The Russian dairy market is expected to contract by up to 3% this year – its first decline in recent times – according to Soyuzmoloko, the national association that represents the country’s milk producers.
The decline will translate into losses of between 7% and 8% for dairy farmers, according to the union’s executive director, Artem Belov.
The dairy sector accounts for 15-20% of value sales in Russia’s food and beverage industry as a whole, and this could be significantly reduced if dairy consumption continues to fall, Belov warned.
This could lead Russian consumers to turn increasingly to cheaper and more basic forms of dairy, or cut dairy products from their diets entirely.
Belov was quoted by Russian news agency TASS as saying: “A lot of people will switch to cheaper spreads instead of butter, or cheese products instead of cheese. And this is a worrying trend, especially taking into account that Russia, in terms of consumption of dairy products, is far from meeting health standards set by the World Health Organization (WHO).
“According to official statistics, in our country we have 240kg of dairy products per year per capita, although in reality this figure is even lower – about 190kg per capita, while the recommended norms are 325-330kg.”
Soyuzmoloko chairman Andrei Danilenko added that the fall in consumption would exacerbate foreign investors’ reluctance to invest in the Russian dairy industry.
A lack of government support – state subsidies worth RUB 26 billion (€362 million), compared to fiscal contributions from the dairy industry amounting to around RUB 200 billion (€2.79 billion) – coupled with the fact that many dairy production plants in Russia are in desperate need of modernisation, was preventing the country’s dairy producers from capitalising on potential growth.
Half of plants are so outdated that upgrading them doesn’t even make sense, Danilenko said.
Soyuzmoloko has developed a plan of action to tackle Russia’s faltering dairy sector by introducing financial incentives for investors and either modernising or replacing facilities. It hopes that its recommendations will bring consumers closer to reaching WHO’s nutrition guidelines and push demand for dairy back in the right direction.