Russia plans to unite with Belarus. What does this mean for food markets of both countries?

Hello.

In April 2020, this information was published in Russian official media, but many foreign media did not notice it or simply did not understand. Russia invited Belarus to unite and the president of Belarus does not mind.

How will it influence the food industry? Currently, Russia and Belarus are members of the Customs Union, which unites 5 countries of the former CIS (Russia, Kazakhstan, Belarus, Armenia, and Kyrgyzstan). These countries have an agreement to deliver goods to each other (including food) without customs duties or any other restrictions.

I spoke in detail about the Customs Union and all its advantages for foreign companies in my new ebook “Your First 50 Right Steps to Enter the Russian Food Market” and devoted a separate chapter to it. You can get the book from here if you want to go a bit deeper.

Now Russia has proposed Belarus to unite not only customs, but also 12 major government agencies, such as the tax service, courts, antimonopoly service and create a common currency, as well as form unified governmental bodies to regulate agriculture, transport, communications, and so on.

Political decisions that will influence food and agribusiness

As a result, Russia and Belarus will turn into one state and this will happen very soon. Sounds like fake news, doesn’t it? I do not think so, let me give you a few reasons.

1. Last year Belarus created free economic zones, regions where taxes are lower and additional support from the state is provided. There are only two such zones: one on the border with Poland, the other one on the border with Russia even though Belarus has borders with other countries too.

2. The most important thing is the presence of a free economic zone on the border with Russia. This free economic zone borders with Belgorod region of Russia. For many foreigners, the name of this Russian region means nothing. But it is in this region that the largest agricultural company in Russia (Miratorg) is located. It is in this region that many Russian politicians and ministers have agro and food businesses. And most importantly, former Prime Minister of Russia Dmitry Medvedev has his own huge agribusiness in Belgorod region.

3. According to my clients who own food business in Belarus, the country will have the first in its history privatization after the next presidential election in Belarus.

Now 96% of food and argo industry in Belarus belongs to the state. What food companies will be affected by privatization? The ones that are located in the area of a free economic zone that borders with Russia. The list of these companies is already known to a narrow circle of Belarusian businessmen, and I can say that many have already bought shares of these food and argo companies.

Some time ago I was invited to conduct an audit at several such food companies in Belarus. I can say that their level of product quality, cleanliness in production and technical condition of the equipment are just excellent. I can confidently say that it is much higher than for similar companies in Russia.

4. Who will win the elections in Belarus? As always, Alexander Lukashenko, who has been the president of Belarus since 1994, which is already for 26 years. No one doubts that in August 2020, at the next presidential election, he will win again.

Why am I so sure? My conclusion is based on the fact that, firstly, there is no opposition in Belarus, and, secondly, Belarus is the only country in Europe which has not introduced quarantine because of the coronavirus. According to the constitution of Belarus, if quarantine is introduced, the presidential elections must be postponed. But these elections are now particularly important for President Lukashenko.

Great opportunities for foreign companies.

So, why do you need all this information as a foreign company? For you it means that entering the Russian food market will become easier. If your products are under an embargo or a ban for import to Russia, just start shipping to Belarus.

Many companies that used to work on the Russian food market for a long time and got affected by the embargo, have lost considerably in profits. Unfortunately, these companies have lost not only profits, but also stable sales on the growing Russian food market.

If you have not yet supplied your food products to Russia and you are interested in its food market, start developing your sales in Belarus. Thus, you will get good profits after the start of unification process of Belarus and Russia because you will be able to freely supply your food products to Russia.

If your business is food production, and you are interested in expanding into Russia and Europe, I recommend locating your food production facilities in Belarus. As compared to Russia, you will get cheaper labor, lower taxes, good and stable raw materials, and the ability to supply your products to Russia without taxes and fees, as well as an easy access to European countries which do not import food from Russia.

By the way, after the embargo on the supply of various foreign foods to Russia was introduced, in Belarus a lot of repacking factories started to operate. Products that were banned for import into Russia were repackaged and marked as “made in Belarus”, then they were delivered to Russia without problems, without customs duties or taxes.

Shrimp and salmon from Norway, apples and berries from Europe, cheeses from Switzerland, chicken from the USA and about a hundred different food products were supplied to Russia via Belarus.

This is the answer why Russian do not suffer at all from the embargo, which was introduced 5 years ago, on the supply of food from many countries of the world. In Russia all these “prohibited” food items are on store shelves just as before, but with a “made in Belarus” label.

This system also works well for foreign companies that supply their food to Russia now, but also would like to supply to Europe. For example, if you are located on another continent — Australia, USA, South America, Canada, Africa — it is easier for you to do your logistics only to Russia, but to all other European countries. So, the option with delivery through Belarus will also work perfectly well.

How to enter the Belorussian-Russian market?

1. The most important thing to do at the beginning is to study all the laws of Belarus and Russia concerning food and the customs union. If you want to have a stable working profitable business in Russia and Belarus, do everything only according to the law!

2. Adapt your food products (ingredients, packaging, etc.) in accordance with the laws of Russia and Belarus.

3. And most importantly — do not look for intermediaries or sales agents. In these countries, this is not accepted and does not work well. Try to sell directly to customers (retail chains, wholesale companies, online marketplaces, etc.)

4. Finally, hire a strong country manager who does not only speaks and writes in the Russian language, but who is a lot of practical experience in food industry. He will set up all the business processes for you, eliminate possible risks related to your food products and build up sales channels.

Then, you will supply your food products for many years in the future without any problems both to Russia and Belarus, as well as to other European countries, which will bring you steadily growing profits.

Yours faithfully
Alexander Sinyanskiy
Business Adviser on the Russian Food Market
www.alexandersinyanskiy.ru  

I hope you will be interested in my other Russian food market news and insights:

Russian food market in May 2020. Results of two-months lockdown (due to virus) and future prospects.

Russia has banned aquaculture products from China (from January, 2020)

President Vladimir Putin fired Prime Minister and all the ministers. The new Russian Government and the Russian food market will change now.

“Your First 50 Right Steps to Enter the Russian Food Market”

Why 2020 and the coronavirus is a good combination to enter the citrus fruit market in Russia.

Russia has banned import of pet food with GMOs.

Russia plans to unite with Belarus. What does this mean for food markets of both countries?

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