It’s hard for a small juice producer to compete with giants, Sady Prykarpattia owner says. Yet, his company was able to find its niche, keep quality at a high level and build a modern production facility with good prospects of exporting to the EU and Canada.
The Western Ukrainian company Aronia, known for its brand name Sady Prykarpattia, grows apples and produces natural NFC juices.
Beginning from September, when the harvesting period begins, the company’s co–owner Nazar Romaniv, whose interview was prepared as part of the special project BiznES Together, has continuously been on the production site. “There were two positive outcomes of the last year’s harvesting period”, the entrepreneur says, “an excellent harvest itself and the fact that I lost 12 kilos“.
Sady Prykarpattia is a family business founded by Nazar Romaniv’s father. In his interview, the entrepreneur speaks about whether it is difficult to create a production process in Ukraine compliant with European standards. He also shares the experience of how a small juice producer can compete with the market’s leaders.
Nazar, how the idea of setting up the production of juice and not just sticking to growing apples was born?
We have 150 hectares of apple orchards, with 3 thousand trees on every hectare. When our children were born, we decided to make apple juice. We bought the Austrian-manufactured equipment with our own money (approximately 80 thousand euros), and began squeezing the juice.
Afterwards, we expanded the range of flavors. Next to our gardens grew chokeberry (aronia) bushes. At first, we thought of cutting them, but then I tasted them, and the taste was excellent. So, I decided to add this berry to the apple juice, and the result was simply fantastic. That’s how the apple and chokeberry juice was born.
Today, apple sales generate 90% of income, and the remaining 10% comes from juice.
How much apples do you gather in your orchards? How much of them are used to make juice? How much do you sell?
Every year, we gather almost 2.7 thousand tons of apples, of which 400 tons (10-15%) is used to make juice. Pear trees yield only 10 tons, as they are only beginning to bear fruits.
Overall, we used to make 200 thousand liters of juice in better years. After the outbreak of war in the East, the production output has declined.
What requirements does a Ukrainian company have to meet to operate under European standards?
We decided to make our production process as close to European standards as possible, because we plan to export our products.
In Europe, there are legislative requirements. The production process must be safe (HACCP-certified – editor’s note) and have a functioning quality control system (ISO-certified – editor’s note). We do have these certificates.
All requirements are adequate. For example, windows at production facilities must be protected by a special film: if a window breaks, it would fall down in a whole piece. Or, personnel are required to wear caps and wash hands with a special disinfectant. You can’t even imagine how hard it was to persuade our employees to adhere to these basic requirements. In the beginning, we didn’t even have a partition between the room with the juice press and the kitchen. A year or two later, we began to change. All paid with our own money.
UAH 600,000-800,000 was invested in modernization of production facility.
Our European trade partners have their own requirements. Supermarkets are very picky, always requiring a Global Gap certificate (a food safety certificate for, in particular, fresh vegetables, fruits and berries – editor’s note) for apples. It requires the producer to use the right plant protection products and fertilizers and adhere to harvesting rules. There are also requirements to water used in the production process, etc.
I believe that all Ukrainian businesses, both small and large, would eventually come to the point of complying with European requirements to receive the necessary documents.
Are requirements in Ukraine softer?
To sell juice in our country, a producer needs to have an ІSO and an HACCP certificate. A sanitary-epidemiological and laboratory analysis is also required for every batch. This document contains information regarding the presence of phytobacteria, acidity, sugar content.
In the past, our supermarkets did not even require compliance with HACCP production safety requirements, but today, they do introduce these requirements as Ukrainian law is being approximated to European legislation.
Did you set up juice production yourself, or engaged consultants?
We invited two foreign consultants to check our production process – one from Germany (SES) and the other from the Netherlands (PUB). Both have experience in growing and launching juice production. We paid only for their trip from Lviv to Sniatyn, accommodation and meals. All other expenses were picked up by organizations from these countries.
We visited apple orchards and juice production facilities in the Netherlands, Germany and the United States. We also attended a trade fair in Canada, all paid for by grants and various support programs.
I am sure that a business can find countless opportunities via the Internet. We also won a 10 thousand-euro grant from the European Bank for Reconstruction and Development and installed an accounting, technological and financial reporting management system. Moreover, we have developed a new website and a label (click here to learn more about access to financing at EU4Business — editor’s note).
