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Trends in food retail in Russia

Grocery remains one of the sectors least affected by the macroeconomic and political situation in Russia. That’s mainly because it offers basic products of high necessity and the market’s growth is supported by the increasing sales value of large area store chains which are continuing their expansion in Russia.

Grocery remains one of the sectors least affected by the macroeconomic and political situation in Russia. That’s mainly because it offers basic products of high necessity and the market’s growth is supported by the increasing sales value of large area store chains which are continuing their expansion in Russia.

But even so, a new USDA GAIN report on retail foods in the Russian Federation says over January-September 2015, Russian retail sales turnover fell 8.5% year-on-year (in comparable prices) reaching $338 billion in value terms and food sales were down 8.3% to $165 billion.

Russia’s ban on a numerous food and agricultural products from Canada, the United States, Europe, Australia and Norway in August 2014 had a tremendous effect on grocery segment and hit retailers and Russian consumers hard. The sudden drop in food supply led to price hikes in several food categories ranging from vegetables to dairy products. “Market analysts have stated that even if Russian producers are able to replace all imports eventually, prices are not likely to ever fall back to previous levels,” the report says.

Organic, Healthy and Ready-to-Cook Products

Another trend in food retail in Russia is that busier lifestyles, particularly in Russia’s largest cities, has created steady growth in demand for products such as chilled ready meals and frozen ready-to-cook products. Supermarkets, hypermarkets, and independent grocery stores have responded by boosting their offerings of chilled and ready-to-cook meals.

Similarly, increasing health-consciousness has spurred a greater offering of healthy, low-fat, salt-and sugar-free foods, fresh exotic fruits and vegetables. High-end supermarkets have begun to develop a range of organic foods, and some entrepreneurs have tried to develop supermarkets specialising in organic produce.

Though disposable income in Russia is expected to drop along with the falling ruble and rising inflation, making all imported products more expensive for Russian consumers and causing prices for organic products to rise in the near future, Euromonitor experts estimate the category will keep growing at 5% yearly to reach $90 million by the end of 2019.

Internet retailing in Russia

The number of internet users in Russia grew 5% in 2014 to 87 million, with the biggest growth of new online customers in Russia’s regions. Indeed, regional expansion was the main driver of internet retailing expansion, as saturation in the markets of big cities negatively reflected on the channel’s overall growth towards the end of 2014.

According to a Profi Online Research study, only 17% of Russians order grocery products online. Respondents asked why they did not buy grocery items online most often mentioned doubts regarding quality and freshness – particularly for fruits and vegetables.

Source:  GAIN report RFATO028, December 9, 2015, Russian Federation, Retail Foods

Image of Moscow City 2013 by Dmitry97ken (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

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Morocco’s citrus exports on the rise

The USDA post in Morocco forecasts a 5% upturn on the previous year for the country’s orange production for a total of 918,120 tons from a planted area of about 55,804 ha. It anticipates orange exports of about 135,000 tons.

Rejuvenation of citrus orchards, improved irrigation, and increases in harvested areas are big factors in expected increases in Morocco’s citrus output and exports for the 2015/16 marketing year.

And the country’s citrus exports are also set to rise, mostly due to high demand in Russia market, as tensions mount between Moscow and Ankara, the USDA says in its 2015 Morocco Citrus Annual Report.

“The Moroccan citrus industry is planning to continue its strong focus on the Russian market this season, but warns coordination will be needed to avoid poor prices,” the report says.

The USDA post in Morocco forecasts a 5% upturn on the previous year for the country’s orange production for a total of 918,120 tons from a planted area of about 55,804 ha. It anticipates orange exports of about 135,000 tons.

Tangerine/mandarin exports are in line for a 10% boost to about 380,800 tons on the back of a 5% production increase to 1,055,241 tons from 62,181 ha.

Exports of lemons and limes should come in at about 7,200 tons. Morocco’s lemon and lime production is forecast to expand 8% to 35,500 tons on a planted area of 3,750 ha.

