November 18, 2010

Ukraine's expensive dairy products linked to trade markups

Substantial trade markups are the reason for retention of high prices for dairy products in the Ukrainian market, according to director general of the Kyiv-based Milk Alliance holding, Serhii Vovchenko.

He said that the producers cannot combat the situation as that is the work of consumer right protection services.

At the same time, Vovchenko said that to produce a kilo of cheese, a producer needs 11 litres of high-quality milk bought for at least UAH4 (US$0.50) per litre. "Add 30% of production expenses and you have at least UAH58 (US$7.30) per kilo," he said.

He said that after cheese sale, a producer has profitability of about 5%.

On November 11, the Union of Dairy Enterprises claims that manufacturers are cutting prices of cheese by between 10% and 20%, based on earlier media reports.

The Antimonopoly Committee of Ukraine on November 5 compelled 11 milk-processing enterprises to bring down wholesale factory prices for milk, sour cream, butter and hard cheese in a phased approach.