"Halfway through last year, the management decided to strive for the diversification of our markets," explains Ogtay Huseyni, of the Azerbaijani company DAD. Russia has traditionally been the most important export market for the company, but it is now looking further into markets in the Middle East and the Far East, where "we have a logistical advantage over Europe, the US, South Africa and Latin America," explains Ogtay. "Shipping via Iran, it takes our products between ten and fourteen days to travel from orchard to the destination market."
Murad Ramazanov, of the export business Agrarco, also sees the importance of exports. "We are an export-oriented company with a continuous growth," he explains. "For this season, we are keeping an eye on the global and local market trends, prices and other news. We are always open to new ideas and suggestions." The company specialises in the marketing of hazelnuts and apples grown on its own plantations. The production of hazelnuts stands at 2,000 tonnes. "We harvest the hazelnuts from our own orchards, of which we have more than 2,000 hectares, and we buy nuts in the shell from local growers." For the apples, Agrarco has an acreage totalling 250 hectares which yield some 4,500 tonnes.
Competition against Turkey
The 500 hectares of orchards cultivated by DAD are located in the Guba region. This region lies in the north of the country, near the Caspian Sea, bordering Russia. Thus, the region has a maritime climate, but also benefits from the influence of the foothills of the Caucasus. "We are investing in expanding the acreage," continues Ogtay. "Last year, we harvested 14,000 tonnes of fruit." Most of the range consists of apples. The company also markets cherries, nectarines, peaches, plums and pears.
The low price of oil has also taken a toll on Azerbaijan's economy and has led to tougher conditions in the domestic market. "The economy is not performing as it used to, so we have to sell our volume elsewhere. Previously, we could fall back on the domestic market, but because of the lower disposable income of Azerbaijanis, we are more or less forced to export."
"For the cherries we see great potential in destinations in the Far East, such as Hong Kong," states Ogtay. No other Azerbaijani company has explored the possibility to export. The season for most products overlap with that of Turkey. "We compete directly against Turkey, but we have an advantage when it comes to price and logistics. I am confident that we’ll be able to obtain a good turnover from exports in the coming years."
Explosive growth of fruit productionFor the elaboration of statistics, Azerbaijan is divided into ten economic regions. Guba-Khachmaz, in the north of the country, where DAD is based, tops the ranking of largest fruit producers. Last year, the region accounted for more than 252,000 tonnes of fruit, while the Aran region, slightly further south, accounted for more than 236,000 tonnes. These two regions are considered the fruit orchard of Azerbaijan; in total, they harvested about 888,416 tonnes of fruit in 2015.
Since the early 2000’s, the fruit production has been recording increases of a few percent figures every year. Over the last fifteen years, the ones for which figures are available, the production has increased by 86 percent. Over the last five years, the growth rate has stood at 22 percent. Within this category, apples are the most representative product, accounting for a production of over 256,000 tonnes in 2015. Second are pomegranates, accounting for over 158,000 tonnes. The Aran region, with 125,527 tonnes, accounts for almost the entire pomegranate production. The bulk of the melon production, which is listed separately in the statistics, can also be found in this region, with a volume totalling more than 373,000 tonnes of a total of 484,510 tonnes, making it the largest producer by far.
Growth in greenhouse cultivation
The Azerbaijani vegetable production last year amounted to nearly 1.3 million tonnes. This sector has grown considerably since the start of the millennium. In 2000, the production still stood at 780,836 tonnes, so there has been an increase of 63 percent. After a rapid growth in the first half of the decade, the growth rate has slowed down. Between 2010 and 2015, the production increased by about seven percent.
In addition to a substantial potato production, amounting to 839,795 tonnes, there is also a considerable production of tomatoes (515,160 tonnes) and cucumbers (230,747 tonnes). The figures for these products don’t make the distinction between greenhouse and open ground crops. "There are various companies, including those devoted to greenhouse tomato cultivation, which are making investments to ensure they get the processes right," affirms Ogtay. "There are many greenhouses in Azerbaijan." Traditionally, Russia is the main market, not only for tomatoes, but also for DAD’s apples and cherries. Another reason to invest in the search for new markets is the political developments. In recent years, Russia has introduced boycotts on the EU and Turkey, which resulted in huge losses. With that in mind, exporters aim to reduce risk and keep multiple options open.
Government encourages exports
"In a year or two, I expect that the export of other vegetables and soft fruit will perhaps also become possible," predicts Ogtay; "not specifically for our company, but looking at Azerbaijan as a whole." The government is investing in the development of exports, "making great efforts to increase them. Besides oil, fruits and vegetables are a competitive export product. "
The export of fruits and vegetables has increased rapidly over the past twenty years. In 1994, the total revenue generated from the export of vegetables stood at $ 10 million, while fruit shipments generated $ 1.3 million. This is in sharp contrast to the 91.6 million dollars generated from the export of vegetables in 2015. For fruit exports, the difference is even greater. In 2015, Azerbaijan exported fruits worth $ 220.2 million.
European standard in the Caucasus
DAD is a pioneer in the export to markets in the Middle East and the Far East. "We started in the United Arab Emirates, where we sell to large wholesalers, such as Barakat, but also to hypermarkets like Lulu Hypermarkets," states Ogtay. Lulu Hypermarkets is the largest retail chain in the Middle East. "We also get orders from the Maldives and we are working on markets in Africa. Kenya has become a good market. Russia will remain the main market because of its convenience."
Imports have also increased, but at a much slower pace. A lot of apples used to be imported from France and Italy, but the flow of trade has virtually dried up. "We no longer need those imports," said Ogtay. "We have the same trees as in Europe and we work according to European standards. We even have a Dutch sorting machine."
Building a network
"I doubt that Europe is an attractive market for us," continues Ogtay. "The logistics process is more complex and countries like Poland and Macedonia are much closer. It will be difficult to compete with them. For us, the Middle East, India and China are attractive destinations. We are working on access to those markets. "These markets have the capacity to absorb the products, so for now it won’t be necessary to look to Europe for our exports.
In any case, Europe is an attractive market for certain products. Agrarco’s hazelnuts, for example, have found their way to Italy, France and Germany. "For the coming season, we are looking at the Middle East and North Africa for export, alongside our traditional markets," explains Murad. "We export ninety percent of the hazelnuts and thirty percent of the apples." For the latter category, Russia is the main market, but we’ll also look for opportunities in the Middle East and North Africa.
"Azerbaijan is a relatively new player and it takes a while to get to know the market. In China, and especially Hong Kong, we see that American products are doing well. They have been available for years, so consumers are familiar with them. "That is also reflected in the prices. Ogtay illustrates this with an example that he saw during a visit to the metropolis. US Red Delicious apples cost 22 dollars per box, while the price of better quality European Galas stood at $ 17 per box.
More information:
DAD
Ogtay Huseyni
ohuseyni@dad.az
www.dad.az
Agrarco
Murad Ramazanov
murad.ramazanov@agrarco.az
www.agrarco.az