Required Report - public distribution

**Date:** 12/20/2005

**GAIN Report Number:** UP5022

UP5022

**Ukraine**

**Retail Food Sector**

**Report**

**2005**

**Approved by:**

![](media/image1.wmf)W. Garth Thorburn II

U.S. Embassy Kiev, Ukraine

**Prepared by:**

FAS Kiev Office, Contracting Party

**Report Highlights:**

Ukraine is the second largest European country with a population of 47
million people. Rapid per capita income growth has driven retail trade
growth rates in food products to \$4.3 billion in 2003. Retail chains
are also expanding rapidly. American products can be successful in some
niche markets in Ukraine: high-value, premium-class products
(high-quality meat products, expensive seafood, alcoholic beverages) are
consumed by a population with increasing incomes. Also experiencing
significant growth are relatively low-priced specialty food products
(special infant dairy food, diabetic foods), inexpensive food for young
people, products associated with a "Western" lifestyle (popcorn, instant
beverages), semi-prepared food, ingredients for preparing different
national cuisine dishes, and microwaveable products.

Includes PSD Changes: No

Includes Trade Matrix: No

Annual Report

Kiev \[UP1\]

\[UP\]

Table of Contents

[**SECTION I. MARKET SUMMARY 3**](#section-i.-market-summary)

[SECTION II. ROAD MAP FOR MARKET ENTRY
6](#section-ii.-road-map-for-market-entry)

[ENTRY STRATEGY 6](#entry-strategy)

[MARKET STRUCTURE 8](#market-structure)

[Distribution Channels 8](#distribution-channels)

[Types of Retailers 8](#types-of-retailers)

[Supermarkets & Hypermarkets 9](#supermarkets-hypermarkets)

[Kiosks and Gas Marts 13](#kiosks-and-gas-marts)

[Convenience Stores (Self-Service Groceries)
13](#convenience-stores-self-service-groceries)

[Traditional Outlets -- Independent Grocery Stores and Open-Air Markets
14](#traditional-outlets-independent-grocery-stores-and-open-air-markets)

[MARKET TRENDS 16](#market-trends)

[Private Label 16](#private-label)

[Modern Trade Promotion Methods 16](#modern-trade-promotion-methods)

[Market Power 16](#market-power)

[SECTION III. COMPETITION 16](#section-iii.-competition)

[SECTION IV. BEST PRODUCT PROSPECTS
22](#section-iv.-best-product-prospects)

[Category A: Products With Good Sales Potential
22](#category-a-products-with-good-sales-potential)

[Category B: Products Not Present in Large Quantities but with Good
Sales Potential
25](#category-b-products-not-present-in-large-quantities-but-with-good-sales-potential)

[Category C: Products Not Present Because of Significant Barriers
(Barriers Indicated)
25](#category-c-products-not-present-because-of-significant-barriers-barriers-indicated)

[SECTION V. ATTACHMENTS 26](#section-v.-attachments)

# SECTION I. MARKET SUMMARY

Retail trade in food products has developed rapidly over the past few
years in Ukraine because of good economic performance and strong income
growth rates. GDP grew by 9.6% in 2003 totaling UAH 267 billion (\$50.3
billion) and 12.4% in 2004 totaling UAH 345 billion (\$65.7 billion).
The number of middle and high-income consumers has also increased (the
population's income grew to UAH 216 billion (\$41 billion) in 2003 and
UAH 270 (\$51 billion) in 2004. Globalization of world trade and major
shifts in consumers' preferences are also contributing factors.
Presently, more people are traveling abroad and are influenced through
the mass media and advertising.

According to some estimates, food product retail trade in 2003 reached
\$4.3 billion (a 19.5% increase over the previous year) and \$4.7
billion in 2004. Other retail trade assessments are even higher because
they incorporate street-level retail trade and sales of meat, fruits and
vegetables in open-air markets (bazaars). All studies reveal the same
conclusion; retail trade growth in Ukraine has led to the development
and expansion of local food retail chains and the entry of foreign
retail giants. Approximately 7% of total investment in 2005 went into
the retail sector. The annual retail turnover in food products reached
\$89 per capita in 2003 (20% growth over 2002). Other studies have this
index as high as \$274 per capita.

######  Table 1. Selected Trade Indicators, 1999-2003 

  ---------------------- ---------- ---------- ---------- ---------- ----------
  **Index**              **1999**   **2000**   **2001**   **2002**   **2003**

  Retail Trade Volume    2,917.2    2,744.5    3,227.3    3,579.9    4,276.7
  (US\$ million\*\*)                                                 
  Source: State                                                      
  Statistics Committee                                               
  of Ukraine                                                         

  Retail Trade Volume    n.a.       n.a.       3,811.5    4,365.1    6,102.7
  (US\$ million\*\*)                                                 
  Source:                                                            
  Derzhzovnishinform\*                                               

  Consumer price index   126.2      128.4      107.9      97.7       110.9
  for food products, %                                               
  ---------------------- ---------- ---------- ---------- ---------- ----------

\*Estimates of the Derzhzovnishinform Center are based on production of
food products, their imports, exports, and consumption by food industry
enterprise as well as direct sales to consumers. Estimates do not
include sales of unofficially traded products.

*\*\*Official yearly average NBU hryvnya-to-dollar rate was used to
convert Ukrainian hryvnyas (UAH) to U.S. dollars.*

According to the largest retailers, the structure of food products sold
by product origin is as follows: Ukrainian products -- 82%, imported
products -- 18%. The share of imported goods seems to be relatively low,
but if unofficial trade is included the number increases significantly.
Larger cities and densely populated urban areas account for the largest
share of retail trade (Kiev city is a high as 17% of the market,
Dnipropetrivsk region -- approximately 9%, Donetsk region -- 8%, Kharkiv
region -- 8%, and Lviv region -- 6%).

Table 2. Pattern of Food Product Sales in Retail Stores, (US\$ million)

  -------------- ---------- ------ ---------- ------ ---------- ------ ---------- ------ --------- ---------- ------
  **Index**      **1999**          **2000**          **2001**          **2002**                    **2003**   

                 US\$       \%     US\$       \%     US\$       \%     US\$       \%     US\$                 \%
                 million           million           million           million           million              

  Domestically   2,693      92.3   2,558      93.2   3,018      93.5   3,351      93.6   3,956                92.5
  produced                                                                                                    
  goods\*                                                                                                     

  Imported       225        7.7    187        6.8    210        6.5    229        6.4    321                  7.5
  items\*                                                                                                     

  Domestically   \-         \-     \-         \-     3,369      88.4   3,918      89.8   5,485                89.9
  produced                                                                                                    
  goods\*\*                                                                                                   

  Imported       \-         \-     \-         \-     443        11.6   447        10.2   618                  10.1
  items\*\*                                                                                                   
  -------------- ---------- ------ ---------- ------ ---------- ------ ---------- ------ --------- ---------- ------

*\* Source: State Statistics Committee of Ukraine*

*\*\* Derzhzovnishinform Estimates*

Ukraine's food product retail sector is still developing and has good
growth prospects. Despite the growing number of supermarkets, open-air
markets remain the most popular retail outlet. Thus, in Kiev, which
accounts for almost 1/5 of the food-product market and where 1/6 of the
country's hypermarkets and supermarkets are located, open-air markets
still accounted for 30-35% of food-product sales in 2002 and 90-95% of
fresh meat sales in 2003. Open-air outlets supplied approximately 50% of
the retail market for the entire country for the same period.

####### Ukraine\'s Retail Trade Structure 2002 vs. 2003

![](media/image2.wmf)![](media/image3.wmf)

*Source: Industry Expert Estimates*

Supermarket chains in Ukraine are developing rapidly. They continue to
increase their share of retail trade and are driving out previously
popular forms of retail trade. Despite the current small share, hyper-
and supermarkets are expected to capture 40% of the market in the near
term, convenience stores/discounters will capture 10-15%, open-air
markets 30%, traditional stores (groceries, over-the-counter trade
stores) 10-15%, and other outlets 10%.

"La Furshet", the largest and fastest growing supermarket chain, is a
good example of how rapidly the retail trade is growing in Ukraine. La
Furshet had 15 stores in 2002, 22 stores in 2003, 30 stores in 2004 and
is expected to have 50 stores by the end of 2005. Nearly 550 mini-,
super-, and hypermarkets were operational in Ukraine in 2001. Their
numbers increased to approximately 616 stores in 2002, and exceeded 690
stores in 2003. In 2004, an average retail outlet was expected to
recover its investment within 3 to 5 years in Ukraine, compared to 10 to
15 years in EU countries.

Many Ukrainian supermarkets launched consumer loyalty programs to
encourage frequent buyers, low-income consumers or retirees. Some (La
Furshet <http://furshet.ua/> and Megamarket
[http://www.megamarket.ua](http://www.megamarket.ua/)) offer on-line
supermarket sales with office or home deliveries. Other outlets practice
telephone shopping.

The largest retail chains have their own kitchens, mini-bakeries and
processing shops. These departments allow chain stores to offer
customers a variety of ready-made food products and semi-finished
products. This includes various ready-made salads, bakery products,
packaged meat cuts, fish and frozen semi-finished products. Supermarkets
are also used as anchors in trade centers and shopping malls. In
Ukraine, shopping malls usually include boutiques, movie theaters,
cafes, and restaurants (often with food courts).

Ukraine is one of the most populated countries in Europe. A steady
increase in personal income over the past few years has driven the rapid
expansion of the retail sector (an increase of 24.3% in 2001, 18.1% in
2002, and 16.5% in 2003). During the past 3 years, established large
European retailers (Metro, Billa, and Spar) entered the Ukrainian
market. Usually, retailers enter markets located in or around big urban
centers with subsequent expansion into smaller cities and towns.
Although local supermarket chains still outpace foreign companies in
terms of the number of outlets, trade outlets of foreign companies have
a much better logistical base, tested market-entry strategies, excellent
personnel-training techniques, well-established connections to suppliers
and solid financial support. Well-established and quickly growing local
retail networks are attractive to foreign investors for takeovers. The
A. T. Kearney retail trade development rating gives Ukraine 11 points
for 2004 and includes Ukraine on the list of countries where
international retailers are recommended to do business.

**Advantages and Problems for US Exporters**

  ----------------------------------- -----------------------------------
  **Advantages**                      **Problems**

  Population of 47.4 million people,  Despite income growth, majority of
  growing number of consumers who can the population continues to save
  afford purchasing high-quality food money on food items.
  products                            

  Demand for higher quality food      Many customers have a prejudice
  products is growing                 against imported food products due
                                      to the boom in imported low-quality
                                      food products in the early 1990's.

  Ukraine's retail sector is on the   Frequently changing trade
  rise, which creates a number of     legislation. Import tariffs remain
  opportunities for perspective U.S.  very high.
  exporters.                          

  Urban life styles are changing.     Local manufacturers are producing
  Increase in demand for              ready-to-cook products which are
  semi-finished and ready-to-cook     highly competitive with similar
  products                            imported goods.

  American-made food and drinks are   Lack of knowledge or tradition for
  still new for the majority of the   American products.
  population, but rather popular      
  among the younger generation.       

  Retailers are constantly in a       High competition with suppliers of
  search of new and innovative        similar products from Russia and
  products in order to attract        European Union
  customers                           

  Existence of large importers who    High level of corruption
  are experienced importers of food   
  products.                           
  ----------------------------------- -----------------------------------

# SECTION II. ROAD MAP FOR MARKET ENTRY

## ENTRY STRATEGY

Below are some basic strategy trends for products entering the Ukrainian
market:

-   A perspective entrant is advised to consult an established marketing
    research firm that specializes in financial and statistical
    information.

-   Participation in a food-product trade show in Ukraine is advisable.
    These events can provide a market snapshot, as well as to identify
    perspective importers and wholesale vendors. Usually only large
    companies participate in these shows.

-   Meet with representatives of state regulatory bodies in order to
    obtain additional information on import requirements. Also use
    relevant embassies, consultants and foreign partner companies who
    are already doing business in Ukraine.

-   In order to make the first in country delivery, usually a large
    local import company is chosen. The company should be established,
    have a good reputation and experience in customs clearance. They
    should have storage facilities and a developed distribution network.
    Also advised is to ensure that the company has worked with Western
    suppliers in the past and has experience in importing regular
    supplies of food products into Ukraine. Western companies that
    strive to arrange direct food supplies without Ukrainian mediators
    often sustain losses due to lack of local market knowledge. A large
    domestic import company is usually better adjusted to local
    conditions, has established trade ties and contacts in state
    structures that are useful when entering the Ukrainian market.
    Ukraine remains a country where personal contacts play an important
    role in business.

-   If a foreign company decides to open a representative office, it
    should be located in Kiev or another large city.

-   Ukrainian import duty rates for food products are very uneven.
    Import duties for unprocessed goods or goods in large packages are
    often zero. These commodities require only minimal processing
    (frying, adding salt, packaging for retail trade). However, duties
    for packaged and ready for sale products are quite high. Many
    companies test the market with finished products and then look to
    process/package locally if the product is successful. This is a way
    to circumvent or reduce custom clearance costs. Many importers
    package tea, muesli, chocolates, and chips; roasted nuts and coffee
    beans in Ukraine. Packaging or production is often organized in
    Russia or other Commonwealth of Independent States (CIS) countries.
    The commodities are then imported from these countries under Free
    Trade Agreements (FTA). FTAs are in force for 11 CIS member states.
    However, a potential importer should weight transportation and
    certification costs.

