B2B AND DOMESTIC MARKET DEVELOPMENTpdf.usaid.gov/pdf_docs/PA00MHJC.pdf · This project aimed to shed light at the restraints and marketing hurdles on the domestic B2B market, to facilitate

B2B AND DOMESTIC

MARKET DEVELOPMENT

Final Report

16 September 2016

This publication was produced for review by the United States Agency for International Development. It was

prepared by Public Association „AgroLead“.

This publication was made possible through support provided by the Office of Agro Horizon Project in the

Kyrgyz Republic, U.S. Agency for International Development, under the terms of the Service Agreement

from 14 June 2016.

Final Report - B2B and Domestic Market Development

I

B2B AND DOMESTIC MARKET

DEVELOPMENT

IN THE FRAMEWORK OF AGRO HORIZON PROJECT

“EXPANDING OPPORTUNITIES IN THE KYRGYZ REPUBLIC”

FINAL REPORT

16 SEPTEMBER 2016

CONTRACT: SERVICE AGREEMENT FROM JUNE 14, 2016

COR USAID: LUIS HERNANDEZ

CHIEF OF PARTY: AGNES LUZ

DISCLAIMER

The author’s views expressed in this publication do not necessarily reflect the views of the United States Agency for

International Development or the United States Government.

CONTENTS

B2B AND DOMESTIC MARKET DEVELOPMENT ............................................................. I

EXECUTIVE SUMMARY ...................................................................................................... 2

BACKGROUND .................................................................................................................... 3

SCOPE OF THE PROJECT .................................................................................................. 4

WORK PLAN ......................................................................................................................... 5

RESEARCH METHODOLOGY ............................................................................................ 8

SURVEY RESULTS ............................................................................................................... 9

Overview ............................................................................................................................................................................... 9

Analysis of prioritized value chains ................................................................................................................................... 11

Requirements of market players ........................................................................................................................................ 17

Potential for import substitution ....................................................................................................................................... 21

Constraints in marketing ................................................................................................................................................... 23

Analysis of trade fairs and market exposure activities ..................................................................................................... 24

ORGANIZATION OF B2B MEETINGS & FACILITATION OF CONTRACTS ................. 30

RECOMMENDATIONS AND CONCLUSION ................................................................... 35

APPENDIXES ..................................................................................................................... 37


2

EXECUTIVE SUMMARY Agricultural producers from Batken, Osh, Jalal-Abad and Naryn in Southern and Eastern Kyrgyzstan have consid-

erable potential to sell on local and regional markets. Nevertheless, several hurdles exist and include a high level of

informality in the economy, lack of a quality infrastructure and weak marketing strategies of local producers. As a

result, the retail sector is in the Kyrgyz Republic is to a large degree dominated by imports of processed and partly

raw or input products.

This project aimed to shed light at the restraints and marketing hurdles on the domestic B2B market, to facilitate

new contracts between suppliers from the four target regions and domestic B2B clients, and to provide recom-

mendations for new products or upgrading needs of local producers to meet the demands of the domestic market.

The initial research showed that there are considerable constraints for producers to meet the requirements of B2B

clients. Many of the 100 surveyed potential B2B buyers reported that they expect quality and standardized prod-

ucts, proper documentation, on time delivery often to various locations (in the case of supermarket chains) and

not seldom sales consignment. All of these requirements pose considerable hurdles for suppliers of agricultural

products from Kyrgyzstan, many of whom do not have the means, infrastructure and experience to fulfil them. As

a result, many B2B clients from supermarkets to wholesale markets to gastronomy largely rely on distributors as

their main type of supplier, which function as service providers between producers and clients. On the other hand,

there is a big interest on the side of both producers and clients to work more closely together in the future.

As a result of four B2B meetings organized between 72 agricultural suppliers from Naryn, Osh, Jalal-Abad and

Batken Oblast and 8 potential buyers, a total of 9 contracts and 19 expressions of interest were signed with Super-

market Frunze, Supermarket “Aruu Tan Shaasasy” (Vefa Center), LLC “Agro Product Asia” and LLC “Bishkek

Expo”. A major success in this regard were the contracts with supermarket Frunze worth over $365,000.

The following recommendations can be given to further develop strengthen domestic B2B supply chains in the

agricultural sector:

The 19 signed expressions of interest will need to be turned into fully-fledged supply contracts. It will be crucial to

follow up on the B2B roundtables individually by supporting the producers in meeting the buyer´s requirements.

Key challenges repeatedly identified were documentation, labelling, logistics and quality management.

Moreover, also other local producers will need to be prepared for the production of quality products demanded by

the market. A number of companies or areas have been assessed as high in potential and have signaled their inter-

est in upgrading their production base. Investments will be needed into processing equipment, quality infrastruc-

ture and logistical procedures in order to increase volumes and quality.

Thirdly, it is recommended to identify concrete products for import substitution and product development. Based

on the rapid assessment, frozen fries, fruit juices and milk products appear to have highest potential, but further

analysis may be required.

Finally, logistical centers are growing in importance and can play a crucial role in facilitating more sustainable local

and regional supply chains as they can considerably improve quality, shelf-life and logistics for local produce. Typi-

cally, they do not purchase products themselves, but rent out the space to producer or traders. Currently, they are

focused on imported products, including frozen meat, but there is interest and need to expand them, build new

ones to better store local produce. Involving these players into upgrading activities for the domestic B2B market

will also be useful.


3

BACKGROUND The Agro Horizon project is part of the overall USAID economic development program in the Kyrgyz Republic.

By increasing human capital, supporting a business-enabling environment and increasing competitiveness in se-

lected economic sectors, USAID strives to accelerate the growth of a diversified and dynamic economy. In particu-

lar, the Agro Horizon project aims to increase the productivity of agricultural producers and link them to existing

and new markets, thereby increasing incomes of farmers and establishing new employment opportunities. The im-

provement of the nutritional status of women and children in its zone of influence is an additional expected bene-

fit.

Target regions of the project are the oblasts Batken, Osh, Jalal-Abad and Naryn in Southern and Eastern Kyrgyz-

stan. Given the natural resources available and the dynamic developments of the Kyrgyz economy, producers and

processors of agricultural products have considerable potential to sell on local and regional markets. Nevertheless,

several hurdles exist for the proper growth acceleration of the agricultural sector: These hurdles include a high

level of informality in the economy, lack of a quality infrastructure and weak marketing strategies of local produc-

ers. As a result, the retail sector is in the Kyrgyz Republic is to a large degree dominated by imports of processed

and partly raw or input products. This study aims to shed light at the restraints and marketing hurdles on the do-

mestic B2B market and provide recommendations for new products demanded by the local market that could sub-

stitute for imports in the short to medium term.


4

SCOPE OF THE PROJECT

The purpose of this project is threefold: Firstly, it will provide an overview of market actors to grow B2B value

chains in the Kyrgyz Republic. For this purpose, a database with around 800 companies from all regions and dif-

ferent sectors (including retail, wholesale, gastronomy, processing, storage and export) was established to identify

key players for agricultural value chains with a resources base in Batken, Osh, Jalal-Abad or Naryn Oblast. Sec-

ondly, the potential for import substitution, current marketing constraints and B2B customer requirements were

investigated through an in-depth survey of over 100 of the companies from the database. This survey resulted in

the identification of concrete bottlenecks and product demands on the downstream side of value chains in order to

develop recommendations for upgrading strategies. Finally, potential market exposure events were analyzed and

B2B meetings were organized with the goal of initiating at least two sustainable B2B relationships.

