, new quickly recyclable packaging, etc. can be added to the technical-technological factors;

4. International and national laws, standards, demands in the field of ecology, etc. can be added to the political factors. 116

114 Anosoff I. Strategic management.Moscow: “Delo”. 1989 А 115 Thompson –ju. Arthur, A., Strickland III, A., G. Strategic management: concepts and situations for analysis. Mos- cow: Publish House “Williams”, 2002

116 Volkova L. Strategic analysis //URL: http://m-arket.narod.ru/StrAn.html 111 Table 4.23 STEP-analysis components

STEP-analysis components General characteristic Includes social processes, tendencies taking place in the society and influencing the activity of the research object. Includes the existing traditions, values, habits, ethical norms, way of life, Social component people’s attitude to work, tastes and psychology of consumers, etc. Includes social structure of the society, its demographic characteristics (birth-rate, average lifespan, population growth rate, migration, educational level, qualification, etc.) Includes scientific and technological factors, the development of Technological component which can allow the research object to modernize old and create new products, improve and develop technological processes. Defines the general level of economic development, the market relations, the competition that is economic conditions in which the object of research functions. Its key parameters: rates of inflation, size of an interest rate, exchange rate, budget deficit, The economic component unemployment rate, norms of the taxation, salary. Changes of these macroeconomic indicators influence a population standard of living, solvency of consumers, demand fluctuations, define investment policy, a price level, profitability. Defines the purposes and the directions of development of soci- The political component (bodies of the ety, its ideology, a foreign and domestic state policy in various government, party, blocks, groups and areas, and also ways and means by means of which the gov- other companies) ernment intends to carry out it.. Establishes admissible norms of business relationship, the Legal drawing up (laws and legal rights, responsibility, and duties of participants of economic ac- statements) tivity. Factors that are connected with climatic conditions, stocks of natural resources, an ecological situation. Natural cataclysms, Natural and geographical factors climate change, emergence of ozone gaps, strengthening of solar activity, limitation of natural resources, environmental pollution.

In the USA as an abbreviation apply a word meaning «a step, a stage, a step (in career)» as environment is possibility for growth, advances, achievements. In Europe this word treat as «a para- site, the wrecker, plague», associating environment with undesirable and unpleasant danger from which it is necessary to fight. It reflects a difference of approaches to business.

The version of the STEP analysis is used for the countries with the developed economy and stable political system and its priority – social and technology factors. In the countries with under- developed economy apply a form of the analysis of PEST, where on the first place policy and economy factors.

STEP - analysis is descriptive and consists in the consecutive description of its components (table 4.24).

112 Table 4.24 Content of STEP-analysis components

Groups of factors of STEP-analysis Analysed characteristics Demographic changes; Changes in base values; Changes in the standard living; Changes in lifestyle; Social factors Changes of tastes and preferences of consumers; Changes in an education level; Relation to work and rest; Change of structure of the income; Change of the relation to branch The State policy concerning technologies; New opening and possibility of their application in analysed branch or allied industries; Significant tendencies for branch in scientific and technical pro- gress; Speed of changes and adaptation of new technologies in branch; Technology factors Speed and level of transfer of technologies in branch; Changes in communication technologies; Emergence of new materials; The technological changes having value for development of branch; Tendencies of emergence of the new goods and services in branch The general characteristic of a situation in national economy and in branch (lifting, stability, recession, crisis); Dynamics of a financial condition (ruble exchange rate, inflation, condition of bank system, refinancing rate etc.) Economic factors Business cycle, Prospects of economic growth in analysed and other branches; Changes of the main external expenses in branch (electric power, water, gas etc.); Unemployment rate … Changes of the legislations influencing branch (labor, antimonop- oly, about environmental protection, customs etc.); Tax policy of the state, region; The relations with the national and regional authorities; Political factors Policy of privatization, business regulation; Level of political stability in the country / region; Approach of elections of the state and local authorities (president, thought etc.)

STEP-analysis can be considered as version of the system analysis since factors are closely interconnected and characterize various hierarchical levels of society. STEP-analysis helps to study "behaviour" of environment only if adequately and objectively to estimate impact on the organization of all four groups of factors and from that, factors were how correctly picked up, quality of STEP-analysis depends.

113 STEP-analysis isn't universal on the range of key factors for all subjects of economy, however to lead it simply. It is necessary to concretize all social, technology, economic, political factors influencing the market and on development of object of the analysis in it.

Stages carrying out STEP-analysis: 117

1. Definition of the main factors which have high probability of emergence and impact on functioning of object of the analysis.

2. An assessment of importance of each event for research objects by assignment to it a certain weight from unit (major) to zero (insignificant). The sum of scales should be equal to unit that is provided with rationing.

3. An assessment of extent of influence of each factor on development of object of research on five mark scale: "five" – strong influence, serious danger; "unit" – absence of influence, threat.

4. . Definition of the weighed assessment by multiplication of weight of a factor to force of its influence and calculation of the total weighed assessment (Table 4.25).

Table 4.25 Results of STEP-analysis

Undertaken ac- Necessary to Factors Opportunities Threats tions undertake Social factors Technology factors Economic factors Political factors

Result of PEST–the analysis is the choice of major factors of external macro environment which will create possibilities and threats for the company in the predicted period.

For the analysis of influence of factors macro environment ETOM-analysis (Environmental Threats and Opportunities Matrix) - a matrix of threats and environment opportunities can be used. This tool is used for rather fast general analysis of threats and environment opportunities. By drawing up of a matrix a small amount of factors is appreciated. The analysis is carried out on the following groups of factors: economic, social and cultural, demographic, political and legal, technological, competitive, geographical.

