MEAT SECTOR IN MONTENEGRO

Transcription

1 UPGRADING MONTENEGRIN MEAT QUALITY STANDARDS AND EXCHANGING LESSONS LEARNED IN THE WESTERN BALKANS MEAT SECTOR IN MONTENEGRO ANALYSIS AND RECOMMENDATIONS FOR STRATEGIC DEVELOPMENT OF THE SECTOR Ministry of Agriculture and Rural Development

2 Contents I. Executive summary... 5 II. Introduction... 8 III. Methodology... 9 IV. Meat sector overview IV.1. Production of meat IV.2. Meat export from Montenegro is limited IV.3. Trade of meat products IV.4. Consumption V. Competitiveness of the meat sector V.1. Methodology VI. Expected global and regional trends VI.1. Global trends VI.2. Regional trade trends VII. Characteristics and structure of meat value chain VII.1. Profile of value chain operators VII.1.1. Beef producers VII.1.2. Sheep meat producers VII.1.3. Pig meat producers... 4 VII.1.4. Poultry meat producers VII.1.5. Horizontal integration of producers VII.2. Base of the meat value chain Montenegro is meat processing industry VII.3. Slaughtering practices in Montenegro include a lot of on the farm slaughter VII.4. Traditional products VII.5. Meat distribution channels in Montenegro VII.6. Support policy to the meat sector VII.6.1. Support institutions VII.6.2. Support measures... 49

3 Table of figures Graph 1: NMS total meat production, sources comparison... 1 Graph 2: EU15 total meat production, sources comparison... 1 Graph 3: Index of meat production in Montenegro compared to region and EU Graph 4: Index of meat production in Montenegro compared to CEFTA and EU (26=1) Graph 5: Production growth of beef meat for CEFTA countries in relation to world average growth and expressed as CEFTA share for period Graph 6: Production growth of sheep meat for CEFTA countries in relation to world average growth and expressed as CEFTA share for period Graph 7: Production growth of poultry for CEFTA countries in relation to world average growth and expressed as CEFTA share for period Graph 8: Production growth of pork meat for CEFTA countries in relation to world average growth and expressed as CEFTA share for period Graph 9: Trend of pork production growth in Montenegro in relation to Serbia Graph 1: Structure of meat export (by value) for selected countries in period Graph 11: Structure of meat import (by value) for selected countries in period Graph 12: Monthly price of pig halves (25-May 217) Graph 13: Beef import Graph 14: Sheep meat import Graph 15: Poultry import Graph 16: Pork import Graph 17: Value of total meat (beef, sheep, pork, poultry) import in CEFTA region countries (21 216) Graph 18: Meat products import to Montenegro and selected countries and country groups per capita Graph 19: Meat import to Montenegro and selected countries and country groups per capita - index Graph 2: Pork meat and meat products import per capita Graph 21: Pork meat and meat products import per capita Graph 22: Pork meat and meat products import per capita Graph 23: Top 1 meat importers to Montenegro with import weight and unit value for period Graph 24: Import structure fresh and chilled vs frozen for period Graph 25: Origin and unit value of beef import in Graph 26: Origin and unit value of chicken import in Graph 27: Unit value of meat and meat products imported in Montenegro for period Graph 28: Trade balance of pork meat in European countries in Graph 29, 3, 31, 32, 33: Production, export and import of meat per capita (29-214) Graph 34: Value and export destinations of meat products from Montenegro (26 216) Graph 35: Import of meat products (Index 1996=) Graph 36: Growth trend of meat products import compared to world growth Graph 37: Destinations of meat products import to Montenegro for period Graph 38: Meat products import in by months Graph 39: Meat products import to Montenegro in relation to other countries of developed tourism- import structure by months Graph 4 and 41: Unit value of meat products import to Montenegro in relation to regions and CEFTA region countries for perod Graph 42: Per capita consumption in Europe (214-24) Graph 43: Meat projection trend per category (214-24) Graph 44, 45, 46, 47: Consumption of different types of meat kg/per capita for CEFTA countries and region (21-215)...25 Graph 48: Competitiveness index of selected countries for all types of meat included processed in relation to NMS, CEFTA and EU15 shares and index growth in relation to World average for production and export in period Graph 49, 5, 51: Competitiveness index of EU, NMS and CEFTA countries - meat Graph 52: Competitiveness index of EU, NMS and CEFTA countries - meat products Graph 53: FAO food price index Graph 54: FAO food price index by commodity groups Graph 55: Import of meat products to Russia, yearly average Graph 56: Import of meat products to Russia in period September June Graph 57: Meat export from Germany Graph 58: Meat export from Germany aug 214 nov Graph 59: Trend of meat products export in EU15 and NMS (2=1) Graph 6: Import trends of meat products EU 15 and NMS (2=1) Graph 61: Total import of meat products to NMS Graph 62: Average growth of GDP and forecasted in developed economies Graph 63: Average GDP growth and forecasted in developing countries Graph 64: Structure of calorie intake per capita (kcal/day) in underdeveloped, developing and developed countries Graph 65: Production meat prices in Europe Graph 66: Croatian export of meat products in period Graph 67: Croatian import of meat products in period Graph 68: Import to Montenegro Graph 69: Import to Serbia Graph 7: Import to B&H Graph 71: Unit value of import of meat products Jan 21 Apr Graph 72: Slaughtered animals per month Graph 73: Place of purchase fresh meat (%) Graph 74: Place of purchase meat preparations (%)... 47

4 Table 1: NMS total meat production, sources comparison (tons)... 9 Table 2: EU15 total meat production, sources comparison (tons)... 9 Table 3: Production of meat (tons) in Montenegro Table 4: Montenegro cattle and sheep meat production, different sources (tons) Table 5: Montenegro pork and poultry meat production, different sources (tons) Table 6: Type of the meat producers in Montenegro Table 7: Production and import of meat in Montenegro (29 214) Table 8: The value of meat production and import in Montenegro (29-214)...37 Table 9: Production and import of inputs for the livestock production Table 1: Value of meat consumption in Montenegro (21-214) - monthly average...37 Table 11: Number of the cattle in period Table 12: Structure of herd, number of farm owners and number of cattle in Montenegro Table 13: Summarized data on the number of farms engaged in sheep-breeding and the number of sheep in Montenegro... 4 Table 14: Summarized data on the number of farms engaged in pork production and the number of pigs in Montenegro... 4 Table 15: Summarized data on poultry in Montenegro Table 16: The resources of the meat processing industry Table 17: Veterinary service in Montenegro Table 18: AgroBugdet measures for livestock - Direct payments ( EUR)... 5 Table 19: AgroBugdet measures for livestock Rural development measures ( ) Illustration 1: Number of farms engaged in cattle breeding and the number of cattle in Montenegro Illustration 2: Number of farms engaged in poultry production in Montenegro... 41

5 5 I. Executive summary This report presents the overview of the meat sector in Montenegro based on a comparative regional analysis of the production, trade and import, competitiveness and, global and regional trends. Montenegro is the smallest regional producer for all types of meat. The annual average meat production in the period was approximately 11,5 tonnes of meat compared to half a million tonnes of Serbia in the same period. Montenegro has limited resources for production that could grow up to some level. The production includes beef (35 percent), pork (25 percent) and poultry (3 percent). Unlike neighboring countries, European Union (EU) countries and world average, pork production does not have a dominant share in Montenegrin structure of produced meat. At the same time, most of the European countries have stopped beef production, not being able to compete with the cost-competitive beef production from other regions such as Brasil, Argentina. The share of poultry production is increasing as in almost all countries, and a similar trend is expected in Montenegro. Montenegro exports small quantities of meat. In 216, the export of meat products valued over USD 1 million and was over five times higher than in 26. Over 8% of total export refers to export to Serbia and to other countries of the CEFTA region. Meat import is significant when converted to the value of meat import per capita and compared to the region and the NMS - it is several times higher per capita compared to other countries or regions. Montenegro is a touristic country and tourism is the driver of imports, along with ham production ( pršuta ) and meat processing in general. Meat is predominately imported from the EU, except poultry meat, which is imported from the CEFTA region. Import of meat products to Montenegro dropped to USD 23.8 million in 216 from the record value of USD 3 million in 214. The unit value of import is high and points to the importance of brand and consumer confidence in the meat consumption. Competitiveness, according to the methodology applied in this report, is the sum / index of 36 analyzed indicators, such as production and trade shares and production and trade trends. The analisys showed low competitiveness of fresh meat production in Montenegro. Contrarly to meat production, the meat-processed products from Montenegro are more competitive at regional and EU level. Montenegro is most competitive out of CEFTA (Central European Free Trade Agreement) countries. The meat products competitiveness is a consequence of the strategic orientation on adding value to meat products in Montenegro and meat processing industry efforts fot improvement of market positioning in the region. Global and regional trends in meat sector point at decrease of prices of almost all agricultural products including meat. EU sanctions to Russia have resulted in a significant shift in global trade as Germany and large meat producers have diversified export markets. At the same time, there is an increase of fresh and processed meat trade in EU New Member States (NMS) while beef price drops, poultry rises and pork and sheep meat prices fluctuate. The slowing down of global economies, the increasing consumption of vegetal proteins versus animal proteins and the projections of high cereal prices both for animal feed and human consumption, bring expectations that there will not be a significant increase in the consumption of meat and meat products. These global trends will reflect on Montenegro meat sector. The expected trends are that the slow growth will result in stagnating prices for some meat products while the demand for high value products in developed countries will rise, and quality orientation would become a priority contraly to price competitiveness. Experience from NMS is also valuable. It is a great challenge to be competitive in meat processing sector to EU 15 countries, particularly to German, Belgium, French, Danish, Dutch, Spanish and Italian producers who have long tradition of production and processing veal and pork. The challenge is greater bearing in mind that EU meat sector is less competitive in comparison to global players. The NMS meat producers faced strong competition at the open market, where one of the good strategies is export orientation to the third markets.

