In this article we will write about the logistic infrastructure, main sales channels and system of distribution in Ukraine.

Logistic infrastructure in Ukraine.

Ukrainian distributors transport almost all products domestic or imported via rail or truck. The shares of air and sea freight are insignificant comparing to the truck or railway.

According to the statistic of the Ukrainian State Statistics Committee the amount of cargo transportation in 2020 was reduced by 11.2% comparing to the 2019. It’s equal to 600 million tons:

  • truck transportation decreased by 21.7%, to 191.3 million tons;
  • pipeline – by 13.5%, to 97.5 million tons;
  • sea and river – by 8.3%, to 5.6 million tons;
  • air – by 6.7%, to 0.1 million tones.
  • railway – by 2.4%, to 305,5 million tones;

The Ukrainian national railway network is managed by the state-owned company – Ukrazaliznytsia. It is the third largest railway company in the EU with the 21.7 km of rail which connects Ukrainian distributors with Belarus, Russia, Moldova, Hungary, Romania, Poland and Slovakia.

The road system in Ukraine links to the pan-European corridors with highways: 

  • Brussels-Dresden-Krakow-Kyiv;
  • Gdansk-Odessa;
  • Venice-Budapest-Lviv-Kyiv;
  • Helsinki-Saint-Petersburg-Gomel-Kyiv-Chisinau-Bucharest-Thrace.

It consists of motor roads, utilities, private and public companies and organizations that serve them. 40% of all international transport corridors pass through Ukraine including existing motorways such as Kyiv-Odessa and Kyiv-Chop. The network of roads has length of 170 000 km. That is why the quality of the road system has the significant impact of all distribution in Ukraine.

In 2020 the amount of cargo delivered through Ukraine by sea or river was 5.6 million tones. Ukraine has 13 sea ports: Berdiansk, Bilhorod-Dnistrovskyi, Chornomorsk, Izmail, Kherson, Mariupol, Mykolaiv, Odesa, Olvia, Reni, Skadovsk, Ust-Dunaisk, and Pivdennyi. There are also 8 river ports in Ukraine which are able to process the bulk and container imports.

Due to the economic crisis in Ukraine, the distributors of all commodity groups reported about the decline of importation volume. Of the five largest commodity groups in terms of turnover, only coal imports showed an increase in imports. This is due to the need for Ukraine to compensate for the shortage of coal production in the temporarily occupied regions of Donbas.

There are two types of customs warehouses in Ukraine:

  • customs warehouse;
  • temporary storage warehouse.

Ukrainian distributors importing cargof can use a temporary warehouse for temporary storage of goods that are awaiting customs clearance, sanitary, environmental or other permission for import or are subject to certification.

Same with other countries, Ukraine controls export-import operations. Customs regulation provides for the declaration of exports and imports, as well as the preparation of a package of export documents.

Channels of the distribution in Ukraine

The Ukrainian State Statistics Service and Ukrainian distributors reported that the retail trade turnover of Ukraine in 2020 increased by 10% compared to 2019 and amounted to $45 billion. Retail chains in Ukraine control less than 50% of the entire market. This demonstrates the huge potential of the market and the opportunities for new distributors in Ukraine to enter the retail market.

Among the retail market in Ukraine, it is worth highlighting:

  • Fast Moving Consumer Goods (FMCG);
  • Household appliances and electronics;
  • Do-It-Yourself (DIY);
  • Branded clothing and footwear;
  • Car parts and accessories;
  • Beauty and toiletries;
  • Drug (pharmacy).

Fast Moving Consumer Goods (FMCG).

FMCG is a retail chain of supermarkets for consumer goods, consumer electronics, Do-It-Yourself, car parts and accessories for cars, toiletries and cosmetics, as well as pharmaceutical FMCG retail is presented in all major cities of Ukraine.

The largest international companies in the Ukrainian FMCG retail market:

  • Auchan, France;
  • METRO GROUP, Germany;
  • Spa, Netherlands;
  • Consul Trade House UA, Lithuania.

In 2020, the German supermarket chain Billa, owned by the REWE Group, was sold to UAB Consul Trade House, which also owns the Novus Ukraine chain, one of the leaders in Ukrainian retail. It should be noted that the Billa chain was the first international retail chain in Ukraine, which opened in 2000. For 20 years, the network has grown to 35 stores in the capital, Kyiv oblast and Zhitomir.

On the Ukrainian market, 4 most successful national retail chains should be set aside:

  • ATB Market;
  • Retail Group;
  • Fozzy Group;
  • Furshet.

Most prominent regional retail chains:

  • in the south of Ukraine: Tavria V and Kopeyka;
  • in the north of the country: LotOK.

Over the past few years, the following FMCG retail formats have been developing most rapidly:

  • supermarkets;
  • corner stores;
  • discounters.

In 2020, several notable FMCG retail brands entered the Ukrainian retail market:

  • IKEA, Sweden, opens at Blockbuster;
  • Athlete’s Foot, Switzerland, opens at Blockbuster;
  • b.young, Denmark, opened at River Mall;
  • 4F, Poland, opened in Retroville;
  • Vans USA opens at River Mall;
  • FLO, Turkey, opened at Forum Lviv.

