Hot Drinks in Ukraine

Hot drinks in 2021: The big picture

Slower retail sales growth was recorded in all categories of hot drinks in 2021 and the main reason for the underwhelming performances seen across the industry during the year is the shift towards foodservice sales that resulted from the reopening of Ukraine’s horeca sector. With quarantine lockdowns and social distancing protocols making it difficult, if not impossible for foodservice outlets to operate at full capacity during the early and middle stages of the COVID-19 pandemic, substantial declines were seen in on-trade sales of hot drinks over the course of 2020, with coffee the hot drinks category hardest hit by this adverse trend.

2021 key trends

The key trends in Ukraine’s hot drinks industry in 2021 revolved mainly around attempts to offer consumers better value for money. With household incomes under pressure due to the interruptions caused to commercial activity in key sectors of the Ukrainian economy at the peak of the COVID-19 pandemic during 2020, there is now a strong focus on obtaining maximum value for money from every purchase among huge numbers of consumers.

Competitive landscape

2021 proved a challenging year for the leading players in hot drinks in Ukraine as the adverse economic environment that has unfolded in the wake of the COVID-19 pandemic out pressure on demand generally, while pushing consumers towards less expensive options, which are generally offered by smaller, less well-known brands. For instance, industry drinks leader Jacobs Ukraina lost significant value share over the course of the year as it faced more intense competition in fresh coffee, with consumer demand becoming increasingly polarised.

Retailing developments

Modern grocery retailers continued to register strong growth in sales of hot drinks during 2021, with the expansion of the outlet networks of major chained retailers ATB-Market and Silpo a major factor underpinning this strong performance. In addition, the shopping habits of Ukrainian consumers are changing, with the better presentation of modern grocery retailers in comparison with traditional grocery retailers become increasingly attractive.

Foodservice vs retail split

During 2021, the easing of the social distancing restrictions that were in place in Ukraine throughout 2020 presented opportunities for operators in Ukraine’s beleaguered consumer foodservice industry to recover sales that they were deprived of at the peak of the COVID-19 pandemic. Nevertheless, the recovery of foodservice sales of hot drinks turned out to be more moderate than previously anticipated and this can be attributed to the reluctance of consumers to spend time socialising in on-trade outlets as well as the pressure has that come on household incomes since the onset of the COVID-19 pandemic.

What next for hot drinks?

Ukraine’s hot drinks industry is expected to mount a complete recovery from the unfortunate situation that has emerged from the COVID-19 pandemic before the end of the forecast period. Although household incomes remained under pressure at the end of the review period due to the unfavourable economic situation that has unfolded within the context of the interruptions caused to commercial activity in key sectors by the COVID-19 pandemic, it is expected that consumers will become more interested in more expensive, value-added types of hot drinks during the forecast period.