4.1. Geographical Indications
According to the leader of MPIG-K2J, GI is a tool for communication and negotiation among the stakeholders along the supply chain. To be able to fulfill these responsibilities, three functions are involved: (1) uniting business actors in the value chain; (2) managing quality, unique characteristics, and product sustainability; and (3) promoting and maintaining product reputation. These responsibilities were also written down in the “Book of Requirements” for Koerintji cinnamon, explained in the following section. MPIG-K2J uses this book to guide farmers willing to participate and use the GI label.
Being a contributor to the cinnamon commodity in Indonesia, MPIG-K2J had encouraged the Sakti Alam Kerinci Farmer Organization (TAKTIK in Talang Kemuning) to innovate continuously. In 2015, this organization also succeeded in legalizing cinnamon patents by achieving the GI certification award, which the Jambi Provincial Plantation Office facilitated. GI certification is a certificate given by the Director-General of Intellectual Property Rights at the Ministry of Law and Human Rights, the Republic of Indonesia, for superior native commodities as an effort to protect the authenticity and uniqueness of agricultural products produced in the “Kerinci regency’. This certification may increase Indonesian agricultural products’ competitiveness in domestic and global markets, including cinnamon with its recognizable label (
Figure 4).
With the presence of this label, sellers cannot confess carelessly of selling Koerintji cinnamon. The next step was to ensure that geographical indication recognition is recognized as a commodity of premium quality and has characteristics not similar elsewhere.
4.2. GIs Stakeholder Perception
Understanding stakeholder perception was a necessity to address the research problem. Economic implications are the most important factor related to established geographical indicators, while local employment is essential for stakeholders in the social dimension. In reality, the research needs to access the highest points are given to the price premium, regional value-added (production improvement), and traceability.
With the help of Rikolto (a Belgium non-profit organization based in Indonesia), a roundtable discussion was conducted on the 19th of October 2018 in the Mahkota Hotel, city of Sungai Penuh, Kerinci regency. Various stakeholders were invited to the session, from farmers to local government officials. The event was held to assess whether GIs can become an added value for the value chain. In addition, a questioner was distributed to the stakeholder (
n = 18) during the RDs to verify their understanding which can be seen in
Figure 5 as follow.
Based on the stakeholder (
Figure 5) perception, that
n = 12 strongly agrees that GI provide information of production origin of the korintjie cinnamon, there were also some disagreements whether enough of the yield was coming from the Bukit Kerman subdistrict. The interesting part, which became a debate during the discussion, was about the benefits of GI. Thirteen people agreed that more buyers are attracted to buy cinnamon with a GI label on its packaging nowadays. It was strongly agreed that GIs benefit them and local producers through legal protection and prevention of any unauthorized use. However, it was vital to determine whether GIs benefit the farmers’ production skills and capacities to answer the research question. The participants agree that GI registration will help boost the commodity’s competitiveness in both domestic and international markets.
For further facts findings, the researchers used a ‘business model canvas’ distributed among the participants in
Figure 6. Using this canvas is for developing new business models and documenting existing ones in the cinnamon sector. The business model canvas is helpful for the research to identify the most central question such as (1) key partners, (2) key activities, (3) key resources, (4) value propositions, (5) costumer relationships, (6) channels, (7) costumer segments, (8) cost structure, and (9) revenue streams.
The business canvas model workshop shows that the participants (
n = 18) have typical results in
Table 2.
The research explored more information to answer the research questions from this stakeholder perceptions of GI Koerintji cinnamon and business model canvas. The research continues to validate directly on farms, which will be described in the following sections.
4.4. Validating the Impact of GI Guidelines
The research continues to survey the members of TAKTIK whether they adopt the guidelines that MPIG-K2J previously established. Production centers were examined to compare and predict the outcome for DM and PM. All the processes were documented to determine whether the guideline helped harvesters improve practices that can be seen in
Figure 7, where members of the group used mat to sundry.
During the observation, attempts were made to validate the points of 1–6 processes. The research areas were clustered with the distance from TAKTIK coordination offices with an area A (1–3 km above), B (3–6 km above), and C (6 km above).
According to the book of requirements (
Table 4), the same respondents who implemented DM and PM were interviewed.
Based on this table, the distance between areas could affect the closeness to the TAKTIK, which determines the practices for following the guidelines. TAKTIK continuously reminds its members of the use of GIs guidelines in the process. However, the purposes and benefits of the implication of GIs are not widely known or understood by cinnamon farmers. In this surveyed area, A, B, and C (n = 60) (mostly from area C) did not make sundried cinnamon in a safe place (n = 8). Furthermore, they did not check for foreign objects hazardous to the human body (n = 9). Most farmers who implemented the DM and PM based on GAP and GMP adjustments live in area A (n = 20).
