Why Geographical Indication (GI) certification matters in German food retail
By Jakob Rackl and Prof. Luisa Menapace
January 9, 2025
5 MIN READ
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This article explores why Geographical Indication (GI) certification matters in German food retail, drawing on recent academic research on agri-food supply chains and producer-retailer relationships.
The Value of Trusted Sourcing
Geographical Indication (GI) certification is a policy designed to identify products that originate from a specific region and possess distinctive qualities linked to that origin. To use a GI label, producers must comply with established production standards, helping ensure authenticity and quality.
In a recent study (Rackl & Menapace, 2025), we examine how GI certification influences agri-food supply chains, with a particular focus on the relationship between small and medium-sized producers and large-scale retailers in Germany. The findings suggest that GI certification can play a role in these relationships by signaling quality and efficiency, and allowing retailers to identify reliable producers more easily, ultimately contributing to enhanced profitability and trust within such partnerships.
Understanding GI Certification
GI certification protects products originating from specific territories where characteristics are essentially or exclusively attributable to their geographical origin. Labels such as Allgäuer Bergkäse, Bayerisches Bier, or Schwarzwälder Schinken act as collective branding tools across agri-food sectors.
Unlike trademarks, which establish individual brand identities, GIs represent a shared form of intellectual property, verified through independent third-party certification and limited to producers within defined geographical areas.
As a result, producers in regions where a GI is available, who are productive enough to meet its standards profitably and willing to adapt their production methods if needed, can advertise their products using the GI label.
Identifying Efficient Producers
One of the primary challenges in agri-food supply chains is the presence of information asymmetries, as retailers often struggle to discern the efficiency and quality production capabilities of various producers. In our study, we explore how GI certification can address this issue through establishing stringent production standards and verifying producers’ compliance with these standards, thereby acting as a credible signal of quality and efficiency.
By requiring producers to adhere to stringent production standards, GI certification ensures that only those producers who can consistently produce high-quality goods are certified. GI certification guarantees that the producer has invested in maintaining these standards, thus reducing the risk of opportunistic behavior such as delivering low-quality products. For retailers, this means that a producer with GI certification is more likely to be a reliable partner capable of meeting high-quality standards.
“GI certification can play a role in facilitating producer-retailer relationships by helping retailers identify reliable producers and incentivizing producers to uphold high standards.”
Notably, GI certification can also provide information about non-GI producers, specifically those in GI regions who choose not to certify. Consider, for example, producers of “dried ham” in the “Schwarzwald” (Black Forest) region in Germany. “Schwarzwälder Schinken” (Black Forest Ham) is a GI registered with the European Union and well-known among German consumers. The dried ham producers from the “Schwarzwald” region who choose to certify their product under the GI label benefit from its reputation but must be efficient in production to profitably provide high-quality products thatmeet the GI’s production standards.
On the other hand, dried ham producers from the same region who opt not to certify their products under the GI label may signal inefficiencies or higher production costs that could stem from challenges in meeting quality standards or from lacking access to resources necessary to comply with GI requirements.
While this does not imply that dried ham from a non-certified producer from the Black Forest region is generally of lower quality than the certified equivalents, the informational gain on producer characteristics enables retailers to make more informed sourcing decisions and adjust contract terms in order to mitigate the risk of receiving low-quality goods.
GI Certification: Strengthening Supply Chains and Producer-Retailer Relations
Using data on the German food craft sector (i.e. bakeries, butchers, winemakers, etc.), the results of our study suggest that German retailers exhibit a clear preference for certified producers, with GI-certified producers being significantly more likely to engage in transactions with retailers than their non-certified counterparts.
This indicates that German retailers are generally aware of the concept of GI certification and recognize its value in signaling quality and efficiency and suggests that GI certification can play a role in facilitating producer-retailer relationships by helping retailers identify reliable producers and incentivizing producers to uphold high standards. However, market structure and consumer preferences, which can vary across sectors and countries, also shape the impact of GI certification on producer-retailer dynamics.
For instance, the price-premium of GI products relative to “generic” products plays a significant role in determining the relationship between (GI) producers and retailers. In Germany, where the four largest food retailers control 96% of the market, and consumer awareness of geographically protected products is relatively low compared to countries like Italy or France, GI certification may primarily serve as a quality signal for retailers rather than a major driver of consumer demand.
In countries with a more fragmented retail sector or stronger consumer preferences for GI-labeled goods, the premium on procurement and final retail prices of GI products may be more pronounced, thereby offering an additional factor that influences the impact of GI certification on producer-retailer relations.
Overall, our study suggests that GI certification can serve as a mechanism for enhancing efficiency and trust within agri-food supply chains, particularly in markets where retailers rely on quality signals to mitigate information asymmetries. By helping retailers identify high-quality producers and encouraging compliance with stringent production standards, GI certification contributes to the stability and profitability of producer-retailer relationships.
Works cited
Rackl, J., & Menapace, L. (2025). Coordination in agri-food supply chains: The role of Geographical Indication certification.
International Journal of Production Economics, 280, 109494.
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