* Multinational firms have local production, suppliers
* Targeted nations export 10 pct of banned goods-analyst
* German meat exports seen hardest hit
By Maria Kiselyova and Martinne Geller
MOSCOW/LONDON, Aug 7 Western multinationals like
Nestle, Unilever and McDonalds will
feel only a limited effect from Russia's ban on certain food
imports from Europe and the United States, since they largely
In retaliation for sanctions related to the crisis in
Ukraine, Prime Minister Dmitry Medvedev said on Thursday Russia
would ban fruit, vegetable, meat, fish, milk and dairy imports
from the United States, the European Union, Australia, Canada
and Norway for one year starting immediately.
While the impact on international food producers may be
muted, Russian shoppers are expected to see the effect of the
measures in higher prices.
Makers of packaged goods said they were still assessing the
potential damage, but many companies including PepsiCo
and Danone have invested heavily in Russia, building
local plants, and already source most products locally.
Nestle, for example, has invested $1.6 billion in Russia
since 1996 and has 11 plants in the country producing a wide
range of products from ice cream to pet food.
"More than 90 percent of the company's products sold on the
Russian market are produced locally, but there are specific raw
materials that we import," a Nestle spokeswoman said, adding
that it would take some time to estimate the potential impact if
the ban forced changes in suppliers.
"The most unpleasant thing is the need to change suppliers
on the go, off cycle, which would entail additional costs," said
a spokeswoman for Anglo-Dutch group Unilever, a major ice cream
and ketchup producer in Russia.
A market source said companies would likely pay fines for
early termination of contracts with suppliers of banned
Danone said Russian and Belarussian milk meets 100 percent
of its needs for the Russian markets but declined to comment on
possible implications of the milk and dairy import ban on the
broader market and prices.
Meanwhile Finnish dairy cooperative Valio Ltd has halted
production of goods it exports from Finland to Russia, according
to Finnish media. Nobody at the company was immediately
available to comment.
HIT TO GERMAN MEAT, BOOST FOR LOCAL SUPPLIERS
According to research firm Euromonitor International, the
country most affected by the ban would be Germany, followed by
the United States, Ukraine and Canada. The amount of German meat
and meat products exported to Russia in 2012 were worth about
$900 million at wholesale, Euromonitor said.
Of the categories banned - fruit, vegetables, meat, fish and
dairy - Russian imports from the targeted countries account for
less than 10 percent of production, as measured by wholesale
prices, said Euromonitor food analyst Lianne van den Bos.
"The restrictions were imposed on products that Russia can
produce itself or is less dependent on banned countries," van
den Bos said, adding that in these categories, Russia imports a
lot from Latin America and Asia.
"Having said that, these sanctions put pressure on local
producers as well as other trade partners as Russia has to look
elsewhere for substitution, which in turn is likely to push up
prices for Russian consumers if government does not step in,"
Russia's domestic food industry has grown significantly in
recent years, boosted by earlier bans on U.S. meat imports over
safety concerns and investment by foreign companies.
"We're committed to developing local suppliers," said a
spokesman for Mondelez International. "In fact, over
the last five years, we've doubled the share of procurement from
local suppliers." The maker of Cadbury chocolate and Oreo
cookies generated $1.2 billion in revenue from Russia last year.
At present McDonald's, the world's largest hamburger chain,
sources 85 percent of its ingredients from more than 160
"We are continually looking at ways to extend cooperation
with the Russian manufacturers," a spokeswoman said. "We are
monitoring the situation and will adjust our plans accordingly."
Pepsico, which is Russia's biggest buyer of potatoes and
became the biggest food and beverage producer in the country
when it bought juice and dairy maker Wimm-Bill-Dann in 2011,
said that almost all of the products sold in Russia are made in
"We are reviewing the new policy," a spokeswoman said.
Even for meat companies like Tyson Foods and Hormel
Foods, Russia has declined in importance, due to the
earlier bans and efforts to boost its domestic food industry.
"We're disappointed about the loss of the Russian market,
but don't expect the impact to be significant since the volume
we ship there can be absorbed by other global markets," said a
"If the ban came 10 years ago it would have been a big deal
but at this point Russia is less important overall," said Liang
Feng, a Chicago-based analyst for research firm Morningstar.
(Additional reporting by Anjali Athavaley in New York; editing
by Janet McBride)