Source: USDA GAIN 2015 Morocco Citrus Annual Report

Image of box of Maroc brand clementines sold in Canada: “يوسفي مغربي” by عمرو بن كلثوم – Own work. Licensed under LGPL via Commons

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The Russian embargo and Turkey’s fruit and vegetable exports

In 2014, 43% of all the volume of tomatoes exported from Turkey went to Russia (336,000 tons).

Since January 2015, Turkey had exported to Russia food valued at $1 billion, or 4% of all Russia’s food imports, according to Russian Customs statistics.

The leading export products were tomatoes (292,800 t) and citrus fruit. Russia also imported grapes (68,000 t), peaches (26,000 t), apricots (28,800 t) and other fruit.

During the fruit season, the share of some Turkish products (for example, citrus) reached 50%.

In 2014, 43% of all the volume of tomatoes exported from Turkey went to Russia (336,000 tons).

“We can substitute Turkish tomatoes with those from Iran, Morocco, Israel, Azerbaijan and Tajikistan,” said Aleksander Tkachev, Russian Minister of Agriculture.

As for Turkish citrus fruit (250,000 tons imported in 2014), they can be substituted by ones from the RSA, Morocco, China, Argentina, Israel, Abkhazia and Georgia, he said.

It is possible that the embargo for Turkish tomatoes, in particular, will lead to price rises; however it is unlikely that the prices will be higher than last winter. In January 2015, 1 kg of tomatoes cost about $3; if it costs more, the demand will slump.

The government has ordered the Ministries of Trade and Agriculture to track price trends; and the Ministry of Agriculture to see how it can support Russian producers.

At the same time, the embargo does not extend to some specific products, such as lemons, lettuce, figs, etc.

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WorldFood Moscow reveals evolution of Russia’s food market post embargo

The 24th WorldFood Moscow exhibition took place in September and demonstrated the urgency of the exchange of the experience and advanced technologies of the leading world producers.

The 24th WorldFood Moscow exhibition, held in September, showed the urgency of the exchange of the experience and advanced technologies of the leading world producers.

More than 1,520 companies from 62 countries participated in the exhibition, which covered 54,600 m2. Half of the exhibitors were Russian companies.

WorldFood attracted 30,981 visitors, among them various leaders from the federal and local government, plus the heads of government authorities, industry associations, foreign missions and brand associations, as well as other guests of honour. More than 70 Russian and foreign journalists covered the event.

The national pavilions at the exhibition spanned 37 countries. Visitors to these could not only discuss professional matters, but get to know the country’s culture, hear its music and try its cuisine.

Numerous business events also took place In the framework of the exhibition. Conferences about the Russian food market, the fresh fruit and vegetables sector and the cooperation of producers with the retail sector were attended by 640 delegates. Leaders from Russia’s agriculture ministry, Rosselkhoznadzor, and from industry associations and large companies were among the speakers.

The 25th edition of WorldFood Moscow will take place in September 2016.

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Turkey is Russia’s largest partner

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About 1.13 billion tons of vegetables and 676 million tons of fresh fruit are produced per annum in the world. According to data from BAIB (West Mediterranean Exporters Union of Turkey), world fresh exports in 2014 reached US $110 billion with the largest share from bananas (9.1%), tomatoes (8%), table grapes (7.3 %) and apples (6.8%).

Turkey benefits from extensive lands and a favourable climate and is a traditionally agricultural country. The country cultivates 28.5 million tons of vegetables and 18.2 million tons of fruit. It is a world leading grower of various fresh products:

  • No. 1. world producer of figs (26%), cherries (21%), quinces (18%) and apricots (19%);
  • No. 2. producer of melons and gherkins;
  • No. 3. producer of apples, tomatoes, watermelons and mandarins;
  • No. 4. pepper producer;
  • No. 5. aubergine producer.

