In early 2014, Dmytro Ignatov, a co-owner of Cube44 – a workshop of designer furniture, did not even suspect how radically his life would change in the near future. Dmytro had lived with his family in Donetsk and was engaged for more than 10 years in the advertising business.

“Our main clients were large Ukrainian and international companies. After the armed conflict began, most of the projects were suspended. Nobody understood what would happen next and how to do business under new conditions”, – Dmytro recalls. It was clear that large-scale marketing campaigns were out of the question. International companies began to roll out their business in the Donbass.

When the situation began to heat up, Dmytro decided to move with his family to Kyiv. “We had friends here who promised to help with housing, among other things. We took the most necessary stuff, left our apartment in Donetsk and went to the capital. At that time, you could still safely leave Donetsk “, – says Dmytro.

Garage project

After moving, Dmytro tried to continue his career in advertising business and contacted his colleagues from the head office. However, the projects they offered were not very attractive, there was not much to do, and he had to make a living somehow.

“I always liked doing something with my own hands for my parents and friends”, – Dmytro says. The furniture business literally began in a garage where he made simple furniture and decor items.

“I was looking for interesting and not very complicated ideas on the Internet and then implemented them in my own way. As a rule, those were wooden things – sofas or shelves. Since there was not enough money, the purchase of good quality materials or development of complex projects was not discussed. The business model was very simple: get an order, buy wood in the market, make a simple sofa. I would post successful examples in social networks, through which new orders started to come”.

“After several successful orders, it became clear that furniture is not only a hobby. This is a business that can bring in money “, – Dmytro shares.

Among other things, Dmytro associates his initial success with the lack of simple and interesting minimalistic solutions in Kyiv’s furniture market. There was a lot of so-called “classics” in the market, but finding a simple table in the “loft” style was difficult.

The number of orders grew and Dmytro could no longer cope with them by himself. At the end of 2014, his friend joined the business and the first two employees were hired. The future furniture workshop also received the first permanent orders – the young men made furniture, showcases and stands for the shops in the Kyiv Darynok Shopping Center.

However, the partnership did not survive and Dmytro decided to continue business alone. This time, he took a more serious approach: to develop his own workshop under his own brand. Friends from the advertising business helped to design a logo, a font and a corporate style.

“The name of the company appeared spontaneously. Since the first furniture was made of wood, the first thought was to associate the name with the English word “wood”. Then I thought: business can grow, furniture will not only be made from wood and the name could not be changed afterwards. Furniture is usually square-cut so why not use the word “cube”? Quads always brought me good luck and if you turn 4 upside-down it looks like a chair. This is how Cube44 was born, – Dmytro says.

A new start

Business continued to grow and Dmytro realized that there was no progress without a good team. He started looking for personnel – specialists in metal and wood processing. Thus, the team grew up to 7 people. The number of orders grew as well, so the workshop moved to the rented premises, and a website was developed.

“I already had experience in managing people, a vision of a business development strategy, and the arrangement of a workshop”, – Dmytro recalls.

Further development of business was influenced by Dmytro’s meeting with a famous Ukrainian designer – Pavlo Vetrov. “I realized the need to develop, and, therefore, attended various design presentations. At one of them, I saw the furniture designed by Pavlo. I liked it. I decided to come up and offer cooperation. Surprisingly, Vetrov immediately agreed to develop a few models for us”, – says Dmytro. – After a couple of weeks, the designer sent us the first sketches that later became the basis of the first joint collection called Horizon. By the way, furniture from that collection is still in great demand both in Ukraine and in the western markets.

Collaboration with a well-known designer helped Dmytro to establish contacts with a number of furniture salons, as well as professional websites specializing in the sale of designer furniture.

The increase in the number of orders made Dmytro seriously think about further expansion, but that required funds, which the entrepreneur did not have. Dmytro did not want to ask friends or relatives so he decided to find a partner, which, fortunately, he did successfully. The new partner became a co-owner of the business, but operational management completely remains Dmytro’s responsibility.

Thanks to the partner’s investments, there was a significant expansion of business in 2015. The company bought its  own premises, purchased new machines, invited new specialists invited,  and even got its own minibus. The products also became more diverse – upholstered furniture was included into Cube44 production line.

Dmytro does not specify the size of investments. However, he estimates that capital investments are required for more or less large-scale production at the level of $200,000 – 300,000. “My experience suggests that availability of large capital is not a prerequisite for start-ups. My initial investment was UAH 2,000 to buy a screwdriving machine”, – Dmytro recalls with a smile.

In the face of shortage of working capital, Dmytro advises start-up entrepreneurs not to try doing everything by themselves but work with contractors. “We used to contract welding and sewing pillows for furniture out to our partners. Now we do it on our own. However, we still outsource such stages as dyeing or laser cutting”, – the entrepreneur says.