You are “small” comparing to leaders of the Ukrainian juice market. How do you manage to compete with them, and can you compete at all?
Our juice is represented at supermarkets with five items only, whereas large producers have shelves five meters long, bringing their juices in truckloads.
However, we have a niche. We offer 100% juice, containing 2 kg of apples in every one-liter bottle.
At the first markets of Ukrainian brands and producers, our sales were crazy. Hands were aching from carrying juices from the truck to the sales outlet. But later, the demand at markets began to decline.
I believe that the 100% juice cannot be mass-produced. The operating scale of supermarkets worsens quality. But I think that you should occupy you niche and make a quality product. I promised myself from the very beginning that I won’t mix juice with water.
What retail chains do you work with?
At first, I was visiting retail chains myself and imploring them to work with us. Our juices have first appeared at Fourchet, where they warned us at the outset that with one apple juice item, we won’t be able to compete with other producers. Still, I persuaded them to give us a chance, and the sales began. Later on, we made a line of five flavors. Today, we no longer work with Fourchet. When the conflict began, I continued to make shipments, but the chain refused to pay. Therefore, we discontinued shipments and took away all the remaining stock from the chain’s 114 supermarkets across Ukraine.
Presently, we work with Megamarket, Good Wine, Novus, eco shops, drugstores and organic food stores in Kyiv, Sumy, Khmelnytskyi, Dnipro, Vinnytsia, Kherson, small towns in the Ivano-Frankivsk, Transcarpathian and Zhytomyr Oblasts.
We also work with restaurants, in particular, with Paul and Volkonsky in Kyiv.
Is it hard to make deals and work with them?
With restaurants, it’s easy. Large retail chains are difficult.
Doing business with small shops is much easier: they pay right away, with no delays whatsoever.
Nazar, do you have plans to export your juices?
We had talks about export of our juices to Europe and Canada, but couldn’t agree on financial aspects. Logistics are expensive, because juice in glass bottles is heavy.
The free trade area made it easier to do business with Europe. Ukrainian producers of apple juice can sell it in the EU without an import duty. But the problem is that these sales are subject to quotas, and unfortunately, these quotas are not very large. In fact, the entire quota can be exhausted in one waybill.
Still, your main area of business is the sale of apples. Do you export them?
Yes. We sell apples in EU states — Norway and Sweden. This year, I hope we also bring Ukrainian apples to the market of the United Arab Emirates.
How you were looking for partners abroad?
Ukrainian entrepreneurs often complain that it’s very hard to find partners in other countries.
But in fact, everything’s simple: you write to 100 companies operating in another country, of which only three would reply; later on, two would drop out, and one would agree to work with you. That’s the whole secret (Nazar smiles).
Was that how you met your partner in Norway?
No, this story is different. Last year, the Norwegian Chamber of Commerce and Industry organized our meeting with one of the largest fruit importers. This company immediately began to demand everything: analysis of water we use to water and wash apples, a Global Gap certificate, analysis of air. Then, we met with a smaller importer (smaller companies have less requirements), to whom we provided an analysis confirming the absence of nitrates and pesticides (that was enough) and shipped three truckloads. Soon thereafter, the Norwegian partner decided to buy cheaper apples in Poland. That was how our cooperation ended. But comes new season, and we shall see.
What are the difficulties in doing business with Europeans?
The biggest problem is logistics. There is a trouble every time we make a shipment. In the entire Ukraine, there are only five vehicles that can deliver apples to Norway. These are correctly equipped trucks compliant with the Euro-5 standard (which regulates the emission of toxic substances with the vehicle’s exhaust fumes – editor’s note).
How much does the delivery of apples from Ukraine to Norway cost?
We pay EUR 3,500 per 20-ton truck.
For comparison: Polish producers deliver for EUR 1,500.
So, we are less competitive. The difference of 2 thousand euros comes from the fact that there are only five vehicles in the entire Ukraine capable of making this delivery. We take apples to Poland, and there, load them onto a ship that delivers them to Norway.
What could you recommend the entrepreneurs who, like you, are trying themselves in Ukraine and in foreign markets?
My advice to them is not to be afraid, to use all opportunities to promote their products abroad and be honest to consumers as regards the content and safety of your products.
The article was originally published on Delo.ua