22 February 2016
Ukrainian Poultry Market Digest
Poultry production has been one of the most dynamics industries in Ukraine. General increase of per capita meat consumption since Y2000, market consolidation (and increase of the share of industrial production in total volume), growth of poultry meat share in total domestic meat consumption (partially – because of faster (vs. other meat production) market consolidation and aggressive marketing campaigns of market leaders) and development of export led to significant growth of industrial production volumes. In Y2014 situation changed – sharp fall of purchasing power of Ukrainian population and stop of export into Russia led to production volumes stabilization.
Such stabilization along with ongoing increase of production capacities of main market players should obviously lead to increase of competition. Realizing new investments into extension of capacities, market leaders intended to boost export volumes, at that in reality, as CIS export volumes significantly declined, producers were not able to substitute lost volumes with export to the new destinations – EU (because of relatively low quotas) and MEA. On domestic market the main problem is the fact, that producers are not able to pass through increased production costs (mainly due to UAH devaluation) to ultimate consumers, so that margins decreased. In such situation production efficiency and vertical integration seem to be main factors of success for producers.
TOP industrial poultry producers market share during last years has been as follows:
Producer
Y2015
Y2014
Y2013
Y2012
Y2007
MHP
60.6%
60.0%
51.6%
50.0%
..
36.0%
Agromars
12.3%
13.0%
14.9%
14.0%
..
21.0%
Volodymyr-Volynska PF
6.4%
6.0%
3.6%
3.5%
Dniprovska PF
5.7%
5.0%
5.4%
6.0%
Agro-Oven
5.4%
5.0%
5.1%
5.0%
Pan Kurchak
2.8%
2.6%
1.7%
1.8%
Being clear market leader, and realizing significant investments into poultry production expansion (along with general vertical integration), during last years MHP significantly increased its market share. It was done mainly at account of non-industrial production, small and less efficient industrial producing companies (such as Ular, Bershadska Ptakhofabrika and some others). The share of second largest player – Agromars – significantly decreased, though the company puts into operation new capacities, so has plans to fight for at least part of lost share. Such a fight is not expected to be an easy one, taking into account a/m information on current market situation and strength of competitors, as all TOP-6 producers have well-established positions (from financing structure, operations efficiency and vertical integration point of view). Significant (by several percentage points) increase of market share can be possible by dumping, which can take place only in case of significant margin of safety present in business and sufficient vertical integration. From this point of view positions of all main players are rather good (non-industrial production will also have its niche as certain part of demand will still be focused on this segment). So, we see that development of export operations can be main factor of growth in the coming years, so it is important for the largest producers to develop new export destinations.