The consumer demand drop in Russia due to the crisis and COVID-19 pandemic, causes vegetable producers to want to enter foreign markets. Rost may begin tomato supplies to the United Arab Emirates already in summer and is conducting negotiations with EU distributors. Due to higher prices on vegetables abroad and ruble devaluation, export profitability can be high. On some foreign markets, there is a high competition.
The founder and general director of Rost, Sergey Rukin has announced that the company is planning to start exporting this summer and that the first deliveries would be to the UAE.
The executive director of the National Fruit and Vegetable Union, Mikhail Glushkov, notes that until now Russian producers have not been exporting greenhouse vegetables, being involved in import replacement. Rost is planning to export exclusive cherry tomato varieties presented by the company under Medovyie, Dolce Vita and Sladkaya Yagoda brands, mentioned Sergey Rukin. According to him, the company is conducting negotiation with distributors and Carrefour chain in the UAE.
The first export volumes would be moderate but this channel could be very profitable due to the high prices, expects the company. Thus, in the UAE wholesale prices on fresh vegetables exceed the Russian ones by 30-40%, which allows the company to be competitive even with the account to the delivery costs, mentioned Rukin. According to Mikhail Glushkov, the company could export 5-10 million cherry tomatoes per year. Apart from that, the company is conducting negotiations with the distributors in the EU. According to Mr. Sergey Rukin, Poland and Germany seem to display a particularly keen interest as in these countries due to the pandemic there is lack of seasonal workers for crop collection.
Export of greenhouse produce is especially acute in connection with the ruble devaluation in the Russian market, which would have influence over fresh vegetable consumption, said Rukin, underlining that the company has been preparing for export long before the current situation. According to Mikhail Glushkov, because of limitations caused by COVID-19, the demand for vegetables dropped by 30%. Because of volatility in the demand and the increased costs the Greenhouse Association of Russia suggested that trade chains limit the trade margin. Magnit and Lenta representatives have not noticed a drop in demand. X5 Retail Group (Pyaterochka, Perekrestok, Karusel) representatives have mentioned an increase in sales in the fresh produce category.
Competitors of Rost are also planning to enter foreign markets. The general director of BF Moye Leto, Vagif Bikulov mentioned that the company has been conducting negotiations on produce delivery to European countries and the UAA and that the sample batches have already been sent. The president of the AIC Eco-kultura, Aleksandr Rudakov also mentioned the Persian Gulf countries are a number one export direction. The markets of the UAE and Saudi Arabia have a huge potential, especially in summer, when local production in these countries stops due to high temperatures and in Russia the cost of tomato production is minimal.
The main challenges for this direction are in the logistics department. Rudakov noted that air transportation is the fasted way of delivery allowing retain maximum shelf life but causing a dramatic increase of own cost. Eco-kultura would test the delivery to the Persian Gulf countries in the nearest future, added the head of the company.
The general director of Technologii Rosta, Tamara Reshetnikova agrees that the market in the UAE can be attractive also because of the small in-house production. However, other suppliers from Morocco, Spain, Greece and Italy are a lot closer to the destination and there “the consumer demand is also dropping and vegetable producers would look for new target markets”. In the EU countries, the competition is a lot higher and the consumers feel the influence of the crisis, limiting the purchase of premium goods, mentioned Reshetnikova.
Source: Kommersant.