Year: 2019

The history of KaDar, the largest footwear manufacturer in Western Ukraine, began more than 20 years ago. In 1999, four partners decided to launch their own footwear business starting from a shoe factory in Lutsk. After an unsuccessful attempt to work on a give-and-take basis, the production was idle for some time.

“I had no experience in the production of footwear, although I had experience in trading. At first, it helped a lot. Six months later, our fourth partner decided to quit the business and I bought out his part”, – Viktor Shulgach, CEO and co-owner of the company, recalls.

 

Design is the main thing

The business quickly grew and, five years later, the company was producing 150-200 pairs of shoes a day. Currently, the production capacity is 500 pairs a day.

From the very beginning, KaDar was focused on men’s leather shoes. The women’s line appeared in the company’s product mix in 2012, first, in a limited quantity. Presently, the share of women’s shoes is about 30% and continues to grow.

For its production, the company uses Ukrainian, Chinese and Italian materials, with an increasing share of Ukrainian raw materials. Leather is bought both in Ukraine and abroad. “The manufacturer has to choose the suppliers that will bring competitive advantages. The cheapest solution is not always the best”, – Mr. Shulgach is sure. In the footwear business, it is the design rather than the price that is the key, and KaDar does the design in its own studio.

Export as a new stage of development

Ukraine remains the main sales market: the domestic market accounts for 2/3 of the company’s total sales.

The first deliveries of KaDar’s products abroad took place in 2012. “The main purpose of export development is to diversify the risks of working in a single market. If problems occur with a market or a client covering more than 50% of sales, these become your problems. That’s why it is optimal, in my opinion, to increase the company’s share of exports from the current 30% to 50%”, – Viktor notes.

First, the company decided to try the Russian and then the Kazakhstan market. However, the co-operation failed for both political and economic reasons.

There was a successful entry in the Belarusian market and then the markets of the Baltic States. The company also made its first steps entering the markets in Poland, Slovakia and Hungary.

According to Viktor, there are no universal rules for successful entry into a new market. One must adapt to each country and adapt the products based on local consumers’ tastes. “It is important to establish contacts with market operators. Moreover, these companies should have grounds to trust you. They must be sure that your company is a reliable partner”, – Shulgach is certain.

 

Access to the Canadian market

Canada is interesting for KaDar as a great opportunity to diversify exports and reach the wider North American market. That is why the company decided to apply to the U CAN Export Program supported by the CUTIS project.

In January 2018, it was announced that KaDar and seven more Ukrainian footwear manufacturers entered the program, the first stage of which was to participate in the international exhibition – Toronto Shoe Show in August 2018. The CUTIS project has taken on the costs associated with the exhibition and the organization of booths.

“We started to prepare six months in advance. My partner visited the previous exhibition, so we knew what to be prepared for, and we created the action plan. We tried to maximize contacts with companies that could be interested in our products “, – Viktor says.

The product mix is a separate issue. Potential clients should see what they may be interested in. The U CAN Export participants were supported by Phil Zwibel, Canadian expert provided by CUTIS, who helped with the selection of the most relevant samples. During the exhibition, a number of B2B meetings were organized.

The company is satisfied with the results of the trip. “We got the first contract – about 500 pairs of shoes. In terms of the company’s total exports, the order is small, but extremely important as this is the first step in promoting our products in the Canadian market. Thanks to the participation in the exhibition, we got a better understanding of the demands of Canadian consumers and started a negotiation process with operators in the Canadian market”, – KaDar CEO says.

Could this have been achieved without a trip to Canada and the cooperation with the CUTIS project? Viktor Shulgach does not think so. “Unlike Ukraine, where the share of small distributors is quite large, the lion’s share of the footwear market in Canada is occupied by chains. It is almost impossible to target them without a previous participation in one or preferably a few exhibitions”, – he says.

Onwards and upwards

After returning to Ukraine, KaDar representatives began vigorously developing a new collection of winter shoes adapted specifically for the Canadian market. The company notes that the new collection was developed not so much at the request of a specific Canadian customer, but in view of the future development of exports to Canada. Therefore, they tried to consider extensively all the wishes and suggestions expressed by potential partners and importers during the first exhibition in Toronto.

For example, the new collection is resistant to the severe Canadian climate being made of waterproof materials. “For Canadians, this is extremely important. About 90% of the visitors of the booth were interested in the materials’ resistance to moisture. At Ukrainian exhibitions, this issue has never occurred”, – recalls Halyna Panas, KaDar’s Export Development Manager. According to her, shoes for Canadian consumers should be as comfortable as possible, sporty or casual.

The company had a chance to see to what extent the new collection met the expectations of Canadian consumers at the end of February 2019 at the second Toronto Shoe Show, which became the next stage in the implementation of the U CAN Export Program.

