Ukrainian clients pivot in response to COVID-19
Changes in the global business climate, affect all business no matter the place, size or industry. Although many businesses try to prepare for a variety of potential economic shocks, being prepared for a global pandemic was something that few businesses both large and small saw as necessary.
In MEDA’s Ukraine project, the pandemic is highlighting and exacerbating the economic inequality that our Ukrainian gender equality team has already witnessed. Since the pandemic began, our team has been analyzing the gendered impacts of COVID-19 on our clients involved in fruit, vegetable and honey production. With this in mind, our team has created target quarantine measures and opportunities to support women clients whose businesses are most vulnerable to such economic shocks.
Ukraine’s state of emergency announcement has influenced all market relationships and actors, including export supply chains and large wholesale markets in the regions MEDA works which are mainly represented by medium and large producing and trading businesses. These gaps in local supply chains to local wholesale, retail, and other roadside markets are served by micro, small and medium businesses; which are most severely impacted by COVID-19’s economic disruptions.
After the adoption of laws aimed to prevent the spread of COVID-19, the possibility of contractual obligations going unmet became an immediate concern. In the supply chains between farmers or traders and supermarket chains with established relations, the changes are unlikely to be felt as strongly. But many small and micro businesses trying to enter local markets and inject themselves into supply chains are at risk of being unable to meet the needs of their buyers. They also face additional challenges because they cannot afford to have payment delayed, certifications of quality fall through or payments with value-added tax (VAT). These conditions have always been challenging for small businesses, and the current COVID crisis has exacerbated these obstacles.
One of the supply chains impacted by the crisis and is especially important for our Ukrainian clients is the supply of goods to households, or the final consumers of “door-to-door delivery". Before COVID, the “door-to-door delivery” supply chain was mostly attractive to small agricultural producers, who sold primary (unprocessed) products directly from their homes. As this end market does not require official contractual obligations, fixed payments and official documents (including certificates of quality/origin) for the product, this chain will likely become more competitive as larger producers and traders who previously dominated other supply chains, begin to enter this market and edge out small independent businesses that rely on these markets for their livelihoods.
In the current environment, small and micro businesses stand to lose the most. While micro and small producing businesses are critical to the success of various horticultural supply chains - they are the most vulnerable to changes and economic shocks.
Although their goods can be exported internationally or sold to large local wholesale markets through traders, they also rely heavily on smaller markets - many of which are now closed or access limited. The transitions and changes that will happen in horticulture markets will almost certainly be easier for medium and large businesses with their higher level of access to financial resources, business diversification, logistics, and human resources.
Among our Ukrainian clients, 15,000 of the farming families we serve and the 1,900 of the single women clients we partner with receive their income exclusively from agriculture. With increased competition, it will be increasingly difficult for producers to adapt to new working conditions and marketing challenges. Many will need to re-think their marketing strategies and target clients to compete in the changing environment and competition for resources.
In order for UHBDP to support producers, the team has identified three strategies to assist our clients with these challenges:
- Online presence
- Guarantee of product safety
- Improved cooperation
Establishing an online presence is an opportunity for producers to position themselves in mass markets. Some examples include various messaging services (e.g. Viber), social networks (e.g. Instagram, Facebook), and other trading platforms or websites. In fact, some small business clients already have begun to build a strong online presence.
However, significant members of Ukraine’s rural population have not accessed this sales channel and are skeptical of the return on investment. MEDA is working with our clients to encourage them to use digital marketplaces to meet the needs of the “door-to-door delivery” supply chains.
Currently, the guarantee of product safety for a final consumer requires packaging and a seller with personal protective equipment (PPE). These conditions are difficult for some producers to meet on their own – in which case they require increased cooperation and market linages.
MEDA’s Ukraine value chain development specialists have already started to work with rural populations, including single women, to establish their online presence, navigate digital trading platforms, and find and maintain contacts with local traders. By encouraging them to shift their products to online sales platforms we hope they will continue to be creative and adapt during an economically stressful time.
The world is changing very quickly. And those who follow events, have opportunities for distance-learning, and have access to information, accordingly, have more chances to adapt to changes. Being flexible in a modern world means an increased chance at creating and maintaining a sustainable business model.
-- The UHBDP project is funded by Global Affairs Canada