Marile Lanturi De Magazine O Duc Foarte Bine in Romania

THE UKRAINIAN MARKET FOR DRIED FRUITS Target Market Confirmation Study

Conducted by CAMIB for USAID/CNFA’s Agribusiness Development Project

February 2007 CONTENT

KEY OBSERVATIONS AND RECOMMENDATIONS...... 1 BACKGROUND...... 2 PRODUCTION TRENDS...... 2 GLOBAL DRIED FRUIT IMPORTS...... 2 DRIED FRUIT PRODUCTION IN UKRAINE...... 2 UKRAINIAN IMPORT TRENDS...... 2 MARKET ACCESS AND TARIFFS...... 2 INFORMATION ON COMPANIES INTERVIEWED...... 2 Supermarkets Interviewed...... 2 Wholesalers/importers Interviewed...... 2 Sources of supply...... 2 Seasonality...... 2 Major Clients And Markets...... 2 Channels of distribution...... 2 Produce Requirements and Preferences...... 2 Packaging...... 2 Labeling...... 2 Logo/Brand...... 2 Varieties and Trends...... 2 Prices...... 2 Major Competitors...... 2 Moldovan Dried Fruits Perceptions And Recommendations...... 2 KEY OBSERVATIONS AND RECOMMENDATIONS

The market for dried fruits in Ukraine has developed dynamically in recent years, and continues to grow. This development is the result of an increase in consumer demand for varieties and types of dried fruits which were unavailable on the market until recently, including many dried tropical fruits. In 2005 the market, including tropical fruits, was estimated at 25,000MT, with a total value of USD13.3mln1. Official Ukrainian data suggests that the largest volume of dried fruits in Ukraine are sold in retail markets and to the processing industry (confectionery factories, bakeries, dairies etc.), however there is a trend towards gradual redistribution of the market share in favor of retail chains (supermarkets, Cash & Carry, etc.) In the near future an increase in the numbers of dried fruit suppliers is expected as well as an expansion of the range of products offered. The anticipated expansion is due to :

 The creation or adoption of new products

 The emergence of a large number of retail packed ‘ready to use’ products

 New dried fruits, berries and nuts mixtures

 The development of new brands and trade marks (TM). In the past only a small selection of dry fruits were available, mainly sold in bulk. The range of products now available is much wider, with different types of pre-packed, branded products available on the market. It is generally believed that those trademarks whose owners develop a wide range of branded products will gain the largest shares of the dried fruit market. Local production of dried fruits in the Ukraine is estimated at around 5% of total market size2, with the remaining 95% of market share being filled by imported dried fruits of all types, but with exotic fruits having the major share. Locally produced products are not very competitive on the market because of a shortage of raw materials and very high production costs for drying fruits (increased gas prices have lead to higher production and storage costs). Imported dried fruits have advantages in the market because of low prices, and consistency in quality, quantity, and delivery. Most of the participants interviewed do not have extensive experience of working with dried fruits exporters from the Republic of Moldova. Some respondents expressed their interest in importing dried fruits (plums) from Moldova, provided that suppliers meet the following requirements:

 delivery of specified quantity of product;

 consistency in supply;

 attractive price and consistent quality. Another recommendation from a survey respondent was that exporters providing retails packs of dried fruit might consider focusing attention to a niche in the "children's" brands, which could become a very promising segment of the market.

1 http://www.dsnews.com.ua/archive/print_ver.php?r_id=24&article_id=26554 2 http://www.dsnews.com.ua/archive/print_ver.php?r_id=24&article_id=26554 Page 1 BACKGROUND

The Ukrainian market for dried fruit has changed considerably in recent years. Several years ago they could be purchased on the open market or in vegetable stores. The assortment was limited to dried fruit which formed the classical "kompot" mixture: prunes, apple, raisins and possibly/occasionally dates, pears, figs, cherries or dried peaches. Nowadays, all types of traditional dried fruits such as dried apricots, raisin, apples and prunes as well as a large assortment of exotic fruits, including pineapple, cantaloupes, papaya and others are available on the Ukrainian market. These are all available in a wide range of types, varieties, size, color and shape etc. For instance, apples are dark brown, light brown, golden or light - in accordance with the variety of apples or drying treatment. Prunes frequently are distinguished by the shape: round or flat. The dimensions of dried apricots in different mixtures can differ and depend on the initial size of apricots. Dried cherries or sour cherries are offered pitted or with stone. The supply structure of the market has clearly changed in recent years due to the increase in availability of exotic dried fruit, and the appearance of diverse fruit mixtures - fruit and berry or fruit and nut mixtures etc. In 2005 the market, including tropical fruits, was estimated at 25,000MT, with a total value of USD13.3mln3. Raisins remain the market leader and hold 17% of the entire volume of supply. Dried apricots hold the second place (15%) followed by prunes (11%). It is interesting to note that fruit and nut mixtures have a 6% share of the market, after classical "kompot" mixtures (4%). It is considered probable that the percentage of mixtures (fruits and nuts) will increase.

Figure 1: Dried fruit market share in Ukraine 2005, %

Raisins 17% Other Dried dried peaches fruits 15% 47%

Dried prunes Compote Dried fruit 11% mixes mixes 4% 6%

Source: LigaBiznesInform

Generally the Ukrainian market demand for dried fruit is stable throughout the year, without significant seasonal or monthly reductions in sales volumes. (unfortunately figures for dried fruit demand are not available) Dried fruits as snacks are unusual for the Ukrainian consumer and the development of this sector of the market is contingent on the advertising and promotional policy of different brands. In the future, the most successful trade marks, will be those whose owners know how to convert them into valuable brands, whilst developing the commodity category as a whole. Today, the leading trade marks on the Ukrainian market for dried fruits are: "AMRA", "SantaVita", "Aromix", "Good Food", "Jasmine".4

3 http://www.dsnews.com.ua/archive/print_ver.php?r_id=24&article_id=26554 4 http://www.santavita.com/?p=press_center_info Page 2 PRODUCTION TRENDS

