Improving Cluster Basis
A Roadmap for İzmir Organic Food Cluster

Important Notice

Launched in March 2007, “Development of a National Clustering Policy” is an EU-funded technical assistance project (the Project, hereinafter) that seeks to contribute to elaboration of a national clustering policy, through development of a “whitepaper” on clustering. The Project is being implemented by the Undersecretariat for Foreign Trade (UFT) with the technical assistance of an international consortium, contracted by Central Finance and Contracts (CFCU).

The methodology, deployed for the development of this and other Roadmaps reflects the key priorities of the DCP Project. Therefore, it, on the one hand aims at developing a roadmap that demonstrates how the cluster can be more competitive, and on the other, serves the key purpose of informing the process of cluster policy-making and development of policy-level and institutional recommendations. The Roadmap for İzmir Organic Food Cluster has been developed with direct involvement of a broad range of stakeholders: enterprises, governmental and non-governmental organisations, academic and research organisations, and other relevant cluster actors. Cluster roadmap itself, is the strategic plan of cluster development that includes the cluster vision, definition of its strategy, key factors for its successful development and the skills, competences and capabilities which are required for ensuring that the success factors are in place. Roadmap report then proceeds to the analysis and recommendations related to the cluster governance and outlines specific cluster activities in the form of pilot project fiches that should be implemented in short-, medium- and long-term.

Improving Cluster Basis

A Roadmap for İzmir Organic Food Cluster

Building on the cluster analysis of Izmir economy and development of the Izmir organic produce sector and the subsequent analyses; the cluster Roadmap develops the strategic guideline, or Roadmap, that provides the overall strategic direction to developing the Izmir Organic Food Cluster. The Roadmap considers six factors; each of these was developed through the participation and consultation of the cluster Working Group.

Cluster Vision: Whilst Izmir Organic Food Cluster should continue to supply organic produce to its existing European markets, it is also a priority to climb up in the “organic” value chain by undertaking the transition from producing raw organic produce to the production of higher value-added organic food products. Such a transition requires that attention be given to four underlying issues or challenges that have an impact on the cluster. First, there is the immediate need for improving the effectiveness of the supply chain and distribution channel for organic foods; second, the Izmir Organic Food Cluster needs to be recognised by international and national buyers as a “trusted” provider of organic products; third, the Cluster should ensure that sufficient volume and variety of organic produce is readily available; and fourth, domestic demand for organic foods needs to increased.

The cluster vision reflects this transition:

Cluster Strategy: The Organic Foods Cluster strategy focuses on the recognition that Izmir currently produces and exports organic produce, raw materials, whereas markets of Europe consume organic food products. The value added or profit is in the transformation of organic produce into organic food products.

Using the same analysis and argument as the cluster vision (i.e. the four underlying issues), the cluster strategy is one of ensuring a transition from a sector that is dependent on the export of organic produce to one that continues to meet this demand, but also develops the domestic market for organic foods (increasing value added), with a longer term objective of supplying value added organic foods to European markets:

Key Success Factors: In general, key success factors (KSFs) represent the factors that a cluster must possess or seek to address to become more competitive. The four KSFs of Izmir Organic Food Cluster’s emerged from a debate as to what issues and challenges the cluster must address to progress towards achievement of the cluster vision and to implement the cluster strategy. The four KSFs take into consideration the four challenges identified in the cluster vision and strategy:

• Supply chain: Organic agriculture sector in Izmir does not have a recognised (or well established) supply chain or wholesale market for organic produce. The current model is one where organic farmers/producers have sales agreements with organic wholesalers (often the representatives of European supermarket chains) based in Turkey or in the European Union. Organic farmers/producers sell directly to these wholesalers, thus there is no effective supply chain and wholesale market structure in Izmir that bridges the gap between the supply and demand of organic produce. Growing or producing the right crops, at the right time and to the right quantity and quality is as crucial as ensuring that these goods meet the organic certification and specification requirements.
• Distribution system management: As there is the need to ensure the effective supply of organic produce, the optimum model or approach to the distribution of organic foods in Turkey should be understood. It is also important to seek establishment of an effective and efficient distribution structure in Izmir (and also in Turkey). This might be a distribution system that is part of an existing food distribution network or a stand alone system for organic products.
• Marketing communication: In order to ensure that cluster’s business strategy succeeds, there is the necessity to educate and inform Turkey as to what organic produce and foods are and are not. As stated in the cluster analysis, there is much confusion on “organics” and their benefits. An effective marketing communication requires that there is a strong understanding of the market for organic foods, products demanded, together with an insight of all the complexities associated with the image of organic foods. Marketing communication also necessitates communication of the “values of organic production” to various different segments of Turkish society, including the health sector (i.e. the professionals in the health sector such medical doctors, dieticians etc.), hotel and catering industry, the media, consumers et al. Marketing communication not only seeks to establish the market for organics, but also seeks to build trust or respect in organic production.
• Establishment of the cluster coordination unit: The Izmir Organic Food Cluster requires effective management, administration and governance.

