Regional_Market_Assessments_-_Final_Report.pdf

KOSOVO NEW

OPPORTUNITIES FOR

AGRICULTURE (NOA)

PROGRAM

REGIONAL NEW MARKET OPPORTUNITY

ASSESSMENTS FOR APPLES, BERRIES, TABLE

GRAPES, GHERKINS, AND LETTUCES IN ALBANIA,

BOSNIA-HERZEGOVINA, BULGARIA, CROATIA,

MACEDONIA, MONTENEGRO, SERBIA AND SLOVENIA

OCTOBER 2011

This publication was produced for review by the United States Agency for International Development. It was prepared by Tetra Tech ARD.

PREFACE

The assessment team wishes to express its thanks to the staff of the New Opportunities for Agriculture Program in Pristina for its logistical and administrative support; and to the hundreds of informants, interviewees and cooperators in Kosovo and the eight target countries who made this study possible and provided invaluable information. The assessment team accepts sole responsibility for any errors or omissions.

The opinions and conclusions expressed in this study are those of the assessment team and do not necessarily represent those of the New Opportunities for Agriculture Program, the Government of Kosovo, the US Agency for International Development or the US government.

Assessment Team Leader and Principal Author: Greg Vaut, Senior Adviser, Ministry of Agriculture, Forestry and Rural Development, Government of Kosovo, Pristina, Kosovo

Market Research Specialists (Markets Assessed):

• Feđa Begovic (Bosnia-Herzegovina, Croatia, Slovenia), Independent Consultant, Sarajevo, Bosnia- Herzegovina

• Ljubomir Dimovski (Macedonia, Bulgaria, Serbia), Manager, EPICentar International, Skopje, Macedonia

• Branimir Dimitrijevic (Bosnia-Herzegovina, Croatia, Serbia), Minority and Marketing Specialist, NOA, Pristina, Kosovo

• Prof. Drini Imami, Ph.D. (Albania, Montenegro), Independent Consultant and Lecturer, University of Tirana, Tirana, Albania

• Liza Marko (Albania, Montenegro, Slovenia), Marketing Specialist, NOA, Pristina, Kosovo

• Faton Nagavci (Macedonia, Bulgaria), Marketing Specialist, NOA, Pristina, Kosovo

Local Research Assistants (Markets Assessed):

• Emil Darev (Bulgaria)

• Metod Dolinshek (Slovenia)

• Natasa Mirecki, PhD (Montenegro)

• Slavoljub Zdunic (Croatia)

This report was prepared for the United States Agency for International Development under USAID Contract Number AID-EDH-I-00-05-00006, Task Order AID-167-TO-11-00001, under Rural and Agricultural Incomes with a Sustainable Environment Plus (RAISE PLUS) Indefinite Quantity Contract

(IQC).

Principal Author: Greg Vaut, Senior Advisor to the Minister of Agriculture, Forestry and Rural Development and Senior Associate, Kosovo, Tetra Tech ARD.

Implemented by:

Tetra Tech ARD 159 Bank Street, Suite 300 P.O. Box 1397 Burlington, VT 05402

KOSOVO NEW

OPPORTUNITIES FOR

AGRICULTURE (NOA)

PROGRAM

REGIONAL NEW MARKET OPPORTUNITY

ASSESSMENTS FOR APPLES, BERRIES,

TABLE GRAPES, GHERKINS, AND LETTUCES

IN ALBANIA, BOSNIA-HERZEGOVINA,

BULGARIA, CROATIA, MACEDONIA,

MONTENEGRO, SERBIA AND SLOVENIA

OCTOBER 2011

DISCLAIMER

The authors’ views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government.

NOA PROGRAM: REGIONAL NEW OPPORTUNITY ASSESSEMENTS i

CONTENTS

List of Tables ....................................................................................................... ii List of Figures ..................................................................................................... iii Abbreviations and Acronyms .............................................................................. iv Introduction

1.0 Apples

2.0 Berries

3.0 Gherkins

4.0 Table Grapes

5.0 Lettuces

ii NOA PROGRAM: REGIONAL NEW OPPORTUNITY ASSESSEMENTS

LIST OF TABLES

Table 1. Opportunities for Exports of Five Target Products to Eight Regional Markets Table 2. Assessment of Opportunities for Kosovo Table Apple Exports to Eight Regional Markets Table 3. Domestic Production, Imports and Exports of Fresh Apples in Target Markets, 2005-2010 Table 4. Market Shares of Largest Apple Suppliers to Bosnia-Herzegovina 2005 – 2009 Table 5. Assessment of Opportunities for Kosovo Berry Exports to Eight Regional Markets Table 6. Assessment of Opportunities for Kosovo Gherkin Exports to Eight Regional Markets Table 7. Assessment of Opportunities for Kosovo Table Grape Exports to Eight Regional Markets Table 8. Domestic Production, Imports and Exports of Table Grapes for Target Markets, 2005-2010 ... 20 Table 9. Assessment of Opportunities for Kosovo Lettuce Exports to Eight Regional Markets Table 10. Largest Lettuce Suppliers to Slovenia 2005–2010

NOA PROGRAM: REGIONAL NEW OPPORTUNITY ASSESSEMENTS iii

LIST OF FIGURES

Figure 1. Typical Market Channel Structure for Imported Produce in Countries Studied, with Average

Price MarkUps (%) Figure 2. Slovenian Annual Apple Imports 2000–2010 (mt) Figure 3. Albanian Apple Production and Imports 2005–2009 (mt) Figure 4. Monthly Distribution of Albanian Apple Imports for 2008, 2009 and 2010 (mt) Figure 5. Weekly Average Wholesale Price Movement for Golden Delicious Apples in Croatia 2006–