This final report provides an overview of the results of the initial research, highlights the content and achieved

contracts of the organized B2B meetings and offers final recommendations follow-up activities to further upgrade

domestic agricultural B2B value chains.


5

WORK PLAN

Below is the detailed work plan, giving an overview of all activities that were conducted in the framework of this

project up until this final report.

№ Activities deadline Expected Result

1. Inception report / work plan Jun-20 work schedule

1.1. Meeting and definition of the expected results from the Agro

Horizon (USAID)

Jun-14 Determination of the

expected result

1.2. meeting with the project team, planning and allocation of tasks Jun-16 Distribution of tasks

1.3. Development of a detailed work schedule Jun-17 Operating schedule

2.1. Identify market players, e.g., supermarkets and other retailers,

hotels and other institutional buyers, etc., in the downstream

side of the value chains in Kyrgyzstan who are looking to ex-

pand their businesses that will lead to increase in sourcing of

raw materials or processed products from Naryn, Osh, Batken

and Jalal-Abad.

08-Jul data base

2.1.1. data collection of all supermarkets, hotels, retail outlets on the

value chain (collection, exchange information with partners of

all buyers) for the identification of potential buyers

Jun-22 company contacts

2.1.2. development of a questionnaire that covers company infor-

mation, supplier requirements and willingness to find new sup-

pliers (quantitative and qualitative)

Jun-24 survey questionnaire

2.1.4. Interviews with market players (supermarkets, hypermarkets,

shops, large and small markets

Jul-04 completed survey

2.1.5. data input to build data base with potential buyers in all 7 ob-

lasts

Jul-06 completed data base

2.1.6. data input to build data base with potential exporters Jul-07 completed data base

2. 2. Determine the requirements (quality, volume, price, timing, ex-

piration, packaging, labeling, etc.), terms of payment, and will-

ingness of the identified market players to carry out a supply

contract with suppliers. (both)

08-Jul draft report


6

2.2. development of a questionnaire that covers company infor-




2.3. Interviews with market players (supermarkets, hypermarkets,

shops, large and small markets, exporters, hotels etc)

Jul-04 completed survey

2.4. data input to build data base with potential buyers in all 7 ob-

lasts

Jul-06 completed data base

2.5. prepare a report based on results of the survey Jul-08 draft report

2.3. Carry out analysis of imports of similar products to Kyrgyz-

stan to include volumes, specifications, supply channel (includ-

ing importers), and competitive advantages (e. g. prices, pack-

aging, quality etc.); determine buyers’ requirements for import

substitution and recommend concrete steps for local suppliers

to increase competitiveness.

Jul-08

2.3.1. conduct an analysis of import substitution potential of priori-

tized value chains

Jun-22 analysis results

2.3.2. development of a questionnaire that covers company infor-




2.3.3. conduct interviews Jul-04 completed survey

2.3.4. data input Jul-06 data base

2.3.5. develop recommendations to improve competitiveness Jul-06 recommendations

2.3.6. write draft report based on results of survey Jul-08 draft report

2.4. 1. Identify constraints in marketing (including for import

substitution) of target VC products and recommend activities

to address these constraints.

Jul-08

2.4.1. develop a questionnaire to identify constraints in marketing of

target VCs


2.4.2. conduct interviews Jul-04 finished survey

2.4.3. data input Jul-06 data base

2.4.4. data analysis and develop recommendations to address con-

straints in marketing

Jul-06 recommendations

2.4.5. write draft report based on results of survey Jul-08 draft report

2.5. Provide analysis of trade fairs and market exposure activities

within Kyrgyzstan and recommend one to two for each value

Jul-08


7

chain that will offer optimal opportunity to obtain contracts

for SMEs in the Project’s priority value chains.

2.5.1. collect information on trade fairs and markets in Kyrgyzstan list of fairs

choose fairs most suitable for prioritized value chains Jul-08 recommended fairs

in draft report

3. Propose and organize, in coordination with Task 2 team, at

least four B2B activities (buyer-seller meetings, exposure visits,

trade fair participation) in at least two of the value chains.

Aug-30 report

3.1. organize B2B roundtable between suppliers and buyers Aug-16 list of participants




3.5. reporting on the conducted B2B meetings Aug-30 report

4. Facilitate signing of at least two contracts between buyers and

suppliers from the Project’s focus Oblasts and priority value

chains.

30-Aug

4.1. facilitation of contracts between suppliers and buyers 30-Aug 2 contracts

5. Presentation of and final written report on outputs and

recommendations for AHOP’s future market development

activities.

05-Sep final presentation

6. development of a draft report 09-Sep draft report

7. final reporting 15-Sep final report


8

RESEARCH METHODOLOGY

In order to get the best overview of the downstream value chain market for agricultural products in the Kyrgyz

Republic from the four target regions of the Agro Horizon project, a mixed approach of qualitative and quantita-

tive research methods was applied. In detail, the research consisted of four main parts, which will be described be-

low.

Firstly, a database was established with market players from all relevant sectors and oblasts of the Kyrgyz Republic

based on information from various partner organizations as well as online and offline resources. Secondly, two

interview guides with quantitative and qualitative questions were developed: one specifically for meat value chain

actors and one for all other value chain actors. Then, over 100 interview participants from all sectors and oblasts

were chosen from the above mentioned overall database based on their relevance (volumes traded), value chain

upgrading potential and interest to work with the project. Finally, the gathered data was put into a consolidated

database and analyzed to develop concrete recommendations to the project. Potential trade fairs events were inves-

tigated separately to propose relevant market exposure events to selected market players.


9

SURVEY RESULTS

OVERVIEW

Out of an overall database of 820 companies from all regions of the Kyrgyz Republic and different sectors related

to agricultural value chains, 100 interview partners were chosen.

Among these companies:

35% were from Chui oblast including Bishkek (26%);

14% from Jalal-Abad Oblast;

13% from Osh Oblast;

14% from Naryn Oblast;

11% from Issyk-Kul Oblast;

8% Batken Oblast;

and 4% from Talas Oblast.

A large part of interviews was conducted in Bishkek and Chui, because of the highest density supermarkets, traders

and other large scale buyers in this region. Graphically, the geographic overview is depicted in diagram 1 below.

Diagram 1: respondents by oblast

In terms of sectors, the respondents can be divided as follows:

30% of respondents were from the processing sector;

21% were wholesalers;

11% supermarkets and stores,

9% bazaars;

6% hotels,

6% logistical centers,

6% cafes/restaurants;


10

5% slaughterhouses;

3% exporters;

And 2 % schools or other institutional buyers.

Diagram 2: respondents by sector

As can be seen in the diagram, the largest share of respondents was processing companies, supermarkets and

wholesalers. Focus was put on such kind of companies for the following reasons:

They are usually interested in purchasing larger volumes

There tends to be the possibility to purchase directly from farmers (existence of storage)

There tends to be interest of working directly with farmers

Looking at the businesses more closely, it can be added that around two thirds (65%) of owners are male and 35%

of female.

Diagram 3: business owners by gender


11

The majority of businesses were founded between 2000 and 2010, but also a considerable amount of them (31%)

has been established within the past 3 years.

Diagram 4: respondents by founding year of business

ANALYSIS OF PRIORITIZED VALUE CHAINS

Based on the requirements of Agro Horizon project and a brief initial analysis of potentials, the products listed

below were chosen as prioritized value chains.

