Consumer Market

Under the influence of radical positive changes in the country as a whole, Ukraine’s consumer market has also had a major boost. Its dynamic growth over the last five years features a number of significant trends:

• Major expansion in all segments of the consumer market. The domestic food market alone is worth over $50 billion:

- Turnover among wholesalers has grown to $144.2 billion, having risen $17 billion or 13% in 2007

With every year, the share of foodstuffs and non-food items alike sold to other wholesalers is going down. In 2007, it was 52.1%, whereas in 2006 it was 58%.

Manufactured goods constitute more than 60% of wholesale turnover.

Among foodstuffs, canned goods represent the largest share, while among non-foods, household appliances do.
 
- Retail turnover has grown to $58.2 billion, rising by $13.2 billion or 29.3% over 2007

More than half, 51.6%, of retail goods are sold through retail chains run by companies, while 31.3% is sold at markets and 18.1% is sold by sole proprietors who have networks outside markets.

Retail networks continue to grow rapidly. Starting in 2007, some supermarket chains began to use a new approach to attracting customers: selling house brands. This allows the seller to reduce costs on advertising, which cuts the cost for an in-house brand up to 25% and encourages competition on the market.

The share of goods being sold on unregistered markets continues to fall, indicating that retail trade is moving into the phase of developing chains. This should raise both the quantity and quality of retail trade and customer service. Around 17% of farm products are already sold at registered markets.

More than half, 51%, of retail enterprises sell foodstuff in non-specialized stores. One third sell non-foods in specialized stores and among them 56% or 2,800 sell pharmaceuticals. Among retailers specializing in foodstuffs, beverages have the largest share, 57%. Bread and baked goods are handled by 11%.
 
- The restaurant business has grown to $1.95 billion, rising $150 million or 8.8% in 2007.

Restaurant chains in Ukraine today represent over 56,600 eateries, including 34,100 cafés, 11,500 cafeterias, 9,000 bars, 1,900 restaurants, and 103 caterers. The average facility seats 47. Family restaurants seat an average of 33.

• The structure of trade turnover is stable, with wholesale trade representing 70% and retail 30%.  Nearly 70% of enterprises engaged in retail and wholesale trade are profitable.

• Real disposable incomes continue to grow steadily. Over the last year, they grew 18.3%, after growing 20.3% the previous year. This means demand among consumers has grown, shown by a 33% rise in consumer spending over 2007

• The structure of the consumer basket has shifted. Non-foods and services are taking a bigger share, although it remains smaller than foods. This also reflects growth in disposable incomes.

Most major international corporations that are leaders on international markets of goods and services have been successfully expanding on the Ukrainian market and are among the largest foreign investors in the domestic economy. Among the many success stories of multinationals that have entered and conquered Ukraine’s consumer market, a few stand out:

- Coca Cola HBC opened a rep office in Ukraine in 1992 and became one of the first international corporations to show interest in the Ukrainian market. Coca Cola is now a domestic enterprise with 100% foreign capital, one of the top investors in the Ukrainian economy and a leader on the non-alcoholic beverages market. In 1998, the company opened a bottling plant just outside Kyiv. The company has over 800 highly skilled local employees. To date, Coca-Cola HBC has invested nearly US $270mn in Ukraine.

- Procter & Gamble entered the Ukrainian market with its products in 1990 and, by 1993, it had opened an office in Kyiv. The company has grown into one of the leaders on the domestic consumer market and offers more than 40 international brands on the Ukrainian market. Today, Procter & Gamble employs more than 1,700 Ukrainians directly, including at two plants, one in Boryspil and one in Ordzhonikidze. Since the beginning of 1995, the company has invested over $150 million in fixed assets, working capital, a distribution network, and marketing support for its products in Ukraine.

- Nestlé began operating in Ukraine in 1994 with the opening of a rep office. Since that time, the company has been actively marketing its own world-renowned brands and has become one of the largest makers of food products on the Ukrainian market. Nestlé offers products in a wide range of categories: beverages, confectionery, cuisine, child and special foods, frozen goods, ice cream, breakfast foods, mineral and drinking water, and pet food. The company is strengthening its position and expanding its presence in Ukraine by investing in local production and industrial infrastructure. It is also actively supporting and promoting its brands and establishing a national sales network. Nestlé’s investment in the Ukrainian market is already over US $40 million. Annual sales in Ukraine are over US $320 million.

- METRO Cash & Carry began expanding in Ukraine with the opening of the country’s first wholesale outlet in 2003 in Kyiv. Since then, the company has invested EUR 250 million into expansion and has created more than 5,500 new jobs for Ukrainians through its 13 wholesale centers and head office. MCC’s wholesale outlets are aimed entirely at business buyers, that is, companies and sole proprietors and offer more than 25,000 food and non-food items. METRO Cash & Carry works with more than 1,100 Ukrainian and international suppliers and nearly 90% of the products offered in the company’s stores are supplied by Ukrainian manufacturers, distributors and importers.

International and domestic experts say that, in the next few years, an efficient and transparent domestic consumer market will continue to develop at a rapid rate as consumer legislation is improved, community organizations expand, and new strategic foreign investors enter the market.