Each of the presented methods of the analysis has the disadvantages and advantages. It is necessary to note that common drawback of techniques of STEP and ETOM analysis is that in them the possible interrelation and interference of factors and events macro environment isn't considered.

117 Peter Doyle Marketing management and strategies. SPb.: Piter, 2007

114 QUEST-analysis (the analysis of macro environment factors) allows eliminating this shortcom- ing. 118

QUEST-analysis (Quick Environment Scanning Technique is the equipment of fast scanning of environment) allows approaching more deliberately to development of the programs of measures for the accounting of influence of macro environment on the enterprise.

The data about an institutional environment are formed by applying model « Porter’s 5 forces » (Porter’s five forces analysis).

This method is applied to the analysis of branches and elaboration of business strategy, de- termination of appeal of the current branch for the enterprise. On its basis potential dangers and problems which should face the enterprise with and competitive advantages to take more advanta- geous position in the market are defined. This technique is a starting point in the list of tools and techniques which can be used for elaboration of strategy of business. But it doesn’t take into consideration exceptions and particulars and is examined as simplified. According to Porter, the model of five forces should be used at a microeconomic level for definition of a place of the company in branch as a whole. It isn't intended for use by group of branches or any part of one branch. The subject of economic, who is carrying out the activity in one branch, should develop at least one «the analysis of five Porter’s forces for this branch. The analysis of Porter’s five forces includes three forces of the "horizontal" competition: threat of emergence of alternative products, threat of appearance of new players, the level of competitive fight; and two forces of the "vertical" competition, market power of suppliers and market power of consumers 119 . The analysis is carried out by deter- mination of 5 competitive forces (table 4.26).

Table 4.26 Competitive forces

Force Analysis of opportunity to ease it The threat of appearance of new players How far it is easy or difficult for new participants to start at the market competing and what barriers do exist? The threat of appearance of alternative How far is it easy to change product or service, particularly, products reduce the price? Decisiveness of customers How far is the customer position strong? Can they order large amounts cooperatively? . Decisiveness of suppliers How strong is the shop assistances’ position? Are there many potential suppliers or several? – Monopoly? Competence among the existing players/ Is there strong competence between existing players? Is there a dominated player or all are equal in force and cize?

Porter's competitive forces model is probably one of the most commonly used tools for the development of individual business strategies.

Possible questions under consideration for each step are shown in Table4.27.

118 URL. http://www.allbest.ru

119 URL. http://ru.wikipedia.org/wik 115 Table 4.27 Recommended list of possible questions

Force Questions to study Availability of entry barriers (licenses, patents, copyrights, etc.), the necessity of expenses on product differentiation, the cost of the brand, the cost of switching or sunk costs, start-up costs for new players, access to the distribution of the cost The threat of entry of new players in the market of the benefits, advantages in the situation in the learning curve, the expected response of the old players, the government's response (a regional (municipal) administration) or other market regula- tors, etc. Quality. Are substitute products better? Are buyers ready for the substitution? What is the The threat of the appearance of substitute products ratio of the relative cost and the effectiveness of substitute products? Switching costs for substitute products. Is it easy to switch to another product? Customer concentration to the level of concentration of companies, the level of dependence on existing distribution channels, the number of consumers, the comparison value of the change of the consumer and manufacturer, the availability of in- Influence of customers formation for the consumers, the possibility of vertical integration (creating vertically integrated holding companies), the availability of existing substitute products, the price sensitivity of consumers, the distinctive advantages of a product (unique conduc- tivity), etc. Are there many buyers and dominant suppliers? Is a brand of a new supplier strong? Are suppliers forced to raise prices? Do suppliers threaten vertical integration in the industry (for example: manufacturers threaten to create their own retail out- Influence of suppliers lets)? Do buyers threaten the inverse integration? What is the role of quality and service on the market? Is the market a key customer group for suppliers? Switching costs. Is it easy for suppliers to find new customers? etc. Structure of competition. The cost structure of the market. The degree of differentiation of production. Competition among existing players Switching costs. Strategic problems. Output barriers.

The total effect of these five factors determines the ability of farms subject in the industry to achieve a certain return on investment in exchange for the cost of capital. The severity of the "five forces" varies from industry to industry, and can change as a result of occurring in the industry change 120 .

As an important tool in marketing BCG matrix, created by the founder of the Boston Con- sulting Group Bruce D. Henderson can be applied.

120 Porter Michael Eugen The Competitive Advantage of Nations. M.: Mezhdunarodnie otnosheniya. 1993. P. 896 116 At the core of BCG matrix model is the product life cycle in accordance with which the product in its development goes through four stages: market entry (product-"problem"), growth (product –"star"), maturity (product –"cash cow") and fall (product-"dog").

To estimate the competitiveness of individual businesses in the matrix BCG two criteria are used: the growth rate of the industry market and the relative market share. Market growth rate is defined as the weighted average of the growth rates of the various market segments in which the company operates or is assumed to be the rate of growth of gross domestic product. Market growth 10% or more is considered as high. The relative market share is determined by dividing the market share of the considered business the market share of the largest competitor. The value of the market share of one separates products – market leaders – from the followers (Fig. 4.11.)121 .

BCG matrix contributes to the implementation of two functions: making the decisions of the intended position in the market and the strategic allocation of resources between the different areas of management in the future.

"Problem" "Stars" High

"Dog" "Cash cow" Market growth

Low

Small Large Relative share Fig. 4.11 The division of the types of the business (a separate product)

It should be noted that the BCG matrix is constructed as a rule, for diversified (many products, many grocery) business. But the logic of this methodological approach can be used at the level of municipal education. In this case products of individual businessmen will be performing the role of strategic management zones.

