It is now more than a year that Russia imposed its food embargo on the EU and other states which had applied sanctions to it over its absorption of Crimea and intervention in southeastern Ukraine. The results of the change-over in overseas suppliers and rising import substitution through the efforts of domestic producers have now become fairly clear.
In this brief report based on visits to retail outlets ranging from convenience stores and market stalls to hypermarkets and from the St Petersburg city center to hamlets 80 km away in the hinterland, I will try to make some sense of what has occurred, how Russians’ shopping basket has changed so far and where the trend lines are leading. Put another way, I will start with a number of small and specific observations and end with some generalizations and forecasts of what broad processes are underway and how they can affect the global food trade.
The provenance of food in Russia’s retail chain is fairly easy to determine. Many sellers across the retail distribution universe identify the foreign country or domestic region responsible for any given product. And at the popular level of municipal markets, the vendors go a step further, acting as hawkers for certain producing areas that are in the public eye. Today this means in particular Crimean products like wines, strawberries, tomatoes and the like. Then there are the especially profitable early fruits and vegetables (primeurs) coming from the Russian South, meaning from Rostov-on-Don down into the enormously fertile Krasnodar region. A very unsentimental lot, the market stall vendors are pitching to the self-reliant, patriotic mood that is very much in the air across Russian society today.
In this regard, it was particularly instructive to spend some time at one of the most prestigious municipal markets in downtown St Petersburg, the Maltsevsky Rynok. Fish mongers there were both well informed and talkative on my several visits. Their assortment has changed dramatically since the introduction of the embargo. Greek farmed dorade and sea bass are gone. Russian sourced fish has stepped up its presence. Europe’s largest fresh water lake, Ladoga, located just 40 km from the Northern Capital, is now a big factor in the wild fish varieties on offer, meaning the whitefish (sig) that otherwise is a favored lake fish in neighboring Finland and large lake trout that approach the size of a salmon. Farmed trout from the republic of Karelia that abuts the Leningrad oblast on Ladoga’s northern and eastern coasts are also featured.
The fishing industry of the Murmansk region further to the northeast, at 1,000 km from St Petersburg, has stepped up its presence in the St Petersburg market, moving beyond its traditional flounder and other low -prestige fish to supply the gorbusha salmon variety native to the Far East. The gorbusha was introduced into these northern waters in Soviet times and now has made a return to the market within the import substitution drive. Fresh whole gorbusha arrives here with egg sacs intact. The raw roe is now also available in the stalls at nominal prices for those who are keen to clean and salt their own red caviar at a savings of 80% on the price of the tinned variety.
Also the luxury end of the fish offer in the Rynok, old favorites like tinned Kamchatka crab and black caviar (now certified), smoked sturgeon and eel are holding their own. The same goes for fresh domestic sterlet (sturgeon) which arrives at the St Petersburg market live from the fishing industry of Dagestan, a republic bordering the Caspian. In addition, wholly new categories of high-quality smoked fish from Siberian rivers have made their appearance.
Norwegian salmon is now distant memory. However, this king of farmed fish is still to be had, and legally too, through a new supplier. The Faroe Islands, nominally part of the Danish state but not members of the EU, have been flouting the anti-Russian sanctions from the start. You might not expect your fish monger to be a specialist in geography, not to mention geopolitics, but mine in the Maltsevsky Rynok told me all about the Faroe Island relationship before I had a chance to look it all up in Wikipedia.
If I have directed a lot of attention to fish, it is because Russian consumption patterns have changed in recent years and continue to evolve even as the food market as a whole is undergoing change. In the past, the attitude of consumers here was rather similar to that in Serbia, where there was the common saying that “the best fish is a pig.” That was justified in the Russian case by the repellant nature of the fish on sale from Soviet times in both markets and retail stores: frozen, “industrial” grade fish displayed in various stages of rigor mortis. Now fresh fish counters are common not merely in downtown municipal markets and supermarkets, but even in outlets of the chain stores in the suburbs and in the hinterland. The price of sig or gorbusha may be well beyond the pocket book of most consumers, but the geographic spread has reached out to middle class consumers wherever they live.
In both meats, and fruits and vegetables, it is less obvious what changes in sourcing have occurred at the Rynok. Given the visible control of stands by either “representatives of the Caucasus nationalities” or Central Asians, these products, both in past and present, tended to come from places like Azerbaijan, Turkey or Uzbekistan, rather than Western Europe. The prices are high, but then the appearance is excellent.
