THE ECONOMIC IMPACT FOR MANUFACTURING SITES OPERATING …

THE ECONOMIC IMPACT FOR MANUFACTURING SITES OPERATING TO BRCGS CERTIFICATION

AUTHORS:

Dr. Ray Lambert Independent Consultant and Associate Research Fellow, Department of Management, Birkbeck, University of London [email protected]

Dr Marion FrenzReader in ManagementDepartment of Management, Birkbeck, University of London [email protected]

DATE: October 2021 © Frenz Lambert 2021

© Frenz Lambert 2021

CONTENTS1 Executive Summary 22 Introduction 63 Scope of paper 74 Demand side based on ‘brands interviews’ 8

4.1Benefitsofstandards:thevaluetobrandsofthird-partystandards 84.2Limitationsofthird-partystandards 84.3.Dobrandsonlyacceptcertifiedsuppliers? 84.4ArethereparticularadvantagesanddisadvantagesofworkingwithBRCGSstandards? 94.5Impactofthird-partystandardsondirectauditing 94.6Impactofthird-partystandardsonFBOcompetitiveness 94.7Standardsconvergenceandthefutureofthird-partystandards 9

5LiteratureReview 105.1Internationaltrade 105.2Productrecalls 105.3Microlevel–surveys 10

5.3.1Objectiveandmotivationsforcertification 115.3.2Challengesandcostsofcertificationtofoodsafetystandards 115.3.3Outcomesofcertificationtofoodsafetystandards 125.3.4 Derived indicators 13

6Empiricalresearch 166.1Motivationsandobjectivesforcertification 166.2Impactsofcertificationonbusinessoperations 18

6.2.1 Modernisation 186.2.2Efficiencyandinvestment 246.2.3Operations 19

6.3 Impact on business performance 206.3.1Competitiveness 206.3.2Growthinsalesinhomemarketsandabroad 216.3.3Internationaltrade 226.3.4Othercommercialeffects 226.3.5Profitability 236.3.6Certificationtootherstandards 24

6.4Responsesbysub-group 256.4.1Region 25

6.4.2 Size 256.4.3Lengthofcertification 25

6.5Respondentcomments 256.6Storylinesandatypologyofcertificationuse 26

6.6.1Factoranalysis 266.6.2Regression 276.6.3Clusters 27

30313351

7ConclusionsBibliographyAnnex 1. Basic statistics Annex2.Factor,regressionandclusteranalyses

© Frenz Lambert 2021

LIST OF FIGURES

Figure1:Theneedtoprovidesafefoodasamotivationforcertification 16Figure2:Theneedtomeetexistingcustomerrequirementsasamotivationforcertification 17Figure3:Theneedtomeetpotentialcustomerrequirementsasamotivationforcertification 17Figure4:Theneedtoincreasecompetitivenessinthedomesticmarketasamotivationforcertification 17Figure5:Theneedtoimprovecompetitivenessinexportmarketsasamotivationforcertification 17Figure6:Theneedtorespondtocompetitor’scertificationasamotivationforcertification 17Figure7:Businessmodernisation 18Figure8:Efficiencyandinvestment 19Figure9:Operations:training,productqualityandrecalls 20Figure10:Competitiveness 21Figure11:Growthinhomemarketsandabroad 22Figure12:Othercommercialeffects 23Figure13:TheimpactonbusinessperformanceofBRCGScertificationcomparedtoothercertificationstandards 24

LIST OF TABLES

Table1:Objectivesandmotivationforcertificationtofoodsafetystandards 11Table2:Challengesandcostsofcertificationtofoodsafetystandards 12Table3:Outcomesofcertificationtofoodsafetystandards 13Table4:GroupingsofFBOsbytypeofcertificationuse(strategicorientation) 27Table5:GroupsofFBOsbysize 28Table6:GroupsofFBOsbylocation 28Table7:GroupsofFBOsbycertificatetype 29Table8:FBOgroupsandchangeinsalesandprofits 29

2© Frenz Lambert 2021

1 EXECUTIVE SUMMARY1.1 PURPOSE OF PAPERThereisacommonviewthattherearebenefitstoFoodBusinessOperators(FBOs)thatarecertificatedaswellasbrandsorretailersthatspecifythemwithintheirsupplychains.Whilethesebenefitsarewellpublicised,priortothisstudy,therehasbeenalackofhardevidenceontheeconomicandoperationalbenefitstoeithercertificatedFBOsorinthewidersupplychain.

ThisresearchseekstoredressthislackofevidencebyusinginternalandexternaldatasetstoidentifythevalueofcertificationforcertifiedFBOs,thewidersupplychain,andonsaferfoodforconsumers.ThispaperwillalsoexplorewhethercertificationtoBRCGSprogrammesprovidesadditionalvalueoverotherstandardsintermsoffoodsafety,top-linegrowth,profitability,modernisationandoperationalefficiency.

Thishasbeencarriedoutthroughdemand-sideinterviewswithlargeBrands,areviewofextantliteratureoncertificationandfoodsafetystandards,anddatafromaround450responsestoasurveyofFoodBusinessOperators(FBOs).

1.2 SUMMARY OF MAIN OUTCOMESTheempiricalevidenceindicatesthatcertificationtoBRCGSstandardsgeneratesextensiveandpositivebusinessimpactsforsuppliers,onascalegreaterthanmighthavebeenexpectedinthelightofpreviousresearch.Thisismorenotableasthestandardshaveprimarilybeendevelopedtoensuretheproductionanddistributionofsafefood,andnotwiththeobjectivesofbusinessgrowth,profitability,operationalefficiencyandinnovation.

Thefindingscanbecategorisedunderi)motivations/objectivesforcertification;(ii)thebusinessactionstakentoachievecertificationand(iii)themajorimpactsonfirmperformanceofcertificationandtheassociatedbusinessactions.

Motivations and objectives for BRCGS certification

• Inlinewithpreviousstudies,ensuringtheproductionofsafefoodisakeydriverforseekingcertificationwith80%of respondentscitingthisasaprimarymotive.

• 85%ofrespondentsstatedthatmeetingtheneedsofexistingcustomersisamajorfactor.Thisisasimilaraimto meetingtherequirementsofpotentialcustomers.

• Enhancingcompetitivenessalsoemergesasakeydriverwith50%seekingdomesticgrowth,and61%growthin overseasmarkets.

• Respondingtocompetitorcertificationisseenasanimportantfactorwith40%ratingitashighlyimportant.

The empirical evidence indicates that certification to BRCGS standards generates extensive and positive business impacts for suppliers.

3 © Frenz Lambert 2021

100%

90%

80%

70%

60%

50%

40%

30%20%

10%

0%SUPPLY SAFE

PRODUCTSCURRENT

CUSTOMERSPOTENTIAL

CUSTOMERSDOMESTIC

COMPETITIVENESSEXPORT

COMPETITIVENESSCOMPETITOR

CERTIFIED

AGREE

NEUTRAL

DISAGREE

Impacts of BRCGS certification on business operations

• AkeyfindingoftheresearchhasshownthatBRCGSstandards,whichdonotinthemselvesincludeinnovationasa purpose,actasadeterminantofbroad-basedinnovation.Thisincludesproductinnovation,operationalefficiencyand business expansion.

• InordertoobtaincompliancewithBRCGScertification,manybusinessesreportedthattheyhadundertakenchanges inbusinesspracticesorproductionresources.Thismodernisationincludesimprovingthestockofphysicalcapital throughneworupgradedplantandequipment,whichwascitedby50%ofrespondents,27%hadupdatedtheiri informationtechnology,and28%hadupdatedproductdevelopmentprocesses.Theseimprovementssupport thegoalsoffoodsafetyaswellasproductivityandcompetitiveness.

• ThedatashowsthatBRCGScertificationhasbeenaspurtoinvestmentandmanagementchanges.70%of respondentsstatedthatchangesinproductionmethodshadledtoefficienciesandgreaterproductivity.50%have investedinnewtechnologyinordertoenablesafeandhighqualityfood.While30%statedthatcertificationhasledto product innovation.

• OperationalimprovementshavebeenachievedthroughobtainingBRCGScertification,with63%reportingproduction improvements.Thisisevidencedthrougha40%reductioninfoodrecallssinceachievingcertification.

70% of respondents stated that changes in production methods

had led to efficiencies and greater productivity.


Competitiveness in domestic and export markets

• BRCGScertificationisassociatedwithexpandedmarketopportunitiesandachievedgrowth,inhomeandexport markets(55%).IthelpsdrivecompetitivenessforlargesharesofFBOs,especiallyinexportmarkets(60%).

• Overonethirdofrespondentsquantifiedtheirsalesgrowth,averagingaround7.5%(forthereportinggroup).

• Aroundonethirdreportincreasesinprofitabilityresultingfromcertificationandtheassociatedinvestmentsand adaptations,averagingaround6%(forthereportinggroup).

• AsmallproportionofFBOsreportedreducedcosts(17%)attributedtocertification,howevernearlyhalfofrespondents findthatcertificationleadstofewercustomeraudits.

100%

90%

80%

70%

60%

50%

40%

30%20%

10%

0%UPDATE

PHYSICAL CAPITAL

IT INVESTMENT

CHANGE PRODUCT

DEVELOPMENT PROCESS

IMPROVED ORGANISA-

TION OF PRODUCTION

INVESTMENTIN NEW

TECHNOLOGY

INCREASE IN PRODUCT INNOVATION

AGREE

NEUTRAL

DISAGREE

INVESTMENT IN HUMAN CAPITAL

IMPROVEMENTS IN PRODUCT

QUALITY

FEWER RECALLS

100%

90%

80%

70%

60%

50%

40%

30%20%

10%

0%INCREASED

COMPETITIVENESS IN HOME MARKET

INCREASED COMPETITIVENESS IN

EXPORT MARKETS

REDUCTION IN COSTS

INCREASED PROFITABILITY

FEWER AUDITS BY CUSTOMERS

AGREE

NEUTRAL

DISAGREE


A comparison between BRCGS and other standards

ManyrespondentsarecertifiedtootherGFSIandnon-GFSIstandardsandwereableprovideinformationabouttheimpactontheirbusinessofthesestandards.

• Around35%ofrespondentswithcertificatestostandardsinadditiontoBRCGSreportedanincreaseinsalesto existingcustomersfollowingfromcertification.Thisresultissimilarto,butsomewhatlowerthan,forBRCGS certification.

• 55%ofrespondentsexperiencedincreasedsaleshavinggainedcertificationtoBRCGS.Only44%ofrespondentswith othercertificationstandardsreportedincreasedsales.

• 26%ofrespondentsagreedthatsalesintheirhomemarkethadincreased,comparedto30%ofBRCGScertificated respondents.

• 46%ofrespondentswithBRCGScertificationreportedincreasedsalesinexportmarkets,comparedwith42%for othercertificationstandards.

• SimilarlytotheshareofBRCGScertifiedfirms,around28%ofrespondentsagreedthatprofitabilityhadincreased.

• Over40%ofrespondentsagreedthattherearefewercustomerauditsaftercertificationtoanotherthird-partystandard. Thiscompareswith48%withBRCGScertification.

60%

50%

40%

30%

20%

10%

0%SALES TO EXISTING

CUSTOMERS FOLLOWING

CERTIFICATION

SALES TO NEW CUSTOMERS FOLLOWING

CERTIFICATION

SALES INCREASE IN DOMESTIC

MARKET FOLLOWING CERTIFICATION

SALES INCREASE IN EXPORT MARKETS

FOLLOWING CERTIFICATION

INCREASE IN PROFITABILITY

FOLLOWING CERTIFICATION

FEWER CUSTOMER AUDITS FOLLOWING

CERTIFICATION

BRCGS

OTHER

55% of respondents experienced increased

sales having gained certification to BRCGS.


2 INTRODUCTIONFoodsafetystandardshavebeendevelopedoverthelast20yearstoprovideasystemofassurancethatfoodfromanysourceissafe.Partlyaresponsetosomehigh-profilefoodscares,butalsotheglobalisationoffoodsourcing.Theyprovideanexternallyvalidatedframeworkforassessingthesafetyandqualityoffoodproductionanddistribution.

Thewell-publicisedincidentsofcontaminatedorotherwiseunsafefoodsfindingtheirwaytoconsumerstriggeredlegislationbymanygovernmentsandtheconsequentestablishmentofregulationsthatseektoensurefoodsafety.Theseframeworksofoversightofnationalandinternationalfoodchainshaveimpelledmajorfoodbrands,retailersandthequick-servicerestaurantindustry(collectivelyreferredtohereinafteras“brands”)toundertakefoodsafetyauditsoftheirsuppliers.Sincemostfoodmanufacturersselltonumerouscustomers,whilebrandshavemultiplesuppliers,thisminimisesriskofinterruptiontothesupplychain.

Directauditingbybrandsofsupplierqualityandsafetycanbecostlyforallparties.Anothermotivation,thereforeforthedevelopmentofprivatethird-partystandardswassomerationalisationofthenumberofauditsbythemajorcustomersofFBOs.Severaloftheleadingstandardshavebeendevelopedundertheleadershipofconsortiaofmajorretailers–BRCGS1intheUK,IFS2inFrance,ItalyandGermany,andSQF3intheUS.AfurtherstagehasbeentheformationoftheGlobalFoodSafetyInitiative4(GFSI)toprovidebenchmarkingoftheoperatingcriteriaforprivatestandards.TheInternationalStandardsOrganisation5(ISO)hasalsopublishedafoodsafetystandard(ISO220006)buildingonthegeneralmanagementstandardISO9001.Thiswasintendedtoofferanalternativetomultipleauditsofsuppliersbybrands.TheISOstandardonitsownisnotcompliantwithGFSIcriteriasinceitlackspre-requisiteprogrammes(whicharecoveredbyseparateISOstandards)butarecentlydevelopedvariantFSSC220007doesfallundertheGFSIumbrella.

Foodcertificationhasemergedasarequirementtogainconsumerconfidenceandensurefoodsafetyacrossvariousstagesinthesupplychain.Theglobalfoodcertificationmarketisforecasttogrow8duetoitsapplicabilityinawiderangeoffoodproducts,increasedhealthandethicalconsciousnessamongconsumers,andmorecomplexsupplychains.Asaresult,foodmanufacturersandsuppliersareactivelyseekingISO22000,BRCGS,SQF,IFS,and‘free-from’certifications.

BRCGS’sfoodsafetystandardwasthefirsttobebenchmarked.Nowinits8theditionwiththe9theditiontobepublishedin2022,thestandardhasevolvedtomeettheneedsofindustryandtoprotecttheconsumer.ItwasthefirststandardtobeGFSIbenchmarked,aswellasintroducefoodsafetyculturerequirements,definefoodfraud,andreduceauditburdenthroughadditionalmodules.BRCGSappliesacomplianceprogrammetoensureconsistentauditoutcomesandresultsthatbrandscanrelyon.

BRCGSstandardsareusedbyover30,000sitesin130countries,andacceptedby70%ofthetop10globalretailers,60%ofthetop10quick-servicerestaurants,and50%ofthetop25manufacturers9.FSSC22000certificationshavebeenadoptedby27,000sites,IFSin17,000sites,andSQFin10,000.TheglobalfoodandgrocerymarketsizewasvaluedatUS$11.7trillionin201910.20%ofthesesalesareplacedonthemarketbymanufacturersthatarecertifiedtoaGFSIcertificationprogramme11.BRCGScertifiedFBOsaccountfor36%ofpost-farmgatesales,andthereforeimpactonUS$800billionofproductsales12.ThisexcludesthesignificantsalesmadeintheQuickServiceRestaurantsector.

