“It was a complicated time,” says Liana Efendieva of Nevskaya. “We didn’t know what would happen and when we could best pay the bill.” Awaiting a stabilization of the exchange rate, Nevskaya decided to postpone payments. “Of course in consultation with our suppliers, who showed understanding for the situation.” The family company is known as one of the biggest players on the Russian market.
“We’re seeing that consumers need time to get used to the new situation and new prices,” Ramin Musayev of Akhmed Fruit adds. “For example, during mid December, prices went up from 500 roubles to 800 roubles per box of oranges, as a result we couldn’t close the 300 rouble devaluation gap in short time. Consumption has gone down by 35 to 40 percent.”
Liana Efendieva, Nevskaya: “It was a complicated time.”
Longer transport times
Both import companies have had years of relations with suppliers. For Akhmed Fruit, who mainly imports from Central Asia, Latin America and Africa, the boycott didn’t have many consequences. Nevskaya had already been doing business with suppliers from countries including Morocco, Argentina, Chile, Peru and Brazil. For them, the problem was mainly with the buyers, the large supermarket chains. “Of our sales, 75 to 80 percent goes to large supermarkets. They want to have the products shipped on time,” Liana says. From the Netherlands, the products took five to seven days to arrive. Now that the products are bought directly in Latin America, the transport times are longer, but retailers don’t take that into account when buying.
Smaller product range and volumes
The economic situation in Russia can be observed in supplies and consumer behaviour. “For a number of products, the volumes have gone down significantly,” Ramin explains. “For instance, we’re importing 10 to 20 percent fewer bananas, but on the other hand, the volumes from South Africa have increased on grapes.” At Nevskaya, they’re also seeing lower volumes for a number of products. “It’s true that the prices in Russia are going up,” Liana adds. “People increasingly buy only the products they really need, such as potatoes, and less luxurious products.” The market for the premium segment and organic products has virtually disappeared in Russia. These markets were largely dependent on the import from Europe and the US.
Ramin Musayev, Akhmed Fruit: “Russia and the rouble are under a lot of pressure from the oil price, OPEC, United States and Europe.”
Oil price, sanctions and rating agencies
The rouble is facing trouble from three directions, Ramin explains. First of all the low oil price, which is the foundation for the rouble’s value. The currency floats on the oil cork, so to speak. Then there are the sanctions from the West, making it more difficult for Russia to borrow money in the short term on the international capital markets, and thirdly, the rating agencies continue to downgrade Russia. These agencies’ ratings largely determines the interest rate at which money can be borrowed on the capital market. “The limited access to dollars is difficult,” says Ramin. “Russia and the rouble are under a lot of pressure from the oil price, OPEC, United States and Europe.”
Reports about international trading in roubles between China, South Africa, Iran, Turkey , Egypt, Morocco and some countries from Central Asia and trying to limit international trade in US dollar is not realistic, Ramin thinks. “The risk of the exchange rate is with the trade in dollars by us, the importers. That risk will then be moved to the exporter.” Liana thinks it’s easier to find companies that are willing to do business in roubles in neighbouring countries. “For instance with Georgia, Azerbaijan and Armenia.”
Proud of Russian produce
The investments by the Russian government in the agricultural sector isn’t viewed as a threat by the importers. “This mainly concerns greenhouse projects in Krasnodar,” Ramin knows. “We are really only able to grow tomatoes and cucumbers well there.” Also, a lot of products aren’t available year-round, and a large part of the country doesn’t have a favourable climate. “I recently bought apples from Krasnodar, they were of good quality,” Liana says. “I was proud of it being a Russian product.”
“All importers in Russia and producers in Latin America, Africa and Europe have lost huge amount of money due to boycotts, devaluation and less decreased demand,” Ramin concludes. “If the situation doesn’t change soon, companies who dealt with Russia over the past years will have financial strains and even quite few may declare their bankruptcy. Nobody has sufficient financial reserves to cover these losses on a consistent basis.” Liana has a more positive view: “No one will go bankrupt only because of the sanctions, the large Russian companies will just change the direction of the loading places, countries and assortment of the loading list. So if there is this ‘wall’ between Europe and Russia, we’ll find another route. Besides, we have our own produce in the southern part of Russia and we have our own partners in other countries.”
More information:
Nevskaya CoLiana Efendieva
60 Sofiyskaya Str., build. 5
192241 St. Petersburg
Russia
T: +7 812 319 3030
E: e.liana@nevskaya-co.ru
W: www.nevskaya-co.ru
Akhmed Fruit CoRamin Musayev
Sofiyskaya, 60
St. Petersburg
Russia
T: +7 812 701 8202
E: mramin.afc@gmail.com
W: www.akhmedfruit.ru