ANALYZING THE MARKET OF DAIRY PRODUCTS IN UKRAINE

In recent years, the Ukrainian dairy market has been characterized by strong instability. The dairy industry is strongly influenced by the economic situation in the country and on the international market. The analysis of the milk and dairy products market shows what changes occurred in this industry in 2016.

Dairy market analysis: production

Ukraine is experiencing a decline in dairy production. In 2014, the country produced 11.23 million tons of milk. In 2015, milk production in Ukraine amounted to 10682 million tons (4% less than in 2014). In January-October 2016, Ukraine produced 9.03 million tons of milk. This is 2.3% less than in the same period of 2015. At that time, 9.3 million tons of milk were produced.

The amount of milk produced by private farms is decreasing. According to Vadim Chagarovsky (member of the Supervisory Board of TERRA FOOD), 60% of milk for processing is supplied by large holdings.

The quality of dairy products is significantly affected by the raw materials used to produce them. According to Irina Kukhtina (Director of Procurement Department of Danon in Ukraine), small farms with 1-2 cows are not interested in investing in quality milk. Such farms produce mostly second-grade milk. The quality of milk is reduced by manual milking, lack of hygiene and milk transportation rules.

According to Raimund Yele (FAO Regional Strategic Program Coordinator for Europe and Central Asia), Ukraine has a very low productivity of the dairy sector. One cow yields an average of 4.9 tons of milk per year. For example, in the USA, an average of 10 tons of milk can be obtained from one cow, while in the EU – 7.5 tons.

In total, there are about 200 enterprises in the milk processing industry. According to analysts, no more than 100 of them operate efficiently. Outdated technologies prevent many Ukrainian enterprises from becoming profitable.

Analysis of the dairycattle breeding market shows thatcattle breeding has become unprofitable. Since the 1990s, the number of cows in Ukraine has been rapidly decreasing. As of September 2016, there are 4162.5 thousand cattle in Ukraine. This is 119 thousand (2.8%) less than in September 2015.

Dairy market analysis: exports and imports

Ukraine’s exports of dairy products are declining. In 2015, exports amounted to 131 thousand tons ($214.4 million). The total export of dairy products in January-October 2016 amounted to 93 thousand tons. This is 8% less than in the corresponding period of 2015.

Exports of dairy products by category in January-October 2016 (in brackets are data on the sum of exports of each category for October 2016).

1. Milk and cream not condensed – 7.9 thousand tons. Moldova imported the most of them (by 378 thousand dollars in October).
2. Condensed milk and cream – 47.2 thousand tons. The largest shipments were to Bangladesh ($886k tons in October) and Kazakhstan ($553k tons in October).
3. Milk whey – 19.8 thousand tons. The largest supplies were to Pakistan ($191 th. tons in October) and China ($151 th. tons in October).
4. Butter – 9.3 thousand tons. The largest importer – Kazakhstan ($2.9 million in October).

Analysis of the dairy products market shows that export priorities have changed. Now Ukrainian producers supply milk powder and butter. These products have a long shelf life, so they can be exported to Eastern and African countries.

The closure of the Russian market prompted Ukrainian producers to search for new markets. In 2016, supplies of dairy products to such countries were significantly increased:

• Egypt;
• Pakistan;
• Georgia;
• China;
• Morocco;
• Nigeria;
• Vietnam, etc.

Imports of dairy products to Ukraine fell sharply in 2014-2015. Previously, desserts, expensive cheeses and yogurts came from Russia, the USA and the EU. The decline in the purchasing power of the population affected imports of expensive products. In January, imports of dairy products to Ukraine amounted to -11.3 thousand tons (35.4m dollars).

Imports of dairy products by category in January-October 2016 (in brackets are data on the sum of exports of each category for October 2016).

1. Milk and cream not condensed – 411 tons. The main supplier – Germany ($44 thousand in October).
2. Condensed milk and cream – 829 tons. The main supplier – Belarus ($136 thousand in October).
3. Dairy whey – 521 tons. Most of all was purchased in Portugal ($87 thousand in October).
4. Butter – 980 tons. The largest supplies were from France and New Zealand. In October the leader of supplies was France (86 th. dollars).

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Milk market research: quality analysis

In summer 2016, the quality of Ukrainian dairy products was checked . SE “Kyivoblstandarttechnologia” examined 40 brands of butter and spreads. The result showed that more than half of dairy products are manufactured in violation of technical specifications. Manufacturers replace milk fat with fats of animal or vegetable origin and mineral oils. This worsens the quality of products and can cause harm to human health.

Milk market research: consumer portrait

Dairy products are an important part of the diet of the Ukrainian population. Milk products serve as a source of vitamins and macronutrients. However, the population of Ukraine is reducing the consumption of dairy products due to their sharp rise in price. Ukrainians consume 220 kg of dairy products per capita. This figure is much lower than in the EU, where a person consumes 260 kg of dairy products per year.

Most consumers, when choosing dairy products, are primarily focused on the price. Products made from natural milk are more expensive, so people take dairy products with additives.

The most common thing people buy is milk. It is used for cooking and drinking. Another popular product is drinkable yogurts. They are nutritious, quickly satiating, and can be carried around. Drinking yogurts are loved by office workers, students and athletes. The popularity of healthy lifestyle among the people has increased the demand for cottage cheese. A variety of yogurts and cheese masses are bought by parents for children.

Analysis of the dairy products market has shown that consumers consider products labeled “for children” to be of higher quality. Therefore, adults also take them for themselves. Such dairy products often have vitaminized additives.