1 https://www.brcgs.com/2 https://www.ifs-certification.com/index.php/en/3 https://www.sqfi.com/4 https://mygfsi.com/5 https://www.iso.org/6 https://www.iso.org/iso-22000-food-safety-management.html7 https://www.fssc22000.com/8 FoodCertificationMarket–GlobalGrowthto2025,MarketsandMarkets,20209 Source:Deloitte,QSRMagazine10 Source:GrandViewResearch(2019)11 Source:GFSI,TheConsumerGoodsForum12 Source:BRCGSinternalcalculations


3 SCOPE OF PAPERThereisacommonviewthattherearebenefitstoFBOsthatarecertificatedaswellasbrandsorretailersthatspecifythemwithintheirsupplychains.Thesebenefitsareunderstoodtoincludemarketaccess,operationalimprovementandefficiencies,andgreaterprocesscontrolleadingtolesswasteorproductrecalls.Brandsandretailersbenefitbyrelyingon3rdpartycertificationaspartoftheirsupplierapprovalandriskmanagementprocesses.Thisallowsthemtofocustheirsupplierauditsonareasofriskandpriority. Whilethesebenefitsarewellpublicised,thereisalackofevidencetosupporttheeconomicandoperationalbenefitstoeithercertificatedFBOsorinthewidersupplychain.Thereissomeanecdotalevidenceandindividualcasestudyinformation,howeverthereislimitedevidencetosupporttheseclaims.ThepurposeofthisresearchistouseinternalandexternaldatasetstoidentifythevalueofcertificationforFBOs,thewidersupplychain,andsaferfoodforconsumers.ThispaperalsoexploreswhethercertificationtoBRCGSprogrammesprovidesadditionalvalueoverotherGFSIandnon-GFSIstandardsintermsoffoodsafety,top-linegrowth,profitability,modernisationandoperationalefficiency.

Thisreportcontainsthreemainparts:

1.Areviewofthedemand-sidebasedoninterviewswithlargebrands;2.Areviewoftheextantliteratureoncertificationandfoodsafetystandards;3.Analysisofresultsfromasurveyofaround450FoodBusinessOperators(FBOs).

Food certification has emerged as a

requirement to gain consumer confidence

and ensure food safety across various stages in

the supply chain.


4 DEMAND SIDE BASED ON BRANDS INTERVIEWS4.1 BENEFITS OF STANDARDS: THE VALUE TO BRANDS OF THIRD-PARTY STANDARDSThegroupofthird-partyfoodsafetystandardsweredevelopedinthelate1990sinresponsetotheincreasingdemandforcloserscrutinyofthefoodsupplychain,toreducetherisksofcontaminatedordangerousfoodsfindingtheirwaytoconsumers.Legislationinseveralcountriesrequiredbrands,includingretail,QuickServiceRestaurantsandproducersofbrandedfoods,toexerciseduediligenceonsafetyissueswhenpurchasingfromanincreasinglyglobalsupplychain.Thisincludedsafetyauditsoftheirsuppliers.Ingeneral,supplierscouldbesellingtoseveralcustomers,whilebrandscouldbesourcingfrommanysuppliers.Thislevelofauditburdenimposedsubstantialcostsonsuppliers,manyofwhomaresmallfirms,whocouldbesubjecttomultipleauditsfromaproliferationof2ndpartystandards.Substantialcostswerealsoincurredbybrandsincarryingoutsomanyaudits,withduplicationofworkforthemanufacturersandexpensewithintheindustry,hencethedriveforharmonisedstandards.

Soasolutionwasdevelopedthatinvolvedanindependentbodydevelopingstandards,inconsultationwithstakeholders,andarrangingauditsandvisitsonbehalfofthebrands.Thiswasviewedasamoreefficientprocess.IntheUKthiswassetupundertheauspicesoftheBritishRetailConsortium13alobbyingorganisationrepresentingUKretailers.SimilararrangementswerelaterdevelopedinotherpartsofEuropeandinNorthAmerica.

Themainbenefitsliein:

• Feweraudits,reducingcostsforbrandsandfoodmanufacturers.

• Apublishedstandardwhichcanbedevelopedandrevisedovertime,withinputfrominterestedparties,including brandsandthecertificationbodieswhocarryouttheaudits.Forexample,theBRCGSfoodstandardisatversion8, withversion9duetobepublishedin2022.

• Foodmanufacturerswhoarecertifiedtooneormoreofthefoodsafetystandardsthusdemonstratebasiccompetenceto actualandpotentialcustomersinanobjectiveway.Thisenablesbrandsthemselvestofocustheirinquiriesto suppliersontheirownmorespecificrequirements. • Certificationisalsoasignaltothemarketthathereisasoundsupplier,thusenablingcompetitionandsupporting internationaltradebyprovidinginformationatlowcostontheavailabilityofreliablesources.

• Suppliersthemselvesbenefitfromtheexternal,expertscrutiny,astheycanembedthegoodpracticesneededfor certificationintotheirownproceduresandthuscontinuouslyimprovethebusinesswhilesupplyingsafefoodtoconsumers.

4.2 LIMITATIONS OF THIRD-PARTY STANDARDSThird-partystandardsprovideanoverallframeworkthatcomplementsbasicGoodManufacturingPractice(GMP)andHazardAnalysisandCriticalControlPoint(HACCP)principles.Firstandsecond-partyauditscanbemorespecifiedandallowforadeeperexplorationofanygivenoperationalrequirement.Brandsthereforehavegreatercontrolindirectingtheauditprocessaccordingtotheirneed.

Theprocessforthird-partyauditsisclearlydefinedanddoesnotpermitauditorstoprovideadviceorguidancetomanufacturersthatmighthelpwithimprovingthesafetyandthequalityoftheirproductsandprocesses.Theirroleistoassessandreportoncomplianceandnon-complianceswithinthetermsofthestandardinaconsistentway. Whilethesetrade-offsareacceptable,togaintheefficienciesofthethird-partystandardsframework,brandsarekeentoensurethatcertificationprogrammeowners(CPOs),suchasBRCGS,maintainthecompetenceandeffectivenessofthecertificationbodiesandthereliabilityoftheauditstheycarryout.

Itwasalsoreportedthatbrandswouldstillfacethestructuralissuesofsourcingreliableaudits,evenabsentthethird-partystandardsframework.Inaddition,brandsmayengageinauditsandsitevisitsoftheirown,tosupplementthethird-partyprocessesandtomaintaintheirownconfidencethatthethird-partystandardsremainfitforpurpose.

4.3. DO BRANDS ONLY ACCEPT CERTIFIED SUPPLIERS?Thebroadpictureisthatbrandsrequirethattheirfirst-tier–directsuppliers–shouldbecertificatedtooneoftheavailablethird-

13 https://www.brc.org.uk/


partystandards.SomemandateaparticularstandardwhileothersinprinciplewillacceptanypertinentGFSI14benchmarkedstandards,suchasBRCGS,FSSC22000,SQForIFS.

Theymayexpressapreferenceforoneorotherofthese.Whilesomespecifiersrequirecertificationfurtherupthesupplychain,itisnotcommon,however,butthemajorityexpecttheirfirst-tiersuppliersthemselvestoensurethesafetyofboughtiningredients.FailuresupthesupplychainwilltriggerinvestigationsbythebrandsthemselvesandcomplaintstotheCPOsandcertificationbodies.Retailersrequirecertificationoftheirsuppliersofownbrandproducts.Manufacturersofbrandedgoodsareresponsibleforensuringsafeproductionintheirownsuppliers.

4.4 ARE THERE PARTICULAR ADVANTAGES AND DISADVANTAGES OF WORKING WITH BRCGS STANDARDS?TherewasagreementamongthebrandsinterviewedthatBRCGSprovidesmanybenefits,andBRCGSstandardsareperceivedasanespeciallygoodexampleofaGFSIbenchmarkedCPO.

Thestandardiswelldefinedandregularlyrevised.BRCGSprovidestrainingtomanufacturersandauditors,usefulinformationandothervalue-addedservices.BRCGSisalsoperceivedtobeopentoideasandwillingtotakeinputfromallstakeholders.

Thepotentialdownside,ofanyofthefoodsafetystandard,thatneedstobecarefullyscrutinised,isthequalityofauditing.BRCGSwaswidelyviewedtobeanexampleofgoodpractice,withtrainingofauditorsandacomprehensivecomplianceprogrammethatsystematicallyreviewsauditperformance.

4.5 IMPACT OF THIRD-PARTY STANDARDS ON DIRECT AUDITINGManybrandscontinuetohavetheirownprogrammeofauditsandsitevisits,toensurethattheythemselvesmeettheneedforduediligenceinmanagingtheirsources.TheGFSIstandardsprovideasoundbaseline.Buttheycannotcoverallthespecificsforeverybrand.Consequently,thereareadditionalinspectionsthatmaybebasedonanassessmentofrisk,butdonotcoverthesamegroundastheGFSIaudits,butexplorethebrands’specificneeds,whichtheywouldnotperhapswishto“pool”inthethird-partystandards.

Visitstositescanbemoreinthenatureofoverallassessmentsofmanufacturerquality,overandabovethefactorscodifiedinthethird-partystandards.Theycaninvestigatethemanufacturers’facilitiesandapproachtoproductionforaparticularbrand,whichmightnotbeselectedforclosescrutinyduringthegeneralauditsagainsttheGFSIstandards.Theycanalsoincludeelementsofadviceandmentoring,supportingsupplierstoenhancequalityaswellassafety,andtothereforegrowtheirbusinesswithvariousbrands.However,anunderstandingofmanufacturers’operationscanalsoinformbrands’inputsintorevisionsofthestandards.

4.6 IMPACT OF THIRD-PARTY STANDARDS ON FBO COMPETITIVENESSCertificationisperceivedassupportingmanufacturers’competitiveness.First,byensuringbasicsafety,whichprovidescredibilityinthemarketplace.Second,winningcontractsfrommajorbrandsraisestheprofileandreputationwithotherpotentialcustomers,andsoitisaplatformforFBOgrowth.

4.7 STANDARDS CONVERGENCE AND THE FUTURE OF THIRD-PARTY STANDARDSJudgingbyourowninterviewswithbrandowners,thereisnoapparentexpectationof,orenthusiasmfor,futureconvergencetoasinglestandard.Althoughthediversityofstandardsmightappeartonullifyoneofthemainbenefitsoftheemergenceofthethird-partyframework,thatdiversitymaintainsanelementofchoiceforFBOsandbrandsandcompetitionbetweenCPOs.

Thelatterstimulatesaprocessofrevisingthestandardsonaregularbasis.Adegreeofco-ordinationthroughGFSIbenchmarkingandtheirorganisingofinternationalnetworkinghelpstomaintainquality.GFSIthemselvesmaynothavetheresourcestodevelopasinglestandard,anditisperceivedasunlikelythatCPOsandbrandswouldsupportsuchadevelopment.

Anothercandidateforasinglestandard–ISO22000–hasnopre-requisiteprogrammes.ThesearedefinedontheISOwebsiteas“(PrerequisiteProgrammes-Allfoodbusinessmusthaveinplaceprerequisiteprogrammes(PRPs).Thesearegoodhygienepracticesthatarethebasicconditionsandactivitiesnecessarytomaintainahygienicenvironment.FBOsmustalsoconsidermaintenanceofthecoldchainandallergencontrolwhenputtingPRPsinplace.)”AGFSIbenchmarkCertificateProgrammeOwner–FSSC22000-hasbuiltonthebasicstandardbyaddingPre-requisiteprogrammes.

14 GFSIaimsforthecontinuousimprovementoffoodsafetymanagementsystemstoensureconfidenceinthedeliveryofsafefoodtoconsumersworldwide.Activitiesincludethedefinitionofrequirements forfoodsafetyschemesthroughabenchmarkingprocess.


5 LITERATURE REVIEWThissectionisabriefreviewofsomeofthepublishedresearchintotheimpactofprivatefoodstandards,includingtheeffectsoninternationaltrade,foodsafetyandonindividualFBOs.

5.1 INTERNATIONAL TRADEFBOscertifiedtofoodsafetystandardsareabletooffertheirproductworldwidewiththeircertificatebeingacceptedasdemonstratingsafeandgoodqualityfood.Thestandardsarethussimilartoothertechnicalandmeasurementstandardsthatareacceptedinternationallyasprovidingassuranceofreliability.Theyacttoreducenon-tariffbarrierstointernationaltrade,enablingexportsbyboththecountriesdevelopingthestandardsandothernationswhoseproducersarecertifiedtoit.Animportantresearchquestionisthereforehowtheyareeffectiveastradepromoters.Researchhasfocussedonrelatingtradevolumesinagriculturalandfoodproductstothenumberofcertificationstoastandardintheexportingcountry.Indicatorshavebeenthenumberofcertificationsforoneorotherstandards,nottheaggregateofallsuchcertifications.

Theprimaryresultshaveshownthatintensityofcertificationsdoespromoteexports–thereisareductioninbarrierstotrade.Somepapershavereportedthatthiseffectisinsignificantorevennegativefordevelopingorlowerincomecountries.Astudy(Mangelsdorf,2016)oftherelationshipbetweentheexportsofmanycountriesandthenumberofcertificatestotheInternationalFeaturedStandard(IFS)heldfoundthatthereisingeneralapositivelink–morecertificatesleadtomoreexports.Thismayinpartbeattributedtoknowledgetransferthroughthecertificationprocess.ButthispositiveeffectisabsentforcountriesinAfrica,interpretedasindicatingalackofknowledgetransferthroughcertificationinthatcontinent.Usingthesamedataset,anotherpaperfindsthatcertificationtotheIFSstandardstimulatestradeflowsbetweenpairsofhigherincomecountriesbutcanhaveanegativeeffectonexportsoflowerincomecountries(Ehrich&Mangelsdorf,2016).

Buttheremaybedifferencesintheeffectsofcertificationbetweenagriculturalproductsandmanufacturedfoodproducts.CertificationtotheAgriculturalProductsStandard,GlobalGaphasbeenreportedtostimulateexportsoffoodfromlessdevelopedcountriestoEurope(Andersson,2019).ThepaperalsoreportsresultsfromresearchintoFBOsinFrancewhichfoundthatBRCGScertifiedfirmsweremorelikelytoexportthannon-certifiedorthosewithothercertificates.

Kim(2021),whousesthenumberofISO22000certificatesastheexplanatoryvariablefindsthatthereisanegativeeffectontheexportsofprocessedfoods,whichtendtobemoretheprovinceofdevelopedeconomies.Buttheeffectispositiveonagriculturalexports,whichistakentoindicatethatdevelopingcountries’exportsarenotdiscriminatedagainstbytheuse of food safety standards.

5.2 PRODUCT RECALLSSomepaperspublishedrecentlyhavereportedincreasingnumbersoffoodproductrecalls,especiallyintheUS(Potteretal.,2012;Page,2018).Thesecanhavesignificantcostsfortheproducers.Onestudyfoundthatthestockmarketvalueofafirmwitharecallwithpotentiallyserioushealthconsequencesfellbyanaverageof1.15%within5daysoftheannouncement(Pozo&Schroeder,2016).Buttherewasnoimpactforarecallwithonlyaminorhazard.

Theupwardtrendinrecallshascoincidedwiththeincreasingavailabilityoffoodsafetystandards.Undertakingprocessreformstoattaincertificationtooneofthesestandardsisanoptionforfoodbusinesseslookingtoreducetheriskofproblemsleadingtorecalls.ResearchforanMScthesis(Zhang,2016)foundthattheexperienceofaproductrecalldidleadtoahigherprobabilityofseekingcertificationtoastandard.Thethesisalsoreportsthataformulaforestimatingthedirectfinancialcostsofarecall(publicity,productretrievalanddisposal)hasbeencalculatedas(retailpricex3xvolumeofproductrecalled).

Acontributoryfactortotheupwardtrendhasbeentherapiddevelopmentinsurveillancesystemsandcapabilitybyregulatorybodies,lowertolerances,betterandincreasedmonitoringandreporting,andincreasedrangeofhazardsthatcantriggerarecall.Operationalratherthanbiological/chemicalhazards,especiallyundeclaredallergens,havebecomethereasonforthemajorityofrecalls(Page,2018).

