Let Them East Cheese: Russian Plant Thrives Amid Sanctions

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(Article ©2018 RFE/RL, Inc., Radio Free Europe/Radio Liberty – rferl.org – Dmitry Lyubimov, Tony Wesolowsky – Oct. 22, 2018 – also appeared at rferl.org/a/let-them-east-cheese-russian-plant-thrives-amid-sanctions-/29557433.html)

Sergei Chernych proudly points to the gleaming Western-made stainless-steel machinery at his cheese factory in Mari El, a small republic in Russia’s Volga region.

Production at the plant in Sernur, some 90 kilometers east of the republic’s capital of Yoshkar-Ola, is up as Russia’s ties with the West are down.

Russia banned European food imports in retaliation for Western sanctions that followed the Kremlin’s 2014 annexation of Ukraine’s Crimean Peninsula.

The import ban included dairy products, and that meant foreign cheese. Authorities showed they were serious about stopping contraband food from being smuggled into the country: cheese was seized, and other illegal edibles were steamrolled.

Enter entrepreneurial Russians, including the bosses of the Sernur Cheese Factory, who spotted an opportunity to fill the void with homegrown alternatives.

“The embargo did its job,” says Chernych in a recent interview with RFE/RL’s Volga Desk. “We started to learn new techniques.”

The payoff is palpable, says Albert Sibagatullin, director of the Sernur factory.

“The sanctions helped us. Production rose, the assortment widened. New jobs were created, and wages rose. Ordinary workers make 23,000 rubles (per month, approximately $350), and specialists — up to 38,000.”

Cheese Please

Milk was being made into cheese in Sernur back in Soviet times, when the plant first opened in this town of 8,300 in 1972.

But its bland cheese for the masses was not quite gourmet.

Fast forward to 2015 and the bosses made a bold move, reorienting production to the types of “Western European” cheeses — mozzarella, Emmental, Parmesan — that were no longer being imported to Russia due to sanctions over the Kremlin’s actions in Ukraine.

That same year, the plant organized trips to dairy facilities in Italy and France. There they learned how to make cheese from sheep’s milk, among other things.

“Our specialists have traveled to France to learn the production of cheeses there, and I studied with a master in Italy at a plant near Rome. We made both ricotta and mozzarella. It wasn’t perfect, but we have improved,” says Chernych.

The plant rejigging came amid rapidly deteriorating relations between Russia and the West. A year earlier, in March 2014, Moscow had annexed Ukraine’s Crimean Peninsula. Shortly afterward, Russia stood accused of fomenting unrest in eastern Ukraine, where fighting between Russia-backed separatists and Ukrainian forces has claimed more than 10,300 lives since April 2014.

Largely as a result of Russia’s meddling in Ukraine, the West hit Moscow with sanctions, and Russia retaliated with the food embargo.

The Kremlin vowed the move would boost “import substitution.” In other words, local firms would fill the consumer void. Companies in the agricultural sector were promised financial and infrastructural support from the state.

Like others in Russia’s food industry, the cheese plant in Sernur accepted the challenge.

Today the plant employs 380 people and produces 30 different varieties of cheese and other dairy products, explains Chernych.

Production is up as well. In August, Sibagatullin says, the enterprise established a new record, processing 3,020 tons of milk to produce 230 tons of cheese.

Becoming Capitalists

Mastering the art of cheese making was half the struggle, according to Sibagatullin and Chernych. They also needed to learn how best to sell it.

They currently spend 2.5 million rubles (about $38,000) a month just on advertising. The factory is also developing a distribution network by establishing franchises across Russia, including in Kazan, Samara, Nizhny Novgorod, and the Moscow region, its biggest market by far. There are plans to open at least three or four more of their own branded stores in different parts of Russia by the end of the year.

The cheese can now be bought online, with delivery promised within 48 hours.

The plant still faces its struggles, namely securing quality local cow’s milk. There’s no problem with goat’s milk.

“We have our own goat farms. As a result, we are producing a high-quality product. The bulk of the cow’s milk — up to 40 percent — comes from Tatarstan, followed by local producers, about 25 percent,” explains Sibagatullin, adding some is also purchased from the Kirov region.

Russia has reaped some reward from its gambit to shun food imports and develop its own domestic producers.

The agricultural sector has indeed increased production of some food items in the past three years, according to data provided by Rosstat, Russia’s state statistics service, cited by U.S. News And World Report.

Russian companies produced 17.5 percent more beef in 2016 than in 2014. Pork production increased 30.6 over the same period, poultry production 11.9 percent, frozen vegetables 31.6 percent, milk 5.8 percent, and cheese 20.2 percent.

Russia’s Agricultural Ministry points to even more encouraging data, cited by the same news report.

Food imports during the past three years dropped almost in half, the ministry said, from $43 billion to $25 billion, whereas overall Russian agricultural production has increased by 11 percent.

On the other hand, the embargo meant fewer products on grocery shelfs, especially at the start, sparking the inflation of “food and non-alcoholic beverages.”

The Sernur cheese factory is proof a Russian producer can help fill that gap, and, according to plant manager Sibagatullin, production is only heading up.

“Sales of Camembert are up 40 percent this year. Our goal is to increase production of this type of cheese per month. Right now, they produce about 200 kilograms,” he explains confidently, adding that producing ricotta is in the works.

Written by Tony Wesolowsky based on reporting by Dmitry Lyubimov of the Volga Desk of RFE/RL’s Tatar-Bashkir Service.