December 1997/January 1998

by Galina Tokareva

The Volgograd oblast has traditionally been an important center for agriculture and food processing. During the Soviet era, food processing in Volgograd was heavily subsidized, but today it suffers from a serious lack of investment. The recent interest of U.S. consumer product companies in Volgograd suggests that opportunities exist for other U.S. firms in this important regional market.

Major meat and poultry processing plants are situated in Volgograd, Volzhsky, Kamyshin, Uryupinsk, Mikhailovka, and several other cities and towns in the oblast, which lies 1,000 kilometers (approx. 640 miles) southeast of Moscow on the lower reaches of the Volga River. In Soviet times, roughly 60 percent of their output was exported to Moscow, Leningrad, and other regions of the USSR. Dairy products are manufactured in Volgograd, Kamyshin, Mikhailovka, and Uryupinsk. Volgograd's three milk processing factories once produced more than 400 tons of milk daily, when operating at peak capacity.

The Impact of Privatization
Since 1991, most Volgograd food-processing enterprises have been privatized. Presently, 52.6 percent of operating businesses in the industry are private, while 24.7 percent are a combination of state and private property. In 1995, private enterprises employed 55.5 percent of the food-processing labor force, a total of 24,519 workers.

Since privatization Volgograd has reduced somewhat its reliance on imported food, although it is still a net importer of food products. In 1996, exports were worth $41 million, compared to $30 million in 1995. Imports declined during the same period from $83 million to $66 million.

Foreign Companies
U.S. consumer products companies active in the oblast include Coca-Cola, which has a bottling plant in Volgograd, Pepsico, RJRNabisco, and Kodak. All advertise aggressively in a marketplace still relatively new to foreign products. Four joint ventures in the food production industry are registered in Volgograd, as well, three of which are operating.

The local food processing industry is in dire need of capital to renovate equipment and develop more competitive products. The management of most enterprises understands how difficult it is to compete in a market economy, although some local mangers maintain expectations that may not be entirely realistic in Russia's contemporary economy. With the basically welcoming attitude of the regional government, American food processing companies could find many applications in Volgograd for both their technology and business skills. For more information on food processing in Volgograd oblast, visit BISNIS Online at www.mac.doc.gov/bisnis/country/9712grad.htm.

Galina Tokareva is Deputy Director of the American Business Center--Volgograd.

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