Starting from scratch. How a family of displaced Ukrainians built a walnut processing business

The walnut processing business of Inesa and Taras Petukhov, a family of immigrants from Mykolaiv, grew out of a hobby. Five years ago, Taras became interested in walnut processing after attending a health promotion seminar and saw a commercial opportunity in this area.

Since then, he has started creating new processing technologies, original recipes, and experimenting with ingredients.

At that time, the family was earning income from another business: they were engaged in commercial real estate. LIGA.net found out how the family developed walnut processing.

Business concept in 10 days

Everything changed when Taras and Inesa's family had to leave Mykolaiv at the end of 2022 due to the full-scale invasion and move to Lviv Oblast. Taras's jobs at a garment factory, in a furniture shop, as a taxi driver, and as a loader did not meet the family's needs. The question arose: what to do next?

"After one training session, I came home and told my husband: 'We're going to turn your hobby into a business. We learned that in 10 days there would be a big fair in Lviv. And we worked like crazy during that time: we prepared products, made labels, came up with a brand and packaging. We were very scared, we were not sure that anything would come of it. But we sold almost everything at the fair in two days. We met the famous chef Yevhen Klopotenko there, who supported us and gave us professional advice. We were very inspired by this," Inesa says.

The family produces their products under their own brand, ITARA – Walnut Workshop. The product range includes walnut pastes: monopastes and with different flavors, sauces, snacks – with honey, candied fruits, salty, smoked, and spicy. They also make spices from grated walnuts with the addition of aged cheese, flour, and oil.

"We did our own little market research and saw that walnuts occupy about 10-15% of store shelves among other nuts. I mean finished products: packaged nuts or nuts' pastes. Most of the products are made from peanuts, 60%. The finished paste is made only from peanuts. In general, the nut processing industry is export-oriented, and this has left the domestic market almost empty," Inesa says.

Production in two rooms

The Petukhovs live in the village of Chyshky in Lviv Oblast. Their production facility is located in the same house they rent for living. They have two separate rooms for it. The couple already had some of the equipment they needed to make their products, and they moved it from Mykolaiv: an infrared dryer for nuts and candied fruits, a colloid mill for grinding nuts into a paste, a dispenser, a cutter, and a special drum that peels nut kernels.

"The peeling removes the bitterness inherent in walnuts, and they have a sweeter taste. This is our innovative technology that sets us apart from other manufacturers," says Inesa Petukhova.

The Petukhovs found suppliers of raw materials in their own and neighboring municipalities: they buy nuts from residents and negotiated with the owner of one of the walnut orchards. They buy both ready-made kernels and nuts in their shells. The villagers are involved in the shelling process.

"They help us crack the nuts, and we pay for their labor. Recently, we agreed to process them with a man who is in a wheelchair. We gave him the first batch of 40 kg to work with. From the very beginning, we planned to hire people who would be either IDPs, veterans, or just rural women, who are also a vulnerable category. We are focused on the social component of our business because we ourselves have gone through difficult times," says the entrepreneur.

Improving the recipe

In addition to walnuts, the couple uses a lot of spices and various ingredients, as well as preservatives, to make their products. They buy both from certified suppliers. To improve the recipes of their products, they engaged a technologist.

"At first, we didn't use any preservatives at all. Everything was natural. But such products cannot be stored for a long time. Natural ingredients spoil quickly. It's difficult to work with an expiration date of a week or two. People can't always eat what they bought during this time. We decided to hire a specialist," says Inesa.

A qualified technologist was found during one of the trainings the entrepreneur attended. The specialist was from Kharkiv, so they worked with her online. Initially, the entrepreneurs submitted product samples to the State Service of Ukraine for Food Safety and Consumer Protection laboratory. Based on the results of the analysis, they selected preservatives that were approved by the Ministry of Health and the State Food and Consumer Service and were safe for children and the elderly.

"The preservatives we chose are of organic origin: from egg whites and milk bacteria. We also chose antioxidants of plant origin. We also added other necessary processes, such as sterilization of containers, pasteurization of products, quartzing, and treatment of all surfaces with professional means. In other words, we minimized all external influences. We use vacuum packaging, which significantly extends the shelf life. And now our products have a shelf life of three months and 10 days after opening," Inesa explains.

Sales without a real price

The process of setting the price for their products turned out to be as simple as possible: they monitored the cost of similar products and set the average price in their segment. They worked like that for a while.

Later on, they were able to calculate the cost of production, include depreciation of equipment and the minimum wage for themselves, and eventually raised the price a bit.

"We set the price right away, so to speak, in a hurry. I can't even say whether it was profitable. For example, a jar of sauce cost 170 hryvnias, and now, after financial planning, detailed cost and profitability calculations, we have revised the price to 200 hryvnias ($5). The margin is 30-35%, depending on the type of pasta. This price gives us a small profit, but we have decided on this price for now," she says.

Plans to enter the B2B market

Entrepreneurs look for customers mostly at fairs. They have an Instagram page where they talk about their products. They have had several corporate orders.

They also became members of the Farmer's Family cooperative, which sells the products of its members, in particular through automotive part retailers. They also cooperated with coffee shops and stores.

