The move is intended to fight milk inflation
Since the days of Stalin, getting shipped off to Siberia hasn’t been anyone’s idea of a good time. But thanks to Russian trade protectionism and a weak Ruble, French yogurt maker Danone and a whole bunch of cows have had no choice but to make the trek to the hinterlands.
Nearly 5,000 Holstein cows will travel some 2,800 miles by truck from the Netherlands and Germany all the way to a farm near Tyumen to begin producing milk that can be used domestically. Russian president Vladimir Putin placed a ban on EU cheese back in 2014, and demand for domestic dairy has surged. In addition to this disruption of the dairy supply chain, a weak Ruble (down about 25% from early 2016) has sent prices spiraling upward. According to Charlie Capetti, the head of Danone in Russia says that this more expensive raw milk has “put products such as yogurt under pressure.”
Making this kind of international agricultural investment isn’t a normal part of Danone’s playbook, but desperate times have called for desperate measures. To house the Holsteins, they’ve invested in a 60 hectare farm with the help of local dairy purveyor Damate. So far, the strategy is paying off: the first crop of cows began yielding milk in May, and production should kick into high gear once the last group arrives next month.
Capetti says that expanding supply should help bring milk prices back down to earth, but he doesn’t see a broader economic recovery for Russia— which has struggled since the Ruble first crashed in 2014— in the cards any time soon. At least now there will be enough yogurt and cheese to tide them over in the meantime.