Global Production and Export of Dried Fruits This report examines the Romanian market for the principle dried fruits that can be produced in Moldova: Prunes, Apples, Apricots and to a lesser extent Cherries. Accurate, uniformly compiled statistical information on the production of dried fruit by country is largely unavailable. However, it is widely recognized that levels of production and export of dried fruits are associated with levels of global fresh fruit production. Apples In 2005, the top five producers of fresh apples were Table 1: 2005 Production of Fresh Apples and China (20.5mln MT), USA (4.8 mln MT), Turkey (2.5 mln Exports of Dried Apples by country leaders Country Production Exports % Share of MT), France (2.2 mln MT) and Italy (2.2 mln MT). Fresh Dried Global Apples Apples value of The majority of processing apples are used in the juice ‘000 MT ‘000 MT Dried fruit industry. For example, in 2004 in the USA 19% (circa exports World 59,444 20.75 920,000MT) of fresh apples were used for juice and cider China 20,406 1.12 3 production, and only an estimated 2% of the fresh crop, United States 4,477 3.92 20 around 97’000MT, was used in the drying industry5. Turkey 2,550 1.38 3 France 2,222 0.21 1 In 2005 the top five exporter countries of dried apples Italy 2,192 2.12 15 were amongst the top 10 fresh apple producing countries. Russian Fed. 2,050 - Poland 2,050 0.36 2 Dried apple exporters included: Chile (5560MT), USA Germany 1,600 0.91 6 (3920MT), Italy (2120MT), Argentina (1170MT) and Chile 1,350 5.56 32 Germany (910MT). China the largest producer of fresh Argentina 1,262 1.17 5 Romania 478 - - apples exported relatively small volumes of dried apples Rep. Moldova 350 0.15 – 1120MT in 2005, 6% more than in 2004. Sources: FAOSTATS/ITC COMTRADE

Dried Prunes Table 2: 2005 Production of Fresh Plums China is the leading producer country for fresh plums, and Exports of Dried Prunes by country producing 49% (4.6mln MT) of global production. leaders Country Production Exports % Share Germany and Romania, are the next major fresh plum Fresh Dried of Global producers, followed by the USA and Chile. See Table 2 Plums Prune value of ‘000 MT ‘000 MT Dried Note: Very poor US harvests were experienced in 2004 fruit exports and 2005, but the 2006 harvest was predicted to be World 9,458 154.7 100 good (National Agricultural Statistics Service, USA). China 4,635 0.6 <1 Germany 568 1.6 2 The United States, France and Chile are the world’s key Romania 409 - - dried plum producers6, and also the world’s largest USA 300 45.8 31 exporters of dried plums. Typically, USA and France Chile 255 29.4 19 Spain 218 0.5 <1 export 40% of prune production and Chile exports 90% of Turkey 215 1.2 1 production, 45,800MT and 29,400MT respectively in France 215 29.7 23 2005. Italy 185 0.3 <1 Russian 185 - - The largest markets for USA produced prunes are Japan, Fed the UK and Germany; for France major markets are Ukraine 180 0.05 <1 Iran 147 1.2 <1 Algeria, the UK, and Germany. Chile’s major client Argentina 127 23.0 14 country is Mexico, but the EU is also supplied. Poland 100 0.9 1 Rep. 35 2.3 1 Apricots Moldova Sources: FAOSTATS/ITC COMTRADE

5 Source: US Agricultural Marketing Resource Centre 6 Source FAS USDA Global Trade Atlas Page 3 Table 3: 2005 Production of Fresh Apricots Turkey and Iran are the leading fresh apricot and Exports of Dried Apricots by country leaders producer countries exporting 370,000MT and Country Production Exports % Share 285,000MT respectively in 2005. Fresh Dried of Global Apricots Apricots value of However, globally Turkey is the major exporter of ‘000 MT ‘000 MT Dried fruit dried apricots, 80,700MT in 2005, (accounting for exports World 2,821 107.0 100 72% of world exports by value), followed by Turkey 370 80.7 72 Tajikistan (11.400MT), and France with 3,400MT. Iran 285 0.4 <1 See Table 3. Italy 233 0.4 <1 Pakistan 215 0.2 <1 The USA accounts for around 2% (74,000MT) of France 181 3.4 8 global fresh apricot production, of which nearly Spain 133 0.01 <1 75% is used in processing, mainly in canning, with Syria 101 0.1 <1 China 90 0.8 <1 1,200MT of dried product exported. Greece 84 0.4 1 Romanian production of fresh apricots has Russian Fed. 82 0.03 <1 declined rapidly, from 42,000MT in 2003 to South Africa 82 0.9 2 USA 74 1.2 2 6,000MT in 2005, with no recorded exports of dried Tajikistan 30 11.4 3 apricots Germany 7 1.7 3 Romania 6 0 0 Rep Moldova 6 0.02 <1 Sources: FAOSTATS/ITC COMTRADE

Table 4: 2005 Production of Fresh Cherries Cherries and % share of Global Exports of Fresh Cherries Globally, Turkey is also the major producer of fresh Country Production % Share of Fresh Global cherries, followed by Iran, the USA and Germany. See Cherry value of Table 4. ‘000 MT Dried fruit exports World 1,828 100 Of the 260,000MT of fresh cherries produced in Turkey Turkey 260 14 in 2005 (sweet and sour cherries combined), Iran 224 12 approximately 15% of the total, (39,000MT), equal to USA 205 11 Germany 120 7 85% of the sour cherry production, were used in the Russian Fed. 110 6 processing industry, dried fruit, canned, jams, juices Italy 101 6 etc. (Source USDA Gains Report). Spain 89 5 Ukraine 88 5 Production of fresh cherries in China is relatively low, France 69 4 Greece 46 3 1% of global production in 2005, (17,000MT), but with Syria 40 2 steady growth in production from 12,000MT in 2001. Poland 39 2 Lebanon 34 2 Chile 33 2 Romania 32 2 China 17 1 Rep. Moldova 8 0 Source: FAOSTATS