"We gave sweet snacks to coffee shops. But they are more focused on confectionery. That's why our products didn't sell well there. Now we have salted, smoked, and spicy nuts. We plan to present them in pubs. We also gave our products to the first store for sale. We plan to cooperate with restaurants. We brought our sauces and pastes to a culinary master class in Kyiv and gave them to the chefs to taste. We received high praise. They said that our pastes could easily be on a restaurant menu," says the entrepreneur.

In general, according to Inesa, the craft goods market in Ukraine is gaining momentum. Big players in food production, retail, and catering are also interested in it. They are interested in bringing authentic recipes to a wider market.

Entrepreneurs have managed to find their own niche, in which they have become unique and currently have virtually no competitors.

"There are actually a lot of nut pastes. And the vast majority of them are peanut spreads. When analyzing the market, we find other varieties, such as urbech, hummus with nuts, but apparently, manufacturers do not promote them too much. Walnuts, for example, can also be found in honey in a jar. That's why we are unique with our range of nine types of pastes, sauces, and six types of snacks with different flavors. We are also working on developing a new line of walnut energy bars with candied fruit," says Inesa.

Separation of roles

The couple's roles in the business have been divided in such a way that Taras is responsible for production and financial calculations, and Inesa is responsible for marketing, advertising, sales, and investments.

The Petukhovs are looking to scale their business, as they have already reached the limit of their ability to produce and manage processes on their own. They need new premises and employees.

"We have confined all the processes to ourselves, and we don't have a day-to-day routine where we do the same thing every day. That's why our production is not systematic – it's often custom-made, fair-based. If there is a corporate order, we work, make it, and send it. Then we are engaged in operational activities: procurement, preparation of nuts and ingredients, development of new recipes, logistics, equipment maintenance, meetings with suppliers and buyers. That's why we need people to take care of the production itself, to make it sustainable," says Inesa.

But expanding the business requires investment. Food production involves registering facilities with the State Consumer Service and organizing production in accordance with HACCP (Hazard Analysis Critical Control Points) standards.

To scale up the business, they need separate premises that must comply with an extensive list of standards. The couple plans to purchase a modular building for production. They plan to put it in their backyard. This, according to the entrepreneur, will allow them to attract employees, increase production volumes and enter new markets in the B2B sector. The cost of such a building ranges from $300 to $600 per square meter.

To purchase it, they are considering investment options, including grants. That's why they participate in various programs. However, they are not counting on grants from the state yet. According to Inesa, if you do the math, a grant is more like an ordinary unfavorable loan that limits an entrepreneur due to the large number of obligations and required payments.

"According to the terms, you have to hire two to four people, and no matter what happens, you have to pay them salaries for at least three years. Taxes are now rising, and if you calculate the amount of the grant and the amount of taxes, they are much higher than the grant. You will be constantly tied down. That's why we are still studying grants from the state, and maybe my opinion will change later," Inesa describes the situation.

In addition to the premises themselves, entrepreneurs need to automate production processes, as it currently takes a lot of time and manual labor to make products, which is done by the entrepreneurs themselves. The cost of equipment for such work starts at $1,000.

"If you take industrial equipment, it costs about $3,000. We now have a request for a machine that would process fruit into candied fruit: peel, cut, separate the seeds and core. The cheapest one costs from 50,000 hryvnias ($1,200). But if we want to become professional and more powerful, we need to invest in it," the entrepreneur says.

There are also problems with hired workers as they are not easy to find in rural areas. There are few men in the village because they are either already working or serving. Women, if they are not working, are engaged in farming or gardening.

"We rely on women who are willing and able to work, and we will teach them processing technologies. We have flexible working hours. We don't need people to work all day and all week. They will come for half a day, do what they need to do according to the plan and go home. So it can be a mother while the child is in kindergarten or school, or a pensioner who could use some help until retirement. We want to attract people who need support," says the entrepreneur.

Ready to enter the big market

According to Inesa, expanding production and hiring employees will make it possible to establish sustainable production. Then they can pay more attention to sales, which will allow them to make a sustainable profit.

Today, their production volume ranges from 80 to 120 kg of finished products per month. With the automation of processes and two employees, production will increase to 300 kg per month.

"We are ready to enter the broader market in 2025. We have made many steps over the past year. Now there are even more tasks for development, but all of them have solutions, it's just a matter of time," says the entrepreneur.

Inesa advises aspiring entrepreneurs not to be afraid to start a business if they have an idea that excites and inspires them. She also recommends participating in various trainings. This gives you the knowledge, necessary contacts, and resources to move forward. For example, to search for grant programs, she recommends the GURT, GrantMarket, and Time for Change platforms, where such programs are published.

Inesa also took business training at various organizations: Silab, Radar Tech, Startup Tech School, Women's Perspectives, Vona Hub, Kryla, Entrepreneur Support Center, UNDP, and other projects. She has participated in the non-governmental grant programs Caritas, Kryla, and Pochatok.

"I took a lot of useful things from each of these trainings. One of the recent trainings I attended was the Regional Business Acceleration Program from the Regional Recovery Project with the support of the UK government (UK International Development). We took two online trainings on Business Modeling and Social Entrepreneurship. I really liked that the experts gave feedback on each of our projects after the presentations. This is very important because it gives us an understanding of what to look for and what to fix," says Inesa.