USAID COMPETITIVENESS SYSTEMS STRENGTHENING ACTIVITY QUARTERLY REPORT #9, Y3 Q1 APRIL – JUNE 2019

July 29, 2019 This report is made possible by the support of the American People through the United States Agency for Interna- tional Development (USAID). The contents of this report are the sole responsibility of Cardno Emerging Markets USA, Ltd. and do not necessarily reflect the views of USAID or the United States Government.

Serbia Competitiveness Systems Strengthening (CSS) Activity

USAID SERBIA COMPETITIVENESS SYSTEMS STRENGTHENING ACTIVITY QUARTERLY REPORT #9, YEAR 3, QUARTER 1 APRIL-JUNE 2019

Submitted by: Cardno Emerging Markets USA, Ltd.

Submitted to: USAID

Contract No.: AID-169-C-17-00003 Serbia Competitiveness Systems Strengthening (CSS) Activity

DISCLAIMER The author’s views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government.

Serbia Competitiveness Systems Strengthening (CSS) Activity TABLE OF CONTENTS

ACRONYMS ...... II 1. INTRODUCTION ...... 1 2. EXECUTIVE SUMMARY ...... 2 3. REVIEW OF PROJECT PROGRESS ...... 3 3.1. TECHNICAL ACTIVITIES ...... 3 3.2. WORKFORCE DEVELOPMENT ...... 13 3.3. ACCESS TO FINANCE ...... 18 3.4. STRATEGIC COMMUNICATIONS ...... 21 3.5. CLA ...... 23 3.6. ADMINISTRATIVE AND LOGISTICAL ORGANIZATION ...... 23 3.7. DEVELOPMENT AND DELIVERY OF CONTRACTED DELIVERABLES ...... 23 4. PR AND OUTREACH (CSS COMMUNICATION CHANNELS) ...... 24 4.1. QUARTER HIGHLIGHTS ...... 24 4.2. MEDIA AND SOCIAL MEDIA MONITORING ...... 24 4.3. THE MOST INFLUENTIAL TOPICS ...... 25 5. ACTIVITIES PLANNED FOR NEXT QUARTER ...... 26

5.1. ACCESS TO MARKETS ...... 26 5.2. ACCESS TO FINANCE ...... 26 5.3. WORKFORCE DEVELOPMENT ...... 27 5.4. STRATEGIC COMMUNICATIONS ...... 27

ANNEX A: PMP TABLE ...... 28 ANNEX B: PROGRESS AGAINST YEAR 3 WORKPLAN ...... 30 ANNEX C: CSS GRANTS AND SUBCONTRACTS ...... 39 ANNEX D: QUARTERLY SELF-ASSESSMENT ON PROGRESS ...... 42 ANNEX E: CSS COMMUNICATIONS STRATEGY ...... 45 ANNEX F: ADDITIONAL COMMUNICATIONS HIGHLIGHTS ...... 59

ATTACHMENT 1: CSS ORG. CHART ...... 62 ATTACHMENT 2: STATUS OF GRANTS AND SUBCONTRACTS ...... 63 ATTACHMENT 3: PRESS CLIPPING LIST ...... 69

Quarterly Report #9: Year 3, Quarter 1 Page i Serbia Competitiveness Systems Strengthening (CSS) Activity Acronyms APSF Association for the Promotion of Serbian Food ARDA Accredited Regional Development Agencies AMELP Activity Monitoring, Evaluation and Learning Plan B2B Business-to-Business BFS Food Show BSO Business Support Organization CEFTA Central European Free Trade Agreement CLA Collaboration, Learning, and Adaptation CSS Competitiveness Systems Strengthening DCA USAID’s Development Credit Authority EFE Emirates Food Exhibition EFTA European Free Trade Association EU PRO European Support to Municipal Development Programme EBRD European Bank for Reconstruction and Development FDI Foreign Direct Investment FMCG Fast Moving Consumer Goods FoA Faculty of Agriculture, University of Belgrade FON Faculty of Organizational Sciences, University of Belgrade FP Facilitation Partner FSA Framework Service Agreements F&V Fruits and Vegetables GHP / GMP Good Hygiene Practices / Good Manufacturing Practices GG Global Gap (Quality Standard) HoReCa Hotel/Restaurant/Café ILC Industry Leader Company IQF Individually Quick Frozen IPARD Instrument for Pre-Accession Assistance in Rural Development MENA Middle East and North Africa MEI Ministry of European Integration MIS Marketing Intelligence System MoA Ministry of Agriculture, Forestry and Water Management MoE Ministry of Economy NBS National Bank of Serbia NAPP National Association of Serbian Prune Producers PFDH Premium Food Design Hub PKS Chamber of Commerce and Industry (“Privredna komora Srbije”) RAS Serbian Development Agency RASFF Rapid Alert System for Food and Feed RF Results Framework SBRA Serbian Business Registers Agency SDA Serbia Does Apples Association SME Small and Medium Enterprise STA Superior Taste Award TOS National Tourism Organization of Serbia VC Value Chain VCAP Value Chain Action Plan VCRA Value Chain Readiness Assessment WAPA World Apple and Pear Association YFI Association Youth for Impact

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1. Introduction Building on previous investments, successes, and lessons learned from USAID and other donor initi- atives in Serbia, USAID’s Competitiveness Systems Strengthening Activity (Project/CSS) is a four- year activity initiated in April 2017. The Project aims to strengthen Serbia’s agriculture processing sector (the sector) by focusing on the growth of sales as the key benchmark for evaluating performance. CSS approach takes a market system perspective and focuses on addressing competitiveness issues that are systemic—rather than particu- lar—thereby testing and proving the collaborative methodologies required to resolve these gaps. While the approach is only being tested on a narrow set of value chains (VCs), fruits and vegetables (F&V), within the sector –, it should create a “ripple effect” into others, creating momentum for strengthening Serbia’s overall competitiveness. For this reason, the Project approach to implementa- tion is organized functionally—rather than being tied to a specific product or VC, it instead targets products and VCs with the highest competitiveness potential for Serbia. The Project will target four pre-identified functional competitiveness areas in different capacities:

Table 1: CSS Functional Competitiveness Areas Competitiveness Area Acronym Description Access to markets A2M Increasing the confidence of Serbian enterprises to identify markets to in- crease connections to local, regional, and international buyers. Firms’ Operations improvement include providing support for improvements in enterprise management, product design and development, product quality. Access to finance A2F Stimulating demand for growth finance and making finance accessible and borrower-friendly. Workforce development WFD Improving the pipeline of qualified workers to companies needing them.

The business environment is being addressed by identifying important issues within the policy and regulatory environment and working actively with government partners, USAID’s Cooperation for Growth project (CFG) and EU programs. To mitigate risk, monitor the progress of activities, and adjust in implementation as needed, CSS uses Collaborating, Learning and Adapting (CLA) as a fundamental implementation principle. The primary goal of CLA is to ensure that the desired objective and purpose of the Project remains the same, even if while changes in program activities lead to modifications in expected outputs.

Figure 1. CSS Theory of Change

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2. Executive summary During the first quarter of Year 3 of the project, CSS was going into its second season for fresh produce marketing, finalizing pilots in frozen and specialty segments, and beginning to focus its workforce development and access to finance efforts. Under fresh trade, market leads to premium EU markets lead to serious consolidation and networking of selected CSS partners in Serbia. The buyer demanded certifications, investments in packaging and sorting equipment, and hiring of new staff all took place rather quickly – showing clearly the importance of the proper market channels and market-driven se- lection of the partners in Serbia. Biggest buyers in EU are sourcing from Serbia this summer, and we expect that this will bring the much-needed attention to the country’s capacity and more importantly, spur development of coordinated networks between firms, government, certification agencies, and growers. Pilots in the frozen segment are also yielding clear pathway for forward development this quarter – organic segment is growing and it’s promising, and labor shortages will need to be addressed by ef- fective hub and spoke models and investments in proper mechanization. A trigger point for a scaled- up adoption of these models will likely be activities through cold storage association that will target knowledge sharing and increased collaboration. The premium food segment is continuing to develop at a rapid pace. Hubs and DM have selected the best Serbia has to offer, their linkages to retail continue to develop, and APSF is becoming more inte- grated and functional. The last is the key development in sustaining efforts under this segment, most importantly the BFS as a central gathering for learning and B2B in Serbia. Most of these efforts are already being supported with targeted A2F efforts. Networking and education are constant, and the project is expecting to yield much more noticeable results in the following quar- ters. Finally, the workforce segment is progressing well with collaborative models between the industry and academia (Lukowa Academie), industry internship promotion, and strategic partnership between UC Davis and University of Belgrade is starting to finally progress. The specialized courses offered through his partnership should cover many aspects of the project efforts in this coming autumn.