Chain stores selling household appliances and electronics.

Today the most successful retail chains in this market segment are:

  • Comfy;
  • Eldorado;
  • Foxtrot.

These companies occupy a significant market share and enjoy consumer loyalty.

Do-It-Yourself retail chains.

The undisputed market leader is a nationwide retail chain – Epicenter, which holds more than 50% share of the do-it-yourself market.

In Ukraine, there are only two international companies operating in this segment:

  • Leroy Merlin, which is part of the Groupe Adeo holding. Leroy Merlin operates 3 stores in the capital;
  • Swedish retailer IKEA, which opened its first store in Kiev in 2019.

Branded clothing and footwear.

There are a number of successful network operators in Ukraine that specialize in the sale of branded clothing and footwear;

We want to highlight:

  • Argo;
  • Intertop;
  • Melon Fashion Group;
  • Helen Marlen Group.

Car parts and accessories networks.

  • There are three national networks in Ukraine;
  • AIS;
  • ZipAvto;
  • Auto Trade Line (ATL).

In addition, there are many independent retailers operating in the country that sell auto parts and accessories. Regional wholesale networks should also be noted:

  • Stop-Transit;
  • Planetauto;
  • Pit stop;
  • Autostiv.

Networks of beauty and toiletries.

The TOP4 national beauty chains include:

  • Eva, 560 stores;
  • DC-Watsons, 440 stores;
  • Prostor, 280 stores;
  • Kosmo, 106 stores.

Networks of drugs (pharmacies) – pharmaceuticals.

Medicines in Ukraine are sold in more than 21,000 private and municipal pharmacies and retail stores. The market share of private pharmacies is 87%, municipal pharmacies occupy the remaining 13%. Some municipalities are taking steps to open new and expand existing so-called “social pharmacies”, which distribute drugs at cost or with a small margin.

TOP 3 retail pharmaceutical chains:

  • Apteka Nyzkyh Tsin (Pharmacy-Magnolia Company);
  • Med-Service Group;
  • Zdorovye (Titan Company).

At the same time, 3 market leaders reported about only 8% of the total volume of all pharmaceutical sales in Ukraine.

As you can see, there is a low level of consolidation of the retail market in Ukraine. Among the pharmaceutical companies, there is not a single company that is present in all regions of Ukraine. This opens up significant benefits for new distributors in Ukraine.

Help of distributors in Ukraine in selling products and services.

A reliable and successful distributor in Ukraine can play a key role in entering the market. Its task is to reduce risks and help you achieve your goals in the Ukrainian market.

UkrainExports will help you identify a trustworthy business partner. Depending on your marketing strategy, we will help you find several Ukrainian distributors in key shopping centers in Ukraine, the largest cities: Kiev, Odessa, Lviv, Kharkiv and Dnipro. Or we will find a Ukrainian distributor who can independently cover the entire country.

A distributor in Ukraine will help you collect information about the Ukrainian market, assess its potential, establish contacts and business connections. Also, a distributor in Ukraine will help you build up a client base, promote your brand, and also lay the foundation for introducing new product lines to the market.

To find a distributor in Ukraine, we recommend that you visit local exhibitions and trade shows. UkrainExports will help you organize your participation both as an exhibitor and as a visitor, depending on your needs. You can find more detailed information about Ukrainian exhibitions here.

We also strongly recommend working with local Ukrainian distributors, and not European or Russian representative offices. Ukrainian consumers and companies prefer to work with Ukrainian distributors. This can be critical for the successful development of the projects in Ukraine. Due to the prolonged conflict between Russia and Ukraine, the country’s population is largely politicized. A number of international companies reported a decrease in sales in Ukraine when using Russian representations.

Establishing an Office in Ukraine.

If you are planning to open a representative office in Ukraine, you have a choice among several forms of ownership:

  • representation;
  • wholly owned subsidiary;
  • limited liability company;
  • joint-stock company.

You can also start working in Ukraine through investment funds / mutual funds or joint ventures / cooperation agreements. Ukrainian representative offices are independent legal entities and are subject to separate taxation. An exception are representative offices that are created for the implementation of advertising, marketing and other auxiliary functions, but cannot be engaged in the sale of goods or services. We recommend establishing a 100% owned company in Ukraine if you plan to carry out commercial activities or production in the Ukrainian market. A foreign company can register both a representative office and a wholly owned subsidiary. LLC is the most popular form of legal entity in Ukraine, as this form allows you to conduct a wide range of economic activities.

In order to register a Ukrainian representative office, you need to provide the following documents:

  • Identification code and passport data of the head of the representative office.
  • Power of attorney for the performance of representative functions, obtained in accordance with the laws of the country in which the head office of the foreign company is officially registered.
  • Application for registration of a representative office in Ukraine in any form.
  • Protocol on the opening of a representative office in Ukraine and the appointment of a Representative by the Director.
  • Notarized certificate from the bank where your official account is opened. the certificate must be signed by the chief employee of the bank.
  • Certificate of Incorporation. This is a notarized extract from the bank / trade register of the country in which the foreign company is registered.
  • Lease agreement of the official address of the representative office in Ukraine.

