RF: dairy producers complain about rising costs

In the Russian Federation, an almost 30% increase in the cost of MILK production since 2020 due to rising costs, which was not offset by higher selling prices, has led to a drop in profitability in the industry.

Artem Belov, General DIRECTOR of Soyuzmoloko (RF), notes that the devaluation of the ruble and the rise in the cost of imported components, the increase in prices for feed, fertilizers, packaging, and the increase in electricity tariffs since 2020 have led to an increase in the cost of raw milk production by 28%, and its processing — by 14–16%.

The sharp increase in costs was not compensated by an equivalent increase in product prices, so market participants faced a decrease in profitability, in some cases losses, and some were forced to stop operations.

Meanwhile, dairy products suppliers have already begun to warn retail chains about price increases.

Andrey Grigorashchenko, vice-president for regional development at Damate, says that dairy products have risen in price by only 4% this year, while the main cost items have increased by 30-50% year-on-year. “Essentially, manufacturers have taken the brunt of the cost increase and dampen it at the expense of internal profitability, without shifting it to buyers,” he points out. But, warns the top manager, further growth in costs may become a threat to market participants.

The HEAD of Streda Consulting, Alexei Gruzdev, considers the likelihood of "manual" regulation of prices for dairy products through price agreements extremely low, given the weak consolidation of the industry. In addition, basic dairy products - drinking milk and kefir - never rise in price sharply in stores, as they are an important source of traffic and a price guide for consumers, he recalls.

Read in full here: kommersant.ru