Ukrainian firms strug­gle to build strong brand names

Kyiv Post - - Business Focus - BY OLENA GONCHAROVA and YULIANA ROMANYSHYN [email protected], [email protected]

Known as the an­gels of agri­cul­ture, hon­ey­bees have been help­ing Ukraine top the list of Euro­pean and world honey pro­duc­ers. In 2016, Ukraine ex­ported $108.2 mil­lion worth of honey.

But cus­tomers abroad won’t see many purely Ukrainian brands of honey on sale: What they usu­ally see is merely a “made in Ukraine” mark on the pack­ag­ing of another coun­try’s brand, since Ukrainian honey pro­duc­ers can rarely en­ter a for­eign mar­ket un­der their own names.

To boost sales of honey and other prod­ucts un­der Ukrainian trade­marks, pro­duc­ers will have to in­vest more in good mar­ket­ing strate­gies and at­trac­tive pack­ag­ing. The least a com­pany can do is trans­late its web­site into English. But only a few com­pa­nies have started to do even that.

One per­son who is al­ready a veteran of the busi­ness is Vadym Pankovsky, mar­ket­ing direc­tor of honey pro­ducer Bart­nik, which has been pro­duc­ing honey for ex­port since 1999. That’s when Pankovsky teamed up with Pol­ish cit­i­zen Janusz Kasztelewi­cz, who helped bring Ukrainian honey first to Pol­ish house­holds, and then later to the Cana­dian and U.S. mar­kets.

It’s worth in­vest­ing in the ex­port of a fin­ished prod­uct: The av­er­age ex­port price of raw Ukrainian honey is $2 per kilo­gram, while pack­aged honey in Ger­many costs nearly $12 per kilo­gram, ac­cord­ing to the Ukrainian of­fice of the Baker Tilly, an ac­coun­tancy and busi­ness ad­vi­sory com­pany. Within the Euro­pean Union, Ger­many and Poland are the largest im­porters of Ukrainian honey.

While Pankovsky ad­mit­ted that Bart­nik still mostly ex­ports raw ma­te­ri­als, he says the com­pany is study­ing ways to tar­get new mar­kets, in­clud­ing those in the Mid­dle East and Africa, to which Bart­nik hopes to ex­port un­der its own trade­mark.

“It’s hard to com­pete in Europe as they get lots of cheap honey from China,” Pankovsky ex­plained. Ex­perts say that the qual­ity of Ukrainian honey is far bet­ter than that of China, the world’s largest honey ex­porter, but Ukrainian honey of­ten struggles to “be­come no­ticed.”

In the United States, Pankovsky said, it’s bet­ter to tar­get places where the Ukrainian ex­pa­tri­ate com­mu­nity lives. Pankovsky’s Bart­nik ex­ported some 4,000 tons of honey in 2016, or 99 per­cent of its en­tire out­put. At home, honey sales are slug­gish.

“There’s no honey-con­sum­ing cul­ture in Ukraine,” Pankovsky said. Most peo­ple only use honey as treat­ment dur­ing the flu sea­son. The com­pany, there­fore, has re­ori­ented it­self to for­eign mar­kets.

Do­ing home­work

Maryana Ka­hanyak, who heads the Ex­port Pro­mo­tion Of­fice in Ukraine, says that ex­port­ing is a good test of the ma­tu­rity of a busi­ness.

“The prob­lem is that Ukrainian brands are of­ten lit­tle-known, and the com­pa­nies of­ten lack re­sources for brand devel­op­ment,” Ka­hanyak ex­plained. “Another ob­sta­cle for many pro­duc­ers is that you need to study the mar­ket from within, and one of the best ways for that is to work with a lo­cal con­sul­tant.”

To pre­pare Ukrainian busi­nesses to en­ter new mar­kets, the Ex­port Pro­mo­tion Of­fice has or­ga­nized trade mis­sions to help pro­duc­ers hold meet­ings with lo­cal busi­ness rep­re­sen­ta­tives.

