It is a difficult season for Uzbek fruit business this year. The production of many key fruits decreased due to frosts. As a result, their prices are high, which negatively affects the volume of exports and domestic consumption.

EastFruit experts draw attention to the fact that prices for early apples of the 2021 season in Uzbekistan are at least 2.5 times higher than the average price in the 2020 and 2019 seasons. As of June 24, 2021, the average wholesale price for early apple varieties is 13,000 sums per kg ($ 1.23). Their average wholesale prices were 2.5 times lower in the second half of June 2020, and 3.5 times lower in the same period of 2019.

According to EastFruit experts, the dynamics of exports of early apple varieties from Uzbekistan showed steady growth and export revenue increased from $ 2.1 million to $ 6.2 million from 2016 to 2020. But in 2021, we will probably see a sharp decline in this indicator, given the prices in the domestic market.

As in the case of apricots, almonds and cherries, high prices for early apples in Uzbekistan in the 2021 season were caused by weather anomalies – a sharp warming in February 2021 and subsequent frosts. Judging by current prices, the damage caused by weather to the harvest of early apple varieties in Uzbekistan is significant.

EastFruit has already written that growing late varieties of apples in Uzbekistan for export can lead to serious losses for local farmers. However, this article also noted that with regard to early varieties of apples, the situation is completely different. In large apple-producing and exporting countries, the harvest begins in the second half of August, as a rule. In Uzbekistan, due to the climatic conditions, early apple varieties become available on the market in the end of April. Late varieties, such as Golden Delicious, are often available at the end of July – almost two months earlier.

Therefore, from May to August inclusive, Uzbekistan has a window of opportunity for exporting apples to northern countries, primarily to Russia. Statistics confirm that Uzbekistan continues to use this export niche for early apples.

Source: Trade Map

As you can see on the chart, the export of early apples from Uzbekistan has a steady upward trend. In 2020, exports reached a record 6.2 thousand tons.

“The main advantage of early apples as an export niche for Uzbekistan over late ones is that no investments in expensive infrastructure for storage and processing are needed. Many farmers and investors underestimate this factor, and for 1 hectare of orchard, investment in a modern fruit storage facilityexceeds the investment in laying a farm with irrigation, seedlings, support, hail protection netting and even equipment! The second important advantage is the high price in summer, as high-quality apples for the Russian market at this time are normally exported from the countries of the Southern Hemisphere: South Africa, Chile, New Zealand, etc. At the same time, Uzbek apples are also very fresh, provided that the cold chain is maintained,” Andriy Yarmak, economist at the Investments Centre, Food and Agriculture Organization of the United Nations (FAO), explains.

However, Uzbekistan is unlikely to increase the export of early apples this year compared to previous years. With very high domestic prices, there is another negative factor – record high apple stocks in Russia and their record low prices in June.

In neighboring Tajikistan, the damage from frosts to early apples turned out to be much less significant than in Uzbekistan. Therefore, the average wholesale price of early apples as of June 24, 2021 is $ 0.62 per kg, i.e. 2 times lower than in Uzbekistan. Considering such a difference in prices and the close distance, Uzbekistan can become their importer, as in the case of apricot or raspberries.

Сообщение Prices for early apples in Uzbekistan are record high – exports are expected to drop появились сначала на EastFruit.

The construction of an export-oriented wholesale distribution center (DC) for storage and processing of agricultural products has begun in the city of Elektrostal, Moscow Region (Russia This is reported by the Minister of Agriculture and Food of the Moscow Region, Sergei Voskresensky on the website of Ministry of Agriculture of the Russian Federation.

“A large investment project for the construction of an export-oriented wholesale distribution center for storage and processing of agricultural products is being implemented by the “Freshistoria” company. The volume of investments will amount to over 1.1 billion rubles. The total area of ​​the center will be about 20 thousand square meters. More than 180 new jobs will be created,” Sergei Voskresensky said.

The project involves the construction of cold storage units for strawberries, mushrooms, tomatoes, cucumbers, freezer units for storing frozen products such as fish and meat and warehouses for dry products, auxiliary and technical premises. The center will provide services for sorting, processing and packaging of vegetables, berries and other products, their transportation outside the Russian Federation, internal and external logistics services.