Table 4.28 Classification of types of strategic economic zones

121 Bruce D. Khendersen Product portfolio// Boston consulting group BCG Review: Digest. M: Boston consulting group.2008

117 Type of product Characteristics of product type "Stars" High sales growth and high market share. The market share should be maintained and increased. "Stars" bring a very large income. But despite the attractiveness of the product its net cash flow is low as it requires a significant investment for a high growth rate. "Cash cows" (“Money bags”) High market share but low growth rate of sales volume. It is necessary to protect and supervise "Cash cows" as much as possible. Their attractiveness speaks that they don't demand additional investments and thus provide good monetary income. Funds from the sale may be directed to the development of "Problem children" and to support "Stars". "Dogs" (the"Lame duck", "Dead weight"”) The growth rate is low, the market share is low, the product is generally of a low level of profitability and requires much attention from the managing director. It is necessary to get rid of “Dogs”. "Difficult children" ("Wild Cats", "Dark horses", Low market share but high growth rates. "Problem "Question marks") children" should be studied. In the future they could become "stars" or "dogs". If it is possible to transfer to the "star" it is necessary to invest, otherwise – to get rid of.

The main recommendations of drawing up of a matrix of BCG and the Boston Consulting Group about formation of a business portfolio of goods (works, services) are presented in Table 4.29.

Table 4.29 Recommendations of BCG matrix

Market share Possible strategies Kind of strategy business unit Growth Investing “Stars”, “Problems” Holding “Cherry-picking” “Cash Cows” Retreat Deinvestment “Dogs”, “Problems”

The matrix is rather useful when choosing between various СЗХ (a strategic zone of managing), defining strategic positions and distributing resources in the nearest future (tab. 4.30).

118 Table 4.30 Recommendations of BCG matrix

Axis The procedure of constructing along the axis The horizontal axis shows the relative share of the market, the coordinate space between 0 and 1 in the middle by 0.1 and then from 1 to 10, step 1. As- sessment of market share is the result of the analysis of the sales of all industry participants. The rela- The horizontal axis tive market share is calculated as the ratio of own sales to sales of the strongest competitor or three strongest competitors depending on the degree of concentration in a particular market. 1 means that their own sales are sales of the strongest competitor. Corresponds to growth rates of the market. The coordinate space is determined by growth rates of all Vertical axis company’s products from maximum to minimum, the minimum value can be negative if the growth rate is negative. For each product one sets the intersection of the vertical and horizontal axis and draws a circle, whose area corresponds to the share of the product in company sales.

Table 4.31 Advantages and disadvantages of BCG matrix

Advantages Disadvantages - Simplicity, theoretical study of the correlation be- - All SZM, in which situations are analysed, should tween financial income and analysed characteristics; be in the same phase of the life cycle; - objectivity of the analysed characteristics (relative - in SZM competition must go so that the indicators market share and market growth rates); were sufficient to determine the strength of the com- - obviousness of the results and simplicity of con- pany’s competitive positions; struction; - only two factors are taken into account and there - possibility to combine a portfolio analysis with a is no consideration of the financial aspect, model of life circle of goods; - the rule that the market share corresponds to profit - comprehensibility; maybe broken by marketing launch of a new product with high investment costs; - easy strategic designing of investment policy for business units. - decrease in the market share due to the end of the product’s life circle doesn’t absolutely corresponds to the reality (there are other situations in the market, for example, the end of roaring demand or an economic crisis ). In the process of improving the matrix completely different figures were offered. The key ones are presented in table 4.32.

119 Table 4.32 Figures of assessment of the strategic position by BCG matrix

№ The object assessment Indicator 1 field growth rates of demand 2 growth rates of market 3 assessment of the SZM attractiveness 4 company company’s market share against the share of the leading competitor 5 relative share of a company in the market 6 future competitive position of a company in the market Indicator of company’s future competitiveness in the market is determined by the ratio of expected returns on capital and optimal (or base) returns on capital. In fact, it is predicting profitability of the company's capital or trend analysis of this indicator in recent years.

4.3 Test questions and group work for topic 4

Test questions 1. What do the stages of strategic planning include? 2. What does market planning include? 3. Expand the contents of strategic planning. 4. Enumerate the stages in developing a marketing plan. 5. Explain the methods for determining marketing budget. 6. What is a goal of developing marketing plan for an agricultural entrepreneur or agricultural municipality? 7. What are main tendencies and technologies of doing the marketing research? 8. What is the SWOT-analysis and what aims does it have? 9. What are the methods and forms of SWOT-analysis? 10. How and why is STEP-analysis carried out? 11. What is a goal and order of QUEST-analysis? 12. What is a goal and how is the “Porter’s five forces” analysis carried out? 13. How and why is the analysis based on BCG matrix carried out? 14. What are advantages and disadvantages of BCG matrix? 15. What indicators of the strategic position assessment with the help of BCG matrix do you know?

Practical tasks for group work: 1. The ideas which have been selected during the previous business game as most perspective, each group makes out in the form of the marketing plan. They do the analysis of the current situation at the market, possibilities and threats of the new activities introduction or production extension, the change of sales channels with using methodics that have been studied be-

120 fore. The marketing plan is conducted after analysis result. The results of the group work are defended at the intergroup meetings.