6 6 Price competitive meat processing industry should be based on the cheapest raw material, which is most commonly imported. The meat value chain in Montenegro is set on two fundamentals that are related to each other. On one hand, the majority of meat producers are small ones, producing livestock - meat for self-consumption and also producing traditional meat products. On the other hand, in the last decade a small but modern and efficient meat processing industry was established based on imported meat as well as on contracted farming for the production quality meat products. The Processing industry also includes smaller but very efficient meat processors producing traditional meat products, Njeguška pršuta in particular, which was the driver for the meat VC development in the last decade. The most important characteristics of the Montenegrin meat value chain is the focus on processing and finalization, adding value to the imported fresh meat. The driver of the meat sector in Montenegro is young and dynamic meat processing industry, which achieves significant results in stimulating meat production and is one of the best-developed processing industry in Montenegro. Processing is concentrated in a few companies that have industrial and export oriented production, high productivity, high quality products, modern production processes, but also large number of workers engaged directly or as intermediaries (cooperants). The dynamic development is a result of investments in new technologies for slaughtering and meat processing and construction of modern buildings. The duality within the meat processing industry indicates on one hand modern, technically up to date establishments, which are increasing production and exports in compliance with international standards and on the other hand a high fragmentation of the small players, usually present only on limited local markets and channels. The processing industry in Montenegro is investing in developing quality brands/labels and strengthening their regional presence, particularly in the neighboring countries. The main marketing channels for meat and meat products in Montenegro are supermarket chains, restaurants and hotels; however, there is a strong consumer preference for direct purchase from producers, cherishing the traditional aspiration for quality domestic products. This report also briefly summarises the policy framework in support to the meat sector (institutional support and support measures).

7 Abbreviations: CEFTA - Central European Free Trade Agreement CETI - Center for Toxicological Research of Montenegro EU - European Union FAO - UN Food and Agriculture Organisation FSVPD - Food safety, veterinary and phytosanitary directorate IPH Institute for Public Health LSS Livestock Selection Service LSU Livestock Unit NMS New Member States Countries accessed EU after 24 MARD Ministry of Agriculture and Rural Development MIDAS - Montenegro Institutional Development and Agriculture Strengthening project NMS New Member State, EU member states accessed EU after 24 SVL Specialised Veterinary Laboratory VC Value Chain 7

8 8 II. Introduction Livestock and meat processing sector in Montenegro is increasingly becoming an important regional player with positive meat product export trends. Though very small, it is a contributor to the agricultural export balance and local employment from small-scale to larger farms. This report presents an analysis of meat production and trade trends in Montenegro compared to the region and the European Union (EU), as well as competitiveness analysis. The latter provided a competitiveness index base which showed a relatively low competitiveness of the meat production in Montenegro when compared with its regional and EU competitors and better meat products competitiveness. The low competitiveness is a consequence of the low level of value chain organization and integration of meat production and processing without a joint approach/strategy without predictability. Still, there are good examples and initiatives that could be reproduced, but yet without a common analysis of the sector barriers and common strategy to overcome it. Within its dynamic growth, it is a challenge to establish links and coordination of value creating activities of all suppliers, processors, channels and consumers. Such process that would enable all actors to recognize and take responsibility over the greatest competitive advantages of Montenegro tradition and quality of meat products, would certainly support the two major outlets: regional markets that benefit from good reputation of Montenegrin meat products, and tourism an untapped major opportunity for increased consumption and export. This analysis was performed under the FAO/EBRD project Upgrading Montenegrin meat quality standards and exchanging lessons learned in the Western Balkans, which aims at supporting more efficient and inclusive agri-food chains in Montenegro. The secondary objectives are to provide greater coordination on food safety and quality standards, support the development of origin-based labels in the meat sector and share knowledge on food safety, quality and geographical indications (GIs). The results of this analysis were also presented at the conference on Quality for Competitiveness of meat products from Montenegro held in Podgorica on April 21, 215 and at the workshop organized on The characteristics and Strategic Directions for Quality Orientation of the Meat Value Chain in Montenegro, on December 4, 215.

9 9 III. Methodology This report is developed with combination of desk research and analysis, field interviews and wide consultation process with various stakeholders in Montenegro and abroad. The data on meat and meat products production and trade have been generated from various sources and data sets: Statistical Office of Montenegro Monstat Official statistics FAO, EUROSTAT and available official statistics from different countries Database International Trade Center (for data at monthly level) and UN Comtrade (for 6-digit data at yearly level) OECD-FAO Agricultural Outlook Different systematic databases like World Bank doing business report, EBRD country competitiveness, IMPF indicators The data on meat production were used from FAO database which is updated at 214 data. The data for 215 and 216 for Montenegro from Monstat and Eurostat are corresponding to the Montenegro slaughtered animal tonnage recorded by Monstat monthly, but in the case of pork and poultry meat they are several times lower for year 214 than the data offered by FAOSTAT who states country s official statistics as its data source. Again, the meat production data are not inline with pig and poultry animal numbers since in 216 there is strong increase of both pig and poultry animals. Also, the meat production from FAO and Eurostat database are not corresponding for the EU15 and NMS as presented in tables 1 and 2 and graphs 1 and 2. Thus, the FAO statistics data were used in this Study because they are available for all countries and thus comparable since the same methodology for collecting data is applied on all countries and possible errors does not affect relative numbers. Table 1: NMS total meat production, sources comparison (tons) NMS FAO 581, , , , , ,585 Eurostat 483,968 54, , , ,13 572,911 62,77 664,677 Table 2: EU15 total meat production, sources comparison (tons) EU FAO 2,439,247 2,513,756 2,546,985 2,521,712 2,491,791 2,497,13 Eurostat 1,97,236 1,963,995 1,988,28 1,961,51 1,934,122 1,939,96 2,9,294 2,53,372

10 Thousand tons Thousand tons 1 Graph 1: NMS total meat production, sources comparison Graph 2: EU15 total meat production, sources comparison NMS EU15 8 3, ,5 2, 1, , 5 - FAO Eurostat FAO Eurostat The production data for pork and poultry meat are the data from Monstat database on slaughtered animals. But there are no data for special case of other slaughtering. So-called other slaughtering is carried out in places other than slaughterhouses. In the EU it is a marginal phenomenon, primarily arising from ownconsumption and traditional or ritual slaughter. It can also reflect weaknesses in the national veterinary information system. It can be locally significant in part due to incomplete implementation of hygiene legislation. The EU has rigorous hygiene rules, and food is tracked at all stages of the production chain, including slaughtering, processing and distribution, in order to guarantee food safety throughout Europe. In 214, 81.3 % of other slaughtering was recorded in those Member States that joined the EU in 24 or later. In relative terms, other slaughtering accounted for 11.3 % of total slaughtering in the 13 newest EU Member States and.4 % in the EU 15 (the first 15 Member States of the EU). The insights were commented and explained through wide consultation process that lasted for the project duration, where number of local stakeholders provided their interpretations of the field situation, policy effects, state of doing business and level of coopration within the meat sector and other relevant sectors. Dialogue with the institutions the Ministry of Agriculture and Rural Development, Livestock Selection Service, farmers and farmer groups have all given valuable directions and steared consensus on the strategic pillars for the development of the meat sector in Montenegro, and particularly meat processing. The initial stakeholder mapping and value chain analysis of the meat production and meat processing and trade were the crutial initial approaches that enabled quality dialogue. In addition, the extensive identification mission assisted in extanding the partner list to small and non registered establishments that are functioning in parallel to the establishe system and are particularly interested in gaining official status of approved food bussines operators, able to acess different markets. The Consumer perception survey, implemented by CEED, assessed the level of satisfaction of local consumers and tourists with quality of meat products, their views on quality labels, product differenciation, purchase habits particularly regarding traditional meat products. The surveys in the neighbouring countries (Serbia, Albania, Kosovo, Macedonia) served to explore export potentials and perceptions and reputation of the Montenegrin meat products.

11 11 Finally, the qualitative interviews with HORECA sector have pointed out potential and underused links between food production and hospitality and tourism industries that could contribute to further expansion of the meat processing sector. Within the project duration, the team consisting of Agrikultura and UN FAO experts and supported by local experts organised number of field visits and focus groups, trainings and consultations, the most important being: Characteristics and Strategic Directions for Quality Orientation of Meat Value Chain in Montenegro, 4 December 215 Protection of the GI of Beef prosciutto and Stelja, quality aspects and market positioning, 8-9 March 215. In Zabljak and Berane Flexibility measures in food safety and hygiene rules and HACCP in small establishments; 3 June Berane, 4 June Njegusi 216. Quality Scheme A guarantee and communicaiton system for increasing product competitiveness 11 October 216, Podgorica Meat sector analysis and strategic inputs endorsement workshop, 4 October 216.

