fresh tomatoes in baltic states 0

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Fresh tomatoes 1 in the

Baltic States

If you want to export tomatoes to The Baltic

States, you should adapt to the trends regarding

the preferences of Baltic consumers Also, take

into account that the buyer requirements in The

Baltic States are very strict Read this fact sheet

and determine if you are ready to compete with

EU producers.

Content:

1 Market size

2 Market trends and developments

3 Opportunities in the trade & distribution channel

4 Prices - segments and developments

5 Long term prospects

Annex: Buyer requirements

SWOT analysis for exporters from Armenia, Georgia and Moldova

Strength

 Low labour costs compared to EU suppliers

 Moldova is exempted from import tariffs

Weakness

 Armenia, Georgia and Moldova are not

recorded to trade with the Baltic States

Opportunity

 Consumer expenditure is driving demand for healthy food products such

as tomatoes

 Fastest growing economies in the EU

Threat

 Local production of tomatoes is large and

provides strong competition

 The Baltic States are focussing on trade relations with other EU countries, rather

than countries outside the EU

 Consumption trend is dwonwards Market size

Consumption

Consumption (thousand tonnes)

2005 2009 Growth/decline

per year

Source: FAOSTAT 2012

1 For this fact sheet we used the statistics of HS code 2011: 07020000 (Tomatoes, Fresh Or Chilled)

Imports increase sharply

In 2010, imports of tomatoes accounted for 69 thousand tonnes, or € 87 million in value Together, the Baltic States form the 11th largest importer in the EU accounting for 2.6% of total imported value Imports increased by 19% per year between 2005 and 2010 In comparison, EU imports increased by 4.4%

In 2010, the Baltic States imported 1.9 thousand tonnes of tomatoes from low-income countries or € 1.9 million (a share of 0.5% of all imports from low-income countries to the EU) Together, the Baltic States form the 16th largest importer from low-income countries in value in the EU, after an increase of 26% on average per year Armenia, Georgia and Moldova are not recorded to export to the Baltic States

Table 1 Import per Baltic state from all countries(in 1,000 tonnes)

Source: Eurostat (2012)

Based Table 1 the most interesting Baltic State to focus on is Lithuania Take into

consideration that the Baltic States are heavily interrelated and therefore focusing on multiple markets is possible through one importer

Marginal share of import from low income countries

In 2010, the Baltic States imported 1.9 thousand tonnes of tomatoes from low income countries or 19 million (a share of 0.5% of all imports from low income countries to the EU) This makes the Baltic States the 16th largest importer from low income countries in value in the EU Armenia, Georgia and Moldavia are not recorded to export to the Baltic States

EU competition barrier for imports

Tomatoes are grown in the EU year round (due to the

greenhouses) There is some production in the Baltic

States and most tomatoes are imported from within the

EU The parallel growing seasons with EU producers are a

major challenge for Armenia, Georgia and Moldova

CBI’s projection for the future: Estonia, Latvia and

Lithuania are the European Union’s fastest-growing

economies In autumn 2011, Estonian GDP was expected

to grow 3.2% in 2012 and 4.0% in 2013, Latvian GPD by

2.5% and 4.0% in 2013 and Lithuanian GPD by 3.4% and 3.8% in 2013 (Source: European Commission, 2011) As a result the demand and imports are expected to rise in the Baltic States Projections should be considered carefully as the economic climate in Europe is unstable The best thing to do to stay up to date is closely monitor the economic

developments and talk to buyers

2 Market trends and developments

Though growth is steep, the Baltic States have a relatively low consumer expenditure level

Lithuania’s economy is the largest of the three Baltic States However, Lithuania's GDP per capita is only 45% of the EU average Of all the former Soviet Union countries, Estonia has made the most progress in building a liberal market economy It has successfully attracted foreign investment and refocused its trade from East to West Privatisation has largely been

Table 2

EU production of tomatoes (1,000 tonnes) (Source: FAOStat, 2012)

Netherlands 815

Lithuania 2.5

completed, its banking system is healthy and entry into the EU has boosted economic growth Latvia has also been economically successful

Note increasing vegetable consumption

The Estonian national office of statistics reports that consumption of vegetables is largest in Lithuania, then Estonia and last Latvia Consumption of vegetables has increased during the past years, but is still significantly smaller than for example in Southern European countries