4.5. The Effect of Internal Control System
One development is through the Internal Controlling System (ICS) that adds value to DM and PM. An ICS is an element of a recorded quality assurance system that allows an external certification body to delegate to an established body or unit within the certified operator the periodic inspection of individual group members [
49]. It ensures that third-party certification bodies, such as MPIG-K2J, conduct an audit of the system’s proper functioning and carry out a few spot-check re-inspections of TAKTIK. Quality assurance helps safeguard and develop TAKTIKs activities (
Figure 8). Therefore, the ICS’s presence may account for the organization’s specific requirements where it operates, adds real value, and helps manage farmers’ groups pragmatically. In this survey, “value-added” means the quantified value of an investment created by supporting agencies’ willingness to develop a functioning ICS for TAKTIK.
In analyzing the presence of ICS in the GI Koerintji cinnamon as a value chain improvement, we refer to the concept of Porter [
41], namely the main activity and the supporting activities. According to the MPIG chairman, ICS requires farmers to implement self-control based on the operating manual and control plan. Furthermore, external controls by MPIG-K2J on producers’ compliance with the control manual and plan are executed at least once a year. The quality of the product will be monitored for its compliance.
The controlling system determines the responsibilities, identifies crucial points of control, specifies the corresponding inspection methods, and stipulates sanctions. Therefore, the operating manual and the control plan need to comply to the handbook. The ICS developed from the handbook of requirements before and after production is described in the
Figure 9 below.
Figure 9 shows that ICS in GIs brought an added value in the harvesting and post-harvesting processes. The partnership between TAKTIK, Rikolto, and MPIG-K2J was quite adequate because they had created an ICS based on ATN, which requested the farmers’ group to ensure quality control and product traceability.
Once every three months, MPIG-K2J inspects and audits them. In 2017, the registered members of TAKTIK were 254. However, 136 adopted the ICS system based on the GI Koerintji cinnamon guideline book, which means it was a challenging job for MPIG-K2J. They conducted a thrice-monthly visitation to the TAKTIK members to monitor and evaluate their post-harvesting practice, including sun-drying and packaging, since December 2016.
Since adopting and applying the I.C.S., TAKTIKs’ members in the post-harvesting handling and process have become more thorough on foreign objects. Furthermore, the quality control by TAKTIK has become stricter than before. Hence, the quality of cinnamon is guaranteed. Furthermore, TAKTIK activities in coordination with their members were examined, including whether the ICS follows the GI Koerintji cinnamon guideline. Finally, the survey investigated how the practice was conducted and their active members and determined improved DM and PM methods.
The TAKTIKs’ product handling was investigated, as shown in
Figure 10. The investigation and observation is to see movement and handling of materials and products in a systematic manner from point of origin to warehouse. The main objective is tKerino observe the safety of the products and how workers conduct proper commodity handling techniques of the cinnamon.
The process involved: (1) Using a mat for the cinnamon bark’s sun-drying process after being brought from the forest (the sun-drying process can take up to three days during the daytime, from 9 AM—4 PM, to decrease the moisture content up to 15%); (2) separating the grades (KM/KF/KS/KA); (3) after the sortation, the cinnamon categorized as KA is then cut into the size of 5, 8, and 12 cm long, depending on the buyers’ requirements; (4) before putting the cinnamon in the nets and cardboard, foreign objects in the cinnamon, such as rocks, rubbers, and plastic, were checked; (5 and 6) After selection, TAKTIK wraps the cinnamon in a nest or puts it in cardboard based on the buyer’s demand. Finally, the bag is put, and a sign of product origin is explained in the following section.
The improved post-harvest handling, such as drying and processing-packaging, are farmers’ behavioral changes. They became fully aware of the hazardous impact of a foreign object in cinnamon bark. In
Figure 11 shows the function of GIs among TAKTIK members. The total respondent (
n = 20) included all the TAKTIK members’ living in area A. The four most crucial question-related GIs and their added value for their daily production were examined.
The respondents responded positively to GI Koerintji cinnamon’s presence, though not all of them clearly understand how it may boost their livelihood and improve post-harvesting practice. Therefore, Koerintji cinnamon’s guideline changed their traditional cultivation and harvesting practice, with eighteen (n = 18) respondents agreeing to it. The interesting part was the question concerning whether GI brings economic prosperity for the farmers. The female members strongly agrees (n = 7), but the male (n = 5) disagree and some of them are in between (n = 6)
However, the majority of the members (
n = 16) consent that the GI also became legal protection as Koerintji cinnamon originality due to the fact that while other regions also produced cinnamon, it is not as high premium a commodity as that from Kerinci regency. Due to its functionality, GIs are “place-based names that conveyed the geographical origin, as well as the cultural and historical identity of agricultural products” [
50]. In this case, it also brings opportunity for the Koerintji cinnamon. Revinon [
51] showed that using the GI label on the local market also has a brand awareness impact for the region or a group of villages, leading to economic improvement. International agreements show that GI is a certification that “identifies a good as originating in a delimited territory or region where a noted quality, reputation or another characteristic of the good is essentially attributable to its geographical origin and the human or natural factors there” [
50]. This is particularly interesting in the Koerintji cinnamon case, wherein the stakeholder with interest tries to sell the product in the global market. Indonesian cinnamon has an outstanding reputation in the European markets, though the name used in these markets is “Cassiavera”. It is produced and originates mainly from the Kerinci regency.