12 IV. Meat sector overview Production of meat Montenegro produces small quantities of meat and with stagnating trend Meat production in Montenegro from 199 to 27, period when Montenegro was in a union with Serbia (until 26) and a year of independence, had identical indexes of meat production in Serbia. During this period, there was a slight decreasing trend in meat production in both countries. The production after 26 followed the similar part as the period before, just in 211 and 212 the production increased to about 4 tons and then again dropped. Due to its small volume, index of meat production in Montenegro is oscillating more than in countries that are large meat producers. Graph 3: Index of meat production in Montenegro compared to region and EU Graph 4: Index of meat production in Montenegro compared to CEFTA and EU (26=1) Serbia Montenegro CEFTA NMS EU Montenegro CEFTA NMS EU15 Source: FAO Statistics Source: FAO Statistics Table 3: Production of meat (tons) in Montenegro Cattle meat 4,456 4,991 4,612 4,576 4,727 4,688 4,391 4,191 3,834 Pork meat 2,913 2,873 1,878 2,76 1,895 4,446 3, ,793 Sheep meat 1,342 1,347 1,11 1, ,43 1,7 1, Poultry 2,55 3, 3,5 3,5 3,5 3,5 3,5 3,35 3,4 Source: FAO Statistics The data for pork and poultry meat production in 215 and 216 vary depending on the source as presented in tables 4 and 5. Table 4: Montenegro cattle and sheep meat production, different sources (tons) Cattle meat Sheep and goat meat Monstat 3,696 4,78 3, Eurostat 3,87 4,14 3, FAO 3,

13 Average CEFTA share Average CEFTA share 13 Table 5: Montenegro pork and poultry meat production, different sources (tons) Pig meat Poultry meat Monstat Eurostat FAO 2, ,4 - - Meat production in Montenegro lags behind regional competitors The production of meat in Montenegro lags behind regional competitors. Beef production has a growing trend, which is slower than the average world growth of beef production. The drivers of this growing trend is situated at north of the country where conditions are very favourable. In addition, poultry production lags behind the world growth and productions in countries regional competitors. Production is in great measure industrialized, have very short production cycle and does not require large area compared with other type of production, demand is growing, particularly for fresh. Sheep meat production in Montenegro has growth of 1-percentage points comparing the average growth rate in the world in observed period but lags behind competitors from CEFTA region and NMS. In these countries, the production of sheep meat moves from the mountain areas to plains and becomes more intensive and price-competitive. The pork production has a growth of nearly 2 percentage points in comparison with world growth, but after 211, the production in Montenegro is decreasing (Graph 9). The trend growth can be explained that trend of decrease of pigment production in world is faster than the one in Montenegro. Graph 5: Production growth of beef meat for CEFTA countries in relation to world average growth and expressed as CEFTA share for period Graph 6: Production growth of sheep meat for CEFTA countries in relation to world average growth and expressed as CEFTA share for period % 4% 35% 3% 25% 2% 15% 1% 5% % -5% -2% -15% -1% -5% % 5% 1% 15% 2% Average growth in relation to the World Serbia Bosnia and Herzegovina Croatia Montenegro Albania Macedonia 5% 4% 3% 2% 1% % -1% -1% % 1% 2% 3% 4% Average growth in relation to the World Serbia Bosnia and Herzegovina Croatia Montenegro Albania Macedonia Source: FAO Source: FAO

14 Thousand tons Average CEFTA share Average CEFTA share 14 Graph 7: Production growth of poultry for CEFTA countries in relation to world average growth and expressed as CEFTA share for period Graph 8: Production growth of pork meat for CEFTA countries in relation to world average growth and expressed as CEFTA share for period % 4% 35% 3% 25% 2% 15% 1% 5% % -15% -1% -5% % 5% 1% Serbia Bosnia and Herzegovina Average growth in relation to the World Croatia Montenegro Albania Macedonia 35% 3% 25% 2% 15% 1% 5% % -1% -5% % 5% 1% 15% 2% 25% Average growth in relation to the World Serbia Bosnia and Herzegovina Croatia Montenegro Albania Macedonia Source: FAO Source: FAO Production of pork meat in Montenegro is decreasing since 211. Montenegrin production makes less than 5 percent of Serbian production. Graph 9: Trend of pork production growth in Montenegro in relation to Serbia Serbia Montenegro Serbia - trend Montenegro - trend Source: FAO Meat export from Montenegro is limited Montenegro exports very small quantities of meat ( average is 241 t). Main export destination is Serbia with over 9 percent share, but in 214 has happened large export to Belarus (according to Montenegro source export quantity was 11,5 tons and by Belarus source 1,66 tons) and this particular year were excluded from some graphs. The export structure is dominated by pork with approximately 2/3 of total quantities. One could note that there is no other country/group of countries with that high share of pork meat in the export structure.

15 I 15 Graph 1: Structure of meat export (by value) for selected countries in period 1% 8% 6% 4% 2% % Graph 11: Structure of meat import (by value) for selected countries in period 1% 8% 6% 4% 2% % Source: UN Comtrade Beef Pork Sheep Poultry Source: UN Comtrade Beef Pork Sheep Poultry Montenegro can additionally increase meat export, particularly to Serbia If Montenegro producers are able to provide stable meat prices, in the period of major price fluctuations in Serbia, they can increase their exports to Serbia. The graph 13 below shows that the Serbian market suffers from the largest price fluctuations, so in the periods of his prices it is always possible to offer lower and more constant prices, and therefore increase export from Montenegro to Serbia. This graph also illustrates the impacts of EU accession to price stabilization Croatia after becoming EU member does not have so pronounced four-year cycle of pork prices as before. Graph 12: Monthly price of pig halves (25-May 217) Euro/1kg EU HRV SRB III V VII IX XII III V VII IX XII III V VII IX XII III V VII IX XII III V VII IX XII III V VII IX XII III V VII IX XII III V VII IX XII III V VII IX XII III V VII IX XII III V VII IX XII III V VII IX XII III V Source: ITC Trade Map, State Statistic agencies Import of all types of meat in Montenegro have increasing trend in relation to world average During recent years, import of fresh, chilled or frozen meat takes the largest percentage of the total import of agricultural products in Montenegro. In the period , trend of import growth of all meat types has been faster than the average import growth in the world. In 215, meat import was percent of total import value of euros. Of the total value of meat import (68 million euros), the largest share relates to import of fresh pork (42.4 million euros). Fresh pork is imported from EU countries mainly (Germany, Austria, Hungary, and the Netherlands) and Serbia.

16 Average World share Average World growth Average World share Average World share 16 Graph 13: Beef import Graph 14: Sheep meat import % 1% 4% 8% 3% 6% 2% 4% 1% Montenegro 2% Montenegro % % -1% -1% -5% % 5% 1% 15% 2% 25% Average growth in relation with World average -2% -4% -2% % 2% 4% 6% 8% 1% 12% 14% 16% Average growth in relation with World average Source: UN Comtrade CEFTA Montenegro NMS EU15 Source: UN Comtrade Montenegro CEFTA NMS EU15 Graph 15: Poultry import Graph 16: Pork import % 2% 15% 1% 5% % Montenegro 35% 3% 25% 2% 15% 1% 5% % -5% -1% -5% % 5% 1% 15% 2% 25% Average growth in relation with World average -5% -8% -6% -4% -2% % 2% 4% 6% 8% Average growth in relation with World average Montenegro CEFTA NMS EU15 Montenegro CEFTA NMS EU15 Source: UN Comtrade Source: UN Comtrade In comparison to regional competitors, Montenegro is importing more than other countries except Croatia. It should be considered that both countries, Montenegro and Croatia are tourist destinations.

17 USD per capita Millions USD 17 Graph 17: Value of total meat (beef, sheep, pork, poultry) import in CEFTA region countries (21 216) Albania Croatia Serbia Moldova B&H Montenegro Macedonia Source: UN Comtrade Montenegro meat import per capita is the largest in Europe Meat import is significant when converted to the value of meat import per capita and compared to the region and the NMS - it is several times higher per capita than in other countries or regions that is compared to. When comparing the import per capita one must take into account, that Montenegro is a tourist country and that tourism is the driver of import, along with production of pršuta and meat processing in general. Montenegro is registering about 1.8 million tourists per year. Graph 18: Meat products import to Montenegro and selected countries and country groups per capita Graph 19: Meat import to Montenegro and selected countries and country groups per capita - index Montenegro Serbia CEFTA Montenegro Serbia CEFTA NMS EU15 World NMS EU15 World Source: UN Comtrade Source: UN Comtrade

18 18 Graph 2: Pork meat and meat products import per capita 214 Graph 21: Pork meat and meat products import per capita 215 Graph 22: Pork meat and meat products import per capita 216 Montenegro Luxembourg Denmark Slovenia Czech Rep. Portugal Ireland Lithuania Slovakia Croatia Greece Sweden Poland Italy Estonia Belgium Latvia Germany Netherlands Hungary Bulgaria Malta United Kingdom France Finland Romania Cyprus Serbia Belarus TFYR of Macedonia Bosnia Herzegovina Russian Federation Switzerland Iceland Georgia Albania Norway Spain Armenia Ukraine Azerbaijan Turkey Rep. of Moldova 1 2 Montenegro Luxembourg Slovenia Denmark Ireland Czechia Austria Lithuania Portugal Slovakia Netherlands Croatia Greece Estonia Poland Sweden Italy Belgium Latvia Malta Hungary United Kingdom Germany Bulgaria Finland France Romania Cyprus Macedonia B&H Serbia Albania Georgia Iceland Switzerland Russian Federation Spain Norway Armenia Moldova Belarus Ukraine Kazakhstan Azerbaijan Turkey Source: UN Comtrade Source: UN Comtrade Source: UN Comtrade (no data for Netherlands, Slovenia, Azerbaijan, Finland, Ukraine and Austria) Meat is predominately imported from the EU, while poultry from CEFTA region Montenegro Luxembourg Slovakia Denmark Czechia Ireland Croatia Lithuania Portugal Estonia Greece Belgium Latvia Hungary Poland Sweden Italy Germany Malta United Kingdom Bulgaria Romania France Cyprus Macedonia Iceland B&H Georgia Albania Switzerland Serbia Spain Norway Russian Federation Armenia Moldova Belarus Kazakhstan Turkey 5 1 For period , highest meat import value is from the Netherlands (29 percent), then Austria (23 percent), Serbia (13 percent), Germany (12 percent) and Spain (7 percent). Montenegro imports 89 percent of beef from the EU, 9 percent from CEFTA and the rest from the WTO countries, while import of poultry meat primarily comes from the region and at higher prices because of being imported fresh. Montenegro imports 8 percent of pork from EU countries, 17 percent from CEFTA and the rest from the WTO countries. In 215, the import shares have changed significantly, especially for beef. Pork, sheep and bovine meat are mainly imported as fresh or chilled (circa 9 percent comes like this) while poultry 6 percent is imported as frozen and 4 percent as fresh or chilled. A significant number of processing industry operations requires frozen meat so the industry first freezes the imported meat first and then it processes it.

