Russia may increase cheese import duties

In February, the Russian government commission on protective measures in foreign trade and customs tariff policy, will decide if it is to increase import duties on cheese. If the government is to go ahead with the move, duties on cheese could increase from 15 per cent to 25-30 per cent. The government believes that this measure could help protect local producers.

Industry observers claim that the Russian cheese market is expanding at a rapid rate. In 2001 the Russian process cheese market was worth 174 million(€140) it is expected to reach $280 million (€226 million) by 2006.

On a global scale Russia has a low rate of cheese consumption per-capita. Its yearly consumption stands only at 3.9 kilograms annually and this unpopularity is only matched with cheese consumption of the Oriental countries. At the other end of the scale, the Finns consume 16 kilograms of cheese yearly.

The expansion in the cheese market has meant that low consumption levels ware thought to rise in the near future, and this has led both Russian and international companies to try and cash in on the potential market.

For example, European cheese represents 60 per cent of the Russian market. EU subsidies help European makers to produce cheese at a competitive price, and it is believed that a measure to curb the import of cheap cheese could allow Russian producers to dominate the market.

The largest cheese producer in Russia, Wimm-Bill-Dann Foods (WBD), wishes to increase its stake in the cheese market in the future. The company has invested €11 million in facilities and its new factory is able to produce an estimated 15, 000 metric tons of cheese yearly. WBD claims that it represents 30 per cent of dairy produce in Russia, and plans to be in a much stronger position by 2005.

Although the argument does stand that a higher tariff on imported cheese could leave producers like WBD in a stronger position, some independent experts in the industry are doubtful that such a move would hold any real significance for Russian cheese makers.

European production of cheese in Russia is increasing, and a tarriff on imported cheese will have no knock on affect on European factories based in Russia.

The German dairy group, Hochland, and the French company Lactalis, began production of cheese in Russia two years ago, these companies will be unaffected by the proposed increased duties. Hochland has 4 production lines and produces an estimated 3,700 tonnes of cheese a year. It invested €8 million two years ago. While Lactalis produces 6,000 tonnes of dairy products yearly and 4,000 tonnes of that figure is actually produced in Russian factories.

Similarly, Ukraine producers who represent 33 per cent of the market will be unaffected by the measures.

Speculation in local newspapers in Russia suggests that this proposal could be the first of many protectionist steps to protect Russia from European dairy products.