CEREAL MARKET ANALYSIS

Cereal Market Research 2017

The analysis of the cereal market in Ukraine begins with a somewhat paradoxical observation: consumption of flour and cereals is falling, while production is gradually increasing. Combines are modernizing existing equipment and building new workshops, increasing the pace. This is due to the increase in exports of cereals and flour abroad.

Ukrainian companies in 2017 began sending their products abroad – for example, Agroprodservis exported products to Hungary and Poland. Domestic products occupied more than 99% of the cereal consumption market, while imports accounted for less than 0.9%.

Ukrainians mainly consume the following types of cereals:

• peas;
• buckwheat;
• corn;
• semolina;
• oatmeal;
• pearl;
• wheat;
• rice;
• barley.

Buckwheat is among the favorites, Ukrainians eat up to 180,000 tons per year, but its production is falling, albeit at an insignificant rate. The reason for this is low profitability and devaluation of the national currency. Nevertheless, Ukraine still exports a lot of buckwheat and remains in the top three exporters.

Read also: “Analyzing the market of prepackaged cereals in Ukraine”

Average prices for basic cereals in 2017 varied by type. Wheat groats rose from UAH 8,182 to UAH 11,136 per ton. Buckwheat became cheaper from UAH 22,345 to UAH 15,014 per ton (hereinafter all statistical data are taken from the reports of the State Statistics Committee and the State Fiscal Service).

I wonder how prices changed from 2013 to 2017. Millet groats are one of the cheapest, buckwheat groats are one of the most expensive. These two products are taken into account in average prices on the official website of the State Statistics Committee, showing market segmentation (prices are in hryvnias per ton).

Cereal market 2017: production

In total, producers gave away 206,758 tons of cereals and cereal-based finished products in 2017. Of these, pure cereals are 148,040 tons and prepared foods (such as muesli) are 58,718 tons. Cereal production for 2017 compared to 2016 increased by an average of 2.6%, driven by higher output of oatmeal, buckwheat and other cereals. Oatmeal output was up more than 52%. The other types of cereals are experiencing a decline, as shown in the table below.

It is difficult to make comparisons with previous years, as the items displayed in government statistics have changed slightly for each period. However, it is known that 281,269 tons of flour and cereals plus 21,058 tons of finished products made from various cereals were produced in 2015. Pure groats accounted for 42,294 tons.

The volume of products sold increased significantly compared to previous years, up 80% compared to 2014. Production in Odessa, Dnipropetrovsk, Chernihiv and Ternopil increased the most. Decrease in volumes occurred in Kherson, Cherkassy, Sumy, Kharkiv.

The index of industrial activity shows how the volume of production is changing. It is calculated as the ratio of the current volume of production in monetary terms to the volume of industrial production in the previous year. In monetary terms, cereal production in Ukraine decreased – see the table below.

Ukrainian cereal market: consumer portrait

Cereal is a versatile product that is purchased by consumers in virtually every market segment. The target audience of large ranges from moms with young children to retirees. The main ones are rice and buckwheat groats, which are the most widely represented on the shelves of stores. Among other bulk products, there are far fewer brands.

Ukrainians eat about 5 kg of rice and 3.5 kg of buckwheat per year. More than half of the groats we buy are used to prepare side dishes. It is a relatively cheap product that is part of the basic consumer basket and is mostly bought in store.

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Croup has a very low level of brand loyalty: consumers do not care about the brand, they easily switch from one manufacturer to another. Brands here are mainly needed for product recognition. The customer is not just offered a product, but is shown attention to it, invested efforts to make him take this particular product.

In the case of rice, the differences in branding are justified – there are many types of rice, from the cheapest to the premium basmati and jasmine. Other cereals, on the other hand, are basically of similar quality and win only due to “attention to the consumer”.

Ukrainian cereal market cross-section: largest producers

The largest cereal producers in Ukraine are:

• Cereal Ukraine;
• Terra;
• Shevchenko plant;
• Nadiya LLC;
• Altera.

Cereal Planet Ukraine is one of the largest producers, holding 10% of the cereal market in Ukraine. Its portfolio of brands includes Olimp, Bulgur, Mayfaina, Ridlana, and Zlatokositsa. The holding was founded in 2012, and Cereal Ukraine itself appeared in 2013 after the merger of ACF Ranok, Olimp LLC, Selkhozkorm LLC. All three companies have been operating in the croup market since the mid-nineties. Cereal Planet Ukraine has 8 lines for the production of: buckwheat, oatmeal, bulgur, millet, barley and other cereals, as well as cereal flakes. The company produces up to 5,000 tons of cereals per month.

Terra produces the following brands: Terra, Healthy Nutrition, Terra-Hercules, Golden Fleece. The company has been operating since 1998 and today produces cereals, flakes and instant porridge.

LLC “Shevchenkivsky Plant of Foodstuffs” since 2001 produces cereals, flakes, flour, muesli. The plants are located in the village of Shevchenkovo and the head office is in Kiev. Main brands: “Try”, “EveryDay”, “Smak Italia”. The company exports cereals to Israel, UK and 5 other countries.

Nadiya Ltd. has been producing cereals and flakes since 2001. The main brand name is Holm’s. The company is capable of producing up to 3,000 tons of cereals and up to 1,000 tons of flakes per month.