5.3 MICRO LEVEL – SURVEYSThereareseveralexamplesofresearchontheexperienceofbusinessesofcertificationtofoodstandardsundertaken


throughsamplesurveys.Mostoftheseworkedwitharelativelysmallsample,intherangeof40to350responses.Thequestionsweremostlyrelatedtomotivesforseekingcertificationtoastandard,andtheconstraintsorproblemsintheirimplementation.Therewereratherfewerattemptstoengagewiththeenterpriseleveleffectsandevenlesscoverageoftangiblecommercialbenefits.Mostofthesurveysuselikertscalestogaugetheimportancetotherespondentsofaseriesofpropositionsaboutthevariousaspectsofcertification.

5.3.1 OBJECTIVE AND MOTIVATIONS FOR CERTIFICATION Insummary,thehighestratedmotivationstendtobethecorepurposesofthethird-partyfoodstandardssystem,namelysaferfoodandacceptabilityoraccesstomajorretailcustomers.Surprisingly,commercial,marketmotivationsandbenefitsweregenerallyratedlower,althoughitmustbeborneinmindthatthesurveyquestionnairestendedtoofferfewerpropositionsintheseareas.

AsmallsurveyinPortugalwith62respondentscertifiedtoISO22000(TeixeiraandSampaio2013)reportedthat3ofthetop4motivationsrated‘Important’or‘MostImportant’bythelargershareswereConfidenceofConsumers,CustomerRequirements,CommitmenttoProductSafetyandMarketDifferentiation,whichwasthethirdhighestranked,perhapspointingtocompetitiveadvantageasaconsciousobjectivethatwasnotfullybroughtoutinthisstudy.

Astudyofanachievedsampleof192Agri-foodbusinessesinItaly(Spadonietal.2014),whichwereBRCGScertified,withquestionsusinga7pointlikertscales,includedmotivations,howeverthepaperdoesnotreporttheresultsforthese.Theysuggestatheoreticalframeworkforunderstandingtheroleofprivatefoodstandards.Thisisbasedontheconceptofproductcharacteristics,whichincludeCredenceAttributes-assertedbyexpertsorknowledgeableusers,andsocanbebelievedbyconsumersandPotemkinattributes,whichcanbeclaimedbutarenotobservableevenbyexternalexperts15.

Table1showsthefourmosthighlyrankedobjectivesfromseveralsurveysofusersoffoodsafetystandards.Thesearelargelyconcernedwithimprovingtheperceptionofthebusinessbycustomersandconsumers.

Table1:Objectivesandmotivationforcertificationtofoodsafetystandards

5.3.2 CHALLENGES AND COSTS OF CERTIFICATION TO FOOD SAFETY STANDARDSThestudiesreviewedwereheavilyfocussedontheconstraintsorchallengesfacedbybusinessesinimplementingthevariousfoodstandards,perhapsgivinganimpressionslightlybiasedtowardsthenegative.Thedirectcostofadoptingastandardwasfrequentlycited,(Rincon-Ballesterosetal.,2019;Casolani,Liberatore,andPsomas2018)particularlyforsmallerbusinesses.

Similarly,theburdensofperceivedbureaucracy,whosepurposeswerenotwellunderstood,waswidelycited(EscancianoandSantos-Vijande2014a).Somequalitymanagerswereconcernedaboutaperceivedrigidityofapproachbyauditors,whodidnotadapttheirassessmentstothecircumstancesofindividualFBOs.Alsoimportantweresomeinternalconstraintsonimplementingthechangesinorganisationandbusinessprocessesneededtoachievecertificationtooneofthestandards.Theseincludedlackofskillsofemployeesandtheirresistancetochange(MensahandJulien2011;TeixeiraandSampaio2013).Thelevelofemployeeskillsandthecostsoftrainingtoachievetherequiredlevel,togetherwithresistancetochangesinpractices,werealsoreportedasamongstthemainconstraintsonimplementationbyChenetal(2015).However,thesebarrierswereovershadowedbythedirectcosts-paperworkandprocessdevelopment.Table2summarisesthemainfindingsonchallengesandcostsfromtheliterature.

BRCGS(Rincon-Ballesterosetal.,2019)

Productsafetyandquality

Consumerwelfare

Accessforeignmarkets

Ethicalprinciples

BRCGS(MensahandJulien2011)

Productquality

CustomerRequirement

RegulatoryRequirement

Marketingadvantage

ISO 22000(TeixeiraandSampaio2013)

Consumerconfidence

Customerrequirement

Marketdifferentiation

Foodchainproductsafety

ISO 22000(EscancianoandSantos-Vijande2014b)

ImproveimageintheMarket

Improvequalityandsafety

Achievecustomerconfidence

Future competitive advantage

15 ThisideaisexplainedbyBecker(1999)as‘placeboeffect’or‘potemkineffect’withtheexampleofpublicregulatorysupportunlinkingtheimportanceof‘countryoforigin’asanindicatorofquality.


Table2:Challengesandcostsofcertificationtofoodsafetystandards

5.3.3 OUTCOMES OF CERTIFICATION TO FOOD SAFETY STANDARDSThemostimportanteffectsoroutcomesforbusinessesofadoptingafoodstandardreportedintheliteraturehaveclusteredaroundinternaloperationalimprovements(MensahandJulien2011;Spadonietal.2014)andexternalreputationandimageeffects-perceivedasasupplierofsafefood(TeixeiraandSampaio2013)16.

Certificationprovidesassurancethatgoodsafetypracticesarebeingfollowed(EscancianoandSantos-Vijande2014a).Directmarketandcommercialgainsgenerallyhavealowerprofilebutare,byimplication,expectedtoarisefromcompetingonperceivedquality.

ApaperonthefinancialperformanceofPolishsmalltomediumsizedbusinesses(SMEs)(Kafel&Sikora,2012)foundthatresultswerebetterforthosecertifiedtotheBRCGSorIFSstandardsbutwerebetterstillforthosewhoalsoholdtheISO900117managementstandard,pointingtothescopeforcomplementaritybetweengenericandfoodsafetystandards.Thestudywasbasedonjust30businessessocannotbetakenasdefinitive.

Improvedbusinessperformancewasalsoreportedinapaperbasedonasurveyof210businesseswithHalalFoodCertificationinMalaysia,whichisarguedtobestrictandcomprehensiveenoughtobeequivalenttooneoftheFSMSstandards.Table3summarisesthemainfindingsonoutcomes.

BRCGS(Rincon-Ballesterosetal.,2019)

Financialconstraints

Lackoffavourableinstitutionalenvironment

Organisationalresistance

Lackofinformation and support(FSMS)


Internalresistance to change

Direct costs

Employeeskills

Takeupofemployeetime


Notaprerequisitefordoingbusiness

ISO22000notwellknown

Highcostsofimplementation

Notrequiredbygovernment


Excessive demands on time and resources

Excessive formalism

Thevolumeofdocumentation required

Highcost,financialconstraints

ISO 22000(Casolani,Liberatore, and Psomas2018)

Costforcertification

Slowsdown some procedures

Lackofinternationalconsumer expectations

Notflexible


Employeeresistance to change

Lackoftechnicalknowledgeandskillofemployees

Lackofawareness of requirements

Highcostofdevelopmentandimplementation

Certification provides assurance that good safety practices are

being followed (Escanciano and Santos-Vijande 2014a)

16 WHOalsoreportthatover70%ofrespondentswerecertifiedtomorethanonestandard.17 https://www.iso.org/iso-9001-quality-management.html


Table3:Outcomesofcertificationtofoodsafetystandards

5.3.4 DERIVED INDICATORS Someofthesurveyedpapershaveappliedexploratoryfactoranalysistotheirdatainordertogeneratesummaryindicators.Thesecanbeinterpretedasthemorefundamentaldimensionsoffoodbusiness’purposesandoutcomesfromcertification.

Thespecificquestionsinthesurveyscanthenbeunderstoodasthefacetsorbuildingblocksofthesecoreconceptsoftheeffectsofcertificationtoastandard.Oneexampleisthederivationofsummaryindicatorsbyfactoranalysisfrom120responsestoasurveyofUKFoodManufacturers(MensahandJulien2011).

NearlyallofthesewerecertifiedtotheBRCGSstandard.Factor1concernsengagementwithinternalandexternalstakeholders-employees,governmentand‘learningcentres’.Factor2isaboutupgradingsystemsandstaffand

BRCGS(Spadonietal.2014)

TheHACCPsystemismoreefficient

Astrongcommitmentwas necessary for thetrainingandqualificationofthepersonnel

Intensificationandbetter interpretation ofmonitoringprocedures on chemicalandphysicalcontamination,GMOandallergens

Anenhancementofimageandanincreasingofreputation towards customers occurred

Also important:TheBRCGSapproachisalsoeffectiveduringthepublicbodiesaudits

Internalauditsystem(asdescribedintheBRCGSstandard)hasalloweda self-evaluationmoreeffective

ISO 22000(Casolani,Liberatore,andPsomas2018)

Improvingcapacitytoaccess domestic and internationalmarkets

Improvingproductsafety

Improvingtraceability

Demonstration of improved safety


Improved methodologiesandpractices

Improved customer satisfaction

Improved consumer confidence

Improved food safety

ISO 22000(EscancianoandSantos-Vijande2014a)

Bettermanagement/controloffoodhazards

Improvedimageinthemarket

Facilitatescompliancewithfoodsafetylegislation

Betteremergencyresponse


Increased customer satisfaction

Improvedinternalprocedures

Improved product quality

Compliancewithregulatoryrequirements


standardprocessesandmakingthisacontinualpartofthebusinessprocess.Factor3includestrainingoftheirownstaffandsuppliermanagement.Thefinalfactoristopmanagementcommitment,whichissuggestedtobeaprecursortotherestandisanessentialpartofmostofthestandards.

Anotherexampleoffactoranalysiswasappliedtoanachievedsampleof192agri-foodbusinessesinItalywhowereBRCGScertified(Spadonietal.2014).Thesurveygenerated28variables,whichwerereducedto8summaryvariablesbyusingfactoranalysis.Thesearelabelledbytheresearchersas:

• Compliance;• Teaminvolvement;• Resourcemanagement;• Managementofinspection;• Relationshipmanagement;• Reducedautonomy;• Auditefficiency.

Thelasttwoofthesemakesmallcontributionstotheexplanatoryeffectoftheanalysis.Thepapertakesthefurtherstepofderiving,byclusteranalysis,fivegroupsofbusinesseswithsimilarpatternsoffactorscores.

Theseareinterpretedas:

• Conformers-Themajority(nearly50%)whoadoptedthestandardasacustomerrequirement,butfeltittobe somewhatofaconstraintontheirfreedomofaction.

• Opportunists-Agroupwhichfoundbenefitsmainlyinimprovedexternalrelationshipsincludingmarketing,butdidnot considerthatthestandardhadbeenimposed.

• Unconcerned-Athirdclusteridentifiedasnotperceivingsignificantbenefitsthemselvesbutobligedbycustomersto gaincertification.

• Unaware-Aclusterwhofindthestandardenhancesteamwork,supportedbytraining.Buttheydonotseemtohave exploitedtheopportunitythuscreatedtoenhancetheirmarketposition.

• Consolidated–Asmallclusterthatfindthestandardhelpfulforteaminvolvement,buildingonexistingoperating strengthsandintegratingotherqualitymanagementsystems.Thisgroupiscomposedbycompaniesthatingeneral didnotperceiveanyspecificimpactoftheBRCGSimplementationbuttheystronglyagreeontheeffectsof BRCGSintermsofteaminvolvementandauditefficiency.

Insummary,thesecategoriesimplyarelativelypassiveattitude,withlimiteduseofcertificationstatuspro-activelytoachievemarketorcommercialadvantage.Butthegroupsidentifieddisplayaplausiblerangeofattitudes.

Astudyof192foodbusinessesinSpaincertifiedtoISO22000(EscancianoandSantos-Vijande2014)alsoderivedtwosetsoffactorssummarisingproblemsandbenefits.Thisisalimitinguseofthetechniquesinceitmaintainsthehardandfastdistinctionunderlyingthesurveyquestions.Poolingthedatafromasurveyenablestheidentificationofmorecomplexinteractionsandpatternsofcommonalityacrosstheinitialcategories.

Problems• “organizationalresistance”includingemployeeattitudes• “bureaucracyandcost”similarlytostudiesofimplementingothermanagementsystemsandstandards.• “unfamiliarity”-limitedawarenessofimplicationsofthestandards.

Benefits• “improvedfoodsafety”• “commercialbenefits”especiallyaccesstointernationalmarkets.• “internalefficiency”involvingimprovedcommunicationsandresourcemanagement• “improvedcompetitiveposition”


• “improvedcommunication”• “technologicalimprovement”-betterpremisesetc.

Therearesome,butlimited,similaritiesbetweenthesummaryindicatorsderivedbythesestudies,mainlyaroundinternalteamsandtheirdevelopment,externalrelationshipsandmanagementofresources.Communicationsandimprovedcompetitivepositionalsoemergedasunderlyingaspectsofcertification.


6 EMPIRICAL RESEARCHAmajorpartofthiseconomicresearchprojectisasurveyoffoodcompanies(FBOs)certifiedtoBRCGSstandards.Thissectionpresentsthemainfindingsfromthesurveyandputstheseinthecontextsoftheotherfacetsofthestudy,includingthereviewofrelevantpublicationsandinsightsprovidedbyinterviewswithbrandrepresentatives.

EarlierresearchemphasisedthemotivesforFBOsinseekingthird-partycertification.Asthesestandardshavedevelopedmainlythroughtheleadershipofmajorbrands,whoarethedirectcustomersofFBOs,itisnotsurprisingthattheneedtomeettherequirementsofthesecustomers,enshrinedinthestandards,hasbeenaprimarydriveroffoodcompanies’adoptionofthestandardsandthecertificationprocessthatgoeswiththem.Thesestudiesdidnotcitetheimpactsonsales,costsandprofits,andonmarketaccessandcompetitivenessrelatedmotivations.

Acoreobjectiveofthisstudyhasthereforebeentoexploreinmoredetailthemarketandcommercialaspectsofthird-partystandards,includinghowtheyenterFBOs’objectivesforseekingcertification.So,thecurrentsurveyinstrumentshavefocusedmoreonthebusinessdimensions,aswellasincludingfoodsafetyaspects.

Atotalof451businessesrespondedtothesurveyfromawiderangeofgeographiclocationsacrossEurope,NorthAmerica,SouthAmerica,AsiaPacifictheMiddleEastandAfrica.Respondentscoveredawiderangeofproductsandstandards,includingnon-food.Afullbreakdownofterritory,businesstypeandsizeisavailableinAnnex1.

Thefindingsaresetoutundertheheadingsofi)motivations/objectivesforcertification;(ii)thebusinessactionstakentoachievecertificationand(iii)themajorimpactsonfirmperformanceofcertificationandtheassociatedbusinessactions.

6.1 MOTIVATIONS AND OBJECTIVES FOR CERTIFICATION

Figure1:Theneedtoprovidesafefoodasamotivationforcertification

Similarlytotheresultsofearlierresearch,over80%ofrespondentsseeensuringthattheirproductsaresafeasahighlyimportantreasonforcertification.

0

MOST IMPORTANT

HIGHLY IMPORTANT

SOME IMPORTANCE

NEITHER IMPORTANT OR UNIMPORTANT

NO IMPORTANCE

NOT APPLICABLE/DON’T KNOW

5045403530252015105Percentage of respondents (%)

Over 80% of respondents see ensuring that their products are safe as a highly important reason for certification.


0

MOST IMPORTANT

HIGHLY IMPORTANT

SOME IMPORTANCE


NO IMPORTANCE



5040 0

MOST IMPORTANT

HIGHLY IMPORTANT

SOME IMPORTANCE


NO IMPORTANCE



5040

Figure2:Theneedtomeetexistingcustomerrequirements Figure3:Theneedtomeetpotentialcustomer asamotivationforcertification requirementsasamotivationforcertification

Inlinewithpreviousstudies,over85%reportedtherequirementsofcurrentcustomersashighlyimportantmotivesforcertification.Asimilarnumberofrespondentsreporttherequirementsofpotentialcustomersasahighlyimportantmotivation.

