Our company, HD Group, is an expert in the baked goods industry. Seven of our facilities produce around 180,000 tons of baked goods and confectionery annually. Our market encompasses all regions of Ukraine, from Chernivchi to its eastern borders.
However, now we witness a steady decline in consumption of one of our most popular products. The market is under strain because of several reasons. Traditional bread isn’t as popular as it has been before. Consumers don’t buy other types of bread very often because of their price.
Nonetheless, there is a way out. Bread should become a functional product with maximum benefits for health. The transformation of usual products into unusual ones is a trend in many developed countries.
Our company has experience in designing functional products. We experimented and created new products together with the top companies in the world, for instance, Puratos.
However, although the trend towards superfoods is well established globally, it is still an emerging one in Ukraine. Ukrainians are not ready to add functional products to their consumer basket. Low demand, as well as a small average bill on the market, hold back the innovations in the food industry.
In Ukraine, low demand, as well as a small average bill on the market, hold back the innovations in the food industry
Still, we have a plan on how to turn the bread everybody knows into a functional product, widening the circle of its customers. I mean the fortification of flour — the main raw material for bread.
Fortification, which means adding vitamins to the flour, has already become a must in the baked goods industry of many developed countries. In some of them, you can’t use flour that doesn’t contain the necessary premixes. The composition of those premixes depends on the health issues common in a particular country. The vitamin composition of the flour can be influenced even by the climatic zone.
The required components of the product may depend even on the particular consumer. For example, the armed forces supplier should have its flour enriched with fluorine and magnesium. The latter is especially useful for those with an extensive load on the heart muscle. The list of such advancements for usual products may vary and be even larger.
The transformation of usual products into unusual ones is a trend in many developed countries
At the same time, such experiments will be successful only in those markets, where most consumers will appreciate them and buy new products. In Ukraine, the price of bread has its psychological limit. We ran experiments, which revealed that for Ukrainians, a price difference of even half a hryvnia is crucial.
Most Ukrainians aren’t ready to pay to preserve their health, which is, perhaps, a result of their mentality acquired in the course of history. In my opinion, such a situation requires the intervention of the government or local authorities. It might be a national program, let’s call it “The National Health.” Such a program could, for instance, include the requirements for the concentration of microelements and vitamins in the bread for school- and preschool-age children.
Most Ukrainians aren’t ready to pay to preserve their health, which is, perhaps, a result of their mentality acquired in the course of history
We need such a program not just to boost the quality standards in the industry, but because the last vestiges of that quality will soon become non-existent. Very few companies really try to meet some clear standards by getting certificates, modernizing their equipment, and so on. We are aware of that fact as we actively participate in various government tenders.
How are those tenders held? The scheme is quite simple. The producer posts an offer at the Prozorro-platform, stating prices that are economically unfeasible. But there are no such things as miracles. The resulting product is manufactured with process violations or using low-quality raw materials. Any vitamin complex or other consumer properties are out of the question in this situation. The price is the cornerstone here, though it shouldn’t be.
What makes the matters worse is that the composition of the bread can be even poorer. It is a result of Ukrainian agricultural production chasing after high yields and losing its vitamin potential.
The situation which emerged is a threat not only to business but also to consumers. Ordinary marketing instruments can’t fix it. No amount of advertising bread as a ‘functional product’ by the market participants will make up for government support. That’s why the government should participate in a national bread program.
The government should participate in a national bread program
The part of such a program could be the cooperation of market players in growing specific raw materials for niche products. For instance, wheat could become a niche raw material if it was ‘supercharged’ not with extra protein but with improved baking properties.
Our company has experience in such production. Not long ago, together with Puratos, we started making bread for toasts — a high-quality product from the point of view I described above.
Still, in Ukraine, making the bread more expensive, even along with improving its recipe, meets a psychological barrier. We got accustomed to cheap bread, so we can’t imagine it as a more expensive high-quality product. Alas, that’s why the main bakery standard in Ukraine is ‘the world’s most basic bread’ with a poor recipe and a small price.
As a result, everyone seems to get what they want: the producers have a stable demand, the consumers buy cheap products with necessary properties.
How could we fix that situation? Broad cooperation could help. For instance, the functional products could be sold with minimal markup for producers on special shelves in supermarkets. No additional marketing would be required.
The examples can be found in the past. The products for people with diabetes could be found in special places. You could buy bread with beta-carotene. After the Chornobyl catastrophe, special bread with a larger concentration of iodine was designed. Those products were sold with minimal markup. As a result, everybody got what they needed: producers had a stable market, consumers had inexpensive products with necessary properties, and the nation was healthier.
Is there a way out? The plan is simple: preserve what we already have and add something new. Something that is required not only by the market but also by common sense.
Source: the speech, delivered as part of the panel discussion ‘The Production of Food with Improved Consumer Properties’, organized on January 29, 2021, by the Kyiv Regional State Administration.