Dairy market research: largest Ukrainian production companies

TERRA FOOD Group. Agrarian Holding is engaged in the production of dairy and meat products, and agriculture. The history of the company begins in 1999. At that time Stanislav Voytovich (President of TERRA FOOD Group) bought the Tulchinsky butter and cheese factory. Today the company’s production capacity consists of 19 plants. In 2016, TERRA FOOD was recognized as the largest dairy company in Ukraine.

Behind the data of the official website company per year:

• processes milk – 553,000 tons;
• produces butter and vegetable and butter mixtures – 113600 tons;
• produces cheese – 54,000 tons;
• produces whole-milk products – 80000 tons;
• produces soft cheese – 2,900 tons.

In 2014, the company became the Ukrainian leader in the production and sales of packaged butter and vegetable-cream blends. In 2016, the company became a leader among Ukrainian producers of processed cheese. The main dairy brands of the company are Tulchinka, Ferma, Bila Liniya, Premialle. TERRA FOOD exports its products to more than 40 countries of the world.

“Danone Ukraine. The French company Danone has been operating in Ukraine since 1998. In 2006, the company acquired the Kherson dairy plant Rodich and renamed it Danone-Dnipro. Due to the high productivity of this enterprise, the company became one of the top three leaders in the dairy industry of Ukraine. 30% of Danon products sold in Ukraine are manufactured by Danon-Dnipro. The company produces products under the trademarks:

• “Vita.”
• “Activia.”
• “The Jolly Shepherd.”
• “Danissimo.”
• “Rusty.”
• “Prostokvashino,” etc.

Techmolprom Ltd. The company is engaged in the production of canned milk (condensed milk, butterscotch, etc.) and milk powder. It produces products under the trademarks:

• “Beliki.”
• “Omka.”
• “Alpine Meadows.”
• “Gadyachmoloko”;
• “Smilka.”
• “Our Milk,” etc.

Techmolprom LLC is the largest exporter of condensed milk in Ukraine. The company exports its products to the following countries: UAE, Tunisia, Iran, Mongolia, USA, Israel, Armenia, etc.

“Dairy Alliance. The company entered the leaders thanks to the high productivity of Yahotyn Creamery. The plant was founded in 1956 to process milk and cream. It has been a part of the group of companies “Milk Alliance” since 2006. It produces products under TM “Yagotinskoye”. In total, the butter plant produces 36 types of dairy products: kefir, milk, sour cream, butter, etc.

The Dairy Alliance Group is constantly expanding its sales markets. It has been supplying butter to the UAE for several years. In 2016, the company delivered packaged milk to the Kingdom of Bahrain.

Zhytomyr Butter Factory (Rud Company). Before the 1976 reconstruction, the plant existed as Zhytomyr Meat Processing Plant. In 1981 the plant started to produce dairy products. Since 1998 PAT “Zhytomyr Butter Plant” has been producing products under TM “Rud”. The company produces dairy products, frozen vegetables, berries, dough. PAT “Zhytomyr Butter Plant” exports its products to Israel, Japan, USA, etc.

 

Trends in dairy product packaging design

Environmental stewardship. Consumer awareness is growing every year. That’s why dairy products in glass packaging are gaining popularity again. Glass bottles and jars can be recycled. The naturalness of the product should also be emphasized by the visual design of the packaging: vegetable prints and colors that are associated with nature.

 

Maximum Simplicity. A huge number of various brightly colored packages tires consumers. On the contrary, simple packaging helps the customer to quickly find the product he needs. Therefore, the most important information: weight, calories and composition of the product should be visible at a glance.

More color. Most manufacturers use traditional color combinations for dairy products: white, blue, blue. Unexpected and bright colors in packaging design help to stand out among other dairy products.

Unusual shapes. More and more often, dairy producers are moving away from standard packaging forms. Unusual design with additional elements immediately attracts the buyer’s attention to the product. At the same time, manufacturers do not forget about the convenience of consumers. Unusual shapes should not affect the stability of the package.

You can read more about milk carton design in our article.

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Forecast of dairy products market development

According to the Ukrainian system of standards there are 4 grades of milk:

• Extra;
• the highest;
• First;
• 2nd.

This approach does not comply with existing EU standards. To be competitive, Ukraine must change its approach to the quality of dairy products. The country has pledged to establish uniform requirements for raw marketable milk by the end of 2017. If such a bill is adopted, Ukraine will be able to expand its presence in the EU dairy markets.

Japan is to open its market for Ukrainian dairy products in 2017. Earlier, imports were banned due to quarantine. There are already representative offices of Japanese trading companies in Ukraine:

• Marubeni Corporation;
• ITt&CO. LTD;
• Sumitomo Corporation;
• Mitsubishi Corporation.

Only highly efficient dairy farms with strict product quality control will be able to stay on the market. Organization of family farms as part of dairy cooperatives can help to develop dairy production. They should be equipped with modern milking and cattle housing systems. It is necessary to organize proper storage of raw materials in milk stations.

 

Summary

1. Ukraine needs to increase the recognition of its dairy products among other countries. According to FAO (Food and Agriculture Organization of the United Nations) experts, the most promising markets will be China and African countries. It will also be profitable to export dairy products to the countries of the former Soviet Union: Georgia, Moldova, Armenia and Kazakhstan.
2. EU countries are not so favorable for the supply of dairy products. The European market is overcrowded with products of local producers. Only 30% of Ukrainian milk meets EU standards. The situation can be improved by obtaining additional quotas for preferential exports to the EU.
3. In order to increase demand for Ukrainian dairy products it is necessary to improve their quality. For this purpose, farms and milk processing plants need to undergo technical reconstruction.
4. It is necessary to expand the domestic market for dairy products. Increasing the number of dairy products may interest consumers.

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