Food Service - Hotel Restaurant Institutional

An Expert's View about Travel, Tourism and Food Services in Ukraine

Posted on: 23 Jan 2012

Only recently major international hotel chains, including U.S. chains, started expansion into Ukraine. U.S. processed food products have a minor role in the Ukrainian HRI market due to general low mar

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Required Report - public distribution Date: 12/27/2011 GAIN Report Number: UP1150 Ukraine Food Service - Hotel Restaurant Institutional Annual Report Approved By: Randall Hager Prepared By: Oleksandr Tarassevych, Agricultural Specialist Report Highlights: The HRI sector in Ukraine is now slowly recovering after a downturn experienced in 2008/09. The majority of Ukrainian restaurants and cafeterias survived turbulent times by paying greater attention to establishment positioning in the market and business efficiency. Only recently major international hotel chains, including U.S. chains, started expansion into Ukraine. U.S. processed food products have a minor role in the Ukrainian HRI market due to general low market presence and consumers’ lack of awareness and habits. A limited assortment of high value added U.S. products can be found in upper scale restaurants and hotels. Post: Kiev GAIN Report – UP1150 Page 2 of 17 SECTION I. MARKET SUMMARY The number of hotels and restaurants in Ukraine grew quickly before the 2008 crisis, reaching 5,866 by the end of 2008, but the financial crisis significantly undermined HRI sector development leading to lower revenues and bankruptcies of some establishments. The industry is back to growth in 2010-11, but the growth rate is much slower. The crisis changed short run market behavior but did not change the overall market trend which is influenced by long-term factors. A rapid increase in income growth over the past years has allowed more lower to middle class consumers to eat out. This trend is the driving force behind the expansion of the foodservice industry. The Ukrainian food service sector continues to be dominated by individual (stand- alone) cafés, bars and restaurants, although development of national pizza chains, and national and multinational fast food and coffee shop chains are expected to reshape the market in the next three to five years. A small, but quickly developing and lucrative market segment represented by discos, nightclubs, karaoke bars, bowling alleys, and children’s entertainment centers provided another outlet for imported food products. The hotel network in Ukraine is underdeveloped despite significant investments made in recent years, both by national and foreign investors. International brands have very little representation in the country. Demand for food in schools, hospitals, corporate cafeterias and fast food restaurants is price driven and provide little sales potential for imported products. The economic hardships of the 1990’s and the legacy caused by the deficiencies of the Soviet public foodservice system meant that consumers did not eat out. The economic recovery that began in 1999 resulted in an increase in disposable incomes and the creation of a middle class who had pent up demand for dining out. Also, low incomes resulted in the significant growth of cheap fast food restaurants, coffee shops and pizzerias (currently the fastest growing sector) with full-service restaurants, clubs, ethnic cuisine restaurants and bars taking the lead. Ukrainian consumers are very perceptive to western lifestyle and began socializing in cafés and restaurants. This trend quickly became part of the normal business and leisure cultures. For these reasons, Ukrainian customers rarely take food home and prefer to enjoy a meal out on the town. The younger generation (35 and younger) has become the major driving force behind the growth of the HRI sector. Ukrainians will continue to spend more on eating out. *Source: Households Spending Survey 2005-2010, State Statistics Committee of Ukraine (Note: Spending includes tipping, purchasing food for home delivery/consumption, eating in theatres, stadiums etc. as well as vending machines). The typical household includes 2.6 people Industry experts are predicting 15 percent annual growth in 2011-2012. The expansion in the HRI sector will continue to be concentrated in cities and larger towns, where per capita incomes are higher, life more hectic, UNCLASSIFIED USDA Foreign Agricultural Service GAIN Report – UP1150 Page 3 of 17 time viewed as valuable, and more consumers are willing to eat out. Restaurants and Institutional Restaurants are defined as the following food service providers: full service (upscale) restaurants, fast-food restaurants, cafés (coffee shops), pizzerias, bars, clubs, discos, karaoke bars, etc. For institutional food service providers, the following are included: schools, hospitals and enterprise/factory canteens and cafeterias. The following graph provides the