Fruits (apricots, apples, plums, peaches, cherries) – fresh, dried, pureed, juice, other processing and seed-

lings

Milk and dairy products

Meat – fresh, frozen and processed

Corn and corn products as ingredients

Potatoes – fresh and processed

Niche products - vegetables and processed berries

Moreover, the interviews included the opportunity for respondents to propose also products beyond the list

above. These may be products that they see a considerable demand for, which can currently not be met.

In order to better understand and later match the relevant players of selected value chains, also the harvesting and

processing periods of the relevant products were identified. Harvesting periods of fruits and vegetables are:

Apricots: June 20 to August 30

Apples: 15 September to 30 November

Plums: August to September

Peaches: June to July

Cherries: June to July

Corn: August to October

Potatoes: June 15 to July 20 or from 15 July to 30 September (depending on variety)


12

Looking at the fruit sector in more detail it can be said that in Kyrgyzstan, most fruits are dried from the end of

August to October, hence dried fruits will be ready for sale only around the beginning of November. Seedlings of

fruit trees will be ready for sale from late February to March. Below are the average purchase volumes of respond-

ents depicted by season, which not surprisingly shows a strong trend in summer and low figures in winter and

spring, when most fruits and vegetables need to be imported.

Diagram 5: purchasing volumes of fruits by season

The meat sector also has considerable potential, but equally stands before certain challenges. Livestock is always

grazing on high mountain pastures in summer, therefore around 70% of slaughtering takes place in autumn, more

precisely at the end of August to November. The period of lactation of cattle is from May to October. Regarding

volumes and prices of meat, it was difficult to get representative data, but the trend shows that traded volumes are

highest in autumn, when livestock comes back from summer pastures and lowest in spring. The price appears to

be somewhat lower in summer, but the difference is marginal.

Osh bazaar in Bishkek is a key hub for the sale of meat (mostly lamb and beef) both within the capital and to the

regions. During the early morning hours, large quantities of meat are traded there to supply retail markets, gastron-

omy outlets from the city and even partly the regions. Much meat, especially frozen chicken, but also various other

types of meat are being imported. The owner of the logistical center “Konsult Cargo” in Bishkek stated, that 70%

of the cooling and storage space in his facility is used for meat and chicken and fish, which is often imported and

partly re-exported. According to some sources, imports are coming especially from China (the price difference of-

ten being up 300% according to unofficial accounts) and Kazakhstan. Naryn plays a particularly important role for

meat, meat from this region having the best reputation in the country. On the livestock bazaar in Naryn, around

5000 cows and 5000 sheep are traded every day, meat processing facilities, however, are limited in size and quality.

One meat slaughterhouse in Naryn stated that it processes around 100 sheep and 5 bulls per day, hygienic condi-

tions are poor though and considerable investments into quality infrastructure are needed. In At-Bashy village, the

company “Janar i Bek” has purchased processing equipment with support from UNDP and is producing canned


13

and smoked meat, which still has potential to grow. Typically, retailers and processors purchase meat as entire car-

casses, more rarely split into pieces (see left diagram below). Several downstream market actors stated they were

interested in additional meat products, especially pre-finished meat (e.g. meatballs), smoked or otherwise processed

meat and poultry (see right diagram below).

Diagram 6: average seasonal price and purchasing volume of beef

The period of lactation of cattle is from May to October. Dairy products are consequently purchased in highest

amounts during the summer months, milk representing the largest share of dairy products. The diary sector does

provide some interesting upgrading opportunities. Several milk processors, both big and small, expressed the diffi-

culty to get sufficient quality supply of local milk. Especially during the winter months, they are facing considerable

supply problems, which is why investments into higher efficiency livestock and fodder may be necessary. The

opening of the border with Kazakhstan in the context of accessing the Eurasian Economic Union may provide a

good opportunity for local producers to export, if they manage to increase their supply base and production capac-

ity.


14

Diagram 7: average seasonal purchase volumes of dairy products

One very interesting market development over the last few years is the mushrooming of supermarkets across the

country. While bazaars and small shops had dominated the retail landscape until recently, there is a clear trend

among the urban middleclass to shop in supermarkets and to prefer processed and packaged products to buying

food on the bazaar. The initiator of this development was the supermarket chain “Narodnyi”, which opened its

first store in Bishkek in 2002 and has since expanded its retail network to 50 stores, 44 of which are located in the

capital and 6 more can be found in different places of Chui and Issyk-Kul Oblasts. Providing over 1500 work-

places, Narodnyi is today by far the largest supermarket chain in the country. Nevertheless, several companies have

set out to challenge this dominant position. The Turkish owned “Beta Stores”, which opened its first of the cur-

rent two large supermarkets in 2003, has also been on the market for over a decade. More recently, supermarkets

such as Frunze (four markets in Bishkek since 2011, one opened in Jalal-Abad City in June 2016 and three logisti-

cal centers (Chui, Issyk-Kul and Osh) are at different stages of construction), Globus and Borsok have also en-

tered the market and increased the competition.

Given that the growth of supermarkets is a relatively recent phenomenon, this sector provides considerable poten-

tial for the development of long-term B2B supply chains. But the requirements of supermarkets for suppliers are

very high in comparison to intermediaries and many wholesalers. Typically, supermarkets do not have their own

logistical centers, which means they expect their suppliers to deliver the produce right to each of their retail stores

in the right quantity at the right time. Excess produce, such as vegetables or fruits that could not be sold, is re-

turned to the supplier and payment is usually done after sale only (consignment). Moreover, suppliers or producers

are expected to pay for a decent display area of their product. All of this means, that the conditions are quite unfa-

vorable to the supplier and entry barriers are high. On the other hand, the fact that most supermarket networks

still only have a handful of retail outlets might be a benefit for medium-sized suppliers as this may lower the high

bar to a somewhat manageable level in terms of complexity of logistics and volumes.

The interviews conducted in all regions of the Kyrgyz Republic also gave some interesting and unexpected results.

While the required volumes of retailers in most regions outside the sides are generally small, there are some market

players that demand considerable volumes or specific products that the local supply cannot cater for. Issyk-Kul


15

region is a case in point, which has an extensive tourist infrastructure and several large-scale processing plants, of-

ten with foreign investors and with a focus on export (Kazakhstan, Russia) rather than the local market. For exam-

ple, the juice producer Orzhemil is planning to increase its production volumes by five times in order to meet in-

creasing demand from abroad, for which it cannot get sufficient supply of the apples, especially of the special sort

“golden ranet”. In consequence, it showed interest in building a second production plant in the South of Kyrgyz-

stan. In a different interview, a wholesaler from Issyk-Kul described his difficulty of getting peaches from the

South and expressed high interest in building direct relationships with producers. He stated a demand by himself

alone of 500kg peaches per day, which is currently only meeting through a supply chain of several intermediaries,

which drives the price up considerably. Also the four target regions of the Agro Horizon project host various com-

panies with the potential for growth (for example, Association “Dary Batkena” from Batken for dry fruits, cheese

brand “At Bashy Sut” from Naryn for dairy products or “Farmers Organic Garden” from Jalal-Abad. Investments

are usually required into quality infrastructure, processing equipment and packaging though.

Across sectors, a majority buyers reported about a difficulty in working with suppliers with regards to quality

and reliability. One purchasing manager of a supermarket reported for example that he used to work with a sup-

plier of rice, who on the first delivery provided quality produce, on the second delivery there were already some

problems and the quality of the third delivery was so poor that he could not sell it, but he could not reclaim the

cost as the supplier had disappeared. Therefore, many buyers feel forced to make use consignment payment condi-

tions.