GLOBAL DRIED FRUIT IMPORTS

Dried Prune import trends 2001 – 2005 Table 5: Global Imports of Dried Prunes 2005 (MT) Global import volumes of dried prunes grew Value US$Quantity Unit value PRUNES slowly, by only 1% over the period 2001 to 2005, thousand MT (US$/MT) to 146,290MT in 2005 - with a 9% increase in World estimation 340,297 146,290 2,326 value - to USD340million. See Table 5. Russian Federation 8,924 16,751 533 The Russian Federation imported the largest Germany 36,853 12,700 2,902 volumes, (16,751MT in 2005) but at the lowest Japan 37,433 10,904 3,433 value - USD533 per ton. Russian imports in Mexico 20,856 8,685 2,401 2005 were primarily from Tajikistan (3,545MT), Brazil 18,311 8,568 2,137 USA 19,852 8,183 2,426 Chile (4,021MT) and Argentina (2,237MT). United Kingdom 23,275 7,374 3,156 German import volumes fell 2% to (12,700MT) in Italy 20,012 6,529 3,065 2005, but values increased by 5% to Spain 12,435 5,673 2,192 USD36.9million – equivalent to USD2,902 per Belgium 14,704 5,581 2,635 Netherlands 13,071 4,877 2,680 MT. Major suppliers to Germany are the USA Poland 9,567 4,538 2,108 (5,089MT in 2005) and Chile (4,703MT) in 2005. Canada 12,688 4,410 2,877 Source: ITC calculations based on COMTRADE In 2005, Japan had the highest unit value at statistics USD3,433 per MT. Japanese imports in 2005 were mainly from USA, 9,058MT (compared to 17,512MT in 2004) and Chile (598MT). The 2004 and 2005 USA reduction in home grown volumes led to a 100% growth in foreign imports by volume and 123% increase by value between 2001 and 2005, to 8,183MT and USD19.9million respectively (2005). US Imports (2005) were mainly from France (4,150MT), Chile (1,567) and Argentina (1,346).

Dried Apple import trends 2001 – 2005 Table 6: Global imports of Dried Apples 2005 Unit Value Quantity Global imports between 2001 and 2005 APPLES value US$’000 MT increased 7% by volume to 25,792MT, and 13% (US$/MT) in value to USD74.3million. See Table 6. World estimation 74,372 25,792 2,884 Germany 16,698 6,135 2,722 Germany is the largest importing country; USA 13,077 4,451 2,938 United Kingdom 9,491 2,820 3,366 volumes increased by 3% between 2001 – 2005 Canada 6,163 1,694 3,638 to 6,135MT, and by 12% in value to Australia 2,501 1,102 2,270 USD16.7million. Major suppliers in 2004 Russian Federation 558 1,054 529 included China (2,255MT), Turkey (1,328MT), France 3,484 700 4,977 Italy 684MT, and Chile 959MT Mexico 2,462 648 3,799 Poland 1,141 590 1,934 Highest unit values were for imports into Saudi Arabia 537 585 918 Romania 137 524 261 Switzerland (USD5,951 per MT), but volumes Table 7: Global imports of Dried Apricots 2005 Switzerland 2,904 488 5,951 were low (488MT in 2005). APRICOTS Value Quantity Unit value Austria 2,455US$ MT433 (US$/MT)5,670 Romania has the lowest unit value for imports of Source: ITC calculations based‘000 on COMTRADE statistics dried apples, (USD261per MT in 2005). Major World estimation 212,853 106,652 1,996 suppliers to Romania are Moldova (500MT in Russian Federation 16,552 30,418 544 2004), with 8MT from Hungary and 13MT from USA 36,403 14,632 2,488 China. United Kingdom 32,020 10,653 3,006 Germany 23,237 8,929 2,602 Dried Apricot import trends 2001 – 2005 France 23,770 8,597 2,765 Ukraine 2,470 4,853 509 Australia 11,086 4,508 2,459 Poland 4,061 2,254 1,802 Canada 5,424 2,188 2,479 New Zealand 6,105 2,107 Page 2,8975 Switzerland 5,568 1,436 3,877 Italy 3,445 1,313 2,624 Source: ITC calculations based on COMTRADE statistics Globally, volumes of dried apricots imported fell by 1% between 2001 and 2005 to 106,652MT, but values increased by 16% to USD213million. See Table 7. The Russian Federation was the largest importer of dried apricots, 30,4182MT in 2005, but values were low at USD544 per MT. Major suppliers to Russia were Tajikistan 11,048MT in 2005 and Turkey 17,159MT. The US is a major importer (14,621MT in 2005), followed by the UK (10,653MT), France (8,597MT), Germany (8,929MT). Turkey is a major supplier to these three countries. In 2005 Turkey exported 14,022MT to the USA, 8,587MT to the UK, 8349MT to France, and 7898MT to Germany. Romanian dried apricots imports in 2004 were worth USD138,000 (volumes not available). Major suppliers to Romania in 2004 were Turkey value USD107,000, and Netherlands USD24,000.

DRIED FRUIT PRODUCTION IN UKRAINE

According to opinion of experts from Agriagency7 (2006), dried fruit production in Ukraine is very small, estimated as 5% of total dried fruits market size (25,000MT including tropical fruits). The reasons for the Ukrainian lack of production are the lack of raw materials and high production costs. Fifteen years ago the situation in Ukraine was quite different and consumers bought dried fruits during winter months to ensure adequate vitamin intake. Supplies of dried fruits at that time were assured by the state collection organization, Ukrpotrebsoyuz, which stored 15-16 thousand MT of dried fruits annually8. Ukrpotrebsoyuz no longer organizes storage of dried products, although Ukrainians do continue to independently store dry fruit and berries. However, production of dried fruit requires large volumes of raw materials. plus investment in storage facilities for both raw and dried product. The high initial costs of raw materials and storage facilities, often means that the cost of local finished product are higher than imported products. When increasing gas costs are added, Ukrainian dried fruits have become less competitive. (http://pro-consulting.com.ua).

UKRAINIAN IMPORT TRENDS

In the last few years volumes of dried fruits imported into the Ukraine have shown an upward trend. Total volumes of dried fruit imports increased by 201%, from 2,780MT in 2004 to 5,598MT in 2005, and in value terms by 148%, from USD2,5mln to USD3,8mln. Average import prices for dried fruits in this period decreased by 22%, from USD0.9/kg to USD0.7/kg.9 According to an Agriagency10 report, the share of imported dried fruits in 2005 accounted for around 95% of the total dried fruits market size. Some local companies estimate annual import volume growth as 20% (“Prirodnye product”), 30% (“Imperia vitaminov”), and others estimate growth at 50% for specific dried products, eg candied fruits. It is anticipated that this growth will continue to increase in future years.

