Required Report - public distribution

**Date:** 12/16/2005

**GAIN Report Number:** RS5318

RS5318

**Russian Federation**

**Exporter Guide**

**Russia\'s Food Imports Reach Record Highs**

**2005**

**Approved by:**

![](media/image1.wmf)Eric Wenberg, ATO Director

American Embassy, Moscow

**Prepared by:**

Ksenia Evdokimova

**Report Highlights:**

Exporters to Russia can realize substantial business due to several
ongoing trends. Russia is poised to purchase almost \$15 billion in food
and agricultural products from abroad in 2005, over \$1 billion from the
United States. Retail sales grew an impressive 12 percent in 2004 and
reached \$198.3 billion. Forty-four percent of products sold through
retail are imported products. Retail outlets have started to expand
aggressively into the regions -- new potential markets for quality,
imported goods and prospective venues for marketing programs. The HRI
sector grew at a fast pace as well. According to experts, 90 percent of
food prepared in restaurants and cafes in Western Russia is imported.
The local food processing industry has become one of the most dynamic
sectors of the Russian economy, with an average increase of 15-20
percent per year. Processors are willing to meet international quality
standards and focus on quality ingredients. Exporters should expect to
support sales with a marketing effort that provides coaching and
counseling to their importer. Effective relationship building is a key
ingredient to success.

Includes PSD Changes: No

Includes Trade Matrix: No

Annual Report

Moscow ATO \[RS4\]

\[RS\]

**TABLE OF CONTENTS**

[SECTION I. MARKET OVERVIEW 3](#section-i.-market-overview)

[KEY POINTS 3](#key-points)

[CHALLENGES AND ADVANTAGES FOR U.S. EXPORTERS
3](#challenges-and-advantages-for-u.s.-exporters)

[SECTION II. EXPORTER BUSINESS TIPS
4](#section-ii.-exporter-business-tips)

[ASSESSING THE MARKET FOR YOUR PRODUCTS
5](#assessing-the-market-for-your-products)

[DISTRIBUTION CHANNELS 6](#distribution-channels)

[LOGISTICS AND TRANSPORTATION 6](#logistics-and-transportation)

[Figure 1. Distribution Channel for supermarkets. Import of
transatlantic products via the Greater Port of St. Petersburg.
6](#figure-1.-distribution-channel-for-supermarkets.-import-of-transatlantic-products-via-the-greater-port-of-st.-petersburg.)

[CREDIT AND PAYMENT TERMS 7](#credit-and-payment-terms)

[FOOD STANDARDS AND REGULATIONS 7](#food-standards-and-regulations)

[PRICING 7](#pricing)

[SECTION III. MARKET SECTOR STRUCTURE AND TRENDS
8](#section-iii.-market-sector-structure-and-trends)

[THE RETAIL FOOD SECTOR 8](#the-retail-food-sector)

[THE HOTEL, RESTAURANT, AND INSTITUTIONAL (HRI) SECTOR
9](#the-hotel-restaurant-and-institutional-hri-sector)

[THE FOOD PROCESSING SECTOR 10](#the-food-processing-sector)

[SECTION IV. BEST HIGH-VALUE PRODUCT PROSPECTS
11](#section-iv.-best-high-value-product-prospects)

[SECTION V. KEY CONTACTS AND FURTHER INFORMATION
16](#section-v.-key-contacts-and-further-information)

[OTHER MARKET REPORTS 17](#other-market-reports)

[OTHER USEFUL CONTACTS: 17](#other-useful-contacts)

[APPENDIX I. STATISTICS 20](#appendix-i.-statistics)

[Table A: Key Trade & Demographic Information ^1/^ ^2/^
20](#table-a-key-trade-demographic-information-1-2)

[Table B: Consumer Food & Edible Fishery Product Imports
20](#table-b-consumer-food-edible-fishery-product-imports)

[Table C: Top 15 Suppliers of Consumer Foods & Edible Fishery Products
21](#table-c-top-15-suppliers-of-consumer-foods-edible-fishery-products)

[APPENDIX II. OTHER ECONOMIC AND DEMOGRAPHIC DATA
22](#appendix-ii.-other-economic-and-demographic-data)

[Table A: GDP Growth (%), 1997-2004 22](#table-a-gdp-growth-1997-2004)

# SECTION I. MARKET OVERVIEW

## KEY POINTS

-   Russia offers U.S. exporters a potentially huge market -- 143
    million consumers

-   High world prices for oil & natural gas, increase in sovereign
    credit ratings, stability in political situation cause overall
    economic development and consumer spending boom. Such dramatic
    growth is beginning to spread beyond Moscow and St. Petersburg to
    the regions

-   World's 4^th^ largest growing economy with 6 years of consecutive
    growth. GDP increased by 6.8 percent to \$570 billion in 2004.

-   Per capita GDP reached almost \$4,000 in 2004. With 9% growth rate
    in 2004, real disposable incomes continue to outpace GDP growth

-   Incomes in October 2005 were 24.5% higher than in October 2004
    (Rosstat). According to experts, average wage in 2005 is \$1,200 for
    Moscow middle income buyers, \$400 for other regions' buyers

-   Fast growing retail market. Retail sales grew an impressive 12% in
    2004 to \$198.3 billion dollars of which \$80 billion was in food
    products. Fourty-four% of products sold through retail are imported
    products. Moscow consumers continue to spend 70% of their incomes on
    consumer goods, the highest ratio in Europe (Interactive Research
    Group). Modern retail formats are going into regions increasing
    total demand for quality products

-   The ruble and euro have continued to appreciate against the dollar

-   Recognized as a "market economy" by US and European Union, Russia
    has made strides with its accession to the World Trade Organization

+----------------------------------+-----------------------------------+
| ## CHALLENGES A                  |                                   |
| ND ADVANTAGES FOR U.S. EXPORTERS |                                   |
+----------------------------------+-----------------------------------+
| ***Challenges***                 | ***Advantages***                  |
+----------------------------------+-----------------------------------+
| Distance being a major barrier   | Russia is the fastest growing     |
| complicates logistics and ties   | retail market in the world, after |
| up importers' funds              | China and India                   |
+----------------------------------+-----------------------------------+
| Government bureaucracy and       | New format supermarkets are       |
| corruption                       | rapidly expanding to meet         |
|                                  | consumer demand, creating a good  |
|                                  | venue for imported products and   |
|                                  | taking sales from other channels  |
+----------------------------------+-----------------------------------+
| Competition from European        | Investors are building more       |
| countries in the Western Russia  | efficient storage facilities,     |
| and Asia in the Russian Far East | improve infrastructure and        |
|                                  | logistics                         |
+----------------------------------+-----------------------------------+
| Misperception among Russian      | As part of the WTO accession      |
| consumers against imported       | process, Russia is moving towards |
| goods. Russians lack knowledge   | international standards           |
| on the quality and benefits of   |                                   |
| US agricultural products         |                                   |
+----------------------------------+-----------------------------------+
| Economic vulnerability,          | Sanitary and Phytosanitary        |
| dependence on oil and mineral    | issues, when they are resolved,   |
| extraction for most wealth       | grow trade                        |
+----------------------------------+-----------------------------------+
| Non-tariff barriers hold trade   | Consumers became less financially |
| below potential                  | restrained and continue to shift  |
|                                  | towards better-quality products,  |
|                                  | growing middle-class              |
+----------------------------------+-----------------------------------+
| Limited acceptance of            | Fast food service and restaurants |
| biotechnology                    | develop at incredible rate        |
|                                  | demanding new products.           |
+----------------------------------+-----------------------------------+
|                                  | Greater emphasis on value-added   |
|                                  | production in food processing     |
|                                  | gives opportunities to new        |
|                                  | products                          |
+----------------------------------+-----------------------------------+

# SECTION II. EXPORTER BUSINESS TIPS

Being a developing market economy, Russia is full of both opportunities
and challenges. There is a line of obstacles that newcomers as well as
experienced players have to overcome to work successfully in this
growing market.

Following are general marketing tips for newcomers to the Russian
market:

-   Take time to research the market for your product. The better you
    understand local conditions and opportunities, the more likely that
    you will succeed in finding a buyer.

-   If/when you do travel to Russia to visit potential trade partners,
    don't expect to spend a few days and close a deal. That could
    happen, but a successful partnership may take months to develop.

-   Pay attention to business fundamentals. Business basics - knowing
    your market, putting the customer first, and offering quality
    products - are as useful and necessary in Russia as in any other
    market.

-   Don't let culture shock impair your business judgment. Some Russian
    business people are not friendly and open during first meetings.
    Still, many entrepreneurs are outgoing and speak good English.

-   Don't expect to do everything at an American pace. While the
    business environment is improving, many things simply move at a
    different speed. A good example: Getting around by car or taxi in
    major cities, such as Moscow and St. Petersburg, can be especially
    frustrating. Build extra time into your schedule - you will probably
    need it.

There are several alternative marketing strategies that can be used to
enter the Russian market. While there may be considerable overlap among
these different types, four broad approaches can be identified:

-   Sell directly to a Russian importer/distributor/processor.

-   Use the services of an American trading or export management
    company.

-   Sell to an agent/consolidator in Western Europe.