-   Supermarket entry costs vary greatly in Ukraine. Charges include a
    company entrance fee, a shelf fee for each commodity, designated
    shelf fee, and a fee for positioning a pallet in a sales area. An
    entrance fee, designated shelves and pallet fee would amount to
    approximately \$100-250 each. Some payments are made once, others
    are charged by the retailer on a monthly basis. The exporter should
    be ready to pay the retailer a percentage of the trade turnover
    (sales of the good or per 1 meter of shelf space). These payments
    are also made on a monthly, quarterly or annual basis. There will
    also be some costs associated with retail chain marketing,
    advertising booklets and in-store promotions. The total monthly sum
    can range between \$1000 and \$1500 per commodity per store. All
    fees are negotiable.

## MARKET STRUCTURE

Food Retail Distribution Channels

### Distribution Channels

The vast majority of importers/distributors have offices in Kiev or in
the port of Odessa. Portside offices are often used solely for customs
clearance procedures. Upon arrival at the port, the product is custom
cleared and then shipped to Kiev. From Kiev products are distributed to
other regions or directly to regional distributors. Some importing
companies purchase goods on CIP Kiev terms and customs clear the
products in Kiev. Truck deliveries from Western European ports are much
more expensive and rarely practiced. Typically large importers supply a
number of commodities to Ukraine. Some companies have exclusive
contracts for distribution of food products in Ukraine. In some cases
several distributors supply the same products and are able to coexist in
the market. Often Ukrainian representative offices agree to be the
exclusive supplier of a product for certain regional distributors.
Retailers often agree to a direct supply contract with a representative
office when it is unprofitable for a regional distributor to supply a
retailer.

### Types of Retailers

The State Statistics Committee of Ukraine reported the number of retail
trade companies selling food products reached 10,095 in 2003 (4.3% less
than in 2002). Out of the 10,095, approximately 950 companies operate
specialized food stores and 9,145 non-specialized outlets. The total
number of food outlets dropped to 38,422, 8% less than the previous
year. Concomitantly, the average floor space of a store increased by
6.4% in 2001 to 88.4 square meters, decreased in 2002 to 87.5 square
meters, and increased in 2003 to 93.1 square meters. Many small food
shops have gone out of business.

**Table 3. Number of Retail Trade Food-Product Companies by Type of
Outlet**

  --------------- ---------- -------- ---------- --------- ---------- ----------
  **Indicator**   **2001**            **2002**             **2003**   

                  Number     Floor    Number     Floor     Number     Floor
                             space,              space,               space,
                             (1000               (1000                (1000
                             sq.m)               sq.m)                sq.m)

  Total           47,330     4,185    41,754     3,655     38,422     3,578

  Food stores     \-         \-       37,615     3,386     34,286     3,294
  with expanded                                                       
  stock list\*                                                        

  Including:                                                          

  Groceries,      \-         \-       596        447       652        536
  supermarkets                                                        

  Hypermarkets    \-         \-       20         72        38         148

  Specialized     \-         \-       4,139      270       4,136      285

  Self service    2,772\*    376\*    1,548      352,800   1,563      490,161
  --------------- ---------- -------- ---------- --------- ---------- ----------

*\*Including mixed stores (with different assortments)*

*Source: State Statistics Committee of Ukraine*

Experts estimate the market share of super- and hypermarkets at less
than 30%, but the rate is quickly growing. Traditional retailers in big
cities are loosing their clientele due to new big retailers. Open-air
markets and kiosks cannot compete due to lower quality products (a major
sales outlet for uncertified and counterfeit goods), while traditional
grocery stores cannot offer the wide assortment of products or the
lowest prices. Supermarkets are not only driving open-air wholesale
markets and Soviet-type stores out of business, but they are forcing the
ones that survive to modernize equipment and marketing methods.

### Supermarkets & Hypermarkets

The majority of retail outlets were privatized during the first wave of
Ukrainian privatization in the early 1990's. Large trade centers with a
self-service system (the Soviet counterpart to supermarkets --
self-service store and trade centers) build in the Soviet Union ceased
to exist after the first year of Ukraine's independence. Later, many
food stores were purchased by private individuals or business
establishments. In order to survive, the overwhelming majority of these
stores traded in both industrial goods and food products.

The stabilization of the national economy resulted in some restructuring
of the retail trade. The formation of a large group of consumers that
began procuring relatively large volumes of food products, a major shift
in life style, the recovery of the Ukrainian food industry and
stabilization of imports, all contributed to the creation and success of
supermarket and hypermarket development. The first domestic supermarket
chain was established to meet this newly created demand. These stores
matched the western definition of a supermarket in terms of floor space,
assortment of products and quality of service.

According to the State Statistics Committee, there were 38 hypermarkets
in Ukraine in 2003, an increase of 20 from the previous year. The floor
space of an average Ukrainian hypermarket was 3,895 square meters. The
number of supermarkets (universal self-service stores) increased by 9%
to 56 in 2003. The average floor space of a Ukrainian supermarket
totaled 822 square meters. The first Ukrainian mall -- "Karavan" (which
is still classified as a hypermarket) was built in 2004 with a total
area of 13,000 square meters. According to Karavan's management, they
built the hypermarket in order to sell it to international operators,
(supposedly to Auchan or Tesco), should they enter the Ukrainian market.
The rather small floor space of many Ukrainian supermarkets is a result
of limited investment resources and limited availability of adequate
buildings that are suitable for trade outlets. Only Western investors
and very few Ukrainian companies are capable of full-scale construction
projects.

According to supermarket owners, smaller stores' product lists include
some 25--30,000 items, with about 80-90% being Ukrainian origin. Dairy
and fish products, meat, bakery and spirits are widely represented.
Supermarkets often cut margins significantly to attract customers. The
largest chain supermarkets source from 1,000 different suppliers
represented by large wholesale companies, producers and importers. Local
chains have adopted practices and standards of foreign retail chains,
including establishment of production quality control departments and
distribution centers. Many supermarkets have 24 hour service.

The foreign chains Billa (Austria), Metro Cash and Carry (Germany),
Perekrestok (Russia) and SPAR (the Netherlands -- sold to Russian
Perekrestok in 2005) entered the Ukrainian market during 2001-2005.
Initially they opened outlets in Kiev but later began to expand to other
large cities. Russian Pyaterochka (with Karusel brand) is also planning
to open supermarkets chain by mid 2006. Two other international giants -
Tesco (Great Britain) and Carrefour (France) are carrying out market
research in Ukraine. Domestic retail chains are also developing rapidly
and include: Fozzy discounters and Silpo supermarkets (Fozzy Group), La
Furshet supermarkets (Garantiya-Trade LLC.), Velyka Kishenya
supermarkets (Quiza-Trade LLC.), and ATB supermarkets (ABT Corp.).
Experts estimate that the growth of the number of new sales outlets
increased approximately 200% in 2002--2003.

Several factors have contributed to the rapid success of hypermarkets
and supermarkets in Ukraine. First, retail chains guarantee higher
quality goods due to selection of suppliers and quality control. Second,
the majority of chains offer attractive prices through improved
logistics and substantial supplier discounts in return for guaranteed
large procurements. This has allowed supermarkets to attract new
customers away from traditional wholesale open-air markets and grocery
stores. Third, supermarkets provide a more comfortable shopping
experience (free parking, heating, etc.), additional discounts for
regular customers (discount cards), and additional services (home
deliveries, Internet shopping, etc.).

Because the market is expanding so rapidly and so many retail niche
markets exist, local retail chains are able to compete effectively with
foreign companies. In particular, as reported by the State Statistics
Committee of Ukraine, there were 123 such trade companies (109
supermarkets and 14 hypermarkets) in 2003 in Kiev. Trade analysts
estimate that Kiev can sustain 350--400 supermarkets. Today, Kiev
accounts for approximately one-fifth of all retail trade in food
products. Operators agree that the demand for larger stores will
continue to develop. Currently, supermarkets compete with traditional
open-air markets more than with each other. The latest trend is to place
supermarkets in shopping malls, which reduces construction costs and
attracts additional customers.

The supermarket industry has developed in different ways in Ukraine. La
Furshet purchased former Soviet self-service stores and remodels them
into modern supermarkets. They are also expanding rapidly into other
regions of Ukraine. As of 2004, the company has 30 supermarkets, with
stores in Cherkassy, Kirovohrad, Lutsk, Poltava, Simferopol, and Odesa.
Other companies are opening new stores and buying already existing
chains (Velyka Kishenya purchased Begemot supermarkets in 2004). The
consolidation process greatly intensified in 2005. Euromarkt, Da!
Market, TikoMarket, Eizhachok, Spar-Ukraine, Vam, Maxi and Jaroslavna
have all seized to exist. Other companies (such as MegaMarket) in order
to survive concentrate on service quality and product stock lists. Table
4 lists major retail operators in Ukraine.