“Work is now underway to complete the development of project documentation. Construction work will begin in the second quarter of this year. The planned completion date of the facility is the second quarter of 2022,” Sergei Voskresensky noted.

The construction of the wholesale distribution center will facilitate the promotion of Russian agricultural products to foreign markets.

Сообщение A new wholesale distribution center (DC) will be built in the Moscow region (Russia) появились сначала на EastFruit.

The national online conference “Horticulture of Tajikistan – the Best Investment Niches” will be held on March 16, 2021. The conference will be held online from 14:00 to 16:00 (Dushanbe) and it has been designed to acquaint agrarians of Tajikistan with the best investment niches in the horticulture sector.

During the event, speakers from around the world will offer conference participants promising niches in the produce business, including:

• production of berries in greenhouses;
• freezing vegetables, fruits, and berries;
• apple business with obligatory infrastructure for storage of crops;
• industrial cultivation of walnuts, almonds, and pistachios;
• growing and drying herbs and spices for exports;
• production of dried fruits and vegetables;
• growing cherries in a super-intensive orchard for export;
• greenhouse business opportunities.

The event will be held with the support of the Food and Agriculture Organization of the United Nations (FAO) and the European Bank for Reconstruction and Development (EBRD). The partner of the event is the agro-media agency Sapieza.

Participation in the event is free subject to registration. To register for the conference “Horticulture of Tajikistan – the Best Investment Niches,” please follow this link: https://forms.gle/17Dr16brwCXYQ17c6.

The conference will be held on the ZOOM platform and all registered participants will receive a link to the event.

For organizational matters, please contact Bakhtiyor Abduvokhidov at +992 927 544 871.

Сообщение National online conference “Horticulture of Tajikistan – the best investment niches” появились сначала на EastFruit.

In the construction of wholesale markets, wholesale distribution centers, or whatever they are called, there are no dogmas. The market is dynamic and everything changes quickly, so you need to always keep your eyes open.

More precisely, there is one dogma – before you start planning investments in such objects, you should very carefully analyze the commodity flows and the structure of consumption of FRESH products (vegetables, fruits, meat, fish, dairy products, perhaps even fresh flowers) and understand whether you can dramatically and radically improve the business of people who are already buying and selling these products.

“Cardinally” means not by 5-10-15%, but at least twice. And here we are not talking about profit but about the possibility of increasing sales volumes, or increasing the speed of product sales, turnover, reducing the loss of time by customers, etc. Then the chances of success could theoretically be.

I wrote this blog following my speech at the first international online business forum “Infrastructure of Agrology” on August 4, 2020. Given the limited time, within the framework of my speech, I was not able to fully disclose all these issues, which has already led to a considerable number of questions. I will try to answer them in a more detailed format.

The errors that I want to talk about now, are errors in the vast majority of cases. However, what I will write now is also not a dogma. There are undoubtedly different conditions and there are exceptions to these rules.

– Copying wholesale markets from other countries or cities – it is not the market that needs to be copied but approaches to planning and market management. Yes, this is the case when the bicycle has to be reinvented every time in order for it to ride. Even in different cities of the same country, which are comparable in size and population, it is likely that different market models and different approaches to their planning and functioning will be needed.

– Construction of the wholesale market “in a better place” than the existing one – the best place is where, even in unorganized and poor conditions, but traditionally, trade was and is carried out. The only way to move the market to a new location is to close the old site. If possible, it is best to create a more convenient and modern market in the old place without interrupting trade.

The task of every investor planning to launch a wholesale market is to ensure that on the first day of work, a lot of sellers and a lot of buyers come to the market. If this does not happen, then inviting them a second time will be many times more difficult and much more expensive. Therefore, we do not forget that professional work with specialized media from the moment of the start of construction is also the most important and completely non-trivial task.

I saw many more markets that never took off than those that did. And the conditions, infrastructure had nothing to do with why the market did not start.

