close up of sea buckthorn tree

Seabuckthorn Tree Plantations And Affiliated Products

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Seabuckthorn Tree Plantations And Affiliated Products

Country
Sector
Most major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Food and Beverage
Sub Sector
Most major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Food and Agriculture
Indicative Return
Describes the rate of growth an investment is expected to generate within the IOA. The indicative return is identified for the IOA by establishing its Internal Rate of Return (IRR), Return of Investment (ROI) or Gross Profit Margin (GPM).
> 25% (in ROI)
Investment Timeframe
Describes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.
Short Term (0–5 years)
Market Size
Describes the value of potential addressable market of the IOA. The market size is identified for the IOA by establishing the value in USD, identifying the Compound Annual Growth Rate (CAGR) or providing a numeric unit critical to the IOA.
< USD 50 million
Average Ticket Size (USD)
Describes the USD amount for a typical investment required in the IOA.
European Union funded Trade-related Assistance for Mongolia project financed and established 4 export clusters, including Uvs sea buckthorn cluster. The funding amount was ~USD 5 mn. (18)
Direct Impact
Describes the primary SDG(s) the IOA addresses.
Zero Hunger (SDG 2) Decent Work and Economic Growth (SDG 8) Climate Action (SDG 13)
Indirect Impact
Describes the secondary SDG(s) the IOA addresses.
Good health and well-being (SDG 3) Gender Equality (SDG 5) Responsible Consumption and Production (SDG 12)

Business Model Description

Invest in B2C businesses involved in sea buckthorn tree plantations and that manufacture products using sea buckthorn. Enterprises operating in this space primarily focus on supply of raw material as well as manufacturing of value added products such as pure sea buckthorn oil and juice, which are two main semi-processed export-oriented products. These products are exported to countries such as Japan, Korea and Taiwan. Additionally, there is focus on exporting products such as sea buckthorn oil, demand for which is increasing, especially in European markets. Examples of companies active in this space are:

Uvs Food JSC, founded in 1942, started manufacturing products using wild seabuckthorn since 1973. They established a seabuckthorn processing plant in 2010 with modern equipment that has the capacity to process 10 tons of fruit per day. 99.8 percent of the total company share is owned by a single person, as of February 2023.

Doctor Tseg LLC started planting seabuckthorn on 3 ha of land in Uvs province in 2005 and has been preparing seabuckthorn, currant, willow, poplar, elm, and larch seedlings since 2008. To date, about 250,000 seedlings have been prepared and delivered to individuals and organizations. Besides seedlings, they also produce seabuckthorn juice and oil.

Ulzii Nuur LLC was founded in 2008 to grow and sell crops, vegetable seeds, trees, and seedlings. It built a 1.5-hectare fenced orchard, planted 35,000 seabuckthorn and currant seedlings per year, and planted 1,000 seabuckthorn trees. They produce high-quality seabuckthorn oil, juice, jam, and soap as well as juice and jam from currant, cranberry, blueberry, and supply them to domestic and foreign markets.

Expected Impact

Reduce national food insecurity by enabling more high-quality domestic sea buckthorn in the market and reduce GHG emissions by planting more its trees

How is this information gathered?

Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.

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Country & Regions

Explore the country and target locations of the investment opportunity.
Country
Region
  • Mongolia: Uvs
  • Mongolia: Tuv
  • Mongolia: Bulgan
  • Mongolia: Selenge
Learn more

Sector Classification

Situate the investment opportunity within sustainability focused sector, subsector and industry classifications.
Sector

Food and Beverage

Development need
Mongolia is facing food insecurity and food regulatory system challenges. (1) As of 2021, 28.4 percent are living below the poverty line and about 22 percent do not have access to sufficient dietary supplements on a regular basis to lead an active and healthy life. (2) According to the most recent data, 1 in 4 Mongolians experienced moderate or severe food insecurity between 2019-2021. (3)

Policy priority
Mongolia's Vision 2050 indicates the agriculture sector as one of the priority sectors for economic diversification. It prioritizes sustainable grassland and crop management, protection of biodiversity, and reversal of land degradation while ensuring safe food provision and creation of export-oriented economy. (4)

