Rapid growth experienced in foodstuff exports to Russia
Demand for butter exceeds Valio’s capacity to produce; good reputation aids sales of Finnish food
Finnish food is in high demand in Russia.
Finnish food exports to Russia are growing vigorously, and for example the leading dairy products manufacturer Valio is unable to produce export items fast enough to satisfy the demand.
The delicious outlook in Russia has caused the foodstuff field to increase its investments. For example Myllyn Paras Oy, a manufacturer of flour, flakes, grits, and pastas, is going to start building a new cereal production facility near Moscow. The factory comes with a price tag of EUR 33 million.
Valio is planning to increase its production of Oltermanni cheese with a EUR 15 million investment. More than half of the produced Oltermanni goes to the Russian market.
On Thursday Valio announced that it would erect a power plant and a factory in Lapinlahti in Northern Savo that produces a powder by-product from the manufacture of cheese that can be used as raw material for baby food and other products. A tenth of the produced powder will be exported to Russia.
Valio is investing nearly EUR 80 million in the Lapinlahti project. According to the company, the powder factory is one of the largest industrial investments in Finland this year.
Russia is an important market for the food industry and the largest export target country.
“There is so much potential there. One simply has to be present there”, says Mika Koskinen, country manager, Valio, Russia.
In the first part of the year food industry exports into Russia reached a growth rate of 28 per cent. This year the export figures are believed to exceed those of the peak year of 1997 before the collapse of the rouble. That year EUR 350 million worth of cheeses and other foodstuff were exported across the eastern border into Russia.
Unpredictable obstacles may also arise to slow down the exports. Last year Russia limited the imports of dairy and meat products, and at the beginning of June the EHEC bacteria epidemic caused the country to put a stop to the importing of vegetables from the EU.
According to Myllyn Paras CEO Pekka Savela, issues related to crossing the border are one of the reasons why it makes good business sense to build production facilities on the Russian side. Savela does not believe that Russia would give up import restrictions as a way of protecting its own industry.
“I am very sceptical”, Savela says.
On the other hand, Russia has been forced to import dairy products because its own production capacity is lagging way behind the demand. According to Valio’s Koskinen, the demand is enormous.
“With butter, for example, for the second year running, the market is such that at its highest the demand exceeded our supply capacity by one hundred per cent”, Koskinen says.
The success of the companies have been aided by the good reputation of Finnish food.
The University of Helsinki is coordinating in Eastern Finland a project by the name of FoodRus, which has established through interviews that the Russian public’s trust in the safety, cleanness, and healthiness of Finnish food is extremely high.
Previously in HS International Edition:
Russia is biggest buyer of Finnish food exports (16.8.2010)
Russia lifts ban on Finnish dairy products (6.8.2010)
Atria and HK Ruokatalo cleared to export meat to Russia once more (10.12.2010)