Strong arguments: why Ukrainian food producers support the initiatives of the new team of the Ministry of Defense to change the food system in the Armed Forces

One of the key principles of the changes in the organization of food for the Ukrainian army is to maximize cooperation with domestic food producers and gradually exclude intermediaries from tenders.

It is clear that domestic producers supported this proposal. Representatives of enterprises and industry associations in exclusive comments to UNN voiced the most important arguments for this format of cooperation with the newly created state enterprise "State Logistics Operator". But, at the same time,  they also expressed some reservations.

Competition, reduction of purchase prices, product quality

Domestic producers are convinced that the participation of a large number of domestic food producers in the Defense Ministry's tenders will definitely lead to a reduction in purchase prices.

"The absence of intermediaries and fair competition always leads to cost optimization and lower purchase prices. The expansion of the range depends on the needs of the Ministry of Defense, but no one has canceled the laws of the market - demand creates supply," Interrybflot told .

In addition, fair competition in tenders will help improve the quality of products supplied to the Ukrainian army and expand their range. 

"Direct competition between producers at tenders will have a positive impact on improving the quality of food in the Armed Forces, because in such conditions the products will be delivered directly by the manufacturer, which is an additional guarantee that a quality product will be received. Competition between domestic food producers, in our opinion, will certainly lead to lower purchase prices, expanded product range and improved product quality," says Volodymyr Krykhta, director of ALAN Meat Processing Plant .

And most importantly, according to the manufacturers, the exclusion of intermediaries from tenders will speed up the delivery of products directly to military units. 

"This is the right initiative, precisely to speed up the procurement process, to make sure that the products are as fresh as possible, to get away from these additional logistics chains - and, accordingly, each additional chain means an increase in price, and directly through producers, these can be wholesale prices. It should be faster and cheaper," says Yuriy Duchenko, president of the All-Ukrainian Association of Bakers.

Against this background, the statements of Dana Yarova, a member of the Public Anti-Corruption Council under the Defense Ministry, who claims that purchasing food directly from producers will lead to higher purchase prices, look somewhat strange.

In particular, she recently statedthat a working group had been set up to analyze the price offers of bakery products and concluded that direct purchases from the manufacturer would allegedly cost 20-30% more. 

Investments, opportunities for production expansion

If domestic producers are confident that they will be able to supply products to the Ukrainian army on a regular basis, this will open a window of opportunity for them to attract investment in this difficult time and expand production accordingly. 

"Transparent access to tenders for as many domestic food producers as possible can have a cascading positive impact on the market: it will equalize the balance of supply on the market in the face of limited exports, encourage agricultural enterprises to invest in the creation and expansion of their own processing and, accordingly, reduce pressure on export routes. It will even encourage farmers to unite in cooperatives to create a larger lot of products for the announced tender. From the point of view of the dairy business, transparent and direct purchases through  the State Operator of the Logistics Center could become an additional guaranteed channel for the sale of raw milk and finished dairy products, as well as beef and veal, and provide an additional impetus for business investment in these sectors," says Hanna Lavreniuk, CEO of the Association of Milk Producers.

In addition, this will support producers who are limited in their export capabilities for certain reasons.

"It's clear that buckwheat producers are definitely interested, because we have an overproduction of buckwheat this year, and markets are limited. Therefore, if there is such a large buyer as the Ministry of Defense of Ukraine, the producers are definitely in favor," says Sergiy Gromovoy, director of the International Buckwheat Association.

Warnings on logistics - DOT responded

In fact, the only reservation of Ukrainian food producers was the issue of logistics, because delivery also affects the price. In addition, not every producer can provide it over a long distance. 

"If, for example, 10 thousand tons of potatoes are needed for all the needs of this customer, then it is obvious that they need to be delivered to more than one location. It will not be difficult for producers, farms, and enterprises to organize delivery to 2-3 locations. But if the issue of delivery to each part of the country starts, separately, relatively speaking, it will be not two or three locations, but 30-40, then I am not sure that the manufacturer will do this. In general, the market is structured so that everyone has to do their own thing: the manufacturer produces, someone else deals with distribution and these small deliveries. This is the only nuance," Taras Bashtannik, president of the Ukrainian Fruit and Vegetable Association, said .

In response, Arsen Zhumadilov, Director General of the State Logistics Operator, made it clear that food procurement and delivery would be separated.

"Procurement and logistics are separated. The manufacturer that wins the tender will supply products to distribution centers. Delivery services from these centers to end consumers will be procured separately by the state," Zhumadilov said .