Russian consumers shift to natural cheese as substitutes lose their price advantage

Demand falls as the price gap closes

Russian consumers are moving away from cheese products made with milk-fat substitutes as their traditional price advantage erodes. Pravda.ru reported that demand for products containing vegetable fats fell by one-third in the first seven months of 2026. A Rossiyskaya Gazeta headline separately said production of cheese products dropped by almost one-quarter in the first half of the year.

The figures describe different indicators and periods: Pravda.ru refers to demand over seven months, while Rossiyskaya Gazeta refers to output during the first half. Both nevertheless point to a sharp contraction in the substitute segment as shoppers increasingly choose natural dairy products.

VAT increase changes shelf economics

The main regulatory change took effect in January 2026, when Russia raised value-added tax on products containing milk-fat substitutes from the preferential rate of 10% to the standard 20%. According to Pravda.ru, the increase removed a central source of their low retail price and weakened the commercial case for placing them alongside natural cheese.

At the same time, an oversupply of natural cheese and lower raw milk prices gave dairy processors more room to run promotions and discount programs. These measures brought retail prices for natural cheese and vegetable-fat alternatives closer together. With less money to save by choosing a substitute, consumers increasingly favored the natural product.

Retail risks rise for suppliers and chains

Tax enforcement has also become more stringent through the integration of product-labeling and tax-control systems. Errors in identifying a product’s composition can now be treated as tax violations, rather than only breaches of trading rules, because natural dairy products and products with milk-fat substitutes are subject to different VAT rates. This increases legal and financial risks for retailers dealing with suppliers whose product declarations may be unreliable.

Products containing fat substitutes now account for about 1% of Russia’s retail dairy assortment, Pravda.ru reported. Regulation and changing consumer preferences are pushing them out of mainstream stores and toward the business-to-business market, where they remain an industrial ingredient for confectionery and prepared-food manufacturing.

Natural cheese processors gain room to grow

For dairy processors, the shift supports demand for deeper processing of raw milk, but the benefit depends partly on the persistence of lower milk costs and surplus cheese supply. Producers of substitute products face a narrower retail market, a higher tax burden and greater compliance requirements. Their remaining opportunity is increasingly in industrial channels, where purchasing decisions depend on recipe functionality and input costs rather than direct comparison by consumers at the shelf. Macroeconomist Artem Loginov told Pravda.ru that the trend demonstrates how tax measures can influence consumer choice when the fiscal advantage of substitutes disappears.