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3. Review of Project Progress Interventions in Year 3 are geared towards scaling up successful pilots, finishing and evaluating the ongoing ones, and monitoring crowding-in of market stakeholders around successful pro- ject interventions. Interventions should be observed in the VCAP context and are presented in the format that includes the title (with intervention code beginning with letter I, from the Logical Framework, linking each intervention with respective entries in Annex tables), description, and sustainabil- ity and theory, as well as a media messaging strategy that is key to promoting successful models. Along with each activity, a work planning table is developed with interventions, tasks, implementing teams, partners, outputs, outcomes and a timeframe (Annexes 1-4).

3.1. Technical Activities 3.1.1. Access to Markets

1. Fresh F&V Sector Through the CSS market strategy, the EU markets were identified as the most promising new international markets for high-value fresh fruits. UK and were recognized as the most promising for Serbian apple producers. There is a clear rationale to diversify away from the oversaturated Russian market. Therefore, the most prominent Serbian apple producers initiated establishment of a professional business association and launched a series of actions to promote their products in EU and internationally. Fresh berry sector is highly profitable and expensive to develop, and it is just starting to grow. Except for strawberries, which are also largely exported to Russia, the recent boom of blueberry production (and other berries) is providing an opportunity for Serbia to show up in EU market with its own source and origin label and start competing in the most profitable and fast-growing segment of the industry. The Project focus in this process is the integration of reliable buy- ers/distributors, from the EU and sup-porting the development of firms that can be an example to the rest of the industry. The buyers of this profile are key since they, depending on the suc- cess of the blueberry trade, can open trade channels for other fresh products, such as stone fruits and vegetables. Similarly, Serbian vegetables segment deserves Project’s strong support and attention. Most competitive vegetable crops, such as peppers, cucumbers, gherkins, tomatoes and root crops such as carrots are widely grown in Serbia mostly by small-scale farmers. Highly skilled and competitive labor, along with proximity to EU markets, offers a unique advantage for Serbian producers, cooperatives and business organizers. Challenge would be to consolidate and stand- ardize the production to access international buyers. In order to address the challenges of globalized fresh F&V markets, the Project supports exist- ing and new entrepreneurs capable to fairly organize their value chains into a hub & spoke, i.e. contract farming models. CSS is encouraging communication and networking within the fresh F&V ecosystem: producers-cooperatives, entrepreneurs, business organizers and traders. In May – June 2019 a team of consultants developed a comprehensive report addressing most effective business models in fresh F&V segment and developed a draft training plan for entities, including entrepreneurs and coops, particularly in south Serbia.

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Industry Associations Support to industry associations remains one of the components of the Projects’ strategic in- terventions for improving competitiveness and increasing exports. CSS is working with a se- lected group of associations on improving marketing research promotional strategies, accessing new markets and buyers, and stimulating membership. Two associations, representing fresh apple and prune industries, have so far shown promise for effective functioning and sustaina- bility. Capacity building – Apple industry association: The main focus for Serbian apple producers is to diversify sales in international markets and consol- idate the industry through the establishment of a strong grouping of the most prominent firms in the sector. In November 2018, eight Serbian lead apple producers established the business association “Serbia Does Apples”. The purpose of the associ- ation is to improve Serbian apple producers’ access to domestic and international markets through pro- fessional knowledge sharing, improving quality standards of apple producers, and increasing capacities to meet buyers’ demands and standards. Supported partially by the Project grant, the association launched a series of activities focused on strengthening capacity and penetrating new markets: > Became a member of the international or- ganizations World Apple & Pear Associa- tion (WAPA) and the European Fresh Pro- duce Association (Freshfel); > Created visuals and materials for interna- tional promotion; > Participated at the London Produce Show and Conference; Serbia Does Apples attended the London Produce Show > Preparing for a trade mission in Romania. 2019, proving the activities of this association are becoming sustainable. In parallel with the activities of the associa- tions, Project engaged a team of market analysts to explore Romanian fresh F&V markets (fo- cus: apples, retail) and organize trade mission for the companies from association. The trade mission to Romania is scheduled for late August 2019 and will focus on connecting with Ro- manian exporters and category managers. Similarly, the Project is planning to support other fresh F&V segments to access the Romanian market. Project has previously supported Serbian fruit producers to access the UK market and will utilize lessons learned from that activity. Capacity building – National Association of Prune Producers (NASPP): The Project has been supporting NASPP members by increasing their visibility through modernizing and up- dating the Association’s website, improving their export capacities and increasing sales to the EU. Autentika Global, consulting firm, has been selected to provide technical support to NASPP and has already produced standardized info sheets for each company. These materials will be used to inform potential buyers especially in target Italian and UK markets. The Italian market for prunes was thoroughly explored including two visits to Italy. First visit included direct interviews with potential buyers in southern Italy. Second included a trade mission to

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Tuttofood in Milan, with six productive interviews with potential buyers. As a result, the lead- ing Italian trader of edible nuts and dried fruit company, Besana, agreed to visit Serbia in Au- gust – September 2019 period. Dried fruit agent “Connect Milano” agreed to promote and ex- clusively distribute prunes produced by members of NASPP. At the same time four other international buyers expressed their interest to visit Serbian prune producers. CSS facilitated two visits and B2B meetings at the end of June between the members of NASPP and two leading European suppliers of nuts and dried fruits Whit- worths and Derby Ingredients. The po- tential buyers visited Agranela, Podgor- ina voće, Jovanović voće, Promo Pen, Tehno Božići and Monicom, where they held B2B meetings and observed their drying, depitting, packing and storage processes and facilities. Both Whit- worths and Derby Ingredients are diver- sifying the imported produce origin countries and are interested in sourcing Whitworths buyers visiting Jovanović voće prunes and other dried fruits from Serbia, primarily the Stanley plum variety. In the next period, Project plans to support promotion of prunes in the local and international markets, and continue supporting export to UK, Italy and Poland.

Industry Lead Companies as Market Integrators Serbian SMEs in the fresh subsector, excluding apple producers, are not as developed. It is necessary to build up a cadre of firms that can respond to market demand, prior possibly form- ing an industry association (fresh berry association). These Industry Lead Companies (ILCs) represent emerging market players (firms and coops) with adequate facilities and human re- sources to establish business links with some of the key EU distributors, such as Greenyard, Total Produce, Reynolds, Chambers, and others. They can also build vertically integrated mod- els with suppliers (hub and spoke): agricultural family households and micro firms. ILCs partners in functional networks include key market actors who work on extension pro- grams for farmers, and financial institutions that provide packages for supply chain financing: ILCs – RZ Agro: Integrated more than 200 F&V cooperants in its value chain and provided education to improve production quality through better supply chain management and educated local growers on production standards required by the international markets. This training is a part of the Project support for consolidation of supply chain in F&V industry through sharing best practices and knowledge between industry leader companies and micro firms and small holders to improve their market access. ILCs – Fresh Berry Industry Companies: The Project has been working over the past year with berry fruit producers to raise their capacity to handle fresh supply chain logistics and integrate them for export to the EU. As a leader in the distribution, Greenyard is looking for new markets, through diversifying the imported fresh produce origin countries and is interested in sourcing blueberries, selected stone fruit and pepper products from Serbia. Recognizing the strong potential of the fresh berry market and increasing demand for fresh produce by European consumers, the Project helped Serbian companies negotiate and close the sales contracts for certified retail ready blueberries with Greenyard.

