Business World

Monday 15 September 2014

Russia's Kerryman warns of looming food sanction crisis

Published 24/08/2014 | 02:30

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Russia's President Vladimir Putin. Reuters
Russia's President Vladimir Putin. Reuters

Import bans imposed by the Russian government will cost Tony Maher's Russian supermarket group around €300m this year, the Kerry native has revealed.

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Mr Maher, the chief executive of supermarket giant O'Key Group, said limitations on food imports will cost his company around 10pc of revenue.

As one of Russia's largest supermarket chains, St Petersburg-based O'Key Group operates 100 hypermarkets across 22 Russian cities. Sales last year reached €3bn.

Russia imposed import bans on a host of food products earlier this month, covering everything from dairy and meat to vegetables.

The ban, a response to European and US trade sanctions provoked by conflict in the Ukraine, will last for one year.

O'Key has only been able to replace half of the products restricted with replacements, Killarney man Mr Maher said.

The rest - which accounts for 4pc of revenue - it is searching for, turning to 
Africa and South America.

Some, he said, cannot be replaced, like certain varieties of cheese and fruit.

Cheesemakers and other dairy suppliers are likely to be the worst affected at home. Alongside Italian mozzarella, French Roquefort and British Stilton, Irish cheddar is now firmly off the menu.

Glanbia, the Irish Dairy Board, Kerry Group, Aurivo, and Dairygold all, until recently, exported to Russia.

Russia can't step in to fill that gap domestically because its raw milk supply, coming into the winter months, is already under pressure.

"We will not have any empty shelves, but our assortment primarily in cheese and fruits and vegetables will diminish... you've got a big portion of the cheese market supply [that] is almost cut out," said Mr Maher.

The country is an important market for Glanbia's sports nutrition division. Glanbia chief executive Siobhan Talbot described the developments as "unhelpful".

"It's an unhelpful development in a market that was starting to show some declines."

Ireland is the 13th biggest European exporter of food and drink to Russia. These exports were worth about €232m last year, having grown six-fold from 2009 to 2013.

Industry is concerned that the year-long ban could have longer-lasting effects.

Russian companies seeking replacements for products from other suppliers, as O'Key Group has done, may not return to their original suppliers once the ban ends.

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