Gender inequalities and marginalization issues
Food insecurity is higher in urban areas when compared to the countryside, which indicates a changing face of hunger and malnutrition in Mongolia as people migrate to the capital city (Ulaanbaatar) in search of better economic opportunities

but instead get caught into the web of seasonal informal employment, higher reliance on markets for meeting food needs and vulnerability to market shocks. (2) The financially vulnerable households incurr ~43 percent of their total expenditure on food and are particularly vulnerable to fluctuation in food prices. (5)

Investment opportunities introduction
73.6 percent of Mongolian land is agricultural land. Agriculture is one of the priority sectors of Mongolia and a part of its cultural heritage, with food and agriculture production contributing 13 percent of Mongolia's GDP, employing 35 percent of the Mongolian work force. (6)

Key bottlenecks introduction
A large livestock herd of ~70 mn animals has resulted in overgrazing. Absence of land-use regulations or pasture management standards have caused land degradation, (7) which is the biggest bottleneck for agriculture sector.

Sub Sector

Food and Agriculture

Mongolia needs to enhance access to adequate affordable, nutritious and healthy food for everyone and improve crop productivity. (8) The agriculture sector alone contributes 49% of all greenhouse gases in Mongolia. (9) Planting more fruits and berry trees would not only provide nutritious and healthy food for people but also mitigate GHG emission in the country.

Policy priority
"National movement on ensuring food supply and security 2022-2027" aims to increase the available land for crop agriculture, adopt modern technology, and entirely address domestic demand using domestic production. (10)

Gender inequalities and marginalization issues
While rural women in Mongolia are heavily engaged in agriculture sector, only 49.7% are engaged in paid labor. (11)

Smallholder farmers in rural and semi-urban areas are more likely to be women and they struggle to make adequate profits from their produce due to insufficient marketing and not being able to sell their products directly to the retailers or final consumers but directly to the intermediary traders. (12)

Investment opportunities introduction
Crop production has 50 years of history with no use of chemicals and pesticides. Mongolia has an arable land of 1,2 mn ha of which 0.6 mn ha is in use. (5) In 2022, seabuckthorn accounted for 2214.5 tons or 86% of the total fruit and berry harvest in Mongolia. (16)

Key bottlenecks introduction
Limited local storage facilities have made it difficult to stockpile products and have led to food losses and increased food prices. Likewise, maintaining a functioning food supply chain became more challenging because of the shortage of working capital and workers. (13)

Industry

Agricultural Products

Pipeline Opportunity

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Investment Opportunity Area

Seabuckthorn Tree Plantations And Affiliated Products

Business Model

Invest in B2C businesses involved in sea buckthorn tree plantations and that manufacture products using sea buckthorn. Enterprises operating in this space primarily focus on supply of raw material as well as manufacturing of value added products such as pure sea buckthorn oil and juice, which are two main semi-processed export-oriented products. These products are exported to countries such as Japan, Korea and Taiwan. Additionally, there is focus on exporting products such as sea buckthorn oil, demand for which is increasing, especially in European markets. Examples of companies active in this space are:

Uvs Food JSC, founded in 1942, started manufacturing products using wild seabuckthorn since 1973. They established a seabuckthorn processing plant in 2010 with modern equipment that has the capacity to process 10 tons of fruit per day. 99.8 percent of the total company share is owned by a single person, as of February 2023.

Doctor Tseg LLC started planting seabuckthorn on 3 ha of land in Uvs province in 2005 and has been preparing seabuckthorn, currant, willow, poplar, elm, and larch seedlings since 2008. To date, about 250,000 seedlings have been prepared and delivered to individuals and organizations. Besides seedlings, they also produce seabuckthorn juice and oil.

Ulzii Nuur LLC was founded in 2008 to grow and sell crops, vegetable seeds, trees, and seedlings. It built a 1.5-hectare fenced orchard, planted 35,000 seabuckthorn and currant seedlings per year, and planted 1,000 seabuckthorn trees. They produce high-quality seabuckthorn oil, juice, jam, and soap as well as juice and jam from currant, cranberry, blueberry, and supply them to domestic and foreign markets.

Business Case

Learn about the investment opportunity’s business metrics and market risks.

Market Size and Environment

Market Size (USD)
Describes the value in USD of a potential addressable market of the IOA.

< USD 50 million

Critical IOA Unit
Describes a complementary market sizing measure exemplifying the opportunities with the IOA.