Figure4:Theneedtoincreasecompetitivenessinthe Figure5:Theneedtoimprovecompetitivenessinexportdomesticmarketasamotivationforcertification marketsasamotivationforcertification

Enhancingmarketcompetitivenessalsoemergesasamajordriver,withover50%citinghomemarketcompetitiveness.61%ofbusinessesreportcompetitivenessinexportmarketsasahighlyimportantfactorinseekingcertification.Foodcompaniesperceivethatcertificationtoathird-partystandardactsasacompetitiveweaponinseekingtowidenanddeepentheircustomerbase.

Respondingtocompetitors’certificationwasalsoafactorformanyFBOsbutonly40%sawitashighlyimportant.

Figure6:Theneedtorespondtocompetitor’scertificationasamotivationforcertification

0

MOST IMPORTANT

HIGHLY IMPORTANT

SOME IMPORTANCE


NO IMPORTANCE



5040 0

MOST IMPORTANT

HIGHLY IMPORTANT

SOME IMPORTANCE


NO IMPORTANCE



5040

0

MOST IMPORTANT

HIGHLY IMPORTANT

SOME IMPORTANCE


NO IMPORTANCE



30


Seekingcertificationinordertogaincompetitiveadvantagecanbeseenasapro-activeuseofthestandardssystem.ThisissimilartothewaysinwhichtechnicalandotherstandardspublishedbyISOandnationalstandardsbodiesareusedasknowledgeinputsbyinnovativebusinesses(egTempleetal,2005).

6.2 IMPACTS OF CERTIFICATION ON BUSINESS OPERATIONSWenextturntothesurveydataonFBOimplementationofbusinessactionstomeettherequirementsofBRCGSstandards.Theseincludedexpenditureonenhancingthecapabilitiesofthefirm’sdaytodayoperations,aswellasinvestmentsincapacityanddevelopmenttopresentamorecompetitiveofferingtothemaincurrentandpotentialcustomers.RespondentsalsoreportedontheirviewofthedirectcostsofacquiringandmaintainingtheirBRCGSstandards,andonthecostsofpaperworkandreportingassociatedwithcertification.Thesetoocanberegardedasaformofinvestmentingainingthemarketcredibilitythatcomeswithcertificationtooneoftheleadingfoodsafetystandards.Thedataalsoincludesasetofperformanceoutcomescoveringgrowthinsales,exportsandprofitability.

Themainpurposeoffoodsafetycertificationistoreducetheriskstoconsumersfromunsafefoodenteringthesupplychain.Fromthatperspective,improvementsinbusinessperformanceareinsomerespectsanunanticipatedbonus,andtheappropriatebenchmarkforassessingtheirscaleiszero.TheextensiveandintensiverangeofimpactsreportedinthefollowingsectionscanthusbeseenasimpressiveandasexceptionalbenefitsforBRCGScertifiedFBOs.

6.2.1 MODERNISATION AsonedimensionofthemultiplewaysofmeetingtherequirementsoftheBRCGSstandards,asubstantialshareoftheFBOsrespondingtothesurveyhadundertakenchangesinbusinesspracticeorintheirproductionresourcesthatcanbestbeinterpretedasmodernisation.Aspectsofthishaveincluded:

• Improvingthestockofphysicalcapitalthroughneworupgradedplantandequipmentwascitedby50%of respondents.Betterproductionfacilitiesshouldcontributetoachievingthegoalsoffoodsafetyaswellasproductivity andcompetitiveness.Around27%hadupdatedtheirinformationtechnology.

• Changestotheproductdevelopmentprocesswerereportedby28%ofbusinesses.

Figure7:Businessmodernisation(Source:owncalculations)

100%

90%

80%

70%

60%

50%

40%

30%20%

10%

0%UPDATE PHYSICAL

CAPITAL

AGREE

NEUTRAL

DISAGREE

UPDATE IT CHANGE PRODUCT DEVELOPMENT

PROCESS


6.2.2 EFFICIENCY AND INVESTMENTThecertificationprocesshasbeenaspurtoarangeofinvestmentandmanagerialchangesthatarelikelytohaveraisedthelevelofefficiencyandopenedexpansionopportunities.Examplesoftheseinclude:

• Changesinorganisationhasbeenespeciallywidespread,withnearly70%ofrespondentsinagreementthatthiswas oneoftheeffects.Itisplausiblethatexternalscrutinyoftheiroperationsandtheavailabilityofacodifiedsummaryof goodpracticeinproducingfoodsafelywerehelpfulinputstoFBOswillingtomakechangestotheiroperations.

• Nearly50%ofrespondentsagreethattheyhaveinvestedinnewtechnology,whichshouldfurtherenable consistentlysafeandhigh-qualityfoodproductionanddistribution.

• Aswellasefficiencygains,thecertificationprocesshasbeenassociatedwithincreasesinproductinnovationfor30% ofrespondents.Thisisastrikingresultastheinitiativeinnewproductdevelopmentmightbeexpectedtolielargelywith majorbrands,ratherthanFBOs.

Themajorityofthosenotreportingefficiencyandinvestmentgainswereneutral,withonlylowsharesbeingsurethatthesechangeshadnotoccurredintheirbusiness.

Figure8:Efficiencyandinvestment(source:owncalculations)

6.2.3 OPERATIONS Aswellastheinvestmentincapital,ITandorganisationalchange,thevastmajority–85%ofrespondentshaveenhancedtheiremployeeshumancapitalbyinvestingintrainingaspartoftheiradoptionofBRCGScertification.Theskillandcommitmentofstaffisacrucialelementinachievingandmaintaininghighqualityproductionandcontributingtoanenvironmentthatconsistentlysuppliessafefood.Trainingalsoenhancesthefutureemploymentprospectsofstaffandhelpstoraisethelevelofskillsfortheindustryasawhole.

Investmentsinoperationalchangearealsoassociatedwithbetterqualityproducts,withmorethan63%ofrespondentsreportingimprovements,whiletheeffectsonfoodsafetyareevidencedasaround40%ofrespondentsreportfewerproductrecallsandwithdrawals,sinceachievingBRCGScertification.

100%

90%

80%

70%

60%

50%

40%

30%20%

10%

0%BETTER

ORGANISATIONAL OF PRODUCTION

AGREE

NEUTRAL

DISAGREE

INVESTMENT IN NEW TECHNOLOGY

INCREASE IN PRODUCT

INNOVATION


Figure9:Operations:training,productqualityandrecalls(Source:owncalculations)

6.3 IMPACT ON BUSINESS PERFORMANCE

6.3.1 COMPETITIVENESSWehaveseenthatenhancingtheircompetitiveedgewasanimportantobjectiveformanyFBOs.Thissectionreportsontheextenttowhichsurveyrespondentsconsiderthattheyhaveachievedimprovementsincompetitivenessinvariousmarketsandhowthesehavebeentranslatedintogrowthandprofitability.

Over50%ofrespondentsreportanimprovementincompetitivenessintheirhomemarket,while60%reportimprovedcompetitivenessinexportmarkets.Takentogether,over70%hadincreasedcompetitivenessinoneorbothofhomeandexportmarkets.

Thereisevidencefromthesurveythatcertificationopensmarketopportunitiesasitprovidesaclearandobjectiveindicatorofsafetyinproductionandinproductquality.Similarsharesofrespondentstothosereportingcompetitivenessgainsfoundthattheyhadaccesstolargermarketsbothathomeandinoverseasmarkets.Again,lowsharesofrespondentswerecertainthattherehadnotbeengainsincompetitiveness.

100%

90%

80%

70%

60%

50%

40%

30%20%

10%

0%TRAINING

AGREE

NEUTRAL

DISAGREE

PRODUCT QUALITY FEWER RECALLS

Over 70% of respondents had increased competitiveness in one or both ofhome and export markets.


Figure10:Competitiveness(Source:owncalculations)

6.3.2 GROWTH IN SALES IN HOME MARKETS AND ABROADSomestrikingcommercialresultsflowedfromthegainsinefficiency,operationalimprovementsandcompetitivenessassociatedwithcertification.Theresultswereparticularlyextensiveingainingnewcustomersandinexportmarkets,withcertificationprovidingassurancetopotentialcustomersthatFBOscansupplysafeandhigh-qualityfoods.

Growthinsalestotheirestablishedcustomerbasewasexperiencedbynearly40%ofrespondents,whileexpansionofsalesvolumestonewlygainedcustomerswasreportedby55%.Certificationofferscurrentandespeciallypotentialcustomersahigherprobabilityofpurchasingsafeandhigher-qualityproductsandhelpsFBOstopenetratenewmarkets.

Similarly,around55%ofrespondentsagreethattheyhaveincreasedsalesinthehomeorexportmarketsorboth.

Somewhatunexpectedly,animpressiveshareofrespondentswereabletoproviderangequantificationofsalesgrowth.Therangesinthequestionwereincreasesinsalesof:

• 0-5%• 5-10%• Over10%

Itispossibletosummarisethisdataintoasinglefigureontheworkingassumptionsthattherangescanberepresentedbytheirmidpoints.Fortheupperrangeofover10%theassumptionusedhereisthatthiscanbecappedat20%,withamid-pointof15%followingthelogicthatthetopofeachrangeisdoublethebottom.

• 0-5%=2.5%• 5-10%=7.5%• Over10%=15%

Ontheseassumptions,theweightedmeanincreaseinsalesforthose(43%ofrespondents)givingapositiveresponsewas 7.5%.

100%

90%

80%

70%

60%

50%

40%

30%20%

10%

0%INCREASED

COMPETITIVENESS IN HOME MARKET

AGREE

NEUTRAL

DISAGREE

INCREASED COMPETITIVENESS IN

EXPORT MARKET

ACCESS TO LARGER HOME MARKET

ACCESS TO LARGER EXPORT MARKET


6.3.3 INTERNATIONAL TRADESomeoftheresearchcitedintheliteraturereviewhasfoundasignificantassociationbetweentheshareoffoodbusinessesholdingcertificatesfromoneoftheCPOsandthevolumeofinternationaltradebetweenthenationsconcerned.Consistentlywiththeseresults,thepresentstudyhasfoundthatover45%ofrespondentshaveseensalesgrowthinexportmarkets,reflectingthegainsininternationalcompetitivenessnotedabove.Ingeneral,thestimulustogrowthofcertificationtotheBRCGSstandardislargerforexportsthanfordomesticsales,althoughthelatteraresubstantial.

Figure11:Growthinhomemarketsandabroad(Source:owncalculations)

6.3.4 OTHER COMMERCIAL EFFECTSThesurveyreportedonarangeofothercommercialimpactsfromBRCGScertification,namelycosts,profitabilityandnumber of audits. Onlyasmallproportion–lessthan17%-attributeoperatingcostreductionstocertification,whereasover50%disagreewiththisproposition.Thereismuchmoreofatendencytoincurcoststomeettherequirementsofthestandard,althoughsomeoftheoutlaysseemlikelytogiverisetootherbusinessbenefits,suchasenhancedphysicalandhumancapital.

Justunder30%ofrespondentsagreewiththeideaofincreasedprofitability,butitisperhapsstrikingthatsuchasubstantialsharecanidentifyprofitabilitygains.

Interestingly,nearlyhalfofrespondentsfindthatcertificationisassociatedwithfewerauditsbytheircustomers–oneoftheleadingrationalesforthedevelopmentofthird-partyfoodsafetystandards.Andtheinterviewswithbrandrepresentativessuggeststhat,withtheavailabilityofthird-partystandards,suchasthoseoftheBRCGS,theirownauditingismoreconcernedwiththeunderlyingcapabilitiesofsuppliersandthebrands’specificrequirementsandrepresentaddedknowledgeforthem,andnotmainlyundertakenasdoublecheckingonthethird-partyaudits.

BRCGS certification has been associated with a wide range of changes in business processes and investments.

100%

90%

80%

70%

60%

50%

40%

30%20%

10%

0%EXISTING

CUSTOMERS

AGREE

NEUTRAL

DISAGREE

NEW CUSTOMERS HOME MARKET EXPORT MARKETS


Figure12:Othercommercialeffects(Source:owncalculations)

6.3.5 PROFITABILITYOursurveyhasdiscoveredthatacquiringandmaintainingBRCGScertificationhasbeenassociatedwithawiderangeofchangesinbusinessprocessesandinvestmentsinthedevelopmentofresources.Inturn,largeproportionsofFBOshaveachievedimprovementsinbusinessperformance,includingoutputgrowth,especiallyexports.Comparedwiththelimitedevidenceonfinancialimpactsofcertificationfoundinpreviousresearch,ourdatashowedthataroundonethirdofrespondentswereabletoreportenhancedprofitabilityandwerealsoabletoprovidesomequantificationofthis.

Althoughinresponsetothequalitativequestionaround27%ofrespondentsagreethatBRCGScertificationisassociatedwithanincreaseinprofitability,butrespondingtothequestionaboutquantifyingprofitabilityincrease,over34%ofrespondentsagreethattheyhaveincreasedprofitabilityinarangefrom0toover10%.

Somewhatunexpectedly,animpressiveshareofrespondentswereabletoproviderangequantificationofprofitabilitygrowth.Therangesinthequestionwereincreasesinprofitabilityof:

• 0-5%• 5-10%• Over10%

Itispossibletosummarisethisdataintoasinglefigureontheworkingassumptionsthattherangescanberepresentedbytheirmidpoints.Fortheupperrangeofover10%theassumptionusedhereisthatthiscanbecappedat20%,withamid-pointof15%followingthelogicthatthetopofeachrangeisdoublethebottom.

• 0-5%=2.5%• 5-10%=7.5%• Over10%=15%

Ontheseassumptions,theweightedmeanincreaseinprofitabilityforthose(34%ofrespondents)givingapositiveresponse was 6%.

Closeranalysisindicatesahighcorrelationbetweenthequantifiedincreasesinsalesandinprofitability,whichimpliesthatsalesgrowthataroughlyconstantmarginwasthemaindeterminantofhigherprofitability.Thisisconsistentwiththesurveydatashowingthatonly17%ofrespondentsagreedthattheyhadachievedcostsavingsasaresultofimplementingthirdpartyfoodstandards.

100%

90%

80%

70%

60%

50%

40%

30%20%

10%

0%REDUCTION IN COSTS

AGREE

NEUTRAL

DISAGREE

INCREASED PROFITABILITY

FEWER AUDITS BY CUSTOMERS


6.3.6 CERTIFICATION TO OTHER STANDARDSThestandardsofferedbyBRCGSarebenchmarkedagainstseveralothersbytheGFSI.Aswellasthisgroup,foodsafetystandardscanbesetbyindividualbrands,toensurethatsuppliersmeettheirveryspecificrequirements.AnothersourceistheISO22000standardpublishedbytheInternationalStandardsOrganisation.ThisisoutsidetheGFSIgroupasitdoesnotitselfentailtheuseofpre-requisiteprogrammesbyfoodcompanies.Butitisanoptionalrouteforthem,onitsownoralongsideGFSIstandards.

InordertotrytoplacetheBRCGSstandardsinthewiderfoodstandardscontext,thesurveyforthisprojectaskedafewquestionsabouttheimpactonfoodcompaniesoftheircertificationtootherstandards,inadditiontothoseofBRCGS.Inpractice,thevastmajorityofrespondentsarecertifiedtomultiplestandards,with425of450questionnairereturnsprovidinginformationabouttheimpactontheirbusinessofotherstandards.Theextentofmultiplecertificationsislikelytobearesultoftheneedforfoodcompanies,eventheverysmall,todiversifytheircustomerbaseandminimisetheriskthatlosingonecustomerjeopardisesthebusiness.Brandshavecorrespondingimperativestodiversifysuppliers,tominimisetherisksofdependenceonafew.Thequestionnairedidnotrequestinformationonwhichstandards,anditislikelythattheresponsesrepresentamixofotherGFSIandperhapsnon-GFSIstandards.

Themainfindingsareshowninfigure13.

