Best Practice: Galicia Greenery
Fresh vegetables produced in Ukraine, for Ukraine, with the Dutch
Every month, the Embassy presents an example of successful Ukrainian-Dutch cooperation in business. This month features Galicia Greenery LLC, a greenhouse company based in Busk, West-Ukraine, that produces vegetables for the Ukrainian market.
Introduction to the company
In 2012, a group formed by Dutch greenhouse vegetable companies Rainbow and Prominent, together with investors and FoodVentures, announced their plans to establish local production on an estimated 5.7 hectares of high tech glasshouses in Busk, a city in Western-Ukraine. In 2013, the foundation was laid and the construction of the greenhouse began. The group hoped to pick the first peppers and tomatoes in the summer of 2013. But then the challenges started…
Galicia Greenery’s marketing and sales manager Mikel Honders explains: “The real challenge started after we lost our initial Ukrainian investor. At the end of 2013, we were in final negotiations with new partners when the Maidan demonstrations started. From this moment all extra difficulties made the challenge ever bigger for us. We were prepared for a lot of problems in Ukraine, but a devaluation of the currency of more than 300% and a country that is losing lives every day in a war were not mentioned in any forecast. These problems had a huge impact on the country as well on our project: large investors pulled back from Ukraine and our project was postponed again.”
On 4 May 2015, the first lettuce was sowed on the DryHydroponics system in Busk. This milestone is achieved with the Dutch partners, a cooperative attitude of the banks FMO and Bank Lviv and a strong local team in Ukraine. With good support of the local government and the European Business Association, the production of 1 million heads of lettuce annually started. These will be sold to supermarkets, wholesale markets and local restaurants in Ukraine.
The local team managed to import the greenhouse materials free of import duties and managed to get back the first part of paid VAT during the import. Most of the people advised to forget about VAT refund, but a lot of work and patience paid off. The country is moving in the right direction and with a growing demand for off-season production of fresh vegetables, Ukraine keeps her huge potential for local production in greenhouses.
Keys to success
FoodVentures focuses on emerging markets with high off-season demand for fresh vegetables. Ukraine is such a country: 70% to 80% of the tomatoes and bell peppers are imported from countries like Spain and Netherlands. Rainbow and Prominent already export their products to this part of the world, but they do not have direct contact with the end customer. With investments in local production they get more knowledge about the local market and are able to establish production where the demand is. Despite the fact that the country is in a very difficult situation, this offers also opportunities for local producers. For example: the devaluation of the hryvnia made import of vegetables even more expensive than before.
A word of advice
To start a successful company in Ukraine, patience and flexibility should be the first two words you think about when you wake up, Honders says. “Every day things are different from how they were yesterday: rules and officials change faster than the weather. The country is working hard to improve the investment climate in Ukraine and getting there step by step”.
The key to success is to find good and trustworthy partners and people with experience, listen to these people and make your own decision. “It is a difficult time in Ukraine at the moment, but once better times will arrive, we will be already here and steps ahead of the competition.”
For more information about Galicia Greenery LLC, visit their website: www.galiciagreenery.com