Russian companies react to food embargo extension

By Vladislav Vorotnikov

- Last updated on GMT

The Dixy chain finds price pressure is more linked to currency volatility, seasonality and legal changes than the embargo
The Dixy chain finds price pressure is more linked to currency volatility, seasonality and legal changes than the embargo

Related tags: Food embargo, Meat, Russian meat union, Global meat news, Pork, Poultry

Russia’s meat industry could reap benefits from the extension of its food embargo, which will not directly increase prices on its domestic market, say market participants. 

In addition, while the embargo initially led to retail losses due to the absence of imported goods on store shelves, most imports have now been replaced, according to the trade.

“Extending the counter-sanctions only continues the conditions under which the retail sector has been operating in recent months. All the processes of the transition period have been left behind,”​ said Catherine Kumanin, director of external relations for the Dixy retail chain. “The pressure on prices is now connected to other factors: seasonality, currency volatility and regulatory changes.”

Jan Mogilev, regional communications manager of the Lenta retail chain, added: “We continue to work under normal conditions even following the extension of the import ban. From a business perspective, nothing has changed. Most of the work to replace the banned goods was done a long time ago.”​ 

Meat imports

Meanwhile, the Russian Meat Union (RMU) believes the food embargo only slightly affected meat imports to Russia. “The reduction in meat imports is not connected to the food embargo, as imports of pork from Europe, for example, were banned due to African swine fever, and we import only 4% of all our beef from the European Union,”​ said RMU CEO Sergei Yushin. 

He believes the extension of the food embargo poses the threat of an overproduction crisis for the Russian poultry industry. However, so far domestic poultry producers have mostly benefited from the ban. 

“Poultry producers have benefited as the demand for poultry is growing,​ added Yushin. “If, last year, its share in the total meat market accounted for 50%, then this year we expected it to be close to 60%. However, the situation for poultry farmers remains complicated, as they failed in the short term to pass on the increased production costs to consumers.”

Russian market observers say that neither the retail nor the meat industry expects a cancellation of the food embargo any time soon. 

‘Will not be cancelled’ 

One representative of one Russian meat producer, who wished to stay anonymous, told Global Meat News: “It is clear that the embargo will not be cancelled (at least fully) in the next few years, as the government has repeatedly promised to investors that the current market structure will not be changed, particularly within the payback period of any investment, which in general stands at five to seven years.” 

Still, the food embargo may still affect meat and poultry prices indirectly as it, together with currency fluctuations, raises the cost of feed components imported from abroad. Russian meat giant Cherkizovo, in particular, expects the pressure on meat producers to increase in the second and third quarter of 2015, when the impact of this will become more noticeable.

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