SHORT SUPPLY CHAINS AND SMALL HOLDINGS IN SERBIA Natalija Bogdanov - PowerPoint PPT Presentation

SHORT SUPPLY CHAINS AND SMALL HOLDINGS IN SERBIA Natalija Bogdanov

CONTENT • DEFINITIONS • CLASSIFICATIONS • BENEFITS AND MOTIVES • WHY SHORT SUPPLY CHAINS IN SERBIA? • SHORT SUPPLY CHAIN IN SERBIA • STRATEGIC AND REGULATORY FRAMEWORK • QUESTIONS FOR DISCUSSION

DEFINITIONS • Short supply chain – an alternative food supply system involving different forms of distribution and characterised by: A small number of intermediaries between consumers and producers (or a complete lack thereof), Short geographical distances between them • EU Regulation 1305/2013 - “short supply chain” means a supply chain involving a limited number of economic operators, committed to cooperation, local economic development, and close geographical and social relations between producers, processors and consumers. • Common to all definitions: distance (geographical, organisational or social) between producers and buyers.

CLASSIFICATIONS • Short supply chain typology is not precisely sistemised ▫ Some of the most commonly applied classification criteria: Organisational form : informal association, social enterprise, cooperative Initiators: producers, local authorities, consumers or a combination thereof Motive for involvement : local economic development, maintaining a local processing facility, environmental protection, social justice or a combination of these and other motives Number of involved players Type of involved products : raw or processed; single or multiple products Production methods : organic, conventional etc. Market type : local, national, international Type of marketing channels : local sales, online sales etc. Activities and services : production, sales, delivery

BENEFITS AND MOTIVES • Economic, environmental and social factors Local community • Maintaining the newly created values within LE limits • Creating new jobs • Better use of resources • Innovative cooperation models at the local level • Territory branding • Positive environmental impact Producers • Higher sales price • Possibility to reduce distribution and additional investment costs • Receiving cash payments • Higher employment for household members • Direct contact with buyers Buyers • New eating habits • New consumer requirements as to the quality and safety • Increased confidence in product traits • Personal contact with sellers and exchange of information about products and production techniques

WHY SHORT SUPPLY CHAINS IN SERBIA? Structural characteristics of holdings Small holdings are dominant Small quantities of products Unreliable and irregular market surpluses Uneven product quality Limited access to market information Issue of labour force and their competencies – are there unemployed persons? Small number of holdings with additional activities Milk, fruit and vegetable processing are dominant Low level and relevance of income from diversified activities directly related to the holding Significant regional differences in all regards Structural reform dynamics Slow – lack of investments

Share of holdings with OGA directly related to the holding in the total number of holdings and UAA Region Holdings with OGA % in the total UAA Number % in the total number Republic of Serbia 78,301 12.4 18.1 Belgrade Region 2,903 8.7 20.0 Vojvodina Region 8,405 5.7 12.7 Region of Šumadij a and West 43,816 16.7 27.0 Serbia Region of South and East Serbia 23,177 12.3 17.2 Share of income from OGA in the total farm income by regions (%) Region up to 20% 20-50% 50-80% 80-100% REPUBLIC OF SERBIA 62.71 28.45 6.61 2.23 Beograde Region 64.14 28.01 5.03 2.82 Vojvodina Region 58.26 28.58 8.82 4.34 Region of Šumadij a and West Serbia 62.36 29.38 6.47 1.80 Region of South and East Serbia 64.80 26.70 6.29 2.22

Share of OGA by type of activity and by regions (%) Region REPUBLIC Belgrade Vojvodina Region of Type of activity of Šumadij a OF Region Region South and and West SERBIA East Serbia Serbia Meat processing 6.01 11.57 7.80 5.40 5.82 Milk processing 57.06 54.08 31.66 60.15 60.80 Fruit and vegetable 30.22 30.90 28.15 32.15 27.23 processing Processing of other 4.31 4.72 4.30 3.93 4.98 agricultural products Wood processing 8.15 1.93 0.80 10.08 7.95 Forestry related activities 4.94 1.48 1.09 5.69 5.36 Tourism 0.66 0.48 1.11 0.67 0.48 Handicraft 1.59 0.72 0.94 2.35 0.50 Production of renewable 0.03 0.07 0.10 0.01 0.03 energy Aquaculture 0.28 0.38 0.67 0.24 0.19 Contract work in the field 5.01 4.55 20.42 2.80 3.65 of agriculture Contract work in other 1.85 0.72 3.91 1.26 2.38 fields

