LINKING PRODUCERS TO MODERN FOOD RETAILERS:A Survey of Buyer Interest in the Balkans

Prepared for the U.S. Agency for International Development

By Chemonics International and J.E. Austin Associates

MAY 2005

CONTENT OF THE PRESENTATION

• Introduction• Demand in the Region• Positive Elements• Obstacles• Comments by Country• Recommendations• Conclusions

INTRODUCTION – STUDY OBJECTIVES

1. Determine potential for farmers to sell to large-scale buyers

2. Suggest regional interventions by USAID

INTRODUCTION – STUDY DESIGN

• Limited Internet research• Interviews in six countries• Analysis and conclusions• Written report

INTRODUCTION – DATES, CONSULTANTS, COUNTRIES

Research done in April and May 2005

Douglas Griffith and Jeff MacKenzieChemonics International, Inc.Romania and Serbia

Marcos Arocha and Kenneth WeissJ.E. Austin Associates, Inc.Albania, Bosnia-Herzegovina, Bulgaria and Montenegro

INTRODUCTION – PEOPLE INTERVIEWED

Roughly 70 interviews in 6 countries

Managers of hypermarket and supermarket chains, processing companies, hotel chains, wholesale companies

INTRODUCTION- MAP OF REGION

DEMAND – INFLUX OF BIG RETAILERS

• Metro, Carrefour, Billa, Mercator, etc.

• A worldwide phenomenon

• Growth in every country visited

• Dramatic expansion plans

DEMAND – PRODUCTS OF INTEREST

• Vegetables – salad and other

• Fruits – melons, apples, etc.

• Meat (packaged cuts) - beef, turkey, etc.

• Dairy – fresh milk, white cheese, etc.

DEMAND – PROCUREMENT METHODS

• Interest in local products (esp. fresh)

• Local decision-making / buying

• Emphasis on quality and quantity

• Preference for long-term relationships

• Discounts and slotting fees

• Private labeling, electronic systems

• Increasing use of central warehousing

• Long payment terms

ON THE POSITIVE SIDE

• Big stores becoming more important• Open to potential new suppliers• Superb preparation for exporting• Several success stores

CONSTRAINTS I

• Critical mass and continuity• Quality and condition• Packaging• Cold storage• Business informality• Supplier agreements unreliable

CONSTRAINTS II

• Definition of quality• Difficulty finding investors• Difficulty obtaining loans• Competition from imports• Strict buyer conditions• Inadequate extension services

RECOMMENDATIONS – QUALITY

• Definitions of quality• Health and safety standards• Post-harvest handling• Packaging information and materials

RECOMMENDATIONS – RELIABILITY

• Sustainable business models• Extended growing seasons• Producer cooperation• Long-term relationships

RECOMMENDATIONS – ACCESS TO CREDIT

• New financial mechanisms• Electronic information systems• “Bankable” supply relationships• International partnerships

RECOMMENDATIONS – OTHER

• Agricultural extension• Turn farms into businesses• Conferences, exhibits, etc.

COUNTRY SUMMARIES I

BULGARIA• Metro, Billa, ENA,

Ramstore, HITT• Kaufland and others• Produce from local

sources• Government

regulations• Protection of “infant

industries”

ROMANIA• Ten years with big

stores; trend continues• Metro, Carrefour,

Mega Image, Billa, etc.• Most produce imported• Role of wholesalers• Consumer behavior

changing

COUNTRY SUMMARIES II

BOSNIA-HERZEGOVNIA

• Small market

• Mercator, Velpro, Interex, VF Commerce

• The role of wholesalers

• The baking industry

SERBIA

• Mercator, C-Market, Super Vero, Metro, and others

• Growing numbers of food retailers

COUNTRY SUMMARIES III

ALBANIA• First Hypermarket to

open in Sept.• Small supermarket

chains• Hotels on the coast• Greenhouse

industry

MONTENEGRO• Confusion from

political situation• Surprising number

of stores• ERA, Voli Trade,

and Mex Centar• The Grey Market

POSSIBLE REGIONAL ACTIVITIES I

• Cooperation by producers• Cooperation by wholesalers• Private brands and co-branding• Supplying food chains for export• Buyer-seller events

POSSIBLE REGIONAL ACTIVITIES II

• Training on grades and standards• Guide to selling to supermarkets• Guidelines on packaging• Business plan for cold storage• IT solutions for tracing products

CONCLUSIONS

1. Market changes are working against small farmers, processors, wholesalers and retailers.

2. Selected interventions will help small business to cope and survive.

3. Some interventions may be appropriate for USAID at the regional level.

— END —

THANK YOU