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Growing fresh herbs for export - Kutaisi region
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Content Goals and Objectives Agropark Model Overview Current Situation
Georgian Market Overview Global Market Overview Advantages and Challenges
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Goals and Objectives The purpose is adaptation of the Kutaisi region to growing and exporting fresh herbs to developed markets and to address several needs simultaneously: Export of quality products to developed markets; Expansion of exports from Georgia.
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Goals and Objectives To increase the income of small and medium-sized farmers by the upgrades working standards and to get market quality produce the suitable for developed markets that are currently inaccessible. Main objectives of the project are: The utilization of the potential for marketing fresh herb products from Georgia. Support and access to international markets for local exporters. Creating an opportunity for small and medium sized entrepreneurs. Proposal for a model that will include a national coordinator to create advanced and unique knowledge in the field of greenhouses. Creating conditions for increasing economic efficiency per unit of agricultural land. Creating conditions for transforming Kutaisi into a logistic center for the export of agricultural produce.
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Agropark Agropark is a site for advanced intensive agriculture, which constitutes a platform for promoting, producing and marketing of premium quality fresh produce designated for export to target countries with high profit potential. Agropark is an agricultural site for growers and individual agricultural entrepreneurs, who are supported by high quality services provided by various expertise in the park. This is not a cooperation with characteristics of a "cooperative", seeing the growers are still entitled to obtain various services outside the Agropark site, as long as all marketing standards and regulations are complied with.
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Agropark The Agropark model is based on several stakeholders (listed below) with different responsibilities. The owner of Agropark should be the investors, maybe together with government or other investors. Investors have a profit interest, invest in building the site and profit from seasonal rental fees paid by the various stakeholders. Growers rent a plot which is fully suitable and equipped for their requirements. They purchase the services provided and sell high quality fresh produce for higher prices than local market prices. Packhouse entity responsible for receiving the fresh produce as soon as it has been picked, sorting and packing, including special packaging requirements. In addition, it is responsible for customer relations. Management entity responsible for ensuring efficient operation of the park, maintaining high level of services provided to the growers (water, electricity, security etc.), as well as training the growers. Marketing entity responsible for marketing strategy and logistics, marketing, business transactions, receiving production forecast from growers and creating market forecasts for growers. Its income is based on a commission.
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Business Model Packing Greenhouse Renting Transportation Agropark
Whole process of growing and exporting fresh herbs can be divided into various business units. Suggested business model for the project is divided into two separate parts: Growers and Agropark. Growers are private farmers, who lease the greenhouse space from the Agropark, grow the herbs according to the exporting standards. Grown herbs are sold out to the Agropark, which in turn is consisted with different units: Greenhouse renting, transportation, packing, exporting, sales, marketing, etc. Agropark Growing Greenhouse Renting Packing Transportation Marketing and Sales
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Description of the model
Cluster will have both small and medium and large investors / entrepreneurs / growers. The export company will be placed as an independent subject in the Cluster Area together with the sorting / packaging / warehousing infrastructure. Each grower will have his / her own industrial space / greenhouse in accordance with the baseline requirements. 42 Ha Greenhouse Cluster
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Main Products Products The main products are: Dill Coriander Chives
Parsley Mint
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Business Model After creating the cluster, expression of interests will be made to arrange cargo terminal at Kutaisi airport; Georgian Airports Administration will ensure the introduction of airlines with cargo service to Kutaisi International Airport. The cost of transportation will be much lower with direct flight from Kutaisi, than transit from Tbilisi. For example, the route Tel Aviv to Amsterdam is 0.8 USD, when with current calculations transit flight cost from Tbilisi is 2.70 EUR.
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Georgian herbs market Catering Business Domestic Kitchen Restaurants Growing fresh herbs is a developing industry and has a potential for further development, due to consistent increase of consumption for fresh herbs over the years. There is an increasing consumer awareness in the various countries and the use of fresh herbs became popular in restaurants, caterers and catering business, as well as domestic kitchen.
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Georgian herbs market Herbs production in Georgia has declined by 42.5% in This change can be caused by the crisis in 2015, which also changed export indicator, which decreased by 60%.
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Current Situation The most suitable regions for the greens production in Georgia are Imereti and Kvemo Kartli regions. In Imereti region mainly following herbs are produced: Dill; Parsley; Coriander; These herbs also are mainly cultivated in greenhouses.
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Georgian herbs market In multiple municipalities (Tskaltubo, Khoni, Samtredia), grower infrastructure is welll developed. Modern technologies are implemented for production storing, giving the ability to store vegetables for 3 to 5-month long period. Figure given bellow shows the main products cultivated by interviewed farmers.
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Georgian herbs market The trend of fresh vegetables (coming under the HS digit code 0709) export is stable from 2015 year and by 2017 it reached 5,943 thousand USD.