Focus on design

Three years is still insufficient to pay off all investments, but the company has already broken even. “At the moment, we are a fully financially independent company that focuses on design solutions. We have already moved away from the Loft concept and position ourselves as a workshop for designer furniture”, – Cube44 co-owner says.

The company has also “outgrown” custom-made furniture and develops its own collections in cooperation with Pavlo Vetrov. Exceptions are made for large corporate clients who order more than ten items at a time. “At the moment, we have six different collections and produce more than 100 items. We work in different price categories: there are both more expensive and more affordable collections. Most recently, we have developed the Easy collection, in which natural veneer was replaced with chipboard, which allowed reducing the price significantly”, Dymtro notes.

Materials used for the furniture are mainly of Ukrainian produce. Exceptions are fabrics imported from Turkey. Sales channels include their own website, online and offline partners. The company does not have its own stores. According to Dmytro, the price of furniture will be the same, regardless of the channel through which buyers purchase Cube44 products. “We have recommended prices, of which a percentage is received by the partner. The percentage varies depending on sales volumes and specifics of cooperation with the partner”, Dmytro explains.

Despite the fact that Cube44 products can be found not only in Kyiv but also in Odessa, Kharkiv and Lviv, major sales occur in the capital (more than 80%). The main buyers are young people aged 22 to 40, with the average (or slightly above average) income who prefer minimalism, practical and convenient solutions.

Entry into Canadian market

The company started seriously discussing exports in the summer of 2017 when it hired an export specialist and began to place products on international marketplaces, such as Etsy.

At the same time, Cube44 learned about the opportunities offered by the Canada-Ukraine Trade and Investment Support Project (CUTIS) to small-scale furniture manufacturers. The project selected Ukrainian companies to be presented at the Toronto Furniture Show in May 2018.

“We prepared all the necessary papers, passed several phases of interviews, our company was visited by a Canadian expert, Jacques Nadeau”, – Dmytro says.

According to Dmytro, this was an extraordinary experience for the company because Cube44 products had never been presented at international exhibitions abroad before. A significant role was played by the fact that the project provided financing of furniture delivery to Canada and covered the cost of the exhibition stand.

Ukrainian products have undoubtedly impressed Canadian buyers, because all items exhibited on the stand were sold on the first day of the exhibition. There were also many useful contacts established, which the company representatives continued to pursue after returning to Ukraine.

“The main thing is that we understood that our products are of interest to the Canadian consumers and competitive on the Canadian market,” – Dmytro says.

They did not manage to continue cooperation with the partner who had bought the furniture from the stand. Active cooperation, however, began with another company that became Cube44’s exclusive representative on the Canadian market.

The website was adapted and marketing materials were developed specifically for the Canadian partner. Already, in September 2018, Cube44 sent the first container to Canada. At the time of shipment, about 20% of the furniture has already been sold.

Further sales will make it possible to understand what products are most demanded in the Canadian market. “Based on this analysis, we will assemble a new container, hopefully more than one”, – Dmytro notes.

The Canadian partner is based in Toronto and plans to develop both online and offline channels for selling Ukrainian products. Creating a separate offline store specializing in Ukrainian furniture is being considered.

The price factor is also important. Even taking into account logistics, expensive rental of warehouses in Canada, partners interest, etc., Ukrainian furniture is competitive pricewise on the Canadian market. “A lot of furniture from China was presented at the exhibition. There were European manufacturers and several Canadian companies. Our quality is in no way inferior. Moreover, in many aspects we were even better”, – Ignatov says. According to him, retail prices for furniture in Canada are several-fold higher compared with prices in the Ukrainian market. Of course, there is top-quality designer furniture in the Canadian market but its price is significantly higher than the cost of Ukrainian designer products.

“Ukrainian furniture is very well received by Canadian consumers. The Free Trade Agreement canceled import duties and simplified shipment of products to Canada. We had no problem with the registration of cargo. I think Ukrainian companies should take a more serious look at this market”, – Dmytro says.

Collaboration with the CUTIS Project became a kind of a trigger that launched further negotiations with international partners. “After participating in the trade show, we started meeting with interested companies from France, Germany and Poland. Moreover, those companies themselves contacted us. We are currently conducting active negotiations with them”, continues Dmytro. Customers from Poland and France have already made their first orders.

Development of export operations poses new challenges for the company. “Foreign partners who visited our company like what and how we do, but they want to be sure that we will be able to complete the order on time and to the full extent. Therefore, we are considering further expansion of production and negotiating with potential investors”, – summarizes Dmytro.

Update of CUCC-CUTIS activities in 2018

Canada’s leading Ukrainian-Canadian newspaper, The New Pathway Ukrainian News, published a feature article about CUTIS Project – an initiative of CUCC funded by Global Affairs Canada.

Please find the whole text below.

