Navigating the Shifting Landscape of Russian Pet Food Imports

The Russian pet food market has undergone a significant transformation in recent years, with imports plunging by 40% in the first half of 2024 compared to the previous year. This shift has been driven by a complex interplay of factors, including challenges in making payments to politically friendly countries, a rise in domestic production, and heightened veterinary restrictions.

Uncovering the Factors Behind the Decline in Russian Pet Food Imports

### Domestic Production Surge and Veterinary ConcernsThe head of Rosselhoznadzor, the Russian state veterinary watchdog, Sergey Dankvert, attributes the decline in pet food imports to a significant increase in domestic production. He asserts that a sufficient number of companies now have the necessary permissions to deliver their products to the Russian market. However, Dankvert also expresses concerns about the composition of pet food exported to Russia from Western countries, claiming that the contents often differ from what is stated on the label.Rosselhoznadzor's actions reflect these concerns, as the agency suspended imports of the Hills brand of pet food in February 2024, citing severe production violations of control standards by both the pet food manufacturer and the Italian regulators. This move underscores the Russian authorities' vigilance in ensuring the quality and safety of pet food products entering the market.### Shifting Trade Dynamics and Payment ChallengesWhile veterinary restrictions may be a contributing factor, the decline in Russian pet food imports is also influenced by the challenges faced in maintaining trade with politically friendly countries. In recent months, Russian businesses have increasingly complained about difficulties in making payments for delivered goods, particularly with China, Turkey, and the United Arab Emirates (UAE).The issue stems from the increased scrutiny by banks in these countries following the threat by U.S. President Joe Biden to impose secondary sanctions on banks and financial institutions facilitating trade with Russia. This has led to extra precautions being taken when dealing with Russian clients, making the transfer of funds a significant hurdle.The impact of these payment challenges is evident in the data. In the first quarter of 2024, Russian imports from China dropped by 20%, following a period of consistent growth. While Kirill Dmitriev, the president of the Russian National Association of Zoo Industry, acknowledges the payment issue as a pressing concern, he believes the downward trend in imports should be attributed to a combination of factors, including veterinary restrictions and the rise in domestic production.### Navigating Supply Chain Gaps: Equipment and PartsThe payment challenges with China have another dimension for the Russian pet food industry. Many Russian pet food companies rely on Chinese equipment or source components from China to scale up their operations. The difficulties in sending money to China have put a brake on some of these development plans.Yulia Dolzhenkova, the development director of Zooinform, a Moscow-based pet industry media business, explains that despite the sanctions, many pet food companies have found ways to make payments to China. However, these solutions come at a cost, as they extend the delivery time and significantly drive up the overall expenses.The increase in prices along the supply chain is a key factor driving the growth of the Russian pet food market in monetary terms. Dolzhenkova notes that the rising costs are a consequence of the existing difficulties, as importers have to bear expenses at every stage of the process. Dmitriev echoes this sentiment, stating that the longer the supply chain, the higher the costs, ultimately leading to imported pet food being more expensive on the Russian market.### Exploring New Avenues for Pet Food ImportsDespite the challenges, it is too early to count out pet food imports to Russia entirely. Kirill Dmitriev reveals that some new importers are contemplating plans to fill the vacant niches left by the decline in imports. For example, several Turkish pet food factories have recently started exporting specialized pet food to the country, and there are negotiations with promising new Asian suppliers.This suggests that the Russian pet food market remains dynamic and open to new opportunities, as importers seek creative solutions to navigate the evolving landscape. The ability to adapt and find alternative supply sources will be crucial for maintaining a diverse and competitive pet food market in Russia.