– Creation of a wholesale market where it does not significantly improve anything. Where everything works well without a new market, the market may not be needed. The wholesale market investor tries to look into his or her business plan, but you need to start by studying the business plan of those for whom the wholesale market is being created, that is, wholesalers, representatives of the HoReCa segment and, of course, manufacturers. If the availability of the site being created does not allow them to earn significantly more, does not create new prospects and opportunities for them, then no one will need it, and the money will be wasted.

– Creating an export-oriented wholesale market is a bad idea in most cases. Especially if you are building a market outside the European Union, where “export” is a purely technical category and there are no borders, and the distance between countries is less than in Kazakhstan between cities of the same region. Export-oriented markets have two key disadvantages:

1) Seasonality. You have built a property that only operates 3-6 months a year. And it needs to be kept for 12 months a year. The return, in this case, will be 2-4 times lower than that of year-round markets, which means you cannot afford the same quality management, etc.

2) Narrow assortment. The wholesale market should be the “king of the assortment”. There should be more product names in each group than in all supermarket chains combined. The wholesale market selling 10 or even 50 positions, as a rule, will not be interesting to trade. Of course, there are exceptions, such as specialized wholesale markets in specific regions. But that’s another story.

– The inattention of the management to the main wealth of the market – market information, which is literally underfoot. Markets often do not monitor prices, assortment, and trade volumes, or do it formally, carelessly. If information is collected, not everyone knows how to use it correctly. But this is a real treasure because such information allows you to create a uniqueness that no one else can repeat. Those who know how to use such tools get clients who never leave and the capitalization of investments is growing at a record pace. Therefore, I am pleased to see how the market information systems that I created many years ago still work and help to make market infrastructure objects not only sustainable but also economically successful and absolutely unique.

– The participation of the state or city in the authorized capital and management of the wholesale market dramatically worsens the prospects for creating a quality facility with quality services. Such a market becomes clumsy, the motive for making a profit is lost, and the attitude to the market and strategy changes with the change of political courses and elites that govern the country, city, or region.

If the market is created as an initially unprofitable object, then it, most likely, will not be able to be aggressive enough in attracting operators, will not improve the conditions for them, and, over time, will become a burden on the budget. Therefore, any partnership with the state or municipal authorities is best avoided at all costs.

– Creation of wholesale markets near small towns and cities with an undeveloped HoReCa segment. Wholesale markets are tied to consumption, not production! In addition, it is a mistake to think that every city, even a relatively large one, needs its own wholesale market. And to understand this is quite simple – you just need to study the trade flows of the entire region. As a rule, a successful market serves the entire region with a pronounced consumer center and it should be as close to this center as possible.

Also, if even in a fairly large city there is no culture of food consumption outside the home (tourism, hotels, restaurants, cafes, etc.), the market’s chances of success will be much lower.

– The creation of a specialized fruit and vegetable market is usually a bad idea because the largest segment of buyers who represent the HoReCa segment is immediately lost. It will be more profitable for them to pay more for products in the supermarket, where they can buy fish and meat and other fresh products. After all, the restaurant needs not only vegetables and fruits. Therefore, I repeat, the wholesale market should be the “king of assortment” so that no supermarket could offer such a choice for HoReCa.

– Creation of expensive infrastructure in the wholesale market, where there is no need for it. As a rule, this error is caused by the fact that an investor listens to a solution provider who is directly interested in over-budgeting and selling many things that are unnecessary for the market. Therefore, an investor should focus, first of all, on the needs of a potential client – a buyer (i.e. HoReCa and representatives of small retail), as well as a potential market seller, but not a supplier of equipment and technologies.

By the way, this is what often becomes the reason that the market “does not take off”. After all, the prices for market services are, in fact, too high, and the range of services includes things that are not needed by real market operators.

– Creation of a wholesale market “for cooling, finishing, processing, and packaging products”. This is a common mistake that costs investors a lot. These operations should be carried out as close as possible to the field where vegetables and fruits are grown. There is no point in cooling, for example, of an apricot that was not cooled immediately after harvesting and then transported 300-500 km or even 50 km. The cold chain does not like such temperature fluctuations, so it is better not to touch such an apricot. It is advisable to cool the product as quickly as possible after cleaning, literally within minutes.

