Iran has once again made clear it looks to profit from the boycott, wanting to increase its market share in Russia to 10%. According to the Iranian secretary of the Food Industries Association, Kaveh Zargaran, the boycott offers a “golden opportunity”. He sees opportunities for the export of apples, for instance. “Iran has a surplus of apples,” Zargaran told an Iranian news site. Since Russia imported many apples from the EU, Iran now has to be able to profit from that, he thinks.
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Price increases since beginning 2015
According to figures from the Russian Ministry of Agriculture, the price of cabbage has gone up by 49.5% between January 1 and February 16, to 21 roubles (29 cents) per kilo, making cabbage the product with the fastest increasing price. Onions got 29.1% more expensive. The price for onions is virtually equal to the cabbage price. Potatoes yield 19.7 roubles (27 cents) per kilo, an 18.8% increase. The carrot prices went up by 18.3% to 25 cents per kilo.
Russia to pay subsides to fish producers to keep pollock and cod in domestic market
The Russian government will provide support to leading domestic fish producers in exchange for increasing supplies in the domestic market. The subsidies aim to overcome the price differential producers can get selling fish for export, and will also pay companies not to raise domestic prices.
Up to seven Russian leading fish producers, based in the Far East, among which are Preobrazehensky Base of Trawl Fleet, Nakhodka Active Marine Fishery Base, OJSC Dalmoreproduct, Intraros, Roliz, JSC Yuzhmorrybflot and JSC Yuzhmorrybflot, may receive financial support from the state this year.
In the case of Nakhodka Active Marine Fishery Base, at present the company remains one of Russia’s largest producers of squid and pollock, a significant part of which, however, is supplied to abroad. According to state plans, the provision of financial support, the amount of which is not disclosed, will allow the company to increase supplies of its products to the domestic market and to freeze a further increase prices for it for local consumers.
In addition, the provision of state funds will allow the company to complete modernization of its fishing fleet.
At the same time, in the case of Preobrazehensky Base of Trawl Fleet, being one of Russia’s largest producers of pollock and herring, the company, so far, has been mostly focusing on the supplies of its fish on the foreign market. The company currently also holds quotas on the production of urchin, shrimp and crab, the majority of which, so far, has been also supplied to abroad. However, according to an official spokesman of Rosrybolovstvo, such a situation may change already in the near future, as the company has already promised to increase the supplies to the domestic market, in the case of the provision of financial support from the state.
A significant part of funds will be also provided to Yuzhmorrybflot, one of Russia’s largest producers of canned fish and the country’s largest supplier of canned Pacific saury, one of the most important products for Russian poor people, prices for which are sometimes regulated by the state.
There is also a possibility of the provision of state support to some Murmansk cod producers, and in particular Murmansk Fish Factory, 70% of which cod production, so far, has been exported to abroad.
At the same time some Russian analysts have already criticized the decision of the state to include Intraros and Roliz in the list of companies that will receive state subsidies, due to their affilation with Russian Fishing Company, and Karat fishing enterprise respectively, both of which are mostly concentrated on fish exports.
Retail chain Okey launched its online store
Russian retail chain Okey launched its online store. Now, there is only one point to pick up orders in one of the hypermarkets near Moscow (in Putilkovo). In the future, the retailer plans to deliver orders directly to apartments or offices. Online store assortment is based on the assortment of Okey hypermarkets: food and non-food products.
X5 Retail Group launched online store E5.ru. However, the range of its online site was not based on the assortment in X5 stores and consisted mainly of non-food products. In the beginning of 2014, the assortment of E5.ru totaled 1.8 million non-food items, its share in the revenues of X5 Retail Group amounted to 0.3%. But late last year, X5 decided to close its online store.
Previously, Okey reported the increase in revenues by 8.9% up to 151.9 billion rubles in 2014.
Retailers firm prices for socially important products
Retail chain Metro Cash & Carry firmed prices for socially important goods – milk, bread, cereals and macaroni till mid-April. Previously, retail chain Dixy declared the price freeze until March 9. It concerned buckwheat, rice, millet, macaroni, sunflower oil and butter, flour, dumplings and frozen fish. In addition, the company maintains a minimum trading margin on some items like sugar, salt, cereals, oil, eggs.
Retail network “Okay” firmed prices for some socially important goods at the end of November last year.
Direct import may be banned for Russian food retailers
Group of deputies and senators are developing draft of the bill, that may prevent Russian food retailers from direct imports from abroad. According to the creators, chains wrongfully prefer foreign suppliers to domestic ones, which creates damage to the Russian farmers. Direct import by retailers are executed by larger groups, which allows them to reduce prices on shelves. Analytics predict price increase, if the law comes to power. Spokesman for the initiative is Sergey Lisovsky, deputy chairman of the agri-food policy and environmental management committee at the Federation Council of the Russian Federation.