4.4 Literature on the topic 1. Best P. Marketing of a consumer. M: Mann, Ivanov and Ferber. 2008. P.98 2. Westwood G. Marketing plan SPb: Piter. 2001, p.256 3. Bronnikova T.S., Chernyavskiy A.G. Marketing: Textbook. Taganrog: Publisher TRTU.1999 http://www.aup.ru/books/m99/6_7.htm 4. Graham G.Khuley marketing. Buisness-class. M.: Unity-Dana, 2004.p. 174 5. Kotler F. Marketing Management SPb.: Piter, 2003.p.797 6. Kadysheva E. The methodics of SWOT-analysis research. The samples of matrix SWOT //URL: 7. http://marketing. By/main/school/theory/0012841/ 8. Lamben Zh.Zh. Management, oriented to market. Strategic and operational marketing SPb.: Piter, 2004.p. 440 9. Thompson –ju. Arthur, A., Strickland III, A., G. Strategic management: concepts and situations for analysis. Moscow: Publish House “Williams”, 2002 10. Volkova L. Strategic analysis //URL: http://m-arket.narod.ru/StrAn.html 11. Peter Doyle Marketing management and strategies. SPb.: Piter, 2007 12. Bruce D. Khendersen Product portfolio// Boston consulting group BCG Review: Digest. M: Boston consulting group.2008

121 Glossary An umbrella brand can be referred to as a brand when a group of products possess the same brand name which is known as a family brand or an umbrella brand (according to International (Nice) Classification of Goods and Services for the Purposes of the Registration of Marks). Brand – book is a document, which contains the rules for registration image and promotional products of a company. Brand is an intellectual part of a product, expressed in the name and design peculiar to that product, possessing sustainable and strong communication with consumer. Certificate in trade mark is a charter of a state specimen in trade mark, registered in Public Reg- ister of trademarks, which verify trade mark priority and exclusive right on the trade mark of products, mentioned in the certificate. Collective trademark is a trademark owned by an organization (such as an association), which members use them to identify themselves with a level of quality or accuracy, geographical origin, or other characteristics set by the organization . Combined mark is a combination of different types of elements (visual, verbal, three dimensional etc.). Eco-cluster is a voluntary union of Russian and foreign companies, which are specialized in the production, processing and selling of pure ecological products and services for Russian market. Eco-labeling is a complex of environmentally concerned information about the product, process and service in the form of the text, separate graphic, colored symbols and its combinations. Eco-labeling is special graphic symbols or text, which confirms that the product fits definite safety standards. Environmental marketing is safe, ecological activity, connected with development, creation and selling of products for satisfaction of population needs, taking into account environmental effects. “Green” marketing is the marketing of products that are presumed to be environmentally safe. Identification mark is a graphic element, which is usually next to the name of the company, but may be used separately. Logotype is a specially worked out, shortened, stylized form of a firm name, often traced origi- nally. Marketing is an integral conception of firm management activity, which are characterized by single entity, mutual principles and functions aimed at production and sales, which are based on the needs of final consumers. Marketing of regional communities is a process of eliciting, creation and realization of prerequi- sites for formation of ecological and socially oriented local economic policy in order to form maximum favorable manufacture and vital activity environment. 122 Marketing plan is a document, one of the important parts in the general plan of the enterprise development; it determines market goals of the enterprise together with the means of their achievement. Marketing program is a document, which contains grounds and details marketing aims and marketing plans of organization. Other designations - sound, light signals etc. PDO products - agricultural raw material and food stuff, obtained EU protected designation of origin. PGI products- agricultural raw material and food stuff, obtained EU protected geographical indication. Product category is a group of products which have equivalent function. Product environmental criteria are environmental requirements that the product shall meet in order to be awarded an environmental label. Production is any service or goods. Region is a historically evolving geographical area, internally united and different from other regions according to some criteria, where economical and socio-cultural activity of the territorially identified population exists. Regional and municipal marketing is the system of measures to attract new economic agents to the region, town or a municipal unit, which will help to prosper of the region as a whole. Regional marketing is the concept of market relations, projected not on the micro level (the level of the enterprise and firm), but on the macro level (the level of the region, territory, republic). Rural areas (countryside, village to wide extent) - territory outside cities’ boarders, including the territories of rural communities. Service mark is trade mark, which is used for identification of services, not goods. Slogan is an advertising formula in the form of epigrammatic, easily memorized short phrase. Sustainable development of rural areas is a socio-economic development, which provides effective functioning of rural economy, including food security, reproduction of human resources, quality boost of labor resources, full and productive employment of able-bodied population, rising of living standard and living quality in the countryside, efficient use and reproduction natural rural potential, development of infrastructure, including improvement of energy supply and energy conser- vation. SWOT analysis is a tool for auditing an organization and its environment. SWOT analysis is the first stage of planning and helps marketers to focus on key issues. SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are internal SWOT factors. Op- portunities and threats are external SWOT factors.

123 Trade mark is the designation, which allows differentiating goods of one legal entity or individual from similar goods of other legal entities and individuals. Trade sign is the designation, which is appropriate to identify goods and allows differentiating goods of one manufacture from others; it is the subject of special registration. Verbal designations are words, letter combinations, which have word character; word combinations and sentences. Visual trademarks are images of living beings, objects, natural and other items, and also figures of any form, line compositions, spots, figures on the surface. Volumetric designations are three-dimensional objects, figures and combinations of lines and figures. “Vitality Leaf» is the first Russian System of voluntary ecological certification, which awards I type environmental label. Warning notice and TM is a special notice, which means that the trade mark was registered.

124 Test questions and self-assessment 1. Are the terms Trademark, Brand and Logotype the synonyms?

a. Yes. b. No. 2. The trademarks and service marks are

a. the registered signs b. signs that don’t differ similar products and services 3. Trademark serves as a. the mean of individualization of the rights holder of the trademark among the multitude of the producers of the similar products and services b. company representative on the product and service market 4. Trademark is the property of the company.

a. Yes. b. No. 5. Trademark consists of a. one or more words b. letters, numbers or pictures c. a sentence d. word combination 6. Could the verbal designations be the trademarks? 1. Yes. 2. No. 7. Graphic signs are 1. graphic designations of living beings 2. any three-dimensional figures 3. two-dimensional figures 4. state symbols 8. What trademark below is a combined sign?