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Cold storage Brestovik Blueberry plantation with implemented Global GAP standards

After a year of supporting companies in the implementation of food safety and quality stand- ards, CSS helped PureBerry and Brestovik implement FSSC 22000, BSCI and Global GAP 2 standards. With CSS help, Agro Bel will soon be able to implement the FSSC 22000 and BSCI standards. These three companies included 85 new cooperants in blueberries (65 cooperants), plums, Before the USAID support, only 10% of agricul- apricots and peaches that are now certified and ex- ture extension services advisors knew about port ready. In order to meet the EU market require- Global Gap standard. Now 75% of advisors in ments, Serbian companies invested approximately Central Serbia can support farmers to implement 600,000 USD in food safety standards implementa- this international farm assurance program, trans- lating consumer requirements into Good Agricul- tion, reconstruction of production facilities, and tural Practice. modern packaging equipment. Project facilitated two buyer visits. A regional representative of Green- yard Fresh SEE visited Agro Bel, Brestovik and Gajičić Fruit in April. Second, a representative from Albert Heijn, a leading European F&V retail chain, visited Brestovik and PureBerry in June. The purpose of the visit was internal Greenyard blueberries shipment to EU in June and blueberries in Albert Heijn catalogue no. 26 control and negotiations about weekly shipments, after which the agreed shipment of fresh blueberries was successfully dispatched to Albert Heijn. About 150 tons containing small, retail-ready 150g, 300g and 500g packs of certified, Serbian blueberries reached the EU markets. Since this is the first substantial export of Serbian fresh produce to leading European retailers, Albert Heijn supported the marketing of Serbian blueberries through promotion and publication in their weekly catalogue. CSS has been supporting “Naši Voćari”, the first Serbian union of cooperatives (complex co- operative), in increasing their visibility. This included assistance in the design of website, branding, logo, brochures and other promotional material. Furthermore, The Project supports the complex cooperative by identifying potential international buyers through our partners Dot- ika and Autentika Global. The potential buyers have confirmed the visit in the next period

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Traders in Fresh F&V Industry Lack of marketing skills among Serbian farmers, coops and SMEs was found the most im- portant impediments to increasing sales. Project engaged export facilitation partners to simul- taneously develop their trade capacities as well as to open new sales channels for the growers. Dotika – Opening new trade channels for fresh F&V in Austria, Germany and the Neth- erlands: Dotika aims to integrate producers from central and south Serbia into a value chain for fresh F&V and provide consolidated offer of best quality products to international buyers. In spring 2019 Dotika organized series of trainings for selected growers on production stand- ards. Dotika participated in Global Berry Congress in Rotterdam in late March 2019 and held B2B meetings with international fresh produce distributors. As a result, Dotika signed contracts with the international buyers such as Total Produce, Widmann Beeren, Prodivec and Port In- ternational. Through these channels, the first quantities of blueberries were exported to Austria, Germany and the Netherlands in June-July 2019. Shipments of watermelons and peppers for the same distributers will start soon too. These are the pioneer efforts to put Serbia on the suppliers lists of fresh F&V markets in Germany1.

MoA Extension Services Agriculture Extension Services (ES), advisory unit of the MoA represent a network of 22 of- fices in Central Serbia. ES principal task is to provide farmers with relevant information re- garding trends, food safety and quality standards for both local and international markets. In order to raise general level of awareness of growers/farmers of the importance of standard im- plementation and healthy food production, the Project supports capacity building of ES unit on Global Gap standards. The importance of this certifications reflected in the fact that Global GAP standards will be mandatory for all retail chains suppliers as of the year 2020. Global certification company, SGS, was selected to deliver a comprehensive Training of Train- ers (ToT) for ES advisors on Global Gap quality standard and documentation procedures. Be- fore the training, approximately 10% of the ES advisors had some previous knowledge on Global Gap standards. Three separate sessions were held on April 9-11 for 120 ES advisors. This included 40 participants per training for fruit production, crop and vegetable production and plant protection. Advisors are trained to define production strategy and sales of agriculture products, to understand and analyze needs of potential customers and markets, to introduce producers with requirements, determine current compliance against relevant standards and to perform cost-benefit analysis of standard implementation, including certification costs. After the theoretical training, ES advisors will work individually with selected farmers, with about 100 agriculture producers across Serbia, up to five per advisory office. The second phase of education aims to perform an on-site analyzes and summarizing the experience gained during the project realization, which will be organized in October 2019. All firms working with CSS on utilizing high value export channels are required to implement Global Gap. This strategic capacity building effort for the MoA extension services is providing a base for collaboration between the firms and the government in the next season.

National Wholesales Market In May 2019, Belgrade Wholesale Market (existing wholesale market owned by the City of Belgrade) signed the MoU with Semmaris, manager of Rungis, largest European wholesale market. According to this agreement, Semmaris is to provide advisory services to Belgrade

1 Source: https://www.ble.de/DE/BZL/Daten-Berichte/Obst-Gemuese/obst-gemuese_node.html

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Wholesale Market on improvement and modernization. According to the MoA officials, this is an actual step towards the creation of the National Wholesale Market (NWM). The Project remains interested to support the MoA in the process of creating the NWM.

2. Frozen F&V Sector The biggest part of the frozen subsector are raspberries, which are under increased pricing pressure from competitors, mainly Poland and Ukraine. Sector is dominated by relatively small cold storages struggling with market access. CSS is enhancing competitiveness of the sector thru: 1. Assisting the industry leading larger cold storages, with access to the highest value markets, to integrate smaller ones into their value chains. 2. Developing new products for retail 3. Utilizing the Private Label sales 4. Expanding organic frozen F&V offer 5. Diversifying production into other crops in order to diversify markets and release “pres- sure” from raspberry-centric trade

Industry Associations The Union of Cold Storages is one of the oldest associations in the F&V processing sector. Even though it encompasses many companies and has active management, its influence and activities are limited. Since the association is undergoing a key management change, the Pro- ject plans to assist building the capacity by identifying professional staff that can improve in- ternal management capacities and set up new funding, promotional and marketing strategies for the members, as well as transfer knowledge to the rest of the industry about ILCs model successes.

Industry Lead Companies as Business Integrators ILC – Lukowa (Education for growers): At the beginning of this quarter 600 participants, primary producers of F&V attended 16 workshops and completed Lukowa’s Education for growers program. This training was a part of the Project’s support for consolidation of supply chain in F&V industry. Through sharing best practices and knowledge, Lukowa team was able to train micro firms and small holders to improve their market access. ILC – Fortis (new organic products and sale channels): Organic sector offers a significant opportunity for integration and development of small agricultural households. Through group certification and carefully selected crops, organic production could become a core segment of Serbia’s agricultural industry. Thru CSS support, Fortis was able to integrate at least 150 new organic producers. This enabled Fortis to expand supplier network, through implementation of organic standards in fruit processing and production, and better integration with international markets. Fortis organized two rounds of training sessions for more than 170 fruit producers in South and West Serbia (municipalities of and Osecina). Fortis attended Polaris B2B Event in Athens in mid-April, for deep-frozen fruit producers and buyers and attended around 30 B2B meetings with potential buyers. Most important meetings are presented in the table below:

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Table 2: B2B Meetings at Polaris Event in Athens Buyers who signed contracts with Fortis Greenyard Belgium audit completed, for blackberry conventional 60 t in bulk packaging Valio Finland audit completed, signed a contract for raspberry organic 60 t in bulk packag- ing Fruits Rouges France audit completed, signed a contract for raspberry conventional 500 t, PL packaging Carrefour Strong sales leads Wild Germany, Vitachem Slovakia, interested in conventional fruits in bulk packaging Alasko Canada, Italcanditi Italy Zentis Germany and Polarica Finland interested in conventional and organic in bulk packaging

Due to these new business opportunities Fortis decided to invest around $400,000 in new equip- ment and reorganize the part of the facility from conventional to organic. ILC – Sirogojno Company: Sirogojno partnered with CSS to address the issues of the food safety management system, product standardization and integration of a number of farmers and SMEs into their value chain. This is being accomplished through a comprehensive approach in improving product quality and safety in the supplier network of small-scale farmers and SMEs in Southwest and Central Serbia that supply frozen and dried fruit, using modern technologies and solutions. After successful completion of trainings for farmers and companies (cold-storages), Sirogojno Company launched further activities: > Strengthening operational and organizational skills within the supply chain, covering thousands of berry farms; and > Training of staff to improve food safety laboratory rules and procedures. ILC – Van Drunen Farms Europe (VDFE): VDFE was selected to enhance the knowledge of food safety practices for raw material suppli- ers. Frozen processors and farmers were edu- cated on how they can enhance their quality and safety standards to meet VDFE’s require- ments, in order to be integrated into the com- pany`s supply chain. This directly contributed to the capacity of the overall frozen industry. For the first time, VDFE also worked on pro- ducing a final, retail ready product for the Ser- bian market which should further increase consumption of berries in Serbia and show- case example for others to follow. Van Drunen’s new lyophilized healthy fruit snack “Handful” In cooperation with CSS, VDFE concluded a contract with the Serbian retail chain “Univerexport” to distribute the newly created healthy fruit snacks. The new products branded as “Handful” were presented during the Independence Day celebration at the US Ambassador’s residence.

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Standardizing the ILCs Business models The initial pilot activity to standardize the ILCs models, integrating smaller firms in ILC value chains, with Chamber of Commerce and Industry of Serbia (PKS), did not yield desired results due to delays in implementation. CSS is currently looking to the Association of Cold Storages or other regional groupings to scale up these efforts. CSS will continue to cooperate with PKS. The activities will focus on trade fairs, B2Bs, coor- dination of industry events (such as BFS) and knowledge sharing.

3. Specialty Food and Private Label Sector CSS recognized a market need for sustainable and scalable food production that uses innova- tion and modern technologies to create new premium food products, and raise the international profile and position the country as a regional quality food leader. To do this, CSS launched three in-house designed business models, Premium Food Design Hub, DM Incubator and Pri- vate Label (PL) Training Center for food export facilitation. CSS also engaged expert trade partners specializing in specific product groups and markets, with the capacity to consolidate fragmented producers.

