Russia’s food & drink sector: 3 forecasts for 2017

Russia’s food and drinks sector continues to beguile, charm, and even frustrate the global community. 2016 saw a range of big events sweep across the industry.

With this in mind, what does 2017 hold for the Russian food and drinks sector? We have picked out three predictions regarding the industry over the next twelve months, to examine what is instore for Russia in the near future. Import substitution gains further traction Laying out self-sufficiency goals, and continuing food embargoes, the Russian government is pursuing its import substitution policy with gusto. Generous government subsidies, amounting to hundreds of billions of dollars annually, is boosting domestic production of key foodstuffs, suggesting Russia’s imports market will subsequently become smaller and more competitive in 2017. According to Agroinfo, Russia cut food and drink imports by a third throughout 2016. The nation used to import roughly $60 billion in agricultural and food products annually. Now, the figure hovers more around $20 billion. However, these stats do not mean there are no opportunities for food and drink exports — particularly in product groups which Russia cannot cultivate domestically. Morocco, for example, has quadrupled its volume of tomatoes shipped to Russia since 2015. The nation now ships 75,000 tons of the fruit to Russia, covering 8% of the Russian market. Roughly 26% of Russian citrus imports are now also sourced from Morocco. Changing consumption trends shake up Russia’s food & drinks industry With the ongoing tangle of sanctions and counter sanctions, Russian consumers are changing their eating and drinking habits. Russia’s economic situation is also having an effect. Households are now spending up to half their income on food and beverages — substantially higher than the EU where the figure rarely exceeds 20%. In practical terms, this means Russians are continually turning away from higher-end products towards affordable offerings. Changes in which meats Russians favour highlight this trend. Pork, blessed by a rapid boost in domestic production, hit 25kg per capita in 2016 — a 25 year high, according to CEO of the Russian Union of Pork Producers Yuri Kovalev. Poultry also saw its per capita consumption slightly rise from 2015’s levels of 32.4kg to 32.7kg per capita last year. Beef, a more expensive option, has dropped to 13.8 kg per capita from 14.3 kg in 2015 with estimates further reductions predicted for 2017. For those looking to grab a slice of Russia’s declining imports market, value-for-money, cheaper varieties, such as tinned or canned vegetables, are the way to go. Non-EU states can still prosper in Russia While the cloud of import substitution is hanging heavy over the Russian market, as touched upon earlier, non-EU states will continue to enjoy access to Russia’s food and beverage sector. Several such nations continue to dominate import markets in a number of areas. Keeping the meat theme going, Brazil holds massive import market shares for both pork and beef. Approximately 85% of all imported pork is sourced from Brazil and around half of all beef imports. Morocco’s aforementioned quadrupling of tomato exports comes at the expense of EU producers’ restrictions — but also a non-EU country. Turkey, subject to its own Russian export embargo, was the primary supplier of tomatoes to Russia prior to 2016 (when sanctions were imposed). Belarus continues to hold a huge market share in terms of dairy products. Roughly 85% of Russian dairy imports, including butter, cheeses and milk, were sourced from its neighbour in 2016. The point is, even though import substation and self-sufficiency are top priorities for the Russian government, unsanctioned countries can find export opportunities across almost all food and beverage sectors going forward.