CONSUMPTION OF DAIRY PRODUCTS AND PRODUCTION VOLUME
Milk is an essential food ingredient, and humans learned to make a huge number of different products based on it. Along with meat and cereals, milk forms the basis of the diet in virtually all Russian families. When milk is processed into various food products, it is done with the purpose of creating special taste qualities or increasing storage stability. The milk used is normally that of farm animals, primarily cows, goats, sheep, camels, yaks and others.
According to the latest statistics, average per capita consumption of dairy products in Russia amounted to 239 kilograms per year in 2015, which is 2% lower than the figure of 2014 and 38% lower than that of 1990, when consumption was reaching its peak of 387 kilograms per person per year. Such a sharp decline in consumption was caused by the overall economic situation in the country: following the drop in real household incomes, demand for the more expensive dairy products (primarily cheeses) decreases as well, shifting towards the segment of powdered milk. This phenomenon can be observed nowadays: whereas starting with 2000 there was steady growth in demand for dairy products, in 2013 demand began to decline. In addition, bans on dairy imports from the EU as part of the Russian counter-sanctions also affected the situation – part of consumers simply could not find a domestic alternative for imported cheeses, yoghurts and other types of dairy goods. As the market gets stabilised and household incomes are recovered, demand for dairy products in Russia will be on a positive trend again, as these food products are popular across virtually all age groups and make up one of the basic parts of a balanced diet.
Among regions of the Russian Federation, dairy products are consumed the most in Tatarstan – 362 kilograms per capita per year on average. The top 5 leaders for this indicator also include Saint Petersburg with the figure of 312 kilograms per capita. Moscow is falling behind noticeably in this regard, its average per capita consumption amounting to 218 kilograms of dairy products per year. Said difference in consumption volumes can be explained by state support for agriculture in the regions – for instance, the dairy industry in Tatarstan receives 3.1 rubles state support per liter of milk. All this results in relatively low retail prices for dairy products.
Residents of Chukotka Autonomous Okrug consume the least dairy products in Russia – only 105 kilograms per capita per year. The remoteness of the region, the lack of local dairy farming as well as national culinary traditions and preferences have led to the autonomous region having a dairy consumption level 3.5 times lower than the leader. In addition, minimal consumption levels for dairy products were recorded in Arkhangelsk region (162 kilograms per capita per year), Primorsky Krai (144 kilograms) and Tula region (113 kilograms).
VOLUME OF DOMESTIC PRODUCTION
Speaking of the dynamics of domestic production, they remain positive: in 2016, 11,896 tons of whole milk goods were produced in Russia (in milk equivalent), which is higher than in 2015 and 2014 by 1.3 and 3.7% respectively.
The declining purchasing power of the population caused by the decrease in real household incomes serves as a limiting factor for market development. On the other hand, European dairy producers having left the Russian market as well as ruble devaluation led to increased attractiveness of Russian products in foreign markets. All in all, the dairy market has been managing the crisis rather successfully. Consumers are offered a wide variety of goods of different categories and flavours. The market can be characterised as well-established and having low dependence on imports. The problem of quality remains – according to different estimations, 30–50% of dairy goods produced do not meet the quality standards; however, with proper control the issue can be resolved.
In 2016, processed liquid milk occupied 46.6% of dairy production in commensurate weight. 26% fell on yoghurt and other fermented dairy, whereas cheese and quark were accounting for 11.7%. Other segments occupied less than 10% of the overall production volume.
PRODUCTION DYNAMICS IN THE MAIN SEGMENTS
Let us compare the indicators in the dairy industry for 2016 and 2013. This choice of years is intentional, as 2013 should be regarded as a pre-crisis year – the embargo on dairy imports from the EU had not been imposed yet, and the economic situation in the country was stable.
The analysis revealed that the key segments of the dairy industry are demonstrating steady growth, which is especially distinct for cheeses and quark, whey, butter and cream. The segment of condensed milk became the outsider of the market, production of this good having dropped by 41.3% to 2013.
Production of milk reached 5,540 thousand tons in 2016 (+2.9% to 2010). Production of yoghurt (and other types of fermented milk and cream products) in 2016 amounted to 3,095 thousand tons (+0.3% to 2013). Cheese and quark output in the time period in question exceeded 1,390 thousand tons (+19.1% to 2013). The volume of whey production in 2016 equaled 621 thousand tons (+26.6% to the level of 2013). Production of ice cream and ice cream-based desserts in 2016 reached a record of 407 thousand tons (+8.8% to 2013), whereas production of condensed dairy goods declined to 348 thousand tons (-41.3% to 2013). Butter output amounted to 253 thousand tons (+11.5%). Cream production increased to 125 thousand tons (+21.4% to 2013), while production of milk and cream solids in 2016 decreased to 116 thousand tons (-0.9% to 2013). The volume of lactose produced was 0.2 thousand tons (-14.5% to 2013), and production of casein amounted to 0.1 thousand tons (+576.2% compared to 2013). The main reason for declining demand for casein is the decrease in purchases of Russian casein by foreign companies, which used to be its main consumers.
FOREIGN TRADE TURNOVER
Having analysed foreign trade turnover, one can state that domestic companies are almost fully satisfying the domestic demand – the volume of dairy imports in 2016 amounted to 1,048 thousand tons, whereas domestic production reached 11,896 thousand tons; 198 thousand tons were exported. Considering the figures given, the dairy market size in Russia in physical terms can be estimated at 12,746 thousand tons in milk equivalent. The share of imported dairy goods in Russian stores amounts to around 8%, almost 87% thereof falling on Belarus. The neighbouring country successfully benefited from the ban on product imports from the EU into Russia and occupied the key position as the main importing country (let us disregard the possible shady schemes where products supplied from the EU are marked as Belarussian goods, as this is not within our competence).
45 countries import dairy products into Russia. Kazakhstan and Ukraine are the main export destinations for domestic products, and together they receive 60% of Russian dairy exports. Russian dairy goods are exported to 41 countries total.
The ruble exchange rate and decent quality of the products supplied make Russian dairy attractive in the eyes of potential consumers in other countries; however, the high level of competition is not letting Russian companies enter most foreign markets.
In September 2016, rapid growth in prices for butter started; the country’s average price for it in June 2017 equaled 515 rubles per kilogram. Rennet cheeses were sold at 473 rubles per kilogram in June 2017, whereas low-fat quark cost 288 rubles per kilogram; sweetened condensed milk – 79 rubles per 400 grams; drinking milk – 52 rubles per liter; yoghurt – 23 rubles per 123 grams.
PRODUCERS AND BRANDS
According to the information-analytical system Globas-i, several most successful companies in sales revenue can be distinguished among dairy producers. They key players of the industry include “Danone v Rossii (Danone in Russia)” Group and “Wimm-Bill-Dann Produkty Pitaniya (Food Products)” OJSC. After “Danone in Russia” Group was reorganized and merged with “Unimilk”, the company’s revenue in 2015 dropped by 22.9% – however, the group continues to lead in the Russian dairy market.
Today it is challenging for separate smaller producers to stay afloat in the dairy industry, and therefore one may expect new waves of merges and acquisitions in the future. The absence of European manufacturers provides domestic producers with a number of opportunities for increasing revenue and expanding their presence in the domestic market as well as in foreign countries, where Russian dairy products are virtually not represented yet.
Information Agency “Credinform”