Russian seafood market facing rising uncertainty
The future of the Russian seafood market remains unclear as the country’s invasion of Ukraine continues, with a decline of household incomes forcing a rebuild of business models in premium segments.
The economic uncertainty that emerged in late February and early March due to sanctions imposed on Russia in response to its invasion of Ukraine led the government to quickly tighten its control over consumer markets. The Russian ruble also heavily depreciated against the euro and U.S. dollar, which coincided with an exodus of major Western brands from Russia, all of which have hurt economic stability and impacted consumer behavior.
The Russian Federal Agency for Fisheries has established a working group to monitor fishing, delivery of seafood, prices of seafood at retail, and the activities of Russian fishing companies in international waters and exclusive economic zones of other countries. The concern, authorities said, was retail prices and the availability of seafood, as a lack of products in stores could spark panic among consumers that are anxious about mounting pressure on their incomes and growing uncertainty for the future.
So far, however, things have maintained relative normalcy since the start of the war through the middle of May. According to the Russian Statistics Agency, seafood prices increased 4.63 percent through 15 April, against 17.62 percent for all food products. Toward the end of April, the prices of herring, pollock, humpback salmon, and other species declined compared with March, according to the Russian Federal Agency for Fisheries.
Seafood is in a better position in Russia than most other food categories, as the country catches five million metric tons (MT) each year, covering the nation’s needs and leaving a tight space for imports of species not caught or farmed in the country. National consumption is about 3.15 million MT, with the remainder of the catch exported.
Through 4 May, Russian fisheries caught 1.71 million of fish and crabs, in line with the corresponding period of 2021. Meanwhile aquaculture produced 157,000 MT of fish in the first quarter this year, up 4 percent year-on-year.
Russian Federal Agency for Fisheries Head Ilya Shestakov said that fishing outside Russia has been good. More than 200 Russian ships are fishing in international waters and the economic zones of other countries, and are facing no serious problems with calling in foreign ports or selling catch.
While there are currently no signs of a seafood shortage in the retail sector, the Russian government and trade associations have nonetheless decided to act proactively to preempt a crisis.
The Russian Federal Agency for Fisheries, The All-Russian Association of Fishing Industry (VAPRE) and the Fishery Union joined forces in late April to consolidate information on catch, exports, imports, the needs of retail, and prices in wholesale and retail segments. Collected on a weekly basis, this information, displayed on the VARPE’s website, will show the current balance of supply and demand for seafood in order to detect any disruptions in the supply chain.
“We decided to do some job relative to the balance of production and demand so that we can ensure the domestic market is supplied with sufficient volumes and assortment. Supply is normal and stable, but we have to keep an eye on it in order to be able to respond to any challenge quickly,” Shestakov said.
While the retail sector appears unimpacted, restaurants and foodservice are being hit harder. Typically restaurants in Russia use a combination of both cheap and expensive species that can be hard to find at retail stores, with expensive, rarer species often sourced through imports that are difficult to get under current sanctions.
Meat&Fish restaurant chain founder Sergey Mironov told business paper RBC that Chilean salmon has all-but disappeared from Russia because of sanctions. Chilean salmon, he said, is the only variety he chooses for his cuisine, even with a robust salmon season in Russia’s Far East in recent years.
Russian salmon, Mironov said, is caught in a short window, and the best parts of the catch are exported to Asian countries. The Russian market gets the leftovers. Plus, in order to buy Russian salmon, he would need to travel to the Kamchatka region and negotiate with fisheries there, build a sophisticated supply chain, and store frozen fish for a long time, a model that doesn’t work for a restaurant that needs next-day delivery of high-quality products.
So far, Mironov said, his restaurant chain hasn’t seen a decrease in income, but only due to an 8 percent increase in prices at Meat&Fish.
White Rabbit Family restaurant group founder Boris Zarkov told business paper Kommersant that his company has also had to find substitutions, especially for tuna previously imported from Japan.
Even if the products can be sourced locally, however, the price may not be tenable. Rakovaya gastrobar chain owner Evgeniy Nichipiruk told Kommersant that the cost of prawns from Russia’s far east increased by 30 percent, to RUB 1,500 (USD 23.51, EUR 21.89). For fisheries, he said, it’s more profitable to export the catch than sell it in the domestic market.
While things have been maintained over the months since the invasion, the consumer outlook for Russia’s seafood market isn’t positive.
The Ministry of Economic Development of Russia suggested the country’s gross domestic product will shrink by 8.8 percent in comparison to 2021 in a basic scenario, and by 12.4 percent in a conservative one. Inflation is expected to be higher than 20 percent for 2022.
Household surveys have found that consumers are cutting their spending as well. A survey by Zarplata.ru showed that 80 percent of respondents have cut their spending in recent weeks. 44 percent are trying to save on everything they can, and 12 percent are spending less on eating out.
According to estimates by the Institute of Research and Expertise VEB.RF, the unemployment level will rise from 4.4 percent in January to between 6 and 6.2 percent over the course of the year. Household disposable income will reduce by 10 to 12 percent compared to 2021.
The weak economic forecasts are estimates based on current trends, and every publication remarked the current situation is hard to forecast. Still, signs point to a potential contraction in Russia’s seafood marketplace.
Photo courtesy of Anna Krivitskaya/Shutterstock