Article: Russian soft drinks industry asks for aid to maintain production

The country's main industry representative has asked for an import duty reset for some raw materials and ingredients necessary to manufacture soft drinks.

Specifically, the Russian Union of Soft Drinks Producers (SPBN) has requested that the government reset import duties on frozen ingredients, mixtures of vegetable fats, sugars and fruit purées.

The Union asked the revision to last for a period of one and a half to two years to prevent domestic price increases, to maintain domestic production and protect workforces.

"According to the experience of the crises of 2008 and 2014, this is precisely the period required to adapt the industry, population and business to new currency exchanges and economic realities," the Union said.

The SPBN said that, in connection with the spread of Covid19, changes in exchange rates and other factors seen in the beginning of 2020, manufacturers and importers predict significant changes in the economic situation. In previous crises (2008-09 and 2014-15), the number of soft drinks manufacturers decreased by 431 companies (15%) - all classified as small and medium businesses.

According to a letter from the SPBN (comprising 70% of all juice, water and non-alcoholic beverages producers inRussia), the list of products consists of 145 items. It includes: strawberry and cherry purées, which now has an import duty of 10%, blackcurrant purée (6%), frozen strawberries (10%), frozen peaches, pineapples, pears, kiwi (8%), zucchini purée (10%), canned beans (10%), as well as vitamin and mineral additions for baby food.

"Today, the share of small and medium-sized businesses in the industry is more than 85% of the total. If the depth of the crisis is similar to previous years, the general staff reductions associated with the liquidation of production might reach 20-25%," the SPBN said.

In addition, market participants are also asking to ensure unimpeded entry into the country and domestic movement of finished products, raw materials, ingredients and packaging, especially raisins, dried apricots, starch, cocoa, fruit purée and concentrated juices.

The industry has also called for the introduction of a moratorium on legislative changes that impede business, and a delay to the entry into force of certain regulatory documents for the period of coronavirus (Covid-19) infection disruptions.

At the time of writing of this article, IHS Markit has not heard of any escalation of the proposed import duty reset measures. The industry seems to be preoccupied with tackling counterfeit products with a product tracing and labelling system, which has been running on a trial basis for bottled water (including natural or artificial mineral, sparkling, without the addition of sugar or other sweetening or flavouring substances) since April 1, 2020.

Although the participation in the experiment is voluntary, Russia's Federation Council Committee on Agricultural Food Policy and Environmental Management has called on Coca-Cola and PepsiCo to join in the experiment.

The committee's chairman Aleksey Mayorov said the companies were urged to participate as they are major suppliers of carbonated drinks and their participation would make the trials "more complete and valuable".

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This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.