At a meeting on Friday, February 25, 2022, the Commission for Emergency Situations of the Republic of Moldova decided to limit the trade markup in Moldovan retail for vegetables of the “borscht set” – onions, beetroot, white cabbage, as well as potatoes and some other food products. This measure is aimed at curbing “unreasonable price increases”.

Indeed, since yesterday, under the influence of the negative flow of news in connection with the armed aggression of Russia and the fighting in neighboring Ukraine, long queues have been lining up in Chisinau supermarket chains. Due to the boom in demand for some products of daily consumption and the long shelf life, employees of individual chains often change price tags or remove them from the shelves altogether.

The decision in connection with the “crisis of retail prices” has not yet been published. Therefore, it is still unclear in what particular allowable range the trade markup will be fixed. Operators of the fruit and vegetable market assume that it will be 8-10%. That is, at the level of the trade allowance that applies to the previously established narrow list of socially significant goods. It is also unclear whether this restrictive measure will last all 60 days of the state of emergency, or a shorter period.

Some representatives of farmers’ organizations consider this measure ambiguous. Prices for bulk vegetables of the “borscht set” in Moldovan supermarkets, especially those positioned as discounters, have been slightly lower for the third year already than for goods of relatively good quality sold in most markets-bazaars in Chisinau. If the chain retailers observe the administrative limitation of the trade markup, then this fact, on the one hand, will put pressure on market prices. On the other hand, it will help attract consumers to supermarkets, just like at the “acute” moment of the pandemic, when city markets were closed.

However, limiting the trade markup too tightly can also have a negative side effect – a reduction in the assortment and a decrease in the quality of goods on the shelves.

Сообщение Retail prices for vegetables from the “borscht set” are being regulated in Moldova появились сначала на EastFruit.

The Ministry of Foreign Affairs of the Republic of Moldova plans a working visit of a government delegation to Egypt in February to hold consultations on an interstate free trade agreement with the ministries and departments of Egypt. The Moldovan Ministry of Economy is currently finalizing the draft document. If it is coordinated quickly and successfully with the Egyptian party, the agreement may be concluded as early as the spring of 2022.

Representatives of organizations of producers and exporters of fruit products claim that they have previously submitted to the Ministry of Agriculture and Food Industry (MAIA) their proposals for cooperation on trade in agri-food products with Egypt. In their opinion, a better option would be to sign not a comprehensive free trade agreement between states, but an agreement on commercial preferences for a list of products.

While studying this issue with Middle Eastern trading partners (owners of enterprises in Moldova exporting fruits to the UAE and North Africa), experts from fruit growing associations concluded that Moldovan apples, table grapes and dried plums may be the most demanded on the Egyptian market. Citrus and exotic fruits, as well as some types of vegetables from Egypt could be supplied to the Moldovan market.

Traders who plan to export apples to Egypt in the near future note that these are most likely to be average-quality apples exported to Cairo – in particular, apples with a diameter of 65-70 mm, red and mostly sweet varieties (although sweet and sour “Idared” is not rejected right away). Given the simpler and faster transport logistics and less stringent product quality requirements, Moldovan exporters regard the Egyptian market as more accessible than the markets of the Middle East. In their opinion, the main deterrent for the active supply of Moldovan fruits to Egypt is the high import duty (about $200/tonne).

In addition, some participants in the Moldovan agri-food market claim that Turkish business is resisting the establishment of preferential trade between Moldova and Egypt. Turkey benefits from the free trade agreement with Moldova – Turkish citrus fruits and vegetables dominate the Moldovan market during certain periods of the marketing year. Also, suppliers of Turkish apples are actively increasing their presence in the Egyptian fruit market.

Сообщение Moldovan government plans to sign an agreement on preferential fruit exports with Egypt появились сначала на EastFruit.

A 15 year-long negotiations on a free trade zone between Ukraine and Turkey ended on February 3, 2022 with the signing of the FTA agreement in Kyiv. This news stirred up the produce business of Ukraine, many representatives expressing fears that Ukrainian vegetables and fruits would no longer be able to compete with Turkish ones. EastFruit experts decided to find out whether these fears are justified and whether Ukraine will benefit from the agreement?