R&D and Innovations in Serbian Specialty F&V Sector Premium Food Design Hubs (PFDH): The Project continues with the PFDH activity focused on providing comprehensive and tailor-made support to premium food SMEs to make their products competitive and scalable in domestic and international markets. The Project selected two hubs – BIPs Food Hub and Desing Taste Center. 16 new companies with proven and sig- nificant market potential, in specific market segments such as functional food, healthy/organic food, snacks, kids food, entered a 3-month hub boot camp. This year, along with selected SMEs in F&V industry, Desing Taste Center will also provide full-range assistance to national Eco- trophelia winner, CandyMoo, to increase their business capacities and market potential. All selected SMEs will receive a comprehensive product and business support in food safety and technology, industrial design, access to markets and access to finance.

Table 3: Premium Food Design Hub 2019 members

Biomarket plus, Agro Iris, Šabac Bliss Honey, Cold Pressok Belgrade Dolina Morave, Belgrade/ Hipberry and Honey Immuniser Omladinski edukativni centar, Niš Konmark, Belgrade/Crna Trava Panić agro, Tovariševo Leta SNB, Pastai testenine, Sremska Pekara Ključ, Belgrade Prpa Jomi, Novi Sad Polo, Čačak Radanska ruža, Živi 100 Kraljevci Additional member: CandyMoo student team from FoA, Univer- sity of Belgrade, with MoCaMela product DM Incubator – This pilot is the first sign of industry crowding in around this market concept: As an immediate market replication of the Project’s PFDH initiative, in October 2018, CSS with dm drogeriemarkt (DM), launched the DM Incubator to mentor and support food and beauty and cosmetic producers to place new innovative products in DM’s retail network of 93 stores in Serbia and potentially south-east and central Europe. After intensive 3-months boot camp, all 18 incubator graduates with 57 refined products will receive placement in stores

Quarterly Report #9: Year 3, Quarter 1 Page 10 Serbia Competitiveness Systems Strengthening (CSS) Activity across the country. DM enlisted the first two product deriving from the DM Incubator - Tanoshide all-natural soaps made of Japanese quail eggs with aromatic plants in June 2019. Other 55 DM Incubator food, cosmetic and beauty products, will be enlisted during summer. All the products will be available to consumers by late September, and will be supported by strong PR and marketing campaign. Private Label (PL) Training Center: The Project recognized PL as a great opportunity for SMEs to approach domestic and international retailers. As a result, CSS applied the hub-like model in this segment as well. The initiative, named Private Label Development Center, will, eventually, replicate some of the PFDH elements in this fast-growing food industry segment. CSS partnered with ENECA to implement this activity. ENECA will provide full-size support to new or already established businesses from South Serbia with premium quality products to increase their competitiveness on foreign markets through PL channels. In July 2019, ENECA will organize info sessions in five cities, Kruševac, Niš, , Užice and Čačak, educating about PL benefits and motivating SMEs in F&V industry to actively participate in this growing FMCG segment. 10 SMEs will enter the PL Training Center boot camp. This activity will bring the concept of one-stop-support-shop to the companies that will increase their competitiveness and create a spill-over effect on other companies/industries. Development of technology transfer and innovations support network: By this time, CSS has established a name as the facilitator and a broker. The group of experienced food technol- ogists from FoA approached the Project with an innovative proposal for the activity. The pro- posed activity would increase fundamental and applicable knowledge of F&V processing com- panies in undeveloped regions of Serbia through introduction of new, innovative products and/or technological processes that will lead to increase in their competitiveness.

Export facilitation partners (Traders) Market access in the specialty food industry is difficult and somewhat of a novelty for Serbian firms. CSS is addressing this issue by developing a cadre of specialized export facilitation partners to open doors in targeted different, niche international markets. Trofej – retail-ready products to CEFTA: Trofej, a regional company based in both Serbia and Macedonia, is focusing their activities to recognize niche, specialty food producers from south and central Serbia and capacitate them to export to markets in the south-east Europe and North America. Trofej team researched and contacted 25 Serbian companies from specialty, processed F&V segment to participate in the program. So far, seven companies have satisfied the requirements of the distributors. Trofej is currently developing custom-made market entry strategies and trainings for the companies. The companies currently in the program include Gaia Food, Sumska Tajna, Food concept, Agro Iris, Drenovac, Suncokret and Rubi. Ko-Voli – Serbian specialty food access online platforms: Ko-Voli trade activities are di- rected towards facilitating export of Serbian companies to the United States and selected inter- national markets, through sales on Amazon and other selected international online sales plat- forms. Ko-Voli also facilitates cooperation of Serbian and international companies through PL- related activities. During the previous quarter Ko-Voli conducted three training and peer-to- peer mentoring sessions aiming to increase knowledge about online trading and PL, to encour- age companies to exchange knowledge and experiences, and to motivate them to find mutual business goals. Ko-Voli selected ten companies with products focused on traditional and niche markets, innovative high-value products made from fruits and vegetables for Amazon on-line platform and PL trading. Companies are also competitive in food manufacturing sectors such as dried fruits and vegetables, frozen fruits and vegetables, and confectionery. Final list of

Quarterly Report #9: Year 3, Quarter 1 Page 11 Serbia Competitiveness Systems Strengthening (CSS) Activity selected companies includes Stanišić Bio, Real Red Raspberry Ltd., Min Commerce, Suncokret Ltd, Živi100, Venac, All Berries, Laki LLC, Polo Čačak and Menex. Agro communications – Serbian high value food to German markets: Agro-communica- tions, as one of selected trade facilitators, will target healthy/specialty/functional food chains in Germany and Austria as well as gourmet foods (“Gastronomie-markt”). As the third largest importer of agricultural and food products worldwide and with 82M consumers, Germany is an attractive target market for Serbian products. Agro communications strives to target some of the biggest supermarkets and drugstore chains in Germany such as EDEKA, REWE, dm, ROSSMANN, and DENN’S. Trade facilitator selected 10 companies from the specialty food sector with high export potential, including Olda Group, Zimnica, Ekofungi, Nisha, Allnatural Food, Aronia Vita, Food Concept, Dolovac, Floriva and BMD. All selected companies passed through intensive training and mentoring to strengthen export capacities for German market.

Industry Associations Association for Promotion of Serbian Food (APSF): To increase competitiveness of Serbian Specialty Food Industry, the Project continues to support the APSF to increase capacities, be- come sustainable and facilitate access to domestic and international markets. nd strengthen the positive image of Serbian food locally and globally. APSF continue with further development and expansion of its activities – primarily the establishment of professional Association man- agement, strengthening of its organizational and operational capacities and organization of Bel- grade Food Show (BFS) 2019, including other targeted promotional and educational activities focused on the needs of the specialty food industry. Also, a consultant with significant back- ground in the management of associations and practical experience from similar markets is engaged to actively work with APSF on building their organizational and operational capaci- ties. Belgrade Food Show 2019 (BFS): This years’ under the promotional theme A Way to Grow, will take place on the October 10-11, 2019, at the Belexpo Center. Throughout this quarter most of the efforts were invested to flesh out a concept for the fair. It will remain a combination of a food and beverage exhibition, a tailor-made educational conference and B2B networking event. APSF and CSS have together adapted lessons learned from last year’s event and incor- porated them. As a result, BFS 2019 will have increased number of exhibitors, more regional footprint, more buyers from targeted markets, more focused and interactive learning activities. Concurrently, a separate area at the Holiday Inn hotel will be set up especially for meetings between exhibitors and potential buyers, previously booked through an online B2B platform. As one of the most integrative platform of the Project, BFS will include perspectives from other project activities related to specialty food, such as: > PFDH through exhibition and pitching session presenting start up companies to poten- tial experts and investors; > dm Incubator participating companies as exhibitors; > Traders already working with the Project will integrate their activities into the BFS; > Student teams that took part in the national Ecotrohelia competition will showcase their products; > International Taste Institute (iTQi) representative will promote Superior Taste Awards and will have working sessions with producers. “World wants homemade” (Svet hoce domace) educational and promotional platform is al- ready integrated with other APSF activities and again will be part of the BFS program. This

Quarterly Report #9: Year 3, Quarter 1 Page 12 Serbia Competitiveness Systems Strengthening (CSS) Activity unique educational and promotional platform for domestic specialty food products continues to increase the capacity of Serbian SMEs to utilize online space - websites, Facebook and In- stagram profiles for marketing and promotion. Serbia Organica: CSS finalized the activity with National Association for Organic Production Serbia Organica. Through the updated and modernized website and social media, Serbia Or- ganica raised its visibility by online visitors from 84 countries. The most traffic was coming from Germany, USA, , , France, Philippines, , , Slovenia and China. In order to increase Serbia Organica capacity, CSS also invested into the development of a modern, tailor-made database of organic producers. The main purpose of the Database is to inform stakeholders in the organic production sector about organic growers` location and production capacities. At the moment, over 100 growers are in the database and this number is constantly growing. Serbia Organica is planning to organize study tours and trainings for foreign organic producers, so far Moldavian delegation expressed interest in visiting.