Update of CUTIS activities in 2018

The Canada-Ukraine Trade and Investment Support (CUTIS) Project is a five-year development assistance project undertaken with the financial support of the Government of Canada (GoC) provided through Global Affairs Canada (GAC), from February 9, 2016 to February 1, 2021.

The CUTIS project aims to increase sustainable economic growth in Ukraine through the expansion of Ukrainian exports to Canada and the encouragement of Canadian investment in Ukraine. In order to increase trade and investment between Canada and Ukraine, the project focuses on supporting Ukrainian small and medium-sized enterprises (SMEs), including SMEs owned or operated by women.

The Canada-Ukraine Chamber of Commerce in coalition with the Conference Board of Canada are partners on the CUTIS project and have been involved since its inception.

To date, CUTIS has partnered with the Ministry of Economic Development and Trade of Ukraine, the Export Promotion Office and UkraineInvest, and works with a wide range of stakeholders, including Ukrainian SMEs in priority industries, government, business associations, other donor-funded development initiatives and think tanks.

CUTIS improved trade information flow by developing a step-by-step guide on how to export from Ukraine to Canada and sharing that critical information with Ukrainian exporters through focus groups, seminars and webinars. The Ukrainian language “I CAN Export Guide” is available on CUTIS website: cutisproject.org. CUTIS project has been promoting the guide on CUTIS’ website, Facebook page, Twitter account, LinkedIn page and YouTube channel.

Trade and Economic Relations between Ukraine and Canada

For the first time since 2014, Ukraine managed to overcome the negative trends in bilateral trade cooperation. The State Statistics Committee of Ukraine data showed that in 2017, bilateral trade between Ukraine and Canada had increased, and the progress was due in part to the Canada-Ukraine Free Trade Agreement, which came into force on August 1, 2017.

According to the State Statistics Committee of Ukraine the total trade turnover between Ukraine and Canada amounted to USD $477.7 million in 2017, export being USD $141.5 million, import – USD $336.2 million. The 2017 data revealed the volume of bilateral trade in services between Ukraine and Canada amounted to USD $128.1 million, the exports of services from Ukraine to Canada being of USD $91.1 million (increased by 18%), and imports of services from Canada to Ukraine of USD $37 million (decreased by 7.5%). The IT sector services dominated export of services from Ukraine to Canada, representing 60.9% of the total. Additionally, as of December 31, 2017, Canadian investments into the Ukrainian economy amounted to USD $49.6 million (as of January 1, 2017 – USD $41.1 million).

Recent Investments by Canadian Companies

In October 2018, French insurer AXA agreed to sell its entire insurance business in Ukraine to Canadian financial services company Fairfax. The Ukrainian insurance business has more than 780 employees, 1,220 agents throughout the country and written premiums of approximately $43 million. In 2015, Fairfax acquired QBE Ukraine another insurance operation, which was later re-branded as Colonnade Ukraine. The purchase price was not disclosed.

In September 2018, Canadian Solar developer TIU Canada broken ground on a new 20.2-hectare solar power system plant boasting a capacity of 13.5 MW in Mykolaiv region, near the village of Kalynivka. In June 2016, TIU had announced a plan to invest USD 111 million in the construction of five solar plants with 90 MW in total capacity. In addition to Kalynivka array, TIU intends to commission two other plants in Mykolaiv and another in the neighbouring region of Kherson. TIU Canada is owned by Refraction Asset Management, based in Calgary, Alberta.

In July 2018, Brookfield Asset Management in conjunction with a group of Lviv based international IT companies have announced their support of the Lviv Innovation District IT Park. The USD 160 million, 10-hectare IT park will include: office buildings, campuses and labs, kindergartens, shopping malls, the Ukrainian Catholic University and other customary facilities. The project will provide office space for nearly 30 IT companies, 14,000 employees and create new jobs.

Trade Shows

CUTIS in conjunction with the Ukrainian government identified five priority trade sectors: Information and Communications Technology, Chocolate and Sugar Confectionery, Apparel, Footwear and Furniture. Based on in-depth market intelligence studies the chosen commodity sectors have the highest probability of successfully exporting to Canada.

In May of 2018, CUTIS launched the brand, Made In Ukraine at SIAL Montreal, the world’s leading international food exhibition network. CUTIS project’s Made In Ukraine row of specialty boutique shops highlighted seven Ukrainian sugar confectionary and chocolate producers to an audience of more than 18,500 buyers, distributers and retailers from Canada, the United States and internationally. The trade show had over 1,000 exhibitors. CUTIS project’s industry experienced consultant contacted, analyzed and interviewed over 41 companies and found that 13 eligible participants, of which seven were chose and exhibited at the Montreal trade show.