Figure13:TheimpactonbusinessperformanceofBRCGScertificationcomparedtoothercertificationstandards

• Around35%ofrespondentswithcertificatestostandardsinadditiontoBRCGSreportedanincreaseinsalesto existingcustomersfollowingfromcertification.Thisresultissimilarto,butsomewhatlowerthan,forBRCGS certification.

• 55%ofrespondentsexperiencedincreasedsaleshavinggainedcertificationtoBRCGS.Only44%ofrespondentswith othercertificationstandardsreportedincreasedsales.

• 26%ofrespondentsagreedthatsalesintheirhomemarkethadincreased,comparedto30%ofBRCGS certificatedrespondents.

• 46%ofrespondentswithBRCGScertificationreportedincreasedsalesinexportmarkets,comparedwithalowerfigure of42%forothercertificationstandards.

0

FEWER CUSTOMER AUDITS FOLLOWING CERTIFICATION

INCREASE IN PROFITABILITY FOLLOWING CERTIFICATION

SALES INCREASE IN EXPORT MARKETS FOLLOWING CERTIFICATION

SALES INCREASE IN DOMESTIC MARKET FOLLOWING CERTIFICATION

SALES TO NEW CUSTOMERS FOLLOWING CERTIFICATION

SALES TO EXISTING CUSTOMERS FOLLOWING CERTIFICATION


60

BRCGS

OTHER


• SimilarlytoBRCGScertifiedfirms,around29%ofrespondentsagreedthatprofitabilityhadincreased.

• Over40%ofrespondentsagreedthattherearefewercustomerauditsaftercertificationtoanotherthird-partystandard. Thiscompareswith48%withBRCGScertification.

TheresultsshowthatbusinesseswithBRGCScertificationexperienceamodestextentofgreaterpositiveimpactonperformance,acrossmostofthecommonindicators.Itisperhapsnotsurprisingthatthereisbroadsimilarityofimpacts,sincethemajorityoffoodsafetystandardsarebenchmarkedbytheGFSIinordertoensuresimilarqualityandreliability.Andourdatacomesfrombusinesseswhoaremultiplecertifiedandregularlyauditedagainstseveralstandards,solarge-scaledivergencesintheimpactsofthevariousstandardsseemunlikely.

6.4 RESPONSES BY SUB-GROUPThissectionshowstheresultsofcomparingthepatternofresponsestothequestionsonbusinessbehaviourbetweenthemembersofsamplesub-groups.Thesub-groupsare:FBOsbygeographicallocation(region);FBOsbysizeofbusiness(employment);andFBOsgroupedaccordingtothelengthoftimethebusinesshasbeencertifiedtoaBRCGSstandard.Weidentifiedthosesub-groupvariationsthatarestatisticallysignificant,wherethetestofsignificanceistheprobabilitythatthereisnorelationship,generatedbythechisquaretest,usinga5%threshold.Atableoftheindicatorsexhibitingsignificantvariationbysub-groupsisinAnnex1.Belowwesummarisethemainfindings.

6.4.1 REGIONResponsestothesurveyexhibitsomestrongpatternsbygeographicallocation.Outof48indicators,30showsignificantdifferencesbetweentheregions,withthemajorityofthesedrivenbyhigherthanexpectedsharesof“agreement”responsesintheMiddleEastorAsiaPacific.

6.4.2 SIZEWefoundthat6indicatorsshowedsignificantvariationbysizeofbusiness,mostlyasaresultofahigherthanexpectedshareofsmallfirmsinagreementwiththestatementsinthesurvey.

6.4.3 LENGTH OF CERTIFICATIONOnly5indicatorsshowedsignificantdifferencesbylengthofcertification,thesevariationsweremainlydrivenbyahigherthanexpectedshareofthosecertificatedfor1-5yearsinagreementwiththestatementsoffered.

6.5 RESPONDENT COMMENTSThesurveyquestionnaireprovidedanumberofopportunitiesforrespondentstoaddtheirownthoughtsandcommentsonindividualquestionsandontheaimsofthesurveyoverall.

Insummary,thesewereslightelaborationsonthebasicquestionnaireresponsesanddidnotprovidemajoradditionalinsightsintotheattitudesofrespondents.

Overalltherewere112Comments(72inEnglish).Thesewerespreadacrossthequestions,withthemajorityinthegeneralcommentssectionattheendofthesurvey.OfthoseinEnglish,asubjectiveinterpretationandsummaryofthebalanceofthecommentsisasfollows.

• 24werepositive,inthesensethattheymadespecificremarkspointingtoimprovementsinthebusinessasaresultof adoptingtheBRCGSstandard.

• 20werenegative,inthesenseofspecificallycriticalontheBRCGSstandards,mainlythedirectcostsofcertification, saidtobehigherthanalternatives.

• 21wereneutral,inthesensetheymadegeneralremarksaboutfoodsafetyandcertification,withoutavaluejudgement onBRCGS.

• 7concernedCustomerAudits,withcomplaintsthatholdingtheBRCGSstandarddidnotpreventcustomersfrom carryingouttheirownaudits.Overall,aroundhalfofrespondentsindicatedthatBRCGScertificationhadledtofewer customeraudits.Thisissuewasalsohighlightedinpreviousresearch.


6.6 STORY LINES AND A TYPOLOGY OF CERTIFICATION USESomeearlierresearchbasedonsurveysofusersofsafetystandardshasdevelopedsometypologiesbasedonFBOs’motivationsforcertificationandontheimportancetheyhaveattachedtothereportedusestheymakeandtheimpactsonthemofbeingcertified(e.g.MensahandJulien,2011,Spadonietal.2013).Inthissection,wereportonsimilarexercisesinmodellingthepatternsofapproachestoobtainingandapplyingcertificationtoBRCGSstandards.Inthiswehavetheadvantageofaratherlargersurveydatasetthanthoseavailabletoearlierresearchers.

ThesurveyofBRCGScustomershasgeneratedalargeamountofdataforaround450businesses.ThisdataenablesthecalculationofindicatorsofhowgroupsofthesebusinessesapproachqualifyingfortheBRCGSstandardsandusingtheircertificationtoincreasetheircompetitivenessininternationalmarketsanddevelopingandimprovingtheirproducts.Inthissectionwereportontheresultsofapplyingsomewell-establishedstatisticaltechniques,knownasfactorandclusteranalysis,toderiveasmallsetofindicatorsthatsummarisethelargeamountofdatafromthesurvey.Wecanthinkoftheseasthe“storylines”thatexplain,insuccinctterms,howthesurveyrespondentscombinethevariousaspectsoftheiradaptationtoandapplicationoftherequirementsoftheBRCGSstandards.Theseindicatorscan,inturn,beusedasexplanatoryvariablesinregressionequationsthatpredictthequantitativeindicatorsofrateofgrowthinsalesandrateofincreaseinprofitability.

Thefirststageintheanalysisistoestimateasetof“factors”thatreducethewiderangeofvariablesfromthesurveytoafewthatrepresenttheunderlyingdatabutaremoreapproachableandabletobeinterpretedasstrategiclevelbusinesspracticesthatintegratethevarietyofmorespecificactivitiescoveredinthesurvey.

Throughtheapplicationofthistechnique,wehaveidentified5factorsorplausiblestorylinesabouttheimpactsofcertificationtoBRCGSstandards.Thesecanbeinterpretedasthemorefundamentaldimensionsoffoodfirms’purposesandoutcomesfromcertification.Thespecificquestionsinthesurveyscanthenbeunderstoodasthefacetsorbuildingblocksofthesecoreconceptsoftheeffectsofcertificationtoastandard.

6.6.1 FACTOR ANALYSISToarriveatthetypologyofcertification–thestoryline–weuse39surveyinstruments(questions)coveringthefollowingbroadareas:(i)agreementwiththeimportanceofasetofobjectivesforcertificationconsistingofsixindividualquestions;(ii)agreementwithfinancialcostsandotherchallenges(10questions),(iii)choiceofBRCGS(4questions);(iv)agreementwithasetofoperationaloutcomes(8questions);(v)agreementwithspecificmarketoutcomes(4questions);and(vi)agreementwithasetofcommercialoutcomes(7questions).TheresultsarepresentedinAnnex2.Thesurveyresponsescanusefullybereducedintofivefactors,typesofcertificationuseorFBOsstrategicorientations.

• Type 1 Product and process innovation.Thisfactorexplainsthelargestshareofvariationinthedataandpullstogether issuesaroundimprovingproductqualityandproductsafety,togetherwithinvestmentintrainingandnewtechnology.It alsoscoreshighlyonthechoiceforaBRCGSstandardandincreasedprofitability.• Type 2 Competitiveness led growth in the home market.Thisstrategicorientationsummarisesresponsesconnected withincreasedsalesinthehomemarketlinkedwithincreasedprofitability.• Type 3 Competitiveness led growth in export markets.Thisstrategicorientationpullstogetherapatternofresponses forexportmarketgrowthandcompetitiveness.• Type 4 Costs of certification and investment.Drawstogetherresponsepatternsaroundthepossiblecostsofattaining andutilisingcertification.• Type 5 Customer requirement for certification.Bringstogetherallquestionsrelatedtothepullforcertificationvia customerrequirements.Thistypealsodrawsincostsaspectsofthecertificationprocess.

Type1,whichwetermed“productandprocessinnovation”,hasconsiderablesimilaritytosomeoftheconceptsusedinmeasurementofbroadinnovation–includingmanagerialchange–forpublicpolicypurposes.Innovationmeasuredinthiswayhasbeenshowntobesignificantlystimulatedbytheavailabilityoftechnicalandmanagerialstandards.(ForashortsummaryoftheliteratureseeSwann,G.andLambert,R.(2017).Asfarasweknow,thereisnopreviousresearchonhowfarprivatefoodsafetystandardshavesuchimpacts.The well determined finding from this research project, that BRCGS food safety standards, which do not in themselves include innovation as a purpose, also act as a determinant of broad-based innovation is a particularly unexpected and impressive result.Fromthefactorsa“score”canbederivedforeachsurveyrespondent,thatisaquantitativeindicatorofhowstronglytheyfavourthatfactor.Thesefactorscoresareusedintwofurthermodellingexercises-regressionequationsandclusteranalysis.


6.6.2 REGRESSIONRegressionequationsareestimatedinordertoshowwhichofthe5indicators–factorsandstrategicorientations–areimportantindeterminingtheimpressiveratesofgrowthinsalesandinprofitabilityreportedinSection6.3.

AbasicOLSregressionandanorderedlogitregressionrevealthatTypes1,2,3and5aresignificantinexplainingthequantumofgrowthinsales;whileTypes1,2and3arealsosignificantinexplainingthequantumofincreasesinprofitability.

6.6.3 CLUSTERS Wethenuseclusteranalysis–atechniquethatgroupstheFBOsbytheirsimilaritiesanddifferencesacrossthefivetypesofcertificationuse–bytheirstrategicorientationtowardscertification.Table4liststhefiveresultinggroupsofFBOs(clusters)andtheircharacteristics–highorloworientation-withregardstothefivetypesofcertificationuse:productandprocessinnovation;competitivenessledgrowthinthehomemarket;competitivenessledgrowthinexportmarkets;costsofcertificationandinvestment;andcustomerrequirementforcertification.

Table4GroupingsofFBOsbytypeofcertificationuse(strategicorientation)Source:owncalculations.HierarchicalclusteranalysisusingWardlinkages.5clustersolutionwasselectedfollowinginspectionoftheDendrogram(clustertree).N=425.Thevariablesfeedingintotheclusteranalysisarethesavedstandardizedfactorscores.Therefore,anegativevalueisindicativeofascorebelowtheaverageonatypeandapositivevalueofascoreaboveaverage.Scoresgreaterthan+/-1deviatealotfromtheaverage.Putdifferently,68%percentofallobservationsfallwithintheintervalof[-1;1]. Thecharacteristics–intermsoftheirstrategicorientationtowardscertification–ofeachgroupofFBOs–Groups1to5–areintherowsofTable4.

Group 1–Exportorientedinnovatorsisthesecondlargestclustercontaining114FBOsandcharacterisedbyanaboveaverageagreementwiththeoutcomeofimprovedproductquality,safetyandinnovationandalowagreementwithhavingexperiencedcostorotherchallengesandlowagreementontherequirementofcertificationbycustomers. Group 2–Requirementdrivenisthesmallestclusterofjustunder30sites.Thesecompaniesagreethattheirmainobjectiveforcertificationiscustomerrequirement.Thisclusterisalsoexperiencingnogrowthinthehomemarket. Group 3–Exportorientedmodernisersisthelargestcluster(199sites).TheseFBOsagreedwiththeincurredcostsandotherchallenges.Thereissomeindicationofagreementwithgrowthinhomeandexportmarkets.So,theyareveryawareofcostsofimplementationbutalsothatadaptingtheirresourcesandbusinesspracticesisassociatedwithenhancedmarketopportunities. Group 4–Homemarketorientedinnovatorsisasmallgroupofbusinesses(40)whichshowhighagreementonthevalueofcertificationinproductquality,safetyandinnovationandwhoatthesametimeshowverylowinternationalorientation.Butasscoringhighlyonproductqualityandinnovationtheyarelikelytoachieveenhancedprofitability. Group 5–Passiverespondersisalsoasmallclusterofsites(45)thatdonotagreethatcertificationledtoanimprovement

GROUPS OF FBOS

1. Export oriented innovators

2.Requirementdriven

3. Export oriented modernisers

4.Homemarketoriented innovators

5.PassiveResponders

NO. OFFBOS

CUSTOMER REQUIREMENT OF CERTIFICATION

COSTS OF CERTIFICATION ANDINVESTMENT

COMPETITIVENESS LED GROWTH IN EXPORT MARKETS

COMPETITIVENESS LED GROWTH IN THE HOME MARKET

PRODUCT AND PROCESS INNOVATION

114

27

199

40

45

0.4

0.3

0.0

0.8

-1.9

0.1

-1.8

0.2

-0.3

0.1

0.3

0.2

0.3

-2.0

-0.5

-0.6

-0.9

0.6

0.3

-0.6

-0.8

0.9

0.2

-0.1

0.7


inproductqualityandsafetyorinvestments.Thesesitestendtobecertifiedbecauseofkeycustomers’requirements.Theydifferfromgroup2innotperceivingexportmarketbenefitsfromcertificationandinalowscoreoninnovation. InthefollowingwecomparethecharacteristicsofthefivegroupsofFBOsintermsofsize,location,timesincecertified,theirproductsandtypeofcertificatesheld.

Table5GroupsofFBOsbysizeSource:owncalculation.Cellcontentpercentages.N=424

Groups4and5,bothfocussedontheirhomemarkets,containalargeproportionofsmallenterprises.Whilegroups1and2containalargershareoflargeenterpriseswith500andmoreemployees.

ThereisnosignificantdifferenceacrossthegroupswithreferencetothetimesinceFBOswerefirstcertified.Notableispresented.

Table6GroupsofFBOsbylocationSource:owncalculation.Cellcontentpercentages.N=424.

Group5,asmallergroupof45FBOs,containsproportionallyalargershareofUKbasedFBOs.Group5isalsomostcriticalintermsofthebenefitsofcertificationonproductquality,safety,andinnovation.Groups1and2haveahigherproportionofFBOslocatedintheMiddleEasternandAsiaPacificregions.(Aswithsizegroup3isdistributedinasimilarpatterntoallresponses).

ThereisnosignificantpatternacrosstheproducttypesofFBOs.Thereis,however,adifferenceacrossgroupswithrespecttothecertificatetypeheld.

GROUPS OF FBOS


2.Requirementdriven


4.Homemarketorientedinnovators

5. Passive responders

Total

MORE THAN 1,500

501-1,50051-5001-50 EMPLOYEES

25

22

33

45

47

33

58

56

61

55

44

57

13

11

5

0

7

7

4

11

2

0

2

3

GROUPS OF FBOS


2.Requirementdriven




Total

NORTHAMERICA

EUROPEUK

2

4

14

18

51

14

35

37

40

35

27

37

8

7

8

28

9

10

7

4

10

3

0

7

SOUTHAMERICA

MIDDLEEAST

ASIAPACIFIC

15

19

11

3

4

11

33

30

18

15

9

21


Table7GroupsofFBOsbycertificatetypeSource:owncalculation.Cellcontentpercentages.N=425.

