During the First International Retail Forum, held within the #FTrade Club 2021 in early December 2021, much attention was paid to new formats of fruit and vegetable retail. In particular, Fedir Rybalko, an expert on the fruit and vegetable market and an international consultant to FAO, made many interesting statements. Together with the FAO and EBRD Project team, he completed the first study of the retail trade of fresh produce in 2021, which revealed a number of noteworthy and unexpected trends.

“The question that has become relevant during the COVID-19 pandemic is whether online sales will become a new trend in the produce market. When we discussed this issue at the conference of the APK-Inform: Vegetables and Fruits project in 2016, it seemed to be a look into a very distant future. However, the share of online sales of fruit and vegetables in Ukraine reaches about 1.5% today, and this segment is growing many times faster than the rest. Dozens of delivery services operating on various platforms were formed in Ukraine during lockdowns, and almost all large market operators entered this segment, trying to take their niche in it,” Fedir Rybalko notes.

He believes this trend will be fundamental in the future, as investments in online sales continue to grow. Kyiv region will remain the driver of online sales in Ukraine in the next 5-7 years.

Nonetheless, taking into account the development of the retail market, Ukraine is not yet of interest to large players in the online sales market who are ready to present innovative solutions, Fedir Rybalko says.

“For example, investments in a project to create a competitive delivery service amount to about $100 million. I believe that the Ukrainian market is not yet ready for these large investments. However, I think such a project can be implemented in 3-5 years,” the expert explains.

In addition, the increase in the fiscalization of non-chain retail continues. In particular, it takes the form of an increase in wages and rental costs. This puts pressure on the business of small retail operators in the market, which are forced to increase their margins and, consequently, prices. According to Fedir Rybalko, it can be assumed that the share of non-chain retail in the market will decrease.

Another important trend Fedir Rybalko notes in the development of the market, is that Ukraine may become attractive for immigrants in the future. “This will happen when the average salary reaches $800 in the country. They will be new consumers of fruits and vegetables, about whom we do not know much so far.” the expert sums up.

Сообщение Online sales of fruits and vegetables in Ukraine will grow, while the share of non-chain retail will decrease появились сначала на EastFruit.

Retailers and entrepreneurs together provide 55% of all sales of fresh fruits and vegetables on the Ukrainian market. Unorganized trade accounts for the rest, EastFruit reports. Thus, about half of the trade in fruits and vegetables in the country, or 35 billion UAH every year are not reflected in any trade statistics. They go through uncontrolled markets, that means direct competitors of the retail business.

This data from the first study of retail trade in fresh fruit and vegetables was announced by Andriy Pankratov, analyst of agricultural markets, international consultant to the Food and Agriculture Organization of the United Nations (FAO), during the First International Retail Forum. It was held within the framework of #FTrade Club 2021 in Kyiv in early December 2021. According to the FAO study, retail chains account for only about 40% of all trade in fresh vegetables and fruits.

The share of self-sufficiency of households in fruit and vegetables is falling and this is a positive sign for professional market players.

As Andriy Pankratov noted in his presentation, only retail allows converting the efforts and expenses of a farmer into money. And it is the retail trade in vegetables and fruits that shapes the trends influencing the business of farmers. This is why the FAO team has always paid so much attention to this: it audits the produce departments of supermarkets, monitors industry news and analyzes retail statistics. FAO experts identified several key features of the Ukrainian market in the study of fruit and vegetable retail of Ukraine.

Firstly, people grow themselves about a third of the fresh vegetables and fruits consumed in Ukraine This was concluded by analyzing the data of a household survey by the State Statistics Service of Ukraine. In monetary terms, this is about 54 billion UAH per year. This amount represents the growth potential of retail trade in fruits and vegetables in Ukraine, not taking into account the possible increase in the level of income of the population.

Although the share of self-sufficiency in vegetables and fruits of Ukrainian households is declining, it remains quite high. According to Andriy Pankratov, to use this potential, retailers should offer such products and in such a way that consumers do not have the need or desire to grow them.

Another important feature is the fact that uncontrolled trade in fresh fruits and vegetables accounts for about half of all retail sales. These are cash sales in markets, which are not reflected in any statistics. As a rule, the whole process, from the purchase of materials and equipment for production, to wholesale and retail sales, is done in cash.

This “cash” segment of the fruit and vegetable trade also continues to decline. It was in 2020 that it dropped below 50% for the first time and amounted to 45%. About 55% of sales, respectively, were provided by retailers and entrepreneurs under the common and simplified taxation system.

The potential for the development of retail trade in fruit and vegetables is still huge.

Moreover, another phenomenon has recently appeared – online trade in fresh fruits, vegetables, berries and herbs. The online sales segment is now developing much faster than traditional supermarkets.

The 2021 Retail Forum gathered more than 200 leading representatives of the Ukrainian fruit and vegetable trade. The event was organized by the project “APK-Inform: Vegetables and Fruits” with the support of the Food and Agriculture Organization of the United Nations and the European Bank for Reconstruction and Development (EBRD). Information partners of the event are the EastFruit International Analytical Platform and the Ukrainian Horticultural Association (UHA).

Сообщение Around 35 billion UAH from the sale of fruits and vegetables are not accounted for in any statistics in Ukraine появились сначала на EastFruit.

The first Georgian online bazaar opened in December and now everyone will be able to buy agricultural products without intermediaries.

Ebazaar.ge is the first Georgian online platform allowing users to easily purchase healthy, environmentally friendly, high-quality agricultural products directly from the grower.

