Why this is important to Wisconsin businesses: Despite the sanctions currently in place, opportunities exist to supply products not subject to sanctions, such as tea, coffee, wine, beer, spirits, baked goods and candy.
Russia’s $25 billion import market continues to hold plenty of potential for international producers. In July 2017, Russia announced it was extending its import ban on EU produce and doing the same for food and drink items from the U.S., Australia, Norway and Canada. Those sanctions, in place since 2014, will now run until at least the end of 2018. There is some indication that the sanctions may be lifted, in part or in full, for U.S. products.
There are several product groups with large markets in Russia that are not subject to the sanctions:
- Tea and coffee ($1.07 billion)
- Wine ($728 million)
- Beer ($127 million)
- Spirits ($683 million)
- Baked goods ($249 million)
- Confectionery ($481 million)
Organic food is rising in popularity among Russian consumers. Sales reached $250 million in 2017, as Russians begin to turn away from processed foods. At present, roughly 3 percent of the Russian population regularly buys health foods and organic produce—a market of 4.5 million consumers.
Fruit and vegetable consumption is increasing nationwide. In 2017, the average Russian ate 63 kg of fruits and berries—an increase of 1.6 percent from the previous year. Vegetable consumption grew 0.9 percent in the same period.
Russia is the world’s biggest importer and fourth-largest consumer of tea. 94 percent of Russians drink it regularly. Tea is heavily ingrained in Russian culture—but coffee may be taking over as Russia’s hot drink of choice. Throughout the Russian Federation, coffee consumption has doubled since the year 2000, and now stands at 1.7 kg per person per year. Imports off coffee are rising too: from countries like Vietnam, Brazil and Italy (now an EU country under sanction), Russia imported coffee products worth $517 million in 2016—an increase of 7.4 percent over the prior year. In keeping with the overall trend of health-conscious eating and drinking among Russians, organic coffee and tea are among the top sellers. Collectively, Russia’s tea and coffee imports are worth over $1 billion a year.
The biggest issue facing Russia’s food and drink industry in recent years has been a slowdown of the national economy. However, the economic situation has greatly improved and in 2017, the World Bank declared Russia out of recession and back in growth mode. For the general population, that means more money to spend on imported or luxury items. Food retail sales have been expanding in recent years, with top retailers like Dixie, X5 and Lenta posting double-digit growth rates in 2017, suggesting that increased consumer confidence is fueling grocery sales.
Western-style mass grocery retail models are spreading steadily across Russia, and it is likely that this mode’s dominance will continue. In 2017, 68 percent of all Russian grocery outlets followed modern retail operational standards, and traditional street markets were rapidly losing ground. Soft discounters (i.e., chains that run convenience stores with deep product ranges) account for 22 percent of modern retail outlets and are the fastest-growing food retail segment in Russia. The country has 112 soft-discount stores per million population—the third-highest density in Europe.
WorldFood Moscow, held in September, is Russia’s leading food and drink exhibition. The trade show features over 1,400 exhibitors and more than 28,000 visitors from 89 countries, and is a recommended venue to meet new and existing clients and customers and grow sales to the Russian market.