Russia Presents Opportunities for Dairy Exports
RUSSIA - While the fourth quarter of 2009 was an extremely difficult period for local dairy producers, both Valio (Finland) and Arla (Denmark) have reported a huge increase in sales for 2009, writes Alla Barinova, Manager, Bord Bia Moscow.
22 March 2010
2 minute read
Valio reported a 25 per cent increase while Arla showed a jump of 62 per cent to €50million. Both companies are reported to be targeting the cost conscious segment of the market as increasing numbers of consumers switch away from the premium dairy segment.
The demand for more competitively priced products has risen and retailers are on the lookout for cheaper brands. Russian producers have been struggling of late against cheaper dairy exports from Belarus, Ukraine and EU countries.
In contrast to the success of foreign market leaders, Russian suppliers have suffered a drop in output due to new changes in technical regulations.
According to Dairy News, dairy producers have been reluctant to change the labelling of their products in accordance with the new standards at a time of seasonal decline in milk production and unexpected shortages of milk powder. Market leader Wimm-Bill-Dann experienced a massive decline in year-on-year profit that saw revenues drop to just one-third of 2008 levels.
This month the Russian Dairy Union, which includes the main Russian dairy processors (Wimm-Bill-Dan, Unimilk, Danone etc) also failed to come to an agreement on a proposed minimum price for milk in 2010. Dairy processors felt that 11 rubles (27 cent) was too high and suggested 8 rubles (20 cent) per litre.
According to Kommersant, Viktor Zubkov, the Russian prime minister has warned dairy companies that if they are not willing to agree on a minimum price, the government will begin to subsidise the creation of state factories for the processing of milk.
In response to the decline in consumer spending power, companies such as Danone have introduced price cuts and switched their focus from ‘value-added products’ to new discount lines. The crisis has lead Russian consumers to shy away from luxury dairy products such as desserts and mousses and return to more traditional products such as keifir and curd. Market analysts have commented that milk processors will need to maintain their focus on nutritional functionality and convenient packaging in order to stop consumers moving away from their products.
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