125 c. 9. Who is the user of a collective trademark?

1. A group of enterprises 2. A natural person 3. An individual entrepreneur 4. An association of enterprises 10. Whish signs are trademarks with the protection of the place of origin:

3. 11. Is the trademark symbol ( ™) legally protected? 1. Right 2. Wrong ll12. Is the following statement correct: Ecolabeling is a complex of ecological information on the product. 1. Correct 2. Incorrect 13. What is allowed to use in manufacturing bio-products? 1. Genetically modified seeds 2. Not modified seeds 3. Chemical fertilizers 4. Compost and manure of animals from bio – farms 5. Fungicides

14. Which one(s) is referred to signs, messages?

3. 15. Which signs mean danger for the environment?

126 3.

4. 16. Guarantee certification system of the bio products include:

1. inspection 2. control 3. certification 17. The following factors determine the legality of the EU bio-labelling: 1. Voluntary participation of the applicant for the certificate for the right to use the sign, 2. There should be at least 75% of bio-components in the product, 3. The participation of the applicant for the certificate for the right to use the sign is obligatory. 18. A model of the complex regional marketing does not include tourism.

1. Yes 2. No 19. Specific features of regional marketing in the agrarian sphere are: a. regional the logo/brand and transparent process of production are the integral distinctive features of foodstuff within the concept of regional marketing in agro-business. b. the policy of communication differs from the similar in classical marketing c. the products are always sold directly. 20. How many levels does the general scheme of food labelling in Germany include: a. One b. Three c. Five 21. Regional brands in Germany are issued by: a. Ministry of Agriculture and food of the Federal State. b. European Ministry of Agriculture. 22. Main types of ABCERT AG activity of are: a. Biological inspections and certification of the Agricultural and Processing Enterprises on (EG) 834/2007. b. Biological inspections and certification of wild-growing crops on (EG) 834/2007. c. Biological inspections and certification of Distribution networks and Internet shops on (EG) 834/2007.

127 d. Biological inspections and certification of the organic production of forages on (EG) 834/2007. 23. What advantages do the agricultural producers have from certification? a. Access to new markets. b. Trust of the customers obtained by means of observance of the recognized international standards. c. Possibility of obtaining "green" credits. 24. The bio-certificate supervises: a. The process of products sales. b. Production of raw materials for a product. c. Manufacture of the products. 25. How many times a year bio-products are checked: a. Two times. b. Once. c. Constantly. 26. Put the steps of bio-products promotion on the market in the right order: a. Development of the products delivery system directly from producers to the consumers. b. Informing the consumers. c. Organizing and carrying out specialized exhibitions of bio-production. d. Activity of the European Union (International Federation of Organic Agricul- ture Movements, IFOAM). e. The international contests of bio - production. f. Products promotion via retail. 27. What are the levels of the general scheme of food marking in Germany? a. Suprastate, state, private. b. Commercial, state, private. c. Suprastate, state, municipal. 28. What does the PDO sign mean? a. A sign of protected designation of origin.

b. A sign of protected geographical origin.

c. A sign of a Traditional Speciality Guaranteed.

29. What does the PGI sign mean?

128 a. A sign of protected designation of origin.

b. A sign of protected geographical indication.

c. A sign of a guarantee of traditional quality.

30. What does the TSG sign mean? a. A sign of protected designation of origin.

b. A sign of protected geographical indication.

c. A sign of a traditional specialty guaranteed.

31. Which of the following is not the purpose of the European Council Regulation No. 510/2006 issued on March 20, 2006: a. Protection of the regional products reputation. b. Development of the agricultural activity. c. Assistance to producers in gaining higher prices for the original production. d. Elimination of the unfair competition. e. Deception of the consumers about not original products of inappropriate quality. 32. The PDO sign identifies: a. Area name. b. Certain place. c. Country name. 33. To receive the TSG status, the product should be manufactured in a certain geographical area: a. Yes. b. No. 34. Regional brands are issued by: a. Ministry of Agriculture and food of the Federal State. b. European Ministry of Agriculture. 34. The use of the signs of national private standards is: a. Free. b. Not free. 35. Guarantee system of the bioproducts certification. a. Certification. b. Inspection. c. Monitoring.

129 36. Choose the advantages of certification which are gained by the agricultural producers: a. New clients, better prices. b. Access to new markets. c. Image and marketing improvement without a bio-label. d. Possibility of obtaining credits. 37. What types of examinations are carried out by certificate-issuing body in the period of the bio-certificate validity? a. Planned and unplanned. b. Actual and documentary. c. Purchases in the shops for quality control. d. Total and selective. 38. After receiving a sign, supervision of the following kind is carried out: a. Self-supervision. b. Neutral. c. External. 39. How often are the bio-products examined? a. Once a year. b. Three times a year. c. Every six month.

40. Which century was a start for system brand formation? a. 18 b. 19 c. 20 d. 21 41. Was the official registration of trademarks carried out in the USSR? a. Yes. b. No. 42. What industry was the first to start registering and protecting trademarks? a. Processing industry. b. Food industry. c. Textile industry. d. Mining industry.

130 43. What part of funds from a total turnover is spent on marketing and advertising by the large companies? a. 0-10 %. b. 10-20 %. c. 20-30 %. d. 30-40 %. 44. Did the process of trademarks registration become widespread in modern Russia? a. Yes. b. No. 45. Which is the type of a trademark gained by an association of good producers? a. Famous trademark. b. A sign which protects the geographical place of the goods origin. c. International trademark. 46. What is required for registration of a sign of an origin of the goods protecting a place? a. To prove uniqueness of a product. b. Raw materials use only a local origin. c. Creation of competitive production. 47. The trademark or unregistered designation which is intensively used in the Russian Federation belongs to category a. Regional. b. Well-known. c. Conventional. d. International. 48. In accordance with clause 1508 of the law of the Russian Federation well-known trademarks are a. Only trademarks of food industry. b. Trademarks, registered by the market association. c. Well-known trademarks. 49. Upon what grounds you can get the legal right on the well-known trademark? a. Temporary. b. Permanent. 50. For what enterprises the well-known trademark is more attractive? a. Large. b. Medium.