Seabuckthorn was planted in 2695.3 ha of land in 2022 in Mongolia. (15)

In 2022, seabuckthorn accounted for 2214.5 tons or 86 percent of the total fruit and berry harvest in Mongolia. (16)

In 2022, seabuckthorn planted in Uvs province (as Uvs Chatsargana) was registered In European Union as the first Protected Geographical Indication from Mongolia. This would provide an opportunity of increasing the income of local seabuckthorn growers and producers, supporting sustainable business and ensuring customers' use of quality and standard products. (17)

Indicative Return

ROI
Describes an expected return from the IOA investment over its lifetime.

> 25%

GPM
Describes an expected percentage of revenue (that is actual profit before adjusting for operating cost) from the IOA investment.

5% - 10%

As per expert consultations, ROI is estimated to be ~30 percent.

In 2021, Uvs Food JSC's reported gross profit margin of ~6 percent.

In 2021, Uvs Food JSC reported revenue growth of approximately 12 percent Year on Year.

As per expert consultations, average revenue per ha is around USD 15,000. Thus, total revenue is estimated to be around USD 40 mn.

Investment Timeframe

Timeframe
Describes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.

Short Term (0–5 years)

As per expert consultations, expected investment period is usually less than 5 years.

Seabuckthorn trees yield their berries every fall season, which implies an yearly return on the potential investment. As per private consultations, each hectare of seabuckthorn harvest in Uvs province yields between USD 12,000-18,000.

Ticket Size

Average Ticket Size (USD)
Describes the USD amount for a typical investment required in the IOA.

European Union funded Trade-related Assistance for Mongolia project financed and established 4 export clusters, including Uvs sea buckthorn cluster. The funding amount was ~USD 5 mn. (18)

Market Risks & Scale Obstacles

Market - High Level of Competition

Sea buckthorns from China are imported at a lower price than domestic sea buckthorns, which increases the competition in the local market. (14)

Capital - Requires Subsidy

The cost of capital in Mongolia is high due to high deposit interest rate and a risk premium, as well as higher labor cost compared to that in China. (14)

Business - Supply Chain Constraints

As per expert consultations, one of the biggest market risks relates to packaging as a most packaging material is imported from China and businesses experienced a shortage of supply when the borders were closed due to COVID-19 restrictions.

Impact Case

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Sustainable Development Need

1 in 4 Mongolians experience moderate or severe food insecurity as a large portion of food products are imported and steeply priced. (1) Locally produced high quality sea buckthorn beverages and other food products would reduce food insecurity.

1 in every 2 deaths in Mongolia is attributable to either cancer or cardiovascular diseases in 2021. (20) Therapeutic use of seabuckthorn is beneficial for treating such illnesses. (14)

Mongolia has the highest GHG emissions per capita in the World, reaching almost 27 tonnes per person. (21) Increased plantations of sea buckthorn trees would absorb more carbon dioxide and reduce the level of GHG.

Gender & Marginalisation

Higher malnutrition in peri-urban areas is prevalent in Ulaanbaatar. (2) Improved availability of locally produced and nutritious sea buckthorn products and locally grown sea buckthorn berries can improve the nutrition level of people living in these areas.

The prevalence of overweight children under 5 years of age has hovered around 10 percent in the last 10 years due to unhealthy and poor quality diets. (2) Sea buckthorn berry juices could replace soft drinks with high sugar content and positively contribute to addressing the child obesity issue.

The southern regions of Mongolia consistently witnessed 20 to over 30 sandstorms annually in the past ten years, while drifting dust stroms were observed ~30–60 days each year in southern and southwestern regions due to growing desertification. (22)

Expected Development Outcome

Reduce malnutrition and obesity issues by offering nutritious and healthy sea buckthorn products while improving crop productivity and strengthening value chains.

Increase the domestic production and income of the local growers and producers.

Reduce the effects of desertification and absorb more carbon dioxide while preventing soil erosion and reducing the water loss in plantation areas.

Gender & Marginalisation

Improved nutrition and diet for children and pregnant women who have malnutrition and obesity issues

Provide employment and increase income in remote regions that might otherwise fall below a critical level of economic activity, leading to depopulation (14)

Improve the income and economic competitiveness of female farmers, thereby contributing to gender equality in Mongolia. Half of employees in sea buckthorn businesses are women.

