2020 IN RUSSIA’S FOOD & DRINK INDUSTRY
A new decade of opportunities is emerging in Russia’s food & drink industry
Join us as we chart the trends occuring this year - and where the opportunities lie.
Russia's food & drink industry: the trends to watch in 2020
Food ban remains in place until 2020 year-end
It will come as no surprise to outside observers that Russia’s import ban on agricultural products from the EU, US, Australia, Norway and Canada remains in place.
This has been a long-standing ban, in place now for five years, which has restricted essentially bulk exports of key food groups.
Those goods still under embargo from Russia by the aforementioned countries include:
- Meat & poultry
- Fruits & vegetables
- Fish & seafood
- Milk & dairy
You’ll notice these are major food groups, and it’s true that the EU used to be the main supplier of the above to Russia’s food & drink imports sector.
Please note, however, that the ban is only in place on those countries mentioned above. That means there are over 180 nations around the world that can freely export without restriction to Russia’s import market.
There are also many sectors, like tea & coffee, baked goods, confectionery, and alcoholic drinks, that represent billions in import revenues daily that do not fall under the scope of sanctions. That lets producers in those countries get access to the Russian market.
So, if you’re thinking about writing off Russia as a potential export market, think again – especially with the vast sums spent on imported produce.
Russian food & drink import values stabilise
The initial impact of the food ban of course saw a drop off in import volumes. From $40bn prior to the ban in 2014, to dropping down to $20bn in the first full sanctions year in 2015, there has been a large reduction.
Despite this, and against the domestic sustainability goals of the Russian government, imports are very much a key factor in keeping Russia’s 144m-strong population fed.
Over the past few years, we’ve seen a stabilisation of Russian food & drink import values. As of 2019, the value had reached $26bn – essentially the volume these purchases have been at for several years.
That covers imports of all the major food groups, including finished products and raw ingredients.
Crucially, these still outweigh Russian foodstuff exports by roughly $2bn annually, proving that domestic production cannot keep up with demand.
Ultimately, WorldFood Moscow expects the same level of spending on imported food & drink products in 2020.
The Russian food ban will continue to cost consumers, but retail buyers will benefit
Another negative impact that the food ban has had on consumers is pricing.
Since the ban was put in place, Russia’s sanctions on EU food & drink has cost Russian shoppers $7bn overall per year. That’s roughly $50 a head, with some 84% of the total burden falling on consumers. Manufacturers, conversely, have seen their costs rise only 3%.
Only pork, poultry and tomatoes have seen any success in terms of import substitution, but other products are seeing prices rise.
This feeds into high retail revenues for key Russian buyers and supermarket chains. Some $200bn a year is spent on food & drink items, accounting for just under half of all retail sales in Russia.
Organic health food market to continue growth
Organic and healthy foods represent one of the fastest growing sectors in Russia.
According to market watchdog RBC’s Green Economy watch, demand for such products in Russia far outstrips supply. Indeed, the market’s current growth rate, around 23% year-on-year, means Russians’ taste for healthier foodstuffs is rising faster than the global average.
Currently, the main barrier to further sales, with Russia’s organic health food sector valued at a low $250m, is cost. In Russia, organic products see a 300% mark up on prices. Thus, the main consumers are young, and affluent, focussed more in Russia’s larger cities like Moscow and St. Petersburg.
However, RBC predicts, with internal production of such products and a shakeup in production and labelling legislation, that these will drop in future to roughly the same as in developed markets – between 15-50%.
Even so, Russians are far more health conscious than at any other time in the Federation’s history. Consumers are keenly checking ingredients labels and the providence of the food they eat – something that’s become a huge concern in a Russian era of “fake cheese” and other such products.
With that comes incredible market potential. As it stands, organic food only covers 0.1% of Russia’s total food & drink market. Coupled with that high annual growth rate, there is certainly massive potential to carve a big niche in Russia’s health-orientated food sector.
Functionality & speed drive consumer food & drink choices
Added to the trend of younger Russians eating healthier comes their desire for functional foods. These are typically products that contain active health benefits, or “added value”, in terms of extra vitamins and minerals.
This is particularly prevalent in more affluent areas of the country and urban centres where shoppers are putting their purchasing power into selecting fortified products.
However, Russia’s younger demographic groups are living busier lifestyles, which means convenience is also key in their food & drink choices. Young people are more willing to spend on convenience, ready-prepared meals and foodstuffs, so are looking for more quick options.
Be aware: what some may consider Western convenience practices may not take hold. Russians are still keen on home cooking, as it is one of the cornerstones of their culture, but this can still be leveraged into further sales. They may be looking at pre-prepared ingredients, like tinned tomatoes and other canned goods, to help them make home-cooked meals, but at a quicker rate.
WorldFood Moscow: gateway to Russia's food & drink market
WorldFood Moscow, the largest food & drink exhibition in Russia and the CIS, is the place to meet the buyers searching for new products.
Over 30,000 professionals, from specialist importers, catering companies, HoReCa sector members, retailers, and wholesalers attend each show – all looking to increase their supplies of key foodstuffs and meet their manufacturers.
As an exhibitor, WorldFood Moscow provides the perfect platform for you to enter the Russian food supply chain, start exporting, and grow your sales in a $26 billion import market – $40bn for the whole CIS.
Want to take part? Click here to book your stand.
Need more information? Contact our team today.