Dairy in Ukraine

Prospects

Higher butter prices encourage continued move from butter to margarine

In 2018, a consumer switch from butter to spreads was evident, despite rising incomes. This was because of strong price increases for butter due to a deficit of milk because of drought, and successful export-led local price increases.

Growth expected for butter in forecast period likely due to product launches

During the economic crisis 2014-2017, butter saw a decline in volume sales, as this product can be replaced by spreads, and Ukrainians economised wherever possible. At the same time, Ukraine was and is one of the top exporters of butter in Western Europe and globally.

Lower unit price leads to popularity of large pack sizes

Traditionally, the pack sizes in butter were 200g and 100g. However, big sizes such as 400g and 500g and even 1kg are appearing in the portfolios of leading companies such as Terra Food Group (Ferma), Valio and private label producers such as Fozzy Group (Premiya).

Competitive Landscape

Schedro maintains lead in margarine and spreads, while more players enter butter

Schedro continued to lead butter and spreads in value terms in 2019, due to its strong and rising share within margarine and spreads. In the last three years of the review period consumers chose this brand as category leader in the “Favourites of Success” vote.

Division between butter and dairy spreads becomes more visible

In Ukraine, according to the product content, the producer is required to indicate whether the product is butter or a dairy spread (with vegetable fat content). Historically, dairy spreads have traditionally been priced lower than butter.

Expansion by local player, but departure for international player Danone

Olkom Kyivskyi Margarinovy Zavod (Olkom brand) invested in modernisation and new equipment in 2018 and 2019. It added a new line for the production of edible fats, and expanded its warehouse space.

Prospects

Unpackaged hard cheese sees strong growth, but unpackaged dominates

Packaged hard cheese continued to see the strongest growth within cheese in current value terms in 2019. It is becoming increasing popular as consumers consider that the packaging guarantees that that the product does not contain any bacteria.

Rising production of local goat cheese leads to sales growth

Farm produced, craft goat cheese, so-called syrovarni, has become increasingly popular. Producers are mainly goat farms and small manufacturers, and their products are often sold at markets which attract tourists.

Health-orientated and lactose-intolerant consumers demand lactose-free cheese

Lactose-free cheese is expected to become increasingly popular in Ukraine, due to the growing consumer demand for lactose-free products from international and Ukrainian companies. Despite the high price of this type of cheese, more and more people are purchasing it, both lactose-intolerant and health-orientated consumers.

Competitive Landscape

Terra Food Group’s umbrella brand Ferma benefits from high quality reputation

Terra Food Group continued to lead the fragmented cheese category in 2019, with a static value share. Terra Food Group has obtained leading positions in almost all dairy categories.

Bright and interesting packaging helps Kovel-Moloko grow its share

Kovel-Moloko (Komo brand) remained the second company in cheese in 2019, and saw a strong value increase. It has a presence in the majority of categories and constantly launches new flavours.

Product launches expected to ensure growth

Recent new product developments in hard cheese included premium products under the Komo brand (Kovel-Moloko), Old Dutch, which is matured for two months, and Golder, which is matured for 12 months. These were unique for the mass market, as such offerings were previously only available in specialist shops.

Prospects

Changes to milk standards expected to have little effect on volume sales

Changes to the state standard (GOST), which were due in January 2018, have been postponed until 2020, and even possibly until 2023. There will be three quality classes in milk (extra, high and first grades) instead of the current five classes.

New products and positionings to stimulate interest

Milk manufacturers are expanding their ranges with new products and new positionings. For example, goat milk is becoming increasingly popular, due to the rising number of lactose-intolerant consumers in Ukraine and falling unit prices.

Making barista-style coffee at home boosts sales of full fat shelf stable milk

Horeca was recently a driver of growth in shelf stable milk in retail. In a continuation of the trend from 2018, the growing number of coffee shops and their rising popularity led to consumer interest in preparing barista-style coffee at home instead of consuming instant.

Competitive Landscape

Lustdorf maintains lead with launches of wellness products

Lustdorf continued to lead drinking milk products in value terms in 2019. The company produces drinking milk products under the core brands Selyanske, Burenka and Na Zdorovya, covering all price tiers with these brands.