131 c. Small. 51. What regions of the Russian Federation were first in the process of registration of the regional brands? a. Orel, Briansk, Tula. b. Moscow. c. Kaluga, Omsk, Republic Altay, Nenets Autonomuos Aeria. d. St.-Petersburg. 52. When in the Russian law appeared the term “Organic products”? a. 2007 b. 2008 c. 2009 53. National normative document about the necessity and possibility of production of organic foods is a. Ecological certificate. b. Security doctrine of the food products. c. Food security doctrine of the Russian Federation. 54. What sign is not employed in the approval systems of environmental requirements in Rus- sia? a. Russian standard conformity mark. b. International conformity mark. c. Mark of the International Ecological Fund. 55. What sign of the eco-labeling is stately accepted in Russia? a. “Chloride-free”. b. “Transgenes-free”. c. “GMO-free”. 56. What sign is typical for the products of forestry and chemical industry? a. “Chloride-free”. b. “Transgenes-free”. c. “Ecologically pure product”. 57. What eco-label was introduced by the Moscow Government in 2007? a. “GMO-free”. b. “Transgenes-free”. c. “Don’t contain GMO”. 58. What is the certification scheme? a. Analyses of information and decision concerning the certification level.

132 b. Collecting and processing of the preliminary information. c. Inspection and processing of the data, report forming.

59. Are any laboratory tests are carried out by the “Organic” certification? a. Yes. b. No.

60. What certification authority issues the eco-sign of the International Ecological Fund? a. «EC». b. «IEF». c. «ECO». 61. The exclusive right on the trademark could be implemented for individualization of a. Goods. b. Labour. c. Services. d. All the answers are correct. 62. Illegal usage of the trademark or similar sign could be prosecuted by a. Civil liability. b. Administrative liability. c. Criminal liability. d. All the answers are correct.

63. How many stages should include the registration of the trademark? a. 5. b. 4. c. 2. d. 3. 64.When was passed the law that regulates rights protection of the trademark? 1. 1991. 2. 1992. 3. 1993. 65. On what stage you should fill the application form for the registration of the trademark and submit it to FIPS? a. 1. b. 3.

133 c. 2. d. 5. e. 4. 66. What period of time takes the evaluation of the application form for the registration of the trademark? a. 1/2 weeks. b. 2/5 months. c. 12/15 months. 67. What period of time the certificate is valid? a. 3 years. b. 10 years. c. 12 years. d. Infinitely. 68. What kind of tax you should pay for the international registration of the trademark? a. Base and additional. b. Additional. c. Base. 69. The right holder has the right to require from the violator the following penalties instead of indemnification: a. Administrative sanctions b. Compensation payment c. Exclusion of the trademark 70. Russian Federation is the participant of the international agreement on protection of trademarks. a. No. b. Yes. 71. What kind of labels is used in the advertisement? a. R. b. TM. c. R and TM. 72. On what legal person the trademark is registered? a. Natural and legal person. b. Legal person and private entrepreneur. c. Private entrepreneur. d. All answers are correct.

134 73. Point the stages of the marketing strategic planning in the right order. a. Planning of the economical portfolio development b. Aims and goals. c. Program of the organization. d. Strategy of the development in the organization. 74. What is the name of the Method of estimation of the marketing budget based on the de- duction of the share from the previous or planned sales amount? a. Financing “Depending from the resources”. b. Method of the “Rival equivalence”. c. Method of the “Maximum discharge”. d. Method of the “Fixed per cent”. 75. Marketing budget consisted of the total planned expenses in relation to every of the planned marketing activity is projected a. From the top downward. b. As subject to the existed categories of the consumers. c. From the bottom upwards. 76. Do the market researches include the researches of the productive forces? a. Yes. b. No. 77. To the group of the social factors of the STEP-analysis belongs a. Change of the education standard. b. Appearance of the new materials. c. Business activity cycle. d. Tax policy of the state. 78. To the group of the political factors of the STEP-analysis belongs a. Appearance of the new materials. b. Business activity cycle. c. Tax policy of the state, region. d. All answers are correct. 79. To the group of the technological factors of the STEP-analysis belongs a. Appearance of the new materials. b. Business activity cycle. c. All answers are correct. d. Your answer. 80. To the group of the economic factors of the STEP-analysis belongs

135 a. Appearance of the new materials. b. Business activity cycle. c. Tax policy of the state, region. 81. What factors of the SPACE-analysis have the characteristics with great significance for the branch? a. Financial strength of the enterprise. b. Competitiveness of the products. c. Branch advantages. d. Market stability. 82. By what kind of analysis do we study of the environmental impact on the economic subject? a. SPACE. b. STEP. c. Porter five forces analysis d. SWOT. 83. What kind of the analysis model is used for the research of the main environmental threats? a. Porter five forces analysis b. SLEPT. c. PESTLE. 84. Do the factors below belong to ecological ones? a. Social. b. Technological. c. Economical. d. Geographical. e. All answers are correct. 85. What kind of method is used for factors macro environment impact analysis ? a. ETOM- analysis. b. QUEST- analysis. c. STEP- analysis. 86. The method of the rapid scanning is a. ETOM-analysis. b. QUEST- analysis. c. STEP- analysis. 87. What competitive forces belong to the Porter five forces?

