Information for fruit and vegetables business in CIS
Agrodvir Cooperative – Farmers’ Commitment to Succeed Together
Zhovkvа is one of the regions in Lviv oblast where the fertile soil and weather conditions are quite favorable for growing a variety of fruit and vegetable crops. Historically many local small-scale farms specialized in producing these crops. Although these fruit and vegetable growers are generally successful in their production activities, yet they increasing face marketing problems. In January 2004 nine farmers came to a thought-out decision to band together, form a cooperative, and market their products jointly. They saw quick returns in the first marketing season – the cooperative’s gross revenues amounted to nearly USD 145,000 in 2004!
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| Pero Fedina, the Leader of Agrodvir cooperative, presents the produce |
The future coop members first thought about the coop idea in six years ago, when they participated in Farmer to Farmer and Western Ukraine Initiative programs implemented at that time in Ukraine by the American cooperative Land O’Lakes, Inc. The farmers had an opportunity to witness benefits from cooperation and its economic impact on their study tours to Hungary and Poland. They observed how Polish and Hungarian farmer cooperatives members significantly improved their economic performance by making joint purchases of input supplies, using custom services, and, most importantly, taking advantage of selling their crops on more favorable terms through their cooperatives. The Ukrainian farmers learned that through the coop their Eastern European colleagues could reduce their procurement costs by up to 20%. Additionally, working with wholesale buyers and forming larger crop shipments helped Polish and Hungarian farmers to compete effectively in their markets and save significant amounts on their trucking costs. After these study tours, six farmers developed an informal initiative group to work out joint solutions to their day-to-day problems and gain benefits from the mutual custom hire assistance and marketing support.
However, the ever-changing markets set forth new requirements. Switching from working with individual producers, most buyers of fruit and vegetable crops looked for preferred suppliers - legal entities able to meet specific contract terms and fully responsible for many important marketing functions. This would simplify buyers’ accounting and payment operations since fewer contracts required less effort and time on their part. To take advantage of this market trend, the farmers made a crucial decision to form and register an agricultural service cooperative with assistance from Agricultural Marketing Project (AMP) specialists. AMP’s cooperative development specialist and the legal advisor helped the farmers to prepare all the necessary registration and charter documents. They also explained the importance of hiring qualified coop employees and assigning their responsibilities, and assisted the farmers in setting up coop accounting and tax payment procedures. As a result, on February 6th 2004 the agricultural service cooperative Agrodvir was registered. By that time three more Zhovkva raion farms had joined the original six members of the informal group. Currently the Agrodvir members farm a total of 255 hectares of lands including 12 hectares of orchards but there’s plenty of room for expansion thanks to new marketing opportunities.
The members of Agrodvir cooperative reaped the benefits of cooperation during the very first year of their coop operation. The coop managed to develop contract relationships with several processing plants. For example, Agrodvir was successful in getting a supply contract with the Vattyus flash freezing processor for 100 tons of potato, 100 tons of carrot, 225 tons of bulb onion, 25 tons of white cabbage and 5 tons of Brussels sprouts. The cooperative profitably met all the contract obligations. In 2004 the coop sold members’ crops through the several marketing channels: 79.9% went to budget institutions (military bases, hospitals and schools), 16.7% to processors, 3.2% to wholesalers, and 0.2% of produce was sold in retail fresh markets. This year the coop members plan on fulfilling a major contract with Intermarket Wholesale Company and other contracts that are now being finalized.
The clear vision and new approaches for their business development demonstrated the cooperative members allowed them to win a grant from Agricultural Marketing Project Grant Program. The grant program funded the purchase of drying and ventilation equipment for a total of USD 16,000. The grant covers only about 12% of the initial investment outlay to implement the coop’s business idea. The majority of the investment will be provided by the Agrodvir members as their project match.
The cooperative plans to produce dried carrot, cabbage, red beets, fresh herbs, onions, apples and berries. It should be noted that the coop can process those fruits and vegetables that can’t be sold on the fresh market and would otherwise go to waste because they don’t meet certain quality, size or other requirements. Some mushrooms, apples and berries the coop members will produce themselves and the rest will be bought from local producers. At the end of the 2005 marketing season the cooperative members forecast additional profits of up to USD 94,300 from their drying facility. The coop’s business expansion prompted a number of local producers to diversify their marketing channels and earn additional profits from selling their produce to the cooperative.
These outstanding results from their joint work encourage the coop members to draw bigger plans for the future. Committing to high quality standards, Agrodvir cooperative plans to develop its own brand for marketing both fresh and dried produce to a diversified group of retail and wholesale buyers.