Primary SDGs addressed

Zero Hunger (SDG 2)
2 - Zero Hunger

2.2.2 Prevalence of malnutrition (weight for height >+2 or <-2 standard deviation from the median of the WHO Child Growth Standards) among children under 5 years of age, by type (wasting and overweight)

2.1.2 Prevalence of moderate or severe food insecurity in the population, based on the Food Insecurity Experience Scale (FIES)

Current Value

2.2.2: As of 2020, overweight- 10.1%, wasting - 7.1%. (3)

2.1.2: Between 2019 - 2021, 25.7% of the population. (3)

Target Value

2.2.2: By 2030, end all forms of malnutrition.

2.1.2: By 2030, end all forms of malnutrition.

Decent Work and Economic Growth (SDG 8)
8 - Decent Work and Economic Growth

8.1.1 Annual growth rate of real GDP per capita

Current Value

As per WorldBank data, annual growth rate of GDP per capita in 2021 was 0%.

Target Value

The Government aims to keep the economic growth (annual GDP growth) at 6% by 2025 (Five Year Development Guideline, Vision 2050)

Climate Action (SDG 13)
13 - Climate Action

13.2.2 Total greenhouse gas emissions per year

Current Value

In 2021, 50.32 mn tons of CO2 emissions. (23)

Secondary SDGs addressed

3 - Good Health and Well-Being
5 - Gender Equality
12 - Responsible Consumption and Production

Directly impacted stakeholders

People

The general public who consume sea buckthorn berries and products would benefit from improved nutrition intake, as well as the outstanding health properties of sea buckthorn. Sea buckthorn growers and producers would also benefit from capturing a bigger market and improved pricing.

Gender inequality and/or marginalization

Children with malnutrition and obesity issues would be directly impacted in relation to improved nutrition and diet.

Planet

Sea buckthorn trees prevent soil erosion and mitigate the effects of desertification on agroecosystems, reduce water loss in the soil, increase options for land reclamation, and it can create habitats for wildlife species. (14)

Corporates

Businesses that manufacture sea buckthorn products would benefit from better supply of sea buckthorn berries and leaves.

Public sector

The domestic market will benefit from increased high-quality local products and better competition.

Indirectly impacted stakeholders

People

With more sea buckthorn trees plantations in deserted areas, herders would benefit from reduced effects of sand storms.

Gender inequality and/or marginalization

Women-led businesses would benefit from increased revenue in relation to larger sawn areas and better technology as well as marketing.

Planet

The planet will benefit from mitigated effects of climate change as a result of more absorption of CO2 by the sea buckthorn trees.

Corporates

Businesses involved in logistics and distribution side of sea buckthorn market would benefit from regular supply of products.

Public sector

The government would benefit from improved availability of nutritious products in the market for the people.

Outcome Risks

Government-subsidized sea buckthorns from China could put domestically harvested sea buckthorns under price disadvantage.

Droughts or insects or birds could jeopardize the harvest volume resulting in profit loss.

Improper techniques and methods adopted for growing sea buckthorn trees could result in harvest loss or land degradation.

Gender inequality and/or marginalization risk: Unless gender equality is recognized within the sector, women could continue receiving lower wages and less opportunities.

Impact Risks

Approximately 90 percent of Mongolia is at risk of desertification, with 41.3 percent land considered as desert or desert steppe areas. (24) Without the sea buckthorn trees, the risk would only increase.

Underdeveloped infrastructure and higher costs of logistics would impact the operations of processing factories located farther from the raw materials.

Unaddressed malnutrition issues can have an adverse effect on other metrics, including those related to health and the economy at a macro level.

Gender inequality and/or marginalization risk: Women-led small or rural farms could find themselves at a competitive disadvantage due to larger producers offering a lower price and better marketing.

Impact Classification

B—Benefit Stakeholders

What

Improve sea buckthorn cultivation and processing value chain to increase value-added output and exports, as well as to improve the overall nutrition level of the population.

