Background

Nothing is more basic to the standard of living than the price and quality of bread.  The economic health of this industry is therefore very important to the governments involved.  Despite the ever- increasing cost of materials and rising wages of the workers, the price of a loaf of bread can be critical to the health of the population and even the stability of the government. 

Objective

The quality and taste of bakery products, including bread, is well established in most countries, and it is not the purpose of this program to alter this aspect of the industry in any way.  Rather, the objective of the CEI bakery economic development mission is to improve the management and marketing of bakery products and thus to improve the economic health of the industry. 

Topics to be covered

The following topics will be covered:

• Marketing strategies and retail operations

• Management of the firms

• The use of technology

• New products and packaging that might be introduced

• Understanding basics of health and nutritional values

• The operation and benefits of a bakery association

• Sanitation and health regulations

• Productivity improvements to reduce costs and improve profitability

• The use of food additives

How can the program help?

The CEI economic development mission for bakery will show industry managers and consultants new techniques that will improve the profitability of their organizations.  Government officials on the mission will also gain a greater appreciation of the needs and problems of the industry. 

Where will the group travel?

The mission will travel throughout the U.S. Mid-western states to visit:

• Bakeries of various sizes

• Marketing organizations

• Trade associations

• Culinary institutes

• Bakery packaging operations

• Health inspection organizations

• Research institutes

• Universities

Example Benefits from Ukraine

Business Plans

Sergiy Tsymbalov visited the U.S. on the CEI 2000 bakery mission.  He had just completed the master business plan for the company in which he was going to branch out into the pasta market.  They would start making macaroni, a popular product made by many Kharkiv firms both large and small. 

The bakery mission visited many U.S. firms and they learned how the Americans specialized into niche markets.  Brand identification and packaging were key ingredients in keeping and expanding their markets. 

Upon his return to Ukraine, Sergiy threw out his original business plan to expand into pasta.  Instead, he purchased new ovens and bread delivery trucks.  The latter have the name “Roma” proudly emblazoned on all 4 sides.  Roma is now growing at a rate of 30% per year. 

Government Policy

Victoria Radchenko of the Kharkiv Oblast Administration participated on the bakery tour and came to learn about the profit squeeze faced by the firms in the industry.  Ingredient costs and wages were constantly rising, while the price of bread was controlled by the government and was thus constant. 

Upon her return to Ukraine, Radchenko convinced government officials to de-regulate the price of some types of bread, thus improving the economic health of industry firms. 

Product Branding, Logos

On each of its study tours, CEI participants noted that the U.S. firms stressed the need for product identification and differentiation.  For bakery and dairy products this is especially important in order to differentiate similar products.  This lesson was not lost on Aleksiy Gonskiy, President of the firm Fasma.  He started designing logos and new packaging for other study tour participants, including the Kharkiv Edible Oil Factory and the Sugar Plant Named after Petrovskiy.  Other firms developed their own logos, including Borovskoy Milk Plant, Roma Bakery, and Kupiansk Milk. 

Roma Bakery is located in Pervomaisk, a medium sized town in the Kharkiv Oblast.  They explained their expansion plan to CEI and said they could expand because “their bread was better”.  Of course every other bakery said the same thing!  Moreover, bread was not a highly differentiated product and was almost always sold without pack-aging or product identification.  It appeared that the public primarily wanted warm, fresh bread daily. 

The challenge for Roma then was how to expand into the neighboring villages and compete with the many small local bakeries.  The solution was to add product branding.  On a subsequent follow-up visit to Ukraine CEI was presented with several loaves of bread packaged in an attractive and colorful plastic bag, complete with the product name and logo – and it was sliced!  This was the first such product seen by CEI during 10 years of work in Ukraine.