Price inflation and a shortage of goods are changing what Russian consumers buy

Price inflation and a shortage of goods are changing what Russian consumers buy
With prices soaring and shortages of basics, Russians have been buying less while producers have been producing smaller packets. / wiki
By Mack Tubridy in St Petersburg April 4, 2022

Walking through the mall in St Petersburg, Russia’s northern capital, these days is a bit like walking through a ghost town. Once greeted with bright lights and ambient music, shoppers now stroll past darkened display windows and signs reading “temporarily closed.” Only a fraction of the shops have remained open following the recent exodus of foreign brands following the invasion of Ukraine on February 24. Popular brands like Adidas, Calvin Klein and Uniqlo that all had branches in the former Tsarist capital have all shuttered their operations in the country.

The malls in St Petersburg are reporting that foot traffic is down by nearly 14% compared to the same period last year, while several newly constructed shopping centres in Moscow have postponed their grand openings due to a sudden lack of tenants.

As popular western clothing brands vanish, some Russians maintain a sense of irony, joking that now they’ll need to style their summer wardrobe with Belarusian threads. Others anticipate a return of Soviet-era fartsovka, or the illegal sale of hard-to-find or inaccessible goods from abroad.

But it’s not just Nike and Tommy Hilfiger. Even basic goods have gone missing from some store shelves. Videos posted on social media showing shoppers battling over packages of sugar and buckwheat have gone viral in recent weeks. In the Volga River city of Saratov, hundreds of residents gather in the central square at weekends, sometimes queuing for several hours to buy sugar that they can no longer find at the store.

“I asked a worker at my local supermarket why there isn’t any sugar. She said there is sugar, but a group of elderly women loitering in the store, waiting for the delivery, buy the stuff up like crazy when it appears,” says Sasha Petrov, a business consultant in Saratov. “I honestly don’t know why they need that much sugar. Maybe they’re witches making gingerbread houses or moonshine.”

“The disappearance of sugar is mostly a logistical problem,” explains a Moscow-based economist and entrepreneur, Dmitry Potapenko, in a recent interview. Producers cannot keep up with panic buying. So far, this kind of frenzied consumer behaviour is mostly affecting staple goods that Russia produces domestically, and therefore supplies are anticipated to normalise soon. As Potapenko notes: “there are other more worrying signs, namely printing paper and feminine hygiene products. All of these things are made from imported materials.”

Sanctions-induced disruptions to logistical chains are causing shortages of everything from receipt paper to aluminium beer cans. Russia’s invasion of Ukraine has created a chaotic ripple effect across the entire economy, leaving few industries and sectors untouched. Even schools have been forced to reschedule the spring examination period to autumn, ostensibly because of coronavirus (COVID-19); however, many suspect the real culprit is a lack of paper.

There are some who believe doomsday reporting of barren shelves at the supermarket to be exaggerated. “I guess people outside of Russia are hearing that there are long lines at ATMs here, that we’ve run out of food,” says Natasha Obolova, a university researcher in Saint Petersburg. “My ex-boyfriend’s mother from Australia called me in a panic and said that I should grow sprouts, since they have all the nutrients a person needs! But I can still find everything I want at the store.”

In a survey published in Novaya Gazeta, sugar is the scarcest product, according to 84.5% of respondents. People from Western Siberia, the Volga region and even Moscow have reported its absence. It is being sold under the counter, on the internet, at inflated prices, one respondent said.

After sugar, respondents (22.2%) cited grain products and pasta as the second most difficult items to find. After these came coffee and tea (7.1%), cooking oil (5.2%) and alcoholic beverages (4.2%). Even when these products are still on the shelves, our study shows that the volume of product in a package is also decreasing. Grains once sold in kilogram packages are now sold in 800 gram amounts; certain brands of pasta are being sold in 400 gram, rather than 500 gram packages.

At the same time, soaring inflation is beginning to hit consumers’ wallets. Earlier this week Russia’s statistical agency RosStat reported that annual inflation for 2022 had already reached more than 15%, which is lower than earlier estimates. Inflation could reach a multi-year high of 20% in 2022. Some of the most impacted goods include sugar, salt, rice and black tea, all of which have seen prices increase in double digits in the last month alone. Onions, meanwhile, have increased in price by more than 18%, and carrots by over 11%.

