Russian meat industry braced for bankruptcy

By Vladislav Vorotnikov

- Last updated on GMT

Around 20% of meat producers "will not survive" further economic hardship, experts say
Around 20% of meat producers "will not survive" further economic hardship, experts say

Related tags: Meat products, Meat

Russia’s meat industry could face a tsunami of bankruptcies across its poultry and red meat processing sectors within the next two years, the Meat Council of the Eurasian Economic Union (EEU) has claimed.

About a quarter of pig producers, 15% of poultry producers and a fifth of meat processing companies could go bankrupt by 2018, according to an EEU forecast report on Russia’s meat industry.

Meat Council president Mushegh Mamikonyan said domestic meat manufacturers had benefited from a drop in import supplies in all categories of meat products since the implementation of Russia’s food embargo. But he warned that this year the positive effect of sanctions could fade away.

Impact of food embargo exhausted​ 

During the first 1.5 years of the​ [economic] crisis, Russia’s meat and meat products market had few problems, as imported products that were less competitive on price were disappearing from grocery shelves,” ​said Mamikonyan. Imports over last two years have dropped rapidly – from 2.3m tonnes (t) in 2013 to 700,000t in 2015.​”

However now, he explained, the impact of import substitutes had become minimal, so in 2016 the market was set to face a completely new stage in development, with falling demand and a sharp rise in competition between domestic manufacturers. The size of the meat market in the country decreased from 10.8mt in 2013 to 10mt in 2015 and, according to experts, could drop to 9.4mt this year.

As a result, we may see the effect of price suppression, given an​ [excess] supply of volumes in the market,” ​explained Mamikonyan. “In international practice, such a situation would lead to a sharp increase in exports, thus maintaining profitability for market participants. However, in the current conditions in Russia, dynamic growth of export sales is very desirable, but cannot take place, due to regulatory and technical barriers to international trade, which cannot be overcome as quickly as they need to be for our producers.​”

Bottoming out of profitability

Falling demand for meat and meat products will dramatically increase competition between the already highly competitive Russian companies,” ​said the EEU forecast. “The increasing decline in demand that domestic producers have felt since November 2015 will continue through to April 2016, while further developments will depend on macroeconomic and government measures to stimulate demand.​”

As a result, according to the forecast, in the period 2016-2018, the whole of the Russian meat industry would bottom out in terms of profitability and a large number of companies might not survive. In opinion polls, more than half of Russian citizens said they had had to cut their spend on food in recent years, so poultry and pork manufacturers are starting to compete with each other for consumers, while meat processors have had to change their product ranges significantly, in order to offer cheaper products.

The situation is different depending on the sector,” ​added Mamikonyan. “For example, about 25% of pig production companies are unlikely to survive this period. In poultry, the figure will be about 15%, while in the meat processing sector all depends on a timely correction to the strategy of companies, but, given the traditional Russian laziness, I estimate that 20% of businesses will not survive.​”

Related news

Show more

Related products

show more

Webinar Case Study – Editorial Webinar

Webinar Case Study – Editorial Webinar

William Reed Business Media | 03-Dec-2019 | Case Study

Download our case study to learn how GlobalMeatNews generated brand awareness and leads for its sponsors with its October 2019 editorial webinar.

The unique natural anti-oxidant for meat applications

The unique natural anti-oxidant for meat applications

Kancor Ingredients Limited | 28-Feb-2019 | Technical / White Paper

Fresh meat is preferred in bright red colour but is highly prone to oxidation and is colour sensitive to extracts. Kancor’s OxiKan R, a highly refined...

Microbiological safety of raw-fermented sausages

Microbiological safety of raw-fermented sausages

Jungbunzlauer | 18-Feb-2019 | Technical / White Paper

Raw-fermented sausages are prone to the contamination with pathogens such as Salmonella and Listeria. Jungbunzlauer gives a new impetus to the exploration...

Related suppliers

2 comments

Investment after the embargoes

Posted by Wilson,

Did investment in meat production increase after the embargoes, which investment is failing due to curtailed demand on high prices?

Report abuse

More Imports

Posted by Graybull,

Maybe they just need to import more Angus.

Report abuse