28.02.2018 Olga Priadko
Nathalie Alquier:
Danone Tests Show That Home Milk May Be Hazardous to Health
Last September marked management changes for the Ukrainian division of the French company Danone. Nathalie Alquier was appointed its new Director General. Latifundist talked to Ms Alquier to find out about the company's progress in 2017, ask about Danone's plans for the new year, its focus on the exquisite quality of the product and discover why home milk is not always wholesome.
Натали Алкер
Nathalie Alquier
What was 2017 like for Danone?
It was a good year. We continued promoting unique brands and secured strong positions in the yogurt market. For instance, we worked on Activia brand promotion, achieved pretty good results in promoting Zhyvynka (Danone). We are very happy about it. Due to innovations, our key brand Rastishka showed significant growth dynamics at the end of the year. Our new product Actimel also started gaining popularity.

Of course there is also a more traditional segment of the market that our products represent. The competition in that segment is much more robust, especially when it comes to prices. Pricing was probably the most difficult aspect of the business but we still retained our leading positions. All in all, things were good. Our products brought profit.

We have a strong and reliable team. We are very proud of our quality control at the factories. We conduct regular audits and ensure a sustainable quality of the products. So, 2017 was a good year.
Let's discuss milk. There's recently been a lot of talk about the quality of Ukrainian milk. Could you tell about Ukrainian milk suppliers for Danone?
We have 31 suppliers. As far as quality goes, it turned out a real challenge for us. We always apply European quality standards and we maintain a very strong internal quality control system. We never buy milk from a supplier before we have meetings and an established partnership with him because we want to make sure that his product meets all the requirements. We also have an external auditor. It is a well-known, independent, non-governmental firm. We are sure of our milk quality because we encourage quality control based on 18-19 main criteria. All our factories use this quality control method. We check milk for biological additives, antibiotics and other admixtures. We run these quality controls at our factories and their systems, and supplier farms. Danone has successfully undergone all the three stages of control.

Personally for me, antibiotics make a very important criterion. We know that their excessive use is hazardous to our health and children's health in particular. Danone checks every milk container for antibiotics. This causes several hours delays in transportation but we need to make sure that milk is fine. According to Ukrainian legislation, such checks are to be carried out once a month. We have them several times a day.

We know that milk starts with a cow that is why milking hygiene is of utmost importance for us. We monitor how milk cools down, how soon it is delivered to the factory. On the one hand, 31 suppliers do not seem like a lot but we need to run many checks before we process the milk so working with only 31 suppliers allows us control maintenance on a regular basis.
Do you have a strategy for the future? Are you going to increase production figures? Do you plan to work with farmers or rather with dairy cooperatives?
We are very focused on improving the quality of the product which affects our production figures. Of course we are going to look for backup suppliers. If one of our current suppliers quits, we need to have a backup. In that case, we always try to build a strong partnership. We are for organic products. Many Ukrainians believe it means buying milk from a granny's household. However, our tests show that such milk may be hazardous. You may check these figures online, it is a well-known fact in professional circles but consumers rarely know that. Danone promotes a quality milk campaign and we are ready to pay for the quality. Milk of an average quality is cheaper but we sell only high-quality milk.

Danone believes that high-quality products have a great future and we hope that Ukrainians will become more aware of quality and will feel the difference.
Are quality standards the same in all the countries or are there differences?
Europe has its specific standards. I know that for sure because I had been Vice President for quality in Danone for 4 years. The EU has high standards for bacteriological levels which are equivalent to high-quality milk standards here in Ukraine. That is the only milk you can sell in the EU. In that respect, Ukraine is way behind Europe. Danone implements the EU standards which means that it is more demanding of the farmers.
Could you tell us more about your work with the supplier?
Well, we are actually ready to help the supplier in development. The company is prepared to do that. Since we have certain requirements for milk quality, we also have certain practices and a professional team with experience of working in Ukraine, Russia and the EU. They can explain to the farmers what needs to be changed to achieve the quality we require. At times, all the farmers need to do is to properly organize the farming, in some cases there is a need for investments to update the milking equipment or cooling reservoirs. Sometimes we go for co-investment or help to find an investor. This is our basic approach to forming a partnership. I recall that Western Europe started with a pretty low level of production organization but the whole market grew in just a few years. However, consumer awareness and their wish to buy a quality product are crucial for this to happen. I am afraid this scenario may not work for Ukraine.
Nowadays the world is crazy about "organic" milk. Does Ukraine have a potential to join this market segment?
If I were a farmer, I would direct my efforts towards producing organic milk. But it should be organic by European standards. An organic product is in high demand around Europe and there are few suppliers. Consumers are ready to pay a pretty penny for it and the market is expanding at a fast rate. The only obstacle to its growth is the lack of suppliers.
Is there a niche for it on the Ukrainian market?
There should be one soon. I think it is just a question of time. What I've learned about Ukrainians so far is that you love organic products. But as I've said, Ukrainians need to review their definition of organic for what people consider to be organic here not necessarily always complies with quality standards.

