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15 Oct, 2007 11:56

Cheese sales stall as dairy prices rocket

The price of some cheeses have risen by as much as 13 per cent in the past month as inflation continues to hit Russia's economy. To counter the problem, the Trade Ministry is pushing for a cut in import duty on dairy products from 15 down to 5 per cent.

The growth of the Russian cheese market has slowed from more than 40 per cent annual growth five years ago – faster than any major market in Europe – to just 6 per cent over the last year.

But industry watchers see no surprise in that.

The great variety of cheeses common in Mediterranean nations like France and Italy is still a rarity on Russian supermarket shelves. Russians do not eat that much cheese. On average they eat only a fifth as much cheese as their European and American counterparts.

Historically, Russians consume cheaper cheese substitutes, like cottage cheese and other solid dairy products.

They also tend to buy lower-priced cheeses, with 43 per cent of the market held by brands priced under $US 5 per kilo.

Only 11 per cent of consumers can afford expensive brands priced over $US 8 per kilo.

Russia doesn't produce most kinds of cheese that are popular in Europe – all exotic types with mould, fruit and vegetable ingredients. They fall into the elite segment but the average incomes are not oriented to the elite products across the country.

The limited domestic market reduces the chances of Russian cheesemakers of competing globally.

Vladimir Korsun, General Director of the Karat factory, which focuses on soft cheese and cheese spreads, says this sector of the domestic cheese market is probably the only one that could compete globally.

“There are not enough facilities to produce hard cheese in Russia yet. Reconstruction is underway now, but so far only about 5 factories have been refitted. When this number increases to 105, then Russia will be able to compete successfully,” he believes.

With domestic production at such a low level and incomes rising, the Russian cheese market has a great potential for growth.

However, in order to reach the standard of the industry's world leaders, the first step is to get the Russian consumer to nibble more cheese, and get a taste for more expensive flavours.