The Supply Chain for Parmigiano-Reggiano Cheese in the United States

The unique characteristics of food products produced in particular locations have been recognized and valued by consumers for centuries. Such products have long been an important component of global trade, but demand for them has grown rapidly in the last quarter century as consumers around the world have gained greater awareness of food from other countries. In the U.S., for example, demand for ethnic foods is growing rapidly as consumers place greater emphasis on variety and taste in the foods they eat. Also, heightened interest in nutritional and health aspects of food encourages consumers to learn more about traditional products. International supply chains for food products differentiated by their place of origin are highly variable, being influenced by product characteristics, trade policies, and the business strategies of key chain participants. However, most products that achieve widespread distribution in another country usually reach consumers by “plugging into” standard domestic wholesale and retail channels. For example, imported fresh produce products from around the world typically move to U.S. consumers through the same produce wholesalers and retail outlets that distribute domestic products. This tends to distance the producers of foods distinguished by their place of origin from the ultimate consumers of those products. As a result, producers may find it difficult to effectively signal the quality of their product and to capture a significant share of the price premium that can be realized when consumers do fully recognize product quality. These are common problems when local foods move into global markets – problems that motivate producers to search for changes in supply chain structure that improve information flows and shift a greater share of returns to those who create unique, place-based product characteristics. The first step in designing more effective supply chains for food products differentiated by their place of origin is to describe the structure of existing chains. In this paper we present a descriptive analysis of the supply chain for Parmigiano-Reggiano cheese sold in the U.S. Parmigiano-Reggiano is probably the most famous of all Italian cheeses, with a long history that goes back to Middle Age. In many export markets, including the U.S., it is also known as Parmesan – a name used for many types of cheese, including the dry, tasteless powder that is familiar to most Americans. This leads to confusion that may hinder full development of the potential value of the Parmigiano-Reggiano “brand.” Our primary objectives in this paper are: (1) to describe the channels through which Parmigiano-Reggiano cheese reaches U.S. consumers, (2) to develop hypotheses about how the supply chain will change as U.S. restrictions on Italian cheese imports are relaxed, and (3) to assess the contributions of institutions that make it easier for Italian producers of Parmigiano-Reggiano cheese to signal quality to U.S. consumers and to capture a greater share of revenues from Parmigiano-Reggiano cheese sold in the U.S. In the sections that follow, we first describe the major segments of the supply chain for Parmigiano-Reggiano cheese, starting with producers in Italy and working our way downstream to the U.S. consumer. We then describe typical trading partner relationship patterns, working our way back upstream through the chain from different consumption experiences for Parmigiano-Reggiano cheese in the U.S. In the final two sections of the paper, we develop hypotheses about how changes in U.S. trade policy are likely to affect prices, chain structure, and trading partner relationships, and we discuss the important role Italian institutions play in the supply chain for Parmigiano-Reggiano cheese.