However, some organic products on the Ukrainian market start to appear and I personally believe that it should serve as a starting point for developing in that direction
Milk as well as bread are counted among the basic food products that is why they are the subjects of governmental price controls. How much should a liter of milk cost to bring profit?
If you want to buy milk from a good farm, there should be enough workers, special equipment; all of this needs to be paid for. There should be milk delivery, drivers who work regular hours. This should be taken into account. Thus, the price for a liter of milk from a trustworthy factory includes all the mentioned above expenses and processes. Milk is not the only source of income for the company, there are other products too. We try to do our best to keep the price for milk affordable.
We've already discussed the stereotype of "organic" home milk. Are there any other stereotypes you've noticed?
There is much difference between what we think is good and what really is good. Milk can be organic but "dirty" because it was milked in a dirty cowshed and bottled without giving it time to cool down. Then it was brought to the market without observing the necessary thermal conditions.

We offer our buyers the same organic milk coming from a real cow except that it is properly processed. It is difficult for consumers to shed the traditional beliefs that milk sold by a granny is wholesome despite the fact that it may be really hazardous. It doesn't mean that there is no place for home milk on the market; it just needs to be properly processed. Not long ago France was shaken by the news of salmonella in the dairy for kids. It illustrates how dangerous milk can be without the proper processing.
In the milk segment of the market, our share is 22% and we hope to increase it by means of quality
In the milk segment of the market, our share is 22% and we hope to increase it by means of quality
What is the company's market share in the Ukrainian dairy market?
In the milk segment of the market, our share is 22%. We lead in quality.
Is there a potential to increase your market share?
Yes, of course. It is on the agenda, given that the market is quite competitive. We are not going to give up our traditions and hope to increase our share by means of quality. European statistics prove that we know how to make quality and tasty product without extra fat or sugar. Danone has recipes to produce the product of exquisite taste and delicate texture. In our French research center we have a unique laboratory which studies fermentation. It holds a collection of 2 thousand different ferments and we know how to combine them to produce the desired taste.
In the milk segment of the market, our share is 22% and we hope to increase it by means of quality
Naturally, we need to take the tastes of the local consumer in the account but we have so much more to share and we will do our best to succeed in it.
Should we expect any new products? Do you plan on increasing exports?
Our priority is to strengthen our positions on the domestic Ukrainian market. Our production facilities are located here and the potential market is quite large. For instance, the population of Ukraine exceeds the population of Spain. Besides, many Ukrainians like dairy products. That is why our priority is to improve our positions on the Ukrainian market.

We are also interested in exporting. Our factories are not yet operating at their full capacity. When we certified Danone-Dnipro for the EU in 2017, we laid a foundation for exporting our products to Europe when there is a demand for them. We have also tested some products for export to Belarus. We regularly export to the UAE, but the export volumes are not large and mainly include cottage cheese, sour cream and yoghurts. We see milk as a product for the purely Ukrainian market.
Are there any products on the French market you would like to introduce to a Ukrainian consumer or are the products on both markets mainly the same?
Not quite the same. The Ukrainian market specializes in traditional products, although there is a tendency to try out new brands. Milk, sour cream and cottage cheese are pretty popular here, whereas Western Europeans mainly prefer yoghurts and some types of fresh cheese, they are a lot like yoghurts in consistency but with larger protein content.

I think the differences stem from ingrained eating habits. Ukrainians seem to prefer drinkable yogurts; maybe it is due to kefir. In Western Europe people mainly buy regular yogurts you eat with a spoon. In fact, I am the only one here to eat my yoghurts, my colleagues usually drink them.

There is a lot we can do for a product promotion. Actimel is a good example. It is not very popular here but it is a hit in Europe. I think it is a glaring omission that dairy producers hardy take into account the love of Ukrainians for sweet products. It may be worth focusing on dairy desserts. There is also Greek yoghurt. It is very popular in some countries like Germany, Spain, the UK but you can rarely see it on Ukrainian supermarket shelves. There are many things which are underrepresented on the Ukrainian market but they are quite capable of winning a share in it.
Could you tell us about Danone's experience with Ukrainian retailers?
We have established good cooperation with all the chains. We use an individual approach to develop a work plan with each chain. All the chains without exception have their own distribution patterns, rules and practices. We deal with very professional retailers. Many chains have high demands and we are glad they do because this is how we want to do business.

I can compare the Ukrainian retail with the French one. Of course, the supply chains are quite different. ATB-Market plays an essential role in Ukraine, for instance. I'd say large supermarkets are not as widespread here as they are in France. There are differences in how the product gets to the customer but the principles of cooperation are pretty much the same and they are very professional in both countries.
You've mentioned that Ukraine and France share similar approaches to building cooperation. Unfortunately, it is well-known that Ukraine does not offer the best conditions for doing business. Have you ever faced any legislative problems, difficulties in establishing contact with local authorities etc.?
Inflation is the greatest challenge for me here. It is very important to understand how to adjust the prices to it. One also needs to take into account currency exchange differences and control the price all the time. It is clear that we use Ukrainian milk but the packaging and some raw materials are imported. Therefore, exchange rates matter. It is quite an exercise in management if you aim to generate profit and establish fair prices for consumers. We all know how sensitive they are to price changes. This is an important Ukrainian peculiarity personally for me.

