Changes Implemented by Participating Companies
Evaluation Part 2 (Return to Part 1)

It is our understanding that the following changes are being implemented.

1^st Sugar Plant Named after Petrovskiy; Yuri Simonenko, Marketing Manager reported that the following took place as a result of the study tour.

1. With the assistance of Fasma, another tour participant, the company has designed a new company logo which is intended to show that they have produced high quality sugar since 1834.
2. Currently, sugar is packaged in plain, 50 kg sacks. The company has designed new sacks with their company logo.
3. The company has decided to package sugar in small 1 kg packages. A sample package, with the new logo was presented to CEI. It will be introduced in 1999 when there is sufficient sugar. This size package was available in Soviet times, but has not been available in recent years.
4. The new small package lists the ingredients in the sugar and shows how they compare with the Ukrainian standard.
5. A new company letterhead and business card have been designed.
6. The company intends to market brown sugar, a new product for Ukraine. Brown sugar is reportedly good for people with diabetes and other ailments. The packaging has already been designed. CEI has supplied recipes since none are currently available in Ukraine.
7. The company is working with Kolos Farm, another tour participant, to obtain additional sugar beet.

Barvenkovskiy Food Plant; Viktor Pavlov, Director and Head Accountant and Viktor Uvarenko, Director and Head Engineer reported on the following:

1. Management realized that one person can be assigned multiple jobs. This is helping improve productivity and reduce costs.
2. New energy efficient Ukrainian ovens have been purchased for the bakery and other equipment is on order.
3. The costs of all their operations were analyzed to reduce costs. Unprofitable lines have been discontinued. They expect to have a net 15% profit in 1999.
4. As a result of the study tour, the company is very interested in producing croutons from the stale bread that is returned at the end of the day. They feel this is a logical product in a country that eats a large amount of soup.
5. The company intends to go into the business of making potato chips. A building has been built for this purpose, but it is now idle due to the economic crisis.

Fasma; Oleksiy Gonskiy, Director has been very active since returning to Kharkiv and reported on his activities.

1. He wrote a chapter in the Technical Manual on Packaging based on the information seen.
2. They are planning their own magazine on packaging and wants as much information on food processing as possible.
3. Worked with the Yuri Simonenko at the 1^st Sugar Plant Named after Petrovskiy to develop a new logo and packaging for sugar.
4. At Taifun worked with Vasyl Zaytsev on packaging salads in cups and on packaging for pancakes. These consisted of two major cost studies (30 to 40 pages each) justifying the technology needed.
5. Worked with Oleksandr Radchenko at Kupiansk Milk to design new packaging for milk and kefir. Sales increased 10-15% due to the new package design. They are also selling new packaging equipment to Kupiansk.
6. Worked with Tetyana Volovyk at the Kharkiv Edible Oil Plant to help install new French technology for packaging mayonnaise in cups. Fasma designed the packaging and sales increased due to the new design.
7. Working on a large confidential project with an American-owned farm in Ukraine.
8. Working on a modernization project with another milk company that participated on a study tour.
9. Wants to be an agent for Flavor Systems International, one of the US host companies. Initial discussions have started on this project.
10. Published an article on the study tour in a journal of the Kharkiv Institute of Technologies of Packaging (ITP). Copies were mailed to CEI members.
11. Intends to publish a small report on the packaging technology he learned in the US.
12. In September 1998 presented a report of the study tour at the Regional Business Assistance Center in Kharkiv to representatives of Associations throughout Ukraine.
13. Together with Mr. Kisilyov of Zmievskoy Milk Plant, presented papers at the International Seminar "Prodmarket-98" in Kiev. The seminar attendance was 80 people.

Kongressovskiy Sugar Plant; Sergiy Pogribnyak, Head of the Financial Department reported:

1. They plan to package sugar in 1 kg packages. The smaller package will have the benefit of greater customer convenience and the customer can be assured of receiving an accurate weight.
2. They are planning a candy operation in 1999. This will provide the company with a value-added product which they can sell at a higher price than raw sugar. More importantly, it will enable the plant to remain open for up to 9 months per year, thus providing employment for the community.