breakdown in spending for all these establishments. Source: State Statistics Committee of Ukraine When data from the 2010 Household Consumption Survey is compared to previous surveys, the trend is clear; Ukraine’s population is spending more on hotels, restaurant and cafeteria (HoReCa) establishments. The share of factory canteens and cafeterias is on the decline (a six percent decrease over the past three years) while the share of independent cafeterias and restaurants continues to increase (five percent and two percent, respectively, over the past three years). This reflects income growth for mid-class consumers and a gradual shift from low-cost, low-quality foodservice providers to higher quality ones. UNCLASSIFIED USDA Foreign Agricultural Service GAIN Report – UP1150 Page 4 of 17 *Source: Households Spending Survey 2010, State Statistics Committee of Ukraine (Note: Spending includes tipping, purchasing food for home delivery/consumption, eating in theatres, stadiums etc. as well as vending machines.) Currently, independent establishments dominate the Ukrainian foodservice market with the exception of fast food restaurants, pizzerias and coffee shops. The overall presence of international food chains remains very limited (including McDonalds fast food, and Nestlé and Jacobs cafés). There is evidence in the Ukrainian press that Burger King and KFC are considering market entry in 2012/13. The Ukrainian fast food sector and pizza chains are developing quickly (for both corporate and franchised establishments). Chelentano Pizza (the owners also control Kartopliana Hata, Café Punkt and Yuppie networks) is leading the pack with 130 franchised pizzerias all over the Ukraine. There are many newly introduced networks at different stages of development (franchising) which are slowly moving into the middle-class and even into the high-end restaurant segment (especially ethnic or specialized food establishments). The cheaper street hot-dog stalls and kiosks are slowly being removed from larger cities and moving to provincial towns with less prosperous and less demanding consumers. Many Ukrainian fast food restaurants and chains avoid associating with “fast food,” preferring to be called “fast service restaurants.” This is a result of the negative perception that fast food chains have in the Ukrainian society. In public statements, managers underline their devotion to freshly procured products and a rejection of semi-processed food ingredients and fried food. Potential U.S. suppliers should be aware of this recent trend for healthier fast foods. The high-end foodservice segment is represented by full-service independent restaurants and two large restaurant groups: The Royal Card and The World Map. These groups are independent businesses, but use single food procurement and distribution center, as well as common discount programs. Many of the independent full-service restaurants began operations in the mid-1990’s, targeting the affluent business clientele who could spend in excess of $100 per person per meal. The emerging middle class is still not too numerous, so growth in high-end restaurant segment is insignificant when compared to fast-food establishments. UNCLASSIFIED USDA Foreign Agricultural Service GAIN Report – UP1150 Page 5 of 17 Source: State Statistics Committee of Ukraine The presence of specialized coffee shops is also expanding quickly. Just a couple of years ago, the Ukrainian market boasted only a few high-end establishments that had opened in the mid 1990’s. Currently, lower-end coffee shops dominate the market. International names such as Nestle (Nestle Ukraine S.A.) and Jacobs (Craft Foods franchising), and Ukrainian and Former Soviet Union based chains such as Double Coffee and Coffee House lead the group. More newcomers are continuing to open small outlets all over the country offering coffee, pastries and soft drinks. These establishments target students, small business employees and younger office workers. Some have copied elements from Starbucks, but others have developed their own style and menus (e.g.: Coffee House Ltd.). The market remains highly fragmented, but very vibrant and expanding quickly. Relatively new to Ukraine, pubs, bars, nightclubs, discos, karaoke bars and other similar establishments usually serve more alcoholic drinks than food (although some clubs have in-house high-end restaurants). This sector has very limited access to U.S. food suppliers (as well as the majority of other foodservice sectors) due to very high fragmentation. Schools, hospitals, state penitentiaries and other government institutions have their own procurement guidelines for food products. In the vast majority of cases, these organizations are under-funded and cannot be considered reliable partners. Concomitantly, the old Soviet procurement system is slowly being replaced with a more transparent system. State institutions announce open tenders for procurement of food