7 http://agriagency.com.ua/?page=6&mode=mnews&data=4004 8 Some experts say the figure was 3-4 times higher. 9 It should be noted that according to official data (Gostcomstat), imports of dried fruits in 2005 increased by 15% compared with 2004, from 22 thousand MT (value of $11,3 mln) in 2004 to 25 thousand MT (value of $13,3 mln) in 2005.

10 http://www.agriangency.com.ua Page 6 Turkey was the leading supplier of dried fruits in Ukraine in 2005. Dried fruit imports from Turkey doubled in 2005 compared with 2004, reaching 4400 MT in quantity terms and increased by 2.6 times, to USD2,302 thousand in value terms. Unit import prices (ie per kg) for dried fruits from Turkey increased slightly from USD0.4/kg up to USD0.5/kg during 2001-2004, and remained at USD0.5/kg in 2005. Uzbekistan was the second most important supplier of dried fruit to Ukraine in 2005; volumes increased by 2.3 times to 598MT and values doubled to USD186 thousand in 2005 compared to 2004. The unit price for imported dried fruits from Uzbekistan in 2001-2005 show a decreasing trend from USD0.9/kg in 2001 to USD0.3/kg in 2005. During the last two years prices for imported dried fruits were stable at USD0.3/kg. Moldova is the fourth leading exporter of dried fruits to Ukraine. Dried fruit export volumes from Moldova are generally very small, but have increased continuously in the last few years. From 2004 to 2005 volumes increased by 61% to 198.3 MT and values by 50%, reaching USD402 thousand in 2005. Export values for dried fruit from Moldova during the period 2001-2005 increased from USD0.6/kg to USD2.0/kg. The export value for dried fruits from Moldova was USD2.0/kg in 2005, 43% higher compared to 2004.

Table 8: Dried fruit imports into Ukraine 2001-2005 (excludes tropical fruits) 2001 2002 2003 2004 2005 Import Import Import Import Import Partner Val, Val, Val, Val, Val, Q, t price, Q, t price, Q, t price, Q, t price, Q, t price, '000 $ '000 $ '000 $ '000 $ '000 $ $/kg $/kg $/kg $/kg $/kg World 3331.5 1536.1 0.5 2745.8 1495.8 0.5 2534.9 1764.7 0.7 2780.0 2546.8 0.9 5598.1 3788.2 0.7 Turkey 3194.2 1387.0 0.4 1828.2 765.0 0.4 1632.8 788.0 0.5 1886.7 902.2 0.5 4400.2 2302.2 0.5 Uzbekistan 26.0 22.4 0.9 501.6 254.5 0.5 440.0 180.6 0.4 285.8 95.2 0.3 597.6 186.2 0.3 Moldova 6.8 4.1 0.6 35.9 39.2 1.1 25.1 33.1 1.3 122.9 171.1 1.4 198.3 402.4 2.0 USA 14.7 24.7 1.7 51.2 97.3 1.9 102.9 199.1 1.9 131.2 441.3 3.4 58.9 257.9 4.4 China 15.0 7.9 0.5 5.6 18.1 3.2 18.1 41.3 2.3 27.9 53.1 1.9 56.6 69.8 1.2 Germany 1.1 3.1 2.7 3.4 19.3 5.7 11.3 117.1 10.3 18.6 340.1 18.2 21.2 317.9 15.0 Tajikistan 6.0 2.1 0.4 83.4 28.0 0.3 169.1 47.2 0.3 220.2 65.5 0.3 20.6 64.6 3.1 Poland 3.2 8.1 2.5 23.6 59.5 2.5 10.7 137.8 12.8 17.0 172.8 10.2 18.9 90.4 4.8 Armenia 0.0 0.0 5.8 2.0 0.3 0.0 0.0 3.0 1.1 0.4 16.3 10.5 0.6 Other 66.3 76.8 1.2 140.2 212.8 1.5 86.1 220.6 2.6 67.1 304.4 4.5 21.4 86.4 4.0 States Source: Comtrade

Dried Prunes The share of dried prunes in total dried fruits import volume in 2005 constituted 10%. The volume of dried prunes imported into Ukraine doubled in 2005 compared to 2004, to 567MT with a value of USD809,000 in 2005. Import prices per kg for dried prunes in 2005 were on average USD1.4/kg. Uzbekistan was the leading exporter of dried prunes to Ukraine in 2005. According to COMTRADE statistics, in previous years Uzbekistan did not export large volumes to Ukraine, and in 2004 none were recorded. In 2005 import volumes of dried prunes from Uzbekistan to Ukraine were 290.5MT with value of USD85,700 and average import price of USD0.3/kg. Moldova was the second major exporter of dried prunes to Ukraine. Import volumes continuously increased during the period 2001-2005. In 2001 volumes were 6.8MT, and in 2004 they were 98MT, increasing by 202% to 198MT in 2005. Average export values for dried prunes from Moldova to Ukraine during the period 2001-2005 continuously increased from USD0.6 in 2001 to USD2.0/kg in 2005.

Volumes of dried prunes imported from the USA increased from 5MT in 2001 to 129MT in 2004, but decreased by 55% to 58.9MT in 2005, with a 42% reduction in value to USD258,000 in 2005 compared with 2004. Average unit prices for USA dried prunes increased from USD2.6/KG in 2001 to USD4.4/kg in 2005.

