Following massive attacks on energy infrastructure, dairy enterprises have been operating on autonomous power supply. In an interview with Delo.ua, the Chairman of the Supervisory Board of Milk Alliance Group, Sergiy Vovchenko, spoke about the sector’s challenges, export conditions, and prospects for restoring production.

Operating on Generators

Due to power outages, the company’s plants were forced to switch to alternative energy sources.

“In January alone, we used about 140 tonnes of fuel — roughly UAH 8 million. The amount is certainly significant, but there is no alternative,” Vovchenko noted.

Attempts to switch to imported electricity were not always successful because of damaged power lines and substations. The situation remained particularly difficult in the Kyiv region.

At the same time, the impact on production costs has so far been limited: electricity accounts for about 3% of total costs, while raw materials represent approximately 67%.

Cheese Production Operating at a Loss

Despite rising expenses, the company does not plan to increase product prices.

“We definitely do not plan to raise prices, especially for cheese. Cheese is currently very difficult to sell,” Vovchenko emphasized.

Due to competition from imports, primarily from Poland, the cheese segment is operating at a loss.

“Unfortunately, cheese production is indeed unprofitable at the moment,” he stated.

Nevertheless, the company continues operating its cheese plants, which employ more than 500 people. Losses are partially offset by profits from fresh dairy products.

Recently, The Ukrainian Union of Dairy Enterprises submitted a proposal to the Cabinet of Ministers of Ukraine to introduce cashback support for bulk (loose) cheeses, which were previously excluded from the list of products eligible for state support. The initiative has reportedly received preliminary approval at the government level.

Processing Remains Stable, Exports Decline

In January, the company processed approximately 750 tonnes of milk per day, which is 15 tonnes more than the previous month. The increase is attributed to a higher supply of raw milk on the domestic market.

At the same time, the export share has declined significantly. Prior to 2014, about 60% of the company’s products were sold abroad and 40% domestically. Last year, exports accounted for only around 20%.

Due to falling prices in Europe, Ukrainian products have lost competitiveness, while European producers have become more active in markets across North Africa, the Middle East, and former Soviet republics.

Without Exports — It Is Impossible

According to Sergiy Vovchenko, the company cannot abandon foreign markets.

“No, we cannot. The only option is to look for new sales markets,” he stated.

The company has already showcased its products at Gulfood in Dubai. There is interest in Ukrainian products, but price remains the key issue.

“The problem is solely the price: to remain competitive, raw milk should cost around UAH 12 per liter, while today it costs UAH 14.5,” Vovchenko explained.

According to him, part of the production will have to be exported at break-even or even at a slight loss.

“Therefore, we will consciously sell part of our products for export — at best breaking even, and sometimes even with a small loss. But it is important to stay on the market and not be forgotten. When market conditions improve, we will be able to increase sales and start making profits,” he noted.

Promising destinations include North African countries such as Egypt and Morocco, as well as Arab countries in the Middle East.

Restoration of the Bashtanka Plant

The Bashtansky cheese factory, which was destroyed as a result of hostilities, will not be restored for now.

“Until at least the active phase of the war ends, we are not considering restarting the plant,” Vovchenko emphasized.

Key constraints include security risks, raw milk shortages, and labor shortages.

Investments Continue

Despite the crisis, the company continues to modernize production. New packaging lines have already been installed at its baby food plant. Negotiations are also underway regarding equipment upgrades at the facility in Yahotyn.

Source: Delo.ua