Group2containsrelativemoreFBOscertifiedforfoodprocessing.Itisthesmallestgroupwithonly27FBOs.Group5,containing45FBOs,hasrelativelymoreFBOscertifiedforstorageanddistribution,andagentsandbrokersandfewerbusinesseswithfoodprocessingcertificates.

Table8FBOgroupsandchangeinsalesandprofitsSource:owncalculation.Cellcontentpercentages.N=309.Columns2and3arepercentagesofFBOsreportinggrowthinsalesandprofits.

Inthesurvey59percentagreedthattheirsalesgrewowingtocertificationand48percentagreedthatprofitsgrewowingtocertification.

Inparticulargroups1and3–theexport-orientedinnovatorsandmodernisers–reportedaboveaveragesalesandprofitgrowths.ThesetwogroupsofFBOscontainbyfarthelargestnumberofbusinesses(313outof425businesses).

GROUPS OF FBOS


2.Requirementdriven




Total

FOOD PROCESSING

51

74

60

53

22

54

27

15

28

20

16

25

8

7

7

15

29

10

4

0

3

8

29

6

6

0

2

3

2

3

4

4

1

3

2

2

PACKAGING STORAGE AND DISTRIBUTION

AGENTS AND BROKERS

CONSUMER PRODUCTS

OTHER

GROUPS OF FBOS


2.Requirementdriven




Total

60

54

68

35

35

59

59

50

52

27

14

48

SALES GROWTH GROWTH IN PROFITS


7 CONCLUSIONSThisreporthasbuiltontheevidenceandinsightsfrompreviousresearch,whichmostlyfocussedonthemotivationsforfoodsupplierstobecomecertified,andontheinternationaltradeeffectsofthedisseminationofthird-partycertifications.However,thisstudyhasaddedmateriallytotheevidencebase,particularlyonFBOperformanceeffects.

Throughdiscussionswithrepresentativesof“brands”-theproximatedemandsideoffoodmarkets-andthroughanextensivesurveyofcertificatedusersoftheBRCGSstandards,wehavebeenabletoevidencetheFBOperformanceeffectsofimplementingBRCGScertification.Thesehadbeensuspectedbuthavenowbeendemonstratedandquantified.

ThisstudyhasdemonstratedthewidespreadeffectsandreachonmultipleaspectsoftheirbusinessoperationsandperformancewithnearlyallFBOrespondentshavingatleastonepositiveimpactfromBRCGScertification.

Althoughoftenaninitialresponsetoarequirementofexistingcustomers,theattainmentofBRCGScertificationopensupmarketopportunities,especiallyinexportmarketsandwithnewcustomers.

ThestudyhasshownthatBRCGScertificationdrivesincreasedcompetitivenessviainvestmentandmodernisation.Itenablesincreasedcompetitivenessamongstfoodsuppliersbyprovidingincentivestoinvestmentinfacilitiesandinhumancapitalandthoughmodernisationoftheproductionorganisationandoperations.

BRCGScertificationalsodeliverspositive“bottomline”effectsformanyFBOs,whichwerepreviouslyun-observed.Thesecanbecalculatedasanaverageof7.5%salesgrowthand6%profitabilitygrowthforthe30to40%ofrespondentsreportingthesequanta.

ThestudyshowsthatBRCGSstandardshavesimilarpositiveimpactstoISOtechnicalandmanagementstandards,inrelationtoenablingproductandprocessinnovation,andthusgrowthinoutputandproductivity.However,BRCGScertificationgoesfurtherthanthesebystimulatingmodernisationandinvestment–broadinnovation.Broaderinnovationincludesproductinnovationandnewtechnologyaswellaschangesinbusinessprocessesandenhancedproductquality(includingsafety).

ThestudyidentifiedhowBRCGScertificationisplacedinthewiderfoodstandardscontext.Whiletherearebroadsimilaritiesinimpact,FBOswithBRCGScertificationexperienceamarginallygreaterimpactonperformanceacrossmostindicators.

This study has shown the widespread effects of BRCGS certification on multiple aspects of business operations and performance.


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ANNEX 1. BASIC STATISTICSThisannexpresentsthebasicdatafromthesitesurvey.Theformatissimpletabulationsofthenumber(frequency),percentagebreakdownandcumulativepercentagesofresponseswithshortbulletnotesdrawingoutthemost salientpoints.

Interestingfindingsinclude:

Profile• Responsescoverarangeofgeographiclocations.• ButthenumberfromtheUKisrelativelylow.• Theycoverarangeofproductsandstandards,includingnon-foods.• Whilethemostfrequentreasonsforseekingcertificationwerethepreferencesofcurrentandpotentialcustomers, improvingcompetitiveness,especiallyinexportmarkets,wasimportantforaround80%.

Costs• Afairlymodestshareofaround50%agreedthatBRCGSandAuditorchargeswerehigh.• TherehasbeenextensiveupgradingofphysicalequipmentandITwhile65%hadtrainedstaff.Thecertificationprocess hasstimulatedmodernisationofbusinesses’physicalandhumancapital.• Only30%reportedthatstaffwereresistanttochange-thiswasseenasamoremajorissueinsomeacademic research.• AnotherissueraisedinsomeearlierresearchwasofFBOsinsmallerorlessdevelopedcountriesfacinglocal infrastructurelimitations,suchasaccesstoauditors.Butonly20%reportedsuchissuesinthissurvey.• Over54%agreedthatpaperworkcostshadbeenincurred-againperhapslessthanexpected.

Why BRCGS• ThemostfrequentlyreportedreasonforthechoiceofaBRCGSstandardwaslargercustomerrequirement.• ButtheBRCGScoverageofthebusiness’soperationswasalsoimportantforover80%,whiletherewasalsoextensive satisfactionwiththequalityofauditing.• Around50%agreedthatBRCGSprovidedthebestvalueformoney.

Operational Outcomes• Morethan63%ofrespondentsreportedimprovementsinproductquality.• VeryhighproportionsofFBOshadmodernisedorenhancedtheirrealandhumanassetswithover70%improvingthe organisationofproductionwhile80%hadinvestedinstafftraining.

Market and commercial outcomes• ImplementingBRCGSstandardsstimulatedcompetitivenesswithover50%ofrespondentsreportinganimprovement intheircompetitivenessintheirhomemarketand60%inexportmarkets.• Alargeproportionoffirmshadachievedsalesgrowth,especiallytonewcustomers–nearly55%–andin exportmarkets.


RESPONDENT PROFILE

Language

Languages-Summary• ThegreatmajoritycompletedthesurveyinEnglish.• ButreasonablenumberstookadvantageoftheopportunitytocompleteinMandarin,SpanishorTurkish.

Location

Location-Summary• TheresponseratefromtheUKisrelativelylow.• ThelargestgrouparerespondentsfromEurope.• Butotherregionsshowausefulnumberofresponses,notablyAsia-Pacific.

Size

Size-Summary• Themajorityofrespondents(90%)areinthesmallormediumcategories.• Ausefulsharearethoughlargeorverylarge.

USER LANGUAGE

332

59

26

34

451

74

13

6

8

100

FREQ. PERCENT CUM.

74

87

92

100

English

Spanish

Turkish

Mandarin

Total

WHERE ARE YOU LOCATED?

67

162

44

31

49

97

450

15

36

10

7

11

22

100

FREQ. PERCENT CUM.

15

51

61

68

78

100

UK

Europe

NorthAmerica

SouthAmerica

MiddleEastandAfrica

AsiaPacificcountries

Total

HOW MANY EMPLOYEES DOES YOUR SITE HAVE?

143

261

33

14

451

32

58

7

3

100

FREQ. PERCENT CUM.

32

90

97

100

Lessthan50

51-500

501-1,500

Morethan1,500

Total


Years certified

YearsCertified-Summary• ThereisgoodrepresentationofFBOswithshorterandlongerperiodscertifiedtoBRCGSstandards.• Some60%havebeencertifiedforbetween1and10years.

Products certified

Productscertified-Summary• Respondentscoverarangeofproducttypes,includingnon-foods.

Certifications

Certifications-Summary• Thelargestgroupofcertificatesheldareforfood.• Butpackagingandstoragearealsowellrepresented.

HOW LONG HAVE YOU BEEN CERTIFIED?

61

140

128

79

43

451

14

31

28

18

10

100

FREQ. PERCENT CUM.

14

45

73

90

100

Lessthan1year

1-5years

6-10years

11-15years

Morethan15years

Total

CERTIFIED PRODUCTS

34

76

12

92

92

144

450

8

17

3

20

20

32

100

FREQ. PERCENT CUM.

8

24

27

48

68

100

Bread

Fruit

Dairy

Meat

Non-food

Other

Total

CERTIFICATES HELD

242

110

47

29

15

9

452

54

24

10

6

3

2

100

FREQ. PERCENT CUM.

54

78

88

95

98

100

Food

Packaging

Storage

Agents

ConsumerProducts

Other

Total


REASONS FOR CERTIFICATION

Current customers

Currentcustomers-Summary• Currentcustomerrequirementisimportantinseekingcertificationfor95%ofrespondents• Thevastmajorityoftheseregarditashighlyormostimportant

Potential customers

Potentialcustomers-Summary• Similarlytoexistingcustomers,potentialcustomerrequirementforcertificationareadriverfor95%ofrespondents.• Thisfactorisrankedslightlylowerinimportancethantheneedsofexistingcustomers.

Domestic competitiveness

CERTIFICATION IS REQUIRED BY CURRENT CUSTOMERS

7

5

13

45

207

174

451

2

1

3

10

46

39

100

FREQ. PERCENT CUM.

2

3

6

16

61

100

Notapplicable/don’tknow

No importance

Neitherimportantorunimportant

Some importance

Highlyimportant

Most important

Total

CERTIFICATION IS REQUIRED BY POTENTIAL CUSTOMERS

7

7

9

72

238

118

451

2

2

2

16

53

26

100

FREQ. PERCENT CUM.

2

3

5

21

74

100


No importance


Some importance

Highlyimportant

Most important

Total

INCREASE COMPETITIVENESS IN HOME MARKET

21

43

36

130

161

56

447

5

10

8

29

36

13

100

FREQ. PERCENT CUM.

5

14

22

51

87

100


No importance


Some importance

Highlyimportant

Most important

Total


Domesticcompetitiveness-Summary• CertificationisalsoimportanttoFBOsbecauseitcanbeusedtopromotetheirofferingtodomesticcustomersor potentialcustomers.• Nearly80%regardgainingdomesticcompetitivenessasimportant.• Closeto50%regardasofhighormostimportance.

Export competitiveness

Exportcompetitiveness-Summary• Aslightlyhigherproportion-83%,seecertificationasimportantforcompetinginexportmarkets.• Similarly,ahighershare-over60%-finditofhighormostimportance.

Safe products

Safeproducts-Summary• Over80%ofrespondentsregardsafeproductsasahighlyimportantreasonforcertificationtoastandard.• Afurther11%seeitasofsomeimportance.

INCREASE COMPETITIVENESS IN EXPORT MARKETS

23

26

28

92

200

77

446

5

6

6

21

45

17

100

FREQ. PERCENT CUM.

5

11

17

38

83

100


No importance


Some importance

Highlyimportant

Most important

Total

NEED TO SUPPLY SAFE PRODUCTS

4

19

13

50

157

206

449

1

4

3

11

35

46

100

FREQ. PERCENT CUM.

1

5

8

19

54

100


No importance


Some importance

Highlyimportant

Most important

Total


Competitor certified

Competitorcertified-Summary• Nearly70%ofrespondentsseesomeneedtomatchcompetitorsuseofcertification• And40%seeitashighlyormostimportant..

COSTS AND CHALLENGES

BRCGS Charges

BRCGSCharges-Summary• Over50%ofrespondentfindBRCGSchargestobeveryhigh.• But11%disagree• And36%areneutral• Theoverallbalanceofresponsesisclosetoneutral-perhapssurprisingly.

COMPETITOR HAS CERTIFICATION

33

52

57

119

115

68

444

7

12

13

27

26

15

100

FREQ. PERCENT CUM.

1

5

8

19

54

100


No importance


Some importance

Highlyimportant

Most important

Total

BRCGS SPECIFIC CHARGES ARE VERY HIGH

13

9

30

166

179

54

451

3

2

7

37

40

12

100

FREQ. PERCENT CUM.

3

5

12

48

88

100


Stronglydisagree

Disagree

Neitheragreeordisagree

Agree

Stronglyagree

Total


Auditor charges

Auditorcharges• AhigherproportionofrespondentsagreethatauditchargesarehighthanBRCGScharges.• Butover40%disagreeorareneutral.

Training

Training-Summary• Some65%ofrespondentshavespentontraining.• Only15%disagreethattheyhavedoneso.

Recruitment

AUDIT CHARGES ARE VERY HIGH

8

10

31

136

205

61

451

2

2

7

30

45

14

100

FREQ. PERCENT CUM.

2

4

11

41

86

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total

COSTS HAVE BEEN INCURRED FOR TRAINING OF STAFF TO MEET CERTIFICATION REQUIREMENT

10

14

47

87

238

54

450

2

3

10

19

53

12

100

FREQ. PERCENT CUM.

2

5

16

35

88

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total

COSTS HAVE BEEN INCURRED FOR RECRUITMENT OF STAFF TO MEET CERTIFICATION REQUIREMENT

27

20

109

106

160

28

450

6

4.44

24.22

23.56

35.56

6.22

100

FREQ. PERCENT CUM.

6

10.44

34.67

58.22

93.78

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total


Recruitment-Summary• Over40%ofrespondentshavespentmoneyonrecruitingstafftomeettheneedsofcertification.• But28%havenothadthatexperience,while24%areneutral.• Recruitmentofnewstaffcangeneratebenefitsthroughincreasedcapabilityandresponsivenesstocustomersand markets.

Employee resistance

Employeeresistance-Summary• Thelargestgroupofrespondents-over44%-disagreethatemployeesareresistanttochange.• Over20%areneutral.• Some30%feelthatthereissuchresistance.• Thebalanceofresponsessuggestthatthisisnotanextensiveproblem.

Modernisation of capital

Modernisationofcapital-Summary• Around50%ofrespondentshaveincurredexpenditureonup-datingequipment.• Only23%disagreethatthisactionwastaken• While25%wereneutral.• Modernisationcanbenefitthebusinessthroughefficienciesandcustomersthroughimprovedproductsandservices.

EMPLOYEES ARE RESISTANT TO CHANGE

20

51

148

99

109

23

450

4

11

33

22

24

5

100

FREQ. PERCENT CUM.

4

16

49

71

95

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total

COSTS HAVE BEEN INCURRED FOR NEW OR UPGRADED MACHINERY AND EQUIPMENT

38

18

89

80

181

42

448

8

4

20

18

40

9

100

FREQ. PERCENT CUM.

8

13

32

50

91

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total


Modernisation of IT

ModernisationofIT-Summary• Over27%ofrespondentshadspentonmodernisingtheirIT.• Butnearly40%hadnot.• Aroundonethirdwereneutral.• ThebalanceofresponsesindicatesthatupgradingproductionequipmentwasmorewidelyadoptedthanimprovingIT provision.

Infrastructure

Infrastructure-Summary• Only20%overallofrespondentsagreedthatcertificationfacedlocalinfrastructureproblems.• Over50%didnotseesuchproblems.• Some25%wereneutral.• Thebalanceofresponsesdoesnotindicatewidespreadinfrastructureissues-althoughparticularlocationsmightshow ahigherincidence.

COSTS HAVE BEEN INCURRED FOR NEW/UPGRADED IT

42

33

140

106

111

12

444

9

7

32

24

25

3

100

FREQ. PERCENT CUM.

