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Ukraine Food and Drink Report Q1 2010
Business Monitor International, Dec 2009, Pages: 79
Ukraine Food and Drink Report provides industry professionals and strategists, corporate analysts, food and drink associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Ukraine's food and drink industry.
Ukraine again ranks in last position – out of the 15 key markets in emerging Europe – in BMI’s Food and Drink Business Environment Rankings (BER) for Q110, which now include Turkey. The worsening in Ukraine’s position is largely the consequence of the dismal current state of its economy, although its score for per capita food consumption remains one of the lowest in the region. In the meantime, falling local currency values continue to negatively reflect in the per capita US dollar spending on food, although the hryvnia is expected to appreciate in the latter parts of our five-year forecast period.
Through to 2014, food consumption is expected to post a 44.64% increase in local currency terms, reaching UAH129bn (US$18bn). The expected growth is respectable, given the challenges posed by the falling population numbers, the trend of population ageing and the closure of some retail stores, although the increase is clearly to be artificially skewed by the challenging 2009.
Nevertheless, there are signs that the conditions are improving. In Q309, leading domestic dairy processor and distributor Ukrproduct – listed on the London Stock Exchange – reported an 8.1% year-on-year (yo- y) increase in gross profit in H109, for its core branded products segment. Around the same time, leading Ukrainian confectionery manufacturer Roshen reported a 3% y-o-y increase in third quarter sales volumes, following a particularly challenging H109. Similarly, Myronivsky Hliboproduct (MHP), a key Ukraine-based vertically integrated meat processing firm, posted a 23% y-o-y increase in H109 net income, on the back of the same y-o-y rise in revenues. The company benefited from the consumer shift towards cheaper poultry products, from more expensive pork.
MHP should also benefit from the August 2009 amendments of Ukrainian import regulations, mandating its inspectors to examine all foreign plants exporting meat products to the country. Although the new regulations may lead to complicated logistics and inspection costs, thus hampering bilateral trade in meat products, the changes follow the H109 introduction of an additional 13% import duty was imposed on a number of items including beef, pork and poultry products, for exporters not covered by Free Trade Agreements (FTAs). The moves can be seen as a bid to protect the domestic industry in the face of the economic downturn, although the restrictions are expected to ease once the economy recovers. In the meantime, adding to the country's problems, which include a conflict over gas with Russia and a delay in receiving the next tranche in IMF financing, the Ukrainian prime minister took drastic measures in late October 2009 in order to stem the outbreak of what she called an H1N1 swine flu epidemic throughout the country. While figures for reported cases of the virus vary, some estimates have put the number of infected at 190,000, including 33 deaths. Therefore, the outbreak will have a potentially dramatic impact on Ukraine's post-crisis recovery, particularly should it lead people to avoid public spaces and hence have a further negative impact on the level of private consumption in the country.
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