Firstly, let’s figure out what the trade in vegetables and fruits between Ukraine and Turkey looks like now. The exports from Ukraine to Turkey is simple – among fruits and vegetables, Ukraine exports only walnuts to Turkey, although there were serious problems with their export in the last 1.5 years. However, we will talk about this below. Periodically, Ukraine exports onions, apples (for re-exports to Egypt) and occasionally potatoes.

Of course, Ukraine imports much more from Turkey than it exports, and it is Turkish imports that are most feared in Ukraine. Let’s analyze the imports of Turkish products to Ukraine.

In 2020, Turkey supplied Ukraine with fresh fruits and vegetables worth $315 million, which corresponded to 30% of all Ukrainian imports of vegetables and fruits. According to the results of 2021, the import of fruits and vegetables from Turkey to Ukraine is estimated at $340-350 million.

For comparison, the largest volume of fruit and vegetables Ukraine exported to Turkey (mainly walnuts) was noted in 2019. It was worth $37 million, which accounted for about 12% of Ukraine’s export earnings in this category of goods. Thus, Turkey is an important sales market for Ukraine, as well. However, let us return to the import of fruits and vegetables from Turkey.

The main position of fruit and vegetable imports from Turkey to Ukraine was citrus fruits accounting for 54% of all deliveries. Another 18% were greenhouse tomatoes, 9% – table grapes, 5% – cucumbers, and 4% – fresh strawberries. All other positions together gave about 10% of the value of imports. They included various exotic fruits that are not grown in Ukraine, dried fruits, as well as fresh apricots, peaches and bell peppers.

Turkey dominated among the suppliers of greenhouse tomatoes and cucumbers to Ukraine – Turkey accounted for 75% and 77% of all imports, respectively. Turkey also dominated in the segment of citrus fruits (53%) and table grapes (63%). By the way, the main position in the category of citrus fruits was Turkish mandarins, while the share of Turkey in lemon, orange and grapefruit imports was noticeably lower.

Ukraine cannot grow most of the fruits and vegetables that it currently imports from Turkey, except for greenhouse cucumbers and tomatoes. Meanwhile, there is a zero import on the import of citrus fruits and other fruits that are not grown or are grown in insufficient volumes in Ukraine from Turkey. As for greenhouse vegetables, we need to go in more detail, since Ukraine grows them. Moreover, record high gas prices in the winter of 2021/22 have already put Ukrainian greenhouse complexes in a very challenging environment.

What will the signing of the FTA between Ukraine and Turkey change for Ukrainian greenhouse growers?

Imports of greenhouse cucumbers, tomatoes and peppers are currently subject to an import duty of 10%. After the entry into force of the FTA agreement, the rate should be zero, although we have not yet seen the full document and do not know this for sure. However, this is the most likely scenario.

How important is this and how will it increase competition in the market?

First of all, Turkish greenhouse vegetables are supplied to Ukraine mainly when Ukrainian ones are not available on the market or are available in small volumes. In addition, as a rule, Turkish vegetables are sold cheaper than Ukrainian vegetables. Consumers still pay more for Ukrainian vegetables, mainly because they are tastier, as they were grown close to the consumer and harvested ripe.

Reducing the duty by 10% to zero, will give Turkish tomatoes about 1.0-1.5 UAH (about $0.05) of an additional advantage in the peak sales season, and this is a lot. In our opinion, other factors will have a greater impact on the competition between Ukrainian and Turkish greenhouse products, namely, a sharp increase in energy costs and the devaluation of the Turkish lira. The first factor will impact Ukraine more than Turkey, and Turkish exporters will benefit from the second factor, too. Although there is one more point – Turkey imports many inventories for growing greenhouse vegetables and their costs will also increase.

It is obvious that the FTA with Turkey is, at first glance, bad news for greenhouse growers in Ukraine. However, they have far more compelling reasons to worry than a 10% cut in import duties on Turkish tomatoes, cucumbers and peppers.

One should look at this from the other side. Ukraine has its own season, when growing greenhouse vegetables is cheaper than in Turkey, and it lasts from mid-June to September.