“Online shopping in Georgia is gaining momentum, and the pandemic has given a significant impetus to the development of this direction. For the last five years I have been developing e-commerce in Georgia and therefore I can compare the situation before and after. Before the pandemic, online shopping developed poorly, but during the first lockdowns, people even ordered mineral water online” Tamar Buadze, co-founder of ebazaar.ge, commented in an exclusive interview with EastFruit.

According to her, the Georgian consumer is more inclined to make small purchases online – the average bill is still $10, while standardized goods such as electronics are most often purchased. “Despite the modest average bill, you need to understand that there are 1.1 million registered households in Tbilisi that buy food every day, and fruits and vegetables are an integral part of Georgian cuisine,” Ms Buadze explains.

“Our platform will help both consumers and growers get closer to each other. This is a classic marketplace where farmers can register freely, place products on electronic stalls and sell them directly to end consumers.”

The goal of the project is to make Georgian agricultural products more accessible through modern technologies, as well as to support local farmers.

“In addition to fruits and vegetables, we offer authentic products from different regions of the country, which often cannot reach the supermarket due to limited production. Now consumers will be able to receive such products with home delivery,” says Tamar Buadze. The high quality of products is controlled by the so-called “consuls”, who work on the farms and help farmers register at the platform, as well as control the quality and organize logistics. A client can leave a review on the taste of the product on the website for each farmer.

ebazaar.ge is a unique business model that does not sell its own products, but offers producers a convenient sales service. A farmer can place an offer himself, set a price, manage stocks and be fully involved in the trading process without an intermediary.

The task of the project is to provide farmers and consumers with a convenient payment service and automatic traceability of the product from the moment of ordering until the product reaches the end consumer.

The company also offers flexible payment terms, when the money is debited from the client’s account upon receipt of the order, and not at the time of ordering, and goes to the farmer’s bank account. Taking into account regional peculiarities and as a matter of convenience, payment is possible both in cash and by bank transfer.

So far, at the platform, you can buy fresh vegetables and fruits from the regions of Kakheti and Kvemo Kartli only in Tbilisi, but next year the company is going to expand deliveries from other regions to large cities – Kutaisi, Batumi.

Сообщение The first online bazaar opened in Georgia появились сначала на EastFruit.

Do buyers of fresh vegetables and fruits trust online delivery? What is the delivery service shopper’s process for selecting vegetables and fruits in supermarkets? What is the share of fruit and vegetable products in the consumer online shopping basket?

EastFruit interviewed Andriy Kurskiy, CEO of the Zakaz.ua food delivery service, which cooperates with supermarket chains in Ukraine, Uzbekistan, and Moldova providing them with additional sales of fruits and vegetables online.

– How did your project start? How long has the Zakaz.ua delivery service been working on the Ukrainian market and in which cities?

In the summer of 2020, Zakaz.ua celebrated its 10th anniversary. Today the service operates in 15 cities of Ukraine. Zakaz.ua started out as a small startup in 2010 and even had a different name. At the start of the project, together with the assemblers and couriers, the team consisted of just over 30 employees and the entire office was run from one small room.

The share of online food sales is 8-10% in the United States, the United Kingdom, and South Korea

– What markets are you currently operating in? In your opinion, where are your grocery delivery services developed better and where are they worse?

For our company, the most noticeable development of service has been in Ukraine. It accounts for the overwhelming majority of completed orders. In addition to Ukraine, the Zakaz.ua service also operates in Chisinau, Moldova and Tashkent, Uzbekistan. We opened the delivery service in Moldova one year and a half ago and in November 2020 for Uzbekistan. Residents of these countries have just started to get acquainted with online food shopping. We still have a lot of work in this direction. Global trends show that grocery delivery is most developed in the United States, the United Kingdom, and South Korea. There, the shares of online sales are 8-10%.

– Which supermarkets do you work with?

We work with all retail chains as our partners. Essentially, Zakaz helps them build an additional sales channel for their products that is user-friendly. Also, it increases the retailer’s loyal customer base.

– Your partners are 10 of the most popular players of the Ukrainian retail market today. Who are they and how did you establish cooperation?

In Ukraine, we cooperate with such networks as METRO Cash & Carry, Auchan, NOVUS, MegaMarket, Furshet, Tavria V, VOSTORG, VARUS, ECOmarket, and City Market. However, this was not always the case. Previously, retailers did not fully understand all the advantages of selling goods online. We had to advise them on the importance of launching a website, a mobile application, and organizing the delivery of their goods to customers’ homes as well as to offices, cafes, and restaurants. Now, we regularly receive offers to cooperate from retail chains. Also, analysts of the commercial department constantly monitor the markets of Ukraine and other countries so we ourselves are ready to come up with an offer to the retailer at the right time.

– You indicate that the prices for goods ordered by your client from supermarkets do not differ from the prices on their shelves. How do you make money for your business?

We have two main sources of income. First, we receive a commission from retailers for organizing business processes such as processing, assembling, and delivering orders as well as digitizing commodity items and posting them on the site. Second, we make money on the shipping cost that the customer pays.

– What is your shopper selection process of goods after receiving an online order from a customer? Items can vary significantly in price and quality at different chains. What guides your employees in this case?

On our website, the customer chooses their favourite retail chain and goes to that online store to select products. The buyer focuses exclusively on the assortment of a particular supermarket. However, that does not prevent the buyer from also purchasing other categories of goods in different chains by placing several orders.