Another interesting observation is that many companies covered in the research do not have any strategic plans for

developing their business. They manage their business often intuitively and often face problems of competitiveness

in terms of pricing and quality in comparison with imported products (for example, imported products often pro-

vided better packaging, higher quality or cheaper input costs). Moreover, it could be observed that the introduction

or improvement of food safety standards is a very relevant topic now, due to the accession of the Kyrgyz Republic

to the Eurasian Economic Union, which requires producers to meet food safety standards for the common mar-

ket. While many companies struggle with meeting the high criteria, especially where considerable investments into

infrastructure are needed, some companies have taken the lead in introducing more transparency and better man-

agement procedures in this regard (e.g. Lesnoi Product from Jalal-Abad).


16

Diagram 13: packaging or size of meat products required by buyers Diagram 14: Interest stated by buyers in additional

meat products

Generally, there is a tendency of business growth both on the level of processers and retail: New processing com-

panies emerge or scale up (e.g. juice producers Natural Product or Orzhemil) and several logistical centers have

recently opened up or are under construction (e.g. Agroproduct in Chui Oblast, Konsult Carge in Bishkek or one

planned in Kochkor, Naryn Oblast). Also, most respondents expressed a great interest in developing sustainable

and long-term supply relationships with producers, as they expect to get access to supplies for better prices. On

the other hand, many also conceded the difficulties in establishing such relationships. Many had previously unsuc-

cessfully tried to do so and eventually decided that it is more favorable for them to work through intermediaries,

because the higher price comes with more reliability, quality and stability.

In order to prepare local producers in meeting the requirements demanded by the market, some support will be

necessary. The following companies or regions have been assessed as high in potential and have signaled their in-

terest in upgrading their production base.

Juice processors Eum, Orzhemil or Natural Product. Eum stated a concrete interest in bringing local juice

in one liter packaging to the market, Orzhemil is seeking to establish a production basis in the South of

Kyrgyzstan as well to meet growing demand from abroad

Private entrepreneur Abdurahimov has been active in the processing and export of agricultural products

from Kyrgyzstan for several years; he is now establishing local production lines for roasted sunflower

seeds and planning to work on frozen fries

The supermarket Frunze is in the process of building three centers that will not only serve as logistical and

storage hubs, but work also for the export and may also involve processing of agricultural products. Fro-

zen potato fries are among the priority products.

Some processors mentioned the physical limitations of current production, which is why they see need

mostly to increase production base; therefore, the producer and trader of nuts and dry fruits LLC Zoloti

Oreh has set up their own plantations of nut and fruit trees and is seeking support to further scale

Naryn could provide the suitable resource base for the construction of greenhouses to supply Issyk-Kul

region with vegetables

Vegetables and fruits from Jalal-Abad, Osh and Batken can be further linked to the Northern regions, es-

pecially Bishkek and Issyk-Kul, because the harvesting season in the South starts several weeks earlier


17

On the buyer side, the following companies are signaled their concrete interest to engage in B2B marketing events:

Frunze supermarket with currently four markets in Bishkek and one in Jalal-Abad is eager to expand its

supply network. The company is currently finalizing the construction of a logistical and storage center in

Chui, starting the construction of one center in Balakchy and is planning a third center in Osh or Jalal-

Abad oblast with a goal of facilitating supplies of agricultural products both for its own network and ex-

port markets. The General Director of the company expressed his strong interest to engage in long-term

relationships with suppliers. While conceding that terms are currently unfavorable for suppliers, he stated

that these are currently necessary to ensure quality and reliability and he also indicated his willingness to

adapt these in case of trustful, contractual relationships.

Logistical centers can play a major role in growing the domestic B2B market and should all be considered

for upcoming market exposure events

The supermarket in Bishkek`s Vefa Center has currently only one retail location, but is very open to work

with new local suppliers and has already several local brands that rented display spaces with promo-stands

“for a symbolic payment”. Their procurement manager stated a current demand of for example over 4,000

liters of milk and 500 liters of apple juice per months.

The Hyatt Regency hotel in Bishkek could be an interesting player for the premium market or certain

niche products. While the demanded volumes are relatively small, a placement in Hyatt could play a very

strong promotional role. Interesting products for the Executive Chef include quality chicken, frozen fries,

tomatoes, dry fruits and nuts in small packaging, quinoa but also many other products.

REQUIREMENTS OF MARKET PLAYERS

A large focus of this research was put into investigating the demands and requirements of downstream market ac-

tors. When asked about their requirements for suppliers, the following aspects were repeatedly mentioned by pro-

cessors, retailers as well as wholesalers:

Firstly, and quite obviously, quality of the produce was stated as a key requirement. Only if products purchased

meet basic criteria of look, taste and shelf life on a permanent basis, will they be accepted by any serious and suc-

cessful business. Closely related to this is the aspect of standardization, a lack of which poses considerable chal-

lenges to many retailers and gastronomy outlets. For example, the executive chef of Hyatt Regency in Bishkek

stated that he has to rely on imported chicken from Europe, not only because of quality concerns (age, packaging

and hygiene), but also because of a high variance between the size of purchased chicken, which does not allow him

to cater equally sized portions of chicken breast to his guests.

Secondly, many respondents mentioned reliability as a key requirement, which suppliers often have difficulties to

fulfill. Especially processing companies of agricultural inputs mentioned this point, which they say led them to rely

to a large degree on intermediaries as aggregators of farm outputs. These intermediaries know the quality, delivery

times and payment conditions of their clients and can deliver in accordance. For example, the director of LLC Le-

snoi Produkt (brand of various jams and honey products “Dary Lesa”) stated that she has informal, but long term

relationships with intermediaries, because only with these she can be sure that she will get inputs supplied to her

processing site when she needs it at 6am in the morning. Somewhat similarly, other companies, such as the direc-

tor of LLC Zolotoi Oreh (“golden nut”) in Jalal-Abad stated the difficulty to develop reliable long-term relation-

ships directly with producers due to “our Kyrgyz mentality”. He argued that he had tried to work directly with pro-

ducers for years, but was over and over disappointed in terms of quality or reliability, which led him to work

mostly through intermediaries.


18

Below you can see the proportion of respondents relying on distributors for their supplies as opposed to di-

rect links to producers, wholesale bazaars or direct importers for selected products. Over half of respondents indi-

cated that they purchase apple juice from local distributors, a minority purchased apple juice from importers, di-

rectly from local manufacturers or from wholesale markets. Fresh fruits, such as in the example of apricots below,

were predominantly purchased from local distributors/intermediaries or, more rarely, from wholesalers or local

products (the latter being mostly the case for processors). Finally, milk products were the only product that was

predominantly purchased directly from local manufacturers, since they need a special supply and cooling chain. It

is important to note, however, that respondents had the opportunity to mention several modes of purchasing,

which were not further weighted in the statistical analysis. Therefore, purchases directly from producers or farmers

appear to be over weighted. The vast majority of respondents across sectors stated that the most common type of

suppliers were different types of distributors. Direct order exists but tend to be the exception rather than the rule.

Diagram 8: types of suppliers for apple juice Diagram 9: types of suppliers for fresh apricots


19

Diagram 10: types of suppliers for milk products

One major advantage that intermediaries and distributors offer to their suppliers is that they usually offer cash pay-

ments right upon delivery, whereas supermarkets and institutional buyers tend to pay their bills afterwards, often

only after sale of the product. Hence, payment conditions are a considerable barrier for producers to enter new

markets. Below is an overview of payment conditions offered by respondents for fruit and nut products. In the

majority of cases, preferred payment conditions are payment at the time of delivery or consignment, which in the

case of apples for example amounts to 47% (upon delivery) and 22% (consignment). It needs to be explained,

however, that the more favorable prepayment was usually granted only by certain exporters and intermediaries to

their long-term suppliers, whereas supermarkets strongly tended to the other end of the spectrum: consignment.