CUTIS, the Canada-Ukraine Trade and In­vest­ment Sup­port Project, also ed­u­cates Ukrainian busi­nesses on how to com­pete in the vast North Amer­i­can mar­ket af­ter a free trade pact with Canada came into force this sum­mer.

Olga Verge­les, project man­ager at CUTIS, said there is not yet much de­mand in Canada for Ukrainian prod­ucts, so com­pa­nies have to do their home­work first.

“When talk­ing to Ukrainian com­pa­nies, I hear a lot about the chal­lenges, e. g. dis­tance, lack of in­for­ma­tion, prices, etc., but the most com­mon ‘prob­lem’ is that many Ukrainian com­pa­nies don’t un­der­stand the need to make changes, first in­side the com­pany and/or the prod- uct, and ac­cept the way Cana­di­ans do busi­ness — in terms of the for­mat, process of ne­go­ti­a­tions, time­line and even busi­ness meet­ings,” Verge­les ex­plained.

Ukrainian prod­ucts must have a com­pet­i­tive ad­van­tage in price, qual­ity or unique­ness, Verge­les said, and only then will it at­tract the at­ten­tion of Cana­dian buy­ers.

EU stan­dards

Tai­lor­ing a strat­egy to Euro­pean mar­kets is time con­sum­ing, but can pay off.

That’s the les­son learned by Kor­motech, a Ukrainian man­u­fac­turer of dog and cat food, which has achieved a break­through for its brand on in­ter­na­tional mar­kets.

The busi­ness, founded in 2003, pro­duces six brands of food for dogs and cats in the stan­dard, pre­mium and su­per pre­mium seg­ments. Kor­motech first started sell­ing on the do­mes­tic mar­ket, and then adapted its prod­ucts for cus­tomers abroad, ac­cord­ing to Ihor Blystiv, deputy mar­ket­ing direc­tor at Kor­motech.

The com­pany started ex­port­ing in 2011 and has since built up a net­work in 18 coun­tries. To adapt the prod­uct for sale abroad, the com­pany re­branded the name of the food into English — as Club 4 Paws — and re­designed its pack­ag­ing. It also ex­panded its prod­uct range.

Ac­cord­ing to Blystiv, “the Euro­pean mar­kets are more de­vel­oped and more fi­nan­cially re­li­able.” Today, about 20 per­cent of the 30,000 tons of food the com­pany pro­duces every year goes abroad.

To en­ter new for­eign mar­kets, Kor­motech hires a dis­trib­u­tor or launches a sales team in the tar­geted coun­tries. Vis­it­ing in­ter­na­tional trade fairs also helps.

“When a new player comes, it's al­ready dif­fi­cult,” Blystiv said. “But when we say that we are from Ukraine, the at­ti­tude is… to a cer­tain ex­tent cau­tious,” he said of Western per­cep­tions of Ukrainian goods. “No one is wait­ing for us there — the Pol­ish mar­ket is ag­gres­sive, sat­u­rated with other play­ers,” he added.

Blystiv said the com­pany was able to hold its own on the Pol­ish mar­ket be­cause of prod­uct qual­ity, good brand­ing and com­pet­i­tive pric­ing. Since its found­ing, the fac­tory has in­tro­duced in­ter­na­tional stan­dards of pro­duc­tion be­cause of the lack of lo­cal leg­is­la­tion on pet food pro­duc­tion, Blystiv said.

“In fact, we’re a Euro­pean com­pany, but just lo­cated 30 kilo­me­ters away from the bor­der,” Blystiv said of his fac­tory, which is in Lviv Oblast, next to Ukraine’s bor­der with EU mem­ber Poland.

A man be­hind bot­tles and jars of honey at the Kyiv honey fair in Au­gust. Ukrainian honey is one of the top prod­ucts the na­tion ex­ports to the West, al­though it rarely is sold un­der a pro­ducer's brand name. (Oleg Pe­tra­siuk)

Ukraine pro­duces and ex­ports the largest amount of honey in Europe every year, but lo­cal pro­duc­ers still strug­gle to es­tab­lish brand names that will sell well in Western mar­kets. (United Na­tions)

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