**Table 4. Hypermarket and Supermarket Chains in Ukraine (3 or More
Outlets)**

+--------------+-----------+-------+---------+----------+------------+
| **Retailer   | **Ow      | **    | **No.   | **Loc    | **         |
| Name and     | nership** | Sales | of      | ations** | Purchasing |
| Outlet       |           | in    | outlets |          | Agent      |
| Type**       |           | 2     | as of   |          | Type**     |
|              |           | 004\* | 2004    |          |            |
|              |           | (U.S. | (as of  |          |            |
|              |           | \$    | mid-    |          |            |
|              |           | milli | 2005)** |          |            |
|              |           | on)** |         |          |            |
+--------------+-----------+-------+---------+----------+------------+
| Sil'po       | Fozzy     | 290   | 51 (61) | Nation   | Direc      |
| supermarket  | Group     |       |         | -wide    | t/importer |
|              |           |       |         |          |            |
|              | (Ukraine) |       |         |          |            |
+--------------+-----------+-------+---------+----------+------------+
| Fozzy,       |           |       | 2 (3)   | 1--V     |            |
| discounter   |           |       |         | yshneve, |            |
|              |           |       |         |          |            |
|              |           |       |         | 1 --     |            |
|              |           |       |         | Odessa   |            |
|              |           |       |         |          |            |
|              |           |       |         | 1 --     |            |
|              |           |       |         | Borispil |            |
|              |           |       |         | rajon    |            |
+--------------+-----------+-------+---------+----------+------------+
| Furshet,     | LLC       | 276   | 30 (45) | Nat      | Direct     |
| supermarket  | «Garanti  |       |         | ion-wide | /wholesale |
|              | ya-Trade» |       |         |          | r/importer |
|              | (Ukraine) |       |         |          |            |
+--------------+-----------+-------+---------+----------+------------+
| PIK,         | CJSC KS   | 52    | 14 (17) | Dnepro   | Direct     |
| Supermarket  | Trading   |       |         | petrovsk | /wholesale |
|              | (Ukraine) |       |         |          | r/importer |
+--------------+-----------+-------+---------+----------+------------+
| Velyka       | Quiza     | 136   | 17 (17) | 6 --     | Direc      |
| Kishenya,    | Trade LLC |       |         | Kiev     | t/importer |
| supermarket  | (Ukraine) |       |         |          |            |
|              |           |       |         | 1 -      |            |
|              |           |       |         | Obukhov  |            |
+--------------+-----------+-------+---------+----------+------------+
| Billa,       | Bill      | 85    | 8 (9)   | 3 --     | Direc      |
| supermarket  | a-Ukraine |       |         | Kiev     | t/importer |
|              | (Reve     |       |         |          |            |
|              | Group     |       |         | 2 --     |            |
|              | Austria,) |       |         | Kharkov  |            |
|              |           |       |         |          |            |
|              |           |       |         | 1        |            |
|              |           |       |         | --Z      |            |
|              |           |       |         | aporizhe |            |
|              |           |       |         |          |            |
|              |           |       |         | 2        |            |
|              |           |       |         | --Dn     |            |
|              |           |       |         | ipropetr |            |
+--------------+-----------+-------+---------+----------+------------+
| Pakko,       | Pakko     | 73    | 12 (16) | Western  | Direc      |
| supermarkets | Group     |       |         | Ukraine  | t/importer |
|              | (Ukraine) |       |         |          |            |
+--------------+-----------+-------+---------+----------+------------+
| Vopak, Cash  |           |       | 7       |          |            |
| & Carry      |           |       |         |          |            |
+--------------+-----------+-------+---------+----------+------------+
| Rainford,    | Rainford  | 30    | 15      | Dnepr    | Direct     |
| supermarket  | Group     |       |         | opetrovs | /wholesale |
| (8), Cash &  | (Ukraine) |       |         | k/Krivoy | r/importer |
| carry (7)    |           |       |         | Rog/     |            |
|              |           |       |         | Dneprodz |            |
|              |           |       |         | erzhinsk |            |
+--------------+-----------+-------+---------+----------+------------+
| Tavriya-V,   | Tavriya-V | 70    | 7       | O        | Wholes     |
| supermarket  | LLC       |       |         | dessa/Il | aler/Direc |
| (5),         | (Ukraine) |       |         | lychevsk | t/importer |
| hypermarket  |           |       |         |          |            |
| (2)          |           |       |         |          |            |
+--------------+-----------+-------+---------+----------+------------+
| Rorus trade  | Pivdenny  | 40    | 6 (11)  | Odessa,  | Direct     |
| center       | Bank      |       |         | herson   | /wholesale |
| «Family»,    | (Ukraine) |       |         |          | r/importer |
| supermarket  |           |       |         |          |            |
| (6), trade   |           |       |         |          |            |
| center (2)   |           |       |         |          |            |
+--------------+-----------+-------+---------+----------+------------+
| Perekre      | Trade     | 30    | 5       | 3 --     | Direct     |
| stok-Ukraine | House     |       |         | Kiev     | /importer/ |
|              | Pe        |       |         |          | wholesaler |
|              | rekrestok |       |         | 1 --     |            |
|              | CJSC      |       |         | Brovary  |            |
|              | (Russia)  |       |         |          |            |
|              |           |       |         | 1 --     |            |
|              |           |       |         | Cherkasy |            |
+--------------+-----------+-------+---------+----------+------------+
| Target,      | Managing  | 20    | 3       | Khark    | Wholesa    |
| supermarkets | c         |       |         | ov/Polta | ler/direct |
|              | ompanies: |       |         | va/Sumy/ |            |
|              | Kibela,   |       |         | Kupyansk |            |
|              | Ornatus,  |       |         |          |            |
|              | Apia      |       |         |          |            |
|              | (Ukraine) |       |         |          |            |
+--------------+-----------+-------+---------+----------+------------+
| ECO-market,  | «         | 48    | 18      | Ki       | wholes     |
| supermarket  | Bayadera» |       |         | ev/Odess | aler/direc |
|              | (Ukraine) |       |         | a/Sumy/C | t/importer |
|              |           |       |         | herkassy |            |
+--------------+-----------+-------+---------+----------+------------+
| KIT,         | Kit LLC.  | 44    | 11 (14) | Za       | wholes     |
| supermarket  | (Ukraine) |       |         | porizhia | aler/direc |
|              |           |       |         | region   | t/importer |
+--------------+-----------+-------+---------+----------+------------+
| West line,   | Trade     | 20    | 3       | Kiev     | wholes     |
| supermarket  | House     |       |         |          | aler/direc |
|              | West line |       |         |          | t/importer |
|              | (Ukraine) |       |         |          |            |
+--------------+-----------+-------+---------+----------+------------+
| YUCI,        | Private   | 2     | 3       | Kharkov  | wholes     |
| supermarket  | company   | 0\*\* |         |          | aler/direc |
|              | "Aq       |       |         |          | t/importer |
|              | uamarine" |       |         |          |            |
+--------------+-----------+-------+---------+----------+------------+
| Kraj,        | Managing  | 1     | 3       | Kiev     | wholes     |
| supermarket  | company   | 9\*\* |         |          | aler/direc |
|              | "Ban      |       |         |          | t/importer |
|              | komsvyaz" |       |         |          |            |
|              | (Ukraine) |       |         |          |            |
+--------------+-----------+-------+---------+----------+------------+
| Intermarket, | Private   | 86\   | 2       | Drogo    | wholes     |
| Cash&Carry   | ent       | *\*\* |         | bych/Tru | aler/direc |
|              | repreneur |       |         | skavets/ | t/importer |
|              | Roman     |       |         | Borislav |            |
|              | Shlak     |       |         |          |            |
+--------------+-----------+-------+---------+----------+------------+
| Arsen,       |           |       | 3       |          |            |
| supermarket  |           |       |         |          |            |
+--------------+-----------+-------+---------+----------+------------+
| Mega-Market, | Founder - | 30    | 3       | Kiev     | Direc      |
| supermarket  | Victor    |       |         |          | t/importer |
|              | Yu        |       |         |          |            |
|              | shkovskiy |       |         |          |            |
|              | (Ukraine) |       |         |          |            |
+--------------+-----------+-------+---------+----------+------------+
| Class,       | Managing  | 15    | 3       | Kharkov  | wholes     |
| supermarket  | company   |       |         |          | aler/direc |
|              | "         |       |         |          | t/importer |
|              | Ukrtrade" |       |         |          |            |
|              | LLC       |       |         |          |            |
+--------------+-----------+-------+---------+----------+------------+
| Absolyut,    | "Lia" LLC | 8-4   | 4       | Lugan    | wholes     |
| supermarket  | (Ukraine) | 0\*\* |         | sk/Sever | aler/direc |
|              |           |       |         | odonetsk | t/importer |
|              |           |       |         | (Lugansk |            |
|              |           |       |         | region)  |            |
+--------------+-----------+-------+---------+----------+------------+
| Alen,        | "Alen"    | 1     | 5       | Se       | wholes     |
| supermarket  | LLC       | 0\*\* |         | vastopol | aler/direc |
|              | (Ukraine) |       |         |          | t/importer |
+--------------+-----------+-------+---------+----------+------------+
| Nat          | "Natalk   | 1     | 5       | Odessa   | wholes     |
| alka-Market, | a-Market" | 0\*\* |         |          | aler/direc |
| supermarket  | CJSC      |       |         |          | t/importer |
+--------------+-----------+-------+---------+----------+------------+
| Metro,       | Managing  | 143   | 7       | Kiev,    | direc      |
| discounter   | company   |       |         | Odessa   | t/importer |
|              | «Metro    |       |         | Dneprop  |            |
|              | Cash and  |       |         | etrivsk, |            |
|              | Carry     |       |         | Donetsk, |            |
|              | Ukraine»  |       |         | Harkiv   |            |
|              | ("Metro   |       |         |          |            |
|              | AG"       |       |         |          |            |
|              | Germany)  |       |         |          |            |
+--------------+-----------+-------+---------+----------+------------+
| Lvovkholod,  | TPK       | 7     | 22      | Lviv and | wholes     |
| Cash&Carry   | "Lv       | 6\*\* |         | Lviv     | aler/direc |
| (1),         | ovkholod" |       |         | Oblast   | t/importer |
| supermarket  | (Ukraine) |       |         |          |            |
| (19)         |           |       |         |          |            |
+--------------+-----------+-------+---------+----------+------------+

*\*Sources: Alliance Capital Management, Ukrainian Business newspaper,
expert estimates, FAS/Kiev estimates;*

*\*\*Turnover for 2003*

\*\*\* Includes Barvinok grocery network

### 

### Kiosks and Gas Marts

The number of kiosks, which were popular trade outlets in early 1990's,
have gradually diminished. A typical kiosk operates 24 hours a day and
sells cheap alcohol, cigarettes and a limited number of food products.
These outlets have limited floor space (usually 8-25 square meters) and
a relatively limited stock list (100-200 items). Competition from larger
private stores and supermarkets that offer lower prices have had an
impact on kiosks' ability to compete. They survive at road
intersections, bus stops, underground stations, near open-air markets,
in suburb communities, and in rural areas. Kiosks offer a variety of
cheap living essentials including food products. Lately, kiosks are
becoming more specialized. For example, producers of meat and bakery
products open kiosks to sell their own products near public
transportation stations.

The number of modern gas stations continues to increase rapidly in
Ukraine. According to official statistics 817 stores and kiosks, and 241
restaurants/cafes are located in gas stations as of April 2004.
Approximately 10-15% of all Ukrainian gas stations have stores and sell
packaged food products. This includes mainly soft drinks, cookies,
chocolates, and various snacks. These 500-800 gas station stores
comprise 1-2% of all food stores. These outlets have good prospects and
may increase its share of retail sales in the future. Imported goods may
be introduced to the market quickly and efficiently through these
outlets.

Table 5. Kiosks and Gas Stations in Ukraine

  -------------------------- --------- ----------- ---------- ------------
                             2000      2001        2002       2003

  Number of kiosks (stalls)  25,361    24,116      22,469     21,499

  Share of kiosks in         8         8           7          6
  convenience goods market,                                   
  %                                                           

  Number of gas stations     4,030     4,396       4,688      5,053
  -------------------------- --------- ----------- ---------- ------------

*\*Source: State Statistics Committee of Ukraine, Alliance Capital
Management*

### Convenience Stores (Self-Service Groceries)

The Fozzy Group is developing a network of Fora grocery stores (24
outlets in 2005). The trade and industrial group Rainford also has a
network of 32 "convenience stores". Their competitor in the
Dnipropetrivsk region, ATB Corporation, has a network of 69 groceries,
although these stores are quite close to supermarkets in size. Usually,
grocery stores are located in suburbs and offer a narrow product range.
These new outlets are quickly replacing Soviet-style food stores. The
average floor space of these stores is between 300 to 500 square meters
and carry between 1,500 and 3,500 items. Grocery stores have become
popular with pension-aged consumers who prefer to shop close to home.
Retirees usually shop more frequently and make smaller purchases.
Grocery stores also target consumers with below average incomes who
regularly purchase goods daily. Many of these products have a short
shelf life (bread, dairy products, fruits and vegetables, etc.). Market
analysts note that convenience stores lack regular customers and their
market share is small. Nevertheless grocery stores are very successful
in small Ukrainian towns due to their convenience and lower investment
costs.

Table 6. Largest Convenience Store Chains in Ukraine

+--------+-------------------+-----------+--------+--------+---------+
| *      | **Owner/managing  | **Type of | *      | **     | **Loc   |
| *Chain | company**         | the       | *Trade | Number | ation** |
| Name** |                   | company** | outlet | of     |         |
|        |                   |           | type** | out    |         |
|        |                   |           |        | lets** |         |
+--------+-------------------+-----------+--------+--------+---------+
| Dnep   | Fozzy Group       | Direct /  | G      | 13     | Nati    |
| ryanka |                   | importer  | rocery |        | on-wide |
|        | (Ukraine)         |           | /      |        |         |
|        |                   |           |        |        |         |
|        |                   |           | Disc   |        |         |
|        |                   |           | ounter |        |         |
+--------+-------------------+-----------+--------+--------+---------+
| Fora   |                   |           |        | 30     |         |
+--------+-------------------+-----------+--------+--------+---------+
| ATB    | Corporation «ATB» | Direct/w  | Conve  | 111    | Central |
|        | (Ukraine)         | holesaler | nience |        | Ukraine |
|        |                   | /importer | store  |        |         |
+--------+-------------------+-----------+--------+--------+---------+
| Ra     | Trade and         | W         | G      | 33     | Central |
| inford | industrial group  | holesaler | rocery |        | Ukraine |
|        | «Rainford»        | /         | /      |        | and     |
|        |                   | importer  |        |        | Sim     |
|        |                   |           | Conve  |        | feropil |
|        |                   |           | nience |        |         |
|        |                   |           | store  |        |         |
+--------+-------------------+-----------+--------+--------+---------+
| Target | Managing          | Wh        | Gro    | 11     | K       |
|        | companies:        | olesaler/ | ceries |        | harkov/ |
|        | Kibela, Ornatus,  | direct    |        |        | Poltava |
|        | Apia (Ukraine)    |           |        |        | /Sumy/K |
|        |                   |           |        |        | upyansk |
+--------+-------------------+-----------+--------+--------+---------+
| Interm | Intermarket CJSC  | Wh        | G      | 17     | Western |
| arket\ |                   | olesaler/ | rocery |        | Ukraine |
| Ba     |                   | direct/   |        |        |         |
| rvinok |                   | importer  |        |        |         |
+--------+-------------------+-----------+--------+--------+---------+
| Kurazh | Atlant LLC        | Wh        | G      | 4      | Lugansk |
|        |                   | olesaler/ | rocery |        |         |
|        |                   | direct/   |        |        |         |
|        |                   | importer  |        |        |         |
+--------+-------------------+-----------+--------+--------+---------+
| Lvov   | TPK Lvovkholod    | Wholesal  | G      | 54     | Western |
| kholod | (Ukraine)         | er/direct | rocery |        | Ukraine |
|        |                   | /importer |        |        |         |
+--------+-------------------+-----------+--------+--------+---------+
| O      | Vyacheslav        | W         | G      | 7      | Donetsk |
| bzhora | Sobolev (Ukraine) | holesaler | rocery |        | city    |
|        |                   | /importer |        |        |         |
+--------+-------------------+-----------+--------+--------+---------+
| K      | Vit Almi LLC      | W         | Conve  | 5      | 4 --    |
| opeyka | (Ukraine)         | holesaler | nience |        | Odessa  |
|        |                   | /importer | store  |        |         |
|        |                   |           |        |        | 1 --    |
|        |                   |           |        |        | Izmail  |
+--------+-------------------+-----------+--------+--------+---------+

\*Sources: Alliance Capital Management, the Ukrainian weekly newspaper
Business

### Traditional Outlets -- Independent Grocery Stores and Open-Air Markets

Soviet-style stores with over-the-counter sales (traditional groceries)
are quite common in Ukraine. Some of these outlets are situated in
central districts and sell food products to office employees during the
workweek and to downtown dwellers. These stores are targeted and often
taken over by companies that operate chain convenience stores. They are
usually converted into modern self-service convenience stores. Other
traditional grocery operations located in the suburbs of larger cities
have survived but are likely to be driven out of business due to fierce
competition from supermarkets and modern convenience stores. They
continue to loose customers because of their limited product line,
higher prices, inadequate service, and unprofessional staff. In order to
survive, many offer round-the-clock service and lease floor space to
sellers of industrial goods and services (e.g. photo labs). Some are
located in distant small districts of large cities and small provincial
towns where the construction of supermarket or modern chain convenience
stores is economically unjustified.

Grocery stores, especially those operating 24 hours a day, can be of
interest to potential U.S. exporters. They are good outlets for cheap
food products that are manufactured abroad with a long shelf life:
alcohol drinks, assorted snacks, confectionery products, meat goods,
canned goods, goods for the elderly. The overwhelming majority of these
stores (except small ones with 150-200 square meters floor space)
procure products through wholesale companies. Smaller outlets procure
products from Cash&Carry stores or from large wholesale open-air
markets.

As reported by the State Statistics Committee of Ukraine, there were
2,891 open-air markets (bazaars) of all types in Ukraine in 2003,
including 597 food-product open-air markets (69, or 10% less than in
2002). Twenty-six open-air markets that sell food products are located
in Kiev. The largest number of food-product open-air markets in Ukraine
is concentrated in the most populated regions. Mixed open-air markets
(rynoks) trading in both foodstuffs and non-food goods prevail in
Ukraine (55% of the total number of markets). Many consumers believe
that food products sold in traditional open-air markets are cheaper than
in supermarkets. Elderly consumers are also confident that products sold
at open-air markets are of high quality.

