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Changing Consumer Preferences Undermine Profitability at Ukrainian Dairy Group

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Changing Consumer Preferences Undermine Profitability at Ukrainian Dairy Group

September 09
11:09 2010

Ukrainian dairy business Ukrproduct Group has reported a 5.3% drop in year-on-year revenue to £20.7m for the first six months ended June 30th 2010, although the figure remained stable in local currency, and gross profit dropped 18% to £3.2m as price sensitive consumers moved down market. Gross profit from branded dairy products, which account for two-thirds of total revenue, fell 42%.

“During the first half of 2010 Ukrproduct has witnessed a further decrease in the purchasing power of the local population, which resulted in a continued switch in consumer preferences from the middle to the mass market segment. At the same time growth in input prices outpaced the rise in consumer prices,” says Sergey Evlanchik, chief executive of Ukrproduct. “Domestic processed cheese prices have declined by 15% on average from January 2010 and have reached July 2009 levels, driven by aggressive pricing by local producers at the low end of the market. Prices for packaged butter were up by 25% year-on-year on average which has partially compensated for the increased cost of raw materials.”

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