Serbia Organica website and database presented at the International agricultural fair in Novi Sad, May 2019

Serbia Organica has prepared hard and online copies of catalogues for consumers, which are being disseminated in retail (DM, specialized shops, Univerexport retail chain), promotional events and fairs. Catalogues promote current offer of organic products, raise public awareness on its avail- Serbia Organica got an offer for promotion of or- ability, helping producers to increase sales. Compa- ganic products from Global Seed, leading cattle nies which advertised in catalogues (Sim Natura, We farm and dairy producer in Serbia and third in Europe. BioPanon (50% Nectar and 50% Global are one, Organic Snack, All Natural Foods, and farm Seed ownership) has launched an eight-month Soksic) claim to have increased their sales by 20% on marketing campaign promoting 28 new different average. Thanks to the visibility and great result of dairy products in the catalog. published catalogues, Serbia Organica has gained new members.

3.2. Workforce development CSS actively engages with educational institutions and the private sector to develop models of cooperation and workforce improvement programs. If Serbia’s food processing industry is to become competitive in international markets, research, innovation, and knowledge transfer have to be tailored to respond to immediate and future industry needs. The creation of sustain- able internship programs for the food processing industry, new educational models and stronger systemic links between academia and the private sector are not “one-off” interventions but are sustainable and will produce systemic changes.

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3.2.1. Professional Certification Courses Partnership with UC Davis: One of the most practical ways to support stronger linkages be- tween academia and the industry is for academia to provide practical services that address broader industry needs. To this end, professional, short-term certification courses are being developed with Belgrade University, Faculty of Agriculture (FoA) and in partnership with the UC Davis Postharvest Center, one of the premier agricultural universities in the US and the world. FoA is implementing this effort through AgroNET – Centre for Education and Research founded by the team of professors from FoA, in order to be more responsive and agile with implementation. UC Davis Postharvest Technology Center as a partner, will provide the knowledge transfer and best practice examples towards successful courses creation and imple- mentation. AgroNET will get acquainted with good international practices for cooperation between aca- demia and the industry that would lead to increasing their capacities to serve as the focal point for further development of linkages between Serbian food processing industry and the FoA in the area of workforce development. During this quarter CSS hosted the UC Davis team during the week of April 8-12 and organized field visits for UC Davis and AgroNet as a Part of the Certification Course Development Process. This visit was an integral part of the assessment process for the Serbian F&V sector that will result in the development of short-term certification courses, for industry staff development and life-long learn- ing opportunities. On April 8-10, the delegation visited five industry leaders: Sirogojno Company (Rupeljevo), RZ Agro and Agromobil (Guča), Lu- kowa (Draginac/) and Agro Bel (/) to get acquainted with their pro- duction, post-harvest, logistics and marketing prac- tices and the challenges they encounter. On April 11 and 12, UC Davis and AgroNet held a workshop on development and implementation of short-term innovative certification courses in the food pro- cessing industry. The Project supported AgroNET team’s study tour to UC Davis on June 17-28, to attend the 41st Annual Postharvest Technology of Horticultural Crops Short Course. During this study tour, AgroNET team interacted with more than 70 F&V industry representatives from all over the world. Together with AgroNET, CSS team saw an opportunity to create and pilot a similar short-term certification course for food processing companies based on the similar models im- plemented in the US, where the educational system regularly responds to critical market needs. The Serbian delegation included three professors from the FoA (members of AgroNET), ac- companied by CSS staff and USAID COR. > The first part of the course included lectures on postharvest biology, quality factors of horticultural crops, maturity and maturation of F&V, nutrition values, cutting, harvest- ing, cooling, packaging and transport, and was augmented by several pertinent labora- tory sessions.

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> The second part included a field visit to 15 cooling, storage, fresh produce packaging facilities, such as Driscoll Strawberry Association, Ocean Mist Farms (artichoke grower), Paramount Citrus, Grimmway (fresh cut carrots processing and packaging) and Monterey Mushrooms. The team had an opportunity to see vegetables harvesting process in the fields of Tanimura & Antle and visit various stone fruits orchards and open field labs.

AgroNet team attending the UC Davis Annual Postharvest Technology of Horticultural Crops Short Course: lab work and a field visit to one of the 15 facilities in Southern California, June 2019.

Partnership with Oregon State University (OSU): In the previous quarter, CSS team visited OSU to learn about programs and identify areas that can be replicated with Serbian stakehold- ers from academia and the agri-sector. The most interesting was OSU’s Small Farm Program, which provides small farms with training and research to support their long-term financial and environmental sustainability. The Project explored the possibility of a joint extension project between OSU and faculties of agriculture in Central and South Serbia. The newly established University of Niš, Faculty of Agriculture in Kruševac concluded that they lack capacity to enter this kind of partnership. More forthcoming was the University of , Faculty of Agronomy in Čačak, demon- strating the interest for this collaboration by forming the team that includes representatives of the Fruit Research Institute Čačak. The team from Cacak will present their project idea to the OSU team at the meeting scheduled for July 11, 2019. 3.2.2. Partnership with Private Sector for New Educational Models Working with the export-oriented companies on developing new educational models will equip students with skills and knowledge required for the business world, not provided by traditional curricula at Serbian universities.

CSS partnered with Lukowa on the Table 4: Partnership with Lukowa accomplish- 2018/19 Lukowa Académie program, ments exceeded expectations designed increase interest in food indus- Milestone Planned Realized try among students and strengthen Student Applications 50+ 100+ workforce development by guiding them through real business situations Selected students for Workshop / 24-30 30 solving real-life company problems us- CASE study challenge ing the case study model. The program Students offered internship 4 11 was realized in close cooperation with Students employed by Lukowa 2 8 three University of Belgrade’s Faculties

Quarterly Report #9: Year 3, Quarter 1 Page 15 Serbia Competitiveness Systems Strengthening (CSS) Activity of Organizational Sciences, Economics and Agriculture. The best 11 gradu ates out of 30 participants of this program were considered to participate in an internship and/or employment. Five got an opportunity to participate in an internship pro- gram and eight received the full-time employment at Lukowa. The basics of this model can be replicated to other Industry leaders to choose most skilled individuals ready to be engaged in the food industry sector. 3.2.3. Tailor-made Internship model for Food processing industry The aim of this activity is to contribute to increasing the productivity and competitiveness of Serbia's food-processing sector through the development of a first standardized and sustainable model of internships in this sector. Companies will be able to implement the model independently after project New partnership endorsed by CSS completion to improve their capacity and workforce. YfI and international movement Young Profes- sionals for Agricultural Development (YPARD) CSS partner, Youth for Impact (YfI), has a strong affil- decided to join forces towards a common goal – iation with the Belgrade University’s Center for Career creating an environment where youth in agricul- Development. YfI’s role is to support companies to cre- ture can reach their full potential in farming. They agreed on future common projects, joint ate long-term internship programs that develop the re- re-search and promotion, as well as sharing quired skillsets and competencies for work in the food useful information, but most importantly they processing industry. Internships are mainly for technol- agreed that YFI will be the hosting association ogists, economists and merchandising positions, suita- for YPARD Serbia. ble for students of faculties like the Faculty of Agricul- ture, Faculty of Organizational Sciences, and Faculty of Economics. Participating companies will appoint mentors for each student and offer some remuneration for students. Total of 127 students applied for 15 positions in seven companies2. YfI organized trainings for both mentors and selected interns. Training of mentors was held in Belgrade on June 11-12. Mentors were acquainted with most important issues of the internship such as good communication and motivation strategies, as well as the plan for monitoring and evaluation of the internship. Students’ orientation training was held on June 29-30 in Belgrade for 20 candidates in soft skills, communication and adapting to the work environment to max- imize the internship benefits. Next training on soft skills for these students will be held on July 13-14 in Veliko Gradiste. In the meantime 12 students have started their internship in targeted companies. YfI team will organize monitoring visits to each company during July & August.

2 Results of application process included: 23 students applied to 4 positions at Sirogojno company; 4 students applied to one post in Stanišić BIO; absolute favorite was the DMV Raw food, from Belgrade, where 65 students applied for two positions, out of which 58 applied for the post of technologist in this firm; 8 students applied for two positions in Menex, 5 students for two positions in Allberries, ; 13 people are competing for one technologist position in Kiri123; and 9 people will compete for two posts in Nektar company.