-   Establish your own import and distribution facilities in Russia.

A U.S. company, operating on its own, will generally pay higher customs
fees, face more difficult inspection procedures, and be forced to
contend with more administrative delays than would a local importer. The
local importer may or may not also be the distributor. This entity will
serve as a conduit for products into Russia and can deal with the
numerous barriers to bringing a new product into the country. A model
employed by many successful exporters is to use a Moscow or St.
Petersburg based trading company to act as primary customer and
facilitator of imports. In fact, most imported products sold in Western
Russia pass through Moscow and/or St. Petersburg. For the Russian Far
East, Vladivostok is home to most importers and the principal import and
transshipment point.

If an exporter is willing to invest the necessary time and effort, even
to the extent of establishing a representative office, then dealing
directly with fast-growing Russian processing companies will provide
better margins and the opportunity to respond more quickly to the
clients' demands. If the decision is made to establish local
representation, this office should be located in Moscow and run by an
experienced Russian national to ensure the greatest market coverage.

Following is an overview of local business practices and other
information that could be important when considering entry into the
Russian market.

## ASSESSING THE MARKET FOR YOUR PRODUCTS

There are various aspects to determining whether your product has market
potential in Russia:

-   Review the information provided in *Section IV. Best High-Value
    Product Prospects* of this report.

-   Participate in one of several established trade shows in Russia.
    This will allow you to take a first-hand look at the local market,
    meet potential importers, and gauge how competitive your product is
    compared to similar products being promoted at the show.

-   

-   Contact ATO Moscow, St. Petersburg and Vladivostok to request a
    brief market assessment for your product and/or a list of Russian
    importers.

TRADE SHOWS IN RUSSIA

World Food

Moscow

September

[www.world-food.ru/eng](http://www.world-food.ru/eng)

This USDA-endorsed event offers an excellent opportunity to introduce
U.S. food products in Russia. In 2005, this 4-day show drew 1,100
exhibitors from 51 countries and attracted more than 50,000 importers,
wholesalers, retailers, and processors from all parts of Russia and from
many neighboring countries.

Prodexpo

Moscow

February

<http://www-eng.expocentr.ru/site/95/default.asp?section=3>

The Prodexpo International trade show is the largest show of foodstuffs
in Russia and Eastern Europe that boosts development of the domestic and
international food markets.

Interfood

St. Petersburg

April

[www.primexpo.ru/interfood/eng](http://www.primexpo.ru/interfood/eng)

Biggest trade show in the NW Russia that is celebrating 10 year
anniversary this year. The number of exhibitors at Interfood 2005 was
160 companies from 21 countries. The show attracted 12 000 visitors.

WORKING WITH A RUSSIAN IMPORTER

Selecting the right trade partner is probably the most important thing
you can do to develop your business in Russia. An experienced and
reliable importer can help you avoid the kinds of mistakes that could
cost your company profits and sales. In this regard, banking and
supplier references are essential, as is an examination of the company's
experience and business history. There are local and U.S.-based
organizations that can help provide this kind of information. However,
be aware that credit reporting is still a relatively new practice in
Russia, and credit-reporting agencies may not have complete information
on potential business partners.

## DISTRIBUTION CHANNELS

Most importers also act as a primary wholesaler or distributor.

The entry of large foreign supermarket/hypermarket chains has had a
fundamental impact on food distribution in Russia. Increasingly, these
large retailers are buying in bulk directly from local manufacturers. At
the same time, the increasing buying power of these retail chains is
encouraging consolidation and growth among distributors in an attempt to
maintain some balance. Although, up to now, Russian retailers have done
little direct import, several of the larger chains are beginning to
bring in some items and a few are considering an even larger range of
products. All operators of the market are busy with optimizing the
process.

## LOGISTICS AND TRANSPORTATION

Various routes are available for shipment of food products to Russia,
each with its own advantages and disadvantages. Some products are
sourced through Western European importers or brokers and transshipped
by truck or boat to Russian ports. More direct imports previously came
via Baltic or Finnish ports and then were shipped by truck or rail to
St. Petersburg or Moscow. The advantage of these ports was greater
efficiency, fewer problems with loss or damage, and overall lower
handling costs. However, changes in Russian import requirements have
largely redirected these shipments to Russian ports: St. Petersburg;
Novorossisk; Vladivostok and Rostov-on-Don.

Most consumer-oriented food and beverage products enter through St.
Petersburg and are customs-cleared there or in Moscow. In fact, the
transportation system for shipping U.S. high value food products into
Russia via St. Petersburg and Moscow is very well established. Transit
time ranges from 20 days to 27 days depending on the origination, with
an additional four days shipping time for final delivery by rail or
truck to Moscow.

## 

## Figure 1. Distribution Channel for supermarkets. Import of transatlantic products via the Greater Port of St. Petersburg.

From Moscow, products may move further eastward by truck or rail to
cities in Siberia and beyond. In fact, some products are shipped all the
way to the Russian Far East (RFE). However, most products destined for
the RFE enter through the ports of Vladivostok, Vostochny, Vanino,
Nakhodka and Magadan. Although Vostochny is the region's largest port by
volume, the majority of U.S. food exports to the Russian Far East enter
through Vladivostok.

## CREDIT AND PAYMENT TERMS

While the Russian banking system has recovered markedly since the 1998
financial crisis, credit is still relatively expensive and can be
difficult to arrange. In addition, Russian bank fees are often high, and
it can take much longer to open letters of credit or transfer funds than
is common in the United States. However, as the economy improves, the
financial operations of Russian banks also are improving. About half the
banks that are authorized to open foreign currency accounts also have
general licenses enabling them to undertake a full range of foreign
currency transactions. Many of these banks have correspondent banks in
the United States. Further, several American and foreign banks such as
Citibank, J.P. Morgan, Rafeissenbank, Societe Generale, and Credit
Suisse are licensed to operate in Russia.

Russian importers are accustomed to making 100 percent prepayment prior
to shipment. Where business relationships have become well established,
simple bank transfers often are made on the basis of payment on delivery
or payment after an agreed number of days. A letter of credit (LC) may
be used when required by the foreign supplier, but LCs are expensive and
sometimes difficult to arrange, so this is not a favored payment method.
Many foreign exporters, particularly those in Western Europe, are
offering credit terms to selected partners. Documentary Collections work
very well at ports and importers are accustomed to these procedures.

USDA credit guarantee programs (Supplier Credit, GSM-102) can help
overcome some of these financing problems. The credit guarantee program
operates with a specific country program for Russia and Russia also is
included in a separate Eurasia program. As of December 16, 2005, the
Russia-only program was fully utilized, but coverage was still available
in the Eurasia program. At present Supplier Credit is not available for
Russia due to the need for regulatory updates to the program. For
further information on these programs, please visit the FAS website
([www.fas.usda.gov](http://www.fas.usda.gov/)) the FAS Moscow website
(eng.usda.ru) or contact ATOMoscow (see SECTION V. KEY CONTACTS AND
FURTHER INFORMATION).

## FOOD STANDARDS AND REGULATIONS

Please, review the Moscow Agricultural Affairs Office (AAO), Moscow
FAIRS Reports RS5025, RS5026, RS5008, RS5009
<http://www.fas.usda.gov/scriptsw/AttacheRep>

Russia has complex food import regulations and exporters should
carefully question importers regarding certificates and procedures
needed for clearance into the Russian Federation. USDA has provided
substantial reporting on these issues in the reports listed above and on
our website <http://eng.usda.ru/> at the Market Access page.

## PRICING

Product pricing for the Russian market, as elsewhere, is essentially
determined by local market conditions. In fact, retail prices can
sometimes vary significantly between relatively nearby cities and even
areas within the same city. However, with the spread of large retail
chains, pricing is becoming more competitive.

To understand how final prices and margins are determined, it is
important to understand the impact of the Russian tax system. The
product retail price is based on a several factors/assumptions:

-   Import duties vary by product, but generally range from about 5-30
    percent (see Appendix III)

-   An 18 percent value-added tax (VAT) is levied on imports at the
    point of entry (note: the VAT on some food products is only 10
    percent)

-   Customs clearance charges add about 1.25 percent The wholesale
    mark-up is typically 12-15 percent, while retail mark-up runs 35
    percent or more, depending on the product and the retailer

-   A profit tax is assessed at 39 percent of gross margin

# SECTION III. MARKET SECTOR STRUCTURE AND TRENDS

As the Russian economy continues to grow and consumer incomes rise,
there are emerging opportunities for a wide range of U.S. food products.
Following is an overview of the three major food and beverage sectors
\-- food retail, food processing and food service (HRI). While each
sector offers a unique set of challenges, there are also many
interesting possibilities for U.S. exporters. For more detailed
analysis, please refer to the other reports provided in *SECTION V. KEY
CONTACTS AND FURTHER INFORMATION*.

## THE RETAIL FOOD SECTOR

-   Russia is one of the fastest growing retail food sales market in the
    world, with the potential to again double in size by 2008, just as
    it did since 2001.

-   Fast growing retail market. Retail sales grew impressive 12% in 2004
    to \$198.3 billion dollars of which \$80 billion was in food
    products. 44% of products sold through retail are imported products.