4.6. The Effect of Adopting GI Principles for Higher Farmgate Price
Within a year, TAKTIK improved their production, reducing the moisture content up to 25% by adopting the ICS system (one of the handbooks of requirements) including peeling, cleaning, and sun drying. Besides it, the development of ICS creation of a traceability system and putting GI’s label in their packaging increased farm-gate price by 4%. In addition, MPIG-K2J conducted a lab analysis for volatile oil (VO) containments to verify the cinnamon quality in order to meet the buyer’s expectations related to the farmgate price.
One reason for this is that the area of production of TAKTIK was not located as one of the favorites and the highest concentration of volatile oil in the area, as stated in the handbook of GI Korintjie cinnamon (see
Table 5).
Cinnamon from these sub-districts was tested through laboratory assessment. The table shows that TAKTIK operational activities are in the Bukit Kerman sub-district that produces 2% of volatile oil. Its fixed buyer contract agreement from PT Agripro Tridaya Nusantara (ATN) only tolerates water contaminants up to 20–25% when the VO percentage is above 3.5%. ATN offered a price of €2.92–3.11 for one kilogram of KM with this quality. This led to a winning stage for TAKTIK, where they had to meet all the ATN criteria.
Table 6 shows the sale price difference of TAKTIK over time.
TAKTIK had gained confidence because of demonstrating its influence in setting the price. MPIG-K2J became involved in training, assisting the producers in applying ICS to reduce the moisture content to 25 percent and forbid pesticide and chemical fertilizer use. In return, buyers witnessed first-hand that producers’ capability in producing premium quality products is improving. TAKTIK, with the support of the Jambi provincial agriculture agency, tested its volatile oil percentage in the laboratory of the Indonesian Center for Estate Crops Research and Development in May 2017.
Buyers also give regular feedbacks to encourage further improvement. As the mutual trust between the two parties strengthens, the commitment to a long-term partnership/cooperation can be realized. The partnership between TAKTIK and ATN became advanced and developed into a joint operation to pursue several goals, including accessing potential markets, gaining efficiencies, obtaining a loan for a significant investment (in this case, a warehouse), and access to skills and capabilities development.
Additionally, the joint operation between TAKTIK and ATN, including ATN’s end buyer (LP), could assure financial institutions (banks) hoping to access individual loans for TAKTIK members’ capitals in harvesting seasons. This is evident for the trust given of mutual benefit, where they improve their practice within one year. Therefore, the impact of geographic indications on farmers’ income could be increased over time when they also enhance their approach to meet the buyers’ criteria for a high premium commodity (
Figure 12).
Figure 12 shows the flowchart of the added value, in which the subject concern from ATN and LP producers, in this case, was that TAKTIK should have met the good agriculture practices (GAP) in processing the goods, and also good manufacturing practices (GMP), as safety and wholesomeness are of utmost concern to the spice industry, customers, consumers, and regulators. As any other agricultural product, the safety, quality, and consistency of cinnamon may be compromised during the processes which occur between the farm and fork.
4.7. The Effect of the Label for Its Origin
The branding of origin represents one of the possible strategies to escape the common goods market. Therefore, at low prices and intense competition [
32], the branding of Koerintji cinnamon with GI labels promotes the brand in the global market. The importance of differentiating branding and promoting Koerintji cinnamon as a worldwide brand in target markets is paramount to highlight the main characteristics of Indonesian cinnamon sourced from other areas for its comparative advantage. The Koerintji’s cinnamon brand image includes organic produce, high volatile oil, unique taste, and a peppery, robust flavor. It could have several positive effects when product originality is stated, which appears to be a good marketing strategy [
52]. Providing a specific label for cinnamon is punctual in spice trading, identifying its locality and traceability. TAKTIK also uses the label for its branding of origin at its packaging. According to handbook principles, the label reduces misappropriations and encourages other cinnamon harvesters in the regency to adopt GI standards (
Figure 13).
Using the label may encourage consumers to pay more for the certified product and know its origin [
53]. Establishing an adequately protected cinnamon origin (
seu generis) brand can help harvester gain a competitive advantage in buyer-driven global markets. Adding value by differentiating the product increases consumer perception of a premium commodity. Kampft research shows that consumers are willing to buy at a price 10% higher for products protected by GIs, with around 87% of them ready to pay 20% more [
54]. Furthermore, consumers’ information of origin can be appreciated, differentiating them from farmers’ output in the rest of the world (see
Figure 14) [
11].
Geographical indication protection should ideally provide consumers with information and assurance that protection for specific products is provided based on their uniqueness, implying that they are unavailable in other regions and thus satisfying consumers when purchasing or consuming such products [
41].