products on their official web sites and publish them in the printed mass media. U.S. companies can compete for those orders, although quite often they are small, very product specific (certain fresh vegetables or canned meat that conforms to GOSTs and DSTUs (State Standards) and include only basic bulk products that are designed for local agricultural producers and farmers. The general outlook for the restaurant and institutional sectors is good with positive growth projected for the next five years. Continued income growth will continue to drive expansion of the sector, especially outside of urbanized areas. The state institutional sector will eventually become a significant consumer as budget constraints relax and procurement transparency increases. So far, U.S. suppliers may only directly approach established restaurant chains (both fast food and high end) that use common distribution centers for ingredients procurement. For the remaining portion of the industry, contact through importers is advised. Income and overall economic growth are the determining factors behind the development of the foodservice sector (please refer to Table 1 in the Attachment). Income growth exceeds GDP growth (please refer to Table 1 in the Attachment) and almost tripled between 2000 and 2005. Experts predict that the foodservice sector’s UNCLASSIFIED USDA Foreign Agricultural Service GAIN Report – UP1150 Page 6 of 17 growth rate will mirror the increase in incomes, which is growing between 10 to 15 percent per year. Future growth is expected in smaller towns where people are able to afford eating out. Ukraine’s Income Growth ($ million) 2002 2003 2004 2005 2006 2007 2008 2009 Total Income 36648 42707 54305 74493 93477 123424 160768 114799 including: wages 15634 18734 23213 31371 40618 55241 69655 46893 Profit and mixed incomes 6642 7194 8679 11407 13700 18852 24931 16657 Property incomes (received) 1049 1328 1651 2163 2744 3976 5405 4449 social assistance and other transfers 13324 15451 20762 29552 36416 45354 60776 46800 including: 0 0 0 0 0 0 0 0 - Social assistance 6258 6994 10304 16527 20414 24648 34307 26200 - Other current transfers 1318 1640 2277 2450 2873 3606 4960 4234 - Social transfers in kind 5748 6818 8181 10575 13128 17101 21509 16365 Source: State Statistics Committee of Ukraine Hotels and Resorts The hotel and resort sectors are the least developed in Ukraine. Non-transparent legislation including fuzzy property rights and distribution of land plots for construction, a lengthy return on investment, and high risk has hindered investment from flowing into this sector. Thus far there are only four 5-star hotels in Ukraine, with a fifth under accreditation. The vast majority of 3-star to “no category” hotels are old soviet hotels with poor service standards and pricing policies. Hotels are used mostly by businessmen and rarely by tourists. Ukrainians prefer to stay in private apartments while vacationing (see spending structure by hotel type below). Conditions in private apartments are often better than in nearby “no category” hotels. These cheap private apartments are especially popular among vacationers traveling to sea resorts in Crimea and Southern Ukraine as well as skiers going to the Carpathian mountains. The lack of reasonably priced hotels in Kyiv has resulted in the formation of an entirely new category of hotel, or apartments for rent. Clients may rent a completely renovated 2-bedroom apartment in the center of Kyiv for $100 a night, while few overbooked 4- star and 5-star hotels offer a regular-size room for $170 to $376. Large western hotel chains find penetration in the Ukraine market difficult. Only Swedish Radisson-SAS has opened a single 4-star hotel in Kyiv and announced a plan to build one more hotel in the near future. Hilton Hotels is developing a hotel in the center of Kyiv as well as Hyatt Regency. The Hyatt is expected to open its doors by the end of 2007. Access to these hotels can be obtained through their international offices, but sales of food products will not be substantial. UNCLASSIFIED USDA Foreign Agricultural Service GAIN Report – UP1150 Page 7 of 17 Source: State Service for Tourism and Resorts According to older official statistics, Ukraine has over 4,500 hotels and resorts with a total capacity of 620,000 visitors. It is unclear how many of these are still operational. The 2010 data show only 1,731 hotels, but with total capacity of only 79,833 visitors. The number of visitors to the country continues to increase. The increase in tourists from the European Union is expanding the most rapidly (mainly from Poland and Hungary), but they rarely visit other regions other than Kyiv, Crimea and Western Ukraine. An inflow of tourists is expected during the EURO-2012 soccer championship. It is expected that tourists will visit mostly championship host cities (Kyiv, Donetsk, Lviv and Kharkiv) with little or no attention to the rest of the