IDM | Market analysis
Russia’s dairy industry split
into several new segments
Author: Vladislav Vorotnikov, IDM Correspondent, Moscow
In August Russia’s government and dairy manufacturers celebrated
the third anniversary of the so-called food embargo – the special
Presidential decree that banned import of almost all food products
from the European Union, the U.S., Australia, Canada and Japan. Although
the measure originally has not been designed to last forever,
there is no certain time frame of when it may be actually cancelled. In
the meantime, the market landscape has changed significantly since
then and it is hard to say that the ordinary consumers are happy with
these changes yet.
Speaking about food embargo Russia’s officials use to make rather
controversial statements. At a St. Petersburg Economic Forum Russian
President Vladimir Putin said that "sanctions brought nothing
good" to anyone, but several months earlier speaking to agricultural
producers he promised to "keep sanctions for as long as possible".
Agricultural Minister Alexander Tkachev in a February 2017 governmental
meeting said that in his opinion it is worth to keep the current
market conjuncture for another 1-2 years. After this Russia will not
cancel the entire embargo at once, but most likely will remove restrictions
on some particular goods only, he said.
22 · 9 2017 | international-dairy.com
In the meantime, it has become clear today that the food embargo
is an important element for the foundation of several new segments
in the dairy industry.
Dairy products without milk fat
Nearly 25% of all dairy products on Russia’s grocery shelves, like cheese,
sour cream or butter don’t contain any milk fat at all, a study of the
governmental Auditing Chamber released in mid-April 2017 revealed. In
most cases, the processing plants replace milk fat with substitutes, like
palm oil, while, however, not changing the label, or at least making only
some unclear changes on the label in a bid to confuse the customer,
the study suggested.
Russia’s media use to describe the segment of dairy products without
milk fat as "dairy surrogates" and this is a brand new niche in
the country’s market. Russia’s sanitary body Rospotrebnadzor in May
2017 estimated illegal surrogates account for 4.3% of the domestic
market of dairy products, while veterinary watchdog Rosselhozndzor
in 2015 was claiming the counterfeit cheese occupied nearly 80% of
the Russia’s market. At the same time, consumer protecting organizations
mostly support Auditing Chamber and Rosselhozndzor, as their
studies in various regions show that between 20% and 60% of dairy
products don’t contain milk fat.
There are two different opinions on what to do with the dairy surrogate:
either to enhance control in the market to wipe them out completely,
or to amend legislation to take them out of the shadows.
Artem Belov, executive director of the National Union of Dairy Producers,
estimated that in some particular segments, like fermented dairy
products the share of surrogates is not so high, while in the cheese and
butter segment it ranges from 15% to 25%; provided producers make
the proper labeling, mentioning of all ingredients included, everything is
completely legal.
"In addition to palm oil Russia’s dairy plants replace milk with coconut
oil and sunflower oil. Why does that happen? Because the purchasing
power of citizens in Russia is not growing, on the contrary, it is even
falling, while the people’s appetite remains the same. And this is why
for products with replacement of milk fat there is a huge demand in
The Russian food embargo is an important element for the
foundation of several new segments in the dairy market