One of the leading world producers and exporters

In 2014, Turkey exported 3.5 million tons of fresh fruit and vegetables valued at $US 2.3 billion. Citrus fruit exports came to $ 942 million (1.5 million tons), and other fruit exports to $720 million (775,000 tons). Vegetable exports were valued at $710 million (1.1 million tons). The country is the leading worldwide exporter in:

  • No. 1. exporter of figs;
  • No. 3. exporter of lemons, mandarins and cherries;
  • No. 4 tomato and apricot exporter;
  • No. 5 orange and grapefruit exporter.

The main destination for Turkey is Russia ($938 million, 39% of total exports). The country’s other large sales markets are Iraq, Germany, Ukraine and Bulgaria.

Turkey is also the largest source for Russian imports of fresh fruit and vegetables, accounting for 17.9% of the total. Other Russian import sources are Ecuador (11.9%), Egypt (5.6%) and Spain (5.5%).

Throughout Turkey, there are 60 exporter unions. West Mediterranean Union, established in 1968, groups together exporters from 25 different sectors from the region around the cities of Antalya, Burdur and Isparta. The fresh fruit and vegetable industry is the leading sector for regional export activity.

The Mediterranean Exporter Union based in Mersin is the Turkish coordinator for the sector. It has 990 members exporting fresh products.

Egypt guarantees high quality products

“Egyptian Agriculture Service & Trade Co. (EGAST) was established 30 years ago,” said Dr. Hatem El Shalma, the company’s CEO. “We trade in onions, potatoes, oranges, and are going to do pomegranates soon. All of these are grown by our farmers, and we control all the processes and guarantee the quality for our customers.”

Last year, potato production amounted to 70,000 tons. It was traded locally, sold to processing industries (Lay’s, etc.) and exported to Russia, Europe and the Far East. Production of onions came to 15,000 tons, exported to Russia and Asia. Production of oranges was 10,000 tons, but this will double next year. They were shipped to Russia and also to Asia: China, Bangladesh, Malaysia and India. “They are a fast growing market and we are pleased with our sales there,” El Shalma said.

EGAST participates in the World Food exhibition because Russia is the largest market for sales. “It is vital to choose a reliable partner,” he said.

El Wadi, the oldest exporter from Egypt

“Our company is a pioneer in Egypt,” says Mohamed Elbialy, Export Manager for El Wadi Export Co. “It was established in 1964 and at that time had exclusive rights to export agricultural products. Russia was our main partner and remains the largest market for us.”

The basic fresh products traded by El Wadi are citrus and other fruit, onions, garlic and other vegetables. Last season, the company exported 80,000 t of oranges, 10,000-15,000 t of onions, 5,000 t of lemons, 3,000 t of potatoes, etc. “We shipped 30,000 t of fruit and vegetables to Russia,” says Elbialy. “After the introduction of the embargo, demand has grown. We also supplied 10,000 t of goods to Europe and 30,000 t to the Middle and Far East and to Asia.” Indeed, the Far East is a growing market. Pomegranates, grapefruit, strawberries, semi-dried dates and other fruit are exported on a large scale. Last year the protocol with China was signed and the company has shipped 100 containers of Egyptian goods there.

El Wadi owns 4,250 acres of orchards where Naval, Baladi and Valencia oranges are grown. Several specialized production stations have been set up in various regions of the country and equipped with modern machinery.

Thanks to its great experience, the company has become distinctive in choosing the best products, preparing and packing them so as to comply with the best international standards: ISO 9001:2000, ISO 22000, HACCP, BRC, GlobalGAP, etc.

Uzbekistan also grows and exports

The volume of Uzbek fruit and vegetables exported to Kazakhstan grew by 10% in 2014, but their exports to Russia have decreased by the same volume. “The reason is the lack of tariff preferences for our products,” states the Vice President of Uzbekistan, Rustam Azimov.  As a result, “grey” schemes are used, and re-export from Kazakhstan keeps growing. “The application of the preferences will help to reduce prices for our products.”