19 Tons 19 Graph 23: Top 1 meat importers to Montenegro with import weight and unit value for period Graph 24: Import structure fresh and chilled vs frozen for period , 2, 3, 4, 5, 6, 7, 8, Netherlands Austria Germany Serbia Spain Belgium Brazil Croatia Bosnia Slovenia Import weight (t) Unit value ($/t) 5, 45, 4, 35, 3, 25, 2, 15, 1, 5, Fresh and chiled Bovine Swine Sheep Poultry Frozen Source: UN Comtrade Source: UN Comtrade Graph 25: Origin and unit value of beef import in 216 Graph 26: Origin and unit value of chicken import in 215 Thousands USD 1, 2, 3, 4, 5, 6, 7, 8, 9, Netherlands Serbia Germany Poland Austria Italy Spain Brazil New Zealand Hungary 21, 18, 15, 12, 9, 6, 3, Import value Import UV UDS/t Serbia Brazil B&H Croatia Slovenia Netherlands Germany Austria Italy Belgium Poland France 3,5 3, 2,5 2, 1,5 1, 5 $/t Import Unit value Mill. USD Source: UN Comtrade Source: UN Comtrade (no aveilable data for poultry 216) Meat trade should be observed both from the perspective of the overall competitiveness of the agricultural sector, and that of all the world market players. In 214, the EU 28 imported meat of the total value of 18.7 billion USD and over the past 1 years, this import grows with an average rate of 7.6 percent. It can be concluded that the EU strategy is to move from the price competitiveness, leaving it to other players at the global market, and to focus on quality. The European Union is a net exporter of pork with value of 5.8 billion USD, with only 7 countries have a positive pork trade balance. Large importers are Romania, Poland, Italy, and Great Britain.

20 2 Graph 27: Unit value of meat and meat products imported in Montenegro for period , 7, 6, 5, 4, 3, 2, 1, Beef Pork Sheep Poultry Meat products Source: UN Comtrade Graph 28: Trade balance of pork meat in European countries in 216 Spain Denmark Germany Netherlands Belgium Austria Ireland France Hungary Finland Norway Slovenia Ukraine Turkey Azerbaijan Kazakhstan Iceland Cyprus Switzerland Malta Moldova Albania Belarus Armenia Luxembourg Serbia Estonia Macedonia Georgia B&H Montenegro Latvia Lithuania Croatia Bulgaria Portugal Slovakia Sweden Romania Greece Czechia Poland Russian Federation United Kingdom Source: UN Comtrade -3, -2, -1, 1, 2, 3, Millions USD4, Comparative analysis of production, trade and import per capita are indicating that productions of beef and poultry meet per capita is significantly smaller in CEFTA than in EU and there is opportunity for the increase of these productions. Import of pork meat in Montenegro per capita is differentiating this country among others but as discussed previously the import is base for added value products both via processing and tourism.

21 kg per capita kg per capita kg per capita kg per capita kg per capita 21 Graph 29, 3, 31, 32, 33: Production, export and import of meat per capita (29-214) Beef meat Pork 25 2 Production Export Import Production Export Import Sheep meat Poultry Production Export Import Production Export Import Meat products Export Import Source: UN ComTrade, FAO Trade of meat products Meat products export increased 5.5 times since 26 In 216, export of meat products was over USD 1 million and over five times higher than in 26. Over 8% of total export refers to export to Serbia and Bosnia and Herzegovina. Since 211, new markets are opened in addition to the ones of Serbia and Bosnia and Herzegovina.

22 Average World share Millions USD 22 Graph 34: Value and export destinations of meat products from Montenegro (26 216) Serbia B&H Macedonia Others Source: UN Comtrade Meat products, such as Njeguška pršuta and Njeguši sausage have long tradition at the Serbian market. Certification of products with long tradition, particularly with a focus on food safety could result in increased exports to Serbia, but also open other markets. The focus should be on quality competitiveness through improved quality and presentation of the final product. Import of meat products is 3 times higher in comparison to 26 Import of meat products to Montenegro reached $ 2 million in 215 and in the period grew at a rate of 17 points compared to world growth, while the other countries in the CEFTA in average lowered their import, when compared to the world growth. Observed per capita, Montenegro has a large import of meat products. In 26, import per capita was about USD 14, while in the coming, year of 27, import increased to more than USD 28 and in 28 it was four times higher. The reason for the large import of meat products per capita lies in the several processing plants were opened and they are importing as input for added value products. In the period the average growth of meat product import to Montenegro was 17 points per year. Graph 35: Import of meat products (Index 1996=) Graph 36: Growth trend of meat products import compared to world growth % 4% 3% Montenegro 2% 1% % -1% -1% -5% % 5% 1% 15% 2% 25% Average growth in relation with World average Montenegro Serbia NMS EU15 CEFTA Montenegro NMS EU15 Source: UN Comtrade (no data for 216 for Sloveni, Finland, Netherlands and Austria) Source: UN Comtrade (no data for 216 for Slovenia, Finland, Netherlands and Austria)

23 Montenegro Greece Croatia Spain Montenegro Greece Croatia Spain Montenegro Greece Croatia Spain Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan Hiljada $ 23 Montenegro imports most of the meat products from Serbia and Bosnia and Herzegovina, with import peak at peak of tourist season Meat products are imported the most from CEFTA region - Serbia (55 percent), Croatia (13 percent), Macedonia (11 percent) and Bosnia and Herzegovina (1 percent). Import of meat products is the lowest in January, then begins to rise as the maximum monthly volume of import is reached in July, i.e. during the peak of summer tourist season. As of August, import starts to decrease, till the end of month of January. In EU, import over the year is more or less balanced by months. Other countries that have a large number of tourists during the summer months, have a similar structure of import by months as Montenegro. Graph 37: Destinations of meat products import to Montenegro for period Graph 38: Meat products import in by months 6, Serbia 4, 2, USD/t B&H Croatia Macedonia Slovenia Italy Netherlands Austria Germany Spain Millions USD Source: UN Comtrade 7, 6, 5, 4, 3, 2, 1, Source: ITC Trade Map Montenegro Serbia EU 6, 5, 4, 3, 2, 1, Graph 39: Meat products import to Montenegro in relation to other countries of developed tourism- import structure by months 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % Source: ITC Trade Map Jan Feb Mar Apr May Tourist season (Jun-Sep) Oct Nov Dec The unit value of import is high and points to the importance of brand and consumer confidence in the meat consumption. Small market that prevents full competitiveness in the import and trade and the potential for development of domestic industrial processing.

24 Million tons USD/t USD/t 24 Graph 4 and 41: Unit value of meat products import to Montenegro in relation to regions and CEFTA region countries for perod , 5, 4,5 4, 3,5 3, 4, 3, 2, 2,5 1, 2, Serbia Montenegro CEFTA NMS EU15 World Albania Croatia Serbia B&H Montenegro Macedonia Source: UN Comtrade Source: UN Comtrade Consumption Per capita meat consumption of all meat, but poultry, is stagnating FAO and OECD predict that global per capita consumption of all meat categories, but poultry, will be stable. That is linked to the expected slow economic growth in many countries and changing consumer habits that prefer plant to animal products and white comparing to red meat. Poultry is considered as healthier (in developed countries) and cheaper (in undeveloped and developing countries), so it is continuous growth trend for per capita consumption, is expected. Graph 42: Per capita consumption in Europe (214-24) Graph 43: Meat projection trend per category (214-24) Beef and veal (cwe) Pigmeat (cwe) Poultry meat (rtc) Sheepmeat(cwe) Beef meat Pig meat Poultry meat Sheep meat Source: FAO-OECD Outlook Source: FAO-OECD Outlook Meat consumption in Montenegro is characterised by the pork meat being dominant with over 5 percent share in the total consumption of fresh meat while in CEFTA average is 32 percent share. Cattle and poultry have approximately the same in all countries percent for cattle meat and 17-2 percent for poultry meat. Sheep meat is consumed the least of all types of meat with share of 2-4 percent, exception is Serbia with 5.9 percent share. Montenegro have significant consumption per capita which is additionally boosted with highly developed tourism and visits in summer season (in the last years three times more tourists than Montenegro`s population). In six years, average consumption of fresh meat per capita was 63.8 kg and it had growing trend during the years. Pork meat dominate with 52 percent share, second is poultry with 2 percent, cattle meat 17 percent share and sheep meat 3 percent.

25 25 Graph 44, 45, 46, 47: Consumption of different types of meat kg/per capita for CEFTA countries and region (21-215) Cattle Pork Serbia Croatia Montenegro CEFTA Serbia Croatia Montenegro CEFTA Sheep and goat Poultry Serbia Croatia Montenegro CEFTA Serbia Croatia Montenegro CEFTA Source: UN ComTrade, FAO

26 26 V. Competitiveness of the meat sector The methodology used to undertake the competitiveness analysis the sum / index of 36 analyzed indicators, such as production and trade shares and production and trade trends, production value determining position of each product/group of products. Methodology SHARE and TREND analysis for each product in number of slaughtered animals, production quantity, yield, trade value and quantity, unit value of import, unit value of export ; 3 criteria were used for supply competitiveness analysis and 15 others for demand analysis; Countries, as well as regions, were ranked and scored; Graphs of different ranks, as well as scores, offer an easy tool to spot country s competitiveness for each product considered; Each criteria has a rank based on which it is awarded a score; Data for each product is compared to World data, as well as regional data. Trends are based on the last five years of available data. Advantage of the competitiveness & demand approach is that it is multidimensional since analyses trends and share of wide data range production, value of trade, trade quantity, slaughtered animals, yield, trade price, it compares countries and regions, provides possibility for further research and analysis since all available data are collected and compared. Supply analysis consists of production data (production quantity, slaughtered animals, and yield) and export data (export quantity, export value, unit value of exported goods). Demand side is considering only import data with information corresponding to the export data set. Here we excluded consumption, which technically refers to and is an important indicator for demand, because it would give an imprecise picture regarding potential markets, as production is an important variable in calculating consumption. Countries with high consumption level can be to some extent self-sufficient with large production and therefore having low imports, which doesn t make them potential markets. For the purpose of the Montenegro meat sector competitiveness analysis, 34 countries were divided into 3 regions. Regions are based on current political and geographical connections, and slightly modified based on cultural similarities and consumer habits. CEFTA: Serbia, Montenegro, Croatia, Albania, Bosnia and Hercegovina, Macedonia and Moldova; NMS (New Member States Countries accessed EU after 24): Bulgaria, Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Romania, Slovakia, Slovenia; EU 15: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden, United Kingdom. The meat sector in Montenegro is less competitive than EU and regional players Comparison of demand and supply indicators of the trade and production of all types of meat are showing that Montenegro is among the countries the least competitive among the EU and CEFTA region. Montenegro and Macedonia are both, according to the performance on selected indicators, ranked among last ones for production and trade. As expected the most competitive are EU countries are Germany, Spain, The Netherlands and NMS country Poland.

