The August 1998 crisis proved that demand for bananas in the Russian Federation is very price-elastic. Demand shrank 53 percent after prices in July-November 1998 doubled in Rouble terms. At the end of 1997 the per kilo banana price constituted 40.7 percent of the per kilo beef price, in July 1998 45.8 percent, in late November 71.2 percent. Bananas are currently almost 25 percent more expensive than apples. SSC unpublished data.
Several factors are now at work in the banana market in the Russian Federation.
Between August and December 1998, real incomes dropped by 15 percent which curbs demand as bananas are income elastic. Retail prices per kg are approaching a level that the survey found prohibitive for most consumers. The population is now accustomed to bananas. There now exists a developed and rational institutional and marketing infrastructure. The market operators will not easily abandon their capital investments.