Speaking at the DAIRY BUSINESS-2018 conference on November 15 in Kyiv, Vadym Chagarovsky expressed shared his thoughts on general situation on Ukrainian dairy market. He also analyzed the reasons why the situation on the dairy market is now better than last year.
Why do we have a better dairy market this year? The first reason is that this year, for the first time in five years, all dairy companies conducted advertising and promotional campaigns. Everyone appeared on TV: Halychyna, Milk Alliance, Danone, Wimm-Bill-Dunn, Terra Food, Molokija, Loostdorf. This list is just an example. Actually, this year practically all dairy companies have carried out extensive advertising campaigns. I believe that this is one of the reasons: consumers’ loyalty has increased and this contributed to the growth of consumption.
The second reason is a relative stabilization of prices for dairy products. There were no big upsurges in prices that were earlier this year. The price situation was more or less stable. It also contributed to the increased consumption.
The third reason is switching from consumption of the home made market dairy products sold on the markets (bazaars) to consumption of the branded dairy of recognized producers. Speaking about bazaars, where dairy products are sold, it is worth noting that there is almost no presence of the State Service of Ukraine for Food Safety and Consumers Protection there. There is a lot to do for them there.
As an example, I will bring a curd (cottage cheese) group. In Kyiv, and also in Kyiv, Kharkiv and Poltava oblasts cottage cheese (curd) costs 23-24 UAH/kg. All dairy specialists understand that this is impossible, because at least 8 tons of milk goes to production of 1 ton of cottage cheese. Even if cheaper milk produced in households is procured for production, then simply the cost of raw milk for production of 1 kg of cottage cheese is 40 UAH. And the selling price of cottage cheese on bazaars is 23 UAH.
In dairy industry we have our own “inventors”, who use special technologies for production of cottage cheese. Such technologies are mainly used in Kharkiv region: Zmiyivsky, Bogoduhivsky, Malorogansky dairies produce cottage cheese by Russian technology – using artificial fibers and vegetable protein. The production capacity of these enterprises makes 30-40 tons of cottage cheese products per day. Unfortunately, there is no response from the relevant consumer protection services. In my opinion, the State Service of Ukraine for Food Safety and Consumers Protection, Tax Inspectorate and even the power structures should be interested in such business activity. Therefore, we still have such products on our dairy market.
Fourth. There is shadow economy in Ukraine. According to European sources its share is 55% of the total economy. Our local sources say that the share is much less, only 40%. But at the same time, everyone admits that this phenomenon exists. Once there is a shadow economy, there are shadow revenues, there is an opportunity to buy products from these revenues.
With the start of using the so-called “innovative technologies” that I mentioned, both dairy consumption and dairy production have increased. The fact that such technologies are applied is apparent, at least because we do not have that much raw milk to produce so much dairy as it is shown by statistics.
Well, the last, fifth, reason for improving the situation on the country’s dairy market. We observe a revival of dairy products consumption in HoReCa segment, and this is especially noticeable in Kiev and the Kiev region. Kiev today is a very large city. In fact, almost all refugees from Donetsk and Luhansk oblasts live in Kyiv region. We see how much the number of catering points has increased. According to some data, the growth of the HoReCa segment is 40%.
Understanding the reasons for the growth of our market we need to think – how to develop further.