Processors usually paid at the moment of delivery.

Diagram 11: type of payment by buyers for different fruit and nut products


20

The timing of deliveries depends on the type of product and business, but most buyers stated that they agree

with their suppliers on product deliveries for the following day, which usually does not pose a problem to distribu-

tors, since they have their established networks of input supplies. As shown below in the example of fresh apples,

the majority of respondents expect deliveries the next day, sometimes also on the same day or just within several

days of the order.

Diagram 12: expected timing of delivery for apples

Another aspect worth mentioning is documentation. Given the large degree of informality in the Kyrgyz econ-

omy, it comes as no surprise that many farmers and suppliers of agricultural products lack the required paperwork

(registration, tax payments, certificates) that institutional buyers demand. While this incurs a cost and thus a com-

petitive disadvantage to suppliers playing according to the rules, it provides an opportunity to those that do, be-

cause it opens doors that are closed for many others.

Finally, it is important to match capacities of producers and demands of clients in terms of volumes in order to

establish sustainable long-term B2B relationships. Individual farmers often cannot supply the quantities required

by an institutional buyer such as a supermarket chain, on the other hand even large gastronomical businesses such

as hotels typically purchase produce every day in quantities that are too small to be interesting for a producer.

Therefore, the right level of suppliers and buyers should be brought together and intermediaries need to be often

seen as playing an important function in a value chain as well.

All the above mentioned points are also reflected in the requirements of big market players such as supermarkets.

The biggest chain Narodnyi with 50 stores in the country has the highest requirements, which form a considerable


21

hurdle for potential suppliers in terms of meeting documentation, logistical and financial requirements1. The super-

market Frunze was currently 5 stores offers a bit more flexibility2. In the attachment a sample commercial proposal

can be found for reference. In order to support new potential suppliers, it is therefore recommended to further

facilitate and help qualified candidates in meeting requirements such as documentation, labelling and quality man-

agement. These issues will be further discussed in the concluding section of the B2B meetings.

POTENTIAL FOR IMPORT SUBSTITUTION

Import substitution is a very relevant topic for various agricultural value chains in Kyrgyzstan. But while it pro-

vides considerable opportunities, several challenges also remain which need to be addressed in order to effectively

compete with imported products. One aspect are the requirements mentioned above, most importantly regarding

quality and standards, that local suppliers often cannot fulfil. Another interesting aspect is the price. While most

imported processed products are considerably more expensive, certain inputs and raw materials can be purchased

from importers for a considerably lower prices than from local suppliers, which obviously gives those a difficult

standing. This applies for example to meat and certain vegetables from China or chicken from overseas, which

represents with around 3 billion USD by far the largest proportion of imported meat according official statistics

(ITC, 2015). Nevertheless, consumers are often ready to pay a premium price for imported products in the expec-

tation of better quality or safer products, which especially applies to processed foods. On the other hand, there is a

growing patriotic awareness among the general population, which is also reflected in the consumption habits of the

middle class and the priorities of purchasing managers of interviewed businesses. For example, the supermarket in

Bishkek`s Vefa Center expressed a strong interest in promoting local products and brands through the inclusion

into the product portfolio and product displays. Another sign of this trend is the Facebook group “Pokupai Kyr-

gyzkoe!” (“Buy Kyrgyz”), initiated as a voluntary initiative by entrepreneur and blogger Bakyt Degenbaev, which

within less than a year accumulated over 15,000 followers that are eager to purchase and support Kyrgyz products

locally and internationally.

The table in appendix 1 gives an overview of current imports, prices and requirements and potential clients. The

prices of imported products are often considerably higher, and often equivalent products cannot be even found

from the local market, which provides an excellent opportunity for local producers to enter the market.

In detail, the following products were analyzed with regards to their potential for import substitution:

Fresh fruits

Dry fruits

Potatoes

Corn

Dairy products

Juices

Roasted sunflower seeds

1 All requirements and a sample contract can be viewed in Russian language on the website of Narodnyi on http://market.kg/dlya-post-

avshchikov

2 Exact requirements for suppliers can be viewed in Russian language on the website of supermarket Frunze on http://www.gipermar-

ket.kg/Postavshchikam

http://market.kg/dlya-postavshchikov

http://market.kg/dlya-postavshchikov

http://www.gipermarket.kg/Postavshchikam

http://www.gipermarket.kg/Postavshchikam


22

The goal of this analysis was to identify differences and opportunities with regards to pricing, quality, labeling,

packaging, certificates and assortment of imported and equivalent local products in order to assess their potential

for import substitution.

The agricultural base of the Kyrgyz economy provides a variety of ecologically clean fresh fruits of high quality.

On the local market, different regions have somewhat specialized on specific fruits, such as Chui for strawberries

and raspberries, Jalal-Abad for cherries, Osh for honeydew melon and pomegranate, Issyk-Kul for apricots and

currant. The market of exotic fruits includes oranges, mandarins, bananas, pineapple, kiwi, mango and grapefruit,

which to a large degree complements the local varieties. In the sales points that were analyzed, around 80% of

products were locally produced. The price of local products is reasonable in comparison to the quality. These fresh

products usually do not have any packaging or labelling, as it is not required according to the sellers. In the assort-

ment of local products predominate apples, apricots and peaches. Local apples tend to be preferred by customers,

even though apples from China are on average around 15 Som cheaper per kg than the local ones are visually more

appealing with less stains (local apples cost between 80 and 130 Som per kg (depending on the sort), whereas Chi-

nese apples usually cost 80 to 90 Som per kg). The remaining 20% of fresh fruits that are imported are mainly cit-

rus fruits, often imported from China, Pakistan, Turkey, Uzbekistan, and more rarely from Argentina or Poland

for example.

Given that the fruit market is very seasonal, the share of imported products is obviously higher during the colder

months. New storage and logistical facilities are expected provide a chance to increase the share of local products

on the market also in winter and spring. A case in point are local apples for example, which are generally appreci-

ated by consumers, but improper storage often results in a loss of quality and taste.

Concerning dry fruits, a large share of products sold are from the local market with the exception of dates and

figs. Dry fruits are usually sold with packaging by weight, sometimes also pre-packed into bags of 500g to 1kg. Av-

erage prices are 500 Som per kg for apricots without kernels, 440 Som per kg for apricots with kernels and 65 Som

per kg for dried apples. In supermarket in Jalal-Abad it was noticed that almonds were sold both from the local

forests and from California. Interestingly, the manager reported that sales for both a somewhat equal even though

the price of the imported almonds was almost twofold (470 Som versus 820 Som per kg).

All fresh potatoes found on the market were from local production. The picture looks different for processed po-

tato products, however. Potato chips exist both from local production (brand “pir”) and from international brands

such as “Lays” and store managers report that sales of international brands are considerably better than of the lo-

cal brand even though the price per package is 7 Som cheaper. Frozen fries are imported to 100%, coming from

different European countries usually (Germany, Netherlands, France), and are sold for approximately 150 Som per

kg. Frozen fries are sold in around 40% of large retailers in Bishkek and experience considerable demand among

consumers. Necessary steps for upgrading include sourcing the right types of potato, investing into processing and

storage.