Table 9: Dried prunes imports in Ukraine 2001-2005 2001 2002 2003 2004 2005 Val, Import Val, Import Import Val, Import Val, Import Source Val, Q, t '000 price, Q, t '000 price, Q, t price, Q, t '000 price, '000 price, '000 $ $ $/kg $ $/kg $/kg $ $/kg Q, t $ $/kg Total imports 70.8 44.0 0.6 150.5 274.9 1.8 181.2 312.3 1.7 278.3 770.5 2.8 567.5 809.4 1.4 Uzbekistan 5.0 2.9 0.6 10.0 14.7 1.5 23.5 9.6 0.4 290.5 85.7 0.3 Moldova 6.8 4.1 0.6 35.9 39.2 1.1 25.1 33.1 1.3 97.9 171.1 1.7 198.3 402.4 2.0 USA 5.0 12.8 2.6 41.6 91.6 2.2 101.5 198.0 2.0 129.5 439.1 3.4 58.9 257.9 4.4 Chile 21.8 41.8 1.9 15.0 33.2 2.2 6.0 20.7 3.4 China 6.0 3.0 0.5 France 21.8 52.7 2.4 3.1 10.1 3.3 21.9 79.9 3.6 5.0 24.8 5.0 Germany 0.8 1.6 1.9 1.9 3.5 1.8 1.9 3.5 1.9 2.5 13.5 5.5 Russian 0.5 1.3 2.6 1.1 4.5 4.0 4.4 16.1 3.7 2.2 6.9 3.2 0.4 1.5 3.9 Federation Turkey 52.0 19.5 0.4 Poland 1.1 2.4 2.3 7.8 15.4 2.0 Greece 0.4 1.0 2.5 Netherlands 30.0 54.9 1.8 Areas. nes 1.5 0.4 0.3 Serbia and 10.0 36.8 3.7 Montenegro Source: UNSTATS

Dried apples Import volumes of dried apples represented only 0.26% of all Ukrainian dried fruit imports in 2005, and are generally insignificant and unstable. Import volumes increased continuously from 2.4MT in 2001 to 15MT in 2005. Total values also increased continuously, from USD10,300 in 2001 to USD55,500 in 2005, but average per unit values fluctuated widely from USD4.2/kg in 2001 to USD2.2/kg in 2003, and USD3.7/kg in 2005. According to COMTRADE statistics, Hungary was the largest supplier of dried apples to Ukraine in 2005, supplying 9MT with a value of USD32000, and a unit price of USD3.8/kg. No exports from Hungary were made in previous years. Hungary is followed by China with total exports of 6MT of dried apples in 2005, 5% more than in 2004. Dried apples unit prices increased by 16% in 2005 in comparison with 2004 to USD3.7/kg. See Table 10.

Table 10: Dried apples import in Ukraine in 2001-2005 2001 2002 2003 2004 2005 Import Val, Import Val, Import Import Import Val, Val, Val, Q, t price, Q, t '000 price, Q, t '000 price, Q, t price, Q, t price, '000 $ '000 $ '000 $ $/kg $ $/kg $ $/kg $/kg $/kg World 2.4 10.3 4.2 3.3 11.2 3.4 9.0 19.8 2.2 10.6 45.9 4.3 14.8 55.5 3.7 Hungary 8.5 32.1 3.8 China 0.9 2.9 3.2 8.0 15.6 1.9 5.8 18.4 3.2 6.1 22.4 3.7 Poland 1.9 7.3 3.9 0.5 0.8 1.6 0.2 0.3 1.7 Germany 0.1 0.6 4.2 0.0 0.1 3.1 0.1 0.2 3.2 0.04 0.5 13.3 Russian 1.0 4.1 4.2 0.3 1.3 4.0 0.03 0.1 6.4 Federation Netherlands 2.1 10.3 5.0 0.1 0.1 1.4 Areas, nes 0.4 0.0 0.1 0.4 0.4 1.0 Italy 3,5 24,9 7,1 USA 0,3 0,2 0,6 Source: COMTRAD

Ukrainian volumes of imported dried fruits Figure 3: Ukrainian Dried fruit imports from Moldova registered a continuous from Moldova MT increase during the past three years. The 250 most significant increases occurred in 2004 200 and 2005: 198 MT were imported in 2005, 150 61% higher than in 2004. The value of 100 imported products doubled to USD403,000, and from USD1.5/kg to USD2.0/kg in 2005, 50 compared to 2004. 0 2001 2002 2003 2004 2005 Source: State Customs Department, Moldova Market Access and tariffs

Importers from Ukraine faced a value-added tax (VAT), import tax and other fees while importing dried fruits. VAT is levied at 20%, based on the customs value on the invoice. Generally, the importer pays the VAT at the time of customs clearance. Agricultural enterprises are exempted from VAT. In January 2000, border checkpoints began collecting a new uniform customs duty, combining seven import fees: customs clearance, sanitary, veterinary and phytosanitary inspection, radiation, ecological control and other fees. Ukraine employs a two-tiered system of general (full-rate) tariffs and preferential (partial-rate) tariffs. Import duties largely depend upon whether a similar item to that being imported is produced in Ukraine. If so, the rate tends to be higher. However as a result of the Free Trade Agreement between CIS countries, dried fruits produced and exported in Moldova are free of import duty in Ukraine. Further information on Ukrainian tariffs can be obtained from the website: http://www.customs.com.ua/php/document.php?ISN=21840 Non-tariff import regulations applied in Ukraine include:  Import licenses  Import quotas  Registration of contracts  Import restrictions/bans  Certification  Narcotic drugs control Page 9  Veterinary, phytosanitary and ecological control At the present time, import quotas are generally only applied for cane sugar imports. (Source: ingredients.) Import documents needed for import of dried fruits in Ukraine are as follows:  Invoice  Packing list  Certificate of Quality (Сертификат качества)  Certificate of Origin (Сертификат происхождения )  SMGS - СМГС накладная (ж/д)  Certificate of fumigation (Сертификат о фумигации)  Phytosanitary Certificate  Sertif Aflotoxines on the request for additional payment +USD 10/MT (Сертификат на афлотоксины)  Export declaration  Insurance Source: http://www.arahis.com/documents.htm - shipment

Marketing standards Moldovan exporters would be wise to familiarize themselves with international marketing or quality standards, as these are minimum standards that dried fruit producers in other countries – Moldova’s competitors - apply.

1. There are no EU marketing standards for dried fruits. However, rules governing EU minimum standards for prunes (which form part of aid schemes intended for EU growers - not marketing standards) can be found in 20 languages at: http://europa.eu.int/smartapi/cgi/sga_doc?smartapi!celexplus!prod! CELEXnumdoc&numdoc=31999R0464&lg=en These standards should be of interest to dried fruit producers.

