You're reading: Business platforms help small, medium businesses launch exports to EU

Ukraine, with an estimated 30 percent of the world’s black earth – the richest soil type – should be an international agricultural powerhouse.


But the
country’s small- and medium-sized farming businesses are struggling to break
into markets abroad. To help them, several organizations are teaming up to
provide these companies with know-how on gaining access to markets in the
European Union and beyond.

A number of problems
stop Ukraine’s smaller agricultural companies tapping possible export markets.
They lack the knowledge and experience required, but also suffer from a lack of
support from the government, which concentrates on the bigger,
oligarch-controlled businesses, whose owners can use their influence to obtain
regulatory short cuts and legislative perks.

The smaller
players also have trouble bringing themselves into compliance with the EU
market’s strict product quality and standards regulations. In the face of this,
a number of business platforms are now popping up to provide practical help to
smaller farming businesses.

Business Lab Export UA

One of them is
Business Lab Export UA.

Starting from
April, it will provide seminars on what companies have to do to successfully
enter the EU market.

Elvira
Sevostianenko, the president of the Donetsk Chamber of Commerce and Industry, one
of the main organizers of the platform, says that Business Lab Export UA’s program
will be provided in several regions of Ukraine. The Donetsk chamber is now
based in Kramatorsk because of Russia’s war against Ukraine.

“We’ll give
practical recommendations on exports,” Sevostianenko said during a recent news
conference at the Ukrainian Chambers of Commerce and Industry. “We will have representatives
telling not only successful business stories, but also unsuccessful ones.”

The seminars
will look at how the EU market functions, how the EU-Ukraine association
agreement will affect trade, and what exact implications the Deep and Comprehensive
Free Trade Area has for Ukraine.

For example,
some companies have had difficulties in understanding how EU quotas work, and
how to successfully obtain them.

“We know that
last year there was a situation with honey, when in one day… all of the honey
quotas to the EU were used up, and our exporters with honey weren’t able to get
the preferential trade (tariffs),” Sevostianenko said.

Galfrost

Maxim
Belozyorov, the deputy director of Galfrost, a berry processing company, will
be one of the business representatives at Business Lab Export UA sharing his
successful experience of exporting to the EU.

Galfrost has
been exporting frozen and freeze-dried berries to the EU since 2007. It is one
of two subsidiaries of private joint stock company Frutica.

Even though it
mainly exports cultivated strawberries, the company also has an EU organic
certificate for wild berries such as bilberries, blueberries, blackberries, and
chokeberries.

The company
exports an average of 1,000 to 1,500 tons of berries to the EU per year. Its
2015 turnover was approximately 3 million, and it employs more than 100
people during the high-season.

Galfrost
exports mainly to Austria and Italy, but sometimes to Belgium, France and the
Netherlands, depending on where its clients’ warehouses are located. The
berries are sold wholesale in 20-kilogram packages and sent to other food
processors in Europe, who use them to produce either juice concentrates or jam.

Alternatives to the EU

But Belozyorov
doesn’t see Ukraine’s free-trade agreement with the EU substantially increasing
Galfrost’s business in Europe in the near future. Instead, its higher
production standards mean that the company expects to see more demand from
non-EU countries.

Galfrost for a
short time exported small quantities of its products to the United Arab
Emirates and China. Now it is looking at South Korea as another potential
market.

As Sevostianenko
noted, not all of the exporting experiences passed on at Business Lab Export UA
will be happy ones.

Olga Luchka,
the vice president of development for Krona, a food processing company, who
will also be a business representative at Business Lab Export UA, says that her
company hasn’t been able to break into the EU market yet.

But even if it
doesn’t, Krona is still trying to get EU certification because it will boost
their product value. “We don’t need to focus our export policy on the EU,
because it’s a limited market and EU farmers are agriculturally subsidized,” Luchka
said. Instead, Krona is eyeing the Middle East and North Africa regions.

Certification

Most
businesspeople who have had experience with the EU certification process say
that it’s not simple.

Krona first had
to receive an audit of its factory, and now it is working on the problems that
were flagged up, such as improving hygiene and sanitary standards.

“We were
surprised. We saw a lot of minuses,” Luchka said.

The price of
receiving a certification may be anywhere between 5,000 and 10,000,
which includes an audit, expert counseling and obtaining the proper documents,
she said.

Belozyorov says
that companies may need a range of certificates in the EU, depending what they
produce. For example, products might require a food safety certificate, a food
quality certificate, and an organic certificate. For any one product you might
have many different certificates, or none at all, he said.

Agriculture ministry

Luchka says
that Ukraine’s agriculture ministry, despite its pro-export stance, hasn’t been
helpful throughout the process of gearing Krona up to sell its products abroad.

The ministry’s
support mainly goes to the country’s big agro-holding companies, the interests of
which are lobbied for by deputies and other government officials, Luchka said.
Small- and medium-sized agriculture companies, in contrast, are left on their
own, making it even more difficult for them to compete with the domestic
giants.

They are
unprotected from financial and political risks, “don’t receive the kind of aid that
the big companies get, and they aren’t represented at various international
fairs and exhibitions,” Luchka said.

“For me this is
a real problem, but we’re looking for alternative ways to involve additional
resources,” he said.

One alternative
is to obtain financial help from the European Bank of Reconstruction and
Development, which is partly covering Krona’s certification expenses. The
grants are given out specifically to small- and medium-sized businesses.

“You can choose
any service, it can be marketing, legal services, auditing, accounting,” Luchka
said.

Germany’s assistance project

Help for small- and
medium-sized agricultural businesses is also coming from foreign-funded
projects.

For instance, Germany’s
Agriculture and Food Ministry is financing another business platform project in
Ukraine; an agreement on it was signed back in October 2015 by German
Agriculture Secretary Peter Bleser and Ukrainian Deputy Agriculture Minister
Vladyslava Rutytska.

Olga
Trofimtseva, the team leader of the project, says that it is expected to be up
and running in April.

The German
government provided 1.5 million for the 3-year project, which will support small- and
medium-sized faming businesses’ efforts to export to the EU.

The project is expected to work with 75 Ukrainian companies, and will
provide them with access to seminars and big EU exhibition fairs, as well as
other helpful tools.

“At least 25
percent of the participants from such companies should be women,” Trofimtseva
said.

Another of the
project’s functions is to develop the political dialogue between Germany and
Ukraine’s agriculture ministries.

But recent
political events, such as the resignation of Agriculture Minister Oleksiy
Pavlenko on Jan 29, followed by the withdrawal of his resignation on Feb. 5,
have created uncertainties for the project.

“These kind of
factors aren’t making our job any easier,” Trofimtseva said.

Kyiv Post staff writer Ilya Timtchenko can be reached
at [email protected]