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May 3 2006, 00:00 Agrarian Marketing Project

Effective Marketing Makes a Difference

A trademark for fruits and vegetables is an old and new practice at the same time.  Produce brand names have been in use for dozens of years, they are often developed out of the environment or from the region where the commodity being branded is produced.  For example, Americans know Florida oranges, California strawberries, and Idaho potatoes.  In Ukraine, Crimean table grapes have tremendous popularity.  Even the shape of the Crimean peninsula patterns a grape bunch.

The specialists of the Agricultural Marketing Project (AMP) used this similarity to develop a brand/label for newly registered Agro-Yukos Ltd.  The three founders of the enterprise decided to switch gradually from grain production to vineyard management.  But, they discovered it is not enough to cultivate the available 5 hectares of table grape varieties: the produce must finally be effectively marketed.  The company continues to maintain 100 ha of grain crops; but, as it moves toward fruit management it also has 3 ha of peach orchard and 0.4 ha of blackberry nursery.  Despite the lack of time available to harvest during the hot harvest season, regional AMP specialists persuaded Agro-Yukos Ltd to apply new packing and marketing practices.  Usually buyers took the table grapes out of field in banana boxes, but now they receive the produce already packed in cardboard boxes with the company brand/label.  Nikolay Choropita, the manager of Agro-Yukos Ltd was able to save money on the manufacture of the boxes, because he provided a local box manufacturer with the needed box sample and they produced it locally at a lower cost.  Originally the buyers paid $2/kg for the grapes in 5 kilo banana boxes.  Now they pay the same price for the grapes in 6 kilo specialized box.  The difference is that the grapes in the banana boxes had high losses, upwards of 50%, and in the specialized boxes the losses were reduced to about 5%.  Since the producer was responsible for the losses these new boxes helped his profits substantially.

Initially a hobby, table grape production has turned out to be a profitable business.  Table grape yields are about 25 tons/ha; and grain crop yields are about 1.2 tons/ha.  When comparing the costs of table grape production with grain production it has been estimated that table grape production is about 1000 times more profitable: $ 50,000/ha for grape and $ 30-40/ha for grain crops.  And, table grape vineyards create many additional employment opportunities.  There are 7 full-time and up to 30 seasonal employees working with Agro-Yukos Ltd.

The success of Agro-Yukos Ltd sounds fantastic: but, in reality years of hard work are in the background.  The founders treat table grape vineyard cultivation as a serious business.  They have a table grape nursery with about 37 table grape varieties.  To date only 4 of these varieties have fully adapted to the local climatic conditions of Crimea; therefore, the seedlings used are from these best-yielding varieties.  Normally table grape canes achieve their production peak in the third to fifth year of vegetation.  This year the vineyard is in its third year and the company expects a good harvest in spite of the January frosts which injured many young shoots and killed some fruiting buds.

Nature showed its true character this year; and, Nikolay Choropita, and his colleagues, learned the necessity to diversify or take other steps to reduce risks of crop failure. To avoid loosing a grape harvest totally two other prominent table grape producers in the region plan to join Agro-Yukos Ltd and form an unofficial group (budding cooperative) of table grape growers.  Being a substantial distance from one another the three vineyards are under somewhat different climatic conditions and this permits less risk from negative weather conditions.  In this way the producers will be able to more likely ensure a crop, and when production is good they will be able to form larger shipments that are more attractive to buyers.  Also, the group has plans to construct 100 tons cold storage and with this they will be able to keep the table grapes longer and sell them at a better time when prices are higher.

Even though an Agronomist, Nikolay Choropita has proved to be an astute strategist with deep intuition and good business-oriented mind.  He understood the importance of having a brand/ label which would help him advertise his product at once.  The popularity of Agro-Yukos Ltd table grapes was indirectly proved when it was observed that buyers selling table grapes in Yalta used the Agro-Yukos Ltd boxes, with brand/label, to sell imported table grapes when the Agro-Yukos Ltd supply ran out.  Based on this observation Agro-Yukos Ltd will be working hard to register their trademark and then aggressively directly enter the Crimean South Coast market, where table grape prices average $5/kg during the tourist season. This will increase the margin substantially for Agro-Yukos Ltd.  The marketing approaches provided by AMP helped increase profitability substantially. 

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