Russian authorities began their three-year tax rises in February in order to cut dry yeast imports and give more support the local manufacturers.
The attempt was based on attracting more foreign investment into the Russian sector. Yet, half-a-year on, yeast imports continue to increase, while domestic manufacture continues to drop - dipping 11.2 per cent in 2004.
French yeast company Lesaffre bought additional shares in one enterprise - JSC "Kurgandrojji" (Kurgan) - in March but, aside from this, there are few positive dynamics on the current Russian market.
"Supplies of dry yeast did not decrease. There are a lot of yeast factories in Russia but the equipment is worn out and, subsequently, the product quality is very low," said Evgheny Ivanov, expert at the Institute of Agricultural Markets.
"Bakeries don't want to change expensive imported yeast on cheap local yeast," said Ivanov, adding that another problem was Russian consumers "gradually cutting down the bread quota in their daily consumption" in exchange for more meat and fruit.
The situation shows that quality is becoming an ever more important rival to price on the Russian food sector.
The Russian branch of Lesaffre said it had continued to import the same amount of yeast since taxes were raised. "We did not lose a single Russian customer," said marketing manager Ecaterina Shuvalova. "Indeed, the import of soluble yeast rose in price, but we calculated the prices in such a way that the customer did not even notice.
"We plan to manufacture pressed yeast, but as we are now re-equipping the factory, it is to early to talk about any indexes," she said.
The main competitors of local manufacturers are companies from Turkey and China, where yeast manufacture is very developed and the production costs are lower.
Moves to curb the influx of yeast from these countries has received support from some Russian producers.
Evghenya Dubinina, executive director of the Derbenev Yeast Factory (one of the leaders in the field), said to the Business newspaper earlier this year that local factories had the capacity to cover the Russian dry yeast market and that the main stumbling block was the import taxes set by the government.
"We did not strive to increase manufacture. It remained at the same level this year," she said, refusing to give specific data.
Figures suggest that illegal imports, mainly from formers Soviet states, are a much bigger problem than import tariffs for the yeast industry.
About 4,000-5,000 tonnes are imported officially, yet as much as 16,000 tonnes is thought to be smuggled in via different channels.
The new import tax rate will be $250/t till the end of 2005, before dropping down $225 in 2006 and $200 from 1 December 2006. Before this, the tax constituted 15 per cent of the total amount of the goods.
Russian manufacturers had been counting on a quota of $500/t.