Novelle Consulting - Global consulting for the produce and packaged food industry

News Article

Novelle Consulting in the Balkans

Between the very developed countries in North America, Europe, and northeastern Asia, and the very poor countries in Africa, Latin America, and other parts of Asia, there are many societies in a state of transition. Croatia is one of these, and Henry (Win) Winogrond of Novelle worked there recently on a USAID sponsored project.

Croatia is a small country (4.5 million people), part of the former Yugoslavia, and suffered both from the hardships during the long years of communism and the Balkan wars in the 90s. But it is now rebounding rapidly, and has recently seen the fastest growth of the supermarket industry seen anywhere in the world, with supermarket sales going from approximately 20% of national food sales to nearly 50.0% in just five years.

However, while retail growth may come quickly, other parameters that are normal in more developed societies, particularly in the area of Sanitary and Phytosanitary (SPS) regulations, often lag far behind the development of the retail sector. Mr. Winogrond was sent to Croatia, to assess the reality of the SPS impact on the fruit and vegetable business there, particularly in terms of this representing a potential obstacle for sales to the supermarkets, as well as impeding exports into the EU member countries of Europe, which have strict SPS standards, as well as an increasing reliance upon EUREPGAP compliance for countries that wish to sell into these markets. This project was part of a larger project, designed to improve the level of competitiveness in agribusiness, and in this case, the horticulture sector.

In July, 2004, Mr. Winogrond spent a month in Croatia, traveling through 19 of the 21 counties in the country, and interviewing all of the important representatives of the industry, including growers, wholesalers, supermarket buyers, cooperatives, and government officials. The goal of this work was to determine the active SPS programs being carried out by the government, as well as the level of EUREPGAP compliance at farm level, which would indicate the real SPS practices at the most fundamental levels.

The work quickly became divided into the public and private sectors. Based upon extensive interviews with the responsible government branches, principally the Ministry of Agriculture and the Ministry of Health, it became evident that the Croatian government was well aware of the deficiencies within their laws and regulations, and has been working very hard to correct this. They have had consultants working with them from both the U.K. and Holland, and they have essentially rewritten nearly all of the food regulations, bringing them into conformance with prevailing EU laws. These new regulations are intended to become official later this year. Inevitably, the more difficult step will be the successful implementation of the new laws, and that will take a few years to judge.

On a more practical basis, it was found that the total lack of contemporary SPS practices at farm level did not present any obstacle to selling to the supermarket chains, as Croatia was found to be in a state of significant shortage of nearly every fruit and vegetable product (with the exception of mandarin oranges and potatoes), and the supermarkets were following a policy of buying any local products that they acquire (and importing the balance of their requirements) and praying that they had no food contamination scandals. Obviously, with such an extraordinary opportunity with the domestic market, the growers had very little interest in the expense of moving toward EUREPGAP compliance, and they generally felt that they would deal with that issue when the domestic market became saturated.

However, Croatia is expected to become a member of the EU before the end of the decade, and the growers and local supermarkets all need to have some long term project in place that will move them toward modern SPS standards. Therefore, Mr. Winogrond made the following recommendations that are expected to be implemented with the assistance of USAID over the next 12-24 months:

Work with the Croatian government and industry leaders to develop a national system of grades and standards, which will begin to move the industry forward, and position them for future export sales to the EU supermarkets.
Develop a 24 month plan with the best growers, wholesalers, and cooperatives that will move them toward EUREPGAP compliance. This is more a matter of accurate record keeping than a wholesale change in farm practices, and when other members of the industry see the leaders enjoying benefits from these changes, they will soon follow.
Assist the industry with infrastructure development, particularly in the cold chain and packing areas. It became evident that the very fragmented nature of the industry (very small blocks of land, very few modern packing plants, very little cold storage) represented a much larger obstacle to the progress of the industry than SPS issues, and USAID will commit resources to helping them move forward in this area.

Read more about Henry Winogrond