The profitability of value-added products in dairy farm diversification initiatives

Abstract

A more open and competitive dairy market has encouraged certain dairy farms to adopt value-adding strategies in order to achieve a higher profitability, which may be important for farms’ survival. This paper investigated the role of some product characteristics in the profitability of value-added products in these farms. For this purpose, we used a unique database of 265 different products commercialized by 49 Spanish dairy farms that offers information on nine attributes of each product. Using hedonic models as a baseline, we examined the influence of these attributes on the margin per liter (ML) of the products. The results of the regression indicated that cheese and yogurt generated 0.688 and 1.518 € more of margin per liter than liquid milk. Similarly, we found a set of attributes that have a positive influence on ML, including possession of a certificate of protected designation of origin (PDO), the milk-type composition (proportion of sheep milk), a longer expiration period, and involvement in direct marketing strategies (DMS). However, other recognized attributes such as organic labeling, maturation period, size of the sales unit and returnable packaging did not have a significant influence on ML. Our findings also showed that firms producing more elaborated products as cheese and yogurt need a lower percentage of their production to cover the fixed costs associated to transformation and commercialization. Overall, our results revealed that the elaboration of value-added dairy products improves the profitability of dairy farms.

Efficiency and Sustainability in Farm Diversification Initiatives in Northern Spain

“…We also found that a greater share of family labor is negatively associated with efficiency. This result seems to contradict previous studies [56], which found that family businesses seem to perform better. Our result may reflect the need to hire external workers in order to be able to achieve a greater volume of sales and thereby take greater advantage of the investment in machinery and facilities.…”

Estrategias de comercialización de quesos artesanales por tipo de mercado, a partir de su revisión sistemática

“…Several authors agree that a direct marketing channel turns out to be more profitable than one with a higher degree of intermediation (Gokkaya et al, 2016;Alvarez, García-Cornejo, Pérez-Méndez, & Roibás, 2018;Naglova, Boberova, Horakova, & Smutka, 2017;Santos-Lavalle et al, 2018). One aspect to note, is that intermediaries have the ability to link and influence several actors within the distribution network (Rendón-Rendón et al, 2019), therefore, there are producers who sell only or mostly to distributors.…”

“…Varios autores coinciden en que un canal de comercialización directo resulta ser más rentable que uno con mayor grado de intermediación (Gokkaya et al, 2016;Alvarez, García-Cornejo, Pérez-Méndez, & Roibás, 2018;Naglova, Boberova, Horakova, & Smutka, 2017;Santos-Lavalle et al, 2018). Un aspecto que cabe señalar, es que los intermediarios tienen la capacidad de vincular e influenciar a varios actores dentro de la red de distribución (Rendón-Rendón et al, 2019), por lo tanto, hay productores que venden solo o mayormente a distribuidores.…”

Caught in the Middle: Reasons for Hindered Growth among Dairy Groups of Haa District in Western Bhutan

“…If the groups are to survive and flourish, it is time that dairy groups adopted a strategy for rapid growth, emphasizing on dairy product diversification and targeting a wide range of customers. Diversification is a tried and trusted strategy that has helped all types of businesses to minimize risks and survive in the competing environments [13,25]. Livelihood diversification increases income [26] and improves livelihood security [27,28].…”