This is the best prospect industry sector for this country. Includes a market overview and trade data.Last Published: 8/11/2017
Overview
Food production and processing is one of the key sectors of Russia's economy. The constantly fast pace of life in Russia led to a strengthening of demand for products suitable for consumption on-the-go. Easy storage and longer shelf life of packaged foods make them more attractive to the modern consumer. Modern retail formats have been rapidly developing in Russia.
Globally, Russia has the eighth largest market of packaged food products with 27.5 million tons of trade volume and drinks (alcoholic and soft) with a trading volume of 26 billion liters.
The growth of personal incomes in Russia until 2014 provided a higher standard of living and a favorable consumer climate. Now that real incomes are falling, consumer spending has dampened. Market researchers expect that in 2017, sales may begin to grow again. The growth in demand for packaged products is expected to reach 7.7%, which would mean 29 million tons by 2020. This long-term projected growth is the basis for the positive forecasts for the packaging market.
Over the past 10 years, the import of equipment for food processing and packaging has doubled in Russia. The food and processing industry has an 11.5% share of the total production in Russia. It covers more than 30 industries and includes 43,000 active organizations. This industry is attractive for foreign investments, which has exceeded 900 billion rubles in the last 5 years. The positive dynamics of the food and processing industry influences the development of the market of food production equipment.
In addition, government projects in the food sector and agriculture offer U.S. suppliers new commercial opportunities. The domestic consumer goods and packaging industry is under pressure to improve its competitive edge so as to substitute the decline in imports. The Russian government is highly interested in import substitution of food production. The ban on imports of food from a number of countries means that the Russian food industry will continue to develop and expand, which requires investment in modern technology for processing and packaging.
The current development of the Russian food processing sector is under the influence of the economic downturn in the country. On August 7, 2014, Vladimir Putin signed a decree banning a long list of agricultural products from the United States, Canada, the European Union, Australia and Norway in reaction to economic sanctions against Russia. The list includes red meat, poultry, dairy products, fruit, vegetables, nuts and many other products.
To meet growing consumer demand for food products, Russia had to import large quantities of food. For some time, the Russian government tried to reduce its dependence on imported food products. Given the prohibition of the Russian government on the import of a number of products from the European Union, the United States and other countries, introduced in early August 2014, Russia is now investing more in the development of its food industry, which should have a positive impact on demand, as well as on modern processing and packaging equipment.
Key factors that influenced the development of the market situation in 2016:
• The downward trend in oil prices, the weakening of the ruble, large fluctuations of the ruble exchange rate
• Reduction of income of the population;
• Decrease of production; increased costs of local production due to the import of spare parts and materials
• The reduction of retail trade turnover;
• High key rate of the Central Bank and high interest rates on loans
All these factors influenced the gradual slowdown in demand for food processing and packaging in 2015 and 2016, but could pick up in the coming years, with signs that the economy is set to grow in 2017.
The low exchange rate of the ruble, which has raised the cost of machinery and equipment imports and high-interest rates on loans, has had an impact on the sales of foreign suppliers. However, a high dependence on imports of packaging equipment will remain in the future.
Recently held in Moscow, Interplastica and Upakovka trade shows, as well as the International Exhibition of Plastics and Rubber, reflected the improvement of the Russian packaging market. About 800 exhibitors from 33 countries presented their novelties to 23,000 visitors from Russia and neighboring countries (in 2016 there were 20,900 visitors). Western companies are expecting an upturn and consider this a confirmation of their policy of maintaining business contacts in difficult years. This positive outlook relates in particular to the plastics and packaging industries, as well as the food processing industry. The great demand for foreign technologies in Russia remains, and there is a special need for further optimization of the production of consumer goods, food, and packaging. According to VDMA research agency, the volume of imported food processing and packaging equipment in Russia amounted to about $2 billion.
Read more: https://www.export.gov/article?id=Russia-Food-Processing-and-Packaging