In the 1st quarter of 2015, Uzbekistan produced 1.3 million t of potatoes, 2.6 million t of vegetables, 163,000 t of cucurbitaceae, 840,000 t of fruit and berries and 24,000 t of grapes. There were 21,800 ha of orchards and 16,600 ha of grapes planted and reconstructed, while 264 ha of hothouses in 500 farms and 400 ha in 9,300 of subsidiary smallholdings were built.

Second wave of ruble devaluation, 27% drop in consumer spending

The official rate of the dollar in Russia grew by 10% last August. Inflation has been at 15.6 % since the beginning of 2015 while the population’s real income has fallen by 2.9%. More than 60% of the population have reduced their travel and food expenses. In fact, 65% of Russians cut down on food spending, while 27% spent less on clothes and shoes, and 17% less on entertainment.

Mexican berries in Russia, too

Berries Paradise, one of the largest Mexican berry producers, has also begun to supply the Russian market, besides Japan and other Asian countries. While expanding its destinations, the company is going to enter the markets of China and Dubai. “Russia is an important target market for us,” said international sales manager Ana Blanca Solis. “That is why we are participating in the World Food exhibition. We have observed Russian interest in our berries and hope to find new customers.”

Berries Paradise is a group of companies producing and exporting blueberries, raspberries and blackberries. “Last season, we delivered over 4 million boxes,” she said. The crop is available from mid-September till June. The berries are exported mainly to the US, Asia and Europe, including the Netherlands, Germany, Spain and the UK.

Organics also in more demand in the East

“We aim to show people a different way of life; a life in harmony with nature,” said Milena Tsvetanova, from the purchasing department of Balev Bio Ltd, one of the leading Bulgarian companies specialised in importing organic food and non-food products. The company cooperates with more than 400 suppliers, mainly from Europe, and its range of products includes more than 4,000 items.

The company owns and runs three organic shops under the Balev Bio Market brand in the biggest cities in Bulgaria: Sofia, Varna and Plovdiv. An online store was also launched recently. “Our clients are the biggest supermarket chains, specialist organic food shops and health food stores, restaurants, etc.,” Tsvetanova said.
A fifth of its turnover comes from fruit and vegetables, its assortment of which covers 300 items. The most popular products are bananas, citrus, apples, avocadoes, tomatoes, cucumbers, carrots, etc. At the beginning of summer, Balev Bio offered its customers exotic fruits like mango, papaya, mangosteen, passion fruit, rambutan, red banana, longkong, etc. In the summer season, watermelons, melons, figs, peaches, apricots, tomatoes, cucumbers, peppers, courgettes, lettuces etc. were sold.

To promote their products, Balev Bio uses social networks, signboards and tastings in shops to provide as much information as possible about the benefits of its products.

The Bulgarian organic market for fruit and vegetables is not big, however interest in organic consumption has been growing slowly but steadily.

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WorldFood Moscow

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Georgia increases its fruit and vegetable export potential

From 2009-2013, exports of fresh vegetables and fruit from Georgia grew by 17% in volume to reach 101,000 tons. Over the same period, they also doubled in value to exceed US$ 200 million.

Georgia has started actively increasing the export potential of its fruit and vegetable industry, according to APK-Inform Agency and based on official statistics for the country.

From 2009-2013, exports of fresh vegetables and fruit from Georgia grew by 17% in volume to reach 101,000 tons. Over the same period, they also doubled in value to exceed US$ 200 million.

In many ways, this trend reflects a reorientation of Georgia’s fruit and vegetable sector towards exports to the EU due to strained relations with Russia. This reorientation has seen the EU share of general exports from Georgia grow from 12-20% in volume and 50-57% in monetary terms.

While showing a fairly modest share in the volume of export supplies, European importers provide more than half of all foreign currency revenues to the Georgian fruit and vegetable industry.