After confirming the order, our assembler receives a list of products and goes to the sales floor to gather them. We have different instructions on how to select certain positions. The employee checks the expiration dates, the integrity of the packaging, and the type and quality of the goods.

– What is the share of fruits and vegetables out of all the commodity items your service delivers to its customers?

This January, the share of sales for the vegetable and fruit category for all partner retailers amounted to 11.7% of the total basket checkouts.

– What are the most popular fruit and vegetable products ordered through your service? Have you analyzed how consumer preferences change depending on the season, pricing policy, and product quality?

The most popular fruit in any season is the banana. Bananas are preferred by almost 50% of our users: every second user has put them in their basket at least once. In second place are citrus fruits lemons, oranges, and mandarins. Apples are in third place. Avocados are gaining more and more popularity.

User preferences change with the season. In spring, young vegetables are purchased more ofter like potatoes, cabbage, and radishes. In May-June, strawberries come out on top for fruits. In summer, zucchini, eggplants, tomatoes, cucumbers, bell peppers, apples, cherries, peaches, and apricots are popular. In autumn, the popular produce products are pears, plums, figs, persimmons, potatoes, and borsch set vegetables (i.e., beets, cabbage, carrots, potatoes). Citrus fruits, kiwis, and apples are most often added to the winter basket.

– Produce, especially fruits and berries, is perishable so proper transportation to the consumer is important in order to preserve product quality. How does Zakaz.ua ensure this and do you guarantee the delivery of high-quality and fresh goods to your customers?

The service takes care of preserving freshness first and foremost. After the purchases go through the checkout, the goods are packed in boxes that protect them from mechanical damage and then are handed over to couriers for delivery. The process is approximately 3 hours from taking the goods off the shelf to handing over the assembled order to the customer.

Also, we do not forget about quality. Our service’s shoppers work in different supermarkets and select products directly from the chain’s shelves. They cannot change the assortment available, but they choose the best guided by the rule “I take what I would want for myself.” If fruits and vegetables are not of the best quality, then our shoppers contact the customer to offer a replacement.

– Tell us about issues with returned products. How do you handle customer complaints about perishable food delivered?

If the customer is not satisfied with the quality, they can always contact us and we will resolve any issue. The service has its own quality control department as well as a contact centre whose operators answer customer questions on a daily basis.

If the customer finds any defects in the ordered fruits or vegetables received, they call us and we look into the situation. We always try to resolve the issue within 24 hours because perishable food will not lie for a long time. We offer several possible solutions including refunding the cost of products or getting a promotional code for free shipping.

– For your corporate clients, you select offer assortments and products based on the type of their business. Tell us in more detail how such a selection takes place, in particular, when it comes to fruit and vegetable products?

We have developed assortment matrices for each distribution channel and we inform customers about the products relevant to them. If we talk about fruits and vegetables, for example, we send notifications to restaurants about cherry tomatoes, avocados, salads and borsch set products. For offices, they receive messages about apples, pears, etc. We are actively working on automating this process. In the near future, our system will learn to intelligently report not only about potentially interesting products, but also keep track of which products the customer bought and then stopped, and then select the most suitable price offer for them.

– Did your business turnover increase during COVID-19 quarantine restrictions when services like yours became very popular since consumers visiting stores was impossible? What are the prospects for such projects after quarantine restrictions are completely lifted in the country?

Yes, during the pandemic, the popularity of delivery services has grown significantly and we are no exception. In general, Zakaz.ua began to deliver twice as many orders for the period from March to December 2020 compared to the same period in 2019.

According to various estimates, the share of online product sales in Ukraine ranged from 0.5% to 1% of the total retail market turnover before the quarantine. No, we assume that the online share has grown by at least 1.5 times.

The market itself has great potential as it is growing faster than in Europe. According to our estimates, the volume of the food delivery market reached $100 million in 2020. It is worth noting that we are talking about development in both B2C and B2B directions. The B2B segment has a much smaller number of orders but this is offset by an average check, which is significantly higher than that of retail customers.

– One of your business clients is the HoReCa segment, which suffered the most during the global coronavirus pandemic. Did your service feel the hit also?

Of course, the COVID-19 quarantine measures left an imprint on the B2B sales market. This was primarily associated with the forced closure of HoReCa establishments during strict lockdown periods and the transition to remote work of offices. The first lockdown was accompanied by a redistribution of sales between the HoReCa channel and traditional trade. Since people love to pamper themselves with tasty things and their favourite establishment was closed, the focus shifted to buying more expensive and gourmet products in supermarkets, which in turn began to increase their range of premium products and products of the fresh and ultra-fresh group, in contrast to the ordinary assortment. As for sub-channels, there was an increase in purchases from all kinds of single-product cafes with take-out like deliveries of pizza, sushi, and small coffee shops.

Among offices, services and organizations that buy products for their own needs, and not for the purpose of resale, we noted an activation by charitable organizations that carry out purchases for their wards.

For all of 2020 through February 2021, two spikes occurred in Ukraine. One was at the end of June when most establishments and offices re-opened their doors to guests and employees. The second, as expected, was in December when offices bought gifts and food sets for their employees for the holidays.

– Recently, the Association of Online Delivery Services was created in Ukraine. Could you tell us more about what made the market players unite? What are the goals of the Association?

One of the initiators to create the Association was the commercial director of Zakaz.ua Evgeniy Netreba, who is currently its head. The idea to unite participants in the online delivery market arose a long time ago, but it was only realized in August 2020.