Nadiya Agricultural Farm; Anatoliy Shkurko, Head Engineer and his management discussed the benefits to their firm.

1. Nadiya has introduced 10 new products seen in the U.S.
2. They currently produce more than 60 products and plans to expand their production by four times.
3. The company will switch to the Euro jar over the next two years. Currently they package their products in glass jars with pry top lids.
4. Anatoliy Shkurko really liked the technology seen in the US. He was particularly interested in the enamel and stainless steel tanks used to store tomato juice that he saw at Ray Brothers and Noble Canning Company in Hobbs, Indiana where they only processed tomatoes. The tomatoes were half processed before being vacuum packed and sent to another firm for further processing. The half-cooked tomatoes could then be cooked when required (1 ton per hour). The use of this technique could lengthen the work year of the plant from 3 to 9 months.

Novoivanovskiy Sugar Plant; Kostyantyn Ulko, Financial Manager reported that as a result of the study tour, their firm plans to package sugar in smaller, 1 kg packages. This will have the benefit of a lengthened work year and a higher valued product.

Pervkhinskiy Sugar Plant; Igor Rud, Head Mechanic was filled with new ideas on his return which were well received by his management.

1. Mr. Rud suggested packaging sugar in smaller packages. Management agreed to proceed with the smaller packages since they already had the packaging equipment. This they will do next year. A sample package from earlier days was presented to CEI. The package was simply labeled "Sugar." Although the small package will be more expensive, the company plans to add its own logo and will work with Fasma on this project.
2. The company wants to introduce new value-added products in order to increase profitability and to lengthen the work period.

Rosinka; Rymma Chepyakova, Owner is currently implementing the new ideas at her restaurant and new supermarket.

1. The owner currently has a food operation that prepares and distributes food to 34 retail outlets. Products include pastry, smoked chicken legs, vegetable salads and semi-finished products (filled pancakes, meat rolled in cabbage leaves, etc.). The study tour showed her how to reduce the cost of this operation.
2. Rymma intends to open a new 1,200 square meter (12,000 sq. ft.) supermarket similar to what she saw in the United States. It will be the first superstore in Kharkiv. The size of the store will be more like a 1950-1960's U.S. supermarket. It will carry a full variety of grocery, meat, produce, and bakery items similar to that of an American store. The store is projected to open in March 1999. The equipment has already been purchased and the store will be attractively decorated and landscaped (an innovation in Kharkiv). Rosinka has its own financing for this project.
3. New salads are being offered by her company based on what she learned on the tour. In the US the stores sell salads by weight, not by the ingredients and she plans to use this technique. Further expansion of the product lines include meat stuffed pouches and meat wrapped with a cabbage leaf.
4. The store organization will be based on ideas from the study tour.
5. Rymma is a member of the Kharkiv Organization of Business Women. She has already made presentations to that organization on her observations from the MTM Study Tour. She also met with the Department of Agriculture to show her video and the laboratory analysis used in the Ohio Department of Agriculture.
6. Rosinka plans to use American style marketing in promoting the new store. They will use special discounts for regular customers and advertise on Kharkiv television. Their plan is to establish a brand name associated with quality goods and services. Obviously, the new store will carry a full line of Rosinka products.
7. Rymma has prepared a video of the tour and shown it to the Kharkiv Oblast Agricultural Department and others.

Savinskiy Sugar Plant; Viktor Loza, Process Engineer reported that as a result of the study tour, the company plans to package sugar in smaller packages. No activities have taken place so far due to the poor economic situation at the plant.

Taifun; Vasyl Zaytsev, President and Oleg Sizonenko, Director of this aggressive fast food restaurant chain have implemented many ideas gained from the study tour.