Also different processed corn products were analyzed. Cornflakes are being sold in various sales points, but are

exclusively imported from other countries. Corn sticks are a popular snack, which is produced both locally (around

20% of market share) and imported (80%). A pack of imported corn sticks costs 23 Som for 260g, whereas the

local product costs 18 Som. However, packaging and labelling (for example, visibility of HACCP certificate) are

more appealing of imported products, which explains the difference in market share. Similar observations could be

made regarding corn in cans or jars. The majority of available products is imported (mostly from Hungary and

Russia), the most popular and expensive brand being Bonduelle (560g for 170 Som). The local producer “Ramah”

sells 425g for 60g, but the product appears weaker with regards to aspects of looks, taste and packaging. In order


23

to increase competitiveness of local producers, it is therefore important to invest into both quality infrastructure

and branding.

Dairy products in Kyrgyzstan generally have good quality and a large assortment. Over 60 milk processing facili-

ties work in the country, the capacity of which is complemented by imported milk products from Kazakhstan and

Russia, which brands are also quite accepted on the local market. Supermarkets and shops only sell pasteurized

milk products from professional processing facilities including different types of cheese, yoghurt and cream. Dur-

ing the summer months also many traditional milk drinks such as “Chalap”, “Kymyz” or the “Maxim” drink by

local company Shoro or other producers are well accepted by consumers. Bazaars moreover also sell various types

of “homemade” milk products of generally high quality, but they lack additives or required processing which pre-

vents them from entering more institutional retailers.

Overall, the analysis showed that local products have many disadvantages compared to imported ones, which de-

creases their competitiveness. Most importantly, these weaknesses include marketing (branding and promotion),

product quality and standards, lack of certification and food safety standards. Therefore, it is recommended to

strengthen the potential of local producers in terms of marketing, introducing food safety standards and to in-

crease volumes and assortments of local producers to increase the competition on the market.

Moreover, a number niche products were identified as having potential in view of growing consumer demands on

the local market: herbal teas, fruit baskets for presents and quinoa. Herbal teas are increasingly finding interest

among the Kyrgyz population, which is traditionally drinking high amounts of tea. While typically green or black

tea is being consumed, more and more people are getting interested in herbal tea infusions for their health bene-

fits. Both wildly grown products (especially from Jalal-Abad forests) and planted herbs could provide a good re-

source base for this. Another idea is the composition of fruit or nuts in convenient baskets or similar packages,

which can expect a high demand especially around religious or other holidays as a suitable gift. Finally, quinoa is a

niche product of which cultivation has been initiated in Kyrgyzstan in recent years and which was met with interest

by gastronomical players (e.g. Hyatt Regency) as well as the supermarket Frunze, which was eager to include it in

its assortment.

Overall, virtually all respondents displayed a high interest to substitute imports for local products, both for pricing

and patriotic reasons. While some suppliers of import products were representatives of specific brands, the major-

ity of import products appear to enter the retail market through the same distribution channels as local brands,

which means that setting up these linkages is unlikely to be a bottleneck. Rather, quality issues and packaging,

which will require investments into equipment and management processes will need to be addressed to success-

fully boost local production and compete with existing imports.

Official data from the customs of the Kyrgyz Republic indicate that 3224 MT milk and cream (out of which 83%

were condensed or sweetened), 1825 MT dry fruits and 2461 MT fruit juices were imported in 2015. On frozen

fries, no official import statistics can be found and due to the lack of local producers, the precise demand cannot

be stated. Several retailers and gastronomy outlets reported interest however in this product. Prices up to 450 KGS

for a large package of imported fries indicate a considerable import substitution potential.

CONSTRAINTS IN MARKETING

Professional marketing poses considerable challenges to many local producers, which is one of the reasons why

consumers often prefer to go for imported products. There is often simply a weak understanding of what market-

ing is and how to conduct it the right way. Products are being launched without a proper analysis of target groups


24

and their specific demands in terms of branding, packaging and availability. One good example are the 3 or 5 liter

containers of fruit juice, which are produced by several Kyrgyz companies. In spite of their relative success, the

majority of consumers still prefer to buy the more expensive one-liter tetra pack juices from international brands.

While one reason for the success of import juices may be the more professional advertisement, the inconvenient

packaging of local juices certainly also plays a key role. Local consumers often buy juice when invited to some-

one´s house, for which a 5-liter container is not the best solution and which is why they tend to prefer interna-

tional brands. If the packaging of a local producers was more convenient, the market share would likely look quite

different.

Supermarkets noted that they welcome local brands that supply their products in readymade packages. Especially

fresh products (fruits, vegetables (see the example of potatoes in the diagram below), meat and cheese products)

are often purchased by retailers bags or boxes and either sold by weight without packaging or they are pre-packed

by the supermarket into more convenient sealed packages (e.g. cheese, meat). Though this is not a requirement,

providing retailers with more convenient pre-packaging (e.g. potatoes in 2.5kg bag, meat in vacuum seal, dry fruit

and nut mixes) can represent a useful marketing and upgrading strategy for local products.

Diagram 13: preferred packaging for fresh potatoes

More generally, many processors shared their difficulties in getting access to sales markets. For example, dry fruit

producers from Batken such as the cooperative “Mol Tushum” have received considerable support from donor

projects with regards to developing the production base, but have difficulty regarding sales. Therefore, it will be

crucial to organize effective B2B market roundtables between producers and potential buyers in order to facilitate

long-term relationships. The concluding section will suggest concrete activities or market players as a basis for dis-

cussion.

ANALYSIS OF TRADE FAIRS AND MARKET EXPOSURE ACTIVITIES

Below is a list of domestic and international trade fairs that are potentially interesting for agricultural producers

and processors from the target regions of the project.