2011 (Prices in HRK/kg: €1.00 = 7.46 HRK) Figure 6. Albanian Monthly Imports of Fresh Strawberries from EU Sources 2008-2010 (mt) Figure 7. Slovenian Monthly Table Grape Imports 2009-2010 (mt) Figure 8. Croatian Black Table Grape Variety Average Wholesale Prices 2006-2011 (HRK/kg) Figure 9. Growth in Albanian Imports of Lettuces 2005-2010 (mt) Figure 10. Average SloveniaN Monthly Lettuce Imports 2009 and 2010 (mt) Figure 11. Average Monthly Slovenian Imported Lettuce Wholesale Prices 2009 and 2010 (€/kg) iv NOA PROGRAM: REGIONAL NEW OPPORTUNITY ASSESSEMENTS

ABBREVIATIONS AND

ACRONYMS

BiH Federation of Bosnia and Herzegovina

CAGR Compound Annual Growth Rate

CEFTA Central European Free Trade Agreement

EU European Union

FAO Food and Agricultural Organization (of the United Nations)

HORECA Hotels, Restaurants and Catering (Foodservice Market Segment)

ITC International Trade Centre kg Kilogram

MAFRD Ministry of Agriculture, Forestry and Rural Development (Kosovo) mt Metric Tons (1,000 kg; 2,204.6 pounds)

NOA New Opportunities for Agriculture Program (USAID-funded Program) pc Per Capita

PRODSTAT FAO Agricultural Production Statistical Database

TISUP Croatian Agricultural Market Information System

TRADSTAT FAO Trade Statistical Database

ULO Ultra Low Oxygen (modified atmosphere storage)

USAID United States Agency for International Development

NOA PROGRAM: REGIONAL NEW OPPORTUNITY ASSESSEMENTS 1

INTRODUCTION

This activity was undertaken to identify new market opportunities for five products selected from the key value chains identified by the Agricultural Strategy1 (“Ag Strat”) and targeted for support by the USAID-funded New Opportunities for Agriculture Program (NOA). These value chains also fall within the top priorities for the Ministry of Agriculture, Forestry and Rural Development (MAFRD) under its program for horticulture, as expressed in MAFRD’s Strategic Plan2 and Integrated Action Plan.3 The value chains selected were apples (fresh table apples), table grapes, lettuces, fresh berries, and gherkins (small cucumbers for further processing).

NOA assessed eight surrounding regional markets for market opportunities for exports of these five products. The eight markets included were:

Albania Bosnia-Herzegovina Bulgaria Croatia Macedonia Montenegro Serbia Slovenia

Two of these countries are full members of the European Union (EU): Slovenia and Bulgaria. All of the others (including Kosovo) are members of the Central European Free Trade Agreement (CEFTA). Several have bilateral agreements with Kosovo that ostensibly favor agricultural trade.

The intent was to gauge the importance of the export opportunity for the five Kosovo products and to identify a strategy (tailored for each product) to enter those specific markets. The quantity and quality of secondary and supporting data for these countries varies enormously. Therefore, the principal research tool was intensive informant interviews in each target market. Two to three team members spent seven days in each country. They met and interviewed fresh fruit and vegetable (“produce”) importers, wholesalers, traders, distributors, processors and retailers (large and small supermarket chains, independent grocery stores and street/green market vendors). The study teams conducted over 350 trade interviews during this field research.

A summary of the final assessment of each market is presented in this report. Considerably more detailed information was collected to provide Kosovo exporters with precise guidance for developing their own market entry strategies for each product, in each market. That information was presented in meetings organized directly with stakeholders. This was a series of five half-day, product-specific workshops to present the detailed results to Kosovo exporters/traders and growers. Representatives from MAFRD, donors, and donor-funded projects were invited as observers. This information covered discussions of the market structures for each product in each country; contact information for specific importers; and price, volume, product and packaging information from the competitive environment in each country. The material presented at these workshops is available from NOA on request.

1 Booz|Allen|Hamilton. February 10, 2010. Kosovo Agricultural Opportunities Strategy, a report prepared for USAID/Kosovo.

2 Ministry of Agriculture, Forestry and Rural Development, Government of Kosovo. 2009. “Agriculture and Rural Development

Plan 2009-13”, Pristina.

3 Ministry of Agriculture, Forestry and Rural Development, Government of Kosovo. November 19, 2010. “MAFRD’s Integrated

Action Plan: Within the Framework of the European Union’s Agricultural Rural Development Plan (ARDP)”, Pristina, updated.

2 NOA PROGRAM: REGIONAL NEW OPPORTUNITY ASSESSEMENTS

This assessment was conducted July-September 2011. The market research team was composed of NOA staff and regional consultants, all with experience in market research in the region. Information on international trade levels and Kosovo agricultural production for the relevant products was compiled by staff of NOA/Kosovo, Tetra Tech ARD, and assessment team members from a variety of primary and secondary sources.

At the end of the data collection and analysis, a condensed summary presentation was presented to MAFRD and to USAID/Kosovo.

In their evaluations of the market opportunities, the teams focused on identifying the opportunities for near-term exports during 2012 and 2013. The research found that the number of countries considered high-priority targets for most products during this near term is very limited. However, these markets and the quality and quantity of the Kosovo product supply will develop over the longer term and it seems that a number of other countries may emerge as likely targets over the medium term (2014-2016).

There are two absolute conditions for Kosovo to achieve exports in any of the crops studies to anyone of the markets assessed:

1. Positive Demand Conditions. The presence of effective demand in a particular market, including the lack of strong competition and of trade barriers; and

2. Positive Supply Conditions. The ability of Kosovar growers and exporters to supply exportable quality and quantity of the product in the highest opportunity season.

In summary, the assessment teams reached the following conclusions about the short-term opportunities for each product, in each market, as shown in Table 1 below.

