Wednesday, 17 January 2018 22:39

When the Ukrainian onion will appear on the shelves of Scandinavian supermarkets

Когда на полках скандинавских супермаркетов появится украинский лук

The company "Green Team" LLC was founded in 2010 as a multifunctional vegetable storage facility in Kakhovka, Kherson region. At the time of building, the storage facility with a capacity of 50,000 tons was one of the largest in Eastern Europe. The enterprise is equipped with modern lines for sorting, peeling and packing of products. During its existence, the company has established itself in growing of "borsch set” vegetables, in vegetables storing, as well as exporting of "niche" vegetables to the EU market. The owner of the company is the private investment British fund Delin Capital.

Denis, how did the company's history begin?

Everything is started in 2010. There was the large deficit of quality vegetable storage facilities at market, which would be able to store the harvest throughout the year. Therefore, it was decided to build a vegetable store. From the very beginning, it was planned to implement a large-scale project – the largest vertical vegetable store in Eastern Europe. All strategic issues – from idea to implementation, took over the private investment British fund Delin Capital, UK, which invested in this project, becoming its owner.

How much did the project cost?

Investments in the project amounted to about $ 40 million, which were spent on the storage construction, purchase of processing and packaging lines, as well as other equipment. A farm was also bought out.

How long did the building last?

The storage was built during 1 year. That time we really wanted to conquer quickly the market on a large scale, which resulted in a series of system errors.

What do you mean?

Initially, the company focused at "borscht set" vegetables – beet, carrot, cabbage, onion. In the first couple of years of existence, we chased after growing a large number of vegetables in huge areas with further storage. At the same time, neither the growing technology nor the vegetables storage technology has been particularly worked out.

As a result, the team of "Green Team" LLC made three major mistakes. First, we started with huge scales of vegetables growing and storage without testing technology. Secondly, there was no quality control of growing. As a result, a large number of product became worthless and it had to be removed. Thirdly, there was no control over the cost price.

Ко всему в придачу с нами сыграло злую шутку ценообразование в тот сезон — компания попала на рекордно низкие цены на свежие овощи. Как результат — убытки в несколько миллионов долларов. 

In addition to all of this, the pricing in that season played a malicious trick upon us – the company hit by the record low prices for fresh vegetables. As a result – losses of several million dollars.

Wow, probably after that, was it decided somehow to change the business model?

Yes, after such experience in 2011-2012, to 2014 the company's strategy was revised. I joined the company at the end of 2014 and persuaded the founders to return to vegetables growing, but to do it other way – to start from small. In 2015, we started from 50 hectares and in 2017 brought the area to 300 hectares. Thus, we managed to perfect the growing technology and minimize the error price.

You mentioned that you started to grow vegetables on 50 hectares. Where are these lands, in which regions?

This is our farm in the Kherson region, which we bought at the very beginning. We grew everything there. At the same time, we changed the list of farmed vegetables and departed from the "borsch set" to more strategic crops. We expanded the cultivation areas, but with one condition – they should not be farer than 50-70 km from the vegetable store. Our farm is in a long-term rent, the area of which is 1200 hectares. In 2017, the volume of vegetables grown gained about 17,000 tons.

 

 

Photo: Green Team

Are you planning to increase the plot of lands?

We started this process with – 50 hectares in 2015 and brought the dimensions to 350 hectares in 2017. In 2018, we plan to reach 400 hectares.

Where do you sell the grown products?

 

We directly work with three trading networks – Metro, Billa, ATB. This is what concerns the domestic market. Mainly, these are the vegetables of "borsch set". Also, we supply products abroad. This direction is strategic for us. We sell for export the vegetables, which are not much in demand in the country.

We are planning to bring the ratio of sales volume to –  60% – export, 40% – domestic market. The present day, we significantly reduce the percentage of borsch vegetables volume in the total structure of cultivated products.

Why did you decide to depart from the "borsch set" of vegetables?

We gradually give up the cultures, which we cannot find use for, except to sell fresh on the domestic market.

Two years ago, we began to study international markets that took a lot of time and money. We wanted to understand what vegetables are in popular demand in the world, where the company can successfully compete and diversify the risks, connected with falling prices in the domestic market.

As a result, we decided on a set of crops, which are in demand on foreign markets – onion in all its forms, garlic, butternut squash and sweet potato.

When did you decide to export?

We started to make our way through the foreign markets even before the revolutionary events. The first export country was Russia. At the same time, we knocked on the Polish market.

After closure of the Russian market in October 2014, we began to think about what to do further. As a result, we concluded that we are not ready yet for expansion into the EU – we had to bring products to the international principles of growing and accounting. This is what we have been doing the next two years.

What and where do you deliver?

If we talk about onion, we are the first who have learned to work with any kind of onions. This vegetable can be of different diameters, shapes, can be peeled or sliced with rings. These are all different formats. For example, we export up to 3-4 thousand tons of peeled onions to Great Britain per year. This country remains our main export market, which we have studied, understood and established system sales.

So far, we export onion and other positions only to the UK. We are also looking for new markets. For example, we are interested in Scandinavian countries – Sweden, Denmark, and Norway with onion, sweet potatoes and the same positions as in the UK. Also, we supply butternut squash and sweet potato to foreign markets. In 2017/2018 marketing year, we plan to add to the onion 2-3 thousand tons of other exported products.

In the course of three years, we intend to take the first place for supply of butternut squash to the European market.