“Turkey is one of the most “protected” economies in the world. Traditionally, import duties are quite high here. Therefore, it would be very interesting for Ukraine to get free access to this huge market. Since Turkey is located in a different climatic zone, the two countries perfectly complement each other in the food industry and food products. Cucumbers, tomatoes and peppers are very difficult to grow in greenhouses in Turkey in summer, because it is too hot there. Now, if Turkey cancels import duties for Ukraine on greenhouse vegetables (and the duty before the FTA ranged from 40% to 100%, that is, it was actually prohibitive), then Ukrainian exporters may well try to arrange the exports of greenhouse tomatoes to Turkey in summer,” – economist at the Investment Centre of the Food and Agriculture Organization of the United Nations (FAO) Andriy Yarmak, says.

Horticulture business expert and FAO international consultant Fedir Rybalko also believes that the FTA with Turkey can bring Ukraine some benefits. “Turkish market can be very interesting for Ukrainian suppliers, especially in case of direct deliveries to retail chains. After all, we have very efficient logistics, because Ukrainian citrus importers are now paying for the return freight. In other words, the cost of exporting to Turkey will be very low. For example, if prices for some products start to rise in Istanbul, Ukrainian products will fill this niche in just 48 hours. Also, Turkey is a very interesting market for suppliers of fresh blueberries from Ukraine. The consumption of blueberries is growing there, and Ukraine exports them when Turkish local blueberries have long ended and neighboring countries cannot supply the market either. We think that Ukraine could export up to 200 tonnes of blueberries to Turkey per season,” says Fedir Rybalko.

He also notes that Turkey is an important transport hub in the region, and Turkish Airlines have direct flights to a record number of cities in the world. Therefore, by entering the Turkish market, Ukraine will be able to use more opportunities of transportation by air. “We can use all existing ferry crossings from Skadovsk and Odesa. For example, a refrigerator loaded with fresh blueberries in the Zhytomyr region for delivery to Singapore, Malaysia or other Asian countries can arrive by ferry to Istanbul airport. This will reduce the risk of loss of quality during exports and will be more cost-effective than delivery by air from Ukraine with reloading in Istanbul,” Fedir Rybalko says.

An even greater potential opens up for Ukraine in fruit and vegetable trade with Turkey if Ukraine ever starts using its largest transport corridor, the Dnipro River, for this. Ukraine could well become a major transit hub for the supply of Turkish products to Belarus and, through Belarus, to the EU market. Trade and transit bring new trading places and budget revenues.

Andriy Yarmak says that the main good news for the produce business will be the opportunity to return to the Turkish walnut market. “Walnuts have been the main export position of Ukraine in the fruit and vegetable segment for many years in a row. However, due to the fact that competitors could supply walnuts to Turkey duty-free, and Ukraine had to pay duties, Ukrainian suppliers lost this market. I estimate Ukraine’s losses from the absence of an FTA in Turkey at $40 million a year. Now Ukraine will definitely return to the Turkish walnut market and will be able to successfully push out competitors there due to cheap logistics,” says the FAO expert.

He also notes the indirect benefits that a free trade zone with Turkey gives Ukraine. “Turkey is one of the largest re-exporters of agricultural products in the world. By supplying products to Turkey, Ukraine will open up new markets. Ukrainian companies already had a similar experience – after their goods entered the Turkish market, they were found in the markets of Africa and Asia, and then exporters directly contacted suppliers in Ukraine. This is an important aspect that should not be underestimated. I think that Turkish and Ukrainian companies may experience synergy in re-exporting fruit and vegetables to the countries of the Middle East and Africa,” notes Andriy Yarmak.

It should also be noted that any increase in trade and reduction in transaction costs is always a direct benefit for any country. These include new jobs, growth in budget revenues, and increased access of consumers to a wider range of products at a competitive price. However, it is obvious that the fruit and vegetable business of Ukraine as a whole is most likely to benefit much more from the free trade zone with Turkey than Turkey.

Сообщение Ukraine and Turkey have signed a Free Trade Agreement – what should the Ukrainian produce business expect? 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.

Georgia intends to start negotiations with the United Arab Emirates (UAE) to conclude a free trade agreement. EastFruit analysts figured out how to maximize the benefits of Georgian producers of berries, nuts, fruits and vegetables from the new opportunities that will open up thanks to the cancellation of tariffs.

