Saffron Value Chains

A13 Saba Naeli Luigi Orsi SaVron Value Chains Insights from Iran Aracne editrice www.aracneeditrice.it [email protected] Copyright © MMXX Gioacchino Onorati editore S.r.l. – unipersonale www.gioacchinoonoratieditore.it [email protected] via Vittorio Veneto, 20 00020 Canterano (RM) (06) 45551463 isbn 978-88-255-3415-3 No part of this book may be reproduced by print, photoprint, microfilm, microfiche, or any other means, without publisher’s authorization. Ist edition: June 2020 Contents 11 Abstract 13 Introduction 15 Chapter I The Importance of the Global Value Chain 1.1. Picture of SaVron Products, 16 – 1.1.1. Application and Usage of Saf- fron, 16 – 1.1.2. The Increasing Importance in Health Sector , 17 – 1.2. Global Trade in the SaVron Value Chain and Lead Players, 18 – 1.2.1. Major Ex- porter, 18 – 1.2.2. Major Importer, 20 – 1.2.3. Lead Players and Their Market Dynamics, 20 – 1.3. SaVron Key Global Trends, 24 – 1.4. SaVron Value Chain Development in Iran, 25. 31 Chapter II Global Value Chain Conceptual Framework 2.1. Input–Output Structure, 31 – 2.2. The Geographic Scope, 32 – 2.3. Trans- actions and Transaction Costs, 32 – 2.4. The Governance of the Value Chain, 32 – 2.5. Transaction Costs and Governance, 34 – 2.6. Deter- minants of Transaction Costs Analysis, 34 – 2.7. Market Power and Governance Structure, 35 – 2.8. Upgrading, 36 – 2.9. Local Institutional Context, 36 – 2.10. Stakeholders Analysis, 37. 39 Chapter III Research Setting and Methodological Approach 3.1. Data Collection, 40 – 3.2. Interview Structure, 40 – 3.2.1. Supply Side Interview, 40 – 3.2.2. Consumer Side Questionnaire Structure and Opera- tionalization, 58. 67 Chapter IV Main Results and Discussion 4.1. Input–Output Structure, 67 – 4.2. Geographic Scope, 71 – 4.2.1. Iran 5 6 Contents Positioning in the SaVron GVC, 73 – 4.3. Governance and Contracts, 74 – 4.3.1. SaVron Value Chain Financing, 85 – 4.3.2. SaVron Value Chain Main Actors Relationships, 87 – 4.4. Local Institutional Context, 89 – 4.5. Up- grading, 91 – 4.5.1. Sociodemographic Analysis of the Survey, 91 – 4.5.2. Con- sumers’ Shopping Behaviour, 92 – 4.5.3. Consumers’ Perception of SaVron, 103 – 4.6. Stakeholders Analysis, 110 – 4.7. Upgrading Trajectories, 112 – 4.7.1. Required Workforce Development Initiatives for Upgrading, 114 – 4.8. Limi- tations and Future Direcetions, 114. 117 Conclusions 123 References List of Tables 1.1 Interpretation of suggested development strategies. 27 3.1 Questionnaire structure and sources1.......... 46 3.2 Questionnaire structure and sources........... 63 4.1 Marketing channels for Iran saVron........... 68 4.2 Quality standards....................... 80 4.3 Participants age distribution................ 91 4.4 Frequency of saVron usage................. 92 4.5 Ranking of the importance of saVron attributes for Italian consumer....................... 94 4.6 Ranking of the importance of saVron attributes for French consumer....................... 95 4.7 Ranking of the importance of saVron attributes for German consumer...................... 96 4.8 Ranking of the importance of labels for Italian consumer.............................. 97 4.9 Ranking of the importance of labels for French consumer.............................. 98 4.10 Ranking of the importance of labels for German consumer.............................. 99 4.11 Ranking of diVerent circumstances to use non–European saVron by Italian consumers................ 101 4.12 Ranking of diVerent circumstances to use non–European saVron by French consumers............... 102 4.13 Ranking of diVerent circumstances to use non–European saVron by German consumers.............. 103 4.14 Ranking of the importance of the attributes for Eu- ropean consumers...................... 109 4.15 Ranking of important labels for European consumers. 109 7 List of Figures 4.1 SaVron input–output structure.............. 70 4.2 Distribution of the importance of eVective factors in shopping choice of Italian................. 94 4.3 Distribution of the importance of eVective factors in shopping choice of French................. 95 4.4 Distribution of the importance of eVective factors in shopping choice of German................ 96 4.5 Distribution of the importance of label for Italian consumers........................... 97 4.6 Distribution of the importance of label for French consumers........................... 98 4.7 Distribution of the importance of label for German consumers........................... 99 4.8 DiVerent circumstances to use non–European saVron by Italian consumers..................... 100 4.9 DiVerent circumstances to use non–European saVron by French consumers.................... 101 4.10 DiVerent circumstances to use non–European saVron by German consumers................... 