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Image: “Georgia proper shown in dark green; areas outside of Georgian control but claimed as part of its sovereign territory shown in light green” by Chipmunkdavis [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

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Exporters of fruit to Russia urged to demand full payment on loading

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South Africa’s Citrus Growers’ Association (CGA) has warned fruit growers of risks of defaults by Russian importers.

Describing the current economic situation in Russia as ‘extraordinary’, the CGA said it is one that demands “extraordinary measures to be taken to prevent losses to SA fruit industry.”

In a message from the CGA representative in Moscow, it advised SA exporters not to ship fruits without 100% payment on the date of loading. “In our view as experts on the spot such condition will be understood and positively accepted by prudent Russian importers. For importers commodities now present better guarantee against losses, than cash in Rubles.”

Forecasts of further decline of oil prices, the present devaluation of Chinese currency, economic problems in Far Eastern countries, and unfavorable news from the New York Stock Exchange are factors expected to see the strengthening of the USD and further weakening of the Ruble, it said.

“So far retail has been loyal to their word given to government to keep prices stable. But with weakening of the Ruble purchasing power in the international markets they will not be able to subsidise the prices, and first of all of imported commodities,” it cautioned.

source: CGA FROM THE DESK OF THE CEO (33/15) 28 August 2015

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Healthy lifestyles and exoticism at the Russian retailer 7th Continent

7th Continent, one of the largest Russian retailers, promotes healthy lifestyles and a large variety of exotic and flavorsome fruit and vegetables.

7th Continent, one of the largest Russian retailers, promotes healthy lifestyles and a large variety of exotic and flavorsome fruit and vegetables.

7th Continent was one of the leading food retailers that detected the all-year round demand of Russian consumers for fresh fruit and vegetables, and not only during the season period. “According to our researches, buyers have become more discriminating,” said marketing director Alexey Zakharkin. “Some economise by choosing the cheapest goods, others keep looking for novelties and exotics, but both categories of consumers pay attention to nutritional benefits. That is why we keep diversifying the assortment of our fresh category, we increase the quantity of our suppliers in order to offer our customers a large choice and good quality of products at reasonable prices.”

Supporting this strategy, a model of a fresh market (Vegetable bazaar) was created in 7th Continent supermarkets and Nash hypermarkets. From the very entrance, a customer is directed to the fresh department with counters of fruit and vegetables. Buyers thus not only easily find what they need, they are also stimulated to purchase healthy food.

Sweet potatoes, durian and spicy herbs

Indeed, one can find anything at the Vegetable Market, from potato to wheat sprouts; from 10 varieties of apples to flavoured durian. There are fruits and vegetables from every part of the world; at any season, one can treat oneself with raspberry and bramble, melon and watermelon, and any other fruit loved by Russians but only available in season. There is a special gourmet zone with fresh spicy herbs, greenery and lettuce.

Due to the short shelf life of fresh produce, the managers of 7th Continent pay close attention to their quality, checking it at every stage of sale. In each store there is a quality control service and every two hours the assortment is inspected to ensure a “fresh abundance” display.

On the wider horizon, the retailer establishes partner relations with Russian and foreign farmers and producers. To ensure the quality of goods offered, the relevant manager visits the plantations and the production of potential suppliers, examining the safety, wholesomeness and taste of the products before concluding the contract.

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Hyper, Super and Gourmet stores in 14 cities

7th Continent, founded in 1994, is a federal Russian retailer operating in two formats: supermarkets and hypermarkets. It has 136 supermarkets (brand name 7th Continent) in Moscow, Moscow region and Kaliningrad, and 20 hypermarkets under the brand name Nash Market are located in 14 Russian cities and towns.

The average daily traffic is 1,000-1,500 customers in the supermarkets and 2,500-4,000 in the hypermarkets. Of the supermarkets located in the center of Moscow, 26 are “gourmet” stores; their customers are residents with high income and tourists. Other stores are focused on customers with medium incomes.

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7th Continent corporate site

 

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Putin prolongs Western food ban

Spanish fruit and vegetable growers are among those asking the European Commission to urgently adopt new aid measures for them amid Russia’s extension of its veto on certain Western food imports.

