POINTERS 2014 MPOC
Palm Oil Internet Seminar
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Section 2: Global Palm Oil Market Opportunities:
Ukraine's Household Cooking, Hotel & Catering Sector - Prospects For Palm Oil
By: Ms. Olga Mozgova

Analyst specialized in food industry and agribusiness. Significant experience in preparing analytical materials and market researches of economic trends and legislation of Ukrainian and international markets of material and technical supply of agricultural and food sectors. Formed working contacts with Ukrainian and foreign participants of these markets.

Centre of Marketing Researches "UkrAgroConsult" - Нead of projects, Analyst of food markets.


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Various vegetable oils are used in Ukraine for food cooking.

The most popular in the country is sunflower oil, as it is a national product. Sunflower oil is normally applied for dressing salads and frying, but it is also added to many industrial items: canned foods, margarines, cooking fats, sauces etc.

Sunflower oil is still the main vegetable oil in household cooking. Other vegetable oils of this group are used much less. This is largely explained by national cuisine traditions and the mentality of consumers.

The main driver of using vegetable oils by HoReCa businesses and other catering
companies is the quality/price ratio.

Businesses exploiting the oil frying technology seek to optimize technological processes of cooking. Therefore, many catering facilities more widely use special frying oils and fats in recent years.

At the moment, almost every catering establishment in Ukraine is equipped with deep-fat fryers. The list of ready-to-eat products made in fryers is quite long: pies, donuts, meat pastries, potatoes and other vegetables, poultry meat and various national dishes, even including confectionary items.

In terms of the price and service levels, HoReCa businesses in Ukraine are broken down as follows:
• elite (premium-class) restaurants
• mid-price (affordable) ones,
• inexpensive (economy-class) cafes-bars-restaurants

Trade sources estimate that some 30,000 HoReCa businesses now operate in Ukraine, including over 2,000 in Kyiv.

International fast-food chains (in particular McDonalds, KFC) as well as national brands are quite widely represented in Ukraine.

The representation of the fast-food segment differs between Kyiv or other metropolises and the regional level. Some 20 fast-food brands operate in Kyiv as of today. Their number in the regions is difficult to calculate, but each major region has at least 2-3 of own ones. The latter develop exclusively within one territory and have no intentions, means or necessity to expand their business.

Fast-food outlets are the key consumers of specialized oils and deep-frying fats.

A distinctive feature of the catering market is that it is underfilled – such establishments boast high attendance. In other words, this market is not saturated. In particular, the number of restaurants per resident in Kyiv is 8-9 times smaller than in other European capitals.

Increasing popularity of fast-food outlets is fueled by demand (especially from young and middle-aged people) for fast servicing, payment convenience and the possibility to buy and consume food on the go.

The above suggests that the sector will continue developing, and demand for fat products, including those based on palm oil, will be high.

According to forecasts, the market is to continue growing. New companies, both national and international ones, will enter it in the future if the political and economic situation normalizes. They will develop rapidly, use franchises and create consolidated companies, thereby increasing the number of catering outlets and generating strong demand for fat products.


