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Building their Canadian base

While the rest of us had our eyes turned south, Ukrainian manufacturer Losova used CUFTA to set up shop in Canada

If we’ve heard about NAFTA and USMCA once during the past 12 months, we’ve heard about them a million times, and for good reason. As the U.S. president’s rhetoric around the renegotiations heated up, the risk to established supply chains in virtually every manufacturing sector kept business executives up at night.

Now, with a new pact that would leave most of the original agreement standing, those same executives are breathing a collective sigh of relief.

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So now we get to go back and look at everything we missed when the trade talks got so tense, they took up all the oxygen in our news cycles. And it turns out this year in the midst of all that angst, another ag machinery brand began work to set up shop here using an agreement we haven’t heard much about: CUFTA: the Canada – Ukraine Free Trade Agreement.

CUFTA came into force last August without any of the USMCA fanfare, and when it was announced, many considered it a small, sideline deal. But now?

Lozova Machinery, a Ukrainian implement manufacturer, decided Canada was where it wanted to come in order to expand its global footprint. Importantly, it saw Canada as the gateway to all of North America. And CUFTA was a major part of the company’s decision to move here rather than the U.S.

Olena Peleshok, Lozova area sales director and business development manager in Canada.
photo: Lozova Machinery

“From an economic perspective it (CUFTA) was an open door for both Canadian and Ukrainian companies to go and engage in the markets,” Olena Peleshok, area sales director and business development manager in Canada, told Country Guide. “It was one of the important factors (for moving here first). So this allows the import and export of agricultural equipment without duties. Of course, in the big picture we want to expand to the whole North American market.”

But CUFTA wasn’t the only factor luring the brand here. Canada’s cultural link with Ukraine was also a consideration, added Peleshok.

“I know the owners of the company, and we had a long conversation and decided, why not try from Canada, because Canada has a wide Ukrainian diaspora, a community with some cultural roots and connections (to Ukraine).”

Lozova is no stranger to the process of international business expansion. The company can trace its roots to the former Soviet Union era, when it was a key manufacturer of agricultural equipment. Back then, the government’s central production policy assured there would be willing buyers in all Eastern Bloc countries. With the fall of communism, though, the company had to adapt to new free-market realities. It did that successfully by remaining a significant player in its original market region while also setting its sights on Western Europe.

“Our history goes back all the way to the time of the USSR, the Soviet Union, when they had a couple of big plants for agricultural production, producing machines for soil preparation,” explained Peleshok. “Also they had a bearing and component factory. Historically, it was one of the most famous plants in the Ukraine supplying all of the Soviet Union.

“In 1990 when the Ukraine became independent, the factories changed direction a little bit and started to focus on the local and European market and other countries based on different demands. In the Ukraine, the company holds about a 25 per cent market share.”

But now the company is looking across the Atlantic in its latest efforts at expansion. And it has moved quickly.

“In June of this year the company decided to look at the North American market and see if there is any chance to propose something to local farmers with our implements,” she continued. “We went to Saskatchewan to see how it looks, what you do here (from an agricultural perspective). We understood that Canada is wide and you have from the west coast to the east coast a little bit different farming practices based on climate and landscape.”

Lozova will eventually import its line of spring tine harrows and other implements as it develops its place in the North American market.
photo: Lozova Machinery

In order to test the water, Lozova imported a disc harrow and decided the best way to show it off and gauge interest here would be to use the trade show circuit, getting the maximum number of eyes on their product in the shortest amount of time.

“So we realized we have to go and participate in one of the trade shows,” Peleshok said. “That’s how we ended up at Canada’s Outdoor Farm Show (in Woodstock, Ont.). We were the first Ukrainian company to approach the Canadian market in tillage equipment, which is a big bonus for us and a bit exciting.”

Having a presence at the show also allowed Lozova to show itself to potential Canadian firms that were interested in distribution.

“We made a decision in the summer to show our machines and look for a partner,” said Peleshok. “Being an unknown player in the market, the biggest challenge for us is to position ourselves. And also to find a reliable, good partner to work with us. This was the most important and challenging task for us.”

The brand ended up inking a distribution deal with Ontario-based Higginson Farm Equipment, both a stand-alone dealer and a distributor, which has experience in working with Eastern European brands.

“They’ve commanded powerful attention (in Europe),” said Jean Kerr, part of the marketing team at Higginson, about why her company took on responsibility for marketing the Lozova brand in Canada. “They’ve got a global attitude. I’m impressed.”

Peleshok thinks finding a willing partner in Canada is confirmation Lozova can be a player here.

“The distributor gave us a good sign there is potential for our machine in this market,” she said. “So we said okay. Our agreement lets us jump in.

“I would say the nice surprise for Ukrainians is to see how similar the landscape, climate and soil types are in Canada and Ukraine. Even though the sizes of the countries are not comparable, in Saskatchewan the climate and landscape are exactly the same as in the south of Ukraine. And in Ontario it’s equal to eastern Ukraine. The farming practices are the same. In Ukraine there is no till and minimum till, and farmers have moved away from plowing as a way to prepare the soil. And the crops are very similar.”

Although Lozova offers several implement types, the initial plan is to start with the brand’s disc harrow. From there, they can work at further penetrating the market with other machines.

“Right now we’re starting with a tillage machine called the Ducat,” said Kerr. “We’ll definitely diversify into the other models, but it will be on the demand of what dealers want.”

That careful approach will also be the plan when it comes to eventual expansion into the U.S.

“That’ll be a goal,” Kerr continued. “They’re going to go steady; and they’re going to go sure. They don’t want to just bounce all over the territory.”

Having a presence at a select number of regional Canadian farm shows will remain a key element in the Lozova marketing plan for the next year, as they work on building brand awareness among potential farmer customers. They also want to get farmers into fields and see the Ducat disc in action to prove it is an implement that can work effectively in Canadian soils.

“Next year we’re making a marketing plan to participate at least in two or three of the biggest, main agricultural shows all over Canada,” said Peleshok. “And also to engage our dealers and provide incentives for them to do demonstrations all over Canada.

“Your farmers have very similar farming practices and that is a good confirmation our machines can work very well in the Canadian market.”

Lozova Machinery produces tillage implements in Ukraine.
photo: Lozova Machinery

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