It was expected that the food embargo would encourage import substitution on the consumer markets, but this potential has not yet been realized

7 july 2015 | Rossiyskaya Gazeta

Since the beginning of the year, food prices have risen 11.3%. According to data from the Analytical Center, the decrease in retail turnover over the past 5 months is 7.7% compared to the same period in 2014. The need to stabilize prices and encourage the development of domestic producers has led to amendments in the laws regulating trading activity.

Tatiana Radchenko
Tatiana Radchenko
Deputy Head

Experts believe that without a consumption forecast, it will not be possible to regulate prices for the coming year. In 2015, the retail trade was forced to compensate for the reduction in consumption, specialists note. Tatyana Radchenko, Head of the Department for Competition Policy of the Analytical Center, commented on the situation in an interview with Rossiyskaya Gazeta. She said that over the course of a year and a half, the consumer price index for food products increased 30%. “All categories of foods are increasing in double figures. The greatest price increases are for sugar, cereals, vegetables, fruits, eggs and sunflower oil. The price increases are not as high with pasta and bread, but they are still in double figures. The main increase in price happened in December 2014 – February 2015. By even the most conservative estimates, the devaluation of the ruble caused a 5% rise in food inflation. The rest is due to the behavior of market participants,” she said.

It was expected that the food embargo would encourage import substitution on the consumer markets, but this potential has not yet been realized, says the expert. “There has been an increase in meat production; in this sector almost all of the previous import levels have been compensated for. There has also been an increase in cheese production. The volume of imports in all meat categories fell by almost 50% after supplies of chicken from the United States and Canada were stopped. In the fish category, supplies of almost all fresh, chilled and frozen fish have been affected due to the restrictions on imports from Norway. This category has not been compensated for. The situation with butter production is also difficult – imports have dropped by almost 70% and the decreased level of imports is equivalent to half the volume of Russian produce. Our level of production is not yet able to compensate for this amount. In the cheese and cottage cheese category, the decrease in imports is equal to one third of Russian production levels,” said Ms. Radchenko. “We already have methods of controlling prices on the retail markets: a regulation on the fixing of prices for socially important goods. It grants the Government the right to fix a price if it rises more than 30% over the course of one month. However, over the past year, no region has put this regulation into effect. In addition, this year a memorandum was signed by retail chains to fix prices for socially important goods. There has been an increase in the practice of agreements being signed between retail chains and regional authorities for local products to have access to store shelves. However, these agreements can hardly be called effective because they discriminate against various other categories of producers.