In addition, compare the feasibility of placing sorting or cooling of fruits and vegetables right next to the field in a production region where land costs a penny and labor is also inexpensive and the location of the same processes in the capital, where land is hundreds of times more expensive and labor is also. The conclusions are clear here.

The market must engage in trade, that is why it is called the “market”. If there is a revision service there, it must first of all be based on the real needs of the trade, if any. However, revision can in no way be the main idea of ​​creating a wholesale market.

By the way, many have probably already noticed that the mistakes I have listed like to accumulate in one investment project. For example, an export-oriented market, with expensive infrastructure, is a very good example of a failed business idea.

– Long-term storage or processing on the wholesale market is an even worse idea than the actual completion of fruit and vegetable products placed on the market. The market should give the maximum turnover per meter, and long-term storage should always be as close to the field as possible. For example, every hour of delay in laying an apple for storage after harvest is minus a week of the shelf life of this fruit.

And again, back to the cost of land and real estate – what is the point of storing cheap potatoes in the capital of the country for 8 months a year? How much does this storage cost compared to using the same area for retail? Obviously, this is complete nonsense from an economic point of view.

Immediately, an ideal example of a hopeless wholesale market is obtained – an export-oriented wholesale market for fruit and vegetable products, with modern storage facilities with controlled atmosphere (CA) storage technology for long-term storage of products, expensive processing infrastructure, located in the center of production and far from consumption centers, without a market information monitoring system, and even with the state as the main shareholder!

Therefore, any storage on the wholesale market should be short-term – 1-3 days, maximum a week. By the way, the lack of infrastructure for long-term storage immediately reduces the investment in 1 m2 of the wholesale market and therefore increases the return on investment.

By the way, investments in modern expensive storage facilities, without changing other aspects of the business (growing technologies, varieties, protection systems, etc.), can be a complete failure. I included this item for those who really want to put a storage facility at a retail facility – there are a lot of such people. So, if a variety of vegetables or fruits is not intended for storage, if it was grown without protection focused on long-term storage, it was not harvested correctly, it was not loaded correctly, it did not provide proper nutrition during the growing season, then the product will not be stored even in ideal conditions and in the most modern storage facilities. The store is not a sanatorium – it cannot improve the quality of the product, but it can help to preserve it.

– Since we are talking about storage, I will repeat the thesis that I have been repeating for about 15 years many times and every year, but there are still those willing to take the risk – “Investments in storage as a separate business are completely unpromising.”

Long-term storage of vegetables and fruits is an integral part of the fruit and vegetable growing business. After all, we cannot eat all the cabbage, potatoes, or all the apples in a week – we want to consume them all year round. So, they need to be stored. It is very interesting to watch how people plant 40 hectares of the apple orchard, but they are not going to build a storage facility with CA storage, for example. Usually, they simply do not understand what 2 thousand tons of apple is and who can buy and ship it even in a month of round-the-clock work.

By the way, storage as a business can still be earned in countries with a really huge shortage of storage capacities and only when building cheap and not very high-quality storage facilities. It is also desirable for this country to be highly closed and high import duties on goods. But even so, the storage business is still a lottery. And once every three to four years, even in such countries, you have to lose up to 100% of the purchased products, because they are not sold at all at any price.

By the way, if the manufacturers are too small, then each of them should not build their own storage, because there is an economically viable storage size, given their high cost. Indeed, in addition to the actual storage chambers, you need to provide the required number of containers, purchase equipment for loading and unloading operations, make all the necessary connections to networks, etc. Moreover, it is best to place the sorting, finishing, and packing lines right there. If you build a storage facility with a capacity of 10 tons or even 100 tons, all these costs per 1 ton will be too high.

Therefore, according to my calculations, depending on the product category, storage facilities for fresh vegetables and fruits should be at least 1,000 tons in size, but better than 1,500 tons.

