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Operating environment 

The euro area economy grew slightly in 2014. The growth was broad-based and private consumption did not weaken. Economic growth was modest in Finland but strong in the UK.

In Finland, private consumption remained at the 2013 level. Popularity of foods made of Finnish raw materials continued and the product range expanded. 

In the UK, competition remained intense in the children's cereal market while the sales decline in the children's cereal category continued. Retail trade is undergoing a major change as discount stores are increasing their sales and online sale of food is gaining popularity. British consumers continue to prefer smaller and affordable confectionery purchases. 

Competition remained intense in the market for cholesterol-lowering functional foods and the retail sector undergoing substantial change in many countries is challenging the producers. In many markets, consumer preferences have changed, which is seen in the growing popularity of, for example, yogurt drinks. 

The situation in Russia and Ukraine

Finland was severely affected by the Russian import ban on dairy products.

The crisis in Ukraine overshadowed the whole year and there were no sign of d├ętente. The crisis resulted in the spiral of sanctions and counter-sanctions between the West and Russia, which resulted in a significant decline in the West's exports to Russia. Finland was particularly severely affected by the Russian import ban on dairy products. As Russian and Ukrainian currencies weakened and the state regulated consumer prices in Russia, the food industry needed to respond rapidly. Russia's sanctions and counter-sanctions did not apply to Raisio's export of flakes and feeds in 2014. 

The Finnish feed market competition further intensified with new operators and additional capacity built in the industry. As farm sizes are growing, farmers are moving from compound feeds to TMR feeding, which Raisioagro has taken into consideration in its new strategy.

Russia's ban on imports of dairy products increased uncertainty among the Finnish milk producers. The decline in milk producer prices in 2014, as a result of the crisis in Russia and Ukraine, as well as the expected change in milk pricing for early 2015 have increased the milk producers' need to reduce costs and to postpone investments. Milk producers are interested in alternatives that help improve the milk production efficiency and farm profitability. Despite the current challenges, the future of milk production looks promising.

At the end of 2014, the rapid weakening of the rouble obstructed exports of feeds as purchasing power decreased in Russia. Increased fish prices in Russia weakened the demand for farmed fish in the situation where Norwegian salmon is under the import ban.