CUTIS’s Made In Ukraine – MEBLICA, at the Canadian Furniture Show featured two open-concept living spaces designed by Sergey Makhno Architects and was furnished by 10 unique and superior quality Ukrainian manufacturers. Made In Ukraine’s high caliber showcase of furnishings won the attention of the 4 industry professional judges and garnered the Best New Exhibitor, 2018 Canadian Furniture Show, and the KULIK System chair was selected by showcase designer and featured in the TRENDS Showcase. The CUTIS project initially had 58 furniture company applicants, 37 were trade eligible and 10 companies participated at the furniture show. The Canadian Furniture Show is the largest furniture trade show in Canada and had over 200 exhibitors and more than 7,000 trade industry visitors.

In August, eight Ukrainian clothing manufacturers launched at the Apparel Textile Sourcing Canada show, featuring lifestyle fashionable urban wear, sportswear and loads of casual comfortable pieces. Simultaneously, eight Ukrainian footwear manufacturers participated at the Toronto Shoe Show and plied their wares from the boutique shops on Ukrainian Avenue. Made In Ukraine introduced stylish shoe brands, quality urban fashions combined with cutting-edge European technology. These perfect venues introduced and opened the door for new business opportunities connecting Ukrainian manufacturers and producers with independent and major retail buyers at business to business (B2B) meetings.

The CUTIS team met with and analysed over 30 apparel companies, determined 15 eligible participants of which eight manufacturers joined the Apparel Textile Sourcing Canada show. The trade show had over 600 exhibitors and more than 5,000 attendees. The footwear industry consultant and CUTIS team met and interviewed 15 shoe producers and selected eight for the Toronto Shoe Show. The show had over 20,000 visitors and more than over 500 exhibitors.

Made In Ukraine, had the trade shows fully covered and offered a winning combination. Top quality, state of the art technology complemented by Ukrainian skilled craftsmanship and competitive pricing backed by the Canada-Ukraine Free Trade Agreement (CUFTA), placing Made In Ukraine in a unique category. The CUFTA entered into force on August 1, 2017 immediately eliminates tariffs on 99% of current imports from Ukraine and contains commitments related to trade facilitation designed to reduce red tape at the border.

Investment Activity

CUTIS project is right on track, looking ahead and planning for the future. October was all about business and finance, and opportunities for decision makers to interact from both sides of the commercial and geopolitical coin. CUTIS celebrated the first anniversary of the Canada-Ukraine Free Trade Agreement (CUFTA) at the Design Exchange and kicked off the first ever Investment Roadshow. The key note speaker at the evening soiree was Stepan Kubiv, First Vice Prime Minister of Ukraine and Minister of Economic Development and Trade, and the special guests included Canadian government representatives, as well as 17 Ukrainian deputy ministers, members of parliament and embassy staff.

The two-day Investment Roadshow was held at The Albany Club where 21 pre-selected Ukrainian companies and C-level management presented to high net worth and institutional Canadian investors lucrative projects in four major sectors: Infrastructure, Natural Resources, Agriculture, and Information & Communications Technology for an estimated total value of USD 1.5 billion dollars. Over 200 prospective Canadian investors attended the opening reception and the two-day Investment Roadshow.

The following week, CUTIS hosted an Executive Roundtable with Dmytro Sologub, Deputy Governor, National Bank of Ukraine and 15 Canadian executives from commercial and investment banks, and insurance and investment companies. Along with a lively round-table discussion, Dmytro Sologub’s presentation provided a better understanding of the National Bank of Ukraine’s interest-rate and economic strategies for the next two years.

In early fall it was back to school and time for Training of Trainers. For a two-week period, fifteen Ukrainian Regional Chambers of Commerce representatives and business schools were trained in Ukraine, Ottawa and Toronto, and put through their paces on how to disseminate information to Ukrainian SME’s (small or medium-sized enterprises) about how to export to Canada.

Future Plans

CUTIS project is planning a second round of trade shows with the Ukrainian footwear manufacturers in February 2019 and chocolate and confectionary producers in May 2019. In addition, over 15 ICT companies will be arriving in Toronto in March 2019 to hold B2B meetings with developers, distributors and potential partners for their products and services.

The Honourable Chrystia Freeland, Minister of Foreign Affairs, agreed to host the Ukraine Reform Conference, Summer 2019. The 2019 conference will bring together foreign ministers from the European Union, the G7 and NATO countries to support Ukraine in ongoing democratic and economic reforms. Canada is firmly committed to working with the international community to support Ukraine and work toward a secure, sovereign and prosperous future for the people of Ukraine. At last year’s conference, hosted by Denmark, discussions were held about recent key reform developments, such as the passing of the Higher Anti-Corruption Court law. CUTIS is expecting to participate, and highlight select Ukraine’s companies’ products and services during the conference which will be held in Toronto.

CUTIS is looking forward to seeing trade and investments between Ukraine and Canada increase significantly in 2019 and 2020.

Bohdan Leshchyshen, Canadian Project Director, CUTIS Project