Moving from the top of the municipal markets to a private food emporium within the Stockmann’s department store in St Petersburg, patterns of new sourcing and newly featured Russian products emerge at this serious arbiter of food fashion. Imported fish remains on offer, but with suppliers switched to meet the law. Where there were Greek fish, there now are Turkish substitutes.
However, the bigger change would appear to be in the smoked fish displays. This is a very popular product variety in which Russians have long looked up to the Finns. It was a common St Petersburg middle class habit to make weekend outings across the border over to Lappeenranta to shop for the superior smoked fish for themselves and relatives. Now the flagship Finnish store in St Petersburg has filled its smoked fish counters with Russian made products that look and taste good, are authentically hardwood fire smoked and cost 40% less than what is on offer over in Finland. It would be safe to say, given the quality of what I sampled, that the Russian masters have raised the level of their offer to match or better what is made abroad now that ‘Made in Russia’ has become a source of pride to the domestic consumers rather than a point of derision, as in the past.
Wines are a product category that also are moving along with politics. Though there is no Russian embargo on wine from countries participating in sanctions against them, and all the French, Spanish and Italian wines of yesteryear are present today on store shelves, the pride of place is given to Crimean and South of Russia wines wherever you go. In Stockmann’s there is a related gesture acknowledging political realities; they are currently featuring wines from Abkhazia, the break-away province of Georgia now under Russian protection.
A rising tide raises all boats. Russian farmers in a variety of product categories have moved swiftly to occupy niches abandoned by Western Europeans. Poultry, to be more specific, ducks, seems to be a case in point. Stockmann’s is now featuring 2-kg pre-packaged, chilled eviscerated whole ducks coming from Rostov-on-Don. This is quite remarkable since it addresses a problem that stymied even highly patriotic restaurateurs in the recent past: the absence of standardized portions and consistency of supply which forced them to work only with frozen French ducks. Russian farm complexes seem now to have met the challenge.
Less commonly, product categories have simply disappeared with the departure of Europeans. For example, frozen soups were supplied in the past by Poland and Hungary, who offered products from their home market that matched closely the taste expectations of Russian consumers. With the embargo, those goods have disappeared and so far there are no Russians or others to have filled the space.
The same goes for certain categories of cheeses. Whereas Serbia is now supplying the feta type cheese which formerly came in from Greece and Russian domestic producers are offering decent Mozzarella substitutes to replace the prohibited Italian product, hard cheeses have not yet found credible producers in Russia or comparable alternative sources outside the EU. To be sure, some supermarkets still appear to have a rich cheese offer that raises questions of legality; however, the tightening of controls, and in particular, the newly approved authorization to destroy contraband at the border may wind down scofflaws in the cheese sector soon.
Notwithstanding the foregoing, a stroll through Russian food retailers at all points of the price continuum shows that nearly all product categories that were offered before the sanctions and embargo remain available. Many domestic products held their ruble prices, meaning they are priced now 40% below comparable goods in Western Europe. New foreign sources are often from developing countries, meaning they are priced below the levels of Europe. Still other imported goods reflect the adverse ruble exchange rate and are one-third or more higher in price than before the sanctions.
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Markets always find an equilibrium between supply and demand. For the exhortations from the political class for import substitution to work, there had to be a radical change in consumer perception of domestically produced foodstuffs. My overriding conclusion from visits to retailers and seeing how goods are promoted is that ‘Buy Russian’ is working because it corresponds to the new patriotic mood.
In turn, increased nationwide demand has brought to the fore producers who can deliver genuinely world-class foodstuffs at prices in line with middle class spending power. And one can add to this picture the increased assortment of locally produced vegetables in hothouses. These were at the fringes when Dutch and Polish produce was established in the market at competitively keen prices based on economies of scale across the EU. But now local hothouse producers in the various metropolitan areas have muscled their way onto store counters as primary suppliers.
All of this has to be read in the context of Russian history when, in the years just before the Russian Revolution, when the agricultural reforms of Petr Stolypin were working their magic, Russia was a major agricultural exporter, not only of grains but of other basic foodstuffs, to the point where in 1912, Russia was shipping butter to Denmark.
Whereas Russia today is again one of the world’s top grain exporters, it has been hard to imagine that it could be an exporter of other agricultural products that are grain-dependent, such as poultry and pork, not to mention an exporter of completely different food categories that are more labor intensive.
Given the trend lines of the past 18 months, these possibilities merit consideration. In that sense, the showdown with Russia over Ukraine and the imposed sanctions may eventually cost Europe much more than the present or future foregone sales of European produce in Russia. They may result in the resurrection of a food super-power which competes with the EU on global export markets.
