In 2005–2009 production of raw milk in Russia was growing though at a quite low rate. After the drought of summer 2010 prices for feedstuff rocketed, so in many regions of Russia the farms had to reduce the cattle stock which lead to decline of raw milk production by 2.5% against 2009.
In 2011 production of raw milk continued to decline; in 2014 it was the same as in 2013. Unlike raw milk yield output of whole milk products demonstrated positive dynamics. In 2013 production of whole milk products in Russia increased by 2.2%. In 2014 production volume did not change in comparison to 2013.
Large share of import in the most important segments of dairy market – cheese, quark and butter - is one of the key factors restraining development of Russian dairy industry.
In 2014 production of butter and spreads in Russia increased by 14.1% in volume over 2013 while volume of import (including foreign trade with Customs Union countries) grew by 11.2%. In particular, share of Byelorussia in import volume of butter constituted 42.3% in 2014.
Considering Russian dairy market in more detail, it should be taken into account that imported butter could be packed at the domestic factories and included into production. Besides it should be mentioned that, for instance in 2008 production of butter came to 257 thousand tons (without spreads). However even this index is not as big as production indexes in 1990s. In particular 825 thousand tons of butter was produced in the country in 1990 – it is 3.8 times bigger than in 2012. The butter production decrease was directly caused by the decrease of milk yield and by milk deterioration.
Production of cheese and quark in Russia increased by 7.7% in 2014 over 2013. In comparison to domestic products share of import in 2014 constituted 14.9% with no consideration of foreign trade with CU countries and 28% with import from CU included.
Domestic production of fermented dairy products and sour cream declined respectively by 0.8 and 1.1% in 2014. Most impressive increase of domestic production was registered in the categories of cheese / cheese products and butter – respectively by 15.3 and 14.1%.
The largest supplying regions for fermented dairy products, sour cream and quark in 2014 in Russia were Moscow, Moscow Region and Krasnodar Territory. In comparison to 2013 output of fermented dairy products in Moscow region increased by 5.4%. Moscow, second large supplier of the review category, saw 6.3% year-to-year decline of production volume. Krasnodar Territory demonstrated 2.4% year-to-year growth of production volume in the review category.
In segment of sour cream the largest supplying region is Krasnodar Territory. In comparison to 2013 production volume of sour cream in this region declined by 7% in 2014. In Saint Petersburg production volume of sour cream increased by 0.2% that year. Vladimir Region, third large supplier of sour cream in Russia saw decline of production volume by 3.2% during the review period.
The leaders of domestic production of quark in 2014 were Krasnodar Territory, Moscow and Sverdlovsk Region. In comparison to 2013 production of quark in Krasnodar Territory increased by 25.5%, in Moscow and Sverdlovsk Region – respectively by 1.6% and 36.5%.
Domestic production of cheese / cheese products in Russia saw 15.3% year-to-year increase in 2014 and constituted 494 thousand tons. Cumulative share of three largest supplying regions in this segment constituted 36%. In Altai Territory production of cheese grew by 15.3% in 2014 over 2013. In Moscow Region production volume increased by 11.2% like a year before, Voronezh Region saw 31.9% year-to-year increase of production volume in the review category.
In 2014 domestic production of condensed milk in Russia declined by 13% down to 540 million conditional cans. The leader in terms of production volume in this segment was Kursk Region. However, in comparison to 2013 production volume of condensed milk in Kursk Region declined by 1.3%. In Orel Region production volume in this segment declined by 6.6%. Leader of last year – Krasnodar Region – was on the third line in production rating of condensed milk in 2014 with 16.9% year-to-year decline in volume.
Production of butter in Russia increased by 1.4% in 2014 and constituted 250 thousand tons. Voronezh Region – the largest supplying region of this dairy category – saw 23.5% year-to-year increase of production volume. Republic of Tatarstan, second large supplier of butter, demonstrated 39.3% year-to-year increase of production volume in 2014. Altai Territory providing third large share in domestic production of butter in Russia saw 36.5% year-to-year increase of production volume in 2014.
In 2013 production of ice cream in Russia increased by 1.4% in volume over 2012; in 2014 this segment saw 2.2% year-to-year growth. Production of ice cream is distinctly seasonal with annual production volume being driven by late spring and summer.
The leader in terms of production volume of ice cream in Russia was Moscow Region which pushed Omsk Region – the leader of previous periods – to the second line. In 2014 production volume of ice cream in Moscow Region was the same as in 2013. Moscow Region is the location of production facilities of such large companies as “Russkiy Kholod (Russian Frost)” GK, “AlterVEST” GK, “Produkt “Chistaya Liniya” (Product “Pure Line”)” LLC, “Bogorodsky KhK (Cold Store Facility)” LLC, “Ice Cream 2000” LLC. Omsk Region saw 5.7% year-to-year decline of production volume in the review segment in 2014. Production facilities of one of the largest Russian companies – “Inmarko” LLC, part of holding “Unilever” – are located in Omsk Region. Nizhniy Novgorod Region demonstrated 5.6% year-to-year increase of ice cream production volume in 2014.
Vologda Region is one of the most important ice cream suppliers in Russia. In 2014 this region provided 6.9% of total production volume in the country. The plant “Vologodskoe Morozhenoe (Ice Cream of Vologda)” LLC of “IceBerry” GK is located there. Production capacity of “Vologodskoe Morozhenoe” reaches 120 tons of ice cream daily.
The group of five largest suppliers of ice cream in Russian also includes Novosibirsk Region; production volume in this region increased by 20.7% in 2014 over 2013.
Most important federal players of Russian dairy market are “Danone Unimilk” Group and “Wimm-Bill-Dann” LLC.
In 2014 “Danone Industriya (Industry)” plant started production of kefir based products with capacity of 50 thousand tons annually. The amount of investments in 2014 constituted about 1 billion rubles; total amount of investments to this project is estimated at more than 14 billion rubles.
In 2013 sales of ice cream by “Unimilk” GK*
constituted 40,127 million rubles with 19.5% increase over 2012. Net profit of the company declined by 6.1 times and constituted 186.4 million rubles. Sales of “Danone Industriya” in 2013 increased by 4.5% while net profit declined by 1.2%.
In 2013 net profit of “Wimm-Bill-Dann” constituted 243.044 million rubles against 1,336.194 millions in 2012.
On local markets federal companies also compete with local manufacturers working inside one or several neighboring regions. However, gradual consolidation of assets by several leading groups in dairy industry is obvious.
During 9 months of 2014 in Russia sales of drinking milk increased by 20.6% in value over same period of 2013, of milk-based drinks – by 19.3%, of rich cheeses – by 21.7%, of whole milk products – by 20.6%.
Since 2005 long-term investments to milk processing and cheese production were growing fast. In 2011 total amount of investments reached the peak: 18.95 billion rubles, growth by 3.3 times over 2010; 88.5% of this amount was provided by investment projects in Moscow and Moscow Region. In 2012 amount of investments was a little smaller against 2010 and in 2013 it increased by 21.9%.
Introduced embargo on import of dairy products opens to Russian manufacturers the doors to retail chains and stimulates them to increase production volume. According to the Ministry of Economic Development of Russia, with consideration of high base of 2014 production of cheese / cheese products is forecasted to increase by 3% in 2015 over 2014, production of butter and of whole milk products – by 2% each segment.*
Data of rating agency “Expert”