Ukraine was represented at the trade show by six leading shoe manufacturers. KaDar’s products were placed in a double booth.

 

According to Halyna Panas, the company sees good prospects for the development of footwear exports to Canada after receiving a lot of positive feedback about their products.

“The first order was successfully completed – as we speak, our products are being shipped to Montreal. The second contract is in the final discussion stage. We do everything possible to ensure that Canadian distributors appreciate the high quality of Ukrainian shoes and we believe our cooperation with them will be successful. The most important reward for us will be the customer’s appreciation and the recognition of KaDar as a trusted business partner. Building successful business relationships with Canadian companies takes more than one day”, – Viktor concludes.

Author – Tetiana Riasna

Photos – Vitaliy Kyrychuk

Environmental certification is becoming increasingly important when it comes to entering developed markets. Canada is not an exception.

Euroshpon-Smyga (Rivne region) is one of the largest wood-processing factories in Ukraine. The company produces planed and spliced veneer, veneer for wrapping various wood products. Euroshpon-Smyga processes nearly 1500 cubic meters of wood monthly, 95% of products for export. The geography of exports includes 19 countries.

Euroshpon-Smyga had the first contact with Canadian partners in 2015. Since then, Ukrainian veneer is used to make Canadian furniture.

At a certain stage of development, the management of the company understood that further progress depends on meeting international standards. In particular, standard on a wood chain of custody oversight was important.

In 2018 CUTIS project co-financed FSC certification for PJSC “Euroshpon-Smyga”. The project contributed to expanding exports to Canada without additional negative environmental impacts in Ukraine.

Getting from professional sport to fashion industry. Do you think it is impossible? Of course, possible! Natalia Nayda, a businesswoman from Ivano-Frankivsk, is sure of that. The story of Natalia’s business is the story of finding her place in the world, which started from producing hand-made postcards in 2008.

In the past, Natalia was engaged in cycling. She participated in competitions and organized various festivals together with her husband. In 2008, after her son was born, she decided to combine maternity leave with her own business.

It was difficult to start a business: finding a buyer for hand-made things in Ivano-Frankivsk proved to be a difficult task. “Nobody really wanted to buy postcards. People preferred Chinese ones for UAH 2.5 rather than ours for UAH 15”, – Natalia recalls.

The entrepreneur did not have any real startup capital. It was her husband who provided finances. In the beginning, materials were paid out of the family budget as well. Step by step, business rolled out and Natalia with two assistants started making fabric toys that were sold at Lviv stores. Social media helped as well, through which first small-scale orders came from abroad. This is how the hand-made crafts shop called Shuflia appeared.

A new start

The events of 2013 and the difficult economic situation affected many startup entrepreneurs. Hryvnia devaluation made Natalia think about making more «practical» products. She decided to focus on handmade notepads, wallets, and bags.

Development of Ivano-Frankivsk’s own municipal visual style in 2014 became an additional incentive. The city ordered souvenir products in the new style in Kyiv. «At some point, it seemed to me that having Ivano-Frankivsk products made in Kyiv was wrong. I decided that I want to make souvenirs in my native city. I purchased special equipment for applying ornaments. This is how the Bukvica brand was launched”, – Natalia shares her memories.

Why Bukvica? Probably not everyone knows that it is how the first letter is called at the beginning of a paragraph.

According to Natalia, the Bukvica project also became a new start for her – the craftswoman transferred from hand-made to craft products. Her team printed unique ornaments on T-shirts, magnets, caps, cups, etc. Patterns were designed by the craft shop’s own designer.

Over time, more and more customers started asking for a t-shirt with a unique print or logo. “At some point, we were confronted with the fact that there are no good quality t-shirts in the market and we thought why not sew them by ourselves? We bought sewing machines, found seamstresses and started. After some time, we wanted to expand the product line and began to sew sweatshirts and dresses. Little by little, we developed our own style and created our line of knitwear, which was mostly sold via the Internet. Later, there appeared also offline partners who bought our clothes”, – says Ms. Nayda.

Natalia tried to develop another area – decorating but was forced to quit it. Under the Tsvikli brand, Natalia and her colleagues engaged in the production of bouquets and decorating premises. “This business was strongly bound to the locality – we could work with flowers only in Ivano-Frankivsk. At some point, I wanted more: to use exotic flowers, while it was not easy to find a buyer for such services in a regional center in Western Ukraine. I do not regret, however, as I have gained an extraordinary experience”, – the businesswoman explains.

Per aspera ad astra

Natalia learned about new opportunities offered by the Canadian market and the CUTIS project for Ukrainian entrepreneurs from Facebook. “I saw the announcement on a selection of Ukrainian companies and decided to apply, although I did not really believe in success at first. Our production volumes were small, but we fitted by other criteria: our business was founded by a woman and the social component has always been important for the company», – she continues.

