How to combat black market in food products and why a GOST standard for ‘eco’ and ‘bio’ needed

“You take out 3 million, but you're liable as if you took 20”

Everyone finds their own way to deal with the challenges of equipment and financing. Olesya Karaganova (Krug PLC, fish production and processing) says there are many plans for upgrades, and the company has adopted a rule to purchase two new pieces of equipment every year.

Despite that since 2022 prices have doubled — and in some cases tripled — they still set aside funds for machinery by withdrawing money from circulation. Loans are unaffordable, and government support for equipment purchases in the fish processing sector is ineffective.

The company has tried several times to acquire equipment through leasing — not once successfully, as they were always denied. As is well known, a letter of guarantee ends up costing almost as much as a consumer loan. That’s why they no longer even want to attempt joining a government support programme — they prefer to cover their equipment upgrade needs on their own.

“No matter how much I analyse and calculate, I always come to the conclusion that government support would cost me far too much,” says Olesya, spreading her hands.

Roman Matveev, commercial director of Helix Group (snail farming and production of ready-made snail-based products), reflects that, in theory, state support could be obtained for snail farming — after all, it is a branch of agribusiness. But for now, the current government decree lists poultry, dairy, meat, fish, and crop production — snails, however, are not mentioned.

Tatyana Kirova, head of the Svetloe Ozero agro-farm, purchases equipment using her own funds. When it comes to government support, however, she offers a practical suggestion: she believes the state should provide substantial subsidies to cover the costs of obtaining mandatory certifications and declarations of conformity (such as halal), as well as laboratory tests required for accompanying documentation and various certificates. All of this is extremely expensive when a small enterprise has to go through the entire process on its own.

This is especially true in agriculture and food production: even basic lab tests on product samples can deal a serious blow to a small business’s finances.

Equipment upgrades: domestic production, in-house engineering, and “garage innovators”

When it comes to import substitution in equipment, the situation remains limited. For instance, machinery needed for fish production is manufactured only in Kaliningrad.

However, in other segments, Chinese manufacturers have shown good performance — especially at the launch stage or for small-scale production.

“In terms of quality, Chinese equipment isn’t far behind what we used previously — for example, we’re currently using a saw for slicing fish steaks. To test it out, we deliberately chose a basic and inexpensive model. Our volumes aren’t large. But we are considering investing in a more powerful unit.”

That said, Russian-made food processing equipment, according to the participants, often offers good value for money. For example, Tatyana Kirova smokes meat and poultry using equipment produced in St. Petersburg. She also uses a cheese-making machine from Yaroslavl and is satisfied with its performance.

The same equipment is praised by Maksim from Chizeria. As he explains, manufacturers in Yaroslavl have managed to outdo the Italians. According to him, the Italian cheese-making machine originally installed at their facility turned out to be surprisingly impractical: a built-in thermometer that couldn’t be removed (!!), no way to drain liquid from the massive tank, and other oddities of engineering design.

Snail farming at Helix Group is largely manual labour. The need to purchase equipment only arises at the production stage — for canning snail fillets and livers, and for preparing frozen escargot. As for canning, the company has so far decided that it is more cost-effective not to purchase its own production lines, but to rely on contract manufacturing and use rented facilities to seal jars of delicacies.

Unity — the key to successful sales?

Important issues were raised by Sergei Nikiforov, Honoured Economist of Tatarstan and Russia, who is engaged in the production of national delicacies and dried ripe pears. He reminded those present of another form of support — support for cooperatives. While some entrepreneurs make use of this, it remains a rather sporadic practice and cannot yet serve as a means of developing the industry.

At the same time, many producers do not properly formalise their documentation — lacking declarations and registration in the Merkuriy and Chestny ZNAK systems. To bring order to this situation, the speaker proposes gathering such producers under a single “umbrella” of production cooperatives, modelled on the Soviet-era district consumer cooperatives (raipotrebkooperatsiya).

This would allow small producers who either neglect or cannot obtain the necessary declarations to legalise their activities. Their products could then pass through procurement and processing, receive the correct documentation, and be distributed through cooperative sales channels to the very same retail networks.

According to Sergey Nikiforov, this approach is more effective than each producer operating in isolation.

Indeed, even if this is implemented, small businesses united in sales cooperatives will face a direct and formidable challenge:

“The volumes of sales on the black market are staggering”

However, many producers operate without proper documentation deliberately — because it means significant savings. They often sell their products “under the table,” using messenger app chats and direct agreements with contractors. This is not about elderly women selling bunches of dill at the market, nor about neighbours exchanging a dozen eggs. According to the expert, the scale of the black market in food products is enormous — he estimates turnover in the billions. From this, Sergey Nikiforov draws his next conclusion.

