less than 0.8% of total milk production. Among milk proces- sors, the leading position is shared between Danone (France) with 7.5% and PepsiCo (USA, known as Wimm Bill Dann for dairy products in Russia) with 7.2%, Molvest (Russian) 2.3%, Kosmos Group (Russian) 2.2% and other companies with less than 2% market share. This means that the dairy market is mostly shaped by a few foreign companies, government companies and numerous small local companies that cannot compete in price with domestic or international companies. This also means that the dairy products on the shelves of most popular chain stores contain mostly products from Danone, Wimm Bill Dan and EkoNiva. Aside from price, an un- derdeveloped technological base is also an issue for the Rus- sian dairy market. Producers need efficient technologies to produce cheaper products, and most production plants need modernisation. Moreover, many producers are dependent on imported components, like the milk itself. In order to develop the Russian dairy market, producers need technologies that can produce larger amounts with better quality and that use local components for lower prices; they also need a developed value chain. It is also important to have continuous development, especially at the market es- tablishment stage, because of the slow return on investment and low-margin branches such as kefir and milk production. A good way to develop a stable dairy sector is to bring for- eign investors into the Russian market. EkoNiva is a good example of a foreign investor that not only produces diverse dairy products and milk, but also has established its own dairy farming. The strategy of EkoNiva to develop a cluster for producing “made in Russia” dairy products allows local
companies to profit by being integrated in some parts of this value chain.
Major improvements Nevertheless, there are some major improvement trends in the Russian dairy market. Data from 2019 and 2020 demon- strate that many local companies grew more than 30% in terms of production, and local cheese producers showed es- pecially good growth. Russia also gained special permission to export dairy products to Japan, Vietnam and China with a simplified certification process. Export of milk and milk prod- ucts from Russia continues to grow since 2018: US$ 294 mil- lion in 2018, US$ 325 million in 2019 and US$ 380 million in 2020. New markets such as Japan, Vietnam and China may significantly raise export volume. Consumption trends in the Russian dairy market are mostly driven by growing awareness of healthy food. Unfortunately for milk producers, many customers have eliminated or sig- nificantly reduced milk products from their diet. In 2019, con- sumption of milk and kefir decreased by 2.5% compared to 2018, while demand for cheese and yogurt increased. More- over, demand for products with healthy additives is growing globally. Western companies are most successful at taking ad- vantage of this trend, as they carefully follow the preferences of customers. For European milk processors, the Russian market provides significant opportunities of new customers, low competition in the market, an approachable labour force and government subsidies. Slow but stable growth in the last three years in the Russian dairy market indicates good invest- ment opportunities and readiness for further development.
▶ DAIRY GLOBAL | Volume 8, No. 1, 2021
Export of milk and milk prod- ucts from Russia continues to grow since 2018: US$ 294 million in 2018, US$ 325 million in 2019 and US$ 380 million in 2020.
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