Region/Countries: Europe, Russia Industry: Food and Beverage Date: May 2019

Why this is important to Wisconsin businesses: Wisconsin manufacturers can supply equipment to the world's eighth-largest food market.

The Russian food market is ranked eighth in the world. The annual turnover of food products reaches 27.5 million tons and beverages (alcoholic and non-alcoholic) reaches 26 billion liters.

Manufacturing of food processing machinery and equipment is an important industry aimed at meeting the growing needs of food production. The market volume in 2016 amounted to more than $863 million.

The largest market segments are:

  • Equipment for the production of food products (34% of the total volume in 2016, including 6% for the milling industry and 5% for the dairy industry)
  • Packing and weighing equipment (34%)
  • Equipment for animal husbandry (20%)
  • Refrigeration equipment (11%)

The highest growth rates since 2012 have been seen in the segments of fish processing equipment (4x growth), the dairy and sugar industries (2.1x growth) and the baking industry (1.8x growth). The largest positive trends in the market have been seen in equipment for filling and bottling. Negative trends have been seen in terms of equipment for animal husbandry and poultry meat processing.

Food manufacturing and processing companies meet much of their demand with foreign equipment, which is typically more technologically sophisticated and productive than Russian-made equipment. The share of imported equipment in 2017 was 87%. Among the market segments with a high share of foreign equipment: equipment for the meat processing industry, including poultry (94% in 2016); equipment for the oil and fat industry (90% in 2016); equipment for the sugar industry (81%); packing and weighing equipment (79%); and equipment for the dairy industry (70%).

The segments with the highest share of Russian-made products include bakery equipment (65%), equipment for catering and trade (64%), refrigeration equipment (43%), equipment for industrial hygiene (41%) and equipment for livestock (40%).

The high share of Russian equipment in the baking industry is due to the active growth of the mini-bakery segment, which creates demand for low-capacity equipment and service opportunities, which is easier for Russian companies to fulfill. In higher-volume segments with more standardized products, foreign manufacturers have a cost advantage provided by economies of scale.

The main suppliers of equipment to Russia are large European manufacturers, in particular from Germany (27% of total imports in 2016) and Italy (23% in 2016). In addition, imports of equipment from China are growing (from 2% in 2014 to 4% in 2016), due to the price advantage of Chinese products as well as the opening of factories of European and American manufacturers in China.

The wear rate of machinery and equipment for commercial food industry organizations in 2016 was 61.6%. The highest degree of wear technology is seen in the following industries:

  • Beer production (77%)
  • Production of mineral waters and other soft drinks (72%)
  • Malt production (72%)
  • Baby food and dietary products (69%)
  • Pasta production (67%)
  • Production of spices and seasonings (66%)
  • Production of margarine products (64%)
  • Tea and coffee production (64%)
  • Production of bread and flour confectionery non-durable storage (63%)
  • Processing and preserving of potatoes, fruits and vegetables (62%)

The lowest rates of equipment wear are seen in the following sectors: production of finished animal feed (49%), sugar production (49%), production of vegetable oils and fats (52%) and processing and preserving of fish and seafood (53%).

Thus, since the dependence of the food industry on imported equipment is quite high and is expected to continue in the coming years—and due to the high rate of equipment wear in the food industry—Wisconsin companies have ample opportunities to supply their products in all the above-mentioned food equipment and machinery segments.

One of the recommendations for entering the Russian market is visiting industry events. The largest of these is the Agroprodmash exhibition, which will be held in Moscow from Oct. 7-11, 2019.