Information for fruit and vegetables business in CIS
A Wholesaler of Frozen Food Goes Fresh
Oksana Bondarivs’ka, 42, a vegetarian, had always had problems finding fresh quality produce in her district. Although there was a small bazaar right across the street and several small retailers who sold produce off and on at the bus station, the assortment and quality of produce was often inadequate and disappointing.
About a year ago in her neighborhood she discovered Rukavychka (The Mitten), a newly opened supermarket with a fruit and vegetable produce department, which has finally satisfied her dietary needs. "The quality of the fresh produce I obtain here is always high, and they have a variety of fruits and vegetables. Now, instead of wasting my time searching for one product or another at the bazaar, I always come to Rukavychka and find everything I need," explained Oksana.
The fresh produce section in the Rukavychka supermarket, a wholly owned subsidiary of Lvivkholod, was introduced from a suggestion by the Lviv office of the Agricultural Marketing Project (AMP), which is funded by the U.S. Agency for International Development. This emphasis on product variety has added value to Lvivkholod’s stores and made them stand out among competitors.
A desire to develop new marketing channels and new customers helped Lvivkholod to survive the difficult period of transition from a planned economy to a free-market enterprise.
Established in the Soviet era, Lvivkholod was mainly a wholesaler of bulk frozen meat and fish products. Operating in the state-controlled planned economy for more than 50 years, the company never encountered any marketing and distribution problems. All the products were sold to a predetermined group of customers at governmentally established prices. Under these conditions issues of product quality, competitiveness, customer orientation and strategic planning were irrelevant.
In the early 90s, with Ukraine undergoing economic transformation and marketing channels collapsing, Lvivkholod had to establish a new way of doing business or disappear, as many other planned-economy enterprises already had.
After privatizing the company, Lvivkholod management completely overhauled its ways of doing business and decided to expand from wholesale into retail. Management reorganized its storage facilities in Lviv into a cash & carry supermarket and, began changing outdated grocery stores in small-town areas into modern food stores. Being ahead of competition in the local food products market, Lvivkholod successfully transformed its business model and managed to occupy a stable market position in the region. However, as a result of growing purchasing power and increasing investment in the local retail industry, the competition grew stronger from year to year. Many of Lvivkholod’s customers now had greater choice as to where to shop and what to buy. The market now demanded the availability of wider product assortments, more shopping convenience and flexible pricing policies.
In 2003, Lvivkholod opened its first Rukavychka supermarket. The same year the company established a close working relationship with the recently opened Lviv office of the Agricultural Marketing Project. Project specialists consulted the company on modern wholesale and retail trade practices and came up with the suggestion for setting up a fruit and vegetable produce department in the company to better meet customers’ needs. AMP also assisted the company in developing its marketing and strategic plans. Lvivkholod’s management decided to implement the suggested idea and hired three employees to set up a fruit and vegetable produce department.
As a result, in December 2003 the company placed fruit and vegetable displays in its Rukavychka supermarket. Subsequently, Lvivkholod opened five more stores with fresh produce sections. Every week these modern supermarkets now sell about 2 tons of fruit and vegetable produce. Up to 17 farmers supported by AMP supply directly 20% to 80% of the produce volume depending on the season. As it turns out, not only Lvivkholod but, farmers too have benefited from the company’s new strategy.