In Ukraine Danone has been working for 20 years, of which 11 it has been engaged in local manufacturing of dairy products.

More than 80% of milk suppliers have been cooperating with Danone for more than five years. In cooperation with their suppliers Danone constantly gives priority to high quality of the purchased milk. That is why building long-term relationships with each of our suppliers begins with the audit of the suppliers, both agricultural enterprises and farms. We do not compromise when it comes to quality and we only work with a network of proven farms.

We still have difficulties with fixing milk purchase prices for a long period (a year or a quarter). There are several reasons for this.

The first reason is significant seasonality of milk production. According to 2017 statistics, in Ukraine individual households are still main milk producers with share in production of 74%. 26% of milk are produced by large dairy farms. Individual households cannot regulate the effects of seasonality.

The second reason, which is also important, is setting large contracts by export-oriented dairy processors. When such a large contract is set, processors are ready to offer a purchase price higher than the market one, because their income from exports covers their expenses for the expensive milk. This leads to market instability.

The experience of Danone shows that even in such conditions there is an opportunity to build long-term cooperation between milk suppliers and processors. The fact that most of Danone’s suppliers has been working with the company since the first day of production start-up is the proof.

For example, we continued successful cooperation with Unimilk suppliers after the merger with this company in 2010, and we have been keeping the main portfolio of milk suppliers till now.

We can see the potential in further dissemination of Danone’s international quality standards in Ukraine. So, we are working towards the contracting based on the principles of mutually beneficial cooperation, so that dairy farmers could develop investing in the further growth of their business.