Ukrainian cheese market is subject to constant changes and unfortunately most of them are not positive. There are several reasons for such a pessimistic assessment of the state of Ukrainian cheese-making industry, both external and internal.
The domestic reasons comprise the significant shortage of raw milk, and therefore high prices of raw milk. In addition, in Ukraine f a the cost of cheese production is too high, and not only because of the high cost of milk. We have a poorly consolidated cheese-making business, there are very few large enterprises equipped with modern equipment with a small number of personnel. There are difficulties with management, marketing and sales.
As for the sales, the big problem is the monopoly of retail chains, which already almost completely dictate the rules of trade, forms of payment and prices. From factory to store counter, cheese often adds in price up to 50%.
The external negative factors primarily include the geopolitical crisis in relations with Russia. When there was trade with this country, Ukraine was one of the world’s largest cheese exporting countries. Due to the cut of the trade with the Russian Federation, Ukraine stopped being called an exporter of cheese, because we now sell only 5-6 thousand tons of cheese to foreign markets.
Moreover, against the background of low world prices for cheese, our country is rapidly turning into a major importer of this product. Now every third kilogram of cheese sold in Ukraine has a foreign origin.
As to the positive aspects, only the stable growth of cheese consumption by Ukrainians can be noted.
Ukrainian cheesemakers are forced to reduce production due to the stable aggravation of the raw milk shortage, as well as for a number of other reasons. But the main problem of domestic producers is the rapidly growing imports of European cheese. If we consider production of hard / semi-hard cheeses (and they form the basis of the market), then we can state that it has decreased by 15% over the past three years. According to INFAGRO estimates, this year production of such cheese will amount to only 57 thousand tons. And ten years ago the figure was many times higher …
Cheese belongs to the category of expensive products, but in Ukraine they are simply expensive. Therefore, even earlier, in times of ordinary financial crises, its consumption declined noticeably. But the crises are passing and Ukrainians are starting to buy more cheese again.
For three years we have been observing an increase in cheese consumption, despite the serious demographic problems – the decline in the birth rate, labor and not only labor migration. Even last year, amid the coronavirus crisis, the growth trend in cheese sales did not slow down, but even intensified significantly.
It’s just wonderful and pleasant to know that Ukrainians have finally gotten rich. The only bad thing is that the growth in consumption occurs exclusively due to imported cheeses. In general, over three years, consumption of cheese and cheese products in Ukraine increased compared to the “bottom” of 2016-2017 by 20% to 173 thousand tons in 2020. This is just an enviable pace for any developed country.
If we assess the average consumption of cheese per capita, it is already more than 4 kg/year, which is a record high for Ukraine. Still, one should not forget that Ukraine still has a very low cheese consumption compared to developed countries.
Unfortunately, in recent years, Ukraine has become a fairly large importer of cheese. Imports of cheese (real cheese) have already exceeded its exports by many times. And the share of foreign cheeses in domestic sales has already exceeded one third of the market. European suppliers are striving to further increase their presence in this market, and soon there will be very little space for domestic cheese makers in their own market.
Until recently, European cheeses were very cheap and it became very difficult for domestic cheese makers to compete with suppliers of this product at a high production cost. Often cheeses of European origin are offered to distributors 20 percent cheaper than domestic cheeses of about the same quality.
Of course, this contributed to the increase in imports. INFAGRO is currently finalizing a new study on the cheese market, and we can see that the situation is difficult. For example, last year importers of cheese have already paid almost $100 million for European goods. In general, the import of cheese has quadrupled since 2018, and this year, according to INFAGRO estimates, it will be about 43 thousand tons.
Yes, the situation in the cheese making business is now complicated. But in the future, everything can get changed if we have enough raw milk and if cheese makers are able to reorganize production and management processes. The potential for this change in the country is simply enormous. Now actively developing companies will strive to stay on the market and in the medium term they will have an excellent profitable business.