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At BDF we recently carried out an online seminar for one of our clients. The topic concerned our dairy culture solutions for the Russian market, the latest trends and how this crisis is affecting the dairy industry in the country.
At BDF we care strongly about the general wellbeing of our personnel and we aim to ensure that our workers and clients are not put at risk. The idea of this webinar resulted from the situation of isolation that everyone is experiencing nowadays, together with the desire to continue working closely with our clients, the use of communication technologies has made this possible.
Our team decided to put together an introductory webinar to discuss the latest developments in our LYOCULTURE starter cultures line, as well as the latest trends and tendencies. We also discuss impacts on work, and changes in the Russian Dairy market during the COVID-19 crisis, which we have detailed below.
COVID-19 has had an undeniable impact on several areas of activity, as well as on our personal lives. Compulsory self-isolation, declining incomes, and increased unemployment - all of these factors not only affect the state of the market, but they also affect the overall welfare of those involved in any professional activity.
At BDF, the well-being of our employees is especially important for us, since the quality of the service provided, and the trust of our customers depends directly on their ability to work well. In these times of crisis, more than ever before, we have given maximum flexibility to our employees' scheduling and have introduced strict hygiene measures in our production areas in order to ensure the absolute safety of our products.
But how has this crisis affected the dairy industry? And what should manufacturers focus on?
Before looking at the dairy industry, one needs to understand the general situation in Russia. It should be noted that in the early months of 2020, Russia was still overcoming the crisis of 2014, the unfavorable situation of the oil market and the subsequent drop in Russian oil prices. In addition to bringing many industries to a standstill, this situation also had an extremely negative effect on both on the solvency of the average consumer, as well as on overall unemployment levels. Furthermore, due to a lack of resources, the effects of the pandemic in Russia are having extremely negative consequences on businesses of all kinds - for example, small and medium-sized farms are highly vulnerable to bankruptcy in the event of a major coronavirus outbreak. At such a time, financial support for small and medium-sized businesses is more important than ever, and this is an extremely problematic issue, given the current federal budget forecast.
With respect to the dairy industry, the negative consequences of the pandemic will reduce milk production by up to 2% during the 2020-2022 period, especially due to the wave of bankruptcies suffered by farms and inefficient agricultural associations.
Surveys show that the most vulnerable category will be cheese sector, where an 18% market loss has been predicted from now until 2022. The cheese market will experience a demand redistribution, one that will favor inexpensive cheeses and cheese-like products. However the market for hard and elite cheeses will remain relatively stable.
The butter and cream category will remain the most stable products in the dairy sector although many consumers will be looking to choose the cheapest options.
The most vulnerable group are yoghurts and desserts, where 30% of respondents said that they would reduce the frequency of their purchases of these items, while 19% stated that they would opt for cheaper brands.
The most profitable category will be traditional dairy products, such as kefir, milk, cottage cheese and sour cream, as well as dessert options such as glazed cottage cheese for children and dessert cottage cheese. As you would expect, for most consumers, product cost will remain the key criterion. Due to the fall in demand for the yoghurt-dessert group, the segment of inexpensive, more traditional, fermented milk products will be subject to a slight increase of 2-3% per year, reaching 8% at the end of 2022.
So, what does BDF recommend to manufacturers? First of all, we suggest acting proactively, that is, to secure your business future by making the right decisions now. Securing an inexpensive line of basic products, with simple, convenient packaging, and that provide reliable and constant quality is of paramount importance. We propose offering your product range to a wider range of target consumers in order to ensure stability in sales. Own-brand investment is also extremely important in addition to staying in line with consumer needs and producing products that meet their requirements.
In addition to basic fermented milk products, special attention should be paid to functional dairy products. This category includes both more traditional fermented milk products, due to their naturally-present healthy ingredients, as well as products with a modified composition of certain components (fat, protein, lactose) and more innovative products that are enriched with highly functional ingredients, such as plant extracts, dietary fiber, biotics (pro-, pre- and postbiotics, as well as symbiotics). A separate group is represented by those dairy products that are enriched with various macro- and micronutrients, as well as products with modified components such as bioactive proteins and peptides.
The priority for both the preservation and the development of the dairy industry in Russia should not only be to ensure stable demand for traditional dairy products, but also be focused on introducing new technologies that allow the use of various non-dairy components that provide novel properties to well-known products. The production of such products cannot be disassociated from certain risks, however, the potential of these products should become a decisive argument for growth and development of the industry, and not just during a pandemic, but during periods of stable prosperity as well.