Requisite Skills and Capabilities: The Working Group identified a set of skills and capabilities, required to address the KSFs. These skills and capabilities have been categorised under five headings: (1) financial; (2) physical; (3) human resources; (4) knowledge and information; and (5) networking and social capital. Identification of the requisite skills and capabilities led to development “Cluster Actions”.

Cluster Actions: Building on the four KSFs and the identified requisite skills and capabilities, the Working Group identified four broad cluster actions that would further develop the cluster, ensure its effective management, and address the intentions of the cluster strategy:

• Establish Izmir Organic Food Association (IOFA): Establishment of a cluster coordination agency to coordinate and undertake the work schedule the Izmir Organic Food Cluster.
• Organic Production and Supply Chain: Establishment and management of the infrastructure necessary to ensure that there is an effective organic food supply chain in Izmir.
• Organic Distribution Channel: Establishment and operation of an organic produce and foods distribution channel to service the domestic organics food markets.
• Organic Food Marketing and Communication: Establishing the organics marketing and communication initiative that ensures Turkish organic produce is known, recognised, trusted and consumed in the domestic and international markets.

Cluster Governance: Most clusters are directed or guided by a “cluster coordination agency” whose role and function is also to encourage cluster partners to compete, cooperate and coordinate where appropriate (i.e. the building and/or enforcement of cluster relationships); to raise their competitive performance through their recognition and take up of innovation and technology, and to raise cluster partner aspirations (growth and development), together with the management of associated cluster actions.

Whilst the Izmir Organic Food Cluster will undertake these functions, it was necessary to develop an appropriate cluster management and governance structure to formalise these activities and the management of the cluster. The Working Group agreed on an appropriate structure.

Recommendations: The objective of the Road-mapping process was to be a “learning experience” that would test various cluster themes so as to develop a series of policy recommendations for consideration in the make of the National Clustering Policy (i.e. more specifically the white paper). Three sets of recommendations were developed at cluster-, institutional- and policy-level:

Whilst many cluster-level recommendations are covered though the four cluster actions, there remain three wider issues to be addressed:

• At present business support activities are mixed, due to a lack of cooperation between Izmir’s business support organisations. Thus there is an immediate need to ensure cooperation and harmony between such organisations (i.e. chambers, unions, relevant NGOs etc.).
• An “organic foods franchising structure” that would enable the sale of Izmir organic foods needs to be quickly developed within an effective commercial framework.
• The operations of organic food control laboratory needs to subsidised by the cluster actors until the volume of test specimens generates fees sufficient to meet the laboratory’s operational (running) costs.

There are a number of issues and impediments that need to be addressed by different institutions so that the Izmir Organic Food Cluster develops smoothly and rapidly[1].

• TUIK (Turkish Statistical Institute): During the cluster analysis phase there were repeated difficulties in gathering regional and sector-specific data and statistics. There is a need to undertake a review of current data selection and collation processes with a view to provide more timely and accurate regional and sector-specific data and statistics.
• Ministry of Agriculture and Rural Affairs (MARA) and GS of Aegean Exporters’ Associations (AEA): In addition to the lack of general statistical data, there is also a lack of timely specific data and statistics on organic produce production and exports. There is a need to undertake a review of Turkey’s export data recording methodology.
• MARA/AEA: Establishment of an organic produce identity and structure within Turkey’s export structure, so as to provide focus and an identity for organic produce exports, together with the AEA establishing an organic produce/food exporters union to provide focus, structure and identity to the industry.
• Izmir Regional Development Agency: There is the necessity to recognise the social and economic value of clusters to Izmir’s regional development process, continued support and assistance should be provided to the cluster, as part of the Agency’s remit.
• MARA/ETO: There is a considerable volume of technical, regulatory and statutory paperwork associated with organic produce/food production and sales, requiring constant review and oversight. As such there is a need to develop a structure that allows for effective discussion and oversight of organic produce regulations, and dissemination of regulatory information.

In addition to the cluster-level and institutional recommendations, there are, as a result of the activities undertaken, some recommendations that may need to be addressed at the policy-level:

• Funding of Cluster Coordination Units: Much of the success of cluster policy and strategy in Turkey will rest in the coordination and management activities undertaken by the Cluster Coordination Agencies (CCUs), in whatever form they are established. Much of this work will not be revenue producing (or for which fees can be charged). Consideration should be given as to how CCUs could be funded[2].
• Consideration of the legal structure of CCU: It is necessary to improve/establish the legal systems and structures that allow CCUs to deliver programmes in an effective and cost-efficient manner. Social enterprises that enjoy certain tax privileges can be found in some European countries; however the Turkish Trade Code does not recognise social enterprises as a privileged economic agent.[3] The cluster policy may address the legal and administrative structure of CCUs so as to clarify their legal identities and roles.
• Clusters as regional development tools: As much of the work of the CCU and that of the Regional Development Agencies will overlap, it is necessary to establish working strategies which would allow for RDAs and CCU’s to work together[4].

A Roadmap for Izmir Organic Food Cluster.rar