Ukraine plans to produce dairy baby food

Ukrainian companies are developing the segment of liquid milk baby food. Following the large dairy companies Lustdorf and the Baltic Dairy Plant, the Svarog West Group agricultural holding plans to invest in new production. The company plans to spend about UAH 350 million of its own and borrowed funds on the project, as well as take advantage of government support.

The liquid milk baby food segment is now very promising, Natalya Ignatova, senior consultant at ICG Astarta-Tanit, told Kommersant. It has been very popular in Ukraine since the times of the Soviet Union, produced and sold through a wide network of dairy kitchens. Almost all of them were closed after the mass poisoning of curds at the Kyiv dairy factory-kitchen in May 2004. Currently, only dairy kitchens operate in children's hospitals in medical institutions. Then most parents switched to powdered breast milk substitutes, up to 70% of which are imported to Ukraine, says Ms. Ignatova. But since about 2006, she says, there has been a growing trend of interest in liquid dairy products. From 2006 to 2009, the market grew from 4 thousand tons to 10.9 thousand tons or up to $12.6 million. For comparison, the market capacity of dry milk baby food in Ukraine is 9.2 thousand tons ($44.5 million ). Recently, large companies such as Lyustdorf (TM Selyanske, Burenka) and the Baltic Dairy Plant (TM Lasunya) have established the production of liquid baby food, Ms. Ignatova recalls.

Svarog West Group plans to begin construction of a plant for the production of liquid milk baby food with a production capacity of 25 thousand tons per year, Andrey Gordeychuk, chairman of the company’s board, told Kommersant. The enterprise will be built in the south of the Khmelnitsky region. It is also planned to establish the production of cereals, canned meat and vegetables for baby food, Mr. Gordeychuk said: “The main difference between the plant and other enterprises will be that dairy products will be produced from its own milk - a dairy farm will be built at the enterprise for 3. 5 thousand heads." Until now, there has been no such practice - this will be a strong argument in the marketing promotion of the company’s products, Natalia Ignatova is sure.

Svarog West Group was founded in 2003 by a group of entrepreneurs whose names have not been disclosed. They took up farming on 4 thousand hectares of land to grow beets for processing at the Shepetivka sugar plant they owned. Now the agricultural holding owned by entrepreneurs has already concentrated 75 thousand hectares in the Khmelnitsky and Chernivtsi regions. Svarog West Group is also developing the direction of dairy and meat livestock farming - it owns 12 thousand heads of cattle and is developing horticulture.

The construction of the baby food plant is planned to be completed in 2-3 years. Investments in the project will amount to UAH 350 million. It is planned to recoup the invested funds in 5-7 years, Mr. Gordeychuk said: “We expect that the enterprise will operate with a profitability of 30-35%.” The project will be financed partly from the company’s own funds, and partly from borrowed funds: negotiations are currently underway on a loan with Brokbusinessbank. “We also count on state support for the project,” said Mr. Gordeychuk, clarifying that the issue of allocating compensation from the state budget for its implementation was discussed with the Minister of Agricultural Policy Nikolai Prysyazhnyuk during his trip to the Khmelnitsky region last Tuesday.

Mr. Prysyazhnyuk confirmed yesterday that he had familiarized himself with the details of the project: “We will definitely support it - the project involves the construction of a dairy farm and an increase in the milking herd, the development of this area is one of the main priorities for agricultural policy in Ukraine. In addition, it involves the processing and production of the necessary in the country of baby food production." Svarog West Group can count on compensation for investments made in the project in the amount of up to 30-40%, Mr. Prisyazhnyuk assured Kommersant.

Alena Golubeva, Tatyana Sivokon, Khmelnitsky

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