Buckwheat a Russian staple is rapidly increasing in price, rising from an average of RUB70 to RUB80-RUB90, and in some places, even to RUB110-RUB130, one respondent to the Novaya Gazeta survey said. 680 respondents also reported that the prices of cereal and pasta have risen by more than 30%. Pet food has also been affected, with one respondent commenting that Grandorf dog food has risen in price by 100%, and in some stores the price has soared by 200-400%. Purina cat food has climbed by 50%. RosStat also noted significant price increases for laundry detergent and personal hygiene products.

“I’m definitely preparing for the worst,” says Oleg Kozlov, who operates a small advertising firm. “I stocked up on some items like cleaning products beforehand, when the prices were still low.”

For his own business, Kozlov faces challenges selling a range of products, like leaflets and flyers, after a number of foreign manufacturers temporarily suspended operations in the country. “I would say that 80-90% of my clients stopped buying products that they used to buy all the time. I’ve received almost no orders for printing materials this past month. Nobody can afford it.”  

Anastasia Kazmina, a medical worker in Saint Petersburg, can still buy the same kind of groceries as before, albeit at a higher price. However, she hasn’t had the same luck with the imported contact lenses she normally uses. “I found out that there are Russian alternatives, but I’ve never seen them in the stores, and I haven’t yet figured out where to buy them.”

Perhaps the most concerning reports are those of the absence of vital medicines in pharmacies. Those for thyroid diseases, epilepsy, diabetes and other diseases are missing from the shelves. The medicines that are available have become more expensive. One respondent in the Novaya Gazeta survey reported: “The price of Maxidex (a Finnish drug that treats eye infections) has increased significantly. It was about RUB350, and is now RUB530. Sulfasalazine (an American drug that treats rheumatoid arthritis and Crohn's disease, among other conditions) has increased from RUB400 rubles to RUB520. The price of Movalis (another American drug that treats arthritis) also increased a lot: it was RUB800 rubles, now it RUB1,300.”

The state has put pressure on retailers to hold prices down but most have abandoned the 5% limit on sugar trade margins introduced at the start of March as unworkable. The Auchan and Atak supermarket chains are now pricing sugar based on market forces, as they argue the price caps were only making shortages worse.

The Federal Antimonopoly Services (FAS) explained that retailers made such a decision "to expand the supply of goods and eliminate local shortages." And the Ministry of Industry and Trade noted that the refusal of voluntary obligations, "may have signs of a violation of antitrust laws,” Kommersant reports.

Together with these networks, other leading supermarket chains, including X5 Group (Pyaterochka, Perekrestok), as well as Dixy and Magnit agreed to voluntarily limit the margin to 5% for socially significant products in March. The latter stated that it would continue to fulfil its previously assumed obligations, but the position of the others is unclear they did not respond to Kommersant's request for information.  

Despite growing economic hardship, many in Russia appear determined to weather the storm. As Svetlana Dubinina, a homemaker from Saratov, puts it plainly: “Everything’s fine. We won’t starve to death. I always have enough to last half the year.”

Older generations familiar with past economic crises may express an almost business-as-usual attitude about a worsening economy, especially those that have a dacha vegetable garden, but younger urban Russians who take an abundance of goods and services for granted face a steep learning curve.

Katya Ostrovskaya, a nursing student who runs a small side business out of her apartment baking cakes, says that she’s had to rethink future plans. “I’m starting to earn less. That’s really not good because my growth depends on profits. Now I can’t open my own bakeshop like I was planning.”

The rising costs of goods has also forced Ostrovskaya to adjust her business model. “A lot of bakers are switching to smaller-sized cakes because you can make them quicker and in larger quantities, which makes up for the higher costs. It’s a kind of anti-crisis option, since people still want cake.”

Asked how he’s preparing for more austere economic conditions, Andrei Guriev, a delivery driver, responds dryly “I’m not.” Guriev recalls hours of waiting for basic goods during the late 1980s and early 1990s. “We’re used to this. We lived with constant shortages in the Soviet Union, so we’ll get by somehow. It might be like the 90s, but we’re not going back to the Soviet Union.”