Many Czech food producers have invested into the Russian market in past years, and their strategy seemed to be working. But the arrival of reciprocal sanctions between the West and Russia due to the ongoing crisis in Ukraine is likely to thwart their thriving business. Voices of concern have already been heard from some of the major Czech producers active on the Russian market – but Czech farmers and small producers could face an even greater risk.
“Trucks loaded with our goods are being ordered to turn back on the border with Russia. We, in turn, will have to return money and lay-off workers,” Milan Teplý, CEO of Madeta, a major Czech dairy producer, told the Czech news agency ČTK on Thursday. The sanctions on EU food producers come as particularly bad news to his company because it was a market in which Madeta had just recently achieved a breakthrough.
“For the last four to five years we have been trying to get into the Russian market in as large a volume as possible. Now that we’ve managed to do this and indexes indicate immense growth - from 200 million to what could have been 300 million next year - it all has to go sour,” Teplý said.
Madeta is not the only company hit by the ban. Hamé a.s., a leading Czech manufacturer of durable and chilled foodstuffs, whose pâtés are particularly popular among Russian consumers, stated that sales on the Russian market which make up for about 20 percent of the company’s annual turnover are expected to fall by up to 100 million crowns.
The company’s CEO, Martin Štrupl told news website idnes.cz that the
company would seek compensation for its losses from either the Czech
government or the European Union. However, Hamé is a large company whose
profits amounted to 5.7 billion crowns last year.
It also manufactures most of its Russian-sold products in its plant in Vladimir, using Russian foodstuffs made locally. The ban should therefore only impact the remaining 15 percent of products it imports from the Czech Republic.
The sanctions could however have a more serious impact on Czech farmers and smaller producers. They fear that the expected large surplus of foodstuffs in Europe will end up being sold at knockdown prices. If that is the case, the governments of agricultural giants such as France, Germany or Poland, could step in to support their own producers making it more attractive for food retailers to buy products at lower prices from them, rather than from local suppliers.
Czech Prime Minister Bohuslav Sobotka suggested on Thursday that if the problem were to become serious, it should be approached on a Europe-wide basis, for example through the European Union’s common agricultural policy. Meanwhile, the Czech Ministry of Agriculture announced it was prepared to help Czech farmers and producers but refused to specify any particular measures before the problem was discussed within the EU.