Italy Bails Out the Parmigiano Reggiano Industry

Sure, we've heard about the bailouts for the automotive and financial industries, but did you know that the makers of Parmigiano Reggiano were in trouble too?

According to the Wall Street Journal, though demand of the Italian cheese remains strong, producers constantly struggle to make money, putting the future of the cheese at risk. "It's a tragic situation," said Marco Iemmi, who has been making parmigiano for 30 years in Salsomaggiore Terme, a small town in Italy's fertile northern Emilia-Romagna region. "I'll have to close up shop unless things improve."

Last year, Mr. Iemmi sold 15,000 parmigiano wheels -- the cheese is produced in rounds of about 35 kilograms (77 pounds) each -- for a total of €4 million ($5.2 million), or about €7.4 a kilogram. It costs Mr. Iemmi €8 a kilo to produce the cheese, he says, so he is losing money.

At the root of the parmigiano problem is that the industry is made up of about 430 small, family-owned businesses that dot the plains outside the northern city of Parma. Mr. Iemmi admits that "there are too many of us." But he adds: "We have an ancient mind-set. Each one of us wants to take care of his own little business."

The fragmentation means that producers have little leverage in negotiating prices with wholesalers that buy the cheese and resell it to supermarkets and other retailers. Massimo Viviani, director of Federdistribuzione, the association that represents many large Italian retail chains, says that the price at which parmigiano is sold in stores "is the price that consumers are willing to pay."

The Italian government has responded to the problem by buying 100,000 wheels of the cheese, and donating them to charity. "The government's new bailout plan will help somewhat", says Mr. Iemmi, "but long-term it's a drop in the bucket".

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