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“Made in” – Addressing Reputational Risk in Global Food Markets
6 June 2019
15:00—16:15
KEY CONCLUSIONS
Russia needs to increase agricultural exports

The objective set by the President is a very ambitious one. USD 45 billion in agricultural exports is, essentially, top league. It is the top level among market players. To reiterate, the US and EU are the current leaders. In the US, trade is more or less balanced, with USD 150–160 billion going in both directions. USD 45 billion essentially represents one third of their exports — Sergey Levin, Deputy Minister of Agriculture of the Russian Federation .

We are faced with an enormous task, which appears to me to be very ambitious. There is a federal project entitled ‘Exports of Agricultural Products’ which stipulates that by 2024, food exports must reach USD 45 billion in value. This is starting out from the baseline period of 2017, when USD 21.6 billion-worth of goods were exported. That is to say, that exports must be more than doubled — Anfisa Voronina, Editorial Director of Commercial Projects, Vedomosti.

A country’s reputation is important for exports

When we think of Italian or French cheese, we immediately have a general image in our minds. We even imagine the taste and smell of the cheese, which is firmly associated with notions of high quality, taste, and so on. This is down to a country’s reputation as a producer of a particular product, and as a supplier of this product to the global market — Sergey Levin, Deputy Minister of Agriculture of the Russian Federation .

The reputation and perception of Russia will be crucial for Russian companies seeking to do business in other countries — Andrey Danilenko, Chairman, Committee on Agro-Industrial Policy, Delovaya Rossiya (Business Russia).

It seems to me that people think about reputations either when something is amiss in the country, or with the product. As a rule, international companies tend to be affected by this notion of reputation during a boycott. <...> The product may be excellent, but something is not right in the country of origin. We experienced this in 2014 — Irina Bakhtina, Vice President for Sustainable Business Development and Corporate Affairs, Unilever Rus .

Reputation is primarily associated with a brand, i.e. something that you want to be proud of, something which you hope will gain widespread recognition, something which people will first think of when they talk about you. In this instance, when they talk about food from Russia — Valery Schapov, President, Mars Russia.

ISSUES
A lack of awareness of Russian brands abroad

In Russia, we have long-standing and well-recognized brands, including regional brands. Everyone in Russia knows about Tula pryanik, Bashkir honey, and Circassian cheese <...> but nobody in international markets has heard of them — Sergey Levin, Deputy Minister of Agriculture of the Russian Federation .

We have learned to produce high-quality products, but we are still far from being able to effectively publicize what we are capable of — Andrey Danilenko, Chairman, Committee on Agro-Industrial Policy, Delovaya Rossiya (Business Russia).

Our problem is not that we have a brand which is not very good and needs to be improved. Our problem is that our products are not widely known abroad — Andrey Slepnev, Chief Executive Officer, Russian Export Centre .

We have solved the issue of import substitution. Today we can provide for ourselves and produce very high-quality products while we are at it. And yet, nobody knows about it — Sergey Mikhailov, General Director, Chairman of the Executive Board, Cherkizovo Group .

Underdeveloped logistics and the difficulty of preparing the necessary documentation for permits

I believe we have a serious issue with logistics, the cost of logistics, and the establishment of a logistics network to transport our goods. We have serious issues with permit documentation — Andrey Danilenko, Chairman, Committee on Agro-Industrial Policy, Delovaya Rossiya (Business Russia).

Logistics is eating away at a great deal of what we wanted to earn from exports. <...> Today, transport subsidies are only in place for food supplies to the East, for some reason. <...> Of course, there is regulation on top of that. Clearing phytosanitary and veterinary products for export can take 3–6 times longer than usual — Irina Bakhtina, Vice President for Sustainable Business Development and Corporate Affairs, Unilever Rus .

SOLUTIONS
Expanding the list of exported products

The objective stipulated by the President commits us to a root-and-branch overhaul of agricultural production and the production of new products which we have yet to ship to international markets, but which will be in higher demand there. <...> 406 billion roubles of public funds have been earmarked for this up until 2024. This is a lot of money. Most of it is going towards establishing new export-oriented production facilities — Sergey Levin, Deputy Minister of Agriculture of the Russian Federation .

Fostering Russia’s image as a supplier of high-quality products

If we want to reach the B2C market, the mass market for processed goods, we need to work to make sure that customers in other countries view Russia as a producer and supplier of eco-friendly, high-quality, and healthy products — Sergey Levin, Deputy Minister of Agriculture of the Russian Federation .

If we were to ask the economic community what comes to mind when they think of Russia, they would cite the weak rouble, inexpensive labour, and cheap energy resources. What is it that we want? We want Russia to be viewed as a producer boasting high-tech potential, science-intensive developments, and a huge natural raw materials base — Valery Schapov, President, Mars Russia.

Brand promotion

Clearly [there needs to be a] focus on the most effective product groups. <...> These sectors are obvious to us already. Without a doubt, they are confectionary – ice cream particularly – and meat. There are other sectors, too — Sergey Levin, Deputy Minister of Agriculture of the Russian Federation .

There needs to be a comprehensive approach. That encompasses developing the country’s brand in and of itself, and probably developing individual categories, too. Looking at sales in China, we can see that national pavilions are ineffective — Sergey Lebedev, Director for Government Relations, Alibaba Russia .

Partnership between the public and private sectors in improving the country’s reputation

It [building a reputation, – Ed.] must be done through public-private partnership. The government cannot assume this role alone. It must involve interested businesses, who must in turn work with the government in this area. That said, the government must also have specific positions regarding the matter — Andrey Danilenko, Chairman, Committee on Agro-Industrial Policy, Delovaya Rossiya (Business Russia).

With respect to the government, I think [it must, – Ed.] support entrepreneurship and simplify procedures wherever possible. I say that because there can be endless inspections — Mikhail Lyasko, General Director, Arla Foods.

The Russian small and medium-sized business segment can frequently suffer from a lack of passion, a lack of drive — Sergey Lebedev, Director for Government Relations, Alibaba Russia .

A consideration of the specific features of destination markets

Let us not forget another thing: every single country varies in its consumer preferences. We must therefore also work together to focus on each specific country. What might be of interest in Russia might be viewed entirely differently in China, and differently again in the Middle East. That could be the case for the exact same product — Andrey Danilenko, Chairman, Committee on Agro-Industrial Policy, Delovaya Rossiya (Business Russia).

With regard to Asian markets, they view packaging completely differently. They have different tastes. A different formula is required, as well as a completely different approach to promotion. Of course, it would be beneficial for us to primarily focus on learning about this, and put forward a brand that will work well — Andrey Slepnev, Chief Executive Officer, Russian Export Centre .

Investment in sustainable development

In developed countries especially, the consumer places a great deal of importance on who the producer is, and whether it is socially responsible or not. A great many make another choice at this stage based on how something is produced. They want to know that the producer acts in a sufficiently responsible way with regards sustainable development, whether they invest in making tomorrow’s world better than today’s. <...> Whoever invests in sustainable development today will emerge victorious tomorrow — Valery Schapov, President, Mars Russia.

Introducing innovations and training employees

What might our advice be to Russian producers so that they can take us [multinational corporations, – Ed.] on in international markets? The first thing would be to invest in modern production facilities. <...> Secondly, they should invest in their scientific and technological potential. The third thing would probably be staff development — Valery Schapov, President, Mars Russia.

The material was prepared by the Russian news agency TASS