27 Trade 27 Graph 48: Competitiveness index of selected countries for all types of meat included processed in relation to NMS, CEFTA and EU15 shares and index growth in relation to World average for production and export in period United Kingdom 7 France Italy Ireland Belgium Hungary Romania Greece Austria Serbia Albania Bulgaria Slovenia Lithuania Sweden Czechia Portugal Slovakia Finland Luxembourg Republic of Moldova Croatia Latvia Malta Cyprus Bosnia and Herzegovina Estonia TFYR of Macedonia Montenegro Denmark 4 Spain Germany Netherlands 1 Poland Production CEFTA NMS EU15 Source: UN ComTrade and FAO database According to the methodology results the EU and NMS meat industry are competitive industries on comparison to the ones in CEFTA region, even they are less competitive than other international players in the global market. Its cost and productivity have been the major issues hindering its competitiveness. Competitiveness index ranks Montenegro at the back of the column with the lowest Index for all four meat productions. The production of beef meat is the least competitive among the CEFTA countries but also other meat productions are noncompetitive at regional and EU level. Graph 49, 5, 51: Competitiveness index of EU, NMS and CEFTA countries - meat Beef meat CEFTA NMS EU15

28 28 Poultry CEFTA NMS EU15 Sheep meat CEFTA NMS EU15 Contrary to meat production, the meat-processed products from Montenegro are more competitive at regional and EU level. Montenegro is the most competitive out of the CEFTA countries. The meat products competitiveness is consequence of strategic orientation on adding value to meat products in Montenegro and meat processing industry efforts on improving market position in the region. Graph 52: Competitiveness index of EU, NMS and CEFTA countries - meat products Source: UN ComTrade and FAO database CEFTA NMS EU15

29 Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun 29 VI. Expected global and regional trends Global trends Prices of almost all agricultural products are decreasing, meat as well Food price index have constant growth from January 215. The high quantity of food stocks are the result of the high interest for production after the price rise 27-29, slowing down of the global economy and rise of US dollar. Meat prices are somewhat stabile, comparing to other groups of products, however are generally following the food price recovery trend. Graph 53: FAO food price index Graph 54: FAO food price index by commodity groups Meat Dairy Cereals Vegetables oils Sugar Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: FAO Source: FAO Lately, there is a significant shift in global trade A few important politically strategic events have triggered shift in the established meat trade. Among the most important, for the West Balkans region, is the introduction of economic sanctions to Russia from EU countries, USA, Canada and other countries, including Montenegro. Likewise, the countermeasures were introduced in August 214, with Russia banning the food import from these countries. The ban for imports of meat to Russian market, initially had a few consequences: Reduced meat price in EU market Introduction of interventions (market and financial) from the EU countries Meat price increase on Russian market, drop of consumption and import Small countries, primarily Serbia and Belorussia, which are not competitive in meat production, but have access to the Russian market start to export significant meat quantitates to the Russian market; Increased re-export from Belorussia Exploring new markets for EU producers

30 Thousand tons Thousand tons 3 Graph 55: Import of meat products to Russia, yearly average Germany Spain Denmark France Belarus Italy Hungary Netherlands Belgium Poland Canada 4, 3,5 3, 2,5 2, 1,5 1, Import Unit value Source: UN Comtrade Millions $ $/t Graph 56: Import of meat products to Russia in period September June 215 Millions $ Belarus Chile Switzerland Canada Ukraine Belgium Serbia Hungary United States of America Italy Czech Republic Source: UN Comtrade , 1, 8, 6, 4, 2, Import Unit value $/t Germany has diversified export markets, based on the market analysis These shifts influence Montenegro which is above all, a big meat importer and has access to cheaper meat from EU as raw material for the processing industry, as well as higher prices from Serbia, particularly for pork meat. Gradually there is a reaction to the low prices from EU and high from Serbia, exploring new markets and increase/ decrease of production, which balances system as well as prices to the initial point. Germany doubled its export to Philippines, tripled to Ukraine and is accessingnew markets as Georgia and China. Graph 57: Meat export from Germany 21 Graph 58: Meat export from Germany aug 214 nov Source: UN Comtrade Source: UN Comtrade Large increase of fresh meat and meat products trade in NMS The import of meat and meat products to NMS has increased more than tenfold during the last eight years, and is continuing to grow. The export is rising at a slower pace. The developed countries have high consumption of products of animal origin. Most commonly, the developed agricultural countries focus their production to high-value products, such as meat production and processing. EU 15 countries are more competitive in meat production and meat processing industries than majority of NMS, which as a result of the increased purchasing power have trends of increased imports. New member states have always suffered the pressure of EU15 countries for export of their products. Therefore NMS had to find less competitive markets, such as Ukraine as well as Montenegro. Therefore, in 28 Montenegro imported 5 percent (977 t) of pork from NMS and in 214 it was 3 percent (1,51t).

31 Millions USD 31 In this case the highest growth of import was in countries which managed to develop meat processing industries. Therefore, the largest meat importers were the largest processed meat exporters. Graph 59: Trend of meat products export in EU15 and NMS (2=1) Graph 6: Import trends of meat products EU 15 and NMS (2=1) NMS EU15 NMS EU15 Source: UN Comtrade (no data for 216 for Sloveni, Finland, Netherlands and Austria) Source: UN Comtrade(no data for 216 for Sloveni, Finland, Netherlands and Austria) The rising trend of meat processing are noted in the countries which have the highest consumption, besides its own processing industry. There are several conclusions from the NMS experiences: It is hard to be competitive in meat processing sector to EU 15 countries, particularly to German, Belgium, French, Danish, Dutch, Spanish and Italian producers which have long tradition of production and processing veal and pork The producers from NMS will face string competition at the open market, where one of the good strategies is export orientation to the third markets Price competitive meat processing industry should be based on the cheapest raw material, which is most commonly imported. Graph 61: Total import of meat products to NMS Slovakia Hungary Czech Rep. Poland Romania Lithuania Bulgaria Latvia Malta Estonia Cyprus Slovenia Source: UN Comtrade (no data for Slovenia in 216)

32 Percentage Procenat 32 A global consumption increase is not expected In the next decade, it is expected that the global economic growth will slow down in the countries that were the main engines of growth in the previos decade, such as Latin American countries, the countries that coupled its growth to oil exploitation as well as China. On the other hand, it is expected that developed countries (USA, EU countries and Japan) will have economic recovery and growth. However, increased growth in developed countries does not bring increased food consumption since the share of food in total consumption is small, in spite of the significantly higher calories intake per capita. Graph 62: Average growth of GDP and forecasted in developed economies Source: FAO-OECD Outlook Slowing growth of global economies, shift from consumption of animal to plant proteins, projections of high cereal prices for animal feed as to cereal prices for human consumption, result in expectations that there will not be significant increase of consumption of meat and meat products. Graph 63: Average GDP growth and forecasted in developing countries Source: FAO-OECD Outlook How does this reflect to Montenegro? Firstly, the expectations are that the decreased growth will result in stagnating prices for some meat poducts, and secondly, the demand for high value products in developed countries is on the rise.

33 33 Graph 64: Structure of calorie intake per capita (kcal/day) in underdeveloped, developing and developed countries kcal/day/person Least Developed Countries Other developing countries Developed countries Other Cereals Vegetable oils Meat Sugar Dairy Fish Source: FAO-OECD Outlook, 215 Drop of beef price, rise of poultry price and fluctuations of pork and sheep meat prices Many pork producers in developed countries are decreasing the offer of meat production (due to environmental, social, economic or other reasons) which creates the predictions that there will be a slight growth in the next decade. However, one of the main characteristics of the pork production is its cyclic nature, coupled to stable consumption results in price variations. The expected drop in beef prices is a result of a stagnating consumption, but also of an increased production in areas where cattle is not commonly reared. It is expected that poultry price will rise, mostly because of increased consumption, while sheep meat prices, in spite of short-term variations, will have a longer trend of mild increase. Graph 65: Production meat prices in Europe Beef and veal (cwe) Pigmeat (cwe) Poultry meat (rtc) Sheepmeat(cwe) Fource: FAO-OECD Outlook

34 Millions USD Millions USD Millions USD Millions USD 34 Regional trade trends Croatia has developed a clear strategy to become the main meat processing industry in the region As part of the strategy implementation, Croatian industry is spreading its distribution network in the region.two leading meat processing industries notably Gavrilovic Ltd and PIK Vrbovec would enable Croatia to become a regional leader. Apart from the production, there is a well developed distribution network in the countries of the region, which is grantee for a good distribution and presence in the leading retail chains. Graph 66: Croatian export of meat products in period Graph 67: Croatian import of meat products in period B&H Austria Slovenia United Kingdom Serbia Montenegro Source: UN Comtrade (no data for Austria and Slovenia in 216) Italy Slovenia Germany Austria Spain Hungary B&H Netherlands France Poland 5, Source: UN Comtrade 4, 3, 2, 1, USD/t 2, 4, 6, 8, tons Meat trade between Serbia, Montenegro and Bosnia and Herzegovina is not growing Serbia, Montenegro and Bosnia and Herzegovina are actively trading, however the trade of processed meat is growing more slowly than in the other parts of Europe. When comparing these three countries, Serbia is clearly the largest producer and exporter, but still there has been a drop of import to Montenegro from 29 stagnating until 214. The export of meat from Bosnia and Herzegovina to Montenegro has been slightly growing during the last 7 years. The export from Montenegro to Bosnia and Herzegovina is constant with minor increases, while export from Montenegro to Serbia has been fluctuating during the last years. Graph 68: Import to Montenegro Graph 69: Import to Serbia Graph 7: Import to B&H Bosnia Herzegovina Serbia Bosnia Herzegovina Montenegro Serbia Montenegro Source: UN Comtrade Source: UN Comtrade Source: UN Comtrade