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3.2.4. Ecotrophelia – Serbian Association of Food Technologists (SAFT)

National Ecotrophelia competition Winning team CandyMoo with MoCaMela cheese with honey and molasses

The national student competition of eco-innovative food products, Ecotrophelia Serbia 2019 was organized by the Serbian Association of Food Technologists (SAFT) with the support from the Project and the Scientific Technology Park in Belgrade. This year’s event, organized under the auspices of Ecotrophelia Europe and the Ministry of Education, Science and Technological Development, and UNDP, attracted nine student teams from three universities. This 100% in- crease in student interest is partially due to extensive promotional activities by CSS. New food products, created and developed through an innovative and ecological approach, and the overall presentation of the teams were judge by a panel comprised of representatives from the food industry, academic institutions engaged in food science and one CSS representative. The first prize was awarded to the team CandyMoo from FoA for developing MoCaMela, a sweet fresh steamed cheese with the addition of honey and molasses of specific appearance and taste. The winning team will participate at the Ecotrophelia Europe competition, at the Anuga trade show, Cologne from October 5-9, 2019. Some of the products of student-run firms will be showcased at the BFS 2019. 3.2.5. Additional Efforts During this quarter the Project supported the Belgrade University Faculty of Agriculture’s student competition “Trade, Marketing, Business” on June 5 by providing mentoring ex- pertise to student teams and participating in the jury. The Project supported the event for the second time as a part of the cooperation with FoA to promote food processing industry as an attractive sector for the employment of young people. Six teams composed of 7-9 students were competing in developing new products from one of 12 product categories (i.e. honey, berries, pumpkin, cherries, plums, apples etc.), by defining the project scope and mission, creating the name, logo, business and marketing plans and ultimately developing the very product. The jury unanimously pronounced the team ARBO a winner with their innovative product “Aronia flour”. The second team was Dolce Vit with frozen cherries and the third team was Zucca with pumpkin products.

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3.3. Access to Finance Lack of access to finance is one of the main constraints to growth and competitiveness which specifically affects SMEs. In other words, they are too big for microfinance, too small or risky for traditional bank lending, and lack the growth, return, and exit potential sought by venture capitalists. The additional impediment is that SMEs have traditionally been treated as a homo- geneous group fully ignoring that financing needs of different types of SMEs at different stages of business cycle. Serbian agribusiness SMEs, like their peers in all sectors of Serbian econ- omy, lack the capacity to identify and utilize sources of financing available to them. This in- cludes State funds, EU funds, commercial banking options, and grants. This also includes the IPARD program, a critical chance to upgrade the capacity of Serbia’s food industry. Alterna- tive financial sources, such as equity investments and foreign direct investments (FDIs), can further support SME development and sound economic growth in the agricultural sector. 3.3.1. DCA guarantee scheme After completion of extensive negotiations which began back in early 2018 between USAID and MoA, two parties signed Agreement for Cooperation to set up a DCA Loan Guarantee with Serbian commercial banks worth $40 million. Agreement was signed on May 13, 2019 between USAID and MoA. Two Serbian banks implementing the Guarantee scheme, ProCredit bank and Addiko Bank went through due diligence by DCA, and are expecting to sign the final implementation contract in July 2019. Guarantee scheme will likely become operational and available to clients in September 2019. DCA Guarantee is specially designed to facilitate long term investment lending to private sec- tor MSMEs in F&V industries throughout Serbia including less developed regions of Serbia and newly established companies. DCA Guarantee is risk sharing tool between banks, MoA and USAID which will enable borrowers to receive loans secured with Guarantee providing 60% of collateral coverage for the loan, thus overcoming the problem of securing long term loans with adequately valuable collaterals. The Project has already started promotional and educational activities relevant for DCA Guar- antee scheme. Guarantee and its benefits were presented by two implementing Banks and CSS during Financial trainings in Central and South Serbia for MSMEs companies in F&V value chains in June 2019. These companies should presumably yield the highest benefits from using the guarantee given the low value of land and buildings in these regions which are commonly required as collaterals for investment loans by banks. Lack or low value of tangible collaterals frequently represent main limitation factors in long term investment financing in MSMEs. After receiving detailed product description for loans covered with DCA Guarantee from Pro- Credit and Addiko banks, CSS will intensify promotional and training activities and direct contacts with potential users of these credit facilities. 3.3.2. Increasing demand for finance In May 2019, CSS concluded bidding and negotiations with business and financial consultants, and signed Framework Service Agreements (FSA) with selected consulting firms. Range of activities which will be provided under FSA should facilitate access to finance for Serbian companies in F&V value chains. Three firms Sim Cert, BDO and ACDE, with track record in food processing industry, have been selected to support MSMEs in facilitating access to finance through educational training, personalized mentoring and development of tailored made investment plans and facilitation of borrowing process with selected lending institution.

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In June 2019, selected consultants have organized trainings in Vrnjačka Banja, Niš, Zaječar and Užice. Over 40 companies from Central and South Serbia participated in full day trainings and received in depth overview of currently available sources of funding through banks and various GoS agencies. Trainings also included detailed overview of IPARD programs suitable for food processing MSMEs. Focus of training was not only general terms and procedures for borrowing funds, but also a number of practical advices from experienced professionals on how to prepare good investment proposal in line with required standards and regulations and minimize risks of operational and financial failures. IPARD program received most of the par- ticipants’ attention due to the fact that this lucrative program enables program beneficiary to receive back up to 50% of approved invested funds upon the completion of investment. Rep- resentatives from CSS partner banks ProCredit, Addiko and Erste Bank took part in trainings.

Investment Finance Training for SMEs, by Sim Cert in Vrnjacka Banja on May 30 and by BDO in Uzice, May 30, 2019

After completion of training sessions, consultants will select around 20 companies with an immediate need for tangible investments in production assets. These companies will receive personalized mentoring on financial and operational management tasks and investment/busi- ness plan. Consultants will support clients in applying for financing to Banks and State funds or institutions and completed investment/business plan will be a part of application for funds. During the trainings it was evident that companies are mostly interested in small scale invest- ments, predominantly equipment and single machines rather than new production lines, new production facilities or acquisition of new land. They have been looking for scarce opportuni- ties of State sponsored financing programs like loans with 25% state grant which were ex- hausted during the first three weeks from its opening in April 2019 or grants for cooperatives provided by MoA in 2018. As already emphasized above, IPARD remains the dominant source of financing with significant grant component and it is emerging as a preferable financing op- tion for significant investments in the industry. Process of selecting the first pool of 20 companies interested in investments is on the way. First 10 have already been selected. CSS will support preparation of business plans and applications for loans for companies which are expected to receive Approval for IPARD supported invest- ments in August and September 2019 and are now ready to apply for investment financing through banks. First mentoring sessions and business plans should be completed in August, and it is realistic to expect that first loan applications can be submitted to banks in September 2019. We expect that by the time of application submission, DCA guarantee will become operational and avail- able to applicants receiving CSS investment financing support. Next CSS activities will be including creating pipeline of companies with investment projects requiring consultant’s support in mentoring, preparation of investment plans and applying for loans and grants. Additional trainings will be organized in the third quarter of Y3 which a high investment season for companies in fruit and vegetable industries.

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3.3.3. Growth through Investment financing So far, setting up of the first domestic private equity fund is on hold, until the new law on Alternative Investment Funds is enacted, which will facilitate a foundation and operation of an investment. In order to overcome absence of investment funds specialized in investing in food companies, in May and June 2019 financing options such as crowdfunding and business angels were introduced for firms in DM incubator. In cooperation with Erste bank, BDO Advisory Service and Association of Business Angels of Serbia, CSS organized two info-sessions in Belgrade on May 28 and Novi Sad on June 3 to present to 12 companies from the DM Incubator funding options such as crowdfunding and business angels investment. Both non-banking options are complementary to bank’s loan and can be combined, depending on the stage of firm’s development and amount needed for further investment (range from EUR 50k to EUR 300k can be financed through crowdfunding while business angels may invest up to EUR 500k). The enlarged concept of investment financing will be presented to companies from PFDH 2019 on July 24 (BIPS hub) and July 26 (Desing hub). Besides Erste Bank, the finance component within Desing and BIPS hubs, will include investment alternatives such as crowdfunding, in- dividual investors, private equity fund and VC fund presented through Smart Kolektiv. Financing option which is still missing on Serbian market is private equity fund that will purposely target investment in SMEs involved in F&V sector in range EUR 0.5M - EUR 2M. CSS will continue to work on attracting interest of individual investors and in- vestment funds for investing in Serbia and agri-business through events such as BFS, Mr. Mirko Perić, from Petka, , producer of Veverko honey-hazelnut crème at Belgrade Venture Forum the funding options info-session for dm Incubator firms, Belgrade May 28, 2019. (November 2019), Invest- ment conference in Abu Dhabi (December 2019). 3.3.4. FDI, Government Subsidies and increasing competitiveness Based on the interest shown by the Government in Q1-Y3, it is agreed that CSS will support the representatives of MoA and RAS for preparation of Serbian investment potential for In- vestment conference in Abu Dhabi-Agriscape 2019. This year, the event is rescheduled from October to December in order to be organized as back-to-back conference with Emirates Food Exhibition. The aim of both events is to attract investors and food producers from all around the world, focusing production of any start-up to UAE which possess innovative and high tech- nology solutions. Alike the previous year, CSS will prepare the pool of SMEs involved in F&V sector that are ready to accept minority/majority share in equity provided by foreign investment partner. Furthermore, MoA continues supporting CSS to develop a competitiveness study that will in- form subsidy system regionalization of financing. A new tailored system will provide favorable