The Association intends to become a platform to exchange experiences among its members, to propose and develop new bills that will contribute to the development of the e-commerce market in Ukraine, and most importantly to protect the interests of users and employees of delivery services.

Сообщение Online trading of fruits and vegetables: how Zakaz.ua does it появились сначала на EastFruit.

The online platform IarmarEco is focused on helping small producers of organic fruits and vegetables and their processed products in the marketing process as well as promoting social and environmental initiatives. The official launch of the platform is scheduled for February 21 and, offline, the ceremony will be held in the building of ARTICO: Republican Center for Children and Youth.

The IarmarEco platform was developed by EcoVisio, a non-governmental organization with financial support from the Entrepreneurship Academy, founded by the EFSE Foundation under the EU4Business initiative and the LED Moldova Foundation (Liechtenstein Development Service). The platform is being financially supported by ERIM (formerly IREX Europe) within the COVID-19: Civil Society Resilience and Resilience project.

Read also: Demand drops for in-shell walnuts, rises for high-quality kernels in Moldova

The launch of the platform coincided with the decision of the National Emergency Commission on Public Health of Moldova to extend until mid-April and tighten restrictions due to the increase in the number of people infected with coronavirus in the country. For local producers of greenhouse vegetables and berries, this was an alarming signal.

In the spring and early summer of last year, farmers were hit particularly hard by the lockdown. Some found a solution in forming a client-base through announcements on websites developed by industry associations because of COVID-19 restrictions as well as on social networks. For a month and a half to two months, Moldova had a rather active system of scheduled product deliveries by farmers to micro districts of Chisinau and large cities as well as to the home by delivery services. However, the process of expanding the system ran into economic constraints since the minimum order size in physical and/or monetary terms was usually not less than 5 kg and $25-30. As the self-isolation requirements relaxed and fixed agri-food markets reopened, both sellers and buyers quickly returned.

Сообщение Online platform IarmarEco selling natural products launches in Moldova появились сначала на EastFruit.

Uzbekistan is a country of world-famous bazaars whose prominence was unshakable for centuries. “I myself go to the bazaar in the season of fruits and vegetables and the best merchandisers work there,” says Roman Sayfulin, CEO of the largest supermarket chain in Uzbekistan Makro, in an exclusive interview with EastFruit.

However, if the number of bazaars in Uzbekistan is decreasing and modern shopping centres are growing in their place, then the number of supermarkets is growing at a very high rate. Makro is going to double the number of its stores in 2021. The new chain Baraka Market opened its first store in December 2020 with plans to increase their number to 50 in two months and 800 stores in two years! Carrefour, a major international food retail operator already operates in Tashkent and is actively competing for retail space with Macro.

In addition to opening brick-and-mortar stores, there is a more surprising trend in the development of online stores in Uzbekistan with a considerable share made up of fresh fruits and vegetables in the assortment of these stores! In 2020, a successful aggregator company Zakaz.ua entered the market with the Zakaz.uz brand and is already actively investing in advertising its site. This company is open to working with various supermarket chains and providing them with additional sales.

Read also: French supermarket chain Auchan sought to enter retail market of Uzbekistan

The Makro supermarket chain decided to develop its own unique platform but also cooperates with aggregators like Zakaz.uz. Makro CEO Roman Sayfulin admits that during the quarantine, they simply could not keep up with all online orders, but after the quarantine was cancelled, their numbers dropped sharply:

“If we talk about the share of sales through online trading, today it is insufficient in customer confidence, technological process, and speed of delivery. It is necessary for people to get used to it. This year we are launching our Dark Store, the first in Uzbekistan. We have made a decision to work on online delivery for our stores, but we are ready to launch any online aggregator on our platform that will offer online delivery services.

“It seems to me that shelf selection for an online store is obviously a business with great restrictions. The biggest example is out of stock and picking off the shelves is always a surprise. Therefore, our Dark Store format is a different approach that can guarantee the availability of goods because there will be a direct link to the online store. This will also speed up order collection,” says the CEO of Makro.

Since Makro focuses on the standardization of fruits and vegetables, in the long term, according to EastFruit experts, this will increase consumer confidence in online orders of fresh vegetables, fruits, herbs, and berries.

Video of the interview with Roman Sayfulin can be viewed on the EastFruit YouTube channel.

Сообщение Supermarkets in Uzbekistan increasing online sales of fruits and vegetables появились сначала на EastFruit.

Despite famous oriental bazaars with their abundance of delicious fruits, vegetables, melons, watermelons, and dried fruits seemed unshakable in Uzbekistan for hundreds of years, the country’s horticulture trade is rapidly moving towards modern, convenient, and consumer-friendly supermarkets of late. Almost every month, both ambitious local chains and international retail operators announce their entrance to the market.

Roman Sayfulin, the CEO of Makro, which is the largest supermarket chain Uzbekistan, explains in his interview with EastFruit about how difficult it is for supermarkets to compete with traditional bazaars and what chains cannot yet offer compared to bazaars and why. Also discussed was the current lack of high-quality retail space and work in the regions as well as difficulties with assortment, local suppliers, VAT, quality standards of fresh fruits and vegetables, and the future of online trading in fruits and vegetables in Uzbekistan.

Video of the interview, which was conducted by Andriy Yarmak, an economist of the Investment Centre of the Food and Agriculture Organization of the United Nations (FAO), is available for viewing on EastFruit’s YouTube channel by clicking here.

