Ukraine aiming for major increase in confectionery exports

Ukraine is aiming for a significant increase in its confectionery sector, despite challenges of market destabilisation resulting from conflict with neighbouring Russia, as Eugene Gerden reports for Confectionery Production

The Ukranian confectionery industry is believed to be on the verge of major changes, with leading local producers preparing to significantly increase the volume of production and exports, according to the nation’s Ministry of Economy.

Last year total volume of confectionery production in Ukraine was reported as being 698.670 tonnes, which includes companies such as Roshen (pictured), which recently exhibited at ISM. However, production figures are still lower than levels before pre-crisis levels, which varied in the range of 900,000 to one million tonnes per year, which means the market still has potential for a further growth.

According to Alexander Sokolov, general director of Pro-Consulting, a Ukranian confectionery agency, the local market has significantly changed in recent years, while among the major factors of this became devaluation of the national currency – hryvnia, and the drop in the purchasing power of local consumers.

The other factors include the ongoing military conflict in the east of Ukraine, and the recent closure of traditional markets of CIS countries for the exports of Ukranian confectionery products, particularly the Russian market. The crisis, which began in the industry in 2014, resulted in the loss of businesses for many Ukranian confectionery producers, particularly those, which factories were located in the east of the country (a centre of Ukranian industrial production prior to 2014), which is reportedly being controlled by pro-Russian forces.

Moreover, the crisis and its consequences is reported to have led to the change of preferences of local consumers, many of which switched to cheaper products.  In the case of producers, the changed consumer preferences led them to increase the output of confectionery from medium and low price categories and to look for new, vacant niches in the market.

One such niche is organic chocolate, a product, the demand for which has almost doubled in Ukraine in recent years. According to Bogdan Shapoval (pictured), chairman of the Ukranian Council on Food Exports, a public association, which regulates the issues of Ukranian food products to abroad, the trend for such chocolate in Ukraine is steadily growing.

He also added, to date, the volume of it domestic production have been insignificant, while most of local needs were met by imports, primarily from the EU. Still, according to him, there is a possibility such a situation will change already this year, while, in addition to domestic production, a particular attention should be paid for the increase of exports to abroad.

Bogdan Shapoval said: “Particular attention of Ukrainian confectioners should be placed on increasing of their presence within Western markets, particularly the US, the UK, Germany, Poland, and the Baltic countries.

“However, securing entry into these markets will require much time and effort from producers. Another promising direction is Asian countries, particularly China, Thailand, South Korea and Vietnam, where the demand for high-quality confectionery has significantly increased in recent years. There is a need to take into account preferences of local customers. For example, dark chocolate is not very popular in Asian markets, which means that bulk supplies should account for its milk analogues.”

A similar position is shared by Alexander Baldynyuk, a head of Ukrkondprom Association, a public confectionery association, said that a recent lifting of duties on the imports of Ukrainian confectionery to the EU creates conditions for a significant expansion of supplies to that market.  According to his data, at present the annual supplies of Ukranian confectionery products to the EU market are estimated at 10,000 tonnes, however, according to state plans, these figures should increase by 8-10 times already during the next several years.

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