In 2003, traditional outlets accounted for approximately 40-50% of trade
in food products in Ukraine. For meat products this indicator reached
90%. These trade outlets are leading sellers of vegetables, fruits,
meat, honey and dried fruits. Sales of dairy products, sunflower oil,
and alcoholic drinks are gradually shifting from open-air markets to
other outlets. Open-air markets provide poor customer service and lack
storage equipment.

Improvement of open-air markets and services could result in increased
sales. Some renovated open-air markets that are centrally located in
larger cities were transformed into traditional elite supermarkets
offering high-quality products. Bessarabskiy and Volodymyrskiy bazaars
in Kiev are good examples. These open-air markets located in the
historic part of the city are major shopping destinations for foreigners
living in Kiev and the Ukrainian elite. These markets can be outlets for
U.S. products such as specialty meat, seafood, semi-finished goods,
microwaveable foods, mixtures of exotic dried fruits, nuts, elite
confectionery goods, alcohol drinks, and traditional U.S. consumer food
products, which ordinary supermarkets often find inconvenient to stock
due to low demand.

**Table 7. Number of Markets (bazaars) Offering Consumer Goods in
Ukraine**

  -------------- -------------- -------------- -------------- --------------
                 **2000**       **2001**       **2002**       **2003**

  Total          2,514          2,715          2,863          2,891

  Food products  634            772            666            597

  Non-food       511            608            725            708
  products                                                    

  Mixed          1,369          1,335          1,472          1,586
  -------------- -------------- -------------- -------------- --------------

Source: State Statistics Committee of Ukraine

In the future, the number of traditional groceries, kiosks, and bazaars
is expected to decrease, while the number of hypermarkets, supermarkets
and self-service convenience stores will increase. Open-air markets with
"vegetable-fruit" stalls will compete strongly with modern stores for
retail sales of fruits and vegetables. However, the number of kiosks
will likely diminish.

## MARKET TRENDS

### Private Label

Private labeling is not well developed and not used often in Ukraine.
The largest Ukrainian supermarket chain - La Furshet was the first chain
to establish a private label. The company already produces and packages
more than 100 products under the La Furshet label. Fozzy group (Selpo
branded products) and Metro C&C are also using private labels.

### Modern Trade Promotion Methods

Chain stores regularly train their personnel and experiment with product
layout in order to get more profits from one square meter of floor
space. Many supplier companies use their own layout schemes (for
example, "Hipp Gmbh" infant food producer). In store new product tasting
and promotion campaigns are also quite frequent.

Many supermarkets are equipped with televisions that play commercials to
promote products and services. Traditional poster and panel
advertisements are also popular. The largest supermarkets issue their
own advertising booklets and discount coupons. They also distribute
these booklets to their customers through direct-mail distribution. In
particular, one such edition published by La Furshet was devoted to
products of German origin. These methods can be applied to U.S. product
advertisement to encourage spontaneous purchases of U.S. products.

### Market Power

In the early days (2000 -- 2002) of Ukrainian retail stores, producers
of food and agricultural products could dictate their terms on goods
positioning, marketing and payments. Food products were viewed as anchor
commodities attracting consumers to new supermarkets. The situation
evolved rapidly and in 2003-2004 retail chains acquired a significant
market share in big cities, attracting middle and high income consumers.
Retailers quickly realized that control over the targeted audience gave
them control over producers. Producers of hard liquor, vodka and dairy
products were vocal about the new power of retailers, while many other
supplies preferred to keep these problems quiet. Most problems were
related to retailer recommended prices and price discounts, some
problems related to product placement and associated fees. The product
shelving fee in Ukrainian supermarkets remains quite low compared to
Western chains, but it seems excessively high to many Ukrainian
producers.

# SECTION III. COMPETITION

The Government of Ukraine took a number of steps aimed at protecting
domestic food producers in mid-1990's. This resulted in high import
tariffs and the creation of a complicated system of sanitary and
phytosanitary requirements. The economic crisis of 1998 abruptly
decreased individual incomes and drove consumers to purchase more
domestically produced products. These factors contributed to the robust
development of the domestic food-products industry. Production of dairy
and meat products (sausages, smoked foods), soft drinks, mineral water,
juices, beer, confectionery, various appetizers, and chilled chicken
meat is increasing. Introduction of high import duties made legal
imports of many foreign food products rather unprofitable, while the
Ukrainian market remained open for food products originating from Russia
and other CIS countries due to a Free Trade Agreement. Russian-made
products were charged only the value added tax, which made their prices
comparable to Ukrainian products. Many imports from the EU and U.S.
could not compete with CIS products due to the lower price.