How much time has passed since the moment when you aimed at the UK market and entered it?

About one year. So much time was necessary to pass all the certifications, to start up a new production workshop, to establish the process and train people.

We started with onion, and now we are promoting the butternut squash. It is in great demand in the UK. The British bake it, add to all kinds of mixes. This year, we started to deliver butternut squash in branded packaging. It says that this is a Ukrainian product, that this is our production. Therefore, we inform the British about Ukrainian products.

Let’s take onion as an example. How much does it cost in Ukraine and how much in the UK? How much do you earn on it?

Take the peeled onion. If we compare marginality in the UK and Ukraine, in the first case it is 2 times higher today. The main difference is that in the UK the contract price is fixed for 12 months, whereas in Ukraine it is directly connected with the cost of raw materials, and can change essentially.

Please, tell in details about the permissive documentation, that the company received to enter international markets.

There is a misconception in the mind of Ukrainian producers. It consists in the fact that some country requires some kind of certificates. In fact, the country does not require anything. Customers require certification. There are some customers, who do not need any certificates. Then the cost of production for them will be minimal. However, there are others, who care about the food safety of their customers and are struggling for quality. The second are willing to pay more. Such customers want to control us – how we grow, how we store, and how we process.

Наша стратегия была направлена на вторую группу клиентов. Поэтому "Грин Тим" решили пройти сертификацию HACCP и многие другие.

Our strategy was focused on the second group of clients. Therefore, "Green Team" decided to pass the certification of HACCP and many others.

Please, tell me more about the work of the vegetable storage facility, because there are stored not only your own vegetables?

We came to this when we refused to grow our own vegetables. The total capacity of the storage facility is 50,000 tons. We fill it with our products for 30-35%, the rest of the space is not occupied. These are the numbers for 2017.

Accordingly, we decided to provide a service for storing products to other manufacturers.

Who are your clients?

The most diverse categories – farmers, vegetable processors, food chains.

Do the vegetables have "face control" before they get to the vegetable store?

Конечно, в самом начале мы проводим анализ входящего сырья, проверяем его в нашей лаборатории. Нам важно понять, насколько оно подходит для хранения. Если все в порядке, тогда даем добро на хранение. Овощи могут хранится у нас до июня.

Of course, at the very beginning, we conduct the analysis of incoming raw materials; check it in our laboratory. It is important for us to understand if it is suitable for storage. If everything is in order – we permit storage. Vegetables can be stored until June.

Because of what you can refuse storage?

When we understand, that the product can not be stored because of illness or pests. The company issues a test certificate to the farmer and tries to convince him that the product is not available for a long time storage.

How do you prevent the mix of vegetables?

Each product has its own optimal storage conditions. For example, let’s take onions, that can not be stored in one chamber with potatoes or carrots. Therefore, products are divided into chambers, and in each specific chamber can be stored one or several products with the similar moisture and climatic conditions of storage. The storage facility is divided into 16 chambers, where the smallest camera is 1500 tons, the largest camera is 4000 tons. Vegetables are put in special containers with a capacity of 1 ton and line up to 7 levels or floors.

Are there any minimum requirements to the volume of vegetables that you can keep?

Previously, we provided container storage service and the minimum amount, which the farmer could give for storage, was 100 containers, that is, 100 tons. Now we have chamber storage, what means that the farmer leases a chamber from us. The minimum volume is 1500 tons.

We are not the only one, providing vegetable storage service in the region. There are also other providers. The prices vary plus or minus 15-25 kopecks per kilogram of stored products per month.

How acute is the problem of shortage of vegetable storage facilities in Ukraine at this moment?

We recently tried to calculate how many providers there are in the market. They can be counted on the fingers of one hand. In Ukraine – the storage is like an addition to growing. That is, there is own business on growing of agrarian production plus storage. But the companies, which provide storage services only, are very few.

Do the companies, dealing with storage only, have problems with customers?

I know several examples of companies that can not fill their storage facilities. Infrastructure leads to the large constant expenses and some of these projects are unprofitable.

And what about the state purchases, do you participate in tenders?

We try to distance ourselves from all state programs and government purchases. When some regular "functionaries" of regional or central level come to us and ask the question: "How can I help you?", the answer usually sounds like a memorized phrase: "Thank you, we need not help. The main thing is do not interfere." And thereon all ends.

Let's talk about the future plans. Which areas do you want to develop?

We see the great prospects in cooperation with HoReCa (hotels, restaurants, cafes). This niche is poorly developed. They have a vital problem with the availability of people for such types of subsidiary work as potatoes or carrots cleaning, for example. Business wants to get the product ready for use. And we are ready to give it.

What kind of products do you mean?

It depends on a very big amount of variables. We are now working on a list of products that we want to do and are looking for equipment in the UK. It can be different types of peeled and cut products with a longer shelf life. For example, in a vacuum package. Recently we talked with representatives of retail. They said, they are interested in packages weighing 3-5 kilograms. In this form, we could distribute to the network of restaurants. The process is moving. When the first deliveries will start, we can tell in more detail. However, the prospects of this direction are good.

 AGRIBUSINESS,    NOVEMBER 27, 2017, at 15-00  

 AUTHOR:   SPORYSH EKATERYNA 

 ON MATERIALS:  “DELO.UA”,       SECTION  “BUSINESS”  
Last modified on Wednesday, 24 January 2018 07:19

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