9

17

48

72

97

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total

LOCAL INFRASTRUCTURE PROBLEMS SUCH AS ACCESS TO AUDITORS

39

72

170

75

72

20

448

9

16

38

17

16

4

100

FREQ. PERCENT CUM.

9

25

63

79

96

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total


Product development

Productdevelopment-Summary• Morerespondents-33%disagreedthatthesecostswereincurred.• Some28%agreed.• Over38%wereneutral.

Cost of bureaucracy

Costofbureaucracy-Summary• Around54%agreedthatsuchcostswereincurred.• Only24%disagreed.

COSTS HAVE BEEN INCURRED FOR CHANGES TO PRODUCT DEVELOPMENT

61

24

124

113

111

15

448

14

5

28

25

25

3

100

FREQ. PERCENT CUM.

14

19

47

72

97

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total

COSTS HAVE BEEN INCURRED DUE TO INCREASED PAPERWORK AND DOCUMENTATION

8

29

78

93

188

50

446

2

7

17

21

42

11

100

FREQ. PERCENT CUM.

2

8

26

47

89

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total


WHY BRCGS?

Biggest customer

Biggestcustomer-Summary• Around77%ofrespondentsagreethattheirbiggestcustomerrequiredBRCGScertification.• Only6%hadsomedegreeofdisagreement.• Thebalanceimpliesthatbrandsareoftenthedefacto“customer”forFoodSafetystandards.

Coverage

Coverage-Summary• Over80%ofrespondentsagreethatthecoverageoftheiractivitiesbytheBRCGSstandardwasimportantintheir choiceofthatsourceofcertification.• Veryfew(16%)disagreedorwereneutral.

REQUIRED BY BIGGEST EXISTING CUSTOMER

14

2

25

63

203

145

452

3

0

6

14

45

32

100

FREQ. PERCENT CUM.

3

4

9

23

68

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total

GOOD COVERAGE OF OUR OPERATIONS

5

4

14

49

284

95

451

1

1

3

11

63

21

100

FREQ. PERCENT CUM.

1

2

5

16

79

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total


Auditors

Auditors-Summary• 80%ofrespondentsagreedonthehighqualityofauditorsavailabletotestcertificationtotheBRCGSstandard.• Under3%disagreed.• TakentogetherwiththeirappreciationofthebreadthofcoverageoftheBRCGSstandard,thisimpliesahighlevelof satisfactionwiththeintegratedstandardsprovisionandcertificationsystemofferedbyBRCGS.

Value for money

Valueformoney-Summary• LessthanhalfofrespondentsagreedthatBRCGSofferedthebestvalueformoney.• Butonlyaround10%disagreed.• Over45%wereneutral.• SothereappearstobeasubstantialbutnotoverwhelmingsharewhoseegoodvalueformoneyfromBRCGS.

HIGH QUALITY OF AUDITORS

2

2

10

73

285

80

452

0

0

2

16

63

18

100

FREQ. PERCENT CUM.

0

1

3

19

82

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total

BEST VALUE FOR MONEY

18

7

40

187

165

34

451

4

2

9

41

37

8

100

FREQ. PERCENT CUM.

4

6

14

56

92

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total


OUTCOMES

OPERATIONAL OUTCOMES

Food quality and safetyWhilethisisnotthemainfocusofthesurvey,theresponsesconfirmthatfoodsafetyandqualityhasbeenverysubstantiallyenhancedbytheirBRCGScertification.

Product Recalls

Recalls-Summary• Around40%ofrespondentsreportfoodsafetyimprovementsthroughexperiencingfewerproductrecallsand withdrawals,sinceachievingBRCGScertification.• Another40%wereneutralorlackedknowledgeontheissue• Under20%reportednosucheffects.

Quality

Quality-Summary• Morethan63%ofrespondentsreportedimprovementsinproductquality• Around11%weresureofnosuchimprovement• Some25%wereneutral(notsureorperceivingnonchange).

WE HAVE EXPERIENCED FEWER PRODUCT RECALLS/WITHDRAWALS

58

30

58

125

132

49

452

13

7

13

28

29

11

100

FREQ. PERCENT CUM.

13

19

32

60

89

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total

OUR PRODUCT QUALITY HAS IMPROVED

16

10

42

97

228

63

456

4

2

9

21

50

14

100

FREQ. PERCENT CUM.

4

6

15

36

86

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total


Product safety

Safety-Summary• Some80%ofrespondentsareconfidentthatBRCGScertificationhasachievedisprimarypurposeofenablingsafer food production.• Only5%disagree.• Around15%areneutralonthistopic.

Efficiency and InvestmentSurveyrespondentsextensivelyreportefficiencygainsthroughorganisationofproduction,oftenwithinvestmentinnewtechnology.Over80%haveinvestedinstafftraining.Theseenhancementsofphysicalandhumancapitalbenefitthesuppliersandtheircustomers.Productinnovationisalsoreportedbysome30%,whichseemshigh,giventheimportanceofcustomerspecificationsinthefoodsupplychain.

Organisation of production

Organisationofproduction-Summary• Nearly70%ofrespondentsreportimprovementsintheirorganisationofproduction.• Only10%definitelydidnotexperiencethiseffect.• Slightlymorethan20%werenotabletogiveanassessment.

OUR PRODUCT SAFETY HAS IMPROVED

6

5

20

59

255

110

455

1

1

4

13

56

24

100

FREQ. PERCENT CUM.

1

2

7

20

76

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total

WE HAVE ACHIEVED BETTER ORGANISATION OF PRODUCTION

29

11

36

68

256

53

453

6

2

8

15

57

12

100

FREQ. PERCENT CUM.

6

9

17

32

88

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total


Innovation

Innovation-Summary• Asmallerproportionofrespondents-30%lessthanforotheroperationaloutcomesreportincreasesin product innovation.• Over20%areclearthatinnovationhasnotbeenincreasebycertification.• Nearly50%cannottakeaviewonthematter.

New technology

Newtechnology-Summary• Nearly50%ofrespondentsagreethattheyhaveundertakeninvestmentinnewtechnology,stimulatedbycertification totheBRCGSstandard.• Overonethirdarenotabletosay.• Around17%areclearthattheyhavenotsoinvested.

PRODUCT INNOVATION HAS INCREASED

51

19

73

174

111

24

452

11

4

16

39

25

5

100

FREQ. PERCENT CUM.

11

15

32

70

95

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total

WE HAVE INVESTED IN NEW TECHNOLOGY

36

8

71

121

186

31

453

8

2

16

27

41

7

100

FREQ. PERCENT CUM.

8

10

25

52

93

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total


Training

Training-Summary• Thevastmajority-85%ofrespondentshaveinvestedintrainingaspartoftheiradoptionofBRCGScertification.• Around4%havenotdoneso.• Some11%areunsure.

Integration with other standards

Integrationofstandards-Summary• Around50%ofrespondentsagreethatthereisbetterintegrationwithothermanagementstandards.• Some8%disagree.• Another42%arenotsure.

WE HAVE INVESTED IN TRAINING

1

3

16

50

309

73

452

0

1

4

11

68

16

100

FREQ. PERCENT CUM.

0

1

4

15

84

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total

THERE IS BETTER INTEGRATION WITH OTHER MANAGEMENT STANDARDS (E.G. ISO 9001)

88

6

29

102

181

48

454

19

1

6

22

40

11

100

FREQ. PERCENT CUM.

19

21

27

50

89

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total


MARKET OUTCOMESForalargeproportionofBRCGScustomerswhorespondedtothesurvey,theoperationaldevelopments,aswellasanenhancedmarketreputation,signalledbygainingcertification,haveledtoimprovedcompetitiveness,especiallyinexportmarkets,whilecertificationstatushasopeneduplargermarketopportunities.Relativelysmallsharesofrespondentshavedisagreedwiththepropositionsonmarketoutcomes.

Competitiveness in home market

Competitiveness-Summary• Over50%ofrespondentsreportanimprovementintheircompetitivenessintheirhomemarket.• But16%donotagreethatcompetitivenesshasimproved.• Aroundonethirdareneutral/undecided.

Competitiveness in export markets

Exportcompetitiveness-Summary• Some60%ofrespondentshavegainedcompetitivenessinexportmarkets-ahighersharethaninhomemarkets.• Only8%havenotfoundexportcompetitiveness.• Again,aroundonethirdareneutralonthesubject.

WE HAVE INCREASED COMPETITIVENESS IN THE HOME MARKET

36

20

55

114

189

40

454

8

4

12

25

42

9

100

FREQ. PERCENT CUM.

8

12

24

50

91

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total

WE HAVE INCREASED COMPETITIVENESS IN EXPORT MARKETS

41

8

30

101

207

68

455

9

2

7

22

45

15

100

FREQ. PERCENT CUM.

9

11

17

40

85

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total


Access to larger home market

Largerhomemarket-Summary• Over50%ofrespondentfindthattheyhaveaccesstoalargerhomemarketasaresultsofBRCGScertification• Some15%havenotfoundthis.• Theremaining35%areunsightedonthetopic.

Access to larger export market

Largerexportmarket-Summary• Again,accesstolargerexportmarketsarereportedbymorerespondents-some65%,thanforhomemarkets.• Justover5%havenotfoundlargerexportmarkets.• Around30%areneutralonthesubject.

THERE IS ACCESS TO LARGER HOME MARKET

36

16

52

122

192

37

455

8

4

11

27

42

8

100

FREQ. PERCENT CUM.

8

11

23

50

92

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total

THERE IS ACCESS TO LARGER EXPORT MARKET

40

4

22

93

220

75

454

9

1

5

20

48

17

100

FREQ. PERCENT CUM.

9

10

15

35

83

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total


COMMERCIAL OUTCOMES

SALES EFFECTSBRCGScertificationisassociatedwithhighersalestoexistingcustomersfornearly40%ofrespondents.However,ithashelpedtogainbusinesswithnewcustomersfor55%ofrespondents,confirmingtheefficacyofcertificationinimprovingcompetitiveness.Thesharewhohavegainedsalesinexportmarketsissomewhathigherthaninhomemarkets,whichsuggeststhatcertificationraisestheinternationalprofileofBRCGScustomers.

Sales to existing customers

Increasedsales-Summary• Over38%ofrespondentsagreethattheyhaveachievedincreasesintheirsalestotheirexistingcustomers,following certificationbyBRCGS.• Morethan20%donotthinkthattheyhaveachievedhighersales.• Around40%areneutral.

Sales - new customers

Increasedsalestonewcustomers-Summary• Ahighershareofrespondents-nearly55%-reportincreasedsalestonewasopposedtoexistingcustomers.• Only13%areclearthattherehasnotbeenanincrease.• Again,onethirdareneutralonthequestion.

INCREASED SALES VOLUMES - EXISTING CUSTOMERS

34

19

72

150

151

20

446

8

4

16

34

34

4

100

FREQ. PERCENT CUM.

8

12

28

62

96

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total

INCREASED SALES VOLUMES - NEW CUSTOMERS

32

10

49

110

215

29

445

7

2

11

25

48

7

100

FREQ. PERCENT CUM.

7

9

20

45

93

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total


Sales - home market

Increasedsalesinhomemarket-Summary• Around30%ofrespondentsagreethattheyhaveincreasedsalesinthehomemarket.• Butover22%havenotfoundthis.• Some46%havenovieworinformationonthequestion.

Sales - export markets

Increasedsalesinexportmarkets-Summary• Over45%ofrespondentsagreethattheyhaveseenincreasedsalesinexportmarkets,comparedto30%in homemarkets.• Around13%donotagreethatexportsaleshaveincreased.• 40%ofrespondentsremainneutralonchangesinthevolumeofexportsales.

Other commercial effectsOnlyasmallproportionattributeoperatingcostreductionstocertification,whereas50%definitelydisagreewiththeproposition.Under30%ofrespondentsagreewiththeideaofincreasedprofitability,whileaverysimilarproportiondisagree.Nearlyhalfofrespondentsfindthatcertificationisassociatedwithfewerauditsbytheircustomers-oneoftheleadingrationalesforthedevelopmentofthirdpartyfoodsafetystandards.Howevernearly30%disagree.

Quantification of commercial impactsOver40%ofrespondentswereabletoestimatethepercentagechangeinsalesarisingfromoperatingwithBRCGScertification.Only5%indicatedapercentageforreductionsinsales.Onprofitability,35%quantifiedanincreasewhile6%quantifiedsomedecline.

INCREASED SALES VOLUMES - HOME MARKETS

47

20

81

161

119

15

443

11

5

18

36

27

3

100

FREQ. PERCENT CUM.

11

15

33

70

97

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total

INCREASED SALES VOLUMES -EXPORT MARKETS

57

9

50

125

169

36

446

13

2

11

28

38

8

100

FREQ. PERCENT CUM.

13

15

26

54

92

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total


Cost reduction

Reductionincosts-Summary• Only16%ofrespondentsassociateBRCGScertificationwithloweroperatingcosts.• Nearly48%aresurethatthereisnoreduction.• Around35%areneutralonthisquestion.

Profitability

Increaseinprofitability-Summary• Around27%ofrespondentsagreethatBRCGScertificationisassociatedwithanincreaseinprofitability.• Againaround27%donotagreethatprofitabilityisincreased.• Some42%areneutral.

REDUCTION IN OPERATING COSTS

25

48

167

130

66

8

444

6

11

38

29

15

2

100

FREQ. PERCENT CUM.

6

16

54

83

98

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total


32

27

97

167

107

14

444

7

6

22

38

24

3

100

FREQ. PERCENT CUM.

7

13

35

73

97

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total


Fewer audits

Fewercustomeraudits-Summary• Nearly48%ofrespondentsagreethattheexperiencefewerauditsbytheircustomers.• But28%donotagreethatthisisthecase.• Around23%areneutral.

Quantified sales growth

Percentchangeinsales-Summary• Around43%ofrespondentsagreetheyhaveincreasedsalesintherange0toover10%.Thisisconsistentwiththe sharesreportingsomedegreeofincreaseinsalesinanearlierquestion.• Some5%agreethattheyhaveexperiencedadeclineinsalesintherange0toover10%.• Over25%reportnochangeandafurther25%areunabletoestimate.

A LOWER NUMBER OF CUSTOMER AUDITS

18

45

82

87

158

55

445

4

10

18

20

36

12

100

FREQ. PERCENT CUM.

4

14

33

52

88

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total

QUANTIFIED SALES INCREASE

7

4

11

113

82

65

51

117

450

2

1

2

25

18

14

11

26

100

FREQ. PERCENT CUM.

2

2

5

30

48

63

74

100

Morethan10%decline

5to10%decline

0to5%decline

Nochange

0to5%increase

5to10%increase

Over10%increase

Don’tknow

Total


Quantified profitability increase

Percentagechangeinprofitability-Summary• Over34%ofrespondentsagreethattheyhaveincreasedprofitabilityinarangefrom0toover10%.• Some6%considerthattherehasbeenadeclineinprofitabilityinarangefrom0toover10%.• Nearly30%areunabletosaywhileafurther30%reportnochangeinprofitability.

Comment:Thesharereportingpositiveratesofprofitabilityincreaseheredoesnotseemfullyconsistentwithanswerstothebroaderquestionofwhetherprofitabilityhasincreased,where27%agreedthattherehadbeensomeincreaseinprofitability.Thedivergenceislargelydue(numerically)to38respondentswhoanswered“NeitherAgreenorDisagree”tothegeneralquestiononprofitabilitybut“0to5%”topercentagechangeinprofitability.Afurther12indicated“5to10%”increase.

OTHER FOOD SAFETY STANDARDSThesurveyrepeatedafewofthecommercialoutcomequestionsbutaddressedtoFBOswhowereapplyingotherfoodsafetystandardsintheiroperations.ThiswasaimedatprovidingsomeelementsofabroadercontextfortheinformationgatheredonthosecertificatedtotheBRCGSstandard.Thequestiondidnotspecifywhatsortsofstandardtoinclude,egnotspecificallyGFSIbenchmarkedstandards.SorespondentscouldbethinkingofISO22000orpossiblysomecustomerspecificstandards.Themajorityofsurveyrespondents(425of450)completedthesequestions,suggestingthatmostsuppliersareoperatingincompliancewithmorethanonefoodsafetystandard.

