You're reading: How to get Ukraine to produce more milk

Ukraine’s dairy sector has yet to recover from the sharp downturn that followed the collapse of the Soviet Union.

The sharp drop in the 1990s was triggered by a collapse of state-run cow farms. Rural farms have still not recovered, yet the potential for a turnaround is high.

Ukraine’s milk production is less than half of what it was in 1991, with an estimated 18 million fewer cows than in Soviet days.

Consumption of dairy products is also far lower than in the European Union and in Russia, with obvious health consequences. Ukraine’s elderly suffer disproportionately from osteoporosis, a bone-weakening disease brought on by calcium and vitamin D deficiency.

Quality is also an issue. A January report by the Organization of Economic Cooperation and Development says that of the three quality grades of milk offered in Ukraine, even the highest one still lags behind the European Union standard grade.

Quality of milk remains variable and challenging.

– Bernard Draily, expert from Danone Belgium

The report, however, also emphasized that Ukraine’s favorable weather and rich farming land could make the sector a cornerstone of the country’s economic growth in the coming decade.

International dairy giant Danone says it is helping Ukraine take on that challenge.

Bolstered by its 2010 merger with Unimilk, a Russian diary giant with extensive operations in post-Soviet countries, the group hopes to boost production capacity in Ukraine, guaranteeing quality and optimizing the distribution process.

To accomplish this, the company brought in Bernard Draily, an organization and logistics expert from Danone Belgium, where he set up one of the company’s three biggest factories worldwide.
According to Draily, the current focus is on getting Danone’s factories up to par and making sure the assets taken over from Unimilk meet the relevant quality standards.

“Quality of milk remains variable and challenging,” Draily said.

For this, the company invested close to $8 million in 2011, with $12 million set to come this year. The company plans to top that with 30 million euros over the next 4 years, the Franco-Belgian expert added.

These will likely be divided between factories and distribution following a 70-30 ratio, Draily said, implying that investments into logistics could come in the vicinity of 10 million euros.

One of the key investments in this regard is a network of refrigeration points, a major weakness in agribusiness logistics chains, so as to stockpile milk for further transfer. Further optimization can be achieved moving from taking orders on a daily basis to a half-day system, Draily added.

“The mission is to deliver tomorrow what we produce today,” he said.

Nonetheless, Ukrainians’ wages remain a major barrier to growth.

“The ratio of value to income is perhaps the key problem” to increase consumption, Draily said. “So affordability is a priority.”

A liter of milk in Kyiv is on average 24 percent more expensive than in Warsaw, according to Numbeo, a website comparing prices across different cities.

Things may be turning around, though. The OECD report projected demand for processed dairy products to increase by 25 percent over the coming decade, lowering prices and turning the country into a significant regional exporter.

Indeed, dairy business was picked as one of the top four sectors on which to base the country’s strategic development plan. Key to this will be boosting yields, which are currently half the EU average, and moving towards more centralized production. At present, 80 percent of milk production comes from farms with less than five cows.

Kyiv Post staff writer Jakub Parusinski can be reached at [email protected].