WHY SHORT SUPPLY CHAINS IN SERBIA? Structural market characteristics Underdeveloped markets and marketing infrastructure Warehouses, cold stores, wholesale markets Huge losses and wastage (30-60%) Differences in the value chain structure Products for export and domestic market Stock exchange traded and other products Fragmented market chain, numerous intermediaries Producers’ share in the added value is low (30-50%) Informal market domination Low negotiating potential of small farms High transaction and marketing costs Predominantly individual sales, lack of common sales Uneven product quality Bulk sales

SHORT SUPPLY CHAIN IN SERBIA TODAY • Usual direct sales channels  Sales at green markets - retail  Sales at wholesale markets - wholesale  Farm gate sales – directly from farm’s yard or at farm’s gate  Sales alongside roads – stationary or from trucks/trailers  Sales from trucks in settlements  Short-term decisions regarding sales, without planning  Agri-, gastronomic and rural tourism (?)

SHORT SUPPLY CHAIN IN SERBIA TODAY • Marketing and promotion  Lack of design, standard packaging and product labels  Lack of standard - “ my stuff is the best ”  Promotion mainly by referral marketing and recommendations  Customer demand and satisfaction not monitored • Threats  “Supermarket revolution”  Decline in confidence in health integrity of home-made products  Grey economy  Trade agreements

SHORT SUPPLY CHAIN IN SERBIA Participants (1/2) • Small, unorganised producers  Part of them specialised, but still without innovative technical, technological, organisational and market practices  Survival rather than development oriented strategy • Intermediaries  Varied  Rare presence of contractual relationships with small producers  Business strategy motivated by profit, more rarely by sustainability and long-term system development  Cooperation type rarely based on profit and risk sharing

SHORT SUPPLY CHAIN IN SERBIA Participants (2/2) • Service sector  NGO  Organisational support for different events  Activities defined by donor projects  Agricultural advisory services – technical assistance and information  Consultancy firms, on commercial basis • Local governments  Budget support for product promotion and farm investments  No evaluation of effects; funding by automatism

STRATEGIC AND REGULATORY FRAMEWORK • Recognised need in strategic and programme documents  National strategy, (certain) local strategies, IPARD  Application (?) • Complex and unstructured regulatory framework  Lack of records, registries,  Excessive inspection oversight or a complete lack thereof anachronistic regulations, delineation of competences  Food safety and standards comprehensive regulations; controls exercised by multiple agencies result in confusion of food chain participants from private sector non-conformity of practice with regulatory mechanisms  Unfavourable taxes

EXAMPLE – SALES AT GREEN MARKET • Regulatory framework: • Law on Trade, • Law on Utilities, • Law on Consumer Protection, • Law on Intellectual Property Protection • Penalties in case of sales of products without a proof of origin, counterfeits... • Conditions for sale of agricultural products • Proof of product’s origin • Invoice, delivery note • In case of food, proof of fulfillment of food safety requirements must be obtained • Keeping the records, indicated prices, indicated business name • Green market sales costs  Registration for the activity of EUR 50 on a one-time basis  Point of sale lease depending on the town Belgrade has the highest prices (up to EUR 500 per month)

STRATEGIC AND REGULATORY FRAMEWORK • A more dynamic progress in the field of labelling and certification  Primarily products for export  Harmonisation of food safety legislation – Chapter 12 of the EU accession negotiations • Rulebook on small quantities ("Official Gazette of RS" No. 111/2017)  Operation of small and traditional production facilities for food of animal origin • Subsidies for construction of facilities and purchase of equipment, tourism - 2018

QUESTIONS FOR DISCUSSION 1. Participants and their roles in creating and developing short supply chains 2. Business environment and regulatory framework 3. Access to funding

Participants and their roles in creating and developing short supply chains • Who are the key players? • Who are the key players in Serbia - examples? • What institutional and organisational structures are missing and where to start?

Business environment and regulatory framework • To what extent and at what level do regulatorry barriers exist? • What are the other limitations? What support measures are needed? • How to build business networks and confidence within them?