Ukrainian confectioners will fight for a place in foreign markets. No other alternative is available

Photo: Ukrainian photo

Ukrainian confectioners will try to convince the Belarusian State Concern of Food Industry (Belgospischeprom) to change pricing for Ukrainian sweets on its market, said the manager of one of the largest confectionery manufacturers in a conversation with Capital. Due to the introduction of import licensing, deliveries of Ukrainian sweets to Belarus have been suspended since Monday, according to the president of the Ukrkondprom Association Oleksandr Baldynyuk. The new rules have not affected Kazakhstan and Russia, members of the Customs Union.

Licenses are issued free of charge, but the suppliers must consent to raise prices for their goods. “Applications for licenses shall be accompanied by agreements on the terms of delivery, which define minimum prices for goods… The markup is within the range from 30% to 500% of producer’s price, which virtually excludes the possibility of sales to Belarusian consumers,” complains Baldynyuk.

The major Ukrainian manufacturers– Roshen, AVK, Konti and ZhL – refused to give official comments. But one manager, on condition of anonymity, said that prices of Belarusian company Spartak were used as indicative price for sweets.
“They took hard candy branded Spartacus and converted its price into US dollars. And now, I have to deal with the prices of USD 2.83 per kilogram, while in the past I supplied Belarus with sweets for USD 1.4,” he says.

The Belgospischeprom confirmed introduction of licensing with the objective of “protection of national confectioners”. The concern refused to give any further comments.

One-way case

This is not the first blockade of Ukrainian sweets in Belarus. In April – May 2013 exports were discontinued due to complications of customs clearance procedures. During that period confectioners’ losses totaled UAH 40 – 50 mn, says Baldynyuk. He explains that Belarus is the fourth largest foreign market for Ukrainian confectionery. In 2013 Ukraine exported to Belarus 24,400 tons of confectionery worth US $70 mn, according to the Ministry of Revenue and Duties.
Russia is the leader in consumption of Ukrainian sweets. Even after July 29, when it prohibited supplies of Roshen’s confectionery, it remained Ukraine’s major consumer of confectionery. However, the Ukrainian market was partially affected by the ban. Roshen failed to find new markets and was forced to close the factory in Mariupol.

Sweet problems

In the event that Ukrainian confectioners fail to reach an agreement with Belarusian officials, their losses will be worse than before. Confectioners will not export goods to Belarus based on proposed prices. “Given the drop in income tax accruals, reduced foreign exchange earnings, downsizing in the confectionery and related sugar, flour, starch, packaging, fat, dairy and other industries, reduced deductions to wage funds, etc., budget losses will amount to UAH 130 mn by the end of 2014,” counts Baldynyuk.

The head of the analytical department at the AAA consulting Maria Kolesnyk says not only confectioners, but also related markets will suffer from restrictions and reduction of exports. “We expect a decline in domestic demand for sugar at the rate of 15,000 tons, for flour – 12,000 t, for starch products – 7,000 t, fat – 3,000 t, milk – 1,000 t, and downsizing in agriculture – up to 2,500 employees,” she says.

Kolesnyk recommends Ukrainian confectioners to seek new markets. But this will require at least six months – the expert warns that the market entry process is too complicated. In addition, the prospects are too vague. “For example, while I make US $3 mn per month in Belarus, supplies to the markets in Afghanistan, Pakistan and Iran are miniscule – US $150,000 – 200,000,” says one of the vendors, who asked not to be named.

Baldynyuk believes that in order to defend the interests of Ukrainian confectioners, Kyiv should take adequate measures in response to the illegal actions of Minsk. “It is not the first time that Belarus boldly violates Ukraine’s trade and economic rights protected by the international law. Inefficient response from Ukrainian authorities only assured Belarusian officials of their own impunity for illegal actions with regard to Ukrainian enterprises,” concluded Baldynyuk.