FASTIV, Ukraine — The clatter of machines fills this factory floor near the city of Fastiv, an hour’s drive from Kyiv and 75 kilometers southwest of Kyiv. Great drums spin, churning out cartons imprinted with dozens of brands of juice and dairy, destined to line store shelves across Ukraine, Eastern Europe and the wider world.
Elopak, a producer of packaging for liquid produce, is one of the oldest Norwegian companies operating in Ukraine. While Elopak-Fastiv had largely served the Russian market since the mid‑1990s, the company hopes to expand its international scope, while focusing on a smaller range of core products.
“We’re examining the local and neighboring markets but also looking wider,” said Konstantin Gavrilyuk, the plant’s general manager. He joined the company in 1997 as an engineer, gaining a supervising role over a decade later.
Elopak, owned by the investment company Ferd AS, is the world’s third-largest supplier of beverage packaging. It entered the Ukrainian market in 1993, providing raw material for a Soviet-built factory in Fastiv, a city of a little more than 40,000 people. In 1996, Elopak gained a controlling stake in the Fastiv plant and used it to provide milk and juice cartons across Russia and Eastern Europe.
Production
In the past three years, the parent company has invested 7 million euros (about Hr 222 million or $8 million) to streamline the Fastiv factory. Here, Elopak is growing its production of aseptic containers, meant for liquids with a long shelf-life. At the same time, the factory is winding down production of packaging for fresh products with a shorter shelf-life. Gavrilyuk said that this changeover is a response to market forces.
The Fastiv plant makes packaging for hundreds of companies, most of which are small and based in Ukraine.
However, its key clients have a multinational reach. These include PepsiCo; France-based multinational dairy company Lactalis; and Czech dairy producer Madeta, all of which use Fastiv’s cartons to sell their products globally.
Much of the raw material is imported — paperboard from Sweden and Finland and polymers from Holland. About 70 percent of the finished products are exported across Eastern Europe, including Russia with the remainder sold throughout Ukraine.
Elopak is currently studying new target markets for its Fastiv plant, including North Africa.
The factory’s change in specialization comes at a cost. The Fastiv plant has shrunk its total number of employees from over 200 a decade ago, to 190 in 2015 and 170 today. Slightly fewer than half of the current employees work on the manufacturing floor, in three daily shifts.
Cartons made for aseptic processing are less labor-intensive than cartons for fresh products. At the same time, Elopak is emphasizing efficiency and automatization to produce more with less manpower.
After a peak of about 1 billion cartons made in 2010, the plant’s production entered a decline, hitting a nadir in 2015 which Gavrilyuk declined to elaborate. Since then, production resumed climbing. In 2018, the plant created between 700 and 800 million units.
Elopak’s direct competitor is the larger Swedish Tetra Pak, which closed its own Ukraine plant in 2016 due to restructuring. Tetra Pak has a considerably greater presence in Ukraine compared to Elopak, but Gavrilyuk said that there is potential to capture some of the rival’s clients.
“Right now, we make some of the same products that Tetra Pak makes, except with less variety,” he said. “In connection to Tetra Pak closing its production capacity, there is a possibility to offer its existing customers… to work with us.”
Ukraine’s labor costs are still very favorable for manufacturing, on top of its well-educated and experienced population, according to the general manager.
Ukraine’s difficulties
However, there are many challenges to overcome. One is infrastructure. “Every year, starting in early spring, we are wrestling with these roads,” Gavrilyuk laughed. Indeed, the roads leading up to the plant are covered in cracks and potholes, which will fill with water and mud during the snowmelt.
A greater challenge comes from the government. While Elopak has not had any direct bribe requests from Ukrainian officials, the past several years had been fraught with difficulties. The State Architectural and Building Inspection of Ukraine (also known as DABI) fined the company for allegedly filing incorrect documents to gain a permit to restructure part of the Fastiv plant.
“There was a desire to punish us for something we weren’t doing right,” said Gavrilyuk. DABI has since acquiesced but the courts have yet to refund the company’s fines. More recently, the local government found fault with the Fastiv plant’s waste water treatment.
Despite these difficulties, Gavrilyuk is confident that a persistent and prepared company can make it in Ukraine.
“There’s nothing that’s scary here, you just have to learn the rules and find a way to deal with the government,” he said. “You can solve problems without bribes, it just takes time and effort.”
When asked how a Norwegian company might succeed in Ukraine, Gavrilyuk downplayed the uniqueness of Ukraine’s challenges. Making it here, he said, is much the same as succeeding anywhere else: staying on top of regulations and knowing how to use your human talent.
