Joining Eurasian Economic Union will Make Armenian Meat Products More Competitive in Russian Market
Armenian meat products to become more competitive in Russian market as Armenia joins EEU.
Armenian meat producers, increasing their production capacities from year to year, can increase the exported meat from 496 tonnes to 3,000 tonnes in 2015-2017, enabling an additional $ 12-13 million increase in export volumes. This is evidenced by the research conducted by Avenue Consulting Group, an affiliate of Armenia’s meat production and export growth opportunities, according to which Armenia’s accession to the Eurasian Economic Union will make Armenian meat products more competitive in the Russian market.
The purpose of the research is to present the current state of the Armenian meat market, as well as the development possibilities conditioned by the recent adoption of the EEU membership and the recent decision to mitigate meat import restrictions by the Russian Federation. It should be reminded that from November 12, 2014, 11 meat processing companies of Armenia have been able to export lamb, pork, beef and chicken meat to Russia.
Meat processing companies of the Armenian meat market sell their products in the domestic market as well as overseas, mainly in Georgia and Turkmenistan, and Belarus exports a certain amount of meat in 2013 and 2 tons of meat products were exported to Switzerland in 2013.
“In the context of recent geopolitical events, RF President’s decree and government decision to ban meat imports from the United States, Canada, Australia, the EU and Ukraine have been banned for one year. Taking into consideration that the share of these countries in the volume of imports to Russia is about 50%, it can be assumed that the released share will create a wide range of opportunities for expanding existing market players and emerging players. Thus, new opportunities will be created both for domestic producers and for exporters from other countries, “the research says. According to the company, the entry of Armenian producers to the Russian market in turn will bring certain risks related to the Armenian producers’ capacities and the demand for domestic products in the Russian market. Besides, in the light of current geopolitical and economic developments, the depreciation of the Russian ruble is observed, with short-term fluctuations, which can cause uncertainty over the future.
Despite these risks, experts say Armenian exporters have a number of competitive advantages to attract the Russian market. Apart from the fact that the EEU membership of Armenian meat producers is free from customs duties, it also imposes new customs duties on the import of goods other than the EEU member countries. Both Armenian and Russian producers use imported raw materials in their production. According to the EEU tariffs, Russia will import meat with a 15% customs duty, while Armenia will receive 10% customs duties by 2017. That is to say, Armenian producers can provide lower cost and offer lower prices in the Russian market rather than local producers. As for transport costs, which are also part of the cost, taking into account the size of the territory of Russia, transportation costs for Russian producers will be approximately the same level as the Armenian producers.
As a result of a survey conducted among several meat processing companies it became clear that meat processing companies in Armenia needed additional capital investment to enter the Russian market. Although there are unused production capacities, new capital investments are needed to improve the quality of the output. Besides, it is necessary to extend the offered range, to strengthen the marketing potential.The Armenian meat producers’ union has been set up to help Armenian meat producers enter the Russian market with a more coherent organization and represent the interests of the industry. The most important mission of the Armenian meat producers is to assist Armenia’s meat producers to gain a stable position in the foreign markets. First of all, this involves grouping marketing potential, joint market research of RF market, negotiation with meat retailers, creating necessary conditions for meat products transfer, etc.
Taking into consideration the fact that Russia regularly reviews qualitative and technical requirements for Russian meat manufacturers, as well as that imports of meat from Russia to the Russian Federation have been banned several times (such as 2007), it should to take into account that the prohibition may be applied again. Therefore, it is necessary to prevent the strong dependence of the export volumes from Armenian producers on the Russian market, diversifying export directions and finding new markets.
It is necessary to clearly plan the activities of the newly created Armenian meat producers and to include in their agenda the discovery of new export trends by studying meat markets in other countries.