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5 reasons to make Russia your next new food market

18 months on from Russia’s decision to ban $25 billion worth of food imports from the EU, US and other countries, there is still a massive need to secure new suppliers to meet demand – especially now Turkish and Ukrainian produce has joined the blacklist. This means exporters in countries unaffected by the bans have a once-in-a-decade chance to grab a slice of this huge market.
This opportunity has come at a perfect time – already the seventh-largest market in the world, Russia’s population is growing, and changes in tastes and technology opened up the sector to new suppliers and new ideas. 
Here are five reasons why selling to Russia should be your priority:

Russia is a huge country and  with a huge food market

Russia is a massive country with a massive market – it is the ninth most populated country in the world with 146 million people. What’s more, it has recently managed to reverse a decade-long population decline – 2010 saw the first increase in the Russian population since 1991, and the number has risen steadily since.
This growing population is also buying more food in certain produce areas. Consumption of meat and poultry in Russia, to take an example, is growing by 5% year on year according to the most recent government statistics.
The sheer size of the Russian market, with the ability to reach more consumers than in Japan, means it is too big for food suppliers to ignore.

Sanctions – big gaps in Russia's food & drink market

Usually, entering a market of Russia’s size and potential means competition to get your products on the shelves is fierce, but geopolitics have dramatically altered the landscape. 
In late 2014, Russia banned all imports of fruits, vegetables, meat and dairy products from the EU, the US and various other countries. Turkey then followed after diplomatic relations deteriorated. While Russia is now looking to boost its own food industry with investments in agriculture, this is not stopping the price rises caused by shortfalls in supply.
One country to fill this gap is Pakistan, which since the ban has grown exports to Russia by 14%. Serbia’s exports to Russia grew 66%, and Egypt now supplies 11.4% of all Russia’s food imports as of May 2015. Latin American exporters have also been getting involved – Chile, an important seafood supplier, has grown exports to Russia by 11%, Argentina increased its meat supplies to Russia by 25% in 2014, and Brazil’s beef exports to Russia grew by 10% in the aftermath of the ban.
The year before the bans were introduced, Russia spent $25.2 billion on food imports in the categories affected. With sanctions reconfirmed this autumn for at least another year, there are still opportunities for new suppliers in new markets to get a slice of this spending.

Russian tastes are becoming more exotic

Finding new import markets is not the only reason Russia is expanding its supply network. Russians have always had international tastes – you cannot move in Moscow for sushi restaurants – but now suppliers of more exotic products are seeing Russia as an invaluable market. The first cargo of buffalo meat from India hit the shelves in Russia in March 2015, and South African farmers signed deals at the WorldFood Moscow exhibition directly after the import bans to export ostrich meat to two Russian clients.

More shelf space as supermarket construction booms

All this new imported food needs to be sold somewhere, and a surge in supermarket construction is yet another reason to make Russia your next market. The major Russian chain Magnit opened five new stores every day in 2015, and this is on top of the 1,600 it opened last year. This shows the size of the food market is still growing and that there is plenty of space for international suppliers to start filling the shelves of these newly built stores.
International firms are not missing out either – the German discounter Tegelmann will open 150 stores in Central Russia by 2020 at a cost of $540m, as well as expanding its network nationwide. Auchan also plans to spend $520m doubling its Russian network by 2018.
With consumer spending under the Russian average, Central Russia is a particularly good place to do business, and retailers are rushing in. As well as Tegelmann and Magnit, the Russian retailers Dixy Group and X5 have both boosted their presence in the region this year, and Auchan will spend $70 million on building 12 stores and a distribution centre outside Moscow.

E-commerce up in Russia

The rise of online grocery shopping in Russia is another catalyst for the growth of its food sector. Russia has the most internet users in Europe, and this is feeding a surge in food e-commerce – a study from Euromonitor estimates that online sales of food and drink in Russia will grow 11% year on year up to 2018.
Online shopping has been unfamiliar territory for many Russians, but the rewards for diving into the sector can be big. One Russian online retailer, Azbuka Vkusa, tripled the size of its warehouse this year to meet online sales demand, and its customers spend four times as much online than they do instore.
While logistics issues can still pose a problem for the home delivery market in the capital and elsewhere, this growth in online sales is another factor driving demand in Russia’s booming food industry.

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Tony Higginson

International Sales Director


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