-   Moscow consumers continue to spend 70% of their incomes on consumer
    goods, the highest ratio in Europe (Interactive Research Group)

-   Modern retail formats (both local and foreign chains are going into
    regions increasing total demand for quality products

-   Only 2/3 of the present demand is satisfied

-   Russia\'s economic improvement over the last five years has
    increased consumer purchasing power and demand for quality products

Among the main focuses of retail chains in 2004 and 2005 were:
construction of new retail complexes in Moscow as well as in most
regions of Russia (St. Petersburg, Nizhniy Novgorod, Samara,
Kaliningrad, Yekaterinburg, Ufa, Tumen, Krasnodar, Yaroslavl, Voronezh,
Lipetsk etc.); development of franchising; purchase of existing retail
multiples.

The entry of foreign chain operators like Ramenka, Auchan and Spar,
which possess significant financial resources for penetration into the
Russian market, also resulted in growing investment made by local
players into their chains. The largest operators, such as Perekrestok,
Sedmoi Kontinent and M Video, converted companies from \'Ltd\' to
\'Inc\' entities with the subsequent issue of bonds (Euromonitor).

According to experts, modern formats still don't possess a significant
share of the market. In Moscow, despite the active development of chain
operators, their share amounts about 24%. This percentage will
undoubtedly grow.

In 2004, the turnover of 5 major retailers (Pyaterochka, Auchan,
Perekryostok, Ramstor, 7 Continent) matched the sum turnover of the main
producers supplying the chains. That gave the retailers another
opportunity to expand their influence on the suppliers. The struggle
over spheres of interest is tough and retailers seem to be winning it.
Another advantage that retailers are taking against their suppliers is
implementation of private label.

Starting in 2001, several retail chains began to offer private label
products. Nowadays, Ramstor, Metro Cash&Carry, Spar, Pyaterochka,
Kopeika, 7Continent and others are developing their private label
products and hoping that consumer awareness will increase. So far,
consumers are doubtful about the quality of such goods and believe that
private label products are for people who are willing to save money.
This most likely happens because packaging doesn't meet consumers'
expectations. According to an AC Nielsen survey conducted in 2005 among
Internet users, 60% of Russian citizens consider private label able to
compete with branded products, which is lower than the results of
Western Europe (about 80-85 percent), but higher than in such countries
as India, China, Poland (55-50 percent). According to experts, the
leaders of private label products are milk, cheese, water, ready-to-eat
cooled meals. Retail chains announce their plans to increase the share
of private label products in their outlets to the level of 10-12% next
year.

Listing fees and strict quality requirements are becoming a stumbling
block between modern format retail outlets and producers. According to
expert evaluation, suppliers have to pay \$200 -- 300 for each unit they
plan to sell in the outlet. Still, in fresh produce, meat and fish
departments products that are supported by marketing programs sponsored
by a supplier can get listed in the store with a discount. In produce
and meat departments, for high quality goods, sometimes listing fees are
waived entirely.

ADVERTISING AND PROMOTIONAL ACTIVITIES

Promotional activities in retail chains are common. The most common
retail marketing method is merchandising (separate displays,
power-zones, shelf trays), seasonal sales, internal radio announcements,
"SALE", or "BARGAIN" signs. All these marketing tools are usually
organized in the alcohol, snacks, confectionery, meat departments of a
retail outlet.

Retailers' leaflets that are distributed in the shop itself, delivered
to customer's homes and distributed on the streets usually do have
information on several items from each department of the outlet and
include the brand name or logo of the product. Usually, such activities
are organized by the managers who are in charge of each department.

Russian customers can be reached through advertisements on TV, radio,
newspapers and magazines and billboard media. There is a large number of
specialized magazines with the all-Russia circulation. During the past
years, culinary shows have flooded TV programs, which can also work as a
good advertisement for your products.

Please refer to GAIN Report Number: RS5302 for more detailed information
on the Russian retail market.
http://www.fas.usda.gov/scriptsw/AttacheRep

## THE HOTEL, RESTAURANT, AND INSTITUTIONAL (HRI) SECTOR

-   Sharp increases in consumer income, pent-up consumer demand, and
    expanding tourism are creating a boom in Russia's HRI sector

-   Fast-food chains, both foreign and home-grown versions, are
    expanding by 14-16 percent annually

-   Sales for mid-level or "democratic" restaurants are growing even
    faster - as much as 30 percent per year

-   Coffee shops are seeing the fastest growth -- 20-25 percent or more
    annually

Eating out and take out food is now often connected to increasing
frequent trips to new retail formats (supermarkets, hypermarkets, and
malls) and after-work convenience foods. Cafes and fast food
establishments have capitalized on increased consumer income and desire
for convenience foods. Amazingly, experts estimate that 90 percent of
all food prepared in restaurants and cafes in Western Russia is
imported.

There are about 15 restaurants in Moscow and 10 restaurants in St.
Petersburg that serve American cuisine. Key concerns that are important
to Russian restaurants are food or ingredient price and availability.
Price is an obvious concern for most restaurants because of the large
number of individual, independent owners. They typically purchase on a
small scale and generally have a demanding, but price sensitive
clientele. Showing restaurants how to maximize the value of a product or
use less expensive substitutes is often helpful. As there are few
restaurants with significant buying power, they often work hard to find
the supplier with the best price. Lastly, developing new menu items
depends on the constant availability of U.S. products.

Established restaurants also work through one or more food service
distributors, both wide-spectrum and specialized distribution companies.
While many restaurants like having a large choice of products from one
company, many continue to work with the specialized suppliers because of
their client orientation and convenient delivery services. Some
restaurants also purchase ingredients through cash and carry retailers.
Though this is more common for small restaurants and cafes, low prices
on bulk items attract a variety of HRI consumers.

This segment is full of opportunities for U.S. exporters because of the
wide variety of imported foods used and the wide range of qualities
(from premium to economy) demanded from different customers. It is very
easy to find a niche for any product. The best prospects are for bakery
ingredients, meat, seafood, and wine.

Please refer to GAIN Report Number: RS5060 for further information on
HRI sector in Western Russia.
http://www.fas.usda.gov/scriptsw/AttacheRep/

## THE FOOD PROCESSING SECTOR

-   Local processors more and more must meet international quality
    standards. They pay more attention to quality of ingredients they
    use.

-   Russian food processing companies continue to expand and modernize
    their production facilities. This stipulates their demand for high
    quality ingredients.

-   Local food industry has become one of the most dynamic sectors of
    the Russian economy, with an average increase of 15-20 percent per
    year.

# 

Russia\'s food processing industry has been growing rapidly in recent
years, with a significant output increase of 25 percent in 2003, which
was valued at \$32.5 billion. In 2004, reports are that the industry
grew 18 percent. Consumer markets are not yet saturated with products.
These trends are expected into the future keeping prospects bright for
continued development at the pace of 10-15% a year. Most local food
processors trying to compete in the market are quality-oriented, rather
than price-oriented ingredient consumers. Many companies report that raw
resources and specialized ingredients for meat, bakery, confectionary,
juice, and dairy processing available from Russia domestically are not
sufficient to satisfy their needs in the future.

Russia's imports of raw materials for processing is already quite large,
in particular for the meat, dairy, fruits and vegetables, nuts, sugar,
fish, and vegetable oils, exceeds \$6 billion annually and is growing
quickly. Trade potential for specialized ingredients in food processing
is understood by examining essential oils. In this category, Russian
imports are growing 18% per year and in 2003 were \$113 million. At
present growth this figure will double by 2008.

# SECTION IV. BEST HIGH-VALUE PRODUCT PROSPECTS

Russia's imports from the United States, while dominated by poultry,
have begun to diversify. Red meat (beef and pork) exports were down in
2004 due to the ban Russia imposed on U.S. exports after the discovery
of BSE in the United States in 2003. This ban hit hardest beef liver
imported primarily by Russia for use in the meat processing industry.
While overall red meat exports were off, U.S. pork is doing quite well,
jumping 640% last year. As a group, food ingredient exports were down in
2004, due only to non-economic reasons related to one specific
component. All other food ingredients saw staggering 88% growth. Tree
nuts (such as almonds), seafood, and snack foods all grew impressively
last year and have a bright future. While fresh fruits and wine sales
appear to be quite moderate, official statistics underreport this trade
due to heavy transshipments to Russia through Europe.

###### 

Following are suggested best prospects for U.S. exporters:

**Fresh fruit (apples, pears, grapes, grapefruit)**

According to the World Trade Atlas, in 2002, Russia imported 2.4 million
tons, in 2003 3.2 million tons, in 2004 3.74 million tons of fruit,
growing more than 15 percent each year. Fruit trade value in 2004
reached a record \$1.6 billion, 40 percent more than in 2003. Russia is
the world\'s largest importer of fresh fruit among the emerging markets,
and is ranked sixth globally in fruit imports behind only the wealthiest
nations, the United States, United Kingdom, Germany, Japan, and Canada.
Lack of marketing and brand awareness in the fruit industry will benefit
exporters to Russia who are willing to start advertisement activities in
Russian stores and grocery markets. While U.S. exports to Russia of
fresh fruit are quite small, at current growth rates, with aggressive
marketing, it may become a top-ten market in 2006. U.S. fresh fruit
companies and trade associations were exhibiting at World Food Moscow in
September 2005.