35 Jan Apr Jul Okt Jan Apr Jul Okt Jan Apr Jul Okt Jan Apr Jul Okt Jan Apr Jul Okt Jan Apr Jul Okt Jan Apr Jul Oct Jan Apr $/t 35 There is a high unit value of the processed meat products, due to relatively weak openness to other markets but CEFTA countries Relatively small openness to other markets is the most evident in the case of Montenegro, with the largest price unit value fluctuations. In the case of Serbia and Croatia, there are milder price oscillations, however their range is still quite high so the prices range from 2.5 per ton to even 4. USD per ton. Graph 71: Unit value of import of meat products Jan 21 Apr 217 6, 5, 4, 3, 2, 1, Serbia Croatia Montenegro Source: ITC Trade Map Other marketing channels, apart from supermarkets, are becoming more and more interesting not only in the region but also in Europe The interest in rural tourism links consumers to producers There is an increased consumer demand for more information about the product and its safety and tracebility There is a growing trend of online services that link market to producers Global wholesale have special terms (dates) in the month for retail sale Decreasing standard of the developing countries, result of the economic crisis, increases direct purchase from producers, as these prices do not have any retail margins

36 36 VII. Characteristics and structure of meat value chain Focus on adding value The meat value chain in Montenegro is characterized by two main factors. Firstly, the majority of meat producers is representated by small producers, producing meat for self-consumtion and traditional meat products. Secondly, it has a modern efficient meat processing industry based on import meat and on emerging contract farming for quality meat products. The processing industry is also consisting of smaller but efficient meat processors producing traditional meat products, in particular Njeguska prosciutto, which was a key driver for the meat VC development in the country in the last decade. The most important characteristics of the Montenegrin meat value chain is the focus on processing and finalization by processing and adding value to the imported fresh meat. Profile of value chain operators In Montenegro majority of farms are subsistence small farms up to 2 LSU The majority of agricultural households is producing for self-consumption and have few livestock units. The small farms in the majority of cases are also producing for the market but their resources are limited. Still there is a potential in this group for expansion. Commercial farms are producing for the market and they have intensive production or they are intensifying it. Table 6: Type of the meat producers in Montenegro Type of producers Share Characteristics Subsistence and on the farm producers up to 5 LSU 64% Producing only for own consumption and extended family with up to 5 LSU and a limited production for usually know buyer, extended family and friends or green market. Small farms 5-15 LSU Farm that produce for sale, but are still below the size that is commonly 29% considered to be economically sustainable for a full time farm. These farms are oriented to expansion but often with insufficient income generated by the production. Non-compliance with rules and regulations. Commercial farms over 2 LSU 7% Fully oriented towards market and scaling up, introducing new breeding systems, good practice in livestock production and management Source: Livestock Selection Service LSS, 216 Dependence on imported meat The meat value chain in Montenegro depends on imported meat. The lowest level of self-sufficiency is in pork production with a high dependence on imported raw material. The production of beef and poultry meat is increasing but still relaint on imports while sheep meat production is self-sufficient Table 7: Production and import of meat in Montenegro (29 214) Meat Production (t) Import (t) % self-sufficiency Beef 4, , Sheep 1, Pork meat 2, , Poultry 3,45 5, Source: FAO, UNCTAD The average value of the meat at period was USD 114 million. At this period 4/5 of the meat value came from import and only 21 percent from domestic production.

37 37 Table 8: The value of meat production and import in Montenegro (29-214) Meat Production value ($) Import value ($) Total Beef 11,793,535 12,637,161 24,43,696 Sheep 3,5, ,31 3,493,423 Pork 4,137,2 64,772,363 68,99,564 Poultry 4,943,152 12,323,469 17,266,622 Total 23,924,11 9,176, ,1,37 21% 79% Source: FAO, UNCTAD Dependency on imported inputs Estimating the value of the inputs is very difficult due to the fact that majority of the production is at selfsuffiicient farms. For example, the average value of import of the live animals in period was USD 29 million. The value of imported live animals in 215 was million (6.518,859 kg or 3,85 percent of the value of the total import of agricultural products) related mainly to commercial cattle breeds imported for further fattening and improvement of the domestic breeds. Comparing these values with meat production values does not allow the rational conclusions on input values for the meat production and in the case of cattle production it is hard to separate the milk from meat value chain. Table 9: Production and import of inputs for the livestock production Production (t) Import (t) Import value ($) Maize 7,858 13,97 3,68,112 Soybean ,517 Animal feed 55,931 2,88,871 Vaccines for veterinary medicine ,147 Live animals 29,162,287 Source: FAO The value of consumed meat per year is over USD 15 million The value of the meat consumed in Montenegro is estimated at USD 15 million per year. It is based on the value of monthly average consumption of different meat and meat product categories. On average, for the period , the value of the consumed meat and meat products was of about USD 153 million per year. Table 1: Value of meat consumption in Montenegro (21-214) - monthly average Unit The estimated number of No 621, ,52 627, , ,521 people Fresh and frozen, beef and veal EUR 3,668,956 3,12,169 2,89,921 2,322,963 2,997,25 Fresh and frozen pork EUR 1,451,188 1,565,985 1,383,59 Fresh and frozen poultry EUR 1,137,77 1,62,126 1,91,596 1,76,75 1,3,171 Organ meats, dried, EUR 4,41,74 3,882,856 3,844,398 3,387,93 3,899,257 smoked and salted meat Canned and processed EUR 335,18 361,945 37, ,89 362,411 meat (canned meat) Total monthly value (EUR / 9,84,756 9,878,284 9,7,688 8,55,62 9,958,864 month) Total yearly value EU Year 117,657,72 118,539,48 116,48,256 12,67,44 119,56,368 Source: Monstat Household Budget Survey

38 38 VII.1.1. Beef producers The cattle breeding is oriented more towards dairy than meat production. The total number of agricultural holdings that breed cattle is which is almost 75 percent of all registered agricultural households in the country cattle of various age including young calves to bulls and oxen. Seventy percent out of cattle farms are milk producers. Less than 7 percent of the farms are producing both milk and meat and only less than 2 percent are specialized for beef production. There are only a few formal and contracted arrangements within the beef production VC. The exception are the cooperation farms of FRANCA Company. There are 32 farms for cattle production and they make capacity of around 12 heifers per shift, produced on these farms. Montenegro has ha of pastures, all cultivated. There is a trend of increase of breeds adjusted to milk production. Holstein is gaining its share over Swiss Brown and Simmental breeds, while Busha and Tyrolean Grey breeds are becoming very minor (the share in total population around 2 percent). However, the percentage of the mixed breeds in total population is still significant (over 35 percent). There have been significant efforts to improve the genetic composition by introduction of artificial insemination programs as well as the education and training of producers. Illustration 1: Number of farms engaged in cattle breeding and the number of cattle in Montenegro Number of households breeding cattle (7%) Number of households only milk production Combined milk and meet production 1,6% Specialised for meet production 62 Number of farms that receive a fattening and slaughter premium Source: Monstat, LSS It can be concluded that number of cattle is increasing based on the assumption that the 212 year is a relevant year for the estimation of the number of cattle. This increase is primarily due to the increase in contracting farming and organising the supply chain by Mesopromet FRANCA, and it reflects the readiness of many farmers to invest in herd expansion, also supported by various policy measures Table 11: Number of the cattle in period Units Cattle of which cows of which dairy cows Source: Monstat The average size of herd is small 3-4 cattle per farm. However, on the farms that are within the monitoring system of Livestock Selection Service this number is increasing, and was 4-5 in 215. Main difference between monitored and non-monitored farms are that the monitored farms are selected for the support from LSS experts. Expectations are that monitoring will provide the expertise and encouragement to producers to enlarge the herd, production and to specialise in particular production.

39 39 Table 12: Structure of herd, number of farm owners and number of cattle in Montenegro Number of livestock units From - to Number of owners % owners Total number of units % , , , , , , , , , , ,2 451,46 More than 1 2,8 295,3 Total Source: Monstat One year calves are the dominant category within slaughtered animals. That is explained by better prices that are achieved for the young animals (3.1 EUR for calf, 2.2 for heifers up to 3 kg or up to one year of age live weight), but also with producers orientation towards pasture production system and lack of high quality domestically produced animal feed for cattle fattening. It is estimated that 4 percent of all calves are slaughtered on the farm or traded, while the majority of cattle up to 1 year of age is imported (around 25. from Serbia yearly) to be slaughtered in the approved slaughterhouses. Contract farming is in early development stage, and the largest processing factory Franca, shows the lead and good example. The company has cooperation farms all over North Montenegro and supply 35-4 percent of their animal purchase in such manner. The rest is imported mainly from Serbia when cattle are concerned. They are fattening approximately 322 heads. All of the poultry supply comes from their own farms. Contract farming is a form of vertical integration within agricultural value chains, such that stakeholders have greater control over the production process - the quantity, quality, characteristics and the timing of what is produced. Small farms usually benefit from improved stability, increase of technical knowledge and which can simplify marketing decisions, and improve efficiency. VII.1.2. Sheep meat producers Along with cattle, sheep breeding has the largest scale and economic impact in Montenegrin meat sector. Sheep breeding is important when it comes to the economic security of the agricultural households in the most mountainous and rural parts of Montenegro. It is based on pasture feed and traditional breeds. However, farmers who are more switching towards commercial production are lately interested in improvement of breeds and introduction of more productive breeds such as Ille de France or Vintemberg. There is higher specialization for sheep breeding than in cattle production. There are 6.88 agricultural holdings that keep sheep and goats, and 2 of those who are specialized for this production. The percentage of animals included in direct payment schemes is higher in sheep breeding than in cattle breeding and it is around one quarter of all sheep or in 214. The reason for that is that the average in the number of heads per AHH in sheep breeding is higher than in cattle breeding.