1. On the first of September 1998, Taifun installed facilities to make salads the same as was observed in the U.S.
2. The company is working with the Kharkiv Institute of Public Catering to work out a line of pastas and salads (with pickles, potatoes, etc.). In order to reduce costs, they will introduce an automated line for making, packaging, dosing and labeling salads. They saw this operation at Club Chef and were very impressed. They will have this facility in operation by September 1999.
3. The greatest benefit from the study tour was in the area of marketing and management techniques.
4. Ten new dishes have been introduced as a result of the trip. These include watermelon and salad decorations.
5. They are now grilling poultry and fish in one of their restaurants.
6. They will use design ideas learned on the study tour in the design of their new cafes.
7. Became acquainted with IESC and had a volunteer help with their planning.
8. Taifun took videos of their trip and purchased a cooking course on video which they have shown to their staff. They are considering similar videos for Ukraine.

Zmievskoy Milk Plant; Victor Kisilyov, Chairman of the Advisory Committee was greatly affected by the study tour program.

1. The tour changed the way Mr. Kisilyov works. He found it difficult to use all the information he gained. For example, the financial systems work in the US and do not work in Ukraine.
2. A liquid plastic bottling line is of greatest interest. The company is working with Fasma on this project.
3. The company will install French equipment ($2 million) for packaging yogurt in plastic cups. This line will start in February and will operate at high productivity.
4. The enterprise has been restructured and some people have been let go. They are now hiring people with higher qualifications.
5. They are bringing down their unit costs by 20-30% with the restructuring and lower utility costs.
6. The tour helped prepared Mr. Kisilyov for making the tough decisions that are necessary without being afraid of the consequences.

1st Kharkiv Milk Plant; Victoriya Marenych, Department Head reported the following took place as a result of the study tour.

1. They are working on improving quality and reducing power consumption.
2. They have changed their method of making cheese to improve quality and reduce power consumption.
3. The company is now offering chocolate flavored milk.
4. A new low-fat sour cream product has been added.
5. A new "Homemade" cheese has been added to the product line.
6. A new computer system for monitoring their production system has been added.
7. The have opened their own retail store where they are trying new advertising and marketing methods learned in the U.S.

Borovskoy Milk Plant; Oleksiy Pavlov, Head Accountant reported on significant changes at their company.

1. Borovskoy believes the benefits of the tour included finding ways for small independent companies to survive under the noses of larger better financed companies.
2. Mr. Pavlov convinced Borovskoy management to adopt a company logo to distinguish itself in the market. Since Borovskoy is in the forest region of the Oblast, it adopted the fox as its logo.
3. Starting in November 1998, all Borovskoy products display the fox on the face of the package. It has helped Borovskoy establish its name and quality reputation in Kharkiv. The fox has caught on as a logo with Kharkiv shoppers and Borovskoy would like to leverage that into additional sales throughout the Oblast.
4. As the economy improves, Mr. Pavlov sees Borovskoy moving into condensed milk and possibly expanding its markets into nearby villages.

Kharkiv Edible Oil Plant; Tetyana Volovyk, Chief Technologist has had a significant impact on her firm.

1. Tatyana has held numerous employee meetings within the plant to describe improvements that can be implemented based on her observations as a participant in the MTM Study Tour. Due to the slow economy, improvements which require capital have been put on hold.
2. One of the key benefits of the tour for Kharkiv Edible Oil was the winterization process using ammonia observed at AC Humko in Columbus, Ohio. Kharkiv Oil is working on developing a similar process. They would appreciate some additional information on the process if it can be obtained from Humko. The new winterization process could reduce costs considerably at Kharkiv Oil.
3. Based on observations from the MTM Tour, Kharkiv Oil believes they need to change their packaging and advertising. American products are much more distinctive and consumer friendly than Ukrainian products. Building a "brand" image is easier in the U.S. because of this. Kharkiv Oil is currently working with the Kharkiv company Fasma to develop new packaging and advertising to promote its products in more markets. New packaging and advertising plans are expected to be completed by the end of May.
4. Tetyana observed that businesses in Ukraine needed to understand better their political situation. They need to participate in legislation to improve their ability to get what they need to be competitive.
5. The most important part of the tour for Tetyana was the division of labor in the United States and the attitudes of the workers. In the U.S. workers are used to giving instead of taking. They require little supervision and thus fewer middle managers are required to oversee each task. The employees are flexible and work where needed, not like Ukraine where old stereotypes still exist and the workforce is less flexible.

