Business Development of the small-scale bakeries in Ukraine.
Since the start of large-scale invasion Ukrainian bakeries faced many challenges: it was difficult to find inputs, employees of some big bakeries could not arrive to their workplaces, and products could not be delivered to the occupied territories and regions affected by hostilities on time. Bread producing plants and factories were destroyed by shelling.
To study the opportunity of solving the issue of insufficient supply of bakery products to the people of Ukraine and to support the design of a business model and a pilot for the development of the small scale baking industry in Ukraine a project was launched by the Netherlands Enterprise Agency RVO in 2022.
The report presenting the results of the project "Business development Bake-4-Ukraine," initiated by the Netherlands Enterprise Agency of the Dutch Ministry of Economic Affairs, (RVO) was prepared by the International Management Institute (MIM Kyiv).
Historical moment of trial bake at the Shcherbynivka bakery. This bakery started from scratch and will provide jobs to people, who had to move from the war zone.
Business model designed within this project will become the basis for larger intervention that will contribute to sustainable production of bread, creation of jobs and sources of income at community level in the areas of Ukraine that are strongly affected by the ongoing war.
In the medium and long term, it is expected that the results of this project will lay the foundation for the sound development of the small scale baking industry, that is modern and competitive to match the local demand and to find a position in the European market.
The project is aimed at: SDG 8: inclusive and sustainable economic growth; target 8.3: Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation; SDG 2: Food security.
Baking the first bread in the new oven at Scherbynivka bakery. This initiative was supported by joint efforts of Zeelandia-Ukraine, Embassy of the Kingdom of the Netherlands in Ukraine, Perspectiva 21.3, Zeelandia United Kingdom and Montana Bakery and private people.
During a war, food safety and supply can be greatly impacted, and the bakery industry is no exception. In the event of large bread production sites closing due to the war, the demand for bread could increase, creating an opportunity for mini-bakeries to fill the gap in the market. However, operating a mini-bakery during a war can be challenging, as the availability of ingredients and equipment may be limited, and the cost of production may increase.
The project aimed to support the design of a business model and a pilot for the development of the small-scale baking industry in Ukraine. It leverages in the short term, the further production of bread, the creation of jobs and the generation of income at community level in areas that are strongly affected by the ongoing war. In the medium and long term, it is expected that the results of this project lay the foundation for the development of the small-scale baking industry that is modern and competitive to match the local demand and to find a position in the European market.
Based on deep market analysis of the existent situation, the project was focused on the development of the mini-bakery industry in the priority regions (oblast) of Ukraine. Selected priority regions are mainly Eastern and partly Northern and Southern regions of Ukraine (mostly suffered from the war), including Chernihiv, Kharkiv, Sumy, Poltava, Dnipro, Zaporizhzhia, Luhansk, Donetsk, Mykolayiv, Kherson, and Odesa regions.
Modern company producing frozen bakery products in Kyiv oblast was destroyed by Russian shelling in spring 2022.
The market analysis demonstrated strong demand for these types of bakeries, and there is an estimated potential market demand requiring 278 micro-bakeries and 289 mini-bakeries in the selected regions with an estimated investment size of 40,000,000 EUR. However, a realistic possibility for such project implementation on a gradual step-by-step approach with a reasonable scale of potential investment from the start-up operations and guarantee for a long run sustainable project live is seen.
The market analysis also demonstrates a positive situation with raw materials practically in all regions of Ukraine. A similar stable situation is with the availability of professional and high-quality staff in the area of food processing due to the availability of a wide network of technology and food processing educational institutions all over Ukraine.
Sharing the freshly baked bread at Scherbynivka bakery.
Another recommendation is a follow-up on the recent project focused on the analysis of the bakery industry in Ukraine. A follow-up would be aimed at implementation of the ideas outlined in the project report and aims to create 10-15 bakeries, develop all logistics mechanisms for launching projects, refine the business model, and form a prototype association of mini-bakeries. The association can then provide the functions outlined in our main project report, such as fundraising, marketing support, consulting, and services to its members. In order to participate in the tender, RVO (or other organization) could invite to the tender consortiums consisting of the leading international companies and existing players in the industry in Ukraine. The costs associated with such a follow up are estimated at 1.5-2 million euros. Each consortium should offer its own vision for industry development, including the possibility of partial implementation of tasks with their own resources.
Read also Business development Bake-4-Ukraine | Project Database CMS (rvo.nl)