**Table 8. Main Suppliers and Volumes of Product Imports to Ukraine**

+------------+-----------+---------+---------+-----------+-----------+
| Output/    | Main      |         |         | A         | A         |
|            | suppliers |         |         | dvantages | dvantages |
| Import     |           |         |         | of        | and       |
| volumes    |           |         |         | supplying | drawback  |
|            |           |         |         | countries | of local  |
|            |           |         |         |           | producers |
+------------+-----------+---------+---------+-----------+-----------+
|            | 2001      | 2002    | 2003    |           |           |
+------------+-----------+---------+---------+-----------+-----------+
| Poultry    | 1\. USA   | Belgium | Brazil  | USA MDM   | P         |
|            | 81%       | 32%     | 31%     | and offal | roduction |
| 2001:      |           |         |         | is much   | is        |
|            | 2\.       | USA 28% | Belgium | cheaper;  | expanding |
| 67.1 ths.  | Belgium   |         | 18%     | B         | rapidly.  |
| tons       | 5%        | Neth    |         | razilians | Producers |
|            |           | erlands | Germany | have      | can       |
| US\$ 62.7  | 3\.       | 16%     | 12%     | price     | supply    |
| mn         | Hungary   |         |         | advantage | chilled   |
|            | 3%        | Germany | Great   | in whole  | product;  |
| 2002:      |           | 9%      | Britain | birds     | supply of |
|            | 4\.       |         | 8%      | supplies  | domestic  |
| 72 ths.    | Germany   | Hungary |         |           | chicken   |
| tons       | 3%        | 5%      | Hungary |           | is        |
|            |           |         | 8%      |           | insu      |
| US\$ 29.8  | 5\.       |         |         |           | fficient. |
| mn         | Ne        |         | USA 4%  |           |           |
|            | therlands |         |         |           |           |
| 2003:      | 3%        |         |         |           |           |
|            |           |         |         |           |           |
| 100.7 ths. |           |         |         |           |           |
| tons       |           |         |         |           |           |
|            |           |         |         |           |           |
| US\$ 44 mn |           |         |         |           |           |
+------------+-----------+---------+---------+-----------+-----------+
| Pork       | Austria   | Poland  | Poland  | Much      | Highly    |
|            | 25%       | 44%     | 78%     | lower     | in        |
| 2001:      |           |         |         | prices,   | efficient |
|            | Poland    | France  | France  | stable    | pork      |
| 1.8 ths.   | 23%       | 18%     | 6%      | quality   | p         |
| tons       |           |         |         |           | roduction |
|            | Belgium   | Austria | Germany |           | in        |
| US\$ 2.5   | 15%       | 11%     | 4%      |           | private   |
| mn         |           |         |         |           | h         |
|            | Ne        | Germany | Austria |           | ouseholds |
| 2002:      | therlands | 10%     | 2%      |           | and in    |
|            | 10%       |         |         |           | majority  |
| 1.3 ths.   |           | Denmark | Hungary |           | of        |
| tons       | Germany   | 9%      | 1%      |           | i         |
|            | 8%        |         |         |           | ndustrial |
| US\$ 1.3   |           | Belgium | Belgium |           | farms     |
| mn         | Denmark   | 4%      | 1%      |           |           |
|            | 7%        |         |         |           |           |
| 2003:      |           | Canada  | Denmark |           |           |
|            | France 5% | 2%      | 1%      |           |           |
| 9.7 ths.   |           |         |         |           |           |
| tons       | Canada 4% | Hungary | USA     |           |           |
|            |           | 2%      | less    |           |           |
| US\$ 6.5   | Hungary   |         | than 1% |           |           |
| mn         | 2%        | Neth    |         |           |           |
|            |           | erlands |         |           |           |
|            | USA 2%    | 1%      |         |           |           |
|            |           |         |         |           |           |
|            |           | USA     |         |           |           |
|            |           | less    |         |           |           |
|            |           | than 1% |         |           |           |
+------------+-----------+---------+---------+-----------+-----------+
| Beef       | Poland    | Poland  | Hungary | Much      | Highly    |
|            | 64%       | 65%     | 69%     | lower     | in        |
| 2001:      |           |         |         | prices,   | efficient |
|            | Russia    | Russia  | USA 1%  | stable    | beef      |
| 1.4 ths.   | 31%       | 18%     |         | quality   | p         |
| tons       |           |         |         |           | roduction |
|            | Spain 1%  | Georgia |         |           | in        |
| US\$ 3.4   |           | 6%      |         |           | private   |
| mn         | Austria   |         |         |           | h         |
|            | 1%        | Hungary |         |           | ouseholds |
| 2002:      |           | 6%      |         |           | and in    |
|            | Australia |         |         |           | i         |
| 0.4 ths.   | 1%        | USA 1%  |         |           | ndustrial |
| tons       |           |         |         |           | farms,    |
|            | USA less  |         |         |           | lack of   |
| US\$ 0.8   | than 1%   |         |         |           | beef      |
| mn         |           |         |         |           | cattle    |
|            |           |         |         |           | and lack  |
| 2003:      |           |         |         |           | of        |
|            |           |         |         |           | hig       |
| 0.4 ths.   |           |         |         |           | h-quality |
| tons       |           |         |         |           | beef      |
|            |           |         |         |           |           |
| US\$ 0.8   |           |         |         |           |           |
| mn         |           |         |         |           |           |
+------------+-----------+---------+---------+-----------+-----------+
| Fish and   | Norway    | Norway  | Norway  | Norway    | Outdated  |
| sea food   | 61%       | 64%     | 58%     | supplies  | cold      |
|            |           |         |         | a wide    | storage   |
| 2001:      | Estonia   | Estonia | Estonia | range of  | f         |
|            | 17%       | 14%     | 12%     | products  | acilities |
| 282.7 ths. |           |         |         | and       | and       |
| tons       | Russia 8% | Iceland | Iceland | secures   | fleet,    |
|            |           | 5%      | 5%      | regular   | outdated  |
| US\$ 80.3  | Iceland   |         |         | de        | p         |
| mn         | 5%        | Russia  | Great   | liveries. | rocessing |
|            |           | 3%      | Britain | Norwegian | fa        |
| 2002:      | M         |         | 3%      | exporters | cilities, |
|            | auritania | Mau     |         | use state | problems  |
| 267.1 ths. | 1%        | ritania | Ar      | promotion | with      |
| tons       |           | 2%      | gentina | programs  | securing  |
|            | Great     |         | 2%      |           | quotas    |
| US\$ 76.5  | Britain   | Great   |         |           | for       |
| mn         | 1%        | Britain | USA 2%  |           | fishing   |
|            |           | 1%      |         |           | in        |
| 2003:      | USA less  |         |         |           | inte      |
|            | than 1%   | Latvia  |         |           | rnational |
| 260.2 ths. |           | 1%      |         |           | waters    |
| tons       |           |         |         |           |           |
|            |           | USA     |         |           |           |
| US\$ 95.2  |           | less    |         |           |           |
| mn         |           | than 1% |         |           |           |
+------------+-----------+---------+---------+-----------+-----------+
| Fresh      | Turkey    | Germany | Uzb     | High      | A lot of  |
| vegetables | 58%       | 60%     | ekistan | stable    | people    |
|            |           |         | 31%     | quality   | grow      |
| 2001:      | Germany   | Turkey  |         | of        | v         |
|            | 17%       | 23%     | Turkey  | v         | egetables |
| 3.4 ths.   |           |         | 20%     | egetables | on their  |
| tons       | Poland 5% | Neth    |         | produced  | household |
|            |           | erlands | Russia  | in        | plots;    |
| US\$ 1 mn  | Spain 3%  | 5%      | 9%      | Western   | Bigger    |
|            |           |         |         | European  | farms     |
| 2002:      | Moldova   | Egypt   | Spain   | c         | lack      |
|            | 2%        | 4%      | 9%      | ountries, | modern    |
| 8.6 ths.   |           |         |         | low       | storage   |
| tons       | Hungary   | Moldova | Georgia | prices    | and       |
|            | 2%        | 2%      | 8%      | for       | p         |
| US\$ 2.7   |           |         |         | products  | rocessing |
| mn         | Austria   | Spain   | Kaz     | or        | fa        |
|            | 2%        | 2%      | akhstan | iginating | cilities; |
| 2003:      |           |         | 5%      | from the  | supplies  |
|            | Ne        | Poland  |         | CIS       | produce   |
| 3.8 ths.   | therlands | 1%      | Neth    | states    | to the    |
| tons       | 2%        |         | erlands |           | retail    |
|            |           | Georgia | 4%      |           | trade     |
| US\$ 1.1   | Slovakia  | 1%      |         |           | networks  |
| mn         | 1%        |         | Egypt   |           | is        |
|            |           | USA     | 3%      |           | co        |
|            | Israel 1% | less    |         |           | mplicated |
|            |           | than 1% | China   |           |           |
|            | Bulgaria  |         | 2%      |           |           |
|            | 1%        |         |         |           |           |
|            |           |         | Kyr     |           |           |
|            | USA less  |         | gyzstan |           |           |
|            | than 1%   |         | 2%      |           |           |
|            |           |         |         |           |           |
|            |           |         | Taj     |           |           |
|            |           |         | ikistan |           |           |
|            |           |         | 2%      |           |           |
|            |           |         |         |           |           |
|            |           |         | Belarus |           |           |
|            |           |         | 1%      |           |           |
|            |           |         |         |           |           |
|            |           |         | Aze     |           |           |
|            |           |         | rbaijan |           |           |
|            |           |         | 1%      |           |           |
|            |           |         |         |           |           |
|            |           |         | Poland  |           |           |
|            |           |         | 1%      |           |           |
|            |           |         |         |           |           |
|            |           |         | Turkm   |           |           |
|            |           |         | enistan |           |           |
|            |           |         | 1%      |           |           |
|            |           |         |         |           |           |
|            |           |         | USA     |           |           |
|            |           |         | less    |           |           |
|            |           |         | than 1% |           |           |
+------------+-----------+---------+---------+-----------+-----------+
| Frozen     | Ne        | Poland  | Poland  | Polish    | In        |
| vegetables | therlands | 76%     | 70%     | companies | efficient |
|            | 68%       |         |         | dominate  | pr        |
| 2001:      |           | Neth    | Belgium | the       | oduction; |
|            | Poland    | erlands | 22%     | market    | growing   |
| 3.9 ths.   | 21%       | 16%     |         | due to    | demand in |
| tons       |           |         | Neth    | high      | large     |
|            | Belgium   | Belgium | erlands | quality,  | cities    |
| US\$ 2.5   | 5%        | 4%      | 2%      | re        |           |
| mn         |           |         |         | cognition |           |
|            | Hungary   | Denmark | Russia  | of        |           |
| 2002:      | 2%        | 2%      | 2%      | t         |           |
|            |           |         |         | rademarks |           |
| 5.1 ths.   | Denmark   | USA     | Canada  | and       |           |
| tons       | 1%        | less    | 1%      | dis       |           |
|            |           | than 1% |         | tribution |           |
| US\$ 3.3   | Czech     |         | Hungary | system    |           |
| mn         | Republic  |         | 1%      |           |           |
|            | 1%        |         |         |           |           |
| 2003:      |           |         | France  |           |           |
|            | Germany   |         | 1%      |           |           |
| 1.5 ths.   | 1%        |         |         |           |           |
| tons       |           |         | Spain   |           |           |
|            | USA less  |         | 1%      |           |           |
| US\$ 1.3   | than 1%   |         |         |           |           |
| mn         |           |         |         |           |           |
+------------+-----------+---------+---------+-----------+-----------+
| Fresh      | Turkey    | Turkey  | Ecuador | Countries | Si        |
| fruits     | 36%       | 35%     | 32%     | of South  | gnificant |
|            |           |         |         | America,  | volume of |
| 2001:      | Ecuador   | Ecuador | Turkey  | Spain,    | smuggling |
|            | 29%       | 32%     | 31%     | Georgia,  | e         |
| 161.9 ths. |           |         |         | and       | specially |
| tons       | Greece 7% | Georgia | Georgia | A         | from      |
|            |           | 6%      | 7%      | zerbaijan | Poland    |
| US\$ 46.8  | Georgia   |         |         | supply    | and CIS   |
| mn         | 6%        | Greece  | Egypt   | citrus    | states as |
|            |           | 4%      | 5%      | fruits at | well as   |
| 2002:      | Spain 3%  |         |         | a good    | lack of   |
|            |           | Egypt   | South   | pric      | storage   |
| 213.5 ths. | Cyprus 3% | 4%      | African | e/quality | fa        |
| tons       |           |         | R       | ratio     | cilities; |
|            | Israel 2% | C       | epublic |           | low cost  |
| US\$ 48.8  |           | olombia | 4%      |           | of local  |
| mn         | A         | 3%      |         |           | p         |
|            | zerbaijan |         | Ar      |           | roduction |
| 2003:      | 2%        | Ar      | gentina |           |           |
|            |           | gentina | 4%      |           |           |
| 239.0 ths. | Egypt 2%  | 3%      |         |           |           |
| tons       |           |         | Aze     |           |           |
|            | Costa     | Aze     | rbaijan |           |           |
| US\$ 56.8  | Rica 2%   | rbaijan | 3%      |           |           |
| mn         |           | 3%      |         |           |           |
|            | Honduras  |         | Israel  |           |           |
|            | 2%        | Spain   | 2%      |           |           |
|            |           | 2%      |         |           |           |
|            | Argentina |         | Spain   |           |           |
|            | 2%        | Cyprus  | 2%      |           |           |
|            |           | 2%      |         |           |           |
|            | South     |         | Costa   |           |           |
|            | African   | Israel  | Rica 2% |           |           |
|            | Republic  | 2%      |         |           |           |
|            | 1%        |         | Greece  |           |           |
|            |           | South   | 2%      |           |           |
|            | USA less  | African |         |           |           |
|            | than 1%   | R       | C       |           |           |
|            |           | epublic | olombia |           |           |
|            |           | 1%      | 1%      |           |           |
|            |           |         |         |           |           |
|            |           | H       | H       |           |           |
|            |           | onduras | onduras |           |           |
|            |           | 1%      | 1%      |           |           |
|            |           |         |         |           |           |
|            |           | Panama  | Gu      |           |           |
|            |           | 1%      | atemala |           |           |
|            |           |         | 1%      |           |           |
|            |           | USA     |         |           |           |
|            |           | less    | USA     |           |           |
|            |           | than 1% | less    |           |           |
|            |           |         | than 1% |           |           |
+------------+-----------+---------+---------+-----------+-----------+
| Dried      | Turkey    | Iran    | Iran    | Low       | Lack of   |
| fruits     | 45%       | 54%     | 53%     | prices,   | climatic  |
|            |           |         |         | high      | control   |
| 2001:      | Iran 29%  | Turkey  | Turkey  | quality,  | for       |
|            |           | 32%     | 36%     | long      | p         |
| 14.1 ths.  | Germany   |         |         | es        | roduction |
| tons       | 8%        | Uzb     | Uzb     | tablished | of many   |
|            |           | ekistan | ekistan | trade     | popular   |
| US\$ 6.3   | Poland 4% | 6%      | 4%      | relations | products; |
| mn         |           |         |         |           | private   |
|            | Italy 4%  | Afgh    | USA 2%  |           | h         |
| 2002:      |           | anistan |         |           | ouseholds |
|            | U         | 1%      |         |           | produce   |
| 17.5 ths.  | zbekistan |         |         |           | dried     |
| tons       | 3%        | USA 1%  |         |           | apples,   |
|            |           |         |         |           | pears and |
| US\$ 7.7   | Af        |         |         |           | prunes    |
| mn         | ghanistan |         |         |           |           |
|            | 2%        |         |         |           |           |
| 2003:      |           |         |         |           |           |