So what about small producers who can’t build their own storage? The answer will be cooperation, of course, provided that the country has appropriate legislation and business traditions. Otherwise, if the storage facilities are in the hands of third parties, the efficiency of the entire system will be significantly lower than in the case of farmers’ cooperation.

– Participation in trade and creation of own trading companies by the management or owners of the market. It is a very common practice, which usually leads to losses on all sides. In such a case, trading does not work out normally, and operators’ confidence in the market decreases. So, the temptation to create special conditions for themselves, worsening them for others, always grows. Thus, this is a classic conflict of interest. As with any business, only the right strategy and reputation will ensure sustainable development. And so, creating their own trade, the owners or managers of the market are losing the reputation of the main business.

It turned out a little more than 10 errors, but this list is certainly not exhaustive. I hope that he will help at least one investor avoid multi-million dollar losses.

Сообщение Planning the infrastructure of the fruit and vegetable market (wholesale markets, storage facilities, distribution centers): Top 10 mistakes появились сначала на EastFruit.

Recently, the question of how to bring the Ukrainian economy out of the shadow has been increasingly raised. Authorities are coming up with new methods of struggle and incentives to get the business out of the shadows. However, almost every government is more interested in repressive methods, rather than incentives for removing them from the shadows.

In addition, the fruit and vegetable industry is too small in the eyes of officials to seriously delve into its problems. In addition, it seems like this precisely because the production and trade in vegetables, fruits, potatoes, and berries is almost completely in the shadow.

Together with the Ukrainian Fruit and Vegetable Association, we have repeatedly proposed several very simple approaches to introducing incentives for removing a significant part of the fruit and vegetable industry from the shadows. These approaches can be beneficial to both the state and business.

In this blog, I want to offer detailed information about the six main indicators that characterize the maturity of the fruit and vegetable industry of any country. Based on these indicators or KPI, specific incentives can be developed for the development of the industry.

Indicator No. 1 – Percentage of retail chains in sales of fruits and vegetables. For the fruit and vegetable business of Ukraine, the domestic market is the foundation of the entire industry, since manufacturers earn much more money from domestic sales than from exports.

The domestic market for vegetables, potatoes, fruits, and berries forms production trends for most producers and wholesale companies. However, the shadow domestic market for different cultures, depending on the season, is, according to my estimates, from 60 to 80%. Therefore, retail chains do not yet have such a market share, which will quickly and significantly change the structure of fruit and vegetable production.

As soon as the market share of retail chains in sales in any country exceeds 50%, sharp changes begin to occur in the entire supply chain. I believe that in the next three years, the share of retail chains in Ukraine can exceed 50% only if the population’s income growth continues at a rapid pace, and also if the rural population continues to migrate to large cities. This will lead to increased competition and higher quality standards for the entire legal produce business.

In order to achieve a 50% of sales through supermarket chains, which means taking several billion hryvnias out of the shadows into the legal field and, therefore, getting significantly more taxes from it, the Ukrainian government needs to do two simple things that have nothing to do with repression:

1. a) reduce the VAT on fruits and vegetables by half – this will make working with cash unprofitable, and legal payment of taxes profitable. In addition, this will stimulate consumption, as products in networks will become more accessible to consumers and will increase its safety and traceability. By the way, in most EU countries, VAT on products, or at least vegetables and fruits, is lower than on other goods, and even Russia reduced VAT on fruits and vegetables in 2020;

1. b) support Bill No. 0856 on agricultural cooperation, developed by industry associations with the support of the FAO and the EBRD, which will allow small and medium-sized professional producers to legally work together and increase direct deliveries to such large buyers as supermarket chains.

Indicator No. 2 – Export Development. Currently, the export of fresh fruit and vegetable products is the least developed segment of the fruit and vegetable industry, with the exception of apples, blueberries, and greenhouse products. I do not mention nuts, as this is a completely separate segment and a separate topic, and most of the nuts exported from Ukraine are not grown industrially.

