March 23, 2010
Russian dairy to work for competitive edge
Soaring demand for competitively priced products from cost-conscious consumers has caused Russian dairy producers to struggle against cheaper exports from Belarus, Ukraine and EU countries.
International dairy producers such as Valio of Finland and Arla of Denmark have reported a significant rise in sales for 2009, both targeting at consumers who are increasingly switching away from the premium market.
Russian suppliers, in contrast to foreign suppliers, have suffered a fall in output due to seasonal decline in milk production and sudden shortages of milk powder. Furthermore, the technical regulations introduced have created some setbacks where local dairy producers feel reluctant to change the labelling of their products in accordance with the new standards. Market leader Wimm-Bill-Dann has reported a massive drop in profit to just one-third of 2008 levels.
This month, the Russian Dairy Union, which includes the main Russian dairy processors such as Wimm-Bill-Dan, Unimilk, and Danone, among others, also failed to come to an agreement on a proposed minimum price for milk in 2010.
In response to consumers' diminishing spending power, companies such as Danone have introduced price cuts and switched their focus from 'value-added products' to new discount lines. However, market analysts have commented that milk processors will need to maintain their focus on nutritional functionality and convenient packaging in order to retain their consumer base.