|            | India 1%  |         |         |           |           |
| 20.3 ths.  |           |         |         |           |           |
| tons       | USA less  |         |         |           |           |
|            | than 1%   |         |         |           |           |
| US\$ 9.5   |           |         |         |           |           |
| mn         |           |         |         |           |           |
+------------+-----------+---------+---------+-----------+-----------+
| Tree nuts  | Turkey    | Turkey  | Turkey  | Turkey    | Lack of   |
| (peanuts   | 39%       | 63%     | 38%     | mainly    | la        |
| excluded)  |           |         |         | supplies  | rge-scale |
|            | A         | Aze     | Aze     | hazelnut  | i         |
| 2001:      | zerbaijan | rbaijan | rbaijan | and       | ndustrial |
|            | 17%       | 20%     | 30%     | p         | p         |
| 4.2 ths.   |           |         |         | istachios | roduction |
| tons       | Germany   | Iran 6% | Iran    | at low    | of nuts;  |
|            | 15%       |         | 22%     | prices,   | In        |
| US\$ 8.8   |           | Georgia |         | A         | tensively |
| mn         | USA 5%    | 4%      | USA 4%  | zerbaijan | d         |
|            |           |         |         | --        | eveloping |
| 2002:      |           | USA 3%  |         | hazelnut, | conf      |
|            |           |         |         | and the   | ectionery |
| 3.5 ths.   |           |         |         | USA -     | industry  |
| tons       |           |         |         | almonds   |           |
|            |           |         |         |           |           |
| US\$ 6.4   |           |         |         |           |           |
| mn         |           |         |         |           |           |
|            |           |         |         |           |           |
| 2003:      |           |         |         |           |           |
|            |           |         |         |           |           |
| 3.9 ths.   |           |         |         |           |           |
| tons       |           |         |         |           |           |
|            |           |         |         |           |           |
| US\$ 6.0   |           |         |         |           |           |
| mn         |           |         |         |           |           |
+------------+-----------+---------+---------+-----------+-----------+
| Canned     | Hungary   | Moldova | Hungary | Well      | Local     |
| vegetables | 25%       | 23%     | 27%     | es        | producers |
| and fruits |           |         |         | tablished | quickly   |
|            | Spain 17% | Hungary | Moldova | trade     | updated   |
| 2001:      |           | 18%     | 27%     | relations | fa        |
|            | Poland 9% |         |         | and well  | cilities; |
| 5.7 ths.   |           | Uzb     | Russia  | known     | ava       |
| tons       | A         | ekistan | 13%     | tr        | ilability |
|            | zerbaijan | 9%      |         | ademarks; | of cheap  |
| US\$ 4.8   | 8%        |         | Uzb     | abundance | raw       |
| mn         |           | Germany | ekistan | of        | m         |
|            | Germany   | 7%      | 8%      | smuggled  | aterials, |
| 2002:      | 6%        |         |         | imports;  | tr        |
|            |           | Russia  | Armenia | Hungary   | aditional |
| 1.4 ths.   | Russia 4% | 6%      | 6%      | (ve       | local     |
| tons       |           |         |         | getables) | brands    |
|            | Italy 4%  | Armenia | Aze     | and Spain |           |
| US\$ 1.3   |           | 4%      | rbaijan | (olives)  |           |
| mn         | Thailand  |         | 5%      | dominate  |           |
|            | 4%        | Neth    |         | the       |           |
| 2003:      |           | erlands | Spain   | market    |           |
|            | Moldova   | 3%      | 3%      |           |           |
| 0.6 ths.   | 4%        |         |         |           |           |
| tons       |           | B       | Austria |           |           |
|            | U         | ulgaria | 3%      |           |           |
| US\$ 0.7   | zbekistan | 3%      |         |           |           |
| mn         | 3%        |         | Germany |           |           |
|            |           | Spain   | 2%      |           |           |
|            | Ne        | 2%      |         |           |           |
|            | therlands |         | USA 2%  |           |           |
|            | 2%        | Turkey  |         |           |           |
|            |           | 2%      |         |           |           |
|            | USA 1%    |         |         |           |           |
|            |           | France  |         |           |           |
|            |           | 1%      |         |           |           |
|            |           |         |         |           |           |
|            |           | USA 1%  |         |           |           |
+------------+-----------+---------+---------+-----------+-----------+
| Fruit      | Ne        | Neth    | Neth    | Western   | Local     |
| juices and | therlands | erlands | erlands | countries | p         |
| co         | 27%       | 27%     | 28%     | supply    | roduction |
| ncentrates |           |         |         | products  | of apple  |
|            | Russia    | Russia  | Russia  | of very   | con       |
| 2001:      | 21%       | 23%     | 17%     | high      | centrate, |
|            |           |         |         | quality.  | tomato    |
| 19.2 ths.  | Brazil    | Brazil  | Brazil  | Russian   | paste,    |
| tons       | 15%       | 15%     | 15%     | products  | and       |
|            |           |         |         | are of    | berries   |
| US\$ 15.9  | Israel    | Israel  | Israel  | low price | partially |
| mn         | 11%       | 12%     | 10%     | and good  | satisfy   |
|            |           |         |         | quality   | domestic  |
| 2002:      | Moldova   | Moldova | Ecuador |           | demand;   |
|            | 7%        | 4%      | 4%      |           | high      |
| 25.5 ths.  |           |         |         |           | d         |
| tons       | Thailand  | T       | Moldova |           | ependence |
|            | 4%        | hailand | 4%      |           | on        |
| US\$ 22.1  |           | 3%      |         |           | imported  |
| mn         | Romania   |         | Aze     |           | conc      |
|            | 3%        | India   | rbaijan |           | entrates; |
| 2003:      |           | 3%      | 4%      |           | High      |
|            | Germany   |         |         |           | co        |
| 31.4 ths.  | 2%        | Germany | T       |           | mpetition |
| tons       |           | 2%      | hailand |           | with      |
|            | India 2%  |         | 3%      |           | r         |
| US\$ 31.4  |           | Ecuador |         |           | eady-made |
| mn         | A         | 2%      | Romania |           | Russian   |
|            | zerbaijan |         | 2%      |           | juice;    |
|            | 1%        | Aze     |         |           | growing   |
|            |           | rbaijan | India   |           | demand    |
|            | Hungary   | 1%      | 2%      |           | for       |
|            | 1%        |         |         |           | juices;   |
|            |           | Hungary | Poland  |           | healthy   |
|            | Slovenia  | 1%      | 2%      |           | drink     |
|            | 1%        |         |         |           | image of  |
|            |           | China   | Germany |           | juice     |
|            | U         | 1%      | 2%      |           |           |
|            | zbekistan |         |         |           |           |
|            | 1%        | Uzb     | China   |           |           |
|            |           | ekistan | 1%      |           |           |
|            | Georgia   | 1%      |         |           |           |
|            | 1%        |         | Hungary |           |           |
|            |           | USA     | 1%      |           |           |
|            | USA less  | less    |         |           |           |
|            | than 1%   | than 1% | Uzb     |           |           |
|            |           |         | ekistan |           |           |
|            |           |         | 1%      |           |           |
|            |           |         |         |           |           |
|            |           |         | Kenia1% |           |           |
|            |           |         |         |           |           |
|            |           |         | USA     |           |           |
|            |           |         | less    |           |           |
|            |           |         | than 1% |           |           |
+------------+-----------+---------+---------+-----------+-----------+
| Rice       | Egypt 45% | Myanmar | China   | Vietnam   | Local     |
|            |           | 26%     | 40%     | and China | industry  |
| 2001:      | Vietnam   |         |         | are       | satisfies |
|            | 31%       | India   | Vietnam | co        | only half |
| 75.9 ths.  |           | 26%     | 20%     | mpetitive | of        |
| tons       | Spain 6%  |         |         | due to    | domestic  |
|            |           | Egypt   | India   | low       | con       |
| US\$ 15.4  | China 5%  | 18%     | 17%     | prices.   | sumption; |
| mn         |           |         |         | India and | high      |
|            | India 4%  | Vietnam | USA 9%  | the USA   | product   |
| 2002:      |           | 17%     |         | supply    | price and |
|            | Russia 3% |         |         | high      | low       |
| 78.3 ths.  |           | China   |         | quality;  | quality,  |
| tons       | Ecuador   | 4%      |         | meanwhile | stable    |
|            | 3%        |         |         | high      | demand    |
| US\$ 14.1  |           | Russia  |         | prices    |           |
| mn         | Thailand  | 2%      |         | position  |           |
|            | 2%        |         |         | American  |           |
| 2003:      |           | Greece  |         | rice in   |           |
|            | USA less  | 2%      |         | premium   |           |
| 85.8 ths.  | than 1%   |         |         | segment   |           |
| tons       |           | Spain   |         |           |           |
|            |           | 2%      |         |           |           |
| US\$ 19.7  |           |         |         |           |           |
| mn         |           | P       |         |           |           |
|            |           | akistan |         |           |           |
|            |           | 2%      |         |           |           |
|            |           |         |         |           |           |
|            |           | T       |         |           |           |
|            |           | hailand |         |           |           |
|            |           | 1%      |         |           |           |
|            |           |         |         |           |           |
|            |           | USA     |         |           |           |
|            |           | less    |         |           |           |
|            |           | than 1% |         |           |           |
+------------+-----------+---------+---------+-----------+-----------+
| Beer       | Russia    | Russia  | Russia  | Broad     | Steady    |
|            | 93%       | 92%     | 92%     | a         | demand    |
| 2001:      |           |         |         | ssortment | for       |
|            | Germany   | Hungary | Estonia | of        | locally   |
| 10.3 ths.  | 2%        | 3%      | 5%      | Rus       | produced  |
| tons       |           |         |         | sian-made | product,  |
|            | Ne        | Germany |         | r         | modern    |
| US\$ 4.0   | therlands | 1%      |         | easonably | p         |
| mn         | 1%        |         |         | priced    | roduction |
|            |           | Neth    |         | beer      | fa        |
| 2002:      | Ireland   | erlands |         | (zero     | cilities, |
|            | 1%        | 1%      |         | import    | broad     |
| 17.5 ths.  |           |         |         | duty due  | as        |
| tons       |           |         |         | to FTA).  | sortment, |
|            |           |         |         |           | good      |
| US\$ 18.8  |           |         |         |           | quality,  |
| mn         |           |         |         |           | and low   |
|            |           |         |         |           | prices.   |
| 2003:      |           |         |         |           |           |
|            |           |         |         |           |           |
| 18.5 ths.  |           |         |         |           |           |
| tons       |           |         |         |           |           |
|            |           |         |         |           |           |
| US\$ 23.3  |           |         |         |           |           |
| mn         |           |         |         |           |           |
+------------+-----------+---------+---------+-----------+-----------+
| Wine       | Moldova   | Moldova | Moldova | CIS       | Steady    |
|            | 68%       | 67%     | 66%     | origin    | demand    |
| 2001:      |           |         |         | wine is   | for       |
|            | Hungary   | Hungary | Georgia | r         | locally   |
| 19.7 ths.  | 15%       | 12%     | 11%     | easonably | produced  |
| tons       |           |         |         | priced    | wines;    |
|            | Georgia   | Georgia | Hungary | and has   | p         |
| US\$ 18.6  | 7%        | 6%      | 7%      | tr        | roduction |
| mn         |           |         |         | aditional | ex        |
|            | Macedonia | Ma      | Italy   | brands.   | perience; |
| 2002:      | 2%        | cedonia | 5%      | Western   | wide      |
|            |           | 5%      |         | Wines     | a         |
| 17.5 ths.  | France 2% |         | Ma      | occupy    | ssortment |
| tons       |           | Italy   | cedonia | the upper | and low   |
|            | Italy 2%  | 5%      | 4%      | segment   | prices;   |
| US\$ 18.8  |           |         |         | and       | poor      |
| mn         | Bulgaria  | France  | S       | perceived | po        |
|            | 1%        | 2%      | lovakia | as high   | sitioning |
| 2003:      |           |         | 3%      | quality.  | of high   |
|            | Romania   | USA     |         |           | quality   |
| 18.5 ths.  | 1%        | \<1%    | France  |           | vintage   |
| tons       |           |         | 2%      |           | wines;    |
|            | USA \<1%  |         |         |           | tr        |
| US\$ 23.3  |           |         | USA     |           | aditional |
| mn         |           |         | \<1%    |           | p         |
|            |           |         |         |           | reference |
|            |           |         |         |           | to        |
|            |           |         |         |           | sweeter   |
|            |           |         |         |           | wines.    |
+------------+-----------+---------+---------+-----------+-----------+
| Liqueurs,  | France    | Moldova | France  | Good      | High      |
| other hard | 29%       | 33%     | 64%     | quality,  | quality   |
| alcohol    |           |         |         | r         | and wide  |
| drinks     | Moldova   | Armenia | Spain   | easonable | a         |
|            | 18%       | 13%     | 16%     | prices    | ssortment |
| 2001:      |           |         |         | for       | of        |
|            | Ne        | Georgia | Moldova | tr        | locally   |
| 2.8 ths.   | therlands | 12%     | 5%      | aditional | man       |
| tons       | 11%       |         |         | Armenian, | ufactured |
|            |           | Russia  | Georgia | Georgian  | alcohol   |
| US\$ 10.7  | Armenia   | 10%     | 5%      | and       | drinks;   |
| mn         | 9%        |         |         | Bulgarian | d         |
|            |           | Great   | B       | cognacs;  | ependence |
| 2002:      | Great     | Britain | ulgaria | High      | on        |
|            | Britain   | 8%      | 3%      | demand    | imported  |
| 3.0 ths.   | 8%        |         |         | for non-  | cognac    |
| tons       |           | France  | USA     | tr        | spirits;  |
|            | USA 5%    | 8%      | \<1%    | aditional | black     |
| US\$ 11.9  |           |         |         | beverages | market    |
| mn         | Georgia   | B       |         | (tequila, | for hard  |
|            | 3%        | ulgaria |         | whisky,   | alcoholic |
| 2003:      |           | 5%      |         | rum, and  | drinks;   |
|            | Finland   |         |         | gin).     | low       |
| 34.6 ths.  | 3%        | Finland |         |           | quality   |
| tons       |           | 3%      |         |           | in low    |
|            |           |         |         |           | price     |
| US\$ 69.2  |           | Estonia |         |           | segment   |
| mn         |           | 2%      |         |           | product.  |
|            |           |         |         |           |           |
|            |           | USA     |         |           |           |
|            |           | \<1%    |         |           |           |
+------------+-----------+---------+---------+-----------+-----------+
| Pet food   | Russia    | Russia  | Russia  | Exports   | Trad      |
|            | 30%       | 28%     | 27%     | of        | itionally |
| 2001:      |           |         |         | w         | high      |
|            | Germany   | Poland  | Poland  | ell-known | number of |
| 38.6 ths.  | 17%       | 19%     | 23%     | pet food  | home      |
| tons       |           |         |         | t         | pets,     |
|            | Hungary   | Hungary | Hungary | rademarks | large     |
| US\$ 22.3  | 16%       | 16%     | 15%     | from      | market    |
| mn         |           |         |         | Russia    | p         |
|            | Poland    | Germany | USA 7%  | dominate  | otential; |
| 2002:      | 10%       | 13%     |         | the low   | low       |
|            |           |         |         | segment.  | demand    |
| 48.8 ths.  | Czech     | USA 5%  |         | U.S.      | for       |
| tons       | Republic  |         |         | brands    | ind       |
|            | 5%        |         |         | are       | ustrially |
| US\$ 30.2  |           |         |         | perceived | produced  |
| mn         | Ne        |         |         | as high   | pet food. |
|            | therlands |         |         | quality.  |           |
| 2003:      | 5%        |         |         |           |           |
|            |           |         |         |           |           |
| 53.2 ths.  | USA 5%    |         |         |           |           |
| tons       |           |         |         |           |           |
|            |           |         |         |           |           |
| US\$ 37.6  |           |         |         |           |           |
| mn         |           |         |         |           |           |
+------------+-----------+---------+---------+-----------+-----------+