TABLE 1. OPPORTUNITIES FOR EXPORTS OF FIVE TARGET PRODUCTS TO EIGHT

REGIONAL MARKETS

Country Market Opportunity Ranking Apples Berries Gherkins Grapes Lettuce Albania 3 1 3 3 2 Bosnia-Herzegovina 2 2 2 3 2 Bulgaria 3 3 3 3 3 Croatia 2 3 2 3 2 Macedonia 2 3 2 3 2 Montenegro 1 2 2 3 2 Serbia 2 2 2 2 2 Slovenia 3 2 2 3 2

Key:

Near-Term Opportunity 1 Medium-Term Opportunity 2 Unlikely Opportunity 3

The five products examined for each of eight markets, represented 40 possible product/market opportunity pairings. Out of the 40 pairings, only two situations currently exist where these two demand and supply conditions occur and which present immediate, near-term opportunities for Kosovo exports:

• Albania for Kosovo fresh berries, and

NOA PROGRAM: REGIONAL NEW OPPORTUNITY ASSESSEMENTS 3

• Montenegro for Kosovo fresh apples.

Over half of the product/market pairings (22 out of 40) have been rated as offering medium-term opportunities. In most of these cases, the first condition of a positive demand situation more or less exists, but Kosovo will need some time to meet the requirements for positive supply. While this study did identify very specific product and price parameters for the Kosovo product to achieve, it was not charged with evaluating the supply conditions within Kosovo. Conclusions regarding supply potential were drawn from the work of NOA and a number of its expert consultants who focused on the Kosovo supply side.

Eighteen of the 40 product/market pairings were judged to offer no near- or medium-term opportunity for product exported from Kosovo. In nearly all of these cases, it was found that competition from local production and/or other importers created a particularly unfavorable competitive environment for the Kosovo product. The positive demand condition was found to be so absent that it is unlikely that Kosovo would be able to penetrate those markets.

From a product perspective, across the five target products, Kosovo is best established in the production of fresh apples (for direct consumption). While there is a fair amount of grape production in Kosovo, growers have specialized in producing wine grapes and not table grapes, so the supply meeting export standards is presently very small. Berries, gherkins and lettuce are relatively new crops and there is so far no material production to date. All five products have somewhat complicated requirements for storage (apples and grapes) and post-harvest handling, and Kosovo is seriously deficient in both storage capacity and post-harvest knowledge. These deficits of production volumes, storage capacity and post-harvest technology are serious impediments to expanding external markets for all five products. A reasonable assessment based on current trends is that the country will need at least five more years of investment and development to begin to overcome them. These serious market drawbacks are exacerbated by the competitive environment where not only Kosovo’s immediate neighbors, but effectively all of southern Europe are producing much larger volumes of the same products and nearly all are materially ahead of Kosovo the technology curve. Time will tell if Kosovo can drive down its cost of production and increase its exportable supply of quality product to overcome the stiff competition in the medium-term markets and achieve the conditions to meet a positive supply situation.

The assessment found that the market structure for imported fresh fruits and vegetables in the eight countries examined were roughly the same for all five products. A reasonably small number of importers dominate the local produce trade and produce moves through a series of wholesalers and distributors (wholesalers who deliver to their clients).

The final market segments for fresh fruits and vegetables are retail, food service and industrial:

• The retail market segment covers the gamut of retail outlets from street and green market vendors to large national and international supermarket chains.

• The food service market segment is also commonly referred to as HORECA (for hotels, restaurants, and catering). The food service (and catering) market segment also includes institutional feeding (e.g., schools, hospitals, military, etc.).

• The industrial market segment includes food processors who buy fresh produce as an ingredient for the manufacture of some other food product. Of the five products studied, gherkins used in manufacturing pickles are the clearest example of an industrial product and the only such product investigated.

4 NOA PROGRAM: REGIONAL NEW OPPORTUNITY ASSESSEMENTS

The final consumer markets are of little interest to the Kosovo exporter/grower since they are seldom a direct customer for the Kosovo seller (with the exception of some the largest supermarket chains who import directly, such as Agrokor in Croatia). The importer and wholesale markets reflect everything that the Kosovo exporter needs to know regarding consumer demand principally through the price mechanism. This is significantly different from the way that markets work for manufactured items, particularly fast moving consumer goods (including branded processed food products).

The internal market structures as found in the eight countries for the five fresh fruits and vegetables studied here is presented graphically in Figure 1. The average markups4 between each market segment are also shown, but these vary rather widely between products and, to a lesser extent, between countries, and sometimes between seasons.

4 Markups are the percentage increase between buying price and selling price.

NOA PROGRAM: REGIONAL NEW OPPORTUNITY ASSESSEMENTS 5

FIGURE 1. TYPICAL MARKET CHANNEL STRUCTURE FOR IMPORTED PRODUCE IN COUNTRIES STUDIED, WITH

AVERAGE PRICE MARKUPS (%)

5-10%

Primary Wholesalers or Distributors

Secondary Wholesaler or Distributor

Large Retail Chains

Other Retail Chains

Independent Retail Stores

Street Vendors Retail or

Green Markets

10-20%

20-25%

5-15%

20-25%

Kosovo Border

5-15%

Final Consumers

Food Service

Industrial

(Sales to Wholesale and Retail Segments)

15-20%

10-20%

20-25% 10-35%

10-35%

Importers

Kosovo Exporters

This diagram is based on primary field research conducted by the assessment teams in Albania, Bosnia-Herzegovina, Bulgaria, Croatia, Kosovo, Macedonia, Montenegro, Serbia and Slovenia during July–August 2011. Markups are the percentage increase between buying price and selling price.

6 NOA PROGRAM: REGIONAL NEW OPPORTUNITY ASSESSEMENTS

1.0 APPLES

The market opportunity assessment examined the potential for exports of fresh apples for direct consumption (“table apples”) produced in Kosovo. The assessment team rated the market opportunities for apples in the eight countries as shown in Table 2.

TABLE 2. ASSESSMENT OF OPPORTUNITIES FOR KOSOVO TABLE APPLE EXPORTS

TO EIGHT REGIONAL MARKETS

Country Market Opportunity Ranking

Albania 3 Bosnia-Herzegovina 2 Bulgaria 3 Croatia 2 Macedonia 2 Montenegro 1 Serbia 2 Slovenia 3

Key:

Near-Term Opportunity 1

The market study team’s summary assessment of the market opportunities found that only Montenegro appears to offer a material near-term (2012-2013) opportunity (assuming an exportable supply in Kosovo).

