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Food safety of Russia and talks about import substitution

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Food safety of Russia and talks about import substitution 27 April 2016,16:52

(April 27, Tatar-Inform, Maxim Kirillov) Russia's economy is not experiencing the best of times. Many experts attribute the economic instability with dependence of some sectors on foreign supplies. Judging by the repeated speeches of Russian politicians in the media, this is true and the country needs import substitution. Using this combination of words has become fashionable and even prestigious, as it was with everything ‘innovative’ a few years ago. However, it often happens that import substitution issue becomes an occasion for jokes in a usual manner for the Russian people. But is this really so? Has our country reach any significant progress in this during last years?

Leading economists define import substitution as an economic process of providing end consumers production directly within the country by local manufacturers.

Analysts say that in the current economic circumstances, Russia needs pursue import substitution policy in several sectors. Thus, this process occurs in some industries faster than the other. Accordingly, the Russian import substitution flows with completely different speeds in different sectors. One active area of import is food products.

 

The food embargo on the West European suppliers has become a great incentive for domestic agricultural producers. Our farmers received an amazing opportunity to proceed unprecedented import substitution, because the list of prohibited products is quite broad, involving dairy products, fruits, vegetables, nuts, meat. The volume of trade turnover between Russia and Western countries on certain categories of goods valued at billions of dollars.

Definitely, fake competition may occur, when same illegal goods continue to come from not prohibited countries. However, despite the alternative, the government is doing everything possible to focus precisely on import substitution in the domestic agriculture. Experts believe that everything depends on how effectively Russian farmers will build cooperation with outlets.

The latest data of the Federal State Statistics Service says, there is a positive trend in these relations. Thus, a report on production of key import-substituting foods informs that since 2010, there has been a steady increase in meat production.

At the same time, another frustrating statistic is reported. For instance, there is a decrease of 29.3 percent in fresh or chilled fish, 5.7 percent in sausage products. However, looking at the whole picture, analyzing the data for several years, shrinking categories are largely growing through the time. Production of cream has increased since 2010 from 80.6 thousand tonnes to 121 thousand tonnes in 2015.

Basic livestock products in our country, cattle and poultry for slaughter, constituted in 2015 104.2 percent of 2014, the same reffers to in vegetable production. Imported foods structure is probably the main in import substitution development. The import drop is observed almost everywhere. For example, there was a 26.7 percent decrease in fresh and frozen meat import, poultry meat decreases by 44.2 percent, butter -37.3 percent, apples- 16.2 percent. It should be noted that some unwanted growth of imports of certain product, such as palm oil, is observed (imports increased by a quarter).

In general, the share of imported food products in retail has been steadily declining from 36 percent in 2005 to 28 percent in 2015, according to a recent poll of the Public Opinion Fund dated March 20, 2016.

Russian nationals have been asked: "In your opinion, are there more domestic or imported foods in local stores?" As much as 45 percent (plus five percentage points since August 2014) of the respondents answer that they notice more domestic products at stores; 27 percent of Russians say about an equal number of those and that goods (minus three percentage points); and only 15 percent of residents see mostly imported food in stores.

It is gratifying that most of the Russian population believes that the quality of domestic products is higher that the overseas (39 percent) or, at least, it does not yielding them (37 percent). Foreign products are considered the best by a minority of Russians.

Regarding price matters, more than a third of Russians say that local products are cheaper than foreign analogues. A small difference is noticed by 35 percent of the population. Another 16 percent think that domestic products are still more expensive than imported ones. Thus, based on the statistical official data of recent months and the results of the latest polls on import substitution in Russia, it can be concluded that almost the absolute majority of Russians positively assesses the  import substitution policy.

Under the current conditions, large retail chains managed to promptly respond to the sanctions policy, refocusing their portfolio on the domestic producer. For instance, according to the Pyaterochka trade network, some groups of goods expanded the share of Russian foods two-three times over the past two years. Particularly, Russian producers share in ‘hard cheese’ category went up to 71 percent. The range of meat in Pyaterochka includes 100 percent of Russian production, Russian cottage cheese and milk - 95 and 99 percent, respectively. All this allowed the trade network to significantly raise the flow of customers and boost sales not just of domestic products, but also those produced directly on the territory of Tatarstan.

Pyaterochka fundamentally changed the trade network. In 2013, the company launched a renovation program, renovated technical means in stores, and expanded floor space by optimizing the outbuildings.

Since the introduction of the Russian embargo, X5 Retail Group (includes Pyaterochka, Perekrestok, Karusel trading networks) has considerably contributed to import substitution, implementing local suppliers support programs and regularly purchasing goods of local suppliers. As a result, the aggregate share of domestic goods of X5 Retail Group exceeds 90 percent, reaching 100 percent in some categories. The total number of X5 suppliers exceeds 6,000, 800 of which appeared in the past year. According to the company's plans, the share of domestic producers in 2016 will continue to grow.

TB

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