Convenient food and vegetable processing in Ukraine. Opinion on investments and market development – Tolsma Technik LLC
The assortment of the peeled and cut vegetables in Ukraine is relatively limited. At the same time the market players observe the tendency that people prefer convenient food, which meets the rhythm of their lives. Please read the expert opinion on the development of the vegetable processing sector in Ukraine?
Why large Ukrainian agricultural companies today do not want to process vegetables, contrary to consumer trends? Which processing segment will have the greatest success in the future? What factors determine the return on investment in processing equipment? Here for your attention the interview of magazine SEEDS with Roman Zligostev, Business Development Manager for vegetables storage and processing solutions of Tolsma Technik LLC .
Seeds: - Roman, the more added value is created to the product the higher is the price, which means that the money invested in the processing line is returned over time. What is the payback period for such an investment?
Roman: - It all depends on the business development and marketing strategy the entrepreneurs choose for themselves. It should be understood that if you trade in raw materials and commodities, then you monitor the situation on the market and see what the average price is now and adjust to it. When it comes to a product, it all depends on marketing. If an entrepreneur approaches this issue professionally and present his product properly to his consumers, then he can influence the market, put the price and stimulate the demand. After all, there is a concept of latent demand, when people want to buy a product that has not yet been presented on the market, or they simply do not know about it.
In terms of return on investment, this is a tricky question. The one who will enter the market first, will definitely be the first to earn the most on the investments.
- Are there many pioneers on the Ukrainian market today, or some niches are still lacking the first comers?
R: Those who today operate on 30-100 hectares of land understand that it is very difficult keep leading positions on the market trading with raw products like bulk vegetables. They invest in creating added value to their products like sauerkraut or Korean carrots. Those businesses with canned food production lines that used to process vegetables by autoclaving now want fully automated green pea or corn production lines.
- Is it feasible to build all this production facilities not far from the field?
R: Usually, to reduce logistics costs, agricultural producers build such processing plants, indeed, not far from the field.
- Do you mean large agricultural companies?
R: No, so far these are just small enterprises. Large agricultural companies, in my opinion, are not yet looking towards this market segment for one simple reason – with their volumes they can be profitable while trading fresh products. However, in case they would like to diversify their business, increase profits, they could easily build lines for the production f.e. green peas. Additionally the investments of large market players into processing of vegetables and fruit can have a significantly positive effect on the rural areas, creating jobs and paying taxes. The whole Ukraine can benefit from this development.
It is important to understand the details of the vegetable processing business, cultural differences and consumer preferences. For example, investing in a line for the production of French fries only for the needs of the Ukrainian market is not advisable. French fries is not the traditional food for Ukrainians, it is not cooked at home, but consumed mostly as fast food.
This year with the introduction of the land market the farmers will get extra impulse to assess profitability of their business and consider ways for its improvement. We, as market players, hope that this development will have a positive effect on the vegetable processing segment. Today a lot of niche crops are grown in Ukraine. For example, I personally have experience in growing hot peppers, which is of good demand. Another example of a crop with is gaining popularity very fast is asparagus. Previously, this product was very expensive and little known, but today its cultivation in Ukraine has acquired a relatively large scale compared to several years ago.
- Which segment of vegetable processing is the most promising for Ukraine in the nearest future?
R: Firstly, these are potatoes, because this is a very popular crop on the Ukrainian market. With the growing demand for so-called fast / convenient food a promising product f.e. is potato flakes and mashed potatoes, widely used in HoReCa.
- How many market players are engaged in potato processing today?
R: In Ukraine, this segment is almost undeveloped today. Enterprises that were built back in Soviet times are trying to modernize existing production facilities. It is difficult to name one company that can meet the needs of the entire Ukrainian market today. I do not know companies producing potato flakes in Ukraine, although it is very promising business in view of growing demand from Asian markets.
- How tasty is such a product for consumers? Many people believe in stereotype that it is not healthy and tasty?
R: From my experience in the restaurant business, I can say that today Ukraine imports such flakes from Belgium and Germany. When it comes to providing food for hundreds or even thousands of people at the same time, mashed potatoes and potato flakes are very unique products. Once we had a so-called blind test - we cooked mashed potatoes from fresh potatoes and from flakes. And only those, who knew about the experiment, felt the difference. If you add cream, milk, butter to the puree, then it is very difficult to guess what kind of product this dish is actually made from. Potato flakes are 99.9% of potatoes, dehydrated during production process.
The construction of potato flakes production line requires significant investment. And therefore it is feasible for large enterprises with export ambitions.
- Today one might say, taking into account the fast food trend you mentioned, that semi-finished and pre-cooked products are getting more popular in the world, it is right?
R: Yes, it is. In Ukraine especially during lockdown we see that more and more retail shops offer pre-cooked frozen products like varenyky (dumplings). There is a similar demand for semi-finished vegetable products. By the way, today there is another trend that will further develop the vegetable processing industry – reduction of meat consumption, substitution of meat products with more sustainable vegetable diet.
Tolsma Technik LLC is a company that represents a number of European manufacturers specialized in storing, handling and processing equipment for vegetables, fruits and berries.