2. UN/ECE standards The Economic Commission for Europe of the United Nations (UN/ECE) has established standards for the marketing and quality control of a range of dried fruit including dried apples, apricots, dates, figs, grapes, pears and prunes.

These standards are in line with the demands of EU countries and can be downloaded in English, French or Russian from: http://www.unece.org/trade/agr/standard/dry/dry_e.htm

3. USA standards These standards are only offered in the English language, and they do not legally apply to European countries. However, they are worth consideration by Moldovan exporters as they set out the minimum standards applied by the USA as a major dried fruit manufacturer, consumer and exporter to markets of interest to Moldovans.

USA standard for dried prunes: http://www.ams.usda.gov/standards/drdprune.pdf USA standard for dried apricots: http://www.ams.usda.gov/standards/driaprco.pdf USA standard for dried apples: http://www.agribusinessonline.com/regulations/grades/grades_us_dried/dhapples.pdf Page 10 Examples of quality (and prices) offered by Chinese exporters to Ukraine, can be found in Russian, on the Chinese website: http://www.arahis.com/price_dfruits.htm

INFORMATION ON COMPANIES INTERVIEWED

The growth in the retail sector and increasing presence of European retail chains has resulted in increased retail competition in Ukraine and contributed to the growth in sales of processed food products. Ukrainian supermarkets maintain a wide product mix, and the largest proportion of imported goods. Despite the rapid expansion of supermarkets in large urban areas, many food products continue to be sold through open-air markets and small convenience stores.

Supermarkets Interviewed

1 Megastore “Karavan” The largest mall in Ukraine (total area 42 thousand square meters). www.karavan-megastore.com.ua

2 The Austrian supermarket concern Billa first arrived in Kiev in 2000. There are currently eight Billa supermarkets in Ukraine and three of them are in Kiev. http://www.kiev.info/shopping/billa.htm

3 Furshet supermarkets. The Furshet supermarkets range in size from 1,200 to 5,000 square meters, and specializes in selling exclusive delicacies, produced in Ukraine and abroad http://www.kiev.info/shopping/furshet.htm

4 The “Silpo” supermarket network, numbering 40 stores in different cities all over the country, is a recognized leader on the market in Ukraine, with stores in Kiev, Odessa, Dnepropetrovsk, Zaporozhye, Rovno, Nikolaevo, Chernovtsy, Cherkassy and many other cities. http://www.kiev.info/shopping/silpo.htm

5 METRO CASH&CARRY hypermarkets are located in: Kyiv (Teremky), Kharkiv Dnipropetrovsk, Kyiv (Pozniaky), Odessa , Lviv, Kyiv (Petrivka), Donetsk, Luhansk and Kryvyi Rih. http://www. metro .ua/en/about.htm

6 “Mega Market” supermarket chain includes 4 supermarkets, of which 3 are located in Kiev and one in Brovari. There is also an on-line “Megamarket” supermarket. http://www.kiev.info/shopping/megamarket.htm “Velika Kishennya” (Kviza Trade) The supermarket network “Velika 7 Kishennya” includes 29 entities (25 supermarkets and 4 hipermarkets), based in Kiev and Kiev region, (Obuhov), Harkiv, Kherson, Mikolaiv, Dnepropetrovsk, Ivano-Frankovsk, Poltava, Ujgorod, AR Krimea (Yalta), Lutsk.

Wholesalers/importers Interviewed

1 ARIOL LTD. is the leading operator in the Ukrainian dried fruit market. In 2000 the company concluded the contract with the manufacturer for exclusive promotion of

dried fruits of the TM “AMPA” in Ukraine. 2 “ARO - METRO” is a company importer: the official Metro distributor. It offers a large assortment of food products including dried fruits. 3 “ Good-food” Group – A Russian producer of dried fruits whose product range includes a wide variety of dried fruits and nuts. The company sells both bulk packed products (to be packed according to the weight required by the consumer), and pre- packed retail packages already weighed (generally 250g, 500g etc), labeled with weight and price. The company’s products are present in a large variety of supermarkets and shops.

Sources of supply Dried fruits are produced in Ukraine in small amounts. According to the companies interviewed, around 95% of the dried fruits present on the market are imported and only 5% are of local origin. Dried fruits are imported into Ukraine from CIS neighbouring countries, as well as from California, USA (25-30%), from Chile (20-25%), Moldova (20-25%), France (10-15%) and Iran. According to the survey respondents the main supplier of dried apples to Ukraine is the Russian Federation (about 45-55% of imports). Another big supplier of dried apples is China (40-45% of imports). Dried apples are also imported from the Republic of Moldova and Poland (5-10), with some produced domestically (1-2%). According to the survey, sour cherries are sold in two supermarkets out of six (Furshet and Karavan). The main suppliers of these fruits are China and Thailand, plus some local production.

Seasonality The survey respondents indicated that during the regional harvest seasons of June to October, Ukrainian and regional dried apples, prunes and cherries are scarcely available. From November to May local dried fruits are available in large volumes, along with products from Moldovan and Russia. This is confirmed to some extent by export statistics for Moldova from the Moldovan State Customs Department, see Figure 4. Imports from other countries are available all year round but in small quantities. Figure 4: Export seasonality of dried fruits from Moldova, t

2004 2005 140 250 120 200 100 80 150 60 100 40 50 20 0 0 I II III IV V VI VII VIII IX X XI XII I II III IV V VI VII VIII IX X XI XII Source: State Customs Department, Rep. of Moldova