country. In a long run the vast majority of visitors continue to be from Russia and Former Soviet Union (FSU) countries. Given relatively low per capita incomes in these countries, spending for lower cost accommodations will continue. These tourists travel to Ukraine “as cheaply as possible” and generally are interested in leisure vacations by the Black Sea or around the Carpathian mountains. In order to cut costs they often stay in private rooms or apartments rented out by the locals. This custom is changing slowly and the share of hotels and guesthouses is growing as incomes in FSU countries grow. However, wealthier Russians have changed their vacation destinations from Ukraine to Turkey, Croatia or Bulgaria to take advantage of the more developed hospitality industry. UNCLASSIFIED USDA Foreign Agricultural Service GAIN Report – UP1150 Page 8 of 17 Source: State Statistics Committee of Ukraine Advantages and Problems for U.S. Exporters Advantages Problems Population of 45.8 million. A growing number of Despite general income growth, majority of consumers who can afford to purchase high- consumers continue to save money on food or rely quality food products on home produced food products Demand for higher quality food products is Many customers have a prejudice against imported growing especially in high-end establishments food products due to the boom of low-quality food product imports in the early 1990’s. Ukraine’s HRI sector is expanding, which creates Frequently changing trade legislation and policies a number of opportunities to perspective U.S. often impact trade. Import tariffs remain very exporters. high. Changes in urban life-styles has increase demand Rapid development of local manufacturers for eating out producing ready-to-cook products creates competition for similar imported goods American-made food and drinks are still new for Growing number of domestically produced generic the majority of the population, but rather popular products; lack of knowledge towards American among the younger generation; products In general restaurant owners are opened to new Strong competition with suppliers of similar products in order to attract customers products from Russia and European Union Existence of large importers experienced in Difficulties in finding a reliable partner or distributor importing food products to Ukraine SECTION II. ROADMAP FOR MARKET ENTRY A. Entry Strategy Every company must choose its own market-entry strategy that is dependent on preliminary market research results and the type of product to be promoted. The strategy is also dependant on the company’s financial strength. Access to the entire HRI sector can be obtained by working through food ingredients importers, UNCLASSIFIED USDA Foreign Agricultural Service GAIN Report – UP1150 Page 9 of 17 since very few chains have their own procurement centers. A perspective entrant is advised to analyze market competitiveness for a specific product with respect to local preferences, restaurant chain menus, local competition and sales channels (marketing research from a specialized consulting firm may be required). A visit to a restaurant or food exhibition in Ukraine may be very useful. These events (although many of them are dedicated to HoReCa equipment) can provide a market snapshot, as well as to identify perspective importers and wholesale vendors. Usually only large companies participate in these exhibitions. It’s advised to meet with representatives from state regulatory bodies in order to obtain additional information on import requirements. Companies are advised to use services provided by their embassies, consultants and foreign partners already doing business in Ukraine. In order to make the first delivery, usually a large local import company or chain is chosen. The company has to have a good reputation and experience in customs clearance, and must have storage facilities and a developed distribution network. The company should have an established record working with Western suppliers and experience in arranging regular supplies of food products. Western companies that strive to supply directly, circumventing Ukrainian mediators, often sustain losses due to lack of local market knowledge. A large domestic import company is usually better adjusted to local conditions, with established trade ties and contacts in state structures. Ukraine remains a country where personal contacts play an important role in business. Should an exporting company decide to open a representative office, it should be located in Kyiv, where government authorities are concentrated, or in other large cities. Ukrainian import duty rates for food products are very uneven. Import duties for unprocessed goods or goods in large packages are often zero. Often these commodities require only minimal processing (frying, adding salt, and packaging for retail trade). Duties for packaged and ready for sale products are quite high. Many