Creaming off Russia's dairy sector
The Russian milk and dairy market shows clear signs of recovery. Between 1997 and 2007, yields rose by 60% to reach 2.2 tonnes of milk per cow per annum. With consumers’ disposable income steadily increasing, domestic demand for dairy products is also on the rise and has a good potential for further growth. In this positive context, investment opportunities in the sector are emerging.
On 27 July, over 60 business and government representatives met in Moscow to explore openings in the Russian dairy sector. The meeting, jointly organized by FAO, the European Bank for Reconstruction and Development (EBRD), the Russian Ministry of Agriculture and the Russian Dairy Union, also allowed leading industry players to discuss how remaining bottlenecks in the sector could be overcome.
FAO and the EBRD presented the key findings of a recent review of the Russian dairy sector, pointing at the strong increase of productivity in certain regions of the country and at the overall recovery of industrial output. Adding to the conclusions of the study, Mr Vladimir Labinov, Director of the Russian Dairy Union, stressed the impressive growth of the cheese and whole-milk products sectors, the output of which grew by close to 200% and 170%, respectively, between 2000 and 2008.
Looking at challenges ahead, Mr Andrei Danilenko, Chairman of the Board of the Soyuzmoloko Association, emphasized that only 15% of the milk currently produced in Russia meet international quality standards. Sourcing high-quality raw milk – together with the strong seasonality of raw milk production throughout the year – therefore remains an important constraint for the Russian dairy industry.
Mr Kirill Kolonchin, Director of the Food and Processing Industry Department at the Ministry of Agriculture, underlined that these challenges were at the core of government discussions and that, during this phase of recovery, support from the public sector was considered necessary. The intention of the Ministry is to build on past state programmes and policies, combining custom regulations and targeted financial support.
Another area of interest for the Russian government is the promotion of geographical indications as a way to boost sales of Russia s traditional dairy products. Valuable contributions to this discussion were made by the Russian dairy industry representatives who recently participated in a study tour organized by FAO and the EBRD on how Italian dairy producers have been using geographic indications to successfully market emblematic products such as parmigiano reggiano.
To conclude the meeting, over 15 local dairy companies from 7 different regions showcased their projects at an investment fair gathering EBRD bankers and other potential investors.
The key conclusions of the workshop will be incorporated in an updated version of FAO’s Russian Dairy Sector Review that will be released in September 2010.
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