From oil to plastic: Making vegetarian foods costs a pretty penny

The cost of ingredients for making vegetarian food products soared by 2-10 times in March-August compared to the same period last year, with the added costs of finding new suppliers, lab tests and paperwork, as well as longer delivery routes. Transportation costs spiraled by 10-120% in six months depending on the direction, PEC transport company reported after analyzing the market and interviewing its leading participants such as the Union of Manufacturers of Plant-Based Products, the manufacturers Volko Molko, Greenwise and NOT MEAT, as well as the Dentro logistics company.

The cost of raw produce increased the most in the non-dairy milk, yogurts and desserts segment, by 50%-700% in six months, Sooperfoods and Volko Molko reported. The cost of manufacturing alternative protein-based products has doubled, NOT MEAT said.

Logistics companies PEC and Dentro reported 10-120% increases in the cost of delivery in six months, let alone a 50-70% longer time, depending on the direction. For example, a year ago, transporting a 40-foot long container (FEU) from a port in Vladivostok to Moscow cost RUR 153,000 ($2.6K); in August 2022, the fees rose to RUR 235,000 ($4K).

This is one of the reasons why ingredient prices have increased, market players said.

“In this new reality, it is important to expand the scope of suppliers to three or four for each product, otherwise production may be disrupted due to a shortage of ingredients. The industry’s scale is enormous, so one of the main responsibilities of logistics operators is to help it reorganize. Namely, to select and verify suppliers, to select the goods with required specifications, to develop a schedule for shipments, and to draw up customs documents and phytosanitary certificates. The priority is to develop a service like this in Asia and the Middle East because most Russian companies are shifting to purchasing goods in those countries,” said Oksana Feoktistova, director of the PEC: GLOBAL business unit.

In the new reality, Turkey, China, India, and the EAEU countries have become alternative suppliers of ingredients for plant-based products, said Artyom Ponomaryov, director of the Union of Manufacturers of Plant-Based Products, co-founder of Greenwise. China mainly supplies protein, and India, flavor additives, added Marina Roylyan, director of the NOT MEAT brand.

However, it is sometimes challenging to find high-quality replacements.

Since April, producers have been hit by a shortage of coconut milk, butter and chips, date syrup, paste and powder, agave syrup, sweet potato syrup and other goods, said Valeria Rodina, executive director of the Union of Manufacturers of Plant-Based Products.

There are certain materials that have no alternative outside the EU market at this point. Deliveries from Europe are becoming more and more problematic, however. Companies now have to add one to four weeks to their lead time to hedge risks. Suppliers no longer guarantee a specific date and time of shipment. Because of this, the manufacturing time becomes unpredictable, and there is a risk that certain categories of goods can be added to a stop list.

When procuring goods from Europe, companies now have to take into account changes in the accompanying documents, Oksana Feoktistova explains. Until recently, an invoice was enough for certain goods, but now a foreign trade contract and a letter on the scope of application of the goods are mandatory. An export (EX) declaration has to be issued before the goods are transported from the EU; until recently, it could be issued while the goods were in transit.

In addition to the more expensive raw materials, packaging prices, too, surged 3-5 times in March-August, said Alexandra Levkova, CEO of Volko Molko. The company had to replace some of its labels because it could no longer procure self-adhesive paper to print them.

Furthermore, manufacturers will soon have to do without barrier plastic, using propylene to make yogurt cups instead – barrier plastic is no longer supplied to the Russian market. As a result, the products’ shelf life will be halved, for example, from 14 to 7 days, explained the managing director of Sooperfoods.

“According to our company’s partners, due to the shortage of packaging materials, deliveries of plant-based products decreased by 10-15% in April-May. Because manufacturers are shifting to more economical practices, it is carriers’ responsibility to tighten temperature control and raise sanitary standards. It is important that the transition period does not affect the quality of goods. For example, Dentro reduced the permissible temperature error from 4° C to 1° C when transporting refrigerated products, and the humidity in the semi-trailer cannot exceed 75%,” explained Igor Ilkayev, CEO of Dentro.

However, despite the higher production costs and the shortage of certain ingredients, the volume of production of plant-based foods has actually increased by 40-50% in Russia since the beginning of the year, the Union of Manufacturers of Plant-Based Products reported. According to Marina Roylyan, the pandemic has induced a change in eating habits, bringing in more buyers of plant-based food products.

At the same time, the market product grid has shrunk. For example, Volko Molko stopped making about 20% of its products that did not enjoy demand, Alexandra Levkova said.

According to Artyom Ponomaryov, consumer attention is gradually shifting towards soybeans (as in soybean cutlets), wheat and peas as possible replacements of animal products. Such semi-finished products are inexpensive, but they retain the taste of natural meat ingredients.

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