Russian Organic Market Taking Root 2011
Report Highlights:
The organic market in Russia is in the nascent stage. In fact, the Russian Federation does not have a standard in place for “organic” labeling. As a result, products can be imported using the organic labeling of their country of origin. After a notable decline in sales of most types of organic products in Russia in 2009 due to the economic downturn, the sales value of organic packaged food in 2010 grew by 14 percent to reach $220.6 million. Organic baby food shows the fastest development with growth of 25 percent in current sales value and 11 percent in volume. Organic products typically cost 20 to 400 percent more than their conventional equivalents, and account for two to seven percent of supermarket sales. Experts estimate future sales of organic products could reach $255 million in 2011. The growth is expected to be most significant in the larger cities, such as Moscow and St. Petersburg, where consumers are wealthiest and most open to following Western trends.
Section I. Market Overview
Although Russia‟s organics market is small and the concept is new, it is quickly expanding. From 2002 to 2008 organic sales in Russia increased almost 20 times. However, demand for almost all types of organic products in 2009 was negatively affected by the economic downturn and lost 20 percent in dollar terms, although in ruble terms there was a 3 percent growth. This was due to devaluation of the Russian currency which lost 21.5 percent of its value against the U.S. dollar. The average rate of the Russian Ruble (RUB) was 31.7/USD in 2009 versus RUB 24.9/USD in 2008. Currently the exchange rate is roughly 28 RUB/USD.
Another reason for the sales decline was the fact that a huge proportion of organic food and beverages sold in Russia are imported, and their already high prices rose significantly due to the weaker ruble. At the same time, many Russian consumers shifted to lower-priced essentials and delayed or cancelled planned purchases of premium products. The only notable exception to this general trend was organic baby food. All organic baby food categories showed growth in volume and value terms in 2009. Many Russian parents favor organic products for the perceived health benefits and were willing to pay extra even if this meant stretching their shopping budgets.
