Trends of 2019, forecasts for 2020
Ekaterina Zakharova
Leading analyst of the Dairy Intelligence Agency
We should start with global trends:
1) Global frustration. The prolonged crisis of international financial and political institutions, the growth of protectionism, the crisis of traditional political forces and their ideology in Europe and the United States.
2) Isolation. Under the conditions of the destruction of old international structures, the natural though short-sighted reaction is the isolation of States and the bet on protectionism. However, now the world is irreversibly global, States and all other players (TNCs, Non-profit organizations, international organizations) are interconnected and interdependent.
3) A crisis of trust or a growing gap between the authorities / elites and society. In fact, this trend follows the previous, key one. Elites as a response to local and global crises do not offer any positive programs; trust in public policy blurs. Power structures, losing trust, strengthen control over society. At the same time, the role of horizontal links within industries, between industries, between business and consumers will increase in order to solve urgent problems and to preserve independence and subjectivity. The trend of loss of trust in the relations between the young generation and the state is especially obvious. The old elites cannot and do not want to respond adequately to the demands of the younger generation, which is most focused on globality and openness. Young people, in turn, are forced to develop their "parallel" agenda through social networks and horizontal connections.
All of the above mentioned global trends are typical for Russia and are specifically refracted in our conditions.
1) The strengthening of administrative control. In fact, this is the Russian response to the first three trends. Instability and frustration before the future and the weakening of confidence in the government is a global challenge, but "tightening the screws" is a typical Russian response, although we are not the only ones suffering from such a policy. In the dairy market, this is manifested both in such obvious, lowered from the top, initiatives as “Mercury” and labeling, and less noticeable at first glance, increase in the share of state structures (mainly through state banks) in the capitals of large and even medium-sized players in the industry. In Ggeneral, banks and subsidies, two points of the same sword are the ideal means to strengthen control over business.
2) Concentration of production. This trend follows the previous one and develops with the support of the state. According to the DIA rating of the TOP 100 milk producers in 2018, the share of the leader of the rating EkoNiva-APK holding was 2.6% in the total milk production in Russia, the share of the top ten rose to 10.9%.
The share of some processors in regional markets exceeds 50%.
And if someone in the market grows, the other one leaves the market. Many companies do not withstand the administrative press and go bankrupt.
3) Industry consolidation. The catalyst for this trend is also increased control, but consolidation as opposed to concentration occurs in spite of it. Industry players are forced to engage in dialogue with each other and with the authorities and seek answers to growing challenges.
Moreover, industry unions do not so much initiate these processes as pick them up, someone earns points due to such activity and someone loses them due to sluggishness.
4) Digitalization. This word set the teeth on edge, almost like import substitution or export, since the frequency of its use by officials of high and not very high rank is quite comparable to the two indicated above. Here the problem of the gap and distrust between the government and society is manifested. "Digitalization from above" is either fiscal-controlling, like labeling, for example, or purely decorative, populist. At the same time, digitalization is really happening from the bottom up, and quite actively, companies are introducing new technologies, including AI and big data, to improve production efficiency and process management. In general, we can say that the Russian agro-industrial complex and the dairy industry are not only able to buy foreign technologies (we are not talking only about digital technologies), but also to export their solutions and their experience.
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