“Standardization is what sets our network apart from the markets”

– Roman, earlier you stated that the main competitor of supermarkets in Uzbekistan is traditional Uzbek bazaars. Based on this, who is the most loyal customer in supermarkets and who still goes to the bazaars? What are your advantages and disadvantages over bazaar trading?

If we talk about our loyal customer base, then I always say that the Makro supermarket chain has stores for all age and social groups – youth and adults, men and women, students and workers. Everyone who comes to our stores should be satisfied with their purchase. This is confirmed by our work on the development of the first price categories, premium goods, middle departments.

If we talk about the fruit and vegetable segment, the bazaar is a very strong competitor. From communication with suppliers, I can conclude that our network in many categories of the fruit and vegetable segment purchases only 1% of the output in the country. I, myself, go to the bazaar during the fruit and vegetable season; the best merchandisers work there. For example, during the peach season, products from all regions of Uzbekistan are presented at the bazaars. The same goes for cherries. However, of note is that all this is present on the markets in relatively small volumes. This is a premium product known far beyond the borders of Uzbekistan but, unfortunately, most producers cannot guarantee the delivery volume needed by supermarket chains and this is our biggest problem. We, as a network serving on average about 85,000 customers daily, must provide the necessary volumes of products in stores located throughout Uzbekistan.

For this, we have our own large distribution centre (DC). This is a distinctive feature of our network over our competitors, which in many regions give fruit and vegetable products for outsourcing. We try to ensure the regularity of deliveries but, naturally, there are also interruptions.

I believe that our great merit in the horticulture trade is working with suppliers in terms of standardization because our customer wants to find, for example, the same tomato in each of our stores. We are talking about the standardization of a local product as imported goods, as a rule, enter the network already standardized. Why am I talking about this? The point is that standardization is what sets us apart from bazaars. Here you will find quality products of the same standard in the required volume all year round. At the bazaar, you can see premium products, which we will not have due to the fact that we do not position ourselves as a premium-format store. Yet, the premium segment on the market will be presented in small volumes during a certain short period of the season.

– The news regarding the Carrefour retail chain entering the food retail market in Uzbekistan, it seems that the country has already begun to feel a shortage of high-quality retail space. Is it true? Also, do you invest in your own retail property or do you prefer to rent it?

The commercial real estate market in Uzbekistan is not saturated. This applies to both the capital city of Tashkent and the regions of the country. This is not about the first floors of residential complexes but about professional commercial real estate like shopping centres and there is not enough space on the market. If we talk about the format of medium-sized supermarkets, there are still such options, but not for super- and hypermarkets. In this segment, tough competition is brewing today in connection with the entry of the Carrefour network into the retail market of Uzbekistan. In addition, a large Kazakh chain wants to enter (Magnum Cash & Carry). In Tashkent, there are not many vacant places yet in order to build a classic hypermarket.

We have chosen a different direction for ourselves. We launched hypermarket projects and then had to reduce the area by almost 30% due to the fact that we could not provide consistent supplies of the assortment that is necessary for this format. Therefore, our strong point is a classic supermarket with an assortment of goods up to 25,000 items. We are abandoning hypermarkets and increasingly moving towards the format of express stores, which are more accessible in terms of location for the buyer. However, in this segment, the competition is even greater. Since the area of ​​our express stores today range from 70 to 500 square meters, on average it is 220 square meters and so we compete with Havas, which is actively developing in this direction. In addition, at the end of last year, the Baraka Market network entered the market, which is also actively developing and has already announced plans to open 800 new stores within 2 years.

Due to competition in the retail market, the price of retail space in the country has doubled in the last 6 months alone. At the same time, our activity is completely based on the lease of retail space; we own only 6 stores.

– Small-format stores in Uzbekistan offer help to customers in the form of a tab in which debts for goods are recorded. In this regard, do you plan to attract the format of selling goods on credit in your stores?

Indeed, such a situation related to the human factor is very important and take place during trade throughout Uzbekistan. Very often in small stores, the owner, cashier, and seller are one person and he can sell goods on credit because, as a rule, he knows all his customers in person.

Over the past year, we have been actively working on launching an express lending program in our network. Now, we are actively negotiating with one of the banks to introduce such a service. We do not want to make money on this ourselves since this is a completely separate business practice to us, but we want to be able to provide this service to our customers. For this, an express checkout service must be introduced in the network, which will be provided to our customers at the cash registers.

“By the end of this year, the Makro network plans to be represented in 35 cities of Uzbekistan”

– The development of your network in the regions is a surprise. According to experts, it is not always worth rushing to launch in the regions given the lower average amount of a customer’s checkout receipt than in the capital. In this regard, why are you actively expanding in the regions?

Actually, the largest checkout is not in the capital. The largest average checkout in our chain stores is in the city of Samarkand. In this regard, we plan to open our “makrocity” format store in this city, which is a large supermarket with an area of ​​2,500 square meters, in March of this year. In addition, shops in Bukhara show good results. Therefore, we are entering the regions with our classic store format. Today, we are operating in 26 cities of Uzbekistan and, by the end of the year, we plan to be represented in 35.

Speaking about entering the regions, you need to understand that 6 years ago there was enough space in Tashkent to open new stores. However, today there is not. We want the Makro chain to be known in every region. In addition, when we want to expand to a certain city, we also see other cities along the way, which, from the point of view of logistics, are convenient for us to enter. Additionally, we also look at the experiences of large Russian and Ukrainian companies, which operate throughout the country. Based on this, the sooner we enter a particular region, the stronger our market position will be.

