By Alla Vetrovcova, Kyiv Post Staff Writer
KPnews.com -- News about Ukraine
Kyiv, Ukraine, 24 October, 2002

DNIPROPETROVSK - Since Chicago-based East Balt came to this country two years ago, the cash it has invested in its Ukrainian subsidiary has created jobs and investment beyond the bakery itself.

From its bakery in Dnipropetrovsk, the company supplies buns to McDonald's restaurants throughout Ukraine and Belarus, as well as to outlets in St. Petersburg and Samara. The $4 million state-of-the-art bakery is highly automated, producing more than 21,000 hamburger buns an hour - a process that consumes 150 tons of flour a month.

Supplying that flour - and most of the other ingredients - has led many of the bakery's suppliers to upgrade their own plants.

East Balt brought a milling expert from Kansas to help Kharkiv's Mercury flourmill provide just the right type of flour to meet McDonald's exacting standards. After a $2 million investment, Mercury installed a new milling facility to produce the flour using imported Kazakh wheat.

East Balt has also worked with Dnipropetrovsk-based Oleyna, a sunflower oil producer, to ensure a reliable supply of high-quality oil for the bakery. The only product East Balt imports is sesame seeds. The ubiquitous McDonald's bun garnish is imported from Guatemala.

Starting a bakery in Ukraine was a good business decision, said East Balt Ukraine Managing Director Plamen Yordanov. Ukraine is big enough for the bakery to successfully develop its business.

"Ukraine has great potential," he said. "It would be unprofitable to invest in a small country like Romania or Bulgaria," he said.

There are 50 McDonald's restaurants in Ukraine, and the fast food chain plans to increase the number of outlets to 100 within five years, according to McDonald's public relations manager Oleh Strekal.

The Dnipropetrovsk bakery East Balt Ukraine has managed to raise bun production by 57 percent in less than two years. The company showed a profit of Hr 100,000 during the last quarter, Yordanov said.

Because the Dnipropetrovsk bakery is so highly automated, it employs a workforce of just 44. That has fostered a family atmosphere at the bakery. "We have invested about $100,000 in training our Ukrainian staff," Yordanov said. Trainers came in from France, Turkey and the United States to provide training in various aspects of the bakery's operation.

The training has paid off. Not only is the bakery's client satisfied with its output, Yordanov said, but the American Institute of Baking, a non-profit trade group, gave the bakery its quality certification this year. Yordanov said that the certification process was thorough.

"These nosy inspectors came and checked everything," he said, "They went into every part of the machinery and inspected the sanitary conditions of everything."

Yordanov said that the company has invested about $150,000 into training and technology upgrades so far this year, and plans to add a new baking line worth another $300,000 by year's end.

Other than saying that the new line will make a product for a Swedish customer, Yordanov won't go into details. He did say that the Swedish customer had been buying from a German customer but had quality concerns, so began ordering from an East Balt plant in Chicago. The expense of transporting the products to Sweden caused the firm to look to East Balt Ukraine, Yordanov said, adding that the plant is well-positioned to take on a second major customer, and supply the European market with the undisclosed Swedish product.

"Our inexpensive production and an affordable labor force, plus affordable water, gas and electricity rates is an advantage for us," Yordanov said. He said that despite Ukraine's difficult legal system, a foreign investor can succeed if it has reliable, loyal employees and a good legal adviser, and if it has cultivated a positive relationship with local authorities. Yordanov said that Ukraine has great potential, but that there is too little information available to encourage foreign investors.

"The government should establish business centers worldwide so that foreign entrepreneurs could access information about investment conditions and legislation," Yordanov said, adding that few people know about Ukraine as an independent country, and still consider it a part of Russia.

Prior to joining East Balt Ukraine, Yordanov managed McDonald's distribution system in his native Bulgaria.

East Balt Ukraine is one of 19 East Balt facilities scattered across the United States, Asia and Europe. Globally, East Balt bakeries have been the exclusive suppliers to the McDonald's restaurant chain for more than 30 years.

East Balt was founded in Chicago in 1955 by a Greek immigrant, Lewis Lee Kuchuris. The company grew quickly, and in 1969 it landed the contract to supply buns to the McDonald's chain. Today, 99 percent of the bakery's production consists of buns.