Apples are a commodity crop. Varietal and quality differentiations are important, but brands and marketing play little role in influencing demand. The per capita (pc) demand for apples does not vary much over time.

In low disposable income markets, the pc demand for apples may grow slightly during the off-season (from November, following the end of the local harvest through July, preceding the beginning of the next harvest) as per capita disposable income grows. A clear example of this income effect on demand is shown in the growth of apple imports to Slovenia, as shown in Figure 2.

NOA PROGRAM: REGIONAL NEW OPPORTUNITY ASSESSEMENTS 7

FIGURE 2. SLOVENIAN ANNUAL APPLE IMPORTS 2000–2010 (MT)

4,291 4,301

8,651

2,585

5,550 6,812

8,829 7,021

17,158 17,953 19,627

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Source: Food and Agricultural Organization of the United Nations (FAO), Trade Statistical Database TRADSTAT.

Retrieved from http://www.fao.org/corp/statistics/en

However, at some stage, pc consumption levels off and growth in demand becomes tied to the rate of population growth (2% or less in this region). Because of this inelastic demand, variations in the market prices of apples are highly correlated with variations in their supply (as opposed to demand changes). In fact, the size and condition of the annual Polish apple crop (approaching 3 million mt per year—versus approximately 13,000 mt for Kosovo) effectively drives prices for both fresh and industrial apples for all of Europe.

In most of the countries in the region, the demand for apple imports negatively correlates with changes in domestic apple production for logical reasons. Apple production and import data for Albania shown in Figure 3 show this clearly.

Over the past decade, studies indicate most of the eight countries invested in expanding apple production and introducing new, more profitable (i.e., higher demand, higher yielding) varieties. The total acreage of apple orchards and the yields per hectare have been constantly increasing. Kosovo is behind its neighbors on such investments, though donor and MAFRD programs now support them.

Kosovo is a net importer of apples, with imports principally focused during the months when the local harvest has been consumed (December–July). Domestic production only supplies 50-60% of total domestic demand because Kosovo does not currently have sufficient good quality storage to permit holding material quantities of locally produced apples in good condition for sale in these later post-harvest months.

8 NOA PROGRAM: REGIONAL NEW OPPORTUNITY ASSESSEMENTS

FIGURE 3. ALBANIAN APPLE PRODUCTION AND IMPORTS 2005–2009 (MT)

Source: FAO 2011. Food and Agricultural Organization of the United Nations (FAO), Agricultural Statistical Database

PRODSTAT; from http://www.fao.org/corp/statistics/en.

FAO 2011. Food and Agricultural Organization of the United Nations (FAO), Trade Statistical Database TRADSTAT; from http://www.fao.org/corp/statistics/en.

As shown in Table 3 below, all eight countries studied, except Macedonia, import relatively large quantities of apples every year (from 8,000 mt in Montenegro, to 29,000 mt to Bosnia-Herzegovina (BiH) and Serbia).

Given that the present total apple production of Kosovo is only about 13,000 mt in total, these are significant quantities. However, the research showed that a number of issues (including varieties, seasonality, quality, packaging and trade barriers (outright embargoes or tariffs and duties) reduce the likely short-term targets for Kosovo exports to a small number of countries.

TABLE 3. DOMESTIC PRODUCTION, IMPORTS AND EXPORTS OF FRESH APPLES IN

TARGET MARKETS, 2005-2010

2005 2006 2007 2008 2009 2010 CAGR

(mt) (%)

Albania

Domestic Production 16,000 27,566 36,000 45,000 47,202 n/a 24%

Imports 38,417 33,723 22,516 15,641 12,928 n/a -20%

Exports - - 147 34 109 n/a n/a

Apparent Consumption5 54,417 61,289 58,369 60,607 60,021 n/a 2%

Bosnia-Herzegovina

Domestic Production 52,181 58,109 60,962 51,946 71,507 n/a 7%

Imports 31,694 25,439 20,434 25,503 28,308 21,469 -6%

Exports 914 1,346 4,129 3,155 3,616 8,134 44%

Apparent Consumption 82,961 82,202 77,267 74,294 96,199 n/a 3%

5 Apparent Consumption = Domestic Production + Imports – Exports.

http://www.fao.org/corp/statistics/en

NOA PROGRAM: REGIONAL NEW OPPORTUNITY ASSESSEMENTS 9

Bulgaria

Domestic Production 26,130 26,328 26,165 23,500 35,456 43,235 9%

Imports 36,170 37,128 37,014 32,849 17,995 28,343 -4%

Exports 47 53 1,336 2,363 335 1,876 85%

Apparent Consumption 62,253 63,403 61,843 53,986 53,116 69,702 -3%

Croatia

Domestic Production 69,682 73,700 80,174 80,201 93,355 n/a 6%

Imports 20,371 20,276 14,392 13,009 14,156 8,839 -13%

Exports 9,244 3,231 20,684 9,219 9,768 19,599 13%

Apparent Consumption 80,809 90,745 73,882 83,991 97,743 n/a 4%

Macedonia

Domestic Production 86,217 95,826 152,089 174,315 106,356 n/a 4%

Imports 252 263 312 - 377 n/a 8%

Exports 42,411 64,956 88,559 - 44,945 n/a 1%

Apparent Consumption 44,058 31,133 63,842 174,315 61,788 n/a 7%

Montenegro

Domestic Production n/a 5,365 5,374 5,065 8,107 n/a 11%

Imports n/a 1,753 5,120 2,117 7,494 5,251 25%

Exports n/a 5 1 2 1 - n/a

Apparent Consumption n/a 7,113 10,493 7,180 15,600 n/a 22%

Serbia

Domestic Production n/a 240,320 245,228 235,601 281,868 n/a 4%

Imports 20,730 12,112 21,387 16,914 12,797 29,346 6%

Exports 11,537 37,140 74,189 35,206 39,957 n/a 2%

Apparent Consumption n/a 215,292 192,426 217,309 254,708 n/a 4%

Slovenia

Domestic Production 106,196 119,176 114,492 102,893 95,662 n/a -2%

Imports 6,813 8,829 6,952 17,158 17,928 19,627 19%

Exports 25,462 20,322 34,021 27,383 23,881 36,784 6%

Apparent Consumption 87,547 107,683 87,423 92,668 89,709 n/a 0% n/a = data not available Sources: —FAO 2011. Food and Agricultural Organization of the United Nations (FAO), Agricultural Statistical