Table 1: Upcoming international trade fairs


25

Name City Country Dates Description

Agrorus St. Petersburg Russia August 30-Sep-

tember 04

Int'l Agricultural

Exhibition and

Trade-Fair

WorldFood Moscow Moscow Russia September 12-15,

2016

Int'l Food & Bev-

erage Exhibition

AgriTek Uzbekistan Tashkent Uzbekistan September 28-30,

2016

Intentional Exhi-

bition for Agricul-

ture, Horticulture,

Animal Hus-

bandry & Stock

Breeding

Agricultural Week Irkutsk Russia October 18-21,

2016

Agricultural exhi-

bition of East Si-

beria

AgroFood Tajikistan Dushanbe Tajikistan October 19-21,

2016

Int'l Exhibition

for Agriculture,

Food, Processing

and Packaging

AgroWorld Almaty Kazakhstan November 02-04,

2016,

Agricultural Exhi-

bition

WorldFood Almaty Kazakhstan November 02-04,

2016,

Int'l Exhibition

for Food, Drink

Products and

Technology

AgriTek Shymkent Shymkent Kazakhstan November 09-11,

2016,

Int'l Exhibition of

Agricultural

Equipment and

Technologies

Siberian Agricultural Fo-

rum

Krasnoyarsk Russia November 16-18,

2016

Siberian Agricul-

tural Forum

Yugagro Krasnodar Russia November 22-25,

2016,

Int'l Agro-Indus-

trial Forum

Agro-Sphere Odessa Ukraine November 23-25,

2016,

Int'l Agricultural

Exhibition

Agro+Food+Drink+Tech

Expo Georgia

Tbilisi Georgia November 30-

December 02,

2016,

Int'l Exhibition

for Food and

Drink Products


26

and Food Pro-

cessing Equip-

ment

Agroexpo Eurasia Izmir Turkey January 19-22,

2017

Int'l Agriculture,

Greenhouse and

Livestock Exhibi-

tion

AgroFarm Russia Moscow February 07-09,

2017

Int'l Exhibition

for Animal Hus-

bandry and Breed-

ing

iFresh China 2016 - Shanghai China 2016/11/14 -

2016/11/16

China Interna-

tional Fruit &

Vegetable Expo

China International Agri-

cultural Trade Fair

Kunming China 07-10 Nov 2016 China Interna-

tional Agricultural

Trade Fair

China Xinjiang Interna-

tional Agricultural Fair

Urumqi China 08-10 Aug 2016 China Xinjiang In-

ternational Agri-

cultural Fair

China International Mod-

ern Agricultural Exhibi-

tion

Beijing China 22-23 Apr 2017 China Interna-

tional Modern Ag-

ricultural Exhibi-

tion

2016 World Honey & Bee

Products Show

Kunming China November 5-8,

2016

Largest Bee Exhi-

bition

China Fruit & Vegetable

Trade Fair

Beijing China 30 Oct-01 Nov

2016

Fruit & Vegetable

Trade Fair

AgriWorld 2016 Makuhari Messe Japan 12-14 October Agricultural Exhi-

bition

Agroinnovation 2016 Tokyo Japan 14-16 December

2016

Agricultural Exhi-

bition

Agri-Food Expo Tokyo Tokyo Japan 18-19 Aug 2016 Showcases prod-

uct from Agricul-

ture & Forestry,

Food & Beverage

industries.


27

Agri World Osaka Osaka Japan 05-07 Apr 2017 Agricultural Exhi-

bition

Sweet & Snacks Middle

East

DUBAI UAE 07-09 Nov 2016 This event show-

cases products like

Bringing the

world’s best prod-

ucts and the re-

gion's quality buy-

ers together etc. in

the Agriculture &

Forestry, Food &

Beverage, Bakery

& Confectionery

industries.

Szentlőrinci Gazdanapok Szentlorinc Hungary August 12-14,

2016

Hungary's Trans-

danubian region's

largest Agricultural

and Food Exhibi-

tion

Biofach Nurnberg Germany 15-18 February

2017

World´s Leading

Trade Fair for Or-

ganic Food

Dubai Food Festival DUBAI UAE March 2017

International Green Week Berlin Germany 20-29 January

2017

Biggest Food and

Agriculture Exhi-

bition

Dutch Organic Trade Fair Zwolle Netherlands January 18-19,

2017

Table 2: Upcoming trade fairs within the Kyrgyz Republic

Name City Place Dates Description

11th International

specialized exhibi-

tion/fair “AgroPro-

dExpo 2016”

Bishkek Sport palace named

after Kojomkul

September 16-19,

2016

Kyrgyzstan biggest

food and agricultural

exhibition

11th International

specialized exhibi-

tion/fair “HOREX-

Kyrgyzstan”


after Kojomku

September 16-19,

2016

Kyrgyzstan biggest

food and agricultural

exhibition


28

24th International

universal exhibi-

tion/fair “Bishkek

2016”


after Kojomkul

November 3-7, 2016 International exhibi-

tion

The exhibition-fair

"Eco products - the

guarantee of health-

2016"

Helvetas-Swiss In-

tercooperation in

Kyrgyzstan.

Jalal-Abad “Barpy” Central the-

atre

First week of Octo-

ber, 2016

Eco-products exhibi-

tion

EXPO “Made in

Kyrgyzstan”

Bishkek Kyrgyz national the-

atre named after

Abdymomunov

June-July, 2017 Kyrgyz biggest man-

ufacture exhibition

Internationally, it makes sense to divide the options of trade fairs into those taking part overseas and those on a

regional level, especially in the CIS countries. For the first group, it makes sense to offer more niche and higher

priced products, due to the higher transport costs and their own production base of basic fruits and vegetables.

Here, for example products such as mountain honey, walnuts or dried mushrooms can be offered as potentially

interesting products for international clients. Internationally reclaimed trade fairs include “Bio Fach” in Nurnberg

or the “International Green Week” in Berlin or the “Dubai Food Festival” in the Arab Emirates. Given the grow-

ing demand for nuts and organic and niche products in Europe, the above mentioned German fair could be a

good entry point to these markets. The emirates, on the other hand, due to their unfavorable climate but the high

purchasing power, offer also very interesting opportunities. Particularly, since Kyrgyz products are often ending up

on such markets through re-exporters such as Turkey (for nuts for example) or Tajikistan (for honey). Building up

direct trade links with the final markets is therefore an important marketing goal. On the other side, China can also

be a very interesting market due to its enormous population. Honey, for example, is demanded in considerable

quantities and the exhibition “2016 World Honey and Bee Products Show” in Kunming can be an interesting

event.

Given the soviet past and the continuous cultural and economic ties within the CIS region, it also makes sense to

further develop marketing links here. During soviet times, meat was exported in considerable volumes to Western

Russia and fruits supplied to Siberia. And in spite of the ongoing economic crisis in Russia, the size of the market

and the partly unfavorable climatic conditions provide good opportunities for Kyrgyz producers of food products.

Therefore, it is recommended to consider exhibitions like “Worldfood Moscow 2016” for developing links into

this direction. Worldfood Moscow is one of the biggest trade fairs in Russia, which brings together buyers from all

over Russia. Equally interesting might be the “Agricultural Week” in Irkutsk, which is the biggest trade fair in Sibe-

ria. Given the past ties and the tensions between Russia and the EU, producers from Kyrgyzstan can now well find

opportunities on this market.

Finally, a handful of trade fairs within Kyrgyzstan will take place in the coming months and years, which will be

useful for local producers to attend to build links with B2B buyers domestically and regionally. The fair “AgroPro-

dExpo 2016” will provide a good opportunity to initiated such linkages.


29


30

ORGANIZATION OF B2B MEETINGS

& FACILITATION OF CONTRACTS

As a result of the previous study, four B2B roundtables were organized with the goal of establishing long-term

supply relationships. The content and participation list of each event was closely coordinated with the Agro Hori-

zon project to ensure a good match with the needs of beneficiaries from the target regions in Batken, Osh, Jalal-

Abad and Naryn Oblast.

Overall, the following events took place. The detailed lists of participants for each event can be found in the ap-

pendix.

1. B2B roundtable in Bishkek on 9th of August 2016

2. B2B roundtable in Osh on 10th of August 2016

3. B2B roundtable in Bishkek on 15th of August 2016

4. B2B roundtable in Osh on 16th of August 2016

In all four B2B meetings together 80 people from the following sectors took part:

- Agricultural cooperatives: 15

- SME farms: 29

- Processing companies: 24

- Consulting firms / extension services: 4

- Potential buyers: 8

Photo: participants of the second B2B meeting in Osh on August 10th 2016


31

In each case, the program was roughly similar by giving both potential buyers and producers a chance to present

their offers and later allow them to come to an agreement through contracts or at least expressions of intent.

