Agribusiness Food Processing and PackagingKosovo's climate is influenced by its proximity to the Adriatic and Aegean Seas, as well as the continental European landmass to the north.
A Favorable Climate for Agriculture
Kosovo's climate is influenced by its proximity to the Adriatic and Aegean Seas, as well as the continental European landmass to the north. The overall climate is of a modified continental type. The combination of Continental and Sub-Mediterranean climate, characteri- zed by long, warm summers and short, not too severe winters provides fertile soil and generally excellent conditions for production of a range of food products.
A Strong Tradition in Agribusiness
With some 60 per cent of the population living in rural areas and mostly working in agriculture, Kosovo has a long agricultural tradition. Agriculture is the main source of income for the majority of the population. The agribusiness and food processing sector is traditionally one of the strongest sectors in Kosovo's economy. Historically, there has been a low reliance on artificial inputs at source, embellishing the integrity of the produce.
Out of a total surface area of 1.1 million hectares approximately 588,000 or slightly more than half is agricultural land with fertile, nutrient-rich soils. About 90% of agricultural land is dedicated to livestock activities such as pastures, meadows, forage crops and some fodder crops for animals. The remaining area is used for grain for human consumption, vineyards, potatoes, fruit and vegetables.
Good Investment Opportunities
The agribusiness sector in Kosovo has traditionally been dominated by socially-owned enterprises, which used to obtain a substantial part of their raw materials from thousands of private farmers. The former socially-owned companies in this field are no longer active. New private companies have started operations in recent years and their production is showing significant and continuous increases.
However, the majority of local processors are still relatively small and only able to provide a minor part of the demand for processed foodstuffs. As a consequence, most of the local demand is catered for by imports, giving rise to substantial import substitution investment opportunities.
Foreign investment in agribusiness in some countries is targeted at the processing and distribution parts of the industry value chain in order to avoid the risks associated with primary production. However, the specific conditions of the sector in Kosovo provide opportunities for investors for integrated investment across the entire value chain.
Kosovo provides opportunities for investment not only in primary production but also in modern post harvest handling facilities, cold storage distribution centers and logistics centers. Modern and efficient processing facilities could be brought closer to the inputs thus providing economies of scale and higher value added products that could compete effectively with the products that Kosovo is currently importing, especially in dairy products, fruit and vegetables, meat products, wine production and other beverages.
The dairy products sector is dominated by imports mainly due to inefficient small holdings within the sector and severe under-capitalization. Despite a good supply of local milk, imports of processed dairy products account for more than 70% of locally consumed products. Kosovo imports around 25- 30 million of dairy produce annually, mainly UHT milk, yogurt, fruit yogurt, butter, white cheese and yellow cheese. About 80 per cent of its imports come from the EU, mainly from Hungary, Slovenia and Germany.
The sector provides attractive opportunities for import substitution by investment in modern equipment, techniques and product branding. Further, the sector is well organized to provide support for such investment via two main trade organizations the Kosovo Dairy Processors Association and the Kosovo Milk Producers Association.
Fruit and Vegetables
A similar picture exists within the fruit and vegetables sub-sector. Imports account for over 70% of local demand. For example, despite the availability of local fruits, there are few fruit processing companies and no facility to produce fruit juice concentrates. There is an immediate investment opportunity here for a new 'greenfield' manufacturing operation or a joint venture with a local fruit processing company.
About 30,000 hectares is devoted to vegetables and potatoes including crops such as tomatoes, peppers, onions, cabbages and melons. The present supply is not sufficient to cover local demand but this could be changed with increased investment to prolong the supply season for example through greenhouses, tunnel production and improved long-term storage facilities. There are definite opportunities for export of high quality vegetable products through the extension of off-season production.
In the meat processing sector, Kosovo has a tradition of large-scale meat production. In the former Yugoslavia, the meat industry was characterized by its own unique system of farming. Socially-owned enterprises operated large-scale agricultural farms and big meat processing complexes. One legacy of this tradition is that today there are six major meat processors in Kosovo who supply around 15% to 20% of Kosovo's domestic market.
Although the sector has adequate processing capacity to meet current local demands, there is a lack of equipment and knowledge to complete the processing cycle. There is still a high dependence on imports of raw materials for production and packaging materials. Investment opportunities exist for joint ventures with existing processors who are interested in partnering with foreign companies.
Grape-growing and wine production has a long tradition in Kosovo. The continental climate and vineyard height of 300 to 400 meters above sea level is very well suited to the production of high quality grapes. There are more than 200 sunny days annually to ripen the grapes, on a par with some much better known wine-producing regions. While local small-scale wine production was developed extensively during the last two centuries, the wine industry peak in 1989, the wine industry had 9,000 hectares of vineyards, divided into private and public ownership, and spread mainly throughout the south and west of Kosovo.
The major share of wine production was for export, mainly to the German market. The wine industry in Kosovo currently consists of about 5,000 hectares of vines. In order to stimulate and support grape growing and wine production, the Government has enacted a Wine Law governing high standards for wine production. Further, the creation of a Wine Institute in 2007 is expected to result in a revitalization and modernization of the wine industry in Kosovo through higher quality wine production and greater use of technology-based winemaking techniques.
There are good investment opportunities to raise new plantations and substitute less productive domestic varieties with well-known international varieties. There are also opportunities to invest in wine tourism and the local municipalities are willing to consider the provision of infrastructural support.
Apart from wine production, there are also opportunities for investment in other beverages such as bottled and carbonated), soft drinks and beer. Kosovo has a number of beverage companies which are active in local and export markets and both 'greenfield' investment as well as partnership arrangements with existing investors are possible.