Database PRODSTAT; Retrieved from http://www.fao.org/corp/statistics/en —Food and Agricultural Organization of the United Nations (FAO), Trade Statistical Database TRADSTAT;

Retrieved from http://www.fao.org/corp/statistics/en —International Trade Centre’s (ITC) Trade Intelligence Market Analysis Tools, Trade Database; Retrieved from http://www.intracen.org/marketanalysis New Opportunities for Agriculture estimates, July-August 2011.

http://www.fao.org/corp/statistics/en http://www.intracen.org/marketanalysis

10 NOA PROGRAM: REGIONAL NEW OPPORTUNITY ASSESSEMENTS

There are effectively two seasonally distinct apple market periods in each country (as in Kosovo). The first is principally for the locally grown varieties and tends to run from mid-August through October, coinciding with the local harvest period. The amount of storage capacity in the region is very small, so a relatively insignificant share of the local harvest is carried over for sale in winter or spring months. The second market period runs from mid-winter up until late July (just prior to the start of the local apple harvest) and is dominated by imported apples. In a few of these countries, these imports are of familiar local varieties such as Ida Red, which are the cheapest on the market (due to regional oversupply), but most of these imports are of newer higher quality (storability, taste, appearance) apple varieties at a much higher average price. Suppliers of apples for this second market are mostly EU countries (e.g., Italy or Poland), with the ability to store large volumes for the second season market, or counter-seasonal producers such as Chile and South Africa (who are harvesting apples during the late winter months). The pattern of monthly apple imports for Albania (shown in Figure 4) is typical across the countries studied.

FIGURE 4. MONTHLY DISTRIBUTION OF ALBANIAN APPLE IMPORTS FOR 2008, 2009

AND 2010 (MT)

Source: Food and Agricultural Organization of the United Nations (FAO), Trade Statistical Database TRADSTAT.

Retrieved from http://www.fao.org/corp/statistics/en

This seasonality is quite also evident in the pattern of seasonal apple wholesale prices in each of the countries (in fact, this is pretty much a universal pattern). Data on weekly price movements over the course of the year for Croatia, shown in Figure 5, are replicated with roughly the same pattern through the region. Prices are lowest during the period of the local apple harvest and highest when demand is met from higher priced imports.

NOA PROGRAM: REGIONAL NEW OPPORTUNITY ASSESSEMENTS 11

FIGURE 5. WEEKLY AVERAGE WHOLESALE PRICE MOVEMENT FOR GOLDEN

DELICIOUS APPLES IN CROATIA 2006–2011 (PRICES IN HRK/KG: €1.00 = 7.46 HRK)

Source: TISUP - Croatian Agricultural Market Information System

Macedonia is the largest regional exporter and the main supplier of lower priced apples to the other regional countries studied. Thus, Macedonia is Kosovo’s principal competitor for the regional seasonal market. Serbia is also an important regional exporter, but its special trade status gives it access to the huge Russian market for most of its exports. The EU and southern hemisphere suppliers to regional markets are not competition for Kosovo, because Kosovo produces insignificant quantities of the same varieties of apples of competitive quality and has no material storage capacity to hold apples for the late winter and spring markets as they can.

Bosnia-Herzegovina (BiH) is the largest importer in the region. Data supplier market shares in BiH in Table 4 demonstrate the breadth of regional competition that Kosovo faces:

TABLE 4. MARKET SHARES OF LARGEST APPLE SUPPLIERS TO BOSNIA-

HERZEGOVINA 2005 – 2009

2005 2006 2007 2008 2009 Source Share Source Share Source Share Source Share Source Share

Croatia 28% Macedonia 29% Croatia 30% Macedonia 24% Macedonia 21%

Slovenia 17% Serbia 21% Macedonia 30% Italy 20% Italy 20%

Serbia 17% Italy 19% Italy 21% Croatia 19% Slovenia 18%

Italy 14% Croatia 13% Slovenia 10% Austria 12% Croatia 15%

Macedonia 9% Slovenia 9% Serbia 8% Serbia 11% Serbia 10%

Austria 9%

Slovenia 10% Austria 8%

Poland 6%

Sources: International Trade Centre’s (ITC) Trade Intelligence Market Analysis Tools, Trade Database. Retrieved from http://www.intracen.org/marketanalysis; New Opportunities for Agriculture estimates, July-August 2011

Based on the market assessments, the team concluded that the most significant barriers to promoting profitable table apple exports from Kosovo to the target countries include:

12 NOA PROGRAM: REGIONAL NEW OPPORTUNITY ASSESSEMENTS

• Profitability. Data on import prices in the importing countries shows that after accounting for transportation costs, duties and varietal and qualitative differences, farm-gate prices in Kosovo during the domestic harvest season were not significantly different from those in potential export markets. Therefore, given the relative ease of selling bulk apples to traders and retailers on the local Kosovo market, there appears to be little financial incentive for growers to endeavor to find export sales during this period.

• Lack of Storage for Off-Season Supply. Good quality, controlled atmosphere (ultra-low oxygen [ULO], temperature and humidity) storage is required to open up profitable local and export sales opportunities for Kosovo growers during the post-harvest marketing period of November-July.

Kosovo has almost no effective storage capacity at present.