In the Baltic States, the food consumption of urban and rural households differs Urban households consume more vegetables, than in rural households

Tomatoes may be classified into four commercial types, depending on colour, shape, weight, size and cultivation method:

o Round (spherical) tomatoes: these are the most widely used, round, smooth, generally red tomatoes intended for fresh consumption

o Beef tomatoes: these are larger than round tomatoes and, some varieties, because of their shape are sometimes called ribbed tomatoes

o Cherry tomatoes: the name points to the similarity in shape and size to cherries Small plum or grape shaped tomatoes are also available

o Plum tomatoes: a thick-fleshed variety, low in seeds, used both for fresh consumption and processing

Any or all of these tomato types may be sold loose as individual tomatoes, as clusters

on vines, or pre-packed into retail sized packages

Various levels of competition between the Baltic States

The Latvian retail market has the lowest degree of concentration among the Baltic States, with traditional formats (small food shops, local marketplaces and kiosks) accounting for around 40% of total food retail sales

In Lithuania, the top five grocers in Lithuania account for roughly half of the national grocery market This is thanks to the overwhelming dominance of domestic market leader Maxima, which alone captures around 23% of the grocery trade According to Planet Retail’s database, the top five players (Maxima, Palink-owned IKI, Norfos Mazmena, Ahold’s Rimi Lithuania and Aibe) controlled a combined 47% share in 2010

- one of the highest shares in Central and Eastern Europe

Lithuania’s leading retailers also control a substantial part of the Latvian market They are expanding rapidly in Estonia and are making in-roads into other fast developing Eastern European markets The Estonian retail structure is most highly developed, with 70% of food sales taking place in modern retail outlets, of which around 18% are hypermarkets, 30% supermarkets and over 20% discount chains

Considerations for actions

Make absolutely sure you comply with the food quality and safety standards that apply (see Annex) If you can not comply, don’t enter this market Contact international operating certification bodies that certify GlobalGAP to find out more on how to comply An examples is SGS (http://www.sgs.com)

Use pre-cooling and cold storage (also during transport) to ensure quality and a long shelf-life

Most varieties yield for a short period of weeks per year, and in order to achieve a long period of supply it is necessary to grow a wider range of varieties with different, successive harvesting dates The peak of supply is mid-summer, with less production

at the beginning and end of the season Find here an example of Moldovan farmers who have succeeded I wider supply windows:

http://www.usaid.gov/press/frontlines/fl_may09/p7_moldova050915.html

Make sure to have confirmed buyers before investing in niche markets

See the Annex at the end of this document for more information on buyer

requirements

Box 1 How to acquire a health control label - example: GlobalGAP

1 Check the standards: http://www.globalgap.org

2 If you want your products to be certified, your compliance has to be inspected by an

independent and approved body GlobalGAP Certification Bodies include: AB Cert, EUROCERT, ICM, Lloyds Register QA and SGS AgroControl More accredited bodies can be found on the GlobalGAP website

3 Make investments Although the GlobalGAP-certification is demanded by EU

retailers, the costs of compliance are at your expense as an exporter or producer

4 Note that for small producers, GlobalGAP developed a smallholder guide on plant

protection modules:

http://www.globalgap.org/cms/upload/Documents/QMS_Manual-Final-1.pdf

3 Opportunities in the trade and distribution channel

Find below an overview of the distribution chain of tomatoes to the Baltic States and some tips to make the most of exporting to this market

Opportunities regarding…

Know your competitive

environment The largest

competitors for you as a exporter

from Armenia, Georgia and

Moldova are countries from

within the European Union (see

table 2) As Table 2 shows the

Baltic States are small producers

of tomatoes and therefore rely

largely on imports

The EU is the world's largest

producer of the tomatoes The

largest competitors for you as a

exporter from Armenia, Georgia

and Moldova are countries from

within the European Union (see

table 2) The EU is able to provide

all year round supply due to the

greenhouses in the Netherlands

There is also some import from

Russia (1.4 thousand tonnes) 7.7

thousand tonnes were produced

in 2010 in the Baltic States

As an exporter you will generally not supply retailers directly Your buyers will mostly be importers, importing processors or agents Some important Baltic importers are:

Augma (Lithuania) -

http://www.augma.lt/a ugma_en.html - one of the biggest fruit and vegetable importers - exporters in the Baltic countries;

Baltic Fresh Fruit (Lithuania) -

http://www.bff.lt/en/c ontacts - provides the Baltic market;

In the Baltic States, the local market, retail and the catering channels are mostly supplied by importers and/or wholesalers Supermarkets usually have their own importing branch

Kaunovaisiai (Lithuania) -

http://www.kaunovaisiai.lt/ en/kompanija.php - wholesaler;

Maxima -

http://www.maximagrupe.e u/en-maxima-lt;

Rimi -

http://www.rimibaltic.com

4 Prices - segments and developments

The driver of profitability for tomatoes is scale

Margins are tight, so either a scale or a premium play (increasingly difficult) is important to survive in this business This is, for the most part, a commodity industry where scale is the driver Small producer countries such as Armenia, Georgia and Moldova will have difficulty competing

China’s producer prices of tomatoes are well beneath production price level in the EU This oversupply caused the price of tomato paste per tonne set by cooperatives to be reduced from € 72.00 to just € 35 00 Buyers are now looking for cheaper alternatives

Make profit due to exporting in large quantities

The introduction of discounter supermarkets will increase demand of lower priced tomatoes In Lithuania the discount retail format remains underdeveloped and the retail scene is dominated by supermarket-orientated retailers An expected Lithuania entry by Lidl would build a solid foundation for potential launches in other Baltic states like Latvia and Estonia, according to Freshplaza

Have a look at consumer price indicator by the Estonian national bureau of statistics

to see if consumer prices in general are under pressure: http://www.stat.ee/cpi-calculator

Information on tariff and price regulations is vital to make

a convincing offer

Moldova has a free trade agreement with the EU and therefore does not pay import tariffs at all

This makes it possible to compete with EU producers directly For Armenia and Georgia import tariffs are 14.4% during EU tomato season making it harder to compete in times of abundant supply In the future further

Box 2 How to find Baltic buyers?

associations and databases (see useful sources) To get into contact with them you can visit specialised trade fairs or contact them via phone or email

approach is looking for peaches and preferably is active already in your country or region This will make it easier for him to personally inspect your facilities By browsing their website you will learn a lot about the company

suppliers from your region They want to know more about your company and your

country regarding varieties, quality, price, supply seasons, delivery times and health and safety control

4 Adapt to the Baltic business culture: in these countries it generally takes several

meetings to reach a decision In most cases, decisions are still made at the top of the company, so unless you are meeting with the top echelon of the company, what you propose will have to make its way up the chain of command for approval For more information about the specific Estonian, Latvian and Lithuanian business culture refer to the website of Kwintessential

(http://www.kwintessential.co.uk/resources/global-etiquette/lithuania.html) (http://www.kwintessential.co.uk/resources/global-etiquette/latvia.html) (http://www.kwintessential.co.uk/resources/global-etiquette/estonia.html)

Table 2 Import tarifs for tomatoes

Price Ad valorem tax

€ 84.60 or more 8.8%

€ 82.90 - 84.60 8.8% + € 1.70/100 kg

€ 81.20 - 82.90 8.8% + € 3.40 /100 kg

€ 79.50 - 81.20 8.8% + € 5.10 /100 kg

€ 77.80 - 79.50 8.8% + € 6.80 /100 kg

€ 0.00 - 77.80 8.8% + € 29.80 /100 kg

economic integration might lead to a free trade agreement but this will take time The Entry Price (EP) and import tariffs for tomatoes determined by the EU can be found in table 2 If your EP is lower than this price you will have to pay an additional duty

Considerations for actions

Use the EU Export Helpdesk (http://exporthelp.europa.eu) to determine the import tariffs and entry price Use this price in your offer to potential buyers (see Action Plan

in Box 2)

Closely monitor for bad harvests in EU producing countries A shortage will force importers to buy outside the EU despite the higher price

In case you are not able to compete on price with EU producers than you may want to focus on countries with which your country has a regional trade agreement such as other Commonwealth of Independent States (CIS): Kazakhstan, Russia, Turkmenistan, Ukraine and Kyrgyzstan Armenia, Georgia and Moldova are also part of this region

Box 3 How to determine your market price?