Major Clients And Markets Nearly 97% of foodstuffs consumed in Ukraine are produced domestically. Imported food products are mainly those not produced domestically, including dried fruits and snack foods. Demand for dried fruit including apricots, prunes and raisins is particularly strong in the Page 12 expanding Ukraine food processing sector. (Source: US Gains report, Ukraine, Food Processing Ingredients Sector 2005) In 2003, according to official GOU statistics, there were 597 open-air markets selling foodstuffs (10% less than in 2002`), of which 99 markets are located in Kiev with a total floor space of 599,000 square meters. Sales of dried fruits are strong in open-air markets. In many cases, these products are smuggled into Ukraine and remain popular among consumers due to competitive prices; the majority of consumers believe that purchasing food at open-air markets is cheaper than in supermarkets. Some central markets, eg Bessarabskiy and Vladimirskiy markets in Kiev, are used by foreign diplomats and the Ukrainian elite. These markets are of interest to exporters of mixtures of exotic dried fruits, nuts, and other products. The number of convenience stores in Ukraine is significant and is presently the second largest retail business sector after open-air markets. Convenience stores are located all over Ukraine, in big cities, towns and big villages. Many of them are privatized Soviet convenience stores that have not changed their trade practices much. Facing stiff competition from supermarkets, many convenience stores have switched to 24-hour operations and have decreased the number of food products offered. They are popular in small Ukrainian towns where construction of supermarkets is not profitable. Small kiosks that offered a wide variety of food products, tobacco and alcoholic beverages, are quickly losing popularity. It is expected that competition among retail chains will increase, taking into consideration that existing players will continue to expand and new players will enter the market; supermarkets such as Billa, Mega Market, Furset and others have announced their intentions to increase their numbers of units in Ukraine in 2007-2008. Wholesalers supply products to supermarket chains and other clients such as medium and small food shops, hotels and restaurants all over the country. According to the survey, the majority of respondents have a network of branch offices throughout the country, but mainly have their headquarters in Kiev. The respondents indicated that only wholesalers import dried fruits, but not supermarkets. Channels of distribution Usually processors/packers of dried fruit carry out limited processing and conditioning of product, but are involved mainly in re-packing into smaller packs for the retail, catering and industrial sectors. The size and branding of these products depends on the marketing strategy of the processor/packer. Some of them have their own brand, whilst others pack according to their customers' specifications, e.g. for supermarkets. Larger packers/processors are increasingly buying directly from processors/exporters in the countries of origin.

Scheme 1. Distribution channels for imported dried fruits

Foreign producers (Commercial use)

Importers Processing companies

Large processing companies (Consumer use)

Small processing companies Wholesalers of food products Wholesalers of confectionery products

Retail shops (supermarkets, shops, confectionery outlets)

Consumers

Produce Requirements and Preferences According to the interviewed importers the general requirements for dried fruits are the following: good appearance, absence of impurities and the acceptable humidity level of production.

The most common specifications mentioned by interviewed importers were:

 the minimum size of dried prunes required is about 30-40 mm in diameter. Some importers however require the size of dried prunes to be 40-50 mm.

 For dried apples and cherries, customers interviewed required sugar content of 65%, +/-5%.

 In addition, for dried apples, specifications state that they should be between 18-24% moisture, with a maximum SO2 level of between 1700-2000ppm.

Packaging

According to the survey respondents in Ukraine, the highly competitive environment in the Ukrainian dried fruit market is becoming increasingly difficult. Some years ago the agent’s commission (also known as a ‘margin’) for selling dried fruits was about 50%, now it is around 5%. One respondent stated that a trader’s revenue from selling a kilo of dried fruit is now around 5-10USDcents. In order to add value and increase returns, many entrepreneurs have begun to pack dried fruits into retail packs. By doing this, a businessman can increase earnings by 5-10 times, however, the cost of a packing line is around €100-120 thousand. The majority of producers prefer to save financial resources by hand packing imported dried fruits into shallow polystyrene trays. Another type of low cost package is the polyethylene pack. It can be an economy pack – a simple polyethylene pack with a sticker carrying the company logo and product information, or a highly colored polythene pack printed with product information.

Figure 5: . Retail pack samples Package types Package type Example

Polystyrene trays Plastic packaging (economy packs ) Plastic packaging (economy packs )

) Polyethylene sacs (economy) Example of a shelf with packed dried fruits in a Ukrainian supermarket

Labeling All food products sold in Ukraine must have Ukrainian language labels attached to the package that contain the following information: 1) Name of food product; 2) Nominal quantity of food product (weight or volume in metric measurement); 3) List of all ingredients found in the food product, including other food products and food additives used; 4) Nutritive values and energy, if applicable; 5) Expiry date or the date of production with indicated shelf life; 6) Storage conditions; 7) Name, country, address of producer, packer, exporter and importer of the product; 8) Terms of use (if any); 9) Presence of genetically modified organisms (GMO); 10) Consumption of food product warnings for certain consumer categories (children, pregnant, senior people, athletes etc.)

Logo/Brand In Ukraine promotion of dried fruits is only just beginning, and the market is still open for new brands. One of the most popular brands on the market is “Santa-Vita”. The company “ARIOL LTD

“has studied the competitive environment and the structure of the customer demand in the market of dried fruits and nuts. It became evident that there were unoccupied segments in the market, and segments with low competitive activity and unhappy buyers. Market research confirmed that there is some space in the market for the entrance of new trademarks. The company carried out further research on:

 expectations of consumers relative to the product (stability of its quality, attractiveness and convenience of package, benefit for the health, optimum correlation “price – quality”)

 the main reasons for consumer choices;

 the attitude of consumers to dried fruits in general;

 the low level of knowledge about the profit of dried fruits. which suggested an increasing interest in a healthy way of life and healthy nutrition. The research led to a differentiated promotion policy for the TM “Santa Vita” According to survey respondents, besides TM “Santa Vita” as a leader, other trademarks include “AMRA”, TM “Aromix”, TM “Good Food”, TM “Jasmin”. Dried fruits as a product still needs development. Nevertheless some progress has taken place. Some years ago the main volume of dried fruits and nuts were sold in nameless packs, now there are tens of trademarks present on the market. Figure 6: The most widespread trademarks on dried fruit market of Ukraine

Source: Respondents’ data

Varieties and Trends In the last few years the change in market structure/presentation has lead to growth in market share for exotic fruit, dried fruit and berry mixes, and fruit and nut mixes. According to this survey, Ukrainian traders classify imported dried fruits by shape and origin (but not by variety).

Prices Wholesale prices Indicative wholesale prices for dried fruits sold by one wholesaler can be found in Russian at: http://naturproduct.com.ua/price.html Figures are available for product sold by the kilo, in bulk packs or small pre-packed retail packs, alongside figures for buyers of large quantities of fruits.

