Coriander would be loved in Europe
Photo says: ‘Wait a little! Everything will be fine.’
It’s the midst of the herb season in Imereti, but Georgian herbs still don’t have a stable market.
Due to the economic problems at the traditional export markets in Russia and Ukraine, there has been a record drop in the prices of Georgian herbs for three years already. As for the European market, the farmers still have no access to it, despite the fact that it is formally open to Georgian products.
On June 27, 2014, Georgia signed the Association Agreement with the EU. The economic part of this agreement, the Deep and Comprehensive Free Trade Areas (DCFTA) Agreement, allows Georgian farmers and entrepreneurs to import up to 580 million Georgian-made products to the EU market without paying customs duties.
However, few farmers in Georgia take advantage of these allowances.
Export to EU countries is growing, but taking a closer look at the statistics, one notices that primarily hazelnut and wine are exported to European countries. These products were actually exported to the European market before signing the Association Agreement.
There are several reasons for that:
Reason 1: Standard and quality
For Georgian fruit and vegetables to get on the shelves of the EU countries’ supermarkets and huge retail networks, an entrepreneur’s economy must comply with the GLOBAL GAP standard.
The GLOBAL GAP standard guarantees that the product is legally manufactured and that harmful impact on the environment and the use of chemicals are minimized.
Herbia Ltd. is the only GlOBAL GAP-certified producer of herbs in Georgia. The company was initially set up to export products to Europe. Herbia underwent a complex and costly process in order to obtain the GLOBAL GAP standard certificate: a Spanish consulting company was invited and the economy was organized based on its recommendation; then it was audited in order to check how well the product complied with the GLOBAL GAP starndards and the company was granted a proper certificate. These procedures cost Herbia 50,000 EUR. For peasants and farmers with smaller incomes, it is unrealistic for them to pay such an amount.
Reason 2: Volume
Having been granted the GLOBAL GAP standard, Herbia faced another obstacle. Although, the company’s products are of high quality and are in demand, at this stage, their export to the EU market is still limited and includes only the Baltic countries and Bulgaria, with the volumes being small. The thing is, European markets require stable supplies of large and guaranteed volumes of vegetables. However, Herbia cannot meet this requirement.
According to Zurab Janelidze, Herbia Ltd. Director General, for the company’s products to get to Europe’s supermarket network, it should supply the network with at least 20 tons of herbs every other day. Unfortunately, the company cannot produce the products in such volumes at this stage.
Recommendation 1. Cooperatives
In order to find the way out of the existing situation, the Industrial Development Group at the Ministry of Economic Development of Georgia hired the Dutch company ‘Bilancia.’
Bilancia’s first recommendation was as follows, in order to get a 50% increase in herbal production, it is necessary to introduce new technologies in greenhouses, which also entails with it huge expenses. Therefore, Bilancia advised the farmers to set up cooperatives, which will allow them to reduce the cost associated with the introduction of new technologies and GLOBAL GAP standard, increasing their production.
Bilancia believes that Georgian herbal producers need to capitalize on certain advantages: herb crops fall during the period from September to May in Georgia and that’s exactly when the demand for herbs increases in Europe. In addition, Georgia has a favorable climate and clean water, which allow farmers to focus on the use of organic fertilizers and production of bioproducts. Both the prices and demand for these organic products have been in recent times increasing worldwide.
Recommendation 2. Modern transportation conditions
The Dutch company has also recommended that farmers should develop a plan of the air-conditioned transportation of herbs, which is also costly, but necessary, to ensure that these products do not lose their quality on the way from Georgia to Europe.
Some farmers have already taken into account the Dutch experts’ recommendations. The ‘Georgian Herbs’ cooperative has been set up by 11 farmers, including Herbia Ltd.
‘We, the owners of huge greenhouses, have united into a cooperative, but we cannot export herbs to the EU at this stage, since Herbia is the only holder of the GLOBAL GAP standard among us,’ says Badri Kiladze, who has been cultivating lettuce, dill, parsley and coriander in a 3 thousand sq.m. greenhouse in the Tskaltubo district for 8 years already.
“Georgian Herbs stakeholders are planning to get the GLOBAL GAP standard certificate at the end of this year and expect the government and donors to assist them in this regard.
‘The state requires us, the members of the cooperative, to cover a certain portion of the amount necessary for the acquisition of the GLOBAL GAP standard. Thus, each shareholder will have to pay roughly $2,500 US. However, given the fact that we virtually have had no income for the past 3 years, it won’t be so easy to raise those funds,’ says Kiladze.
‘Some comprehensive measures need to be taken in order to increase exports to the EU: a detailed study of the EU market should be conducted; demand for certain types of products should be determined and the niches, in which Georgia will have a competitive advantage, should be identified. Because we are a small country, it is necessary to focus on branding and raising the awareness of Georgia and Georgian products. This requires aggressive marketing. Regrettably, the activities carried out either by the government or businesses, are hardly enough,’ says Rati Kochlamazashvili, a research fellow at the International School of Economics at Tbilisi State University (ISET).
- According to the ‘Industrial Development Group’, 550 small businesses and 10 large companies in Imereti produce an average of 25 000 tons of herbs in 1,000 greenhouses annually. Georgian herbs are mainly exported to Ukraine, Belarus, Azerbaijan, Latvia and Moldova.
- According to the ‘Industrial Development Group”s forecast, in the case that they enter the EU market, Georgian herbs will hold 0.2% of the European market. The minimum cost of Georgian herbs will be 2-3 EUR per kilo, the maximum being 6 EUR. The most important thing is the production of parsley, fennel, coriander and arugula (rucola).
- Statistical data show that Georgia’s foreign trade turnover with the EU increased by 6%, up to $3.165 billion US in 2015, as compared with the previous year. According to this data, $646 million US worth of products were exported to the EU in the report period, meaning a 4% increase from last year. Wine and hazelnuts are the primary agricultural products exported to Europe. After signing the Association Agreement, blueberries and kiwi have been also included on that list.