By Lucas Witman
In a meeting of the Russian Cabinet in August, Russian Prime Minister Dmitry Medvedev announced that his country will henceforth ban imports of all meat, seafood, fruit, vegetables, dairy and fresh prepared foods produced in the United States, Canada, EU, Australia and Norway for a period of one year. The move was ostensibly made in an effort to give the Russian agriculture sector an opportunity to better compete with foreign farmers and food producers and increase its global market share. However, the import ban implicitly serves as retaliation against these countries for the sanctions that were imposed against Russia following the country’s annexation earlier this year of the Crimean Peninsula in Ukraine.
Only a few months old, the Russian import ban is already yielding negative effects for many European farmers. According to the European commission, exports by companies in EU member countries to Russia of food and agricultural products were worth 5.1 billion euros ($6.5 billion) in 2013. This represents 4.2 percent of total agricultural exports from the EU. From German cabbage to Dutch pears to Italian tomatoes, agricultural products that were once destined for Moscow or St. Petersburg are now without a home, and farmers are left struggling, wondering what to do with their goods.
The good news for European farmers is that the EU has already stepped in to offer assistance to those who have been negatively impacted by the Russian import ban. Almost immediately following Medvedev’s announcement, the European Commission stated that it would provide 125 million euros in support to European farmers saddled with a glut of produce that they cannot export to its original target. Shortly thereafter, the European Commission expanded its support, pledging to help European dairy farmers defer the costs of storing surplus butter, cheese and milk powder. On September 30, the European Commission stated that it would increase its support to farmers by an additional 165 million euros.
It is as yet unclear how deeply the Russian import ban will negatively impact U.S. farmers and food producers. In 2013, U.S. exports of agricultural products to Russia totaled $1.3 billion. Key U.S. exports to Russia include poultry ($310 million), pork ($18 million), tree nuts ($172 million), fruit ($34 million), seafood ($83 million) and prepared foods ($84 million). U.S. producers of these commodities are now being forced to seek out new markets for their products.
The California almond industry has long relied on Russia as a key trading partner, and thus this is one group of U.S. producers who are bracing for an economic hit this year. “Year-to-date, shipments to Russia represent about 3 percent of total California almond exports. Russian imports of almonds from the U.S. in calendar 2013 were approximately 23,500 tons, with a value of $126 million,” said Julie Adams, Vice President of the Almond Board of California.
Although Adams regrets the negative impact that California almond producers may face as a result of their inability to export products to Russia, she is equally concerned that Russian consumers will no longer have access to a product they love to eat. “The sanctions are particularly disruptive to consumers and manufacturers in Russia, who recognize the nutritional benefits of almonds,” she said. “We look forward to working again with our customers in Russia, once the market is reopened. The Almond Board will continue to monitor the situation, working closely with the U.S. government.”
The U.S. poultry industry is also expected to be impacted by the ban on exports to Russia, although industry insiders anticipate that impact to be relatively minimal. “At one point we were exporting 42 percent of our exports to Russia. That was in 1997. That has declined through the years,” said Jim Sumner, President of USA Poultry & Egg Export Council. “In 2013, we exported 7.5 percent of our exports to Russia. Fortunately, this situation didn’t happen ten or 15 years ago. It would have been catastrophic for our industry. Today it is unfortunate. We don’t want to lose a market anywhere, but thanks to the diversification of our industry it’s but a blip on the radar.”
“We’re in a pretty tight market situation here in the United States – the highest beef prices we’ve ever seen, higher pork prices,” Sumner continued. “The timing really couldn’t have been better for our industry if it was going to happen than now.”
Miami-based Russian specialty product superstore Marky’s does a brisk business exporting U.S.-produced Eastern European specialty goods, including caviar, seafood, foie gras, truffles, mushrooms, cheeses, oils and vinegars to Russia. “In relation to the market and our business as it relates to Russia, we do not function as a Russian business,” said Chris Hlubb, President and COO of Marky’s Group Inc. “However, we do export from the U.S. to Russia and Ukraine and ex-Soviet republics and have been adversely affected from our ability to continue to export certain products due to recent bans from the Russian side.” Still, in this case as well, the impact may be felt more severely by Russian consumers who now have diminished access to specialty goods and are forced to pay higher prices.
The positive news for Russian consumers is that as companies in North America, Europe and Australia are being inhibited from exporting goods to their country, producers in other countries are stepping in to fill the void. Brazil, Argentina, Turkey, Egypt, China and Belarus are just a few of the countries stepping in provide much-needed agricultural goods to Russian consumers. The organizers of Russia’s largest food trade show, WorldFood Moscow, held in September, were thrilled by the increased global turnout at this year’s show, arguing that the food bans have been responsible for bringing companies from new countries to the show and the Russian market.
