Country Report ¦ IDM
April 2020 ¦ international-dairy.com · 31
“All kinds of import restriction at this stage
are premature, as they are threatening to cut
the range of high-quality IMF on the Russian
market,” commented Alexey Popovichev, executive
director of the Russian non-profit organization
RusBrand. “The main obstacle to the
production localization in this segment is associated
with the absence of some raw materials
in Russia, specifically demineralized whey powder,”
he explained.
Alexey Lisyakov, chairman of the Russian
IMF producer Infaprim told the local press that
the new restrictions “are the only way to ensure
minimal safety of the 800,000 newborns
in Russia per year and to keep the prices on the
market flat”.
United Green Group and the Russian Direct
Investments Fund earlier unveiled plans to build
the first Russian full-cycle IMF plant. With the
investment cost of Rub10 billion ($150 million)
the plant would have the designed production
performance at 15,000 tons per year. There is
no clarity when the construction may start.
“IMF is a sensitive category where such
things as quality and availability should be a priority,
and not the support of some producers.
Quite often, child nutrition is designed by physicians
and so the range on the market must be
as broad as possible,” said Antonina Tsitsulina,
chairman of the Russian Association of Children
Goods Companies.
In addition, this year a group of Russian
food giants called to ban Russian citizens from
importing finished food products in their hand
luggage. Viktor Linnik, president of the Russian
major food manufacturer Miratorg said that
“the citizens need to think about developing of
their own country, and not about parmesan or
Iberian ham”.
Officially, the Russian food companies were
concerned over the possible spread of the food
products of animal origin containing some diseases,
but there is a widespread opinion that
in this way the companies want to increase
their sales by closing the last legal loophole of
how European dairy products, in the first place
cheese, could land on the tables of the Russian
customers.
On average 5 to 10 million Russian tourists
visit the European Union every year, and they
are allowed to take up to 5 kg of food products
back home with them. Russian citizens use that
option quite often, although it is not clear what
products and in what quantities are imported
this way in Russia. There is no final decision on
the proposal yet.
Insecurity instead of security
Russia is spending enormous amounts of money
to achieve import-replacement on the domestic
food market. In 2018 alone, investments
totaled Rub600 billion ($9.5 billion), Russian
President Vladimir Putin estimated, speaking
at a press-conference in Moscow in 2019. “A
price hike on some products, including food,
was one of the negative impacts of sanctions.
And it is only now when the prices stabilized,”
Putin said.
All marketing studies indeed indicate that
the Russian food embargo cost the average
Russian consumer a lot, and in spite of the original
intentions of the Russian government food
insecurity is growing. In 2018, Russian citizens
on average were spending 34.3% of their wages
on food, as compared to 27.7% in 2013,
prior to the food embargo, Rosstat estimated.
This is an extremely high figure, as in the
countries with high living standards this share
is not exceeding 10% or 15%, commented
Pavel Sygal, vice president of the Russian noncommercial
organization Opora Rossii. As a
result, 64% of the Russian citizens were trying
to spare money on food in 2019, a marketing
study conducted by the Russian biggest bank
Sberbank showed.
“In past, Russian dairy products were more
expensive than imported ones, and the main
expectation of the import-replacement campaign
was that it would make high-quality dairy
products more affordable, but this has never
happened. Basically, the quality of the products
of the Russian origin remained rather low,
at least lower than that of European products,
while the prices have been constantly rising,”
commented a source on the Russian dairy market
who wished to not be named.
In 2019, the main suppliers of dairy products
to Russia were New Zealand, Argentine,
Uruguay and some other countries in Latin
America, according to the Federal Customs Service.
New Zealand has nearly doubled supplies,
so now it accounts for roughly 10% of the overall
Russian dairy imports.
“One of the main reasons why imports
have been seen growing is the weak operations
of Russian dairy products manufacturers.
It is difficult for them to compete with importers
pricewise. Due to the high price of raw milk
and poor efficiency of milk processing in Russia,
the cost of finished products is on the rise,”
Russian Union of Dairy Producers Soyuzmoloko
estimated.
On this background, the Russian scientific
center Skolkovo, the Russian Academy of Science
and a group of retailers filed a petition to
the Russian government asking to revise the
Food Security Doctrine, making the main emphasis
on reducing costs and improving quality
on dairy products.
“Now that doctrine raises concerns that
food supplies to Russia could be stopped because
of some political issues. But in peaceful
times this happens rarely. Besides, any barriers in
trade with one country could be compensated
with the increase trade with other countries,”
the authors of the petition said.
The quality of the Russian dairy products
is still not comparable with that of
import products
The Russian dairy production is not
growing