The UAE is a center of trade in the Middle East and a very attractive market that is growing, striving for diversification and has a very high purchasing power, thanks to a GDP per capita of $43 000 (2019). Imports of fruits, nuts and vegetables  have been growing over the past two decades, and in total reached about $3 billion per year, excluding 2020 with a slight decline due to the pandemic.

In the UAE, imports of agricultural products are taxed on average 6% for WTO members, among which is Georgia. Despite this low tariff and high demand for imported products, Georgia did not export much to the UAE. Georgian exports of fruits, nuts and vegetables to the UAE totaled only $3.2 million over the past 8 years. Annual exports peaked in 2021 at $1.1 million, with 72% coming from the export of hazelnut kernels and fresh blueberries. The two main factors holding back imports are expensive logistics and insufficient product quality for the demanding UAE market.

Read also: Georgia: TOP-10 events of the produce business in 2021

As key Georgian exporters to the Middle East explain, so far the only way to deliver fruits, nuts and vegetables from Georgia to the UAE is by plane. Of course, this is very expensive, but the problem is much more serious: there are no cargo planes. Georgian exporters have to put their goods to the luggage compartment of passenger flights that are not intended for the carriage of perishable goods such as fruits and vegetables and do not have a temperature and humidity control. This limits the volume of exports, and increases the risk of deterioration in product quality during transportation.

However, there were the first attempts to export table grapes by land to Qatar in refrigerated container through Azerbaijan and Iran last year. Also promising is the opening of a new transport corridor to connect the Persian Gulf with the Black Sea.

In addition to logistics problems, it is usually difficult for Georgian exporters to obtain export-quality products in large volumes. They say that there is demand from the Middle East and importers are ready to sign contracts, but local suppliers will not be able to provide them with products of the required volumes and quality.

At the same time, many Georgian products are in demand in the UAE. Moreover, these trade positions have one of the highest growth rates among imports of fruits, nuts and vegetables to the UAE. Georgia could also export these products to the UAE in higher volumes.

Сообщение Will free trade with the UAE help boost Georgian exports? появились сначала на EastFruit.

The entry of the German retail network Lidl into the Ukrainian market was reported last week in the Ukrainian media, referring to the leak of an internal letter published by Lebensmittel Zeitung. Despite the information not being official yet, EastFruit experts analyzed what this could mean for the Ukrainian retail trade in fruits and vegetables, for Ukrainian farmers and vegetable growers, and for the retail business in general.

If the Lidl chain enters the retail market of Ukraine, it could become the largest event in the history of the country’s retail. Therefore, we advise you to read this material to the end.

Since EastFruit has been conducting retail audits of fruit and vegetable departments of supermarkets around the world for many years proving that the fresh vegetable and fruit department is the key to overall success in the retail business, we have full information on the positioning of Ukrainian supermarket chains and their ratings by assortment, prices, quality of products, department and service. We’ve also learned a lot about the Lidl model, which is unique in many ways.

An even more detailed and unique analysis of fruit and vegetable retail can also be obtained at the “Retail Forum – 2021” by the APK-Inform project: vegetables and fruits in Kyiv on December 2, 2021.

To begin with, what is Lidl and why should other networks fear such a competitor?