Kharkiv Milk Plant; Anatoliy Bazyura, Chief Maintenance reported that:

1. Kharkiv Milk plans to introduce new products but needs to purchase new equipment. to do it. This they will do just as soon they pay off some of their existing loans.
2. They want to introduce new packaging and are studying the impact on prices and retail sales.

Komarovka Milk Processing Plant; Viktor Sergiyenko, Director discussed their ambitious plans and activities.

1. Komarovka has two main initiatives for 1999 which are a direct result of participation in the MTM Study Tour. First is the consolidation of its production facilities. Komarovka has a small meat processing operation on the opposite side of Kharkiv which is being consolidated with the main plant. It currently produces canned meat in tin cans for export to Russia and for filling government orders (Army, etc.).
2. The second initiative is an expansion of the dairy product lines into the manufacturing of margarines. Mr. Sergiyenko believes they can procure a stable supply of raw materials to produce their own line of margarine at prices that are competitive with other major suppliers. This strategy will require new equipment and some up-front capital to establish contracts for supplies. Financing will come from private sources as current bank rates make borrowing nearly impossible.
3. Komarovka currently markets its own line of soft drinks in plastic bottles. Its markets are the Donetsk oblast and Crimea resorts. Komarovka will begin to market its soft drinks in the Kharkiv region to see if it can get acceptance.
4. The meat operation currently purchases tin cans from Kupiansk Milk Plant. As part of the agreement, Komarovka is prohibited from producing condensed milk. Komarovka is currently seeking another source of tin cans closer to its plant so that it can expand into condensed milk. This move will require very little capital investment and would be a natural horizontal extension of the company's product line.

Krasnogradski Butter & Cheese Plant; Rayisa Manko, Production Department Head reported on the activities of her plant.

1. Cheese production is the focus of all the processing at Krasnogradski. Since October 1998 (the date of the MTM Tour) the company has shifted its production from its traditional cheese to fat free and low fat products. From their American counterparts they had learned they could get higher yields at lower costs by shifting to low fat products.
2. The aging process for the new cheese is one month compared to two months from its traditional product line. Krasnogradski has not had a problem selling its new low fat cheeses. It has helped the company meet its debts and remain in operation during these very difficult times.
3. In addition to the new low fat/no fat cheese, Krasnogradski has been able to introduce, on a limited basis, a line of cottage cheese. Again, acceptance has been good and the outlook is favorable if the supply of raw materials can be sustained or improved.
4. In the United States, dairies pay a premium to suppliers in order to maintain a supply of raw materials year round. Krasnogradski is experimenting with something similar. They are currently paying their suppliers a premium to ensure a constant source of supply. Paying above market price has help stabilize the supply, although it is far less than what is needed to meet demand.

Kupiansk Milk Plant; Svitlana Medvedyeva, Vice President Finance reported that the following took place as a result of the study tour.

1. Upon return from the United States MTM Study Tour Kupiansk struck a deal with an ADM soy supplier in Donetsk oblast for a supply of soy. The contact was made as a result of meeting with ADM executives in Illinois. As a result, Kupiansk is now making a soy based condensed milk.
2. Additional MTM Study Tour benefits include the introduction of chocolate condensed milk and the implementation of computerized tracking of costs throughout the plant (as observed at SIG Combibloc).
3. A new idea brought home from America was to sell whey in one kilogram packages to housewives for baking. This product has been well received and Kupiansk plans to expand it further as capital allows.
4. The company has some additional whey products in the approval process with Oblast officials.
5. Kupiansk will begin the production of ice cream this summer. It is believed that there will be sufficient supply of raw material at that time to make the venture pay for itself.