Ukrainian farmers produce a much wider range of fresh food products that have good export potential, but actually export only large quantities of blueberries and apples. Therefore, as the saturation of the domestic market increases, significant funds will need to be invested in promoting fruit and vegetable exports. The development of trade through retail chains will also stimulate exports, as it will help to raise quality and safety standards. On the contrary, export development allows you to increase sales in the network. As in the previous case, it would be logical to stimulate exports by creating modern civilized conditions for the cooperation of gardeners, vegetable growers, and potato growers.

Indicator No. 3 – Import Development. You should not be afraid of import, because not all vegetables and fruits can be grown in Ukraine due to climatic restrictions. The growth of population incomes, as well as the constant growth in the consumption of fruits and vegetables, always stimulate the development of imports of fruits and vegetables.

Every year, new companies enter the Ukrainian market, but the largest world and European companies are still afraid to invest even in the opening of Ukrainian representative offices, not to mention direct investments.

The development of imports and the involvement of importers in the domestic market can also contribute to the development of exports. Indeed, importers are often also exporters, and they will find new opportunities within the country, if, of course, we can interest them to work in the Ukrainian market.

Indicator No. 4 – Unified quality standards. The Ukrainian fruit and vegetable business needs to introduce uniform quality standards. This is an important aspect of the development of a civilized domestic market, as well as export. The main problem that impedes the implementation of common standards is corruption in the entire supply chain. Corruption can be overcome with the help of technologies and incentives such as reducing VAT and developing cooperation. Therefore, the active use of decision-making automation, when accepting or sorting fruits and vegetables by quality, will remove the human factor and significantly reduce corruption risks.

Indicator No. 5. Market infrastructure development. In recent years, an increasing number of Ukrainian fruit and vegetable companies have been investing in their own development and creation of modern market infrastructure, which is already radically changing the image of the fruit and vegetable industry. However, significant problems related to acceptable quality roads, the sea, rail, aviation, and river logistics, the quality of storage facilities, the shortage of sorting lines and their technological level continue to exist throughout the country. The solution to these issues will create the basis for the long-term development of business in Ukraine, and to solve these problems, the state does not have to pay for the development of infrastructure. There is a need to create opportunities for its development.

An example is the formation of conditions for cooperation between farmers which will make investments in the creation of storage facilities and the purchase of sorting lines more accessible for each individual farmer since many of them cannot afford this themselves.

Market infrastructure also includes such important elements as access to market information and the development of wholesale markets. In this regard, Ukraine has a good position in comparison with many other countries.

Indicator No. 6 – Quality packaging. A developed market for modern and safe packaging, which preserves the product well and helps to sell it, is very important for the development of all participants in the existing supply chain in the fruit and vegetable industry, from a small producer to an end consumer.

At the same time, in Ukraine over the past 25 years, a used banana box has been used as a market “standard” for packaging. In such boxes, almost all products sold to markets and even part of products are sold to supermarket chains. That is about 80% of all fruits and vegetables.

Naturally, the greater the percentage of product sales through supermarket chains, the less demand will be for a used banana box. If we look at the world packaging market, then now it is even moving away from disposable plastic, to which the Ukrainian market is just beginning to come. The trend for packaging fruit and vegetable products in biodegradable and ecological types of containers, as well as the use of reusable returnable containers (pulling), is relevant. In Ukraine, several supermarket chains also use the pulling system successfully. However, all its advantages are not used because it can work not only in networks, but also in markets, and even in international trade. 

If we bring a small intermediate result, we can note the average level of maturity of the Ukrainian market and huge prospects for its development. A reduction in VAT on fruits and vegetables and the development of cooperation in the country will give an incentive to legalize the turnover of fruits and vegetables, increase safety and quality standards, sales in networks, and consumption of products by the population of Ukraine, and develop exports, infrastructure and modernize approaches to growing, packaging, and marketing.

These principles are universal and can be used not only in Ukraine but also in other countries. I think that this can be very relevant for Uzbekistan, Tajikistan, Moldova, and other countries that aim to develop vegetable, fruit, and berry industries.

Сообщение Bringing the fruit and vegetable sector of Ukraine out of the shadows: six vital KPIs of the industry’s maturity появились сначала на EastFruit.