Russian butter market in turmoil
Russia’s butter market is experiencing supply disruptions and an upward price rally, local press reported citing market players.
According to the Russian business newspaper Izvestia, at least 10 prominent Russian dairy manufacturers have downsized production or delayed shipments of butter to retail chains.
H&N, a Russian firm running former Danone assets in the country, reported suspending butter deliveries to retail chains. Since early October, Milkom, another major dairy manufacturer, revealed it had stopped butter production under 2 key brands, Varvara-Krasa and Izh-Moloko, and cut the output under other brands.
Butter prices
With this as a backdrop, the price of butter has spiked in Russia. As estimated by H&N, the price has shot up by 55% since the beginning of 2024.
The company blames the aggressive inflation of raw cream for the dynamic. During the first 8 months of 2024, the price in this segment jumped by 46%, the company estimated. However, this contradicts the official figures. Rosstat, a Russian government agency, calculated that the butter price, on average, grew by 18% since the beginning of the year.
The Russian Association of Retail Companies estimated that the price of butter jumped by nearly a third in 2024 and by 8% in the last month alone.
A group of Russian companies have reportedly filed a notification to the Russian Federal Antimonopoly Service about an upcoming rise in butter prices by up to 20%.
Several drivers
The butter market crisis is driven not by a single factor but rather a mix of different factors, local analysts explained.
A raw milk shortage, which has been worsening in Russia over the last few years, and a drop in milk production with high fat content are partly to blame.
“Last year, the market saw a sharp decline in the profitability of dry milk [production], and producer prices fell by 20%. Last year, retail prices for dairy products dynamics remained flat, and the cost price gradually increased,” commented Marina Petrova, CEO of Petrov 5 Consulting, a Moscow-based think tank.
Russian Union of Dairy Manufacturers, Soyuzmoloko, denies a crisis in the butter market. Artem Belov, Soyuzmoloko’s general director, estimated that this year, Russian butter production is anticipated to decline by only 1%. He added that domestic sales would climb by 3%, and the gap would be largely closed by imports, which are set to jump by 16%.
In the foreseeable future, Russia will expand imports from several new suppliers, specifically Iran and India, Belov estimated.
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