Rogan Meat Processing Plant; Svitlana Ulitska, Deputy Head of the Board reported:

1. Rogan is changing their cooling system to overhead cooling similar to what was observed in American plants. They have done the work themselves and have three chambers already converted. In February the equipment will be tested and in March or April they will use their own cooling system. The savings of $97,000 US will come from a reduction of cooling currently purchased from Kharkiv Milk.
2. Svitlana has given seminars for 400-500 people about the study tour program.
3. Rogan has added a second person in Marketing after Svitlana returned to Kharkiv, and special emphasis has been placed on getting the proper training.
4. As part of consumer research (learned in the United States), specialists from the plant go to the Rogan kiosks (Rogan has 24 kiosks) to talk to consumers. They are getting very high praise for their quality, but again, price is a major issue.

Solbozhanski Agricultural Farm; Yuriy Tovstopyat, Head Economist.

After viewing American management to employee ratios, Mr. Tovstopyat improved productivity by transferring two employees to another area of the farm. Neither production nor quality has suffered as a result of the moves.

Ukrainian Edible Oil Institute; Tetyana Avdeyenko discussed the activities at her Institute following her return.

1. Tetyana held employee meetings when she returned from the United States to review the advantages American companies have in competitive markets. One of the biggest advantages was their ability to establish their brand name and target their customers with specific marketing plans.
2. To assist their member organizations, the Institute purchased American marketing software. The software helps businesses develop annual marketing plans. The staff is working on translations and sample marketing plans for training their member organizations.
3. CEI delivered a sample copy of the Bob Evans Farms 1998-1999 Market Plan. This plan is being translated and will be used as an example of a well defined and successful Market Plan.

Velikoburluskii Cheese Plant; Anatoliy Kovalyov, Chairman of the Board has had great and significant benefits from the study tour.

1. Velikoburluskii is planning two new hard cheeses and one or two new soft (processed) cheeses in May 1999 depending on the supply of raw materials.
2. Velikoburluskii has ordered vacuum packaging equipment through a Kiev distributor for introducing small consumer packages. At present all cheese is packaged in 7 kg. wheels.
3. The 1999 plan calls for sliced and wrapped products much the same as retail stores in the U.S. market to consumers. Anatoliy Kovalyov observed in the U.S. retail stores that whole cheese sold for approximately $8.00 per pound but when it was sliced and packaged it sold for $10.00 to $15.00 per pound. Velikoburluskii will try to duplicate the American pricing strategy as they introduce the smaller vacuum packaged consumer products. If successful, this could increase revenues by as much as 50% with only a marginal increase in expenses.
4. A second use of the new equipment will be to replace the paraffin overwrap on the 7 kg. wheels with a vacuum package. This will reduce the drying and aging time by 3-5%. It also helps to reduce the product loss from poor paraffin seals. The net result of the reduced aging and product loss is the potential to increase the throughput by another 50-60 tons of cheese per month. While this will be impacted by the availability of raw materials, Velikoburluskii should certainly see some gain in 1999 revenues as a direct result of the use of vacuum packaging. The savings from eliminating paraffin are approximately $32,000 annually.
5. Anatoliy Kovalyov made labor improvements at Velikoburluskii after he returned from the US. A total of 50 positions were eliminated generating a savings of approximately $185,000 in 1998. Based on observations of US management practices, Mr. Kovalyov made each department head responsible for their section. This includes productivity improvements and internally generated savings. Elimination of waste was the first area tackled by the department heads, and Velikoburluskii now boasts of very little waste in the production process.
6. Due to improved labor organization and increased productivity, the company had been able to increase production, and therefore sales, by 20%. Other changes will help reduce costs by an additional 10%.
7. The company is planning to add a new computer systems that will tie together the current systems and this will allow them to improve efficiency.

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