Ukrainian meat and milk producers learned about daily operations at Constantin

CONSTANTINE -  Freedom brought costly consequences for meat and dairy business leaders from Kharkiv, Ukraine. When markets opened nearly a decade ago, former Soviet-style businesses could not compete.

Bruce Vaillancourt, Cincinnati Bell senior market manager, hopes to reverse an alarming trend that's seen market pressures, astonishingly-high government rates and local Mafia wipe out Ukrainian businesses struggling to emerge after communism's fall.

On Wednesday, 15 dairy business people and one government official from the former Soviet Union visited the Michigan Milk Producers Association Plant in Constantine.

The delegation was part of a United States Agency for International Development program to learn first-hand how to compete in a market economy.

"(The) Michigan Milk Producers Association represents a perfect opportunity for the Ukrainians to learn how to diversify to compete with larger companies," said Vaillancourt, Center for Economic Initiatives tout coordinator . "The Association is not only beneficial to its members through the sale of raw milk, but through key production facilities as well. Cooperatives and associations are non-existent in Ukraine today but have the ability to add significant value as they compete with Large European competitors. MMPA's diverse production facilities made this a must-visit for our tour. Print butter would be something they could introduce with almost no cost and give them a niche difficult for Europeans to penetrate."

Wednesday's Constantine visit was one of 23 scheduled during a three-week tour of five Midwestern states.

A question and answer session led by plant manager Tom Carpenter followed a detailed tour of the plant.

Ukraine has always had a command economy. The country was told what and how much to produce under the Tsar and Soviet regimes. Ukraine gained independence in 1991, but the economy has faltered under democracy.

As large European companies begin to sell their goods and services in the former Soviet Union, the small to mid-sized local businesses are being pushed out of their markets. Their management lacks the marketing skills to compete effectively, Vaillancourt said.

The tour guide said experts predicted Ukraine would flourish in communism's wake, but once the Soviet distribution system disbanded, the fledgling democracy couldn't compete. Many Ukraine dairy plants employ up to 400 workers although no milk has been produced in two years and no one receives a paycheck. Vaillancourt said.

"It's basically a barter economy now," he added. "This tour gives them a chance to view a plant in operation. They also get to talk to the plant manager and recognize how a plant functions in a market economy."

Vaillancourt said Ukrainian business leaders don't believe in using food additives and preservatives, a staple of European competitors. Europeans also inject meat with water, allowing them to sell the finished product more cheaply.

The marketing problems are fixable, Vaillancourt insist, but Ukraine’s government continues to tax it businesses at 105 percent of profits. And the local Mafia controls most large companies, causing international reform efforts to be aimed at small or mid-sized businesses, he added.

Currently, 90 percent of Ukrainian plants operate at 10 percent of capacity due to a lack of supply.

The Center for Economic Initiatives and United States Agency for International Development have partnered to help. In a training program patterned after the Marshall Plan technology and productivity tours, the agribusiness industry leaders are being brought to the U.S. to learn how to compete and win.

Host companies like Michigan Milk provide a view of technology and an opportunity to get questions answered on key strategy questions which can be taken home and put into immediate use.

The Marketing, Technology and Management Study Tour was arranged by the Center for Economic Initiatives, a non-profit organization headquartered in Cincinnati. CEI works closely with USAID and the World Bank in training business executives from the former Soviet Union. It has assisted in the training of numerous industry executives from numerous former Soviet countries.