102 4.11 Familiarity with saVron properties–Italian....... 104 4.12 Familiarity with saVron properties–French....... 104 4.13 Familiarity with saVron properties–German...... 105 4.14 Italian expectation of Iranian saVron........... 106 4.15 Italian perception of Iranian saVron........... 106 4.16 French expectation of Iranian saVron.......... 107 4.17 French perception of Iranian saVron........... 108 4.18 German expectation of Iranian saVron......... 109 9 Abstract Saffron as the most expensive spice demonstrate very bright market in the future. It experiences increasing demand trade as well explored by new sectors such as cosmetics and pharmaceutical. Moreover, the saffron flowers grow well in arid and semi–arid regions mostly,the area that suffer from poverty,water scarcity,and other environmental problems. This plant requires very little water and have low environmental impact while have high value added. These makes it good solution for sustainable development of these regions and bettering off the local community. In Afghanistan it introduced as a replacement for opium cultivation since its high price can compete with opium cultivation profit. Research was done by gathering primary and secondary data from diVerent stakeholders of saVron value chain. Primary data collect by interview and online questionnaires aimed farmers, firms, intermediators, and European consumers. The secondary data gained from local, national, and international data base mainly on trade statistics. The result from supply side indicated Iran as the main producer and exporter does not enjoy the highest profit rate of this market. Countries as Spain dominated the established distribution channels and gain higher profit by the direct connection with retailers and industries demand this spice. It also could successfully establish Spanish saffron as the most fa- mous and high quality one, whereas most of the saffron traded by Spain comes from Iran and other countries and small amount of it cultivated there. On the demand side the consumers show little knowledge of dis- tinguishing high quality and genuine saffron as well its usage. They also express their concern about safety and hygiene, usage of agrochemical, and environmental impact of saffron come from Iran. Considering all the data the diVerent saVron Global Value Chain (GVC) is mapped, their advantage and disadvantage discussed, and upgrading trajectories and empirical implementation to promote Iranian saVron in the global market suggested. 11 Introduction SaVron is a spice obtained from the dried stigma of the flower of saVron crocus (Crocus Sativus). It is the most expensive spice in the world. It is predicted that in the next years, saVron market grows massively due to new and important application of it. Apart from food and beverage sector which is conventional but also growing demand sector for saVron application, this spice become important for pharmaceutical and cosmetics industries since its health benefits are exploring. Nowadays, there are many research and studies on applying saVron in cancer or depression medicine. SaVron market indicated increasing trends of demand, consump- tion, and trade. Iran as the main producer and exporter of this market, 96% of worldwide saVron production come from Iran (United Na- tions Industrial Development Organization, 2014), does not enjoy the highest profit. This country exports its product in bulk and companies in other countries as Spain, which is the old actor of this market, or new entering countries as United Arab Emirates (UAE) and China manage the packing, marketing, and distribution of this product. This spice is cultivated mainly in less developed countries such as Iran and Afghanistan, in arid or semi–arid regions which suVer from scarce natural resources. Therefore, it has profound role in the livelihood of people in those area as well can be a product to bring sustainable development there. Apart from the actors in the bottom of the Value Chain (VC) as farmers, intermediators, and cleaning units in recent years new actor in the distribution channel appeared that by using e–commerce connect consumers directly to the farmers and aimed to provide high quality saVron in the market, better oV farmers earnings, and fight with the environmental problems, mainly water scarcity in Iran. Start–up Keshmoon is founded in 2017 following three main goals, bettering oV farmers by omitting the intermediators and providing them 13 14 Introduction higher share of consumers’ price, providing high quality and genuine saVron to consumers, and attempt to stop extracting water from the deep well which exploit the underground water of the region and has profound negative eVect, there is a resistance from farmer side to not using the deep well

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