This is a best prospect industry sector for this country. Includes a market overview and trade data.
Last Published: 8/6/2019

Overview

Data in USD thousands

 2016201720182019 estimated
Total Local Production68,12981,06598,23100,000
Total Exports25,60330,89732,86635,000
Total Imports130,239149,566232,264150,000
Imports from the US7062,159      1,5172,000
Total Market Size134,598199,734199,496215,000
Exchange Rates25.55 UAH26.60 UAH27.20 UAH29.40 UAH
(total market size = (total local production + imports) - exports)
Data Sources:

Total Local Production: State Statistics Service of Ukraine  
Total Exports: Global Trade Atlas; State Statistics Service of Ukraine  
Total Imports: Global Trade Atlas; State Statistics Service of Ukraine  
Imports from U.S.: Global Trade Atlas  

In 2018, total processed food production in Ukraine was $15 billion making up 20 percent of the total industrial output.  In trade terms, processed food exports reached $9.4 billion accounting for 50 percent of Ukraine’s agricultural products and processed food exports. In 2018, exports of sunflower oil and cake amounted to $4.1 billion and $922 million, respectively.  Poultry products export amounted to $507 million.
Altogether, there are two thousand small, medium, and large food processing enterprises in Ukraine, 200 of which are partners of international companies.  Global giants that are well established in Ukraine include Mondelez, Nestle, Danone, PepsiCo, CocaCola, Carlsberg, Jacobs, East Balt Bakery, and Wim-Bill-Dann. In 2018, capital investments made in food processing companies increased by $189 million compared to 2017 and amounted to $848.9 million or 12 percent of total industrial capital investments. 
While Ukraine’s food processing industry includes more than 40 different sectors Vegetable oils dominate the industry.  Vegetable oil account for 24 percent of all Ukraine’s food products exports. 

Along with the vegetable oil, there are significant opportunities in vegetable and fruit processing. For example, Ukraine is the leading producer of tomato paste in the former Soviet Union and an active competitor vis a vis European producers. Ukraine is also one of the five largest European suppliers of apple concentrate. Finally, Ukraine’s share of global potato production is 6.2 percent and the with its GMO-free potato, Ukraine is well positioned to develop a strong position in the potato flour and stash market and to increase the volume of potato exports to the EU. 

Given the obligatory implementation of HACCP by 2020 and new export markets such as China and Africa, major dairy companies are investing in milk production to control the full production chain from livestock breeding and milk processing to manufacturing and packaging. 

Large vertically integrated poultry producers, assisted by international financial institutions, will continue to expand and increase their market share.  This growth will be driven by exports to the European Union (EU), Middle East, and Asia and harmonization with EU standards.  The level of concentration in Ukraine’s meat processing sector is high, with the top 20 companies accounting for 10 percent of cattle livestock, 28 percent of pig livestock, and 58 percent of poultry livestock.

U.S. food processing companies should consider the competitive landscape.  Germany, Italy, Turley, the Netherlands, and Poland are the major exporters of food processing and packaging machinery and equipment.  Italy and Germany exports account for 73 percent of the machinery used for confectionary.  Spain’s share of sugar manufacturing machinery exports accounts for 40 percent.  The Netherlands, Germany, and Poland’s share of poultry processing equipment is 81 percent.  Italy and Netherlands together account for 33 percent of the equipment for bakery and macaroni production.  Overall U.S. exports food processing machinery and remain very low compared to the European suppliers. 

The Commercial Service in Kyiv identified food processing equipment as a "best prospect" following the beginning of the implementation of the Deep and Comprehensive Free Trade Agreement (DCFTA) between Ukraine and the European Union (EU) in January 2016.  This agreement includes the gradual removal of customs tariffs and quotas and the extensive harmonization of Ukraine’s laws, norms, and regulations in various sectors.  Harmonization, in turn, will create an even greater competition for U.S. suppliers. 

U.S. suppliers need to consider that despite fierce competition from European suppliers, the potential of agri-food chain development is very high as food processing companies will need to modernize their production.  Harmonization of the Ukrainian food safety legislation in compliance with EU norms, the requirement to implement Hazard Analysis and Critical Control Points (HACCP) by 2020, and expansion to foreign markets will increase demand for higher quality food processing and packaging materials. 

Regarding distribution, in Ukraine it is easier for U.S. companies to sell equipment and machinery to local distributors rather than end-users. This is because distributors have local exposure, meaning they know who needs the products and most importantly, who can pay for it.  Also, a local distributor may handle customs clearance, tax payments, and certification procedures, as well as service and maintenance.  If a U.S. exporter is interested in the Ukrainian market, they should consider opening a representative office here. This will broaden the scope of expected support functions (marketing, promotion, and other auxiliary functions), serve as a base from which to expand to neighboring countries, and allow the company to manage the demand for spare parts and repair services. 

Leading Sub-Sectors

  • Animal fats and vegetable oil production
  • Vegetable products/processing (including oils)
  • Confectionary products/processing
  • Dairy products/processing
  • Meat processing
  • Food packaging

Opportunities

Despite the challenges listed above of a lack of financing for equipment purchases and a lack of highly qualified personnel, the Ukrainian food processing industry has many advantages. Most significantly, Ukraine has an abundance of domestic raw materials.  Additionally, Ukraine can serve as an export base to both East and West.  In 2015, the Government of Ukraine implmented significant reforms and structural adjustments that will positively impact food processing, including the progressive removal of customs tariffs and quotas and the extensive harmonization of laws in compliance with the DCFTA as discussed above.  Together, these strengths are creating opportunities in oil production, vegetable processing (including oils), confectionary, dairy, and meat processing. 

Web Resources

Trade Events Useful Links


 

Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.