May 1999

by Azim Mamanov

Siberia's Novosibirsk Oblast, with 7.15 million hectares of agricultural land and 2.8 million consumers, is a major food processing center and a promising market for U.S. food processing equipment. Although causing difficulties in Novosibirsk, the August 1998 Russian financial crisis has opened up some new opportunities for the local food processing sector, which accounts for about 25 percent of all industrial production in the oblast.

The August crisis caused a major decrease in imported foodstuffs, making domestic food products more competitive in the local market and prompting a resurgence in production by Novosibirsk food processors. However, Novosibirsk food processors that want to take full advantage of this situation need to remedy the lack of modern food processing equipment. For example, a company that previously imported foods from Italy is now in the process of obtaining Italian equipment to produce mozarella to supply the region.

Major Players
The majority of food-processing companies operating in the region are based in the city of Novosibirsk. Among the larger food-processing companies are the Novosibirsk Meat Company, Novosibirsky Zhirovoi Kombinat Butter Company, VINAP (alcohol and soft drink producer), Novosibirsk Pasta Company, Novosibirsk Poultry Farm, and Gormolzavod, Sibirskoe Moloko, and Albumin milk-processing companies, all of which provide food to the entire region.

The Novosibirsk Meat Company is one of the largest producers of meat products in Siberia. It makes over 70 types of sausages and meat products and has its own network of retail stores in Novosibirsk. Gormolzavod, Sibirskoe Moloko, and Albumin milk-processing companies produce a wide variety of milk, yogurt, cheese, and butter products. The production capacity of the companies is about 600 tons per day. Currently, only 5 percent of the capacity of these companies is being utilized.

Although the United States is by far the largest foreign investor in Novosibirsk, the only Western food-processing company that has established a production facility in the oblast is the Coca-Cola Company, whose plant started operations in August 1997. Coca-Cola has invested more than US$70 million in Novosibirsk and employs 400 people. In addition, PepsiCo, Inc., has a distribution center in Novosibirsk.

Best Sales Prospects
Due to the August financial crisis' effect on ruble purchasing power, Russia cut processed food imports dramatically, causing regional consumers to turn to locally processed foods. Currently, most imported equipment used by Novosibirsk companies comes from Europe, particularly from Germany and Italy. Demand for used or low-cost equipment in this sector could offer U.S. companies potential sales, as new food processing equipment can be prohibitively expensive for Russian companies. However, U.S. companies seeking to enter the market need to be more active and as flexible as possible (for example, open to different financing terms) in this market to successfully export to Russia. Financing will likely be the main problem for U.S. exporters seeking to make sales in Novosibirsk. Although a number of local banks (for example, NovosibirskVnesh-TorgBank, SibEcoBank, and Sberbank) have emerged from the financial crisis in relatively decent shape and may be willing to provide credits to Novosibirsk food processing companies, U.S. agricultural equipment suppliers should also seek financing from domestic sources.

Trade Promotion Opportunities
Novosibirsk has the largest exhibition center in the Siberian Region, Sibirskaya Yarmarka. It arranges exhibitions year round, and foreign companies are welcome to participate and exhibit their sample products. This year, exhibitions dedicated to food and the food processing industry are scheduled for April and December. These trade shows present an excellent opportunity for U.S. companies to meet buyers for their machinery and equipment, find agents or distributors, and promote business in the Siberian region. Sibirskaya Yamarka can provide a wide range of services, including assistance with customs clearance, visa support, hotel reservations, and arranging meetings with potential partners.

For a full report on the food processing industry in Russia's Novosibirsk Oblast, visit BISNIS Online at www.mac.doc.gov/bisnis/isa/9902novo.htm. For more information on the Siberian region, visit BISNIS Online www.mac.doc.gov/bisnis/country/regions.html#Siberia.

For a recent report on potential opportunities for U.S. manufacturers in the food processing sector of the Urals region of Russia, please visit BISNIS Online at www.mac.doc.gov/bisnis/isa/990415uz.htm.

Azim Mamanov is the BISNIS overseas network representative in Novosibirsk.

Key Contacts

Novosibirsk Oblast Administration
Department of Foreign Economic and
Inter-Regional Relations
Vladimir Nekhoroshkov
18 Krasny Prospect, Novosibirsk, Russia
Tel: +7 (3832) 230-680 Fax: +7 (3832) 234-514

Novosibirsk Oblast Administration
Department of Agriculture
18 Krasny Prospect, Novosibirsk, Russia 630011
Tel: +7 (3832) 230-862 Fax: +7 (3832) 236-972

Sibirskaya Yarmarka Exhibition Center
16 Gorky St., Novosibirsk, Russia 630099
Tel: +7 (3832) 100-905, 100-224, 269-802
Fax: +7 (3832) 236-335
Email: Siberian.fair@sovcust.sprint.com
Website: www.sibfair.nsc.ru

Novosibirsk Meat Company
1 D. Kovalchuk St., Novosibirsk, Russia
Tel: +7 (3832) 289-703, 251-719
Fax: +7 (3832) 265-328

Novosibirsk Pasta Company
33 Fabrichnaya St., Novosibirsk, Russia
Tel/fax: +7 (3832) 236-227

NovosibirskVneshTorgBank (regional bank)
44 Kirov St., Novosibirsk, Russia 630102
Tel: +7 (3832) 102-089 Fax: +7 (3832) 103-024
Email: nvtb@nvtb.nsk.ru

This report is provided courtesy of the Business Information Service for the Newly Independent States (BISNIS)