These figures are not the prices paid to growers/processors, but do give a good indication of comparative values for a range of different products. Retail prices Retails prices with supermarkets, for any product, are always much higher than prices paid to suppliers. The retail mark-up (margin) does not represent only profit; it also covers the very significant cost of building and equipping stores, recruiting staff and supplying their uniforms, maintaining supermarkets/hypermarkets warm in winter and cool in summer, the cost of centralized distribution etc. Retail prices for dried fruit vary depending of many factors, including: product quality, quality of packaging, brand and support for the brand (TV advertising, promotions etc), package capacity (smaller packages are relatively more expensive to pack), etc. Some samples of Ukrainian retail prices 2005) can be seen in Table 11 below.

Table 11: Dried fruit prices in Ukrainian supermarkets, UAH / pack / kg Pack Price,Price, Supplying Supermarket Capacity, g UAH USD country Dried prunes Dried prunes 100 4,8 0.9 Silpo Ukraine Moldova, Dried prunes (Moldova) 200 8.3 1,7 Furshet “Aromix” TM Karavan- Dried prunes 200 6,8 1,4 Ukraine Megastore Dried prunes 200 8.8 1.8 Silpo Ukraine Dried prunes, large sized, sold by kg 1 000 40.0 8.0 Silpo Ukraine Dried prunes, medium sized, sold by kg 1 000 36.0 7,2 Silpo Ukraine Dried cherries Ukraine, Dried cherries without stones 125 8.8 1,8 Furshet TM "Jasmin" Karavan- Dried cherries without stones 1 000 47.8 9,6 Ukraine Megastore Dried cherries with stones, sold by kg 1 000 52.8 9.6 Silpo China Dried apples Karavan- Dried apples 200 5.0 1,0 Ukraine Megastore Dried apples, rings, weighted out 1 000 30,0 6,0 Silpo Russia Fruit mixes Dried fruit mix (dried apples, dried apricots, Karavan- 350 3.9 0,8 Ukraine dried prunes) Megastore Karavan- Dried fruit mix (dried apples, dried pears) 412 7.6 1,5 Ukraine Megastore Dried fruit mix (apples, pears, prunes, Karavan- 500 15,64 3,1 Russia apricots, peaches) Megastore Source: Respondents’ data

Major Competitors Ukranian imports of dried fruit have grown due as a result of the shortage of locally produced dried fruit, and the unavailability of some types of dried fruit production in Ukraine (eg tropical fruits). The competition on the market is increasing, and the present market players are those, who can offer good quality products at competitive prices.

Taking this into account Moldovan producers will have to work diligently to access the market, and hold on to and expand their share of the market. As the survey showed the major competitors on the Ukrainian dried fruit market are as follows: for dried prunes – USA (California), Chile, Iran. France, Poland, Greece, Austria, Germany; for dried apples - Russian Federation, China, Hungary, Netherlands, Poland; for dried cherries – mainly China, Thailand etc.

Moldovan Dried Fruits Perceptions And Recommendations According to the survey the majority of interviewed supermarkets and wholesalers sell dried cherries and apples, and practically all shops sell dried prunes. Dried fruits from Moldova were found in only one supermarket (Karavan). Other supermarket representatives expressed an interest in buying Moldovan dried fuits only if the interrelation between price and quality is acceptable, and Moldovan dried fruits suppliers meet contract requirements for volumes, quality and timeliness of delivery. It is advisable for Moldovan exporters of dried fruits to Ukraine to have international quality certification, such as ISO, HACCP etc. According to the respondents, even when dried fruits are delivered in bulk they should comply to some standard requirements, such as being attractively packed in strong packages which protect the products from moisture. At present the majority of exporters are concentrated on the Kiev market, where the purchasing power is the highest in Ukraine and the business climate is the most favorable. However Kiev is not the only trade hub in Ukraine, and it was recommended that Moldovan exporters consider other regions, and look for distributors with nationwide capabilities, including those in the cities of Lviv, Odesa, Zaporizhzhya, Donetsk and Kharkiv. These cities are in important industrial regions of Ukraine and are densely populated. Survey repondents, including one major supermarket, reported that one of the main problems of Moldovan dried fruit is the cheap packaging used. As the first thing the consumer or buyer sees is the package, Moldovan exporters are strongly advised to use good quality, colourful packaging for their dried fruits. With regard to short term market strategy, Moldovan dried fruits exporters should take into account dried fruit consumption growth in such sectors as musli production. Supplying industrial clients is considered by some to be more profitable than supplying retailers, because of the cost of branding and buying shelf space for retail sales. However, the industrial market is already well established/supplied and the competition to enter this market is very tough. Another recommendation from a survey respondent was that exporters providing retails packs of dried fruit might consider focusing attention to a niche in the "children's" brands, which could become a very promising segment of the market.

NOTE: Contact information for buyers in this market may be obtained from Agribusiness Development Project (ADP): str. Bulgara 33/1, Chisinau, Republica Moldova 2001; Tel: (373 22) 577-930, Fax: (373 22) 577-931; Email: [email protected] Website: www.cnfa.md

Annex 1. List of reference materials

1. State Customs Department, Moldova 2. http://www.liga.net/ligabusinessinform - site of a consulting company 3. http://www.agriangency.com.ua - site of a consulting company 4. www.karavan-megastore.com.ua - “Karavan-Megastore” Company site 5. http://www.kiev.info/shopping/billa.htm - information about “Billa” supermarket 6. http://www.kiev.info/shopping/furshet.htm - information about “Furshet” supermarket 7. http://www.kiev.info/shopping/silpo.htm - information about “Silpo” supermarket 8. http://www.metro.ua/en/about.html - METRO cash & Carry Company Site 9. http://www.kiev.info/shopping/megamarket.htm - information about “Megamarket” supermarket 10. http://proretail.com.ua/kont.php?c_i=269 - information about “Megamarket” supermarket 11. http://www.arahis.com/documents.htm#shipment – importing company site 12. Eurostat Comtext 13. www.kompass.md – international business catalog 14. Market Study for Moldavian Dried Prunes on the German Market, CNFA, 2005