Risk

Lower-price imported sea buckhtorn increases the domestic market competition but puts local producers with high input costs under risk of competitive disadvantage. (14)

Contribution

Mongolia is aiming to reduce its GHG emission by 22.7 percent or 16.9 Mt CO2 compared to the BAU scenario. Forests, including sea buckthorn tree, would sink 2.6 Mt CO2 reduction by 2030. (25)

Impact Thesis

Reduce national food insecurity by enabling more high-quality domestic sea buckthorn in the market and reduce GHG emissions by planting more its trees

Enabling Environment

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Policy Environment

"In Vision 2050, clause 6.4.8 states that Mongolia will aim to increase CO2 sink by increasing the forest area. 8.3.6: Increase the competitiveness and value of Mongolian crops grown on fertile soil, increase exports, and develop agriculture based on smart technology. (continued below)"

8.3.7: Zoning and diversifying the activities of intensive agricultural producers to stabilize the food supply and availability of the concentrated population and reduce the import of certain types of products, and support the export. (4)"

Five-Year Development Guidelines (2021-2025). Clause 6.2.1: protect soil fertility and moisture, prevent land degradation, soil pollution, and desertification, rehabilitate damaged and degraded land, and put it into agricultural use. 6.2.5: increase the area covered by forest. (26)

Government Resolution 36. (2022). As part of the national movement ""Billion Trees"", state will establish 30 ha of agro-forestry in the provincial centers and 10 ha in county centers, establish fruit and berry seedling breeding centers, and create a forest strip by fencing crop fields. (27)

Financial Environment

Financial incentives: According to Government Resolution No. 117 (2022), the State is providing a loan of USD 29.9 mn with an annual interest of 3 percent for agriculture production. (30)

Fiscal incentives: Sea buckthorn production is subject to value-added tax exemption. (31)

Other incentives: Businesses that are registered in a county or province located 500km and 1000km distant from Ulaanbaatar and provide employment in the county or province are subject to tax relief on income from operations by 50% and 90%, respectively. (32)

Regulatory Environment

Laws to ensure food safety. 5.1.1: To ensure the safety of raw materials and products at all stages of the food value chain. 8.1: If the food operator believes that the food raw materials and products may have a negative effect on human health, they are to be withdrawn from the food chain. (28)

12.1: Food raw materials and products are packed in food containers and packages made of materials that do not have a negative effect on human health.

Law on Agriculture regulates relationships related to farming, determining agricultural areas, proper use of agricultural land, soil protection and improvement, and combined development of agricultural and intensive livestock production. (29)

MNS 0916: 2011. This standard applies to setting requirements for picking, preparing, inspecting, receiving, packaging, labeling, storage and transportation of wild and cultivated sea buckthorn berries. It also applies to the quality of imported sea buckthorn.

MNS 6250 : 2011. This standard applies to the propagation, preparation and delivery of sea buckthorn seedlings, quality assurance, inspection and acceptance, packaging, storage, sale, importation and transportation.

MNS 0664 : 2015. This standard covers the production, packaging, labeling, storage, transportation and analysis of all types of juice, nectar and pulp of sea buckthorn.

Marketplace Participants

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Private Sector

Corporates: Uvs Food JSC, Teso Foods, Shine Birj LLC, Choros Gal LLC, Hatnii Ulaan LLC, Us Erdene Jims LLC, Ulaan Shuren, Solongo Talst LLC, Ulzii Nuur Hulst LLC, Netent LLC, DNNMG LLC, Munkhiin Altan Gadas LLC, Doctor Tseg LLC, Gazar Jims LLC, Bohch-Od LLC. Investors: Teso Group.

Government

Ministry of Food, Agriculture and Light Industry, Ministry of Health; Ministry of Environment and Tourism, Provincial Governments.

Multilaterals

Food and Agriculture Organization, European Union, Asian Development Bank, Global Nature Fund, The Association of German Chambers of Industry and Commerce.

Non-Profit

Mongolian National Association of Fruits and Berries.

Public-Private Partnership

Uvs Seabuckthorn Cluster, Mongolian National Chamber of Commerci and Industry.

Target Locations

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country static map
rural

Mongolia: Uvs

As per expert consultations, Uvs province is considered to have the best quality seabuckthorn, with 3 times more vitamin C content than the seabuckthorn growing in other regions of Mongolia. In 2022, Uvs produced 60% of the total sea buckthorn harvest of Mongolia. (16)
rural

Mongolia: Tuv

Tuv province produced 5% of the total seabuckthorn harvest in Mongolia in 2022. (16)
rural

Mongolia: Bulgan

In 2022, Bulgan province cultivates over 200,000 or 6 percent of the total sea buckthorn trees in Mongolia. (33)
rural

Mongolia: Selenge

Selenge province is the largest agriculture producer of Mongolia and accounted 144,633 tons or 6.5 percent of the total seabuckthorn harvest in 2022. (16)

References

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