Please refer to GAIN Report Number RS5307 for further information on
fresh fruits.

http://www.fas.usda.gov/scriptsw/AttacheRep/

**Nuts (almonds, pistachios, pecans) and dried fruits**

Domestic consumption continues to expand for a wide variety of edible
nuts, including almonds, hazel nuts, and pistachios. Nuts are popular as
both sweet and salty snacks. In addition, the fast-growing confectionery
industry uses nuts in a variety of chocolates and baked goods. In
particular, imports of U.S. almonds are expanding sharply, although
direct import figures do not reflect the actual level as large volumes
of U.S. almonds are also imported through Western Europe. Comparison of
the total Russian import volume of January-September 2004 and the same
period of 2005 shows imports growth of over 55%. In 2004, imports of
tree nuts valued \$ 31 million.

###### Wines

Fueled by stable economic growth over the last six years, Russia is one
of the most rapidly growing wine markets in the world with an average 30
percent wine consumption increase per year. Although Russian consumers
still drink a greater quantity of popular wine labels from CIS countries
like Moldova, Georgia, and European wines from France, the popularity of
New World wine is growing steadily. U.S. wine exporters to Russia have
excellent prospects. Chile and Argentina are the leaders among the other
'New World' countries in the Russian imports. In addition, this year
French exporters are going to invest about one million Euros in wine
promotion to Russia, three times more than last year.

Please refer to GAIN Report Number RS5306 for further information on
wines

Please refer to GAIN Report Number RS5009 for further information on
complete report on the laws and regulations that govern wine exports.
http://www.fas.usda.gov/scriptsw/AttacheRep

###### Ready/prepared/chilled/canned/frozen foods and vegetables, and microwaveable foods

Ready/prepared/chilled/canned/frozen products are relatively new market
areas that continue to see growing sales, underpinned by the time-saving
concept and increasing quality and variety. Among most popular frozen
foods are: ravioli, hamburgers, pastry, minced meat, stuffed vegetables,
crepes with different stuffings. Such parallel industries as fast food
restaurants will have a visible impact on the specific products as well.

Frozen processed potatoes will be in strong demand. Many small cafés and
mobile fast food kiosks find it more convenient to use frozen products
for fast cooking as it comes in a prepared format, i.e. vegetables are
cut and potatoes ready to be cooked into chips. Frozen pizzas will enjoy
increasing popularity, as there are not many places in the foodservice
channel that are prepared to offer freshly made pizzas.

**Statistics on Foodservice Sales of Packaged Food by Sector:**

**Volume 1999-2004, thousand tons**

  ------------------ ---------- ---------- ---------- ---------- ---------- ----------
                     **1999**   **2000**   **2001**   **2002**   **2003**   **2004**

  Ready meals        6.00       6.67       8.05       9.45       10.44      11.42

  Soup               3.68       3.91       3.82       3.58       3.34       3.09

  Canned/preserved   15.27      16.21      17.32      18.47      19.38      20.29
  food                                                                      

  Frozen processed   45.00      48.63      55.27      63.18      72.11      82.79
  food                                                                      

  Dried processed    87.57      91.46      95.62      101.31     105.80     110.69
  food                                                                      

  Chilled processed  117.00     125.49     134.37     145.53     152.39     160.86
  food                                                                      
  ------------------ ---------- ---------- ---------- ---------- ---------- ----------

###### Source: Euromonitor

###### 

###### Snacks

Increasing beer consumption will be the major force behind rising savory
snack sales. According to the Euromonitor, in 2004, sweet and savory
snacks grew by 11% to reach approximately \$ 982 million.

According to the research done by Comcon-Media performed in 2005, most
popular sweet snacks among kids aged 4-15 are: ice-cream, chocolate
bars, chewing gums, chocolate eggs with toys, cookies, chewing sweets,
chewing marmalade. All major producers are represented on the market:
Cadbury, Chupa-Chups, EVR, Mars, Nestle, Perfetti Van Melle. With the
growth of the overall personal disposable incomes Russian kids are
getting more of pocket money, which was quite uncommon historically. So,
many of these goods are purchased by kids on their own. According to AC
Nielsen, most sweeties are purchased in convenient stores, supermarkets,
kiosks. Moscow region is a leaders in this segment of goods.

Together with a growing number of modern format movie theatre,
popularity of popcorn is rapidly rising. Times when popcorn was
something rare have passed and more people are looking into the novelty
of the market -- popcorn bags that are easy to cook in the home
microwave.

###### Fish and seafood

As Russian consumers are becoming more concerned about their health,
fish consumption is growing. In 2004, fish imports reached about \$ 700
million, showing 60% growth from 2003.

U.S. fish and seafood product exports will continue to grow and may
reach \$30 million in 2005, up from \$23.1 million in 2004. High-quality
fish, in particular for retail sale and in the hotel/restaurant sector,
are growing in demand. Due to Russian industry's strong export focus,
the domestic retail market is growing and relies heavily on imported
fish and seafood.

Please refer to GAIN Report Number RS5008 for further information on
fish and seafood. <http://www.fas.usda.gov/scriptsw/AttacheRep>

###### Confectionery 

According to World Trade Atlas, in 2004, Russia imported \$349 million
worth of confectionery goods (bread, pastry, cakes, biscuits, chocolate,
sugar confectionery**)** and showed growth of 81% for bread, pastry,
cakes and biscuits (HS 190590), 18% for chocolate (HS 1806) and 15% for
sugar confectionery from 2003. USA exports to Russia equaled \$9.4
million, almost 90% of which is chocolate. Among leading confectionery
importers to Russia are Germany, Ukraine, Poland, Belgium, France, Italy
and South Korea. As the A.C. Nielsen survey shows, sweet cookies,
waffles, pastry, spice-cakes, salty cookies are leaders of sales among
Russian urban consumers in 2004-2005.

###### Food ingredients

Russia\'s food processing industry has been growing rapidly in recent
years, with a significant output increase of 25 percent in 2003, in
2004, the industry grew by 18 percent and valued at \$38.4 billion. Due
to the growing preference for Western style food and beverages, rising
consumer incomes, and a significant population of 143 million, Russia is
an excellent prospect for exporters to supply food processors. Consumer
markets are not yet saturated with products. These trends are expected
to continue, keeping prospects bright for U.S. exporters. Most local
food processors trying to compete in the market are quality-oriented,
rather than price-oriented ingredient consumers. Many companies report
that raw resources and specialized ingredients for meat, bakery,
confectionary, juice, and dairy processing available from Russia
domestically are not sufficient to satisfy their needs in the future.

Please refer to GAIN Report Number RS5301 for further information on
food ingredients. http://www.fas.usda.gov/scriptsw/AttacheRep/

Following are suggested best prospects for U.S. exporters by sector:

+---+-------+-------+------+-------+--------+-----------+----------------+
| # | []{.  |       |      |       |        |           |                |
| # | mark} |       |      |       |        |           |                |
| # |       |       |      |       |        |           |                |
|   |       |       |      |       |        |           |                |
| [ |       |       |      |       |        |           |                |
| ] |       |       |      |       |        |           |                |
| { |       |       |      |       |        |           |                |
| . |       |       |      |       |        |           |                |
| m |       |       |      |       |        |           |                |
| a |       |       |      |       |        |           |                |
| r |       |       |      |       |        |           |                |
| k |       |       |      |       |        |           |                |
| } |       |       |      |       |        |           |                |
+---+-------+-------+------+-------+--------+-----------+----------------+
| * |       | *     | **   | **    | **     | **Key     | **Market       |
| * |       | *2004 | 2004 | 5-Yr. | Import | Co        | At             |
| P |       | Im    | I    | Avg.  | Tariff | nstraints | tractiveness** |
| r |       | ports | mpor | Ann   | Rate** | to Market |                |
| o |       | from  | ts** | ual** |        | Deve      | **for USA**    |
| d |       | USA** |      |       |        | lopment** |                |
| u |       |       |      | **I   |        |           |                |
| c |       |       |      | mport |        |           |                |
| t |       |       |      | Gro   |        |           |                |
| C |       |       |      | wth** |        |           |                |
| a |       |       |      |       |        |           |                |
| t |       |       |      |       |        |           |                |
| e |       |       |      |       |        |           |                |
| g |       |       |      |       |        |           |                |
| o |       |       |      |       |        |           |                |
| r |       |       |      |       |        |           |                |
| y |       |       |      |       |        |           |                |
| * |       |       |      |       |        |           |                |
| * |       |       |      |       |        |           |                |
+---+-------+-------+------+-------+--------+-----------+----------------+
| F |       |       | 3.75 | 12.7% | A      | Strong    | Good potential |
| r |       |       | mmt  |       | pples: | co        | as a niche     |
| e |       |       |      |       |        | mpetition | market for     |
| s |       |       |      |       | (Jan   | from      | U.S. apples,   |
| h |       |       |      |       | 1-Jul  | Poland,   | pears, grapes, |
| F |       |       |      |       | 31)    | China,    | citrus.        |
| r |       |       |      |       |        | Moldavia  | Especially     |
| u |       |       |      |       | 0.1    | for       | during         |
| i |       |       |      |       | Euros  | apples;   | February-      |
| t |       |       |      |       | per kg | Argentina | April period.  |
| s |       |       |      |       |        | and China |                |
|   |       |       |      |       | (Aug   | for       |                |
|   |       |       |      |       | 1-Dec  | pears.    |                |
|   |       |       |      |       | 31)    |           |                |
|   |       |       |      |       |        |           |                |
|   |       |       |      |       | 0.2    |           |                |
|   |       |       |      |       | Euros  |           |                |
|   |       |       |      |       | per kg |           |                |
|   |       |       |      |       |        |           |                |
|   |       |       |      |       | \+ 18% |           |                |
|   |       |       |      |       | VAT    |           |                |
|   |       |       |      |       |        |           |                |
|   |       |       |      |       | Pears: |           |                |
|   |       |       |      |       |        |           |                |
|   |       |       |      |       | 10% +  |           |                |
|   |       |       |      |       | 18%    |           |                |
|   |       |       |      |       | VAT    |           |                |
+---+-------+-------+------+-------+--------+-----------+----------------+
| D |       | Rais  | Rai  | 10.7% | 5%,    | Tough     | U.S. raisins   |
| r |       | ins - | sins |       | but    | co        | and prunes     |
| i |       | \$162 | -    |       | not    | mpetition | competitive    |
| e |       | tho   | \$24 |       | less   | from      | for quality    |
| d |       | usand | mil  |       | than   | Iran,     | retail and     |
| f |       |       | lion |       | 0.02   | Ta        | processing     |
| r |       |       |      |       | Euros  | jikistan, | market.        |
| u |       |       |      |       | per kg | Af        |                |
| i |       |       |      |       | +      | ghanistan |                |
| t |       |       |      |       |        | and       |                |
| s |       |       |      |       | 18%    | U         |                |
|   |       |       |      |       | VAT    | zbekistan |                |
|   |       |       |      |       |        | for bulk  |                |
|   |       |       |      |       |        | dried     |                |
|   |       |       |      |       |        | fruits.   |                |
+---+-------+-------+------+-------+--------+-----------+----------------+
| T |       | N     | Nu   | Nuts  | Tariff | Iran      | U.S. almonds   |
| r |       | uts - | ts - | --    | de     | biggest   | enjoying very  |
| e |       | \$5   | \$23 | 29%   | pends, | c         | strong growth. |
| e |       | mi    | mil  |       | 18%    | ompetitor | Good potential |
| n |       | llion | lion |       | VAT    | for       | for U.S.       |
| u |       |       |      |       |        | peanuts   | pecans and     |
| t |       | Al    | Alm  |       |        | and       | other nuts.    |
| s |       | monds | onds |       |        | pi        |                |
|   |       | --    | --   |       |        | stachios; |                |
|   |       |       |      |       |        | T         |                |
|   |       | \$4.6 | \    |       |        | ajikistan |                |
|   |       | mi    | $4.8 |       |        | for       |                |
|   |       | llion | mil  |       |        | walnuts.  |                |
|   |       |       | lion |       |        |           |                |
+---+-------+-------+------+-------+--------+-----------+----------------+
| W |       | \$2.3 | \$   | 18%   | GAIN   | Lack of   |                |
| i |       | mi    | 445  |       | Report | US wines  |                |
| n |       | llion | mil  |       | R      | p         |                |
| e |       |       | lion |       | S5009, | romotion, |                |
|   |       |       |      |       | [ww    | strong    |                |
|   |       |       |      |       | w.fas] | positions |                |
|   |       |       |      |       | (http: | of other  |                |
|   |       |       |      |       | //www. | importers |                |
|   |       |       |      |       | fas/). | (         |                |
|   |       |       |      |       |        | Moldavia, |                |
|   |       |       |      |       | us     | Burglary, |                |
|   |       |       |      |       | da.gov | France,   |                |
|   |       |       |      |       |        | Italy,    |                |
|   |       |       |      |       |        | Spain,    |                |
|   |       |       |      |       |        | Chile)    |                |
+---+-------+-------+------+-------+--------+-----------+----------------+
| F |       | \$    | \    |       | 10% +  | Recovery  | Opportunities  |
| i |       | 23.1  | $642 |       |        | in local  | for groundfish |
| s |       | mi    | mil  |       | 10-18% | catch/    | and salmon,    |
| h |       | llion | lion |       | VAT    | pr        | especially     |
| a |       |       |      |       |        | oduction, | underutilized  |
| n |       |       |      |       |        | expected  | species, for   |
| d |       |       |      |       |        | higher    | processing.    |
| S |       |       |      |       |        | prices.   | Growing demand |
| e |       |       |      |       |        |           | for high value |
| a |       |       |      |       |        |           | products for   |
| f |       |       |      |       |        |           | HRI and        |
| o |       |       |      |       |        |           | retail.        |
| o |       |       |      |       |        |           |                |
| d |       |       |      |       |        |           |                |
+---+-------+-------+------+-------+--------+-----------+----------------+
| C |       | HS1   | HS19 |       |        |           |                |
| o |       | 90590 | 0590 |       |        |           |                |
| n |       | --    | --   |       |        |           |                |
| f |       | pa    | pas  |       |        |           |                |
| e |       | stry, | try, |       |        |           |                |
| c |       | c     | ca   |       |        |           |                |
| t |       | akes, | kes, |       |        |           |                |
| i |       | b     | br   |       |        |           |                |
| o |       | read- | ead- |       |        |           |                |
| n |       |       |      |       |        |           |                |
| e |       | \$200 | \$29 |       |        |           |                |
| r |       | tho   | mil  |       |        |           |                |
| y |       | usand | lion |       |        |           |                |
|   |       |       |      |       |        |           |                |
|   |       | H     | HS   |       |        |           |                |
|   |       | S1806 | 1806 |       |        |           |                |
|   |       | --    | --   |       |        |           |                |
|   |       | choc  | c    |       |        |           |                |
|   |       | olate | hoco |       |        |           |                |
|   |       | --    | late |       |        |           |                |
|   |       | \$8.2 | --   |       |        |           |                |
|   |       | mi    | \    |       |        |           |                |
|   |       | llion | $229 |       |        |           |                |
|   |       |       | mil  |       |        |           |                |
|   |       | HS    | lion |       |        |           |                |
|   |       | 1704  |      |       |        |           |                |
|   |       | --    | HS   |       |        |           |                |
|   |       | sugar | 1704 |       |        |           |                |
|   |       | p     | --   |       |        |           |                |
|   |       | astry | s    |       |        |           |                |
|   |       | --    | ugar |       |        |           |                |
|   |       |       | past |       |        |           |                |
|   |       | \$ 1  | ry - |       |        |           |                |
|   |       | mi    | \$   |       |        |           |                |
|   |       | llion | 91   |       |        |           |                |
|   |       |       | mil  |       |        |           |                |
|   |       |       | lion |       |        |           |                |
+---+-------+-------+------+-------+--------+-----------+----------------+
| S |       | \$9   | \    | -8%   | 5% -   | Strong    | Good potential |
| n |       | mi    | $385 |       | 15%,   | co        | for high       |
| a |       | llion | mil  |       | but    | mpetition | quality U.S.   |
| c |       |       | lion |       | not    | from      | snacks:        |
| k |       |       |      |       | less   | local     | popcorn, nuts, |
| F |       |       |      |       | than   | p         | dried fruits   |
| o |       |       |      |       | 0.15   | roducers, | mixes.         |
| o |       |       |      |       | --     | including |                |
| d |       |       |      |       | 0.075  | some      |                |
| s |       |       |      |       | E      | foreign   |                |
|   |       |       |      |       | uro/kg | brands    |                |
|   |       |       |      |       | (duty  | such as   |                |
|   |       |       |      |       | d      | Lay's     |                |
|   |       |       |      |       | epends | (PepsiCo) |                |
|   |       |       |      |       | on     | and       |                |
|   |       |       |      |       | pr     | Estrella  |                |
|   |       |       |      |       | oduct, | (Kraft)   |                |
|   |       |       |      |       | size   | --        |                |
|   |       |       |      |       | of     | Pringles  |                |
|   |       |       |      |       | pa     | from      |                |
|   |       |       |      |       | ckage, | Europe.   |                |
|   |       |       |      |       | sugar  |           |                |
|   |       |       |      |       | co     |           |                |
|   |       |       |      |       | ntent, |           |                |
|   |       |       |      |       | e      |           |                |
|   |       |       |      |       | tc.) + |           |                |
|   |       |       |      |       | 10% -  |           |                |
|   |       |       |      |       | 18%    |           |                |
|   |       |       |      |       | VAT    |           |                |
+---+-------+-------+------+-------+--------+-----------+----------------+
| R |       | 0.002 | 0.46 | 12%   | 10%,   | Some      | Opportunity    |
| i |       | MMT   | MMT  |       | but    | local     | for high       |
| c |       |       |      |       | not    | p         | quality U.S.   |
| e |       |       |      |       | less   | roduction | rice, wild     |
|   |       |       |      |       | than   | and       | rice in HRI    |
|   |       |       |      |       | 0.03   | l         | and retail.    |
|   |       |       |      |       | Euros  | ow-priced |                |
|   |       |       |      |       | per    | co        |                |
|   |       |       |      |       | kilo + | mpetition |                |
|   |       |       |      |       | 10%    | from      |                |
|   |       |       |      |       | VAT    | Chin      |                |
|   |       |       |      |       |        | a/Vietnam |                |
+---+-------+-------+------+-------+--------+-----------+----------------+
| W |       | 0.4   | 229  | 7.4%  | 20%, + | Co        | Existing       |
| i |       | mln   | mln  |       | 18%    | mpetition | wine-drinking  |
| n |       | l     | li   |       | VAT    | from      | culture        |
| e |       | iters | ters |       |        | locally   | getting boost  |
|   |       |       |      |       |        | produced  | from GOR       |
|   |       |       |      |       |        | beer,     | policy to      |
|   |       |       |      |       |        | vodka,    | reduce hard    |
|   |       |       |      |       |        | plus wine | alcohol        |
|   |       |       |      |       |        | imports   | (vodka)        |
|   |       |       |      |       |        | from      | consumption.   |
|   |       |       |      |       |        | Europe.   | Especially     |
|   |       |       |      |       |        |           | good potential |
|   |       |       |      |       |        |           | for            |
|   |       |       |      |       |        |           | medium-priced  |
|   |       |       |      |       |        |           | wines.         |
+---+-------+-------+------+-------+--------+-----------+----------------+
| P |       | \$4   | \$61 | 15.3% | 20%,   | Strong    | Large number   |
| e |       | mi    | mil  |       | but    | local     | of pets and    |
| t |       | llion | lion |       | not    | pro       | limited        |
| f |       |       |      |       | less   | duction - | consumption    |
| o |       |       |      |       | than   | Mars has  |                |
| o |       |       |      |       | 0.16   | two       |                |
| d |       |       |      |       | Euro   | plants    |                |
|   |       |       |      |       | s/kg + | that      |                |
|   |       |       |      |       | 18%    | produce   |                |
|   |       |       |      |       | VAT    | Whiskas,  |                |
|   |       |       |      |       |        | Kitekat,  |                |
|   |       |       |      |       |        | Pedigree; |                |
|   |       |       |      |       |        | Nestle's  |                |
|   |       |       |      |       |        | Purina    |                |
|   |       |       |      |       |        | produces  |                |
|   |       |       |      |       |        | Friskies  |                |
|   |       |       |      |       |        | and       |                |
|   |       |       |      |       |        | Darling   |                |
|   |       |       |      |       |        | locally;  |                |
|   |       |       |      |       |        | other     |                |
|   |       |       |      |       |        | imported  |                |
|   |       |       |      |       |        | and local |                |
|   |       |       |      |       |        | brands,   |                |
|   |       |       |      |       |        | some very |                |
|   |       |       |      |       |        | in        |                |
|   |       |       |      |       |        | expensive |                |
+---+-------+-------+------+-------+--------+-----------+----------------+
|   |       |       |      |       |        |           |                |
+---+-------+-------+------+-------+--------+-----------+----------------+