– In essence, you are talking about strengthening the Makro brand?

Yes, exactly that. I am sure that our customers will not fully satisfy all of his or her needs in our store, but we want him or her to buy as many items as possible in our network. For this, we are working on such components as price, quality, and product range. However, I repeat, it is difficult to cover the entire range of consumer preferences, not only in Uzbekistan but from my observations, for European chains as well.

Speaking about the strength of the brand and the strength of customer loyalty, I want to say that it means a lot to us. In our network, we have a loyalty program and a digital cash-back program. Another important factor is that the more stores and retail spaces there are, the faster we can go down the path of reducing product prices.

“Fruit and vegetable products are the sales engine”

– Are the fruit and vegetable departments in your network the centre of profit generation or are they unprofitable but a necessary addition? What is the share of fresh fruits and vegetables in the total revenue of the chain?

It is fundamentally important for us to have fruits and vegetables in our stores and they are represented throughout our network. They are, figuratively speaking, the engine driving our sales. If we talk about revenue, then in 2018 the share of fruits and vegetables was 11.3%. This is a fairly high figure. In 2019, after the introduction of VAT, the share decreased to 10.1%. This happened due to the fact that we began to lose in price to traders in bazaars, which were not subject to VAT. Last year we managed to increase the share of proceeds from the sale of fruit and vegetable products by 0.5 percentage points.

It should be understood that the behavioural model of buyers in Uzbekistan is very different from the northern countries. Our people prefer to buy fresh fruits and vegetables every day. Nobody buys them a week in advance.

– According to the EastFruit retail audits of supermarket produce departments, Makro is not the most competitive in this segment. Taking into account the presence of your own distribution centre and rather large sales volumes, what further steps do you envision to increase the competitiveness of the fruits and vegetables in your stores?

An audit by your platform is a fear for our pricing department. After the publication of your data, they received comments, first of all, from me. It was also an unpleasant surprise for me that in terms of prices for fruits and vegetables, we turned out to be the most expensive in retail in Uzbekistan. Today, we pay great attention to this fact. If we consider us when compared with our competitors, then in many positions we have already caught up. It is quite difficult to compete in pricing with small stores due to the difference in the specifics of purchasing goods. After all, we do not work with suppliers who are not VAT payers and this is our biggest problem of finding suppliers who pay this tax.

For this reason, only 35-40% of our suppliers of fruits and vegetables are producers of these products. The bulk is represented by companies that buy, sort, pack, and calibrate fruit and vegetable products. All these factors lead to a higher price. Yet, work on the pricing policy is among one of the priorities of our company for the current year. We understand very well that price is the determining factor for the buyer.

– What are the positions of the fruit and vegetable trade in which you can and cannot successfully compete with the bazaars?

For imported products, we are very competitive in this segment in terms of prices. This, in particular, concerns citrus fruits, potatoes, and a number of other products. This is due to the fact that VAT is already included in the price of imported products regardless of where it goes be it to a bazaar, supermarket chain, etc.

If we talk about local products, then during the season we can successfully compete in prices for apples, tomatoes, and table grapes. As for the rest of the positions, we sometimes lose here.

– Which horticulture position is the most problematic for you?

Berries. The fact is that for the majority of fruit and vegetable items, we work with suppliers on a return basis. In the case of berries, suppliers do not accept this condition. In addition, it is not possible to provide berries to all of our chain stores due to their high prices.

– How important is the fresh greens segment for you today? Are there any trends to expand the range of this segment by adding new types of greens, taking into account, for example, the increased consumption of lettuce salads?

Here we keep up with the times. I want to praise the entrepreneurs who have started producing new types of greens. These are new technologies for the production of salad mixes. Today, almost all our stores have separate refrigerators from suppliers with packaged chopped single and mixed greens. The assortment of greens is growing and, most importantly, the interest of buyers in these products is growing. Even 7-8 years ago, products like broccoli were considered a luxury in the Uzbek market. Today, it is sold in almost every store.

Growth in the greens category is very important for retail as greens are an expensive category. For most people, greens are associated with a healthy diet and when a person thinks about their health, they usually no longer try to save on it.

– Considering such trends, is there movement in the greens market of Uzbekistan towards microgreens since this has become very popular in many countries recently?

Unfortunately, there is no such movement in Uzbekistan yet. In my opinion, this direction is new to the markets of Western countries.

– You said that you are not a premium segment store and yet Makro is a confident leader in assortment judging by the EastFruit retail audits of the supermarket produce departments in Uzbekistan. Given the opportunities to improve the quality of merchandising and information content, Makro may well qualify for the premium segment.

Unfortunately, there is already a well-established opinion that Makro is an expensive store. We are trying to break this stereotype so we are following the path of private label development (e.g., the chain’s own trademark, private label, etc.). It is rather difficult to develop private labels in the fresh market segment. Our goal is not only to provide the first price on the shelf of our store but also to make our first price compete with the price of any other store. This is a priority for us.

In express format stores, the assortment of fruits and vegetables is much smaller with only those in which there is an urgent daily need. It is on these positions and the reduction in prices for them that we will work on in the future.

– You mentioned that your share of suppliers-producers of fruit and vegetable products is no more than 35-40%. What is the conventional portrait of such a supplier in Uzbekistan and what is necessary to supply those products to the Makro network?

