No Brie for Moscow as Cheese Stacks Up in France on Ban

Aug. 21 (Bloomberg) -- French producers of brie are feeling the effect of Russia's embargo on the cheese. Bloomberg Television's Caroline Connan finds out how much French exporters stand to lose if new buyers aren't found. (Source: Bloomberg)

At Alexander Krupetskov’s one-window cheese store in central Moscow, sales of products from France have tripled in the past two weeks.

Shoppers are stocking up on foods set to become scarce after Russia banned a range of products from the European Union and the U.S. in retaliation for sanctions over Ukraine. The nation of 143 million has been one of the fastest-growing export markets for French cheesemakers as Moscovites acquire a taste for creamy brie, pungent camembert and spicy Roquefort.

“The very foundation of the shop has been cast into major doubt,” said Krupetskov, who has four weeks of inventory left.

Waging Financial War

French cheese exports to Russia climbed 29 percent to 49.5 million euros ($66 million) last year, beating a 4.4 percent increase in total exports to 3 billion euros. Brie shipments to Russia rose 37 percent, while sales of stronger-tasting Roquefort advanced 13 percent, Eurostat trade data show.

At the Rungis food market outside Paris, a 30-hour drive west of Moscow, Nicolas Medard, deputy director of Thomas Export, says 100,000 rounds of brie headed for Russia are stranded after the ban announced on Aug. 7, with no new destination for now.

“All these cases were for Russia,” Medard says, pulling a tin of Pere Toinou brie from one of 2,000 plastic-wrapped cardboard boxes. “We’ll lose about 120,000 euros.”

Photographer: Patrice de Villiers

Brie cheese. Close

Brie cheese.

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Open
Photographer: Patrice de Villiers

Brie cheese.

Russia’s blacklisting of $9.5 billion of agricultural products and food from the U.S., the EU, Norway, Canada and Australia is likely to accelerate annual inflation to 8 percent in 2015, above a target of 4.5 percent, according to government officials.

Specialty Store

Thomas Export may lose about 1.3 million euros in total sales due to Russia’s ban, around 4 percent of the company’s revenue, according to Medard. Sales to Ukraine are also in decline, he said.

In addition to Roquefort, Krupetskov displays French cheeses such as Fol Epi and Saint Agur. At the specialty store, which the cheesemonger says is the first of its kind in Moscow, French varieties accounted for 60 percent of the selection, with the remainder Swiss.

Swiss exporter Intercheese AG said last week it’s been contacted by Russian buyers looking for cheeses they can no longer get from the EU, such as mozzarella, Gouda and Edam.

Krupetskov, who says he panicked when he heard about the import ban, is looking to sample cheese from Latin America or Israel that might help restock his shelves.

Production Halt

The EU exported 257,000 tons of cheese to Russia last year, accounting for 33 percent of shipments outside the bloc and 2.6 percent of production. Cheese and curd shipments to Russia had a value of 985 million euros, with the Netherlands, Germany and Lithuania the biggest suppliers.

Dutch dairy producer FrieslandCampina said yesterday it halted production of cheese specifically for the Russian market. The company said it exported about 190 million euros of dairy products to Russia last year, and said the ban is adding to pressure on dairy markets.

While Germany and the Netherlands mostly sell bulk varieties such as yellow Edam to Russia, France and Italy ship higher-value specialty cheeses, said Bart Van Belleghem, managing director of the European Association of Dairy Trade, or Eucolait.

Export prices for French cheese were an average 4.30 euros per kilogram (2.2 pounds) last year, while Italy got 6.39 euros per kilogram, trade data published by Eurostat show. That compared with 3.36 euros a kilogram for Germany, the EU’s biggest cheese exporter.

Price Pressure

France and Italy ranked eighth and ninth among EU cheese exporters to Russia last year, meaning “the effects will be felt less harshly than in, say, Lithuania,” Van Belleghem said by telephone from Brussels on Aug. 14. “It could result in some price pressure, but I expect it to be less than for Gouda-type cheeses.”

At Societe Fromagere de la Brie, a cheesemaker in Saint-Simeon in the Brie region southeast of Paris, director Philippe Bobin saw no direct impact on earnings. He was concerned that falling milk prices will hurt the farmers who supply his company, making it tempting to drop dairy for growing grain.

The company, one of the last two artisanal brie makers in the region, makes the traditional variety from raw milk as well as a pasteurized version for exports. Societe Fromagere de la Brie lifted sales 8 percent last year to about 10 million euros.

Milk Prices

“The impact of the Russian embargo may be more violent and quicker than we think,” Bobin said. “As of this week, milk prices in the trade are starting to fall. We risk selling our cheeses at a lower price, but recompensed by the lower purchasing price of the raw material.”

The average milk price paid by 13 French dairies in August was 38.154 euro cents a liter, compared with an average base price of 38.021 euro cents in July for 19 dairies, according to data published online by milk producers.

Russia may have trouble finding a cheese supplier to replace Europe, Van Belleghem said. The country was 51 percent self-sufficient in cheese last year, while imports from the EU accounted for 29 percent of supply and Belarus supplied 12 percent, according to data from the European Commission.

“For milk powder and butter, I don’t expect any problems, there’s sufficient availability,” Van Belleghem said. “For cheese from Europe, there aren’t too many alternatives.”

To contact the reporters on this story: Rudy Ruitenberg in Paris at rruitenberg@bloomberg.net; Anatoly Medetsky in Moscow at amedetsky@bloomberg.net; Caroline Connan in London at cconnan@bloomberg.net

To contact the editors responsible for this story: John Deane at jdeane3@bloomberg.net Steve Stroth, Randall Hackley

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