• Varieties. Most of the apples produced in Kosovo are of the Ida Red variety. There is a much smaller amount of Golden Delicious, Red Delicious and Granny Smith produced. Ida Red is an old variety and the most common produced throughout the region. It has poor storage qualities. It was generally the lowest priced variety in eight markets studied. Other red or pink apple varieties such as Gala and Fuji bring much higher prices, and have much better consumer qualities (flavor, sweetness, storability) and storage qualities. The “newer” varieties are the most important varieties traded across Europe now and have replaced the older and more traditional varieties. Kosovo growers need to begin to quickly replace older Ida Red orchards and invest in new orchards planted with the new, more marketable and higher yielding varieties.

The assessment team concluded that Kosovo’s first priority (that of growers, donors and government) should be import substitution. This means a focus on investments to double production (to fill the current import gap of 40-50%), and more importantly, to build good quality apple storage capacity to allow local growers to profitably satisfy apple demand in their domestic market for the seven to eight months of the year when Kosovo now depends on imports. Material efforts to promote exports to other countries in the region are unwarranted at present, and may be difficult in the future when domestic production and investments in good storage finally produce a significant surplus of export quality fruit in the December-July target export sales season. However, Kosovo’s competitors are not standing still. In the time that it will take for Kosovo to achieve this export level, they too will have increased production, improved quality and varietal selection and acquired more storage capacity.

Or in ungraded in 300 kg bins (at a lower average price):

Fresh apples for export markets are ideally shipped either graded in various retail-ready packs (at a higher average price)

Or in ungraded in 300 kg bins (at a lower average price)

NOA PROGRAM: REGIONAL NEW OPPORTUNITY ASSESSEMENTS 13

2.0 BERRIES

The market opportunity assessment examined the potential for exports of fresh berries (raspberries, blueberries and strawberries) produced in Kosovo. The assessment team rated the market opportunities for berries in the eight countries as shown in Table 5.

TABLE 5. ASSESSMENT OF OPPORTUNITIES FOR KOSOVO BERRY EXPORTS TO

EIGHT REGIONAL MARKETS

Country Market Opportunity Ranking

Albania 1 Bosnia-Herzegovina 2 Bulgaria 3 Croatia 3 Macedonia 3 Montenegro 2 Serbia 2 Slovenia 2

Key:

Near-Term Opportunity 1

The assessment examined the markets for fresh berries intended specifically for direct sale to consumers and not for berries intended for further processing (freezing, juicing, fruit preparations, concentrating, jams, etc.).

There is little information concerning trade in or production of fresh berries available through the normal Food and Agriculture Organization (FAO) and International Trade Centre (ITC) secondary sources.

Strawberries are the most frequently reported, but the data is incomplete and inconsistent. Raspberries are typically reported yet without distinguishing between exports for industrial purposes and for the fresh market.6 However, in those few markets where fresh berries were observed as commonly present in retail sales (e.g., Slovenia); a large share of the product was found to be imported from outside the region.

Raspberries are the most widely produced berry in the region, but it must be understood that at present there is very little production of raspberries for the fresh market. Most is for the industrial market (freezing or juicing). In this case, the distinction is the varieties grown. The predominant Meeker and Willamette raspberry varieties are older cultivars with a very short shelf life. Fresh, they will not last more than two or three days after picking and are unsuitable for retail sales as fresh berries. The situation is the same in Kosovo production. The raspberry varieties needed for fresh berry production are not yet widely available in the

6 Serbia is frequently cited as the most important regional exporter and competition, but Serbian raspberry production is almost exclusively for the industrial market (further processing). A relatively small share goes to the fresh market in part because the most commonly grown varieties in Serbia have poor fresh market characteristics.

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region. Blueberry production does not currently exist on a truly commercial scale yet in the region. Strawberry production for fresh sales has started and is probably the most advanced of the three berries.

The assessment team found that because of problems with local production and easy access, Albania is probably a relatively good export market for Kosovo berry growers. Unfortunately, at present, Kosovo has no significant production of any of these berry crops. From January to May in each of the past three years (2008, 2009, and 2010), Albania imported 40–60 mt per year from EU sources. Good relations exist between the produce industries in Kosovo and Albania, and accessing the Albanian market will be reasonably easy once Kosovo has an adequate supply. Figure 6 shows Albanian fresh strawberry imports for the three-year period.

FIGURE 6. ALBANIAN MONTHLY IMPORTS OF FRESH STRAWBERRIES FROM EU

SOURCES 2008-2010 (MT)

Source: European Commission EUROSTAT External Trade Database retrieved from http://epp.eurostat.ec.europa.eu/portal/page/portal/external_trade/data/database

Croatia exports about 1,000 mt of strawberries per year over the period 2005-2010, making it a potentially interesting market, but the distance from Kosovo is a significant barrier at present (complicated by the inability to pass through BiH).

One Croatian producer, Fragaria, has offered to work with Kosovar growers to improve their strawberry production and assist them in exporting to markets Fragaria serves. The other regional markets either are effectively self-sufficient in fresh berry production or depend on higher quality product, typically imported from Turkey, Italy, Greece, and Spain. Kosovo will need several years to be able to compete effectively with these other suppliers in terms of both price and quality.

Kosovo growers will also have to establish early season production (March-May) to be able to penetrate regional export markets profitably.

Fresh berries for export markets in the countries studied are shipped already graded in retail-ready packs

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Kosovar consumers also appear to want more fresh berries, but the demonstrated inability of the Kosovo retail market segment to properly handle and merchandise fresh berries is a serious barrier to the growth of a profitable domestic berry growing industry. The locally produced fresh berries observed in Kosovo retail markets were of extremely poor quality, poorly packed, not refrigerated and poorly displayed. Until the retail sector can learn to overcome these shortcomings, Kosovo growers will have a very hard time accessing the local market.

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3.0 GHERKINS

The market opportunity assessment examined the potential for exports of gherkins (small fresh cucumbers for further processing) produced in Kosovo. The assessment team rated the market opportunities for gherkins for further processing in the eight countries as shown in Table 6.

