THE STATE OF THE RUSSIAN DAIRY INDUSTRY
When Russia hit the EU, US, Canada, and other key food and drink suppliers, with import bans, dairy was one of the first affected sectors. Imported products are off the menu – so now it’s up to domestic producers to fill supply gaps
The end result is a newly confident, newly rich Russian dairy industry. It has taken a couple of years, and big helpings of government money, to get here, but production volumes are gradually rising.
But there is still a way to go. As in crop production, as in food manufacturing in general, Russia’s past is holding it back. Soviet-era machinery dominates the market. It’s old, it’s nearing obsolescence, and it’s time it was replaced.
Still, Russia is facing a new dairy reality — and one that promises much for international suppliers of cattle rearing equipment, dairy production machinery, and bottling and packaging solutions.
Russia produces more dairy items
Since 2013 — just one year prior to Russia’s food and drink embargo entering force — Russian dairy production has grown at an average rate of 4% annually. In 2017, a new high for the industry, production topped out at 11.1 million tons of dairy products.
Growth was particular fierce between 2015 and 2017. During this time, output rose 15%. Production growth has slowed to 3% in 2018 so far, but momentum is still rolling along.
If we look at 2017’s production volumes, supplied by Italian dairy consultancy firm CLAL, we can see Russia’s current output volumes in the main product groups:
- Liquid milk — 9.2 million tons
- Cheese — 935,000 tons
- Butter — 260,000 tons
- Skimmed milk powder — 68,000 tons
- Whole milk powder — 60,000 tons
Indeed, many companies are pushing production levels higher and higher. Ekoniva Group, owned by Germany holding company Ekosem-Agar GmbH, reached a new milk output record in early 2018. At this time, Ekoniva passed the 1,000 tons a day mark, making it Russia’s largest milk producer.
Russia’s dairy industry is capable of producing all of the major product groups, such as raw milk — by far and away the biggest product — butter, skimmed and whole milk powder, creams, yoghurts, buttermilk, and infant formula.
Increasing sophistication of production processes and facilities means the portfolio of Russia-made products is widening. Just look at cheese. As well as traditional domestic favourites like bryndza and tvorog, Russian cheesemakers are exploring and making worldwide varieties, such as parmesan, tilsiter and parmesan.
Fake dairy affects consumption
One big issue that arose in the wake of the import ban is fake dairy products. Fake dairy is basically what it sounds like: familiar products made without milk. Alternatives like palm oil are being used in bootleg operations across the nation.
The results? Dangerous products hitting the market in large quantities. It’s been estimated that as much as 25% of all dairy items available in Russia right now can be considered fake.
This has affected consumption volumes. According to Russian retailer X5, Russians are now consuming 1.5 times less dairy than is recommended by the Ministry of Health.
Even, yearly per capita consumption amounts to around 233.4kg.
Measures are in place to get more Russians eating and drinking more dairy products again. X5, for instance, is pushing a “three dairy items a day” promotion in its supermarkets, backed by the Ministry of Health.
Once outfitted with the proper machinery, Russia’s dairy companies will be able to outproduce the fakes and get consumption rising once more — but it requires modern solutions to do it.
Cattle inventories drop off
Another problem the Russian dairy industry is facing is shrinking dairy herds. A report from the United States Department of Agriculture (USDA), using stats from Russia’s official statistic service Rosstat, shows the scale of the slump.
As of January 2016, Russia’s dairy cow inventory stood at 7.8 million head. After 12 months, this had slipped to 7.5 million head. Forecasts predict further reductions in herd sizes nationwide, with the USDA projecting figures of 7.3 million by 2018’s end.
Imports of appropriate breeding stock is one way Russia is tackling the downward slump in . Around 35,000 head are expected to be imported throughout 2018. However, other estimates are more generous. For instance, Russia’s Federal Customs Service says 90,000 meat and dairy cows were imported in 2017.
While the EU’s dairy produce is banned from entering Russia, its dairy cows aren’t. The Netherlands, Germany, and Hungary are the main suppliers of dairy cattle to Russia, alongside France and Denmark sending smaller export levels too.
Government subsidies aid Russian dairy industry
Realising the need for investment in order to modernise the industry, the government has increased its level of subsidies for dairy farmers.
In 2016, the amount of cash the government was willing to invest in nationwide dairy production doubled. Subsidies reached a total of $500 million. An additional $25 million in short term bank loans was made available for farmers.
Capital costs for construction and renovation of farms also received a $100 million boost.
The government is keen to keep these investment levels stable until the industry is developed enough to stand on its own feet.
Crucially, this puts more money into the hands of farmers in need of modernised production and animal husbandry equipment.
More Russian dairy farms in the pipeline
Hundreds of large-scale farms and factories are planned for construction between now and 2020. Ministry of Agriculture Alexander Tkachev says this will add an extra five million tons of to Russia’s total output.
Many foreign firms are entering the market as a result. Vietnam’s TH Group, for example, has invested $2.8 billion in a complete farm-and-production complex in the Moscow region. Its 50,000-hectare site is home to 45,000 cows and will produce 234,000 tons of milk a year.
EkoNiva also has bold plans. In order to double its 1,000-tons-a-day output level, it is investing in new breeding and production sites. In Bashkortostan, hundreds of kilometres east of Moscow, it is planning three separate sites where it will breed 11,600 cattle.
Many more facilities are in development — so expect to find a healthy demand for production, processing, and animal-rearing technologies at 2019’s instalment of the international Dairy & Meat Industry exhibition.
DairyTech 2021: Russia’s leading dairy technology exhibition
DairyTech, held between 26-29 January 2021, is Russia’s leading event dedicated to technologies for milk and dairy production equipment.
Its audience is highly professional, full of sector representatives. At 2020’s show, it connected 210 exhibitors with over 5,000 buyers from around Russia’s food, dairy, and catering industries.
DairyTech is the perfect place to meet new clients and partners from across Russia’s booming dairy industry, and grow your sales in a new geography.
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