The Russian dairy market: what's happening to the industry and how Russians' preferences are changing

The Russian dairy industry continues to demonstrate its ability to adapt to challenging economic conditions. Despite rising costs and raw material shortages, production remains positive.

According to BusinesStat, production volume in 2024 increased by 6% compared to the previous year, reaching 12.4 million tons. This growth is due to a combination of government support measures, import substitution, and changing consumer preferences.

Market dynamics and government influence

Since the imposition of the food embargo in 2014, the industry has undergone significant transformation. According to Artem Belov, General Director of Soyuzmoloko, dairy imports have decreased by 32.1%, while self-sufficiency has increased from 77% to 87%. Government support has played a key role: over the past decade, more than 380 billion rubles have been allocated to support the raw materials and processing sectors.

However, the industry faces significant challenges. In 2024, milk processing costs increased by 18–21% due to rising raw material, packaging, logistics, and energy costs. Meanwhile, retail prices increased by only 13.3%, as the state regulates prices for socially important products.

Raw material shortages and rising prices

The industry's key problem was a shortage of raw materials. Commercial milk production volumes increased by only 0.8% in 2024, while the cattle population declined by 4.1%. The purchase price of raw milk reached 44–46 rubles per liter excluding VAT, 30% higher than the 2023 figures.

In 2024, dairy market segments demonstrated varying dynamics. Ice cream led the way, with production increasing by 18% and consumption by 20%. Cream also showed strong growth: output increased by 15% and demand by 14%. Cheese saw production growth of 6% and consumption of 7%. Yogurt saw production increase by 9.1% and demand growth of 14%. Cottage cheese increased production by 5.7% and consumption by 8.3%. Sour cream demonstrated moderate growth: production increased by 1.9% and demand by 3.1%. The kefir segment remained stable, with production increasing by 0.6% and consumption by 2%. Meanwhile, butter saw output decline by 1.8%. A decline was also observed in the skim milk powder sector, with production decreasing by 14%.

According to Soyuzmoloko, the operating cost of raw milk in 2024 remained 11.9% higher than in 2023. Processing costs increased by 18-21% due to higher feed, energy, logistics, and credit costs. Meanwhile, retail prices for dairy products increased by only 13.3%, preventing producers from fully recovering their costs. This is creating significant pressure on industry profitability and forcing players to seek cost optimization and implement innovative technologies.

Changing consumer preferences

Consumers have become more mindful when choosing dairy products. Health benefits and naturalness are becoming more important. According to Milknews, 62% of consumers believe that choosing natural products is the best way to make healthy eating a habit.

Key trends in consumer demand:

// Functionality. Consumers value products high in protein, vitamins, and probiotics. The high-protein yogurt segment is growing by 17.2% annually.
// Reduced sugar and fat content. Products with reduced sugar and fat content are in demand, such as 10% sour cream and low-fat cottage cheese.
// Lactose-free products. Sales of lactose-free milk increased by 11.6% in monetary terms.
// Localization and tradition. 70% of consumers prefer domestic brands, and 85% want to see new Russian brands on shelves.
// Packaging is shrinking. 100-150g formats are gaining popularity, meeting the needs of small families for a varied diet.

Growth is particularly noticeable in the cheese segment. Cheese production in Russia increased 2.3-fold from 2013 to 2023, reaching 801,000 tons. In 2024, cheese production increased by another 6%. This sector remains attractive for investment, as imports account for over 20% of the total, compared to 10% for other dairy product categories.

The premium segment is showing strong growth, especially in large cities. Consumers are seeking niche and traditional cheeses (Parmesan, Maasdam).

Technological innovations to improve efficiency

Manufacturers are increasingly implementing innovations that improve efficiency and margins. ESL (Extended Shelf Life) technology extends the shelf life of fresh milk to 24 days while preserving its natural flavor. This expands sales geography and enhances the brand's appeal to retailers.

Gentle heat treatment of fermented milk products minimizes process risks and ensures stable organoleptic properties. These products can be stored on a "warm shelf," reducing distribution requirements.

Implementing remote monitoring systems (such as QiVisor) helps manufacturers optimize processes, reduce energy consumption, and quickly respond to production situations.

Export ambitions

The Russian dairy industry is gradually shifting from import substitution to realizing its export potential. According to the Agroexport Center of the Russian Ministry of Agriculture, dairy exports increased by 20% in 2024, exceeding $370 million. By 2030, this figure could exceed $700 million.

The main export products are cheese and cottage cheese (30% of revenue). The main buyers are the CIS countries (Kazakhstan, Belarus, and Uzbekistan). In 2024, China entered the top five largest importers for the first time, with exports to China growing by 70%.

Forecasts for 2025–2026

The industry expects further growth despite ongoing raw material shortages and cost pressures.

Key trends:

// Growing demand for both low-cost and premium products.
// Market consolidation and acquisition of assets by large holdings.
// Development of exports to countries in Asia, Africa and the Middle East.
// Implementation of technologies to improve efficiency and reduce costs.
// Expansion of the range of functional and specialized products.

Sustainable development of the industry requires a balanced pricing policy and government support, including affordable loans. Manufacturers should focus on optimizing production processes and implementing innovative technologies to remain competitive in the face of rising costs.

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