“We will always have competitors in the form of the black market. They will always be more competitive than all of us combined. They pay no taxes, they file no documentation. And yet their sales volumes are simply staggering. I’m not saying their products are bad or of low quality — they may in fact be good. But the volumes are gigantic! We also have a major loophole in our legislation: the sale of food products by individuals is not monitored or regulated by anyone. Legally, only legal entities and sole proprietors are allowed to produce and sell food. Individuals are not. And because they are not — no agency oversees them. Not the tax service, not Rospotrebnadzor — no one! And that is a huge problem,” the economist observed.

There is yet another issue: Russian legislation does not provide a definition for natural products. The term simply does not exist in the legal vocabulary, which means that anyone can label their product as “natural” without bearing any responsibility. Meanwhile, this significantly limits the opportunities for many honest producers of natural food products to scale up their operations or increase sales.

“If we introduce a GOST standard for natural products and implement voluntary certification to confirm product naturalness, while also providing subsidies to cover the certification costs, this would be the most practical support measure!” argued Sergey Nikiforov.

“At the same time, we need to establish liability for those producers who falsely claim their products are natural. This way, we will create a stable market with higher prices and guaranteed demand for quality goods from our small enterprises. In parallel, the issue of the black market must also be addressed.”

According to the honoured economist, he is currently exploring ways to approach Rosstandart to begin developing a GOST standard for ‘Natural Products’.

Who will catch the ‘black market food producers’?

But how can this very black market of food products be eliminated? What needs to be done, and most importantly — who will take on this task and on what legal basis? In Sergey Nikiforov’s view, the legal basis is quite simple:

“When information is posted in messenger chat groups, it constitutes a public offer — a commitment to sell without conditions to any third party. Legally, this means the start of entrepreneurial activity, and there is no need to prove anything further. And since this is illegal entrepreneurship, it automatically includes tax evasion, trading without Merkuriy, without Chestny Znak. I believe we need to delineate areas of responsibility and impose severe penalties. The emphasis should not be on punishing the individual sellers, but rather on the administrators of these groups who post information about the sale of food products without accompanying documentation proving their safety (such as declarations, etc.). Impose, say, a fine of one million rubles on them! I see no point in chasing after a private household owner who sold a sack of potatoes through a group in a messenger. But the group administrator definitely sees who is trading and in what volumes. By the way, often the person trading illegally is the one who created the group in the first place.”

Roman Matveev poses the question: but still, who exactly will be doing the catching? And how much money should the state budget allocate to maintain the staff who will be tasked with identifying individuals engaged in unregistered food production? Sergey Nikiforov has an answer: these structures already exist — Rospotrebnadzor, Rosselkhoznadzor, Ministry of Internal Affairs, Federal Tax Service, Prosecutor’s Office…

Does this mean the workload within these agencies needs to be redistributed and additional resources allocated? The question hangs in the air.

However, Olesya Karaganova is skeptical about this idea: in her view, there is no need to chase legal entities — all their actual and registered addresses are well known to the relevant authorities. But who will go after individuals who sell large volumes of fish illegally from underground cold storage? After all, they still need to be found and the fact of illegal entrepreneurship proven.

“In the end, they will come to us anyway,” the entrepreneur concludes.

“Just make it tastier than theirs”

Opinions among those present were divided on the need to fight the black market. Roman Matveev is convinced that it is impossible to tackle this phenomenon.

“We can talk endlessly about involving the government to help us and wait for that support. But all of us have businesses that demand money, investment, and growth every single day. While we wait for the state to finally come up with something and remove all the violators from the market, our own businesses will shut down. I believe we need to take the opposite approach — make sure we can confidently present our product to the market, find reasons for customers to choose us. Some look for opportunities, others for excuses. And prove that we are better,” Roman reflects.

Sergey Nikiforov responded by saying this is not about making excuses, but about healthy lobbying for the necessary legislative framework. He personally has experience lobbying federal laws and is ready to take on the next ones. According to him, he has already spoken with State Duma deputies from our republic, and they are willing to support a bill addressing the black market — provided someone drafts it first. The economist reasoned that he could draft it, but for that, it is necessary to determine which agencies will oversee the process. Therefore, these agencies must first be brought together on a single platform to discuss the issue and avoid multiplying unviable proposals.

Vorontsov concluded by stating the situation in his industry: it is impossible to make a tasty, year-aged cheese at home, underground. So, for him, the problem of the black market simply does not arise.

“Our main competitor is foreign cheeses. But if they taste better than ours, I should blame myself, not them. Let’s not bring them in, or watch to make sure they don’t sneak in suitcases. That won’t help win the competition. Just make it tastier than theirs — and everything will be fine!”