companies test the market with finished products, and then look to process and package locally if the product is a success. This way they manage to reduce custom clearance costs. Many importers package tea, muesli, chocolates, chips, roast nuts and coffee beans in Ukraine. Packaging or production is often conducted in Russia or other Commonwealth of Independent States (CIS) countries. The commodity can be imported from these countries under Free Trade Agreements (FTA). FTAs are in place for 11 CIS countries and under the negotiation with EU, Turkey and Canada. However, a potential importer should weight transportation costs. B. Market Structure The Food Ingredients Distribution Chart summarizes all of the above. The majority of sales go through the second channel, or through a Ukrainian distributor. FAS/Kyiv is unaware of any direct sales of U.S. products to restaurant chains or independent establishments, although sales of high-quality U.S. beef to Ukrainian steak restaurants were recorded in the past. It is strongly advised that all U.S. companies consider legal counsel before and while doing business in Ukraine. Ukrainian laws and regulations are vague and open to interpretation. U.S. businesspersons are advised that partnership with a Ukrainian company is a challenge that is beyond the control of the U.S. partner and their legal advisors. UNCLASSIFIED USDA Foreign Agricultural Service GAIN Report – UP1150 Page 10 of 17 C. Sub-Sector Profiles Almost all Ukrainian HRI sector companies are independent entities privatized during the first Ukrainian privatization campaign in 1994 through 1998. This includes restaurants of all types, coffee shops, casinos, bars, clubs, etc. Needless to say, such a large HRI sector is composed of many different types of businesses. Meals provided at work through company-based canteens and cafeterias are often considered a part of the employee’s compensation package (or social package). These facilities often operate as an auxiliary enterprise (often at a loss for the parental company, or with zero profit). Over time this sector is expected to shrink substantially. The state continues to control most institutional organizations such as hospitals, schools, railways and prisons. Privatization of food service in these organizations is not expected and will remain unchanged for the foreseeable future. Access to this sector is possible only through participation in open tenders. Major Ukrainian HRI Companies and Chains* Company Name Outlet Name, Type and Location Purchasing Agent Number of Outlets Fast Food Systems Chelentano Pizza - 72 Nationwide Own Distribution Center for (FFS) Kartopliana Hata - 27 franchisees Café Punkt- 2 Yuppie – 3 McDonalds Ukraine Inc. McDonalds - 57 Nationwide Direct Importer (does not work with franchisees in Ukraine) Royal Card Over 60 (Virtual Franchising Nationwide + 5 Direct, Own Distribution Center Network) restaurants in New York + Catering Service (USA) World Map 20 (Virtual Franchising Retail and HRI Direct, Own Distribution Center Network) + Crystal Catering Service Eurohata Fast food restaurants - 11 Kyiv and Zaporizhia N/A Mack Smack Ukraine Mack Smack Pizzeria –12 Nationwide Direct Importer Mr. Snack - 16 Pechena Kartoplia Ltd Pechena Cartoplia 40 Nationwide Direct, Own Distribution Center for franchisees Omex Inc. Two gees -12 Nationwide Direct, Own Distribution Center XXI Century Shvydko - 11 Kyiv Direct Importer Puzata Hata Puzata Hata - 4 Kyiv Works with Importers Taste Factory 20 (Virtual Franchising Kyiv Works with Importers Network) -5 UNCLASSIFIED USDA Foreign Agricultural Service GAIN Report – UP1150 Page 11 of 17 Rosinter Ukraine Restaurants, Pizzerias -4 Kyiv N/a Carte Blanche Upscale Restaurants (Virtual Kyiv N/a Franchising Network) -5 Kraft Foods Inc Jacobs Coffee Shop - 5 Nationwide Direct, Own Distribution Center Nestle Ukraine Nestle Coffee Shop - 6 Kyiv Direct, Own Distribution Center JV Galka Galka Coffee Shop - 6 Western Ukraine Direct, Own Distribution Center Love and Hunger Bars, Clubs and Restaurants - Kyiv Direct, Own Distribution Center (former Eric’s Family) 8 Coffee House Coffee House - 10 Kyiv Direct, Own Distribution Center Coffee Time Coffee Time - 5 Kyiv Direct, Own Distribution Center Trali-Vali Trali-Vali -3 Kyiv Own Distribution Center Source: FAS Kyiv Estimate; * Some information can be outdated as chains slowly update their websites * Estimated sales are unavailable for all chains Section III. Competition More than 95 percent of all food products consumed in Ukraine are produced domestically. Current domestic production and consumption of agricultural and food products in Ukraine is still only half the level recorded during the last years of the Soviet era. The seafood, fruits and vegetables, and beverage sectors have developed very quickly over the past five years. Production of beef and milk is on the decline. According to the World Bank Country Classification, Ukraine