*Sources: State Statistics Committee of Ukraine, DZI informational
bases, expert estimates*

# SECTION IV. BEST PRODUCT PROSPECTS

### 

### Category A: Products With Good Sales Potential

+----------+------+------+------+---------+-------------+------------+
| Product  | 2003 | 2003 | Ave  | Import  | Main        | Attr       |
|          |      | Im   | rage | taxes   | factors     | activeness |
|          | Ma   | port | gr   |         | hindering   | of the     |
|          | rket | vo   | owth |         | import      | market for |
|          | vo   | lume | of   |         | development | USA        |
|          | lume |      | imp  |         |             | suppliers  |
|          |      |      | orts |         |             |            |
|          |      |      | over |         |             |            |
|          |      |      | the  |         |             |            |
|          |      |      | past |         |             |            |
|          |      |      | t    |         |             |            |
|          |      |      | hree |         |             |            |
|          |      |      | y    |         |             |            |
|          |      |      | ears |         |             |            |
+----------+------+------+------+---------+-------------+------------+
| Poultry  | 300  | 1    | 24%  | 30% but | High        | US poultry |
|          | ths. | 00.7 |      | no less | customs     | in market  |
|          | tons | ths. |      | than    | duty,       | for a long |
|          |      | tons |      | EUR 1.5 | competition | time. Low  |
|          |      |      |      | per 1   | from        | prices     |
|          |      |      |      | kg; EUR | Brazil,     | attract a  |
|          |      |      |      | 0.7 per | high        | lot of     |
|          |      |      |      | 1 kg of | production  | consumers. |
|          |      |      |      | chicken | rates by    | Deficit of |
|          |      |      |      | offal   | local       | local      |
|          |      |      |      | and     | man         | produce,   |
|          |      |      |      | cuts;   | ufacturers, | high       |
|          |      |      |      | 10% but | low-quality | prices for |
|          |      |      |      | no less | image of    | European   |
|          |      |      |      | than    | imported    | and low    |
|          |      |      |      | EUR 0.4 | frozen      | quality of |
|          |      |      |      | per 1   | product     | Brazilian  |
|          |      |      |      | kg for  |             | MDM make   |
|          |      |      |      | whole   |             | American   |
|          |      |      |      | birds + |             | product    |
|          |      |      |      | 20%VATi |             | very       |
|          |      |      |      | +0.2%   |             | attractive |
|          |      |      |      | for     |             | for        |
|          |      |      |      | customs |             | processors |
|          |      |      |      | s       |             |            |
|          |      |      |      | ervices |             |            |
+----------+------+------+------+---------+-------------+------------+
| Beef     | 250  | 0.4  | Less | EUR 0.6 | High import | Cattle     |
|          | ths. | ths. | than | per 1   | duties,     | numbers    |
|          | tons | tons | 1%   | kg of   | smuggled    | d          |
|          |      |      |      | meat    | imports     | ecreasing; |
|          |      |      |      | and 20% | from        | shortage   |
|          |      |      |      | per 1   | Poland,     | of beef;   |
|          |      |      |      | k       | Germany,    | abrupt     |
|          |      |      |      | ilogram | and         | increase   |
|          |      |      |      | of beef | Argentina;  | of         |
|          |      |      |      | t       | lack of     | domestic   |
|          |      |      |      | rimming | regular     | prices;    |
|          |      |      |      | +20%    | deliveries  | vacant     |
|          |      |      |      | VAT;    | of beef     | niche of   |
|          |      |      |      | 0.2%    | from USA;   | fresh meat |
|          |      |      |      | for     | deficit of  | delicacies |
|          |      |      |      | customs | modern      | (steak,    |
|          |      |      |      | s       | storage     | etc.);     |
|          |      |      |      | ervices | facilities  | deliveries |
|          |      |      |      |         |             | of high    |
|          |      |      |      |         |             | quality    |
|          |      |      |      |         |             | meat for   |
|          |      |      |      |         |             | HoReCa     |
+----------+------+------+------+---------+-------------+------------+
| Pork     | 90   | 9.7  | 674% | EUR 0.6 | High import | Modern     |
|          | ths. | ths. |      | per 1   | duties;     | domestic   |
|          | tons | tons |      | kg +    | gradual     | production |
|          |      |      |      | 20%     | recovery of | growth;    |
|          |      |      |      | VAT +   | local       | shortage   |
|          |      |      |      | 0.2%    | output;     | of pork in |
|          |      |      |      | for     | competition | the        |
|          |      |      |      | customs | from Brazil | market;    |
|          |      |      |      | s       | and Poland; | abrupt     |
|          |      |      |      | ervices | smuggling;  | price      |
|          |      |      |      |         | lack of     | increase;  |
|          |      |      |      |         | modern      | reduction  |
|          |      |      |      |         | storage     | of EU pork |
|          |      |      |      |         | facilities  | imports    |
|          |      |      |      |         |             | due to     |
|          |      |      |      |         |             | growing    |
|          |      |      |      |         |             | prices;    |
|          |      |      |      |         |             | high       |
|          |      |      |      |         |             | demand     |
|          |      |      |      |         |             | from the   |
|          |      |      |      |         |             | processing |
|          |      |      |      |         |             | industry;  |
|          |      |      |      |         |             | vacant     |
|          |      |      |      |         |             | niche      |
|          |      |      |      |         |             | market for |
|          |      |      |      |         |             | fresh meat |
|          |      |      |      |         |             | d          |
|          |      |      |      |         |             | elicacies; |
|          |      |      |      |         |             | growing    |
|          |      |      |      |         |             | HoReCa     |
|          |      |      |      |         |             | sector     |
+----------+------+------+------+---------+-------------+------------+
| Fish and | 510  | 2    | Less | 0 --    | Smuggling;  | Sk         |
| sea food | ths. | 60.2 | than | 10%     | tough       | yrocketing |
|          | tons | ths. | 1%   | (shel   | competition | demand     |
|          |      | tons |      | lfish - | with        | from       |
|          |      |      |      | EUR 1   | Norwegian   | processing |
|          |      |      |      | per 1   | product;    | industry,  |
|          |      |      |      | kg,     | shortage of | HoReCa and |
|          |      |      |      | clams   | suitable    | population |
|          |      |      |      | EUR 0.2 | trade       | demand     |
|          |      |      |      | -- 1    | equipment   | reasonably |
|          |      |      |      | per 1   | at retail   | priced     |
|          |      |      |      | kg)     | outlets;    | m          |
|          |      |      |      | +20% +  | lack of     | id-quality |
|          |      |      |      | 0.2%    | modern cold | product    |
|          |      |      |      | for     | storage     |            |
|          |      |      |      | customs | facilities  |            |
|          |      |      |      | s       |             |            |
|          |      |      |      | ervices |             |            |
+----------+------+------+------+---------+-------------+------------+
| Dried    | 1    | 24.2 | 15%  | 0%- EUR | Sharp       | Intensive  |
| fruits   | 03.5 |      |      | 0.2 +   | competition | d          |
| and      | ths. |      |      | 20% +   | from Iran   | evelopment |
| almonds  | tons |      |      | 0.2%    | and Turkey; | of         |
|          |      |      |      | for     | flood of    | con        |
|          |      |      |      | customs | low quality | fectionery |
|          |      |      |      | s       | product     | industry;  |
|          |      |      |      | ervices | from Iran,  | growing    |
|          |      |      |      |         | Uzbekistan, | retail     |
|          |      |      |      |         | and         | sales;     |
|          |      |      |      |         | Afghanistan | quality    |
|          |      |      |      |         |             | advantage  |
|          |      |      |      |         |             | of U.S.    |
|          |      |      |      |         |             | raisins    |
+----------+------+------+------+---------+-------------+------------+
| Canned   | 413  | 0.6  | Less | EUR 1   | Large       | High       |
| fruits   | ths. | ths. | than | per 1   | volume of   | demand for |
| and      | tons | tons | 1%   | gross   | good        | canned     |
| ve       |      |      |      | kg +20% | quality     | output and |
| getables |      |      |      | VAT +   | product on  | p          |
|          |      |      |      | 0.2%    | the market  | erspective |
|          |      |      |      | for     | from        | for        |
|          |      |      |      | customs | Hungary and | further    |
|          |      |      |      | s       | Poland;     | future     |
|          |      |      |      | ervices | smuggling;  | growth;    |
|          |      |      |      |         | abundance   | gradual    |
|          |      |      |      |         | of cheap    | reduction  |
|          |      |      |      |         | Ukrainian   | of         |
|          |      |      |      |         | product;    | home-made  |
|          |      |      |      |         | tradition   | cans;      |
|          |      |      |      |         | for         | emerging   |
|          |      |      |      |         | home-made   | market for |
|          |      |      |      |         | canned      | hi         |
|          |      |      |      |         | fruits and  | gh-quality |
|          |      |      |      |         | vegetables  | canned     |
|          |      |      |      |         |             | product    |
+----------+------+------+------+---------+-------------+------------+
| Rice     | 170  | 85.8 | 6%   | 10% but | A           | Market for |
|          | ths. | ths. |      | no less | vailability | hi         |
|          | tons | tons |      | than    | of locally  | gh-quality |
|          |      |      |      | EUR     | produced    | American   |
|          |      |      |      | 0.03    | product;    | rice as    |
|          |      |      |      | per 1   | large       | premium    |
|          |      |      |      | kg      | imports of  | class      |
|          |      |      |      |         | cheap       | product;   |
|          |      |      |      |         | Vietnamese  | emerging   |
|          |      |      |      |         | rice; high  | niche      |
|          |      |      |      |         | competition | markets    |
|          |      |      |      |         | from other  | for        |
|          |      |      |      |         | cereals     | parboiled  |
|          |      |      |      |         |             | rice,      |
|          |      |      |      |         |             | brown      |
|          |      |      |      |         |             | rice, wild |
|          |      |      |      |         |             | rice, rice |
|          |      |      |      |         |             | with       |
|          |      |      |      |         |             | different  |
|          |      |      |      |         |             | additives, |
|          |      |      |      |         |             | etc.       |
+----------+------+------+------+---------+-------------+------------+
| Alcohol  | 2    | 7.9  | 93%  | EUR 0.5 | High import | Demand for |
| drinks   | 24.3 | mn   |      | per 1   | duties;     | exotic     |
|          | mn   | dal  |      | liter   | competition | drinks     |
|          | dal  |      |      | of      | with        | (whiskey,  |
|          |      |      |      | beer,   | Ukr         | gin, rum). |
|          |      |      |      | EUR 2-3 | ainian-made | Government |
|          |      |      |      | per 1   | spirits and | policy is  |
|          |      |      |      | liter   | drinks      | directed   |
|          |      |      |      | of      | produced in | at         |
|          |      |      |      | wine,   | CIS states  | increase   |
|          |      |      |      | EUR 7.5 |             | in         |
|          |      |      |      | per 1   |             | c          |
|          |      |      |      | liter   |             | onsumption |
|          |      |      |      | of 100% |             | of less    |
|          |      |      |      | other   |             | strong     |
|          |      |      |      | alcohol |             | drinks     |
|          |      |      |      | d       |             | (wine and  |
|          |      |      |      | rinks + |             | beer) and  |
|          |      |      |      | 20% +   |             | enc        |
|          |      |      |      | 0.2%    |             | ouragement |
|          |      |      |      | for     |             | of these   |
|          |      |      |      | customs |             | goods,     |
|          |      |      |      | ser     |             | stock      |
|          |      |      |      | vices + |             | expansion  |
|          |      |      |      | excise  |             | on the     |
|          |      |      |      | tax     |             | market     |
|          |      |      |      | (UAH 6  |             |            |
|          |      |      |      | -17 per |             |            |
|          |      |      |      | 1 liter |             |            |
|          |      |      |      | of 100% |             |            |
|          |      |      |      | spirit) |             |            |
+----------+------+------+------+---------+-------------+------------+
| Pet food | 100  | 53.2 | 18%  | EURO    | Abundance   | Large      |
|          | ths. | ths. |      | 0.05    | of          | number of  |
|          | tons | tons |      | per 1   | R           | home pets, |
|          |      |      |      | kg +    | ussian-made | increase   |
|          |      |      |      | 20%     | product     | in         |
|          |      |      |      | VAT +   | (mostly     | incomes;   |
|          |      |      |      | 0.2%    | Mars and    | High       |
|          |      |      |      | for     | Nestle),    | market     |
|          |      |      |      | customs | smuggling,  | potential; |
|          |      |      |      | s       | developing  | low import |
|          |      |      |      | ervices | local       | duty       |
|          |      |      |      |         | brands,     |            |
|          |      |      |      |         | lack of     |            |
|          |      |      |      |         | tradition   |            |
|          |      |      |      |         | for         |            |
|          |      |      |      |         | indu        |            |
|          |      |      |      |         | strial-made |            |
|          |      |      |      |         | pet food    |            |
|          |      |      |      |         | use         |            |
+----------+------+------+------+---------+-------------+------------+
| Fresh    | 2 mn | 239  | 22%  | EUR 0.3 | High import | Growing    |
| fruits   | tons | ths. |      | -- 0.6  | duties;     | demand for |
|          |      | tons |      | per 1kg | tough       | premi      |
|          |      |      |      | (20%    | competition | um-quality |
|          |      |      |      | but no  | with cheap  | product in |
|          |      |      |      | less    | Eastern     | winter     |
|          |      |      |      | than    | Europe and  | months     |
|          |      |      |      | EUR 0.2 | CIS         | from chain |
|          |      |      |      | per 1   | countries   | stores     |
|          |      |      |      | kg of   | produce;    | (pears,    |
|          |      |      |      | bananas | a           | grapes)    |
|          |      |      |      | or EUR  | vailability |            |
|          |      |      |      | 0.1 per | of          |            |
|          |      |      |      | 1 kg of | inexpensive |            |
|          |      |      |      | citrus  | local       |            |
|          |      |      |      | fruits) | produce;    |            |
|          |      |      |      |         | lack of     |            |
|          |      |      |      |         | modern      |            |
|          |      |      |      |         | storage     |            |
|          |      |      |      |         | facilities  |            |
+----------+------+------+------+---------+-------------+------------+

### Category B: Products Not Present in Large Quantities but with Good Sales Potential

-   Premium-class food products: meat specialties (meat for further
    cooking -- steaks, fillet, etc.) smoked meat, cheese;

-   Exotic seafood, ready-made high quality canned fish (tuna etc.);

-   Cereals: muesli, instant porridge, ready-made rice, different
    assortments of ready-made packaged rice;

-   Food for diabetics;

-   Specialized infant food, canned vegetables and infant food;

-   Exotic drinks/juices (from exotic fruits, energy drinks, vitamin
    drinks, root beer), drink concentrate, traditional drinks with
    different additives (tea/hot chocolate with additives);

-   Semi-prepared goods, ready-made frozen food, microwaveable food;

-   Packaged food ingredients of high quality for cooking (brown sugar,
    sugar powder, high-quality spices, etc.)

-   High-quality beer snacks (a rapid increase in beer consumption over
    the past several years and expected beer consumption growth in the
    future).

-   An aging population creates a niche market for this category of
    costumers. Presently, low incomes make this market profitable only
    in the future.

### Category C: Products Not Present Because of Significant Barriers (Barriers Indicated) 

-   Mid range ready-to-eat meat products (smoked meat, sausages,
    hotdogs) -- high import duties (30%, but not less than 1.2 EUR/kg +
    20% VAT) -- high competition of similar Ukrainian products;

-   Inexpensive imported chocolates - high import duties (0.5 EUR/kg +
    20% VAT) -- high competition from similar Ukrainian products;

# SECTION V. ATTACHMENTS

**Product Structure of Retail Trade Sales**

  --------------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
                  **1995**    **2000**   **2001**   **2002**   **2003**   **1995**   **2000**   **2001**   **2002**   **2003**

                  UAH                                                     \%                                          
                  million\*                                                                                           

  All commodities 11, 964     28,757     34,417     39,690     49,993     100        100        100        100        100

  Foodstuffs      7,546.5     14,930     17,337     19,068     22,806     63.1       51.9       50.4       48         45.6

  Meat and        1,198       1,788      2,114      2,253      2,735      10         6.2        6.1        5.6        5.5
  products                                                                                                            

  Meat (including 420.6       659.6      862.4      960.8      1,148      3.5        2.3        2.5        2.4        2.3
  poultry)                                                                                                            

  Sausages        728.8       1,073      1,184      1,209      1,474      6.1        3.7        3.4        3          3

  Meat cans       48.6        55.2       67.8       83         112        0.4        0.2        0.2        0.2        0.2

  Fish and sea    244.6       453.3      556.6      640        813        2.1        1.5        1.6        1.6        1.6
  food                                                                                                                

  fish            126.4       236.6      296.3      360        469        1.1        0.8        0.9        0.9        0.9

  herring         58          97.3       111.1      108        138        0.5        0.3        0.3        0.3        0.3

  Fish cans       60.2        119.4      149.2      171        205        0.5        0.4        0.4        0.4        0.4

  Vegetable and   118.8       160.9      205.7      270        368        1          0.6        0.6        0.7        0.7
  fruit cans                                                                                                          

  fats            477.9       543.3      644.3      706        809        4          1.9        1.9        1.8        1.6

  butter          293.7       242        258.5      262        281        2.4        0.8        0.8        0.7        0.6

  oil             70.2        114.2      148.8      168        215        0.6        0.4        0.4        0.4        0.4

  Other fats      114         187.1      237        275        311        1          0.7        0.7        0.7        0.6

  Milk and dairy  352.9       626.6      745.1      857        1,044      2.9        2.2        2.2        2.2        2.1

  Cheese and      116.5       187.8      240.5      285        403        1          0.7        0.7        0.7        0.8
  brinsen                                                                                                             

  eggs            136.5       231.7      289.8      338        369        1.1        0.8        0.9        0.9        0.7

  sugar           261.9       253.9      251.2      279        315        2.2        0.9        0.7        0.7        0.6

  confectionery   561.1       1,231      1,444      1,622      1,797      4.7        4.3        4.2        4.1        3.6

  tea             35.9        100.3      113.4      142        185        0.3        0.3        0.3        0.3        0.4

  coffee          24.4        129.1      165.4      221        308        0.2        0.4        0.5        0.5        0.6

  salt            20          28.5       27.6       27         31         0.2        0.1        0.1        0.1        0.1

  Bread and       1,330.2     1,898      1,769      1,457      1,466      11.1       6.6        5.2        3.7        2.9
  bakery                                                                                                              

