Five years before Ukrainian President Petro Poroshenko’s chocolate empire Roshen started in 1996, a company was founded in Donetsk that became the first – and, at the time, only – cocoa importer and supplier to chocolate factories across Ukraine in 1991.
By 1994, it began producing its own chocolate and other confectionery products. Its name was AVK Private Joint Stock Company. In the fall of 2016, the brand celebrated 25 years as AVK Confectionery Limited Liability Company.
According to Roshen, the confectionery business in Ukraine racked up sales of roughly $1.5 billion in 2014. With hryvnia devaluation, that number likely declined in the last two years.
But sweets are still big business.
At the end of 2016, AVK was second after Roshen among Ukrainian chocolate producers, with a market share of 21 percent. It was third in overall confectionery goods production, with a 7.6 percent market share.
The standing is even more impressive, considering that AVK lost nearly 70 percent of its production capacity after Russia launched its war against Ukraine in 2014. AVK had plants in Donetsk and Luhansk, now controlled by Kremlin-backed separatists. The only plant left was in Dinpro.
To make matters worse, AVK also lost its biggest export market – Russia, which constituted 60 percent of the company’s revenues.
“We had two options – either we swim and survive or just sink,” said Volodymyr Avramenko, the company’s founder and general director, in an interview with the Kyiv Post at AVK’s Kyiv head office. Back in 1991 Avramenko and his then-business partner Valeriy Kravets lent their initials to the brand name AVK.
After 2014, Avramenko revamped the company, despite suffering the loss of $20 million in finished products and ingredients seized at its distribution center in Belgorod, Russia, coupled with its Donbas production center losses estimated at $150 million.
He and his wife re-registered the company as AVK Confectionery LLC in Kyiv and his team started searching for new production centers and export opportunities.
Collaborations with candy factories in Poltava and Rovno, along with production lines in the Czech Republic, allowed the company to continue making sweets, albeit at a much lower volume.
Developing new markets was key.In 2013, the company exported to 20 countries; today it finds customers in 53 countries. Of the 53,132 tons of confectionery produced by AVK last year, 13,560 tons were for export.
A big contributor to AVK’s success in the early years was the U.S. Western NIS Enterprise Fund, then headed by former Finance Minister Natalie Jaresko. In 1998, AVK received $9 million for a 25 percent share, provided that it comply with Western management standards. “It was the direction of culture we chose,” Avramenko said.
Western NIS Enterprise Fund cashed out in 2013 with $45 million, a handsome return.
Today, AVK Confectionery is listed as No. 62 in Candy Industry’s Global Top 100 Candy Companies. Yet Avramenko has no intention of becoming complacent.
“We know that we are on the right track and we know that we still have a lot to work on – and we do it,” he said.
In addition to renting production lines at other factories, AVK plans to build more of its own.
Ukrainians “have to show that we can create, instead of just sell raw materials. And around that there will be machine engineering, logistics, finance, IT. That’s how an economy is built,” Avramenko said.
When asked how AVK feels about competing with President Petro Poroshenko’s Roshen, Avramenko said: “It’s great to have competition. You remember how we lived when there was no competition? Thank God for competition!”
Ukrainian confectionery producers compete fiercely, but with civility, for brand popularity. Avramenko thinks AVK’s edge comes in research, development and marketing. It is proud of its Trufalie and Royal Charm candies.
The company frowns on reviving Soviet brands. “We were creating ours from the beginning,” he said. “In the portfolio today, apart from Gulliver candy, we don’t have anything from the Soviet times.”
One of the latest ventures is instant coffee. With chocolate products affected by seasonality, Avramenko expects that coffee sales will help financially.