belongs in the group of low-income countries. The average Ukrainian family continues to spend a significant share of their income (53-58 percent) on purchasing food products, however over time this share is slowly decreasing. In 2011, the share of food product expenditures in the Consumer Price Index consumption basket reached almost 55 percent. Ukrainian Households Income Distribution (in percent) UNCLASSIFIED USDA Foreign Agricultural Service GAIN Report – UP1150 Page 12 of 17 * Including Eating Out Source: State Statistics Committee of Ukraine Products from the European Union are the main competitors for U.S. products. CIS countries cannot compete with European and U.S. producers in high value added and processed products, but are quite successful in supplying cheap food products. Currently, over 30 percent of products (both processed and raw materials) are imported from the EU, and almost 19 percent from the CIS. Germany, Netherlands, France and Italy are the main suppliers of food ingredients to Ukraine. As consumer preferences shift to more expensive products, more opportunities will develop for U.S. and European companies at the expense of CIS products. Competitive advantages are not fixed and change over time when local production recovers or the price situation changes. One of the notable examples is the loss of Ukrainian market by U.S. poultry producers, who used to be the largest foreign supplier from early 2000’s to 2010. Competitive Situation in the Ukrainian Food Ingredients Market Product Major Supply Strength of Key Advantages and Disadvantages Category Sources* Supplying Countries of Local Suppliers Pork Brazil 35% Much lower prices, Highly inefficient pork production in Poland 29% stable quality private households and in majority Net Imports: Germany 15% of industrial farms; Some 113 ths. tons production rebound in 2006 based on renewed technologies. US 7 ths. tons Beef Brazil 70% Much lower prices, Highly inefficient beef production in stable quality private households and on Net Imports: industrial farms, lack of beef cattle 2 ths. tons and lack of high-quality beef US – No Supplies Fish and Norway 34% Norway supplies a wide Outdated cold storage facilities and Seafood Estonia 8% range of products and fleet, outmoded processing Iceland 10% secures regular facilities, problems with securing Net Imports: deliveries. Norwegian quotas for fishing in international 468 ths. tons exporters use state waters UNCLASSIFIED USDA Foreign Agricultural Service GAIN Report – UP1150 Page 13 of 17 promotion programs US 17 ths. tons Fresh Netherlands 29% High stable quality of A lot of people grow vegetables on vegetables Spain 27% vegetables produced in their household plots; Bigger farms Poland 12% Western European lack modern storage and Net Imports: countries, low prices processing facilities; stable supplies 20 ths. tons for the products of the produce to the retail trade originated from the networks are complicated US 0. ths. Tons CIS states Frozen Poland 71% Polish companies Inefficient production; growing vegetables Hungary 20% dominate on the demand in large cities market due to high Net Imports: quality, recognition of 5 ths. tons trademarks and distribution system US 0 ths. tons Snack food Poland 71% Countries of South Informal trade from Poland and the Russia 9% America, Spain, CIS states as well as lack of Net Imports: Georgia, and storage facilities; low cost of local 50 ths. tons Azerbaijan supply production citrus fruits at right US 1 ths. tons price/quality ratio Tree nuts Turkey 19% Turkey mainly supplies Lack of large-scale industrial (excluding Iran 18% hazelnut and pistachios production of nuts; Intensively peanuts) USA 15% at low prices, developing confectionery industry Azerbaijan – hazelnut, Net Imports: and the USA - almonds 7 ths. tons US 1 ths. tons Fruit and Brazil 24% Western countries Local production of apple vegetables Netherlands 17% supply products of very concentrate, tomato paste, and juices and Moldova 12% high quality. Russian berries partially satisfy domestic concentrates products are of low demand; high dependence on price and good quality imported concentrates; High Net Imports: competition with ready-made 41 ths. tons Russian juice; growing demand for juices, healthy drink image of juice US 112 tons Wine and Beer Moldova 34% CIS origin wine is Steady demand for locally Russia 22% reasonably priced and produced wines; production Net Imports: Georgia 10% has traditional brands. experience; broad assortment and 59 million liters Western Wines are low prices; poor positioning of high occupy the upper quality vintage wines; traditional US 33 ths. liters segment and perceived preference to sweetened wines as high quality ones Pet food Poland 28% Exports of well-known Traditionally high number of home Hungary 21% pet food trademarks pets, large market potential; low Net Imports: Russia 14% from Russia dominate demand for