136 a. Provider influence. b. Threat of the substitute products. c. Threat of the new producers on the same market. d. Competitiveness among the existed producers. e. Influence of the consumers. 88. The important instrument in the marketing is a. BCG-matrix b. PMP-matrix c. BCT-matrix 89. What criteria are used for the competitive evaluation of the certain kinds of business in the BCG-matrix? a. Rate of increase of the sector market. b. Relative market share. c. All answers are correct. 90. Evaluation rates of the strategic position in the PMP-matrix are a. Growth rates of demand. b. Future competitive position of the company on the market. c. Appeal evaluation of the strategic economics areas d. Relative company share on the market. e. All the answers are correct.

137 Annex: Training material

The elaborated RUDECO modules serve for the purpose of “Vocational Training in Rural Development and Ecology” in Russia. They target on representatives of local and regional administrations and advanced students in the different fields of rural development.

All below listed RUDECO partners can be addressed in case of training interest in one of the modules. For readers of the module textbooks and training participants the project website provides the possibility to download additional material on http://tempus-rudeco.ru/en/modules (required password RD-modules ), e.g. presentations and other didactic material used in the conducted train- ings.

138 RUDECO partners and contact information

Contact persons for the presented module

Orel State Agrarian University Ul. Generala Rodina 69 Orel 302019 http://www.orelsau.ru/

Olga Popova, Orel State Agrarian University Email: [email protected]

RUDECO project site http://tempus-rudeco.ru/

All RUDECO partners

Russia/ Россия

Russian State Agrarian University-Moscow Timiryazev Российский государственный аграрный университет – Agricultural Academy МСХА имени К.А.Тимирязева Sustainable Rural Development Center Центр устойчивого развития сельских территорий Moskva, Timiryazevskaya 49 Тимирязевская , 49 Moscow 127550 г. Москва , 127550 [email protected] [email protected] http://www.timacad.ru/en/ http://www.timacad.ru/

Russian Ministry of Agriculture Министерство сельского хозяйства РФ Department of Rural Development and Social Policy Департамент сельского развития и социальной поли- 1/11 Orlikov pereulok тики Moscow 107139 Орликов переулок , 1/11 http://www.mcx.ru/ г. Москва , 107139 http://www.mcx.ru/

All-Russian Alexander Nikonov Institute of Agrarian Prob- Всероссийский институт аграрных проблем и инфор- lems and Informatics of the Russian Academy of Agricul- матики им . А.А. Никонова Российской академии сель- tural Sciences (VIAPI) скохозяйственных наук B. Kharitonievskiy per. 21/6 Б. Харитоньевский пер . 21/6, Moscow 105064 г. Москва , 105064 [email protected] [email protected] http://www.viapi.ru/ http://www.viapi.ru/

Tambov State University named after G.R.Derzhavin Тамбовский государственный университет имени Г.Р. Internatsionalnaya 33 Державина Tambov 392000 Ул . Интернациональная , 33 [email protected] г. Тамбов , 392000 http://tsutmb.ru/ [email protected] http://tsutmb.ru/

Administration of Tambov region Администрация Тамбовской области Internatsionalnaya 14 Интернациональная , д.14 Tambov 392000 г. Тамбов , 392000 http://www.tambov.gov.ru/ http://www.tambov.gov.ru/

Orel State Agrarian University Орловский государственный аграрный университет Generala Rodina 69 ул . Генерала Родина , д. 69. Orel 302019 г. Орел , 302019 [email protected] [email protected] http://www.orelsau.ru/ http://www.orelsau.ru/

139 Samara State Agricultural Academy Самарская государственная сельскохозяйственная settl. Ust-Kineskiy, 2 Uchebnaya str. академия Samara region 446442 п. Усть -Кинельский , ул . Учебная 2 [email protected] Самарская обл ., 446442 http://www.ssaa.ru/ [email protected] http://www.ssaa.ru/

Yaroslavl State Agricultural Academy Ярославская государственная сельскохозяйственная Tutaevskoe shosse 58 академия Yaroslavl 150042 Тутаевское шоссе , 58 S. Shchukin: [email protected] г. Ярославль , 150042 http://www.yaragrovuz.ru/ С.В. Щукин : s.shhukin @ yarcx.ru http://www.yaragrovuz.ru/

Kostroma State Agricultural Academy Костромская государственная сельскохозяйственная Karavaevo Campus академия Kostromskoy rayon Учебный городок КГСХА Kostromskaya oblast, 156530 пос . Караваево , Костромской район [email protected] Костромская обл ., 156530 http://kgsxa.ru/ [email protected] http://kgsxa.ru/

Stavropol State Agrarian University Ставропольский государственный аграрный универси- Per. Zootekhnicheskiy 12 тет Stavropol 355017 пер . Зоотехнический 12 [email protected] г. Ставрополь , 355017 http://www.stgau.ru/english/official.php [email protected] http://www.stgau.ru/

Omsk State Agrarian University named after P.A.Stolypin Омский государственный аграрный университет Institutskaya Ploshchad 2 им .П.А.Столыпина Omsk 644008 Институтская площадь , 2 [email protected] г. Омск , 644008 http://www.omgau.ru/ [email protected] http://www.omgau.ru/

Novosibirsk State agrarian University Новосибирский государственный аграрный универси- Dobrolubova 160 тет Novosibirsk, 630039 ул . Добролюбова , 160 [email protected] г. Новосибирск , 630039 http://nsau.edu.ru/ [email protected] http://nsau.edu.ru/

Buryat State Academy of Agriculture named after Бурятская государственная сельскохозяйственная V.R.Philippov академия им . В.Р. Филиппова Pushkina 8 ул . Пушкина , 8 Ulan-Ude, 670024 г. Улан -Удэ , 670024 [email protected] [email protected] http://www.bgsha.ru/ http://www.bgsha.ru/

