EBRD and EU support Mongolian flour producer’s exports

By Altjin Munkhbat

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Asia is home to diverse and vibrant culinary cultures. Traditional nomadic meals in Mongolia, however, generally require only two basic ingredients: meat and flour. Even now, with all the choice brought by the global market, many Mongolians keep to simple diets of meat and flour for their day-to-day meals, making flour an irreplaceable strategic resource.

In this background, Oeg Flour LLC, a flour producer from rural Mongolia, succeeded in uplifting their business and began exporting internationally with business expertise from the EBRD and the European Union (EU).

Competition in the Mongolian flour market

Oeg Flour LLC began its operation in Darkhan-Uul Province, Mongolia, in 2011 with the aim to supply 100 per cent of rural regional flour demands, then expand to the capital city of Ulaanbaatar. Today, Oeg is a well-established flour brand in Mongolia with a market share of 20 per cent and has positioned itself as a major regional flour distributor.

“Many people only think of Darkhan as the third largest city in Mongolia. While we are distant from the capital, people in rural areas still require new opportunities,” says Ms. Oyunsuvd Enkhbold, General Manager.

However, to truly become a major competitor and take their business to the next level, they lacked a number of essential ingredients in their operations.

With 68 per cent of the country consuming flour-based food and 35-45 per cent cooking with flour daily, the Mongolian flour market provides opportunities for growth and expansion. However, this also means there is fierce competition among Mongolian flour brands.

While Oeg boasted high sales figures, concerns over product quality, malfunctions in production processes, flour wastage and unmonitored inventory meant the company needed to urgently overhaul its business practices.

“Despite our best efforts to set high standards, the fluctuation in product quality has been exceptionally high. We were gaining a notoriety for poor quality and losing customers,” she says.

EBRD and EU’s role in Oeg’s revival

In 2019, government agencies from Mongolia and China reached an agreement to allow flour exports to China, creating an exciting new opportunity for Mongolian flour producers. Oeg needed to act quickly to seize this chance or it would fall behind the competition.

The company approached the EBRD’s business advisory service team with their issues in 2019 and Observe Consulting LLC were selected to introduce a Hazard Analysis and Critical Control Point (HACCP) quality management system.

The consultants identified that Oeg had retained the same management structure and style since 1997 and had not evolved to fit the changing market environment of the past decades.

“Had flour not been such an important part of the Mongolian diet, we might have faced business challenges years ago. The popularity of the product had made the management less keen on pursuing innovation and development,” Oyunsuvd reflects.

Throughout the advisory project, the consultants identified several major issues and introduced some notable key solutions. They helped Oeg obtain the quality management standard ISO 9001:2015 and introduced HACCP controls to maintain food safety standards.

With revitalised management, many of Oeg’s troubles, including procurement, quality control, and lack of oversight and bookkeeping, became things of the past. The business was now not only ready to re-establish itself as a stronger competitor in the Mongolian flour market, but poised to enter the lucrative Chinese market.

Firm foundations for regional growth

Since 2019, Oeg has continued to hit new milestones in sales. In Mongolia, Oeg’s management created a plan to establish a reliable supply chain encompassing all activities from wheat planting to delivering flour to consumers. They are now eyeing the patisserie market.

For the international market, the company has submitted a formal application to the Mongolian Ministry of Food, Agriculture and Light Industry and are expecting to be among the pioneering Mongolian flour exporters to China by 2022.

Thanks to joint support from the EBRD and the EU, Oeg Flour is now a well-established business that is making signification contributions towards its community’s sustainable growth. The producer has become a role model for many other businesses – and an inspiration to those studying and developing rural supply chains.

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