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Georgian herbs market Concerning the import of all types of vegetables to Georgia, as shown on the chart below, various fresh, frozen and conserved vegetables are being imported to Georgia.
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Georgian herbs market The price of greens is changing according to the season. The highest price is recorded especially in winter, when temperature is very low and sometimes in summer, when weather is too hot.
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Main players in Georgian greenhouse herb industry
Georgian herbs market Small manufacturers Middle sized manufacturers Wholesale traders Partners Small traders Supermarkets
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EU market of herbs Spices and herbs are a minor but important ingredient that contributes little to the total cost of the food in which they are used. The demand is inelastic to price changes. In 2013, direct imports from developing countries amounted to 303 thousand tons (57% of total EU imports), or € 926 million (53%). Consumption by EU countries accounted for 340 thousand tons in Consumption grew by 2% per year between 2009 and 2011.
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EU market of herbs Due to high prices and a sense of scarcity, European buyers are increasingly willing to buy from smaller suppliers. According to EU studies the consumption of Fresh herbs and leafy products is rising steadily with an increase of slightly more than 10 percent per year. European imports of spices and herbs from developing countries have grown significantly in recent years, by 6.1% annually between 2012 and The global herbs and spices market is expected to grow by 5.1% between 2017 and 2021.
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General Standards of Packaging and Processing
Growing fresh herbs for export requires the manufacturer to meet the standards, certificates and criteria of the target countries. Raw greens require appropriate protective packaging Protective layer is necessary to protect leaves against possible damage during packaging and reduce the risk of external moisture Cut raw greens are usually covered by the polyethylene sacks and placed in cardboard boxes In is crucial to provide the appropriate temperature and moisture in the process of transportation in order for the raw greens to retain its properties Packaging requirements differ for different customers and market segments It is necessary to consider the fact that raw greens need to be packaged immediately after being harvested
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Issues Lack of the critical volume of homogenous products (greens and vegetables) that would comply with Global Gap standards and an assortment relevant to market requirements that are necessary for entering new markets; No inputs’ control at the level of primary production; Herbs exported from Georgia are not properly sorted and packaged and thus, cannot get to organized retail; In majority of initial enterprises in a short term it is impossible to implement modern standards that would satisfy market requirements; or a significant financial and human resources are necessary to implement these changes; There is no post-harvesting processing enterprise in Georgia (this is mainly due to the first paragraph) Logistic elements necessary for transporting FRESH product do not exist in the region; Mostly greenhouses production satisfies the demand on traditional markets.
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Challenges Consolidation of fragmented production based on territorial approach Availability of services for the effective production of greens and vegetables of new and traditional varieties Create preconditions for establishing an enterprise with able to handle post-harvesting handling Create logistic units necessary for transporting “FRESH” products
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Advantages Challenges Advantages and Challenges
Marketing period Quality Local cheap labor Little Limited use of pesticides Good picking habits Soil Fertility The farmers - The Human Factor Challenges Adapting existing greenhouses Winter temperaturesSoil Support system for farmers Inputs Soil cultivation The project, which aim is growing fresh herbs for export in the Kutaisi region, has many advantages and Alongside the outstanding advantages there are also challenges. In an obvious way, all the farmers, without exception, expressed their willingness to deepen their agricultural knowledge and raise the standard of growth and production, although it will require considerable effort, investment and change of existing habits.
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Main stakeholders Agropark Exporting company Growers
Growers – produce fresh produce according to marketing company's plan and demand, supply fresh herbs to Pack houses; maintain contact with Pack house and marketing company, regarding herbs supply. Agropark – Rents greenhouses, sorts and packs the produce, maintains contact with growers, regarding to quality of herbs; Exporting company – markets/sells the produce, receives forecast data from the growers and accordingly plans with the growers the production and supply chain, cares of logistics and payment to growers and pack house.
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SWOT Analysis Strengths Weaknesses Opportunities Threats
Possibility of price eruption dew many new investments in range of growing area, Latin America, Africa South west Europ Possibility for growing chives in an area clean of thrips Growing market constantly searching for sources Ability to supply a "fair trade" product Limited and expensive logistics Limited product range Lack of awareness in Europe regarding fresh produce from Georgia Lack of local experience in working according to EU standards Good growing conditions with very little insect influence Very little need for use of pesticides Cheap skilled labor Strengths Weaknesses Threats Opportunities
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Conclusion Suggested business model requires different managerial and professional skills. Therefore, it will create opportunities for people with different fields of expertise in the region. As a result, opportunities will open up for the local small entrepreneurs, rather than attracting only investors with high capabilities. Overall, this project will be of vital importance in terms of promoting economic growth and herb growing culture in the region with rich agricultural history.
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