The selection process for the CUTIS Program became a turning point for Natalia and her team. At one point, a Canadian expert, Rodolfo Moseres, was invited to visit the company.

“I told him then that we would very much like to cooperate fruitfully with Canada, but our capacities were five sewing machines. Rodolfo convinced me that there was a place in the Canadian market also for small workshops that produce quality clothing with a unique style,” – says Ms. Nayda.

In January 2018, it became known that Bukvica and seven other apparel manufacturers were selected to participate in the U CAN Export Program of CUTIS. The first stage was participation in the Apparel Textile Sourcing Canada in Toronto.

It was Rodolfo who suggested thinking about an alternative brand name, since even a Latinized version of the name Bukvica was hardly perceived by the English-speaking audience. This was the beginning of the new Framiore brand.

Work on the new collection and trademark started after Natalia’s return from holidays in Asia where she was inspired by Asian motives, namely the Hmong people living in Vietnam. “By contrast with Bukvica, which has always been positioned as casual clothing, I wanted to focus on thoughtful design and fabric quality in the new brand. We decided to use only natural raw materials, particularly, tencel – environmentally friendly material made of the wood of Australian eucalyptus”, – says Nayda.

After several months of working on the new collection and consulting with Canadian experts, Natalia and her team realized that the new brand was too expensive for the Canadian mainstream market and the Toronto Trade Show, which was scheduled for August. Therefore, they returned to Plan B – to bring the cheaper Bukvica brand to Canada.

Together with four other Ukrainian apparel brands, Bukvica participated for the first time in a fashion show held as part of the exhibition. «Participation in exhibitions is extremely important for the companies that develop exports. One thing is to look on the Internet for information about popular brands and trends in Canada, and it’s totally different to go through the Canadian shops by yourself and understand what clothing consumers choose”, – Natalia says confidently.

This is actually what she did. With her colleagues, she put on Bukvica clothes, grabbed the catalogs and went to meet with representatives of small shops recommended at the exhibition. “Without such field research, it is impossible to correctly formulate the strategy of entering a new market. It’s cool that thanks to the CUTIS project we were able to go to Canada and chat with the owners of small stores and our potential partners. We understood their demands better and are ready to offer exactly the product that they will be interested in”, – Natalia says.

In her opinion, the main conclusion from the trip is that Ukrainian products are competitive in the Canadian market and can easily find their buyer.

There are certain limitations, however. “During the trip, we found stores that are potentially willing to buy our goods, but in small quantities, in trial batches. Canadian partners want to be sure that our cooperation is a long game. Ukrainian clothing manufacturers should understand that it is impossible to conclude a large contract right after the first exhibition. You have to participate repeatedly and position yourself as a reliable partner”, – Ms. Nayda continues.

The company is currently negotiating with a few Canadian stores and planning to participate in a trade show. “We will get orders for sure, we keep communicating. Negotiations with Canadians take much longer than what we are accustomed to in Ukraine. One has to be prepared for that. In addition, I would advise Ukrainian companies to visit not only Canadian but also American trade shows where many Canadian buyers are represented as well. This is my plan for the next occasion”, – points out the businesswoman.

Business transformation

After returning from Canada, Natalia decided to change her business structure. It was decided not to give up the Framiore brand. Moreover, the focus was exactly made on it with the view of entering Western markets. “The Framiore brand is specially designed for exports and foreign markets. Ethics of production and the slow fashion are exactly what the European and North American consumers need. Ukrainian consumers, unfortunately, are not ready to pay for that. So far”, – says Ms. Nayda.

The Framiore brand is already available in several offline stores in the UK. This became possible due to the company’s participation in the UK Moda exhibition in Birmingham in August last year. Five Ukrainian apparel manufacturers were represented at the UK exhibition with EBRD support under the EU4Business Program. “We already have several UK partners, things are already sold in London. We work on a pre-order basis. We do not want to produce to stock, there are millions of clothes in the world. Why sow even more clothes that may never be worn”, – Ms. Nayda states.

In addition, the company became one of the eight winners of the selection conducted by the Export Promotion Office. In February 2019, the Framiore brand will participate in a trade mission to France. The project is being implemented with the EBRD support within the EU4Business Program.

“Canada, US, UK and France are the very markets we are focusing on”, – Ms. Nayda says.

As for the Bukvica brand, its further development is more aimed at the local Ukrainian market, private label and corporate orders.

“Ukrainian products have great potential in foreign markets. We must overcome our own inferiority complex, improve quality and make the most of all the opportunities offered in Ukraine for small and medium business development. It is the experience of participating in a Canadian trade show that helped me to look at my own business differently and understand the importance of a systematic approach to entering foreign markets”, – says the Ivano-Frankivsk businesswoman confidently.

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.