All documents must have a translation certified by a notary, signature and seal of the company that opens a representative office in Ukraine.

This package of documents must be drawn up no earlier than six months before the submission to the ministry.

Marketing tools and promotion in Ukraine.

Most often, foreign distributors use email and tele-marketing to find partners and promote products in Ukraine.

Direct marketing is a successful tool for promoting a number of niche segments: cosmetics, herbal products, small consumer goods. However, for most goods and services, the effectiveness of direct marketing will be low.

Email marketing and distribution of commercial electronic messages are governed by the Law of Ukraine “On Electronic Commerce”, which was in September 2015.

Commercial e-messages can be sent to the recipient only with his consent, or with the provision of an opportunity to unsubscribe from receiving such messages in the future.

Also, commercial messages must meet the following requirements:

  • must be unambiguously identified as commercial and provide information on the conditions of the offer, promotion, etc.;
  • must provide access to the sender’s data;
  • must comply with the law about the advertising in Ukraine.

To store, process and use personal data of users for personal purposes, distributors in Ukraine are required to obtain appropriate consent from users.

Tele-marketing (promotion using phone calls and video conferences), unlike electronic marketing, is not regulated by legislation in Ukraine.

Taking into account national peculiarities in promoting products in Ukraine, we recommend that you rely on the experience of a Ukrainian distributor, sales representatives and local layout agencies.

Licensing in Ukraine.

According to a Law No. 222-19, “On Licensing of Types of Economic Activities,” adopted on March 2, 2015, and amended on July 1, 2020, there is a list of business activities that require licensing. You can find the whole list at the at parliament (Verkhovna Rada) of Ukraine website.

  • Financial leasing;
  • Factoring;
  • Granting guarantees and suretyships;
  • Specific types of insurance as defined by the legislation;
  • Lending funds with their further return;
  • Administration of private pension funds;
  • Trust management of financial assets;
  • Administration of financial assets for purchase of goods for groups of purchasers;
  • Property management for financing constructions or real estate transactions;
  • Granting loans including financial credits;
  • Transportation of passengers, dangerous goods and hazardous waste by river, sea, road, rail and air transport, international carriage of passengers and goods by road vehicles;
  • Tour operator activity;
  • Professional activity in securities market;
  • Security guard activities;
  • Brokering in employment abroad.

In addition, a number of products require import and export licenses. The list of goods subject to licensing is updated annually on the website by the Cabinet of Ministers of Ukraine. You can find the current list of such products in the Resolution of the Cabinet of Ministers of Ukraine No. 1018 “On approval of the List of goods subject to import and export licensing and the corresponding quotas for 2021” dated December 28, 2020.

In 2021, the list includes:

  • means for pedicure and manicure;
  • cosmetic products;
  • shaving sprays and deodorants;
  • lubricants;
  • pharmaceuticals;
  • waxes, shoe polish;
  • dyes;
  • paints and varnishes;
  • hygiene products;
  • solvents;
  • silicone;
  • insecticides;
  • fire extinguishers and chemicals used to fill fire extinguishers;
  • conditioners;
  • refrigerators and freezers.
  • herbicides and plant growth regulators;
  • insecticides;
  • fungicides;
  • humidifiers and other selected industrial chemicals.

Express Delivery in Ukraine.

In Ukraine, there are 30 international companies that provide courier delivery of documents and goods, including: UPS, DHL, TNT Express and FedEx.

The delivery market in Ukraine is occupied by local companies such as Ukrposhta, Nova Poshta, Meest Express.

You can find a detailed comparison of postal services here.

We will only add that when sending goods from abroad, you need to take into account the rules of customs clearance of parcels. So for sending documents you only need a waybill. But to send the goods, you need to prepare a commercial invoice, and in some cases, other export documents.

From July 1, 2019, amendments to the Tax Code of Ukraine began to operate. If, before July 1, all shipments up to 150 euros were not subject to duty, then with the entry into force of the new Tax Code, the tax-free total invoice value has been reduced to 100 euros. It should be noted that the total invoice value means the total invoice amount of all parcels delivered to one recipient in one day.

If the total invoice value exceeds 100 euros, 20% VAT will be charged on the amount exceeding 100 euros.

All permitted excisable goods are subject to customs duties and other taxes, regardless of the total invoice amount. Some types of goods are prohibited for international express delivery to Ukraine:

  • Explosive, flammable and other hazardous substances.
  • Military equipment (unless otherwise provided by law)
  • Firearms and ammunition
  • Narcotics, psychotropic substances and their analogues.
  • Permits to carry weapons.
  • Objects of obscene and immoral content.
  • Live animals.
  • Work book and identity card (except for Ukrainian passports for traveling abroad)

A complete list of prohibited goods is available on the website of the State Fiscal Service of Ukraine.