# SECTION V. KEY CONTACTS AND FURTHER INFORMATION

***Contact Information for FAS Offices in Russia and in the United
States:***

Eric Wenberg, ATO Director

Vacant, Marketing Specialist

Ksenia Evdokimova, Marketing Assistant

Natalia Merinova, Administrative Assistant

U.S. Agricultural Trade Office

American Embassy

Bolshoy Devyatinskiy Pereulok 8

121099 Moscow, Russia

Tel: 7 (495) 728-5560; Fax: 7 (495) 728-5069

E-mail: <atomoscow@usda.gov>

*For mail coming from the U.S.:*

Agricultural Trade Office

PSC 77 AGR

APO, AE 09721

*For international mail*:

Agricultural Trade Office

U.S. Embassy - Box M

Itainen Puistotie 14

00140 Helsinki, Finland

*Covering Northwest Russia (St. Petersburg):*

Maria Kulakhmetova, ATO Marketing Assistant

American Consulate General

Nevskiy Prospekt, 25

191186 St. Petersburg, Russia

Tel: 7 (812) 326-2580; Fax: 7 (812) 326-2561

E-mail: <Maria.Baranova@usda.gov>

*Covering the Russian Far East (Vladivostok):*

Svetlana Ilyina, ATO Marketing Assistant

American Consulate General

Ulitsa Pushkinskaya, 32

690001 Vladivostok, Russia

Tel: 7 (4232) 300-089; Fax: 7 (4232) 300-089

E-mail: <Svetlana.Ilyina@usda.gov>

*For General Information on FAS/USDA Market Promotion Programs and
Activities:*

AgExport Services Division

Room 4939

14^th^ and Independence, SW

Washington, DC 20250

Tel: (202) 720-6343; Fax: (202) 690‑0193

**FAS Website:** [www.fas.usda.gov](http://www.fas.usda.gov/)

*For Trade Policy/Market Access Issues, General Information on the
Russian Agricultural Sector, etc:*

Allan Mustard, Minister-Counselor

Office of Agricultural Affairs

American Embassy

Bolshoy Devyatinskiy Pereulok 8

121099 Moscow, Russia

Tel: 7 (495) 728-5222; Fax: 7 (495) 728-5133 or 728 5102

E-mail: <agmoscow@usda.gov> or <agmoscow@corbina.ru>

To learn more about USDA/FAS AND ATO services please visit
http://eng.usda.ru.

## OTHER MARKET REPORTS

Attache reports on the Russian food and agricultural market are also
available on the FAS website www.fas.usda.gov\\attache.

## OTHER USEFUL CONTACTS:

The ATO/Moscow works with a large number of U.S. industry organizations,
some of which have local offices to assist U.S. exporters of these food
and agricultural products. Find these contacts at eng.usda.ru.

U.S. Poultry and Egg Export Council (USAPEEC)

E-mail: <usapeec@usapeec.ru>

U.S. Meat Export Federation (USMEF)

E-mail: <Moscow@usmef.org>

U.S. Wheat Associates

E-mail: <uswmow@dol.ru>

U.S. Grains Council (USGC)

E-mail: <fgcmow@online.ru>

Pear Bureau Northwest

E-mail: katerina@newmark.ru

Washington Apple Commission

Moscow office:

<office@bestapples.ru>

Vladivostok office:

<katerina@newmark.ru>

Almond Board of California

E-mail: Irina.Koziy@mail.ru

American Soybean Association

E-mail: soyaru@rol.ru

California Wine Institute

E-mail: dc_wines@mail.ru

Pet Food Institute

E-mail: agerman@globalworks.ru

National Renderers Association

E-mail: lischenko@ane.ru

Another good source for information on doing business in Russia, the
American Chamber of Commerce which has offices in Moscow and St.
Petersburg:

American Chamber of Commerce in Russia (AmCham)

Ul. Dolgorukovskaya, Building 7, 14th floor

127006 Moscow, Russia

Tel: 7 (495) 961‑2141; Fax: 7 (495) 961‑2142

Email: <amchamru@amcham.ru>

American Chamber of Commerce in St. Petersburg

25 Nevsky Prospect, 3^rd^ Floor

191186 St. Petersburg, Russia

Tel: 7 (812) 326-2590; Fax: 7 (812) 326-2591 or 326-2561

Email: <st.pete@amcham.ru>

For questions on agricultural machinery, food processing and packaging
equipment/materials, refrigeration equipment, etc., please contact:

U.S. and Foreign Commercial Service

Bldg. 2, 23/38 Bolshaya Molchanovka

121069 Moscow, Russia

Tel: 7 (495) 737-5030; Fax: 7 (495) 737-5033

E-mail: moscow.office.box@mail.doc.gov

<moscow.office.box@mail.doc.gov>

## APPENDIX I. STATISTICS

+-------------------------------------------------------+--------------+
| ### T                                                 |              |
| able A: Key Trade & Demographic Information ^1/^ ^2/^ |              |
+-------------------------------------------------------+--------------+
| Agricultural Imports From All Countries (\$Billion)   | 12.9         |
| ^3/^                                                  |              |
+-------------------------------------------------------+--------------+
| Consumer Food Imports From All Countries (\$Billion)  | 7.7          |
| ^3/^                                                  |              |
+-------------------------------------------------------+--------------+
| Edible Fishery Imports From All Countries (\$Million) | 642          |
| ^3/^                                                  |              |
+-------------------------------------------------------+--------------+
| Total Population (Millions)/Annual Growth Rate (%)    | 144.2        |
+-------------------------------------------------------+--------------+
| Urban Population (Millions)/Annual Growth Rate (%)    | 105.8 / 1.3  |
+-------------------------------------------------------+--------------+
| Number of Major Metropolitan Areas ^4/^               | 13           |
+-------------------------------------------------------+--------------+
| Size of the Middle Class (Millions)/Growth Rate (%)   | 25 / 27      |
| ^5/^                                                  |              |
+-------------------------------------------------------+--------------+
| Per Capita Gross Domestic Product (US\$)^6/^          | 4,000        |
+-------------------------------------------------------+--------------+
| Unemployment Rate (%)^6/^                             | 8.6          |
+-------------------------------------------------------+--------------+
| Per Capita Food Expenditures (US\$) ^7/^              | 530,8        |
+-------------------------------------------------------+--------------+
| Percent of Female Population Employed ^8/^            | 88           |
+-------------------------------------------------------+--------------+
| Exchange Rate (US\$1 = 28.9 Rubles)                   | As of        |
|                                                       | December     |
|                                                       | 2005         |
+-------------------------------------------------------+--------------+

^1/^ Unless otherwise noted, 2004 data

^2/^ Source: Unless otherwise noted, Russian State Statistics Committee
(Goskomstat)

^3/^ Source: GTI World Trade Atlas

^4/^ Population in excess of 1,000,000

^5/^ Source: Various - based on estimate of individuals earning
US\$500-\$2,000 per month

^6/^ Source: Goskomstat

^7/^ Source: Estimate based on annual total retail food sales

^8/^ As percentage of economically-active female population (employed or
actively seeking employment)

\- female workers account for 41% of the total economically-active
population.