1. The largest food retailer in Europe and the fifth largest in the world, after four US chains. The Schwarz Group, which owns the Lidl supermarket chain and Kaufland hypermarkets with an annual turnover of 125 billion EUR ($145 billion) and almost 12.9 thousand stores in 33 countries, is the most important player in the market. The turnover of the Schwarz Group supermarket chains almost corresponds to the GDP of Ukraine ($156 billion in 2020)!
2. In terms of turnover, Schwarz Group is several times superior to international supermarket chains operating in Ukraine. For example, Metro AG, which owns the Metro Cash & Carry supermarket chain in Ukraine, has approximately 3 times less turnover than Schwarz Group, and Auchan almost 4 times less.
3. The fastest growing supermarket chain in Europe – Lidl was not the leader in food retail in Europe 8 years ago, giving place to Carrefour, Tesco and Aldi. Considering the current huge gap with competitors – 50% larger turnover than Aldi, the second in the ranking, one can understand how impressive growth rates Lidl has had in recent years!
4. Ukraine is the first former CIS country where Lidl enters, but not the first where Schwarz Group operates. The Kaufland supermarket chain shortly after entering the Moldovan retail market took the lead in the comprehensive assessment of fruit and vegetable departments and greatly raised the bar for the quality and range of fruit and vegetables.
5. The business model is a tough discounter. Kaufland is usually a premium supermarket, but Lidl is the opposite. We can say that Lidl is a trendsetter in this segment. It is distinguished by extremely low, sometimes incredibly low prices, a minimum of staff, placement of goods on shelves in original packaging from the supplier in order to save the consumer’s money, a limited assortment, an emphasis on its own network brands (Private Label), but the presence of leading independent brands, unlike other discounters.
6. Private Label – Lidl has an extensive system of partners-producers of goods for the chain under its own (chain) trademarks in different countries. In addition, the company has its own powerful production facility, Schwarz Produktion. These products are the most affordable in each category, as a rule.
7. In Poland, Lidl operates a chain of more than 700 stores with a turnover of over $6 billion, being the leader in food retail in Poland. For comparison, the turnover of ATB, the leader of the Ukrainian retail, is approximately the same in 2020 as the turnover of Lidl in Poland. At the same time, ATB has much more stores – about 1200. However, the average size of a Lidl store in Poland, according to our estimates, is 35-50% larger than that of ATB in Ukraine.
8. Lidl officially announced its entry into the markets of Bosnia and Herzegovina and Estonia in 2022. Let us remind you that entering the Ukrainian market has not yet been officially announced.
9. Lidl Plus is an interesting and effective loyalty system that goes far beyond traditional discounts and cashbacks. Consumers can use the smartphone app around the world.
10. The scandals and litigation involving Lidl mainly concerned complaints about working conditions and low wages at Lidl’s suppliers and in the stores of the chain.

How does Lidl sell fresh vegetables and fruits?

As in any other segment, Lidl focuses on ultra-low prices for vegetables and fruits. The challenge for a retailer is always to be the first in fruit and vegetable prices.

Nonetheless, the requirements for the quality and safety of fruits and vegetables in Lidl are very high. The chain may not offer premium-quality products, but it inspects the suppliers of fruits and vegetables very rigidly in terms of complying with the safety and quality requirements. The supplier, on the other hand, knows that if Lidl’s requirements are met, the chain will be able to offer huge development prospects and large volumes of product sales.

Lidl’s range of vegetables and fruits is limited, but the chain has recently regularly prioritized this segment of goods, given the global trend towards healthy food choice. For example, in the UK, the chain plans to increase the share of healthy foods to 85% of total sales and increase sales of fruits and vegetables by 35% by 2026, Fruitnet reported.

The focus on local vegetables and fruits is also an important element of the fruit and vegetable trading strategy for Lidl. Trade in local products, as we regularly emphasize in the fruit and vegetable audits of EastFruit retail chains, is beneficial for any chain. This allows to offer fresher, and therefore tastier fruit and vegetables, reduce transport costs, emphasizing the concern for the environment, and, at the same time, get a higher price, since consumers in most countries prefer local products to imports.

However, the availability of high-quality and safe products in the country at a competitive price should be taken into account. Otherwise, Lidl’s global direct procurement and direct import system will find alternatives.

The quality of the produce department and the quality of services in Lidl supermarket chains usually correspond to the discounter format. The chain is trying to minimize staff costs, so you shouldn’t expect a lot of workers in the store. Lidl supermarkets are also unlikely to amaze by merchandising and beautiful display, as products are usually sold in the same packaging they were supplied by producers or wholesalers of fruits and vegetables. Nevertheless, Lidl’s information content, as a rule, is at a fairly high level, as well as the convenience of shopping.

Lidl stores normally have an area of ​​about 1 thousand square meters, but there are also stores of ​​about 2 thousand square meters.

Lidl, taking into account the general trend towards a healthy diet, also pays great attention to the sale of organic vegetables and fruits and has its own line of organic products. This, undoubtedly, can attract not only economy-oriented shoppers to the store, but also the premium segment.