I will tell you about such a supplier using the example of GDF – Gold Dried Fruits. This company has large areas of its own greenhouses and stone fruit orchards. Today, we have signed a one-year contract with them for the supply of greenhouse vegetables (cucumbers, tomatoes), greens (iceberg lettuce), as well as cherries and peaches. In addition, they supply us with a unique product – the earliest melons of the season. This supplier has its own processing and very strict standards in handling, sizing, labelling, and packaging. For example, they no longer use wooden containers for the delivery of products. This is very important for us today. We have already received the ISO 9001 certificate and, most importantly, the HACCP standard food safety certificate. Our RC, management system, and the first two stores have already passed this certification. Throughout this year we will continue to certify our stores. One of the requirements of this certification is the absence of wooden boxes for fruit and vegetable products. Today, our suppliers supply fruits and vegetables in plastic containers because there are problems with cardboard packaging in the Uzbek market.

– Do you use the pooling system of reusable folding plastic boxes that can withstand about 200-400 revolutions of fruit and vegetable products, which are widely used in the EU and Ukraine?

We haven’t come to this technology yet. Our plans for today are to standardize all fruit and vegetable crates, taking into account our limited space. At the same time, we want to lease such containers to producers so that in the future they will supply their products in it to our network.

“For suppliers wishing to work with us, we have a 3-month trial period”

– If a farmer is psychologically ready to work with your network and has the required volume of products for delivery, what other characteristics should he or she have in order to approach your purchasing department and offer services as a partner?

First of all, a supplier must be a VAT payer. Secondly, it is important for us to guarantee the supply of the annual volume of products, unless, of course, we are talking about seasonal products. The third point is the terms of payment.

In addition, we study the products offered to us such as their quality, packaging, and other characteristics. We offer a trial period for cooperation since there are unscrupulous suppliers who send the first batch as quality products then supply products of inferior quality in subsequent batches. We monitor the consistency of quality in each batch. We give any supplier a 3-month trial period. During this time, we study in detail the sales of the products supplied by them, we study the price, the display of the goods on the shelf, etc. Based on this information, we make a decision on further work with the supplier in the future.

– An interesting position is bananas. Zafar Khashimov, the founder of Anglesey Food, which also includes the Korzinka.uz chain, said that bananas are the best-selling item in the fruit and vegetable segment of supermarkets in Uzbekistan in terms of volume. Meanwhile, according to our data, the consumption of bananas in Uzbekistan is almost the lowest in the world. How are you doing with the sale of bananas in the Makro chain?

The banana is also among the leaders in our country. This year, bananas occupy 31.1% of the share of sales of all fruits. This is a fairly high figure. However, I do not agree that this is the best-selling SKU with us, but it is in the lead every year. This year, for example, bananas are in second place.

– What are the Top-3 best-selling fruits and vegetables in your network for imported and local Uzbek products respectively?

The Top-3 import positions are bananas, apples, and mandarins. The Top-3 local products are apples, lemons, and pears. Last year (2019), this list also included table grapes, which was replaced by lemons this year. When we consider the Top-3 imported products, the gap between bananas and apples is very large. As I already said, the share of bananas in the sales of all fruits is 31.1%, while apples are only 16% and mandarins are only 9%.

– Are the mandarins a product from Pakistan?

Mandarin is the only category of fruit and vegetable products that we have imported ourselves over the past 4 years. The leader in the mandarin segment today is the Medovka variety from China. It is a seedless citrus fruit with a thin skin. This position competes with Georgian mandarins. True, Georgian citrus fruits ripen much later than Chinese ones. Chinese importers can ship their products at the end of October.

In 2020, there was a transport collapse with supplies from China due to delays in the transhipment of goods at the Sino-Kazakh border. This almost doubled the price of Chinese mandarins. Then, there was a transport collapse associated with the supply of Turkish mandarins. At the same time, a significant amount of Pakistani mandarins remained on the market. By the end of the year, the market had already stabilized and was saturated with supply.

– Have you given up direct imports this year? Do you plan to do this in the future?

We refused due to the fact that due to the coronavirus pandemic, the cost of transportation has increased significantly. We refused to take the risk of “freezing” money at such a high cost. Due to the increased cost of transportation, the price of products also increased while the suppliers of these fruits did not receive a higher price for their products.

– Some food retail operators are also large operators of the wholesale market, importing volumes of products that are many times higher than the sales in their networks. This practice is specially developed for those items that require infrastructure improvements. Do you have such plans?

We studied this issue in terms of banana imports, but so far such projects have been postponed. However, I think that over time we will return to this topic. From time to time, we import, for example, Russian potatoes, when we understand that the harvest of local products on the market is running out, but this is not a consistent practice.

“We see online trading as the company’s potential future.”

– How did the coronavirus pandemic affect the sales of fruits and vegetables? Which vegetables and fruits sales in your network have grown and which have fallen?

If we talk about fruit and vegetable sales, then garlic sales have grown the most. The increase in sales of garlic showed a record of 962% for the year followed by potatoes, onions, dill, and radishes. However, if we talk about sales volumes, then the leader is potatoes. We sold it with zero mark-up and people bought it quite actively.

If we talk about the most affected segments, then it is worth highlighting the finished product. We ourselves produce salads and pastries and their sales have decreased threefold.

– Is the HoReCa segment your client?

HoReCa is our client. We have contracts with large hotels where there are many restaurants with large restaurant chains. In addition, we are the exclusive distributors of such brands as the Russian Miratorg, a major meat producer, and Vici, a Lithuanian seafood producer. We are also distributors of frozen fruits and vegetables, including berries and all kinds of cocktail mixes.