“Altera or Altera Azteca Milling Ukraine has been part of the Gruma group of companies, a major producer of corn flour and corn flour products, since 2010. The company itself was founded in 1995. The company produces more than 120,000 tons per year and exports a portion to 10 countries overseas.

Major brands of croup

In addition to the companies and brands described above, there are other major brands of croup on the Ukrainian market:

• Art Foods;
• “August.”
• “Macfa.”
• { “narodna”;
• “One hundred poodles.”
• “Takida.”
• “Fourchette.”
• “Hutorok.”

Art Foods – produced by GALA FOODS, which has been in operation since 2015. The firm specializes in rice and buckwheat groats. In addition to the brand mentioned above, their assortment includes the “Pere” and “Taki Spravy” lines of cereals for different price segments of the market.

“August” – products of the company TOV “August-Kiy”, which is engaged in the production of cereals, flour, sugar. The company began operations in 1996.

Makfa produces products under the name of TM “Makfa” and specializes in pasta and flour. However, there are plenty of cereals in her range as well. This is a Russian brand, widely represented in the Ukrainian market.

“Narodna” and “Furshet” are trademarks of the Furshet chain. The first brand is sold at low prices for the budget segment of the market, while the second brand is slightly higher in quality and price. Furshet does not produce itself, but cooperates with manufacturers and packs cereals under its own name.

Read also: “Developing a private label for retailers”

The Sto Pudov trademark belongs to Variator, which also produces canned fruit and vegetable products under the Ogonyok brand and dairy products under the Vershok brand. The Kharkov company has been working for more than 15 years on the same model as Furshet: it negotiates with suppliers, receives cereals from them, then stores, packs and distributes them under its own brand.

“Takida” is produced by PE “Company Energy”. The brand supplies 33 different items: cereals, flour, sugar and pulses. The company makes arrangements with producers of agricultural commodities and distributes them under a named brand.

“Khutorok” is a brand of the company “Ridny Product”, part of the Ukrainian Food Company (UFC) group. The complex was founded in 1998 and now also produces under the brands “Khutorok Panskyi”, “Zolotiy Vrozhay”, La Pasta per primi, Pasta Letta.

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Import and export of cereals

The main sales regions for Ukrainian cereals are Asia and Africa. Exports during 2017 increased by 26% compared to 2016. Although if compared to 2014, the value of exports decreased by 24%.

Main export countries:

• Israel;
• Moldova;
• Netherlands;
• Belarus;
• Egypt;
• Germany.

The main export item for which an increase was observed was corn groats. Egypt and Israel purchased it the most. There were also new buyers: Malaysia and Saudi Arabia. The largest importer of Ukrainian cereals in general was Poland – purchases increased to 1.7 thousand tons, by 183%. Germany, on the other hand, began to buy much less, although a year earlier it was the main consumer.

Imports vary along the same lines as exports, and compared to 2016, imports of cereals into Ukraine increased by 33%. Compared to 2014, imports are down 30%.

Imports increased mainly due to imports of buckwheat. Due to this, its prices have decreased during 2017. Most of it (82%) was imported from Russia, while the rest came from Kazakhstan.

Cereal market in Ukraine in 2017: price segmentation

The main consumer trends are buying cereals in sachets for quick cooking and instant porridge. All major manufacturers are sure to have such products in their product range.

The price segmentation in the croup market is as follows:

• weight – nameless groats sold in bulk containers (25-50 kg) or packaged by retailers (brands “Narodna” and “Furshet”);
• pre-packaged – cleaned groats, packaged for retail, the manufacturer and brand are indicated on the package;
• value-added – cereals in bags, with additives or flakes, all products undergo additional cleaning and processing, which increases the price.

Trends in cereal packaging design

Most prepackaged cereals come in two types of packaging: a cardboard box with portion packets (about 400 grams) and a regular cellophane bag weighing about 800 grams. Examples of such packaging can be seen in the pictures in the “Big Brands” subsection.

Portion packs save time cleaning and cooking the grits. In addition, one bag contains a measured amount of groats, which is convenient for the consumer.

A 700-800 gram cellophane bag is cheaper, but it’s not necessarily synonymous with budget groats. Art Foods, for example, sells expensive jasmine and basmati rice in such packages.

Another option is individual portioned cereal bags. Most often they sell oatmeal with fruit and other additives. Such porridge is convenient for moms with small children and for those who are used to start the morning with oatmeal, but do not want to mess with its cooking.

Read also: “Packaging for porridge and convenience foods”

Cereal market in Ukraine in 2017: legislation

In 2017, Ukrainian lawmakers introduced only one but significant change in the legal framework of the croup market. In July, the law on the abolition of state regulation on food products began to take effect. The main goal was to reduce pressure on business and promote competition.

Abolished price regulation on trade additives not exceeding 15% of the supplier’s wholesale price. Now the prices of flour, bread, pasta, cereals – a total of 15 groups of goods – are not restrained by law.

Also, producers do not have to declare wholesale prices for buckwheat groats, along with 12 other categories of goods. The limits on the profitability of flour, bread and baby food production were abolished.

Conclusion: the situation of cereal consumption

In general, the cereal market continues to develop steadily. Domestic production falls marginally, which can be attributed to weather conditions and imperfect legislation. Exports and imports of cereals are increasing rapidly. The bulk of Ukrainian exports of cereals go to Asia and Africa. Experts believe that the same trend will continue in the future.

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