The smell of freshly baked bread wafts out of a small storefront onto Horodetsky street on a July morning. Despite the season, people are lined up inside the small, hot bakery with plastic bags in their hands.
By the end of the day, the woman at the cash register will have seen somewhere between 700-1,000 such customers eager buyers of the bakerys fresh loaves of various shapes, sizes, colors and tastes.
For over a year the Svizhy Khlib (Fresh Bread) bakery has been selling such bread to those Kyiv residents tired of the batons and dark round loaves of the large state bakeries. Thanks to the finicky tastebuds of their customers, the owners of the bakery are on the way to recouping their initial investment of $65,000.
There are approximately 600 such small private bakeries in Ukraine, including over 100 in Kyiv alone. Bread-baking entrepreneurs say the reasons for the growth of their niche industry are multifaceted: general economic turmoil, a breakdown in former bread distribution networks, and popular dissatisfaction with state products.
Many of Kyivs bread capitalists are simply doing for themselves what they used to do for the state. Employees at the citys Radossin confectionery plant, for example, succeeded in having the State Property Fund approve their participation in the privatization of the enterprise. Stagnant legislation also influenced their choice: enterprises are forbidden from changing the nature of their economic activity.
We couldnt sell TVs, for example, only food products, said Viktor Kolomiets, the assistant general director of Trade House Meringovsky, the firm which owns the Horodetsky street bakery.
Other bread bread-baking businesses have foreign connections. Cansin Ltd., which opened Kyivs first Turkish-style bakery, entered the Ukrainian market after a successful venture in Moscow.
We saw that our products would be in great demand among Ukrainians, said company Director Metin Azizoqullari. The companys bakery on Velyka Vasylkivska (former Chervonoarmiyska) street is the only place in the city that sells Turkish cookies, cakes and pastries in addition to fresh bread.
Kyivs legal code favors bread businesses. Under city administration Order 660, rent for bakeries is set at 20 kopiykas per square meter, as compared to 8 hryvna for food stores.
Low costs and daily customer demand thus combine for an attractive business opportunity. In a national economy crippled by nonpayment, a steady cash payment flow is another plus.
People make money quickly, said Sergei Ivanov, general director of Zlak, a consultancy for private bakeries. In three hours, you can bake a loaf of bread and you have your money. Private bakeries exist in Ukraine because of the peculiarity of their technology.
Bakers also benefit from the fact that Ukrainians simply eat more bread than most other Europeans. According to Mikhail Bogdan, director of UkrKhlibProm, the former state bread monopoly, the average Ukrainian consumes 350-500 grams of bread per day, versus about 70 grams for the average European. Ukraine as a country consumes approximately 225,000 tons of bread per month.
In Soviet times, UkrKhlibProm was a network of 640 bakeries and 1,300 shops responsible for supplying bread to over 70 percent of the Ukrainian population. By the onset of this fall, between 93-96 percent of the bakeries in this system will have been privatized, according to Bogdan. Together, the former state system has 60,000 employees.
Today, state factories produce 20-30 different products, down from 105 three years ago. By comparison, private bakeries tend to turn out the number of varieties their customers demand, in the process charging 10-15% more for the same loaf put out by the state.
Prices can be pushed up if a private bakery chooses to buy expensive foreign equipment. The Radossin confectionery plant opted for French equipment because of its superior quality, said company director Nikolai Geveliuk.
According to Zlak consultancy chief Ivanov, foreign equipment can cost up to 10 times more than domestic equipment, making it necessary to amortize start-up costs over a longer period of time. He said the average foreign bakery comes with a price tag of up to $100,000, while a Ukrainian system costs $10,000-$20,000.
Whether from a private or a state bakery, paying more for bread is something Ukrainians have gotten used to. The price of a loaf rose five times in 1993-1994.
Private bakers are not pleased with all of the deregulation. State flour subsidies were ended in 1994, clearing the way for big price rises. Over the past year alone, flour prices have gone up 20 percent.
Weve had to raise our prices 5 percent, said Geveliuk. We couldnt raise them any more than that, or we wouldnt be able to compete with the state bakeries.
Finding the right people to turn flour, yeast and water into a loaf of bread is one more challenge facing the industry. The Svizhy Khlib bakery on Horodetsky street went through three work crews before it found the right team. Foreign equipment tends to make training more complicated.
As yet, private bakers have not formed an association.
Ivanov said the benefits of banding together are obvious: For example, heres some quality Dutch yeast better than what most bakeries are buying, but small bakers have no way to find out about it [without an association], he said. He added that an association could also afford its members legal protection, as in the case of a bakery recently accused of selling poisoned bread.