Quarterly Report #9: Year 3, Quarter 1 Page 20 Serbia Competitiveness Systems Strengthening (CSS) Activity conditions for developing underserved regions by tailoring financing for certain crops accord- ing to specific agro-ecological and economic conditions. This program will also increase the movement of private capital as well as attract the attention of companies to certain regions where additional investment is needed.

3.4. Strategic Communications The CSS overall communications goal remains the same – to build awareness around opportu- nities for Serbia to innovate and increase trade, expand business partnerships, and attract in- vestments. This message was successfully sent through intensive Project activities in this quar- ter and continues to follow the project scale up in Y3. The goal is to position Serbia as a place of innovation in food processing, a delicious food hotspot and a healthy destination. This is achieved by sending the more specific and stronger messages, by building an embedded capacity of project partners to be the owners of this message, and CSS and USAID as support- ers. Simultaneously, the Project continues to promote all its activities through CSS communi- cation channels in line with USAID communication and branding strategy. This evolution in the project approach reflects in the updated Communication strategy, which is finalized at the beginning of this quarter (Annex E) 3.4.1. Branding activities and further development of umbrella brand During the reporting period, the Project continued to promote the umbrella brand and adapted slogans to raise the international profile of Serbia’s fresh fruit and vegetable producers in order to increase sales and exports in international markets. As the NASPP approximately presents two-thirds of Serbia’s total prune export volume, the Project recognized the Association`s potential to expand also through branding improvements. Those branding improvements implied New NASPP website to increase the Association’s vis- ibility and branding under ‘Serbia does Prunes’ brand. The Association of Apple Producers continues with the promotion of Serbian apple production and presentation of Serbia as a modern, market-oriented supplier of high-quality apples for foreign markets under the brand Serbia Does Apples. London produce Show, where they ex- hibited and presented themselves under the brand Serbia does Apples, new web site (www.ser- biadoesapples.com), social networks and video material are some of the promotional tools and activities SDA is working on last quarter. “Naši Voćari”, the first Serbian union of cooperatives established in 2018 was also supported by the Project. With the aim to spread their success story, to help them become a role model to others and to improve their performance in foreign markets, the project developed new visual identity, website, brochure, technical info sheets on products’ offer and promo material. 3.4.2. International Taste Institute (iTQi) Label To distinguish their products in competitive specialty food market, premium food producers are turning to renowned, consumer-trusted institutions that certify product quality and taste. iTQi, based in Brussels, is the leading independent chef and sommelier-based organization dedicated to certifying the superior taste of food and drink products from all around the world. STA certification is increasingly recognized worldwide by both major retailers and consumers as a proof of high-quality, and producers with awarded products gain competitive advantage in increasing sales in domestic and international markets. CSS assisted 5 export-ready specialty food producers from Serbia to select their products and apply for the Superior Taste Award.

Quarterly Report #9: Year 3, Quarter 1 Page 21 Serbia Competitiveness Systems Strengthening (CSS) Activity iTQi awarded all five companies for the following products: Agranela () for “Dried plum without preservatives” with 2 Golden Stars; Real Red Raspberry (Bečej) for “Light rasp- berry jam” with 1 Golden Star; Ecovital (Bikić Do) for “Cold-pressed pumpkin seed oil” with 2 Golden Stars; Happy Honey (Beograd/Kučevo) for “Honey and Plum” with 1 Golden Star and Strela (Leskovac) for “Stripped ajvar, Birano” with 2 Golden Stars. These products were blind tasted by the jury consisted of more than 100 leading world and Michelin star chefs on their merits, in terms of taste, quality and pleasure. “This is a great success for Serbian food pro- On June 24, Serbian producers received this prestig- ducers. The Superior Taste Award is a mark of ious award and attended the official ceremony in distinction for these products which 100 leading world and Michelin star chefs sampled and Brussels together with food and beverage producers awarded,” said Alan Coxon, a jury member and from all over the world, renowned chefs and somme- the host of this year’s International Taste Insti- liers, representatives of retail chains and media. tute award presentation ceremony. “This is why consumers trust these brands and buy their To celebrate the awards, the Project, in collaboration products, knowing that they get superior quality with the Serbian Mission to the European Union, or- for money spent.” ganized a reception at the Serbian Embassy in - sels. The event gave the awarded companies an op- portunity to network with the representatives of the diplomatic corps, Belgium companies and food prod- uct importers. News about awarded Serbian products attracted ex- tremely high attention of domestic media, with a great number of requests to producers and CSS rep- resentatives for statements and TV appearances.

USAID supported Super Taste Awards recipients from Serbia at the award ceremony with chef Daniel Ayton, and tasting of products at the reception in the Embassy of Serbia, June 24, 2019.

Marina Jovićević, Ambassador of the Republic of Serbia to the Kingdom of Belgium, in her opening speech, highlighted the fact that the award pre- sented to Serbian food producers would pave the way for future business cooperation between Serbia and Belgium, as well as other EU member countries. In addition, Jasmina Debeljak Maljković, Deputy Chief of Party, underlined the importance of promotion of Serbian high-quality food prod- ucts in international markets, in particular, the EU single market, and ex- plained the USAIDs support of these efforts.

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3.4.3. International PR activities As a part of the project communication strategy to create greater awareness of Serbia as a great food destination, the Project started with planning study tours for media, in partnership with National Tourism Organization of Serbia (TOS). The idea is to offer participants a unique ex- perience of Serbian attractions, quality and great taste of food products, interesting stories and professionalism of producers in order to generate publicity on the country as a preferred desti- nation not only for enjoying but also for doing food business. This is also in line with the Projects goals to position Serbia as a place of innovation in processing industry, a delicious food hotspot and a healthy, natural destination and the vision to position Serbia in a positive light in international markets, especially the EU market. Study tours will be organized to introduce Serbia to media from selected export markets - Ger- man speaking countries, UK and Scandinavia. During the last quarter, Project team intensively worked on creation of the visiting program, selection and preparation of producers who will represent the Serbian food industry. As a part of preparation, visits to the producers and their production facilities are being organized (Agranela, Agro bel, Aguara, Global seed, Atos Fruc- tum), which will be a part of the study tour. During the summer, the team will visit other re- maining companies to prepare producers and organize the arrangements for foreign media rep- resentatives. 3.5. CLA The Project organized its first Year 3 CLA event on May 20-22, in . A three-day CLA event collectively reflected on the Y2 efforts and results and reviewed and discussed the Y3 Work Plan and key initiatives towards achievement of Project goals. During the event, the technical teams delivered presentations for the whole staff to discuss the activities for Y3 with the highest-promise for success by scaling pilots conducted in the previous year, based on learning from market reaction to interventions and results achieved, and collaboration with the Project partners. The CLA event, attended by USAID, provided a chance for team members to synchronize activities, resources and partnerships and refocus Y3 Work Plan, and it served as a team building and cross-collaboration exercise.

3.6. Administrative and Logistical Organization One new staff member, Financial Investment Manager joined the Project team.

3.7. Development and Delivery of Contracted Deliverables

During the first quarter of Year 3, the team developed and delivered to USAID the following doc- uments: • Year 2 Annual Report (including Quarterly Report, PMP and self-assessment on pro- gress). • CSS Communication Strategy (Annex E)

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4. PR and Outreach (CSS Communication Channels) CSS communication channels are already established and recognized as an important source of information for media and industry partners. Individual partners, project models, and events were highlighted as successful examples of change the project has stimulated in the market The Project continues to leverage traditional PR and marketing, the best media practice and social networks to promote the Project and its partner organizations. Throughout the quarter, CSS organized and supported numerous activities that were intensively promoted through tra- ditional and online media outlets.