40 4 Table 13: Summarized data on the number of farms engaged in sheep-breeding and the number of sheep in Montenegro Number of agricultural holdings having sheep 6.88 Number of agricultural holdings specialized for sheep breeding 785 Number of agricultural holdings mixed sheep and cattle production 85 Number of sheep according to census Number of sheep according to Monstat Number of agricultural holding receiving payments per head Number of animals at farms receiving payments per head Number of animals receiving payments per head Source Monstat, LSS The lamb production is the only meat production with the full self-sufficiency. Market surpluses (as estimated) are directed through state discounted supply of lamb to the associations of retired persons, considered to be of a lower purchase power. Most of the sheep breeds are varieties of Pramenka, either Sjenicka or Pivska, either mixes, with some of the newly introduced breeds of Virtemberg or similar. There are two production systems in Montenegro - extensive, breeding of autochthonous breeds mostly on pastures, with inadequate feed in winter months and poor animal shelter and semi intensive system with summer pasture feed and winter supplementation of hay with concentrated fodder. Lamb and sheep are sold as fresh meat, for preparing dishes and roasts, however there are many appreciated processed products such as stelja/pastrma, dried sheep ribs, kastrdina and dried sheep ham. Consumer habits are changing, so these products, though of high quality and part of gastronomic identity are now only occasionally consumed and are to be considered as an exclusive part of the many, mostly consumed in the particular occasions. It is difficult to estimate, however only rough guesses indicate about 1 percent of sheep meat processed, while the rest is sold fresh. VII.1.3. Pig meat producers Pork consumption has the largest share of total meat consumption, while the most famous meat product Njeguska pršuta is produced from pork meat, so there is a natural interest for high quality raw material and pig breeding. Commercial pig production is not developed mainly due to the fact that it cannot compete at price and quality level with competitors. There is significant gap in domestic production (self-sufficiency only 11%) that is supplemented by import of live animals (around 2. mostly fattening pigs) as well as pork meat for processing industry. Table 14: Summarized data on the number of farms engaged in pork production and the number of pigs in Montenegro Number of agricultural holdings having pigs Number of agricultural holdings specialized for pig 3399 Number of agricultural holdings specialized for pig breeding 119 Number of agricultural holdings specialized for pig fattening 325 Number of agricultural holdings specialized for pig breeding and fattening 75 Number of pigs according to census Number of pigs according to Monstat Source: Monstat, LSS Fattening of pigs is largely done on family households for own consumption. The pig identification system has been initiated in 215, and the recent statistics count about 2. pigs, of which the majority is slaughtered as piglets and young pigs (approximately half until 5kg) and one quarter of animals for fattening over 1 kg and more.

41 41 VII.1.4. Poultry meat producers Poultry meat processing is carried out in three approved establishments, some of which integrated broiler breeding, slaughtering and processing. Table 15: Summarized data on poultry in Montenegro Number of poultry (Monstat) Yield poultry (Monstat) Poultry production tons (FAO) Slaughtering (Eurostat),51,63 Import of poultry meat tons Source: Monstat, FAO, Eurostat Poultry production in Montenegro is characterised by dual production: small self-sufficient producers at backyard and industrial farms. All trends are very much influenced by regional production, prices and trade. Knowing that poultry production in the region is increasing will be difficult for Montenegrin producers. Montenegrin production have stable trend and average production 3,4 t/year, similar trend has Serbia with production of 9,1 t/year and Albania with 17, t/year. Bosnia and Hercegovina have growing trend of 15%, production of 44,3 t/year, Croatian production is increased for 4% 214 compared with 21 average production 26,9 t/year, while Macedonian production decreasing with almost halved production 215 related to 21, annually production 2,1 t. Illustration 2: Number of farms engaged in poultry production in Montenegro Number of family households producing poultry 185 Number of specialised farms for poultry production 33.7% of the total livestock are with legal entities (9 of them) 138 Number of farms specialised for egg production 11 Number of broilers production farms 9 Number of legal entities poultry producers 96.2% of agricultural households having 1 to 5 animals and 3.16% has 51 to VII.1.5. Horizontal integration of producers Horizontal integration is represented with the cooperation of farmers/producers within the farmer associations, production groups and similar organizations of the processing industry. These organizations are not business associations, but mostly represent their members in the stakeholder dialogues and relations with institutions and the government. A few more prominent are: The North Montenegro Union of cattle breeders which gathers 17 associations in all municipalities of North Montenegro (with the exception of Plav). Most of the associations were formed under the FAO project Development Assistance to Farmers in Remote Areas of Kosovo and Montenegro. Association of the producers of Njeguška specialities with producers from Njeguška Business club of Cetinje with meat processing industry from Cetinje There is a growing understanding of importance and prospects of such organisation, the advantages related to governance of quality issues, better efficiency and possibilities for advocacy, however, the organisations are very underdeveloped and in initial development stages.

42 42 There is particularly strong value chain integration towards organised retail. Several meat processing companies have their own network of retail stores and wholesale distribution centres. Some of the most important Montenegrin meat producers understood that the key for gaining competitiveness on the local meat market is intense vertical integration from farms (own and cooperative), meat processing, distribution and trade. Some of the largest ones are Franca, Martinovic, Gradina and Lakovic meat industries. Base of the meat value chain Montenegro is meat processing industry Montenegro has a young and dynamic industry, meat processing, which achieves great results and is a main driver of growth in meat production and one of the best-developed processing industry in Montenegro. Processing is concentrated in a few companies and their development is reflected in the large scale production which is exported to a large extent, high productivity, high quality products, modern production processes, but also a large number of workers engaged or directly or as intermediaries (cooperants). The dynamic development is a result of investment in new technologies slaughtering and meat processing and construction of modern buildings. The duality within the meat processing industry indicates on one side modern, technically up to date establishments that are increasing production and working in compliance with international standards, increasing exports, while on the other side there is strong fragmentation of the small players, usually present only on limited local markets and channels. Processing industry in Montenegro is investing a lot in development of own strong brands and strengthening of regional presence, particularly in the neighbouring countries. Companies and brands such as Goranovic, Franca, Martex have very diversified range of products, from fresh meat to different kinds of processed meat products: smoked, cooked, canned, fermented, pates etc. The main competitors on the domestic markets are brands from Serbia, that have long tradition from the shared market of the common state, or intensive marketing campaigns in the last years: Carnex, Zlatiborac, Neoplanta but also PIK Vrbovec who enters the market through own supermarket chains such as Idea and Merkator. Table 16: The resources of the meat processing industry COMPANY Slaughter Cutting Processing Wholesale and Retail capacity in tons/8 hours distribution MI Goranovic Franca/ Mesopromet Whole MNE Gradina Retail in Rozaje, Berane, Podgorica and Bar MI Point Martinovic Retail shops Cetinje and Budva, Podgorica HD Lakovic Whole MNE Source: MARD Updating sector studies for the purpose of drafting the Strategy for Agriculture Development FRANCA MESO-PROMET, BIJELO POLJE The largest meat processing companies when it comes to production volume, range of products and services is '' MESO- PROMET'' DOO. The company employs 1,2 people and about 1, agricultural holdings, and in the north of Montenegro is one of the main actors in rural development. Cattle fattening farm company has a capacity for 2, cattle in one round and to 5 in their own farms and the rest within so called satellite farms. The company provides large technical assistance and inputs. The company currently is

43 43 working with the 32 family farms is expected to increase the number cooperating (contract production) farmers in the future. Meso-promet is the largest producer of chicken in Montenegro. The capacity of farms to produce poultry meat is increasing from 12, to 17, and the goal is 2, broilers. In addition to its own production, the company has five contract production farms for the production of chicken meat and three subcontractor who have a farm egg-laying hens. The company redeemed 25, to 3, lambs and sheep per year. Products 2 to 3 different meat products. The main products are beef ham, sausages, salami, pancetta, pork sirloin different and canned meat products like beef cuts, beef stew and chicken pate. Meso-promet sells its products through its own 4 retail stores in all super and iper markets in Montenegro. It is estimated that through hotels the company sells about 2% of the product. Mesopromet is present on the markets of Kosovo, Bosnia and Herzegovina, Macedonia and Serbia. In these countries have their representatives or local companies as representatives of the Franca. In most cases, the products are sold under its own brand. The company holds all relevant quality standards ISO 22, HACCP HALAL standard for the slaughter of cattle and sheep. INDUSTRIJA MESA GORANOVIC, NIKSIC Meat industry Goranovic is family business operating for 3 years. The production capacity of the company Goranović is 17, tons per year. Slaughter capacity utilization is at a level of 15% compared to the possibilities. It has three lines of slaughter - cattle, sheep and pigs. The daily production capacity of 4 t meat products and meat. Company is dedicated to quality production and has all relevant quality standards. ISO 91, ISO 22, HACCP MARTEX CETINJE Martex doo is one of the largest private producer of meat products in Montenegro, produces 2. Njeguška pršuta and other meat products. In 1996 started a production in their own object Sušara in Bajice, located near Cetinje. 74 employees. The company has 5 retail stores, 4 of which are located in Cetinje and 1 in Budva.] Slaughtering practices in Montenegro include a lot of on the farm slaughter. According to Veterinary database, in meat establishments were registered. Out of them 26 are slaughterhouses, 79 establishments were registered for meat processing and 15 for cutting. Montenegro has adopted food hygiene regulations in line with the relevant EU regulations. In acordance to the national Law on Food Safety, the Regulation on conditions for derogation in respect to the construction, layout and equipment of facilities with a small volume of production, processing and treatment of food ("Official Gazette of Montenegro", No. 21/216) was adopted. Granted derogations in this Regulation cover the adaptations of food hygiene requirements on the construction, layout and equipment which could be applied to small volume establishments and use of traditional methods of production and the derogations that could be applied in production of food with traditional characteristics (infrastructure, equipment). The slaughter of animals is following the local demand (in the case of pig December when majority of holidays are or processing the meat) or following the policy measure case of sheep in October when the sheep are slaughtered for delivery to customers which traditionaly prepare meat stocks for the winter.

