Kazakhstan’s dairy kings not interested in Russian market

Kazakhstan’s leading producers of dairy products Rodina and Zenchenko and Co are not planing to enter the Russian market or compete for the niche previously held by the western agricultural, raw materials and food producers that Russia banned in response to a series Western sanctions, Tengrinews reports.

In July, in response to Moscow's intervention in the Ukraine crisis, the United States and Europe targeted Russia's key financial, arms and energy sectors with new tough sanctions. In response, on August 7 Russian president Vladimir Putin signed a decree  selectively banning some types of agricultural products, raw materials and food products imported from the countries supporting the sanctions against Russia, which are the USA, European Union, Australia, Norway and Canada.

According to the head of the National Chamber of Entrepreneurs of Kazakhstan Ablai Myrzakhmetov, Kazakhstan could use the opportunity to occupy the niche previously held by the now banned importers of agricultural products. However, it turned out that the major Kazakh dairy enterprises have no such plans.

“Russia has opened its market to us. Usually, the main problem in business is to find a potential market and win it, but in this case, we are free to enter the Russian market. However, I do not think that everyone will rush there with a breakneck pace. We have well established contacts in Kazakhstan. Rodina supplies dairy products to Astana, we have a well-oiled business there - regular customers and a good attitude. If tomorrow someone asks us to supply milk at a 10 percent higher price to Russia instead, we will not take the offer because we have our own market here (in Kazakhstan),” Chairman of Rodina Agrocompany Ivan Sauer said at the briefing in Central Communications Service headquarters.

Ivan Sauer added that Rodina company was growing along with Astana. “I remember the time when we were entering the market with 500 liters of milk a day, and now we supply 32 tons a day. This is our market, this is our city, we are part of the Food Belt around Astana, and naturally, our first priority is our own territory, our capital. If we mange to increase our output further, then we might consider other markets, " he said.

The Chairman of Zenchenko and Co, another major Kazakhstani producer of dairy products, Gennadiy Zenchenko shares the opinion. He told Tengrinews that Russian regions bordering on Kazakhstan had been asking him to deliver dairy products to Russia for some time. "Kurgan and Chelyabinsk have requested supplies of dairy products. But it is not going to happen," he shared.

"We produce 45 tons of dairy products and we sell it at the territory of Kazakhstan only. We are quite happy with that. Astana regularly consumes 20 tons of our dairy products. It seems simple enough to deliver the products to Russia, but do we need it? Kazakhstan created us and the government gives us benefits. I think it would be unfair to use the subsidise provided by Kazakhstan to supply the Russian market, " Gennadiy Zenchenko said.

Ivan Sauer believes that Kazakhstani producers of vegetables may be more interested in the opportunities offered by the Russian market that the diary producers. “Potatoes are going to be harvested In a month and a half, and since we do not have enough storages for all the potatoes, the farmers are trying to sell as much as they can in autumn. And this may be the time when our Russian colleagues will be coming to Kazakhstan to stock up on potatoes at large amounts. The potatoes that used to be imported from Poland may now be imported from Kazakhstan. But everything is going to be within reason and it is not going to influence the market prices in Kazakhstan much," Ivan Sauer suggested.

“The same problem is with melons. Kazakhstani market is not large enough (to sell all the melons we produce). Besides, our watermelons are of much more attractive than these brought from overseas in terms of price, quality and in all other respects,” Ivan Sauer said.

So, it looks like even though Russia has opened its market for Kazakhstan, Kazakh producers are not ready to expand into the foreign market, Ivan Sauer concluded.

Reporting by Renat Tashkinbayev, writing by Assel Satubaldina, editing by Tatyana Kuzmina