Russia: consequences of the import ban

“Compared with a year ago, there has been a huge fall in the exchange rate of the rouble against the euro with the result that imported goods are now much more expensive,” says Tanya Lebedeva. She is the founder and CEO of LookBio, an important publisher of both a printed and an internet magazine for consumers and professionals in Russia. Tanya gives an overview of the problems for the organic sector. Of course, things are not easy because the government in Moscow has banned the import of a lot of fresh products. In addition, the falling exchange rate of the rouble has had a negative impact on the Russian economy.

High import rate for organic goods

“As around 80 % of the sales volume in organic stores was imported from wholesalers in Germany, France, Britain or Italy, this has had a big impact on the retail activities of the shops,” the Moscow journalist explains. Now there are more products from Russia to fill the gaps on the shelves. Other products like natural cosmetics, household wares or packaged goods such as spaghetti, tomato sauce, juices, cereals, baby food and cosmetics have not been hit by the national import ban, although the import of these products has declined as the effect of the exchange rate has made them unaffordable for most consumers.Today the rouble is worth 12 euro cents; in April last year it was 17 euro cents and three years ago, in March 2013, it was 25 cents. Since then, due to western sanctions, the export of German goods (industrial and food) to Russia has almost halved. Since August 2014 Moscow has also stopped importing vegetables, fruit, meat, fish and dairy products.

Even until a year or two ago only a small group of wealthy people went shopping in natural and organic stores. “People all over Russia now buy much less fresh fruit and vegetables because they’ve become extremely expensive and shoppers just can’t afford them any more,” says a disappointed Tanya. The most difficult situation is with cheese because Russian production can in no way provide the wide offer that was previously available.  

Picture: Imported packaged goods are still available but at far higher prices than 3 years ago on this photo. © Kai Kreuzer

More organic manufacturing capacity is needed in Russia

“Now the direction of sourcing has changed and more products are supplied from the south of Russia or adjacent countries like Georgia, Turkey, Serbia, Armenia or South America. One cheese producer is now selling ten times more cheese than he did before,” says Tanya. But, of course, the assortment is quite limited. The sanctions mainly help producers of agricultural primary products like potatoes, tomatoes, carrots, peas, beans, cabbage, sauerkraut and pickled cucumbers. Everything that has to be manufactured is a problem because of the insufficient capacity of machines and plant, and the storage facilities are also limited. “For that you need capital, construction permits and so on. So, it takes years to build up storage and manufacturing facilities. Besides, credit is extremely expensive and difficult to get, with interest rates over 20 % per year.

The sanctions have mainly helped those companies which were already in the market when the import ban was imposed and were able to grow their business in a short time,” is how Tanya sums up the situation. An example is Pane Nero (Chyorniy Khleb), a specialist in organic grain and flour. According to Pavel Abramov, the company’s turnover tripled from 2014 to 2015. “We’ve increased our product range and the quality has improved,” he says. “We’re producing according to the standards of Agrosofia and we’re controlled by Eco-Union.”

But as Tanya explains: “We’re most definitely seeing a tendency to replace the missing organic fresh products with natural products from Russia without certification. Concerning packaged goods, retailers are turning to less expensive alternatives offered by western manufacturers and wholesalers.

Photo from Ilya Kaletkin: Organic spelt and flour from the manufacturer Arivera

Although some very good organic stores, for example Bio-Market, which was opened 2006 in Moscow, closed in 2015 due to the downturn in sales following the economic crisis, some new shops have opened.  So there are still about a dozen wholefood shops with around 30 -40 % of organic stock in Moscow and also some in St Petersburg. And some shops like Biostoria – founded over three years ago - are surviving. This shop has a good 90 % of organic products on its shelves. (See the internet images of the shop fitter Frishman for impressive shop interiors.

St. Petersburg is the second most important market

In St. Petersburg, with around 5m inhabitants the second biggest city in Russia, there are 4 organic shops: Biomatica, Klever and Organica (we reported in 2013) with two Bio/Eco stores Supergreeen. They offer natural and organic food, natural and organic cosmetics and ecological household articles. Biomatica also intends to open up new outlets, reports Anastasia Prikazchikova. Her profession is journalism and she is currently devoting her time to her eco-blog ‘I’m Organic’, where she recently published an article with photos of the newly opened and very eco-stylish Biomatica store in her hometown St. Petersburg.

Girlanda, a shop concept by Alena Gililova and Anton Gililov, mainly offers local fresh food from trustworthy natural farms around St. Petersburg, most of which are not certified organic even though they in fact operate naturally and organically. Alena and Anton have now opened a steak house Girlanda steak shop&show in St Petersburg. One of the organic suppliers near St. Petersburg is the organic farm Alehovshina  (eco-labels). They produce organic eggs, cabbage, beetroot, potatoes and goat milk products that are certified organic by ABcert and carry an NOP certification by BCS.

Picture: Fresh meat from natural farms near St Petersburg. © Kai Kreuzer

Summarising the situation in Russia it can be said that the trade restrictions caused by the sanctions on both sides have made life harder for the few existing organic and natural shops, but they have also developed domestic organic production to meet the growing demand. Sanctions and the difficult economic situation have reduced choice in retail but have strengthened the position of Russian farmers and food manufacturers.

Picture: The Russian journalist Tanya Lebedeva visiting Krasnodar organic farmers. Photo privat