FARMERS CAN NOT SELL THEIR PRODUCTS IN TRADING NETWORKS

(Summary)

The reason: Retailers high rates

Iva Chkonia: “It will be difficult for farmers to enter in the trading networks"

Local manufacturers face many problems in realization of their products. One of the most difficult things is communication with trade networks. Several manufacturers and distributors refused to supply their products to supermarkets. The reason was signed agreements, which contain enslaving conditions.

Entering into the trading networks is especially difficult for small producers, because retailers have set too high tariffs for their products. Addition to one-time tax on placement, they have so called cash-back, which is 10-15% of sold product. Other marketing taxes are also included.

The farmer Nodar Tatishvili did not manage to bring raspberries to the shops. He has raspberries’ orchards in Gori.

Nodar Tatishvili, farmer:

“We would like to bring our raspberries into the trading networks, where prices are higher, but we can’t. “Carrefour” requested to pay 10 thousand Laris in advance, ”Ori Nabiji” asked for 5 thousand Laris for product placement. We cannot pay such high rates, and prefer to sell directly from the orchards. Imported frozen berries are sold in "Carrefour". Our raspberries have better quality but our hands are tied.”

Iva Chkonia, Head of Distributor’s Business Association:

“It is difficult for the farmer to bring products independently in the trading networks. It's so much costly, they cannot afford it. Big producers and distributors also face many barriers. Entering the supermarket cost, so-called “listing payment” is very high. If you have homogeneous product, for example, tomato, it is required to pay additional payment for places in each shop. If they open a new shop, you have to pay additional money. Even if trading network will open 30 more stores, the tax will increase by 30 times. All of this reaches colossal amounts. As a result, we get the fact that one business tries to engulf another, which is not regulated by law.

- Local producers of berries have a problem with selling their products. What can they do in order to get into the trading networks?

It is impossible for farmers to satisfy the conditions of large trading networks. The farmer does not have money to spend on marketing. Cooperation with the distributing company is more favorable for them, which, for example, allocates one place where some of the farmer's products will be collected and distributing company itself will enter in the trading networks.

In order to start realization of berries, distributing company needs to buy refrigerator-car, rent the warehouse, and pay taxes for entering to trading networks. At the same time, it is not insured that the retailer will not offer a new, complicated condition next year. There is a risk to increase taxes and distributors may shut down their businesses. 2-3 stores can take the berries from the farmers, but they will have a difficulty in getting into the big networks.


Author: Nona Kvlividze

The article is prepared with the financial support of the Ministry of Foreign Affairs of Lithuania and  "Development Cooperation and Democracy Promotion Programme."