Association of organic and biodynamic agriculture "AG- Некоммерческое Партнёрство по развитию экологиче- ROSOPHIE" ского и биодинамического сельского хозяйства « Агро- Krasnaya 20 софия » Solnechnogorsk ул . Красная , 20 Moskovskaya Oblast, 141506 г. Солнечногорск , [email protected] Московская область , 141506 http://www.biodynamic.ru/en/ [email protected] http://www.biodynamic.ru/ru/

LLC Company "Gutelot" ООО компания « Гутелот » Marshala Katukova Str. 20 ул . Маршала Катукова , д. 20 Moscow 123592 г. Москва , 123592

140 The National Park "Plescheevo lake" Национальный парк « Плещеево озеро » Sovetskaya 41 ул . Советская , 41 Pereslavl-Zalesskiy г. Переславль -Залесский , Yaroslavlskaya Oblast, 152020 Ярославская область , 152020

Service on environmental safety, protection and use of Управление по охране и использованию объектов жи- fauna, aquatic bioresources вотного мира , водных биоресурсов и экологической Sauren Shaumyan Str. 16 безопасности Orel 302028 Улица Сурена Шаумяна ,16 г. Орел , 302028

Moscow State Agroengineering University named after Московский государственный агроинженерный уни- V.P. Goryachkin. верситет им . В.П.Горячкина Timiryazevskaya Str. 58 ул . Тимирязевская , 58 Moscow, 127550 г. Москва , 127550 [email protected] [email protected] http://www.msau.ru/ http://www.msau.ru/

All-Russian Association of Educational Institutions of Ассоциация образовательных учреждений агропро- Agro-Industrial Complex and Fisheries мышленного комплекса и рыболовства Listvennichnaya alleya 16A, build. 3 ул . Лиственничная аллея , д. 16 А, корп .3 Moscow, 127550 г. Москва , 127550 [email protected] [email protected] http://www.agroob.ru/ http://www.agroob.ru/

Germany / Германия

University of Hohenheim Университет Хойенхайм Institute of Landscape and Plant Ecology (320) Институт ландшафтной экологии Eastern Europe Centre (770) и экологии растений (320) 70599 Stuttgart Центр Восточной Европы (770) [email protected] 70599 Stuttgart https://oez.uni-hohenheim.de/ [email protected] https://oez.uni-hohenheim.de/

Agency for Development of Agriculture and Rural Areas of Агентство по развитию сельского хозяйства и сельской the Federal State of Baden-Wuerttemberg (LEL) местности федеральной земли Баден -Вюртемберг Oberbettringer Strasse 162 (LEL) 73525 Schwäbisch Gmünd Oberbettringer Strasse 162 [email protected] 73525 Schwäbisch Gmünd https://www.landwirtschaft-bw.info [email protected] https://www.landwirtschaft-bw.info

Academy for Spatial Research and Planning (ARL), Sec- Академия пространственных исследований и планиро- tion WR IV "Räumliche Planung, raumbezogene Politik" вания (ARL) Hohenzollernstr. 11 Отдел WR IV " Пространственное планирование , тер- 30161 Hannover риториальная политика " [email protected] Hohenzollernstr. 11 http://www.arl-net.de/ 30161 Hannover [email protected] http://www.arl-net.de/

Terra fusca Ingenieure Терра -фуска Marohn, Lange Partnerschaftsgesellschaft Marohn, Lange Partnerschaftsgesellschaft Karl-Pfaff-Str. 24 a Karl-Pfaff-Str. 24 a 70597 Stuttgart 70597 Stuttgart http://www.terra-fusca.de/ http://www.terra-fusca.de/

141 Poland / Польша

Warsaw University of Life Sciences Варшавский университет естественных наук Laboratory of Evaluation and Assessment of Natural Re- Лаборатория анализа и оценки природных рессурсов sources Nowoursynowska Street 166 Nowoursynowska Street 166 Warsaw 02-787 Warsaw 02-787 [email protected] [email protected] http://www.spoiwzp.sggw.pl http://www.spoiwzp.sggw.pl

Association for Sustained Development of Poland Ассоциация устойчивого развития Польши Grzybowa Street 1 Grzybowa Street 1 Warsaw-Wesola 05-077 Warsaw-Wesola 05-077 [email protected] [email protected] http://www.ekorozwoj.pl/ http://www.ekorozwoj.pl/

France / Франция

L'Agence de services et de paiement Агентство сервиса и платежей (ASP) Mission des affaires internationales Служба международных отношений Rue du Maupas 2 Rue du Maupas 2 Limoges 87040 Limoges 87040 [email protected] [email protected] http://www.asp-public.fr/ http://www.asp-public.fr/

AgroSup Dijon Национальный институт высшего образования в сфе- 26 Boulevard Docteur Petitjean ре агрономии , продуктов питания и окружающей среды 21079 Dijion cedex (AGROSUP), Дижон [email protected] 26 Boulevard Docteur Petitjean http://www.agrosupdijon.fr/ 21079 Dijion cedex [email protected] http://www.agrosupdijon.fr/

Italy / Италия

University of Udine Университет Удине Department of Agricultural and Environmental Sciences Институт сельскохозяйственных наук и экологии Via delle Scienze 208 Via delle Scienze 208 33100 Udine 33100 Udine [email protected] [email protected] http://www.uniud.it/ http://www.uniud.it/

Slovakia / Словакия

Slovak University of Agriculture Словацкий университет сельского хозяйства International Relations Office Отдел международных отношений Tr.Andreja Hlinku 2 Tr.Andreja Hlinku 2 94976 Nitra 94976 Nitra [email protected] [email protected] http://www.uniag.sk/ http://www.uniag.sk/

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