In fact, speaking about the sale of frozen products, we took a difficult path. It all requires refrigeration facilities, warehouses, special transport, and delivery conditions, but the frozen food category is growing dramatically. Personally, I associate this with a change in the rhythm of people’s lives. 5 years ago, I find it hard to remember the presence of such an assortment of semi-finished products on store shelves. Today, they are presented, as there is consumer demand for them.

– You have a very good online store. You previously stated that during quarantine it was unable to handle customer orders. Then, as the quarantine was cancelled, this number decreased again. How important is the online trading segment for Makro?

If we talk about the share of sales through online trading, today it is insufficient in customer confidence, technological process, and speed of delivery. It is necessary for people to get used to it. This year we are launching our Dark Store, the first in Uzbekistan. We have made a decision to work on online delivery for our stores, but we are ready to launch any online aggregator on our platform that will offer online delivery services.

Zakaz.uz is an internet aggregator that is already operating in Uzbekistan. They can work with any of the stores and they are great. Unfortunately, due to the pandemic, they had a long delay in launching. Instead of in March, they opened only at the end of last year. They invest in Internet advertising and from time to time we even compete in this. It seems to me that shelf selection for an online store is obviously a business with great restrictions. The biggest example is out of stock and picking off the shelves is always a surprise. Therefore, our Dark Store format is a different approach that can guarantee the availability of goods because there will be a direct link to the online store. This will also speed up order collection.

“We conduct quality control of fruit and vegetable products twice”

– You have already mentioned the quality standards for fruits and vegetables in your stores. Where did you get them from? Did you use ready-made ones or developed standards you needed by trial and error?

Since 2016, we have been negotiating with representatives from the French network Auchan. Unfortunately, they failed to enter the retail market of Uzbekistan, but the team that worked here for a long period of time brought a whole book of fruit and vegetable standards for the first time and this was the base. However, a distinguishing feature of today’s stores versus yesterday’s is that quality control today occurs twice at the DC and directly in the store.

It is worth noting that in small-format stores, we do not have the opportunity to carry out quality control at the entrance. Therefore, there is a so-called confidential shipment of goods from the supplier. A specialist from Ukraine today heads the department for product quality control and she is also involved in the implementation of ISO standards. Therefore, all our quality standards for fruit and vegetable products have been supplemented by international requirements. I cannot say that we have time to follow them 100%. However, work in this direction is being carried out, given that not everything here depends on us and a lot of work should be done by product suppliers. For example, if previously we had frozen products that could have been brought by a Zhiguli car, today no one would dare dream of doing it, even in a nightmare.

– Today, supermarkets from the EU, the US, and a number of other countries present various initiatives to minimize the negative impact of product consumption on the environment. This concerns the transition to reusable containers, abandonment of plastic bags, and emphasis on the consumption of local products. Do you have similar green initiatives?

We have such initiatives and we are rightfully proud of them. We are the first and only company in Uzbekistan to replace all plastic bags with biodegradable ones. First, we introduced using such bags at the checkout. In the second stage, we replaced plastic bags with biodegradable ones at the packaging stage all fruit and vegetable products. We do not make money on the bags but sell them at cost. People have come to understand that they need to be used more rationally. We have our own nylon bags called “I am good” designed for a load of 25 kg. Plus, very soon we should have fabric bags that have a folding design taking up as little space as possible for daily purchases. It is designed for 10 kg of weight.

In regards to ecology, we support our partner companies in various social projects related to, for example, planting trees in parks, but we are not particularly advertising this yet. Also, the process of sorting waste inside the stores has been introduced in our network.

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EastFruit would like to thank Roman Sayfulin and the Makro supermarket chain for their openness and we wish them every success. We believe that it is very important for all participants in the horticulture market – from producers to wholesalers – to understand that whether we want it or not, the retail trade is transforming from bazaars to more organized formats. The openness of all participants in the transformation process will allow us to focus on the opportunities and minimize the risks of switching to a different trading model.

Сообщение Fresh fruits and vegetables are the sales engine – Roman Sayfulin, CEO of Makro supermarkets in Uzbekistan появились сначала на EastFruit.

According to representatives of the Pomușoarele Moldovei Association of Berry Producers, against the backdrop of a worsening epidemic situation in the country and the associated reduction in working hours, as well as stricter control over the activities of urban fruit and vegetable markets, their visitors’ traffic is reduced. The resumption of work (in a limited format) of HoReCa facilities did not lead to an expected increase in sales of berries. Probably, in this case, the declining incomes of the population and the caution of buyers, frightened by negative news, are also of high importance. In this situation, individual farmers who managed to acquire a stable customer base in social networks during the lockdown, or who used the services of home delivery services, decided to resume this sales practice.

According to the chairman of the association, Annette Ganenko, a relatively small but rather active group of farmers appeared in the spring and early summer, selling up to several hundred kilograms of berries daily in a pre-order format through the Internet. Prices for products in this trading format are slightly higher and more stable than in the wholesale and retail markets. After the opening of markets, online sales declined slightly, but now they are likely to begin to recover.

Moreover, as the very hot weather returns to Moldova, a certain category of consumers, including those who appreciate the convenience of home delivery services for berries upon pre-order, will continue to use it more actively.

Сообщение Due to the worsened situation with COVID-19 in Moldova, berry producers are returning to online trading появились сначала на EastFruit.