Issue 3, 2015. June-July

   

NERGETA'S SUCCESSFUL EXPORT: SHARING OUR LESSONS

Investor.ge invited Hans Gutbrod, one of three founders of Nergeta, to share with readers how his company found its niche in the EU market. If your company has an EU export success story, please share it with us!

Hans Gutbrod

Agriculture is often seen as one of the main potential drivers of economic development in Georgia. The country has an excellent and diverse climate, plenty of water, and significant amounts of land that currently aren't being farmed. Yet, besides wine and hazelnuts, relatively few products are exported successfully.

What, then, could be a path to success for more products to reach European markets? The experience of our company, Nergeta, may be useful in this context. Nergeta (www.nergeta.ge) was the first company to export kiwifruit from Georgia to a mainstream European supermarket. At this supermarket, Lidl, our kiwifruit were offered as branded and labeled Georgian products. Lidl, Europe's most dynamic supermarket chain, is interested in receiving more kiwifruit from Georgia in the future, showing that Georgia can make it in the European market.

Our lessons can be summarized in eight key points. First, you should be curious. Our team, two Georgians and I, spent much time exploring various aspects of Georgian agriculture, including kiwifruit, which had been introduced in the 1980s in the Soviet Union, but weren't being farmed systematically. We knew that this local kiwifruit had a great taste, and the lack of systematic attention in Georgia made us even more curious.

Second, you have to be rigorous about checking market requirements, beyond your first curiosity. We looked at export statistics; figured out that kiwifruit remains a premium product; understood that we wouldn't ever compete with New Zealand, as kiwifruit only store well for about four months, so that northern hemisphere kiwifruit come on the market just when southern hemisphere's are all sold; spent hours checking the climate suitability via the archive at www.meteoblue.com; and sent local fruit to be tested in foreign labs.

Third, this analysis showed that we would have a real competitive advantage. The climate of lower Samegrelo was particularly suited to kiwifruit. On some key indicators, local kiwifruit did as well (and even better) than northern hemisphere competitors from Italy and Greece.

Fourth, we were systematic about recruiting knowledge and funds. There is little knowledge on modern agriculture and post-harvest techniques inside Georgia, so we sought and found expertise in those countries where kiwifruit sector has an extensive track record of research and development. We became very good at finding relevant knowledge, either directly on the internet, or by talking to the relevant experts. Regarding funds, due to our team's experience in agribusiness and trust, we received funding from our own network, including foreign capital.

Fifth, we tested. We tested the soil. We tested our own ability to market by first buying local fruit, storing and then selling them. We tested the planting by first planting one plot, then the next, learning critical lessons on the way. We tested export, and now that we have exported we know that we are on the right track for planting more.

Sixth, we brought focus and patience. Starting agriculture in Georgia is tough, so you need a long-term perspective to sustain the first years. We started our venture six years ago, and the experience highlighted the importance of having a good team, in which there is openness for continued learning and openly acknowledging when things went wrong. The management on the ground, led by a co-founder, an exceptionally committed Operations Director, made a critical difference. His commitment to getting details right allowed us to gain the Global GAP certification that you need to export to European mainstream supermarkets.

Seventh, you have to bring the product to the customer. We made much effort to network, at key points, and to demonstrate that we would always put quality first. This lesson, too, is critical for building long-term relationships.

Lastly, we were driven by the conviction that - with and because of its risks - doing something entrepreneurial is one of the most worthwhile uses of one's life. It's a substantive way of bringing and sustaining improvements. That is a lesson that we hope many young Georgians also will take in before they leave school. Together with persistence, a dedication to building better ventures is an approach that can transform Georgian agriculture and Georgia itself.

This is only the beginning; there are huge opportunities for Georgia. North of Georgia it's too cold for many products, in the East too dry, in the South too hot, and in the West growing products often is very expensive. Detailed analysis, and analysis of the climate, is critical. In the beginning, it makes sense to focus on products that are robust, with stable pricing, and that don't need to get to the market within a week or two. Once local teams have developed more skills and export relationships are established, Georgia is also suitable for more complex products.

A number of recommendations flow from this. An increased frequency and quality of networking events, conferences and field trips would help. Another is to bring modern knowledge to more farmers, and to use modern technology for that purpose. For investors, there are tremendous opportunities if they get their analysis right, and our experience may be a good guide to success.

Contact Hans Gutbrod at hfgutbrod(at)gmail.com

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