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Questions & Answers (7) :
Sia Su Ping
5 months ago
Dear Ms.Olga, since the Ukraine consumers have growing tendency to healthier food, do you foresee a decrease in fast food consumption? If yes, how would this impact the usage of palm oil which is used in deep frying fats?
Olga Mozgova:
"Dear Ms. Sia Su Ping, Yes, it's true. We observe the growing presence of health and wellness food products in Ukraine. At the same time, the fast-food market is not yet saturated and maintains a growth trend. Therefore, in the medium term, in the next 5 years, we do not expect a decrease in the consumption of fats for deep-frying, incl. palm oil. During this period, we expect their consumption to grow by 1-2% annually. In the future, we expect stabilization of consumption and then a gradual reduction in consumption. In addition to the growth factor of the trend of healthy eating, the demographic situation in Ukraine will also influence this. Ukrainian population is declining. Best regards, Olga Mozgova"
5 months ago
Fatah
5 months ago
Sustainability, 3 - MCPD and saturated fats are concerns in the global edible oil market. Is Ukraine market following this trend. How about poor oil quality uses in commercial food production. Is it an issue in Ukraine?
Olga Mozgova:
Dear Fatah, Questions of 3 - MCPD and saturated fats is known for several reasons In Ukraine. Firstly, in the process of European integration, Ukraine is gradually introducing European legislation, including food. Secondly, as elsewhere in the world, in our country, consumers distrust the products of industrial production. And finally, more and more people are striving to lead a healthy lifestyle. In Ukraine, standards are established for the use of transisomers of fatty acids only in spreads and margarines (up to 8%) and fats for the dairy industry (up to 8%). Restrictions on fats for the confectionery industry do not apply. The legislation does not require mandatory labeling of products indicating the number of trans fats used. Quality food oils are used for food production in Ukraine. At the same time, consumer confidence is caused by products using specialty fats (cheese products, milk-containing products, etc.) Best regards, Olga Mozgova
5 months ago
Nur Izati binti Abu Hassan
5 months ago
Dear Ms. Olga Mozgova, 1. Could you please advise whether there is any reference data shows the most Palm Oil export to Ukraine is from which country? 2. What is the forecast for the quantity of Palm Oil import in Year 2020? Thank You
Olga Mozgova:
Dear Nur Izati binti Abu Hassan, 1. This information can be found on the website of the State Statistics Service of Ukraine http://www.ukrstat.gov.ua/. In 2019, import of Palm Oil from Indonesia amounted to 86.5%, Malaysia - 12.8%, other countries - 0.7%. 2. In 2020, we expect of Palm Oil active import at the level of 200-215 thousand tons. Best regards, Olga Mozgova
5 months ago
Nur Izati binti Abu Hassan
5 months ago
Dear Ms. Olga Mozgova, 1. Could you please advise whether there is any reference data shows the most Palm Oil export to Ukraine is from which country? 2. What is the forecast for the quantity of Palm Oil import in Year 2020? Thank You
Olga Mozgova:
Dear Nur Izati binti Abu Hassan, 1. This information can be found on the website of the State Statistics Service of Ukraine http://www.ukrstat.gov.ua/. In 2019, import of Palm Oil from Indonesia amounted to 86.5%, Malaysia - 12.8%, other countries - 0.7%. 2. In 2020, we expect of Palm Oil active import at the level of 200-215 thousand tons. Best regards, Olga Mozgova
5 months ago
Yazid Mustafa
5 months ago
Your paper says that there are local brands presence in Ukraine’s fast food sector. How do they operate their business? Is their business operation similar to international brands such as KFC and Mcdonald? The other issue is that there is no blended palm oil with other soft oil selling in your supermarket. This differs from many other markets in temperate countries where palm based blended oil is sold. This mode of selling is mainly done on cost reduction reason. Can you explain why Ukraine’s market behavior this way
Olga Mozgova:
Dear Yazid, The Ukrainian fast food networks develop according to the model of foreign networks: own outlets and the sale of franchise. They operate both in separate premises and on food courts. Fast food outlets develop in the following three main directions: 1) a focus on ethnic cuisine (Ukrainian, Italian, Japanese ones), 2) analogues of international networks like McDonald’s, KFC, Burger King etc., 3) a focus on healthy food. Where the first two directions are pursued, the menus offer a wide range of foods cooked using vegetable oils, in particular deep-fried ones. The third direction aims at thermal treatment without any fats or oils, and vegetable oils are used as dressing there. The traditional vegetable oil in Ukraine is sunflower oil. The reasons include its affordability, taste qualities and consumer habits. Palm oil is an atypical product for Ukrainian households consume. There is no culture of using it in the country. In addition, a discussion about harmfulness of palm oil constantly brought up in the Ukrainian media pushes consumers away from its use. This is the main factor why palm oil blended with other vegoils is not available in Ukrainian supermarkets. Promotion of palm oil in Ukraine requires active awareness-building efforts, work with trading networks, tasting events, and the opening of ethnic Malaysian catering outlets, where it would be possible to promote the product. Best regards, Olga Mozgova
5 months ago
Syamimi
5 months ago
Your household analysis shows that Ukraine’s average person per household is 2.58 which is close to 2. Is it because Ukrainian household has no children or at best 1 to 2 children?
Olga Mozgova:
"Dear Syamimi, Yes, it's true. Ukraine has a difficult demographic situation. The mortality rate exceeds the birth rate. Families has predominantly 1 to 2 children or has no children at all. Best regards, Olga Mozgova"
5 months ago
LIM TECK CHAII
5 months ago
One of your slide shows that Mcdonald outlets is more than KFC. Based on your expert opinion, can you explain why Mcdonald is more popular than KFC in Ukraine.
Olga Mozgova:
Dear Lim Teck Chai, KFC opened its first restaurant in Ukraine in late 2012. The decision to enter the Ukrainian market had been quite long discussed by the company. In 2014-2015, due to economic instability, it was decided to postpone the planned expansion of the network. Now the situation has improved. 30 KFC restaurants operate in Ukraine now, including 18 in Kyiv and nearby suburbs, 6 in Dnipro, 4 in Kharkiv and one in Sumy and Zaporizhia each. The company’s near-term development plans include opening franchise restaurants in all major cities of Ukraine. The reasons why KFC is less present in the market include the following: 1. A later entry into the market 2. Keen competition for attractive locations to place a restaurant 3. Low demand for KFC franchise from potential franchisees because of high costs (according to open sources, the franchisee must pay USD 48,400 and deduct 6% of the turnover per month as a royalty fee, plus a deduction of 4% to the marketing fund and 1% for local marketing costs. In addition, on average another USD 700,000 will have to be spent on opening the restaurant. The investment payback period is 4-5 years). The McDonald’s company has been working in Ukraine since the late 1990’s. Back then, supported by the U.S. Embassy, the network purchased and rented the best premises. According to the company, 90 restaurants were operating in 20 cities and one village of Ukraine as of the end of 2019. McDonald’s is planning to continue reinforcing its position in the Ukrainian market. The accelerated development plan is focused on providing customers what they really want: fast-service hot tasty foods. The company offers a wider menu than KFC. In Ukraine, McDonald’s has only own outlets – no franchise is sold. As of 2017, McDonald`s had made the following investment in own outlets in Ukraine: a food-court: up to USD 1 Ml a restaurant in a separate building: USD 1.2 - 2.5 Ml reconstruction: USD 700 Th – USD 2.5 Ml Best regards, Olga Mozgova
5 months ago
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