industrially produced 133 ths. tons in low segment. U.S. pet food brands are perceived US 6 ths. tons as high quality ones UNCLASSIFIED USDA Foreign Agricultural Service GAIN Report – UP1150 Page 14 of 17 Sources: State Statistics Committee of Ukraine, expert estimates *Based on 2010 data SECTION IV. BEST PRODUCT PROSPECTS A. Best Product Prospects with Good Sales Potential The following import sectors are the most developed and most likely to grow in the short term: The seafood products market is developing very rapidly. Record high U.S. exports were achieved beginning in 2004 and the market continues to grow at a significant rate. Insignificant domestic production of low quality products will continue to open the door to imports. The annual consumption of fish and fish products in Ukraine reached 17,200 MT in 2010 with a possible growth to 20,000 MT by 2011. Beef and pork offal for further processing (predominately beef liver and tongs) looks very promising. Exports of beef from the U.S. were resumed in 2007 after removal of veterinary technical barriers to trade and the signing of a protocol in March 2006. Upon Ukraine’s accession to the WTO, other meat products will be competitive and demanded in the Ukrainian market Premium beef products (both chilled and frozen) can constitute a separate market segment in Ukrainian HRI. Many upscale restaurants and hotels may become buyers of US beef in the near future Almond imports are growing due to the booming Ukrainian confectionary industry. The market for almonds is expected to remain stable in 2011 although it will continue to be sizable and attractive to American businesses. SECTION V. POST CONTACT AND FURTHER INFORMATION Should you have any questions about this report or need assistance, please do not hesitate to contact the Agricultural Affairs Office in Kyiv at the following Address: Agricultural Affairs Office 10 Yuriy Kotsyubinsky St. Kyiv, 01901 Tel: +38-044-490-4005 Fax: +38-044-490-4110 e-mail: Hompage: A list of importers is available from FAS/Kyiv to exporters of U.S. food products. The Country Commercial Guide, prepared by U.S. Foreign Commercial Service is available at For the most recent “Exporter Guide” or product briefs please visit USDA’s Foreign Agricultural Service official website and reporting page. UNCLASSIFIED USDA Foreign Agricultural Service GAIN Report – UP1150 Page 15 of 17 Attachments Table1. Ukraine’s Selected Macroeconomic Indicators Indicator Name 2006 2007 2008 2009 2010 Imports of goods and services (BoP, current million US$) 53307 72153 99962 56206 73239 Goods imports (BoP, current million US$) 44143 60412 83808 44701 60579 Service imports (BoP, current million US$) 9164 11741 16154 11505 12660 Foreign direct investment, net outflows (% of GDP) -0.12 0.47 0.56 0.14 0.53 Net income (BoP, current million US$) -1722 -659 -1540 -2440 -2009 Net trade in goods and services (BoP, current million US$) -3068 -8152 -14350 -1953 -3984 Net trade in goods (BoP, current million US$) -5194 -10572 -16091 -4307 -8388 Goods exports (BoP, current million US$) 38949 49840 67717 40394 52191 Service exports (BoP, current million US$) 11290 14161 17895 13859 17064 UNCLASSIFIED USDA Foreign Agricultural Service GAIN Report – UP1150 Page 16 of 17 Deposit interest rate (%) 7.6 8.1 9.9 13.8 10.6 Lending interest rate (%) 15.2 13.9 17.5 20.9 15.9 Cost to import (US$ per container) 1495 1495 1680 1680 1580 Documents to import (number) 8 8 8 8 8 Time to import (days) 39 39 36 36 36 Time required to enforce a contract (days) 354 354 354 345 345 Procedures to enforce a contract (number) 30 30 30 30 30 Agriculture, value added (% of GDP) 8.7 7.5 7.9 8.3 8.2 GDP (current million US$) 107753 142719 179992 117228 137929 GDP per capita (current US$) 2303.0 3068.6 3891.0 2545.5 3006.9 Official exchange rate (LCU per US$, period average) 5.05 5.05 5.27 7.79 7.94 Unemployment, total (% of total labor force) 6.8 6.4 6.4 8.8 Population, total million 46.8 46.5 46.3 46.1 45.9 Rural population million 15.0 14.9 14.8 14.7 14.6 Urban population million 31.8 31.6 31.4 31.3 31.2 International tourism, receipts (current million US$) 4018 5320 6722 4349 4696 Agricultural raw materials imports (% of merchandise imports) 1.2 1.0 0.9 1.1 1.1 Food imports (% of merchandise imports) 6.8 6.5 7.4 10.5 9.2 Agricultural raw materials exports (% of merchandise exports) 1.4 1.3 0.9 1.2 1.1 Food exports (% of merchandise exports) 12.0 12.6 16.0 23.8 19.2 Source: The World Bank Per capita Food Consumption (1st Qtr. of 2011) Source: State Statistics Committee of Ukraine The 2010 Annual Foodstuffs Consumption by an Average Household* of 2,59 person (in U.S. $) Total - $2,092 UNCLASSIFIED USDA Foreign Agricultural Service GAIN Report – UP1150 Page 17 of 17 Source: Households Income Survey, State Statistics Committee of Ukraine; *Total number of households in Ukraine 17,050.3 ths UNCLASSIFIED USDA Foreign Agricultural Service
Posted: 23 January 2012