INTERVIEW ▶▶▶ Artem Belov, general director, Soyuzmoloko


Russian dairy industry plagued by uncertainty


The investment attractiveness of the Russian dairy industry remains high and is projected to stay this way in the coming years, as the country’s prospects are bright due to rising consumption of dairy products per capita and increasing exports of dairy products. However, the industry is struggling in many ways.


BY VLADISLAV VOROTNIKOV N


ew government regulation could undermine profitabil- ity and negatively impact the processing segment, ac- cording to Artem Belov, general director of the Nation- al Dairy Producers Union in Russia, Soyuzmoloko. Here


Belov tells us more about the dairy industry in Russia.


What are the main trends in the Russian dairy industry? The picture is different for the raw milk and processing segments. For the raw segment, the last five or six years were rather success-


The picture is different for the raw milk and processing segments.


ful, with sustainable growth. Since 2014, milk production in Russia has increased by 2.8 million tonnes with compound annual growth rate of around 3%. The EBITDA margin at some point reached 50%. This is a very good ratio that secures prerequisites for the further development of the segment. So, the development dynamics in the raw milk segment are very positive. In the pro- cessing segment, things are a little bit more complicated.


18 ▶DAIRY GLOBAL | Volume 7, No. 2, 2020


With the food embargo in 2014, the Russian government re- moved all European dairy products from the domestic mar- ket. How has Russia managed to replace those supplies? Our estimates show that self-sufficiency in the Russian dairy mar- ket climbed from 75% in 2014 to 80% in the past year. The intro- duced sanctions and a twofold slump in the exchange rate of the Russian ruble created a very good atmosphere for the Russian dairy industry, hampering import supplies. If we look back at 2014, in some segments import products accounted for 50% or more of overall sales on the Russian market. Thanks to that during the past years we had dynamic development of butter, cheese, and milk whey production.


Do you expect consolidation in the Russian dairy industry? The trend of building big milk farms is common over the past 15–20 years globally and for the past 10 years in Russia. The com- mon practice is building production complexes for 1,000 head. Today, 4% of the farms produce 50% of the milk in Russia, which clearly shows that we are going through some consolidation and amalgamation processes. This trend is likely to continue. This doesn’t mean there won’t continue to be backyard farms. Some


Basically, due to a sharp rise in price for raw materials and a pro- duction cost hike following some regulatory actions, the situation in this segment is not that smooth. An aggravating factor is the purchasing power of the Russian population, which has not grown over the past six years. In general, demand is not growing, so milk processors are not in a very strong position.


PHOTO: VLADISLAV VOROTNIKOV


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