Colette from the cartoon “Ratatouille” called the crunch of fresh bread a symphony. And the most pleasant and appetizing smell for all people is the aroma of freshly baked bread. Who in childhood (and maybe even now), buying bread, did not take a bite of the delicious crispy crust? Despite all the charms and tastes that our and foreign manufacturers release to the markets, the production of bakery products is falling. You can see the situation on other Ukrainian markets here.
Bakery products market: reasons for production reduction
Analyzing the market of bakery products, experts of the Economic Discussion Club noted that bread production in Ukraine has decreased by half compared to the figures of 2000. The reasons are as follows.
- Reduction of sales markets on the territory of the Crimean Peninsula, Donetsk and Lugansk regions.
- The emergence of a powerful shadow segment of the market: bakery products and bread are sold in kiosks registered as FOPs or without registration at all. Thanks to this they manage to cheapen the products, which are often produced in unsanitary conditions and cannot meet any quality standards. But, since it is profitable, the shadow segment of the market accounts for about 60% of the total production of bakery products.
- Many supermarkets in Ukraine specialize in producing their own bakery products, but this production is not recorded.
Based on all of the above, statistical data concerning the amount of bread produced in Ukraine are not fully reliable. Reliable data are here.
What bakery products are produced in Ukraine
There are such products available in the market:
Recently Ukrainians have become more interested in non-traditional varieties: yeast-free bread, bread kneaded according to ancient recipes, bread with minerals, etc. Such varieties are somewhat more expensive, so the sales volume is less, although many experts tend to believe that some of the new products will increase. By regions, the most bread and bakery products are produced in Dnipropetrovsk, Kyiv, Kharkiv and Zaporizhzhya regions.
The share of bread products is increasing due to the popularity of healthy nutrition: dietary and therapeutic bread, with the addition of grain mixtures, bran, fructose, honey, nuts, with additives from fruits and vegetables.
The increase in prices for utilities and raw materials affected the cost of bread and bakery products and led to a decrease in the number of bakery enterprises or to their transition to illegal status.
The largest producers of bakery products
Bread and bakery products – a special type of food, which occupies the main place on the table of Ukrainians. They possess up to 40% of the total caloric content of the food ration of the population. Due to this ratio, the production of bakery products can be considered one of the strategic sectors of the state economy.
Today the bakery products market is represented by a range of products from different bakeries. The largest producers are:
The State Statistics Committee notes a 9.1% decrease in bread production in the first two months of 2017 compared to the same period of 2016. According to official statistics, 1.123m tons of bread were produced in 2016, which is just over 100g of bread and bakery products per each Ukrainian per day.
Breadbasket of the world
Ukraine is considered the breadbasket not only of Europe, but also of the world. It was so 10 years ago. Today’s sown areas allocated for rye are only 144 thousand hectares and, accordingly, the reduction of rye production to 388 million tons (two times), compared to 2013, indicates that Ukraine has lost the status of the world’s breadbasket. Although, in this case, we can take into account military-political and climatic conditions, which significantly affected production and crops.
Traditional European bread types
Against the background of decreasing production of rye flour, the demand for rye bread is increasing, the production of which increased and reached 8.1 thousand tons in 2016, but the raw material for such bread, unfortunately, has to be imported: in 2014/2015 – only 9 thousand tons, and in 2015/2016 already 21.2 thousand tons, of which for three months of 2016 (July-September) imports amounted to 12.4 thousand tons.
Bakery products market: imports and exports
Asia is the main buyer of Ukrainian agricultural products and bread. For example, in March, China published a special issue of the magazine “Food to China” dedicated to food products produced in Ukraine. And although the main products supplied to Asia are carbonated water, beer and confectionery, bread and bakery products are not the least important.
Thanks to the abolition of duties, the EU is opening its markets, although it is quite difficult to win them: high quality standards and great competition require significant investments, which not all bakeries have.
In 2016, Ukraine increased exports to Moldova of bread cereals and grain products worth more than $17 million.
Portrait of the target audience
Bread is a universal product that is in demand among all segments of the population. In recent years, the so-called “social bread” has appeared, but the designation is not correct, because social bread is bread of traditional recipes.
Revival of ancient recipes of bread and bakery products production is due to the growing popularity of everything national and originally Ukrainian. The popularity of healthy lifestyle provoked the emergence of new varieties of bread, which are mainly produced according to the specifications of the enterprise, but are no less in demand.
Traditional world types of bread
The habit of young people to eat on the go and various fast food dishes popularize lavash, both Georgian and Armenian. The loaf has become quite a popular bread product on the tables of young people and not only. In general, there is an increase in demand for white bread compared to rye bread.
During all the years of independent Ukraine, bread was the most regulated product by the state. Today, Resolution No. 1548 of 1996, which allows local authorities to fix prices for goods from the social group, has not ceased to be in force.
The cost of bread that we see on the shelves of stores is formed from: flour – up to half of the production cost, gas and electricity – from 4% to 15% (depending on the company), wages to employees (up to 7%).
Bakery products market analysis: trends and forecasts
Analyzing the world market of bakery products, experts note the growth in the number of small bakeries, which is currently 65%. But the Ukrainian market is different: small enterprises, as well as large ones, have faced a number of problems.
The main problems in the development of the bakery products market today are:
- crisis in the economy due to the depreciation of the hryvnia;
- ATO and the loss of markets in Luhansk and Donetsk oblasts, as well as the annexation of the Crimean peninsula;
- monopolization of the market in some regions;
- increasing production at home;
- poor quality of raw materials;
- Difficulty in supplying to remote regions due to lack of infrastructure;
- tax pressure on small businesses;
- depreciation of production equipment.
The economic crisis, as well as the consequences of military actions in the east of the country and the reduction of product supplies to the Russian market, provoked a 10% decrease in the production of bakery products in Ukraine, compared to 2016.
Everyone can buy low-quality bread. The reason for this can be not only expired goods, but also the composition, which many manufacturers do not specify. To cheapen the cost of the final product, they use low-quality raw materials (contaminated or expired flour), produce bread using simplified technologies that allow to speed up the production process significantly. At the same time they add flavorings, stabilizers, flavor enhancers, leavening agents, dyes. The only plus of such goods that meet the requirements of the retail network is that they stay on the shelf for a long time without losing their marketable appearance.
The increase in the minimum wage from 01.01 2017 to UAH 3,200 provoked an increase in taxes to be paid by entrepreneurs.
The quantity of plain bread and bakery products is decreasing, but, nevertheless, the popularity of more expensive and high-quality bakery products is growing. To increase profits and market promotion, bakery enterprises should increase the number of types and varieties of bread products, modernize production.
All factors affecting the level of bread consumption can be divided into three categories:
- those that have little or no impact on product consumption;
- those that increase consumption;
- the ones that lower the bread intake.
The main factors affecting demand:
- pricing policy;
- population size;
- population migration;
- revenues;
- unemployment rate;
- rational consumption rates;
- flour production.
In general, the market of bakery products should be developed by optimizing production according to demand. This will allow to establish economically justified prices for products and, accordingly, will stimulate agrarians to increase the yield of bread crops to obtain stable profits, even at the expense of reducing the cultivated land.
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