Inbroadterms,thepatternofresponsesweresimilartothoseconcernedwithBRCGSstandardsonly.Relativelylargedifferencesthoughoccurredfor:“Increasedsalestonewcustomers”where55%ofBRCGScertifiedFBOsagreedagainst43%ofthoserespondingon“Otherfoodsafetystandards.”“Reductionincustomeraudits”confirmedby47%ofBRCGScertifiedrespondentsagainst40%ofthosealsousingotherstandards.

PROFITABILITY INCREASE

6

4

19

132

87

37

30

132

447

1

1

4

30

19

8

7

29.53

100

FREQ. PERCENT CUM.

1

2

6

36

55

64

70

100

Morethan10%decline

5to10%decline

0to5%decline

Nochange

0to5%increase

5to10%increase

Over10%increase

Don’tknow

Total


Sales - existing customers

Increasedsalestoexistingcustomers-Summary• Around35%ofrespondentswithcertificatestostandardsinadditiontoBRCGSreportedanincreaseinsalesto existingcustomers.(ThisresultissimilartobutsomewhatlowerthanforBRCGScertification.)• Some15%didnotagreethattherewasanincrease.• Theremaining50%wereneutral.(AmuchhigherproportionthaninthecaseofBRCGSstandards,where40% wereneutral.)

Sales - new customers

Increasedsalestonewcustomers-Summary• Over43%agreedthattheyexperiencedincreasedsalestonewcustomers.(Thisismarkedlylowerthanthe55%of BRCGScertificatedrespondents.)• Just11%disagreedwiththeproposition.• 45%wereneutral.

INCREASED SALES VOLUMES -EXISTING CUSTOMERS

77

11

53

133

137

14

425

18

3

12

31

32

3

100

FREQ. PERCENT CUM.

18

21

33

64

97

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total

INCREASED SALES VOLUMES - NEW CUSTOMERS

76

7

39

118

164

22

426

18

2

9

28

39

5

100

FREQ. PERCENT CUM.

18

19

29

56

95

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total


Sales - home market

Increasedsalesinhomemarket-Summary• Some26%ofrespondentsagreesthatsalesintheirhomemarkethadincreased.(Slightlylowerthanthe30%of BRCGScertificatedrespondents.)• Around15%disagreedwiththepropositionofhigherdomesticsales.• Thelargershare-55%-wereneutral.

Sales - export markets

Increasedsalesinexportmarkets-Summary• Morethan42%ofrespondentsexperiencedincreasedsalesinexportmarkets(slightlylessthanthe46%ofBRCGS certificatedrespondents).• Some10%disagreedwiththeideaofincreasesinexportsales.• While47%wereneutral.

INCREASED SALES VOLUMES - HOME MARKETS

92

19

60

143

99

11

424

22

4

14

34

23

3

100

FREQ. PERCENT CUM.

22

26

40

74

97

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total

INCREASED SALES VOLUMES - EXPORT MARKETS

87

9

35

113

149

31

424

21

2

8

27

35

7

100

FREQ. PERCENT CUM.

22

26

40

74

97

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total


Cost reduction

Costreduction-Summary• Just17%ofrespondentsagreedthatcertificationtoanotherstandardledtoloweroperatingcosts.• But39%disagreed.• While43%wereneutral.

Profitability

Increaseinprofitability-Summary• Around29%ofrespondentsagreethatprofitabilityhasincreased.• However21%disagree.• Butover50%areneutralonprofitability.

ThispatternofresponsesisverysimilartothoseforBRCGScertification.

REDUCTION IN OPERATING COSTS

71

32

135

112

59

14

423

17

8

32

26

14

3

100

FREQ. PERCENT CUM.

22

26

40

74

97

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total


81

15

74

133

109

11

423

19

4

17

31

26

3

100

FREQ. PERCENT CUM.

19

23

40

72

97

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total


Customer audits

Fewercustomeraudits-Summary• Over40%ofrespondentsagreethattherearefewercustomerauditsaftercertificationtoanotherthird-partystandard. Thiscompareswith47%onBRCGScertification.• Some25%disagreeonthisimpact.• While44%areneutral.

RESPONSES BY SUB-GROUPSThefollowingtablesreportonthetestofstatisticalsignificanceacrosssub-groupsofFBOs:byregion;size;and timecertified.

By region

A LOWER NUMBER OF CUSTOMER AUDITS

56

30

76

88

139

35

424

13

7

18

21

33

8

100

FREQ. PERCENT CUM.

13

20

38

59

92

100


Stronglydisagree

Disagree


Agree

Stronglyagree

Total


Competitorcertified

Employeeresistance

Upgradephysicalcapital

Coverageofoperations

Bestvalueformoney

Productrecalls

Organisation


Salestoexistingcustomers

Pearsonchi2(25)=86.6229Pr=0.000

Pearsonchi2(25)=50.9086Pr=0.002

Pearsonchi2(10)=18.1847Pr=0.052

Pearsonchi2(10)=19.9154Pr=0.030

Pearsonchi2(10)=19.7933Pr=0.031

Pearsonchi2(10)=47.8302Pr=0.000

Pearsonchi2(10)=44.9076Pr=0.000

Pearsonchi2(10)=41.4187Pr=0.000

Pearsonchi2(10)=70.8166Pr=0.000

Pearsonchi2(10)=24.1012Pr=0.007

UKlowimportance, Europehighimportance


By size

By time certified

BRCGScharges

Coverageofoperations

Bestvalueformoney

Homecompetitiveness

Customeraudits

Pearsonchi2(6)=13.0886Pr=0.042





1-50highagree

501-1500morellikelytoagree

1-50morelikelytoagree


Recruitment

Homecompetitiveness

Profitability

Customeraudits

Pearsonchi2(20)=33.5231Pr=0.030





1-5yearshavehigherthanaverageagreement

1-5yearshighagree,over15yearslowagree

1-5yearshighagree,over11yearslowagree

1-5yearhighagree


ANNEX 2. FACTOR, REGRESSION AND CLUSTER ANALYSESFACTOR ANALYSISToarriveatthetypologyofcertificationweuse39surveyinstruments(questions)coveringthefollowingbroadareas:(i)agreementwiththeimportanceofasetofobjectivesforcertificationconsistingofsixindividualquestions;(ii)agreementwithfinancialcostsandotherchallenges(10questions),(iii)choiceofBRCGS(4questions);(iv)agreementwithasetofoperationaloutcomes(8questions);(v)agreementwithspecificmarketoutcomes(4questions);and(vi)agreementwithasetofcommercialoutcomes(7questions).TheresultsarepresentedintheAppendix.Thesurveyresponsescanusefullybereducedintofivefactorsortypesofcertificationuse.

• Type 1 Product and process innovation.Thisfactorexplainsthelargestshareofvariationinthedataandpullstogether issuesaroundimprovingproductqualityandproductsafety,togetherwithinvestmentintrainingandnewtechnology.It alsoscoreshighlyonthechoiceforaBRCGSstandardandincreasedprofitability.• Type 2 Competitiveness led growth in the home market.Thistypologysummarisesresponsesconnectedwith increasedsalesinthehomemarketaswellasincreasedprofitability.• Type 3 Competitiveness led growth in export markets.Thistypologypullstogetherthepatternofresponsesforexport marketgrowthandcompetitiveness.• Type 4 Costs of certification and investment.Drawstogetherresponsepatternsaroundthepossiblecostsofattaining andutilisingcertification.• Type 5 Customer requirement for certification.Bringstogetherallquestionsrelatedtothepullforcertificationvia customerrequirements.Thistypealsodrawsincostsaspectsofthecertificationprocess.

Goingacrossthetopofthetablethetypologyofcertificationuse.Determiningtherowsoftheablearethe39individualsurveyquestionsthataresummarisedintothefivetypes.Thenameofeachtypologyisourowninterpretationbasedonthevaluesinthetable.Eachcellinthetableshowshowstronglyaspecificsurveyquestioncorrelateswithorloadsupontoaspecifictypologyandhowmuchitcontributestoitsmeaning.


Table1.FactoranalysisSource:owncalculations.N=425. Methodology for the factor analysis

ThefactoranalysisisperformedusingaSpearmanrankcorrelationmatrix.Allvariablesfeedingintotheanalysisaremeasuredona5-pointlikertscalerangingfromstronglydisagreetostronglyagree.Rotationmethodvarimax.Factorloadingsbelow0.3arenotshown.5factorswitheigenvaluesgreaterthan1areretained.Allfactorstakentogetherexplain87%ofvariationinthedata.Theresultingfactorscoresaresavedusingaregressionmethod.

CertificationisrequiredbycurrentcustomersCertificationisrequiredbypotentialcustomersIncreasecompetitivenessinhomemarketIncreasecompetitivenessinexportmarkets.NeedtosupplysafeproductsCompetitorhascertificationBRCGSspecificchargesareveryhighAuditchargesareveryhighCostshavebeenincurredfortrainingofstafftomeetcertificationrequirementsCostshavebeenincurredforrecruitmentofstafftomeetcertificationrequirementsEmployeesareresistanttochangeCostshavebeenincurredforneworupgradedmachineryandequipmentLocalInfrastructureproblemssuchasaccesstoauditorsCostshavebeenincurredfornew/upgradedITCostshavebeenincurredduetoincreasedpaperworkanddocumentationCostshavebeenincurredforchangestoproductdevelopmentRequiredbybiggestexistingcustomerGoodcoverageofouroperationsHighqualityofauditorsBestvalueformoneyWehaveexperiencedfewerproductrecalls/withdrawalsWehaveachievedbetterorganisationofproductionOurproductqualityhasimprovedOurproductsafetyhasimprovedProductinnovationhasincreasedWehaveinvestedinnewtechnologyWehaveinvestedintrainingThereisbetterIntegrationwithothermanagementstandards(e.g.ISO9001)WehaveincreasedcompetitivenessinthehomemarketWehaveincreasedcompetitivenessinexportmarketsThereisaccesstolargerhomemarketThereisaccesstolargerexportmarketIncreasedsalesvolumes-existingcustomersIncreasedsalesvolumes-newcustomersIncreasedsalesvolumes-homemarketsIncreasesalesvolumes-exportmarketsReductioninoperatingcostsIncreaseinprofitabilityAlowernumberofcustomeraudits

COM

PETI

TIVE

NESS

LED

GROW

TH IN

THE

HOM

E M

ARKE

T

PROD

UCT A

ND P

ROCE

SS

INNO

VATI

ON

COST

S OF

CER

TIFI

CATI

ON

AND

INVE

STM

ENT

COM

PETI

TIVE

NESS

LED

GR

OWTH

IN E

XPOR

T M

ARKE

TS

UNIQ

UENE

SS

CUST

OMER

REQ

UIRE

MEN

T

OF C

ERTI

FICA

TION

SURV

EY C

ATEG

ORY

SURVEY QUESTION

IMPO

RTAN

CE O

F OB

JECT

IVES

FOR

CE

RTIF

ICAT

ION

FINA

NCIA

L COS

TS A

ND O

THER

CH

ALLE

NGES

CHOI

CE

OF B

RCGS

OPER

ATIO

NAL O

UTCO

MES

MAR

KET

OU

TCOM

ESCO

MM

ERCI

AL O

UTCO

MES

0.60.60.60.50.80.80.60.60.60.60.90.60.80.60.60.60.80.70.70.70.70.40.40.60.50.60.70.80.50.30.50.30.40.50.30.30.60.60.9

0.50.5

0.40.4

0.5

0.30.6

0.30.40.4

0.60.6

0.50.4

0.60.5

0.50.4

0.40.40.4

0.50.7

0.70.6

0.60.60.50.3

0.40.4

0.40.4

0.60.50.8

0.7

0.7

0.7

0.80.40.5

0.8

0.3


REGRESSION ANALYSISWeperformedalinearregressiontolookatcorrelationsbetweenthefactorsandchangesinsalesandprofits.

Table2Regressionresultsfortypesofcertificationandoutcomes–profitsandsales

Andanorderlogitregressionwhichshoeshighlysimilarcorrelations.

VARIABLES

0.25***(0.06)

0.22***(0.06)

0.22***(0.05)-0.10*(0.06)-0.02(0.07)

2.67***(0.64)

29710.17***

0.15

(1)CHANGE IN PROFITS

(2)CHANGE IN SALES

Product and process innovation

Competitivenessledgrowthinthehomemarket

Competitivenessledgrowthinexportmarkets

Costsofcertificationandinvestment

Customerrequirementofcertification

Constant

ObservationsF-testR-squared

Standarderrorsinparentheses*** p<0.01, ** p<0.05, * p<0.1Regressionmethods:OLS

0.21***(0.07)

0.28***(0.06)

0.27***(0.06)0.02(0.06)

0.27***(0.08)0.56(0.67)

31413.36***

0.18


Table3Regressionresultsfortypesofcertificationandoutcomes–profitsandsales

CLUSTER ANALYSISWethenuseclusteranalysis–atechniquethatgroupstheFBOsbytheirsimilaritiesanddifferencesacrossthefivetypesofcertificationuse.Thetablebelowliststhefiveresultinggroups(clusters)andtheircharacteristicswithregardstothefivefactors:Productandprocessinnovation;competitivenessledgrowthinthehomemarket;competitivenessledgrowthinexportmarkets;costsofcertificationandinvestment;andcustomerrequirementforcertification.

Table3.GroupingsofFBOsbytypologyofcertificationuseSource:owncalculations.

VARIABLES

0.47***(0.11)

0.46***(0.10)

0.43***(0.09)-0.19*(0.11)-0.09(0.13)

-0.50(1.15)0.03(1.12)1.19(1.09)

3.85***(1.12)

5.36***(1.13)

6.41***(1.15)

63.81***0.07297

(1)CHANGE IN PROFITS

(2)CHANGE IN SALES

Product and process innovation

Competitivenessledgrowthinthehomemarket

Competitivenessledgrowthinexportmarkets

Costsofcertificationandinvestment

Customerrequirementofcertification

/cut1

/cut2

/cut3

/cut4

/cut5

/cut6

LRchi2(5)PseudoR2Observations

0.37***(0.10)

0.50***(0.10)

0.50***(0.09)0.02(0.10)0.39***(0.12)

2.98***(1.08)

3.46***(1.06)

4.16***(1.05)

6.83***(1.10)

8.01***(1.12)9.25***(1.14)

77.46***0.08314

CLUSTERS

Group1

Group2

Group3

Group4

Group5

NO. OFFBOS

CUSTOMER REQUIREMENT OF CERTIFICATION

COSTS OF CERTIFICATION ANDINVESTMENT

COMPETITIVENESS LED GROWTH IN EXPORT MARKETS

COMPETITIVENESS LED GROWTH IN THE HOME MARKET

PRODUCT AND PROCESS INNOVATION

114

27

199

40

45

0.4

0.3

0.0

0.8

-1.9

0.1

-1.8

0.2

-0.3

0.1

0.3

0.2

0.3

-2.0

-0.5

-0.6

-0.9

0.6

0.3

-0.6

-0.8

0.9

0.2

-0.1

0.7


Thevariablesfeedingintotheclusteranalysisarethesavedstandardizedfactorscores.Therefore,anegativevalueisindicativeofascorebelowtheaverageonatypeandapositivevalueofascoreaboveaverage.Scoresgreaterthan+/-1deviatealotfromtheaverage.Putdifferently,68%percentofallobservationsfallwithintheintervalof[-1;1].

Methodology for the cluster analysisTheclusteranalysisusedishierarchicalclusteranalysisusingWardlinkages.5clustersolutionwasselectedfollowinginspectionoftheclustertreebelow.N=425.

Figure1.Clustertree

0

100

200

300

400

500

G1G2G3G4G5G6G7G8G9G10G11G12G13G14G15G16G17G18G19G20G21G22G23G24G25G26G27G28G29G30G31G32G33G34G35

DISS

IMIL

ARIT

Y M

EASU

RE

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