Spanish fruit and vegetable growers are among those asking the European Commission to urgently adopt new aid measures for farmers amid Russia’s extension of its veto on certain Western food imports.

The Russian move came in retaliation to the EU decision to prolong until January sanctions against Russia over the Ukraine conflict.

Russia’s original ban – which applied to food products including vegetables, fruit, beef, pork, fish and dairy products from the EU, the US, Canada, Norway and Australia – was introduced last August. Yesterday, Russian President Vladimir Putin announced he was extending it, “by one year beginning from today.”

Fepex, the Spanish federation of associations of producers and exporters of fruit, vegetables, flowers and live plants, immediately called on the European Commissioner for Agriculture Phil Hogan to extend the exceptional measures used by the Commission to help EU fruit and vegetable growers affected by the existing ban.

In a letter to Hogan, Fepex said the Russian ban on the import of EU fruit and vegetables in force since last August had deprived the Spanish fruit and vegetable sector of the top non-EU export market. “There are no alternative markets that can compensate for this loss,” it said.

Fepex calculates Spanish fruit and vegetable exports to non-EU countries in the first quarter of this year were down 17% – a total of 218 million tons – on the same period in 2014. It said the extension of the veto “will worsen a major crisis in the EU summer fruit market” and called for the Commission to urgently adopt market crisis management measures.

Meanwhile, Murcia’s Ramón Luis Valcárcel Siso, a member of the European Parliament from Spain’s ruling Partido Popular party, in a written question in the Parliament has called for stone fruit to be covered under the earlier exceptional support measures.

He said these existing measures did not contain any exceptional support for Spanish plums, table grapes, kiwifruit, peaches, apricots or nectarines.

“Exports to alternative markets have not absorbed the 60,698 tons which were previously exported to Russia. Measures need to be taken therefore to prevent prices falling as they did between 2013 and 2014 (by 32.3% for plums, 36.7% for yellow flesh peaches and 44.9% for yellow flesh nectarines). The marketing season started in April and farmers are now extremely concerned,” he said.

Photo of Russian President Vladimir Putin: Kremlin.ru [CC BY 3.0 (http://creativecommons.org/licenses/by/3.0)], via Wikimedia Commons

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Vegetable prices keep climbing in Russia

Russia’s retail sector is highly dependent on imported vegetables – particularly during the off-season. In 2014, Russia imported 2.4 million tons of fruits and vegetables making it the third largest importer globally.

Fruit and vegetables prices in Russia were up 43% in February 2015 compared to the same month last year, a new report by the US Department of Agriculture says.

Titled ‘Vegetable Prices Keep Rising’, the report on the Russian Federation blames the import restriction, in combination with a depreciating ruble, for the soaring prices.

It also says many Russian consumers are buying less vegetables or switching to cheaper ones as their purchase power drops along with Russia’s weakening economy.

Russia’s retail sector is highly dependent on imported vegetables – particularly during the off-season. In 2014, Russia imported 2.4 million tons of fruits and vegetables making it the third largest importer globally.

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The report also says that the most popular vegetables for Russian consumers are cabbage (21% of total vegetables volume), tomatoes (20%), onion (13%), carrot (11%), cucumbers (10%), beets (6%), pumpkin (4%), and squash (3%).

In 2014, Russia produced 15 million metric tons (MMT) of fresh vegetables which covered around 86% of total domestic consumption needs. The vast majority of all vegetables in Russia (70%) are grown by households and do not enter modern retail channels.

The main vegetables produced in Russia, besides potatoes, are cabbage (3.4 MMT), tomatoes (2.2 MMT), onions (1.9 MMT), carrots (1.6 MMT), cucumbers (1.1 MMT), pumpkins (708,000 MT), squash (508,000 MT), and garlic (248,000 MT).

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USDA Gain report “Russia: Vegetable Prices Keep Rising

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