### 

<table>
<colgroup>
<col style="width: 35%" />
<col style="width: 7%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 5%" />
<col style="width: 6%" />
<col style="width: 6%" />
<col style="width: 6%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="10"><h3
id="table-b-consumer-food-edible-fishery-product-imports">Table B:
Consumer Food &amp; Edible Fishery Product Imports</h3></td>
</tr>
<tr class="even">
<td></td>
<td colspan="3"><p><strong>Imports from</strong></p>
<p><strong>the World</strong></p></td>
<td colspan="3"><p><strong>Imports from</strong></p>
<p><strong>the U.S.</strong></p></td>
<td colspan="3"><h4 id="u.s-market-share">U.S Market Share</h4></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="3"><em><strong>(Million Dollars)</strong></em></td>
<td colspan="3"><em><strong>(Million Dollars)</strong></em></td>
<td colspan="3"><em><strong>(Percent)</strong></em></td>
</tr>
<tr class="even">
<td></td>
<td><strong>2002</strong></td>
<td><strong>2003</strong></td>
<td><strong>2004</strong></td>
<td><strong>2002</strong></td>
<td><strong>2003</strong></td>
<td><strong>2004</strong></td>
<td><strong>2002</strong></td>
<td><strong>2003</strong></td>
<td><strong>2004</strong></td>
</tr>
<tr class="odd">
<td><strong>CONSUMER-ORIENTED AG TOTAL</strong></td>
<td>5,617</td>
<td>6,687</td>
<td>7,735</td>
<td>535</td>
<td>534</td>
<td>529</td>
<td>10</td>
<td>8</td>
<td>7</td>
</tr>
<tr class="even">
<td>Snack Foods (excl. Nuts)</td>
<td>252</td>
<td>307</td>
<td>385</td>
<td>1</td>
<td>3</td>
<td>9</td>
<td>0</td>
<td>0</td>
<td>2</td>
</tr>
<tr class="odd">
<td>Breakfast Cereals &amp; Pancake Mix</td>
<td>11</td>
<td>11</td>
<td>10</td>
<td>1</td>
<td>1</td>
<td>1</td>
<td>2</td>
<td>2</td>
<td>6</td>
</tr>
<tr class="even">
<td>Red Meats, Fresh/Chilled/Frozen</td>
<td>1,414</td>
<td>1,426</td>
<td>1,470</td>
<td>70</td>
<td>53</td>
<td>29</td>
<td>5</td>
<td>4</td>
<td>2</td>
</tr>
<tr class="odd">
<td>Red Meats, Prepared/Preserved</td>
<td>64</td>
<td>58</td>
<td>69</td>
<td>1</td>
<td>1</td>
<td>1</td>
<td>2</td>
<td>2</td>
<td>1</td>
</tr>
<tr class="even">
<td>Poultry Meat</td>
<td>816</td>
<td>698</td>
<td>663</td>
<td>417</td>
<td>405</td>
<td>396</td>
<td>51</td>
<td>58</td>
<td>60</td>
</tr>
<tr class="odd">
<td>Dairy Products (excl. Cheese)</td>
<td>188</td>
<td>264</td>
<td>286</td>
<td>1</td>
<td>1</td>
<td>1</td>
<td>1</td>
<td>0</td>
<td>0.12</td>
</tr>
<tr class="even">
<td>Cheese</td>
<td>235</td>
<td>355</td>
<td>462</td>
<td>1</td>
<td>1</td>
<td>1</td>
<td>0</td>
<td>0</td>
<td>0.01</td>
</tr>
<tr class="odd">
<td>Eggs &amp; Products</td>
<td>12</td>
<td>16</td>
<td>22</td>
<td>1</td>
<td>1</td>
<td>1</td>
<td>1</td>
<td>6</td>
<td>1</td>
</tr>
<tr class="even">
<td>Fresh Fruit</td>
<td>742</td>
<td>1,053</td>
<td>1,463</td>
<td>3</td>
<td>2</td>
<td>3</td>
<td>0</td>
<td>0</td>
<td>0.2</td>
</tr>
<tr class="odd">
<td>Fresh Vegetables</td>
<td>224</td>
<td>377</td>
<td>416</td>
<td>1</td>
<td>1</td>
<td>2</td>
<td>1</td>
<td>0</td>
<td>0.37</td>
</tr>
<tr class="even">
<td>Processed Fruit &amp; Vegetables</td>
<td>380</td>
<td>451</td>
<td>528</td>
<td>6</td>
<td>5</td>
<td>4</td>
<td>2</td>
<td>1</td>
<td>0.85</td>
</tr>
<tr class="odd">
<td>Fruit &amp; Vegetable Juices</td>
<td>131</td>
<td>148</td>
<td>173</td>
<td>1</td>
<td>3</td>
<td>3</td>
<td>1</td>
<td>2</td>
<td>2</td>
</tr>
<tr class="even">
<td>Tree Nuts</td>
<td>23</td>
<td>25</td>
<td>31</td>
<td>6</td>
<td>4</td>
<td>5</td>
<td>26</td>
<td>16</td>
<td>16</td>
</tr>
<tr class="odd">
<td>Wine &amp; Beer</td>
<td>361</td>
<td>497</td>
<td>576</td>
<td>2</td>
<td>2</td>
<td>2</td>
<td>0</td>
<td>0</td>
<td>0.42</td>
</tr>
<tr class="even">
<td>Nursery Products &amp; Cut Flowers</td>
<td>75</td>
<td>94</td>
<td>186</td>
<td>1</td>
<td>1</td>
<td>1</td>
<td>0</td>
<td>1</td>
<td>0.01</td>
</tr>
<tr class="odd">
<td>Pet Foods (Dog &amp; Cat Food)</td>
<td>18</td>
<td>22</td>
<td>61</td>
<td>1</td>
<td>3</td>
<td>4</td>
<td>6</td>
<td>6</td>
<td>6</td>
</tr>
<tr class="even">
<td>Other Consumer-Oriented Products</td>
<td>651</td>
<td>844</td>
<td>933</td>
<td>24</td>
<td>52</td>
<td>69</td>
<td>4</td>
<td>6</td>
<td>7</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td><strong>FISH &amp; SEAFOOD PRODUCTS</strong></td>
<td>382</td>
<td>481</td>
<td>709</td>
<td>5</td>
<td>9</td>
<td>23</td>
<td>1</td>
<td>2</td>
<td>3</td>
</tr>
<tr class="odd">
<td>Salmon</td>
<td>41</td>
<td>60</td>
<td>104</td>
<td>1</td>
<td>2</td>
<td>3</td>
<td>0.19</td>
<td>3</td>
<td>2</td>
</tr>
<tr class="even">
<td>Surimi</td>
<td>11</td>
<td>21</td>
<td>34</td>
<td>1</td>
<td>2</td>
<td>6</td>
<td>4</td>
<td>10</td>
<td>17</td>
</tr>
<tr class="odd">
<td>Crustaceans</td>
<td>23</td>
<td>33</td>
<td>45</td>
<td>1</td>
<td>1</td>
<td>1</td>
<td>0</td>
<td>3</td>
<td>0.2</td>
</tr>
<tr class="even">
<td>Groundfish &amp; Flatfish</td>
<td>44</td>
<td>63</td>
<td>94</td>
<td>2</td>
<td>2</td>
<td>11</td>
<td>5</td>
<td>3</td>
<td>11</td>
</tr>
<tr class="odd">
<td>Molluscs</td>
<td>11</td>
<td>14</td>
<td>19</td>
<td>1</td>
<td>1</td>
<td>1</td>
<td>1</td>
<td>7</td>
<td>1</td>
</tr>
<tr class="even">
<td>Other Fishery Products</td>
<td>251</td>
<td>290</td>
<td>413</td>
<td>2</td>
<td>3</td>
<td>4</td>
<td>1</td>
<td>1</td>
<td>0.93</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td><strong>AGRICULTURAL PRODUCTS TOTAL</strong></td>
<td>9,443</td>
<td>10,699</td>
<td>11,878</td>
<td>713</td>
<td>663</td>
<td>714</td>
<td>8</td>
<td>6</td>
<td>6</td>
</tr>
<tr class="odd">
<td><strong>AGRICULTURAL, FISH &amp; FORESTRY</strong></td>
<td>10,001</td>
<td>11,422</td>
<td>12,891</td>
<td>721</td>
<td>674</td>
<td>740</td>
<td>7</td>
<td>6</td>
<td>6</td>
</tr>
<tr class="even">
<td colspan="10"><em><strong>Source: FAS' Global Agricultural Trade
System using data from the United Nations Statistical
Office</strong></em></td>
</tr>
</tbody>
</table>

