Russian food producers: problems and prospects of the industry

MarketMedia, a popular domestic analytical resource on the retail and restaurant business, published an article on the declining number of retail chains in the country. The reason for the issue to be studied and the situation to be analyzed was the May deals on selling Diksi and Billa chain stores. With Magnit and Lenta gradually turning into monopolies, suppliers have less and less room for maneuver. Looking for favorable terms among a limited number of product purchasers is becoming more and more challenging. Leading Russian producers shared their strategies for survival and development in current conditions. The invited experts included Larisa Yerina, the Director for Sales of ECO-Culture agro-holding.

As she says, the trend for large market players to grow and small producers to gradually leave the scene now can be observed in many sectors of the economy. Meanwhile, retail consolidation also has its advantages, with the emergence of a single procurement center where professional standards can be followed properly. Thus, major chains pay maximum attention to the assortment, taking unmarketable items off the shelves and trying to increase the amounts of consumers’ favorite products.

In the long term, however, the takeover of local and small companies by big federal chains still may have a negative impact on the market. The big players will be able to dictate their pricing terms to suppliers (particularly to vegetable producers). And while it is always possible to negotiate with small chains, influencing the commercial policy of large retail structures is extremely difficult.

Fortunately, there is a way out of this situation, which would be by fixing the purchase price for vegetable products at the level of regulatory documents, as it is done for some other commodities. To do so, producers should unite their efforts to bring the pricing policy under strict control. Whatever happens, the availability and popularity of safe and environmentally friendly vegetable products in Russia should keep growing.

According to Larisa Yerina, up to 85 per cent of all the agricultural holding’s products go to retailers. The extinction of small chains almost does not affect the income of such large-scale producers as ECO-Culture since bigger buyers can quickly restore the previous volumes of purchases. In addition, the company has recommenced its cooperation with the HoReCa sector, which was suspended during the pandemic, so this promising sales channel is expected to continue its further development.

Internet commerce is another significant development vector with strong potential. Right now, the agricultural holding is constantly increasing its online sales. Whereas previously supplies to Yandex.Lavka and SberMarket were made twice a week, now goods are being shipped on a daily basis, and with a much broader range of products, too.

ECO-Culture’s long-term initiatives include mastering a fundamentally new format of business that is opening its own branded stores. By the end of the year, the company plans to launch sales outlets within each greenhouse complex. Nowadays, there are about a dozen of such facilities in the country. The company also plans to rent a number of premises in large shopping malls to place pavilions with the holding’s branded products. Possibly, the direct retail sales format could be implemented in cooperation with other producers.

Those interested in other market participants’ opinions can see the full article on website.