The Impact of the War in Ukraine on Drinks in Russia

Delivery

This report comes in PPT.

Key Findings

Economy and consumers

The Russian economic outlook has worsened since the start of the war in Ukraine and the imposition of significant economic sanctions at the end of February and March 2022. Russia’s consumer expenditure - corresponding to 47% of the country’s GDP - is expected to decline severely in 2022. Decreased incomes are pushing consumers to change their purchasing habits and switch to cheaper options. Restrictions on freedoms, strict sanctions, rising inflation, falling disposable incomes and rising unemployment are leading to increasing emigration. 

International players

Pre-war, Russia was seen as a target market for further expansion by leading international companies, which are now limiting or ending their presence in the country. Besides assortment limitations due to import and production suspensions by major international players, spillover effects are having a severe impact on Russian industries. International drinks faced significant price hikes along with mushrooming local analogues stepping on the heels. The practice of constant price promotions is put on hold. This situation has also hampered those international market players that decided to stay in Russia and that depend on imported resources. 

Local production

Difficulties in logistics and international payments have led to delays and out-of-stocks, resulting in price increases. Shortages of imported ingredients, packaging materials and equipment are also affecting local production and distribution. Packaging for juice brands “lost” previous colours and designs due to lack of specific dyes. Wines are expected to turn to metal screw closures, rather than corks. The government, companies and retailers have sought to establish new schemes for import possibilities, but increasingly complicated logistics have led to further rises in commodity prices. State price controls for necessities place a burden on retailers and producers, which have sought to maintain margins by reducing packaging size or quality.