Horticulture 2020: value chains under COVID 19

Олександра Гармаш

Change of the business climate, both in the world and in Ukraine, affects all business no matter small or big. However, extreme changes - natural or economic - always have a more negative impact on certain categories of citizens. So, let's find out who may have the greatest losses among the fruit and vegetable producers from COVID-19, namely quarantine measures, and what can be done to help the most vulnerable categories. 

To begin with, let's consider the types of supply chains of fruits, vegetables and honey which are available in Ukraine, and who they are represented by. 

The announcement of quarantine and the situation of emergency can influence on market relations. This should be especially notable in export supply chains and in large wholesale markets (for example, Nezhdaniy, Shuvar, Stolichniy, etc.). These chains are mainly represented by medium and big businesses, both producers and traders.  

We should expect no less failure in supply chains to local wholesale and retail markets, HoReCa, as well as to roadside markets. Small and medium businesses were usually there, as well as small and micro businesses – at the roadside markets. 

 Currently, the supermarket supply chain is the most stable. After the adoption of the Law “On amendments to some legislative acts of Ukraine, aimed to prevent the occurrence and extension of coronavirus disease (COVID-19) on March 17, 2020”, there is an opinion about the possibility of contractual obligations unfulfillment. In fact, those who have been working under these contracts and obligations have already realized that everything is not so easy, and this is confirmed by the Law “On Chambers of Commerce and Industry in Ukraine” as amended on March 17, 2020 (although it should be noted, that the conditions of force majeure can be set individually in each contract). In the supply chains between farmers or traders and supermarket chains, who have established steady relations in the past, the changes are unlikely regarding the appearance of new players or increase of competition between the participants. What is meant? There are certain binding conditions: payments with VAT, delayed payment, certificates of quality and origin, etc. These conditions have always been insurmountable for small business, so they remain an obstacle for today. 

Another one of the so-called supply chains is the supply of goods to households, that is, to the final consumers or “Door-to-door delivery". Before the changing of business environment, the supply chain “Door-to-door delivery” was mostly attractive to small agricultural producers, who sold primary (unprocessed) products mostly from yards of the houses, and HoReCa was involved in the supply of food (ready meals or semi-finished products). As entering this market requires basically determining whom to sell and where to buy the product without the official contractual obligations, delayed payments and without necessity to provide documents for the product, this chain should attract the attention of the most players of horticultural market and lead to great competition between them. 

So, who can lose the most from the current course of events? 

Small and micro-businesses have been suppliers into the most supply chains of horticultural products. Their goods were exported, sold to large wholesale markets and local wholesale markets through traders (including middlemen). In addition, small farmers delivered their goods to other markets, some of which are closed now or operate with limited access to them. The increase of competition between participants is expected on other markets. 

The transformation of work to new conditions is much easier for the medium and especially big business than for a small and micro business. The rural people, small producers of fruits, vegetables and honey can lose the most. Among UHBDP clients 57-65% of producers have income only from agriculture. Including: 

  • * families – there are more than 7500 spouses which is 15 000 people
  • * single women from rural area – there are more than 1900 alone ones

New working conditions this is a challenge to change approaches and directions of work through understanding of clients needs, where they are, how to find them and persuade to buy from “me”. 

Now let’s see what needs to be done for this. 

There are three conditions for a small business to accept and fulfill this: 

  • online presence
  • guarantee of product safety 
  • cooperation. 

Cooperation is necessary to meet the needs of two supply chains: trader and “Door-to-door delivery”. Why are cooperation and partnership a challenge for most agricultural producers? Because during the annual survey, 66% of producers noted they had done nothing in 2019 to develop partnership relations with others. But a trader needs guaranteed to get a certain volume of goods, of a certain quality and at a certain time, even in quarantine period and restricted movement. 

At the present time the guarantee of product safety for a final consumer means a product, that is packaged and a seller with personal protective equipment (PPE). If these conditions are not possible to fulfill on your own, then you will have to look for cooperation with those (including traders), who are able to fulfill the consumers’ requirements. 

Online presence is an opportunity now to position oneself at the mass market, that has moved to the Internet. These are various messengers (Viber, etc.), social networks (Instagram, Facebook), trading platforms or own sites. A certain category of small business has already found itself and its clients online. However, significant part of rural population is left without sales channels, especially those who sell vegetables and consider online sales or online presence as follows: “Why should I waste my time which I lack anyway. I’d better take it to the market; there someone will buy it anyway”. 

Nowadays, the world is changing very quickly. And those who follow events, learn, have access to the information and, accordingly, have more chances to resist and adapt to the changes. Being flexible in a modern world is a chance to keep business, it is an opportunity to provide for a family and develop. 

 UHBDP Value Chain Development Specialists have already started to help rural population, including single women, to establish an online presence, navigate the online trading platforms, find and maintain contacts with local traders.

Related Items

  • No comments found

Leave your comments