Time Session Responsible

09:30 – 09:40 Registration of participants Office manager

09:40-10:00 Greeting

Program overview

Introduction of participants

moderator

10:00-10:30 Proposal by Agro-Horizon project benefi-

ciaries to supermarket Frunze on the sup-

ply of agricultural products

Suppliers / beneficiaries

10:30-11:00 Interest, conditions and requirements by

the buyer

Q & A / discussion

Potential buyers

11:00-11:30 Exhibition & tasting of agricultural prod-

ucts

11:30-12:30 Negotiation between suppliers and buyer moderator

12:30-13:30 lunch

13:30-14:30 Discussion and development of a work

plan

moderator

14:30- 15:00 conclusion moderator

Photo: director of Frunze supermarket (center right) and other participants at B2B meeting in Bishkek on August 9th 2016


32

All B2B roundtables can be considered a success with producers and buyers not only expressing interest, but often even concretely agreeing on the supply of products. Especially the first meeting on August 9th in Bishkek, which was attended by producers from Naryn Oblast and Batken and the director of the supermarket chain Frunze (22 participants in total), was very positively received by the buyer, the producers and participants from USAID (Gra-ham Dale) and AgroLead. As result of this meeting, four contracts and two expressions of intent were signed with Frunze Supermarket. In total, 9 contracts on the supply of different agricultural products and 19 expressions of interest were signed be-tween suppliers from the Naryn, Osh, Jalal-Abad and Batken Oblast and big clients such as Frunze Supermarket, Supermarket “Aruu Tan Shaasasy” (Vefa Center), LLC “Agro Product Asia” and LLC “Bishkek Expo”. In detail, the following contracts and expressions of interest were signed with the above mentioned buyers:

company product volume

LLC «At-Bashy sut» Dutch cheese, butter 300 kg/monthly

Private Enterprise «To-lonov»

Chechil, brynza 300 kg/monthly

Commodity and Service Cooperative Agroleader

Potato 1000 tons during the year

Agricultural Cooperative «Korifey-Agro»

Buckwheat 50 tons/ under the terms of the contract

Agricultural Cooperative «Nookat almasy»

Apple 300 tons

Agricultural Cooperative «Zoloto doliny»

Potato 30 tons

Agricultural Cooperative «Tajybai»

Onion 50-60 tons

Agricultural Cooperative «Alysh-Dan»

Dried-fruit Under negotiation

Private Enterprise “ Ab-dulazhanov X”

Compote 30 tons

total yearly volume 1470 MT

Table: Supply contracts signed with supermarket Frunze


33


Agriculture «Azyk» Onion, Potato, Carrot; Under negotiation

Agricultural Cooperative «Kok zhar zhyldyzy»

Potato, quinoa 500 tons for 2017 year

LLC«Shirin Sulaiman» Confectionary products Under negotiation.

Agricultural Cooperative « Aravan agroservis»

Potato for 2017 year

Agricultural Cooperative «Mol-tushum»

Dried fruits Needs for marketing sup-port

Agricultural Cooperative «Dary Batkena»

Dried fruits

LLC «Farmer’s Organic Garden»

Conservation, dried fruits Under negotiation

Agriculture «Abdykerim» Onion 300 tons

Table: Expressions of interest signed with supermarket “Aruu Tan Shaasasy” (Vefa Center)


“Alysh-Dan” Fresh apricots 100tons for 2017 year

Agricultural Cooperative «Nookat almasy»

Apples 300 tons

LLC “Recruitment Centre” Vegetables 20 tons

Table: Expressions of interest signed with logistical center LLC Agroproduct Asia


“Alysh-Dan” Apricot stones 20tons

Black cumin

Table: Expressions of interest signed with oil producer LLC Bishkek Expo


34

While the contacts established at the B2B roundtables were very important and useful, the high number of expres-sions of interest rather than final contracts indicates that many suppliers were not yet fully ready to engage in a business relationship with their clients. The following section therefore discusses some recommendations on how to further facilitate and develop such supply chains.

Photo: products presented at the exhibition of the B2B round table on August 9th 2016 in Bishkek


35

RECOMMENDATIONS AND

CONCLUSION

Both research and B2B meetings showed that there is high interest on behalf of processors, supermarkets and gas-

tronomy businesses to develop long-term supply contracts directly with producers as they expect better prices

when cutting out intermediaries. At the same time, many expect difficulties with this because of bad experiences

they had made in the past, which led most of them to prefer working with the same distributors as suppliers. But

given that the retail sector in Kyrgyzstan is dynamically developing and still in a stage of formation, there is good

potential to establish more formal and more long-term relationships through careful facilitation.

As a result of the B2B meetings, a total of 9 contracts and 19 expressions of interest signed were signed between

agricultural suppliers from Naryn, Osh, Jalal-Abad and Batken Oblast and large scale buyers such as Frunze Super-

market, Supermarket “Aruu Tan Shaasasy” (Vefa Center), LLC “Agro Product Asia” and LLC “Bishkek Expo”.

In order to further enhance the B2B supply market for agricultural products in Kyrgyzstan, the following activities

are recommended for the short to medium term future:

First and foremost, the contacts initiated in the B2B meetings should be further fostered and developed. Especially

the 19 signed expressions of interest will need to be turned into fully-fledged supply contracts. It will be crucial to

follow up on the meetings individually by supporting the producers in meeting the buyer´s requirements.

Key challenges repeatedly identified were documentation, labelling, logistics and quality management. Kompot

producer “Abdulazhanov” for example is ready to supply 30 MT of kompot to Frunze, but is having problems

with the proper labelling of his products (barcode). Other suppliers are struggling with similar issues.

Moreover, also other local producers will need to be prepared for the production of additional products demanded

by the market. A number of companies or areas have been assessed as high in potential and have signaled their

interest in upgrading their production base. Investments will be needed into processing equipment, quality in-

frastructure and logistical procedures in order to increase volumes and quality. One candidate for this could be the

meat processor “Zhanar i Bek” from At-Bashy, Naryn, who is interested in purchasing better packing equipment

to enhance sales in on the domestic and export market.

Thirdly, it is recommended to identify concrete products for import substitution and product development.

Based on the rapid assessment, frozen fries, fruit juices and milk products appear to have highest potential, but

further analysis may be required. Private Entrepreneur “Abdurahimov” has been exporting various agricultural

products from Kyrgyzstan in recent years and is now looking into options of producing frozen fries locally. For

investing into upgrading the processing line of fruit juices, producers “Orzhemil” or “Eum” are likely to be good

candidates, signaling interest in building a second processing facility in the South of Kyrgyzstan and new packaging

equipment respectively. With regards to milk products, there are already a number of milk processors in the mar-

ket, but many of which report difficulties to get access to sufficient quality supplies all year round. It will be useful

therefore to provide additional support at the beginning of value chains on the level of milk providers.

Finally, logistical centers are growing in importance and can play a crucial role in facilitating more sustainable

local and regional supply chains as they can considerably improve quality, shelf-life and logistics for local produce.

Typically, they do not purchase products themselves, but rent out the space to producer or traders. Currently, they


36

are focused on imported products, including frozen meat, but there is interest and need to expand them, build new

ones to better store local produce. Involving these players into upgrading activities for the domestic B2B market

will also be useful.


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APPENDIXES

Appendix 1 – table on imported products

Appendix 2 – database of all potential companies

Appendix 3 – database of 100 companies covered in survey

Appendix 4 – SPSS database

Appendix 5 – list of contracts and expressions of interest with B2B buyers

Appendix 6 – lists of participants of the four B2B meetings

Appendix 7 – sample contract for suppliers with Supermarket Frunze


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U.S. Agency for International Development

1300 Pennsylvania Avenue, NW

Washington, DC 20523

Tel: (202) 712-0000

Fax: (202) 216-3524

www.usaid.gov

Documents

B2B AND DOMESTIC MARKET DEVELOPMENTpdf.usaid.gov/pdf_docs/PA00MHJC.pdf · This project aimed to shed light at the restraints and marketing hurdles on the domestic B2B market, to facilitate