Since Lidl was a large wholesale company for a long time before entering the retail segment of the business, it knows well how to minimize the logistics costs for the purchase of fruits and vegetables. Accordingly, the supermarket chain is likely to launch a distribution center (DC) at the earliest stage of market entry. Without this, it will not be possible to implement the strategy of ultra-low prices. Naturally, the chain will strive to work directly with producers who have the necessary capabilities to ensure year-round supplies of fruits and vegetables.

As Lidl is trying not to hire many employees in sales areas, the chain will most likely require suppliers of fruits and vegetables to supply products with the maximum level of “packaging”. In other words, you probably won’t find bulk potatoes, carrots or other root vegetables in Lidl.

What does the possible entry of Lidl into the market mean for Ukrainian farmers, vegetable and potato growers?

First of all, these are new opportunities. Competition is always good, and Lidl will become a new powerful distribution channel. The partnership with Lidl will help producers create long-term business development strategies, taking into account the best international practices. After all, if you can meet the requirements of Lidl in Ukraine, you will most likely be able to supply products to any supermarket in the world.

Here is the second advantage – the opportunity to enter the international market, as well as through Lidl. Lidl’s global procurement strategy provides this opportunity for the most efficient and competitive suppliers. Therefore, the network can become a gateway to the markets of the EU and other countries in the world.

The third advantage is the general increase in the quality and safety of fruits and vegetables, which usually takes place after such a powerful international player enters the market. For instance, Lidl in Poland requires mandatory GlobalGAP certification from all vegetable and fruit suppliers, and the requirements for pesticide residues in the chain are much stricter than the EU standards.

While producers dislike and actively oppose increased requirements to their products, improved quality always leads to higher sales and revenue. Of course, this will require investment in the infrastructure for refinement, and many will even have to change approaches to production and crop protection, if they want to take advantage of the opportunities provided by Lidl.

The fourth advantage is the reduction of the risk of non-payment by the chain. Unfortunately, many suppliers of vegetables and fruits in Ukraine have not been able to receive payments for the supplied products due to bankruptcies of chains, or they often received payments delayed up to six months or more. In the case of the leader of European retail, such risk will be minor.

In general, any opportunity will require improvements from producers. Without a doubt, these are changes for the better and producers need to start preparing for them now.

What does Lidl’s possible entry into the market mean for fruit and vegetable consumers?

It is quite clear – competition means lower prices. An average Ukrainian consumer is not among the richest in the world, so he will only be glad to save money.

The second important advantage for the Ukrainian consumer is Lidl’s increased requirements for residues of plant protection products in vegetables and fruits, which we mentioned above. This will provide additional safety guarantees to Ukrainian consumers, and the chain will benefit from a high level of loyalty.

The third advantage is higher requirements for the quality of fruit and vegetable products. This can be very important for those who are tired of dirty potatoes, onions, carrots, beets in supermarket stores.

The fourth is the availability of organic products in the chain’s stores. However, it is not yet entirely clear how widely the organic segment will be represented in the fruit and vegetable department of Lidl in Ukraine.

The fifth is the promotion of local products that are tastier and fresher. Lidl will create opportunities to develop fruit and vegetable production in Ukraine and promote local products as they do in other countries.

Perhaps, a reduced assortment can be a potential drawback of the chain. However, the “reduced assortment” in the EU market may be quite sufficient for the Ukrainian market, as the average supermarket chain in Kyiv has about 100-120 positions of vegetables and fruits, the leaders – 200-260 positions, and ATB – about 50 positions.

What does Lidl’s entry into the market mean for the retail business, and how will it take place?

Since the former manager of the chain in Poland has been appointed as the head of the Lidl chain in Ukraine, it is obvious that Ukrainian chains should study the experience of the neighboring country.

Will Lidl buy any of the Ukrainian supermarket chains or will it create its own supermarket chain in Ukraine from scratch? It would be logical to assume that the ATB supermarket chain is the most suitable for the Lidl chain in terms of its format, and its purchase can provide the rapid gaining of leadership.

However, the experience of other countries shows that Lidl prefers to create its own chain, rather than enter the market through the purchase of competitors. Perhaps this is due to the format of the chain and high requirements for efficiency created by standardizing stores. Nevertheless, it is this option of entering the Ukrainian market that seems very likely. This will become a significant impetus to the development of the commercial real estate market in Ukraine, as experience has proven that the chain will strive to take the leading positions in the country within 3-5 years.

