Russia vs. EU: Ukranian 'chocolate king' picks his side

By Annie Harrison-Dunn

- Last updated on GMT

Roshen’s future perspectives will be strongly dependant on upcoming political decisions in Ukraine, says analyst
Roshen’s future perspectives will be strongly dependant on upcoming political decisions in Ukraine, says analyst

Related tags Roshen Russia Ukraine

The anti-Russian sentiments of Roshen's owner means the future of Ukraine’s biggest confectioner rests on the political fate of his country, an analyst has said.

Roshen owner, Piotr Poroshenko, currently serves as a member of the Ukrainian parliament and has been tipped as a presidential contender in possible upcoming elections, Georgij Grebinskij, research analyst for Euromonitor International, told ConfectioneryNews.

Grebinskij said: “Taking into account Roshen has a large share of exports to Russia, as well as the fact that Piotr Poroshenko is holding an anti-Russian position regarding Russia’s intervention in the Ukrainian political environment, political activity of this oligarch can have an effect on his business, especially concerning Roshen’s confectionery business with the Russian federation.”

Thousands of protestors took to the streets of Kiev last month after the country’s president, Viktor Yanukovych, announced it would abandon plans to join the EU in favor of stronger ties with Russia. Since then the country has become an epicenter of political wrangling that has seen trade promises upped, Russian deployment of troops throughout Crimea and some parts of Ukraine and international threats of sanctions thrown at Putin and co. 

Roshen-Russian tension dates back to before the recent political unrest, with Russia's consumer protection agency placing a ban on Roshen chocolate last July.  

Trading politics

Ukraine protest -
98 people died and many more were injured in violent clashes between protestors, police and military amid political unrest in Ukraine. Photo Credit:

Traditionally the Russian market is the most significant for Ukraine, Grebinskij said, due to competitive pricing, reputation of Ukrainian product quality and marketing efforts.

“Many Ukrainian brands are well known to Russian consumers from the Soviet times. And for this reason they are both appealing to nostalgia of some customers and are often perceived as natural and ecologically clean (organic),”​ he said.

The Commonwealth of Independent States (CIS) remains the biggest export market for Ukrainian confectionery, in particular Russia, Kazakhstan, Georgia and Belarus. However, he said that from 2012 members of the Customs Union (Russia, Belarus and Kazakhstan) had been trying to “push out”​ Ukrainian exports such as dairy and confectionery.

In 2011 Kazakhstan introduced higher entry barriers as a prohibitive trade measure for Ukrainian boiled sugar confectionary, which at the time accounted for 72% of overall confectionery imports in Kazakhstan and was considered to be the strongest competitor to its domestic confectionery,  Grebinskij said.

He said such measures were also seen in Belarus where in 2012 draconian document checks created ‘artificial’ import border queues, hitting Ukrainian importers.

In 2013 Russia banned imports from Roshen claiming it had found harmful ingredients in its chocolate, Belarus also followed suit for a time and the company was forced to temporarily close one of its factories in light of this so-called ‘chocolate war’​. 

Grebinskij said these circumstances forced Ukranian confectioners to look away from traditional trade links in search of other opportunities. If Ukraine were to join the EU it would gain access to the area’s free trade zone agreement. However, he said entrance to the EU market would be harder compared to CIS or other post-Soviet countries due to differences in consumer preference and long-standing consumption of other established brands.

He said challenges would also wait for EU brands looking to hone in on export opportunities to Ukraine, adding that Ukrainians preferred familiar brands.

“Ukrainian consumers are rather conservative regarding their tastes and do not change preferences easily. Therefore new companies have to be constantly ready to offer something novel - taste, packaging, brands - in order to gain and sustain share on the market.”

Yet he did say that in view of recent events, some Ukrainians had begun boycotting products imported from Russia.

Long term, short term

Grebinskij said that Roshen’s future perspectives will be strongly dependent on upcoming political decisions in Ukraine. He said that on-going unrest made it difficult to make short-term forecasts since it hinged on a “myriad of unpredictable factors”​. 

Looking to longer-term forecasts he said: “If the situation in the country stabilizes, current political and economic shock, which has dented confidence of both businesses and final consumers, will be overcome and current fluctuations will be eventually smoothed.”

However, he said that if instability continued, further development of the Ukrainian confectionery industry as well as the country’s economy as a whole will remain “vague and unpredictable”.  

According to Euromonitor data, the Ukrainian chocolate market had a retail value of $3,018.7m in 2013, up 14.4% from the previous year. The research firm forecasts this annual growth to stay within the early teens leading up to 2018, but to show a steady deceleration. 

Related topics Markets Chocolate Emerging Markets

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