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Review of the Russian Cheese Market

Research by the Company Step by Step
Cheese is one of the products supplies of which were heavily influenced by Russian economic counter-sanctions. Before 20142015, the shares of Russian and imported products in the cheese market were virtually equal. For instance, in 2013 imports amounted to 316.5 thousand tons, whereas domestic cheese output equalled 428.6 thousand tons. In 2016, however, cheese imports declined to 191.4 thousand tons, and production reached 546.3 thousand tons. Similar dynamics can be observed in the first 10 months of 2017: 169.1 thousand tons and 530 thousand tons respectively.
It is obvious that the total volume of cheese output and imports has been decreasing. At the same time, the share of imports has dropped almost two-fold, as there are no supplies from the European Union anymore. Earlier cheeses were imported from more than 30 countries. It should be noted that this situation is perceived by consumers negatively, as both regular imported cheeses and delicacies, which are completely absent in the market at the moment, used to be in demand. On the other hand, the current state of things can stimulate Russian entrepreneurs to become more active and offer new products to the consumer. However, Russian manufacturers are facing a shortage of raw materials. The countrys agriculture, in particular dairy farming, has been in decline. The total dairy herd has dropped by 25% during the past 10 years. Therefore, Russia has long been suffering from a shortage of milk the amount of milk produced does not exceed 6065% of the consumption volume.
Let us examine the dynamics of Russian cheese and cheese product output during the past few years.
Following a decline in cheese production that occurred in 2013, in 20142015 there was an increase in production. Quite obviously, it was due to reduced imports caused by economic counter-sanctions. During this time period, Russian entrepreneurs saw a new niche for themselves, and attempted to enter it. In 2016, the volume of production remained virtually unchanged. From January to October 2017, 385,801.13 tons of cheeses were produced. While making a forecast for the year 2017, one may expect production indicators to be lower than in the previous year, amounting to around 530,970.28 tons (for comparison, in 2016 the volume of production equalled 546,297 tons).
Production of goods in the cheese products category has been demonstrating positive dynamics for many years. In JanuaryOctober 2017, 152,539.66 tons of products in the category were produced, which has already exceeded the level of the full year 2016. The statistics available allow one to forecast the volume of 165,544.54 tons in 2017.
We would like to note that cheese product output is showing growth more dynamic than cheese output. This may be due to simpler recipes of the former, the lack of need of ripening, cheaper components and other reasons.
Statistics on average consumer prices are present in slightly different categories that are being monitored. The segment of cheeses includes: hard and soft rennet cheeses; national cheeses and bryndza; processed cheeses. This makes it impossible to fully match and compare the data.
Analysing the dynamics of growth in average consumer prices in the Russian Federation in 20162017 by categories, one can see that they show pronounced seasonality in the national cheeses and bryndza category the lowest indicators of the year are observed in MayJune, whereas in December the price reaches its peak. In addition, a sharp drop in prices that occurred in the second half of 2016 was not compensated for by growth in the respective period of 2017. In the processed cheeses category, price growth has a stable nature: in the period from January 2016 to November 2017, the price increased by 42 rubles. A similar picture can be seen in the hard and soft rennet cheeses category, in which the price increased from 421.08 to 476.77 rubles in the same time period.
By analysing average retail prices by federal districts, one can discover that the Far Eastern Federal District has been leading in all cheese categories, demonstrating the highest prices across the country. National cheeses and bryndza in the Far Eastern Federal District are being sold at 541 rubles per kilogram on average; processed cheeses are being sold for 420 rubles per kilogram; and the average price for hard and soft rennet cheeses has been 542 rubles per kilogram. Regarding the lowest prices, each category has its own leader. For instance, prices for national cheeses and bryndza as well as hard and soft rennet cheeses are lowest in the North Caucasian Federal District 337 and 394 rubles per kilogram respectively. The lowest prices in the processed cheeses category can be observed in the Southern Federal District 246 rubles per kilogram.
The volume of retail sales of high-fat cheeses in monetary terms has been increasing year by year*. One of the reasons of this process is the growing consumer prices. On the contrary, no significant market growth in physical terms takes place in crisis.
Products of the following categories are supplied to the Russian market:
* young cheeses (unripened), quark;
* grated cheeses and powdered cheeses of all varieties;
* processed cheeses, non-grated and non-powdered;
* blue cheeses and other varieties made with the use of penicillium roqueforti;
* other cheeses.
In 2016, there was a drop in import volumes of cheeses of various categories. Indicators in the grated cheeses and powdered cheeses of all varieties, processed cheeses, non-grated and non-powdered and blue cheeses and other varieties made with the use of penicillium roqueforti categories were originally low, whereas the other two categories have been demonstrating a sharp decline in the volume of products imported starting from 2015. Said drop is ongoing. However, it should be noted that data for 2017 are only available for the first 10 months, and therefore it is too early to make final conclusions.
Exports in the young cheeses category began to decline after 2015. The decline in export supplies in the processed cheeses, non-grated and non-powdered category has continued. The volume of exports in the other cheeses category is rather stable. Regarding the categories grated cheeses and powdered cheeses of all varieties and blue cheeses and other varieties made with the use of penicillium roqueforti, it is difficult to derive a dynamic trend for them, as the indicators demonstrated throughout the chosen time period have been too varied. Data for 2017 are only present for the first 10 months, and thus one should not be guided by them just yet.
To sum up, cheese product output has been demonstrating more dynamic growth than cheese production. One may assume that cheeses in the Russian market are being partly replaced by cheese products.
Dynamics of retail sales in value terms has been positive in recent years, which is largely due to inflation.
Imports have been demonstrating a decline in supplies in all categories starting from 2015.
The situation with exports is ambiguous: the leading positions are occupied by two cheese categories young cheeses and processed cheeses, non-grated and non-powdered, but exports thereof have been declining year to year.
Many were expecting that after the implementation of the sanctions, Russian manufacturers would have a fresh incentive to fill the emptied niche however, the data available demonstrate that it has not happened.

* Statistics on retail sales are only available for high-fat cheeses.

Irina Zabegaeva,
Project Director
Step by Step Group

Anastasia Godovalnikova,
Public Relations Specialist