4.1. Quarter Highlights Upgraded digital communication. In line with revised Communication strategy, some changes in digital communication was made that influenced the quality of posts - short, clear, direct messages; even greater focus on partners, producers and their successful stories; greater attention to photos that follows posts; more usage of videos. Specially created media campaigns. Beside regular communication, the Project conducted 2 specially created social media campaigns. 1) Promoting of new cycle and open call of the ini- tiative Premium Food Design Hub through communication of the program and success stories, experiences and impressions of representatives of the first PFDH cycle. 2) Promotion of Super Taste Awards (STA) - 5 awarded Serbian companies and the ceremony in Brussels. This event specially generated excellent media coverage in national media outlets. YouTube channel launch. On May 14 the Project launched CSS YouTube channel “Konku- rentna Privreda” in order to gather numerous promotional video materials on one place (whether it is a short promo video from the event or TV appearances) and to achieve better engagement with audience - video format posts receive 59% more engagement than other FB posts. YouTube will be additional promotional tool which will provide bigger exposure of the Project and its activities. At this moment 15 videos are uploaded, and channel already gained 1,289 of total impressions. More engaged partners on social media. Many Project partners became more engaged on social media which influenced on overall results of the campaigns. CSS was mentioned 29 times in Facebook posts by our partners in this quarter. The Project will continue to help part- ners in their promotional efforts and highlight the necessity of good online communication. Superior Taste Awards great exposure. Last but not least, 5 Serbian producers that received STA were hot topic in numerous media outlets including national TV stations and achieved great exposure.

4.2. Media and Social Media Monitoring In most media appearances the Project was mentioned as an initiator of each activity which resulting in very successful PR campaigns. Media support for this period included print (15), online (88), TV (14) and radio (1) appearances – total 118. Sentiment of article was positive in 89% of cases and neutral in 11%. USAID was mentioned in 99 articles. Main key words this quarter were: USAID Competitive Economy Project, USAID, BFS, APSF, PFDH, iTQi, DM Incubator, high quality food and agriculture. On the social media Facebook remains our strongest channel on which public is constantly returning and sharing our activities, with 4,888 new fans this quarter. Facebook page had ex- ceptional result this quarter by 409 shared posts and 29 mentions. Twitter engagement rate of

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1.25% is very good (0.2% to 0.9% are considered to be good). Linked engagement rate is ex- cellent (higher that 0.1% is considered to be excellent. Detailed statistics is in the table below.

Table 5: Reach, Impression, Engagement from April 1, 2019 - June 30, 2019 Social Network Impressions Engagement Reach Mentions Fans Facebook 2,733,450 87,612 2,266,211 / 37,456

Twitter 38,453 483 / 9 281

Linkedin 138,770 7.89% rate / / 2,508

Instagram 294,992 56,322 241,324 / 4,504

4.3. The most influential topics Most popular topics that had the best engagement were success stories on people from the industry, awards, competitions and international promotion of Serbian companies. In last quar- ter, the most activities and the best engagement was in June (26 posts on Facebook, 23 posts on Twitter and 30 on LinkedIn) promoting various activities related to Project and our partners: UC Davis visit and educational model, DM Incubator, Serbia Does Apples Association at the London Produce Show, Youth for Impact Internship Program, Ecotrophelia Competition, Eneca Open Call, iTQi/STA, Premium Food Design Hub second cycle announcement and open call for companies. Additional PR Highlights can be found in Annex F.

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5. Activities planned for Next Quarter Next quarter, noteworthy planned activities covering the July 1 – September 30 2019 period will in- clude.

5.1. Access to Markets > Continue supporting members of NASPP in exporting to new markets with special focus on UK, Poland and Italy. The team will facilitate promotion of prune in both local and interna- tional market, through the new NASPP website, promotional material, B2B meetings and joint presentation of Serbian prune producers in Poland. > With Serbia Does Apples association Project will prepare and organize a trade mission to Ro- mania to increase export opportunities to the neighboring country. The event will be business opportunity to present other fresh F&V segments (berries, stone fruits, vegetables). > Introduction of integrative business models such as ‘hub and spoke’ and cooperatives are planned for the F&V entrepreneurs and coops through trainings, particularly in south Serbia. > Building the capacity of the Union of Cold Storages of Serbia Association by helping identify professional staff that can improve internal management capacities and set up new funding, promotional and marketing strategies for the members. > The Project will engage with Serbian Food Technologists Council to assist selected Serbian cooperatives to launch new, healthy and functional F&V food products > In partnership with the BSOs (e.g. PKS, industry associations) Project will commence organi- zational activities to support three international trade events: SIAL Abu Dhabi, UAE – Dec 2019; Fruitlogistica, Berlin, Germany – Feb 2020; and Foodex Japan, Tokyo, Japan 2020 (TBC). > Finally, Markets and other teams will participate in preparatory, organizational activities re- lated to Belgrade Food Show, scheduled for Oct 2019.

5.2. Access to Finance > Creation of a pool of MSMEs ready to pursue investments in production assets and support access to finance through mentoring, preparation of investments plans and facilitation of con- tact and application process with selected lending institutions (Banks, MoA, DFS etc.). Pool will be created in close cooperation with consultants contracted under Finance FSA and CSS. Create the most suitable form for consultant’s engagement to accommodate revolving need for investment financing consulting services. > Promote DCA Guarantee scheme in cooperation with two implementing banks Addiko and ProCredit Bank and identify potential users and beneficiaries of DCA Guarantee. > Matching individual investors with companies from hubs/incubators for Belgrade Food Show 2019 > Working with RAS on identification of perspective foreign investors for BFS 2019 > Cooperation with EBRD on identification of perspective domestic investors for BFS 2019 > Creating follow-up events for attracting investment in food industry – it will start with BFS 2019 and continue with Belgrade Venture Forum and furthermore in Agriscape 2019 > Scouting of companies from hubs/incubators for start of Crowdfunding financing in September 2019 and linking banks (that signed agreement with DCA) with Crowdfunding to take a role of Lead investor for successful start of campaign; instead of banks the role of Lead investor can take retail chains, individual investors, business angels, PE/VC funds. > Preparing the pool of companies involved in F&V sector that are ready to accept equity invest- ment to be presented on Investment Event in Abu Dhabi at Agriscape 2019.

Quarterly Report #9: Year 3, Quarter 1 Page 26 Serbia Competitiveness Systems Strengthening (CSS) Activity 5.3. Workforce Development > AgroNET will be finalizing their concept of the pilot course curricula (theoretical and practical part), select the lecturers and start advertising it to the companies on their website; > The next Lukowa Académie improved cycle will be developed in August; It is planned to pre- sent this model to our partner companies, with emphasis on fresh segment in order to attract some other Industry leaders to create their own educational model (Brestovik, Pureberry, RZ Agro, etc.); Info meeting with the companies will be organized in September to present them the model of Lukowa Académie. > Internship model: Youth for Impact: During July and August monitoring visits will be orga- nized to targeted companies who host students for Internship; the second orientation for stu- dents will be organized on 13-14 July; In the last months of the first year of implementation of the Internship, to plan an advocacy campaign with YfI, Center for career development ad- dressing MoESTD and some other international partners (i.e. GIZ) that will result in standard- izing the internship model (that we already developed); Another steam of activities addressed to companies: to promote developed model and motivate and animate companies to be more open to host students; Serbian Association of Managers (SAM) is interested to promote intern- ship model as well; > Oregon State University small farmers program & Faculty of Agroeconomy: To review the concept note from University of Kragujevac and to see how the next meeting will go on July 11 in Belgrade. > Ecotrophelia/SAFT: Desing supported redesign of the MoCaMela package; they are preparing the application for EU competition; > Support to FoA website (partnership with companies – AgroNET/FoA): AgroNET website is enough as a platform for communication with the companies; short promo-film could be still produced, but linked to AgroNET website; > FoA and Technology Institute requested support of the 60th anniversary of the Technology Institute of FoA; meeting with USAID CFG has been scheduled for July 18, 2019.

5.4. Strategic Communications > Following and supporting efforts on establishment of APSF professional management, strengthening its organizational and operational capacities > Intensification of all preparatory activities of BFS 2019, since next quarter will be crucial for conclusion of Conference program and engagement of all participants; buyers and exhibitors’ confirmations; conference delegates application; all operational, logistics and promotional ac- tivities. > International PR activities – final preparation for study press tours with NTOS and realization of first at the beginning of September 2019 > Preparation of joined media campaign with DM, promoting enlisting of all products in over 90 stores and finalization of first cycle of DM Incubator > Promotional support to partners and Project activities (DM, PFDH program, apple producers association, Lukowa, Internship program, etc.) through support in SM campaigns, PR, promo- tional materials and organization of the events. > CSS Communication channels further maintenance and development

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