44 44 Graph 72: Slaughtered animals per month 12, 1, 8, 6, 4, 2, Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May , 9, 8, 7, 6, 5, 4, 3, 2, 1, Bovine Swine Sheep Poultry Source: Monstat Numerous family companies build their integrated businesses around providing supply to their restaurant and hotel businesses and butchery shops, starting gradually with investment in slaughter, supply from own farms and processing. Most of them are still in process of expansion, of with small scale production with slaughter, processing to a restaurant and butchery shop. Sheep breeders are marketing their products in a special time of the year (usually autumn) which results in creation of the artificial surplus of lamb meat on the market. Under such circumstances and time limitation the market cannot, tough the existing distribution channels, absorb the offered amounts. To overcome this situation, it is necessary to stimulate the producers to sell the lambs in the period of spring- summer, when the lambs weight no more than 3 kg LW. This product has a better price and it opens the export possibilities as well. In addition, possible outlet for the sheep production could be technological and marketing investments in creating demand for sheep meat products that are quite unique specialties. The fact that consumer survey shows that stelja, kastrdina, sheep pršuta or sheep dry koshet, ribs, ham etc. are less consumed could reflect the changes of consumer habits, but also lack of access to such products which in time leads to their departure from the daily menus. Lamb roast remains the most consumed dish, with larger potential within the tourist gastronomic offer. Montenegro has already set up a system for the identification and registration of cattle (27), sheep and goats (211) and pigs (215) along with an electronic database which is in accordance with EC Regulation No. 176/2. Montenegro will, during the period , adopt a rulebook with detailed rules for the application of classification and for the grading of carcasses of cattle, pigs and sheep and for the reporting of prices; the implementation of the rulebook will begin on the day of Montenegro s accession to the EU. Trained qualified technicians who are licensed for the classification of carcasses will be responsible for forwarding information to the Paying Agency. Although the identification of cattle is in accordance with the EU legislation, the national system of beef product labelling has not been harmonized with EU requirements. By 218, the rulebooks that govern the labelling of beef and beef products will be harmonized with the EU acquis.

45 45 Traditional products In Montenegro, there is a long tradition of consumption of typical products that are directly offered to consumers at the farm, at green markets, through small specialized shops, etc. and there is a large number of traditional food products. These products have great potential to increase the quantities produced and be placed on the market through tourism or export. All agricultural and food products and traditional specialties in Montenegro have not been precisely identified yet which ones have the potential to be subjected to protection with some of the quality labels. Also, possibility of restoring the production of some forgotten food product specialties should not be ignored. Traditional agricultural and food products may be protected by the competent institutions through the quality labeling procedures, with three types of quality logos: Designation of origin, Protected geographical indication or Traditional speciality guaranteed. Under the FAO/EBRD project, an Inventory of the traditional products in Montenegro was produced which has shown the strong gastronomic tradition linked to the high percentage of food production by agricultural households. Most of small holders still produce their own food, transforming milk in cheese, butter, kajmak and other dairy products; and processing meat of different animals in hams, salami as well as other specialties or fruit and vegetables in pickles and sweet preserve for the winter time. There are more than 2 traditional meat products identified by the Inventory that are produced both home made and in semi industrial and industrial conditions. The most renowned product is Njeguska pršuta, pork dried meat with a well-established regional reputation. There has been large increase in the production volume in the last years, and Njeguska pršuta has lately been protected as PGI, while Crnogorska beef pršuta and Crnogorska stelja are in process of application for the PDO protection. Traditionally, various products aim at the valorization of the whole animal. For this reason, several traditional products have the same geographical area of production. Processors of goveđa pršuta, produce dry beef ribs as well as sudzuk (beef fermented sausage with the remaining meat). Similarly, producers of dry sheep or goat ribs produce košet of both small ruminants, and producers in Njeguši and Cetinje produce beside of Njeguški Pršuta produce, the Njeguška Kobasica (Njeguška Sausage) and the Njeguška Pečenica (Njeguši loin). However, many of these products are too generic in the wider region, and could be found in the wider area of Sandzak or Balkans (Bosnia and Hercegovina, Serbia and Kosovo) and are common in the neighboring countries as well. The range of meat products is rather small there are three to four types of products

46 46 1. Fresh meat Beef fresh meat and fresh lamb from Northern Montenegro. The meat quality results from husbandry techniques and particularly the mountain pastures. These products have strong link to the territory, and premium quality is certainly achieved because of free grazing habit and used feed, but its quality properties still have to be confirmed and controlled. 2. Dried meat products beef dried meat (beef pršuta or pecenica (sirloin), dry beef ribs), dried sheep meet such as stelja and kastradina, and pork pršuta (Njeguška pršuta) 3. Fermented sausages beef or sheep sausages, such as sudzuk, beef sausages or Njeguska sausage 4. Smoked fresh products, such as smoked sausages All groups of the processed products are very attractive for domestic consumption and for the tourists, and are way to valorize the best cuts of meat, and to use the lower categories of meat that remain for long lasting products. However, the consumer survey has shown that the majority of respondents never consume so called traditional Montenegrin dishes such as stelja/pastrma, zatop and kastradina (7.6 percent stelja/pastrma, 68.3 percent zatop and 64.8 percent kastradina), which indicate the changes in their consumption habits in comparison with the past times. The traditional products are part of the production range also for the largest meat processing companies. There is also a strong commitment to preserving the traditional features of these products within the industrial technology. The whole Cetinje meat processing industry based its development around the pork pršuta and traditional meat products, with companies now mostly present on the regional market. It is similar with the biggest meat processors Franca and Goranovic who are having their premium segment of traditional products. Franca is currently investing in the new facilities, capacities 4t, for maturation of pršuta, to be produced without smoking technology, which is an alternation to the traditional production, and though it will be different from Njeguska pršuta, will be inhabiting the same product niche. That is one of the factors for quick reaction to the need for protection of geographic designation of origin that goes parallel to codification of the production steps and quality aspects. There is strong need for identification of the quality aspects and differentiation from the similar products at the market. Therefore, the investigation of the sensory properties, specificities of production process and reputation with consumers might bring the consumer recognition of specific quality and developing capacity to value and distinguish produts. Meat distribution channels in Montenegro Short channels with limited access to premium (HoReCa) and mass markets (supermarkets) The main selling channels for meat and meat products in Montenegro are supermarket chains, restaurants and hotels; however, there is a strong consumer preference for a direct purchase from producers, cherishing the traditional aspiration for quality domestic products. Channels of livestock and meat distribution in Montenegro include:

47 47 Direct sale from the farmer. There are still marketing links through family ties to holdings involved in livestock production in the North of Montenegro who firstly produce for extended family and known buyers, and than for the market. Consumers from southern municipalities buy fresh meat and meat preparations at supermarkets/mega markets to significantly greater extent than consumers from central and northern region do. Though not researched in the consumer survey, the share of consumers buying directly from farmers would be much higher for sheep and beef, which were not considered as a separate category. There are 18 livestock markets registered at the territory of Montenegro, which operating falls within the competences of municipalities. Only livestock markets in Podgorica, Bijelo Polje and Berane are functioning. Butcher shops linked with some farms. There are butchers or meat retailers, including supermarkets who have their meat sections or they have business cooperation with slaughtering industry. There is more purchase in the specialized butcher shops and particularly from farmers, for special occasions, when it is presumed that quality aspects become important. There is a small share of direct sale of processed meat, which indicates strong need for further development of farmer access to retail, currently hindered by relatively small number of registered processing establishments. On the other hand, many of the butcher shops do have their (unregistered) production or sale of farmers products that in the future, with the establishment of the flexibility rules, would become more integrated in the controlled and legal VC flow. Supermarkets and hypermarkets. Consumer trends in meat purchase have shown that the supermarketisation, though still ongoing in Montenegro, has already profoundly altered the purchasing habits. The data show that almost half of the respondents are purchasing fresh meat for daily consumption in supermarkets, while an overwhelmingly high share of respondents (7%) buy processed meat in supermarkets and similar stores. The direct sale from the farmers allocate to a surprisingly 3.6% for fresh and even less for the processed meat, which does not correspond to the expectations of still functional and alive family and origin links of many families who in such manner have access to good quality and usually cheaper meat. Butcher shop is the second most common point of purchase for fresh meat and way behind supermarkets for meat products. Graph 73: Place of purchase fresh meat (%) Graph 74: Place of purchase meat preparations (%) In supermarkets/ mega markets In supermarkets/ mega markets At butcher s store My own production In specialized stores (fresh meat +meat preparations) From agricultural producers In little stores/groceries At butcher s store In specialized stores My own production In little stores/groceries From agricultural producers Regular consumption Special occasions Regular consumption Special occasions There are no official data on the structure of the meat retail market The top retailers in Montenegro however include the supermarket chain Voli, which has the largest share of the retail market in the country (more than a quarter); Maxi (part of Delhaize group), Roda (part of Merkator), Merkator (stores name Mercator-MEX), Martinovic, HD Lakovic, Konzum CG and CBA,.There is aslo an announced expansion of Billa, Interspar, Kaufland and LIDL that will additionally diversify the offer with new brands with regional distribution. HoReCa (hotels, restaurants, catering) channel, primarily reflects the economic activity generated by industries such as hotels, travel agents, airlines and other passenger transportation services (excluding commuter services), restaurants leisure industries. Visitor exports generated 54.3% of total exports in 214 and it includes