  Flour, cereals, 357         587.6      532.8      529        686        3          2          1.5        1.3        1.4
  and pasta                                                                                                           

  flour           118.7       257.1      217.1      198        257        1          0.9        0.6        0.5        0.5

  Cereals and     122.5       180.7      173.7      191        241        1          0.6        0.5        0.5        0.5
  beans                                                                                                               

  pasta           115.8       149.8      142        140        187        1          0.5        0.4        0.3        0.4

  potato          71.2        72.4       80.8       109        152        0.6        0.3        0.2        0.3        0.3

  vegetables      174.4       166.3      185.6      220        286        1.5        0.6        0.5        0.5        0.6

  Fruits,         104.7       143.2      166.7      191.9      302        0.9        0.5        0.5        0.5        0.6
  berries, and                                                                                                        
  melons                                                                                                              

  Tobacco         111.6       1111       1,501      1,851      2,457      0.9        3.9        4.4        4.7        4.9
  articles                                                                                                            

  Other           1,595       4,613      5,515      6,145      7,256      13.3       16         16         15.5       14.6
  foodstuffs                                                                                                          
  --------------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------

*\*Exchange rate UAH 5.3 - \$1*

*Source: State Statistics Committee of Ukraine*

**Structure of Total Household Expenditures**

(in average per month as calculated for one household)

  ---------------- -------------- ------------- ----------- -------------- ------------- ------ ----------- -------------- ------------- ------ -----------
                   **2000**                                 **2002**                                        **2003**                            

                   **All          **Including               **All          **Including                      **All          **Including          
                   households**   those                     households**   those                            households**   those                
                                  residing in**                            residing in**                                   residing in**        

                                                                                                                                                

                                  **towns**     **Rural                    **towns**            **Rural                    **towns**            **Rural
                                                area**                                          area**                                          area**

  **All expenses,  **541.3**      **547.3**     **528.1**   **658.3**      **677.6**            **615.8**   **736.8**      **775.8**            **653.5**
  UAH**                                                                                                                                         

  \%                                                                                                                                            

  Total consumer   93.3           93.8          92.5        92.8                         93.8   90.4        93.3                         94.3   90.6
  expenditures                                                                                                                                  

  Foodstuffs       67.9           65.3          74.1        62.8                         60.9   67.7        62.7                         60.4   68.2
  (including                                                                                                                                    
  eating out,                                                                                                                                   
  alcohol, and                                                                                                                                  
  tobacco items)                                                                                                                                

                                                                                                                                                

  Non-foodstuffs   25.4           28.5          18.4        30                           32.9   22.7        30.6                         33.9   22.4
  and services                                                                                                                                  

                                                                                                                                                

  Payment for      6.9            8.1           4.2         9.2                          10.6   5.8         8.7                          9.9    5.6
  housing,                                                                                                                                      
  utilities and                                                                                                                                 
  services                                                                                                                                      

                                                                                                                                                

                                                                                                                                                

  Benefits and     2.3            2.5           1.8         1.9                          2.1    1.2         1.3                          1.4    0.9
  subsidies                                                                                                                                     

                                                                                                                                                

  Non-foodstuff    6.7            6.2           7.5         7.2                          6.2    9.6         6.7                          5.7    9.4
  total                                                                                                                                         
  expenditures                                                                                                                                  
  ---------------- -------------- ------------- ----------- -------------- ------------- ------ ----------- -------------- ------------- ------ -----------

*Source: Households Income Survey, State Statistics Committee of
Ukraine*

**Structure of Total Household Expenditures in 2003 (total per capita
expenditures)**

(in average per month as calculated for one household)

  ---------------- -------------- -------------- ---------------- ----------------- ------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ -------------
                   **All          **With average                                                                                                                                                                                
                   households**   per capita                                                                                                                                                                                    
                                  expenditures                                                                                                                                                                                  
                                  per month,                                                                                                                                                                                    
                                  UAH**                                                                                                                                                                                         

                                  **Up to 60.0** **60.1--90.0**   **90.1--120.0**          **120.1--150.0**   **150.1--180.0**   **180.1--210.0**   **210.1--240.0**   **240.1--270.0**   **270.1--300.0**   **300.1--360.0**   **More than
                                                                                                                                                                                                                                360.0**

  **All expenses,  **736,8**      **173.5**      **317**          **409**                  **461.8**          **525.1**          **564.5**          **609.2**          **659.8**          **693.9**          **758.7**          **1,102.4**
  UAH**                                                                                                                                                                                                                         

  **%**                                                                                                                                                                                                                         

  Total consumer   93,3           97.0           97.6                               96.8   97                 96.7               95.9               95.3               95.4               94.8               94.4               89.9
  expenditures                                                                                                                                                                                                                  

  Foodstuffs ()    62,7           81.4           76.6                               73.5   71.3               70.8               67.5               65.9               65.8               65.1               63.2               56.6

  Non-foodstuffs   30,6           15.6           21.0                               23.3   25.7               25.9               28.4               29.4               29.6               29.7               31.2               33.3
  and services                                                                                                                                                                                                                  

                                                                                                                                                                                                                                

  Housing,         8,7            5.1            9.3                                9.5    10                 9.6                10.5               10.2               9.6                9.2                8.9                7.2
  utilities and                                                                                                                                                                                                                 
  services                                                                                                                                                                                                                      

                                                                                                                                                                                                                                

  -Incl. Benefits  1,3            0.2            0.8                                1.2    1.5                1.3                1.8                1.5                1.5                1.4                1.5                1.0
  and subsidies                                                                                                                                                                                                                 

                                                                                                                                                                                                                                

  -Incl.           6,7            3.0            2.4                                3.2    3                  3.3                4.1                4.7                4.6                5.2                5.6                10.1
  Non-foodstuff                                                                                                                                                                                                                 
  total                                                                                                                                                                                                                         
  expenditures                                                                                                                                                                                                                  
  ---------------- -------------- -------------- ---------------- ----------------- ------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ -------------

*Source: Households Income Survey, State Statistics Committee of
Ukraine*

**Structure of Household Expenditures in 2003 (Basic Consumer
Expenditures)**

(in average per month as calculated for one household)

  ------------------ ---------------- ------------- ----------- ---------------- ------------- -----------
                     **Total                                    **Currency                     
                     expenditures**                             expenditures**                 

                     **All            **Including               **All            **Including   
                     households**     those                     households**     those         
                                      residing in**                              residing in** 

                                      **towns**     **Rural                      **towns**     **Rural
                                                    area**                                     area**

  **Total            **736.8**        **775.8**     **653.5**   **621.9**        **697.3**     **461**
  expenditures,                                                                                
  UAH**                                                                                        

  **%**                                                                                        

  Consumer           93.3             94.3          90.6        91.6             94.7          81.7
  expenditures                                                                                 

  foodstuffs         58.6             55.7          65.6        53.4             55            48.1

  alcohol            1.6              1.8           1.1         1.8              1.9           1.4

  tobacco            1.2              1.3           1           1.4              1.5           1.4

  Clothes and shoes  5.3              5.6           4.7         6.3              6.2           6.6

  Housing, water,    10.4             11.2          8.2         10.7             10.9          10.3
  electric energy,                                                                             
  gas, and other                                                                               
  kinds of fuel                                                                                

  Furniture,         2                2.2           1.6         2.4              2.4           2.3
  furnishings,                                                                                 
  household                                                                                    
  appliances and                                                                               
  daily housing                                                                                
  services                                                                                     

  Health protection  2.8              3             2.5         2.9              2.8           3.4

  transportation     3.3              3.7           2.2         3.5              3.6           2.9

  communications     1.5              1.8           0.6         1.6              1.9           0.8

  Leisure time and   2.3              2.8           0.9         2.4              2.8           1.2
  culture                                                                                      

  education          1.1              1.3           0.6         1.3              1.4           0.9

  HoReCa             1.4              1.8           0.5         1.7              2             0.8

  Other goods and    1.8              2.1           1.1         2.2              2.3           1.6
  services                                                                                     
  ------------------ ---------------- ------------- ----------- ---------------- ------------- -----------

*Source: Households Income Survey, State Statistics Committee of
Ukraine*

**Foodstuffs Consumption (per capita per year, kg)**

  ---------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
                                     **1990**   **1995**   **2000**   **2001**   **2002**   **2003**

  Meat and products (as calculated   68         39         33         31         33         35
  by meat including lard and                                                                
  by-products)                                                                              

  Dairy and milk (as calculated by   373        244        199        205        225        226
  milk)                                                                                     

  Eggs, pieces                       272        171        166        180        209        214

  Fish and seafood                   17.5       3.6        8.4        11         11.9       12

  Sugar                              50         32         37         40         36         36

  Oil                                11.6       8.2        9.4        10         10.7       11.3

  Potato                             131        124        135        140        133        138

  Vegetables and melons              102        97         102        105        108        114

  Berries, fruits, and grape         47         33         29         26         29         33
  (without processing for wine)                                                             

  Bread and bakery (bread, pasta     141        128        125        130        131        125
  calculated by flour, flour,                                                               
  cereals, beans)                                                                           
  ---------------------------------- ---------- ---------- ---------- ---------- ---------- ----------

*Source: Households Income Survey, State Statistics Committee of
Ukraine*

***Foodstuffs Consumption by Household (average per month as calculated
for one person, kg)***

  -------------- -------------- ------------- --------- -------------- ------------- --------- -------------- ------------- ---------
                 **2000**                               **2002**                               **2003**                     

                 **All          **Including             **All          **Including             **All          **Including   
                 households**   those                   households**   those                   households**   those         
                                residing in**                          residing in**                          residing in** 

                                **towns**     **Rural                  **towns**     **Rural                  **towns**     **Rural
                                              area**                                 area**                                 area**

  Meat and       3.3            3.3           3.2       3.3            3.5           2.8       3.9            4.2           3.2
  products                                                                                                                  

  Milk and dairy 17.1           15.4          20.5      18.8           17.6          21.2      19.1           18.6          20.1

  Eggs, pieces   18             20            16        17             18            17        17             19            15

  Fish and       1.3            1.4           1.1       1.4            1.5           1.2       1.4            1.5           1.1
  seafood                                                                                                                   

  Sugar          3.5            3.5           3.5       3.1            3.1           3.1       3.2            3.3           3.2

  Oil and other  1.8            1.9           1.6       2              2             1.8       2              2.2           1.8
  vegetable fats                                                                                                            

  Potato         10.4           9             13.1      10.3           8.6           13.7      9.9            8.2           13.2

  Vegetables and 9.5            9.7           9.3       9.5            9.3           9.9       9              9             8.9
  melons                                                                                                                    

  Fruits,        2.5            2.7           1.9       2.4            2.6           1.8       2.5            3             1.8
  berries, nuts,                                                                                                            
  grape                                                                                                                     

  Bread and      10.7           10.5          11.2      10.7           10.4          11.3      10.3           9.8           11.2
  bakery                                                                                                                    
  -------------- -------------- ------------- --------- -------------- ------------- --------- -------------- ------------- ---------

*Source: Households Income Survey, State Statistics Committee of
Ukraine*

**Foodstuffs Consumption by Household in 2003 (total per capita
expenditure)**

*(in average per month as calculated for one person, kg)*

  ------------ -------------- -------------- ---------------- ----------------- ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ---------
               **All          **With average                                                                                                                                                                         
               households**   per capita                                                                                                                                                                             
                              total                                                                                                                                                                                  
                              expenditures                                                                                                                                                                           
                              per month,                                                                                                                                                                             
                              kg**                                                                                                                                                                                   

                              **Up to 60.0** **60.1--90.0**   **90.1--120.0**   **120.1--150.0**   **150.1--180.0**   **180.1--210.0**   **210.1--240.0**   **240.1--270.0**   **270.1--300.0**   **300.1--360.0**   **More
                                                                                                                                                                                                                     than
                                                                                                                                                                                                                     360.0**

  Meat and     3.9            0.4            1                1.4               1.9                2.5                2.8                3.3                3.8                4.1                4.7                6.5
  products                                                                                                                                                                                                           

  Milk and     19.1           3.3            7.2              10.7              12                 14.8               15.9               17.1               19                 20.5               22.7               27.4
  dairy                                                                                                                                                                                                              

  Eggs, pieces 17             2              9                11                12                 15                 16                 17                 18                 18                 20                 22

  Fish and     1.4            0.4            0.4              0.5               0.7                0.9                1                  1.2                1.4                1.5                1.7                2.4
  seafood                                                                                                                                                                                                            

  Sugar        3.2            0.9            1.2              1.7               2.1                2.4                2.7                3                  3.3                3.6                3.8                4.6

  Oil and      2              0.8            1                1.2               1.4                1.6                1.8                1.9                2.1                2.2                2.4                2.8
  other                                                                                                                                                                                                              
  vegetable                                                                                                                                                                                                          
  fats                                                                                                                                                                                                               

  Potato       9.9            4.9            7.5              8.5               8.9                9.5                9.9                9.6                10                 10.8               10.5               10.6

  Vegetables   9              2.4            3.9              4.9               5.8                6.5                7.3                7.8                8.9                9.5                10.5               13.2
  and melons                                                                                                                                                                                                         

  Fruits,      2.5            0.5            0.7              0.9               1                  1.5                1.7                2                  2.4                2.7                3.1                4.7
  berries,                                                                                                                                                                                                           
  nuts, grape                                                                                                                                                                                                        

  Bread and    10.3           5.9            6.5              7.5               8.4                9.1                9.3                10                 10.6               10.9               11.5               12.4
  bakery                                                                                                                                                                                                             
  ------------ -------------- -------------- ---------------- ----------------- ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ---------

*Source: Households Income Survey, State Statistics Committee of
Ukraine*