South Africa main supplier citrus to Russia
South Africa has become the main supplier of fruit, particularly citrus, to Russia. About a quarter of all oranges on the Russian market come from South Africa. Since the trade between the nations was initiated twenty years ago, not a single shipment has been rejected on phytosanitary grounds, according to Mikhail Fateev, head of the food and agriculture department of the Russia-RSA Business Council.
South African growers may have a problem, Technical Regulations for “Food production labeling” introduced by Eurasian Economic Commission and due for full enforcement in Russia from February 15, 2015, are difficult, expensive and in some cases impossible for implementation by SA Fruit industry. It is technologically not possible to carry out EAC labels sticking in ports of shipment without destruction of pallets prepared for long oceanic travel. Neither it’s possible to stick labels on cartons at packing houses: Fruits are packed for exports without correlation to a specific market.
Russia postpones lifting sanctions
Russia postponed the plan to partially lift the ban on pork. The Russian inspection planned on lifting the restrictions on the export of meat, meat products and potatoes for France, Hungary, Italy, Germany, Denmark and the Netherlands, but those plans have now been put on hold. The head of the inspection says Russia wanted to take a step towards resolving the conflict, but the EU does not appreciate this step. The European Commission says there’s been no progress in the talks with Russia, and that there hasn’t been contact with Russia. Last week, the EU extended the sanctions against Russia by half a year.
Retail development in 2015
Most leading retail companies have already announced their plans for the current year. Magnit presented the most ambitious program of the development. Initially, the retailer planned to open 1,100 convenience stores, 80 hypermarkets and Magnit Semejnij stores and 300-350 cosmetic stores, now they are planning to launch 1,200, 90 and 800 stores respectively.
Auchan plans to open 7-8 stores, investing 10 billion rubles into the development of business in Russia this year. Metro Cash & Carry is going to open the same amount of stores this year as they did the last year (in 2014 they opened seven stores). Neither Metro nor Auchan have not change the plan of developmet for the year.
Lenta is going to launch at least 10 hypermarkets during the first half of 2015 . This is more than in the first half of last year, when the company opened five hypermarkets and four supermarkets. Their plan to double the retail space in three years (from the end of 2013 to the end of 2016) remains in force.
Dixy did not report that their development plans would change this year. Last year, in November, Ilya Yakubson, Dixie president, spoke about the opening about 500 stores in 2015.
In the end of the last year, Tony Maher, head of Okey company, spoke of plans to open more than 12 hypermarkets and to launch new project – about 40 discounters “Da!” in 2015. The start was scheduled for the spring. For this projects the retailer was going to use debt funds in the amount of 8 billion rubles. Today, the retailer intends to continue developing, but at a pace that “would be sustainable for the business and does not require significant new credits at the current rates,” – as it was stated in the report on the results of 2014.
The only company who has not announced its development plans for the year is X5 Retail Group.
Retail trade turnover to be reduced by 8.2%
In 2015 retail trade turnover will be reduced by 8.2%, according to the forecast of the Ministry of Economic Development. Even during the 90-s and the crisis of 2009, the trade was not reduced so much. The main reason is that the government has no anticrisis plan that would stimulate consumer demand. Authorities are not planning to increase the budget expenditures, and the Central Bank is not going to stimulate bank loans for citizens.
The reduce of trade turnover by 8.2% is one of the main factors of the projected GDP decrease by 3% this year, as the share of retail trade in the GDP is about 15%. According to the Russian Federal Statistics Service, in the last 25 years in Russia trade turnover decreased five times – in 1991, 1995, 1998-1999 and 2009. The biggest drop was recorded in 1995 (6.2%). In the crisis of 2009, the decline was 5.1%. All the other years there was a growth that exceeded the growth rate of GDP. In the past year, according to the preliminary data, GDP increased by 0.6% and retail trade turnover increased by 2.5%.
According to the forecast, the wages in nominal terms in the private sector will not be increased this year, and as the inflation rate is expected to be 15.8%, the real wages will decrease. Also, the government is going to reduce budget expenditures by 10% this year, in 2016-2017 – by 5%.
The officials say that consumer demand ceased to be a driver of the economic growth, and therefore, they do not try to support it.
Elvira Nabiullina, the head of the Central Bank, said in 2013 that consumer demand, driven by increases in incomes and consumer credits, was the driver of the economy in 2011-2012, but not now.
“Attempts to stimulate consumer demand led to an increase in imports, increase of consumer credits and, in fact, to fueling the inflation,” – she said. According to the head of the Central Bank, the new driver of economic growth should be investments, but investments decraesed last year and will decrease in the current year. According to Alexei Ulyukayev, Minister of Economic Development, investments in 2015 will be reduced by 13.7%.