Where will Lidl find its Ukrainian competitors, where will it be inferior to them, and what position would the chain take in our audit today if it had already operated on the market?

As a rule, Lidl is a leader in terms of prices, but it will not be easy to do this in Ukraine. Particularly, it will be more difficult than in Poland. This is due to the fact that, according to EastFruit estimates, only 26% of all vegetables and fruits are sold through supermarket chains, and 74% of trade turnover is sales in markets, stands and street trading. If we take into account the consumption of self-grown vegetables and fruits in value terms, the chains control only 16.5% of the consumption of vegetables and fruits in value terms.

Obviously, the Lidl chain will be able to count on leadership in prices in the segment of imported vegetables and fruits at the first stage. It may take some time to become the leader in local products.

In terms of assortment, the chain is most likely to be somewhere in the middle, but it is likely to take leading positions in terms of quality. As for the quality of the department, we expect the chain to have the same positions as in the assortment – in the upper middle of the rating of the country’s supermarkets.

Thus, we assume that Lidl, according to a comprehensive assessment of the fruit and vegetable departments, will enter the top 3 of Ukraine. The chain will most likely offer the greatest competition to such supermarket chains in Ukraine as ATB, Novus, Silpo and Auchan.

Of course, only the ATB chain can be considered a direct competitor of Lidl, however, the German retailer will put pressure on Auchan and all other chains in terms of prices. In terms of product quality, Lidl will compete directly with Novus, especially Novus Express, offering significantly lower prices. Silpo, on the other hand, has multi-format stores, and their large part are very similar in format to discounters. It is this segment of the chain that will suffer the most from the potential expansion of Lidl in the Ukrainian market.

Given the long stagnation at the very end of the EastFruit rating of the Ecomarket and Velyka Kishenya chains, Lidl’s entry into the Ukrainian market may accelerate their exit from the retail business, because their formats will directly intersect with a more powerful international competitor.

Conclusions

Lidl’s entry into the Ukrainian market may not take place, since the chain has long had offices in some countries with no Lidl stores. However, these are usually countries with large orders for the production of goods for sale in this supermarket chain, and Ukraine hardly fits this criterion.

Most likely, Lidl’s entry into the Ukrainian market will take a lot of time. Therefore, we cannot say for sure that there will be at least one store of the chain in the country by the end of 2022.

Lidl’s entry into the Ukrainian market will have a powerful impact on both the retail market and the fruit and vegetable market. The impact will be predominantly positive, as it will open up new opportunities for business development and even export expansion for the most progressive producers and provide access to better and safer products at a fair competitive price for consumers.

The entry of such a powerful player into the country’s market is also positive for the image and investment attractiveness of Ukraine, as Lidl will create new investment opportunities in other sectors of the country’s food and non-food businesses.

“The EastFruit team is looking forward to including Lidl in our periodic retail audits of supermarket horticultural departments, which we have been doing for nearly 15 years. We see how the development of modern fruit and vegetable retail is changing the fruit and vegetable business of the countries of our region, creating new opportunities for all market participants ready to face the challenges of modern times and develop,” says Andriy Yarmak, Economist at the Investment Centre of the Food and Agriculture Organization of the United Nations (FAO), managing a joint FAO/EBRD project to develop the fruit and vegetable trade in Ukraine, Moldova, Georgia, Uzbekistan and Tajikistan.

We invite everyone to the first international conference “Retail Forum – 2021” on December 2, 2021 in Kyiv. As part of the event, EastFruit experts and representatives of the Ukrainian Horticultural Association will present a unique study of the country’s fruit and vegetable retail. The study includes the top 20 best-selling vegetables and fruits, seasonality of sales, specific weight of vegetables and fruits in the turnover of chains, current turnovers of fruits and vegetables in Ukrainian retail, and, of course, opportunities for the development of this segment.

Registration of participants will soon be available on the FruitInform website. For participation you can contact the project staff:
+380 96 5836323 – Yevhen Kuzin, eugenekuzin@gmail.com

+380 96 4337857 – Olexandr Khorev, halex.khorev@gmail.com

+380 96 1319287 – Olexandra Manko, sashchaa@gmail.com

Сообщение Lidl to make a revolution in Ukraine’s retail and produce sectors: detailed analysis by EastFruit появились сначала на EastFruit.

