Russian ice cream brands eye hungry Chinese market but challenged by emergence of fake goods

By Chu Daye Source:Global Times Published: 2018/5/27 17:43:40

Russian President Vladimir Putin buys ice cream during a visit at the 2017 MAKS Air Show in Zhukovsky, outside Moscow. Photo: VCG


After Russian President Vladimir Putin brought ice cream as a state gesture to the 2016 Group of 20 meeting in Hangzhou, capital of East China's Zhejiang Province, some Chinese entrepreneurs were quick to explore a new business opportunity: selling Russian ice cream.

"More Chinese consumers have begun to show interest in Russian ice cream," Xiao Yu, who works at the Mandilai ice cream shop on The Bund in Shanghai, told the Global Times on Friday.

"If Shanghai's weather is warmer than usual, I am sure the sales of our ice cream will surpass that of 2017," Xiao said, whose shop focuses on the sales of Roctob ice cream from Russia.

Russian ice cream is experiencing brisk sales in China, domestic news site cankaoxiaoxi.com reported on May 17, citing a report by Russian media outlet kp.ru.

Despite small-sized portions of ice cream being priced not-so-cheaply at 9.5 yuan ($1.51), or twice the price of locally produced counterparts, Chinese people are nevertheless buying it in bulk, the report said.

In another sign of the expansion of Russian ice cream in China, a number of Qing-Feng Steamed Dumpling Shops in Beijing have also started selling Roctob ice cream, which has proved to be a hit among their customers, according to media reports.

Big opportunities

"Indeed, Russian ice cream has suddenly become a market darling in some local Chinese markets, despite the relatively higher price," said Song Kui, president of the Contemporary China-Russia Regional Economy Research Institute in Northeast China's Heilongjiang Province.

Russian ice cream has established a reputation thanks not only to its ingredients of pure milk and natural flavorings but also to the fact that Russian agricultural products are pollution-free and genetically modified organism-free, noted Song.

"Ice cream is just one product among a wide range of Russian agricultural products that are quickly gaining popularity among Chinese consumers. Russian flour, beer and other foodstuff are all popular in China, and Russia has in recent years ramped up its agricultural exports to China, with such products accounting for a growing proportion among its exports," Song said.

Pavel Kudriavtsev, chief representative in eastern Asia (Beijing) with the Russian Chamber of Commerce & Industry, said Russian exports of ice cream to China surged 17.5 percent year-on-year in the first half of 2017, adding that the most popular imported brands include Russkii Holod, Marka and ICE RUS, citing Russian customs data.

Roman Lola, CEO of Russian ice cream company Iceberry, told the Global Times that his company will sell over 15 million portions of ice cream in China in 2018, adding that the company is ready to double and even triple export volumes to the country.

"This is a very good start, but [the current supply] is very little for the large Chinese market, and not so big for our company. We sell the same amount over less than a week in Russia," Lola said. 

Iceberry, inheriting traditions and know-how from Soviet-era ice cream production, is one of the top three Russian ice cream companies in terms of sales and production volume.

"Russian ice cream in China is currently more like a niche product and all Russian exporters together hold about 3 percent of the Chinese ice cream market. Our main focus is the highest possible quality at every level and every stage of production and delivery," Lola said, noting that ice cream is a product demanding special requirements in both production and transportation.

Lola said Iceberry is working hard to make high-quality Russian ice cream more affordable and to introduce it to the shelves of some of the main Chinese sales channels, including ubiquitous convenience store 7/11.

"For Russian people, good ice cream is the taste of happiness and their childhood and we believe we are able to make Chinese children and adults happier by means of our ice cream," Lola said.

Obstacles ahead

However, the rise in popularity of Russian ice cream is also accompanied by some unwanted developments.

"In 2016, there were some imports of Russian ice cream, but sales were poor due to weak marketing. Since last year, locally produced fake Russian ice cream has been emerging, which uses some Russian ingredients, although there are no dairy products as they cannot be imported [from Russia] under the current arrangements," a source who is familiar with trade at the Sino-Russian border said on condition of anonymity.

"Not long ago, I saw six ice cream-making machines get imported through our port," the source said, noting that the current market is filled with predominantly fake products and a small amount of smuggled ones.

"The key issue at the moment is that in some border regions, such as the Border Trade Zone in Manzhouli [in Northeast China's Heilongjiang Province], a significant rise in improper activity known as 'gray customs clearance' is killing the interests of some Russian ice cream makers in the Chinese market, and they are even starting to lower supply to the Chinese market," Kudriavtsev said.

"Some Chinese are shipping Russian goods worth up to $1,500 a day without paying tariffs into China customs and such activities have caused economic losses to Russian makers, reduced the possibility for them to monitor the price of goods they produced, and also forced them to consider the practicality of further pursuing the Chinese market," Kudriavtsev said.

"As a result, ice cream exports from Russia's Far East to China have in turn been dropping," noted Kudriavtsev.

To add insult to injury, fake Russian food products account for 70 percent of the market share in Northeast China, Kudriavtsev noted, with ice cream and chocolate being the top victims.

Iceberry in particular has been feeling the bite of this reality. "We have seen a dangerous trend: when responding to business opportunities with high margins, mediocre producers simply put a picture of the Kremlin or a bear or other Russian looking symbols on their packaging and call their ice cream 'Russian'," said Lola.

With large producers showing concern, small-scale wholesales of Russian ice cream is failing to satisfy Chinese consumers' demand, according to Kudriavtsev.

"Therefore, the fame of Russian ice cream is contained within Northeast China. In central and southern China, sadly, consumers are denied the opportunities to have a taste of green and quality Russian food," said Kudriavtsev.


Newspaper headline: A taste of Russia


Posted in: INSIGHT,BIZ FOCUS

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