“The changes in Russia’s food regulations has meant that interest from non-EU countries entering this market has increased, and subsequently we received an influx of last minute bookings from those countries that are not affected by the ban,” said Tony Higginson, Sales Director for WorldFood Moscow. “We are also pleased to confirm that Russia’s ban had little effect on the event’s exhibitor list.”
American consumers respond to Russian import ban
As the United States gets further embroiled in the ongoing conflict in Ukraine, anti-American sentiment is growing among many in Russia. Some Russian consumers are turning away from American staples like McDonald’s (12 locations were recently closed by Russian officials over dubious food safety concerns) and Kentucky bourbon (health officials have similarly threatened to ban the potable). And American expats in the country report experiencing hostility from Russian nationals.
Anti-Russian sentiment in the United States is also on the rise. According to a recent Gallup poll, 60 percent of Americans surveyed stated that they view Russia unfavorably – the highest number since 2005 and a 16 percent spike since 2012. With Americans’ perception of Russia turning sour, U.S. retailers and food companies specializing in Eastern European products are being forced to confront the possibility of a backlash.
Unlike what happened in the early years of the Iraq War when anti-French sentiment in the United States compelled some to dump bottles of French wine and members of Congress to chow down on “freedom fries,” the good news for Russian specialty companies today is that they have yet to experience a similar backlash from American consumers as a result of ongoing global tensions. However, this may have less to do with Americans’ devotion to Russian food or indifference to global politics and more to do with the fact that the market for European specialty goods in this country is made up almost entirely of Eastern European immigrants and their descendants – a group not likely to ditch their affinity for these items.
“We have not seen any such public backlash, as customers for Russian products tend to be uniquely Russian or from Eastern Europe,” said Hlubb of the bustling business Marky’s continues to do both online and at its retail space in Miami. “And due to limited cuisine expansion into Europe and the U.S., we see little to no effect from our customers.”
“Most of our customers are Russian, Lithuanian, Belarusian, Georgian, Bulgarian or from other Eastern European countries,” said Zourab Tsiskaridze President of Russian Gourmet, a chain of five Russian specialty stores in the suburbs of Washington, D.C. “Of course, we have American customers too, but it’s not a majority. It’s a minority.”
According to Tsiskaridze, Russian expatriates and others with Eastern European heritage continue to flock to his store, seeking out the products that remind them of their families and their youth. The most popular items people pick up at Russian Gourmet include sausages, cheeses, caviar, smoked fish, dairy products and prepared foods. This clientele is not likely to abandon these products simply out of a sense of American patriotism. “People who live somewhere in different countries, of course they remember taste, how the food was when they were young or something. They remember this and they want to eat. They can live without Russian food but they have some kind of fondness, some kind of remembrance,” he said.
Although he has not yet observed any backlash by American consumers against his store’s largely Russian product selection, one thing Tsiskaridze has observed among his store’s Eastern European clientele is the occasional rejection of Russian products by Ukrainian nationals and vice versa. For Tsiskaridze, an immigrant from the former Soviet republic of Georgia, this reminds him of the hostility he experienced from Russian shoppers when Russia invaded Georgia in 2008. He recounts a recent instance of a Ukrainian woman rejecting an item at his store after realizing it was produced in Russia.
“One woman was Ukrainian, and we had the same product from two different countries – one from Ukraine and one from Russia. The Ukrainian was a little more expensive than the Russian,” he said, “She said, ‘I don’t want to buy Russian products.’ I don’t think this was smart.”
Still, although Russian Gourmet, Marky’s and other Russian specialty retailers continue to weather whatever storm of anti-Russian sentiment currently exists in this country with relative ease, as the global tensions between the two countries continue to build, there is no certainty that a larger public backlash will not eventually emerge. The potential threat to purveyors of Russian goods was made apparent during preparations for the 2014 Winter Olympic Games in Sochi when several gay rights organizations urged a boycott of Stolichnaya vodka and other Russian-produced goods in light of the country’s alleged human rights violations.
In the meantime, however, the added exposure Russia is receiving on the global stage may actually be a positive thing for those selling Eastern European foods in this country. This has been the case for Russian Gourmet, where profits are actually up in recent months. Tsiskaridze says that his stores have become an important meeting place for immigrants coming to share news of their homeland and debate the ongoing conflict in Ukraine. “People from Soviet Union, they are very political people. They might not understand, but they like to talk,” he said. “In my store, I have a Russian kitchen. The sales person is Ukrainian. I am Georgian. Yesterday we talked for two hours about this situation, going back in history. We like to talk. What else can we do?”
This story was originally published in the November issue of Gourmet News, a publication of Oser Communications Group.