1 To determine a reasonable market price at the moment you want to sell, do your own market research first You can do this by quoting your prices to potential importers After, you can compare their reactions Also, websites such as CIRAD and Freshplaza show European prices for fruits and vegetables

2 For higher volumes, the price is usually less per product compared to those sold in small volumes This does not mean you should not sell in small quantities

Sometimes a buyer will want to buy more quantity of your harvest if the cooperation has been positive (a pallet of 600-700 kilos is the minimum to transport to the EU)

3 Make sure to include the Incoterm (the terms on which you agree with your buyer who pays fro transport and insurance; see

http://www.iccwbo.org/Incoterms/index.html?id=40772 ) and whether you are

sending a firm offer or a quotation

4 In some cases it is convenient to enclose a period of validity in your offer, especially when the market price is highly fluctuating

5 Long-term prospects

Future prospects may favour the importance of low-income countries in global fruit trade Within the next five to ten years, CBI expects that:

Arable land will become scarcer while world population grows and therefore the pressure on prices and margins will relax Michael Porter has written a visionary article about it: ‘Creating shared value’ See http://hbr.org/2011/01/the-big-idea-creating-shared-value/ar/1

Internationalisation of large companies will increase This means that many (EU-) firms will have their own production sites in low-income countries from where they export into their home countries

As emerging countries gain voting power in the WTO, the EU’s trade agreements regarding agricultural products will likely involve less trade barriers for countries outside the EU

Considerations for actions

Monitor closely whether changes are made in agreements between your country and the EU These are advertised on this website: http://ec.europa.eu/trade/creating-opportunities/eu-and-wto

Consider partnerships with Baltic companies looking to invest across their borders

Useful sources

Latvian Minstry of Agriculture - http://www.zm.gov.lv/?setl=2; Lithuanian Ministry of Agriculture - http://www.zum.lt/en; Estonian Ministry of Agriculture - http://www.agri.ee/?lang=en; Latvian Federation of Food Enterprises - www.lpuf.lv;

Latvian Traders Association - www.lta.lv; Latvian Institute of Agrarian Economics - www.lvaei.lv; Latvian Export Import Directory - www.exim.lv;

Association of Estonian Food Industry - http://toiduliit.ee/?pageLang=GB; Estonian Chamber of Agriculture and Commerce - http://www.epkk.ee

This survey was compiled for CBI by CREM B.V

Disclaimer CBI market information tools: http://www.cbi.eu/disclaimer

Annex: Buyer requirements

The Baltic States follow EU legislation

regarding the marketing of tomatoes and has

not set any additional requirements

See the CBI’s module ‘Compliance with

buyer requirements for vegetables’ for more

information

Supermarkets chains in the Baltic States are becoming stricter regarding their food health and safety requirements

GlobalGAP and/or IFS or Q&S certification is increasingly important on the market, especially when supplying large retail chains

The EU, thus the Baltic States, has committed

to the Tomato Standard of the Codex

Alimentarius Refer to the website

(http://www.codexalimentarius.net/search/adv

anced.do?lang=en) and type ‘tomatoes’ as a

search word in ‘Text in Title’

There are three quality classes: Extra class, Class

I and Class II For example for Class I tomatoes

the following criteria apply:

They must be free of cracks and visible greenback

The following slight defects, however, may be allowed, a slight defect in shape and development, colouring; slight skin defects and very slight bruises

Retailers mostly take Class I tomatoes

Class II tomatoes are sold mostly to the

processing industry

Tomatoes shall be packed in each container in compliance with the Recommended International Code of Practice for Packaging and Transport of Fresh Fruit and Vegetables (CAC/RCP 44-1995) Refer

to the FAO website (http://www.fao.org/ag/agn/CDfruits_en/others/do cs/CAC-RCP44-1995.PDF) The standards include: Tomatoes must be packed in such a way as to protect the produce properly

The materials used inside the package must be new, clean, and of a quality such as to avoid causing any external or internal damage to the produce

The use of materials, particularly of paper or stamps bearing trade specifications is allowed, provided the printing or labeling has been done with non-toxic ink or glue

Tomatoes are packed in open and closed fruit cartons and trays, and sometimes packed into retail size plastic or fibreboard boxes (also known as punnets or clamshells)