We have no problems with local authorities. Danone managed to establish a dialogue with the local authorities and developed a good system for declaring taxes, salaries and other law-sensitive matters. We are in good standing with the government and we feel no pressure from it. I know that some French companies were less lucky. Some of them experienced significant pressure.
Are there any legislative norms you would like to change in Ukraine?
That would be product safety regulations. I would implement ubiquitous and regular safety checks as we have in Europe. We observe some changes happening here in that respect. We approve of them and support them. It would be great to have more competition in that area. Not all manufactures play fair when it comes to quality. Some companies are shady about their processing operations. I think it speaks volumes about the state of arts at their factories.

Another important matter is the disposal of the used packaging. We, as an industry, need to take responsibility for that. We need to understand that it impacts the whole community. There are some changes regarding this issue. Verkhovna Rada has taken the first step to improve the situation but there is still an ongoing discussion as to the best way of disposal management.
Which is best in your opinion: to sort garbage as it done in France or return the packaging to supermarkets for discounts?
Waste sorting is important but each business branch needs to develop a complex solution for disposal management with local authorities. There should be a plan for recycling certain types packaging, glass, organic waste etc. Consumers should also have a say in how it is managed.

It is important to have a powerful recycling industry for the project. I should say one can build a solid business in recycling. Perhaps it will serve as inspiration for a whole new business branch in Ukraine. Garbage is not just a problem, it is a source of income. People in Western Europe have learned to use it to their advantage.
Let us talk about staff. As far as Latifundist knows there are some problems with employee turnover at Danone factories, for example in Kremenchuk. How hard is it to get good employees?
Employee turnover is a real problem. On the one hand, the issue you mentioned occurred because we failed to keep pay-raise proportional to the inflation rates. We've learned our lesson and significantly raised salaries last December. There is going to be another raise this year. When we face high inflation rates in a country, we need to take corresponding steps. We do it not just for the sake of legislation but also to keep our best workers. Our new Director of Production in Kremenchuk also tries to create exceptionally comfortable working conditions.
Inflation resulted in lower labor costs but at the same time a lot of staff lack sufficient qualification. How difficult is it to find a well-qualified specialist in the dairy industry?
It is hard to find staff even for the lowest positions like merchandising for instance. True, it is one of the lowest positions but we want to employ a responsible worker. There are standards for every position. We need qualified, responsible people covering every aspect of manufacturing and distribution. That was another challenge we faced here, given that some of our employees left for Poland looking for better life. Some of them came back having realized that things are not picture-perfect there as well.
You've already been working for Danone for 18 years. What is your secret of success and what's been keeping you there for so long?
Danone is not the first company I have worked for. Before I started working for Danone, I worked for an American company Colgate-Palmolive. When Danone approached me, I got interested in the project they wanted me on but I couldn't imagine that I'd stay here for almost 20 years. That wasn't the initial plan (laughing). Back then, we embarked on a project that was interesting in terms of both economic and social benefit. It totally changed our approach to decision making and HR policies. To tell the truth, we still use the approach we developed then. Even today our mission is to provide high quality dairy to as many people as possible. The thing is that we do not only want to make a profitable product but also a wholesome product. It was important for me as a woman to use this chance and try and reach success in a company mainly run by men. Danone has also given me an opportunity to try on different roles and constantly improve myself.
The thing is that we do not only want to make a profitable product but also a wholesome product
The thing is that we do not only want to make a profitable product but also a wholesome product
The thing is that we do not only want to make a profitable product but also a wholesome product
Was it a hard choice for you and your family to move to Ukraine?
I am lucky to be mature enough and have grown-up kids. My son is 25 and my daughter is 22. They live independently in France and they are happy for their mom. There was no conflict of interest there (laughing). To be honest with you, when I first came to Kiev, I was enchanted with its atmosphere. My family, including my parents who were very worried about their daughter, knows that I live in a wonderful place. They greatly supported me. I like my life. It's just like they say: "Follow your dream."
What was your impression of the Ukrainian team?
To begin with, I really like the atmosphere in the office. We have a very young team which adds dynamicity, enthusiasm and an air of friendship to everything we do. We celebrate birthdays, holidays and other important events. There is nothing I want to change. It's a real boon for me. It is a perfect environment for constant professional growth. This is what I am here for, to teach and encourage growth, to help the team in its desire to improve. The team is motivated and learns fast. It is very important for me. The company is very strong but I see the potential for it to grow even stronger.
Thank you for the interesting interview!
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