The potential of the professional social network LinkedIn is greatly underestimated In Eastern Europe, especially in the fruit and vegetable sector. However, it is here that the target audience gathers, including that for exporters of vegetables and fruits when it comes to supplies outside the CIS.

At the same time, the EastFruit’s page in LinkedIn has gathered more than 1,000 subscribers last week, becoming the main source of information about the produce business in Eastern Europe and Central Asia.

“Diversification of the export of fruit and vegetables outside the traditional markets is one of the most challenging tasks for farmers and vegetable growers in the region given a decrease in Russian imports and increased competition in the regional market. Thanks to the information shared by the English page of the EastFruit website on LinkedIn many importers and supermarket chains in the EU, Middle East and Asia have become interested in importing grapes, plums and apples from Moldova, cherries, dried fruits, watermelon, melons and onions from Uzbekistan, niche products from Tajikistan, feijoa, kiwi and blueberries from Georgia,” says Andriy Yarmak, economist at the Investment Centre of the Food and Agriculture Organization of the United Nations (FAO).

He advises all entrepreneurs who are interested in exporting their products outside the CIS, and even those who work in the CIS logistics market, to register online. In addition, he points to the fact that the EastFruit platform is open for export promotion and can be used now for free. In this case, the exporter or producer must confirm his readiness to export, namely: sufficient volumes for exports, knowledge of international requirements for the quality and safety of products, in particular, the availability of GlobalGAP certification, and HACCP for processors; fluency in English; active websites or pages in social networks containing information about the company and its products in English; understanding of international logistics and international trade as a whole.

EastFruit experts will help businesses that meet these criteria prepare promotional materials in English and post them on the Eastfruit’s page and on the LinkedIn platform to facilitate the search for partners. This information will be seen by an average of 5-30 thousand people – exclusively from the fruit and vegetable sector.

In addition, companies can use the LinkedIn trading group “Fruits and Vegetables” to directly promote their products. However, the efficiency will be lower there.

For those who work mainly in the markets of the former USSR countries, we recommend the most popular Telegram platform EF Trade Platform with more than 18 thousand participants. It is the only platform of its kind in terms of the number of participants and the live update of publications on the East-Fruit.com website visited by about 1 million people annually.

Сообщение 1,000 followers on EastFruit’s LinkedIn page появились сначала на EastFruit.

According to EastFruit analysts, in the first half of 2021, Uzbekistan worsened its position in the Russian fruit market. For six months of 2021, the country fell back in the 14th position in the ranking of the largest fruit suppliers to the Russian Federation, reducing supplies by 10% in volume and 3% in value.

The main reason for the decline in positions was climate change, which affected Uzbekistan in 2021. A sharp warming in February 2021 triggered the awakening of fruit trees too early, followed by two waves of frost . As a result of frost damage, the harvest of Uzbek apricot suffered the most, and its exports to Russia decreased by almost seven times. Exports of peach and nectarine decreased by 41% (as of the end of June), exports of raisins by 16%, exports of lemon by 28% and exports of plums almost halved. We also note a decrease in exports of fresh apples by 44%, table grapes by 68%, walnuts by 66% and melons by nine times.

At the same time, Uzbekistan was able to increase the exports of watermelon and cherry. Export of cherry to Russia increased 2.6 times in physical terms, and exports of watermelon – 4.2 times! But Uzbekistan had to reduce prices for both cherry and watermelon for exports to Russia, therefore, the total revenue from exports did not increase as much as the volume of exports. In particular, the export price for the Uzbek watermelon dropped by 62% at once compared to 2020.

In general, in the first half of 2021, Russia increased fruit imports by 3.2%. Ecuador remained the leader in deliveries. Turkey, Egypt and South Africa improved their positions – each of these countries increased their exports by 10-17%. Serbia remained in the fifth place with stable export volumes. Moldova fell back in the eight place after a reduction by 23% in fruit exports to Russia.

Сообщение Uzbekistan is losing its position on the Russian fruit market появились сначала на EastFruit.