### 

+-----------+-------+-------+-------+---+------------+-----+-----+-----+
| #         |       |       |       |   |            |     |     |     |
| ## Table  |       |       |       |   |            |     |     |     |
| C: Top 15 |       |       |       |   |            |     |     |     |
|  Supplier |       |       |       |   |            |     |     |     |
| s of Cons |       |       |       |   |            |     |     |     |
| umer Food |       |       |       |   |            |     |     |     |
| s & Edibl |       |       |       |   |            |     |     |     |
| e Fishery |       |       |       |   |            |     |     |     |
|  Products |       |       |       |   |            |     |     |     |
+-----------+-------+-------+-------+---+------------+-----+-----+-----+
| *         |       |       |       |   | FISH &     |     |     |     |
| *CONSUMER |       |       |       |   | SEAFOOD    |     |     |     |
| -ORIENTED |       |       |       |   | PRODUCTS   |     |     |     |
| AG TOTAL  |       |       |       |   | (\$1,000)  |     |     |     |
| (\        |       |       |       |   |            |     |     |     |
| $1,000)** |       |       |       |   |            |     |     |     |
+-----------+-------+-------+-------+---+------------+-----+-----+-----+
|           | **2   | **2   | **2   |   |            | **  | **  | **  |
|           | 002** | 003** | 004** |   |            | 200 | 200 | 200 |
|           |       |       |       |   |            | 2** | 3** | 4** |
+-----------+-------+-------+-------+---+------------+-----+-----+-----+
| Ukraine   | 46    | 68    | 83    |   | Norway     | 1   | 1   | 3   |
|           | 1,391 | 1,443 | 1,047 |   |            | 57, | 98, | 06, |
|           |       |       |       |   |            | 484 | 650 | 623 |
+-----------+-------+-------+-------+---+------------+-----+-----+-----+
| Brazil    | 71    | 71    | 78    |   | United     | 24, | 32, | 45, |
|           | 2,803 | 9,120 | 0,518 |   | Kingdom    | 465 | 720 | 009 |
+-----------+-------+-------+-------+---+------------+-----+-----+-----+
| United    | 53    | 53    | 52    |   | Denmark    | 24, | 28, | 38, |
| States    | 5,354 | 3,889 | 9,174 |   |            | 069 | 069 | 472 |
+-----------+-------+-------+-------+---+------------+-----+-----+-----+
| Germany   | 48    | 46    | 51    |   | China      | 19, | 24, | 33, |
|           | 7,685 | 1,326 | 7,734 |   | (Peoples   | 493 | 949 | 526 |
|           |       |       |       |   | Republic   |     |     |     |
|           |       |       |       |   | of)        |     |     |     |
+-----------+-------+-------+-------+---+------------+-----+-----+-----+
| Poland    | 28    | 37    | 44    |   | Latvia     | 39, | 39, | 30, |
|           | 4,792 | 6,801 | 2,017 |   |            | 674 | 740 | 110 |
+-----------+-------+-------+-------+---+------------+-----+-----+-----+
| Ecuador   | 19    | 26    | 36    |   | Mauritania | 12, | 18, | 25, |
|           | 1,361 | 1,244 | 2,174 |   |            | 233 | 940 | 641 |
+-----------+-------+-------+-------+---+------------+-----+-----+-----+
| Ne        | 27    | 31    | 31    |   | United     | 4,  | 8,  | 23, |
| therlands | 1,722 | 9,268 | 9,013 |   | States     | 809 | 750 | 235 |
+-----------+-------+-------+-------+---+------------+-----+-----+-----+
| Moldova,  | 17    | 25    | 28    |   | Iceland    | 532 | 3,  | 18, |
| Republic  | 3,791 | 8,946 | 4,828 |   |            |     | 462 | 465 |
| of        |       |       |       |   |            |     |     |     |
+-----------+-------+-------+-------+---+------------+-----+-----+-----+
| France    | 23    | 27    | 28    |   | Lithuania  | 16, | 20, | 17, |
|           | 2,904 | 2,931 | 4,179 |   |            | 784 | 315 | 011 |
+-----------+-------+-------+-------+---+------------+-----+-----+-----+
| China     | 22    | 24    | 27    |   | Chile      | 6,  | 7,  | 15, |
| (Peoples  | 2,881 | 2,828 | 2,341 |   |            | 204 | 084 | 267 |
| Republic  |       |       |       |   |            |     |     |     |
| of)       |       |       |       |   |            |     |     |     |
+-----------+-------+-------+-------+---+------------+-----+-----+-----+
| Argentina | 7     | 14    | 25    |   | Canada     | 3,  | 3,  | 14, |
|           | 3,010 | 1,963 | 8,919 |   |            | 445 | 987 | 669 |
+-----------+-------+-------+-------+---+------------+-----+-----+-----+
| Uz        | 8     | 12    | 23    |   | K          | 12, | 12, | 13, |
| bekistan, | 6,962 | 9,967 | 2,597 |   | azakhstan, | 952 | 658 | 502 |
| Republic  |       |       |       |   | Republic   |     |     |     |
| of        |       |       |       |   | of         |     |     |     |
+-----------+-------+-------+-------+---+------------+-----+-----+-----+
| Spain     | 14    | 18    | 21    |   | Argentina  | 578 | 4   | 13, |
|           | 6,682 | 7,441 | 0,414 |   |            |     | 225 | 359 |
+-----------+-------+-------+-------+---+------------+-----+-----+-----+
| Italy     | 14    | 18    | 20    |   | Estonia    | 7,  | 5,  | 10, |
|           | 7,116 | 1,249 | 9,661 |   |            | 602 | 036 | 515 |
+-----------+-------+-------+-------+---+------------+-----+-----+-----+
| Turkey    | 12    | 13    | 17    |   | Ukraine    | 6,  | 5,  | 9,  |
|           | 2,545 | 8,341 | 7,401 |   |            | 634 | 434 | 313 |
+-----------+-------+-------+-------+---+------------+-----+-----+-----+
| Other     | 1,46  | 1,78  | 2,02  |   | Other      | 44, | 66, | 94, |
|           | 5,889 | 0,222 | 3,023 |   |            | 611 | 925 | 033 |
+-----------+-------+-------+-------+---+------------+-----+-----+-----+
| World     | 5,61  | 6,68  | 7,73  |   | World      | 3   | 4   | 7   |
|           | 6,928 | 7,040 | 5,116 |   |            | 81, | 80, | 08, |
|           |       |       |       |   |            | 570 | 948 | 746 |
+-----------+-------+-------+-------+---+------------+-----+-----+-----+
| #######   |       |       |       |   |            |     |     |     |
+-----------+-------+-------+-------+---+------------+-----+-----+-----+

## APPENDIX II. OTHER ECONOMIC AND DEMOGRAPHIC DATA

The Russian economy has expanded sharply following the 1998 economic
crisis and Ruble devaluation. The table below shows this growth during
the 1997-2004 period.

+-------+-------+-------+-------+-------+-------+-------+--------+
| ###   |       |       |       |       |       |       |        |
|  Tabl |       |       |       |       |       |       |        |
| e A:  |       |       |       |       |       |       |        |
| GDP G |       |       |       |       |       |       |        |
| rowth |       |       |       |       |       |       |        |
|  (%), |       |       |       |       |       |       |        |
|  1997 |       |       |       |       |       |       |        |
| -2004 |       |       |       |       |       |       |        |
+-------+-------+-------+-------+-------+-------+-------+--------+
| **1   | **1   | **1   | **2   | **2   | **2   | **2   | **     |
| 997** | 998** | 999** | 000** | 001** | 002** | 003** | 2004** |
+-------+-------+-------+-------+-------+-------+-------+--------+
| 1.4   | -5.3  | 6.4   | 10.0  | 5.1   | 4.7   | 7.3   | 6.8    |
+-------+-------+-------+-------+-------+-------+-------+--------+
| ***So |       |       |       |       |       |       |        |
| urce: |       |       |       |       |       |       |        |
| Bus   |       |       |       |       |       |       |        |
| iness |       |       |       |       |       |       |        |
| Mo    |       |       |       |       |       |       |        |
| nitor |       |       |       |       |       |       |        |
| I     |       |       |       |       |       |       |        |
| ntern |       |       |       |       |       |       |        |
| ation |       |       |       |       |       |       |        |
| al*** |       |       |       |       |       |       |        |
+-------+-------+-------+-------+-------+-------+-------+--------+

As indicated in the following table, the Russian population is largely
urban. The two largest cities are Moscow (nine million) and St.
Petersburg (five million). Although not widely known, Moscow's total
metropolitan population of nearly 18 million makes it the largest city
in Europe. Another 12 cities across Russia have populations in excess of
one million each.