Craft food production is actively developing in Ukraine, becoming an important element of the rural economy. At the same time, the sector remains vulnerable and requires systemic support.
That is why the online publication AgroPortal.ua, with the support of the Government of the Kingdom of the Netherlands, has launched an educational grant project for craft food producers, CraftUP Ukraine.
Its goal: to support small food producers on the path to establishing and developing their business, to provide the necessary knowledge for conducting entrepreneurial activities, implementing safety standards, developing their own brand, expanding sales channels and attracting financing. The project is also designed to contribute to the preservation of Ukrainian gastronomic heritage and the formation of a community of craft like-minded people.
Beeld: © https://agroportal.ua/
On March 19, the first stage of the project was completed, within the framework of which the partner, Pro-Consulting, presented the results of a market study of craft food producers.
The expert team joined active discussion of the research results: Deputy Minister of Economy, Environment and Agriculture of Ukraine Denys Bashlyk, Deputy Director of the Department of Rural Development of the Minister of Economy, Environment and Agriculture of Ukraine Mykola Moroz, Director of the State Enterprise "Office for the Development of Entrepreneurship and Exports" Andriy Talama, Head of the project "German-Ukrainian Agropolitical Dialogue" Olga Trofimtseva, as well as representatives of state institutions, specialized associations, market experts and media.
Carolien Spaans, Agricultural Counsellor of the Embassy of the Kingdom of the Netherlands in Ukraine
CraftUP Ukraine is a logical continuation of the competition of the online publication AgroPortal.ua “Incredible Villages of Ukraine”, which we have been supporting since 2018. The experience of working with communities has shown the potential and capabilities for the development of craft food production. We are convinced that it is small-scale production that is the basis of the economic stability of rural areas. And it is not only about taxes and new jobs. It is about creating favorable living conditions for the development for talented entrepreneurs.
Product categories
More than 400 craft food producers expressed their interest in joining the project. Half of them completed an extended questionnaire. The most represented categories are the production of processed dairy products (33%), vegetables, fruits (15%), and meat (14%).
It is worth noting that the product group “Other” amounted 15%, which includes various niche products - from hemp products and saffron to snail and shrimp farming.
The largest share of respondents has been engaged in craft production for over 7 years. More than half of the survey participants have been active in this field for over 3 years, while the smallest share of respondents - 11% - has been working in the industry for less than a year.
Denys Bashlyk, Deputy Minister of Economy, Environment and Agriculture of Ukraine
The craft sector is not yet covered by Govermental policy, so there are currently no systematic instruments to support or subsidize such producers. However, today we can look at this activity from the perspective of rural development. Craft can become a tool for involving IDPs, veterans and women in the strengthening of communities. This is a comprehensive approach that should be integrated into state strategies. After all, it is not only about food production, but also about the formation of local identity.
Production scale
For 92% of respondents of the CraftUP research, the weekly production volume does not exceed 500 kilograms/liters/units of production, while for 65% of them it does not even reach 100 units of the corresponding measure. Formally, “small production” in Ukraine is up to 1,000 kg/l per week. That is, the real craft sector is much smaller than the threshold that the state defines as “small”.
Mykola Moroz, Deputy Director of the Department of Rural Development, Ministry of Economy, Environment and Agriculture of Ukraine
The presence of a gap in production volumes gives craft producers the opportunity to grow and eventually move into the middle segment. If we immediately severely limit their volumes, we will take away this potential for development. Therefore, creating such a “space for growth” is one of the tasks of the state. Talking about tax benefits, especially for excisable products, is not yet relevant due to the situation in the country. But we are moving towards the formation of a system that will give small producers more opportunities, in particular in access to financing.
Registration and operation permits
Among the respondents, 76% are officially registered. At the same time, only about half have a registration of capacities or an operating permit. Among craft producers who do not have permits, 42% do not have a registration of entrepreneurial activity. Among them are producers of cheese, meat products, and processed fruit and vegetable products. This is a rather high indicator of the production of food products without official quality control, sanitary conditions, and without state accounting.
Olga Trofimtseva, head of the German-Ukrainian Agricultural Policy Dialogue - Ambassador of CraftUP Ukraine
Production standards are primarily a matter of sector's self-regulation and responsibility of producers themselves through their cooperatives, associations, etc. If self-regulation does not work, then the state intervenes. But state regulation is already the second level. In the organic production sector f.e., we see that such a model is already working effectively in accordance with European standards. In the context of European integration, Ukraine will move in this direction. Over time, more support instruments will open up for producers, in particular those related to the EU Common Agricultural Policy. At the same time, without producer associations and proper infrastructure for craft producers, there is a risk that there will simply be no one to use the available resources effectively.
Safety management systems and export
A third of respondents have implemented the HACCP system (regular or simplified), ISO 22000 or other certified product safety management systems. 88% of respondents are familiar with sanitary requirements, while 60% indicated that they have full knowledge of all current requirements. Among the producers who are not aware of sanitary requirements, there are mostly honey producers, fruit and vegetable processors (in particular, pastila producers), cheese producers (single), and vegetable oil producers. About half of them do not have official registration.
The main markets for craft products, according to the survey results, are local - within the region, community or district. The majority of respondents (63%) sell their products throughout Ukraine, while only 10% of survey participants export abroad. Among those who export, the main destinations are the European Union countries (20 respondents), the United Kingdom (5), Canada (4) and the United States (5). Other markets are represented by one respondent each: South Korea, the UAE, Switzerland, Turkey, China, Japan, Australia and Moldova.
Andriy Talama, Director of the State Enterprise "Office for the Development of Entrepreneurship and Export"
One of the programs that we implement together with the Swedish Trade Council involves training manufacturers and assistance with entering the Swedish market. Last year, six Ukrainian manufacturers have already signed contracts with Swedish retailers. The value of this program is that the training is conducted directly by Swedish partners - those who work in this market. This year we continued the program, in particular in the HoReCa direction: at the end of March, 16 participants will go for training, and some of them already have contracts. Such initiatives need to be scaled up. At the same time, the process of entering EU markets remains complex and lengthy - in particular, due to the requirements for certification and inclusion of manufacturers in the relevant registers (trusts), without which export of products is impossible.
Cooperation and education
There is a growing demand among craft producers for cooperation and the creation of associations (for example, craft unions or "honey banks") to jointly protect interests, promote products in retail, and enter European markets.
The craft sector is characterized by a strong will for development. In particular, a high share of self-education is recorded — 76%, which may indicate limited resources, in particular insufficient financial capacity to invest in formalized training programs or limited access to quality educational opportunities. In this context, self-education is a forced alternative to more structured training. In total, 96% of respondents stated a need for training, and 45% indicated that they had already planned or plan to invest in training, which confirms the presence of a formed demand for further development of competencies.
Mykola Moroz, Deputy Director of the Department of Rural Development, Ministry of Economy, Environment and Agriculture of Ukraine
European integration changes, in particular the implementation of EU Regulation No. 1308, open up new opportunities for associations of producers. Such associations receive broader rights, in particular the opportunity to officially represent and lobby their interests at the state level. This also includes certain facilitation in antimonopoly regulation and expansion of instruments for interaction with state institutions, including tax authorities. This gives producers the opportunity to act more systematically, openly and effectively.
The portrait of the Ukrainian craft producer
The results of the study have formed a portrait of the Ukrainian craft producer. This is a multitasker who works at the limit of possibilities, combining several roles and developing a business in conditions of constant challenges. Despite this, crafters not only hold on, but also strive for growth, invest in production and seek access to new markets. This means that the craft sector is not just a niche business, but a real resource for the development of communities, the economy and Ukrainian identity.