TABLE 6. ASSESSMENT OF OPPORTUNITIES FOR KOSOVO GHERKIN EXPORTS TO

EIGHT REGIONAL MARKETS

Country Market Opportunity Ranking

Albania 3 Bosnia-Herzegovina 2 Bulgaria 3 Croatia 2 Macedonia 2 Montenegro 2 Serbia 2 Slovenia 2

Key:

Near-Term Opportunity 1

In the case of gherkins, the trade interviews largely ignored any retail market segment (sales of gherkins for home pickling) and included processors in the target markets. Some interest in Kosovo supplies of gherkins was expressed by packers in Croatia, Macedonia, Montenegro and Serbia if they can meet quality requirements and are price competitive. BiH, Macedonia, Bulgaria and Albania are potential competitors with large or growing exports already established.

Kosovo imports large quantities of pickled gherkins from its neighbors and local processors report being unable to purchase sufficient locally produced gherkins for their own needs. Gherkin production for pickling is generally better organized in the neighboring countries, with packers often utilizing advance production contracts with local growers, and growers having access to post-harvest cooling. Kosovar packers are just starting to explore such arrangements. In general, there is no differentiation in Kosovo between production for the gherkin market and production for the fresh salad cucumber market. Growers generally do not understand the differences and therefore are not maximizing the potential profitability of gherkin production.

Furthermore, post-harvest handling of gherkins in Kosovo is very poor. The grading is not done well (there are currently only two mechanical graders in the country). Attention is not paid to avoid damaged fruit.

Gherkin shipments must be cooled before shipment to maintain quality, but there is no chilling or refrigerated storage capacity in Kosovo. Until both production and post-harvest handling are improved, Kosovo will not be able to export material quantities. For the moment, growers should focus on satisfying local packer demand.

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Fresh gherkins for export markets in the countries studied are shipped, preferably graded, in bulk containers

Or already graded in net bags

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4.0 TABLE GRAPES

The market opportunity assessment examined the potential for exports of fresh grapes for direct consumption (“table grapes”) produced in Kosovo. The assessment team rated the market opportunities for table grapes in the eight countries as shown in Table 7.

TABLE 7. ASSESSMENT OF OPPORTUNITIES FOR KOSOVO TABLE GRAPE EXPORTS

TO EIGHT REGIONAL MARKETS

Country Market Opportunity Ranking

Albania 3 Bosnia-Herzegovina 3 Bulgaria 3 Croatia 3 Macedonia 3 Montenegro 3 Serbia 2 Slovenia 3

Key:

Near-Term Opportunity 1

The team concluded that only Serbia represents a viable export target for Kosovo table grapes, and only in the medium term.

Grapes cannot be stored longer than two to three months under the best of conditions. Most countries import the largest quantities of grapes from regional suppliers during the harvest period, between August and October, plus stored grapes in November and December. Imports of table grapes over the winter months are from counter-seasonal suppliers such as Chile and South Africa. Import data for Slovenia, shown in Figure 7, below, follows a typical pattern in terms of monthly imports found in those regional countries which have material imports.

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FIGURE 7. SLOVENIAN MONTHLY TABLE GRAPE IMPORTS 2009-2010 (MT)

In all countries, there is clearly a late market price premium for stored grapes delivered in the months after the harvest season. This premium price is clear in the multi-year data from Croatia in Figure 8, which is typical in pattern (not necessarily magnitude) for table grapes in all markets assessed.

FIGURE 8. CROATIAN BLACK TABLE GRAPE VARIETY AVERAGE WHOLESALE PRICES

2006-2011 (HRK/KG)

Source: TISUP (Croatian Agricultural Market Information System)

Kosovo is currently a net importer of table grapes and will have to increase domestic production significantly to be able to export grapes. However, Kosovo table grape production faces a similar litany of barriers:

• Kosovo growers do not yet understand the differences in production methods between wine grapes and table grapes that are required to produce a reasonable quality product as demanded in importing countries profitably.

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• Kosovo does not produce any material quantity of the most popular table grape varieties (e.g., Red Globe or Thomson).

• Kosovo does not have adequate post-harvest handling facilities for packing or storing table grapes either for export or for the domestic market.

Increasing total Kosovar table grape production is not an insurmountable technical challenge, but until these other handicaps are overcome, Kosovo will continue to be a net importer and has no hope of establishing significant exports. Once overcome, there will still be few export opportunities in the surrounding region due to the intensive competition both from neighbors (e.g., Macedonia, Montenegro and Serbia) and externally (Italy, Greece, Turkey and South Africa).

While Serbian table grape production is growing and it is the largest exporter in the region (moderately ahead of Macedonia), Serbia is still the largest regional importer of table grapes.

Most of Serbia’s imports come from Macedonia.

If trade barriers are removed and Kosovo can begin to match Macedonian quality and prices, Kosovo’s small distance advantage should make it possible for local growers to compete in Serbian markets—particularly in the southern half of the country.

Date on volumes of local production, imports and exports of table grapes for the eight target markets are presented in Table 8.

TABLE 8. DOMESTIC PRODUCTION, IMPORTS AND EXPORTS OF TABLE GRAPES FOR

TARGET MARKETS, 2005-20107

Albania Domestic Production 115,100 127,800 146,500 153,900 162,800 n/a 7%

Imports 14,897 10,914 6,676 5,008 4,029 n/a -23%

Exports n/a n/a n/a n/a n/a n/a n/a

Apparent Consumption8 129,997 138,714 153,176 158,908 166,829 n/a 5%

Bosnia-Herzegovina Domestic Production 23,273 21,498 21,235 23,912 25,617 n/a 2%

Imports 10,029 8,950 7,516 9,654 7,766 6,762 -6%

Exports 11 55 375 524 711 1,104 116%

7 Data was not collected for Slovenia.

8 Apparent Consumption = Domestic Production + Imports – Exports.

Table grapes for export markets in the countries studied are ideally shipped already graded in retail-ready packs

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Apparent Consumption 33,291 30,393 28,376 33,042 32,672 n/a 0%

