Russian Dairy Market — Key Trends and Prospects
The last three years were very dynamic for the Russian dairy market. And despite a multitude of rapidly changing challenges, the Russian dairy industry shows rather good growth.
This makes it attractive for a broad range of potential partners, such as production and cooling equipment manufacturers, software developers, suppliers of ingredients and packaging from the Near, Mid and Far East regions.
Current Status of Dairy Market — Summary
In the previous year, the dairy industry maintained its positive development dynamics. According to Rosstat (Russian Federal State Statistics Service), the industry produced 32.9 million tonnes of milk (including products for personal consumption) in 2022, which is 2% higher than in 2021. Soyuzmoloko Association experts point out that the industry produced 24.7 million tonnes of market milk in the previous year, which is 4% higher than 2021 figures.
Manufacturers of milk products also demonstrated growth in 2022. The Milknews Analytics Centre provides the following data: volume of whole milk powder production grew by 8% versus 2021 (to 69 thousand tonnes), skim milk powder — by 16 % (to 111 thousand tonnes), butter — by 11% (to 314 thousand tonnes). At the same time, due to a decrease in consumer paying capacity, product ranges had to be adjusted too, e. g. output of liquid milk increased by 2% (to 5.8 million tonnes) in 2022, but the production of sour milk products suffered a decline. For instance, yoghurt production dropped by 16%, to 692 thousand tonnes.
Sales of dairy products on the Russian market in 2022 grew by 13% versus 2021 figures. It is interesting to note that the demand vector last year shifted to traditional product categories, while sour milk and dessert products were less sought for.
Import of dairy products in 2022 decreased approximately by 9% versus 2021. The data courtesy of the Milknews Analytics Centre. In total, around 5,8 million tonnes of milk for the amount exceeding $3 billion USD was imported to Russia in the previous year. That said, around two-thirds of the import in monetary terms are accounted for by cheeses (45%) and butter (22%). It is worth noting that only imports of Belarusian products increased in the previous year, by 1%.
Bottlenecks
Product variety reduction. Suspension of operations by a number of European companies certainly affected the dairy products variety. In the previous year, the strongest dynamics of product variety reduction was observed in the whey drink segment, where the product range constricted almost by a third (-29%). The variety of milk desserts reduced by 23%, and liquid desserts — by 19%. This affects not only manufacturers themselves, but related industries, such as packaging suppliers, as well.
Exit of equipment suppliers. The Soyuzmoloko Association reports that the share of imported equipment in processing industry amounts to around 70%, and in the packaging equipment segment — to approx. 50%. And if we consider the dairy industry only, the share of imported equipment there is 89% according to NTech analytics data. The primary equipment suppliers, up to February 2022, were Germany, Italy, Austria, Poland and the Netherlands, covering up to half of the total volume of supply. At the same time, imports of equipment from Belarus in 2022 amounted to only around 10% of the total equipment import volume, and imports of equipment from China and Turkiye barely reached 2%.
In the packaging equipment segment, the share of imported machinery amounted to 40% until February 2022. These were mainly equipment packages of Italian and American origin.
Apart from the equipment supply issues, it is worth noting the resulting necessity to search for alternative suppliers or ways of delivery of spare parts and consumables. Software update issues are a serious complicating factor as well.
Exit of packaging manufacturers. In 2022, two largest packaging manufacturers (Elopak and Tetra Pak) suspended their operations in Russia. As a result, producers of milk and dairy products had to urgently search for alternatives for imported products. Another important issue is that a large share of raw materials for packaging manufacture — up to half of the total volume of painting materials and cardboard — is imported as well.
Growth areas and opportunities
Emergence of new suppliers of equipment and materials. In the environment of the dairy product market growth, the demand for new equipment — both for potential new projects and upgrades of the existing ones — is evident. This refers both to equipment for primary milk processing, and production and filling equipment — and packaging manufacture equipment as well. This is especially relevant because China and Turkiye have been making significant progress in this area in the past few years. Various materials for packaging manufacture are in demand as well.
Government support. Events of the past three years have substantially expanded the role of the state, and its primary task now is not just to invest funds in the industry, but also implement targeted support measures to address certain relevant issues. This year, the total budget of such support measures grew by 7%. Also, one should not simply discard the influence of these processes on related industries. For instance, implementation of various preferential loan programs for milk producers will result in increase of production output and, in turn, increase in demand for various equipment for production and processing of dairy products and packaging, and demand for packaging itself. For new players it will be a great opportunity to make themselves known and claim their spots on the Russian market.
Maintaining or further growth of investment activities. The effect of government support measures implemented in 2020 (subsidies, preferential loans, tax benefits) is evident by now, with a number of major and mid-level dairy product manufacturers confirming their plans on construction of new animal husbandry and production facilities. Experts predict that in the coming 5 to 7 years we can expect the investment rates to stay at the same level. However, equipment is required to launch new production facilities, and ingredients and packaging are needed in the production processes directly. Therefore companies, who consider entering the Russian market, should search for new partners among those designing their facilities right now.
The DairyTech Exhibition Will Drive Entrance to Russian Market
For more than 20 years, the DairyTech Exhibition is gathering the industry’s leading experts and largest manufacturers of milk processing and production equipment, packaging equipment and ready packaging for discussion of relevant issues, search for the ways to address them, and presentation of the participants’ achievements.
144 companies from 13 countries took part in the Exhibition in 2023. 4,334 unique visitors were registered at DairyTech 2023, among them top managers and specialists of the dairy industry influencing the decisions on equipment procurement in their companies (70%).
Survey results confirmed a booming interest in all 7 sections of the Exhibition. More than half visitors (63%) were interested in equipment for milk and dairy products manufacturing, while 39% of specialists were interested in cheese production equipment and technologies, and 38% were searching for packaging and packaging materials.
It is worth noting that 59% come to DairyTech to look for new suppliers and business partners. 27% of those can tap into procurement budgets exceeding 50 million roubles.
And so, participation in the Exhibition is a unique opportunity for foreign suppliers of production equipment, packaging and ingredients to show their products and find new partners, and possible execute new contracts directly at the Exhibition.
The 22nd International Exhibition of Milk and Dairy Production Equipment will take place 24–26 January 2024 in the Crocus Expo International Exhibition Centre, Pavilion 1, Hall 4.
