23 October, 2017
Without a proper system of food storage and distribution, small local farms, whatever their number, cannot provide enough food for today’s economy.
Supermarkets and hotel chains need to plan ahead for their purchases. And if small neighbouring farms cannot guarantee the right amount of tomatoes by next Tuesday, there is always somebody further afield – often across the border – who will.
As for small-scale farmers, if they lack reliable buyers, they will have difficulty accessing finance to expand. This is what happened in Montenegro for many years.
But now, thanks to a new state-of-the-art distribution centre built by the country’s leading food retailer, Voli, with EBRD support, that situation will change.
Montenegro, a country of only 600,000 people on the Adriatic coast, is a popular tourist spot in Europe. The country’s economy – from big hotels and restaurants to small cafes – relies heavily on tourists: tourism accounts for up to 22 percent of GDP.
However, what many tourists do not realise, despite perhaps seeing lush orchards and vegetable gardens on their way to the seaside, is that they are more than likely to be eating imported food. Agriculture accounts for 10 percent of the country’s GDP and employs about 6 percent of the labour force.
Although Montenegro is endowed with natural conditions that are favourable for growing quality produce – including a mild climate, uncontaminated land and plenty of water for irrigation – it currently imports far more fruit and vegetables from the European Union and neighboring countries such as Serbia than it exports.
And the country’s growth in tourism is increasing imports of fruit and vegetables rather than stimulating local agriculture.
The EBRD believes that there is great potential for Montenegro to replace many of these imports with locally grown, high-quality produce.
One way of linking farmers and suppliers would be to use a national distribution centre. Until now, Montenegro simply did not have a sufficiently large cold-storage warehouse where fruit and vegetables could be kept for longer in good condition. That has now changed.
In September 2017, Voli opened a new, state-of-the art distribution centre in Podgorica, financed by an equity investment from the EBRD. The 14,000 m2 centre aims not only to supply Voli’s own stores, but those of other retailers, too.
It will therefore link local suppliers with wholesale and retail customers. Over time, Voli is planning to purchase more fruit, vegetables and dairy products from their existing local suppliers and also attract new ones.
By entering into a contract with a distribution centre of this kind, local farmers will have more stable incomes, which in turn will allow them better access to finance, and give wholesale customers – such as hotels – a reliable supply of local produce.
Miljan Zdrale, EBRD Regional Head for Agribusiness, said: “Since the EBRD started working with Voli back in 2009, the company has also improved corporate governance in cooperation with the Bank. As the largest local company, Voli can show the way for smaller Montenegrin corporations by bringing its corporate governance in line with regional peers. Voli also sees itself as the main driving force in boosting local value chains.”
Miljan Zdrale is also the EBRD representative on the board of directors, which also includes an external board member, Paul Foley, who has 30 years of retail experience.
Dragan Bokan, CEO of Voli, said: “The opening of the distribution centre is the first step in the supply-chain development. It was perceived as important not only by our key local and regional suppliers, who all attended the opening ceremony, but also by the national authorities. Before the event, an informal session was held with the Prime Minister, Duško Marković, who met with me, the EBRD’s Miljan Zdrale and 15 business leaders from Croatia, Montenegro, Serbia and Slovenia, to discuss investment challenges and opportunities in Montenegro.”
In parallel with the EBRD’s financing for Montenegro’s agribusiness sector, which now stands at EUR 33 million, the Bank is also helping the country raise quality and establish local value chains.
The EBRD’s Agribusiness Advisory team, in partnership with the UN’s Food and Agriculture Organization (FAO), and with support from the Montenegrin Ministry of Agriculture and Rural Development, has set out to create a development plan for the horticultural sector, including specific quality standards, such as Montenegro’s own geographical indications, organic food certifications or GAP (Good Agricultural Practices) certification.
The EBRD and FAO have already worked on upgrading quality standards in Montenegro, in partnership with local meat producers and processors.
We are now working with retailers and wholesalers on supply-chain linkages, producer organisation and consolidation, as well as safety and quality standards.
As these projects come to fruition, the whole country, as well as tourists and investors, will benefit from fresher and more authentic Montenegrin food.
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