Bulgaria Domestic Production 266,183 307,173 376,663 363,539 281,302 n/a 1%

Imports 6,231 8,728 8,283 7,705 3,157 3,093 -11%

Exports 5 7 24 519 698 985 141%

Apparent Consumption 272,409 315,894 384,922 370,725 283,761 n/a 1%

Croatia Domestic Production 181,021 179,426 197,979 185,256 206,437 n/a 3%

Imports 13,622 12,776 10,614 10,750 9,213 8,619 -7%

Exports 9 2 - - 120 45 31%

Apparent Consumption 194,634 192,200 208,593 196,006 215,530 n/a 2%

Macedonia Domestic Production 265,717 254,308 209,701 236,834 253,456 n/a -1%

Imports 30 92 53 - 93 n/a 25%

Exports 38,003 31,460 46,250 - 24,098 n/a -9%

Apparent Consumption 227,744 222,940 163,504 236,834 229,451 n/a 0%

Montenegro Domestic Production n/a 41,726 35,402 43,989 38,635 n/a -2%

Imports n/a 236 3,908 796 5,182 589 20%

Exports n/a 265 829 1,215 817 1,359 39%

Apparent Consumption n/a 41,697 38,481 43,570 43,000 n/a 1%

Serbia Domestic Production n/a 359,454 353,343 372,967 431,306 n/a 5%

Imports 13,999 12,112 21,387 16,914 12,797 29,346 13%

Exports 90 37,140 74,189 35,206 39,957 107,007 225%

Apparent Consumption n/a 334,426 300,541 354,675 404,146 n/a 5% n/a = data not available Sources: —FAO 2011. Food and Agricultural Organization of the United Nations (FAO), Agricultural Statistical Database

PRODSTAT; Retrieved from http://www.fao.org/corp/statistics/en —Food and Agricultural Organization of the United Nations (FAO), Trade Statistical Database TRADSTAT; Retrieved from http://www.fao.org/corp/statistics/en —International Trade Centre’s (ITC) Trade Intelligence Market Analysis Tools, Trade Database; Retrieved from http://www.intracen.org/marketanalysis New Opportunities for Agriculture estimates, July-August 2011.

http://www.fao.org/corp/statistics/en

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5.0 LETTUCES

The market opportunity assessment examined the potential for exports of lettuces9 produced in Kosovo. The assessment team rated the market opportunities for lettuces in the eight countries as shown in Table 9.

TABLE 9. ASSESSMENT OF OPPORTUNITIES FOR KOSOVO LETTUCE EXPORTS TO

EIGHT REGIONAL MARKETS

Country Market Opportunity Ranking

Albania 2 Bosnia-Herzegovina 2 Bulgaria 3 Croatia 2 Macedonia 2 Montenegro 2 Serbia 2 Slovenia 2

Key:

Near-Term Opportunity 1

The team felt that lettuce perhaps offered one of the most important potential export opportunities for Kosovo for a number of reasons. But at present, there is only minimal local production (almost exclusively romaine type leaf lettuce) and it cannot satisfy the local market at all. With greater diversification of varieties grown in Kosovo, and with income growth, it is probable that pc demand will increase significantly within Kosovo.

Kosovo has some potential advantage in lettuce production for agro-climatic reasons, but the production technology and post-harvest handling are very poor, as with most of the other crops examined. In particular, post-harvest cleaning, packing and cooling are vital. Also, as with fresh berries, the Kosovo retail sector (particularly supermarkets and grocery stores) are very poor at stocking and merchandising lettuces (particularly on lack of cooling and humidification).

As Kosovo production and post-harvest handling develop and grow, regional export opportunities will exist, but that is a medium-term (2014-2016) prospect at best.

There is no reliable data on regional production or trade available. However, a few countries have useful statistics. The growth in import demand in Albania is typical of the growth in lettuce consumption over the past several years in most of the region. The data on Albanian lettuce imports for 2005-2010 (Figure 9) shows

9 The study looked at various varieties of leaf and head lettuces that are grown or imported to the region, including iceberg, romaine, radicchio, butter head, etc.

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the growth pattern (not necessarily the rate of growth) throughout the region reflects significant growth in pc lettuce consumption.

FIGURE 9. GROWTH IN ALBANIAN IMPORTS OF LETTUCES 2005-2010 (MT)

The international trade in lettuces to and within Europe is fairly well established. This is reflected in the fact that imports are available throughout the seasons when local producers cannot grow lettuce (e.g., October– May), and prices do not fluctuate as widely between the local harvest season (usually the lowest wholesale price period) and the peak import seasons (typically the highest price period).

Monthly lettuce import data for Slovenia, shown in Figure 10, below, demonstrate how—in more developed markets where pc consumption is higher—imports step in over the market period when local supplies are not available (typically, December–May).

FIGURE 10. AVERAGE SLOVENIAN MONTHLY LETTUCE IMPORTS 2009 AND 2010 (MT)

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Monthly lettuce wholesale price data from the Slovenian market (presented in Figure 11) also demonstrates the relatively low differential in wholesale lettuce prices between imports and local production. This difference is far less remarkable than it is for the other crops (see, for example, apples in Section 1 above, or grapes in Section 4), and is a consequence of access to large volumes of imports from outside the region (which dampen prices).

FIGURE 11. AVERAGE MONTHLY SLOVENIAN IMPORTED LETTUCE WHOLESALE

PRICES 2009 AND 2010 (€/KG)

This difference between peak winter prices and the lower in-season prices is remarkably low. It is higher in less developed markets, but not enormously so. This implies that there is less premium for very early and very late season lettuce production (lettuce cannot be stored for more than a few days even under ideal conditions).

Also, unlike the other four crops examined, Kosovo’s main trade competitors for lettuce are not regional.

Turkey, Spain, Italy, the Netherlands and Greece are key suppliers to the region, as the Slovenian data in Table 10 shows—at least on the higher end of quality and value.

TABLE 10. LARGEST LETTUCE SUPPLIERS TO SLOVENIA 2005–2010

Source Share of Total Imports

2005 2006 2007 2008 2009 2010

Italy 85% 86% 80% 73% 76% 77%

France 5% 4% 2% 3% Spain 2% 6% 3%…