Flavoured milk drinks grows thanks to widening flavours, with cocoa having strong appeal

Cocoa is a traditional milk beverage in Ukraine, which is produced mostly at home, or in kindergartens, schools and hospitals. However, in the middle of the review period Molochny Alliance launched Kakao Na Molotsi (cocoa-flavoured dairy milk drink), which saw great success, as it is ready prepared and is tasty either cold or hot.

Smaller pack sizes a strategy to maintain value sales

After cancellation of the state regulation on unit prices for social products (including milk), manufacturers of drinking milk products increased unit prices only moderately, as many consumers could not afford to purchase expensive products. In a strategy to maintain their value sales, most producers reduced the size of their packaging from 1-litre to 950ml, 900ml, 890ml or 870ml, to keep prices stable.

Prospects

Sour milk products benefits from traditional appeal, in addition to health trend

Yoghurt and sour milk products continued to see retail volume and current value growth in Ukraine in 2019. Sour milk products remained the biggest category, due to the popularity of traditional products such as kefir, ryazhanka and zakvaska, and their benefits for digestive health.

New launches in all categories focus on health and wellness benefits

The health and wellness trend was strong in yoghurt and sour milk products in 2019, due to the many recent new product developments. Due to its continued rising popularity, new products were launched in plain yoghurt, without sugar and with lower fat content, and marketed as “natural”.

Stronger advertising stimulates sales and consumer loyalty

In 2019, much more advertising activity was seen from several brands. For instance, Halychyna, Yagotynsky Maslozavod, Danone, Wimm-Bill-Dann, Terra Food Group, Molokiya and Lustdorf carried out television advertising, and for some products SMM/digital support was also seen.

Competitive Landscape

Danone launches new products, attempting to halt decline

Danone continued to lead yoghurt and sour milk products in value terms in 2019, although it saw a further slight share decline due to the increasing competition. Meanwhile, Lactalis Ukraine in second place saw a slight share increase.

Yagotynsky Maslozavod offers various niche products to maintain its growth

Yagotynsky Maslozavod was the fourth player in yoghurt and sour milk products in 2019. It has a separate factory for baby food and its dairy brand for children, Hopsy.

Strong innovation as players seek to capitalise on shifting health trends

At the end of the review period, Halychyna rebranded and carried out new product development. It launched white packaging for its products, and gave television and YouTube support to the rebranding, focusing on the younger generations.

Prospects

Plain fromage frais and quark grows with the rise of cheaper family packs

Other dairy continued to increase in both retail volume and current value terms in 2019. Plain fromage frais and quark saw the strongest current value growth, and this is expected to continue in the forecast period.

High sugar content and old-fashioned image lead to decline in condensed milk

Plain condensed milk is considered an old-fashioned product, which is not in favour amongst people with modern lifestyles. Its unhealthy image due to the high sugar content is also a factor negatively affecting sales.

Hectic lifestyles boost chilled snacks, with room for growth in the premium segment

As hectic lifestyles leave limited room for cooking or going out, the snacking culture is expanding towards all price platforms, including the premium segment, in which chilled snacks has room for growth. Chilled snacks are mostly made from fromage frais, and are the choice of parents who want to give their children tasty and healthy snacks instead of biscuits or chocolate.

Competitive Landscape

Widening range leads to the rising share of “others”

Wimm-Bill-Dann Ukraine continued to lead other dairy in 2019, although it saw a slight decline in its value share due to the rising competition. The company has a presence in chilled snacks, cream, and fromage frais and quark with the brands Slovyanochka, Chudo and Vesely Molochnik.

Several new product developments from Danone’s Danissimo

Danone offered various new product developments in chilled dairy desserts at the end of the review period. For instance, it launched the brand line Danissimo - The Cake, with flavours of popular desserts such as tiramisu, cherry brownie and medovik (Slavic layer cake).

New products target niches and new packaging attracts consumers

Danone was not the only player involved in new product development, however. The Lactonia Fit+ line from Lactalis Ukraine is a flavoured fromage frais and quark with high protein and low fat (0.

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